Asatico Civils and Construction (Pty) Ltd v Ekurhuleni Metropolitan Municipality (2230/2017) [2017] ZAGPJHC 351 (20 November 2017)

IN THE HIGH COURT OF SOUTH AFRICA,

LOCAL GAUTENG DIVISION, JOHANNESBURG

CASE NO: 2230/2017

Not reportable

Not of interest to other judges

Revised.

20/11/2017

In the matter between:

ASATICO CIVLS AND CONSTRUCTION Applicant

(PTY) LTD

and

EKURHULENI METROPOLITAN Respondent

MUNICIPALITY

JUDGMENT

MIA, AJ

[1] The applicants seeks summary judgment against the respondent for the amount of R1 537 082.03. The application is opposed.

[2] The applicant a civil construction company and the respondent is a Metropolitan Municipality established as such in accordance with the provisions of the Local Government: Municipal Structures Act, No. 117 of 1998.

[3] The respondent invited bids for infrastructure services related to repairs of roads and stormwater drainage. The closing date for bids was 13 September 2011. The notice provided that “All bids shall hold good for 120 days as from the closing date of bids”. The respondent informed the applicant on 7 March 2012 that it was the successful candidate for the upgrading and construction of Road and Stormwater water infrastructure on an "as and when required basis with effect from date of award until 31 December 2013." A copy of the appointment letter, which was not in dispute, formed part of the papers.

[4] The award amount for the rendering of the aforementioned services was contracted per “AS1” attached to the summons "… at an averaged estimated contract amount of R67 985 731, 04 at the offered averaged rates". These rates excluded VAT and were subject to escalation based on the CPA with base month being September 2011 as provided between the parties.

[5] The applicant proceeded with work upon instructions issued by the respondent. Instructions were issued dated 14 March 2012; 6 August 2012; 7 September 2012; 14 November 2012; 1 March 2013; 10 July 2013 and 4 October 2013. The work required to be performed was for the upgrading and construction of roads and stormwater infrastructure as specified by the Programme Manager in the area of deployment and per the scope determined by the Programme Manager. The copies of the seven "Letters of Instruction to Perform Work", issued by the Respondent were annexed to the Particulars of Claim.

[6] The applicant contended that it had complied with its obligations in terms of its appointment and delivered all the services required in terms of the aforesaid Letters of Instruction to Perform Work. Upon completion of the work the applicant submitted invoices for the services rendered from time to time to the respondent. A certificate of completion of works was signed on 15 April 2014 on behalf of the applicant and on 17 April 2014 on behalf of the respondent.

[7] In pursuance of the outstanding payments the applicant delivered a letter of demand on 21 October 2016 in terms of Section 3 of the Institution against Certain Organs of State Act, No. 40 of 2002 which referred to the letters of instruction; the work completed at various sites; the certificate of completion and the various invoices were attached. The final amount of R3 320 810.31 which constituted retention monies held by the respondent as a result of a prescribed defects liability period of 12 months from the date of the completion of the works. This money was only to be paid out after 12 months once the respondent had inspected all sites and was assured of the quality of the work completed. The applicant contends the 12 months period expired on 19 January 2015, all work is completed and they thus became entitled to the monies held by the respondent. The applicant thus applies for summary judgment for the amount of R1 537 082. 03 which constitute the balance of the retention monies held back by the respondent less payments made by the respondent after the applicant’s letter of demand.

[8] The respondent opposed the application for summary judgment and raised the following defences:

8.1 The application for summary judgment was late and filed out of time;

8.2 The applicant’s appointment was not valid;

8.3 The applicant did attach the contract on which it based its claim;

8.4 The instructions issued to the applicant were unlawful;

8.5 The amount claimed by the applicant exceeds the amount of the appointment letter;

8.6 The amount claimed had not been agreed upon.

[9] At the outset, Counsel for the applicant pointed out that the present application is similar to an application brought by the applicant

against the same respondent on the same grounds for the bulk of the monies due in terms of the contract awarded to the applicant. The application was opposed and the relief was granted in favour of the applicant by Davis AJ. In the present matter the relief requested pertains only to the retention of monies held back as a guarantee for the 12 month period which has since elapsed. Mr McTurk appearing on behalf of the applicant, relying on the decision in Maharaj v Barclays National Bank Ltd 1976(1) SA 418 (A) submitted that the respondent had no defence which was bona fide or good in law. He submitted further that in the present matter the applicant’s demand secured part payment of the monies due which made clear that there was no triable issue as a bona fide defendant was entitled to per Joob Joob Investments (Pty) Ltd v Stocks Mavundla Zek Joint Venture 2009 (5) SA 1 (SCA) 11G-12D. I turn now to deal with each of the individual defences raised by the respondent.

summary judgment was filed out of time

[10] The respondent raises the point that the application for summary judgment was filed out of time. It is apparent that the court file was not located for some time after the respondent filed its notice of intention to defend and after the matter had been enrolled for default judgment. It is also apparent that the respondent tendered costs for the default judgment which is indicative of the position that the notice of intention to defend was late and after the matter was enrolled for default judgment. The applicant’s pursuance of costs was in terms of Rules 19 (5). I agree with the applicant’s submission that the respondent’s point is technical and does not indicate that there is a triable issue.

The applicant’s appointment was not valid

[11] The respondent contended that in terms of the invitation to bid, the closing date was 13 September 2011 and all bids “shall hold good for 120 days as from the closing date of bids”. This meant that all bids were valid till no later than 13 January 2012. The applicant’s bid had to be accepted within the 120 day period failing which it failed to exist in law. The appointment letter was dated 7 March 2012 and fell during a period when bids could no longer validly be accepted and such acceptance was invalid and unlawful.

[12] In support of the allegation of invalidity Mr. Mofokeng submitted that section 217 of the Constitution informed the respondent’s procurement of goods and services. He submitted that based on the decision in Q Civils (Pty) Ltd v Mangaung Metropolitan Municipality and another 2017 JOL 38137 (FB) the Court held that section 217 was the starting point for an evaluation of a proper assessment of the state procurement process. He then referred to Metro Western Cape (Pty) Ltd v Ross 1986 (3) SA 181 (A) where the Court held that

“the section prohibits a general dealer from carrying on business by entering into particular contracts on or from fixed premises without the required certificate of registration and licence, the contracts themselves are prohibited by implications.”

This he submitted implied that the bid offer was invalid and everything flowing therefrom was invalid.

[13] Mr. Mofokeng made further reference to the view expressed in Cool Ideas 1186 v Hubbard and Another 2014 (4) SA 474 (CC) where the Court held that:

“The general principle of our law is that an act performed contrary to a statutory prohibition is invalid and has no legal effect. In explaining the principle in Schierhout Innes CJ said:

‘What is done contrary to the prohibition of law is not only of no effect, but must be regarded as never having been done and that whether the law giver has expressly so deemed or not, the mere prohibition operates to nullify the act’”

It is on this basis that the respondent relies that when contracting with the applicant, it could not evade the requirements of section 217 of the Constitution in a manner which was unfair and inequitable. It had done so by offering the bid on the 5 March 2012 outside of the time period. It was peremptory to comply as held by Satchwell J in Country Cloud Trading CC v MEC, Department of Infrastructure Development [2012] 4 All SA 555.

[14] In the absence of any other submission there appears to be no inequity or improper conduct regarding the process. There was no negotiation with the applicant or any other tenderer. There does not appear to have been differential treatment of bidders. The bids appear to have been assessed according to the criteria put forward in the invitation. It appears the only dilatory conduct was on the part of the respondent who delayed in awarding the tender. There was therefore no prejudice to the principles of equitable

competitiveness. In Asatico Civil and Construction (Pty) Ltd v Ekurhuleni Metropolitan Municipality 2016 JDR 0205 (GJ) at p13 Davis AJ reffered to Allpay Consolidated Investment v CEO, SA Social Security Agency 2014(4) SA 179 (CC) at [30] where the Court held:

"Logic, general legal principle, the Constitution and the binding authority of [the Constitutional Court] all point to a default position that requires the consequences of invalidity to be corrected or reversed where they can no longer be prevented. It is an approach that accords with the rule of law and principle of legality".

[15] It is significant that the entire period for which the bid had been awarded has expired, all services have been rendered, there are no outstanding items, no outstanding instructions, no work to be performed. The bulk of the payment has been received and upon demand made the respondent made further payment, the only amount outstanding is the balance of the retention monies held back by the respondent for the prescribed defects liability period of 12 months from the date of the completion of the works. The period of 12 months has already passed.

[16] Davis AJ in Asatico (above) refers to the proper approach to be adopted in such matters which was quoted with approval in the Bengwenyama Minerals v Genorah Resources (Pty) Ltd 2011(4) SA 113 (CC) at [85]; and the Allpay Consolidated Investment (above) is that stated by Moseneke DJC in Steenkamp NO v Provincial Tender Board, Eastern Cape 2007(3) SA 121 (CC) at paras. [29] and [30] namely:

"It goes without saying that every improper performance of an administrative function would implicate the Constitution and entitle the aggrieved party to appropriate relief. In each case the remedy must fit the injury. The remedy must be fair to those affected by it and yet vindicate effectively the right violated. It must be just and equitable in the light of the facts, the implicated constitutional principles, if any, and the controlling law. It is nonetheless appropriate to note that ordinarily a breach of administrative justice attracts public law remedies and not private law remedies. The purpose of a public law remedy is to pre-empt or correct or reverse an improper administrative function … Ultimately the purpose of a public remedy is to afford the prejudiced party administrative justice, to advance efficient and effective public administration compelled by constitutional precepts and at a broader level, to entrench the rule of law … Examples of public remedies suited to vindicate breaches of administrative justice are to be found in Section 8 of the PAJA. It is indeed so that Section 8 confers on a court in proceedings for judicial review a generous jurisdiction to make orders that are just and equitable."

[17] This court is not seized with an application for judicial review. It is not sufficient for the respondent to simply refer to the invalidity of the appointment and the exposure created as a resulted of its administrative act before it has been declared invalid and the appropriate relief has been considered. In appropriate circumstances it may well be that invalid administrative acts in a tender process are allowed to stand due to the extent of the completion of the work. In a matter such as the present instance where all the work has already been completed and most of the payment has been made the consequence in setting aside the invalid administrative acts or upholding the respondent’s purported defence, would be to deprive the applicant of a portion of money to which it is entitled as payment for works completed and which the respondents clients received the benefit. (See Asatico Civil and Construction (Pty) Ltd v Ekurhuleni Metropolitan Municipality 2016 JDR 0205 (GJ) and Davis AJ’s reference to Chairperson, Standing Tender Committee and Others v JFE Sapela Electronics (Pty) Ltd and Others 2008(2) SA 638 (SCA). )

[18] The respondent in this matter similar to matter before Davis AJ has not brought an application to set aside the invalid administrative

action which it alleges it has been involved in, when awarding the bid. Whilst such review is not forthcoming the respondent must accept the legal consequences of its actions and follow through on its obligations in terms thereof. As Davis AJ indicates the respondents actions “has legal consequences that cannot simply be overlooked”.

the CONTRACT NOT attached

[19] The applicant attached the appointment letter to its Particulars of Claim. It provides sufficient particularity to indicate the basis of the applicant’s claim namely the cause of action and how the amount is made up. In the particular instance the amount was for the retention monies held back by the respondent as a guarantee in terms of the agreement for the prescribed defects liability period of 12 months from the date of the completion of the works. The period has passed and the amounts were to be released or paid. Once demand was made only a portion was paid and the application for summary judgment is for the balance thereof. The respondent paid the first amount on demand and tendered costs in the application for default judgment. I can see no triable defence herein.

The instructions issued were unlawful

[20] The respondent contends that in view of the contract being invalid it is unlawful. Mr. Mofokeng submitted that the contracted amount was only R67 986 731.04 and the applicant received more than this amount. The respondent thus had a counter claim in the amount of R R14 173 268.96. This defence does not challenge any of the seven Instructions to Proceed with Work letters issued during the period March 2012 until October 2013. Mr. Mofokeng’s submission also does not take account of the letter dated 7 March which reads “at an average estimated contract amount of R67 985 731 .04”. It also does not have regard to the paragraph that follows which reads that the rates in 10 supra are subject to escalation on the CPA with base month being September 2011. This accounts for increases which are higher than amounts which appear in the letter.

[21] The respondent has failed to deal with the Particulars of Claim, the Instructions to Proceed with Work letters, the invoices, the payments made to date, with any particularity. There is a deliberate obfuscation and avoidance of issues which does not constitute a bona fide defence.

Amount claimed exceeds the amount of the appointment letter

[22] respondent contends that the applicants claim is limited to the

amount stated in the letter dated 7 March 2012 and the applicant is not entitled to be paid more than this amount. This view is addressed in paragraph [18] above, it simply does not take into account that the appointment letter referred to an "average estimated contract amount". Further it fails to take into account that the amount excludes VAT and escalation. The respondent's contention lacks particularity and fails to satisfy the requirements set out in Maharaj v Barclays National Bank Ltd 1976(1) SA 418 (A) that there is a defence that is bona fide and good in law.

The amount claimed had not been agreed upon

[23] The respondent avers that the applicant's claim is not for a liquidated

amount and states that it has not agreed to pay the applicant the retention money claimed in these proceedings. It was submitted further that the applicant has failed to prove that it was entitled to receive such retention monies. The respondent does not dispute the letter dated 7 March 2012. It did not dispute any of the Letters of Instruction to Proceed with Work or the Certificate of Completion. In the absence of any particularity substantiating this statement, this allegation is both unfounded and lacks the particularity required from an affidavit seeking to resist summary judgment. There is no denial of services rendered. The respondent has already paid a portion of the retention monies upon demand.

[24] In considering the judgment of Davis AJ in Asatico (above) and the present matter, the defenses raised are substantially similar on similar facts except that the present matter pertains only to the balance of monies due. No bona fide defence was found then and the respondent has still not raised a valid bona fide defence in the present matter. The same defenses cannot succeed where they have failed previously. I am consequently of the view that the respondent has not satisfied the requirements for resisting summary judgment.

ORDER

[25] In the result summary judgment is granted against the respondent for:

1. Payment of the amount of R1 537 082.03

2. Interest on the aforesaid amount at the rate of 9% per annum from 21 October 2016 to date of payment.

3. Costs of suit.

_________________________________________________

S C MIA

ACTING JUDGE OF THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

Appearances:

On behalf of the applicant : Adv S McTurk

Instructed by

: Otto Krause Inc Attorneys

On behalf of the respondent : Adv X Mofokeng

Instructed by

: Khoza & Associates Inc

Date of hearing

: 31 October 2017

Date of judgment

: 20 November 2017