Saak 33/2023 - Eis R64 000 000 Mosselbaai Munisipaliteit verloor saak

[Administrator]

Municipality of Mossel Bay v Steenkamp N.O and Another (33/2023) [2023] ZAWCHC 315 (1 December 2023):

Belangrik om te weet die saak se koste gaan eers op die 2023/2024 state wees.

Skakel na die saak

Punte wat saakmaak

1. The applicant (the Municipality) seeks to review its own decision taken
in February 2009 in which it allocated a tender for the building of 3 middle-income
housing projects to its preferred bidder. The matter has a long history but the points
for determination in this review are fairly crisp.

2. The review has its genesis in action proceedings which are pending in
this court under case no 21583/2011 in which the successful tenderer (cited in those
proceedings as the Stone Trade Trust) has sought specific performance from the
Municipality to enforce the contract which was allocated to it, alternatively a claim for
damages in excess of R64m for its alleged loss of profits.

3. On 21 December 2022, and as the parties were preparing to go trial on
13 February 2023, the Municipality put a spanner in the works as it sought to review
the tender allocation which it had made some 13 years earlier. It goes without saying
that, in addition to the merits of the application which is brought as a legality review,
there is the question of unreasonable delay in filing the review

16.7 The Trust (Respondent) was at the relevant time, essentially dormant, insolvent and
incapacitated to execute the tender itself. ST Trade Construction (Pty) Ltd had just been
registered.

It will be immediately noted that the Municipality's stance regarding the party with
whom it contracted was speculative and based on assumption rather than clear and
equivocal.

20. Prins goes on to aver that, based on these facts, the provisions of s217
were breached in the following respects.

"17.1 On a proper construction of the tender in question it is uncertain whether the bidder was
the Trust, ST Trade Construction Pty Ltd or Marblesharp 122 (Pty) Ltd;

17.2 It is uncertain whether the tender was awarded to the Trust or ST Trade Construction
(Pty) Ltd;

17.3 The Trust could and should not have "earned "the 12 points referred to above;

17.4 ST Trade Construction (Pty) Ltd could and should not have earned the preferential
procurement points or the title of the other 10 points;

17.5 Neither of the two entities should or legally could accordingly, have been awarded the
tender;

17.6 Neither of these two entities was earmarked to execute the tender. It was Marblesharp
122 Pty Ltd;

17.7 Neither of these two entities were financially or otherwise competent to duly perform the
obligations arising from the tender;

17.8 Neither of these two entities were properly authorized by resolution, to tender, as
required by the tender documentation. (In this regard: (a) - the Resolution relating to the Trust
(Respondent) was: not legally valid and - in any event did not authorize the submission of the11
tender; (b) - No resolution at all authorized a tender on the half of ST Trade Construction in
respect of the proposed development."

21. In the answering affidavit the Trust claims that the stance adopted by
the Municipality is cynical and singularly lacking in good faith. It suggests that the real
purpose of the review is to stall the trial action, given that the Municipality has known
since at least the days of the ASLA review what the Trust's case is, and in particular
how the relationship between the Trust and the JV was established and how it was
intended to function.

23. But before this restructuring could be implemented, says Steenkamp
Jnr, the Trust took the first step in the tender process when it submitted its Expression
of Interest document to the Municipality. That was in November 2007 when the
business was still conducted through the vehicle of the Trust which used the trading
name Stone Trade Trust Construction and, as I have said, was sometimes
abbreviated with the acronym STTC.

27. These documents passed through a host of hands and were scrutinized
by several officials evaluating the various tenders on behalf of the Municipality. These
would have been officials very alive to the spectre of "fronting" which is anathema to
the provisions of s2175. Included in those officials was Prins, the Municipality's legal
head. And yet, none of them had any difficulty in understanding the proposed
structure of the tender, the execution of the works or with which entities they were
dealing. The claim now by the very same Prins that there was uncertainty as to whom
the tender was awarded is both astonishing and absurd. The tender was awarded to
the Trust and everybody knew that – both at the time of the award of the tender and
later during the ASLA review.

28. Counsel for the Municipality queried why the tender document was
lodged by the Trust while ST Trade was described in the JV as "Contractor 1". That of
5 Esorfranki Pipelines (Pty) Ltd and another v Mopani District Municipality and others [2014] 2 All SA
493 (SCA) at [26]13
course is a question which might have been asked by the Municipality at the
evaluation stage, if it was confused or concerned about what the relationship was
between the Trust and the JV. But it did not do so – obviously it did not require clarity
on the point.

29. In that regard, it is important to note that in the bid document the Trust
expressly informed the Municipality that it would be "roping in" a BEE partner and that
the construction work would be performed by the JV through the vehicle of
Marblesharp. Further, the customary scoring of BEE points in the tender process was
based on Mbobs' shareholding in Marblesharp. Everything appears to have been
above board and none of the Municipality's sub-committees found fault with the bid.

30. As demonstrated in para 8 above, the decision of the Municipality's
Council in awarding the tender was that it should go to "Stone Trade Trust
[Marblesharp 122 (Pty)]". The incomplete reference to Marblesharp in parentheses
indicates unequivocally that the Municipality recognized that entity's association with
the Trust in relation to the tender but that the party to whom the tender was granted
was the Trust.

31. Clearly, it did not bother the municipal officials how the Trust structured
its affairs through the use of an eponymous company as "Contractor 1" in establishing
the JV with Mbobs. In argument, the Court asked Mr. van Riet whether there was any
authority on the interpretation of s217 which established that, in a situation where an
entity had been awarded a contract by an organ of state, it was precluded by that
section of the Constitution from rearranging its corporate affairs or structure for
purposes of its own business efficiency in such a way that, for example, a wholly
owned subsidiary was established to perform part (or all) of its obligations under the
contract. Counsel was not aware of any such authority at the time and has not drawn
anything to the Court's attention subsequent to the hearing notwithstanding an
invitation to do so.14

CONCLUSION

32. On the evidence presented in the affidavits in this matter, I am unable to
find that the Municipality has established conclusively that the contract in question
falls foul of the provisions of s217 and that it must thus be set aside. It was fair,
Transparent, equitable, competitive and evidently cost-effective. It follows that the
review must fail.

33. As regards costs, Mr. Vivier urged the Court to grant the Trust a punitive
costs order in light of the cynical and mala fide way in which it has approached the
court to save its bacon in the damages claim. In my view, there is certainly merit in
what counsel submitted but I consider that there is a more appropriate way to grant
such a costs order. In the oft quoted decision of Alluvial Creek6 almost a century ago
in this Division Gardiner JP held as follows.

ORDER OF COURT

Accordingly, it is ordered that:

A. The application for review is dismissed.

B. The applicant is to pay the costs of the first and second
respondent, in their representative capacity as trustees of the
Stone Trade Trust, on the scale as between attorney and client.
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