Company fails in court bid to enforce 14-year MyCiTi contract with City

Cape Town – ICT-Works, the company behind the MyCiTi bus automated fare collection (AFC) system, has failed in a court bid to enforce a 14-year contract signed in 2011 with the City.

This came after the City argued that the person who signed the contract on behalf of the City lacked the requisite authority to sign such a long contract and that in fact the contract was intended to be for a limited period of seven years and was envisaged to expire in February 2018.

The City said that while it accepted that the contract in its current form expires in August 2025, it was opposed to it on the basis that the contract is unenforceable due to the mistake relating to its duration.

The City wanted the court to instead review and set aside decisions of its Council, made in 2010, leading to the conclusion of the contract and to declare the contract unlawful.

Between October 2018 and July 2019, the City engaged ICT-Works on the validity of the contract and also sought legal advice from its internal and external legal advisers who said that the contract was unlawful for lack of compliance with section 33 of the Municipal Finance Management Act.

ICT-Works had wanted the court to enforce the contract until it expires in August 2025, but Western Cape High Court acting judge Matthew Francis dismissed the application.

However, the judge said that the dismissal of the application did not affect any payments that may have been made to ICT-Works in terms of the contract up to and including July 5, 2019.

In his ruling, Judge Matthews said the length of the contract, and the financial consequences would have had a ripple effect on other issues which required a resolution by the Council, such as whether or not the project has a financial benefit.

“Clearly, the Council could only make such a determination if it had all the available information at its disposal for the entire contract period.

“The Council only had at its disposal the financial information for seven financial years, and no longer. It could, therefore, not legitimately conclude that the City would derive a significant economic financial benefit from the contract beyond seven years.

“In my view, it is clear and undisputed that the contract entered into with ICT for a period in excess of seven years was unlawful in that it contravened the MFMA as well as the threshold requirements of fairness, competitiveness, and transparency which are required for a valid procurement process,” Judge Matthews said.