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2024
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[2024] ZAECELLC 33
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Afrocentric IP (Pty) Ltd v Buffalo City Metropolitan Municipality and Others (EL575/2024) [2024] ZAECELLC 33 (15 April 2024)
IN THE HIGH COURT OF
SOUTH AFRICA
(EASTERN CAPE
DIVISION, EAST LONDON CIRCUIT COURT)
CASE NO: EL575/2024
NOT REPORTABLE
In the matter between
AFROCENTRIC IP (PTY)
LTD
Applicant
and
BUFFALO CITY
METROPOLITAN
MUNICIPALITY
First Respondent
THE MUNICIPAL MANAGER,
BUFFALO CITY
METROPOLITAN
MUNICIPALITY
Second Respondent
MEC RESPONSIBLE FOR
COOPERATIVE
GOVERNANCE &
TRADITIONAL AFFAIRS,
EASTERN CAPE
Third Respondent
CHAIRPERSON OF
PROJECTS BOARD,
BUFFALO CITY
METROPOLITAN
MUNICIPALITY
Fourth Respondent
BRIEF REASONS AND
RULING
UNDER PART A OF
APPLICATION
FOR INTERIM RELIEF
HARTLE J
[1]
The applicant seeks interdictory relief
under Part A pending a judicial review under Part B.
[2]
In the latter respect the applicant seeks
the review firstly of the first respondent’s decision (“
the
first impugned decision
”) that
it took in terms of its procurement processes to publish the Request
for Quotation (“
RFQ
”)
preceding the appointment of Durchame Asset Management and Accounting
(Pty) Ltd (“
Durchame
”)
to “
assist the Department with
addressing the audit qualifications for 2022/2023 financial year for
a period of four months
”, and
secondly, the purported termination by the municipality of a service
level agreement that the municipality entered
into with it which was
due to expire by effluxion of time on 29 November 2024 but for the
unlawful termination (“
the second
impugned decision
”).
[3]
Although
the Municipality
[1]
opposed the
application on the basis that urgency was self-created, the parties
were in agreement, each for reasons of their own,
that the matter
should be promptly heard before me and instantly determined, at least
in respect of the relief sought under Part
A to clarify Ducharme’s
position. The latter the company was appointed by it on 12
March 2024 pursuant to the RFQ aforesaid
for a specific short term
objective.
[4]
On the issue of the objection by the
Municipality of the non-joinder of “
Ducharme”,
the manner in which Mr. Dyke who
appeared for the applicant reframed the proposed notice of motion to
allow for an expedited return
date to deal with this isolated facet
would have catered for Ducharme’s interests in the short term
given the claimed urgency
in the matter. By virtue of my ruling
I make herein however it is unnecessary to rule on the question
whether I should have
non-suited the applicant or deferred the
determination of the issues sought to be promptly resolved under Part
A until it was joined.
The parties are in agreement that based
on the relief sought in both applications Ducharme would have a
direct and substantial
interest in the matter and has, according to
Mr. Dyke who appeared on its behalf, now being appropriately served.
(The applicant
contends that it would certainly have joined it sooner
had it been timeously apprised of its identity before launching the
application
and if the municipality had not deflected that it should
find out of its identity via media the machinery of the Promotion of
Administrative
Justice Act, No. 3 of 2000 (“
PAJA
”).
[5]
The most critical aspect is whether the
applicant has established a
prima facie
right to assert its entitlement to the relief sought pending the
review application. (It is a trite principle that the
requirements
which an applicant for an interlocutory relief must
establish are firstly such a right coupled with a well-grounded
apprehension
of irreparable harm if the relief is not granted and the
ultimate relief is eventually granted that, the balance of
convenience
favours the granting of the interim relief sought, and
the absence of any other satisfactory remedy.)
[6]
The applicant has clarified two bases for
its interest in the matter.
[7]
Not only is it concerned with the purported
termination of its service level agreement under perceived mysterious
and claimed unlawful
circumstances which it contends should not be
countenanced in the realm of public law since it would be
ultra
vires
the legislation governing how the
municipality is required to conduct its affairs and how,
constitutionally, issues if procurement
and cancellation should be
approached, but it contends that the appointment of Ducharme under
the RFQ mechanism was in effect to
substitute it as the exclusive
provider of these services pending the natural expiry of its service
level agreement.
[8]
Whatever suspicions the applicant initially
entertained that Ducharme was upstaging it, however, this was
evidently laid to rest
in what was revealed by the Municipality in
its answering affidavit. It transpires that it had, by way of
public advertisement
on 22 April 2022 already and well before there
was any hint of a dispute between the applicant and the Municipality
arising from
the terms of their service level agreement, procured the
appointment of a panel of professional service providers to assist
the
municipality with “
Financial
Management Support for a period of three years
”.
Ducharme was self-evidently appointed to that panel on 6 July 2023
under a different contract (CE 430), and was thereupon
appointed from
that panel in terms of the RFQ on 12 March 2024. (The only
scrutiny that remains is around the timing of the
order being issued
to Ducharme relative to the applicant’s own unique relationship
with the municipality and the termination
of its service level
agreement.)
[9]
It is evident that the applicant was
appointed under a different contract (CE 351) for the “
Supply,
Implementation, Support and Maintenance of an Integrated, Full Asset
Life Cycle Management System
” for
a period of three years. Even if conceptually these services
may overlap, little purpose is served for present
purposes in trying
to map the areas of commonality with a fine-tooth comb.
[10]
The
municipality has also provided what appears to be an objective
motivation for its appointment latterly of Ducharme as a consequence
of adverse audit findings by the Auditor-General extensively revealed
in Annexure “AA 20”, which is dated 19 November
2023.
This it would be entitled to do under Chapter 2 of the
Local
Government Municipal Systems Act, No. 32 of 2000
, especially when a
service delivery agreement is expected to expire or be terminated
within the next twelve months.
[2]
[11]
The Municipality was in my view ostensibly
within its rights to appoint a member from the panel pursuant to a
RFQ mechanism.
Whilst the timing of the appointment may appear
suspicious, the municipality has in my view established an objective
entitlement
and need
per se
for the kind of services contemplated by the municipality that
Durchame is expected to provide for a limited basis.
[12]
There are vast implications of the
statutory obligations on the municipality to promptly address a
qualified audit and even though
the applicant alleges that it has
achieved a clean audit for the municipality before, it has nowhere
suggested that it is presently
in a position, given its obviously
troubled relationship with the municipality going back to September
2023 and its failure to
have gone on site, even if not of its own
making, to address the concerns of the Auditor-General in this is
short term.
[13]
Though there is still much to be explained
and investigated around the circumstances under which the applicant
claims to have been
sidelined and not to have been prevailed upon
itself to engage with the Auditor-General’s adverse findings in
the scope of
its works, there is in my view an objective imperative
to permit the municipality to address these issues as it has through
the
short term appointment of Ducharme for the limited period and
purpose. The applicant cannot claim that by allowing that work
to continue it will suffer irreparable harm inasmuch as it has been
precluded from doing the work not as a result of the appointment
of
Ducharme
per se
by virtue of the second impugned decision taken. The
municipality by its own concession is not duplicating services by its
appointment of Ducharme in the short term and, but for the
termination of the service level agreement, would have been obliged
to honour both agreements going forward, but for the claimed unlawful
termination.
[14]
But the applicant does in my opinion have a
prima facie
right insofar as its unique relationship with the municipality is
concerned and within the realm of the constitutional value of
legality to question the claimed unlawful termination of its service
level agreement. In this regard the issue of exclusivity
of
services and the timing of Ducharme’s appointment may have a
bearing, but the applicant has in my view not established
a
prima
facie
right insofar as the RFQ and the
appointment of Ducharme is concerned.
[15]
Even if I am wrong in this respect,
however, I would in the exercise of my discretion whether to have
granted the interdict pending
a review of the first impugned decision
have declined to grant the relief for the reasons stated in paragraph
10 above.
[16]
In summary, with regard to the requested
scrutiny into the circumstances under which the applicant came to be
sidelined and its
availability to provide the professional services
that it was contracted to bring, the applicant certainly has a
pressing interest
which it is entitled to pursue by way of the
interdictory relief sought concerning its own affairs as envisaged in
prayer 3 of
the notice of motion under Part A.
[17]
The
applicant correctly alleges in my view that although its parochial
contractual issues are at stake the municipality’s
conduct in
terminating the agreement is very much in the arena of public law and
it is entitled to an expectation that the municipality
will conduct
its contractual affairs properly in this regard. Any suggestion
of constitutionally invalid conduct or conduct
that threatens to
undermine the constitutional value of legality underpins a
prima
facie
right and gives ground to the requirement of reasonably anticipated
harm.
[3]
[18]
It is for example of concern that the
municipality is seeking to augment reasons for terminating the
service level agreement and
has further intimated that it will ask
for a rectification (regarding the service level agreement’s
starting date) to render
the issue of any review moot. Even if
a review court finds that the Municipality was entitled to hold the
applicant to account
in its relationship with it as a service
provider, it cannot avoid a legality review by simply wishing away
the contract.
Instead of satisfying this court that there is no
harm to be envisaged for the applicant in its recent justification
for termination
of the service level agreement, which has grown since
the issue of the present application, it instead reinforces the need
for
proper scrutiny and underscores the applicant’s claims that
it will likely succeed in the proposed review of the second impugned
decision.
[19]
As the applicant has further pleaded there
is much at stake for it not only in respect of its financial
interests arising in terms
of the agreement but also from the point
of view of its standing as a professional entity in the context of
the work envisaged
in the service level agreement. It does not
sit well with it for the service level agreement to have been
prematurely terminated
for reasons which casts aspersions on its
professional repute.
[20]
I am accordingly inclined to grant to the
applicant the interim relief sought in resepct of the second impugned
decision pending
the proposed review under Part B. By the
municipality’s own insistence that Durcharme’s
appointment is unrelated,
the balance of convenience favours the
service level agreement remaining in place pending the review.
As for the question
of costs I am satisfied that these should follow
the result even if the applicant has only been partially successful.
The
municipality could surely assuaged the applicant’s
reasonable concern that its conduct toward it was not above board in
its
appointment of Durchame if it had appreciated the very public
nature of its procurement processes.
[21]
In the result I issue the following order
under Part A:
1.
The first respondent is interdicted and
restrained from giving effect to the termination letter sent to the
applicant and/or its
attorneys on 8 March 2024 and confirmed on 22
March 2024 pending the finalization of the review application under
Part B.
2.
The first, second and fourth respondents
are liable for the costs of the application under Part A.
3.
The costs shall include the costs of
employing two counsel, where applicable.
B HARTLE
JUDGE OF THE HIGH COURT
DATE OF
HEARING
:
11
April 2024
DATE
OF JUDGMENT :
15 April 2024
Appearances:
For
the applicant:
Mr.
B Dyke SC instructed by Poswa Incorporated c/o Drake Flemmer &
Orsmond (EL) Inc., East London (ref. Mr. Pringle).
For
the first, second & fourth respondents:
Mr.
S Rorke SC instructed by Wesley Pretorius & Associates, East
London (ref. Mr. Pretorius).
[1]
This
is a collective reference to the first, second and fourth
respondents cited herein.
[2]
See
section 77
(b)(ii).
[3]
See
for example
Down
Touch Investment (Pty) Ltd & Another v SA National Road Agency
SOC Ltd & Another
2064/2000
[2020] ZAECGHC 120 (29 October 2020) and
LSM
Security & Others v MEC, Department of Social Development, EC
(2300/2022) [2023] ZAECGQBHC 12 (24 January 2023).