Organs of state seeking a review of own decision: A question of legality or PAJA?

April 1st, 2018
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By Thenjiwe Vilakazi

On 14 November 2017, the Constitutional Court (CC) determined for the first time whether the Promotion of Administrative Justice Act 3 of 2000 (PAJA) applies when an organ of state seeks to review its own conduct. In the matter of State Information Technology Agency SOC Ltd v Gijima Holdings (Pty) Ltd 2018 (2) SA 23 (CC); 2018 (2) BCLR 240 (CC), the State Information Technology Agency (SITA) brought an application for leave to appeal the majority ruling of the Supreme Court of Appeal (SCA) who had decided that PAJA applies to review applications instituted by organs of state.

SITA argued that when an organ of state seeks to review and set aside its own conduct, it does so on the basis that its conduct is inconsistent with the Constitution, and accordingly, the question should be one of legality under s 2 of the Constitution read with s 217, and not PAJA.

Gijima, on the other hand, argued that s 217 of the Constitution requires an organ of state to devise a system of fair procurement that allows only exceptional deviations. Gijima emphasised that there is no reason to exempt organs of state from the applicability of PAJA and devise a separate system of judicial review for them. Government should generally be required to follow the same forms and processes for review as any other party.

The road which led to the CC

On 27 September 2006, SITA and Gijima entered into an agreement in terms of which Gijima was to provide information technology services (IT services) to the South African Police Service (SAPS agreement). However, on 25 January 2012, SITA terminated the SAPS agreement with effect from 31 January 2012. This resulted in a loss of R 20 million in future revenue for Gijima. On 1 February 2012, citing unfair termination, Gijima instituted an urgent application against SITA in the Gauteng Division of the High Court in Pretoria.

Pursuant to this application, on the 6 February 2012, the parties entered into a settlement agreement in terms of which Gijima would render hardware maintenance and support services to the Department of Defence (DoD agreement). The DoD agreement intended to compensate Gijima for the loss of future revenue that it would have suffered as a result of SITA’s termination of the SAPS agreement. The DoD agreement was, however, not made an order of court. In light of the DoD agreement, the urgent application was removed from the court roll.

The DoD agreement resulted in Gijima being appointed as the service provider for the KwaZulu-Natal Health Department from 1 March 2012 to 31 July 2012 and for the Department of Defence (DoD) from 1 April 2012 to 31 July 2012 on SITA’s standard terms. As part and parcel of the DoD agreement, SITA was obliged to comply with all its internal procurement procedures. Gijima was concerned about SITA’s competence to conclude such a contract without having gone through a competitive bidding process and raised those reservations with SITA. SITA by means of its executive committee at the time, assured Gijima that it had the authority to conclude and authorise agreements up to an amount of R 50 million. Relying on that assurance, Gijima accordingly rendered the IT services to the DoD and the Health Department.

The DoD agreement was extended several times, and on 30 May 2013, SITA informed Gijima that it did not intend to renew the DoD agreement any further. A payment dispute then subsequently arose between the parties and Gijima instituted arbitration proceedings in order to force SITA to pay the outstanding amount. As at 30 May 2013, SITA allegedly owed Gijima an amount of R 9 545 942,72.

The payment dispute resulted in being only the very tip of a very large legal iceberg, which resulted in a number of judicial processes being instituted, starting at arbitration and concluding in a much anticipated judgment being handed down by the CC.

I outline these processes in more detail below:

  • Arbitration: The dispute around the outstanding amount could not be resolved, and Gijima instituted arbitration proceedings on September 2013. SITA resisted the claim on the basis that the DoD agreement, as well as the three extending addenda that followed it, were invalid as there was non-compliance with the provisions of s 217 of the Constitution when the parties concluded the agreement. SITA also argued that Gijima had not performed in terms of the DoD agreement and the three addenda. The arbitrator held that he did not have jurisdiction to adjudicate the question whether proper procurement processes had been followed and the payment dispute was, therefore, left unresolved. The court, therefore, had to be approached first in order to decide whether there was non-compliance with s 217 or not.
  • High Court: SITA approached the High Court to set aside the DoD agreement on the same basis as set out above. It instituted these proceedings outside of the 180-day period within which a review of administrative action must be brought in terms of PAJA. The court held that PAJA applied, as a decision to award and renew the DoD services agreement qualified as an administrative action as defined under PAJA. This meant that unless the court, acting in terms of the provisions of PAJA, sanctioned the late application, such application could not be entertained. The court concluded that it would not be just and equitable to set aside the main agreement, and could not substantiate any reasoning for the extension of this period. The application was therefore dismissed with costs.
  • SCA: Despite the above ruling, SITA argued that the conclusion of the agreement did not constitute administrative action as it did not adversely affect Gijima’s rights. On the contrary, SITA claimed that the decision to award the DoD agreement had actually benefited Gijima. Nevertheless, the majority held that a decision to award a contract for services did constitute an administrative action in terms of s 1 of PAJA and held that, on that basis alone, there existed no good reason for immunising administrative decisions taken by the state under PAJA. The majority dismissed the appeal with costs and concluded that PAJA does indeed apply to review applications instituted by organs of state. Furthermore, the wording in s 6(1) of PAJA, which allows any person to institute proceedings in a court or tribunal for the judicial review of an administrative action, is wide enough to include organs of state.
  • CC: Despite this ruling, SITA maintained that it is inconceivable that an organ of state can assert the right to lawful administrative action against itself, but then complain to itself that it had violated its own right to lawful administrative action and seek to invoke PAJA against itself. Therefore, on 9 May 2017, the matter appeared before the CC. SITA once again argued that when an organ of state seeks to review and set aside its own conduct, it does so on the basis that its conduct is inconsistent with the Constitution. It contended that the review should be decided in terms of the principle of legality, and not in terms of PAJA. Gijima, on the other hand, argued that there is no reason to exempt organs of state from the applicability of PAJA and that government should be required to follow the same forms and processes for review as any other party.

The CC’s ruling

The CC differed from the SCA and held that PAJA does not apply when an organ of state applies for the review of its own decision. It concluded that an organ of state seeking to review its own decision must do so under the principle of legality. The court held that, on an interpretation of s 33 of the Constitution and of PAJA itself, it cannot be said that an organ of state seeking to review its own decision can be a beneficiary of the rights under s 33, which create the right to just administrative action to be enjoyed by private persons only. The state is only the bearer of obligations under
s 33. The court accepted that, by awarding the contract to Gijima, SITA acted contrary to the dictates of s 217 of the Constitution.

The court therefore ordered as follows:

‘(a) The applicant’s decision to appoint the respondent as a DSS service provider under a contract which was to be effective from 1 April 2012 to 31 July 2012 and all decisions in terms of which the contract was extended from time to time are declared constitutionally invalid.

(b) The order of constitutional invalidity in paragraph 3(a) does not have the effect of divesting the respondent of any rights it would have been entitled to under the contract, but for the declaration of invalidity.’

In achieving this judgment, SITA succeeded in proving that when an organ of state seeks to review and set aside its own conduct, it does so on the basis that its conduct is inconsistent with the Constitution and the question should be one of legality under s 2 of the Constitution read with s 217, and not PAJA.

However, and despite its success, SITA’s delay of nearly 22 months before approaching the High Court for review was found to be inordinate by the CC, which held that there was no basis for it to exercise a discretion to overlook the delay. Despite the invalidity of the award of the DoD agreement, the court held that, in the interests of justice and equity, SITA must not benefit from having given Gijima false assurances from its own undue delay in instituting proceedings. It therefore declared the award of the contract to Gijima and the subsequent decisions to extend that contract to be invalid, but ordered that the declaration of invalidity must not have the effect of divesting Gijima of rights to which – but for the declaration of invalidity – it would have been entitled.

This highly anticipated ruling was expected to provide legal practitioners with some clarity on the application of PAJA versus legality in matters of judicial review. However, it is crucial to note that the court was at pains to emphasise that this judgment cannot be used as a precedent for cases where an organ of state is in a position akin to that of a private individual (natural or juristic) and seeks to review the decision of another organ of state. Nor does this ruling set a precedent in a situation where, in seeking a review of its own decision, an organ of the state is purporting to act in public interest in terms of s 38 of the Constitution.

 Thenjiwe Vilakazi LLB (UKZN) is an attorney at Gildenhuys Malatji Inc in Pretoria.

 This article was first published in De Rebus in 2018 (April) DR 32.

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