PMA REAL EST AGENCY (PVT) LTD v ARDA 2011 (2) ZLR 355 (H)

Flynote

Contract — validity — contract made between State agency and another person — such contract concluded without following procedures laid down by relevant procurement legislation — such contract void ab initio and unenforceable
Revenue and public finance — tender procedure — need for procuring entity to follow requirements of procurement legislation — effect of failure to do so — contract in breach of such requirements void ab initio

Headnote

The plaintiff operated a real estate business, including the valuation of assets and auctioning. The defendant was a statutory body established under the Agricultural and Rural Development Authority Act [Chapter 18:01]. The plaintiff issued summons claiming from the defendant a certain sum as valuation fees, together with interest, collection commission and costs. The arrangement between the parties had been that the defendant would pay a percentage of the value of assets valued by the plaintiff as valuation fees and that those fees would be paid out of the proceeds of sales by auction. This arrangement came to an end when the defendant told the plaintiff to stop further auctions as the plaintiff was not registered with the State Tender Board. The issue for determination was the validity of the contract between the parties in the context of the legislation on procurement.

Under s 3(1) of the Procurement Act [Chapter 22:14], the provisions of the Act apply to procurement by all procuring entities as defined in s 2(1), including every statutory body such as the defendant. Under s 30(1) of that Act, services by a procuring entity shall be done by a method which complies with s 32, which sets out the general procedures to be followed in the procurement of services. These relate to, inter alia, the publication of notices, tender documentation, criteria for qualification, the submission and evaluation of proposals and other tender formalities. All proceedings for the procurement of a service must be in accordance with procurement regulations made by the Minister or, with regard to any matter not prescribed in such regulations or in the Act, in accordance with such procedure as the procuring entity may fix. The Procurement Regulations 2002 set out the procedures governing the invitation of tenders generally. It is an offence to contravene any provision of the

Regulations, although the Regulations are silent as to the penalty to be imposed. The Act is equally silent in this regard.

Held, that the more pertinent enquiry was whether the contract was concluded in compliance with other procedures enjoined by the Act and the Regulations. Reading all of the relevant provisions together, what was contemplated by the Act in relation to the procurement of services was that every procurement entity must adopt a method that complies with the general procedures set out in s 32(1) of the Act, as read with the detailed procedures elaborated in the Regulations. Any departure from the prescribed procedures must be sanctioned under the Act or the Regulations. The defendant did not follow the general procedures set out in s 32(1) of the Act or the formal tender procedures stipulated in ss 4 and 8 of the Regulations. There was nothing to indicate that it adopted any other method of procurement allowed by the Regulations in its contract with the plaintiff. In particular, there was no evidence of the quotations or approvals enjoined by s 5 of the Act. The defendant's departure from the prescribed procurement regime was not otherwise provided by the Act nor was it in accordance with the Act, and was clearly unsanctioned by the State Procurement Board or its Chairman.

Held, further, that the provisions of ss 30, 31 and 32 of the Act were couched in peremptory terms and compliance with them, as well as the Regulations, was intended to be mandatory rather than merely directory. However, the Act did not state the legal consequences of any failure to so comply.

Held, further, that the scope of a State employee's authority is more often than not determined by statutory provisions and the requirements of the statute or regulations concerned must be complied with. If such requirements are mandatory, any contract made in breach of them is invalid and unenforceable. No State employee has the authority to circumvent or dispense with the requirements of a statute. To recognise or enforce any such contract would operate to render the applicable enactment nugatory. Although it might be argued, by analogy with company law, that persons dealing with the State are entitled to assume that the functionaries in a question have duly complied with the prescribed formalities, any hardship which might befall persons contracting with the State is outweighed by the public interest in safeguarding State property and public monies. If contracts made in material breach of a statute were to be recognised and enforced, the unavoidable result would be to frustrate and defeat an explicit injunction of the Legislature.

Held, further, that a contract in breach of a statute cannot be retrospectively ratified or otherwise validated because (a) the law does not countenance the ratification of a contract or transaction which, being contrary to a statute, is null and void ab initio; and (b) the Executive is not at liberty to waive or renounce a peremptory statutory obligation imposed by the legislature for the protection of State property and public monies. Accordingly, the contract in casu was invalid and unenforceable.