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[2023] ZAFSHC 468
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Calvin and Family Security Services v Centlec (SOC) Ltd (6311/2023) [2023] ZAFSHC 468 (30 November 2023)
SAFLII
Note:
Certain
personal/private details of parties or witnesses have been
redacted from this document in compliance with the law
and
SAFLII
Policy
IN THE HIGH COURT
OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Reportable:
YES/NO
Of
Interest to other Judges: YES/NO
Circulate
to Magistrates: YES/NO
CASE
No.:
6311/2023
In
the matter between:
CALVIN
AND FAMILY SECURITY SERVICES
Applicant
and
CENTLEC
(SOC) LTD
Respondent
JUDGMENT
BY:
VAN RHYN, J
HEARD
ON:
28 NOVEMBER 2023
DELIVERED
ON
:
30 NOVEMBER 2023
[1]
This is an urgent application issued on 21 November 2023 in terms
where of the applicant seeks
the following relief:
“
1.
That the applicant’s non-compliance with the Uniform Rules of
Court is condoned
and the matter is heard on an urgent basis in terms
of Rule 6(12) of the Uniform Rules of Court;
2
The intended termination of contract between the parties as of 30
November
2023 by the respondent be interdicted pending the referral
of the parties dispute to arbitration and proper ventilation of the
matter by an independent arbitrator.
3. The terms of the
Service Level Agreement between the parties are enforced.
4. The respondent pay the
costs of this application on an attorney and its client scale.”
[2]
The applicant is cited as “Calvin and Family Security Services,
a private company” represented
by Calvin Mojalefa Mathibeli,
the Chief Executive Officer of the applicant. The applicant has its
registered address at Bloemfontein,
Free State Province. The
respondent is Centlec (SOC) Ltd, a state owned company as
contemplated in section 8(2)(a) of the
Companies Act
[1]
having its registered address at Bloemfontein, Free State Province.
[3]
The application was served upon the respondent, presumably per email
on 21 November 2023.The respondent
had to notify the applicant’s
attorneys of record on 22 November 2023 of its intention to oppose
the application and to file
an answering affidavit on 24 November
2023 at 9am, effectively giving the respondent two days to answer to
the relief sought. On
27 November 2023 the applicant filed its
replying affidavit.
[4]
The matter was enrolled for hearing for Tuesday, 28 November 2023.
These truncated time periods
were provided on the ground that during
October 2023 the applicant received a termination note, dated 27
September 2023, that the
Service Level Agreement (“SLA”)
concluded between the parties would terminate on 30 November 2023 due
to the budgeted
project amount being depleted.
[5]
The respondent disputed the urgency of the matter and prayed that the
applicant’s application
be struck from the roll for lack of
urgency with an appropriate cost order. To consider the urgency of
this matter, the factual
background circumstances should be
considered.
[6]
The applicant was appointed to provide security services for the
respondent pursuant to a tender
process. The tender process
was initiated by a court order subsequent an urgent review
application seeking the setting aside
of a previous award on tender.
The respondent had 14 days to publically invite competitive bids.
In terms of clause
31 of its Supply Chain Management Policy, the
procedure may only be used for transactions that are for a value less
than R 10,000,000.00
(VAT inclusive) (“R10 million”).
[7]
On 23 May 2022 the deponent to the respondent’s answering
affidavit, Malefane Sekoboto,
the chief executive officer of the
respondent, issued a letter of appointment with the reference number
CD37/2021(Re-advert) to
the applicant. The letter served as
confirmation that the applicant was appointed as a service provider
for security services (guarding,
access control, armed
reaction/response) including supply, delivery, installation,
commissioning and maintenance of security equipment
to the respondent
for a period of 36 months.
[8]
The appointment was made subject to the successful conclusion of a
detailed contract between the
applicant and the respondent under the
conditions set out in the letter of appointment which,
inter alia
,
included the following:
“
3. The
appointment shall be for thirty-six (36) months from signing of the
contract.
5. The total amount
of the contract should not exceed the amount of R10 000,000.00
(ten million rand) for the completed
period of thirty-six (36)
months.”
[9]
The SLA was concluded on 19 July 2022. The 23
rd
of May
2022 was, notwithstanding the signature date, regarded as the
commencement date of the agreement. On 27 September 2023,
the acting
chief financial officer of the respondent issued a termination note,
per email to the applicant at c[...]@calvinfamily.co.za,
informing
the applicant that the SLA will be terminated effectively on the 30
th
of November 2023 due to the budget of R10 million being depleted
prior to the aforesaid period of 36 months.
[10]
Subsequent to receiving the termination note, the applicant addressed
a letter, dated 31 October 2023, to the respondent
indicating that
the applicant does not accept the unlawful termination of the SLA. It
relied on the fact that the SLA did not contain
the budgetary
limitation clause mentioned in the termination notice.
[11]
On 3 November 2023 the respondent replied and affirmed the validity
and enforceability of the termination
note issued to the applicant on
27 September 2023 on the basis that prior to entering into the SLA
the applicant had been informed
that the budget allocated for the
contract amounts to R10 million for the entire 36 months. The
applicant was directed to
the Termination Clause (clause 14) and the
Dispute Resolution Clause (clause 19.3) and furthermore relied upon
the strict compliance
with the contractual stipulation of the 60-day
termination period.
[12]
In paragraph 9 of the letter the respondent was notified that,
subsequent to 30 November 2023, the applicant
will not be entitled to
any compensation for any services rendered and the presence of the
applicant at the premises of the respondent
will be considered as
trespassing.
[13]
On 8 November 2023 the applicant’s attorneys of record
responded to the reply received from the respondent
and indicated
that the letter serves as a written notice in terms of clause 19.2 of
the SLA that a dispute regarding the lawfulness
of the notice of
termination exists and requesting the respondent to agree to a
mediation process to be initiated. The respondent
was requested to
give an undertaking that the termination will be put on hold pending
the finalization of the mediation and/or
arbitration process, should
mediation fail. The undertaking had to be made by Friday, 10 November
2023 at 11h00, failing which
the applicant intended to approach the
court on an urgent basis to stop the termination.
[14]
On 14 November 2023 the parties held a mediation meeting, however no
solution was reached. On 15 November
2023 the applicant informed the
respondent that they are referring the dispute to arbitration in
terms of the SLA and proposed
an arbitrator. The application was then
issued on 21 November 2023.
[15]
On behalf of the respondent Mr Molotsi SC argued that
the applicant provided particularly unreasonable time periods
having
regard to the history of the matter and the fact that the application
was brought as one of extreme urgency. The applicant
failed to
indicate in its founding affidavit when the termination notice was
received and merely mentioned, “during October”.
The
initiation of dispute resolution proceedings is not a pre-condition
for the launching of the application for the relief sought
by the
applicant with the result that the application could have been issued
prior to 8 November 2023 or even subsequent to the
mediation process
failing on 14 November 2023. Accordingly, the urgency in the matter,
if any, is self- created.
[16]
Only in its replying affidavit did the applicant address the time
period that lapsed since it received the
termination notice dated 27
September 2023. According to the applicant the notice was not seen
until 31 October 2023 when Mr Mathibeli,
the deponent, opened his, so
called, “spam” emails. The termination notice was not
sent to the project manager with
the result that it remained
unnoticed until 31 October 2023. It is denied that the applicant is
bound by what is stated in the
appointment letter on the basis that
it is not a reflection of the terms agreed upon by the parties.
[17]
In its reply the applicant furthermore relies upon an email
supposedly received during the past week that
the respondent has
sought the advice of National Treasury regarding the termination of
the SLA. The applicant appended a copy of
an email purportedly
received from National Treasury indicating that the term regarding
the total amount of the contract not exceed
R10 million, was not
included in the SLA.
[18]
The first issue to consider is whether the
applicant has made a case for urgency, failing which the matter may
be struck off the roll. If the applicant was successful in showing
urgency, the issue would be whether the termination of the SLA
was
justified.
In
dealing with the requirements of Rule 6 (12) the court in
East
Rock Trading 7 (Pty) Ltd and Another v Eagle Valley Granite (Pty) Ltd
and Others
,
[2]
held that:
"[6]
The import thereof is that the procedure set out in rule 6(12) is not
there for taking. An Applicant has to set forth
explicitly the
circumstances which he avers render the matter urgent. More
importantly, the Applicant must state the reasons why
he claims that
he cannot be afforded substantial redress at a hearing in due course.
The question of whether a matter is sufficiently
urgent to be
enrolled and heard as an urgent application is underpinned by the
issue of absence of substantial redress in an application
in due
course. The rules allow the Court to come to the assistance of a
litigant because if the latter were to wait for the normal
course
laid down by the rules it will not obtain substantial redress."
[19]
The High Courts would be unable to function efficiently if the normal
roll is continually interrupted by
urgent applications being brought
by litigants in matters, such as the matter at hand, which has been
enrolled for hearing on such
short notice. What is common cause is
the fact that the applicant’s SLA with the respondent was
terminated in a letter dated
27 September 2023, sent per email to one
of the addresses provided for notices in terms of clause 21.11.2 of
the SLA. The
reason for the termination of the SLA is due to
the budgeted project amount being depleted.
[20]
On 31 October 2023, approximately a month later the applicant
addressed a letter to the respondent claiming
that the termination is
unlawful and that it never bound itself to limit its fees to below
R10 million. From 31 October 2023 to
21 November 2023, when the
application was issued, correspondence was exchanged between the
parties. The application was enrolled
on the urgent roll for hearing
on 28 November 2023.
[21]
The interdict sought by the applicant is linked to the
finalisation of the purported arbitration proceedings.
In terms of
clause 19.6 of the SLA the referral to arbitration must be made
within 10 business days after mediation. This did not
occur.
[22]
Having regard to the contentions of the respondent, the outcome of
the mediation process and the inability
to agree on the way forward,
I would have expected the applicant to make haste to launch their
dispute with an arbitrator as soon
as possible. However, this has not
happened. Since the applicant took notice of the termination letter
dated 27 September 2023,
whenever that may be, it has not yet
launched the arbitration proceedings which will inevitable prolong
the continuation of the
SLA in the event of the application being
successful. The respondent argued that the arbitration process,
having regard to the
fact that the yearend holiday season is pending,
will only be finalized in 3 to 4 months.
[23]
The grounds for the termination of the SLA are that the tender was
submitted for an amount of R10 million
and the total contract
value in the said amount is for the period of 36 months, which amount
will be depleted by 30 November 2023.
The respondent contends that it
was entitled to cancel the SLA due to the budget allocated to this
project being depleted prior
to the lapse of the period anticipated,
namely 36 months. With reference to sections (4(1)(d), (4(2)(a),
95(d), 99(1) and 100(a)
of the Municipal Finance Management Act
[3]
(the “MFMA”) it is contended that the provisions of the
MFMA requires of the respondent to take action and to prevent
fruitless and wasteful expenditure as well as unauthorised
expenditure.
[24]
The MFMA was enacted to secure sound and sustainable management of
financial affairs of municipalities and
other institutions in the
local sphere of government to ensure that all revenue, expenditure,
assets and liabilities of those governments
are managed efficiently
and effectively. It would therefore be unlawful for the respondent to
make any further payments to the
applicant in respect of the tender
awarded to it and the SLA concluded between the parties. The
respondent furthermore relied upon
the provisions of clause 31
and se 32 its supply Chain Management Policy.
[25]
The applicant argued that it will suffer financial harm
due to the respondent’s failure to comply with the
SLA in that
it has acquired vehicles and other equipment specifically for the
purpose of the SLA. The applicant has incurred debt
and financing
from financial institutions which it will be unable to repay should
the contract be terminated. The applicant furthermore
contends that
it has no alternative remedy than to seek this urgent interdict. For
the applicant to institute proceedings to claim
damages in the
ordinary course is of no comfort and the intended termination is
likely to cause irreparable harm to the applicant.
[26]
In respect of these contentions on behalf of the applicant, the
respondent argued that there is no irreparable
harm to be suffered as
the applicant has been paid as per the contract value, namely.
R10 million and to proceed with the
terms of the SLA, beyond the
limit of the contact amount would be unlawful. The applicant has
sufficient alternative remedies available
in the form of arbitration
in terms of the SLA and/or claiming damages, if any, from the
respondent.
[27]
In clause 3.2 of the SLA, under the heading
‘Interpretation” that:
“
This
agreement shall be interpreted according to the following provisions,
unless the context requires otherwise.” In
clause 3.2.9
the following is recorded in the SLA:
“
3.2.9
The Annexures to this Agreement are an integral part of this
Agreement and reference to the Agreement shall include the
Annexures.”
The proposal, tender
documents and the declaration for procurement above R10 million are
annexures to the SLA. Clearly the applicant’s
arguments that
the contents of the proposal, bidding documents and appointment
letter do not from part of the SLA and are not binding
upon the
applicant, are misplaced.
[28]
The application was issued just over a week before
the expiry of the termination period. The termination
notice was
issued on 27 September 2023, two months prior to the hearing of this
urgent application. I agree with the submission
on behalf of the
applicant that this was a deliberate attempt to create urgency. The
procedure adopted by the applicant and the
time limits imposed upon
the respondent are completely unjustified and are not supported by
the facts relied upon by the applicant.
Whatever urgency
exists, if indeed it exists at all, is entirely self- created. The
applicant failed to comply with the requirements
of an interim
interdict in that, to my mind, no prima facie right was established.
[29]
Regarding the costs of this application, Mr Molotsi SC argued that
the respondent was dragged to court on
an extremely urgent basis in
an endeavour to prolong its contract with the respondent and in the
hope of receiving payments from
a contract which has run out of its
allocated budget. Therefore, a punitive costs order on the scale
between attorney and client
is prayed for. I agree with his
contention.
[30]
ORDER:
In the result the
following order is issued:
1.
The application is dismissed.
2.The
applicant shall pay the costs of the application on the scale as
between attorney and client.
I
VAN RHYN
JUDGE
OF THE HIGH COURT,
FREE
STATE DIVISION, BLOEMFONTEIN
On
behalf of the Applicant:
ADV.
Z BUTHELEZI
Instructed
by:
NW
PHALATSI & PARTNERS
BLOEMFONTEIN
On
behalf of the Respondent:
ADV.
H MOLOTSI SC
Instructed
by:
RAMPAI
ATTORNEYS
BLOEMFONTEIN
[1]
Act 71 or 2008.
[2]
(11/33767)
[2011] ZAGPJHC 196 (23 September 2011).
[3]
Act 56 of 2003.