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IN THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
In the matter between
Transnet Limited
Appellant
and
Goodman Brothers (Pty) Ltd
Respondent
BEFORE: HEFER ADCJ, HARMS, OLIVIER, SCHUTZ JJA and
MTHIYANE AJA
DELIVERED: 9 NOVEMBER
2000
Duty to give reasons to unsuccessful tenderer
under the Constitution - administrative action - right or interest to obtain
reasons.
W P SCHUTZ
_____________________________________________________________
J U D G M E N T
________________________________________________________________
SCHUTZ
JA:
[1] This appeal raises the question whether the Constitution obliges the
appellant, Transnet Ltd (“Transnet”), once a
part of government as the South African Railways and Harbours, now a limited
company owned by the government, to give reasons to an unsuccessful tenderer who
asks for reasons, why another has been preferred
over him. The matter came
before Blieden J, whose decision in favour of such an unsuccessful tenderer, the
respondent, Goodman Brothers
(Pty) Ltd (“Goodman”), is reported as
Goodman Bros (Pty) Ltd v Transnet Ltd 1998 (4) SA 989 (W). The detailed
facts may be gleaned from this report.
[2] The case before us can be decided
on s 33 of the 1996 Constitution. Pending the passing of legislation by the
national legislature
such as is envisaged by subsections 32(2) and 33(3), item
23 of Schedule 6 provides for an interim reading of subsections 33(1) and
(2).
As the tenders with which we are concerned were dealt with before any such
legislation had been passed, the interim reading
has application. It reads:
“Every person has the right to -
(a) lawful administrative action where any of their rights or interests is affected or threatened;
(b) procedurally fair
administrative action where any of their rights or legitimate expectations is
affected or threatened;
(c) be furnished with reasons in writing for
administrative action which affects any of their rights or interests unless the
reasons
for that action have been public; and
(d) administrative action
which is justifiable in relation to the reasons given for it where any of their
rights is affected or threatened.”
[3] It is (c) particularly with
which we are concerned. As it falls within the Bill of Rights (Chapter 2) it is
one of the cornerstones
of our democracy and is limitable only to the extent
allowed by s 36.
[4] Three matters have to be decided in order to determine
whether (c) entitles Goodman to reasons. They are: first, whether calling
for
and adjudicating tenders constituted “administrative action”,
secondly, whether Goodman had a “right”
or an
“interest”, and thirdly, whether, if he did, the right or interest
was “affected”. Section 39 enjoins
that when interpreting the Bill
of Rights a court must promote the values that underlie an “open”
and democratic society
based on human dignity, equality and freedom.
[5] Before dealing with each of these points it is useful to look at the
background against which the Constitution is set and which
explains many of its
provisions. Baxter Administrative Law (1989) at 741 sums up the position
as it was:
“In the absence of statutory authority there is no general duty upon public authorities to give reasons. Although the state of the law has been widely criticized, no general legislative provision has been enacted to correct the situation.”
The value of giving reasons is set out
by the same author at 228, as follows:
“In the first place, a duty to give reasons entails a duty to rationalize the decision. Reasons therefore help to structure the exercise of discretion, and the necessity of explaining why a decision is reached requires one to address one’s mind to the decisional referents which ought to be taken into account. Secondly, furnishing reasons satisfies an important desire on the part of the affected individual to know why a decision was reached. This is not only fair: it is also conducive to public confidence in the administrative decision-making process. Thirdly - and probably a major reason for the reluctance to give reasons - rational criticism of a decision may only be made when the reasons for it are known. This subjects the administration to public scrutiny and it also provides an important basis for appeal or review. Finally, reasons may serve a genuine educative purpose, for example where an applicant has been refused on grounds which he is able to correct for the purpose of future applications.”
[6] The Constitution has plainly set out
to remedy the previous position and without even dealing with particular words
or resorting
to authority, to my mind a straightforward reading of the words
leads to the inevitable conclusion that the former deficiency has
been remedied
in a case such as is before us. If it is necessary to resort to s 39 (which I
do not think it is), then I do not consider
that an “open . . .
society” countenances the type of secrecy in the tender process, such as
Transnet contends is permitted
by the Constitution.
[7] Turning to the first
question, whether administrative action was involved, it has already been held
in this court that the State
Tender Board’s handling of tenders for
transport service for the government, constituted administrative action - in
Umfolozi Transport (Edms) Bpk v Minister van Vervoer en Andere [1997] 2
All SA 548 (SCA) at 552 j - 553 a. Howie JA pointed out that the steps that
had preceded the conclusion of a contract
were purely administrative actions and
decisions by officials, whilst in addition public money was being spent by a
public body in
the public interest. Naturally, said Howie JA, in such a case
the subject is entitled to a just and reasonable procedure. I agree
entirely.
Moreover, the same considerations apply to Transnet.
[8] I do not think
that anything can be made of the fact that Transnet is now a limited company.
The government still owns all the
shares in it and thus has ultimate control.
It still provides a general service to the public, even though it is now
competition-
and profit-orientated. It still has a near - monopoly over rail
transport.
[9] It was presumably for reasons like these that counsel for
Transnet conceded that some of its actions amount to acts of administration.
But a distinction was sought to be drawn between different kinds of action. In
this connection reliance was placed on the judgment
of the Constitutional Court
in President of the Republic of South Africa and Others v South African Rugby
Football Union and Others 2000 (1) SA 1 (CC) at paras 140-141, pp 66-67.
There it was stated that in determining whether an act is an administrative act
the emphasis should
be on the function rather than the functionary, not on the
arm of government to which the actor belongs but on the nature of the
power
exercised. From this it followed that the exercise of some of the powers of a
member of the executive (the President in that
case) amounted to administrative
action whereas exercises of other powers did not. This reasoning was sought to
be extrapolated
to the procurement activities of Transnet. Some of its actions
are administrative. Others are not. Thus, so proceeded the argument,
when
Transnet invites tenders for the supply of locomotives, its acts
administratively. But when it invites tenders for toilet paper,
or, as in this
case, gold watches, it does not. I fail to see how such a distinction is to be
drawn, particularly where, as in this
case, the purchase of watches is clearly
incidental to the exercise of Transnet’s general powers. The gold watches
are bought
so that they may be used to secure the loyalty of employees, much as
salaries are paid to secure their services. For the reasons
given I am of the
view that the actions of Transnet in calling for and adjudicating tenders
constituted administrative action, whatever
contractual arrangements may have
been attendant upon it.
[10] Turning to the second question, the
“right” or “interest”, Transnet relied on the unreported
judgment
of Heher J in SA Metal Machinery Co Ltd v Transnet Ltd (WLD 9
March 1998), in which the learned judge held that a person in a position such as
Goodman was, was “effectively a stranger
to the tender process” (the
passage is more fully quoted at 996H - 997A of Blieden J’s judgment) and
therefore had no
protectable right or interest entitling him to just
administrative action. If that were correct, every applicant for a permit would
likewise have no right or interest. By contrast with the decision of Heher J,
in Aquafund Pty Ltd v Premier of the Province of the Western Cape 1997
(7) BCLR 907 (C) Traverso J identified the right (at 913 I) as the right to
obtain the information which the tenderer reasonably
required in order to enable
him to determine whether his right to lawful administrative action provided for
in the interim Constitution
had been violated. For instance, reasons given may
tell a tenderer that his goods did not comply with the specification. He,
knowing
that they did comply, would then be able to take the matter further.
Without reasons he might be without remedy.
[11] Another valid approach is
that the tenderer has the rights to lawful and procedurally fair administrative
action provided for
in par (a) and (b). The rejection of a tender affects these
rights and they are protected by par (c).
[12] As to whether Goodman’s rights were “affected” (the third question), I
do not think there is any doubt about it if
the first two questions are settled
adversely to Transnet in the manner
already expressed. Without reasons
Goodman is deprived of the opportunity,
to which he is entitled, to consider
further action.
[13] Further matters considered in the court below have fallen by the wayside.
As will be seen at pp 997H - 998D and 1001F, Transnet unsuccessfully
contended a quo that, failing all else, it could rely on a waiver of rights clause
in the tender conditions. During argument in this court that contention was
dropped (wisely I would think).
[14] Although s 217 of the
Constitution was relied upon by Goodman as an alternative basis for relief, it
is not necessary to say
anything about that section, and therefore also not
necessary to decide whether Transnet is an “organ of
State”.
[15] There was no cross-appeal against the court a
quo’s finding (at 999 C - 1001 E) that Goodman was not entitled to
further information of the various tenders.
[16] Finally, I would suggest
that once Transnet gets into the habit of giving reasons, when asked to do so,
it will find the exercise
a healthful one.
[17] The appeal is dismissed with
costs.
W P SCHUTZ
JUDGE OF APPEAL
CONCUR
HEFER ADCJ
HARMS JA
MTHIYANE
AJA
SAFLII:
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