Godimong Consulting Engineers (Pty) Ltd v Mahikeng Local Municipality (UM255/22) [2023] ZANWHC 79 (11 April 2023)

IN THE HIGH COURT OF SOUTH AFRICA

NORTH WEST DIVISION - MAHIKENG

Case No. : UM255/22

REPORTABLE: YES/NO

CIRCULATE TO JUDGES: YES/NO

CIRCULATE TO MAGISTRATES: YES/NO

CIRCULATE TO REGIONAL MAGISTRATES: YES/NO

In the matter between:

GODIMONG CONSULTING ENGINEERS Applicant (PTY) LTD And MAHIKENG LOCAL MUNICIPALITY Respondent

This judgement was handed down electronically by circulation to the parties' representatives via email. The date and time for hand-down is deemed to be 11 April 2023.

ORDER

In the result, the following order is made:

The application is dismissed with costs.

JUDGMENT

MFENYANA AJ

Introduction

[1] This matter concerns an application by the applicant, to interdict the respondent from proceeding with a tender process for the "Provision of project management services for the Mafikeng and Mmabatho central business district". The respondent is a local municipality in the province of the North West, situated in Mahikeng, the capital city of the Province. From time to time, the Municipality issues tenders for goods and services required for the running of the Municipality. In line with section 217 of the Constitution, Act 108 of 1996, (the Constitution) it also advertises for suitable service providers to apply for inclusion in the database of service providers, from which goods and services are procured.

[2] Over time, various service providers apply and are included in the database of the Municipality, for the provision and rendering of such goods and services as may be required from time to time. The applicant, a private company in the field of engineering, under the directorship of one Norman Modisane Mongae, ( Mr Mongae) is one such service providers, having successfully entered into an agreement with the respondent in 2018 to provide civil, structural, electrical, and mechanical engineering, health and safety services to the applicant.

[3] It is common cause that the initial appointment of the applicant was for a period of three years, terminating in June 2021. The agreement was extended on a month-to-month basis with effect from 19 June 2021 for an unspecified period, on the same terms and conditions as the initial agreement.

[4] On 24 November 2022 the respondent advertised a tender for the "provision of project management services for the Mafikeng and Mmabatho central business district" under reference number SCM/MLM/77/1 1/2022. It is this tender which the applicant seeks to interdict, on the basis that it had already been appointed to provide the same services. The respondent has opposed the application and contends that the applicant is not entitled to approach this Court as it has.

[5] The application was brought on a semi- urgent basis and it is opposed by the respondent.

Factual matrix

[6] The genesis of the dispute between the parties, lies in a letter of appointment issued to the applicant by the respondent on 23 December 2021, under the auspices of its then Municipal Manager, (Mr Mokgwamme). In terms of the letter, the respondent appointed the applicant to provide 'professional services' for the Administration and Implementation of the Neighbourhood Development Partnership Programme

(NDP). The applicant avers that this letter of appointment created a contractual relationship between the parties. As a result of such relationship, the applicant contends that it engaged the National Treasury and made application for the applicable grants as is required for NDP grants. These activities, contends the applicant, commenced shortly after it received the letter of appointment, which included the preparation and submission of a formal application for grant funding. In a detailed presentation annexed to the founding affidavit, the applicant avers that it prepared the said presentation as a draft application on behalf of the respondent. The presentation sets out details of the NDP project and includes a cost breakdown and a 10 - year cash flow projection at an overall amount of R7 000 466.00. Notably, ex facie the presentation which runs into some 31 pages, it appears that it was prepared in July 2007, some 15 years before the appointment of the applicant.

[7] The applicant avers that it was further requested by the respondent to do a presentation to the Mayoral Committee of the respondent which it duly did on 9 May 2022. The applicant refers to certain communications between itself and the respondent, which form the basis of its belief that it is entitled to interdict the respondent from proceeding with the advertised tender.

[8] Principally, the applicant states that the Mayoral Committee resolved to proceed with the funding application and issued a resolution to that effect. Before the application could be signed by the Municipal Manager, his term of office came to an end during June 2022. The Acting Municipal Manager, who was also the NDP grant coordinator in the applicant's project, also failed to sign and submit the application. It was only in August 2022 when the current Municipal Manager (Adv. Mongwaketse) was appointed, that the applicant requested feedback with regard to the status of the application. No response was forthcoming until November, when the Municipal Manager sought audience with the applicant. It is common cause that the said meeting went ahead. What is in dispute is who attended the meeting on behalf of the applicant. According to the applicant, he attended the meeting, whilst the respondent avers that two individuals, namely Oupa and Tumelo, attended on behalf of the applicant. What is also not in dispute is that the current Municipal Manager, was also in attendance. The import of this is that Mr Mongae cannot positively swear to what took place at the meeting of 28 November 2022, if he was not personally in attendance.

[9] According to Mongae, it was at this meeting that he was informed of the letter of termination of the applicant's appointment, which he later received. He does not state precisely when he received the letter.

[10] The essence of the dispute between the parties is that the applicant contends that there is a valid contract between itself and the respondent, as a result of which the respondent is not at liberty to engage another service provider. The respondent on the other hand, contends that it has validly terminated the agreement with the applicant which agreement it further contends was irregular, as Mokgwamme did not have the authority to appoint the applicant. The applicant further contends that the respondent has repudiated the contract.

[11] The present application is, as the applicant contends, a result of the advertisement of the tender advertised by the respondent, for the same services that the applicant was appointed to provide. Linked to that issue, is the termination of the NDP programme to which the applicant was appointed, and along with it, the applicant's appointment under the hand of the previous Municipal Manager. Strangely, the applicant does not challenge the termination of its appointment, but rather seeks to interdict the appointment of another service provider, should the tender process be finalised.

[12] The letter of appointment sets out the services to be provided by the applicant as follows:

Legal framework

[13] Section 217 of the Constitution requires organs of state, when procuring goods and services, to do so in terms of a system that is fair, equitable, transparent, competitive, and cost effective. The main purpose of the provision is to ensure fairness and impartiality in the awarding of state contracts. For a valid public procurement process, this provision, together with the relevant provisions of the PFMA, National Treasury Regulations and internal supply chain policies must be complied with. This constitutes the procurement legal framework which all state organs must adhere to. Compliance with this framework is compulsory. In Allpay[1] Froneman J said that this legal framework was not a mere internal prescript that could be disregarded at whim. Failure to adhere to legal prescripts "designed to ensure a transparent, cost-effective and competitive tendering process in the public sector is invalid and will not be enforced. '[2]

[14] The provisions admit of no ambiguity and are peremptory. Any procurement of goods and services by a public entity must adhere to the requirements set out in section 217 of the Constitution.

[15] There is no doubt from the facts of the present matter, that no procurement process was followed in the appointment of the applicant. From the facts available, even from the applicant itself, "the respondent provided the applicant with a letter of appointment in terms whereof the applicant was appointed... ". According to the applicant, the mere issuing of such letter created a contractual relationship between itself and the respondent, albeit a defective one. The applicant falls short of admitting the unlawfulness of the contractual relationship and is mum on this. What is more is that in terms of the impugned letter of appointment, the project amount is stated as R8 billion, which calls for an open tendering system. This did not happen. There were no competing submissions and presentations from various service providers, who could potentially provide the services to the respondent. This is what the advertised tender of 24 November 2022 seeks to do, and it is the same tender process the applicant seeks to halt.

[16] The National Treasury Regulations provide thresholds for the procurement of goods and services by organs of state, varying from requests for quotations to the open bidding process. In terms of these regulations and relevant to the present application, accounting officers have a variety of options to utilise when procuring goods and services including petty cash, verbal or written price quotations or competitive bids. Where the value of the goods or services to be procured exceeds R500 000.00, competitive bids should be invited subject to stipulated departures. There is no suggestion that there were any circumstances which called for a departure.

[17] In dismissing an appeal against a decision of this Court, for its refusal to make a settlement agreement based on an unlawful contractual arrangement, an order of court, Plasket JA stated in Valor IT v Premier, North West Province[3] .

"The award of these contracts was unlawful and invalid because their award had not been preceded by an open procurement process in accordance with the required constitutional and legal prescripts. This was the state of affairs that prevailed when the provincial government cancelled the SDA and the agreements that followed it. "[4]

[18] Nothing rings truer for the present application. This finding further fortifies the principle that "if the underlying contract suffers from a defect, such as unenforceability, dressing it in different garb will not alter that fact.”[5] In the present matter the flagrant disregard of procurement processes by the parties in the appointment of the applicant, is unmistakable and has culminated into the present application. It follows from these authorities that the agreement is unenforceable. Nothing can change the character of the agreement entered into between the parties, precipitated by the letter of appointment issued on 23 December 2021. It remains invalid and unlawful, for want of compliance with applicable constitutional and legal prescripts. The SCA in Valor IT[6] had occasion to deal with this aspect, and concluded that calling a contractual arrangement which does not comply with the applicable

prescripts, anything else, does not alter the fact that it is unlawful and invalid because of noncompliance with procurement prescripts required by the law.

[19] It was argued on behalf of the respondent that it is not open to the applicant to simply ignore the termination of its appointment and not challenge it on the basis that it is unlawful. The mere fact that the respondent has not set aside the decision to appoint the applicant does not relieve the applicant of the burden to have that decision reviewed and set aside, continued the respondent. The respondent placed reliance on the decision in Hunter[7] for this proposition, and, contended as the Constitutional Court found in Hunter, that the applicant had 'chosen to ride the wrong horse'.

Urgency

[20] The application was brought in the form of a final interdict.

[21] In the founding affidavit, Mongae states that the applicant became aware of the tender 'shortly before' the meeting of 28 November 2022. According to the applicant, attempts were made, seemingly, from 30 November 2022, to resolve the issue of the termination as well as the advertised tender. These attempts fell on deaf ears, as no response was received from the respondent. On 15 December 2022, the applicant caused a letter of demand to be issued, giving the respondent until 19 December 2022 to cancel the tender process failing which, urgent proceedings would be instituted. In the said demand, the applicant contends that the issue of the termination of its appointment is 'moot and redundant' on account of the fact that it has not been reviewed and set aside. The application was brought on 23 January 2023.

[22] During the hearing of the matter, the applicant sought to rely on Kirland [8] for the proposition that an organ of state cannot withdraw a decision on the basis that it is dissatisfied with it, and that the respondent had not brought an application to (self) review the decision. While this is the proposition in Kirland, the distinguishing factor is that the applicant seeks a final interdict against another decision of the respondent, that being the advertisement and finalisation of tender number: SCM/MLM/77/1 1/2022. For the mere fact that the applicant is not seeking a declaratory order for the determination of the validity of the agreement between itself and the respondent, Kirland is distinguishable. The applicant instead sought to obtain a final interdict restraining the exercise of the power of the respondent to advertise a tender. In an application for a final interdict, as the one sought by the applicant, the applicant has to establish firstly, a clear right. Secondly, the applicant must show that there is a reasonable apprehension of injury, and thirdly, absence of any other remedy.[9] This is trite. The applicant is well aware of this and says as much, in its application.

[23] Whether the applicant has a clear right is a matter of substantive law. It must be a right that exists in law and can be protected. A clear right is one that is not open to doubt whatsoever. What the applicant seeks in the present matter, is to affirm its appointment in terms of the letter of 23 December 2021. That right has been conferred in terms of a defective contract, as I have found. No clear right can be attributed in those circumstances. At best, the applicant may have established a prima facie right which in itself may not escape the scrutiny of legality.

[24] In Molteno Bros and Others v SA Rlys and Others[10] the court held that a "prima facie right can only suffice in an application for a final interdict where there is a likelihood of irreparable harm being suffered if the relief is not granted." Surely, the applicant cannot be heard to be arguing that it stands to suffer irreparable harm on the basis of unlawful arrangement. I align myself with the sentiments of the Supreme Court of Appeal in Qaukeni [11] that:

"If the (respondent's) procurement of . services through its contract with the (applicant) was unlawful, it is invalid and this is a case in which the (respondent is) duty bound not to submit to an unlawful contract but to oppose the respondent's attempt to enforce it[12]

[25] Another factor which distinguishes the present matter from Kirland is that the applicant seeks to restrain the exercise of a statutory power, a right sourced from section 217 of the Constitution. The applicant must show that he was appointed following a fair process.

[26] I have already stated that that the appointment was defective. Thus, on the strength of Gibson, Valor IT, supra, as well as other authorities on this principle, the defect in the appointment relied on by the applicant, subverts the contract. There cannot be any doubt that the applicant has no clear right for a final interdict to be granted in its favour.

[27] It would be an academic exercise to deal with the remaining requirements for a final interdict as no harm, deserving of this Court's sanction, could lawfully arise from an unlawful contractual arrangement. Nothing turns on the applicant's contention that the respondent has repudiated the contract. For the above reasons, I do not consider it necessary to deal with this aspect. In any case, this issue was not argued with any much enthusiasm by the applicant, save to state it. The applicant's reliance is not on breach of contract, but simply to obtain interdictory relief for the impending tender.

Conclusion

[28] The applicant has not satisfied the requirements for a final interdict.

The application must fail.

Order

[29] In the result, I make the following order:

S MFENYANA

ACTING JUDGE OF THE HIGH COURT OF SOUTH AFRICA

NORTHWEST DIVISION, MAHIKENG

APPEARANCES

DATE OF HEARING: 01/26/23 JUDGEMENT RESERVED: 01/26/23 DATE OF JUDGEMENT: 04/11/23 For the Applicant: MR W M KEENY Instructed by: VAN VELDEN - DUFFY INC clo: CJP OELOFSE ATTORNEYS Email: mhk3@cipo.co.za For the Respondent: ADV O. I MONNAHELA Instructed by: MOTSHABI ATTORNEYS Email: mpendulo@motshabiinc.com

[1] Allpay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer of the South African Social Security Agency and Others (No 2) [2014] ZACC 12; 2014 (6) BCLR 641 (CC); 2014 (4) SA 179 (CC) (17 April 2014)

[2] Municipal Manager: Qaukeni Local Municipality and Another v F V General Trading CC (324/2008) [2009] ZASCA 66; 2010 (1) SA 356 (SCA); [2009] 4 All SA 231 (SCA) (29 May 2009)

[3] August 2020 [2020] 3 All SA 397 (SCA)

[4] At para 44d - e

[5] Gibson v Van der Walt

[6] n.3 supra

[7] Hunter v Financial Sector Conduct Authority and Others 2018 (6) SA 348 (CC)

[8] MEC for Health, Eastern Cape and Another v Kirland Investments (Pty) Ltd [2014] ZACC 6

[9] Setlogelo v Setlogelo 1914 AD 221

[10] 1936 AD 321 at 332

[11] supra, n.2

[12] at para 26