On 31 January 2024, the Supreme Court of Appeal delivered a judgment condemning state-owned entities (SOEs) that opportunistically institute review applications against their own prior decisions to avoid contractual obligations. The court emphasised that ‘self-reviews’ ought to be aimed at vindicating clean governance.
The matter involved the award of a tender by an SOE to a construction company for the installation of a high security fence, pursuant to which the parties entered into a contract for the installation services. The agreed specifications of the fence in terms of the contract differed slightly from the tender specifications, following negotiations between the parties which were provided for in the tender provisions.
During the installation of the fence, a dispute arose regarding the fence’s specifications which was referred to an adjudicator in terms of the contract’s dispute resolution mechanism. The adjudicator ruled that the fence complied with the terms of the contract and that the company was entitled to payment from the SOE. The company applied to the high court to make the adjudicator’s award an order of court. In response, the SOE launched a self-review application seeking to have the tender award and consequent contract set aside as unlawful and invalid.
The SOE’s self-review was based on the company’s alleged failure to:
- submit a sample that complied with the tender requirements;
- submit the test results of the tender sample, which was a pre-condition of the contract; and
- install the fence according to the tender specifications.
Before the court could consider the merits of the self-review application, it had to establish whether the SOE’s delay in instituting the self-review was unreasonable and, if so, whether the delay ought to be overlooked. The court found that the alleged irregularities were known to the SOE for at least one year before it instituted the self-review application. No explanation for that delay was provided by the SOE, and the court concluded that the SOE only took action when it could no longer contest the adjudicator’s award. Accordingly, the SOE’s delay was unreasonable.
In considering whether to overlook the delay and consider the merits of the self-review, the court took into account that the alleged irregularities were minor and that there was no suggestion of fraud or corruption in the procurement process. In addition, neither the SOE nor the public would be prejudiced if the court did not condone the delay because the purpose of the tender was achieved. The SOE received a fence that materially met the tender specifications and the public purse was not harmed. Accordingly, nothing in this matter warranted judicial intervention and the self-review application was dismissed with costs.
The court reprimanded the SOE for seeking to set aside the very contract that it previously sought to enforce as lawful and binding before the adjudicator. The court described the SOE’s self-review as an opportunistic attempt to avoid its contractual obligations, which is not consistent with the constitutional principles of transparent, responsive and accountable governance.
This blog was co-authored by Felix le Roux, Trainee Associate.