High Court dismisses Tshwane’s bid to review multi-million-rand tender

A City of Tshwane application to review and set aside a controversial 2016 multi-million-rand vehicle fleet management tender and subsequent public-private partnership (PPP) agreement has been dismissed with costs by the High Court in Pretoria. The PPP agreement only had one month more to run

The city was also seeking an order that the Moipone Group be directed to repay the profits it earned from the PPP.

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To date, Moipone Group has apparently been paid more than R850 million in terms of the PPP agreements in circumstances where the combined value of the PPP agreements does not even exceed R700 million.

The PPP was entered into with the Moipone Group, which entered into agreements with Absa Vehicle Management Solutions (AVMS) to provide it with vehicle finance to enable it to comply with its obligations in terms of the PPP agreements.

Moipone Group and AVMS were respondents to the application.

Get-out-of-contract-free card requests getting out of hand …

Judge Colleen Collis, in a judgment handed down last week, referred to the Supreme Court of Appeal (SCA) describing the review by the state and organs of state of their own decisions as “a novel, but burgeoning, species of judicial review”.

She said the SCA more recently went further and described state self-review cases as:

“[A]n ever growing, and frankly disturbing, long line of cases where municipalities and organs of state seek to have their own decisions, upon which contracts with service providers are predicated, reviewed and overturned, for want of legality, more often than not after the contracts have run their course and services have been rendered thereunder.”

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Collis said the high court has found that “the proliferation of late self-review by organs of state is becoming a whimsical trait, fanciful and out of step with commercial and socio-economic realities”.

“It camouflages inefficiencies by hiding under the protective shield of the Constitutionally mandated procurement procedures … [this] is an impermissible Get Out of Contract Free card to avoid its carefully struck bargain under the [agreed upon contracts]”.

Irregularities and fraud 

The city listed tender and PPP irregularities and highlighted fraudulent documents provided to support Moipone Group’s tender.

The city said Moipone fraudulently represented, through a letter issued by Imperial Automotive Retail CEO Philip Michaux, that it had entered into an exclusive joint venture with Imperial Fleet Management (IFM).

It said this impression was false, and provided a letter from Michaux in which he denied authoring or authorising the letter on an Imperial Group letterhead.

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In another letter submitted by Moipone Group with its tender documents allegedly came from Hydro Plant (Pty) Ltd and created a further false impression that it was “pleased to provide preferential support to Imperial Fleet Management … and the Moipone Group, for the City of Tshwane vehicle tender”.

Jaco Bezuidenhout of Hydro Plant testified that he did not issue the letter, the signature appears to be forged, and that Hydro Plant does not lease or sell vehicles or sell spare parts.

The city sought to review and set aside its decision to conclude the PPP agreements and to set aside the agreements in terms of the principle of legality because it claimed the conclusion of the PPP agreements was not authorised by law for a number of reasons. These include failure to meet the suspensive conditions and a lack of proper compliance with the Municipal Finance Management Act.

It said the Moipone Group also should not to be allowed to benefit from an unlawful award tainted by irregularities and fraud to which it was a party.

To allow Moipone to retain all the profits it earned in terms of the PPP agreements would, it added, defeat the whole purpose of judicial review and setting aside of decisions to award procurement contracts because such reviews would not bring any meaningful remedies to organs of the state.

Perspective

Judge Collis said AVMS was not a party to the tender process that led to the PPP agreements concluded between the city and Moipone.

She noted that AVMS did not participate in the irregularities and fraudulent activities upon which the city relies for the relief it seeks.

“It would not be just and equitable for AVMS to be deprived of the rights vested upon it in terms of the finance agreements if those agreements were set aside or if the setting aside of the PPP agreements were to result in it losing the rights vested upon it in terms of those agreements.”

Judge Collis said the Moipone Group and AVMS raised various defences to the city’s application.

The most crucial was the unreasonable delay by the city in bringing the review proceedings in addition to the lack of evidence to support its cause of action, with the city also failing to provide a full explanation for its delay.

She said the city could have brought the review proceedings from as early as November 2013.

But it waited until April 2017 – almost four years after it became aware of the irregularities in the tender process – to initiate the proceedings.

‘State capture’ argument

The PPP was entered into when the ANC was in charge of the City of Tshwane administration, with the DA suggesting it was an attempt at state capture by politically connected tenderpreneurs.

But Collis said: “It matters not that the CoT [City of Tshwane] at some point had argued that the changes in the political administration … from the African National Congress to the Democratic Alliance during August 2016 explain the delay (if any) on its part.

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“In fact, this argument about a change in political governance within the CoT is unsustainable both at the level of fact and at the level of law and was successfully rejected in Aurecon wherein the Constitutional Court rejected a similar explanation that was advanced by the City of Cape Town.”

She said there was no evidence before the court providing any basis for the unreasonable delay by the city to be condoned and its delays in bringing the review proceedings had been compounded by its delays of another five years in prosecuting its review.

Attempting to ‘undo a contract that has been completed’

“So, as the matter now stands, the PPP agreements are only a month away of having run their course in full and the City is effectively asking this Court to undo a contract that has been completed and in respect to which the City has been benefiting from Moipone’s performance for over six years.

“In effect, the City is asking this Court to unscramble an egg that would have been years away from even being laid, but for its unreasonable delays.”

She added: “Having regard to the legal principles applicable, this Court is not persuaded that it can overlook the CoT’s inordinate delay in instituting the review proceedings.

“The CoT has not offered a good explanation as to why it delayed given the number of opportunities it had at launching review proceedings before 20 April 2017.

“Its failure in taking steps earlier to review the irregularities has simply not been adequately explained and for this reason this Court cannot come to its assistance.”

* The High Court in Pretoria previously issued an order directing the CoT to pay all amounts outstanding in respect of Moipone invoices, including an admitted figure of R111.5 million. It failed to do so until April 2024, when the Moipone Group attached the CoT’s bank account in execution of the order.

This article was republished from Moneyweb. Read the original here