About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Supreme Court of Appeal
SAFLII
>>
Databases
>>
South Africa: Supreme Court of Appeal
>>
2014
>>
[2014] ZASCA 172
|
|
Mogale City Municipality v Fidelity Security Services (Pty) Ltd and Others (572/2013) [2014] ZASCA 172; 2015 (5) SA 590 (SCA) (19 November 2014)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
REPORTABLE
Case
No: 572/2013
In
the matter between:
MOGALE
CITY
MUNICIPALITY
........................................................................................
Appellant
and
FIDELITY
SECURITY SERVICES (PTY)
LTD
......................................................
First
Respondent
MAFOKO
SECURITY SERVICES (PTY)
LTD
...................................................
Second
Respondent
BOSASA
SECURITY SERVICES (PTY)
LTD
........................................................
Third
Respondent
RED
ANT SECURITY SERVICES (PTY)
LTD
....................................................
Fourth
Respondent
NATIONWIDE
SECURITY
CC
.................................................................................
Fifth
Respondent
CHANGING
TIDES 208 (PTY)
LTD
.........................................................................
Sixth
Respondent
Neutral
citation:
Mogale City Municipality v
Fidelity Security Services (Pty) Ltd
(572/2013)[2014]
ZASCA 172 (19 November 2014)
Coram:
NAVSA ADP, WALLIS, SALDULKER, MBHA and ZONDI JJA.
Heard
:
7 November 2014
Delivered
:
19 November 2014
Summary:
Tender –review – irregular
procedure – Uniform Rule 30 – discussion of effect of
blacklisting by National
Treasury – bids not properly
considered – tender process defective – just and
equitable remedy – warning
to errant officials.
ORDER
On
appeal from:
South Gauteng High Court
(Meyer J sitting as court of first instance):
The
following order is made:
1
Paragraph 3 of the order of the court below
is amended to replace the period of four weeks with a period of two
weeks.
2
An additional paragraph to be numbered 5 is
added to the order of the court below reading as follows:
‘
The
order of invalidity in paragraph 2 hereof is suspended for a period
of three weeks from the date of this order, whereafter it
will take
effect.’
3
The references in paragraphs 3 and 5 of the
order of the court below to ‘the date of this order’
are to be construed
as meaning the date on which this judgment is
delivered.
4
The appeal is otherwise dismissed with
costs, such costs to include those consequent upon the employment of
two counsel.
JUDGMENT
Wallis
JA (Navsa DP, Saldulker, Mbha and Zondi JJA concurring)
[1]
On 4 July 2011 the appellant, the Mogale
City Municipality (the Municipality) published a tender, SS(T&S)
01/2012, for the provision
of security services to the Municipality
for a period of three years. The first respondent, Fidelity Security
Services Proprietary
Limited (Fidelity), which was already providing
those services in terms of an existing contract with the
Municipality, submitted
a tender. Its tender, and that of the fourth
respondent, Red Ant Security Services (Pty) Ltd (Red Ant), scored
highest in the bid
evaluation process, but for different reasons both
were ultimately excluded from consideration by the Bid Adjudication
Committee
(BAC), acting on the recommendation of the Bid Evaluation
Committee (BEC). Instead the contract was offered to and accepted by
Mafoko Security Services (Pty) Ltd (Mafoko), which has been
performing it since 2012. As has become virtually the norm in
relation
to high value tenders, that outcome was challenged,
initially by Red Ant and finally by Fidelity. The latter’s
challenge
was upheld by Meyer J in the South Gauteng High Court and
an order was granted setting aside the award of the tender and
ordering
the Municipality to re-evaluate the bids within a period of
four weeks. Meyer J then gave leave to appeal to this Court.
[2]
At
the commencement of the appeal we dealt with an application by
Fidelity to lead further evidence on appeal. It was dismissed
with
costs, including the costs of two counsel. The proposed evidence was,
in substance, already before the court, and in any event
there were
no circumstances warranting the admission of further evidence at this
stage in accordance with the test that this Court
applies in such
cases.
[1]
[3]
The Municipality advanced two arguments in
its heads of argument. First, it contended that the proceedings were
irregular and that
on that ground alone the appeal should be upheld.
If that argument was rejected, it argued secondly that the BAC was
correct to
exclude Fidelity’s tender from consideration and
that as a result Fidelity lacked the necessary
locus
standi
to pursue any other objections
to the tender process. The latter contentions on the merits were not
persisted with in oral argument.
In the result oral argument was
confined to the procedural objection and the terms of the order
granted by the court below. The
procedural argument will be addressed
first. That requires an outline of the course that the litigation
took in the high court.
[4]
When the outcome of the tender process
became known, Red Ant challenged it in review proceedings before the
South Gauteng High Court.
Fidelity was cited as the fourth respondent
in those proceedings. It delivered an affidavit supporting Red Ant’s
contention
that the tender process was legally flawed and complained
of the fact that its tender had not been considered. It opposed the
request
for an order that the Municipality be directed to award the
tender to Red Ant. Instead, Fidelity argued that the tender process
should be re-evaluated.
[5]
After the record of the deliberations of
the BEC and the BAC had been delivered and all parties had also
delivered their affidavits,
the litigation took an unexpected turn
when, on 6 December 2012, Red Ant’s attorneys delivered a
notice of withdrawal of
the proceedings. Apparently this was because
Red Ant and Mafoko had negotiated a compromise in terms of which they
would share
the benefits of the contract. There is some indication
that this had the tacit approval of the Municipality. This prompted
Fidelity
to launch what it described as a counter-application,
seeking an order reviewing and setting aside the decision of the
Municipality
to award the tender to Mafoko and ordering that the
tender process be re-evaluated. In the ‘founding’
affidavit delivered
in support of the counter-application Fidelity
contended that its disqualification from the tender process was
unlawful and invalidated
the entire process. It also contended that
the process was invalid on certain other grounds. The Municipality
filed further answering
and replying affidavits in response to the
counter-application and the matter was then argued before Meyer J.
[6]
Although Meyer J held that this procedure
was irregular, he said that the issues in dispute between the parties
had been fully canvassed
without objection by the Municipality and
accordingly refused to dismiss the application on this ground. In my
view that was plainly
correct. There are three approaches any of
which justify that conclusion. The first is that the review
application commenced by
Red Ant was still in existence, if only
because the notice of withdrawal had not contained a tender to pay
the costs of the other
parties. It was therefore still open to the
other parties, including Fidelity, to set the matter down for
argument on costs or
take other steps, such as delivering the
counter-application. The second is that Fidelity was in any event a
party to the existing
lis
with
a distinct interest in its outcome. It was already engaged in seeking
to set aside the tender and was entitled to continue
to do so as
against the Municipality, notwithstanding Red Ant’s withdrawal.
The third is to accept that the original proceedings
had terminated
and to treat the ‘counter application’ as a procedurally
defective application for review, which is
what Meyer J did in the
court below. Accepting that all of these may possibly have involved a
procedural irregularity, if the Municipality
wished to object to it
they should have done so by way of an application in terms of rule 30
of the Uniform Rules of Court. They
did not do so when the irregular
step was taken and thereafter took a further step in the proceedings,
with knowledge of the irregularity.
In terms of the rule that
disqualified them from pursuing any objection. This is clear and the
only surprising feature is that
neither the court below nor the
parties referred to the provisions of rule 30.
[7]
Even
if an application had been brought in terms of the rule, the court
would have had a discretion in terms of sub-rule 3 whether
or not to
set the counter-application aside. It is plain that Meyer J would
have exercised his discretion against the Municipality,
not least
because the objection was not initially raised but was made at a late
stage of the proceedings. As Schreiner JA put the
matter in
Trans-African
Insurance Co Ltd v Maluleka
:
[2]
‘
.
. . technical objections to less than perfect procedural steps should
not be permitted, in the absence of prejudice, to interfere
with the
expeditious and, if possible, inexpensive decision of cases on their
real merits.’
[8]
Appellant’s
counsel sought to argue that this was not in reality a point about
irregular procedure, but a point about jurisdiction.
He contended
that if Fidelity had instituted fresh review proceedings they could
have been met by an objection that the review
had been instituted
outside the period of 180 days provided in s 7 of PAJA.
[3]
But that is a procedural objection, not a question of jurisdiction,
and, if the point had been raised in the court below it had
a
discretion to condone the late application. Bearing in mind the
circumstances in which the issue arose and the manner in which
the
court below dealt with the procedural objection once it was raised,
it seems inevitable that it would have condoned the delay.
But it is
unnecessary to speculate, as the point was not raised in the court
below and it is not open to the Municipality to raise
it at this late
stage. Fidelity has not had an opportunity to respond to it by
evidence or to seek condonation for the delay. The
procedural
objection is therefore rejected.
[9]
Turning to the merits, Fidelity’s
tender was rejected by the BAC in the following circumstances. All
tenderers were required
to complete a document headed ‘Declaration
of Bidder’s Past Supply Chain Management Practices’.
Clause 3 of that
document reads as follows:
‘
The
bid of any bidder may be rejected if that bidder, or any of its
directors have:
a
abused the municipality’s/municipal entity’s supply chain
management system or committed any improper conduct in relation
to
such system;
b
been convicted for fraud or corruption during the past five years;
c
wilfully neglected, reneged on or failed to comply with any
government, municipal or other public sector contract during the past
five years; or
d
been listed in the Register for Tender Defaulters in terms of section
29 of the Prevention and Combatting of Corrupt Activities
Act (No 12
of 2004).’
The
tenderers were then required to answer certain questions. The first
of these was whether the bidder or any of its directors
were listed
on the National Treasury’s data base as a company or person
prohibited from doing business with the public sector.
Fidelity
answered this in the negative.
[10]
Unbeknown to Fidelity, when the tender was
submitted Mr Godfrey Jack, one of its directors, had been so listed
on the National Treasury’s
data base. It was not disputed that
the data base was not accessible either to companies or to
individuals, but only to public
bodies on application to National
Treasury, and therefore the erroneous answer to the question posed in
the declaration was inadvertent
and unavoidable. There is a note in
the declaration suggesting that companies or people who are placed on
the data base will be
informed of that by National Treasury, but
neither Fidelity nor Mr Jack had been so informed. Fidelity became
aware of Mr Jack’s
listing on the data base on 4 September
2011, which was after the submission of its tender. It acted speedily
and Mr Jack resigned
as a director on 6 September 2011.
[11]
The Municipality only became aware that Mr
Jack’s name had appeared on the National Treasury’s data
base, when it received
a letter from the auditor general on 8
November 2011. That letter related to the existing contract between
the Municipality and
Fidelity for the provision of security services,
and not the tender. It appears to have generated some panic among the
officials
of the Municipality. On the same day Ms Liebenberg, the
Manager: Supply Chain Management, had a telephonic discussion with
Fidelity’s
Tenders Administrator, Ms Madondo. She raised the
matter of Mr Jack’s status with Ms Madondo, who informed her
that Mr Jack
had resigned as a director on 6 September 2011. Later
that morning Ms Madondo sent an e-mail to Ms Liebenberg informing her
that
Fidelity had become aware of Mr Jack’s position on 4
September 2011 and that he had resigned on 6 September 2011. She
attached
all the relevant CIPC documents in substantiation of that.
[12]
Ms Liebenberg referred this e-mail to
various other officials, including the Municipality’s legal
advisor. She was concerned
whether the existing contract with
Fidelity should be terminated and whether the expenditure on it
should be treated as irregular.
She also wrote to Mr Fourie, the
General Manager: National Tenders of Fidelity on 8 November 2011. The
heading to that letter referred
to the existing contract between the
Municipality and Fidelity for the provision of security services. The
body of the letter read
as follows:
‘
The
award of the abovementioned contract has reference.
It
has come to our attention that one of your directors, Mr Godfrey
Jack, has been prohibited by National Treasury to do business
with
any organ of state, due to misrepresentation, for the period
20/11/2003 until 19/11/2013.
After
a telephonic [conversation] between our Ms Renell Liebenberg and your
Ms Priscilla Madondo on the 07 November 2011, your office
has
forwarded copies of the Cipro documentation with regard to the change
of director. We also want to enquire from yourselves
as to why your
company withheld this important information to ourselves which the
Municipality believes that you had a legal obligation
to do so.
It
will however be appreciated if you can officially respond to the
statement by the Auditor-General as the expenditure that Mogale
City
has incurred to date in respect of this contract, is now regarded as
irregular expenditure.’
[13]
On 18 November 2011 Ms Madondo wrote to the
municipal manager of the Municipality attaching a number of
documents, most of which
were those previously furnished to Ms
Liebenberg, but they also showed that a Mr Mahlangu had been
appointed a director in place
of Mr Jack. One document did not,
however, deal with Mr Jack’s position. It was a letter that Ms
Liebenberg had addressed
to Fidelity on 14 November 2011 asking it to
agree to extend the validity of its tender for the contract SS(T&S)
01/2012 to
31 December 2011. That was the tender in dispute in this
case. Fidelity was asked if it was willing to hold its tender valid
for
the further period. The answer, given by Fidelity on 18 November
2011, was in the affirmative. Ms Madondo’s letter to the
municipal manager bore the tender reference as its heading.
Accordingly, while clarity was being sought and given in regard to
Mr
Jack’s position, Fidelity was asked by the very official
responsible for supply chain management to extend the validity
of its
tender and it agreed to do so.
[14]
It is against that background that the BEC
met on 13 January 2012 to consider the different tenders. It had
before it a report,
from the Manager: Traffic, Security and VIP
Protection, recommending that the contract be split between the two
highest scoring
tenderers, namely, Red Ant and Fidelity (itself an
unexplained irregularity in the tender proceedings as there was
nothing in the
tender documents permitting such a split). It also had
all the documents provided by Fidelity in relation to Mr Jack’s
position
and his resignation as a director. During the course of the
meeting, the BEC sought and obtained the advice of the acting manager
of legal services in the Municipality about the validity of
Fidelity’s tender. His advice was that it fell to be rejected
on the grounds that at the time that the tender was submitted Mr
Jack’s name appeared on the National Treasury data base.
[15]
That advice was embodied in the BEC’s
recommendation to the BAC, which read as follows:
‘
Fidelity
Security Services is rejected based on the fact that the information
as provided in their tender submission is based on
the details of the
company shareholding with Mr Godfrey Jack still listed as a
shareholder – blacklisted shareholder. The
advice from the
Legal Section was that information obtained during the quotation
process, cannot be used for a different procurement
process. The
tender has to be evaluated based on the information as provided in
the tender submission.’
At
its meeting on 12 March 2012 the BAC adopted this advice. In the
result Fidelity’s bid was not considered. The advice was,
however, patently wrong, as counsel for the municipality accepted. A
bar on awarding a tender does not mean that a possible obstacle
to
the award of the tender cannot be removed before the decision on the
tender is made. The exclusion of Fidelity was accordingly
wrong and a
reviewable error in terms of PAJA.
[16]
It is largely unnecessary to canvass the
other complaints by Fidelity about the tender process. I should,
however, highlight two
of them. The first is that in scoring the
tenders for functionality that of the ultimately successful tenderer,
Mafoko, received
such a poor mark that it should have been
disqualified at that stage. In circumstances that remain obscure its
score was revised
so as to afford it a qualifying score and kept it
under consideration. That was itself an irregularity warranting the
setting aside
of the award of the tender. The second is that the BEC
recommended that the contract be awarded in arbitrarily determined
proportions
to Red Ant and Fidelity. That was inconsistent with the
advertised basis of the tender and was also irregular and warranted
the
setting aside of the award of the tender.
[17]
The adjudication of the tender was
therefore in breach of Fidelity’s right to fair administrative
action. The award of the
tender accordingly fell to be set aside. The
high court made the following order:
‘
1
The decision(s) of the first respondent of 19 March 2012 and/or
thereafter to award tender No SS (T&S) 01/2012 to the second
respondent is reviewed and set aside.
2
The contract between the first respondent and the second respondent
pursuant to tender No SS (T&S) 01/2012 is set aside and
declared
void
ab initio
.
3
The first respondent is to re-evaluate the bids submitted for tender
No SS (T&S) 01/2012 and re-award the contract within
4 weeks of
the date of this order.
4
The first respondent is ordered to pay the fourth respondent’s
costs of the counter-application, including the costs of
two
counsel.’
[18]
There
is no objection to the first paragraph of this order and there
clearly could not be in the light of the Constitutional Court’s
judgment in
Allpay
.
[4]
Nor was it disputed that the result of the award of the tender being
set aside, had to be the invalidation of the contract concluded
pursuant thereto and the re-evaluation of the bids. The only concern
with the second and third paragraphs of the court below’s
order
was that an immediate invalidation of the contract awarded to Mafoko
would leave the Municipality without a service provider
in respect of
security services in its area of jurisdiction.
[19]
In
order to address this concern counsel for the Municipality submitted
that we should craft an order that was conditional on the
outcome of
the re-evaluation of the bids, along the lines of the order in
Millennium
Waste
,
[5]
in which an order of invalidity in respect of the existing contract
would issue only if, after the re-evaluation process, the contract
was to be awarded to a bidder other than the existing contractor.
Fidelity, on the other hand, argued that it would be more appropriate
to make an order of invalidity in respect of the contract, but to
suspend the operation of that order for a period sufficient to
enable
the re-evaluation of the bids to take place and, thereafter, to
provide enough time for an orderly hand-over (assuming that
to be the
outcome of the re-evaluation) from Mafoko to the successful bidder.
It pointed to the relief eventually granted in
Allpay
in
support of this submission.
[6]
In my view that is the more appropriate course to follow, especially
as it may be that Mafoko’s bid is disqualified from
consideration in the re-evaluation process. That serves to
distinguish this case from
Millennium
Waste
,
where the original successful tenderer might still have been awarded
the contract after a re-evaluation of the bidding process.
[20]
The
parties agreed that two weeks was adequate to enable the Municipality
to re-evaluate the bids. We were informed from the bar,
on
instructions obtained in the course of the hearing, that the
Municipality will not seek to take the matter on further appeal
to
the Constitutional Court. In those circumstances there should not be
any delay in undertaking the re-evaluation or awarding
a contract for
the balance of the tender period.
[7]
The suspension of the order of invalidity for a period of three weeks
from the date upon which this judgment is delivered
should therefore
ensure that the Municipality does not find itself deprived of
security services. However, it is not always feasible
for a court, on
the basis of limited and frequently imperfect information, to cater
for every possible eventuality. It is accordingly
appropriate to
record that if any dispute arises in the process of re-evaluation or
as to the award of a contract pursuant to that
process it must be
dealt with in fresh proceedings before the high court having
jurisdiction. In other words we do not retain jurisdiction
to oversee
the bid re-evaluation process and its outcome.
[21]
One
final comment is required. The tender process in this case was so
defective and involved so many flaws that it seems extraordinary
to
think that a public authority could engage in such a farcical
endeavour. To recapitulate, the successful tenderer should have
been
disqualified in the initial evaluation of tenders. The two tenders
that were evaluated as the best, namely those of Red Ant
and
Fidelity, were clearly so much better than those of the other bidders
that the decision should have been to award it to one
of them.
Instead the recommendation was that the contract should be split
between them in arbitrarily determined proportions contrary
to the
terms of the tender and without any apparent investigation as to
whether that was an appropriate or feasible basis for security
services to be provided to the Municipality. Red Ant was allowed to
continue as a bidder (and at one time the preferred bidder)
at a time
when it was sponsoring a major function for the Municipality, which
both elected and employed officials attended and
where they were the
recipients of gifts. Then, when the review proceedings were underway,
and with the apparent agreement of the
Municipality, Red Ant and
Mafoko entered into an agreement under which they would share the
contract between them. This litany
of errors is such that it is
appropriate to remind the Municipality that it runs the risk, if
there is a recurrence of such conduct,
either at the re-evaluation
stage or when dealing with other tenders, that a court may be minded
to take the decision out of its
hands and, rather than referring it
back, to order that the tender be awarded to the bidder to whom, in
the court’s view,
it should have been awarded had a proper
process been followed.
[8]
That
may also result in identifiable officials responsible for that
situation being ordered to pay the costs personally, because:
‘
It
is time for courts to seriously consider holding officials who behave
in the high-handed manner described above, personally liable
for
costs incurred. This might have a sobering effect on truant public
office bearers.’
[9]
[22]
In the result the following order is made:
1
Paragraph 3 of the order of the court below
is amended to replace the period of four weeks with a period of two
weeks.
2
An additional paragraph to be numbered 5 is
added to the order of the court below reading as follows:
‘
The
order of invalidity in paragraph 2 hereof is suspended for a period
of three weeks from the date of this order, whereafter it
will take
effect.’
3
The references in paragraphs 3 and 5 of the
order of the court below to ‘the date of this order’
are to be construed
as meaning the date on which this judgment is
delivered.
4
The appeal is otherwise dismissed with
costs, such costs to include those consequent upon the employment of
two counsel.
M
J D WALLIS
JUDGE
OF APPEAL
Appearances
For
appellant: I W Maleka SC (with him N Mayet)(the heads of argument
having been prepared by I W Maleka SC and S Yacoob)
Instructed
by: TGR Attorneys, Sandhurst, Johannesburg
Webbers
Attorneys, Bloemfontein
For
respondent: Carol Steinberg (with her Nick Ferreira)
Instructed
by: Blake Bester Inc, Roodepoort
Phatshoane
Henney Inc, Bloemfontein.
[1]
De
Aguiar v Real People Housing (Pty) Ltd
2011 (1) SA 16
(SCA) para 12.
[2]
Trans-African
Insurance Co Ltd v Maluleka
1956
(2) SA 273
(A) at 278F-G. This approach has been accepted on many
other occasions.
[3]
The
Promotion of Administrative Justice Act 3 of 2000
.
[4]
Allpay
Consolidated Investment Holdings (Pty) Ltd and Others v Chief
Executive Officer, South African Social Security Agency and
Others
2014
(1) SA 604
(CC) paras 25 and 56.
[5]
Millennium
Waste Management (Pty) Ltd v Chairperson, Tender Board: Limpopo
Province and Others
2008
(2) SA 481
(SCA) para 35.
[6]
Allpay
Consolidated Investment Holdings (Pty) Ltd and Others v Chief
Executive Officer, South African Social Security Agency and
Others
2014
(4) SA 179
(CC) para 78.
[7]
Unlike in
Allpay
we
were not asked to order that any fresh contract be awarded for a
period extending beyond the period of the existing contract.
[8]
Gauteng
Gambling Board v Silverstar Development Ltd and Others
2005
(4) SA 67
(SCA) paras 28-29 and 38-40.
[9]
Gauteng
Gambling Board and Another v MEC for Economic Development, Gauteng
2013
(50 SA 24
(SCA) para 54.