State Information Technology Agency Soc Ltd v Gijima Holdings (Pty) Ltd (641/2015) [2016] ZASCA 143 (30 September 2016) per Cachalia JA (Tshiqi and Van der Merwe JJA concurring with Bosielo JA and Dlodlo AJA dissenting)
In disallowing the appeal the SCA held that when an organ of state seeks to undo its own decisions it:
- can only rely on PAJA;
- may not rely on the principle of legality; and
- must apply for condonation for any delay in instituting the proceedings.
Excerpts without footnotes
[1] This is an appeal from the Gauteng High Court (Matojane J) dismissing an application by a state entity to declare its contract with a listed company unenforceable for want of compliance with the public procurement requirements of s 217 of the Constitution. There is no dispute that these requirements were not followed in awarding the contract. The court a quo dismissed the application because the entity had relied directly on the constitutional principle of legality, instead of instituting review proceedings under s 6 of the Promotion of Administrative Justice Act 3 of 2000 (PAJA). It had also not applied under s 9(1)(b) to condone its failure to institute such proceedings within 180 days of the contract having been concluded, as s 7(1)(b) requires.
. . . . .
[20] The phrase ‘direct, external legal effect’ was borrowed from German federal law. The allusion to the word ‘direct’ refers to decisions that are final; the word ‘external’ to those that affect not only the decision-maker but also other parties, and the word ‘legal’ overlaps with the requirements that rights must be affected.[1] There can be no doubt that the decision to conclude the agreement met all these requirements. The decision was final; it had the capacity to adversely affect Gijima’s rights and those of the Defence Department, which counsel for SITA conceded during his argument.
[21] The upshot is that SITA cannot avoid the provisions of PAJA. Its failure to follow a prescribed competitive process therefore brings its administrative decision, in awarding the contract to Gijima, within the scope of s 6(2)(a)(i), s 6(2)(b) and s 6(2)(f)(i) of PAJA. This is because: it did not have the authority to contract outside of a competitive bidding process to do so; it contravened s 217 of the Constitution and had also failed to comply with a mandatory and material procedure prescribed by law.
. . . . .
[23] The court in Telkom SA upheld the contention. In so doing it held that the lawmaker seems to have deliberately omitted applying s7 of PAJA to the situation where a decision-maker seeks to review its own decision.[1] It therefore proceeded to decide the case on the common law rule.
[24] It appears, however, that in interpreting s 7 of PAJA in this manner the court overlooked s 9(1)(b), which empowers a court ‘on application by the person or administrator concerned’ to extend the 180 days referred to in s 7(1). An ‘administrator’ is defined in s 1 of PAJA to include an ‘organ of state’. So, read together, as ss 7 and 9 must be, the 180-day rule indeed applies to organs of state, and does to the SITA decision at issue in this case. On this point, therefore, Telkom was incorrectly decided.
. . . . .
[26] In the instant matter, as I have mentioned, SITA avoided PAJA by seeking declaratory relief directly under the constitutional principle of legality. It thus could not, and did not, invoke s 9(2) by applying for an extension of the 180-day period. In fact, in its founding affidavit, it did not refer to the delay or offer an explanation for it at all. This is unacceptable.[1] In these circumstances, the court a quo found that it was not in the interests of justice to grant an extension in terms of s 9. However, without an application from SITA, supported by facts justifying an extension of the 180-day period, the court did not have the power to even consider whether it was in the interests of justice to extend the period or to entertain the application.[2] That should have been the end of the matter.
[27] But the matter does not end here. SITA maintains that it is nevertheless entitled to avoid instituting review proceedings under PAJA – and the procedural requirement under s7 to institute its proceedings within 180 days – by relying directly on the constitutional principle of legality to obtain declaratory relief against Gijima. Put differently, it contends that if PAJA applies it had a choice to initiate a review under its provisions or bypass it, and formulate its cause of action as a legality challenge. It relies heavily for this submission on the judgment of this court in Municipal Manager: Qaukeni Local Municipality & another v FV General Trading CC.[3]
. . . . .
[30] Although it is perhaps implicit in this passage that a litigant may raise a legality challenge instead of proceeding by way of a formal review under PAJA, the court explicitly left open the question whether it was necessary for a municipality to do so when it seeks to avoid a contract in respect of which no third party has an interest.
It is therefore not binding authority for the issue in this case. Furthermore, and importantly, the delay rule was not in issue there. However, in MEC for Health, Eastern Cape & another v Kirland Investments (Pty) Ltd t/a Eye & Lazer Institute[1] Cameron J, writing for the majority in the Constitutional Court, intimated that an organ of state could not avoid the consequences of the delay rule by resorting to ‘procedural tricks’.[2]
This is because, he said, when the government has delayed bringing proceedings to set aside its decision ‘the court and Kirland are entitled to know what happened in that time’.[3] In other words, it could not simply ignore the rule by not bringing a counter-application.
. . . . .
[32] However, the issue has now been raised squarely in this case, and can no longer be elided. It is important to bear in mind that SITA did not institute review proceedings by using uniform rule 53 either under PAJA or directly under the Constitution on the ground of legality. If it had, it would have had to have made the complete record available to Gijima and the court; and justify the delay. Instead it applied for declaratory relief, which in substance is a legality review, but without explaining the delay. Under s 7 of PAJA, as we have mentioned, the delay rule is 180 days. When the application is styled as a legality challenge, but in substance is a legailty review, the two-stage enquiry enunciated in Wolgroeiers[1] applies. This means that the fact of an undue delay will play a role in the court’s exercise of its discretion whether or not to entertain the review.[2] As I have said, SITA’s contention is that it had a choice to proceed by way of PAJA or rely directly on the constitutional principle of legality.
[33] It is necessary to distinguish between a PAJA review, on the one hand and a legality review, on the other. PAJA was enacted to give effect to the right to lawful administrative action in s 33 of the Constitution.[3] And, as it was intended to be, and in substance is, a codification of the rights in s 33, so the Constitutional Court said in New Clicks,[4] it was not possible for litigants to go behind it, by relying either directly on s 33(1) or on the common law, when reviewing unlawful administrative actions as this would undermine the very purpose for which it was enacted.[5]
So, PAJA covers administrative action while private (contractual) power remains reviewable at common law.[6] In short, if the unlawful administrative action falls within PAJA’s remit there is no alternative pathway to review through the common law.
. . . . .
[36] But it is not a problem that can legitimately be avoided. For if a litigant or a court could simply avoid having to conduct the sometimes testing analytical enquiry into whether the action complained of amounts to administrative action, PAJA, in Professor Hoexter’s words:
‘. . . would soon become redundant, for no sane applicant would submit to its definition of administrative action (or to the strict procedural requirements of section 7) if he or she actually had a choice.’[1]
[37] Put differently, the consequence of this would be that the principle of legality, unencumbered by PAJA’s definitional and procedural complexities, would become the preferred choice of litigants and the courts – which is happening increasingly – and PAJA would fall into desuetude. This would be a perverse development of the law, one that the framers of the Constitution would not have contemplated when they drafted s 33(3) of the Constitution.[2] Neither would the lawmaker have imagined this when enacting PAJA.
[38] In my view, the proper place for the principle of legality in our law is to act as a safety-net or a measure of last resort when the law allows no other avenues to challenge the unlawful exercise of public power. It cannot be the first port of call or an alternative path to review, when PAJA applies.
As this court said in National Director of Public Prosecutions & others v Freedom Under Law:[3]
‘The legality principle has now become well established in our law as an alternative pathway to judicial review where PAJA finds no application.’ (emphasis added)
CONSTITUTIONAL COURT OF SOUTH AFRICA
State Information Technology Agency SOC Ltd v Gijima Holdings (Pty) Ltd
CCT 254/16
Date of hearing: 9 May 2017
MEDIA SUMMARY
The following explanatory note is provided to assist the media in reporting this case and is not binding on the Constitutional Court or any member of the Court.
“On 9 May 2017 at 10h00, the Constitutional Court will hear an application for leave to appeal in a matter concerning whether an organ of state can seek the review and setting aside of its own decision in terms of the Promotion of Administrative Justice Act 3 of 2000 (PAJA).
On 27 September 2006 the State Information Technology Agency SOC Ltd (SITA) and Gijima Holdings (Pty) Ltd (Gijima) entered into an agreement in terms of which Gijima was to provide information technology services (IT services) to the South African Police Service (SAPS agreement). That agreement was, however, terminated by SITA. This resulted in Gijima forfeiting R20 million in its revenue. Gijima instituted urgent proceedings in the High Court of South Africa, Gauteng Division, Pretoria (High Court) to protect its rights under the SAPS agreement.
On 6 February 2012 the parties entered into a settlement agreement in terms of which Gijima would render IT services to the Department of Defence (DoD services agreement). The settlement agreement also provided that SITA would compensate Gijima for losses which arose from the termination of the SAPS agreement.
Pursuant to the DoD services agreement, Gijima rendered IT services to the Department of Defence. The said agreement was extended at various intervals. A payment dispute arose between the parties.
In proceedings before an arbitral tribunal, SITA for the first time pleaded that the DoD services agreement was concluded in contravention of section 217 of the Constitution. The arbitrator was faced with a constitutional challenge and issued an award ruling that he did not have jurisdiction.
In the High Court SITA sought to set aside the DoD services agreement due to non-compliance with section 217. These proceedings were instituted well over 180 days. In terms of PAJA, the review of administrative action must ordinarily be brought within 180 days. If PAJA was applicable, this meant that, unless the Court – acting in terms of the provisions of PAJA – sanctioned the late application, the application could not be entertained. The High Court held that a decision to award and renew the DoD services agreement qualifies as administrative action which implicates the provisions under PAJA.
The Court concluded that it will not be just and equitable to set aside the main agreement for the following reasons: (1) SITA has received the services provided by Gijima for a lengthy period of time, substantial payments have been made to Gijima and services cannot be reversed; (2) there is no indication of corruption or wrongdoing by the respondent in relation to SITA’s non-compliance with section 217 of the Constitution; (3) there are no disappointed tenders who wasted resources in a tender process who stand to benefit by the setting aside of the main agreement and its addenda; and (4) Gijima forfeited contractual damages against the applicant in excess of R20 million. The Court dismissed the application with costs.
In the Supreme Court of Appeal, the majority held that a decision to award a contract for services constitutes administrative action in terms of section 1 of PAJA and held that, on that basis alone, there exists no good reason for immunising administrative decisions taken by the state under PAJA. The majority dismissed the appeal with costs and concluded that PAJA applies to review applications instituted by organs of state.
In this Court, SITA argues that when an organ of state seeks to review and set aside its own conduct, it does so on the basis that its conduct is inconsistent with the Constitution and the question should be one of legality, and not PAJA.
Gijima argues that section 217 of the Constitution requires of an organ of state to devise a system of fair procurement that admits only of exceptional deviations. Gijima emphasises that there is no reason to exempt organs of state from the applicability of PAJA and devise a separate system of judicial review for them. Government should generally be required to follow the same forms and processes for review as other parties”.