47793/15 2 JUDGMENT
Coram: Kooverjie J
Heard on: 3-5 February 2025
Delivered:
SUMMARY: 17 February 2025 - This judgment was handed down electronically by
circulation to the parties' representatives by email, by being uploaded
to the CaseLines system of the GD and by release to SAFLII. The date
and time for hand -down is deemed to be 15h00 on 14 February 2025.
1. He who alleges must prove. See Pillay v Krishna and van Wyk v
Lewis .
2. SCM3, the framework applicable to the appointment of consultants
by the Department does make provision in certain circumstances,
not to procure consultants in terms of the competitive bidding
process.
ORDER
___________ _____________________________________________________ ___
It is ordered: -
1. The defendants are ordered to pay the plaintiff the amount of R6 462
968.00 (Six Million Four Hundred and Sixty Two Thousand Nine Hundred
and Sixty Eight Rand).
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2. The defendants are ordered to pay interest to the Plaintiff on the amount of
R6 462 968.00 (Six Million Four Hundred and Sixty Two Thousand Nine
Hundred and Sixty Eight Rand) at 9% per annum from 18 March 2015 to
date of payment.
3. The defendants are ordered to pay the plainti ff’s costs on High Court Scale
B.
JUDGMENT
___________________________________________________________________ _
KOOVERJIE J
[1] The plaintiff , Mr Keyter instituted action proceedings against the defendants in this
matter. The plaintiff claims damages in respect of the Service Level Agreement
entered into between him and the D irector -General , at the time Mr Xaba. The
defendants will also be referred to as “the Department”.
[2] The main thrust of the defendant s’ case is that the Service Level Agreemen t (“the
agreement”) entered into between the parties was unlawful as it was not in
accordance with the SCM3 of 2003 (“the Practice Note 3”).1
ISSUE FOR DETERMINATION
1 Supply Chain Management Office Practice Note number SCM3 of 2003, practice note 3 applicable to the
appointment of consultants.
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[3] The main issue for determination is whether the impugned agreement was
lawfully entered into and , if so, the extent of the loss of earnings the plaintiff had
suffered .
THE PLEADINGS
[4] The plaintiff, in his particulars of claim , premised his case on the basis that a valid
agreement was entered into with the Department. Therein the specific terms of
the service level agreement were set out, more particularly as follows :
4.1 the agreement was entered into on 21 November 2012 with Mr Xaba, who
represented the defendants;
4.2 the agreement came into effect immediately and would terminat e upon the
completion of all the deliverables together with the submission of a
comprehensive report filed by the plaintiff;
4.3 the duration of the agreement was for a period of five years with the
termination date being 20 December 2017;
4.4 the plaintif f was assigned to a project where he was to render specialised
IT services and provide strategic support services to the Department. He
was appointed as an expert consultant where specific work was assigned
to him in terms of the project . Same is set out in annexure ‘A’ to the
agreement ;
4.5 the remuneration was in accorda nce with the Department’s guide lines that
prescribed the hourly rates for consultant s. At the time the hourly rate was
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R855.00 per hour. The hourly rate was to be revised in line with annual
adjustments by 1 April of e very year;
4.6 on 5 December 2014 , the plaintiff was informed by the defendants that the
agreement had been terminated.
[5] The p laintiff pleaded that the repudiation was unlawful. The agreement was
subsequently cancelled . Although t he plaintiff elected to accept t he repudiation,
he pursued his claim for damages in the form of loss of income that he should
have received during the duration of the agreement.
[6] The defendants , in their plea, alleged that the plaintiff’s appointment as a
consultant was unlawful and irregular as the competitive bidding process as
stipulated in Practice N ote 3 was not followed . They raise this defence in their
counterclaim where they pleaded that the agreement was terminated as it was
unlaw ful and should be set aside .
[7] The evidence led at the trial dealt squarely with the issue: whether the impugned
agreement wa s unlawful or not.
THE PLAINTIFF’S EVIDENCE
[8] Mr Keyter testified that he had rendered specialised services to the Depa rtment ,
since 2008. During that time, he contracted with the Department under his
business name , namely Kovac Technologies.
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[9] He explained his qualifications and the extent of his expertise in the IT field and
particularly mentioned that he focused on software Development.
[10] He had worked with the Department since 2008 and did so on a continuous basis .
The Department renewed the contracts with him during this time . At the time he
worked closely with Mr Greef and Mr Ngcobo . He was also well acquin ted with
Mr Phala, who was already the Chief Information Officer at the time.
[11] Prior to the conclusion of the impugned agreement, he had various discussions
with Mr Greef and Mr Ngcobo who r equested him to continue assisting the
Department going forwa rd. He was, at that time, requested to draw up the terms
of reference which w ere then incorporated into a workplan. The workplan define d
the scope and capacity of the tasks that he was required to execute going
forward.
[12] After internal di scussions amongst the officials of the Department were held , he
was approached and advised that a service level agreement would be entered
into with him , provided that , inter alia , it conformed to the prescribed tariffs .
[13] It was on this basis that the agreement was drawn up and eventually signed by
him. In terms of the agreement he was to assist the Department going forward
with open and free source migration a s well as the maintenance of the
infrastructure during the D epartment ’s relocation to the new premises, located at
Kingsley Centre in Pretoria.
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[14] Mr Phala was aware of the specialized services that he was rendering to the
Department at the time. After the signing of the agreement he was advised by the
Director -General and Mr Ngcobo that he was to focus on the tasks which were
necessary for the relocation of the Department .
[15] He then explained how he had prepared his monthly timesheet s together with a
report setting out the progress he made in the project. Same were submitted to
the Department, as well as to Mr Phala. The timesheets were based on the hours
he would have s pent working on the project each month. His calculations
excluded his leave , weekends , and public holidays.
[16] His evidence under cross -examination confirmed his testimony. He again
explained how the calculations for the prospective loss of income was arrived at.
When it was put to him that his contract was not in accordance with the P ractice
Note 3, as no competitive bidding process had taken place, his response was that
he was not aware of the internal processes that the Department followed when
entering into contracts with consultant s. He also confirmed that he was not
requested to submit his proposal by virtue of the competitive bidding process.
[17] Under re -examination he confirmed that the rates set out in his timesheets were in
accor dance with the D epartment’s guidelines and reflected only the hours that he
would have w orked in a month . He also confirmed that he was not part o f the
final decisions amongst the Departm ent’s officials where the decision was made
to enter into a service level agreement with him.
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THE DEFENDANT’S CASE
[18] Mr Phala’s testimony was brief. He, in essence , testified that the consultant had
not participated i n a competitive bidding process. Premised on this observation,
he concluded that the agreement was unlawful. He does so without any evidence
demonstrat ing why the agreement was unlawful. I n fact , he testified that the
agreement was concluded without his involvement.
[19] He also co nfirmed under cross -examination that “red file s ystem ” was in operation
in the Department , which contained certain contracts . He testified that he had only
seen the impugned agr eement after the parties had si gned. He was not aware
that it was part of “the red file system” .
[20] During cross -examination Mr Phala confirmed that the D irector -General is the
accounting officer of the Department and is empowered to enter into contracts
with consultants. He also clarified that the plaintiff continued the task s that he
was assigned to do previously. He, however , added that there were certain new
projects that Mr Keyter was required to undertake in terms of the impugned
agreement . He recalled that prior to 2008 Mr Keyter was paid in accordance with
the prescrib ed tariffs set out in the guidelines.
ANALYSIS
[21] After having considered the pleadings, the testimonies of both witnesses as well
as the arguments presented by counsel for both parties , it became evident that
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the core dispute for determination is whether th e impugned agreement was lawful
or not.
[22] From the outset, it should be noted that the defendants’ case in terms of their
pleadings was initially premised on both the breach of contract as well as th e
unlawfulness of the agreement. However dur ing the trial, evidence was only led
on the lawfulness issue .
[23] I have further noted the correspondence to Mr Keyter, namely the notice of
breach of the Service Level A greement where Mr Keyter was informed, inter alia,
that he neglected to do any wor k in respect of certain key divisions and the
identified projects . Thereafter , on 5 December 2014, a termination letter was
communicated to Mr Keyter advising him that the agreement was terminated . It is
evident that initially the Department’s reason for the termination was not at all
premi sed on the unlawfulness issue.
[24] However, d uring the trial, evidence was only led on whether the agreement was
lawful or not. The defendants’ case , in law, is premised exclusively on Practice
Note 3.
[25] I find that t he defendants , on a balance of probabilities, have failed to established
any facts that would enable this court to come to the conclusion that the
agreement was unlawful, more specifically, if one considers Practice Note 3.
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[26] Practice N ote 3 expressly makes provision for the general procedure when
procuring the services of the consultant, namely that the competitive bidding
process should be followed. However provision is also made for the accounting
officer (the Director -general, Mr Xaba in this case) to enter into contracts with
consultants without having followed the competitive bidding process .
[27] In context, Practice N ote 3 is derived from the Constitution and the Public Finance
Management Act (“the PFMA”) . Both section 217(1) of the Constitution and
section 38(1)(a)(iii) of the PFMA provides that when an organ of state contracts
for goods or services, it must do so in accordance with a system which is fair,
equitable, transparent, competitive and cost effective.
[28] Section 76(4)(c ) of the PFMA provides that National Treasury may make
regulations or issue instructions to all institutions to which the PFMA applies,
concerning the determination of a framework for an appropriate procurement and
provisioning system. By virtue of sectio n 76(4)(c) of the PFMA, a framework for
supply chain management was promulgated in Government Gazette Nr. 25767 on
5 December 2003 as “Treasury Regulations”. Practice Note 3 sets out the
specific framework applicable to the appointment of consultants at t he time.
[29] The preamble of the Practice N ote clearly stipulate s:
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“Consultants should be appointed by means of competitive bidding processes
whenever possible . All bids and contracts should be subject to the general
conditions of contract (“GCC”) is sued by the National Treasury.”2
[30] The general approach which makes room for competitive bidding process is set
out in clause 4 of the Practice N ote. O f relevance is clause 4.2 which stipulates
that other methods of selection are available to the acco unting officer when it is
appropriate. Clause 4.2 stipulates :
“In the majority of cases, these consideration s can best be addressed through
compet ition amongst firms in which selection is based both on the quality of the
services to be rendered and on the cost of the services to be provided (Q uality –
and Cost – Based S election [Q CBS] as described in paragraph 9.3. However
there are cases where QCBS is not the most appropriate method of selection.
The complex and h ighly specialised assignments or those t hat invite innovations
selection based on the quality of the proposal alone , quality based selection
[QBS] would be more appropriate. Other methods of selection and the
circumstances in which they are appropriate or outlined in paragraph 10. ”
[31] Paragra ph 10 stipulates that Quality Based S election (“QBS”) is appropriate in
respect of a complex highly specialised assignment where it is difficult to define
precise terms of reference and the required input from the consultants is required
in the proposals. Under this system the re are technical proposals a nd financial
proposals which are considered by the accounting authority and consultant s are
required to negotiate a financial proposal .
2 My underlining
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[32] Under the QBS selection, single source selection is used in excep tional
circumstances provided that consideration is given to the overall interest of the
client and the project. More importantly, with regard to single source selection ,
the accounting authority is required to reco rd the basis for the selection, prior to
concluding the agreement.
[33] Clause 10.5.6 prescribes the fee rates for consultants. It stipulates :
“Provision i n exceptional circumstances to appoint the consultants provided that
the guidelines and hourly fee rate for consultants issued by the Dep artment of
Public Service and A dministration is used as a benchmark to establish the
appropriate tariffs to determine the reasonableness of the tariffs .”
[34] Having regard specifically to clause 8.2 of the impugned agreement , it is recorded
that the D irector-General has full authority to enter into an agreement and will
secure the necessary authorizations as required for the agreement and that
he/she would comply with all the laws and governance applicable to the South
African government departments. This entails that Mr Xaba had the authority to
enter into the agre ement, provided that he complied with the relevant prescripts.
[35] The defendants ’ persis tence , in argument , that the consultant’s services should
have been procured through the general proce ss, namely that the competitive
bidding process , has no merit. The defendant s further contended that no
exceptional circumstances existed for the accounting officer at the time to not
have followed the competitive bidding process. However, they raise the se
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defences without presenting any evidence reflecting that Mr Xaba acted
unlawfully.
[36] Every state organ is obliged to maintain the ir recordkeeping, particularly when
agreements of this nature are concluded and when there are deviations from the
gene ral process . Likewise the Director -General, Mr Xaba, was duty -bound to
maintain such record keeping and take into consideration all the factors before he
entered into the agreement with the consultant. The defendants failed to present
any such evidence. The question that begs an answer is - how is this court
required to draw a conclusion in their favour without evidence to support their
case .
[37] The defendants have failed to prove that the agreement was unlawful. The onus
was on the defendants to prov e the unlawfulness. The duty is cast on the
defendants to satisfy the court that they are entitled to their defence. The burden
of proof never shifts. This goes hand in hand with the latin maxim “actio incumbit
probatio ”. Plainly put, he who alleges, m ust prove.3
[38] In conclusion, I find that the plaintiff has proved his claim for damages . He
pleaded that a valid agreement was in place.
QUANTUM
3 Van Wyk v Lewis 1924 AD 438 at 444
Pillay v Krishna 1946 AD 946 at 952 to 953