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ESDA Properties (Pty) Ltd v Amathole District Municipality and Others (2635/2014) [2014] ZAECGHC 76 (18 September 2014)

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IN THE HIGH COURT OF SOUTH AFRICA

EASTERN CAPE DIVISION, GRAHAMSTOWN

                                                                                    CASE NO: 2635/2014

                                                                                    DATE HEARD: 04/09/2014

                                                                                    DATE DELIVERED: 18/09/14

NOT REPORTABLE

In the matter between:

ESDA PROPERTIES (PTY) LTD                                                                            APPLICANT

and

AMATHOLE DISTRICT MUNICIPALITY                                                     1ST RESPONDENT

SALDOSOL INVESTMENTS (PTY) LTD                                                    2ND RESPONDENT

SKG PROPERTIES                                                                                     3RD RESPONDENT

SABBSAL INVESTMENTS (PTY) LTD                                                       4TH RESPONDENT

FILIGREE TRADING & INVESTMENTS 1071 (PTY) LTD                          5TH RESPONDENT

STHATHU FUNDING (PTY) LTD

(in joint venture with VALLEY HEIGHTS PROPERTY

DEVELOPMENT)                                                                                        6TH RESPONDENT

 

CAPITAL PROPERTY FUND 7TH RESPONDENT Tender – whether, in circumstances, applicant obliged to exhaust internal remedies in terms of s 7(2) of the Promotion of Administrative Justice Act 3 of 2000 – whether successful tenderer preferred to other bidders and tender pre-determined in its favour – whether required that successful tenderer be owner of building it let to first respondent.

JUDGMENT

PLASKET J

[1] The applicant, ESDA Properties (Pty) Ltd (ESDA), has applied to review and set aside a tender awarded by the first respondent, the Amathole District Municipality (the ADM) to the second respondent, Saldosol Investments (Pty) Ltd (Saldosol). The matter is opposed by these respondents as well as the third respondent, SKG Properties (SKG).

[2] Three issues arise for determination. They are: (a) whether I am precluded from dealing with the review because ESDA has not exhausted its internal remedies; (b) whether the award of the tender is irregular on account of it being rigged in favour of Saldosol; and (c) whether the fact that Saldosol does not own the building it leased to the ADM pursuant to the tender renders the award of the tender irregular.

[3] Given the contents of the founding papers, it is necessary to stress at the outset that review is not concerned with whether the decision to award the tender was ‘right’ or ‘wrong’, or a ‘good’ decision or a ‘bad’ decision.  Review is concerned instead with whether the decision was regular or irregular – with whether or not there has been a failure of administrative justice in the sense that the tender was awarded contrary to the requirements of lawful, reasonable and procedurally fair administrative action.[1] In order to establish this, the applicant will have to prove one or more ground of review. The grounds of review for administrative action are codified in s 6(2) of the Promotion of Administrative Justice Act 3 of 2000 (the PAJA).

[4] These being motion proceedings in which final relief is claimed, I am required to determine the facts in accordance with the well-known rule in Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd.[2]

It seems to me, however, that this formulation of the general rule, and particularly the second sentence thereof, requires some clarification and, perhaps, qualification. It is correct that, where in proceedings on notice of motion disputes of fact have arisen on the affidavits, a final order, whether it be an interdict or some other form of relief, may be granted if those facts averred in the applicant's affidavits which have been admitted by the respondent, together with the facts alleged by the respondent, justify such an order. The power of the Court to give such final relief on the papers before it is, however, not confined to such a situation. In certain instances the denial by respondent of a fact alleged by the applicant may not be such as to raise a real, genuine or bona fide dispute of fact . . . If in such a case the respondent has not availed himself of his right to apply for the deponents concerned to be called for cross-examination under Rule 6(5)(g) of the Uniform Rules of Court . . . and the Court is satisfied as to the inherent credibility of the applicant's factual averment, it may proceed on the basis of the correctness thereof and include this fact among those upon  which it determines whether the applicant is entitled to the final relief which he seeks. . . Moreover, there may be exceptions to this general rule, as, for example, where the allegations or denials of the respondent are so far-fetched or clearly untenable that the Court is justified in rejecting them merely on the papers . . .’

[5] I turn now to the three issues that I have identified.

The exhaustion of internal remedies

[6] It is necessary to deal first with whether ESDA was under a duty to exhaust internal remedies because this issue can be definitive: if it was under such a duty, that will be the end of the matter as it has not sought to exhaust internal remedies or applied for exemption from having to do so.

[7] It is, by now, trite that the award of a tender is an administrative action and that the review of such a decision takes place in terms of s 6(2) of the PAJA.[3] Section 7(2) of the PAJA places a procedural hurdle in the way of a party who wishes to review an administrative action. It provides:

(a) Subject to paragraph (c), no court or tribunal shall review an administrative action in terms of this Act unless any internal remedy provided for in any other law has first been exhausted.

(b) Subject to paragraph (c), a court or tribunal must, if it is not satisfied that any internal remedy referred to in paragraph (a) has been exhausted, direct that the person concerned must first exhaust such remedy before instituting proceedings in a court or tribunal for judicial review in terms of this Act.

(c) A court or tribunal may, in exceptional circumstances and on application by the person concerned, exempt such person from the obligation to exhaust any internal remedy if the court or tribunal deems it in the interest of justice.’

[8] The import of s 7(2) is clear. If a party has not exhausted its internal remedies and has not been exempted from the obligation to do so, a court may not entertain an application for review and must direct the party to first exhaust its internal remedies before it institutes an application for review.[4]

[9] Two provisions have been identified by Saldosol and SKG as internal remedies that the applicant was obliged to exhaust before bringing this application. The first is created by ss 108 and 109 of the ADM’s supply chain management policy which creates a dispute resolution mechanism that a person aggrieved by a decision may utilise. It provides that a person aggrieved by a decision or action taken in the implementation of the supply chain management system may lodge an ‘objection or complaint’;[5] that the accounting officer must appoint an independent and impartial person to ‘assist in’ the resolution of the dispute;[6] that this person must ‘strive to resolve’ the dispute promptly and submit monthly reports to the accounting officer;[7] that, if a dispute has not been resolved within 60 days, the dispute  may be referred to the provincial treasury;[8] and if the provincial treasury is unable to resolve the dispute, it may be referred to the national treasury.[9] Finally, s 109 ‘must not be read as affecting a person’s rights to approach a court at any time’.[10]  

[10] In my view it was, for two reasons, not obligatory for ESDA to have first utilised this mechanism before applying for the review of the award of the tender.

[11] The first is that ss 108 and 109 do not create an internal appeal or review in which the decision-maker has the power to confirm, substitute or vary the decision complained of. Instead, it creates a dispute resolution mechanism in which a person, with no decision-making powers, is appointed to assist the parties to resolve their dispute, acting, it would appear, as a mediator or conciliator. This is not an internal remedy contemplated by s 7(2) of the PAJA.[11] The second reason is that s 109(6) provides in express terms that a party has a choice of either using the dispute resolution mechanism or approaching a court. In other words, it does not operate to prevent a party from approaching a court ‘at any time’.

[12] The second provision that is pointed to as an internal remedy that ESDA was required to exhaust before bringing this application is s 62 of the Local Government: Municipal Systems Act 32 of 2000. This section provides:

(1) A person whose rights are affected by a decision taken by a political structure, political office bearer, councillor or staff member of a municipality in terms of a power or duty delegated or sub-delegated by a delegating authority to the political structure, political office bearer, councillor or staff member, may appeal against that decision by giving written notice of the appeal and reasons to the municipal manager within 21 days of the date of the notification of the decision.

(2) The municipal manager must promptly submit the appeal to the appropriate appeal authority mentioned in subsection (4).

(3) The appeal authority must consider the appeal, and confirm, vary or revoke the decision, but no such variation or revocation of a decision may detract from any rights that may have accrued as a result of the decision.

(4) . . .

(5) . . .

(6) . . .’

[13] A decision on appeal may not, in terms of s 62(3), ‘detract from any rights that may have accrued as a result of the decision’ appealed against. This section was interpreted in Reader & another v Ikin & another.[12] Davis J, for a full bench, held that the section meant that ‘once a right accrues as a result of a decision, that decision cannot be reversed on an appeal if the reversal takes away the right initially granted’.[13] In the Supreme Court of Appeal, this interpretation was confirmed to be correct, albeit in a split decision. In City of Cape Town v Reader & others[14] Lewis JA, for the majority, held that a decision can only be appealed against in terms of the section if ‘the outcome of the appeal does not detract from the rights of the successful applicant’.[15] In this case, a successful appeal would undoubtedly detract from the rights of Saldosol.

[14] I am aware that, in Evaluations Enhanced Property Appraisals (Pty) Ltd v Buffalo City Metropolitan Municipality & others,[16] the court appeared to accept that s 62 provided an internal remedy that the applicant had been required to exhaust prior to launching an application to review the award of a tender. That judgment was concerned with whether the duty to exhaust internal remedies arose at all, it being argued that it did not because the applicant had not been notified of the decision or given reasons for it, and, when this argument was rejected, what the consequences were for an applicant who has not exhausted internal remedies and has not applied for exemption prior to launching a review application.  The full bench and the parties appear to have assumed the availability of a s 62(1) appeal and the interpretation of s 62(3) did not arise. It is, consequently, distinguishable. In any event, I am bound by the majority judgment in City of Cape Town v Reader & another.[17] 

[15] In the result, I conclude that there was no internal remedy available to ESDA that it could have exhausted. That being so, s 7(2) of the PAJA does not stand in the way of the application being considered on its merits.

The merits

[16] I turn now to the merits of the application. I do so with some diffidence because I have experienced a great deal of difficulty in identifying, within the welter of relevant and irrelevant material in the lengthy, often vague and repetitive founding affidavit, the nub of ESDA’s case. It appears to be that the entire tender was manipulated to favour Saldosol and was designed to ensure that the tender was awarded to it.

[17] Before dealing with that issue, it is necessary to say something about the contention made on behalf of ESDA that its bid was compliant. The invitation to tender stipulated that the ADM wanted a building that would be within five kilometres of the East London city hall that would provide 10 000 to 15 000 square metres of space and 500 parking places. ESDA’s building met the first requirement but it did not provide the required space or parking places. It was suggested that this did not matter because the ADM did not need 10 000 or more square metres of space and so should have found ESDA’s bid to have been compliant.

[18] It is not for ESDA to say what the ADM’s needs are and much less for the court to ignore what it had decided it needed. There has been no challenge to the validity of the conditions so they must be accepted as being applicable. There is simply no merit in this point and it only has to be stated for its lack of merit to be apparent. What it also means is that, even if ESDA succeeded in setting aside the award of the tender, there could be no talk of it being awarded the tender, either by the court or once the matter had been remitted to the ADM for fresh consideration. 

[19] I now return to the nub of the case – whether the award of the tender was tainted by bad faith as a result of it being pre-determined. If that is established, of course, it will mean that the award of the tender was invalid for want of compliance with the requirements of proper procurement that flow from s 217(1) of the Constitution. This section provides:

When an organ of state in the national, provincial or local sphere of government, or any other institution identified in national legislation, contracts for goods or services, it must do so in accordance with a system which is fair, equitable, transparent, competitive and cost-effective.’

[20] ESDA’s case seems to be that because of certain factors Saldosol must have had prior knowledge of the bid requirements and the ADM must have identified Saldosol as the party with whom it wanted to contract and manufactured the bid requirements so that Saldosol and nobody else would qualify. Its allegations of impropriety go further to include that the ADM and Saldosol conspired to create a false bid requirement – that the duration of the lease would be three years – knowing that it would in fact be for a longer period. 

[21] The factors to which ESDA points are: the short period for the submission of bids; the short period for preparing the building for occupation; the requirement that the building had to be within a certain distance of the East London city hall; and the fact that it was stated by the ADM that the lease of the premises would be for three years, pending its move to Stutterheim. 

[22] What emerges clearly from ESDA’s founding papers is that its director, Mr Dean De Villiers, who deposed to the founding and supplementary affidavit, is prepared to make serious allegations of a fraudulent conspiracy on the part of the ADM and Saldosol without putting forward facts, but relying entirely on speculation and the drawing of dubious inferences. When his version is boiled down to its basics, it is the following: because Saldosol’s building complied with the ADM’s tender requirements, the tender must have been rigged.

[23] ESDA’s allegations and speculation are, however, comprehensively debunked and refuted in the affidavits filed on behalf of the ADM and Saldosol and SKG. I do not intend burdening this judgment with a lengthy exposition of their denials.     It is not, in my view, necessary to deal with the detail of the answering affidavit filed on behalf of Saldosol and SKG. I shall, however, deal with the answering affidavit filed on behalf of the ADM, deposed to by Mr CH Bhana, its general manager for supply chain management.

[24] He explained that the ADM found itself in chaotic circumstances because its offices were situated in various buildings ‘scattered throughout East London’. These buildings provided inadequate office space resulting in overcrowding. The facilities were inadequate for ADM’s needs and some of the buildings were in such a state that they were potentially harmful to employees and members of the public. So bad is the condition of some of them that Bhana stated that they ‘should, strictly speaking, be condemned as being unsuitable for office accommodation’. In addition, most were being occupied on a month to month basis.

[25] Because the current situation was intolerable, it was decided to obtain a single, suitable building in East London to house all of the ADM’s councillors and employees. As a result, it was decided to ‘embark on a competitive tender process, but to do so in an expedited manner having regard to the current unacceptable and chaotic situation which still exists’.

[26] The ADM had also taken a decision to relocate most of its operations to Stutterheim because it is more central than East London. To do this, a purpose-built building would have to be constructed. That process is proceeding and requests for proposals (in a public, private partnership) have been called for. This means that the lease for the building in East London had, of necessity, to be for limited duration.

[27] On 20 December 2013, the council approved the proposal that had been placed before it concerning obtaining a single building in East London and authorised the municipal manager ‘to undertake all the necessary procurement processes’. As a prelude to this decision, a survey had been conducted to determine the costs involved. It had been determined that the office space occupied by the ADM in the various leased buildings and one that it owned amounted to a little over 12 000 square metres. It was determined that in the new building, with space being more optimally used, a minimum of 10 000 square metres would be required, hence the tender containing a requirement for the building of between 10 000 and 15 000 square metres. A similar assessment was done in respect of parking requirements.

[28] It was decided that it would be most convenient for all concerned if the building was in close proximity to the central business district in East London. Most of the ADM’s employees lived in the area. In addition, because of the urgency involved, the ADM wanted a building that ‘only needed to have changes made to the interior and be ready for occupation after a three month period’.

[29] In respect of the short period for the submission of bids, Bhana makes the points that: (a) the matter was urgent; (b) the municipal manager granted the request to reduce the time from the usual 30 days to 14 days; (c) the shortening of the period was reported to the council; and (d) a number of bidders, including ESDA, were ‘quite able to complete bids within the specified time period’. As far as the allegation that the building had been pre-identified and the tender then rigged to suit Saldosol, Bhana said:

Corporate Services was aware that Slipknot Investments 777 (Pty) Ltd had substantial office space available in the Waverley Park office complex. The ADM was not sure  if other properties which meet the minimum space requirement are available in East London. It had previously done an assessment of the type of rental and parking that could be made available as reported on [annexure] CB1. It was therefore decided to put the matter on tender and obtain a building which only required the interior to be adapted. This dispenses with the need to prepare building plans which require BCM approval. We could not afford a position where between a year and eighteen months would elapse before building works could be completed.

I deny, however, that any bidder was pre-determined or that the specifications were drawn in such a way as to prefer one bidder above another. The intention was to get accommodation as soon as possible and this made the matter urgent.’

[30] The basis of ESDA’s case is similar to the case that Ponnan JA was confronted with in Manong and Associates (Pty) Ltd v Minister of Public Works & another[18] when he said:

I have quoted in extenso from the affidavits, because they illustrate, I do believe, that if this were a horse race, the appellant has not yet made its way out of the starting stalls. At best for the appellant, the hypothesis advanced by it is a rather tentative and speculative one. The relief sought is not grounded in any factual foundation but rather on conjecture, perception and supposition.’

[31] Bhana’s affidavit puts paid to every plank of the conspiracy theory postulated by De Villiers. It is a full explanation of how and why the tender process was engaged in and why it resulted in the award of the tender to Saldosol. On the papers before me, there is not so much as a tittle of evidence of impropriety on the part of either the ADM or Saldosol, let alone a conspiracy between them. I therefore accept on the papers before me that preference was not afforded to Saldosol on the basis of it being a pre-determined and preferred bidder.

Ownership of the building

[32] It is contended by ESDA that Saldosol does not own the building that it has let to the ADM and because it has not entered into a joint venture with the owner, Slipknot Investments 777 (Pty) Ltd (Slipknot), this renders the award of the tender irregular.             

[33] The short answer to this point is that it was not a tender requirement that the successful tenderer had to be the owner of the building concerned. The fact that Saldosol was not the owner of the building was disclosed to the ADM and Slipknot, which, like Saldosol, was part of the Slipknot group of companies, authorised Saldosol to offer the building in the bid.

[34] It was also not a requirement of the tender that, in circumstances such as these, a joint venture had to be entered into. Saldosol and Slipknot could have entered into a joint venture agreement if they had wanted to but they did not have to do so.

[35] Bhana stated in his affidavit that while an agreement between Saldosol and Slipknot may have been required inter se the fact that Saldosol did not own the building posed no problem for the ADM and no joint venture agreement was required as far as it was concerned. There is no merit in this point.

The order

[36] The application is dismissed with costs. 

_______________________

C Plasket

Judge of the High Court

 

 

APPEARANCES

Applicant: A Beyleveld SC instructed by Leon Keyter Attorneys

First respondent: R Buchanan SC instructed by Netteltons

Second and third respondents: LM Malan instructed by Neville Borman and Botha


[1] Joubert Galpin Searle Inc & others v Road Accident Fund & others 2014 (4) SA 148 (ECP) paras 58-59.

[2] Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd 1984 (3) SA 624 (A) at 634H-635C.

[3] Joubert Galpin Searle Inc (note 1) para 35.

[4] Evaluations Enhanced Property Appraisals (Pty) Ltd v Buffalo City Metropolitan Municipality & others [2014] 3 All SA 560 (ECG) paras 72-74.

[5] Section 108.

[6] Section 109(1).

[7] Section 109(3).

[8] Section 109(4).

[9] Section 109(5).

[10] Section 109(6).

[11] Reed & others v Master of the High Court of SA & others [2005] 2 All SA 429 (E) paras 20-21, 25; Lohan Civil-Tebogo Joint Venture & others v Mangaung Plaaslike Munisipaliteit & others (508/2009) [2009] ZAFSHC 21 (27 February 2009) paras 32-33.

[12] Reader & another v Ikin & another 2008 (2) SA 582 (C).

[13] Para 25.

[14] City of Cape Town v Reader & others 2009 (1) SA 555 (SCA).

[15] Para 33. At para 36 Lewis JA expressly held that the court below’s interpretation of s 62(3) ‘should be affirmed’.

[16] Note 4.

[17] Note 14.

[18] Manong and Associates (Pty) Ltd v Minister of Public Works & another 2010 (2) SA 167 (SCA) para 30.