Logbro Properties CC v Bedderson NO and Others

• Jurisdiction: South Africa
• Judge: Howie JA, Farlam JA, Cameron JA, Heher JA, Lewis AJA
• Judgment Date: 18 October 2002
• Citation: 2003 (2) SA 460 (SCA)
• Docket Number: 372/2001
• Hearing Date: 23 August 2002
• Counsel: G J Marcus SC (with him M Daley) for the appellant. E J B Lingenfelder for the first to fourth respondents.
• Court: Supreme Court of Appeal

Cameron JA: F

[1] In 1997 the High Court ordered a provincial tender committee to 'reconsider' a tender the appellant had submitted two years earlier to buy a property. This appeal raises the question whether the committee when doing so was entitled to take into account the fact that property values had increased since 1995, or whether it should have adjudged the tender excluding this and other supervening considerations. The Court below held that the increase could properly G be taken into account. The appellant challenges that conclusion. If its main argument fails, it raises a fresh question in this Court: should the tender committee in 1997 have given it an opportunity to be heard on the significance of the price rise? H

Background

[2] In February 1995, the KwaZulu-Natal provincial government ('the province') awarded a tender for the sale of a well-situated Richards Bay property, approved for development as a filling station, to one Naidoo. The appellant's tender was rejected. But it challenged the award on the basis that Naidoo's tender, although by a considerable I margin the highest, did not comply with the tender conditions. Its challenge prevailed. In February 1997 the Natal Provincial Division of the High Court (McLaren J) set aside the award. It ordered the province's assets committee ('the committee') to reconsider the appellant's and other J

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tenders that complied with the tender conditions. Non-compliant tenders, including Naidoo's, were to be A excluded. There was no appeal against the decision of McLaren J.

[3] So the matter came before the committee (of which the first respondent later became chairman) less than a month after the High Court decision. The appellant's tender was now the highest. But the B committee decided by three to one (the first respondent dissenting) to accept neither the appellant's nor any of the other 1995 tenders. Instead, in view of the increase in Richards Bay property values in the intervening two years, it recommended a call for fresh tenders entirely.

[4] The appellant went back to Court. Its challenge, launched in the Natal Provincial Division in December 1998 and argued in September C 2000, failed before Skweyiya J. In a judgment delivered in August 2001, he held that the meaning of McLaren J's order directing the committee to 'reconsider' the qualifying tenders required the committee to consider the matter anew: this left it free to take into account new factors and circumstances, including the increase in property values D since the abortive 1995 process. With his leave the appellant appeals against that conclusion. Of the 12 respondents originally cited (including all the 1995 tenderers), only three oppose the appeal - the committee itself (represented by the first respondent), and the national and provincial executive members of government responsible for housing (respectively the second and fourth E respondents).

Was the committee in 'reconsidering' the tender permitted to take the increase in property values into account?

[5] The starting point must be that the tender process constituted F 'administrative action' under the Constitution. This entitled the appellant (and it does not matter in this case whether the interim or the 1996 Constitution applied) [1] to a lawful and procedurally fair process and an outcome, where its rights were affected or threatened, justifiable in relation to the reasons given for it. [2] I say 'must be' since in the light of G

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several decisions of this Court applying the Constitution's administrative justice provisions to governmental tender A processes [3] the statement seems obvious. Yet counsel for the province asserted the contrary. It is necessary to deal with his argument, not because it has substance, but because of the terms in which it was advanced. Counsel contended, distinguishing the cases referred to, that the tender conditions the province stipulated B gave it a contractual right to withdraw the property from tender in 1997, which could be exercised 'without having to pass the scrutiny of lawful administrative action'. He invoked two decisions of this Court, Mustapha and Another v Receiver of Revenue, Lichtenburg and Others [4] and Cape Metropolitan Council v Metro Inspection Services (Western Cape) CC and Others. [5] C

[6] It is correct that in the first litigation McLaren J held that the province's tender offer, accepted by the tenderers, gave rise to a contract whose conditions the tenderers could enforce against the province. The tender conditions included: D

'1.1

The highest tender will not necessarily be accepted.

1.2

No reasons will be given for the acceptance or non-acceptance of [a] tender.

1.3

The Regional Housing Board, KwaZulu-Natal may at any stage and without giving reasons withdraw a property or properties from the tender.

1.4

Tenders which do not comply with the requirements set out below should not be considered. E

. . . .'

[7] It was condition 1.4 that McLaren J held the appellant could enforce to secure the exclusion of Naidoo's and other non-compliant tenders, though it is the others the province now seeks to invoke. But the argument is flawed. Even if the conditions constituted a contract F (a finding not in issue before us, and on which I express no opinion), its provisions did not exhaust the province's duties toward the tenderers. Principles of administrative justice continued to govern that relationship, and the province in exercising its contractual rights in the tender process was obliged to act lawfully, procedurally and fairly. In consequence, some of its contractual G rights - such as the entitlement to give no reasons - would necessarily yield before its public duties under the Constitution and any applicable legislation.

[8] This is not to say that the conditions for which the province stipulated in putting out the tender were irrelevant to its H subsequent powers. As will appear, such stipulations might bear on the exact ambit

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of the ever-flexible duty to act fairly [6] that rested on the province. The A principles of administrative justice nevertheless framed the parties' contractual relationship, and continued in particular to govern the province's exercise of the rights it derived from the contract.

[9] Counsel's invocation of the Cape Metropolitan case as authority to the contrary is mistaken. There it was held that a local authority's cancellation of an agreement was not B 'administrative action' under the Constitution entitling the other contractant to procedural fairness before termination. Although the public authority derived its power to conclude the contract from statute, it was held that the same could not necessarily be said about its power to cancel. But the Cape Metropolitan case turned on its own facts, and this Court was careful to delineate them. In the first place, the tender cases were expressly C distinguished. [7] Second, the employment cases (where a public authority's express statutory power to dismiss public sector workers was held bound by public duties of fairness notwithstanding that a corresponding right existed at common law or that such a right might also have been contained in a contract) [8] were also D distinguished. [9] Third and most importantly, the Court in Cape Metropolitan did not purport to provide a general answer to the question whether a public authority in exercising powers derived from a contract is in all circumstances subject to a public duty to act fairly. That question was left open. Instead, the Court's judgment makes it plain that the answer depends on all the circumstances. The critical passage in the reasoning of Streicher JA is E this:

'Those terms [ie entitling the public authority to...