Mafoko Security Patrols (Pty) Ltd and Others v Mjayeli Security (Pty) Ltd and Others (590/2024) [2025] ZASCA 179 (28 November 2025)

Case Note

Case Name: Mafoko Security Patrols (Pty) Ltd and Others v Mjayeli Security (Pty) Ltd and Others
Citation: [2025] ZASCA 179
Date: 28 November 2025

Reportability

This case is reportable due to its significant implications for public procurement law, specifically concerning the remedies available when a tender is found to be unlawfully awarded. The Supreme Court of Appeal addressed complex issues pertaining to the principles of public procurement, including the balance between public interests and private rights of innocent tenderers. The decision contributes to the evolving jurisprudence surrounding the application of section 172(1)(a) and (b) of the Constitution, particularly the court's discretion to determine just and equitable remedies in cases of unlawful tender awards.

Moreover, the case is noteworthy for its exploration of the “no loss, no gain” principle in the context of public contracts and the broader impact of corruption in public procurement processes. By clarifying that an innocent tenderer may retain profits despite an unlawful tender, the judgment challenges previous interpretations that leaned heavily towards punitive measures for innocent parties.

Cases Cited

1. Trencon Construction (Pty) Limited v Industrial Development Corporation of South Africa Limited and Another [2015] ZACC 22; 2015 (5) SA 245 (CC); 2015 (10) BCLR 1199 (CC).
2. Steenkamp NO v Provincial Tender Board of the Eastern Cape [2006] ZACC 16; 2007 (3) SA 121 (CC); 2007 (3) BCLR 300 (CC).
3. State Information Technology Agency SOC Limited v Gijima Holdings (Pty) Limited [2017] ZACC 40; 2018 (2) BCLR 240 (CC); 2018 (2) SA 23 (CC).
4. Allpay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer of the South African Social Security Agency and Others [2014] ZACC 12; 2014 (6) BCLR 641 (CC); 2014 (4) SA 179 (CC).
5. Special Investigating Unit v Phomella Property Investments (Pty) Ltd and Another [2023] ZASCA 45; 2023 (5) SA 601 (SCA).
6. Special Investigating Unit and Another v Vision View Productions CC [2020] ZAGPJHC 421; [2020] JOL 53649 (GJ).

Legislation Cited

1. Public Finance Management Act 1 of 1999.
2. Constitution of the Republic of South Africa, 1996, Section 172(1).

Rules of Court Cited

1. Rule 6(5)(d) of the Uniform Rules of Court.

HEADNOTE

Summary

This judgment addresses the appeal brought by Mafoko Security Patrols (Pty) Ltd concerning the unlawful award of a tender for security services made to it by the South African Broadcasting Corporation (SABC). Mjayeli Security (Pty) Ltd had challenged this award, leading to an investigation by the Special Investigating Unit (SIU) which found that the tender result was marred by financial misconduct. After the Gauteng High Court ruled in favor of Mjayeli, the appeal centered around the nature of the remedy provided, particularly whether Mafoko, as an innocent party, should be required to disgorge profits derived from services rendered under an invalid contract.

Key Issues

The key legal issues addressed in this ruling include:
1. The appropriateness of the high court's determination of a just and equitable remedy in cases of unlawful tender awards. 2. The interpretation and application of the “no profit, no benefit” principle in public procurement disputes. 3. The balance between public good and the protection of innocent tenderers' interests when remedial options are considered.

Held

The Supreme Court of Appeal found that the Gauteng High Court erred in its interpretation of the law, specifically regarding the discretionary powers when formulating remedies. The court concluded that while the tender awarded to Mafoko was invalid, the high court's orders concerning the disgorgement of profits were unjustified for an innocent party. They overturned the high court’s decision and remitted the matter back for determination of an appropriate remedy following proper considerations of evidence and submissions by the parties.

THE FACTS

On 30 June 2017, Mafoko Security Patrols (Pty) Ltd was awarded a tender by the SABC for providing security services. This decision was made contrary to recommendations from the SABC's Bid Adjudication Committee, which favored Mjayeli Security (Pty) Ltd based on scoring higher on both price and empowerment metrics. Following the lawsuit by Mjayeli to set aside this tender, the SABC urged the SIU to investigate the award, resulting in a finding of financial mismanagement.

In December 2018, the high court granted an order allowing Mafoko to continue executing its services while pending the outcome of the investigation. The SIU subsequently joined the action, supporting Mjayeli's request to set aside the award. The high court ultimately ruled that Mafoko's award was unlawful but, in an unusual remedy, required Mafoko to return profits made during the period of the tender’s execution, claiming such profits unjustly benefited from an unlawful contract.

THE ISSUES

The court was required to address several critical legal questions:

1. Did the Gauteng High Court exercise its discretion correctly when deciding on remedies due to the unlawful contract?
2. Should Mafoko be penalized by being forced to return profits earned under the unlawful tender award, despite being deemed an innocent party?
3. How should the court balance the interests of public good against the rights of an innocent tenderer?

ANALYSIS

In its analysis, the Supreme Court of Appeal focused on the understanding of the just and equitable remedy provisions outlined in the Constitution. It referenced various precedents, employing the "two-truths dictum," which asserts that while a tenderer may not be entitled to profits from an unlawful contract, a court must examine closely the specific circumstances surrounding the award and the performance rendered.

The court found serious flaws in the high court's legal reasoning, especially its overly simplistic adherence to the “no loss, no gain” principle. This principle was ultimately deemed inappropriate given the established innocence of Mafoko in the tender award process. The Supreme Court articulated that while the tender was invalid, there existed significant complexities to consider, which included how Mafoko's service was rendered under duress and the normative expectation surrounding public service contracts.

The court emphasized that remedies should not be predetermined by preconceived judicial attitudes towards corruption in public procurement; instead, they should be grounded in factual examinations and legal reasonableness. The Supreme Court suggested that the timeline and context of service delivery must factor into the discussions of fairness and the appropriate remedies that should be afforded to innocent parties in similar situations.

REMEDY

The Supreme Court of Appeal overturned the high court's order and remitted the matter back for the high court to reassess the nature of remedies available. The court directed that the high court should reconsider its earlier findings on what would constitute a just and equitable resolution under section 172(1)(a) and (b). This remittance is predicated on the necessity to gather further evidence and submissions from the involved parties before finalizing the nature of the remedy.

LEGAL PRINCIPLES

This judgment elucidates several key legal principles concerning public procurement: - Innocence of Tenderers: Innocent tenderers should not be unjustly penalized despite the unlawful award of tenders. - Just and Equitable Remedy: Courts have broad discretion to tailor remedies that take into account the context and specifics of each case, particularly concerning public goods and services. - No Profit No Benefit Principle: While it is essential to scrutinize benefits arising from unlawful contracts, the recognition of potential profit in the hands of innocent parties must remain on the table for consideration during remedy determinations. - Complex Evaluation of Culpability: Courts should carefully consider the degree of culpability of tenderers and the implications of their performance on public service provisions when making a ruling on remedies.

The Supreme Court of Appeal's judgment emphasizes the need for a balanced approach that acknowledges the intricate interplay between lawful procurement, public interest, and the rights of innocent service providers in South Africa.