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No. 11 2008
The November law reports include Supreme Court of Appeal judgments
relating to a 10-year disqualification to tender for State contracts, the duty
of the State to maintain public roads, and the procedure to increase
municipal assessment rates.
Legal Update No. 11 - 2008
ADMINISTRATIVE LAW COMMERCIAL LAW
DISQUALIFICATION OF TENDERER FROM TENDERING CHEQUE – HOLDER IN DUE COURSE
FOR FUTURE STATE CONTRACTS African Bank Ltd v Covmark Marketing CC; African Bank Ltd v
Chairman, State Tender Board and another v Soodhoo and others
Supersonic Tours (Pty) Ltd 2008 (6) SA 46 (D)
2008 (6) SA 220 (SCA)
FACTS: Three cheques were drawn by C and were made
FACTS: The State Tender Board called for tenders for the supply payable to “Wilmington”. The printed words “or bearer / of
of travel and accommodation services to the Department toonder” were not deleted. The first cheque was endorsed as
of Defence. S tendered and was awarded the tender. The follows: “Endorsed as a special endorsement in full and without
Department of Defence then wrote to S, noting that there restrictions or conditions to the order of African Bank Ltd t/a AB
were possible misrepresentations in the tender and asked for Commerce by Wilmington Personal CC”. The second and third
S’s explanation. S wrote a detailed letter in reply. When the cheques were also similarly endorsed by “Wilmington Personal
National Treasury sent a similar letter to S, S sent a copy of Care CC”. Payment on each of the cheques was stopped. The
its letter to the National Treasury. The Department of Defence court had to decide if the African Bank was a holder in due
then wrote to S, stating that S had failed to adequately address course. It was not in dispute that when the cheques were
the discrepancies in its tender. S then wrote back, asking which negotiated to the bank, they were post-dated and the post-date
alleged discrepancies had not been addressed. By this time the thereof had not yet arrived.
State Tender Board had already decided that it had relied on a
misrepresentation in S’s tender. The Board decided to cancel HELD: Section 11(2) of the Bills of Exchange Act, 1964, read
the contract immediately and to restrict S from tendering for 10 with the definition of a “bill of exchange” in s2(1) and the
years and from obtaining business from the State or any organ definition of “cheque” in s1, has the effect of rendering a post-
of State. S brought an application asking for this decision to dated cheque a demand instrument notwithstanding that the
be reviewed. effective date of demand may be sometime in the future. At
the very least, the instrument becomes a cheque on the arrival
HELD: The right of the State Tender Board to disqualify S is of the post-date thereof. The instrument is not incomplete or
derived solely from regulations issued under the State Tender irregular on the face of it because it is post-dated. There is no
Board Act, 1968 and under the Preferential Procurement Policy provision in the Act to convert a bearer instrument into a bill
Framework Act, 2000. The power to disqualify is limited to payable by order. If a bill is materially altered, the liability of
circumstances listed in reg 3(5)(a)(iv) (State Tender Board Act) the parties to the bill at the date of alteration who did not assent
and of these grounds, the Board relied on fraud and acting in to it must be regarded as if the alteration had not been made.
bad faith. Reg 15 issued under the Procurement Policy Act An alteration will be regarded as material if it would alter the
allows for disqualification if the tender had been awarded business effect of the instrument. Attempting to convert a bearer
on a fraudulent basis. The State Tender Board is an organ of instrument into an order instrument is a material alteration, as
state and made a decision which was a “decision” in terms the conversion would increase the liabilities of the drawer. The
of s1 of the Promotion of Administrative Justice Act, 2000 applicant could not be a holder in due course.
(PAJA). The decision was the exercise of public power in terms
of legislation, and the decision had immediate and direct COMMENT: Regularity, validity, and liability are three distinct
legal consequences for S. The decision therefore amounted concepts in bills of exchange law.
to administrative action in terms of PAJA. S’s rights were
materially and adversely affected by the decision and S was CONSTITUTIONAL LAW
therefore entitled to procedural fairness in terms of s3(1) of
PAJA. S was at no time advised that it was suspected of fraud or CONFIDENTIAL MEDICAL INFORMATION – RIGHTS TO
of having acted in bad faith, or that the State Tender Board was FREEDOM OF EXPRESSION AND PRIVACY
considering disqualifying it for either of these reasons. Section Tshabalala-Msimang and another v Makhanya and others
3(2)(a) of PAJA requires that S be given “adequate notice of the 2008 (6) SA 103 (W)
nature and purpose of the proposed administrative action”, and
a “reasonable opportunity to make representations”. This was FACTS: In 2005 T, the then Minister of Health, spent some time
not done. The court set aside the decision to disqualify S. in a private hospital. The Sunday Times newspaper published
an article relating to her stay in hospital from which it was clear
COMMENT: It is an open question whether a 10-year that the newspaper had access to T’s private and confidential
disqualification to tender is excessive. hospital records. T sought an interdict obliging the newspaper
Legal Update No. 11 - 2008
to return her medical records, and to refrain from further respondents, under whose management and control the road
commenting on or publishing any comments on the medical fell. The respondents pleaded that they took reasonable steps
records. to ensure that the existence of potholes were brought to their
attention and repaired, which included the establishment of
HELD: The National Health Act, 2003 provides that a person’s a call centre and a system of weekly routine inspections; and
medical records are private and confidential. They are that they had insufficient funds to maintain roads in that area.
confidential because it is the user who has control over the It was M’s case that the respondents’ negligence lay in their
information about itself, and it is the user who decides to keep failure to ensure that the pothole was repaired long before the
it confidential from others. In terms of the Constitution and date of the accident and long before it had grown to the size it
the Health Act, private and confidential medical information is had by that date.
worth protecting as an aspect of human autonomy and dignity.
Section 14 of the Constitution and s14(1) of the National HELD: Where negligence exists in the form of an omission,
Health Act envisage that a patient has a right to privacy, which it first has to be established whether a legal duty existed to
also includes the right not to have private medical information have acted differently in the circumstances. Whether such
disclosed without the patient’s consent to the public. The a legal duty exists in a particular case, is a matter of public
newspaper has no right to the medical records, either to or legal policy. Section 3(1) of the KwaZulu-Natal Provincial
possess or have access to them, or to make or retain any copies Roads Act obliges the second respondent to administer the
of the records. That said, even where information sought for provincial road network so as to achieve optimal road safety
publication is obtained unlawfully, there may be overriding standards. Section 3(2) provides that this duty exists within the
public policy considerations which would allow publication. Province’s available resources. Section 9(3) makes it clear that
Public interest will depend on the nature of the information delictual liability will follow where negligence is established.
conveyed and on the situation of the involved parties. The It is reasonably foreseeable that harm could come to road users
public has a right to be informed of current news and events where potholes are not attended to. As to the reasonable steps
concerning the lives of public figures such as politicians. the respondents should have taken, a court will not lightly
The purpose of the press is to advance the public interest by find that a public authority failed to act reasonably because it
publishing facts and opinions without which a democratic elected to prioritise one demand on its limited resources above
electorate cannot make responsible judgments. The published another demand. However, where in the actual implementation
article was relevant to T’s performance of her constitutional of the adopted procedure the respondents’ servants failed to
and ministerial duties and was therefore in the public interest. take reasonable steps to guard against foreseeable damage, a
The article did not mislead the public and was capable of court will hold the public authority liable. The road in question
contributing to a debate in our democratic society relating to was subjected to weekly inspections, yet no explanation was
a politician in the exercise of her functions. The court ordered given why the pothole was not repaired. No signs were posted
the return of T’s medical records but declined to interdict the warning road users of the existence of potholes. The Supreme
newspaper from further commenting on the matter. Court of Appeal considered the circumstances of M’s accident
and held the respondents liable for 60% of M’s still to-be-
COMMENT: The dividing line between fair comment on a proved damages.
public figure’s comings and goings, and scandalous gossip, is
not always easy to draw. COMMENT: Where there is no time or resources to remove a
known danger, at least warnings should be put in place.
DELICT
PROPERTY
FAILURE OF PROVINCIAL GOVERNMENT TO MAINTAIN
ROAD IMPOSITION OF MUNICIPAL RATES - PROCEDURE
McIntosh v Premier, KwaZulu-Natal and another Kungwini Local Municipality v Silver Lakes Home Owners
2008 (6) SA 1 (SCA) Association and another
2008 (6) SA 187 (SCA)
FACTS: M and a group of friends went cycling near
Pietermaritzburg. They cycled up a steep incline and then FACTS: The Kungwini Municipality’s 2004/5 budget dated
decided to ride back. M reached a speed of about 55 May 2004 proposed an increase in the assessment rate for the
kilometres per hour while travelling about one metre from Bronberg area from R0.02 per rand value of the relevant property
the centre line. He entered a bend in the road and he moved to R0.088, an increase of 340%. A later published draft budget
closer to the barrier line to negotiate the bend. He suddenly dated 7 June 2004 provided for an increase to R0.054, reflected
observed a large pothole on the broken line between the two as 145,45% while it was in fact 170%. On 29 June 2004 a
solid white lines. He tried to avoid the pothole by swerving special council resolved that R0.054 for Bronberg be approved
but lost control of the bicycle and fell heavily. M sued the and a percentage tariff increase of 145,45% be approved. On
Legal Update No. 11 - 2008
28 July 2004 a local authority notice was published, setting out least the municipality should have done was to make clear
these decisions. On 1 August 2004 the increased rates were to residents how and when the increased rates would come
reflected on the accounts of Bronberg residents. On 31 August into operation, with reference to any objections that might be
the councillor for Ward 1 in the Bronberg area, per letter, noted lodged during the specified period and to ensure that sufficient
to the council that it had not considered the objections to the time was allowed to properly consider any timeous objections.
budget it had received after publishing the draft budget on The court declared that the municipality was therefore not
7 June; that the actual percentage increase was 170%; that the entitled to levy the increased rates.
council resolved on 29 June 2004 to adopt the budget before
the notice of 28 July 2004 was published and before any COMMENT: Fairness, seen in the context of broader societal
representations or objections were considered; and that the needs, may well operate unfairly on particular individuals.
170% increase was contrary to National Treasury guidelines.
The municipality then held a special council meeting on
5 October 2004 where it amended the percentage increase to
170%. It did not publish the amendments to the budget or the The work of the individual still remains the spark that moves
percentage increase. On 14 October 2004, at a further special mankind ahead even more than teamwork.
council meeting, the council resolved that all objections
received timeously be considered; that all objections be IGOR SIKORSKY
dismissed; and that the assessment rates be implemented. The
Supreme Court of Appeal was called upon to decide if the
29 June meeting was lawful and whether the 28 July notice
was within the powers granted by the empowering statute in
that the notice did not expressly set out the date on which the
rates increases were to be effective and the increased rates
were implemented four days after publication of the notice and
before the expiry of the time period for lodging of objections.
HELD: The Constitution itself grants the power to a municipality
to impose a rate on property. This is an original power
and constitutes a legislative, not an administrative, act. The
principle of legality enshrined in the Constitution demands
that a municipality must follow the procedure prescribed by
the applicable national or provincial legislation in levying,
recovering and increasing property rates. The relevant
legislation for the relevant period was s10G(7) of the Local
Government Transition Act, 1993. This section envisages that
DENEYS REITZ INC.
interested parties should be given a proper opportunity to
make submissions on property rates and that the municipality Reg. No. 1984/003385/21
must give these submissions proper consideration. The section
does not demand the formal consideration of submissions SANDTON (JOHANNESBURG)
both before the resolution is taken and after the required 82 Maude Street Sandton 2196
notice is published. National Treasury budget guidelines Tel: +27 11 685 8500 Fax: +27 11 883 4000
are not prerequisites for the approval of a municipal budget
and they apply generally to own revenue sources for capital DURBAN
and operating budgets, not specifically to property rates 4th Floor The Marine 22 Dorothy Nyembe Street Durban 4001
increases. The increases did not “materially and unreasonably Tel: +27 31 367 8800 Fax: +27 31 301 3346
prejudice national economic policies” as set out in s229(2)(a)
of the Constitution. Historically, the property rates in the
CAPE TOWN
Bronberg area were exceptionally and unnaturally low, while
8th Floor Southern Life Centre 8 Riebeek Street Cape Town 8001
the area is at the same time one of the most affluent areas in
Tel: +27 21 405 1200 Fax: +27 21 418 6900
the municipality. On the other hand, a procedure whereby
residents are presented with an accomplished fact, does not
This update is published for general information and is not intended as legal
encourage the involvement of communities in matters of local
advice. As every situation depends on its own facts and circumstances, only
government, as required in s152(1)(e) of the Constitution. specific professional advice should be relied upon. Copies of Update may
Practically, the municipality levied rates with retrospective be obtained from our marketing department (mailinglist@deneysreitz.co.za)
effect. The relevant legislation did not authorise this. The or on our website http://www.deneysreitz.co.za
