IN THE HIGH COURT OF SOUTH AFRICA
NATAL PROVINCIAL DIVISION   	CASE NO. 2267/2007

In the matter between:

VULINDLELA SECURITY FORCE C.C.	APPLICANT

and 

MEMBER OF THE EXECUTIVE COUNCIL
FOR THE DEPARTMENT OF WORKS FOR
THE PROVINCE OF KWAZULU NATAL	 RESPONDENT

JUDGMENT   Delivered on 10 March  2008
_______________________________________________________

SWAIN, J.

[1]	The applicant seeks payment of the sum of R2,299,608.00 as specific performance of a tender allegedly awarded by the respondent to the applicant.

[2]	The facts, which are common cause, or not disputed, which give rise to this claim, are as follows:

2.1	In 2004 the Department of Works for KwaZulu Natal invited tenders for the provision of security services (Tender No. ZNT 6568W) which was to run for a period of three years.

2.2	The applicant submitted a tender which was not accepted and the tender was awarded to Jenson Investments t/a Best Security cc.

2.3	The applicant and another unsuccessful tenderer, Peacecor Security cc (hereafter referred to as Peacecor) then noted appeals against the decision of the Central Procurement Committee, on the basis that the Central Procurement Committee had incorrectly calculated the average tender amount.

2.4	The Tender Appeal Tribunal recommended that the Minister set aside the decision of the Central Procurement Committee and the tender be awarded to the applicant.

2.5	On 03 July 2006 the MEC for Finance and Economic Development (KZN) confirmed the award to the applicant.

2.6	On 31 July 2006, Peacecor was advised in writing by the Department, that it intended terminating the interim security 

2.7	services which were being provided by Peacecor, with effect from 30 August 2006.

2.8	The tender was then awarded to the applicant, with effect from 01 September 2006.

2.9	Peacecor lodged an appeal against the award of the tender to the applicant, citing irregularities in the Tribunal proceedings.

2.10	On 14 August 2006, the Tender Appeals Tribunal advised Peacecor that it could not appeal the decision of the Tribunal, to the Tribunal itself, as the Tribunal was functus officio.

2.11	Peacecor then obtained an interim interdict on 29 August 2006 from this Court, interdicting the Department from implementing the decision to award the tender to the applicant, and setting aside the notice of termination in respect of the contract of Peacecor, pending the review and setting aside of the decision to award the tender to the applicant.

2.12	At a meeting held between the applicant, the Department and Peacecor on 31 August 2006, it was recorded, inter alia, that by virtue of the Court order the contract with Peacecor

“may not be terminated until legal process has taken place” and 

“However, Department of Works has now to employ Vulindlela Security in addition to Peacecor Security as a binding acceptance of tender is in place” and 

“In terms of the acceptance of award of tender, site will be handed over to Vulindlela Security in terms of ZNT6568W”.

2.13	By virtue of Peacecor remaining in occupation of and performing security functions at the sites in question, applicant was unable to perform such functions.

2.14	Peacecor launched review proceedings before this Court under Case No. AR413/06 in terms of which an order was sought setting aside the decision of the Chairman of the Tender Appeals Tribunal to award the tender to the applicant.

2.15	.On 31 October 2007 the award of the tender to the applicant was set aside by consent, by order of this Court.

[3]	At the hearing of this matter I asked Mr. Naidoo, who appeared for the applicant, what the effect was in law, of the setting aside of the award of the tender, upon the applicant’s claim for payment for the performance tendered by the applicant, after the tender was awarded, but before it was set aside.  The applicants claim was for the services it had tendered to perform for respondent for the period March 2007 to October 2007 inclusive.

[4]	My concern arose from the debate surrounding the issue of whether unlawful administrative acts are “void” or “voidable” because they have to be annulled and the effect of such a distinction upon the validity of acts performed in reliance upon the unlawful act

Baxter Administrative Law - pages 355 – 358

[5]	After the hearing Mr. Naidoo asked for leave to file additional heads of argument on this issue.  As a consequence additional heads have also been filed by Mr. Seegobin, S.C., who appeared for the respondent.  The upshot of this is that I have been referred to the decision of the Supreme Court of Appeal in

Oudekraal Estates (Pty) Ltd. v City of Cape Town and Others
2004 (6) SA 222 (SCA) at 243 A – H

[6]	In this case, the Supreme Court of Appeal, referring to the views of Christopher Forsyth, writing in “Essays on Public Law in honour of Sir William Wade, Q.C. (Clarendon Press at page 141) stated the following:
“….while a void administrative act is not an act in law, it is, and remains, an act in fact, and its mere factual existence may provide the foundation for the legal validity of later decisions or acts”

at page 243 B

The Court quoted with approval and emphasised the following passage of Forsyth:

“The crucial issue to be determined is whether that second actor has legal power to act validly notwithstanding the invalidity of the first act”

at page 243 E

The Supreme Court of Appeal emphasised that the proper enquiry, at least at first

“…..is not whether the initial act was valid, but rather whether its substantive validity was a necessary precondition for the validity of consequent acts”.

[7]	It is vital to determine the true legal nature of the initial act, i.e. the award of the tender to the applicant.  It is clear that a call for tenders is no more than a request to submit offers and once accepted a binding agreement is concluded on the terms set out in the tender.

G & L Builders cc v McCarthy Contractors (Pty) Ltd.
1988 (2) SA 243 (SECLD) at 247 B

[8]	The award of the tender to the applicant, on 03 July 2006, by the MEC for Finance and Economic Development (KZN) was set aside on review and was consequently a void administrative act.  No agreement, enforceable in law, therefore resulted from the factual acceptance by the MEC for Finance and Economic Development of the offer made by the applicant, in terms of the tender.

[9]	What were the acts consequent upon this acceptance in fact of the applicant’s offer, whose validity has to be determined?

[10]	The applicant alleges that at the meeting on 31 August 2006 the respondent agreed that the applicant was “also in its employ in addition to the previous security provider”.  The respondent’s reply to this allegation is to state that amongst the matters discussed at the meeting was that 

“……the Department of Works has now to employ the applicant in addition to Peacecor Security as a binding acceptance of the tender award were in place” (sic)

[11]	A copy of the minutes of the meeting are put up by both parties and I have quoted the relevant passage dealing with this issue at paragraph 2.11 supra.

[12]	It seems that the respondent’s representatives did not appreciate the fact that the interim interdict granted by this Court restrained the respondent from implementing the decision to award the tender to the applicant.

[13]	Mr. Naidoo submits that this “agreement” constitutes a subsequent act that was valid and enforceable until the setting aside of the administrative act, i.e. the award of the tender.  As I understand it, the argument is that the respondent thereby agreed to employ the applicant, and acting in accordance with such subsequent act (agreement) the applicant tendered performance of its obligations, before the award was set aside, entitling it to payment.  

[14]	In my view the representative of the respondent at this meeting clearly had no legal power to validly conclude an agreement of employment with the applicant, because the award of the tender to the applicant was invalid.

[15]	The mere factual acceptance by the MEC for Finance and Economic Development of the offer made by the applicant, in terms of the tender, could never provide the foundation for the legal validity of such an “agreement”.  The “substantive validity” of the award of the tender was “a necessary precondition for the validity” of the consequent agreement, applying the language used by the Supreme Court of Appeal in the Oudekraal case, to the present facts.

[16]	Put differently, the legal validity of the tender of performance by the applicant of its “obligations” in terms of the consequent “agreement”, was dependent upon the substantive validity of the contract “created” as a result of the award of the tender.  There was no substantive validity to such “contract” and the tender of performance by the applicant was therefore without any legal validity.

[17]	In any event, it is clear from the minutes of the meeting, the contents of which are common cause between the parties, that the undertaking to employ the applicant, in addition to Peacecor, was given “as a binding acceptance of tender is in place”.  In other words, it was assumed that the award of the tender was legally valid.   

[18]	Mr. Naidoo expressly stated that the applicant’s claim was based upon performance by the respondent of its obligation to make payment in terms of the awarded tender, and I assume, subsequent “agreement” of employment, and was not one for the payment of damages.

[19] 	Mr. Naidoo also submitted that it would result in an injustice if the applicant was not paid, as the applicant’s conduct was unimpeachable.  He relied upon the following passage in the Oudekraal case, appearing at page 246 paragraph 36, as support for his contention:

“On the other hand, a Court that is asked to set aside an invalid administrative act in proceedings for judicial review has a discretion whether to grant or to withhold the remedy.  It is that discretion that accords to judicial review its essential and pivotal role in administrative law, for it constitutes the indispensable moderating tool for avoiding or minimising injustice when legality and certainty collide.’

[20]	It is quite clear that the issue of injustice is a factor to be considered by the Court in exercising its discretion whether or not to review an invalid administrative act.  That is not the challenge that is before me in the present case.  A review of the decision of the Chairman of the Tender Appeals Tribunal has already been undertaken.  What I am asked to do is determine the legal validity of acts performed in reliance upon the initial invalid administrative act. Allegations of injustice have no bearing upon the determination of such an issue.

[21]	  The order I therefore make is the following:

The application is dismissed with costs.

______________	
SWAIN, J		

		Appearances..../

Appearances:

Counsel for the Applicant	:	MR. D.D. NAIDOO	 

Instructed by			:	C.K.M.G. Attorneys								 		C/o Udesh Ramesar
476 Church Street 
						Pietermaritzburg.

Counsel for the 1st Respondent	:	MR. R. SEEGOBIN, S.C. 

Instructed by			:	State Attorney KwaZulu Natal 								C/o Cajee Setsubmi, Chetty Inc. 
						95 Boshoff Street										Pietermaritzburg.

Date of Hearing 			:	13 February 2008

Date of Judgment			:          10 March 2008