THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

JUDGMENT

Case number : 389/07
Reportable

In the matter between :

THE CHAIRMAN OF THE STATE TENDER BOARD
FIRST APPELLANT
THE MINISTER OF FINANCE

SECOND APPELLANT

and

SUPERSONIC TOURS (PTY) LTD

RESPONDENT

CORAM :

SCOTT, FARLAM, NUGENT, CLOETE et MAYA JJA

HEARD :

9 MAY 2008

DELIVERED :
27 MAY 2008

Summary: State tenders ─ disqualification of tenderer by State Tender Board from tendering
for future State contracts─ when competent ─ interpretation of regulations made under the
State Tender Board Act, 68 of 1968 and the Preferential Procurement Policy Framework Act, 5
of 2000 ─ Procedural fairness as required by the Promotion of Administrative Justice Act
(PAJA), 3 of 2000 ─ Income Tax Act, 58 of 1962 ─ possible contravention of s 4 ─ papers sent
to the Commissioner, SARS, to enable him to investigate.

Neutral citation: This judgment may be referred to as Chairman, State Tender Board v
Supersonic Tours (Pty) Ltd (389/07) [2008] ZASCA 56 (27 May 2008).
_________________________________________________________

CLOETE JA/

CLOETE JA:

[1] Supersonic Tours (Pty) Ltd ('Supersonic') brought motion proceedings in the
Pretoria High Court in terms of a notice of motion dated 11 October 2005. Part of the
relief sought was an order setting aside on review a decision of the State Tender
Board ('STB') that Supersonic and its directors be restricted for a period of ten years
from obtaining business from the State or any organ of state. The chairman of the
State Tender Board was cited as the first respondent and the Minister of Finance, in
his capacity as head of the National Treasury (being the department under whose
control the STB resorts), as the second respondent. The court a quo (Pretorius J)
granted this relief on 11 May 2007 and subsequently, leave to appeal to this court.
The respondents in the court a quo are the appellants and Supersonic, the
respondent.

[2] Supersonic has for more than 25 years carried on the business of providing
management of travel services to, amongst other clients, various government
departments and organs of state. In August 2003 the STB called for tenders for the
supply of travel and accommodation services to the Department of Defence for a
period of two years. Supersonic tendered and was awarded the contract at the end
of the following month.

[3] On 28 February 2005 Supersonic received a letter from the Department of
Defence dated 26 January 2005. The letter reads, in part:
"The Department of Defence awarded this tender to Supersonic Tours (Pty) Ltd t/a Sure Supersonic
Travel (hereinafter referred to as 'your company') based on the information supplied in your tender
documents.
However, after the tender had been awarded to your company it came to our attention that there were
possible misrepresentations in your tender, specifically with reference to the SARS Tax Clearance
Certificate and preference points in equity ownership that you have claimed for your company. We
investigated the tender documents submitted and it seems that these allegations require your urgent
explanation. Accordingly and without prejudice to the State's rights, you are hereby given 14 days to
let us have your detailed explanation regarding the following matters:─
1.
Did your company have a Tax Clearance Certificate as was required in the tender? If so, a

copy thereof (dated prior to the tender closure time) must be submitted. You will note that you have
submitted a Tax Clearance Certificate for a company by the name of Supersonic Travel (Pty) Ltd,
which is clearly not applicable. As was stated in the tender conditions (see ST 5.) failure to comply
with this requirement may invalidate your tender.
2.
As you are aware the preference points claimed for equity ownership by historically
disadvantaged individuals was a material consideration for the award of the tender and we are of the
opinion that misrepresentation of a claim in this regard may render the contract void alternatively
voidable. With this in mind, you are requested to submit your explanation on the following aspects for
the State Tender Board to make a decision regarding the matter [and a number of questions
followed].
. . .
3.
As it is clear that the contract was awarded as a result of points claimed by your company,
you are required to furnish full documentary proof, to the satisfaction of the State Tender Board that
your claims/information in your tender in this regard, were correct. In this regard you are referred to
paragraph 14.7(iv) of the ST11.1, that indicates what the State Tender Board may do in addition to
any other remedy that if may have, if it is found that your claims were incorrect.'

[4] The 'ST11.1' referred to in para 3 of the letter just quoted is form ST11.1, the
Preference Points Claim Form: Equity Ownership by Historically Disadvantaged
Individuals, which formed part of the tender. The reference in the letter should
obviously have been to sub-para (v), not (iv), of that form. Para 14.7 provides:
'I/we, the undersigned, who warrants that he/she is duly authorised to do so on behalf of the firm
certify that points claimed, based on owners/shareholders who are actively involved in the day to day
management of the enterprise equity ownership, qualifies the firm for the points shown and I/we
acknowledge that:
. . .
(v)
If the claims are found to be incorrect, the State Tender Board may, in addition to any other
remedy it may have ─
(a)
recover all costs, losses or damages it has incurred or suffered as a result of that
person's conduct;
(b)
cancel the contract and claim any damages which it has suffered as a result of having
to make less favourable arrangements due to such cancellation;
(c)
impose a financial penalty more severe than the theoretical financial preference
associated with the claim which was made in the tender; and
(d)
restrict the tenderer/contractor, its shareholders and directors from obtaining business
from any organ of state for a period not exceeding 10 years.'

[5] Supersonic wrote a detailed letter dated 11 March 2005 in reply. It then
received a letter dated 21 July 2005 from the National Treasury in terms identical to
the letter from the Department of Defence to which it had already responded. It sent
a copy of its previous response to the National Treasury under cover of a letter dated
4 August 2005.

[6] On 27 September 2005 the Department of Defence wrote to Supersonic
informing it that it had failed adequately to address the discrepancies in its tender to
the Department and the National Treasury. On the same day, Supersonic reacted to
the letter by writing to the Acting Secretary of Defence requesting a written
explanation as to which alleged discrepancies had not been addressed properly.
Both the Department and the Acting Secretary took up the attitude that it was for the
STB to give the explanation requested by Supersonic. But all of this was an exercise
in futility as the STB had already taken its decision on 22 September 2005. The
National Treasury sent a telefax to Supersonic on 29 September 2005 which read:
'At a sitting of the State Tender Board on 22 September 2005, the Board found that in awarding of the
tender to Supersonic Tours (Pty) Ltd t/a Sure Supersonic Travel, the department relied on a
misrepresentation made in your tender, especially with reference to the SARS Tax Clearance
Certificate and preference points on ownership that you have claimed for your company. After a
lengthy deliberation the Board resolved:
 The contract be cancelled with immediate effect; and
 the company and its directors be restricted for a period of 10 years.
The department has been informed accordingly.'

[7] The decision of the STB to cancel the contract with Supersonic has been
overtaken by events and is now academic. It is the decision to restrict Supersonic
and its directors for a period of ten years ─ which, it is common cause, operates to
prevent them from obtaining business from the State or any organ of state for that
period ─ which is the subject matter of this appeal.

[8] The STB has power to exclude a person to whom it has awarded a contract
from being considered for future contracts, both in terms of regulations made under

the State Tender Board Act1 and under the Preferential Procurement Policy
Framework Act.2 The regulations on which the appellants rely were referred to in the
following passage of the answering affidavit deposed to on behalf of both appellants,
which also summarises the appellants' case:
'[Supersonic] does not deny that the Tax Clearance Certificate which accompanied the tender
documents did not relate to it. It is clear therefore from the above that [Supersonic] during the
tendering process misrepresented itself in relation to the Tax Clearance Certificate and in relation to
the Equity Ownership and therefore the points that were claimed in relation thereto were incorrect and
should never have been claimed. This constituted a misrepresentation and fraud as envisaged in
Regulations 3(5)(a)(iv) and 3(6)(b) to the State Tender Board Act, 1968 (Act No. 86 of 1968) read
together with Regulations 15(2)(b) and (d) to the Preferential Procurement Policy Framework Act,
2000 (Act No. 5 of 2000). Accordingly, the [appellants] were entitled in terms of the abovementioned
regulations, which form part of the tender conditions, to cancel and restrict [Supersonic] and its
directors. It is accordingly submitted that [Supersonic] has acted in respect of the tendering process,
in a fraudulent manner or in bad faith, the conduct which was improper in obtaining the contract from
the State.'

[9] The relevant regulations under the State Tender Board Act provide as follows:
'3(5)(a) If the Board is of opinion that a person ─
. . .
(iv)
who has concluded an agreement referred to in section 4(1)(a) of the Act, has
promised, offered or given a bribe, or has acted in respect thereof in a fraudulent manner or in
bad faith or in any other improper manner, the Board may, in addition to any other legal
remedies it may have, resolve that no offer from the person concerned should be considered
during such period as the Board may stipulate.
[The contract which resulted from the acceptance of the Supersonic tender was clearly an agreement
referred to in s 4(1)(a) of the Act.]
. . .
(c)
Any restriction imposed on any person by the Board may at the discretion of the Board also
be made applicable to any other enterprise, or to any partner, manager, director or other person, who
wholly or partly exercises or exercised or may exercise control over the enterprise of the first-
mentioned person, and with which enterprise or person the first-mentioned person is or was in the
opinion of the Board actively associated.
. . .

1 86 of 1968.
2 5 of 2000.

(e)
Where the Board imposes a restriction regarding the consideration of an offer, or varies or
rescinds such restriction, it shall inform any other tender boards on which it may decide, all
Government departments and, where the Board deems it necessary, the Republic's representatives
abroad, of any resolution relative to such restrictions or rescindment [sic] or variation, and request the
said boards, departments and representatives to take similar steps in respect of the person concerned.
. . .
(6)
If an agreement has been concluded with an contractor on the strength of information
furnished by him in respect of which it is after the conclusion of such agreement proved that such
information was incorrect the Board may, in addition to any other legal remedy it may have ─
(a)
recover from the contractor any costs, and any damages incurred or sustained, as the case
may be, by the State as a result of the conclusion of the agreement; or
(b)
terminate the agreement and recover from the contractor any damages which the State may
suffer by having to make less favourable arrangements thereafter; and
(c)
impose by written notice directed to the contractor and delivered to him by registered post, a
penalty not exceeding 5 per cent of the monetary value of the agreement.'

[10] It is important to contrast the provisions of regulation 3(5)(a)(iv) and 3(6).
Regulation 3(6) gives remedies to the STB where information provided by a
contractor, on the strength of which the contract was concluded, was 'incorrect'; and
those remedies do not include disqualification from consideration for future tenders.
The power to disqualify is limited to the circumstances mentioned in regulation
3(5)(a)(iv) which include fraud and acting in bad faith (the two grounds on which the
appellants rely).

[11] Regulation 15 made under the Preferential Procurement Policy Framework
Act provides:
'(1)
An organ of state must, upon detecting that a preference in terms of the Act and these
Regulations has been obtained on a fraudulent basis, or any specified goals are not attained in the
performance of the contract, act against the person awarded the contract.
(2)
An organ of state may, in addition to any other remedy it may have against the person
contemplated in subregulation (1) ─
(a)
recover all costs, losses or damages it has incurred or suffered as a result of that person's
conduct;
(b)
cancel the contract and claim any damages which it has suffered as a result of having to
make less favourable arrangements due to such cancellation;

(c)
impose a financial penalty more severe than the theoretical financial preference associated
with the claim which was made in the tender; and
(d)
restrict the contractor, its shareholders and directors from obtaining business from any organ
of state for a period not exceeding 10 years.'
The only basis upon which this regulation could find application in the present matter
is if a preference obtained by Supersonic had been obtained 'on a fraudulent basis'
as contemplated in subregulation (1).

[12] Supersonic relies in this court, as it did in the court below, on the provisions of
the Promotion of Administrative Justice Act ('PAJA').3 The appellants deny that PAJA
applies. I accordingly turn to consider this question.

[13] The insertion of para 14.7 in form ST11.1, which formed part of the contract,
does not, as was submitted on behalf of the appellants, have the consequence that
contractual rights were conferred on the STB. The paragraph ─ in terms ─ amounts
to an acknowledgement that the STB has rights; it evinces no intention to confer
rights. The right of the STB to disqualify Supersonic is accordingly derived solely from
the regulations which are referred to in the answering affidavit and which have been
quoted above.

[14] The STB is an 'organ of state' as defined in s 239 of the Constitution,
incorporated in the definitions section, s 1, of PAJA. The STB made a 'decision
relating to imposing a restriction' as contemplated in para (d) of the definition of
'decision' in s 1 of PAJA. The decision was an exercise of a public power in terms of
legislation, viz the regulations quoted above, and that requirement of 'administrative
action' as defined in s 1 of PAJA is accordingly fulfilled.  The decision had immediate
and direct legal consequences for Supersonic. The decision accordingly constituted
an 'administrative action' as defined in s1 of PAJA and the provisions of PAJA are
applicable: cf Grey's Marine Hout Bay (Pty) Ltd v Minister of  Public Works.4 The
rights of Supersonic were materially and adversely affected by the decision and

3 3 of 2000.
4 2005 (6) SA 313 (SCA) paras 23, 24 and 28.

Supersonic was consequently entitled to procedural fairness in terms of s 3(1) of
PAJA.

[15] The crux of this appeal is that Supersonic was at no time advised that it was
suspected of fraud or of having acted in bad faith, or that the STB was considering
disqualifying it for either of these two reasons. Section 3(2)(b) of PAJA required the
STB to give Supersonic 'adequate notice of the nature and purpose of the proposed
administrative action' and 'a reasonable opportunity to make representations'. Para 1
of the letters from the Department of Defence and the STB (dated 26 January and 21
July 2005 respectively, and quoted in para 3 above) suggests that failure to comply
with the requirement that a tax clearance certificate be provided 'may invalidate your
tender'. Para 2 of the letters says that 'we are of the opinion that misrepresentation of
a claim [in regard to equity ownership by historically disadvantaged individuals] may
render the contract void alternatively voidable.' There is no suggestion that a finding
of fraud or bad faith leading to disqualification might be made. Nor can the reference
in para 3 of the letters to para 14.7(v) of form ST11.1 (quoted in para 4 above) avail
the appellants. Paragraph 14.7(v) says that the STB may exercise the powers to
which it refers 'if the claims are found to be incorrect' and had Supersonic referred to
the paragraph, its provisions would not have sufficed to alert Supersonic to the fact
that it was being investigated for fraud or that it was suspected of having acted in bad
faith. I should emphasise that paragraph 14.7(v) is a mistaken statement of the
powers given to the STB in terms of regulation 15 made under the Preferential
Procurement Policy Framework Act, quoted in para 11 above. Because subregulation
(2) refers back to subregulation (1), the requirements of subregulation (1) ─ ie either
that the preference was obtained on a fraudulent basis, or that their was non-
attainment of specific goals in the performance of the contract ─ must be satisfied
before the provisions of sub regulation (2) can become operative; and an 'incorrect'
claim for preference does not, without more, enable an organ of state to act under
any of the paragraphs of subregulation (2). The decision of the STB was therefore
procedurally unfair as contemplated in s 6(2)(c), and falls to be set aside in terms of
s 8(1), of PAJA.

[16] Before the appropriate order is made, there is a disquieting feature which
appears from the record which requires comment. A firm of attorneys was instructed
by the Department of Defence to investigate the correctness of the information
supplied by Supersonic in form ST11.1. In a memorandum dated 13 May 2004, sent
to the Department of Defence, a partner of the firm said:
'1.4
I started preparing this Memorandum on April 20, 2004 but as a result of further instructions
received from Col Dirk Louw (paragraph 1.3 above) I reported on April 28, 2004 to Mr Peter Rabie C/o
Chief Financial Officer, Department of Defence, Pretoria that the completion of my Memorandum
would now be delayed. I further explained that it would not be meaningful to attend at [Supersonic's]
offices and expect it to disclose to ourselves the number of its employees and their duties. A more
meaningful way would be to obtain access to the records of South African Revenue Services and the
Unemployment Insurance Commissioner ("U.I.F.") in order to determine the number of, and identity of
each employee from whose salaries income tax and contributions to the U.I.F. are deducted monthly
and paid over. However, the South African Revenue Services by virtue of the provisions of Section 4
of the Income Tax Act 58 of 1962, is prohibited from disclosing any information at its disposal and
therefore such information should be collected in an "unofficial" manner. This necessitated a delay in
preparing and finalising this Memorandum.
. . .
13.2
Staff Complement:
. . .
13.2.3
as indicated, we are employing "unofficial" means of obtaining the information from South
African Revenue Services. As at the point in time when this Memorandum is being signed, such
information is not yet available but we trust to have same available when we will shortly meet.'
In view of these statements I consider it necessary to request the Registrar of this
court to send a copy of the memorandum and of this judgment to the Commissioner,
South African Revenue Services, drawing attention to this paragraph of the judgment,
in order to alert him to the fact that there may have been a contravention of s 4 of the
Income Tax Act and to enable him to take such steps as he may deem expedient
including, if he considers such a step to be warranted, a referral to the appropriate
law society which has jurisdiction over the firm of attorneys concerned.

[17] The appeal is dismissed with costs, including the costs of two counsel.

______________
T D CLOETE

JUDGE OF APPEAL

Concur: Scott JA

Farlam JA

Nugent JA

Maya JA

THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From: The Registrar, Supreme Court of Appeal
Date:
27 May 2008
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

THE CHAIRMAN OF THE STATE TENDER BOARD & ANOTHER v SUPERSONIC TOURS
(PTY) LTD

Supersonic Tours (Pty) Ltd tendered for, and was awarded, a contract for the supply of travel
services to the Department of Defence. The State Tender Board subsequently disqualified
Supersonic and its directors, for a period of 10 years, from tendering for State contracts, on
the basis that Supersonic had acted fraudulently or in bad faith when it had submitted its
tender.

The SCA set the disqualification aside as Supersonic had at no time been informed that the
State Tender Board was considering disqualifying it on either of the grounds relied on by the
Board, and the Board's decision was accordingly held to be procedurally unfair.

--ends--