An appeal application by the City of Ekurhuleni against a municipal service provider has been dealt a blow after it was struck from the roll by the Supreme Court of Appeal (SCA).
In an electronic judgement handed down on Thursday, the SCA ordered that the City of Ekurhuleni’s application and matter against Business Connexion (Pty) Ltd (BCX) be struck from the roll.
The SCA also ordered the City to pay the legal costs of Business Connexion (Pty) Ltd’s lawyers.
Appeal against service provider
The matter between the City and Business Connexion was heard at the SCA on March 17 this year.
The City brought an appeal application at the SCA to challenge a judgment by the Johannesburg High Court. The High Court found that there was a valid and binding agreement between the City of Ekurhuleni Metropolitan Municipality and Business Connexion (Pty) Ltd (BCX).
It ordered the municipality to pay BCX the sum of R85, 479 535.26 plus interest. The payment was for the purchase of software licences and related services. And the High Court refused an application for leave to appeal by the City, so did the SCA. The Johannesburg High Court judgement was handed down on January 31 2023.
In its full judgement on Thursday, the SCA outlined the background of the matter.
Upgrade of infrastructure
The SCA’s judgement said in March 2020, Oracle Corporation (South Africa) (Pty) Ltd assessed the municipality’s information system and advised that it needed to upgrade its infrastructure.
As a result, in May 2020, the municipality embarked on a process to establish a panel of accredited service providers. These were sought to renew the existing software licences and to procure new software licences from Oracle. BCX was appointed by the municipality to its panel of service providers.
The court’s judgement said in August 2020, the municipality sent a request for quotation to each of the Oracle partners on the list, including BCX. BCX’s bid was successful.
Municipality signed agreement
The court’s judgement further states that on August 27 2020, the municipality sent the agreement to be signed by BCX.
“This was titled, ‘ICT Instruction to Perform Work’ (IPW). Once again, the heading is identical to the RFQ. The licence specifications and prices are set out with a total sum provided for in the amount of R85, 479 535.26.
“The IPW was followed by a letter from the municipality to Oracle SA. The letter was confirming the ‘execution’ of the agreement with BCX. And it set out the Oracle products to be purchased. Believing that they had been awarded the tender, on 28 August 2020, BCX procured the specified licences and made payment,” said the court judgement.
Procurement placed on hold
The court judgement added that on September 23 2020, Matlhodi Senyatsi from the municipality sent an email to a Ms Tleane at BCX stating that they “would like to place the order for procurement of additional licences on hold, while the City determines if the modules intended to be
used by these licences will be required going forward”.
“Ms Tleane responded that BCX had ordered and procured the licences as per the municipality’s instruction of 27 August 2020. It was therefore impossible to put the procurement on hold.
“A couple of days later, on 25 September 2020, Mr Monyepao sent an email stating that due to budget cuts, the municipality was unable ‘to honour the order for additional licences’ and that they had not received delivery of the licences,” said the judgement.
The SCA judgement added that on October 29 2020, the municipality sent a letter of cancellation of the procurement order to BCX.
Municipality unable to pay
“It is the letter of cancellation that sets out in the clearest
terms the reason for the municipality’s refusal to pay. Nowhere is the non-delivery of the licences mentioned, or that the common understanding was that the licences would only be required once certain upgrades were completed.
“The sole reason provided is that the municipality did not have the money to pay the purchase price. This was because their revenue had been drastically reduced due to Covid-19. The municipality in argument conceded that the reason it did not want the licences was because it was unable to pay for them,” read the judgement.
No substantial defence
“Inability to pay for a contract freely and voluntarily entered into is no defence in these circumstances. It is undisputed that BCX procured the licences and paid for them on the instruction of the municipality.
“BCX will be out of pocket to the tune of R85, 479 535.26 should the appeal succeed. The high court cannot be faulted for dismissing both of these defences,” read the judgement.
The SCA then made an order to strike the matter off the roll.
