No execution or attachment for satisfaction of final court order sounding in money may be issued in any action or legal proceedings against the state

April 1st, 2020

Department of Agriculture, Forestry and Fisheries and Another v B Xulu and Partners Incorporated and Others (WCC) (unreported case no 6189/2019, 30-1-2020) (Rogers J)

In the case of the Department of Agriculture, Forestry and Fisheries and Another v B Xulu and Partners Incorporated and Others (WCC) (unreported case no 6189/2019, 30-1-2020) (Rogers J), the Western Cape High Court ordered the law firm B Xulu and Partners Inc (Xulu and Partners) to refund an amount of R 20 242 472,90 to the applicants the Department of Agriculture, Forestry and Fisheries (the department) and the Department of Environmental Affairs, Forestry and Fisheries, after the applicants launched an urgent application on 5 August 2019 wherein the applicants sought to have the writs and attachments of monies suspended.

On 25 October 2016 a Memorandum of Understanding (MoU) was concluded between the department and Emang Basadi Legal and Forensic Services Pty Ltd (EBL) in terms of which, EBL was engaged to provide legal advisory services. The applicant further stated that this was part of a move by the former minister of the department, Senzeni Zokwana’s faction to get rid of the State Attorney in Cape Town so as to enable private law firms to extract excessive fees from the department.

On 6 January 2017 EBL wrote to Xulu and Partners stating that EBL had been instructed by the department to appoint Xulu and Partners as attorneys to assist in pending litigation in which Viking Inshore Fishing (Pty) Ltd was suing the department. According to Xulu and Partners, the department recommended that Xulu and Partners apply to be added to the Marine Living Resources Fund’s supplier database so that EBL could be dispensed with as an intermediary. The department’s Chief Director: Legal Services, Kanthi Nagiah, who had no complaint with the quality of services rendered by the State Attorney, did not approve the latter’s side-lining.

The Director-General of the department, Mzamo Mlengana (who was appointed from outside the department from 1 July 2016), wrote to EBL on 2 February 2017 stating that proper supply chain management processes had not been followed in EBL’s appointment, rendering the contract invalid. He wrote this letter after conferring with (among others) Ms Nagiah. Xulu and Partners said that it continued working on the Viking case because it was unaware of the termination of EBL’s services. Mr Mlengana complained that despite the termination, the Deputy Director-General: Fisheries Management, Siphokazi Ndudane continued to use EBL’s services and to approve payments to it.

On 3 April 2017 former minister Zokwana wrote to the Deputy Minister in the Department of International Relations and Cooperation (DIRCO) to say that the department had mandated Xulu and Partners, working with advocate Nomazotsho Memani, to initiate and facilitate the restitution of money due to the South African government in the Bengis case (Bengis and Others v Government of South Africa and Others [2016] 2 All SA 459 (WCC)). Former minister Zokwana asked DIRCO to assist Xulu and Partners in meeting with various foreign authorities and provided DIRCO with Xulu And Partners’ contact details. According to Xulu And Partners, Ms Memani was a legal adviser to former minister Zokwana. On 14 April 2017 Xulu and Partners was registered on the Marine Living Resources Fund’s supplier database.

Slightly more than a month later the service-level agreement was purportedly concluded. The preamble recorded that the department had already appointed Xulu and Partners in the Bengis case, an appointment said to stem from a mandate former minister Zokwana had given to Xulu and Partners, and that the service-level agreement was being concluded to regulate the relationship between the parties and to ensure the achievement and maintenance of high-quality performance and standards. The service-level agreement defined ‘Delegated Authority’ as meaning the Deputy Director-General of the department, namely, Ms Ndudane. The court said the significance of this lies in the fact that clause 2.2 recorded that Xulu and Partners had accepted appointment on the understanding that, for the purpose of the service-level agreement, the department would be presented by the Delegated Authority, who would be the ‘first point of interface’ in all matters pertaining to the services.

Clauses 4.3 and 4.4 stipulated that Xulu and Partners would only accept instructions from the Delegated Authority and was prohibited from accepting instructions from any officials or employees from the department. In terms of clause 14 disputes were to be referred to the Delegated Authority for resolution. The draftsman was careful to bypass Mr Mlengana. Clause 10.1 stated that because of the wide geographical spread of the ‘project’ (defined in the preamble as meaning the Bengis project), all service providers were required to bill the the department in US dollars, ‘as this was the currency in which restitution was being claimed’. Remarkably, this applied to Xulu and Partners itself. Annexure B to the service-level agreement set out hourly rates in US dollars for counsel and for an attorney of different seniority within Xulu and Partners. Payment was to be made within 30 days of receipt of the invoices.

The first ground of attack on the service-level agreement was that it was not duly signed on behalf of the department. It was purported to have been signed by Mr Mlengana in Cape Town. Although he did not dispute that the signature was his, he denied that he knowingly signed it. According to his diary, he was in Cape Town on 23 May 2017 and met with former minister Zokwana. He surmises that the last page of the document (p 19, which contained no contractual terms) was placed before him as part of a document of a different character. The court referred to the circumstances, which supported Mr Mlengana’s allegations, were as follows:

  • A few months previously, Mr Mlengana had contested the validity of EBL’s appointment on the basis that the supply chain management processes had not been observed. This was equally true of Xulu and Partners’ appointment.
  • It was former minister Zokwana who was promoting Xulu and Partners’ appointment and had already given mandate.
  • The relationship between Mr Mlengana and the former minister was frayed (shortly after the purported execution of the agreement, the former minister placed Mr Mlengana on suspension).
  • Mr Mlengana’s signature was purported to have been witnessed by Ms Memani, the advocate who was a legal adviser to the minister. Mr Mlengana says that she was not present when he met with the minister and could not have witnessed his signature. He alleged that she had orally confirmed that but refused to give an affidavit.
  • Although Ms Memani’s initials appeared on each page of the agreement, including the attachments, Mr Mlengana’s did not.
  • Mr Mlengana alleged that he became aware of his signature on the service-level agreement and reported this to the Hawks as fraud.

On 5 October 2018 Mr Mlengana wrote to former minister Zokwana regarding the latter’s request that the department engage private law firms. He set out what he saw as the advantages of using a State Attorney, saying that its performance rivalled that of private firms ‘whose fees are exorbitant’. Where the State Attorney briefed counsel, they usually negotiated special rates. The Auditor-General (AG) had made findings about the department’s use of private law firms. He said such use could not be justified, and he requested the former minister to reconsider his instruction.

Former minister Zokwana did not heed the request. On the contrary, he issued a directive that the department settles Xulu and Partners’ fees. When Xulu and Partners sought Ms Ndudane’s assistance in giving effect to this directive, Mr Mlengana on 13 February 2019 notified Ms Ndudane that, as the Marine Living Resources Fund’s accounting officer, he had asked the State Attorney to verify Xulu and Partners’ invoices and no payment would be made until this was done.

The court said because Mr Xulu and his witness were not present when Mr Mlengana signed, they cannot from personal knowledge dispute what he says. If Mr Xulu tried to get an affidavit from Ms Memani, he was as unsuccessful as the Director General. That left the former minister as a potential witness. On 8 November 2019 Xulu and Partners filed an affidavit by former minister Zokwana in which the latter dealt with various matters but not with Mr Mlengana’s allegations concerning his signature on the service-level agreement. The court added that a criticism of Mr Mlengana’s version was that he did not say what the document was. Unless he signed it hurriedly, he ought to have noticed that it purported to be the last page of a contract.

The court said that provision was made on the same page for Xulu and Partners to sign. Nevertheless, in the absence of contrary evidence from the two persons who would have been able to refute Mr Mlengana’s version was false, namely, former minister Zokwana and Ms Memani, the courts pointed out it could not reject it.

The second ground of attack was that Xulu and Partners was not appointed pursuant to a fair public procurement process. Authority was scarcely needed for the obligations imposed in that regard on public bodies pursuant to s 217 of the Constitution. On the assumption that there were rational grounds to engage private attorneys to handle the Bengis and other cases, such appointments require a competitive bidding process. None was followed.

The court said that is a common cause and added that item 16A of Treasury Regulations, promulgated in terms of s 76(4)(c) of the Public Finance Management Act 1 of 1999 (the Finance Act), requires an accounting officer to develop and implement a supply chain management system that is, inter alia, fair, equitable, transparent, competitive, cost effective and consistent with the Preferential Procurement Policy Framework Act 5 of 2000. Various requirements with which such a system must comply are set out. In terms of item 16A.6.4, the accounting officer may deviate from the system where it is ‘impractical to invite competitive bids’, but then the reason must be recorded.

The court pointed out that item 16A.6.4 must be read in the light of National Treasury Instruction SCM Instruction Note 3 of 2016/17, issued in terms of ss 6(2) and 18(2) of the Finance Act, and which took effect on 1 May 2016. Paragraph 8.1, therefore, states that an accounting officer must only deviate from a competitive bidding process ‘in cases of emergency and sole supplier status’. The former is defined as occurring ‘when there is a serious and unexpected situation that poses an immediate risk to health, life, property or environment which calls an agency to action and there is insufficient time to invite competitive bids.’

‘Sole source procurement’ may occur – ‘when there is evidence that only one supplier possesses the unique and singularly available capacity to meet the requirements of the institution.’ Paragraph 8.5 provides that any other deviation ‘will be allowed in exceptional cases subject to the prior written approval from the relevant treasury’. The court said that there was no emergency requiring Xulu and Partners to be appointed, that there was no evidence that Xulu and Partners possessed the ‘unique and singularly available capacity’ to deal with Bengis case or any other cases on which it worked for the department. The applicant challenged Xulu and Partners to provide evidence that it had any track record in dealing with fishery matters. Xulu and Partners did not rise to the challenge.

Rogers J said on 6 June 2019 the Western Cape High Court, per Steyn J, made a purported settlement agreement concluded between Xulu and Partners and the first applicant, an order of court. The purported settlement agreement was concluded on 12 April 2019. Rogers J referred to the document as the settlement agreement though he said its validity is contested. When the department failed to make payment in accordance with settlement agreement, Xulu and Partners levied execution.

The court, however, declared the settlement by agreement invalid, and it was reviewed and set aside. The court pointed out that there are grounds of attack, which stand independently of the rescission of Steyn J’s order and one of those was non-compliance with the State Liability Act 20 of 1957. In terms of s 3(1), and subject to the further provisions of s 3 of the State Liability Act, no execution or attachment for satisfaction of final court order sounding in money may be issued against a defendant or respondent in any action or legal proceedings against the state or against any property of the state.

The court added that it was concerning that writs were issued in this case without an inquiry into compliance with the State Liability Act. Rogers J said he consulted with the court’s chief registrar, and it seemed that the registrars in the division of that court may not be alert to the provisions of the Act. He pointed out that there is no standard form for written request contemplated in s 3(6) of the Act. He said that attorneys who seek writs against national or provincial governments departments must not make such requests unless there has been compliance with the Act, and registrars should not issue writs unless so satisfied. He noted that in practice, it seems that to require the attorney, in the written request, to state –

  • when the period contemplated in s 3(3) expired;
  • that after expiry of that period, due services were affected on each of the person contemplated in s 3(4), and the dates of such service; and
  • that 14 days have expired from such service without payment having been affected and without acceptable arrangements for satisfaction of debt having been reached.

Kgomotso Ramotsho Cert Journ (Boston) Cert Photography (Vega) is the news reporter at De Rebus.

This article was first published in De Rebus in 2020 (April) DR 28.

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