Road Accident Fund and Others v Mabunda Incorporated and Others; Minister of Transport v Road Accident Fund and Others

The Road Accident Fund (RAF) contracted a panel of 103 attorneys in 2014 for five years to provide specialist legal services, pursuant to Service Level Agreements (SLAs). In preparation for expiry in November 2019, the RAF issued a new tender (2018 tender) on 30 November 2018 for a five-year period, closing on 28 February 2020 (extended to 14 June 2020). The Board extended the SLAs to 31 May 2020 through a second addendum signed by 89 attorneys (panel attorneys). On 5 December 2019, a new permanent Board was appointed. A management presentation on 12 December 2019 showed the RAF had income of R28.645 billion, expenditure of R74.358 billion, resulting in a deficit of R45.713 billion, with 99.65% of matters settling on trial day. Management proposed a new operational model involving insourcing legal services rather than using private attorneys. The Board accepted a strategic plan for 2020-2025 incorporating the new model on 31 January 2020. On 18 and 20 February 2020, panel attorneys were notified of phased handover of files to be completed by 31 May 2020 (handover decision). On 26 February 2020, the Bid Adjudication Committee (BAC) cancelled the 2018 tender (tender withdrawal decision) due to "unaffordability of services as advertised in the tender, as well as changed circumstances". Panel attorneys launched three review applications seeking to set aside the handover and tender withdrawal decisions. Hughes J granted an order on 1 June 2020 setting aside both decisions, requiring panel attorneys to continue serving for six months. The RAF appealed. Both appeals lapsed but the RAF sought condonation and reinstatement.

• Whether the appeal was moot given the six-month period in the high court order had expired
• Whether the BAC had authority to cancel the tender
• Whether cancellation of the tender complied with Regulation 13(1) of the Preferential Procurement Policy Framework Act 5 of 2000
• Whether the handover decision was unlawful
• Whether the second addendum to the SLAs was invalid
• Whether condonation should be granted for the lapsed appeal
• Whether the high court could extend SLAs that had already expired by effluxion of time

The appeal under case number 1082/2020 (Minister of Transport) was struck from the roll with costs. The application for condonation was granted and the appeal under case number 1147/2020 (RAF) was reinstated and upheld with costs including those of two counsel where so employed. The order of the Gauteng Division of the High Court, Pretoria was set aside and replaced with an order dismissing the review applications under case numbers 17518/2020, 15876/2020 and 18239/2020 with costs including those of two counsel where so employed.

The binding legal principles established are: (1) A delegation of authority by a board of an organ of state to a committee remains valid and effective upon appointment of a new board unless expressly withdrawn or terminated. (2) Where an organ of state demonstrates compliance with any one of the grounds specified in Regulation 13(1) of the Preferential Procurement Regulations 2017, it is entitled to cancel a tender before award. (3) "Changed circumstances" resulting in no longer needing goods or services under Regulation 13(1)(a) can be established where an organ of state adopts a new operational model that fundamentally changes how services will be delivered, even if some residual need for similar services remains. The test is whether there is no longer a need for services "as specified in the invitation" (i.e., on the scale and model originally tendered). (4) The ground that "funds are no longer available to cover the total envisaged expenditure" under Regulation 13(1)(b) is established where an organ of state demonstrates it lacks sufficient funds to meet the financial obligations of the tender. (5) A court cannot by order create or extend contractual relationships between parties where those contracts have already terminated by effluxion of time before the date of the court order. (6) An organ of state is generally bound by the reasons it provides for an administrative decision at the time the decision is made, and cannot change or add to them ex post facto for purposes of justifying the decision on review.

The Court made several non-binding observations: (1) It noted the dictum in Trencon Construction v Industrial Development Corporation (that a public body can only cancel a tender on grounds stipulated in the applicable regulation) had been doubted in Nambiti Technologies, which held the regulation was permissive rather than peremptory. The Court declined to definitively resolve this issue since the RAF had satisfied the regulation's requirements in any event. (2) The Court expressed concern about the exponential increase in the RAF's legal costs (from R941 million in 2005 to R10.6 billion in 2019) while claims decreased, though it noted this was based on an academic article rather than formal evidence. (3) The Court observed that 99.65% of RAF matters settled on the trial day with only 0.35% proceeding to trial, suggesting trial fees were being unnecessarily incurred under the existing model. (4) The Court expressed "a strong desire" that the RAF and panel attorneys arrive at an equitable outcome regarding their relationship after 31 May 2020, given the uncertainty created by the expiry of the SLAs. (5) The Court noted that the issue of the lawfulness of the second addendum was not properly before it on appeal because appeals lie against orders not reasons, and the high court had not made any order setting aside the second addendum. (6) The Court indicated that even if it had been required to consider the second addendum, no case had been made out for finding it unlawful, particularly given that panel attorneys had voluntarily signed it.

This case provides important guidance on several aspects of South African public procurement and administrative law: (1) It clarifies that a delegation of authority by an organ of state board remains valid despite the appointment of a new board, unless expressly withdrawn or terminated. (2) It confirms that Regulation 13(1) of the Preferential Procurement Policy Framework Act provides permissive (not peremptory) grounds for tender cancellation, and that demonstrating any one of the specified grounds is sufficient. (3) It establishes that "changed circumstances" under Regulation 13(1)(a) can be demonstrated where an organ of state adopts a fundamentally different operational model that substantially reduces (even if not eliminating) the need for the services tendered. (4) It affirms that financial constraints and inability to afford tendered services constitute valid grounds for cancellation under Regulation 13(1)(b). (5) It reinforces the principle that courts cannot create or extend contracts between parties by judicial order, particularly where contractual relationships have already terminated by effluxion of time. (6) It demonstrates the limits of judicial intervention in public procurement where organs of state make strategic operational decisions to address financial sustainability. The case is particularly significant in the context of the RAF's ongoing financial crisis and reform efforts.