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[2009] ZAGPJHC 65
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Menzies Aviation South Africa (Pty) Limited v South African Airways (Pty) Ltd and Others (08/22988) [2009] ZAGPJHC 65 (4 December 2009)
Links to summary
IN THE
SOUTH GAUTENG HIGH COURT
(JOHANNESBURG)
CASE NO:
08/22988
In the matter between:
MENZIES AVIATION SOUTH AFRICA (PTY) LIMITED
Applicant
and
SOUTH AFRICAN AIRWAYS (PTY) LTD
First Respondent
SWISSPORT SOUTH AFRICA (PTY) LTD
Second
Respondent
BIDAIR
SERVICES (PTY)
LTD
Third
Respondent
EQUITY AVAI
TION SERVICES
(PTY) LTD
Fourth
Respondent
AIRPORTS COMPANY SOUTH AFRICA LTD
Fifth Respondent
J U D G M
E N T
BLIEDEN, J
:
[1]
The
Applicant, Menzies Aviation (South Africa) (Pty) Limited (Menzies) is
part of an international group of Companies and specialises
in ground
handling operations at airports. It presently carries on business at
129 airports world wide. Since 2007 it has been
involved in
providing these services at some of the major South African airports,
having received a license to do so from the Fifth
Respondent,
Airports Companies South Africa Limited (ACSA). It has been employed
by a number of airline companies operating in
this country to perform
these various functions at local airports, but up and to 11 June 2008
the First Respondent (South African
Airways (Pty) Limited) (SAA) was
not one of its clients.
[2] SAA is the
national airline of South Africa. It is an airline operator on both
internal (domestic) and international routes.
It flies to and from
various airports throughout the country. By far the busiest airport
from which it operates is the O.R. Tambo
International Airport, near
Johannesburg. The scope and size of the operations of SAA can be
gauged from the fact that it is estimated
that its aircraft make some
58 000 flights per year, both internally and overseas. By far the
majority of flights are internal
(domestic).
[3] On 11 June
2008 SAA invited four entities, including Menzies, to tender for the
provision of ground handling and passenger services
for its flights
to and from six of South Africa’s most important airports for a
period of five years. The bids were to be
submitted by 11 am on the
1
st
of July 2008. The four parties invited to submit bids were required
to attend a compulsory briefing session on 17 June 2008.
In effect
those tendering were given nine working days within to prepare their
bids.
[4] The other
three entities are the second, third and fourth respondents to the
present application. The fifth respondent is ACSA
which is the
company managing the airports concerned. Other than SAA none of the
respondents have opposed the present application
although Menzies’
founding papers were served on all of them. They have chosen to
abide the order of this court. Menzies
has not asked for any order
of costs to be made against any of these respondents.
[5] The
compulsory briefing duly took place and was attended by all four
invitees. Certain further information was requested by
some of the
parties present (not Menzies) and this information was provided on 24
June 2008. The information so provided included
inter
alia
,
freight flight schedules, incomplete information concerning
compulsory equipment purchases from ACSA, and certain requirements
for passenger assistance units and average laundry volumes.
[6] The stipulated service level agreements for cleaning, and for the
differing service parameters at airports other than O.R.
Tambo
International (which agreements were stated to be compulsory
components of the envisaged contract) were never provided, despite
the terms thereof being crucial to the determination of the staffing
and equipment capacity needed to avoid the incurrence of penalties
for breach of such service levels with resulting impact on
profitability.
[7
] Ground
handling services comprise both ramp and passenger handling services.
The former, rendered on airport aprons (where aircraft
are parked),
include push back and towing services for aircraft; providing steps
for embarking and disembarking; bussing passengers
and crew between
the airport and aircraft; loading and unloading luggage and cargo;
transporting luggage and cargo between terminals
and aircrafts;
supplying water and toilet services to aircraft; supplying ground
power to aircraft as required; manually starting
aircraft engines as
required. All of these activities require the use of specialist and
expensive equipment, nearly all of which
is imported.
[8
] Passenger
services occur primarily within terminal buildings and include
operating check-in facilities; baggage handling; providing
lost
luggage services and providing passenger assistance.
[9
] At
the time of the bid request, the second and third respondents, being
Swissport SA (Pty) Limited (Swissport) and Bidair (Pty)
Limited
(Bidair) were already providing full services to SAA and had been
doing so since January 2008. Swissport did the bulk
of the services
while Bidair was providing certain transport and cleaning services to
SAA.
[10
] Menzies
did not submit a bid by 1 July 2008 and the contract was subsequently
awarded to Swissport in part and Bidair in part.
It is Menzies’
case that the manner in which the request for tenders was formulated
as well as the short deadline effectively
precluded it from
submitting an accurate and competitive tender and therefore from any
meaningful participation in the tender process.
[11
] Immediately
prior to the deadline for the submission of bids Menzies had
requested the First Respondent to extend the deadline
and also to
supply additional information. This was refused by SAA.
[12
] The
present application is for the review and setting aside of SAA’s
tender process, including any contracts that might
have been
concluded pursuant to it. It is Menzies’ case that the tender
process was fundamentally flawed; thus justifying
the relief claimed
by it.
[13
] It
is not in dispute that SAA is an organ of state and is bound to
uphold the Constitution and also that as such, it is subject
to the
provisions of the Promotion of Administrative Justice Act No.3 of
2000 (PAJA). The detailed grounds on which the present
application
is brought appear in Menzies’ founding papers at pages 11 and
12 of the record. They read:
“
12.1
The applicant’s rights to administrative justice in terms of
section 33 of the Constitution of the Republic of South
Africa Act
108 of 1996 read with
section 6(1)
of the
Promotion of Administrative
Justice Act 3 of 2000
have been breached in that the tender process
was administrative action which was:
biased or can reasonably be suspected of bias in favour of the
bidders who participate therein and against the Applicant;
procedurally unfair;
taken for an ulterior purpose or motive, namely appointing
Swissport and / or assisting Swissport in obtaining a ground
handling
license;
taken in bad faith;
taken arbitrarily or capriciously;
The tender process was otherwise unconstitutional and unlawful
in that the following basic values and principles governing public
administration in terms of section 195 of the Constitution were
contravened:
Efficient, economic and effective use of resources must be
promoted;
Public administration must be development-oriented;
Services must be provided impartially, fairly, equitably and
without bias;
Transparency must be fostered by providing the public with
timely, accessible and accurate information.
The tender
process was otherwise unconstitutional and unlawful in that section
217 of the Constitution was not complied with
in that the process
was not in accordance with a system which is fair, equitable,
transparent, competitive and cost-effective.”
Menzies’ Case:
[14
] This
is set out in the affidavit of Forsyth Rutherford Black (Black) a
director and its senior vice president-Africa. Black’s
evidence is that he has five year’s of international experience
in preparing bids of the size in the present matter or even
larger on
behalf of Menzies Aviation Plc.
[15
] Given
the nature and scope of the work to be done, the time given to
prepare the tender and the absence of ground schedules at
various
airports and particularly O.R. Tambo international, was of such a
nature that it was impossible to submit an accurate and
competitive
tender. This was explained to SAA by Menzies when it asked for an
extension of the deadline for the tender as well
as the provision of
certain important information such as the ground schedules. This
request, as already has been stated, was
summarily refused by SAA.
[16
] The
other bidders being Swissport and Bidair, and to a limited extent the
fourth respondent, Equity Aviation Services (Pty) Ltd
(Equity), had
all previously performed the SAA work for which the tenders had been
requested. In particular Swissport and Bidair
had for the six months
immediately prior to the request for bids been engaged in exactly
this work on behalf of SAA. They accordingly
must have been in
possession of all the relevant information relating to the ground
schedules and the equipment, the purchase of
which formed part of the
bid requirements. Equity had done this work for SAA prior to 2007
and accordingly was also possessed
of some of the relevant
information.
[17
] The
importance of being in possession of the ground schedules is
graphically described by Black at page 484 of the papers, where
he
makes the following comments in answer to a claim that Flight
Schedules had been provided in the tender documents:
“…
.the
information contained in SAA’s flight sche
dules
is inadequate for the purposes of preparing a detailed submission and
costing of the provision of ramp handling services to
many aircraft
represented in the flight schedule. Unless one can establish which
plane is arriving and at what specific time,
how long it will remain
on the ramp, what services it will require and what its next
destination is, any accurate analysis of the
number of staff, the
nature of the equipment and the time periods required to perform the
necessary servicing is little more than
conjecture.
Given the scope of SAA’s operations, it was manifestly
unreasonable for SAA to expect any experienced operator to submit a
competitive quotation based on such paucity of information. I have
no doubt that any bids, other than those of Swissport, for
the ramp
handling services would of necessity have had to err on the side of
dearness. The only party favoured in that scenario
is Swissport, who
because of their hands-on experience through the preceding months,
was in a position to construct an accurate
and therefore keenly
costed proposal. That such a proposal would give them a huge
competitive advantage in a supposedly fair and
equal tendering
process cannot be gainsaid.”
[18] It is
Menzies case that the procurement process followed by SAA in the
circumstances of this case, and in the light of the
special position
of the other bidders, was not fair, equitable, transparent, or
competitive and in the result, cost effective as
is required by
section 217 of the Constitution, nor was such process procedurally
fair as required by PAJA.
SAA’s case:
[19
] The
first defence raised by SAA is that Menzies was not a party to the
“
tender
process
”
having only registered an interest to participate therein. For
this reason it has no
locus
standi
to bring the present application, so it was submitted.
[20
] Additionally,
and in the alternative SAA relied on the evidence of Ms. Lee-Ann
Swart “
procurement
specialist for ground handling
”
who was the person who was in charge of the administration of the
tender process which is the subject matter of the present
application.
[21
] It
is SAA’s case that by furnishing all the bidders with its
flight schedules and certain other information this was sufficient
to
enable each of them to put in bids within the time period given to
them. Ms Swart conceded that the ground schedules were not
furnished
to any of the bidders, but significantly makes no mention of this
manifest gap in the information furnished by SAA.
[22
] Ms
Swart makes the further point that if Menzies required any further
information it could have asked for it and this would have
been
furnished within 24 hours of such request. No such request were
made. The other bidders did ask for further information
and this was
in fact provided to them.
[23
] In
addition she specifically denied that the tender period was too short
or that the bidders, other than Menzies, were in any
way advantaged
by the fact that they had done and were in the process of doing work
which was the subject matter of the tender
application relevant to
this case.
[24
] She
also referred to the fact that Ian Michael van Rooyen (van Rooyen)
who had been employed by SAA up to December 2007 as head
of airport
operations, was now a director of Menzies. She said that he was
therefore in a position to provide Menzies with all
the necessary
information in order to put it on an equal level to the other
bidders.
An analysis of the cases presented and the consequent legal
issues:
[25] The first issue to be decided
is whether the “
tender
process”
as
described in these papers can legally be described as administrative
action within the meaning of PAJA.
[26] The various elements forming
part of the “
tender
process
”
are identified. They include SAA’s decision which resulted in
it inviting persons to bid for “
a
joint partner arrangement”
during June 2008 for the rendering of ground handling services to it
throughout South Africa. It invited Menzies and the other
selected
parties to bid on the advertised terms. It set the closing date for
the submission of the bids to be 1 July 2008, it
included what it
regarded as the relevant information as part of the request for bids,
it decided not to extend the closing date
for bids or to provide
further information as requested by Menzies. In my view these
decisions all formed part of the process
and constitute individually
and collectively the administrative action referred to as the “
tender
process
” for
ground handling services in terms of the bid document. In the
circumstances I am of the view that Menzies, as an invited
bidder has
locus standi
to bring the present application.
[27] The fact that SAA has over 58
000 flights a year, both locally and internationally, is ample
evidence that the provision of
ground services to cater for these
flights at South Africa’s major airports, is a complex
operation. Ms Swart’s contention
to the contrary must be
rejected as being a bald denial in the face of Black’s detailed
and convincing evidence. There is
no answer to Black’s
statement that to expect anyone to prepare a proper tender even if
they were on 17 June given all the
information necessary in the time
period afforded it, is unrealistic.
[28] Van Rooyen’s evidence
that it would be ridiculous to expect him to remember the details
required to formulate a bid must
be correct. This is factually
supported by a perusal of the ground schedules for one week which
were provided in terms of rule
35(12). This schedule constitutes 89
pages of detailed information. Black’s evidence as to precisely
what is entailed in
calculating the bid to be made, has not in any
way been contradicted. In this regard had SAA disagreed with Black’s
evidence
on this issue, one would have expected it to lead evidence
in this regard. More significantly there was no contrary evidence by
anyone on behalf of Swissport or Bidair, who are the parties who must
have been and were at all times in possession of such information
and
who have a real interest in gainsaying Black’s evidence.
[29] Despite Ms Swart’s
protestations that a request for further information by Menzies would
have resulted in such information
being furnished to it within 24
hours, it was not in issue between the parties that the applications
brought by Menzies in terms
of Rules 35(12) and 53 have not resulted
in the production of the ground schedules requested. As has already
been mentioned to
the date on which this matter was argued in court,
the ground schedule for only one week has been furnished by SAA.
This is hardly
enough for Menzies to meaningfully tender. In
addition, as is pointed out by Black, if any further information had
been given
to any of the other bidders as claimed by Ms Swart, this
should also have to been given to Menzies. This was one of the
conditions
of the tender process. The information which was
furnished has been described, and it plainly shows that such
information was
totally inadequate for a bid to be made by a party
such as Menzies.
[30] Menzies’ contentions
regarding the other bidders being in an advantageous position
compared to it in furnishing tenders
within the very short period
given, has not in any way been contradicted, save for bald denials by
Ms Swart. She is plainly not
a person with the expertise to
meaningfully deal with Menzies’ detailed allegations in this
regard. It is again significant
that no person better qualified than
her has deposed an affidavit on behalf of the SAA on this extremely
important issue. Again
the people who would be best able to deal
with this issue, namely employees of Swissport and Bidair, have not
said anything, save
that they abide the order of this court.
[31] In answer
to the submission
by SAA that Menzies is unable to point to any particular natural
person who acted in bad faith or has done anything arbitrarily
or
capriciously, or that the tender was not done within the ambit of
sections 195 and 217 of the Constitution, Menzies’ reaction
is
that the facts speak for themselves. This is not a matter where the
acts of any particular natural person is put in question.
It is the
conduct of SAA, as an entity, that is being attacked. It is beyond
doubt that:
by
the request for a bid being cast in the terms it was regarding time
periods and with the failure by SAA to furnish ground schedules,
Menzies was severally handicapped in its bid compared to the other
bidders. In effect the only parties who could meaningfully
put in
bids were those who already had the necessary information and would
need no time to make any further enquiries or do any
further
research. These two parties were Swissport and Bidair, who as has
already been mentioned, were doing the relevant work
at the time of
the tender.
The attitude
adopted by SAA in refusing to extend the tender time period without
consulting any of the other bidders when it was
informed of Menzies’
difficulties is evidence that it was not really interested in
obtaining a bid from Menzies. It had
been told that Menzies’
Chief Executive Officer, Black, had been out of the country for most
of the nine working days from
17 June to 1 July, that a decision
would have to be made by Menzies’ board in London and without
the ground schedules it
was physically impossible for Menzies to
submit a proper bid. It, however, ignored these considerations when
it refused Menzies’
application for an extension of time, and
for further information to be furnished.
[32
] When
all the facts are looked at one is forced to the inescapable
conclusion, as submitted by Menzies counsel, that the whole
tender
process was a sham to legitimise the current situation of Swissport
and Bidair continuing to perform the services they were
at that time
doing. In other words maintaining the status quo.
The legal position:
[32] As I have already found the
decision of SAA to put the contract out to tender and the process
followed in doing so constitutes
administrative action as defined in
PAJA.
Transnet Limited v Goodman Brothers (Pty) Ltd
[2000] ZASCA 151
;
2001 (1)
SA 853
SCA. Furthertrade Two (Pty) Ltd v MEC for Roads and Public
Works, Eastern Cape
2007 (6) SA 442
(CKHC).
[33] It is a decision taken by an
organ of state exercising a power in terms of the Constitution or
performing a public function
in terms of legislation.
[34] The action of SAA affected the
rights and legitimate expectations of Menzies and had a direct,
external effect - a contract
was concluded with Swissport and Bidair
as a result of the “
bid
process
” and not
with Menzies. SAA was constrained to exercise its public power in
compliance with the Constitution, which is the
supreme law. In
particular section 217 of the Constitution and section 3 of PAJA are
of importance. See
Pharmaceutical Manufacturers Association
of South Africa and Another : In Re Ex Parte President of the South
Africa and Others
[2000] ZACC 1
;
2000 (2) SA 674
(CC)
at para 27, 45 and 51.
Logbro Properties CC v Bedderson NO
and Others 2003(2) SA 460 (SCA)
par
5 at 465 F – 466C.
[35] In the Logbro Properties case,
supra at paras 8 and 9 at 466 H – 467 C Cameron JA referred to
the “
ever flexible
duty to act fairly
”
that rested, in that case, on a provincial tender committee. The
same principles apply here. In my view the fair procedure
is not a
matter of secondary importance, it goes to the very heart of the
administrative process. As stated by Wade and Forsyth,
Administrative Law, 7
th
edition “
Procedural
fairness and regulatory conduct are the indispensible essence of
Liberty
”. The
same authors make the point that a violation of natural justice makes
the decision concerned void (See pages 491 -516).
[36] It is a principle of
administrative law in this country that tender procedures are vital
to the very essence of effective government
procurement policies.
These procedures may well be described as intended to ensure that
government, and therefore SAA, before
it procures goods or services,
or enters into contracts for the procurement thereof, has ensured
that a proper evaluation is done
of what is available, at what price
and whether or not that which is procured serves the purposes for
which it is intended. It
has as its duty the obligation to ensure
that SAA gets the best price and value for that which it pays.
Conclusion:
[37] The shortcomings in the tender
process as described above, were so serious as to make the “
tender
process”
flawed
and justifies intervention by this court. An important bidder was
excluded from properly participating in a multi-million
rand tender
for a five year contract with weighty national and international
ramifications.
[38] Fairness entails a
consideration not only of the interests of the excluded tenderer
(Menzies) but also the interests of all
the constituents who are
effected thereby. These include the State as the sole shareholder of
SAA, the taxpayer who’s taxes
to a large extent fund the
operations of SAA and the public who have to rely on the ground
handling services provided by the service
providers such as Menzies
at the airports in question.
[39] Menzies was ostensibly invited
to tender and certainly wished and, accordingly to the affidavits
filed on its behalf, continues
to wish to do so. It was prevented
from submitting a tender because of the manifest insufficiency of
time to formulate a bid and
the paucity of reasonably required
information which had to be supplied to it for this purpose.
[40] I agree with Menzies’
counsel’s submission that the extremely short time constraints
under which Menzies was required
to prepare a tender is in itself
strongly suggestive of procedural unfairness. The reason for such a
tight deadline has not been
adequately explained – the process
itself was a selective tendering process where only a few licensed
ground handlers were
invited to bid. This would in itself have
expedited matters.
[41] It must have been plain to SAA
that Menzies was not possessed of the information which the other
tenderers had. This enabled
them to make their bids timeously.
Notwithstanding this fact it insisted that Menzies complied with the
requirements of the tender,
despite its protestations.
[42] In all the circumstances I am
of the view that the review should succeed and that a final order
should be issued in terms of
paragraph 1.1. of Menzies’ notice
of motion, and that any contract concluded with SAA pursuant to the
present tender provisions
should be set aside. What has been stated
in this judgment is to be taken into account by SAA if it is minded
to call for new
tenders for its ground handling services at airports
in South Africa.
[43] Counsel were agreed that this
is a matter which justified the employment of two counsel by each
party. It is also necessary
to mention that the costs awarded should
include those reserved on 27 May 2009 when this matter was postponed
by agreement.
[44] The following order is made:
1. The tender process for ground handling services in terms of the
bid document with reference number GSM029/08RFB, including any
contract that might have been concluded with any respondent pursuant
thereto, is reviewed and set aside.
2. The first respondent is ordered
to pay the costs of this application, such costs are to include the
costs of two counsel and
are also to include the wasted costs
reserved as a result of the postponement of 27 May 2009.
_________________________
P BLIEDEN
JUDGE OF THE HIGH COURT
COUNSEL FOR THE APPLICANT D.F.
Irish SC
R.G.L. Stelzner
INSTRUCTED BY MacGregor Stanford
Kruger Inc.
COUNSEL FOR THE FIRST
RESONDENT I.A.M. Semenya SC
S.M. Lebala SC
INSTRUCTED BY Mdlulwa Nkuhulu
Inc.