Fidelity Security (Pty) Ltd v City of Cape Town and Another (16998/2014) [2020] ZAWCHC 78 (11 August 2020)

82 Reportability

Administrative Law

Brief Summary

Costs — Review application — Appeal against costs order — First respondent withdrew opposition to review application, conceding merits — Appellant contended first respondent should bear sole costs due to its withdrawal — Court a quo ordered costs to be paid jointly and severally by appellant and first respondent — Appeal court held that the principles in Biowatch should have been applied, emphasizing the constitutional nature of the review and the responsibility of the State for ensuring lawful conduct — Costs order set aside, with first respondent held solely liable for costs.

Comprehensive Summary

Summary of Judgment

Introduction

The matter concerned an appeal limited to a costs order made by the court of first instance (the court a quo) in proceedings that originated as an urgent review application. The review was brought under the Promotion of Administrative Justice Act 3 of 2000 (PAJA) and related to the award of a municipal tender for security services.

The appellant, Fidelity Security Services (Pty) Ltd, had been the successful tenderer in the procurement process. The first respondent, the City of Cape Town, was the contracting authority and decision-maker in the tender process. The second respondent, Distinctive Choice Security CC, was an unsuccessful bidder which brought the PAJA review. In the appeal, the second respondent abided the decision of the court.

The procedural history was material to the costs dispute. The City initially filed a notice of intention to oppose the review (it said, to safeguard its position while preparing the Rule 53 record and obtaining legal advice). After filing the Rule 53 record, the City withdrew opposition to the merits of the review, delivered an explanatory affidavit conceding the merits, but resisted liability for costs. The appellant had initially opposed the review but, following the City’s concessions, withdrew opposition to the substantive relief, leaving costs as the only remaining issue for determination. The tender decision was ultimately set aside by agreement, with the question of costs standing over for later determination.

The court a quo subsequently made a costs order that the costs of and incidental to the review be paid jointly and severally by the appellant and the City. The appeal, brought with leave granted by the Supreme Court of Appeal, was directed solely at that costs order. The appellant contended that the City should have been held solely liable for the review costs.

Material Facts

The City published a tender during September 2012 for the supply of protection services at various council sites in Cape Town. Numerous security service providers, including the appellant and the second respondent, submitted bids.

In May 2014 the City notified the appellant that its bid was successful and the tender had been awarded to it. In June 2014 the City notified the second respondent that its bid was unsuccessful. When the second respondent sought reasons, it was informed that its tender was not recommended essentially due to budgetary constraints.

The second respondent pursued an internal appeal. In August 2014 the City partially upheld that internal appeal, but this did not result in the award being made to the second respondent. The second respondent then launched an urgent PAJA review in the month following.

The City filed a notice of intention to oppose the review in October 2014. After the Rule 53 record was filed and legal advice obtained, the City withdrew opposition to the merits in June 2015, conceding the merits of the review but disputing liability for costs. The appellant delivered its opposing affidavit shortly after the City’s withdrawal; the appellant’s affidavit had been prepared before it was served with the City’s notice of withdrawal. The appellant thereafter withdrew opposition to the substantive relief.

By March 2016 an order was granted (by agreement) setting aside and reviewing the tender award, with the costs issue reserved for later determination. The court a quo ultimately ordered that the costs of and incidental to the review application be paid jointly and severally by the appellant and the City.

The appeal record reflected that the court a quo had made findings (left unchallenged by the City) that the City was aware of irregularities in its tender process, that the conduct of its functionaries was not bona fide and not free from gross irregularity, and that there were no good grounds to depart from the general rule that a successful party is entitled to costs. These findings were treated by the appeal court as significant to the costs question.

Legal Issues

The central legal question was whether the court a quo, in the exercise of its discretion, misdirected itself in ordering the appellant to be jointly and severally liable (with the City) for the costs of and incidental to the PAJA review application.

The dispute primarily concerned the application of legal principles governing costs to the particular procedural and factual context of the litigation, together with the proper characterisation of the litigation as having a constitutional dimension (given that it involved judicial review of administrative action). It also concerned the scope of appellate interference in a costs discretion exercised “in the true sense”.

A further issue arising in the appeal court’s reasoning was whether, given the City’s stance in seeking some form of apportionment, a cross-appeal was required. However, the appeal was framed as being directed at the appellant’s liability for costs imposed by the court a quo.

Court’s Reasoning

The court approached the matter from the premise that a costs order is generally a matter of judicial discretion in the true sense, and that an appellate court will interfere only where the discretion was not exercised judicially or where there was a material misdirection.

Although the appeal was formally against costs only, the court held that the costs determination could not be wholly isolated from the merits, because the second respondent was ultimately successful in setting aside the City’s tender decision. The question remained why, in those circumstances, the appellant should bear any part of the review costs.

A central theme of the reasoning was the constitutional character of PAJA review proceedings. The court emphasised that the review was brought under PAJA and not framed as a legality review “in the strict sense”, but it still involved judicial scrutiny of unlawful or irregular administrative action. The court held that, given the nature of the proceedings, the court a quo was obliged to apply the Biowatch principles to the issue of costs. The court also referred to the proposition that a failure to give reasons for not applying the Biowatch approach in appropriate circumstances may justify appellate interference.

The court reinforced this conclusion by referring to authority from a Full Bench of the same Division in Fidelity Security Services (Pty) Ltd v The City of Cape Town and Others (A250/2018) [2019] ZAHWCHC 2 (6 February 2019), which criticised an approach that overlooked the constitutional character of similar litigation and the established costs principles applicable to it.

The court further considered that PAJA itself expressly empowers a court to make an order as to costs under section 8(1)(f). It noted that the prevalent approach in review proceedings of this nature is that the successful party is entitled to costs, subject always to a discretion to make a just and equitable order in light of the position of the party against whom costs are sought.

In addressing joint and several liability for costs, the court considered the notion of co-litigants (consortes lites) bearing costs in equal shares, while recognising that courts have discretion to depart from equal allocation depending on the circumstances. However, on the facts before it, the court found no basis to impose any aliquot share of the second respondent’s review costs on the appellant.

Several considerations were treated as decisive. The City conceded the merits yet made no tender as to costs, even after the relevant material was before it. The court was unpersuaded by the City’s suggestion that it could only properly assess the merits once the Rule 53 record was filed; it regarded the City as being obliged to collate and file the record as custodian of the documents and considered that much of the review costs would have been consumed by the compilation and copying of that record. These costs, in the court’s view, were properly for the City’s account.

The court also placed weight on the absence of conduct by the appellant that would justify an adverse costs order. It accepted that the appellant’s initial steps to oppose were to protect its position, and that after the City withdrew opposition the appellant did nothing untoward. The court further observed that it was the second respondent, not the City, that sought a joint and several costs order against the appellant.

Finally, the court addressed the costs consequences of the appeal itself, noting that the Supreme Court of Appeal order granting leave dealt with costs of the leave applications as costs in the appeal, meaning they would follow the result.

Outcome and Relief

The appeal was upheld. The costs order of the court a quo was set aside and substituted with an order that the City of Cape Town (the first respondent) is solely liable for the costs of and incidental to the review application, and is also liable for the costs incurred in respect of the hearing on the issue of liability for costs in the review application.

The City was further ordered to pay the appellant’s costs of and incidental to the appeal, including the costs of the application for leave to appeal before the court a quo and the costs incurred in the application for leave to appeal to the Supreme Court of Appeal.

Cases Cited

Biowatch Trust v Registrar, Genetic Resources, and Others 2009 (6) SA 232 (CC)

Fuel Retailers Association of Southern Africa v Director-General Environment, Mpumalanga Province 2007 (6) SA 4 (CC)

Hotz and Others v University of Cape Town 2017 (7) BCLR 815 (CC)

Fidelity Security Services (Pty) Ltd v The City of Cape Town and Others (A250/2018) [2019] ZAHWCHC 2 (6 February 2019)

Parag v Ladysmith City Council and Another 1961 (3) SA 714 (at 716A–C)

De Drukpers Maatschappy v Oosthuizen 1915 CPD 401 (at 410)

Legislation Cited

Promotion of Administrative Justice Act 3 of 2000, section 8(1)(f)

Rules of Court Cited

Uniform Rules of Court, Rule 53

Held

The court held that, in the context of a PAJA review with a constitutional character, the costs principles in Biowatch Trust v Registrar, Genetic Resources, and Others 2009 (6) SA 232 (CC) were applicable to the determination of costs. On the facts, there were no grounds to burden the successful tenderer (the appellant) with joint and several liability for the review costs where the City conceded the merits, failed to tender costs, was the custodian obliged to produce the Rule 53 record, and where no untoward conduct by the appellant justified an adverse costs order.

The court held that the court a quo’s joint and several costs order against the appellant could not stand and had to be replaced with an order making the City solely liable for the review costs, together with the costs associated with the costs hearing in the court a quo, and the costs of the appeal (including leave-to-appeal costs treated as costs in the appeal).

LEGAL PRINCIPLES

The judgment applied the principle that a costs order is ordinarily a matter of judicial discretion in the true sense, and that appellate interference is permissible only where the discretion was not exercised judicially or where there was a material misdirection.

The judgment applied the principle that, in litigation with a constitutional character, including challenges to State conduct through judicial review, the Biowatch approach to costs is generally applicable, placing the responsibility for constitutional compliance at the State’s door in appropriate cases, and requiring proper consideration of that approach when deciding costs.

The judgment applied the principle that, even where only costs remain in dispute, the costs determination may still be informed by the outcome and context of the merits, including that the administrative decision was set aside and the review applicant was successful.

The judgment applied the principle that, in review proceedings implicating illegality or irregularity, it will seldom be appropriate not to award costs against the administrative decision-maker whose decision is successfully set aside, while still recognising the court’s discretion to craft a just and equitable order.

The judgment applied principles regarding joint and several liability and apportionment of costs among co-litigants, recognising the general permissibility of allocating aliquot shares, but emphasising that such allocation must be justified by the circumstances and the conduct of the parties, and that absent a proper basis, a private party should not be burdened with costs stemming from the State’s failures in administrative process and record-keeping obligations under Rule 53.