Logbro Properties CC v Bedderson NO and Others (372/2001) [2002] ZASCA 135; [2003] 1 All SA 424 (SCA) (18 October 2002)

About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Supreme Court of Appeal
SAFLII
>>
Databases
>>
South Africa: Supreme Court of Appeal
>>
2002
>>
[2002] ZASCA 135
|

|

Logbro Properties CC v Bedderson NO and Others (372/2001) [2002] ZASCA 135; [2003] 1 All SA 424 (SCA); 2003 (2) SA 460 (SCA) (18 October 2002)

THE SUPREME COURT OF
APPEAL
OF SOUTH AFRICA
Case
no: 372/2001
REPORTABLE
In the matter between:
LOGBRO PROPERTIES
CC
Appellant
and
S A BEDDERSON, NO
First respondent
MINISTER OF
HOUSING
Second respondent
NATIONAL HOUSING
BOARD
Third respondent
MINISTER OF HOUSING,
KwaZulu-Natal
Fourth respondent
BALSONS INVESTMENTS
CC
Fifth respondent
K R GOVENDER
Sixth
respondent
SB MKHIZE
Seventh
respondent
K NAIDOO
Eighth
respondent
J
NARAINSAMY
Ninth respondent
R G MOODLEY
Tenth
respondent
EVERSURE CARTAGE
Eleventh respondent
MOODLEY’S PROPERTY
HOLDINGS
Twelfth respondent
Before:
Howie
JA, Farlam JA, Cameron JA, Heher AJA, Lewis AJA
Heard:
23
August 2002
Judgment:
18
October 2002
Tender –
Constitutional requirements of administrative justice apply to
process – Fairness does not however require administrator
in
reconsidering decision set aside by Court to ignore supervening
considerations – But affected party entitled to opportunity
to make
representations if such considerations may lead to adverse decision
JUDGMENT
_____________________________________________________
CAMERON JA:
[1] In 1997 the High
Court ordered a provincial tender committee to ‘reconsider’ a
tender the appellant had submitted two years
earlier to buy a
property. This appeal raises the question whether the committee when
doing so was entitled to take into account
the fact that property
values had increased since 1995, or whether it should have adjudged
the tender excluding this and other supervening
considerations. The
court below held that the increase could properly be taken into
account. The appellant challenges that conclusion.
If its main
argument fails, it raises a fresh question in this Court: should the
tender committee in 1997 have given it an opportunity
to be heard on
the significance of the price rise?
Background
[2] In February 1995, the
KwaZulu-Natal provincial government (‘the province’) awarded a
tender for the sale of a well-situated
Richards Bay property,
approved for development as a filling station, to one Naidoo. The
appellant’s tender was rejected. But
it challenged the award on
the basis that Naidoo’s tender, although by a considerable margin
the highest, did not comply with the
tender conditions. Its
challenge prevailed. In February 1997 Natal Provincial Division of
the High Court (McLaren J) set aside
the award. It ordered the
province’s assets committee (‘the committee’) to reconsider the
appellant’s and other tenders
that complied with the tender
conditions. Non-compliant tenders, including Naidoo’s, were to be
excluded. There was no appeal
against the decision of McLaren J.
[3] So the matter came
before the committee (of which the first respondent later became
chairman) less than a month after the High
Court decision. The
appellant’s tender was now the highest. But the committee decided
by 3 to 1 (the first respondent dissenting)
to accept neither the
appellant’s nor any of the other 1995 tenders. Instead, in view of
the increase in Richards Bay property
values in the intervening two
years, it recommended a call for fresh tenders entirely.
[4] The appellant went
back to court. Its challenge, launched in the Natal Provincial
Division in December 1998 and argued in September
2000, failed before
Skweyiya J. In a judgment delivered in August 2001, he held that the
meaning of McLaren J’s order directing
the Committee to
‘reconsider’ the qualifying tenders required the committee to
consider the matter anew: this left it free to
take into account new
factors and circumstances, including the increase in property values
since the abortive 1995 process. With
his leave the appellant
appeals against that conclusion. Of the twelve respondents
originally cited (including all the 1995 tenderers),
only three
oppose the appeal – the committee itself (represented by the first
respondent), and the national and provincial executive
members of
government responsible for housing (respectively the second and
fourth respondents).
Was the committee
in ‘reconsidering’ the tender permitted to take the increase in
property values into account?
[5] The starting point
must be that the tender process constituted ‘administrative action’
under the Constitution. This entitled
the appellant (and it does
not matter in this case whether the interim or the 1996 Constitution
applied)
1
to a lawful and procedurally fair process and an outcome, where its
rights were affected or threatened, justifiable in relation to
the
reasons given for it.
2
I say ‘must be’ since in the light of several decisions of this
Court applying the Constitution’s administrative justice provisions
to governmental tender processes
3
the statement seems obvious. Yet counsel for the province asserted
the contrary. It is necessary to deal with his argument, not
because
it has substance, but because of the terms in which it was advanced.
Counsel contended, distinguishing the cases referred
to, that the
tender conditions the province stipulated gave it a contractual right
to withdraw the property from tender in 1997,
which could be
exercised ‘without having to pass the scrutiny of lawful
administrative action’. He invoked two decisions of
this Court,
Mustapha and Another v Receiver of Revenue, Lichtenburg and
Others
4
and
Cape Metropolitan Council v Metro Inspection Services
(Western Cape) CC and Others
.
5
[6] It is correct that in
the first litigation McLaren J held that the province’s tender
offer, accepted by the tenderers, gave
rise to a contract whose
conditions the tenderers could enforce against the province. The
tender conditions included:
‘
1.1 The highest tender
will not necessarily be accepted.
1.2 No reasons will be
given for the acceptance or non-acceptance of [a] tender.
1.3 The Regional Housing
Board, KwaZulu-Natal may at any stage and without giving reasons
withdraw a property or properties from the
tender.
Tenders which do not
comply with the requirements set out below should not be
considered.
…’
[7] It was condition 1.4
that McLaren J held the appellant could enforce to secure the
exclusion of Naidoo’s and other non-compliant
tenders, though it is
the others the province now seeks to invoke. But the argument is
flawed. Even if the conditions constituted
a contract (a finding not
in issue before us, and on which I express no opinion), its
provisions did not exhaust the province’s
duties toward the
tenderers. Principles of administrative justice continued to govern
that relationship, and the province in exercising
its contractual
rights in the tender process was obliged to act lawfully,
procedurally and fairly. In consequence, some of its contractual
rights – such as the entitlement to give no reasons – would
necessarily yield before its public duties under the Constitution
and
any applicable legislation.
[8] This is not to say
that the conditions for which the province stipulated in putting out
the tender were irrelevant to its subsequent
powers. As will appear,
such stipulations might bear on the exact ambit of the ever-flexible
duty to act fairly
6
that rested on the province. The principles of administrative justice
nevertheless framed the parties’ contractual relationship,
and
continued in particular to govern the province’s exercise of the
rights it derived from the contract.
[9] Counsel’s
invocation of the
Cape Metropolitan
case as authority to the
contrary is mistaken. There it was held that a local authority’s
cancellation of an agreement was not
‘administrative action’
under the Constitution entitling the other contractant to procedural
fairness before termination. Although
the public authority derived
its power to conclude the contract from statute, it was held that the
same could not necessarily be
said about its power to cancel. But
the
Cape Metropolitan
case turned on its own facts, and this
Court was careful to delineate them. In the first place, the tender
cases were expressly
distinguished.
7
Second, the employment cases (where a public authority’s express
statutory power to dismiss public sector workers was held bound
by
public duties of fairness notwithstanding that a corresponding right
existed at common law or that such a right might also have
been
contained in a contract)
8
were also distinguished.
9
Third and most importantly, the Court in
Cape Metropolitan
did not purport to provide a general answer to the question whether a
public authority in exercising powers derived from a contract
is in
all circumstances subject to a public duty to act fairly. That
question was left open. Instead, the Court’s judgment makes
it
plain that the answer depends on all the circumstances. The critical
passage in the reasoning of Streicher JA is this:
‘
Those terms [ie
entitling the public authority to cancel the contract] were not
prescribed by statute and could not be dictated by
the [public
authority] by virtue of its position as a public authority. They
were agreed to by the first respondent, a very substantial
commercial
undertaking. The [public authority], when it concluded the contract,
was therefore not acting from a position of superiority
or authority
by virtue of its being a public authority and, in respect of the
cancellation, did not, by virtue of its being a public
authority,
find itself in a stronger position than the position would have been
had it been a private institution. When it purported
to cancel the
contract it was not performing a public duty or implementing
legislation; it was purporting to exercise a contractual
right
founded on the consensus of the parties in respect of a commercial
contract. In all these circumstances it cannot be said
that the
[public authority] was exercising a public power.’
10
[10] The case is thus not
authority for the general proposition that a public authority
empowered by statute to contract may exercise
its contractual rights
without regard to public duties of fairness. On the contrary: the
case establishes the proposition that a
public authority’s
invocation of a power of cancellation in a contract concluded on
equal terms with a major commercial undertaking,
without any element
of superiority or authority deriving from its public position, does
not amount to an exercise of public power.
11
[11] In the present case,
it is evident that the province itself dictated the tender
conditions, which McLaren J held constituted
a contract once the
tenderers had agreed to them. The province was thus undoubtedly, in
the words of Streicher JA in
Cape Metropolitan
, ‘acting from
a position of superiority or authority by virtue of its being a
public authority’ in specifying those terms. The
province was
therefore burdened with its public duties of fairness in exercising
the powers it derived from the terms of the contract.
[12] For reasons not only
doctrinal but historical, the province’s invocation of
Mustapha
’s
case is even less appropriate. There the Minister, mainly for
racially discriminatory reasons, terminated a statutory permit
to
occupy land. This Court by a majority held that since the permit was
embodied in a contract, the termination constituted the
exercise of
an absolute and unqualified contractual power, rendering the racial
discrimination permissible or at least irrelevant.
12
Schreiner JA delivered a strong dissent:
‘
Although a permit
granted under sec. 18 (4) of Act 18 of 1936 has a contractual aspect,
the powers under the sub-section must be exercised
within the
framework of the Act and the regulations which are themselves, of
course, controlled by the Act. The powers of fixing
the terms of the
permit and of acting under those terms are all statutory powers. In
exercising the power to grant or renew, or to
refuse to grant or
renew, the permit, the Minister acts as a state official and not as a
private owner, who need listen to no representations
and is entitled
to act as arbitrarily as he pleases, so long as he breaks no
contract. For no reason or the worst of reasons the
private owner can
exclude whom he wills from his property and eject anyone to whom he
has given merely precarious permission to be
there. But the Minister
has no such free hand. He receives his powers directly or indirectly
from the Statute alone and can only
act within its limitations,
express or implied. If the exercise of his powers under the
sub-section is challenged the Courts must
interpret the provision,
including its implications and any lawfully made regulations, in
order to decide whether the powers have
been duly exercised …’
13
[13] The artificiality in
the majority’s approach was pointed out at the time. It was
observed that its reasoning ‘virtually
severs the agreement from
the statute’, which was at least in part the contract’s
‘progenitor’. This in turn conferred on
the agreement ‘an
ineffaceable orientation’,
14
which rendered its termination an inescapably public exercise of
power. The moral and political implications of the majority decision
also attracted censure.
15
The total fissure the majority attempted to effect between the
statutory source of the contract and the exercise of the powers the
contract conferred is clearly incompatible with
Cape Metropolitan
,
particularly the passage set out earlier, and it is necessary for
Mustapha
now to be overruled, and for the dissenting judgment
of Schreiner JA to be recognised as correct.
[14] The significance of
this analysis is that even if the terms the province stipulated for
the tender process entitled it to withdraw
the Richards Bay property,
it could exercise that power only with due regard to the principles
of administrative justice. It could
not withdraw the property
capriciously or for an improper or unjustified reason. And this is
the core of the appellant’s case:
that the property’s withdrawal
because of the increase in property values constituted improper and
unjustified administrative action.
[15] Whether this is so
does not in my view depend on the precise meaning to be attached to
the word ‘reconsider’, but rather
on determining what
‘reconsidering’ the appellant’s and other compliant tenders
entailed in the light of the principles of
administrative fairness.
In making this determination, the brunt of the appellant’s
complaint must be appreciated. On the table
before the committee in
both 1995 and 1997 were departmental recommendations that the
property be sold to the highest tenderer.
This implies two
consequences. First, had the committee excluded non-compliant
tenders from consideration in 1995, the appellant’s
tender would in
all likelihood have been accepted. Second, had the committee in 1997
omitted from consideration the increase in
property values,
acceptance of the appellant’s tender was a foregone conclusion.
[16] In other words, had
the 1995 process been perfect, the appellant would in all likelihood
have received the benefit of a property
acquisition judged against
then market values. That provides the basis for its current claim
that in 1997 the committee should have
ignored the supervening
increase in market values. But the underlying question the
appellant’s case raises is broad and important,
and its general
force must be appreciated: to what extent is the administrative
subject entitled to be immunised from the adverse
consequences of
mistakes by an administrator? Formulated differently, the question
is to what extent the right to administrative
justice entails
exemption from the prejudicial effects of a functionary’s mistakes.
[17] In a nuanced
argument, Mr Marcus conceded that the appellant was not entitled to
a perfect process, free of innocent errors,
and that the
administrative subject could not expect to be immunised from all
prejudicial consequences flowing from such errors.
He also conceded
also that in some cases it might be appropriate for an administrator
in repairing a previously botched process
to take changed
circumstances into account. Here, however, he submitted, the reason
for the changed circumstances was a delay
caused by the committee’s
own error. What was more, the appellant, having succeeded in a
competitive and secret process in 1995
in judging the market and
other conditions rightly, should not be made to forfeit the profits
of its labour and skill by the tender
process being re-opened.
[18] It serves no
purpose, however, in weighing the significance of the disadvantage
the appellant experienced, to categorise
the committee’s conduct
in 1995 in awarding the tender to Naidoo pejoratively as ‘unlawful’
or ‘improper’. Such epithets
represent conclusions of law
applicable to a wide range of administrative errors, some innocent,
some malign. On the evidence
before us, the fact is that the
committee made an innocent mistake, and Mr Marcus on behalf of the
appellant was constrained to
concede as much. It took a judgment of
the High Court to establish that the condition specifying that
non-compliant tenders ‘should
not be considered’ was
enforceable. In these circumstances the appellant can found an
entitlement to the benefit it failed to
acquire in 1995 on neither
bad faith nor administrative perversity, and the question becomes
solely whether fairness required the
committee in 1997, having
innocently erred in 1995, to ignore the supervening increase in
property values.
[19] That increase
was however not only a fact, but an obvious fact. The committee’s
mandate was to dispose of public assets
in the public interest. In
determining what was fair to the appellant, it could hardly have
been proper for it to ignore competing
claims on the public purse –
including the claims of those to whose material advancement the
department in which the committee
functioned, namely the department
of housing, was committed. The committee rightly refers in its
deposition to ‘the legitimate
interest of the State in obtaining
the best possible price for the property’, and points out that it
was not only the appellant’s
interests that came into play when it
had to decide the matter whether to recommend re-advertisement.
[20] The fact is
that the committee’s performance of its duty in 1997 was a prime
instance of what commentators have dubbed
‘polycentric
decision-making’. It was not a unilinear question involving the
assertion of one subject’s rights against the
administration. The
appellant had a right to a fair tender process in 1995. That right
McLaren J vindicated with his order that
the committee ‘reconsider’
its tender. In doing so he rightly emphasised that the appellant ‘is
naturally not entitled to
an order that its tender should be
accepted’, but only ‘to have its offer considered without
competition from [Naidoo’s]
tender or any other tender which does
not comply with the tender conditions’. When, therefore, the
committee set out to ‘reconsider’
the compliant tenders, it
undertook the typically complex task of balancing all the public
interests its mandate required it to
fulfil. This included fair
reconsideration of the appellant’s tender – but not to the
exclusion of considerations involving
its broader responsibilities.
These included the public benefit to be derived from obtaining a
higher price by re-advertising the
property.
[21] It is in just
such circumstances that a measure of judicial deference is
appropriate to the complexity of the task that
confronted the
committee. Deference in these circumstances has been recommended
as:
‘ …
a judicial
willingness to appreciate the legitimate and
constitutionally-ordained province of administrative agencies; to
admit
the expertise of those agencies in policy-laden or polycentric
issues; to accord their interpretation of fact and law due respect;
and to be sensitive in general to the interests legitimately pursued
by administrative bodies and the practical and financial constraints
under which they operate. This type of deference is perfectly
consistent with a concern for individual rights and a refusal to
tolerate corruption and maladministration. It ought to be shaped
not by an unwillingness to scrutinize administrative action,
but by
a careful weighing up of the need for – and the consequences of –
judicial intervention. Above all, it ought to be
shaped by a
conscious determination not to usurp the functions of administrative
agencies; not to cross over from review to appeal.’
16
[22] I agree. The
conclusion is unavoidable that the committee in 1997 acted
unimpeachably in considering that the increase
in property values
might point away from immediate disposal of the property, and,
albeit for somewhat different reasons, I agree
Skweyiya J’s
conclusion.
The audi point
[23] But in this
Court Mr Marcus raised an entirely new point on behalf of the
appellant – that the committee before deciding
not to award the
tender in 1997 should have given the appellant an opportunity to
make representations, at least in writing, on
the significance of
the price increase. That point, although not raised in the
affidavits or argued in the court below, may properly
be raised at
this stage since not only are the facts before us clear, but neither
party wishes to adduce any further relevant evidence.
The
unquestioned fact is that the committee decided to recommend
re-advertisement without giving any of the compliant tenderers
an
opportunity to make representations.
[24] While, as Mr
Marcus pointed out, it is no answer to a claim to be heard that the
subject might have had little or nothing
to say if such an
opportunity had existed,
17
it is certainly worth pointing out that, if afforded, the
opportunity might have been extremely valuable. The fact of an
increase
in property values between 1995 and 1997 was undisputed
before us. But its extent is unknown. The appellant’s 1995
tender exceeded
the property’s then market value by more than 50%.
Did the increase over the next two years surpass that margin? We
do not
know. Whether it did or not, the appellant was entitled to
try to persuade the committee that accepting its 1995 offer would be
more advantageous, taking all factors into consideration, than a
call for fresh tenders; and in any event that, given its investment
in time and money and its employment of skill, fairness pointed
notwithstanding any increase to acceptance of its tender.
[25] Procedural
fairness in my view demanded that the committee in reconsidering the
tenders would afford the compliant tenderers
an opportunity to make
representations, at least in writing, on any factor that might lead
the committee not to award the tender
at all. That opportunity not
having been afforded, the committee’s 1997 decision must be set
aside, and the matter remitted
to the appropriate authority to
afford the appellant and the other compliant tenderers the
opportunity to make representations,
at least in writing, on any
supervening consideration relevant to the committee’s exercise of
its powers in relation to the award
or non-award of the tender.
[26] During the
hearing the parties were asked, if this conclusion were reached, to
supply us with an agreed form of order.
After a considerable delay,
of nearly five weeks, two sets of draft orders were supplied. The
order at the end of this judgment
reflects in material respects the
parties’ respective proposals. For the sake of clarity, it is
worth spelling out that the
authority charged with repairing the
flawed process of 1997 is itself now entitled to take into account
any consideration material
to the decision whether or not to
recommend the sale of the property on the basis of the 1995 tenders
(including further increases
in property values since 1997), but
must give the compliant tenderers an opportunity to respond, at
least in writing, to the considerations
in question.
Costs
[27] As pointed out
earlier, the appellant raised the
audi
point in written
argument it submitted shortly before the hearing in this Court. The
respondents’ stance in contesting at all
stages the relief sought
is nevertheless relevant to determining what order will be fair in
respect of costs. The main argument
– in which the respondents
persisted before us, and persisted despite the
audi
point
being raised – was that the tender process was contractual, not
administrative, and that considerations of fairness were
irrelevant.
In the alternative, they argued that because the
audi
point
was not raised in the papers it could not be raised now. This does
not suggest that had the
audi
point been raised earlier, the
respondents would have relented, and in these circumstances the
costs must follow the result.
[28] There is
therefore an order in the following terms:
The order of the Court
below is set aside, and in its place there is substituted:
‘
(a) The decision
taken on 4 March 1997 by the assets committee of the Province of
KwaZulu-Natal, established under s 12A of the
Housing Arrangements
Act 155 of 1993, that Lot 11113 Brackenham, Richards Bay,
KwaZulu-Natal, be re-advertised for sale by public
tender, is set
aside.
The fourth respondent
is directed:
to appoint within 30
days of the date of this order a committee (“the committee”) to
reconsider the tenders which were considered
by the assets committee
on 4 March 1997;
(ii) to require the
committee to call upon the appellant and other tenderers whose
tenders were before the assets committee on 4
March 1997 to make, on
or before a date determined by the fourth respondent in conjunction
with the committee, such representations
as the appellant and the
other tenderers may wish to make as regards the market value of Lot
11113 as at February 1995 and since;
(iii) to require the
committee to consider such representations and, within 60 days of
the date of its appointment, to declare its
decision as to the sale
by tender of Lot 11113.’
The first, second and
third respondents are to pay the appellant’s costs, jointly and
severally, the one paying, the other to
be absolved.
E CAMERON
JUDGE OF APPEAL
HOWIE JA )
FARLAM JA ) CONCUR
HEHER AJA )
LEWIS AJA )
1
In terms of s 33 of the 1996 Constitution, read with item 23(2)(b)
of Schedule 6, the administrative justice provision of the
interim
Constitution (s 24) remained in force until the Administrative
Justice Act 3 of 2000 came into operation on 30 November
2000.
2
Section 24 of the fundamental rights chapter of the interim
Constitution read:
Administrative justice
24.
Every person shall have the right to —
(a) lawful
administrative action where any of his or her rights or interests is
affected or threatened;
(b) procedurally fair
administrative action where any of his or her rights or legitimate
expectations is affected or threatened;
(c) be furnished with
reasons in writing for administrative action which affects any of
his or her rights or interests unless the
reasons for such action
have been made public; and
(d) administrative
action which is justifiable in relation to the reasons given for it
where any of his or her rights is affected
or threatened.
3
Umfolozi Transport (Edms) Bpk v Minister van Vervoer en Andere
[1997] ZASCA 8
;
[1997] 2 All SA 548
(SCA) 552-553;
Transnet Ltd v Goodman
Brothers (Pty) Ltd
[2000] ZASCA 151
;
2001 (1) SA 853
(SCA) 870;
Olitzki
Property Holdings v State Tender Board and Another
2001 (3) SA
1247
(SCA) para 33. Compare
Premier, Free State and Others v
Firechem Free State (Pty) Ltd
2000 (4) SA 413
(SCA) para 32
and
Eastern Cape Provincial Government and Others v
ContractProps 25 (Pty) Ltd
2001 (4) SA 142
(SCA) para 8.
4
1958 (3) SA 343
(A).
5
2001 (3) SA 1013
(SCA).
6
Du Preez and Another v Truth and Reconciliation Commission
[1997] ZASCA 2
;
1997
(3) SA 204
(A) 231H-233C,
Premier, Mpumalanga, and Another v
Executive Committee, Association of State-Aided Schools, Eastern
Transvaal
1999 (2) SA 91
(CC) para 39. Compare now
s 3(2)(a)
of the
Promotion of Administrative Justice Act 3 of 2000
.
7
2001 (3) SA 1013
(SCA) para 19.
8
Administrator, Transvaal and Others v Zenzile and Others
1991
(1) SA 21
(A);
Administrator, Natal and Another v Sibiya and
Another
[1992] ZASCA 115
;
1992 (4) SA 532
(A).
9
2001 (3) SA 1013
(SCA) paras 11-12.
10
2001 (3) SA 1013
(SCA) para 18.
11
The importance to the decision of the parties’ equality of
bargaining power is rightly emphasised by Iain Currie and Jonathan
Klaaren
The Promotion of Administrative Justice Act Benchbook
(2001) 72, 74.
12
1958 (3) SA 343
(A) 356B-357C, per Ogilvie Thompson AJA.
13
At 347D-G.
14
Ellison Kahn 1958
Annual Survey
23.
15
John Dugard
Human Rights and the South African Legal Order
(1978) 320-321, 323.
16
Cora Hoexter ‘The Future of Judicial Review in South African
Administrative Law’
(2000) 117
SALJ
484
at 501-502, citing
A Cockrell ‘”Can You Paradigm?” – Another Perspective on
the Public Law / Private Law Divide’
1993
Acta Juridica
227.
17
Administrator, Transvaal and Others v Zenzile and Others
1991 (1) SA 21
(A) 37C-F, per Hoexter JA.