IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE HIGH COURT, CAPE TOWN)
Case No: 19335/2008
In the matter between;
WESTERN PROVINCE LAUNDRY
CONSULTING SERVICES CC Applicant
GROOTE SCHUUR HOSPITAL First Respondent
THE DEPARTMENT OF HEALTH OF
THE WESTERN CAPE Second Respondent
HLAMBA LINEN CC Third Respondent
JURGENS STEENKAMP N.O.
(in his capacity as Liquidator of
Mandarina Trading 536 CC) (in liquidation) Fourth Respondent
Z F JOUBERT AJ
1. The Applicant seeks confirmation of a Rule Nisi handed down on 28 November 2008 in
terms of which an order is sought in the following terms:
1. A Rule Nisi is issued calling on the Respondents to show cause, if any, on 2 March
2009 at 10h00 or as soon thereafter as counsel may be heard why an order should not
be made in the following terms:
(a) That on 12 September 2008 a binding contract was concluded between the
Applicant and the Second Respondent in terms of which the Applicant was engaged
until 20 September 2009 as the sole supplier of:
(I) laundry services to Groote Schuur Hospital at a price of 185 cents per piece
(excluding value added tax) subject to price increases according to the price
increase formula of the Department of Health;
(ii) linen distribution service for Groote Schuur Hospital, the price for which is
the total remuneration of all linen distribution staff and the cost of all
consumables plus 15% and value added tax;
(b) That for the duration of any such contract which the Honourable Court may find to
exist, the First and Second Respondents be directed to comply with all their
obligations in terms of the contract referred to in (a) above, and, in particular:
(i) to permit the Applicant access to Groote Schuur Hospital for purposes of
collecting all laundry items and distributing linen;
(ii) not to permit any other party to collect such laundry or distribute such linen;
(iii) to pay the Applicant the amount due calculated in accordance with the
terms of the said contract upon presentation of valid VAT invoices therefor.
(c) That the alleged cession of the contract between the Second Respondent and
Mandarina Trading 536 (CC) (in liquidation) to the Third Respondent, Hlamba Linen
CC, with effect from 1 December 2008, be declared invalid;
(d) That the First and Second Respondents, jointly and severally with any other
respondent that opposes, be directed to pay the costs of and attendant upon this
(e) That such further and/or alternative relief be afforded to the Applicant as this
Honourable Court may deem next.
2. The relief sought by the Applicant falls into two broad categories:
(i) that which relates to the contract which it contends was allegedly concluded on 12
September 2008 between itself and the First and/or the Second Respondents; and
(ii) that which relates to the alleged cession of the contract between the Second Respondent
and Mandarina Trading 536 (CC) (in liquidation) to the Third Respondent, Hlamba
THE CONTRACTED CONTENDED FOR BY THE APPLICANT
3. In the Notice of Motion dated 20 November 2008 the Applicant sought, inter alia, the
"2. That specific performance of the agreement as reflected in Annexure
"WPL11" concluded between the Applicant and First and/or Second Respondent
3. That the First and/or Second Respondent be interdicted and restrained from
taking any steps which will lead to the evacuation (sic) of the Applicant from the
premises of the First Respondent on 1 December 2008;"
4. Annexure "WPL11" is a letter dated 21 October 2008 addressed to The CEO, Groote
Schuur Hospital, which was apparently sent by telefax, for the attention of Dr S Karriem, by the
Applicant and is signed by Mr Leon Kroucamp ("Kroucamp"). The relevant portion of the letter
reads as follows:
"1. The contract between WP Laundry Consulting Services (Pty) Ltd and Groote
Schuur Hospital has been agreed by both parties.
a. The terms we agreed are as follows:
i. The laundry services are delivered on the request of Groote Schuur Hospital
for a period of 12 (Twelve) months ending on 20 September 2009.
ii. The price agreed was 185 cents per piece excluding VAT and subject to
price increases according to the price increase formula as supplied by the
Department of Health. The price for the linen distribution service is
calculated by adding the total salaries of linen distribution staff and
consumables plus 15% admin fee and VAT. Please note that the price will
increase on November 1sl because of Industry wage increases and other
iii. The service agreed was 24 hr turn around Laundry service and a linen distribution service."
5. The Applicant is the provider of industrial laundry services to various institutions in the
Western Cape. In 1998 the Applicant was contracted to provide industrial laundry and linen
services to the Department of Health, the Second Respondent. Four years later, it tendered
successfully for a contract to perform laundry linen management services for the Groote
Schuur Hospital, the First Respondent. In the Founding Affidavit to which he deposed on behalf
of the Applicant, Kroucamp sets out that during the period from 1998 to 2006, the Applicant
was "contacted" by Groote Schuur Hospital to provide laundry and linen services on an interim
basis, when its current contractor, whoever that may be at any given time, experienced
difficulty in performing to the required standard. He further sets out that this typically happened
due to excessive laundry demand or other operational problems. He further points out that the
Applicant was able to perform such "emergency service" as it is the largest provider of
industrial laundry services in the Western Cape. It apparently has a unique facility and system
of service delivery which is unequalled by any other industrial laundry service provider.
6. In June 2006, and after a tender process, the Groote Schuur contract was awarded to
Mandarina Trading 536 CC trading as "Medical Linen Services" ("MLS"). The contract was for
a period of five years and will terminate on 1 June 2011. MLS was provisionally wound up on
11 September 2008 and a final liquidation order was granted on 30 October 2008.
7. MLS experienced financial difficulties and the Applicant was approached to help out again.
Kroucamp states that he was approached by Mr Vincent Rossouw ("Rossouw"), who is the
Assistant Director in the Linen Management Department, at the Hospital. According to the First
Respondent, the Applicant was not approached by Rossouw initially, but by Quinton Escreet
("Escreet"), the Deputy Director of Laundry and Linen Services in the Department, the Second
Respondent, to provide the laundry service. This factual dispute is important because the First
and Second Respondents deny that Rossouw had the requisite authority to conclude the
agreement on 12 September 2008. This is so, because the terms of the interim agreement
concluded in July are not in dispute and the Applicant contends that the September agreement
constituted an extension of the July agreement, on the same terms, for a period of one year.
The Applicant contends that Rossouw had actual authority, but that in the event of this not
being so, he had ostensible authority. Both these contentions are disputed by the Hospital and
the Department. I will return to this aspect later.
8. There is no Affidavit from Escreet and no explanation for this lacuna. According to
Kroucamp, he responded to a telephone call from Rossouw on 1 July 2008 in a letter written on
the following day addressed to Rossouw (and not Escreet):
"Our telephone conversation refers.
We will render a laundry service to your hospital for a one week period or longer at
211 cents per piece processed. This includes transport and VAT. We are also
prepared to pay the current distribution staff their daily wages for the same period.
Our charge will be the wages paid (at industrial council rates) plus 15% admin fee
If you need any further information please do not hesitate to contact me.
Kind regards Leon
The Applicant commenced providing this service on the same day.
9. The Groote Schuur contract is one of substantial proportion. Approximately 260 000 pieces
of linen are dealt with on a monthly basis and these items need to be washed, dried, ironed,
disinfected and repaired.
10. On 9 July Kroucamp forwarded a further letter by telefax to Rossouw dealing with the
mechanics of the interim arrangement. On 30 July 2008 Rossouw forwarded an e-mail to
Escreet dealing with staff matters. The following is stated in regard to the Applicant's charges:
"Our price has also come into discussion. Attached is the calculation of the laundry price
(your expert opinion on this is appreciated). It is so unfair that industry perception of price
is the determining factor and not the true calculation based on the SANS standards,
Accounting policies and Statutory Requirements."
The e-mail is addressed to "Quinton". The annexure referred to in the e-mail is not
attached to the papers.
11. A further meeting took place between Kroucamp and Rossouw at Groote Schuur Hospital
on 12 September 2008. The Applicant contends that it was during this meeting that the
September agreement was concluded. The First and Second Respondents dispute this. The
relevant paragraph in the Founding Affidavit reads as follows:
"In response to the correspondence mentioned supra a further meeting was held
with Mr Vincent Rousseau from the Groote Schuur Hospital on 12 September
2008, This meeting was held at the office of Mr Rousseau at the hospital. At this
meeting Mr Rousseau requested that the Applicant perform the laundry services at
the Groote Schuur Hospital for the period of one year. Mr Rousseau indicated that
he is satisfied with the manner in which the Applicant performs its contractual
obligations and that he would be pleased if the Applicant would be willing to
perform the service for a period of one year. Mr Roussseau requested the
Applicant's willingness to consider a negotiation of the current price agreed
between the parties. Mr Johan van Eeden and myself were present at this
meeting and the Respondent was represented by Mr Rousseau. The agreement
was concluded and the parties left the meeting." (my emphasis)
12. During argument I requested Counsel for the Applicant to explain how the highlighted sentence
in the paragraph is to be understood. Despite Counsel's eloquent attempts, I am still in the dark
as to what the Deponent intended to convey in the sentence. Had the parties agreed that the
price in terms of the new contract contended for would be the same as that of the interim July
contract, one would have expected the Deponent to state this. What the Deponent does not
say is that the price was agreed at the meeting. That the price was not agreed appears to be
borne out by the correspondence that followed.
13. On the next day, Kroucamp sent a further letter by telefax to Rousseau:
Our meeting of yesterday refers.
We except (sic) your offer to extend the agreement for a period of one year. We
are also prepared to go into price negotiations regarding this. This (sic)
negotiations will however not have any influence on the level of service or the
period as agreed.
We would however like to address some logistics regarding the linen management
service. The current staff and working procedure is ineffective and we will be able
to streamline it, if allowed.
Please advise when we can meet with you (sic) Hospital management to
introduce ourselves and for the price negotiations.
If you need any further information please do not hesitate to contact me." (my
14. In my view, what the letter does not say is more significant than that which it does say. It
does not say that the price has been agreed. It further does not say that the price will be the
same as that laid down in the interim July agreement. It does say that the level of service and
period has been agreed. A plain reading of the letter seems to suggest that the price has yet to
15. According to the Answering Affidavit deposed to on behalf of the First and
Second Respondents by Isac Smith ("Smith"), as confirmed in the Confirmatory Affidavit of
Rousseau, Rousseau on receipt of the letter, telephoned "Applicant" (presumably Kroucamp)
and pointed out to it (sic):
"... the letter was factually incorrect as he was not empowered to enter into
agreements on behalf of the Department. Kroucamp is fully aware of this and the
letter was obviously an attempt by the Applicant to bypass the procurement
procedures with which it (sic) was fully familiar."
The Deponent goes on state:
"It is correct that Rossouw entered into preliminary negotiations with the Applicant
and that he informed the Applicant that he would make a recommendation in its
favour to the GSH Sub-bid Committee. The Applicant was aware and was also
alerted to the fact that this was, subject to the Sub-bid Committee supporting the
recommendation to Dr S Karriem and the Department. Dr Karriem and the
Department did not endorse the recommendation."
16. Mr Duminy SC, on behalf of the Applicant, argued that this paragraph indicated that the
contract was conditional upon the approval of the Sub- bid Committee which, according to the
papers, was obtained and that this condition was, therefore, fulfilled. His submitted that the
content of this paragraph goes to conditionality rather than to authority.
17. Thereafter Rossouw addressed an e-mail to Escreet stating the following:
"I hereby request an urgent meeting with the Department regarding the contract.
Our current arrangement cannot carry on like it is at the moment.
I had to permanently employ the extra staff in the factory according to the LRA and
pressure from the union. I also have to vaccinate the staff as I am putting them to
risk and I have to upgrade our transport.
This means that we will need at least a 3 month notice period for the current
Other issues that I would like to discuss is (sic):
The future of the Groote Schuur contract
The future of WP Laundry
I would appreciate it if we would have this meeting before the end of the week." (my
18. The e-mail does not suggest that a binding agreement was concluded between the
Applicant and the Department, the Second Respondent, (or the Hospital, the First
Respondent?) and that the essentialia of such an agreement had been agreed upon, and in
particular the price. The references to:
(i) the "current arrangement" not being able to "carry on like it is at the
(ii) the desire to discuss "other issues" such as:
(a) "the future of the Groote Schuur contract"; and
(b) "the price";
all tend to suggest that no such agreement is in place.
19. As is pointed out by the Deponent to the Founding Affidavit, the following appears at the
foot of the e-mail he received in response from Escreet:
"No employee of the PGWC is entitled to conclude a binding contract on behalf of
the PGWC unless he/she is an accounting officer of the PGWC or his or her
20. Rossouw is not an accounting officer of the PGWC and there is nothing in the papers to
indicate that he is an accounting officer's "authorized representative".
21. In regard to the authority of Rossouw, the Deponent states the following in the Applicant's
"Mr Vincent Rousseau at all material times indicated to myself and Mr Van Eeden,
who acted on behalf of the Applicant, that he is in fact the authorized
representative of the Hospital and is in a position to contract on its behalf."
Even if this was correct, it does, of course, not assist the Applicant in establishing the
authority of Rossouw. The averment is, however, pertinently denied by Rossouw and the
First and Second Respondents. The Deponent goes on to state:
"In the past this is precisely what happened and we concluded our agreements with Mr
Once again, this is pertinently denied by Rossouw and the Respondents.
22.lt is clear that Rossouw did not have actual authority. It was, however, submitted on behalf
of the Applicant that he had ostensible authority. In my view the Applicant has not made out a
sufficient case on the papers to discharge the onus which it bears to establish that either the
Department or the Hospital held out to the Applicant that Rossouw had the requisite authority.
No such averment is made in the Founding Affidavit and the oblique suggestions in this
direction are denied by the Hospital and the Department. Despite Mr Duminy's able and
persuasive argument and his thorough and diligent reference to every iota of evidence which
can be gleaned from the papers in support of his submissions in this regard, I am not
persuaded that the Applicant had established that Rossouw had the requisite authority to
conclude the September agreement contended for with the Applicant.
23. On 9 October Kroucamp addressed an e-mail to Rossouw in which he stated, inter alia, the
Baie dankie weereens vir die openlike gesprek gister. Na aanleiding van hierdie gesprek en die
een wat ons op 12 September gehad het, bleik (sic) dit dat die Hospitaai wel die kontrak met
die vorige diensverskaffer beeindig het.
Hiermee wil ek net weer in kort bevestig dat ons julle aanbod aanvaar het om 'n een jaar
ooreenkoms vir die lewering van die diens aan te gaan. Soos op 12 September aan jou
genoem is ons steeds bereid om oor die prys te onderhandel. Hierdie prys
onderhandeling sal egter geen effek op diens of die termyn van die ooreenkoms uitoefen
nie." (my emphasis)
24. This e-mail reflects a willingness to conclude an agreement rather than a confirmation
that an agreement has been concluded. If, in fact, an agreement had been concluded
on 12 September, one would have expected Kroucamp to have said so in the e-mail. If
the price had been agreed on, one would, similarly, have expected him to have stated
this in the e-mail. The statement that: " ... ons is steeds bereid om oor die prys te
onderhandel" is indicative of the fact that no price had been agreed upon.
25. On 13 October, Rossouw copied an e-mail to Kroucamp which had been sent to him by the
Assistant Director: SCM - Tenders of the Department of Health. The e-mail reads as follows:
Can you please thank WP and inform them that we will only require their services until 30
November 2008. MLS has been ceded and the new company will commence 1 December
26. According to Kroucamp, he was alarmed and concerned when he received the e-mail.
Notwithstanding this alarm and concern, it was only some eight days later, and on 21 October
2008 that he forwarded the letter referred to in the Applicant's initial Notice of Motion to the
Chief Executive Officer of Groote Schuur Hospital (and not the Department) in which he set out
the terms of the contract which the Applicant contends was concluded with Groote Schuur
Hospital on 12 September 2008. The letter alleges that the following terms were agreed:
"(a) The laundry services are delivered on the request of Groote Schuur Hospital for a
period of 12 months ending on 20 September 2009.
(b) The price agreed was 185 cents per piece excluding VAT and subject to price
increases according to the price increase formula as supplied by the Department of
Health. The price for the linen distribution service is calculated by adding the total
salaries of linen distributed staff and consumables plus 15% admin fee and VAT.
Please note that the price will increase on November 1 st because of Industry
wage increases and other cost increases.
(c) The service agreed was 24 hr turn around Laundry service and a linen distribution
27. Nowhere in the Founding Affidavit does Kroucamp mention that it was agreed on 12
September that the twelve month agreement would end on 20 September 2009. Nowhere in
the Founding Affidavit is it stated that it was agreed on that date that the price which was
allegedly agreed was: "... subject to price increases according to the price increase formula as
supplied by the Department of Health."; or that: "the price for the linen distribution services
calculated by adding the total Salaries of linen distribution staff and consumables plus 15%
admin fee and VAT"; or that: "... the price would increase on November 1st because of Industry
wage increases and other cost increases." (The latter term was omitted from the portion of the
letter quoted in the Founding Affidavit).
28. One further searches in vain in the Founding Affidavit for an averment that it was agreed on
12 September that: "The service agreed was 24 hr turn around Laundry service and a linen
29. On the next day, the Applicant received a letter from the Department, the Second
Respondent, which reads as follows:
"We hereby wish to inform you that effective from 1 December 2008, your services
will no longer be required. Your company's last working day will thus be on 30
On behalf of Hospital Management we wish to thank you for your support
throughout this difficult situation that we experienced since July 2008."
30. Mindful of the probably consequences of the factual disputes raised in the papers, Mr
Duminy submitted in the alternative that these disputes should be referred to evidence.
31. Mr Gamble SC, on behalf of the First and Second Respondents, submitted that this is not
an appropriate case for a referral under Rule 6(5)(g) on the basis that:
(i) the Rule cannot be invoked to make out a case which is not already made on
the affidavits; and
(ii) the applicant should have realized when it launched the application, that the
factual disputes are incapable of resolution on the papers.
32. In my view there would be no point in referring the disputes to evidence for the reasons set
out above, and insofar as the portion of the application relating to the September 2008
agreement is concerned, Mr Gamble is correct and this portion of the application should not be
granted. It follows that in respect of the Rule Nisi issued on 28 November 2008, subparagraphs
(a) and (b) of paragraph 1, stand to be discharged.
33.ltHYPERLINK "http://33.lt/" 33.lt is now necessary to deal with the cession of the contract
between the Second Respondent and Mandarina Trading 536 (CC) (in liquidation) to the Third
Respondent, Hlamba Linen CC with effect from 1 December 2008.
34. Kroucamp on behalf of the Applicant, deposed to a Supplementary Affidavit on 26
November 2008 in support of an application to join the Third Respondent Hlamba Linen CC,
and the Fourth Respondent, Jurgens Steenkamp N.O., in his capacity as liquidator of
Mandarina Trading 536 CC (in liquidation). In it, he states that the Applicant first became
aware of the alleged cession on 13 October 2008 when it received a copy of the e-mail of that
date in which Claude Munnik, the Assistant Director: SCM -Tenders, WC Department of
Health advised Rossouw as follows:
"Hi Vincent, can you please thank WP and inform them that we will only require
their services until 30 November 2008.
MLS has been ceded and the new company will commence 1 December 2008."
35. Kroucamp goes on to allege in his Affidavit that the cession was neither valid nor lawful. He
points out that in the Founding Affidavit for the liquidation of Mandarina Trading 536 CC, Mrs
Schoeman stated that the Groote Schuur Hospital contract had been cancelled. (In a
subsequent Affidavit filed by Schoeman she states that she erred in this regard). Kroucamp
goes on to state:
"Moreover, in terms of Section 217 of the Constitution read with the Public Finance
Management Act and the regulations made thereunder, the procurement of laundry
and linen distribution services for the Groote Schuur Hospital had to take place in
accordance with a system which is fair, equitable, transparent, competitive and cost
effective. The appointment of Hlamba Linen by means of the purported cession did not
comply with any of these requirements, nor with the supply chain management
procedures laid down in the Treasury Regulations issued under the Public Finance
and Management Act, No. 1 of 1999, which regulations were contained in Government
Gazette No. 27388 dated 15 March 2005. The contract value exceeds the threshold of
R200 000 and no competitive bid process was followed before the appointment of
Hlamba Linen was approved."
36. In the First and Second Respondents' Answering Affidavit, Mr Isac Smith, a Director in the
Safety and the Supply Chain Management Division of the Second Respondent, responds as
follows to these contentions:
"52. AD PARAGRAPH 10
The Department denies that its right to agree to the assignment to Third
Respondent was required to be exercised in the manner suggested by the
Applicant. The Department behaved lawfully in exercising its contractual rights and
observed the procedures laid down, as appears from annexures IS7.
The Accounting Officers systems were followed and approval in terms of
37. The "contractual rights" on which reliance is placed on behalf of the First and Second
Respondents arise out of the contents of the Service Level Agreement concluded between the
Second Respondent and MLS. My attention was directed during the course of argument to
clause 8 of that Agreement which provides as follows:
8.1 Neither the benefits nor the obligations under this Agreement may be ceded or
assigned by either party except with the prior consent of the other Party."
38. "Annexures (sic) IS7" to which Smith refers, is the Second Respondent's Accounting
Officer's System (AOS) for Procurement, Supply Chain and Asset Management (Issued in
terms of section 38 (1)(a)(iii) of the PFMA).
39. In the Foreword to the AOS the following appears:
Section 38 of the Public Finance Management Act, Act 1 of 1999 confers general
responsibilities on the Accounting Officers. It determines in subsection 1 that:
(1) "The accounting officer for a department, trading entity or constitutional
(a) must ensure that department, trading entity or constitutional institution
has and maintains - an appropriate procurement and provisioning
system which is fair, equitable, transparent, competitive and
40. Paragraph 11.2.2 sets out the procedure to be followed in respect of the cession and
assignment of contracts:
"11.2.2 Cession and Assignment of contracts
126.96.36.199. Contracts may be ceded/assigned on recommendation by the relevant
Bid Committee and in accordance with the Departmental Delegations.
Applications for the cession and assignment of contracts must be submitted on
the prescribed forms that must be completed and signed by both the transferor
and the transferee and countersigned by two witnesses. Full reasons for the
transferring of the contract must be provided and the transferee's ability to
carry out the contract must be established and reported. Unless it is
otherwise in t he best interests of the Department, it is unlikely that the transfer
will be approved if the Department would suffer a loss as a result thereof or if
there is an increased risk to the Province.
188.8.131.52. The same conditions used for the award of t he bids concerned
must be made applicable to the transfer of contracts. For instance, if the
original contract was subject to the provision of surety, the transferee must
provide the same degree of surety, or better. If a contract was awarded to a
particular bidder on the basis of preference claimed, the contract might not
be transferred to a firm/person qualifying for a smaller percentage
preference unless the transferee is prepared to lower the contract price so
that the comparative price that was used for the award of the contract is
maintained." (my emphasis)
41. In support of his denial that the assignment is void, Smith attaches a copy of the "Transfer
Agreement" dated 5 August 2008 between MLS and Hlamba Linen marked "IS1":
"I further attach the acceptance of this transfer by the Respondents marked
42.The cession document on which Smith relies on behalf of the First and second
Respondents makes for interesting reading. The first page thereof is headed "Transfer" and
was signed on behalf of MLS which in terms of the document is called "the transferor" who in
terms of the document:
" ... hereby transfer all my (sic) rights and obligations under the
above-mentioned contract to Messrs. HLAMBA LINEN with Registration
number to be registered (called the transferee)."
The document was signed at Durbanville on 5 August 2008 by Schoeman, apparently in the
presence of two witnesses. The second page of the document reads as follows:
"B. I, MAGDALENA ELIZABETH ZIETSMAN the undersigned in my capacity as trustee
for the Close Corporation to be formed and to be known as
Messrs. HLAMBA LINEN with Registration number to be registered (being the
hereby assume and accept full responsibility and liability under the said
contract on the same terms and conditions as it was held by the
I hereby confirm that the preferential procurement rating in respect of
Messrs HLAMBA LINEN (being the transferee) in terms of the
under-mentioned categories are as follows:
0. Equity ownership by persons who had no franchise in the national
elections (people of colour %
1. Equity ownership by women %
2. Equity ownership by disabled persons %
3. Local Manufacture (iro the item/s
to be transferred) %
• Western Province based enterprise %
See letter attached, (my emphasis)
Thus done and executed at DURBANVILLE this 5th day of AUGUST 2006 in the presence of
the undersigned witnesses:"
The document is signed by Zietsman and Schoeman signed as a witness. The portion of the
document which provides for signature by the second witness has been left blank despite the
provision contained in Section 184.108.40.206 of the AOS that the " ... prescribed forms that must be
completed and signed by both the transferor and the transferee and countersigned by two
As is apparent from the portion of the document quoted, the Sections of the document which
refer to the preferential procurement rating in respect of Hlamba Linen have been left blank.
Despite the words "see letter attached" - no such letter is attached to the copies of the
documents annexed to the Answering Affidavit. The third page of the document is headed
"Consent" and reads as follows:
I, the undersigned in my capacity as Chief Financial Officer of the Western Cape Department
of Health, hereby confirm that approval
Is granted in terms of paragraph 9.7 of the Department of Health's Accounting Officer's
System (AOS), issued in terms of Section 38(1 )(a)(iii) of the PFMA).
Thus done and executed at CAPE TOWN this 22nd day of September 2008." (my emphasis)
(The typed portion of the document contained the word "August" and this has been crossed out
and replaced with the word "September"). The somewhat puzzling series of events which led to
the signature of this document may explain this. There is no "paragraph 9.7" in the AOS. I was
advised by Counsel for the First and Second Respondent that what was intended to be
referred to was paragraph 11.2.2 to which I have referred above.
43. Argument in this matter commenced on Monday 2 March 2009. On the preceding Friday
afternoon, Counsel for the Applicant provided Counsel for the other parties and myself, with a
Supplementary Note containing further and more detailed submissions on behalf of the
44. Counsel for the First and Second Respondents as also Counsel representing the Third
Respondent, applied for the matter to be postponed as they contended that they needed time
to consider the submissions made in the Note and that the Note contained submissions which
were not set out in the Applicant's Heads of Argument which had been filed some time before.
45. Substantive applications for postponement had been prepared over the weekend, with
Supporting Affidavits. Annexed to the First and Second Respondents' application for
postponement were copies of the Applicant's original Heads of Argument and of the
Supplementary Note. It is not clear why this was necessary as these documents had already
been made available to the parties and the Court.
46.ltHYPERLINK "http://46.lt/" 46.lt was submitted on behalf of the First and Second
Respondents that the issues raised in the Note were not properly addressed on the papers filed by
the Applicant, or in the Heads of Argument and that the Respondents were HYPERLINK
"http://46.lt/" 46.lt was submitted on behalf of the First and Second Respondents
that the issues raised in the Note were not properly addressed on the papers filed
by the Applicant, or in the Heads of Argument and that the Respondents were
"...HYPERLINK "http://46.lt/" 46.lt was submitted on behalf of the First and
Second Respondents that the issues raised in the Note were not properly
addressed on the papers filed by the Applicant, or in the Heads of Argument and
that the Respondents were "... required to meet a new case". It was further
submitted that the First and Second Respondents would be " ... severely
prejudiced should the Applicant be allowed to raise these new issues without a
proper opportunity for their Counsel to consider and research same."
47. The application brought on behalf of the Third Respondent was based on substantially the
same contentions. Even more documentation, including the Note, was attached to this
48.ltHYPERLINK "http://48.lt/" 48.lt appears that the portion of the Note which caused the most
apprehension amongst the First to Third Respondents was that which dealt with the validity of the
cession. It is, however, clear from the papers that the validity of the cession is in issue and one would
have expected the Respondents to do the necessary preparation in order to enable them to defend their
stance that the cession was in fact validly executed. Insofar as any extra preparation may have been
necessary in order to deal with the more detailed submissions contained in the Note, there was, in my
view, ample time to do so between 14h00 on Friday 27 February 2009, when I understand the Note was
delivered, and the hearing.
49. The time spent in preparing the substantial applications for postponement, would, in my
view, have been better spent in preparing for the hearing, and insofar as may have been
necessary, in considering the submissions contained in the Note. I heard argument on the
application until approximately noon on 2 March 2009 and, having heard argument, dismissed
50. The Note, however, had further consequences as it elicited further Affidavits (two sets on
behalf of the First and Second Respondents) and one from the Third Respondent.
51. In the first of the Supplementary Affidavits handed up on behalf of the First and Second
Respondents dated 3 March 2009, Smith, the Deponent to the Answering Affidavit, states that
on 6 August 2008 and as a result of a meeting held with MLS on 11 July 2008, MLS provided
Claude Munnik, of the Sub-Director : Tenders in the Department with a "contingency plan" after
which the task team met with MLS to discuss the plan on 14 August 2008.
52. The contingency plan, which is annexed to the Supplementary Affidavit as annexure ISS3,
is an undated letter signed by Mr Schoeman on behalf of MLS. The fact that the portions of the
cession documents relating to the preferential procurement rating had been left blank and that
the letter which was said in the documents to be attached, did not appear to be there, had
been referred to during the course of argument. It was suggested, on behalf of the
Respondents during argument that these aspects were catered for in the letter in question and
in particular, in paragraph 7 on the second page thereof. The impression I formed after hearing
argument in this regard, was that insofar as the portion of the cession documents relating to
the preferential procurement rating referred to an attached letter, that this was in fact the letter
that had been attached to the documents in question.
53. The cession documents are included in a number of places in the application papers and in
not one of these places is the letter which one would expect to find as a result of the notation
contained in the cession documents: "see letter attached", to be found.
54. In this Supplementary Affidavit, Smith goes on to state:
"9. ... The contingency plan at this stage proposed the transfer of the existing SLA
to a new entity (with the retention of MLS staff as far as possible) and made
mention of a possible assignment, the main focus being financial rescue." (my
55. It is extremely difficult to reconcile this statement with the contents of the
cession documents. According to those documents, Zietsman, on behalf of Hlamba Linen and
in her capacity as trustee for the close corporation to be formed, had already accepted the
cession and assignment on 5 August 2008.
56. In paragraph 2 of the "contingency plan" Schoeman states on behalf of MLS, the following:
"2. We wish to confirm that we want to exercise our right as more fully set out in
clause 8 on page 10 in our Service Level Agreement, which we have (sic)
entered into with the Department of Health, dated 11 November 2005."
It appears that MLS was under the incorrect impression that it had the right to insist that
the Second Respondent consent to the proposed cession. This would appear to be the
only explanation for the use of the phrase "... we want to exercise our right as more fully
set out in clause 8."
57.The next paragraph of the "contingency plan" is almost as perplexing as the reliance by the
First to Third Respondents on this document in support of their contention that the cession was
validly executed. It reads as follows:
"3. Please find attached hereto the corresponding Transfer Document, signed by the
Transferor and to be signed by the Transferee upon your written consent to cede
and assign the benefits and/or all the obligations under the said Service Level
Agreement to a new Close Corporation, the details of which shall be confirmed
to you in writing on receipt of your consent as aforesaid."
However, as is apparent from the "Transfer Document" itself, it had already been signed by
the Transferee on 5 August 2008. This must have been apparent to the Second
Respondent when it received the "contingency plan" and the attached cession
58. Paragraph 5 of the "contingency plan", as also paragraph 1 thereof, refer to a facsimile
received on 29 July 2008, and a written response to answers which were apparently requested
in that document. Neither the Court nor the other parties were favoured with copies of the
facsimile received on 29 July 2008 or the "attached written response with the required answers
to the concerns that you have put forward in the said letters."
59. Paragraph 6 of the "contingency plan" states the following:
"6. The aforesaid investor's auditor had advised her to conduct the business in a new
legal entity and more specifically a Close Corporation and same is in the process of
being registered at the offices of the Registrar of Companies in Pretoria. The new
investor has however stated that it is an explicit suspensive condition that the
said contract DOH30/2005 must first be ceded or assigned to the new Close
Corporation before the said investor will be prepared to proceed with the day
to day conduct of the business and it is a further explicit suspensive condition
that your written consent must be obtained by no later than close of business
on Thursday, 7 August 2008, due to the urgency of the matter and the fact that
the investor wants to proceed with business as usual as soon as possible from
the business's premises in Observatory." (my emphasis)
60.ltHYPERLINK "http://60.lt/" 60.lt is clear that the "further explicit suspensive
condition" that the Second Respondent's written consent "must be obtained by no later than close
of business on Thursday 7 August 2008" was not complied with, as the consent was only signed on
22 September 2008.
61. Paragraph 7 of the "contingency plan", the paragraph on which First to Third Respondents
Counsel relied for their submissions that the statutory requirements in regard to the preferential
procurement rating was concerned were complied with, reads as follows:
"7. The investor has further noted and is fully aware of your Department's BEE
requirements with regards to the preferential procurement rating and it is herewith
confirmed that the new Close Corporation will conduct the business as a Western
Cape Province based enterprise, that the new Close Corporation will appoint local
people as personnel of the business and that almost all the personnel will be
either women and people of colour or disabled persons. Regarding the equity
ownership, the investor has undertaken to attend to and ensure the necessary
skills transfers in accordance with an acceptable employment equity policy and/or
ownership equity policy which will be complied with in due course by reaching
certain future goals set in accordance with the business's projected future
feasibility and profitability."
62.There is such a dearth of meaningful detail in this list of promises, made by an unnamed
investor, and conveyed to the Second Respondent by somebody else, that the reliance
thereon by the First to Third Respondents is surprising.
63. On the next day, that is to say on 4 March 2009, yet a further Supplementary Affidavit was
tendered on behalf of the First and Second Respondents. The body of the Affidavit reads as
"3. On Tuesday 3 March 2009 and during the course of argument on behalf of First
and Second Respondents, the Honourable Court directed certain questions to
counsel as to the Third Respondent's compliance with preferential procurement
preference framework requirements.
4. I instructed my Department to compile a spreadsheet of such compliance as at
the time of the assignment. The spreadsheet is attached hereto marked "X". For
the sake of completeness the Applicant is included in this document.
5. It will be seen from annexure "X" that the procurement preference status of
Hlamba is more or less the same as MLS.
6. The difference of 0.2% between MLS and Hlamba is marginal and is not
regarded as significant, while the Applicant falls below these percentages."
64. It is clear from this Affidavit that, apart from other respects in which the cession and
assignment fall short of complying with the relevant statutory requirements that the provisions
of paragraph 220.127.116.11 of the AOS were not complied with. The paragraph in question requires
"18.104.22.168 The same conditions used for the award of the bids concerned must be
made applicable to the transfer of contracts."
"If a contract was awarded to a particular bidder on the basis of preference
claimed, the contract might not be transferred to a firm/person qualifying for a
smaller percentage preference, unless the transferee is prepared to lower
the contract price so that the comparative price that was used for the award
of the contract is maintained."
65. The memorandum dated 19 September 2008 from the Assistant Director: SCM - Tenders,
addressed to the Delegated Official in regard to the cession, sets out the financial implications.
It is clear that the costing structure pursuant to the cession was higher than the MLS costing
structure. The management fee increased from R77 776,00 per month to R85 000,00 per
month, and the cost per piece increased from R1.51 to R1.85.
66. The third page of the cession document which records the consent granted by the Chief
Financial Officer of the Second Respondent, which was signed on 22 September 2008,
confirms that approval is granted in terms of paragraph 9.7" of the AOS issued in terms of
Section 38(1)(a)(iii) of the PFMA. The AOS which was applicable at the time, and which is still
applicable, does not contain a paragraph 9.7. I was informed by First and Second
Respondents' Counsel that the document should in fact have referred to paragraph 11.2.2 of
67. In the Supplementary Affidavit deposed to on behalf of the First and Second Respondents
by Smith on 3 March 2009, he states the following in this regard:
"20. On 20 September 2008 the assignment to Hlamba was formally approved by
Mr A van Niekerk, the Chief Financial Officer in the Department, who holds the
rank of Deputy Director General : Finance, as is required by paragraph D18 of the
AOS. MLS was informed of this decision the following day by Prof Househam.
21. The reference in Mr Van Niekerk's approval to para 9.7 of the AOS is still a
reference to the earlier 2002 AOS." (my emphasis)
68. According to the Foreword to the AOS which is presently in place, and in
order to comply with the provisions of Section 38 of the PFMA, National Treasury embarked in
2003 upon a procurement reform process, the goal being to elevate the procurement process
to its rightful place in the Financial Management System. The Foreword further points out that
in response to this, Provincial Treasury abolished the Provincial Tender Board, and transferred
the entire responsibility and accountability for procurement to Accounting Officers, as from 1
January 2004. The Foreword further states the following:
"To create the operational framework for procurement and provisioning in this
department an Accounting Officer System (AOS) for Supply Chain Management
was issued on 29 December 2003."
It further states that:
"This AO System makes provision for all these developments and replaces the
initial document issued on 29 December 2003 and will be effective from 1
January 2007." (my emphasis)
69. On the face of it, it appears there was no "earlier 2002 AOS" as deposed to by Smith. The
relevant footnote to his Affidavit refers to an annexure which contains paragraph 9.7. The
relevant paragraph (presumably the one contained in the initial AOS issued on 29 December
2003) reads as follows:
"9.7 Transfer of Contracts
The contractor shall not abandon, transfer, cede, delegate, assign or sub-let
a contract or part thereof without the prior written approval of the
When a contract is transferred, it must be ensure that the transferee equals
or betters the preferential procurement rating of the transferor.
Documentary proof will be required." (my emphasis)
70. By virtue of the fact that the Chief Financial Officer, in certifying that consent has been
granted in terms of paragraph 9.7 of the AOS, refers specifically to that paragraph and in the
absence of any explanation from him in this regard, the inference is inescapable that he had
the provisions of the old paragraph 9.7 in mind when he granted his consent. It is clear that no
prior written approval was obtained from the Department before the consent was granted. It is
further clear that the Second Respondent, the Department, did not"... ensure that the
transferee equals or betters the preferential procurement rating of the transferor." The
requirement that: "documentary proof... be required." was apparently also ignored.
71.The specific reference by the Chief Financial Officer to paragraph 9.7 of the previous AOS,
again in the absence of any explanation, further leads to the irresistible inference that he was
not aware of the existence of paragraph 11.2.2 of the current AOS when he granted his
72. Paragraph 9.7 of the Supplementary Affidavit of Smith which I have quoted above, offers
no assistance in this regard. Apart from the fact that its reference to Van Niekerk's approval is
hearsay, the reference to the "earlier 2002 AOS" appears to be incorrect. It is to be regretted
that the First and Second Respondents did not clarify the situation in their initial Answering
Affidavit and thereafter in their two further Supplementary Affidavits.
73. As was pointed out by Mr Raubenheimer SC on behalf of the Third Respondent, the Third
Respondent has, to a large extent, been obliged to rely on what the First and Second
Respondents had to say about the validity of the cession. Notwithstanding this, the Third
Respondent elected to enter the lists and file a Supplementary Answering Affidavit in which it
contends that the cession was valid. The Third Respondent had in its original Answering
Affidavit also contended that the cession was in fact valid and disputed the Applicant's
contentions in this regard.
74. In her Supplementary Affidavit deposed to 4 March 2009, Mrs Zietsman, on behalf of the
Third Respondent states:
"... Nou dat daar met 'n vergrootglas van naderby daarna gekyk word, is dit vir my
noodsaaklik om vir die Hof die versekering te gee dat Hlamba te alle tye voldoen
het aan die vereistes van die tersaaklike wetgewing. In die verband heg ek hierdie
aan as Aanhangsel "A" die eedsverklaring van Jacobus Johannes Kotze ter
3. Hlamba is op 11 Augustus 2008 geregistreer. Handelinge wat voor dit geskied
het namens die te stigte beslote korporasie deur myself voor gemelde datum is
bekragtig en geratifiseer deur Hlamba."
75. In terms of Section 53 of the Close Corporations Act, No. 69 of 1984, any written contract
concluded by a person professing to act as an agent or trustee for a corporation not yet
incorporated, may be ratified or adopted by such corporation. Sub-section (2) of this Section
"The ratification or adoption by a corporation referred to in subsection (1) shall be
in the form of a consent in writing of all the members of the corporation, given
within a time specified in the contract or, if no time is specified, within a reasonable
time after its incorporation."
The question of pre-incorporation contracts entered into by a Close Corporation
was raised with Counsel during argument and if the provisions of the Section 53(2)
had been complied with, one would have expected there to have been a reference
to the written consent referred to in the Section. However, I am prepared to
assume, in favour of the Third Respondent, that the requisite written consent
ratifying or adopting the cession was in existence when Mrs Zietsman deposed to
76. Mrs Zietsman further states in her Supplementary Affidavit:
"4. Die rede waarom die spesifieke persentasies nie ingevul was op die document
wat deur my onderteken is op 5 Augustus nie, is omdat daardie inligting myns
insiens inkorporeer was in die skrywe van Jaco Schoeman wat aangeheg was
daartoe en ek verwys in die besonder na Jacobus Johannes Kotze se kommentaar
rakende paragraaf 7 daarvan wat inderdaad gestalte gekry het."
77. In his Affidavit, Mr Kotze refers to an oral agreement concluded in approximately July 2008:
" ... wat onder andere behels dat Hlamba personeel van MLS oorneem as deel van wat beskryf
was as die sessie- ooreenkoms." He thereafter sets out details of the employees. He further
refers to paragraph 7 of the "contingency plan" and provides the Court with: "... die versekering
... dat aan die vereistes voldoen is ... " He further refers to ownership in terms of "wetgewing"
without indicating to which legislation he is referring, and states that he is aware of the
statutory requirements in regard to Broad-based Black Economic Empowerment. It is not clear
what the relevance of legislation referring thereto, has in the context of this application.
78. It is necessary to refer briefly to the history prior to the formal approval of the assignment
by the Chief Financial Officer of the Second Respondent. On 22 September 2008 Rossouw
sent an e-mail to Smith in which he stated the following:
"I spoke to Dr Kariem, he will send an email to his secretary who in turn will
forward it to yourself and me. He did indicate that he would recommend cancelling
the existing linen contract at GSH."
Smith thereafter sent an e-mail to Rossouw on the same day in which he stated:
"Informed Mrs Schoeman of the decision not to cede and the possibility of
cancellation. Pise ensure that I get Dr Karriem's request/decision in writing.
Goliath to prepare submission for cancellation and contingency plan. Pise submit
by 27 Aug 2008."
79. On 25 August 2008 Smith wrote to MLS informing it that the proposed cession to Hlamba
would not be recommended. The letter itself reads as follows:
"CONTRACT DOH 30/2005: PROVISIONING OF A LAUNDRY AND LINEN
SERVICE AND A LINEN MANAGEMENT SERVICE TO GSH FOR THE PERIOD
(1 JUNE 2006 - 31 MAY 2011) -REFUSAL OF PERMISSION TO CEDE THE
CONTRACT AND THE ASSOCIATED MATTERS
1. Your undated letter faxed on the 06 August 2008 has reference.
2. The request to grant permission to cede the above-mentioned
contract is hereby refused by the Department in terms of clause 8 on
page 10 in our Service Level Agreement read in conjunction with
clause 12 on page 9 of the revised BID DOH 30/2005 date 15 June
3. We have considered your request and found t hat the cession will not
be in the interest of the Department.
4. You are furthermore informed that the Department is taking legal advice in
respect of exercising its contractual right to terminate the contract." (my emphasis)
80. On 28 August 2008 the Sub Bid Committee at Groote Schuur Hospital recommended the
cancellation of the Service Level Agreement. The relevant resolution reads as follows:
"The Sub-Bid Committee, constituted in terms of paragraph 16A2.2 of Chapter 16A
of t he Western Cape Provincial Treasury instructions, considered the
recommendation contained in the above report at its meeting held on 28 August
2008 and resolved to recommend to the delegated official that the
recommendation be accepted as to the cancellation of the relevant contracts."
81. There was, however, a change of mind as is apparent from the Minutes of the meeting of
the Departmental Bid Committee held on 3 September 2008. The Resolution provides as
The Committee resolved that the contract be ceded to Hlamba Linen with certain
conditions, and that the SCM Unit work out the details i.t.o the rescue plan, and that
the start up date of the contract be confirmed."
82.The Applicant's attack on the cession was based on an alleged lack of legality and the
legality and validity of the purported consent to the cession were in issue. This involves an
enquiry into the legislation and statutory instruments applicable to the procurement of goods
and services by organs of State. As was submitted by Mr Duminy on behalf of the Applicant, a
declaration of invalidity is a recognized method for remedying the effects of unlawful
administrative actions. This common law remedy is also available under the Promotion of
Administrative Justice Act, No. 3 of 2000 ("PAJA").
See: Rail Commuters Action Group v Transnet Limited t/a Metrorail
2005 (2) SA 359 (CC) at para  - .
The principle of legality dictates that once administrative action is declared unlawful, it
stands to be set aside, as is provided for in Section 8(1 )(c) of PAJA. Once an
administrative act is set aside, any further act that depended on this act for its validity, is
invalid, as the legal foundation for its performance no longer exists.
See: Seale v Van Rooyen & Others : Provincial Government Northwest Province v
Van Rooyen N.O. & Others 2008 (4) 43 (SCA) at para , 49E-50F
83. In terms of Section 217(1) of the Constitution of the Republic of South Africa, 1996:
"Where an organ of State, national, provincial or local sphere of government, or
any other institution identified in national legislation, contracts for goods and
services, it must do so in accordance with the system which is fair, equitable,
transparent, competitive and cost effective."
(See: Steenkamp N.O. v Provincial Tender Board, Eastern Cape 2007 (3) SA121 (CC)
at para .)
84. Section 217(2) permits preferential procurement and sub-section (3) provides that national
legislation must prescribe a framework within which the preferential procurement policy
referred to in sub-section (2) must be implemented. This has led to the enactment of the
Preferential Procurement Policy Framework Act, No. 2 of 2000 ("the PPPFA").
85. After the 1996 Constitution came into effect, amendments to the State Tender Board
Regulations permitted national and provincial departments to procure goods and services
directly in accordance with the provisions of the Public Finance Management Act, No. 1 of
1999 ("the PFMA"). The Supply Chain Management ("SCM") aspects relating to direct
procurement by national and provincial government are now regulated by Chapter 16A of the
Treasury Regulations adopted under Section 76(4) of the PFMA.
76.1. Regulation 6A 3.2 requires a Supply Chain Management System to comply, in short,
with Section 217 of the Constitution, the Preferential Procurement Policy Framework Act,
and the Broad-Based Black Empowerment Act, No. 53 of 2003.
76.2 Regulation 16A 6.1 provides that "procurement of goods and services either by way
of 'quotations or through billing process' must be within the threshold values as determined
by the National Treasury.
76.2 Regulation 16A 6.4 provides that if in a specific case it is impractical to invite
competitive bids, the Accounting Officer or accounting authority may procure the required
goods or services by other means, provided that the reasons for deviating from inviting
competitive bids must be recorded and approved by the Accounting Officer or the
86. The contract to which the cession related was a five year contract and it was dealt with in
accordance with the preferential procurement provisions in 2005. The invitation to bids
specifically stipulated that the 90:10 preferential point principle will be applicable to the bid.
Regulation 4 (2) provides that a maximum of 10 points may be awarded to a tenderer for being
an HDI (historically disadvantaged individual) and/or sub-contracting with an HDI and/or
achieving any of the specified goals stipulated in regulation 17. Regulation 13(11) requires the
tender to be awarded to the tenderer that scores the highest points.
87. The award of the original MLS contract was subject to 90:10 preference.
88. The First to Third Respondents contend that clause 22.214.171.124 of the AOS was complied
with. The clause is quoted above and it is necessary to refer again to the following portions
"The same conditions used for the award of the bids concerned must be made
applicable to the transfer of contracts."
"If a contract was awarded to a particular bidder on the basis of preference
claimed, the contract might not be transferred to a firm/person qualifying for a
smaller percentage preference unless the transferee is prepared to lower the
contract price so that the comparative price that was used for the award of the
contract, is maintained."
89.On 23 September 2008 the Second Respondent's Head of Department wrote to MLS as
follows in connection with the cession of the contract:
"CONRACT DOH30/2005: PROVISION OF A LAUNDRY AND LINEN
MANAGEMENT SERVICE AT GROOTE SCHUUR HOSPITAL FOR THE
PERIOD 1 JUNE 2006 TO 31 MAY 2011, CESSION OF CONTRACT FROM
MEDICAL LINEN SERVICES (MLS) TO H LAMB A LINEN CC
1. Your request to cede the above-mentioned contract to Hlamba Linen dated 5
August 2008 refers.
2. Kindly note that the Department has approved your request to cede the contract to Hlamba Linen, in
line with the following agreed conditions:
• That the contract will be monitored extensively for 6 months with a
suspensive condition that the Department reserves the right to cancel the
contract in the event that the contractor is not fully operational within 6
months from the start-up date.
0. That an independent consultant (Mr Mickey Finn) be appointed for
a period of approximately 6 months to manage the relationship
between the contractor and Groote Schuur Hospital, and that the
costs of such appointment be shared between the two parties.
1. That the costs incurred by appointing WP Laundry be borne by
MLS Laundry from the time that operations were ceased by MLS
until the date of submission of the recovery plan, and
2. That the contract price be amended from R1.51 per piece and R77
776.00/month for the management fee to R1.85 and R85
90. It would appear from this letter that there are further aspects in respect of which the
Department, the Second Respondent failed to comply with AOS 126.96.36.199. The conditions
subject to which approval was granted for the cession of the contract from MLS to Hlamba, do
not mention any evaluation of preference claims according to the 90:10 system, nor is there
any reference to security, two items expressly mentioned in paragraph 188.8.131.52 of the AOS.
91. Clause 7 of the General Conditions of Contract issued by the National Treasury further
stipulates that performance security is to be provided. The conditions under which the cession
was approved do not refer to security at all.
92. From all of the above, it would appear that the Second Respondent failed to comply with
the Constitution, the PFMA, the PPPFA and its Regulations, and the National Treasury
Regulations when consenting to the cession. The Second Respondent also failed to comply
with the provisions of paragraph 184.108.40.206 of the AOS.
93. For these reasons, and those set out above, i am of the view that the cession was invalid
and stands to be set aside.
94. Although the Applicant was unsuccessful in obtaining the relief sought relating to the
contract contended for by itself, it has succeeded in obtaining the relief sought in relation to the
cession, and accordingly achieved substantial success in regard to the application as a whole.
95. The Third Respondent who was joined made common cause of the First and Second
Respondent and therefore should be liable for costs only to the extent, and from the time it
commenced opposing the application.
96. I accordingly make the following order:
1. Sub-paragraphs (a) and (b) of paragraph 1 of the Rule Nisi handed down on 28
November 2008, are discharged and set aside.
2. Sub-paragraphs (c) and (d) of paragraph 1 of the Rule Nisi are confirmed and the
cession of the contract between the Second Respondent and Mandarina Trading 536 (CC)
(in liquidation) to the Third Respondent, Hlamba Linen CC, from effect 1 December 2008 is
declared to be invalid.
3. The First and Second Respondents, jointly and severally with the Third Respondent, are directed to
pay the costs of the application, including the costs of two Counsel.
4. The costs of the application for postponement on 2 March 2008 brought by the First,
Second and the Third Respondents, are to be paid by those Respondents, jointly and
5. The costs reserved in terms of paragraph 2 of the Rule Nisi are to be paid by the First,
Second and Third Respondents, jointly and severally, such costs to include the costs of
two Counsel to the extent that the services of two Counsel were utilized.
ZF JOUBERT AJ
12 March 2009