This blog was co-authored by Felix Le Roux, Candidate Attorney.
In a September 2023 judgment, the Supreme Court of Appeal (SCA) affirmed that a court is entitled to declare a contract unlawful and invalid on administrative law grounds, even in the absence of a review application by the party raising such grounds.
In October 2015, the North West Province Department of Sport and Education awarded a tender to a law firm to evaluate and adjudicate the award of a further tender for the provision of stationery to schools in the province. The Department and the law firm concluded a service level agreement (SLA) and three days later the same parties, without a further procurement process being followed, concluded an addendum to the SLA. The addendum increased the duration, scope of work and fees provided for in the SLA.
When the law firm demanded payment from the Department in terms of the addendum, the Department cancelled the addendum on the basis that it was invalid due to non-compliance with procurement law. The law firm sued the Department for damages based on repudiation of the contract. The High Court dismissed the law firm’s claim and found that the addendum was unlawful and invalid for want of a fair, equitable and transparent procurement process as required by section 217 of the Constitution.
On appeal, the SCA confirmed that the Department was entitled to challenge the lawfulness and validity of the addendum without launching a counter-application to review and set aside the addendum. Such a challenge is called a collateral (or reactive) challenge and is available to a defendant if the interests of justice require it. In this matter, the manifest non-compliance with procurement law and the fruitless and wasteful expenditure caused by the addendum were factors that required the court to entertain the collateral challenge. Accordingly, the SCA upheld the High Court’s finding that the addendum was unlawful and invalid, and the law firm’s appeal was dismissed with costs.
The judgment illustrates the principle that a defendant faced with an attempt to enforce an invalid administrative decision may challenge that decision without countering the claim with an application to review and set aside the decision, provided that the interests of justice favour the challenge.