The review of municipal awarded tenders: Regulation 50 of the municipal supply chain management regulations and s 7(2) of the Promotion of Administrative Justice Act

March 23rd, 2016
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DDP Valuers (Pty) Ltd v Madibeng Local Municipality (SCA) (unreported case no 233/2015, 1-10-2015) (Mhlantla JA (Mpati P, Lewis, Bosielo and Swain JJA concurring))

By Yashin Bridgemohan

Regulation 50 of the municipal supply chain management regulations GN 868 GG27636/30-5-2005 (the regulations), which deals with disputes, objections, complaints and queries, provides as follows:

‘(1) The supply chain management policy of a municipality or municipal entity must provide for the appointment by the accounting officer of an independent and impartial person not directly involved in the supply chain management processes of the municipality or municipal entity –

(a) to assist in the resolution of disputes between the municipality or municipal entity and other persons regarding –

(i) any decisions or actions taken by the municipality or municipal entity in the implementation of its supply chain management system; or

(ii) any matter arising from a contract awarded in the course of 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 contract.

(2) A parent municipality and a municipal entity under its sole or shared control may for purposes of subregulation (1) appoint the same person.

(3) The accounting officer, or another official designated by the accounting officer, is responsible for assisting the appointed person to perform his or her functions effectively.

(4) The person appointed must –

(a) strive to resolve promptly all disputes, objections, complaints or queries received; and

(b) submit monthly reports to the accounting officer on all disputes, objections, complaints or queries received, attended to or resolved.

(5) A dispute, objection, complaint or query may be referred to the relevant provincial treasury if –

(a) the dispute, objection, complaint or query is not resolved within 60 days; or

(b) no response is received from the municipality or municipal entity within 60 days.

(6) If the provincial treasury does not or cannot resolve the matter, the dispute, objection, complaint or query may be referred to the National Treasury for resolution.

(7) This regulation must not be read as affecting a person’s rights to approach a court at any time.’

Section 7(2) of the Promotion of Administrative Justice Act 3 of 2000 (the Act) provides:

‘(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.

(b) Subject to paragraph (c), a court or tribunal must, if it is not satisfied that any internal remedy referred to in paragraph (a) has been exhausted, direct that the person concerned must first exhaust such remedy before instituting proceedings in a court or tribunal for judicial review in terms of this Act.

(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.’

Facts

During the month of May 2013 the first respondent sent out an invitation to bidders for the tender to compile the new and supplementary evaluation roll for the term of 2014 to 2018. The appellant who was the valuer for the term preceding September 2013 had applied and was shortlisted. The appellant was, however, unsuccessful and the second respondent was awarded the tender.

In accordance with reg 49 of the regulations the appellant addressed a letter to the first respondent requesting information relating to the second respondent and the bid evaluation process used. The appellant further requested the first respondent, in accordance with reg 50, appoint a qualified and able individual to assist in the dispute resolution process.

The first respondent replied via e-mail and advised the appellant that it would be unethical to engage in communication as the appellant had instituted action for unpaid invoices. The appellant replied and indicated that legal action would be taken if the information required was not provided.

On receiving no response, the appellant made application to the Gauteng High Court for the review and the setting aside of the tender awarded to the second respondent.

The respondents in opposing the application raised a point in limine, being that the appellant had not exhausted all its internal remedies in terms of s 7(2)(a) of the Act. The internal remedy in question being reg 50. This point in limine was upheld by Makogba J and the application was dismissed. The appellant then made application for leave to appeal in the Supreme Court of Appeal (SCA).

Issue before the SCA

The main issue before the SCA was whether the dispute resolution process provided for in reg 50 amounted to an internal remedy as provided for in s 7(2)(a) of the Act.

SCA’s judgment

Mhlantla JA focused on the definition of an ‘internal remedy’ in administrative law as defined in Reed and Others v Master of the High Court of SA and Others [2005] 2 All SA 429 (E) at para 25 as follows:

‘The composite term “internal remedy” … is used to connote an administrative appeal – an appeal, usually on the merits, to an official or tribunal within the same administrative hierarchy as the initial decision-maker – or, less common, an internal review. Often the appellate body will be more senior than the initial decision-maker, either administratively or politically, or possess greater expertise. Inevitably, the appellate body is given the power to confirm, substitute or vary the decision of the initial decision-maker on the merits. In South Africa there is no system of administrative appeals. Instead internal appeal tribunals are created by statute on an ad hoc basis.’

The court noted that generally the duty to make use of internal remedies first is not absolute or automatic.
According to the court this was evident from s 7(2)(c) of the Act, which permits courts to exempt applicants in exceptional circumstances from exhausting internal remedies if the interests of justice permit same.

It was further noted that a failure to exhaust internal remedies can be condoned where the remedy in question is ‘illusory or inadequate, or because it is tainted by the alleged illegality.’

In addition to the above, the court noted that in terms of our common law there are two important factors:

‘(a) whether the domestic remedies are capable of providing effective redress; and

(b) whether the alleged unlawfulness undermines the internal remedies themselves.’

Mhlantla JA held that as reg 50 did not make provision for an internal remedy, there was no obligation on the appellant to make use of it or make application for an exemption in terms of s 7(2)(c) of the Act and, as such, the court a quo erred ‘when it concluded that even though a purported internal remedy would not be effective and its pursuit would be futile, it was still incumbent upon the appellant to approach the court for exemption from the obligation to exhaust internal remedies.’ Mhlantla JA further held that the court a quo erred in upholding the point in limine.

Mhlantla JA had also noted s 62 of the Local Government Municipal Systems Act 32 of 2000 (the Systems Act), which allows an individual to appeal by giving written notice and reasons for the appeal to the municipal manager, who then submits the appeal to the appeal authority. The appeal authority is empowered to confirm, vary or revoke the decision, provided that such variation would not adversely affect the rights that have already accrued to the successful bidder.

However, in this case as the first respondent had already been awarded the tender and signed an agreement with the second respondent, which resulted in the rights accruing to the second respondent, the court found the appellant did not have to resort to the s 62 procedure of the Systems Act in order to comply with s 7(2) of the Act. The only avenue available to the appellant as unsuccessful bidder was to apply for the judicial review of the tender award and the conclusion of the contract. Hence Mhlantla JA  held the appellant’s appeal has to succeed.

The court accordingly upheld the appeal and ordered that the matter be referred back to the court a quo for consideration on its merits.

Conclusion

This judgment of the SCA is important because in light of it reg 50 of the regulations does not fall under s 7(2) of the Act. Unsuccessful bidders for a municipal tender may apply to court for the judicial review of the awarded tender, without exhausting the reg 50 process or making an application for exemption in terms of s 7(2)(c) of the Act for failure to exhaust the reg 50 process. This is, however, provided that the tender has been awarded and an agreement has been signed between the municipality and successful bidder. Where a tender has not been awarded and no agreement has been entered into the internal remedy provided for in s 62 of the Systems Act must be followed before making an application to court for judicial review otherwise failure to comply with s 7(2) of the Act can be raised by the respondents as a point in limine.

Yashin Bridgemohan LLB (UKZN) is an attorney at Yashin Bridgemohan Attorney in Pietermaritzburg.