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[2018] ZASCA 72
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WDR Earthmoving Enterprises and Another v Joe Gqabi District Municipality and Others (392/2017) [2018] ZASCA 72 (30 May 2018)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case No: 392/2017
In
the matter between:
WDR
EARTHMOVING
ENTERPRISES
FIRST APPELLANT
COTTERRELL’S
CONSTRUCTION CC
SECOND APPELLANT
and
THE
JOE GQABI DISTRICT MUNICIPALITY
FIRST RESPONDENT
THE
MUNICIPAL MANAGER: JOE GQABI DISTRICT
SECOND
RESPONDENT
THE
CHAIRPERSON OF THE BID ADJUDICATION
COMMITTEE:
JOE GQABI DISTRICT MUNICIPALITY
THIRD RESPONDENT
AMADWALA
TRADING 363 CC
FOURTH RESPONDENT
Neutral
citation
:
WDR
Earthmoving Enterprises & another v The Joe Gqabi District
Municipality & others
(392/2017)
[2018] ZASCA 72
(30
May 2018)
Coram
:
Navsa and Swain JJA and Davis, Pillay and Hughes AJJA
Heard
:
17 May 2018
Delivered:
30 May
2018
Summary:
Municipal
Supply Chain Management Regulations – regulation
21(
d
)
– obligation on tenderer to submit three years of audited
annual financial statements – tenderers declaring legally
obliged to do so – failure by tenderers to comply –
peremptory statutory requirement – tenders including a
competing
one declared non-responsive in accordance with tender
conditions.
ORDER
On
appeal from:
Eastern
Cape Division of the High Court, Grahamstown (Plasket J, with Revelas
and Mbenenge JJ concurring, sitting as court of appeal):
1
The appellants are granted special leave to appeal
against the judgment and order of the full court
of the Eastern Cape
Division of the High Court.
2
The appeal succeeds to the extent set out in paragraph 3 below and
the first respondent is ordered to pay the
first and second
appellants’ costs of appeal, such costs to include the costs of
the application for leave to appeal.
3
The order of the full court is set aside and replaced
with the following order:
‘
(a)
The appeal in respect of the refusal by the court a quo to review and
set aside the decision of the third respondent to declare
as
non-responsive the tender offer of the appellants is dismissed.
(b)
The appeal in respect of the refusal by the court a quo to review and
set aside the decision by the second respondent to award
the tender
to the fourth respondent is upheld.
(c)
The first and fourth respondents are ordered to pay the costs of
appeal of the first and second appellants, jointly and
severally, the
one paying the other to be absolved.
(d)
The order of the court a quo is substituted as follows;
(i)
The application to declare as responsive the tender offer of the
applicants and award the tender to the applicants
is dismissed.
(ii)
The decision by the second respondent to award the tender to the
fourth respondent is reviewed and set aside.
(iii)
The first and fourth respondents are ordered to pay the costs of the
first and second applicants jointly and severally, the
one paying the
other to be absolved, such costs to include the costs of the
application to interdict and suspend the operation
of the work by the
fourth respondent, the
rule 35(13)
application and the
counter-application thereto, as well as the main application.’
JUDGMENT
Swain JA (Navsa JA and
Davis, Pillay and Hughes AJJA concurring):
[1]
The first
issue to be determined in this appeal is whether the joint venture of
the first appellant, WDR Earthmoving Enterprises
and the second
appellant, Cotterrell's Construction CC, should be granted special
leave to appeal against the judgment of the full
court of the Eastern
Cape Division of the High Court (Grahamstown). The full court
dismissed the appeal of the appellants against
an order of the high
court (Lowe J), in which the appellants’ application was
dismissed. The appellants were in addition
ordered to pay the costs
of the first and second respondents.
[2]
There was
before us an application for leave to appeal, referred for oral
argument in terms of
section 17(2)(
f
)
of the
Superior Courts Act 10 of 2013
. The parties were directed to
be prepared, if called upon to do so, to address us on the merits. We
heard argument on the application
and the merits by the appellants
and the first respondent. The fourth respondent, Amadwala Trading 363
CC, did not participate
in the appeal and abides the decision of this
court.
[3]
The
relevant factual background is as follows. During September 2014 the
first respondent placed advertisements in the local press
inviting
tender offers from suitably qualified contractors, for the
construction of an internal gravity sewer system in Jamestown,
in the
Eastern Cape, to eradicate the bucket system of sewer collection,
then in place.
[4]
Of the
tender offers received by the first respondent, only the tender offer
of the joint venture of the appellants, as well as
that of the fourth
respondent, were found to be responsive and progressed to a
functionality assessment. The tenders of the appellants
and the
fourth respondent were then ranked by applying the tender evaluation
point system in accordance with clause F.3.11 of the
Standard
Conditions of Tender, which together with the Tender Data, governed
the tender process. The appellants achieved 99 points
and the fourth
respondent achieved 85.75 points in terms of the Preferential
Procurement Policy Framework Act 5 of 2000 (the Act).
[5]
It was
accordingly recommended that the tender and contract be awarded to
the appellants for the agreed amount of R10 376 681.96,
subject
to scrutiny by the internal audit unit of the first respondent. In
the event of the appellants failing to pass the audit,
the project
was to be awarded to the fourth respondent for the agreed amount of
R12 020 082.82.
[6]
On 1 April
2015 the second respondent, the municipal manager of the first
respondent, reported that the internal audit process had
revealed
that the appellants’ bid was non-responsive because:
'.
. . your recommended bidder ie WDR/Cotterrell JV has not fully
complied with the submission of returnable documents, especially
the
annual financial statements.
The
WDR/Cotterrell’s JV specifically Cotterrell's Construction CC,
submitted annual financial statements for the periods ending
29
February 2012, 28 February 2013 and interim financial statements for
the period ending 31 January 2014.
This
is a non-compliance with regards to a returnable document and
therefore this bidder should not have proceeded further than
the
evaluation committee.
.
. .
Your
committee is therefore advised to reconsider its decisions and
consider preference in terms of all other qualifying bidders.'
[7]
As a
result, the Bid Evaluation Committee met and noted that what was
submitted in the case of the first appellant were audited
annual
financial statements for the requisite three financial years. In the
case of the second appellant, audited financial statements
for only
two financial years were attached. In respect of the third year,
interim annual financial statements for a portion of
the financial
year, from 1 March 2013 to 31 January 2014, were attached. It was
resolved that the fourth respondent be recommended
for the award of
the bid. The Bid Adjudication Committee met and the third respondent,
the Chairperson of the Bid Adjudication
Committee, then recommended
to the second respondent that the tender be awarded to the fourth
respondent.
[8]
Aggrieved
at the turn of events, the appellants’ attorneys wrote to the
second respondent requesting reasons for the decision
to award the
tender to the fourth respondent. The first respondent's attorney
replied that the reasons for the declaration of the
appellants’
tender offer as non-responsive were that:
'2.1
The WDR/Cotterrell’s JV was considered non-responsive for its
failure to submit all supplementary information
in relation to Part
T2: Returnable Documents, Section T2.2: Returnable Schedules;
alternatively, the bid was not accepted because
it was incomplete.
2.2
More particularly, the JV failed to submit audited financial
statements for the past three years or since
the date of
establishment where established during the past three years, as
required in terms of sub-paragraph 1.1 of 2C –
Declaration for
Procurement above R10 million (all applicable taxes included)
(MBD 5).'
[9]
Dissatisfied
with the reasons furnished by the first respondent for declaring
their tender offer non-responsive, the appellants
instituted
application proceedings in the Eastern Cape Division of the High
Court, (Grahamstown) in which an order was initially
sought
suspending the award of the tender to the fourth respondent, pending
the finalisation of an application to review and set
aside the
decisions of the second and third respondents. An order was granted
that the work undertaken by the fourth respondent
pursuant to the
award of the tender be suspended. As a result, no further work was
carried out on the project in the intervening
period.
[10]
The
appellants thereafter sought an order reviewing and setting aside the
decision by the third respondent to declare the tender
offer of the
appellants as non-responsive, and that of the fourth respondent as
responsive. In addition, the decision by the second
respondent to
award the tender to the fourth respondent was sought to be reviewed
and set aside and replaced with an order awarding
the tender to the
appellants. The court of first instance did not deal with the merits
of this claim finding that a dispute of
fact had arisen in relation
to whether the fourth respondent's bid was non-responsive but that
the factual dispute had to be resolved
in its favour, applying the
test in
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A) at 634 E-I. As already noted, the
application was dismissed with costs and a subsequent appeal to the
full court was
unsuccessful.
[11]
The appeal
raises three issues for determination:
(a)
Whether the appellants have standing to seek the review and setting
aside of the declaration of the fourth
respondent's tender offer as
responsive, as also the award of the tender to the fourth respondent?
(b)
Whether the declaration of the appellants’ tender offer as
non-responsive, is reviewable?
(c)
Whether the declaration of the fourth respondent's tender offer as
responsive, is reviewable?
[12]
As regards
the issue of standing, the full court held that the appellants had no
standing to challenge the award of the tender to
the fourth
respondent because:
'.
. . once its bid was found to be non-responsive, it fell out of the
race and it no longer had a legally protected interest in
the outcome
of the process. As Pillay J stated in
Rodpaul Construction CC t/a
Rods Construction v Ethekwini Municipality & others
[2014 JDR
1122 (KZD)] "only a compliant tenderer acquires the right to
challenge an award."'
The
full court then rejected the argument that the appellants standing to
challenge the award to the fourth respondent arose from
s 6(1) of the
Promotion of Administrative Justice Act 3 of 2000 (the PAJA) which
provides that 'any person may institute proceedings
in a court . . .
for the judicial review of an administrative action’. It held
that this provision was:
'.
. . merely a recognition that everyone has a right to just
administrative action in terms of s 33 of the Constitution and
that one way in which that right may be vindicated is by applying to
review administrative action that is unlawful, unreasonable
or
procedurally unfair. It is followed by s 6(2) which states that a
court has the power to judicially review administrative action
if one
or more of the listed grounds of review are present. Section 6(1)
does not concern itself with standing. It is implicit
in s 6 that it
is only a person envisaged in s 38 of the Constitution who may
approach a court to judicially review an administrative
action.'
[13]
However, in
Giant
Concerts CC v Rinaldo Investments (Pty) Ltd & others
[2012]
ZACC 28
;
2013 (3) BCLR 251
para 29, the Constitutional Court held
that:
'PAJA,
which was enacted to realise s 33, confers a right to challenge a
decision in the exercise of a public power or the performance
of a
public function that “adversely affects the rights of any
person and which has a direct, external legal effect”.
PAJA
provides that “any person” may institute proceedings for
the judicial review of an administrative action. The
wide standing
provisions of section 38 were not expressly enacted as part of PAJA.
Hoexter suggests that nothing much turns on
this because “it
seems clear that the provisions of section 38 ought to be read into
the statute”. This is correct.'
It
then added at para 30 that 'adversely affects' in the definition of
administrative action:
'.
. . was probably intended to convey that administrative action is
action that has the capacity to affect legal rights, and that
impacts
directly and immediately on individuals. The effect of this is that .
. . an own-interest litigant, had to show that the
decisions it seeks
to attack had the capacity to affect its own legal rights or its
interests.'
[14]
The
Constitutional Court added, at para 32, that in determining a
litigant's standing:
‘
.
. . we must assume that its complaints about the lawfulness of the
transaction are correct. This is because in determining a litigant’s
standing, a court must, as a matter of logic, assume that the
challenge the litigant seeks to bring is justified.'
It
summarised the position at para 43, in the following terms:
'The
own-interest litigant must, therefore, demonstrate that his or her
interests or potential interests are directly affected by
the
unlawfulness sought to be impugned.'
[15]
The
standing of the appellants has to be determined by considering
whether the award of the tender to the fourth respondent would
have a
direct effect upon the interests, or potential interests of the
appellants, without regard to whether the decision was valid
or not.
It has to be assumed that the challenge the appellants wish to bring
is justified.
[16]
I agree
with the submission by the appellants that a declaration that a
decision on whether the fourth respondent's tender offer
was
non-responsive, would directly affect their rights. In the event of a
decision against the fourth respondent, the tender process
would have
to be re-commenced as the only responsive tender offers were those of
the appellants and the fourth respondent. The
appellants and the
fourth respondent together with any other interested parties, would
then be entitled to compete for the tender.
The appellants therefore
have standing to seek the review and setting aside of the declaration
of the fourth respondent's tender
offer as responsive, as also the
award of the tender to the fourth respondent.
[17]
The full
court accordingly erred in concluding that the standing of the
appellants to challenge the award of the tender to the fourth
respondent, was determined by the finding that the appellants’
bid was non-responsive. Its reliance upon
Rodpaul
Construction CC v Ethekweni Municipality
2014
JDR 1122 (KZD) was misplaced. The statement in
Rodpaul,
at para 52, that:
'.
. . only a compliant tenderer acquires the right to challenge an
award. At best a non-compliant tenderer may appeal to the authority
before expiry of the tender notice to waive strict compliance.'
is
too broadly cast and does not correctly reflect Canadian law, from
which it was said to be derived.
[18]
In
M.J.B.
Enterprises Ltd v Defence Construction
(1951)
[1999] 1 SCR 619
paras 58 and 60, the Supreme Court of Canada held
that the submission of a tender in response to an invitation to
tender may give
rise to contractual obligations (contract A),
distinct from the obligations associated with the contract to be
entered into upon
the acceptance of a tender (contract B), depending
upon the intention of the parties. Where the party calling for
tenders, awards
contract B to a non-compliant tenderer, then a
tenderer who submitted a compliant bid, would suffer the loss of
contract B and
would be entitled to damages in the amount of the
profits it would have realised, had it been awarded contract B. It is
in this
context that only a compliant tenderer would have locus
standi to institute an action for damages. The decision has no
application
to the present dispute.
[19]
I turn to
consider whether the declaration of the appellants’ tender
offer as non-responsive, is reviewable. This requires
a consideration
of the returnable schedule which lies at the heart of the present
dispute. The schedule reads as follows:
'2C
Declaration for Procurement above R10 million (All Applicable Taxes
Included) (MBD 5)
For
all procurement expected to exceed R10 million (all applicable taxes
included), bidders must complete the following questionnaire:
1
Are you by law required to prepare annual financial statements for
auditing? Yes/No
1.1
If yes, submit audited annual financial statements for the past three
years or since the date of establishment if established
during the
past three years.’
The
representatives of the appellants completed separate schedules in
respect of the first appellant and the second appellant in
compliance
with a direction at the site inspection meeting, that in the case of
the tenderer being a joint venture, ‘each
entity has to submit
the relevant returnable documents and complete the relevant forms’.
In each schedule they ringed the
answer 'Yes' to the first question
and in response to the second question, stated the following in
manuscript, 'Included' and ‘See
Attached'.
[20]
It is
common cause that what was attached in the case of the first
appellant were audited annual financial statements for the requisite
three financial years. However, in the case of the second appellant,
audited financial statements for only two financial years
were
attached. In respect of the third year, interim annual financial
statements for a portion of the financial year, from 1 March
2013 to
31 January 2014, were attached.
[21]
The
obligation to furnish the requisite audited annual financial
statements is found in the
Municipal Supply Chain Management
Regulations GN
868,
GG
27636, 30 May 2005 made by the Minister of Finance in terms of
s 168
of the
Local Government: Municipal Finance Management Act 56 of 2003
.
Regulation 21
provides:
'A
supply chain management policy must determine the criteria to which
bid documentation for a competitive bidding process must
comply, and
state that in addition to
regulation 13
the bid documentation must
.
. .
(
d
)
If the value of the transaction is expected to exceed R10 million
(VAT included), require bidders to furnish
–
(i)
if the bidder is required by law to prepare annual financial
statements for auditing, their audited financial
statements –
(
aa
)
for the past three years; or
(
bb
)
since their establishment if established during the past three
years.'
[22]
In
compliance with the regulations, paragraph 29(d)(1) of the Supply
Chain Management Policy of the first respondent includes this
provision. There is accordingly a statutory obligation on the part of
the first respondent to obtain and for a tenderer to furnish,
the
information requested in returnable schedule ‘2C Declaration
for Procurement above R10 million (MBD 5)’. In the
event of an
affirmative answer to the question, ‘are you by law required to
prepare annual financial statements for auditing?’
there is
thus a statutory obligation on the tenderer to furnish and for the
first respondent to receive, audited annual financial
statements for
the past three years.
[23]
It is in
this context that the relevant clauses in the Tender Data and the
Standard Conditions of Tender must be examined. Of importance
is the
provision in the Tender Data, that in interpreting the Tender Data
and the Standard Conditions of Tender, in the event of
any ambiguity
or inconsistency, the Tender Data shall have precedence.
[24]
Clause
F.1.2 of the Tender Data provides that the tender documents issued by
the employer comprise inter alia:
‘
Part
T 2 Returnable documents
T
2.1 List of returnable documents
T2.2
Returnable Schedules.’
[25]
Clause
F.2.14 in the Standard Conditions of Tender provides:
'Accept
that tender offers, which do not provide all the data or information
requested completely and in the form required,
may
be regarded by the employer as non-responsive.
'
(Emphasis added.)
is
varied by clause F.2.14 in the Tender Data to read as follows:
'The
Tenderer is required to enter information in the following sections
of the document:
.
. .
Section
T2.2: Returnable Schedules
.
. .
Accept
that failure on the part of the Tenderer to submit any one of the
Returnable Documents listed in F.2.23
shall
result
in
a tender offer being regarded as non-responsive.
’
(Emphasis added.)
Clause
F.2.23 of the Tender Data in turn provides that:
'All
certificates and information, as per T2.1 and T2.2 of the tender
document are to be provided with the tender offer as well
as:
1.
Returnable Schedules required only for tender evaluation purposes
.
. .
2.
Other documents required only for tender evaluation purposes
.
. .
2C
Declaration for Procurement above R10 million (MBD 5).'
[26]
Accordingly,
in terms of clause F.2.14 of the Tender Data a tenderer is required
to enter information in the ‘Returnable Schedules’
forming part of section T2.2 which includes the returnable schedule,
‘2C Declaration for Procurement above R10 million (MBD
5)’.
The answer by a tenderer to the first question posed is information
that the tenderer is required to enter on the schedule.
If answered
in the affirmative, the tenderer is obliged to submit the specified
audited annual financial statements.
[27]
For the
purposes of clause F.2.14 the Returnable Schedule '2C Declaration for
Procurement above R10 million (MBD 5)’ must
be regarded as a
'Returnable Document' because in clause F.2.23 it is included under
the category 'Other documents required only
for tender evaluation
purposes’, and not under the category ‘Returnable
Schedules required only for tender evaluation
purposes’. The
specified audited annual financial statements must accordingly also
be regarded as 'Returnable Documents'
for the purposes of clause
F.2.14. A failure on the part of a tenderer to submit any one of the
Returnable Documents listed in
F.2.23 results in a tender offer being
regarded as non-responsive in terms of clause F.2.14.
[28]
By
contrast, clause F.2.14 of the Standard Conditions of Tender provides
that '. . . tender offers, which do not provide all the
data or
information requested completely and in the form required,
may
be regarded by the employer as non-responsive’.
Consequently, the discretion possessed by the employer to condone a
failure by the tenderer to provide all of the data or information
requested, completely and in the form required in the Standard
Conditions of Tender, was replaced in the Tender Data with a
peremptory provision that a failure by the tenderer ‘to submit
any one of the Returnable Documents’ will result in the tender
offer being regarded as non-responsive.
[29]
The third
respondent therefore correctly determined that the appellants had not
complied with the obligation to submit returnable
documents, being
audited annual financial statements for three years. However, whether
the tender offer of the appellants was correctly
declared as
non-responsive has to be considered in the context of the decision in
Dr JS
Moroka Municipality & others v Betram (Pty) Ltd & another
[2013]
ZASCA 186
;
[2014] 1 All SA 545
(SCA).
[30]
In
Moroka
para 10, it was held that it was for the municipality and not the
court to decide the prerequisites for a valid tender. A failure
to
comply with prescribed conditions would result in a tender being
disqualified as an acceptable tender under the Act, unless
those
conditions were immaterial, unreasonable or unconstitutional. With
reference to the decision in
Minister
of Environmental Affairs and Tourism & others v Pepper Bay
Fishing (Pty) Ltd; Minister of Environmental Affairs and
Tourism &
others v Smith
2004
(1) SA 308
(SCA) para 31, the court noted that as a general principle
an administrative authority has no inherent power to condone failure
to comply with a peremptory requirement. It only has such power, if
it has been afforded the discretion to do so.
[31]
It was held
at para 14, that in the absence of any discretion in the relevant
legislation or regulations, a discretion to condone
a failure to
comply with a peremptory requirement was entirely dependent upon a
proper construction of the documents forming part
of the tender
invitation. In the absence of any specific provision in the tender
invitation, or the various documents included
therewith, providing
for a discretion to be afforded to a municipal official or committee
to condone a failure to comply with any
prescribed condition of
tender, the failure could not be condoned.
[32]
The dictum
in
Millennium
Waste Management (Pty) Ltd v Chairperson, Tender Board: Limpopo
Province & others
2008 (2) SA 481
(SCA) para 17 that:
'[O]ur
law permits condonation of non-compliance with peremptory
requirements in cases where condonation is not incompatible with
public interest and if such condonation is granted by the body in
whose benefit the provision was enacted.'
was
disapproved of at para 18, on the basis that it was inconsistent with
the decision in
Pepper Bay
, but also offended the principle of
legality.
[33]
In
Overstrand
Municipality v Water and Sanitation Services South Africa (Pty) Ltd
[2018] ZASCA 50
para 50, this Court held that it was not necessary on
the facts of the case to resolve the apparent differences in the
decisions
in
Millennium
and
Moroka
and stated the following:
'I
am alert to the debate concerning the possible sufficiency of
substantial or adequate compliance with what, in conventional terms,
is described as mandatory requirements. One should also guard against
invalidating a tender that contains minor deviations that
do not
materially alter or depart from the characteristics, terms,
conditions and other requirements set out in tender documents.
In the
present case the non-compliance is not of a trivial or minor nature.'
[34]
As pointed
out above, the obligation to furnish audited annual financial
statements is found in the
Municipal Supply Chain Management
Regulations. The
failure to provide the requisite audited annual
financial statements cannot accordingly be regarded as trivial, or of
a minor nature.
Likewise, the requirement cannot be described as
immaterial, unreasonable or unconstitutional.
[35]
Once the appellants affirmed that they were legally obliged to have
their annual financial statements audited, there was an
obligation on
the part of the first respondent to obtain and for the appellants to
furnish, the information requested in returnable
schedule ‘2C
Declaration for Procurement above R10 million (MBD 5),’
including audited annual financial statements,
as returnable
documents in compliance with clause F.2.23 of the Tender Data. The
first respondent was not obliged to determine
by the calculation of
their respective public interest scores, whether the appellants or
the fourth respondent were excused from
having their annual financial
statements audited. As pointed out by the first respondent, it does
not require the calculation of
the public interest scores of a
tenderer to be submitted to it for independent verification. Nor does
it require, or is able to
ask for the contributing and relevant point
scoring facts so that it may do the calculation itself. The
calculation by the appellants
in their replying affidavit of their
respective public interest scores, done with the object of proving
that they were not legally
obliged to have their annual financial
statements audited, illustrates the problem faced by the first
respondent. They did not
provide independent verification for their
case which was based upon limited disclosed facts. It is for
this reason that
the first respondent has to rely upon the accuracy
of the information provided by a tenderer in the returnable schedule
in question.
The importance of the accuracy of this information is
emphasised by the fact that the resultant obligation to furnish
audited annual
financial statements is mandatory and the first
respondent possesses no discretion to condone the appellants’
failure to
provide them. Significantly, as stated above the public
interest calculations of the appellants are seen from their
perspective
and have not been independently verified.
[36]
Likewise, the argument advanced by counsel for the appellants that a
report by the appointed consulting engineer for the project,
confirmed that the appellants had the financial resources to perform
the tender and were not insolvent, is irrelevant. As pointed
out by
the first respondent, the consulting engineer, without reference to
the annual financial statements that were submitted,
stated that
according to their knowledge the appellants were not insolvent, under
receivership, bankrupt or being wound-up, or
had suspended their
business activities.
[37]
Two further arguments advanced by counsel for the appellants require
consideration. Relying upon clause F.2.18.1 of the Tender
Data, which
provides that:
'Notwithstanding
F.2.23 submit, within 7 days from receipt of a written request by the
Employer, a full report from his banker as
to his financial standing.
The Employer may, at its discretion, condone any failure to comply
with the foregoing condition.
Provide
on written request by the Employer, where the tendered amount
inclusive of VAT exceeds R10 million:
i.)
audited annual financial statements for 3 years, or for the period
since establishment if established during the last 3 years,
if
required by law to prepare the annual financial statements for
auditing’,
It
was submitted that the obligation to provide audited annual financial
statements only arose on receipt of a written request from
the first
respondent, which written request, it was common cause, had never
been made. Accordingly, so the argument went, the failure
to make a
written request calling on the appellants to provide the requisite
audited annual financial statements, rendered the
requirement non-
mandatory. This argument ignores paragraph 29(d)(1) of the Supply
Chain Management Policy of the first respondent
which requires their
production and precludes any discretion on the part of the first
respondent to request their production.
[38]
The second argument advanced by counsel for the appellant was
that when regard was had to clause F.3.8 of the Standard
Conditions
of Tender and the decision in
Allpay Consolidated Investment
Holdings (Pty) Ltd & others v Chief Executive Officer of the
South African Social Security Agency
& others
2014 (4) SA 179
(CC);
[2014] ZACC 12
, the failure by the appellants to furnish the
requisite audited annual financial statements, did not constitute a
material deviation
from the requirements of the Tender Data and
Standard Conditions of Tender.
[39]
Clause F.3.8 provides as follows:
‘
F.3.8.1
Determine, after opening and before detailed evaluation, whether each
tender offer properly received:
a)
complies with the requirements of these Conditions of Tender,
b)
has been properly and fully completed and signed, and
c)
is responsive to the other requirements of the tender documents.
F.3.8.2
A responsive tender is one that conforms to all the terms,
conditions, and specifications of the tender documents without
material deviation or qualification. A material deviation or
qualification is one which, in the Employer’s opinion, would:
a)
detrimentally affect the scope, quality, or performance of the works,
services or supply identified in the Scope of Work,
b)
significantly change the Employer’s or the tenderer’s
risks and responsibilities under the contract,
c)
affect the competitive position of other tenderers presenting
responsive tenders, if it were to be rectified.
Reject
a non-responsive tender offer, and not allow it to be subsequently
made responsive by correction or withdrawal of the non-conforming
deviation or reservation.'
[40]
As pointed out, in interpreting the Tender Data and the Standard
Conditions of Tender in the event of any ambiguity or inconsistency,
the Tender Data has precedence. The peremptory provision in clause
F.2.14 of the Tender data that a failure by the tenderer ‘to
submit any one of the Returnable Documents’ will result in the
tender offer being regarded as non-responsive, is inconsistent
with
the discretion afforded to the first respondent in terms of clause
F.3.8 of the Standard Conditions of Tender. The peremptory
provision
accordingly has precedence. In addition the dictum in
Allpay
at para 28, that in determining whether a ground of review exists
under the PAJA, the materiality of any deviance from legal
requirements
must be assessed by linking the question of compliance
to the purpose of the provision, is distinguishable on the facts of
this
case, where a peremptory provision is in issue. In any event the
purpose of the provision is to provide independent audited
verification
for three years, in order to provide assurance as to the
financial viability and ability to perform the contract.
[41]
The appellants’ appeal against the refusal by the court a quo
to review and set aside the decision of the third respondent
to
declare as non-responsive the tender offer of the appellants and the
dismissal by the full court of the appellants’ appeal
in this
regard, must accordingly fail.
[42]
I turn to consider whether the declaration of the fourth respondent's
tender offer as responsive, is reviewable. As pointed
out the court
of first instance held that a dispute of fact had arisen in relation
to whether the fourth respondent's bid was non-responsive
but that
the factual dispute had to be resolved in its favour, applying the
test in
Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A) at 634 E-I. The full court did not deal with the
merits of this issue, having found that the appellants had no
standing to
challenge the award of the tender to the fourth
respondent.
[43]
The appellants submit that the fourth respondent's tender offer
should have been declared non-responsive because it also failed
to
submit audited annual financial statements, despite having declared
that it was required, by law, to have audited annual financial
statements, by answering the first question posed in returnable
schedule ‘2C Declaration for Procurement above R10 million
(MBD
5)’ in the affirmative. In this regard it is clear that there
is no dispute of fact as extracts of the annual financial
statements
of the fourth respondent, as attached to the appellants’
supplementary affidavit, confirm that they were unaudited.
In
addition, the first respondent in its opposing affidavit to the
appellants’ application for special leave to appeal confirmed
that 'it is correct that the Fourth Respondent submitted complete
financial statements, but that these were not audited’.
[44]
Counsel for the first respondent therefore submitted that although
the financial statements of the fourth respondent were unaudited,
they were nevertheless complete. By contrast in the case of the
second appellant, so the argument went, audited financial statements
for only two financial years were attached. In respect of the third
year, interim annual financial statements for a portion of
the
financial year, from 1 March 2013 to 31 January 2014, were attached.
In other words the annual financial statements of the
fourth
respondent were complete, albeit unaudited, whereas the annual
financial statements of the second appellant were incomplete,
because
in the third year they only covered the period 1 March 2013 to 31
January 2013 and did not extend to 28 February 2013.
The distinction
is one without a difference. Returnable schedule ‘2C
Declaration for Procurement above R10 million (MBD 5)’,
read
with the
Municipal Supply Chain Management Regulations, and
paragraph
29(d)(1) of the Supply Chain Management Policy of the first
respondent, required audited financial statements for
three years to
be submitted. The fact that the fourth respondent’s annual
financial statements for three years were complete,
matters not, if
they were unaudited. The same considerations as at para 40
apply.
[45]
The third respondent accordingly erred in concluding that the bid of
the fourth respondent was responsive. The decision by
the second
respondent to accept the recommendation of the third respondent to
award the tender to the fourth respondent and thereafter
award the
tender to the fourth respondent, accordingly falls to be reviewed and
set aside. In the result, the first respondent
will have to commence
the tender process afresh and invite tender offers from suitably
qualified contractors, for the construction
of the internal gravity
sewer system in Jamestown. The appellants accordingly qualify for the
grant of special leave to appeal
from the judgment of the full court
of the Eastern Cape Division, Grahamstown, to this Court.
[46]
I turn to the issue of costs. Although the appellants’ appeal
against the decision by the second respondent to declare
the
appellants’ bid as non-responsive has failed, the appellants’
appeal against the decision by the second respondent
to award the
tender to the fourth respondent has succeeded. The appellants have
therefore achieved substantial success on appeal
and are entitled to
their costs in the court of first instance, against the first and
fourth respondents jointly and severally,
the one paying the other to
be absolved. Such costs are to include the costs of the application
to interdict and suspend the operation
of the work by the fourth
respondent, the
rule 35(13)
application and the counter-application
thereto, as well as the application on the merits of the appellants’
claim. The appellants
are also entitled to the costs of the appeal to
the full court, against the first and fourth respondents jointly and
severally,
the one paying the other to be absolved. However, as
regards the appeal to this Court, by virtue of the fact that the
fourth respondent
did not participate in the appeal and abided the
decision of this Court, the appellants’ costs of the appeal
should only
be awarded against the first respondent.
[47]
I grant the following order:
1
The appellants are granted special leave to appeal
against the judgment and order of the full court
of the Eastern Cape
Division of the High Court.
2
The appeal succeeds to the extent set out in paragraph 3 below and
the first respondent is ordered to pay the
first and second
appellants’ costs of appeal, such costs to include the costs of
the application for leave to appeal.
3
The order of the full court is set aside and replaced
with the following order:
‘
(a)
The appeal in respect of the refusal by the court a quo to review and
set aside the decision of the third respondent to declare
as
non-responsive the tender offer of the appellants is dismissed.
(b)
The appeal in respect of the refusal by the court a quo to review and
set aside the decision by the second respondent to award
the tender
to the fourth respondent is upheld.
(c)
The first and fourth respondents are ordered to pay the costs of
appeal of the first and second appellants, jointly and
severally, the
one paying the other to be absolved.
(d)
The order of the court a quo is substituted as follows;
(i)
The application to declare as responsive the tender offer of the
applicants and award the tender to the applicants
is dismissed.
(ii)
The decision by the second respondent to award the tender to the
fourth respondent is reviewed and set aside.
(iii)
The first and fourth respondents are ordered to pay the costs of the
first and second applicants jointly and severally, the
one paying the
other to be absolved, such costs to include the costs of the
application to interdict and suspend the operation
of the work by the
fourth respondent, the
rule 35
(13) application and the
counter-application thereto, as well as the main application.’
K G B Swain
Judge of Appeal
Appearances:
For
the Appellants:
J D Huisamen SC
Instructed by:
Joubert Galpin Searle
Inc, Port Elizabeth
Honey & Partners Inc,
Bloemfontein
For the
Respondents:
S Grobler
Instructed by:
Peyper Attorneys,
Bloemfontein