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IN THE HIGH COURT OF SOUTH AFRICA

EASTERN CAPE LOCAL DIVISION (GRAHAMSTOWN)

Reportable / Not Reportable

Case No: 1330/2018

In the matter between:

SENQU LOCAL MUNICIPALITY                                                           Applicant

and

DIBANANI CONSULTING CC                                                               Respondent

JUDGMENT

NQUMSE AJ:

Introduction:

[1]        The applicant, a local municipality, launched an application against the respondent in which the order it seeks can be summarized as follows:

1.1       directing the appointment of the respondent on 8 April 2005 for the construction and rehabilitation of all access roads, river crossings and storm water control in wards 7, 8, 9 and12 of the applicant’s municipal area inconsistent with and contrary to section 33 of the Local Government : Municipal Finance Management Act, No. 56 of 2003, the rule of law and section 217 of the Constitution of the Republic of South Africa, 1996 and invalid.

1.2       the order in paragraph 1 shall have prospective effect only and shall not affect the validity of:

1.2.1   any contract or part thereof or works completed by the respondent to the date of the order;

1.2.2   any contract or part thereof in respect of the completion of works already commenced by the respondent at the date of the order.

            1.3       Costs of this application.

Background

[2]        The applicant is the Senqu Local Municipality with its principal place of administration in Lady Grey.  It appointed the respondent, Dibanani Consulting CC, a close corporation, on 8 April 2005 to provide consulting engineering services for the construction and rehabilitation of access roads, river crossings and storm water control in wards 7, 8, 9 and 12.  The appointment of the respondent which is extant up to date appears to be for an indefinite period.

Facts:

[3]        Mxolisi Yawa, the municipal manager of the applicant, deposed to the founding affidavit on behalf of the applicant in which he stated that the respondent was appointed on 8 April 2005 to provide the services indicated in paragraph [2] above.  He further stated that according to a letter of appointment of the respondent which he compiled, the respondent was not appointed to construct the access roads but to assist with the matters set out in paragraph 4.1 thereof; namely, feasibility studies and preliminary designs; designs and compilation of tender documents; and production of working drawings.  This work was done at risk because the payment of 65% professional fee of the consultant would be paid to the consulting engineer only once the project was approved by national government as qualifying for the Municipal Infrastructure Grants (“MIG”) funding.   

[4]        The MIG funding for wards 7, 8, 9 and 12 was approved on 18 October 2005 in the amount of R5 109 927.00. 

[5]        Based on the advice of Douglas Botha Attorneys, the appointment of the respondent was reconfirmed on 23 April 2008 and accepted by the respondent on 5 May 2008.  The letter of appointment annexed to the founding affidavit as “MMY 4.2” contained the following terms:

“1.        That you have been appointed for this project as a whole and that it will be implemented in separate phases, and that your appointment is valid for the whole project.

2.         That this Project will be implemented on the availability of MIG Funding and subject to Senqu Municipality’s Infrastructure Development Policy and the conditions set out in your original Letter of Appointment.

3.         That this project will be implemented in separate phases and that you have accepted appointment for the whole Project, including all phases of this Project, irrespective of date of implementation of each separate Phase of this Project.”

[6]        Yawa further stated that according to the letter “MMY 6” and “MMY7” which were sent to the respondent, instructions were that the municipality would not procure services of any other consultant but Dibanani.  On 25 October 2010 acting on a legal opinion from other attorneys, the applicant attempted to cancel the appointment of the respondent but it was met with resistance.  The respondent’s contention was that the project was divided into phases due to budget constraints and could therefore not be treated as a once-off project.  Its response prompted the applicant to direct another letter annexed to the founding affidavit as “MMY 11” dated 11 February 2011 in which the applicant explained to respondent, that the cancellation of the appointment is only in respect of future work still to be done.  At this stage the respondent was on the final phase of the project.  However, in order to be fair, the applicant took into account work belonging to the fourth project which had the value of R15 million as having been commenced with.  For sake of clarity I find it necessary to reproduce the contents of the letter which stated the following:

“We refer to our letter 15/12 dated 25 October 2010.

It is apparent that the wording in the said correspondence could have been misunderstood in as far as existing contracts were concerned.  Any project that is under construction or that has been commenced must be completed until the end of the retention period.

Project R/EC/7604/10/12 phase 4 as approved by MIG for the amount of R15, 000, 000.00 will be regarded as one of the aforesaid projects.

You will be informed as to when to commence with the above project.”

[7]        He further stated that in 2017 the applicant issued a tender for consulting engineering services in respect of Ward 8 (IDP project 232).  The respondent protested this move claiming that it had a valid contract with the applicant for work which included the work covering ward 8.

[8]        Whilst the dispute between the respondent and the applicant still remained unresolved in respect of the project of ward 8, the applicant advertised a tender for consulting services for ward 7.  Once again the respondent demanded the withdrawal of the said advert claiming that it infringed its constitutional rights under the appointment it holds.

[9]        This prompted the applicant to address a letter to the respondent in which it withdrew the advert and apologized for the error to advertise the tender for ward 7.  However, in the same letter, it raised the contention that the appointment of respondent is unlawful for lack of non-compliance with section 33 of the Municipal Finance  Management Act, No. 56 of 2003 (“MFMA”).[1]  Once again this contention was resisted by the respondent.

[10]      Yawa further stated that the applicant does not rely for the review and setting aside of its own decision on the Promotion of Administrative Justice Act, No 3. of 2000 but relies on the rule of law and its principle of legality.  It is the applicant’s further contention that the issue of delay in bringing the application does not arise since the appointment of the respondent constitutes a “continuous wrong” that binds the applicant indefinitely into the future to commit illegal administrative activities.  The result thereof is that the respondent has acquired a right to perform all the work relating to the project without any tender process which is open for fair competition.  It is further his contention that the appointment as it stands is an affront to section 217 of the Constitution of the Republic of South Africa and contrary to section 6(2)(i) of the Promotion of Administrative Justice Act, No. 3 of 2000 (“PAJA”) alternatively the principle of legality.  The consequence thereof is that the appointment is invalid.

[11]      The respondent’s answering affidavit by Peter Swanepoel, who is the sole member of the respondent, briefly states that, notwithstanding a notice he gave in terms of Rule 35 to obtain certain documents from the applicant, its response demonstrated a general reluctance to provide those documents.  According to him the applicant failed to file a complete record of the decision exposing any and all the advantages and negative facts underscoring its case.   He refuses to believe that the appendices to the founding affidavit constitute the sum total of the documents underscoring the decision to appoint Dibanani and other consultants.  Nor does it disclose fully the events preceding the physical appointment of Dibanani and other consultants and the manner in which the expenses thereby incurred had been budgeted for.  He stated that Dibanani has vested rights for the last thirteen (13) years and has an accumulation of fees of anything between R7 million and R10 million on the remaining work.  He further stated that the applicant was advised by his attorneys as far back as eight years ago that there was nothing untoward in the appointment of Dibanani.

[12]      He also stated that the decision of the applicant to terminate Dibanani’s contract is actuated by ulterior motives since there is no other party that has been affected by his appointment.  According to him the agreement was that the work for which the respondent was engaged was on an ad hoc basis as and when the ministerial grant is received and this arrangement was to expire only when the work for the project in wards 7, 8, 9 and 12 has been completed.  He also denies that any of the projects that have been performed extended beyond three years.  He also points out another firm, previously known as Sektor Consulting, which was appointed in 2005 at the same time as Dibanani, was still performing work relating to the Lady Grey Bulk Work project unabated.  He also contends that should the funds have been sufficient and available the whole project would have been done in 2015. 

[13]      He avers that Dibanani’s appointments were made on an “own risk” basis since engineers had to assist with the securing of Ministerial Grants by submitting, inter alia, designs.

[14]      In reply Yawa stated that the respondent has not provided details of the information or documents that it claims were withheld by the applicant.  He further contends that since the applicant has not brought a review in terms of Rule 53 or under PAJA, it was not obliged to file a record of the decision it seeks to set aside.  He further contends that all documents relevant to the appointment of the respondent were filed accordingly.  To this end, he contends that the respondent is in possession of documents relating to the implementation of the project and could have annexed those which it finds relevant.  He admits that the respondent, together with the other consultants, were selected from a roster and no competitive process was followed in the compilation of the roster.  Instead, the MIG projects were divided between the six consultant engineer firms who were also responsible for compiling business plans which were used to apply for managerial grant funds.  He further stated that this is no longer the case under the Division of Revenue Act, No. 1 of 2018 (“DORA”) a process according to which funding is made available every year end to be used at the discretion of the municipality for the provision of infrastructure in accordance with the priorities in the IDP.

[15]      He further stated that the six consultant engineering firms between which the MIG projects were divided all had their appointments cancelled for the same reasons underlined in this application.  The last termination was Ninham Shand (currently known as Aurecon) whose termination was done by a letter dated 26 February 2018 which is annexed to the founding affidavit as “MMY 23”.

[16]      He further contends that it is the applicant’s case that the appointment was in non-compliance with section 33 of the MFMA and section 217 of the Constitution as well as in non-compliance with the Preferential Procurement Policy Framework Act, No. 5 of 2000 (“PPPFA”).  He contends that the absence of complaints cannot seek to cause the applicant to tolerate implementation of “illegal contracts”.

[17]      He also denies that there is someone else waiting to replace the respondent.  If a new service provider is to be appointed, it will be appointed in terms of an open and competitive public procurement process which complies with the relevant legislation and policies.  He further stated that the duration of the project was estimated to cover nine financial years.  It was on reflection of its decision that the municipality found out that the consulting component should have been placed out to tender for the separate phases as is done for the construction components.

[18]      The issues to be determined can be formulated as follows:

18.1    Is the appointment of Dibanani in violation of section 217 (1) of the Constitution of the Republic of South Africa and section 33 of the Municipal Finance Management Act?

18.2    Has the municipality followed the correct procedure in seeking to have its impugned decision set aside by the court?

18.3    What is the effect of the lapse of time since the appointment and the apparent delay in bringing this application?

[19]      Counsel for the applicant submitted that the applicant had a duty to approach the court to set aside its own unlawful conduct.  In support of this argument he relied on Merafong City Local Municipality v Anglo Gold Ashanti Limited.[2]  He also argued that the decision of the applicant was in contravention of section 33 of the Municipal Finance Management Act.  To this end the appointment is contrary to the principle of legality and invalid. 

[20]      In support of the argument under the principle of legality he submitted that the appointment was for an indefinite period with an unclear scope and therefore vague.  He also submitted that the appointment, being in direct conflict with the Constitution and contrary to section 33 of the Municipal Finance Management Act, any contract concluded pursuant thereto must be declared unlawful and invalid.  However, the declaration it seeks should not affect the accrued rights of the respondent.  He also argued that since the appointment of respondent constitutes a continuous wrong, the appointment generates a fresh illegality every time the funding becomes available for consulting engineering services for the construction and rehabilitation of access to roads, river crossings and storm water control in wards 7, 8, 9 and 12 of the municipality.  His argument in the alternative is that even if the rule against unreasonable delay finds application, section 172 (1) (a) of the Constitution enjoins a court to declare invalid any law or conduct that it finds to be inconsistent with the Constitution.  Relying on State Information Technology Agency Soc Ltd v Gijima Holdings (Pty) Ltd[3] he asked the court, in exercising its remedial powers under section 172 (1) (b) of the Constitution, not to interfere with the accrued rights of respondent, both in terms of the payments made for past work or the continuation and payment for work already commenced.

[21]      In his heads of argument respondent pointed out that applicant does not contend that when the contract was concluded in 2005, section 217 of the Constitution was violated.  This is therefore not the case of applicant.  I should hasten to say that the submission of respondent is clearly wrong.  The contention that the appointment is contrary to section 217 of the Constitution is clearly borne out in the founding affidavit of the applicant where he states in paragraph 38, that the appointment of Dibanani on 8 April 2005 was in direct conflict with the core principles applicable to public procurement as contained in section 217 (1) of the Constitution.  In paragraph 40 of the affidavit, he continues to state that not only is the appointment inconsistent with section 217 (1) of the Constitution but it also did not comply with section 33 of the MFMA. 

[22]      Applicant has further advanced this contention in his argument that the appointment is contrary to section 217 (1) of the Constitution.  I therefore cannot agree with the submission of respondent in this regard.

[23]      Section 217 of the Constitution provides that:

“(1)      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 service, it must do so in accordance with a system which is fair, equitable, transparent, competitive and cost-effective.”

[24]      It therefore follows that an organ of state is empowered in terms of the Constitution to approach the court to declare its decision which was taken in contravention of the Constitution invalid and to be set aside.  (See Department of Transport and Others v Tasima (Pty) Ltd.[4])  In light thereof I do not see the need to say anything further on this point.

[25]      I turn to deal with the procedure adopted by applicant to bring this application.

[26]      After judgment was reserved in this matter the parties by agreement favoured me with a judgment of Nelson Mandela Bay Metropolitan Municipality v Erastyle (Pty) Ltd and Others[5] delivered by Goosen J.  The learned judge in making reference to the findings made in Jockey Club of South Africa v Alan Forbes[6] concerning the utilization of rule 53 of the Uniform Rules stated:

“No purpose could be served by the facilitative procedure of the rule in circumstances where the plaintiff, who seeks the relief, is possessed of both the reasons for the decisions and the record relevant thereto.   In any event such procedural benefits as the Rule confers upon a party seeking to impugn administrative action or conduct on review can be waived by that party”

[27]      My understanding of the effect of the judgment by Goosen J, is that Rule 53 is not obligatory and peremptory in a case such as this one.  This therefore should be dispositive of the contention that the applicant ought to have followed a review procedure under Rule 53 to bring this application.  I am therefore of the view that the applicant was not obligated to invoke rule 53 in the application for review of its impugned decision.

[28]      I turn now to deal with the question of delay.  The respondent has argued strongly that the applicant’s delay of thirteen years before bringing this application offends the principle that a court will not entertain a review when it is not instituted with the expediency such relief deserves.  The applicant’s response is that the appointment of the respondent generates a fresh illegality every time the funding becomes available and it therefore constitutes a continuous wrong.  Applicant argued in the alternative that even if the court were to find that the application is unreasonably delayed, section 172(1)(a) of the Constitution enjoins the court to declare invalid any law or conduct that it finds to be inconsistent with the constitution.

[29]      In Tasima,[7] Khampepe J referring to Khumalo[8] said, “This court endorsed the approach adopted in Gqgwetha[9] that a plea of undue delay in bringing a review application by a state organ is addressed by examining (1) whether, on the facts the delay is unreasonable or undue; and, if so (2) whether the court should exercise its discretion to overlook the delay and nevertheless entertain the application.”

[30]      It cannot be gainsaid that the delay in this application is extremely inordinate.  Applicant does not furnish reasons why it failed to launch the application at the earliest opportunity to ameliorate the extent and the effect of the illegal decision it took.  It is trite law that whenever a party seeks condonation for delay, a full explanation that covers the entire period is necessary.

[30]      In the founding affidavit by Yawa, applicant avers that pursuant to a legal opinion obtained on 25 October 2010 it attempted to cancel the appointment and everytime it attempted to do so it failed.  However, the only time they approached the court with a review application is in 2018 and nothing much is said about the period between 2010 and 2018.  Even though there may have been correspondence back and forth between the parties in which the intended cancellation of the appointment was raised, it still does not fully explain why the applicant has delayed at the least for a period of almost eight years before this application was launched.

[31]      In Tasima[10] Khampepe J continued and said, that the court had emphasized in Khumalo that an important consideration in assessing whether a delay should be overlooked is the nature of the decision. 

[32]      In Gqwetha v Transkei Development Corporation Ltd[11] Nugent JA stated that it is important for the efficient functioning of public bodies (I include the first respondent) that a challenge to the validity of their decisions by proceedings for judicial review should be initiated without undue delay.  The rationale for that longstanding rule – reiterated most recently by Brand JA in Associated Institutions Pension Fund v Van Zyl[12]– is twofold:  First, the failure to bring a review within a reasonable time may cause prejudice to the respondent. Secondly, and in my view more important, there is a public interest element in the finality of administrative decisions and the exercise of administrative functions. 

[35]      Nugent JA further referred to Wolgroeiers Afslaers (Edms) Bpk v Munisipaliteit van Kaapstad[13] where Muller JA stated thus:

‘It is desirable and important that finality should be arrived at within a reasonable time in relation to judicial and administrative decisions or acts. It can be contrary to the administration of justice and the public interest to allow such decisions or acts to be set aside after an unreasonably long period of time has elapsed - interest reipublicae ut sit finis litium … Considerations of this kind undoubtedly constitute part of the underlying reasons for the existence of this rule.’

[36]      As indicated above the applicant has not explained its delay of thirteen (13) years except to rely on the aspect that the existence of the contract with Dibanani constitutes a continuous wrong.  Nothing turns on this explanation because the continuous wrong is a natural consequence for the delay of applicant bringing a review application to set aside its decision.  On the question whether the delay is unreasonable or undue.  Upon an investigation of the facts before me I can come to no other finding except that the delay was indeed unreasonable.

[37]      The applicant sought to suggest that section 172(1)(a) of the Constitution can cure an unreasonable delay that is unexplained.  I disagree.  Section 172 could never have been intended to relieve a party who wishes to bring an application for review to escape its obligation to seek condonation for such delay and to support such condonation application with a full set of facts explaining the reasons for the delay, something the applicant has failed to do in this matter.

[38]      As indicated above in light of the facts placed before me I am unable to exercise my discretion in favour of the applicant to grant a condonation and as a result the application ought to fail.

[39]      The following order is made:

            1.         The application is dismissed with costs.

________________________

V M NQUMSE

ACTING JUDGE OF THE HIGH COURT

Counsel for the applicant              :       Adv. S Grobler

Instructed by                                  :        Whitesides

                                                                Grahamstown

                                                                Ref. Nunn/sw/C10822)

Counsel for the respondent         :           Adv. H J De Waal S.C.

Instructed by                                   :        Netteltons

                                                                Grahamstown                                          

                                                                  Ref. Mr. Nettelton)

Date heard                                     :          22 November 2018 

Date judgment delivered                 :          28 February 2019

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