Maximum Profit Recovery (Pty) Ltd v Rustenburg Local Municipality and Others (UM81/2022) [2023] ZANWHC 91 (22 June 2023)

SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document in compliance with the law and SAFLII Policy

IN THE HIGH COURT OF SOUTH AFRICA

NORTH WEST DIVISION, MAHIKENG

CASE NUMBER: UM81/2022

Reportable: YES/NO

Circulate to Judges: YES/NO

Circulate to Magistrate: YES/NO

Circulate to Regional Magistrates: YES/NO

In the matter between:-

MAXIMUM PROFIT RECOVERY (PTY) LTD

Registration No 2[...])

Applicant

and

RUSTENBURG LOCAL MUNICIPALITY

1st Respondent

BAZUZU TRADING AND PROJECTS CC

(Registration No 2[...])

2nd Respondent

MTC TAX CONSULTING (PTY) LTD

(Registration No 2[...])

3rd Respondent

BAZUZU TRADING MTC TAX

CONSULTING JV

4th Respondent

VICTOR MAKONA N.O.

5th Respondent

JUDGMENT

FMM REID (WAS SNYMAN) J:

Introduction:

[1] The applicant seeks a judicial review of an administrative action in terms of the Promotion of Administrative Justice Act 3 of 2000 (PAJA) to review and set aside a tender award R[...] (the tender) made by the first respondent (Municipality) in favour of the 4th respondent (the Joint Venture) for the appointment of a professional service provider to render VAT recovery services for a period of 36 months. The Joint Venture comprises of the 2nd and 3rd respondent.

[2] In ancillary relief the applicant seeks to have the appointment of the Joint Venture declared unconstitutional, that the agreement between the Municipality and Joint Venture be set aside and that the

tender be awarded to the applicant.

[3] The applicant is represented by Adv APJ Els. The 1st respondent (Municipality) and the 5th Respondent (Makona) is represented by Adv NG Laubscher. Makona is the Municipal Manager of the Municipality and is cited in his official capacity. The 3rd respondent (MTC Tax Consulting) is represented by Adv M E Manala.

[4] The court documents are volumous and encompass five (5) lever arch files. Argument was heard over a period of two (2) court days.

Material background facts

[5] Most of the facts are common cause and can be summarised as follows.

[6] On 22 October 2021 the tender was published and it contained the following pre-qualification criteria:

“Pre-qualification Level 1 BBBEE, administrative evaluation (document completion and attachment of mandatory documents), Functionality (minimum qualifying score of 75) and 80/20 preferential point system (price = 80 and BBBEE points = 20)”

[7] On 2 November 2021 the tender was again advertised in the Platinum Weekly. In the advertisement the requirement is stated that it will have a prequalification level 1 BBBEE (Broad Based Black Economic Empowerment).

[8] On 9 November 2021 the applicant penned a letter to the 1st and 5th respondent, noting that the prequalification of a minimum Level 1 BBBEE is in contradiction of section 217 of the Constitution of the Republic of South Africa, 108 of 1996 in that it is not fair, equitable and transparent.

[9] On 26 November 2021 the Municipality published an erratum notice which reflected the following under the heading “Evaluation Criterion”:

9.1.

Administrative evaluation (document completion and attachment of mandatory documents);

9.2.

Functionality with minimum qualifying score of 75;

9.3.

80/20 preferential point system (price = 80 and BBBEE points = 20).

[10] The closing date for the bids was 10 January 2022.

[11] The bids that form part of the tender process were not opened in public. On the closing date of the tenders, the country was in “hard lockdown” of the COVID 19 pandemic and the regulations made under the Disaster Management Act 57 of 2002, published in the Government Gazette of 18 March 2020, which prohibited gathering of people in confined spaces. During the opening process of the bids, two (2) officials of the Municipality witnessed the opening of the tenders.

[12] The Joint Venture is an unincorporated joint venture between the 2nd and 3rd respondent and was created on 5 January 2022.

[13] The Municipality awarded the tender to the Joint Venture on 4 April 2022.

[14] The applicant initially launched the application on a semi-urgent basis and the application was set down on the urgent roll of 30 June 2022. After receipt of the record, the applicant set the matter down on 21 July 2022, on which date a court order was granted by Hendricks DJP (as he then was) stipulating time periods for the filing of further affidavits.

[15] The matter is heard on the normal roll and not on the basis of urgency.

Grounds of review

[16] The applicant claims that the Municipality committed serious and fundamental irregularities in the tender process.

[17] The following grounds are advanced by the applicant as the grounds for review of the tender:

17.1. The tender was published with a prequalification criteria of Level 1 BBBEE, where after the Municipality deleted the prequalification criteria.

17.2. The tenders were not opened in public;

17.3. The Joint Venture failed to complete the required MBD4 Forms;

17.4. MTC Tax consultant (which is one of the two companies that comprise the Joint Venture) was not tax compliant;

17.5. There was no scoring in respect of functionality;

17.6. The Joint Venture is not registered for VAT and there is no evidence that the Joint Venture was tax compliant.

[18] The respondents claim that there was substantial compliance with section 217(1) of the Constitution of the Republic of South Africa 108 of 1996 and that, as a consequence, there should be no declaration of invalidity in terms of section 172(1)(a) of the Constitution.

Point in limine

[19] The 1st, 3rd and 5th respondents raise a point in limine, namely that the applicant failed to comply with the provisions of section 7(2)(a) of PAJA in that it failed to exhaust internal remedies available to it. This provision reads as follows:

“7 Procedure for judicial review

(1) …

(2)(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.

(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.”

(own emphasis)

[20] No application was brought by the applicant to exempt the applicant from complying with section 7(2)(a) of PAJA in exceptional circumstances shown. Section 7(2)(c) thus finds no application.

[21] It is common cause that the decision to award the tender is an administrative action as defined in PAJA (See South African Veterinary Council and Another v Veterinary Defence Association 2003 (4) SA 546 (SCA)) and an internal remedy, if available, must be exhausted prior to judicial review proceedings. See Koyabe and Others v Minister for Home Affairs and Others (Lawyers for Human Rights as Amicus Curiae) 2010 (4) SA 327 (CC) para 34; Nichol and Another v Registrar of Pension Funds and Others 2008 (1) SA 383 (SCA).

[22] It is argued on behalf of the respondents that the applicant is not entitled to the relief claimed on the basis that this provision is peremptory and the applicant failed to exhaust the internal remedies provided. The respondents argue that the applicant had to exhaust the following internal remedies prior to approaching the court:

22.1. The process and procedure provided for in terms of Regulations 49 and 50 of the Supply Chain Management Regulations, 2005 promulgated in terms of the Local Government: Municipal Finance Management Act 56 of 2003 in paragraphs 20.3 and 20.4 of the Supply Chain Management Policy.

22.2. The appeal process as provided for in the provisions of section 62(1) of the Local Government: Municipal Systems Act 32 of 2000 (the Municipal Systems Act) which provides for an appeal against the decision of the 5th respondent to the Executive Mayor of the 1st respondent.

22.3. The processes and procedures provided in terms of Rule 41A(2)(a) of the Uniform Rules of Court, that determines that an applicant shall file a notice with the application indicating the applicant’s agreement or refusal of a referral of the dispute to mediation.

Discussion of points in limine

[23] From the onset I respectfully disagree with the argument that Rule 41A(2)(a) of the Uniform Rules of Court would provide an alternative remedy. The fact that the applicant failed to give notice of whether it is amenable to mediation does not constitute an alternative remedy in my view. This ground of the point in limine can therefore not succeed.

[24] The Supply Chain Management Policy of the Municipality reads as follows in paragraphs 20.3 and 20.4:

“20.3 Objections and complaints

Persons aggrieved by decisions or actions taken by the Municipality of this policy, may lodge within 14 (fourteen) days of the decision or action, a written objection or complaint against the decision or action.

20.4 Resolution of disputes, objections, complaints and queries

(1) The Municipal Manager must appoint an independent and impartial person not directly involved in the supply chain management processes of the Municipality.

(a) to assist in the resolution of disputes between the Municipality and other persons regarding:

(i) any decisions or actions taken by the Municipality in the implementation of its Supply Chain Management System; or

(ii) any matter arising from a contract awarded during its Supply Chain Management System; or

(b) to deal with objections, complaints or queries regarding any such decisions or actions or any matters arising from such conduct.”

[25] The applicant claims that the utilisation of section 7(2)(a) of PAJA would have not been applicable as the Municipality has already delivered a letter of appointment to the Joint Venture on 23 March 2022. In addition, the service level agreement (SLA) has already been signed on 24 March 2022 which binds the Municipality and Joint Venture contractually. As such, the applicant argues, the agreement can only be set aside by a Court and not any functionary of the Municipality. The Joint Venture has also started rendering services to the Municipality since 24 March 2022 and rendered invoices which has become due and payable.

[26] Regulation 49 of the Municipal Supply Chain Regulations provides as follows:

“49. The Supply Chain Management Policy of the Municipality or municipality entity must allow persons aggrieved by decisions or actions taken by the municipal entity in the implementation of its Supply Chain Management System, to lodge within 14 days of the decision or action a written object or complaint to the Municipality or municipal entity against the decision or action.”

[27] It is argued on behalf of the applicant that Regulation 49 of the Municipal Supply Chain Regulations would only be applicable if the tender was conditional and subject to the finalisation of the objection raised.

[28] In Basson v Hugo and Others 2018 (3) SA 46 (SCA) the issue on appeal was whether the appellant was obliged to exhaust the internal remedy as contemplated in section 7(2) of PAJA, before launching an application to review and set aside a decision taken by the Health Professions Council of South Africa (the Council), in terms of which an application for the recusal of the panel members on the ground of bias was refused. It was held that the appellate committee lacked the power to grant the relief asked for, namely the setting-aside of the conduct committee's proceedings, and the matter was referred back to the High Court.

[29] The question for consideration is whether section 62 of the Municipal Systems Act affords the applicant an internal remedy as contemplated in section 7(2) of PAJA. The answer to this question lies in the interpretation of section 62. Section 62 of the Municipal Systems Act reads as follows:

“(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) When the appeal is against a decision taken by –

(a) a staff member other than the municipal manager, the municipal manager is the appeal authority;

(b) the municipal manager, the executive committee or executive mayor is the appeal authority, or, if the municipality does not have an executive committee or executive mayor, the council of the municipality is the appeal authority; or

(c) a political structure or political office bearer, or a councillor –

(i) the municipal council is the appeal authority where the council comprises less than 15 councillors; or

(ii) a committee of councillors who were not involved in the decision and appointed by the municipal council for this purpose is the appeal authority where the council comprises more than 14 councillors.

(5) An appeal authority must commence with an appeal within six weeks and decide the appeal within a reasonable period.

(6) The provisions of this section do not detract from any appropriate appeal procedure provided for in any other applicable law.”

Finding on points in limine

[30] Section 62(1) lays down two requirements. The first is that the decision appealed against must have affected the rights of the applicant. The second is that such decision ought to have been reached in the exercise of a delegated power.

[31] The decision to appoint the Joint Venture was a delegated power as determined in section 62(1) of the Municipal Systems Act. What needs to be considered is whether the applicant satisfies the first requirement that its rights have been affected. If not, it cannot be held that there was an internal remedy which they ought to have exhausted before approaching the High Court. If so, the applicant should have embarked on the appeal process in terms of section 62 of the Municipal Systems Act.

[32] The question of whether the applicant’s rights have been affected by the awarding of the tender, can be answered with reference to City of Cape Town v Reader and Others [2008] ZASCA 130; 2009 (1) SA 555 (SCA) in which it was held that:

“Objecting neighbours and other third parties have no right of appeal against municipal planning permissions and decisions under s 62 of the National Building Regulations and Building Standards Act 103 of 1977. It is only the aggrieved applicant, who has failed to secure the permission sought in his or her application, who is afforded a right of appeal under s 62. There is therefore no internal remedy that objecting neighbours and other third parties must first exhaust before applying for a review of the municipality's decision. (Paragraphs [31] and [35] at 563H - J and 564G.)

The first and second respondents were neighbours of the third respondent who applied unsuccessfully in the High Court for an order reviewing and setting aside the decision of the appellant (the municipality), in terms of s 7 of the National Building Regulations

and Building Standards Act 103 of 1977, to approve certain building plans for the third respondent's erf. The High Court dismissed the application on the basis that, in terms of s 7(2)(c) of the Promotion of Administrative Justice Act 3 of 2000, the first and second respondents had failed first to exhaust an internal remedy, namely, the appeal procedure provided for in s 62 of the Local Government: Municipal Systems Act 32 of 2000 (the Municipal Systems Act). On appeal to the full bench of the same division of the High Court, that decision was set aside, with the full bench finding that third parties (as were the appellants) did not have an appeal in terms of s 62 of the Municipal Systems Act. The municipality appealed against the decision of the full bench to the Supreme Court of Appeal.

Held, that s 62 clearly gave no general right of appeal to those who objected to municipal planning permissions and decisions. It gave a right of appeal only to one whose rights were directly affected by a decision. (Paragraph [30] at 563E.)”

[33] After careful consideration of the facts and the case-law, I find that the applicant had a right that was affected in the decision made to award the tender to the Joint Venture. This right includes (but is not limited to) administrative fair processes and the audi alteram partem rule.

[34] As such, I find that the applicant should have lodged an appeal in terms of section 62(1) of the Municipal Systems Act against the decision to award the tender to the Joint Venture.

[35] Had the appeal been lodged within the prescribed time periods, within 21 days of becoming aware of the decision, the appeal might have been adjudicated prior to the signing of the Service Level Agreement between the Municipality and the Joint Venture.

[36] In the premise, the point in limine is upheld and the application is to be dismissed.

Cost

[37] The normal rule is that the successful party is entitled to its costs and I find no reason why the normal rules should not be adhered to.

[38] The applicant is thus to pay the costs of the 1st, 3rd and 5th respondents.

Order:

[39] In the premises I make the following order:

i) The point in limine that the applicant failed to exhaust internal remedies, is upheld.

ii) The application is dismissed with costs.

FMM REID (WAS SNYMAN)

JUDGE OF THE HIGH COURT

NORTH WEST DIVISION MAHIKENG

DATE OF ARGUMENT: 5 DECEMBER 2022

DATE OF JUDGMENT: 22 JUNE 2023

APPEARANCE FOR APPLICANT: ADV APJ ELS INSTRUCTED BY: ALBERT HIBBERT ATTORNEYS 231 LANGE STREET NIEUW MUCKLENEUK PRETORIA TEL: 012 – 346 4633 EMAIL: jaco@hibbertlaw.co.za albert@hibbertlaw.co.za REF: A HIBBERT / JDP / M 633 C/O LABUSCHAGNE ATTORNEYS CONSTANTIA DRIVE MAHIKENG APPEARANCE FOR 1ST AND 5TH RESPONDENT: ADV NG LAUBSHER INSTRUCTED BY: ME TLOU ATTORNEYS INC NO 43 CNR BADEN POWELL & VISSER STREET MAHIKENG TEL: 018 011 0036 EMAIL:naledi@tlouattorneys.co.za REF: RUS1/0030/ME TLOU APPEARANCE FOR 3RD RESPONDENT: ADV ME MANALA INSTRUCTED BY: LAMOLA ATTORNEYS 609, 6TH FLOOR OLIVETTI HOUSE SOPHIE DE BRUYN AND PRETORIUS STREET PRETORIA TEL: 012 323 9709 EMAIL: info@lamolaatt.co.za lamolamadimetja4@gmail.com C/O KGOMO ATTORNEYS 56 SHIPPARD STREET, MAHIKENG