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[2023] ZAGPJHC 1192
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AfriRent (Pty) Ltd v Rand West City Local Municipality and Another (2023-052811) [2023] ZAGPJHC 1192 (23 October 2023)

IN THE HIGH COURT OF
SOUTH AFRICA
(GAUTENG DIVISION,
JOHANNESBURG)
Case
No.
2023-052811
NOT REPORTABLE
NOT OF INTEREST TO OTHER
JUDGES
REVISED
23/10/23
In the matter between:
AFRIRENT
(PTY) LTD
Applicant
and
RAND
WEST CITY LOCAL MUNICIPALITY
First
Respondent
FLEET
HORIZON SOLUTIONS (PTY) LTD
Second
Respondent
JUDGMENT
WILSON
J:
1
The applicant, Afrirent, tendered unsuccessfully for a
contract to provide specialised vehicles and fleet support services
to the
first respondent, Rand West. The tender was ultimately awarded
to the second respondent, Fleet Horizon. Afrirent then filed papers

launching a wide-ranging attack on the legality of the tender
process. When its application came before me, however, Afrirent
ultimately restricted its case to the contention that the tender
process was vitiated by three material irregularities. On the
strength of any one of these irregularities, Afrirent seeks to review
and set aside the decision to award the tender to Fleet Horizon
and
asks for an order directing that the tender process be started again
from scratch.
2
The three alleged irregularities to which Afrirent adverts
are: first, that its bid was irrationally disqualified on the basis
that
it had failed to provide Rand West with a detailed statement of
its liability to the South African Revenue Service (SARS); second,

that Fleet Horizon was awarded the tender despite not having provided
Rand West with three years’ worth of audited financial

statements, the production of such statements being a mandatory
regulatory requirement; and third, that the award of the tender
to
Fleet Horizon was made subject to a condition that was never
fulfilled.
3
A fourth irregularity Afrirent initially pursued in oral
argument was that Fleet Horizon was awarded the tender despite not
having
provided Rand West with a tax clearance certificate. However,
that allegation fell by the wayside during the hearing, once it
became
clear that, whether or not such a certificate had been
physically handed over to Rand West, Fleet Horizon had plainly
provided
a document bearing its SARS Tax PIN, which placed Rand West
in a position to download a tax clearance certificate from SARS’

website. There was in any event no suggestion that Fleet Horizon did
not in fact have tax clearance.
4
I now turn to deal with the three alleged irregularities with
which Afrirent ultimately persisted.
Afrirent’s
disqualification
5
There is no dispute that Afrirent owes SARS a great deal of
money. Just how much is not clear. There is a dispute between
Afrirent
and SARS on that score, and it is only the fact of the
dispute, rather than its contours, that is relevant to this case.
While
assessing Afrirent’s tender, Rand West was alerted by
SARS to the fact of Afrirent’s debt. SARS initially suggested

that it was about to nominate Rand West as a third-party collector of
Afrirent’s tax debt, as it is empowered to do in terms
of the
Tax Administration Act 28 of 2011
. The effect of such a nomination
would have been to require Rand West to pay what was due to Afrirent
under any contract between
Rand West and Afrirent directly to SARS in
reduction of Afrirent’s tax debt.
6
This possibility obviously excited a degree of concern. Rand
West asked Afrirent, Fleet Horizon, and another shortlisted bidder to

provide a copy of their full SARS statements, in addition to the tax
clearance certificates that they had already provided. As
any
taxpayer will know, a SARS statement provides an account of tax
liability against tax actually paid, and allows anyone who
reads it
to understand whether, and to what extent, a taxpayer owes SARS
money. A tax clearance certificate, on the other hand,
simply
confirms that a taxpayer is in good standing with SARS. That may be
because the taxpayer has paid all that is due. However,
it could just
as easily mean that the taxpayer owes SARS, but has entered into an
arrangement to pay the amount owing instalments,
or that the
obligation to pay the amount has been suspended pending the
determination of an objection to a tax assessment, and
an ultimate
reckoning of the taxpayer’s liability.
7
Fleet Horizon and the other bidder both promptly handed over
their tax statements. For reasons that have never been explained,
Afrirent
did not. It was argued before me that the failure to hand
over the SARS statement was no more than a good faith oversight. But
there are no primary facts alleged anywhere on the papers that would
allow me to accept that proposition. The facts that are on
the papers
do not support it. Afrirent was asked to provide a statement. It
initially simply resubmitted its tax clearance certificate.
Afrirent
was then told again that what was required was a statement, not a
clearance certificate. It did not then respond to that
second request
to provide the statement.
8
The failure to provide the statement caused Rand West’s
bid evaluation committee to draw two separate, but related,
conclusions.
The first was that Afrirent had something to hide. As
the committee summed things up in its report, the fear was that
Afrirent
does “not want to disclose the amount [it] owe[s] to
SARS as it might indicate the high-risk rating that the municipality

will face if [Afrirent is] appointed”. The second conclusion
was that Afrirent’s tax liability – apparently in
the
region of R50 million at the time – might affect Afrirent’s
ability to perform on any contract that Rand West ultimately

concluded with it. If Afrirent’s bid was successful, and SARS
went through with its threat to nominate Rand West as a third
party
collector, the money that would have to be paid over to SARS would
amount to about a third of the value of Afrirent’s
R150 million
bid. In those circumstances, faced with a substantial reduction of
the value of Rand West’s contract with it,
Afrirent may have
decided, or have been forced, not to perform under the contract.
9
Rand West ultimately concluded that the risk presented by
Afrirent’s apparent lack of candour about its tax affairs was
too
great to ignore. It disqualified Afrirent from consideration on
that basis. This was explained in a letter from Rand West’s

Municipal Manager to Afrirent dated 10 May 2023.
10
Afrirent contends that the decision to disqualify it on that
basis was unlawful. Its first reason for saying so was that, as
things
turned out, there was never any serious threat that Rand West
would be nominated as a third-party collector of Afrirent’s
tax
debt. Afrirent was clearly tax compliant, whatever Rest West’s
misgivings might have been. Afrirent had a tax clearance
certificate.
SARS had confirmed that it had come to an agreement with Afrirent
about how the question of its tax liability was
to be resolved. Any
dispute between Afrirent and SARS could be addressed without resort
to the drastic step of essentially garnishing
Afrirent’s
contract with Rand West. Moreover, Afrirent contended, if Rand West
had taken a step back, and evaluated Afrient’s
alleged tax
liability in light of its overall turnover (which is well in excess
of R1 billion), Rand West could have assumed no
serious risk in
awarding the tender to Afrirent.
11
Even if this is true, it misses the point entirely. What
worried Rand West, fundamentally, was that Afrirent had not been
candid
about its tax affairs. That lack of candour presented a risk.
It does not matter that the nature of the risk the bid evaluation

committee set out in its report turned out to be more apparent than
real. The non-disclosure was itself enough to ground a rational

disqualification. If I were to accept Afrirent’s argument, I
would have to find that an unsuccessful bidder could review
its
disqualification from a tender process notwithstanding its failure to
disclose information that the state reasonably believed
was material
to the assessment of the bid, merely because the bidder was itself
sure that the information requested would have
made no difference to
the strength of its bid.
12
But that cannot be. Rand West was right to be concerned. It
acted rationally in seeking more information. When that information
did not come, it acted rationally in disqualifying Afrirent merely on
the basis of its failure to disclose the SARS statement.
13
A second prong to Afrirent’s attack was that the
decision to disqualify Afrirent on the basis of its failure to
provide a
tax statement was inconsistent with the bid conditions Rand
West stipulated in its invitation to tender. What the bid conditions

required, so it was argued, was the submission of a tax clearance
certificate. Afrirent submitted such a certificate. Rand West
was not
at large to change the rules halfway through the tender process by
demanding a SARS statement and then disqualifying Afrirent
on the
basis that it failed to provide one.
14
This argument is not supported by a realistic interpretation
of the conditions themselves. Clause 2 of Part B of Rand West’s

“Terms and Conditions for Bidding” deals with the “tax
compliance requirements” that prospective bidders
had to meet.
The first of these requirements was that “bidders must ensure
compliance with their tax obligations”.
The second to seventh
of the requirements set out various ways in which documentary
evidence of that compliance had to be provided.
But those documentary
requirements cannot sensibly be read as coterminous with the overall
requirement that a bidder actually be
tax compliant. That condition
goes further than any documentary evidence that may be proffered to
satisfy it. If the documents
listed at clauses 2.2 to 2.7 of the
conditions did not satisfy Rand West that a bidder was tax compliant,
the bid conditions allowed
Rand West to ask for more documentation,
even if it that documentation was not explicitly set out in the
conditions themselves.
Of course, had Afrirent been disqualified for
failure to supply a document not listed in the conditions, and for
which it had never
been asked, that would have breached the bid
conditions. But that is not what happened.
15
It follows that Afrirent’s bid was lawfully and
rationally disqualified on the strength of its failure to disclose
documents
about its tax affairs that were material to the viability
of its bid.
16
It was contended on behalf of Rand West and Fleet Solutions
that Afrirent’s case should end there. The argument was that a

properly disqualified bidder has no legal interest in the ultimate
decision to award the tender, because the disqualified bidder
could
never have been awarded the contract anyway.
17
That argument had some superficial attraction, but I do not
think that I can accept it. The question is whether Afrirent has a
direct
and substantial interest in the relief it seeks. The relief
ultimately sought from me is a review of the decision to award the
tender to Fleet Horizon and a direction that the process should be
run again. There is no suggestion that, if I were to grant that

relief, Afrirent would not be able to compete for the contract in the
new tender process. That, I think, is reason enough to find
that
Afrirent retains an interest in relief setting aside the ultimate
decision to award the contract to Fleet Horizon, even if
Fleet
Horizon’s failure in the initial tender process would not
automatically have led to the award of the contract to Afrirent.
18
It follows from all of this that, even though I have rejected
Afrirent’s arguments against its own disqualification, I must

still consider its attack on Fleet Horizon’s ultimate selection
as the successful bidder.
Fleet Horizon’s
non-submission of audited financial statements
19
Where a tender is put out for a contract valued at more than
R10 million, paragraph 21.1 (d) of Rand West’s Supply Chain
Policy
obliges a bidder that is “required by law” to have
its financial statements audited to submit three years’ worth

of audited financial statements together with their bid. This is no
more than a repetition of the requirement to submit audited
financial
statements set out in Regulation 21 (d) of the Municipal Supply Chain
Management Regulations, 2005 (GN
868 in GG 27636)
(“the Regulations”).
It is common cause that Fleet
Horizon submitted only two years’ worth of statements, together
with a third set of statements
– its most recent – which
had not yet been audited. Afrirent says that this invalidated Fleet
Horizon’s bid.
20
However, Fleet Horizon says that, as a matter of fact, it is
not “required by law” to have its financial statements
audited. In paragraph 45.7 of its answering affidavit, Fleet Horizon
explains that this is because it (a) is a private limited company

that (b) holds no assets in a fiduciary capacity (c) does not compile
its statements internally, but rather employs an external
accounting
firm to do so, and (d) is not the type of company that is required to
audit is financial statements in the public interest.
These
allegations are confirmed by an affidavit from an accountant at the
firm Fleet Horizon uses to independently produce its
financial
statements.
21
Whether or not Fleet Horizon is “required by law”
to audit its financial statements is a mixed question of law and of

fact. The answer depends on whether the character of Fleet Horizon as
a going concern is such that it attracts a legal obligation
to audit
its accounts. This being an application for final relief, I am
required to accept Fleet Horizon’s allegations of
fact about
the kind of entity it is. If those facts are accepted, then, at least
on the face of it, Fleet Horizon is not “required
by law”
to audit its financial statements.
22
Afrirent does not take issue with this conclusion. Nor does it
dispute the facts on which the conclusion rests. Afrirent rather
seeks to capitalise on the fact that, at the time Fleet Horizon
submitted its bid, Fleet Horizon erroneously believed that it was

“required by law” to audit its financial statements, and
that Fleet Horizon stated as much in its bid documents. In
its
replying affidavit, Afrirent accuses Fleet Horizon of attempting to
amend its bid after the closing date.
23
I think that rejoinder is misguided. Either the Regulations
enjoined Fleet Horizon to submit audited financial statements, or
they
did not. If they did, then Fleet Horizon’s bid did not
comply with the requirements of the tender, and it would be necessary

to consider whether that non-compliance should have been fatal to
Fleet Horizon’s bid. However, on the undisputed facts,
the
Regulations did not require Fleet Horizon to submit audited financial
statements, because Fleet Horizon was not “required
by law”
to prepare them. There can accordingly be no suggestion that Fleet
Horizon’s bid was non-compliant.
Failure to fulfil the
condition under which the tender was awarded
24
Fleet Horizon’s bid was the cheapest qualifying bid once
Afrirent was disqualified.  However, it was not lost on Rand

West that Fleet Horizon’s
bid was still
around R100 million more expensive than Afrirent’s.
Accordingly, in its award letter, Rand West made clear that
Fleet
Horizon was to be appointed as the service provider under the terms
of the tender “subject to a negotiation”
aimed at
“decreasing” Fleet Horizon’s bid to a more
“affordable amount”. It seems clear on the papers
that,
whatever negotiations ensued, Fleet Horizon’s price was never
reduced. What happened instead is that Fleet Horizon
increased the
range of services it was willing to provide for the price it had
originally bid to do the work.
25
This, Afrirent contended, was a failure to
fulfil the condition Rand West placed on the award, which vitiated
the award of the tender.
But I cannot agree. The condition Rand West
imposed was not that Fleet Horizon’s price had to come down,
but that there had
to be a negotiation aimed at that result. There
plainly was such a negotiation. It did not achieve that result, but
it did achieve
an increase in the value of the services Rand West
would receive for the same price. In these circumstances, I fail to
see how
the condition Rand West imposed was not fulfilled.
Order
26
In this case, Rand West sought the best price it could get to
procure vehicles needed provide essential municipal services. The
best price it might have got was that tendered by Afrirent. But
Afrirent scuttled its own bid by refusing to provide tax
documentation
that any responsible organ of state would have asked
for on the information available to Rand West at the time. Because of
this,
Rand West had to settle for a more expensive bid from Fleet
Horizon, but Rand West still did its best, through post-award
negotiation,
to enhance the value of the services it would receive
under that bid.
27
It is not as if it was open to Rand West not to provide the
services it sought to procure through the invitation to tender. Nor
could Rand West reasonably have been expected to put up with
Afrirent’s refusal to be candid about its tax affairs, the
murkiness
of which, at least at the time, gave rise to a reasonable
appreciation of risk in accepting Afrirent’s bid.
28
I can find no basis on which to impugn the rationality or the
lawfulness of the process Rand West adopted on these facts. For that

reason, the review must fail.
29
The application is dismissed with costs, including the costs
of two counsel where they were employed.
S D J WILSON
Judge of the High Court
This judgment is handed
down electronically by circulation to the parties or their legal
representatives by email, by uploading
to Caselines, and by
publication of the judgment to the South African Legal Information
Institute. The date for hand-down is deemed
to be 23 October 2023.
HEARD ON:  10
October 2023
DECIDED ON:  23
October 2023
For the Applicant:
AJP Els
Instructed by
Albert Hibbert Attorneys
For the First
Respondent:
V Maleka SC
(Heads of argument drawn
by V Maleka SC and
M Salukazana)
Instructed by
Straus Daly
For the Second
Respondent:
AC Botha SC
(Heads of argument drawn
by AC Botha SC and CJ Bresler)
Instructed by
Bouwer & Oliver