For several years before 2006, the Northern Cape Department of Education involved publishers in a decentralized procurement system for learner teacher support materials (LTSM). Schools ordered books from a departmental catalogue that publishers prepared at their own expense. Schools placed orders with bookshops, which ordered from publishers. In June 2006, the Department decided on 'central provisioning' for grades 8, 9 and 11 for 2007, cutting out schools and bookshops from the selection process. The Department would select books itself and order directly from publishers to achieve efficiency and cost savings, particularly for implementing the New Curriculum Statement (NCS). The Department made this decision using additional funds (R5 million) specially allocated for these grades. Publishers were not consulted or informed about the change. They learned of it months later by accident. Publishers had already invested in producing catalogues, paying participation deposits, producing promotional materials, and conducting marketing roadshows for 2006. Publishers sought an interdict and review of the decision, arguing it violated their legitimate expectation to be consulted.
The appeal was dismissed with costs, including costs of two counsel. The High Court's order setting aside the Department's decision and directing it to withdraw orders for centralized procurement of books for grades 8, 9 and 11 was upheld.
A government department that closely involves private business entities in its procurement processes over a period of time, causing them to incur expenses and plan their affairs in reliance on the continuation of that practice, has a legal duty under section 3 of PAJA to give those entities reasonable notice and an opportunity to make representations before abruptly changing the system. The duration of a practice (even two years) is less important than whether it was designed and intended as an ongoing procedure upon which parties could reasonably rely. The fact that a different source of funds is used for a procurement decision does not affect the duty of procedural fairness owed to affected parties - budgetary decisions and procurement processes must not be conflated for purposes of determining the duty of fair decision-making. A legitimate expectation arises where parties have been led to expect a practice will continue and have acted to their potential detriment in reliance on that expectation.
Cameron JA noted he did not find it necessary to go as far as the High Court in finding a violation of section 217(1) of the Constitution or holding that competitiveness must be 'determined and driven by market forces and not by the Department on undisclosed criteria'. The majority emphasized this was not a case of government owing publishers a living or obligation to contribute to their profits - the duty was simply to give reasonable notice to enable adjustment of business plans. Kgomo JP observed (when refusing leave to appeal) that the finding did not mean procurement 'can never be centralized by the Department' - it required only observing elementary fairness in process, in good time, before doing so. The judgment discusses the balance that must be struck between protecting individuals from unfair administrative decisions and avoiding undue judicial interference in administration, referencing the 'unruly horse' warning from Administrator, Transvaal v Traub about not freely invoking the doctrine of legitimate expectation.
This case is significant in South African administrative law for several reasons: (1) It clarifies that a practice of only two years can constitute a 'regular practice' sufficient to create legitimate expectations if it is designed as an ongoing procedure; (2) It establishes that when government closely involves private entities in its processes, causing them to incur expenses in reliance, elementary fairness requires reasonable notice before changing those processes; (3) It confirms that the source of funds used for a decision is irrelevant to determining duties of procedural fairness - budgetary and procurement decisions must not be conflated; (4) It demonstrates judicial willingness to protect legitimate expectations even in procurement contexts involving government efficiency objectives; (5) It shows the application of PAJA section 3 to procurement decisions affecting business expectations; (6) The split decision illustrates ongoing tension between administrative efficiency and procedural fairness, and between judicial deference to administrative decisions and protection of affected parties.