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IN THE HIGH COURT OF SOUTH AFRICA

(EASTERN CAPE LOCAL DIVISION, BHISHO)

                                                                                       Case No: 502/2020

REPORTABLE

In the matter between:

 

SIPHINDILE MAJOJOBELA                                            Applicant

 

and

MEC FOR RURAL DEVELOPMENT AND

AGRARIAN REFORM                                                          First Respondent

THE HEAD OF THE DEPARTMENT

OF RURAL DEVELOPMENT AND

AGRARIAN LAND REFORM                                            Second Respondent

 

MEC FOR FINANCE, EASTERN CAPE                            Third Respondent

 

THE HEAD OF DEPARTMENT OF FINANCE         

EASTERN CAPE                                                                Fourth Respondent

 

 

JUDGMENT

 

TOKOTA J:

 

Introduction:

 

[1]     This matter came before me on the roll of unopposed matters of 22 September 2020. In addition to an order condoning non-compliance with the Rules of Court and entertainment of the matter on an urgent basis the applicant sought:

“an order declaring:

2.         that the fixed term contract for the supply and delivery of fertilizers with the First and Second Respondent, have (sic) not terminated by due performance or effluxion of time;

3.         that the purported cancellation of the contract awarded to the Applicant under number SCMU-17/18-0045 by the First and/or the Second Respondent be declared to be a breach thereof alternatively constitutes an unlawful repudiation, that such cancellation be held to be of no force and effect and that the cancellation be set aside;

4.         in the event the relief in (3) is granted that the Applicant and First to the Second Respondents be declared to be still bound by    the provisions of the Settlement Agreement concluded on the 22^nd November 2018, entitled to the benefits of such contract with effect from conclusion of this contract; and that the respondent be accordingly directed to accept the applicant’s tender of their services to perform in its reciprocal obligations in terms of the settlement agreement concluded on 22 November 2018.

5.         Interdicting any subsequent tender which seeks to directly or indirectly affect the future remaining obligations of the Applicant with the First Respondent in terms of their settlement agreement;

6.         That the 1st Respondent be directed to pay the costs of this application on an attorney and client scale alternatively on a party and party scale of costs.”

 

[2]     The matter was initially opposed by the respondents. In the unsigned affidavit, the respondents accepted the terms of the settlement agreement but took a point in limine that it was not competent for the court to grant prayers 3 and 4 on the basis that they were vague and had no practical effect. The precise basis for this contention is not clear. The matter was, however, enrolled on the unopposed roll. Mr Skoti appeared for the applicant and Mr Quin SC appeared for the respondents. I was informed from the bar that the parties have settled the matter and, a draft order by agreement was handed up to me. The draft order reads thus:

“By agreement between the parties the following order shall issue:

1. On or before 22 November 2021:

            1.1       The Applicant shall deliver to sites designated by the                           Second respondent 31875 units of 50kg of 4.3.4 (30) +                          0.5% Zn fertilizer.

            1.2       The Applicant shall submit an invoice to the Second                            Respondent after delivery of the aforesaid fertilizer at the                           rate of R391.78 per 50kg unit within 14 days of completion of                    delivery.

            1.3.      The First Respondent shall pay to the Applicant the sum of                R12 487 987.50 within 30 days of submission of the invoice.

2.         Each party shall pay their own costs.”

The effect of the draft order is that the contract in terms of the settlement agreement between the parties is reinstated.

 

Factual matrix

[3]     For a proper perspective of the matter it is necessary to set out the factual background leading to this application as appears from the applicant’s founding affidavit. On 12 May 2017 the Department of Rural Development and Agrigarian Reform, Eastern Cape,(the department) advertised a tender/bid for the supply of fertilizers for OR Tambo district for a period of three years under Bid No. SCMU8-17/18-0045. The closing date was 2 June 2017 but was subsequently extended to 13 June 2017. Bids were received by the department including that of the applicant.

 

[4]     On 4 August 2017 the department published a notice of cancellation of the invitation to bid under bid No. SCMU8-17/18-0045 and simultaneously re-advertised the same bid under Bid number SCMU/17/18/0099. The applicant felt aggrieved by the cancellation of the bid and brought an urgent application seeking an interdict restraining and interdicting the department from implementing the second bid invitation pending a review of the cancellation of the first invitation to bid. On 6 October 2017 this court issued a restraining order interdicting the respondents from evaluating and ultimately implementing a decision to award bid No. SCMU/17/18/0099 pending finalisation of the review of the cancellation of bid number.SCMU8-17/18-0045.

                    

[5]     On 16 January 2018 the applicant obtained an order reviewing and setting aside the decision to cancel tender number SCMU 8/17/18/0045.[1]The respondents applied for leave to appeal against this judgment and order. In view of the settlement agreement the respondents agreed to withdraw the application for leave to appeal.

 

[6]     On 9 November 2018 the Acting Head of the department addressed a letter to the applicant informing it of the department’s intention to settle the court cases between the parties by awarding the said tender No. SCMU-17/18-0045to the applicant. In this letter it was said that the department had been at ‘logger heads’ with the applicant leading to the litigations with regard to tender numbers SCMU-17/18-0045; SCMU-17/18-0047; SCMU-17/18-0048 and SCMU-17/18-0052. It is noteworthy to observe that the applicant was, in terms of this letter, ‘given authorization to go ahead with the orders to avoid any further delays.”

 

[7]     On the 9^th of November 2018 the applicant responded to the letter of the Acting Head of the department dated the same day in the following terms:

“1. We hereby accept the intention for the appointment on all the below mentioned tenders e.g. SCMU-17/18-0045; SCMU-17/18-0047; SCMU-17/18-0048 and SCMU-17/18-0052 as per your letter dated today’s date emanating from the settlement agreement.

2. We shall await for the quantities required for the inputs as well as the consolidated delivery points and GPS co-ordinates. We shall start with the preparations for the deliveries in order to avoid any delays.”

 

[8]     On 22 November 2018, pursuant to the letter of 9 November 2018, a settlement agreement was signed by the parties in terms whereof the applicant was awarded tender number SCMU-17/18-0045. The settlement agreement effectively made an award of the tender in favour of the applicant. The duration of the “award” was three years.

 

[9]     Pursuant to the conclusion of the settlement agreement the applicant delivered 1025 tons of fertilizers on 21 December 2018. On 13 November 2019 the applicant delivered another batch of fertilizers as per orders from the department.

 

[10]   On 8 July 2020 the Acting Head of the department addressed a letter to the applicant advising it that the contract in terms of the settlement agreement has come to an end as the budget of R20 757 295.30 for this project had been exhausted.

 

[11]   The letter of 8 July 2020 triggered these proceedings. The applicant contends that the cancellation of the “contract” awarded in terms of the settlement agreement is an unlawful repudiation of the terms of the settlement agreement. The applicant submits that this court should “curb this conduct as it is disdainful and breaching the clear terms and provisions [of] the settlement agreement.”

The applicant contends further that on the principle of pacta sunt servanda the respondents must be compelled to adhere to the terms of the settlement agreement. These contentions clearly demonstrate in no uncertain terms that the cause of action is based on the enforcement of the settlement agreement.

 

[12]   The matter came before me placed on unopposed roll. On the hearing date the applicant was represented by Mr Skoti and the respondents were represented by Mr Quin SC. I expressed my prima facie view to Counsel that the said settlement agreement appeared to me to be unlawful and that I was not prepared to endorse it by giving effect thereto. I then invited them to address me in this regard, as it was my duty to do so, having informed them the basis upon which I was of the view that the contract appeared to me to be unenforceable in a court of law.

 

[13]   Mr Skoti for the applicant submitted that my attitude was tantamount to revisiting the decision that was already made. I was under the impression that he was referring to the interdict application as the judgment thereof formed part of the papers. I informed him that this is a separate case with a separate cause of action. It turned out later that he was in fact referring to the order making the settlement agreement an order of Court. I will deal with this later in this judgment.

 

[14]   As stated above the cause of action in this matter is the enforcement of the settlement agreement. The Court's authority does not extend beyond the issues which the parties themselves have raised in their pleadings for resolution. Therefore it cannot be correct to say I am revisiting any order that has already been made. Otherwise if the matter was res judicata it would not have been brought to court again by the same applicant.

 

[15]   Mr Skoti informed me that although he was not involved in the previous litigation between the parties he is aware that there was a Court order in terms whereof the settlement agreement was made an order of Court. Two problems arise from this argument. First, in this matter I am not called upon to enforce that Court order hence that order does not form part of the papers. Second, since I have reservations about making this settlement agreement an order of Court in light of Eke v Parsons,[2] I am in any event not bound by it. In my view the settlement agreement does not accord with the Constitution and legislation governing procurement of goods and services by the State.

 

[15]   It is clear from the papers before me that the settlement agreement was concluded before the award of any tender was made by the Bid Adjudication Committee in terms of procurement processes. Mr Skoti properly conceded this and Mr Quin’s argument was to the same effect as well.

 Clause 1 of the settlement agreement states:

“The first and second respondent[s] hereby agree to award the tender number SCMU-17/18-0045 to the Applicant on the same terms and conditions set out in the First Respondent’s RFPs which was advertised on 12 May 2017 whose closing date was extended to 13 June 2017 in respect of the supply and delivery of fertilizers and seeds to the O R Tambo district for a period of three (3) years.”

From the papers before me the award was never made by the Bid Adjudication Committee as required by the prescripts. The order of this Court reviewing the cancellation spells it out clearly in paragraph 3 of the order which reads thus:

“The matter is remitted to the Bid Evaluation Committee to make proper recommendations to the Bid Adjudication Committee and for the tender process thereafter to follow its ordinary course.”

 

[16]   I pointed out to Counsel that in the absence of compliance with section 217 of the Constitution the award appeared to me to be unlawful. It was on this basis that I informed Counsel that I was not prepared to make any order in terms of the draft or even in terms of the prayers in the notice of motion. Mr Quin SC submitted that by giving me the draft order they were merely relying on the settlement agreement of 22 November 2018.

 

[17]   In view of the above I indicated to Counsel that I will reserve judgment in the matter. On hindsight and after the adjournment I considered that it would be fair to give both parties an opportunity to address me properly. This is so because both Counsel were taken by surprise at the hearing as they did not prepare for the points I raised mero motu. For this reason I issued a directive in the following terms:

“1.     whether it was lawful for the parties to conclude the settlement agreement despite the fact that the process of the tender was not yet finalised, if so, the basis thereof;

2.      Whether the settlement agreement complied with the procurement processes as envisaged in section 217 of the Constitution and the Practice Notes issued by the National Treasury including the regulations published under section 76 of the Public Finance Management Act 1 of 1999.

3.      Whether it is competent for the court to endorse the settlement agreement if it was concluded contrary to the abovementioned prescripts.”

By agreement I set the matter down for oral argument on 24 September 2020.

 

[18]   Subsequent to my directive I received heads of argument from both Counsel. Mr Quin SC who, together with Mr Young, appeared for the respondents, submitted that the settlement agreement was unlawful as it was not in compliance with section 217 of the Constitution. The order of the Court that heard review proceedings was attached to the heads of argument. He argued that in terms of that order the parties were ordered to go back and finalise the bidding process.[3]

Mr Quin SC submitted that instead of the parties going back to complete the procurement process in terms of the prescripts and Court order they simply took a short cut and signed a settlement agreement.

 

[19]      Mr Skoti did not address my concerns but merely insisted that I should make the order either as prayed for or as previously agreed to by the parties in terms of the draft order. I must confess I did not understand what he was referring to in his heads of argument. He persisted that to revisit the settlement agreement would be to revisit a decision which has already been taken by the Court. I informed him that I am bound by the case made out in the papers as the cause of action. He submitted that the argument by Mr Quin was opportunistic in that he relied on the Court’s misgivings about the legality of the settlement agreement and non-disclosure.

 

[20]   Mr Quin SC submitted that on hindsight the agreement to present a draft order to me should not have been reached. He submitted that the settlement agreement was contrary, not only to section 217 of the Constitution but also contrary to the regulations of the Public Finance Management Act No. 1 of 1999 (the PFMA). Consequently, such an agreement was invalid and therefore cannot be enforced. He referred me to the recent case of Valor IT v Premier, North West Province and Others (Case no 322/19) [2020] ZASCA 62 (9 June 2020)[4] as one of the authorities to the effect that a public procurement contract awarded contrary to the prescripts is invalid.

 

[21]   It is correct, as Mr Skoti argued, that the parties agreed about the draft order which was presented to me on the initial hearing date. However I was not bound by what the parties had agreed upon. I still had a duty to satisfy myself that what the parties agreed upon was within the legal limits for a case before me. It has been held that:

“Where a point of law is apparent on the papers, but the common approach of the parties proceeds on a wrong perception of what the law is, a court is not only entitled, but is in fact also obliged, mero motu, to raise the point of law and require the parties to deal therewith. Otherwise, the result would be a decision premised on an incorrect application of the law. That would infringe the principle of legality. Accordingly, the Supreme Court of Appeal was entitled mero motu to raise the issue of the commissioner's jurisdiction and to require argument thereon.[5]

 

[22]   From the contents of the letter dated 9 November 2018 referred to in paragraph 6 above it is clear that the purpose of the settlement was twofold: First, to avert a string of litigation matters, including this tender number SCMU 17/18-0045, between the parties; Second, to circumvent the procurement processes which were in progress.

 

[23]   In my view the fact that the settlement agreement was made an order of Court is of no moment. In this regard I am bound by the decision of the Supreme Court of Appeal in The Master of the High Court (GNP)v Motala NO  2012 (3) SA 325 (SCA) para.14 where it was said:

“In my view, as I have demonstrated, Kruger AJ was not empowered to issue, and therefore it was incompetent for him to have issued, the order that he did. The learned judge had usurped for himself a power that he did not have. That power had been expressly left to the Master by the Act. His order was therefore a nullity. In acting as he did, Kruger AJ served to defeat the provisions of a statutory enactment. It is after all a fundamental principle of our law that a thing done contrary to a direct prohibition of the law is void and of no force and effect (Schierhout v Minister of Justice 1926 AD 99 at 109). Being a nullity a pronouncement to that effect was unnecessary. Nor did it first have to be set aside by a court of equal standing. For as Coetzee J observed in Trade Fairs and Promotions (Pty) Ltd v Thomson and Another  1984 (4) SA 177 (W) at 183E:

            'It would be incongruous if parties were to be bound by a decision which is a nullity until a Court of an equal number of Judges has to be constituted specially to hear this point and to make such a declaration.'

(See also Suid-Afrikaanse Sentrale Ko-operatiewe Graanmaatskappy Bpk v Shifren and Others and the Taxing Master  1964 (1) SA 162 (O) at 164D – H.)”

 

[24]   The provisions of section 217 of the Constitution of the Republic of South Africa Act, 1996 (the Constitution) are clear. The PFMA, regulations published there under and National Treasury Practice notes prescribe the manner in which goods and services should be procured by the State

 

[25]   In terms section 217 of the Constitution procurement of goods and services by the State must be done in accordance with a system which is fair, equitable, transparent, competitive and cost-effective.

The accounting officer for a department has a duty to ensure that his/her department, maintains effective, efficient and transparent systems of financial and risk management and internal control; He must ensure that the department complies with, and operates, in relation to financial control, in accordance with regulations and instructions prescribed in terms of sections 76 and 77 of the PFMA. He must ensure that within the department there is an appropriate procurement and provisioning system which is fair, equitable, transparent, competitive and cost-effective.[6] Any agreement concluded to by-pass these prescripts is unlawful and cannot be enforced in a Court of law.[7]

 

[26]   National Treasury is empowered by the PFMA to issue instructions in the form of Practice Notes. These instructions are binding on the Organs of State. I quote herein below from the National Treasury Practice note No.8 of 2007/2008[8]

“3.4.1 Accounting officers / authorities should invite competitive bids for all procurement above R 500 000.

 

3.4.2 Competitive bids should be advertised in at least the Government Tender Bulletin and in other appropriate media should an accounting officer / authority deem it necessary to ensure greater exposure to potential bidders. The responsibility for advertisement costs will be that of the relevant accounting officer / authority.

 

3.4.3 Should it be impractical to invite competitive bids for specific procurement, e.g. in urgent or emergency cases or in case of a sole supplier, the accounting officer / authority may procure the required goods or services by other means, such as price quotations or negotiations in accordance with Treasury Regulation 16A6.4. The reasons for deviating from inviting competitive bids should be recorded and approved by the accounting officer / authority or his / her delegate. Accounting officers /authorities are required to report within ten (10) working days to the relevant treasury and the Auditor-General all cases where goods and services above the value of R1 million (VAT inclusive) were procured in terms of Treasury Regulation 16A6.4. The report must include the description of the goods or services, the name/s of the supplier/s, the amount/s involved and the reasons for dispensing with the prescribed competitive bidding process.”

 

[27]   It is these prescripts that the department fell foul of. The department was not entitled to take a short cut before the process of procurement was complete so as to avoid a litany of litigations between it and the applicant.

 

[28]   That generally speaking the purpose of making a settlement agreement an order of Court is that, in the event of non-compliance, the party in whose favour it operates should be able to enforce it through execution or contempt proceedings is well established. Depending on the nature of the order, a party in whose favour it was made may first issue a mandamus for compliance. Failing compliance, it may then consider committal for contempt of Court.[9]

 

[28]   It cannot be gainsaid that settlement agreements are beneficial to the smooth administration of justice. They bring about swift resolution of disputes between the parties and the wheels of justice are swiftly lubricated. They bring about finality to the lis between the parties as there are very limited grounds of an appeal after the order by agreement. They relieve the judges of the duty to write judgments on issues capable of resolution by the parties themselves. Although the door for coming back to court on the same issues is not completely closed this may be limited to enforcement of the settlement or a Court order incorporating the same or correction of patent errors. The Court will be spared of going through the truncated litigation in regard to issues which culminated in the agreement itself.

 

[29]   Notwithstanding the above the Court is still not relieved of the duty to ensure that its orders are lawful and capable of being enforced. A Court making a settlement agreement an order of Court will not do so by a mere say so of the parties. In Volar IT[10] relying on Eke the learned Judge of Appeal said:

“[52]    In Eke v Parsons,[11] a contractual dispute between two private individuals, the Constitutional Court considered the nature and effect of settlements being made court orders. Madlanga J held that first, it is not anything agreed to by the parties that can be made an order: the order must be ‘competent and proper’ in the sense that it relates to the dispute with which the court was seized.[12] Secondly, it may not be objectionable from either a legal or a practical perspective: its terms, in other words, must ‘accord both with the Constitution and the law’ and they may not be ‘at odds with public policy”’.[13]

 

 

[30]   It follows therefore that settlement agreements concluded in circumstances where the procurement prescripts were disregarded are not enforceable by reason of their invalidity.[14]The signing of the settlement agreement in casu was also not in accordance with regulation 16.A6.4. The reasons for deviation had nothing to do with impracticability or emergency. Instead it was signed to curb a string of litigation matters between the parties.[15]It is the duty of the Courts to ensure that organs of State operate within the limits of the law. In a number of cases it has been held that 'Courts are required by the Constitution to ensure that all branches of government act within the law and fulfil their constitutional obligations.[16]” It is the only way to curb the scourge of corruption. Consequently the application cannot be granted.

 

Costs

 

[31]   The parties have agreed that an appropriate order in respect of costs is that each party should pay its own costs. In light of the turn of events in the matter I agree.

In the result the following order will issue.

1.      The application is dismissed

2.      Each party is to pay its own costs.

 

 

B RTOKOTA

JUDGE OF THE HIGH COURT

 

 

 

 

APPEARANCES

For the applicant:                         Mr Skoti

Instructed by Gordon McCune Attorneys

For the Respondents:                  Mr R Quin SC

                                                             Mr Young

Instructed by State Attorneys

Date of hearing:                   24 September 2020

Date delivered:                     3 November 2020

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