SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable

Case No: 233/2015

In the matter between:
DDP Valuers (Pty) Ltd                                            Appellant

and

Madibeng Local Municipality

First Respondent
Dijalo Property Valuers                                           Second Respondent

Neutral citation:   DDP
Valuers
(Pty)
Ltd
v
Madibeng
Local
Municipality (233/2015) [2015] ZASCA 146 (1 October 2015).

Coram:
Mpati P, Lewis, Mhlantla, Bosielo and Swain JJA
Heard:
15 September 2015
Delivered: 1 October 2015
Summary: Administrative Law – review of municipal tender –
interpretation and application of section 7(2) of the Promotion of
Administrative Justice Act 3 of 2000 – duty to exhaust internal remedies
prior to instituting judicial review proceedings – the dispute resolution
mechanism created by regulation 50 of the Municipal Supply Chain
Management Regulations does not constitute an internal remedy as
contemplated by section 7(2) of the PAJA.

___
ORDER

___

On appeal from: Gauteng Division of the High Court, Pretoria
(Makgoba J sitting as court of first instance).
1 The appeal is upheld with costs.
2 The first and second respondents are ordered to pay the costs of the
appeal jointly and severally, the one paying the other to be absolved.
3 The order of the court a quo is set aside and replaced with the following
order:
‗The point in limine is dismissed with costs.‘
4 The matter is remitted to the court a quo for a decision on the merits.

___
JUDGMENT

___

Mhlantla JA (Mpati P, Lewis, Mhlantla, Bosielo and Swain JJA
concurring):

[1] This appeal with leave of the court a quo turns on whether the
dispute resolution mechanism created by reg 50 of the Municipal Supply
Chain Management Regulations, GN 868, GG 27636 of 30 May 2005
(the regulations) constitutes an ‗internal remedy‘ contemplated in s 7(2)
of the Promotion of Administrative Justice Act 3 of 2000 (PAJA). The
litigation in this matter arose after the Madibeng Local Municipality (the
Municipality) awarded a municipal contract to Dijalo Property Valuers
(the second respondent) one of several entities that had tendered for a
contract to perform services for it.

[2] The facts are uncomplicated. On 10 May 2013 the Municipality
issued an invitation to tender for the compilation of a new General and
Supplementary Valuation Roll for the period 2014 to 2018. Fifteen
bidders submitted tenders. DDP Valuers (Pty) Ltd (the appellant), which
had been the municipal valuer for the Municipality in the period
preceding September 2013, and the second respondent were shortlisted.

[3] The second respondent was successful in its bid and was appointed
to perform the services listed in the agreement with effect from 9
September 2013 until 30 June 2018 in terms of the Service Level
Agreement concluded between it and the Municipality. Upon being
advised of the award of the tender to the second respondent, the appellant
lodged an objection in terms of reg 49 of the regulations on the basis that
the second respondent‘s tender was out of proportion and far exceeded
the appellant‘s bid which was the second lowest.  Reg 49 provides the
following:
‗49. Objections and complaints.—The supply chain management policy of a
municipality or municipal entity must allow persons aggrieved by decisions or actions
taken by the municipality or municipal entity in the implementation of its supply
chain management system, to lodge within 14 days of the decision or action a written
objection or complaint to the municipality or municipal entity against the decision or
action.‘

[4] On 1 October 2013 the appellant directed its letter of objection to
the Municipality requesting the latter to provide it with certain
information relating to the winning bidder and the evaluation process.
The appellant also requested the Municipality in terms of reg 50 of the
regulations, to appoint a competent and qualified person to assist in
resolving the dispute. The suspension of the operation of the new contract

with the second respondent was sought until the dispute with the
appellant had been resolved.

[5] The Municipality replied on the same day by email stating that in
view of the fact that the appellant had instituted action against it for
payment of outstanding invoices, it would be unethical for the appellant
to continue communicating with the Municipality and its staff.

[6] The appellant‘s reply to the email from the official was that its
objection was a separate issue which had nothing to do with the summons
issued against the Municipality. The appellant concluded by stating:
‗Should we not receive the information requested, we will also take legal action on
this matter against your municipality.‘
The Municipality did not respond to the appellant‘s letter and its request
in terms of reg 50 of the regulations.

[7] The appellant proceeded to launch an application in the Gauteng
Division of the High Court, Pretoria for the review and setting aside of
the Municipality‘s award of the tender to the second respondent on a
number of grounds including, inter alia:
(a)
That the tender Bid Evaluation Committee (BEC) had evaluated
the tender on criteria in respect of functionality that differed from what
was stated in the tender specifications set out in the Request for Proposals
(RFP).
(b)
That the BEC evaluated the tender based on responsiveness instead
of the preference points system prescribed in regs 5 and 6 of the
Preferential Procurement Regulations1 and contrary to reg 4(5) thereof.
[8] The Municipality and second respondent opposed the application.

1 Preferential Procurement Policy Framework Act, 2000: Preferential Procurement Regulations, GN
R502, Government Gazette 34350 of 8 June 2011.

In their answering affidavits, the respondents raised a point in limine that
the appellant had not exhausted internal remedies in terms of s 7(2) of the
PAJA, and in particular reg 50 of the regulations, prior to launching the
judicial review proceedings. It was argued that upholding the point in
limine would be dispositive of the case.

[9] The matter came before Makgoba J. The learned judge was asked
to determine the point in limine before considering the merits. He held
that reg 50 of the regulations constituted an internal remedy and that the
appellant either had to exhaust that remedy or approach the court for
exemption as contemplated in s 7(2) of the PAJA. Since the appellant had
done neither, the court a quo upheld the point in limine and dismissed the
application with costs.

[10] The issue to be determined is whether the dispute resolution
mechanism created by reg 50 constitutes an internal remedy as
contemplated in s 7(2) of the PAJA. The Municipality abides the decision
of this court and accordingly did not make any submissions in respect of
the merits of the appeal. The second respondent, whilst abiding the
decision of the court, submitted written heads of argument to address the
issue of costs of the appeal in the event the appeal is upheld.

[11] Central to the issues is reg 50 of the regulations, which provides
the following:
‗50. Resolution of disputes, objections, complaints and queries.— (1) The supply
chain management policy of a municipality or municipal entity must provide for
the appointment by the accounting officer of an independent and impartial person
not directly involved in the supply chain management processes of the
municipality or municipal entity —
(a)
to assist in the resolution of disputes between the municipality or

municipal entity and other persons regarding —
(i) any decisions or actions taken by the municipality or municipal entity in   the
implementation of its supply chain management system; or
(ii) any matter arising from a contract awarded in the course of its supply
chain management system; or
(b)
to deal with objections, complaints or queries regarding any such decisions
or actions or any matters arising from such contract.
(2) A parent municipality and a municipal entity under its sole or shared
control may for purposes of subregulation (1) appoint the same person.
(3) The accounting officer, or another official designated by the accounting officer,
is responsible for assisting the appointed person to perform his or her functions
effectively.
(4) The person appointed must —
(a) strive to resolve promptly all disputes, objections, complaints or queries
received; and
(b) submit monthly reports to the accounting officer on all disputes, objections,
complaints or queries received, attended to or resolved.
(5) A dispute, objection, complaint or query may be referred to the relevant
provincial treasury if —
(a) the dispute, objection, complaint or query is not resolved within 60 days; or
(b) no response is received from the municipality or municipal entity within 60
days.
(6) If the provincial treasury does not or cannot resolve the matter, the dispute,
objection, complaint or query may be referred to the National Treasury for
resolution.
(7) This regulation must not be read as affecting a person‘s rights to approach a
court at any time.‘

[12] The overarching statutory provision, s 7(2) of the PAJA, provides
the following:
‗(2)(a) Subject to paragraph (c), no court or tribunal shall review an administrative
action in terms of this Act unless any internal remedy provided for in any other law
has first been exhausted.

(b)
Subject to paragraph (c), a court or tribunal must, if it is not satisfied that
any internal remedy referred to in paragraph (a) has been exhausted, direct that
the person concerned must first exhaust such remedy before instituting
proceedings in a court or tribunal for judicial review in terms of this Act.
(c)
A court or tribunal may, in exceptional circumstances and on
application by the person concerned, exempt such person from the obligation to
exhaust any internal remedy if the court or tribunal deems it in the interest of
justice.‘

[13] In Reed and others v The Master of the High Court and others,2
Plasket J defined the term ‗internal remedy‘ when used in administrative
law as follows:
‗[T]he composite term ―internal remedy‖ . . . is used to connote an administrative
appeal – an appeal, usually on the merits, to an official or tribunal within the same
administrative hierarchy as the initial decision-maker – or, less common, an internal
review. Often the appellate body will be more senior than the initial decision-maker,
either administratively or politically, or possess greater expertise. Inevitably, the
appellate body is given the power to confirm, substitute or vary the decision of the
initial decision-maker on the merits. In South Africa there is no system of
administrative appeals. Instead internal appeal tribunals are created by statute on an
ad hoc basis.‘ (Footnotes omitted.)

[14] Generally, the duty to exhaust internal remedies is not in and of
itself absolute3 nor is it automatic.4 That much is clear from the latitude
given to courts in s 7(2)(c) of the PAJA, to exempt applicants, in
exceptional circumstances and upon application made by the person
concerned, from exhausting internal remedies if deemed by the court to
be in the interest of justice. Furthermore, ‗a court will condone a failure to

2 Reed v Master of the High Court of SA [2005] ZAECHC 5; [2005] 2 All SA 429 (E) para 25.
3 Koyabe v Minister of Home Affairs (Lawyers for Human Rights as Amicus Curiae) [2009] ZACC 23;
2010 (4) SA 327 (CC) para 38.
4 Lawrence Baxter Administrative Law (1984) at 720. See also Cora Hoexter Administrative Law in
South Africa 2 ed (2012) at 539.

pursue an available remedy where the remedy is illusory or inadequate, or
because it is tainted by the alleged illegality.‘5 Under the common law,
the two ‗paramount considerations‘ are (a) whether the domestic remedies
are capable of providing effective redress, and (b) whether the alleged
unlawfulness undermines the internal remedies themselves.6

[15] Section 7(2) of the PAJA was considered by Mokgoro J in Koyabe
v Minister of Home Affairs (Lawyers for Human Rights as Amicus
Curiae),7 where it was held that an aggrieved party must take reasonable
steps to exhaust internal remedies in view of the rationale of internal
remedies as ‗a valuable and necessary requirement in our law‘.8 However,
it was also held that this requirement should not be rigidly imposed, nor
should it be used by administrators to ‗frustrate the efforts of an
aggrieved person or to shield the administrative process from judicial
scrutiny‘.9 The court held that internal remedies are necessary because
they are designed to provide more readily available, immediate and cost-
effective relief.10 They defer to the executive administrative autonomy
and afford the relevant ‗higher administrative body‘ an opportunity to
rectify its own irregularities before resorting to litigation.11 They also
enable the administrators, where applicable, to apply specialised
knowledge which may be of a technical or practical nature,12 including
fact-intensive cases, where administrators have easier access to the
relevant facts and information, which benefits courts in judicial review
proceedings having the full record of an internal adjudication.13

5 Hoexter (note 4 above) at 539. (Footnotes omitted.)
6 Baxter (note 4 above) at 721.
7 Koyabe (note 3 above) para 34-49.
8 Paragraph 38.
9 Paragraph 38.
10 Paragraph 35.
11 Paragraph 36.
12 Paragraphs 36-37.
13 Paragraph 37.

[16] In this court, counsel for the appellant submitted that reg 50 of the
regulations does not provide an internal remedy in that the tribunal does
not have the powers to declare the award of the tender invalid and set it
aside. I agree. The heading of reg 50 merely refers to the ‗resolution of
disputes, objections, complaints and queries‘. What is envisaged by
subregulation (1) is that the procedure be contained in a municipality‘s
Supply Chain Management policy (the SCM policy). This seems to
suggest that the SCM policy must itself set out the procedure.

[17] The functions of the independent and impartial person are twofold.
He or she must:
(a) assist in the resolution of disputes between the municipality or
municipal entity and other persons regarding any decisions or actions
taken by the municipality or municipal entity in the implementation of its
supply chain management system or any matter arising from a contract
awarded in the course of its supply chain management system; or
(b) deal with objections, complaints or queries regarding any such
decisions or actions or any matters arising from such contract. Such
appointed person must (i) strive to resolve promptly all disputes,
objections, complaints or queries received; and must (ii) submit monthly
reports to the accounting officer on all disputes, objections, complaints or
queries received, attended to or resolved. Having regard to the words used
in reg 50, in the context of the regulations as a whole and the apparent
purpose to which they are directed,14 reg 50 is not an internal remedy as
envisaged in s 7(2) of the PAJA.

[18] In addition, reg 50 does not set out the manner in which these

14 Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] ZASCA 13; 2012 (4) SA 593
(SCA) para 18.

complaints, queries or objections will be dealt with and what documents
will be considered in the process of dealing with them. The grounds upon
which the decisions may be challenged are not specified. The appointed
person is required to ‗submit monthly reports to the accounting officer‘.
The independent and impartial person is not directly involved in the
supply chain management processes, evincing the lack of the hierarchy
and specialised knowledge requirements mentioned in Koyabe. There
appears to be no indication that the report(s) will be communicated to the
aggrieved person. Importantly, the powers of the independent and
impartial person are not set out in reg 50, but they clearly do not include
powers to correct or set aside the decision of the Municipality complained
of. It is clear that this person has no decision-making powers. This too
falls short of what an internal remedy would constitute.

[19] Where the dispute remains unresolved within a period of 60 days,
or no response is received from the municipality within that period, the
aggrieved party may refer the dispute to the relevant provincial treasury,
failing which it may be escalated to the national treasury. No procedure is
provided on how these objections and complaints would be resolved save
to state that if the impartial person is unable to resolve the dispute, the
aggrieved party may refer the dispute to the provincial treasury.
Similarly, if the latter cannot resolve the dispute, the complaint or
objection must be referred to the national treasury. The regulation is silent
as to how and by whom the dispute would be resolved at these levels and
on further action if the national treasury has not resolved the dispute.

[20] Finally, subreg (7) provides that the ‗regulation must not be read as
affecting a person‘s rights to approach a court at any time‘. A person is
therefore given a choice either to lodge a dispute in terms of reg 50 of the

regulations or launch an application in court. As has been pointed out by
Professor Phoebe Bolton,15 on a reading of the regulations, there is no
intention on the part of the legislature for the independent and impartial
person to have remedial powers. He or she is simply required to resolve
or settle complaints and objections. On the wording of the regulations, a
municipality or municipal entity is under an obligation to provide for the
filing of objections and complaints without prescribing remedial
outcomes. The regulations do not provide an internal remedy in terms of s
7(2) of the PAJA. Consequently, the regulations do not constitute an
internal remedy.

[21] In my view the decision of Plasket J in ESDA Properties (Pty) Ltd
v Amathole District Municipality16 is correct. In that case, the learned
judge was faced with provisions similar to those of reg 50, ie ss 108 and
109 of Amathole District Municipality Supply Chain Management
Policy, 2012.17 The learned judge held as follows in paras 10-11:
‗In my view it was, for two reasons, not obligatory for ESDA to have first utilised this
mechanism before applying for the review of the award of the tender.
The first is that ss 108 and 109 do not create an internal appeal or review in which the
decision-maker has the power to confirm, substitute or vary the decision complained
of. Instead, it creates a dispute resolution mechanism in which a person, with no
decision-making powers, is appointed to assist the parties to resolve their dispute,
acting, it would appear, as a mediator or conciliator. This is not an internal remedy
contemplated by s 7(2) of the PAJA. The second reason is that s 109(6) provides in
express terms that a party has a choice of either using the dispute resolution
mechanism or approaching a court. In other words, it does not operate to prevent a
party from approaching a court ―at any time‖.‘

15 Phoebe Bolton ‗Municipal tender awards and internal appeals by unsuccessful bidders‘
Potchefstroom Electronic LJ 2010 (13) 3 at 80, available at http://www.nwu.ac.za/p-per/index.html.
16 ESDA Properties (Pty) Ltd v Amathole District Municipality & others [2014] ZAECGHC 76; 2014
JDR 1878 (ECG).
17 The policy adopted by the Amathole District Municipality is very similar to reg 50 of the regulations.

[22] In the result, since reg 50 of the regulations did not provide an
internal remedy, there was no obligation on the appellant to utilise its
provision or apply for an exemption in terms of s 7(2)(c) of the PAJA.
Therefore, the court a quo erred when it concluded that even though a
purported internal remedy would not be effective and its pursuit would be
futile, it was still incumbent upon the appellant to approach the court for
exemption from the obligation to exhaust internal remedies. The court a
quo erred in upholding the point in limine.

[23] In my view, the only other provision that could have been
applicable is s 62 of the Local Government: Municipal Systems Act 32 of
2000 (the Systems Act),18 which is a general appeal provision for
municipalities and does constitute an internal remedy contemplated in s
7(2) of the PAJA. Unlike reg 50 of the regulations, in that section, the
appeal authority is empowered after considering the appeal to confirm,
vary or set the decision aside, provided such variation will not adversely
affect the rights that have already accrued to the preferred bidder. In the
majority judgment of City of Cape Town v Reader and others,19 Lewis JA
considered the meaning of s 62 of the Systems Act to be that a decision
can only be appealed against in terms of that section, if the outcome of
the appeal does not detract from the rights of the successful applicant.

18 Section 62 subsecs (1), (2) and (3) of the Local Government: Municipal Systems Act 32 of 2000
provide:
‗(1) A person whose rights are affected by a decision taken by a political structure, political office-
bearer, councillor or staff member of a municipality in terms of a power or duty delegated or sub-
delegated by a delegating authority to the political structure, political office bearer, councillor or staff
member, may appeal against that decision by giving written notice of the appeal and reasons to the
municipal manager within 21 days of the date of the notification of the decision.
(2) The municipal manager must promptly submit the appeal to the appropriate appeal authority
mentioned in subsection (4).
(3) The appeal authority must consider the appeal, and confirm, vary or revoke the decision, but no
such variation or revocation of a decision may detract from any rights that may have accrued as a result
of the decision.‘
19 City of Cape Town v Reader & others [2008] ZASCA 130; 2009 (1) SA 555 (SCA) para 32.

[24] In Groenewald NO and Others v M5 Developments (Cape)(Pty)
Ltd,20 it was held that unsuccessful tenderers were entitled to appeal
under s 62 of the Systems Act. Leach JA held:
‗Section 62(1) allows a person to appeal by giving ―written notice of the appeal and
reasons‖ to the municipal manager who, under s 62(2) has then to submit ‗the appeal‘
– obviously the notice of appeal and the reasons lodged therewith under s 62(1) – to
the appeal authority for it to consider ‗the appeal‘ under s 62(3). Although in terms of
this latter subsection the appeal authority is empowered to ―confirm, vary or revoke
the decision‖, it exercises that power in the context of hearing ―the appeal‖, viz the
appeal and the reasons lodged by the aggrieved person under s 62(1).‘

[25] In this case, the appellant as an unsuccessful tenderer would have
been entitled to appeal under s 62. However, the Municipality had already
awarded the contract to the second respondent and the parties had already
signed an agreement to that effect resulting in the rights accruing to the
second respondent. It follows that the appellant could not resort to that
procedure in order to comply with s 7(2) of the PAJA.

[26] In the result, the only recourse available for the appellant as an
unsuccessful bidder was to apply for the judicial review of the tender
award and the conclusion of the contract, which it did. The appeal must
therefore succeed.

[27] What remains is the question of costs.  The second respondent in
its written heads of argument submitted that it should not be ordered to
pay the costs of appeal.  It submitted that it would not be fair or equitable
to mulct it with these costs as it did not oppose the appeal and it gave all
the parties notice of its non-opposition, three and a half months before the

20 Groenewald NO & others v M5 Developments (Cape)(Pty) Ltd [2010] ZASCA 47; 2010 (5) SA 82
(SCA) para 24.

hearing of the appeal. In the alternative, it submitted that it should only be
liable for the appellant‘s costs until 9 June 2015 when it filed its notice to
abide.

[28] The basic rule is that all costs are in the discretion of the court. It is
true that the second respondent filed a notice to abide the decision of the
court. This obviously does not have the effect of setting aside the order of
the court a quo. The appellant still had to proceed with the appeal to have
that order set aside so that the review process could proceed. The
appellant therefore had no choice but to carry on with the appeal.

[29] The general rule on appeal is that a substantially successful party is
entitled to the costs of the appeal. There is no reason to depart from the
general rule on the facts of this case. Accordingly, the appellant is entitled
to its costs of appeal which shall be paid by both respondents jointly and
severally.

[30] In the result, I make the following order:
1 The appeal is upheld with costs.
2 The first and second respondents are ordered to pay the costs of the
appeal jointly and severally, the one paying the other to be absolved.
3 The order of the court a quo is set aside and replaced with the following
order:
‗The point in limine is dismissed with costs.‘
4 The matter is remitted to the court a quo for a decision on the merits.

__________________
N Z MHLANTLA
JUDGE OF APPEAL

APPEARANCES:

For Appellant:
B C Stoop SC
Instructed by:
Coetzer and Partners, Pretoria

Honey Attorneys, Bloemfontein

For Respondents:  No appearance

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

FROM

The Registrar, Supreme Court of Appeal

DATE

1 October 2015
STATUS

Immediate

Please note that the media summary is intended for the benefit of the media and does not
form part of the judgment of the Supreme Court of Appeal.

DDP Valuers (Pty) Ltd v Madibeng Local Municipality (233/2014) [2015] ZASCA 146
(1 October 2015).
The Supreme Court of Appeal (SCA) today upheld an appeal against a judgment of the Gauteng
Division of the High Court, Pretoria. The appeal related to the question whether a regulation of the
municipality constituted an internal remedy as contemplated in section 7(2) of the Promotion of
Administrative Justice Act 3 of 2000 (PAJA).

DDP Valuers (Pty) Ltd (appellant) and Dijalo Property Valuers (second respondent) and several other
entities tendered for a contract to perform services for the first respondent, the Madibeng Local
Municipality (Municipality). The appellant and the second respondent were shortlisted. The tender
was awarded to the second respondent. Pursuant thereto a Service Level Agreement was concluded
between the Municipality and the second respondent.

Upon learning of the Municipality’s award of the tender to the second respondent, the appellant
lodged an objection in terms of reg 49 of the Municipal Supply Chain Management Regulations (the
regulations). There was no response to the objection. The appellant proceeded to launch an
application for the review and setting aside of the tender award in the Gauteng Division of the High
Court, Pretoria (Makgoba J) on a number of grounds including that the tender was incorrectly
evaluated. The Municipality and second respondent opposed the application raising a preliminary
point of law that the appellant had failed to first exhaust internal remedies of the Municipality in terms
of s 7(2) PAJA which requires prior exhaustion of internal administrative remedies before approaching
a court for judicial review. The Municipality and second respondent contended that regulation 50 was
such internal remedy which the appellant had to exhaust before approaching the court. The court a
quo was asked to determine the preliminary point before considering the merits. It held that regulation
50 constituted an internal remedy and dismissed the application with costs. The court granted the
appellant leave to appeal to this court.

The issue on appeal was whether regulation 50 constituted an internal remedy which the appellant
had to exhaust before approaching a court on review. The SCA found that regulation 50 fell short of
the legal requirements of an administrative internal remedy envisaged in s 7(2) of PAJA in that an
administrative decision was not capable of being appealed in terms of the regulations, ie to confirm,
substitute or vary the decision. Regulation 50 was instead a non-binding mere dispute resolution
mechanism.

The SCA accordingly held that regulation 50 did not constitute an internal remedy and that the court a
quo erred in upholding the preliminary point raised by the Municipality and second respondent.

The SCA found that s 62 of the Local Government: Municipal Systems Act 32 of 2000 (the Systems
Act) would have been an internal remedy envisaged in s 7(2) of PAJA, however that it was limited to
cases where rights had not yet accrued. Section 62 of the Systems Act was not applicable in this
appeal as the Municipality and second respondent had concluded a Service Level Agreement in
respect of which rights had accrued. The court found that the appellant, as an unsuccessful tender
bidder, could approach the court on review.

The SCA accordingly upheld the appeal and replaced the order of the court a quo with an order
dismissing the preliminary point with costs against the Municipality and second respondent jointly and
severally. It remitted the matter to the court a quo for the determination of the merits of the case.

--- ends ---