Fleet Africa (Pty) Ltd v Polokwane Local Municipality

Fleet Africa (Pty) Ltd won a tender (Bid 49/2012) from Polokwane Local Municipality in May 2012 to provide fleet vehicles and related services for five years from 1 March 2013 to 28 February 2018. A Service Level Agreement (SLA) was signed on 25 February 2013 with an estimated cost of R229,163,716.72. The Municipality had an option to extend but decided not to on 21 November 2017. The SLA included a 'put and call' provision (Clause 25) requiring the Municipality to pay the residual purchase price for leased vehicles upon termination. On 16 February 2018, Fleet Africa exercised this option, claiming R53.9 million. The Municipality did not pay, instead claiming on 6 March 2018 that it had overpaid Fleet Africa by R147,406,350. The dispute was referred to arbitration. Eight years after the bid was awarded and two years after the SLA expired, the Municipality raised a defence in the arbitration that the tender award was irregular because the Bid Adjudication Committee was not properly constituted according to regulation 29(2) of the Municipal Supply Chain Management Regulations, rendering the SLA null and void. The Arbitrator indicated this constitutional issue might not fall within his jurisdiction. Fleet Africa approached the Limpopo High Court seeking a declaratory order that the Municipality's defences had no merit and that the SLA was binding. The Municipality raised points in limine regarding jurisdiction, arguing that Clause 33.10 of the SLA gave exclusive jurisdiction to the Johannesburg High Court. The high court upheld the jurisdiction point and dismissed Fleet Africa's application with attorney and client costs. Fleet Africa appealed with leave.

• Whether the parties explicitly agreed that the Johannesburg High Court would have exclusive jurisdiction to hear disputes arising from the SLA
• Whether Clause 33.10 of the SLA, read with Clause 23, ousted the jurisdiction of the Limpopo High Court
• Whether parties can exclude the jurisdiction of a competent court through contractual agreement
• Whether a court of appeal has jurisdiction to act as a court of first instance to determine the merits of the application where the high court made no decision on the substantive merits
• Whether the Municipality's defence that the tender award was irregular due to non-compliance with regulation 29(2) of the Municipal Supply Chain Management Regulations was valid
• Whether the doctrine of estoppel applied to prevent the Municipality from raising the contract's invalidity as a defence
• Whether excessive delay in raising the legality challenge should bar the Municipality's defence

The appeal was upheld with costs, including costs of two counsel. The order of the high court was set aside and substituted with an order declaring that: (1) The defences raised by the Municipality in the pending arbitration—that the bid award was unlawful due to non-compliance with regulation 29(2) and that the SLA is null and void—have no merit and can be disregarded by the Arbitrator; (2) The SLA is binding on the Municipality; (3) The Municipality must pay costs of the application on an attorney and client scale, including costs of two counsel where employed.

Parties to a contract cannot exclude the jurisdiction of a competent court by mutual agreement; a contractual clause consenting to the jurisdiction of a particular court does not oust the concurrent jurisdiction of other courts that have jurisdiction over the subject matter based on the location where jurisdictional facts occurred. Where a jurisdiction clause does not expressly use terms such as 'exclusive jurisdiction', it will be interpreted as merely recording consent to a particular court's jurisdiction without excluding others. A High Court does not have discretion to decline to hear a matter that falls within its jurisdiction on the ground that another court has concurrent jurisdiction, unless there is an abuse of process. The legality of a municipality's procurement decision is primarily within the jurisdiction of the High Court, not an arbitrator. The principle of legality requires that review proceedings be initiated within a reasonable time frame; undue delay can constitute a bar to relief, particularly where the delay is excessive, unexplained, and prejudicial. Where an alleged irregularity in the exercise of public power (as opposed to an ultra vires act) is raised as a defence after significant delay and after the party has conducted itself consistently with the validity of the decision, the doctrine of estoppel may prevent that party from later challenging the validity of its own decision. An appellate court may exercise its discretion under section 19 of the Superior Courts Act to determine the merits of a matter where the court a quo declined jurisdiction without deciding the merits, all necessary facts are before the appellate court, and the interests of justice favour finality given extensive prior delays.

The Court observed that Fleet Africa was not obligated, without knowledge to the contrary, to investigate whether all internal municipal processes or formalities had been fulfilled when entering into the SLA; it was entitled to assume that all necessary arrangements and formalities had been properly met. The Court noted that more than ten years had passed since the alleged irregular decision was made, and that the Municipality had pursued a series of unsuccessful interlocutory applications (three urgent applications, four applications for leave to appeal) without once mentioning the alleged irregularity in the tender process, suggesting the defence was contrived. The Court commented that there was no indication of fraud, dishonesty, or corruption in awarding the contract, strengthening the application of estoppel principles. The Court noted with apparent disapproval that the Municipality had acknowledged in writing (letter dated 7 September 2020) the validity and legality of Fleet Africa's appointment, and had publicly confirmed the award in a notice under section 33 of the MFMA, yet later sought to challenge its own decision. The Court emphasized that Fleet Africa's contractual right to timely resolution of the dispute as stipulated in the SLA was being significantly impacted by the prolonged delay caused by the Municipality's conduct.

This case clarifies important principles regarding jurisdictional clauses in contracts in South African law. It confirms that parties cannot completely oust the jurisdiction of a competent court through contractual agreement; a consent to jurisdiction clause merely designates a preferred court but does not exclude concurrent jurisdiction of other competent courts. The case reinforces that the doctrine of forum non conveniens does not apply in South African law except in admiralty matters. It also addresses the intersection of contractual arbitration clauses with constitutional issues and administrative law challenges, confirming that legality challenges to public procurement decisions fall within the jurisdiction of the High Court, not arbitrators. The judgment emphasizes the importance of timely challenges to administrative decisions, applying strict principles against delay in instituting review proceedings, particularly where such delay is unconscionable and prejudicial. The case demonstrates the application of the estoppel doctrine against public authorities where irregularities (as opposed to ultra vires acts) are alleged, and where a party has acted in good faith. It also illustrates the willingness of appellate courts to exercise discretion under section 19 of the Superior Courts Act to decide matters on the merits where justice demands finality and all necessary facts are available, even where the lower court made no substantive determination.