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2024
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[2024] ZAECMKHC 61
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Likunga Protection and Security Services (Pty) Ltd v Emalahleni Local Municipality and Another (673/2023) [2024] ZAECMKHC 61 (13 June 2024)
IN THE HIGH COURT OF
SOUTH AFRICA
(EASTERN CAPE
DIVISION, MAKHANDA)
Case
no:
673/2023
Reportable
YES/NO
In the matter between:
LIKUNGA PROTECTION &
SECURITY
Applicant
SERVICES (PTY)
LTD
and
EMALAHLENI LOCAL
MUNICIPALITY
First respondent
SOV
SECURITY SERVICES CC
Second
respondent
JUDGMENT
Cengani-Mbakaza AJ
Introduction
[1]
By
way of the amended notice of motion filed of record and issued on 23
June 2023, the applicant, a security services provider and
a private
company registered in terms of the
Companies Act No. 71 of 2008
,
seeks an order reviewing and setting aside the decision made by the
first respondent (“the Municipality”).
[1]
The decision relates to the award of the tender (“a tender or a
bid”) under bid ELM/1/7/2022T in favour of the second
respondent. Furthermore, the applicant seeks an order that either:
(a) substitutes the Municipality’s decision with one that
appoints it, alternatively; (b) to remit the decision to award
the second respondent back to the Municipality for reconsideration.
The application is opposed by both the Municipality and the second
respondent.
[2]
On 27 July 2022, the Municipality’s Bid Evaluation Committee
(“Municipality’s
BEC”) issued a request for the bid
(“RFB”) for the provision of security services for a
period of three years.
The bid’s closing date was 26 August
2022.
[3]
The details on the conditions of the bid were fully outlined at pages
25-78 of the
RFB
, inter alia,
as follows:
‘
Bidders
will be adjudicated in accordance with the Municipality’s
Supply Chain Management Policy in terms of Preferential
Procurement
Policy Act new regulations 2017 and will be based on 80/20 points
system…
Completed MBD 1, MBD 3.3,
MBD 4, MBD 6.1, MBD 7, MBD 8 and MBD 9.
All other relevant
pre-requisites as detailed in the bid documents shall apply.
Failure to complete all
the supplementary information will result in bidder being deemed
non-responsive …’
[4]
Among the set of documents that were to be completed and duly signed,
one in particular
included the MBD 5 where it was expected of the
bidders to declare whether they were by law, required to submit a
three-year Annual
Financial Statements (“AFS”) for
auditing and, if so, to submit same. The MBD 5 was to be completed
for all the procurement
that exceeded R10 million rand.
[5] The applicant
submitted its bid along with other 24 bidders. The Municipality’s
Bid Adjudication Committee (“the
Municipality’s BAC”)
disqualified the applicant’s bid due to its omission to submit
a three-year audited AFS.
Subsequently, the Municipality’s BAC
recommended the appointment of the second respondent. It is against
this background
that the second respondent is cited in the
proceedings.
[6] The crisp
issue is whether the Municipality committed a reviewable irregularity
when it excluded the applicant on
account of failing to furnish the
audited AFS for the previous three years.
The applicant’s
case
[7]
In his supplementary founding affidavit, Mr Mbulelo Vincent Mxoli,
the applicant’s
director asserts that the requirement to
submit the audited three-year AFS which is MBD 5 of the tender
documentation was
not consistently applied to other bidders. He
further concedes that he failed to submit an AFS. The following is
extracted in paragraph
15 of his supplementary founding affidavit:
‘
15.
The Applicant admits not having submitted the audited AFS as an
oversight as its MBD 5 was completed and referred to the AFS
as
attached. Please refer to ‘
R1’
attached. However, the Applicant’s contention is that the
submission of the AFS was not a mandatory requirement to test the
responsiveness of the bids and, if it is found that indeed it was a
requirement for responsiveness, the requirement was not applied
consistently and unfairly applied on the Applicant as more fully set
our hereunder.’ [Footnote omitted.]
[8]
The applicant further avers that the second respondent failed to
submit an audited
three-year AFS. The statements submitted were not
signed.
The Municipality’s
case
[9]
In his answering affidavit Mr Thobela Terrence Javu, the
Municipality’s erstwhile
manager, avers that the listed
documents in section F of the RFB were inclusive of the MBD 5. The
applicant completed the MBD 5
and indicated that it was by law
required to prepare the three-year AFS. It also indicated on the form
that it would attach and
submit the requisite AFS but failed to do
so.
[10]
All the bidders were informed about the requirement to submit AFS.
The second respondent, so
it is averred, submitted the three-year
audited AFS and won the tender.
The second
respondent’s case
[11]
In his answering affidavit, Mr Viwe Mbobo, who completed and
furnished all the documents required
in the RFB on behalf of the
second respondent, declares that he understood the tender conditions.
Consequently, he made it his
business to submit the second
respondent’s audited AFS for 2019/2020, 2020/2021 and 2021/2022
financial year.
[12]
He states that the copies attached to the applicant’s founding
affidavit are not the best
of the clear copies, the lack of signature
may be that the copies were made from another copy. In his answering
affidavit, the
second respondent has annexed the three-year AFS as
VM-1, VM-2 and VM-3 respectively.
The legal framework
[13]
The
Constitution of the Republic of South Africa (“the
Constitution”) and the Procurement Preferential Policy
Framework
Act
[2]
(“PPPFA”) set out a legislative framework in terms of
which decisions may be taken in the procurement process. The
general
rule under s 217 of the Constitution is that all public procurement
must be effected in accordance with a system that is
fair, equitable,
transparent, competitive and cost-effective.
[3]
[14]
These
core principles of public procurement are given effect by a range of
statutes and subordinate legislation such as the regulations
made in
terms of the PPPFA and policies and guidelines, such as supply-chain
management policies of bodies.
[4]
In
Allpay
Consolidated Investment Holdings (Pty) Ltd and Others v Chief
Executive Officer, South African Social Security Agency and
Others
[5]
, Froneman
J emphasized that ‘compliance with the requirements for a valid
tender process, issued in accordance with
the constitutional and
legislative procurement framework, is thus legally required',
and that they are not merely internal
prescripts that may be
disregarded at whim’.
[15]
In terms of section 239 of the Constitution, the Municipality is an
organ of the state, therefore a
decision to reject a tender is an
administrative action as defined in terms of section 1 of the
Promotion of Administrative Action
Act 3 of 2000 (the PAJA). The
power to review an administrative action is sourced in the
Constitution
[6]
and PAJA.
[7]
The
parties’ legal submissions and analysis by the court
[16]
Mr Mphithi, counsel for the applicant argued that the submission of
the AFS was not a mandatory
requirement.
He
further criticized the manner in which the RFB was formulated. He
argued that the failure by the Municipality to include MBD
5 in the
RFB and in particular in the list of the section that specified the
required documents rendered the RFB vague.
[17]
Mr Bodlani SC, counsel for the Municipality,on the other hand, argued
that as part of the requirements
for the tender, the Municipality had
stipulated that the bids would be adjudicated in terms of the
Municipality’s Supply
Chain Management Policy and PPPFA. In
terms of the Municipal Finance Management Act, 56 of 2003 (MFMA), if
the value of the transaction
is expected to exceed R10 million vat
included, and if the bidders are required by law to prepare annual
financial statements for
auditing, they are required to furnish their
audited annual financial statements for the past three years as part
of the tender
conditions.
[18]
Counsel further argued that the Municipality clearly stipulated the
tender conditions and the
failure to submit the audited three-year
AFS was communicated with the applicant and it failed to comply with
the tender conditions.
Ms Nxazonke-Mashiya, counsel for the second
respondent raised similar submissions to those made by counsel for
the Municipality.
[19]
Whenever a court is called upon to review a decision of a public
body, its powers are limited. The court’s
duty is not to usurp
the functions of the administrative agent. Section 8 of the PAJA
provides for remedies in proceedings for
judicial review, and in
particular section 8(2) provides for a court to grant an order that
is just and equitable. The full Court
in
WDR
Earthmoving
[8]
,
Plasket
J (as he then was) held:
‘
Administrative
action may only be set aside by a court exercising its review powers
if it is irregular. It may not be interfered
with because it is a
decision a judge considers to be wrong’.
[20]
Whether the applicant’s tender offer was correctly declared as
non-responsive has to be
decided in the context of the decision in
Dr
JS Moroka Municipality &Others v Betram (Pty) (Ltd) &
Another
[9]
,
where it was held that it was for the Municipality and not the court
to decide the prerequisites for a valid tender. It is
well-established
that a failure to comply with the prescribed
conditions would result in a tender being disqualified as an
“acceptable tender”
unless those conditions were
immaterial, unreasonable and unconstitutional.
[21]
In the present instance, I disagree with the arguments raised by the
applicant’s counsel
for the following reasons: Section 168 of
the Local Government; MFMA, in particular Regulation 21(
d
)
provides:
‘
A
supply chain management policy must determine the criteria to which
bid documentation for a competitive bidding process must comply,
and
state that in addition to regulation 13 the bid document must
…
(
d
) If the value
of the transaction is expected to exceed R10 million (VAT included),
require bidders to furnish―
(i) If the bidder
is required by law to prepare annual financial statements for
auditing, their audited annual financial statements-
(
aa
) for the past
three years;or
(
bb
) since
their establishment if established during the past three years.’
[22]
From this extract, it is clear that the submission of the AFS for a
three-year period in cases
where the value of the transaction is
expected to exceed R10 million is a mandatory requirement.
In
casu
, it is common cause that the tender was for more than R10
million. The applicant’s counsel criticized the Municipality
for
its failure to list the MBD 5 in the section that dealt with
checklist of the documents that were required. Considering the fact
that the MBD 5 was annexed in the RFB as part of the documents that
were required to be completed by the tenderers, this criticism
has no
basis. The Municipality was very explicit in what it intended to
achieve.
[23]
The applicant’s completion of MBD 5 document clearly
illustrates that the applicant was
fully aware of what the
Municipality intended to achieve. Furthermore, the applicant admitted
that the failure to submit the audited
three-year AFS after it
completed MBD 5 was due to an oversight on its part. In a competitive
environment, as in the present case,
the Municipality cannot be
blamed for the omissions caused by a tenderer who failed to pay
attention to the stipulations of the
RFB. The obligation to furnish
the audited three-year AFS is statutorily prescribed. The Supreme
Court of Appeal in
WDR
Earthmoving Enterprice & Another v Joe Gqabi District
Municipality and Others
(“WDR
Earthmoving”)
acknowledged
that the failure to provide the requisite audited AFS cannot be
regarded as trivial, or of a minor nature. Consequently,
the
requirement cannot be described as immaterial, unreasonable or
unconstitutional.
[10]
Based on
the aforesaid, the Municipality was correct in concluding that the
applicant’s bid was non-responsive, therefor
it was entitled to
disqualify the applicant’s tender.
[24]
The two further arguments raised by the applicant’s counsel
need consideration. Referring
to the SCA’s decision in
WDR
Earthmoving
,
[11]
the applicant’s counsel argued that the second respondent
submitted statements which were unaudited and therefore its bid
should have been declared non-responsive in accordance with the
tender conditions. Had the submission of the AFS been a requirement,
the second respondent would not have been awarded the tender, so the
argument continued. The three- year AFS that were annexed
in the
second respondent’s offer were unaudited on the basis that they
were unsigned, he argued. The applicant’s counsel
further
argued that the first respondent’s decision to award the tender
to the second respondent should be remitted to the
Municipality for
reconsideration. By contrast, the second respondent submitted that
the three-year AFS were properly signed by
the auditors and the
applicant’s copies faded because a lot of copies were made from
the original.
[25]
It is observed that
WDR
Earthmoving
case has distinct elements that make it different from the present
case, and these differences are relevant to the decision-making
process. In the case of
WDR
Earthmoving
,
there was a consensus that the AFS were not audited. The SCA ruled
that the fourth respondent’s tender was deemed non-responsive
due to its failure to submit audited AFS for a period of three years.
In the current case, there is a disagreement about whether
the
three-year AFS were audited or not, and this dispute triggers the
application of
Plascon
Evans
[12]
principle.
[26]
After examining the second respondent’s three-year AFS, I
specifically requested that the applicant’s
counsel provide a
convincing argument to support their claim regarding the second
respondent’s three-year AFS. However, their
argument was
unconvincing because the second respondent’s three-year AFS,
which is part of the documents submitted to the
court bear the
signature of one Mr Tshabalala with practice number BAP (SA) 1725
purportedly the auditor, on page 1 of the documents.
Although the
signature appears on the first page of the filed documents and not on
the other pages, it is undisputed that the AFS
were audited by the
same firm of auditors, and each statement includes the following
components: accountant’s report, member’s
approval, audit
committee responsibilities, statement of comprehensive income,
statement of financial position, statement of cash
flows, and
statement of changes in equity. The inclusion of all these requisite
components in the AFS squarely rebuts the applicant’s
claim
that the Municipality’s decision lacked reasonable grounds or
justification. Therefore, the applicant’s claim
that the
Municipality acted arbitrarily or capriously in awarding the tender
to the second respondent lacks legal merit. It stands
to reason
therefore that the applicant has failed to make out a case for the
relief sought. In the exercise of my judicial discretion,
I find no
compelling reason to deviate from the established principle that the
successful party should be awarded costs, and therefore,
I rule that
the costs should follow the event.
Order
[27]
The following order shall issue:
The review application
is dismissed with costs.
N CENGANI-MBAKAZA
ACTING JUDGE OF THE
HIGH COURT OF SOUTH AFRICA
APPEARANCES
:
Counsel
for the Applicant:
Adv.
Mphithi
Instructed
by:
TSHANGANA
ATTORNEYS
C/o
YOKWANA ATTORNEYS
10
New Street
MAKHANDA
Ref.:
N Yokwana/L87
046
– 622 9928
Counsel
for the First Respondent:
Adv:
A.M Bodlani SC and Adv: A Tshabalala
Instructed
by:
TALENI
GODI KUPISO INC.
C/o
AKHONA GEORGE & ASSOCIATES
118
High Street
Millbarn
Centre
MAKHANDA
Ref.:
Ms A George
Tel.:
046 – 004 0025
Counsel
for the Second Respondent:
Adv:
Nxazonke-Mashiya
Instructed
by:
NDZO
ATTORNEYS
C/o
MGANGATHO ATTORNEYS
7
Somerset Street
MAKHANDA
Ref.:
A Mgangatho/S0169
Tel.:
073 524 3586
Date
Heard:
18
April 2024
Date
Delivered:
13
June 2024
[1]
The
municipality is an organ of the state with separate legal entity
which is duly constituted in terms
of
section 2 of the Local Government Municipal Act 32 of 2000.
[2]
The
Preferential Procurement Policy Framework Act 5 of 2000
is a
national legislation as contemplated in terms of section 217(3) of
the Constitution.
[3]
Airports
Company South Africa SOC Ltd v Imperial Group Ltd and Others
2;
[2020] 2 All SA 1(SCA)
;
2020 (4) SA 17
(SCA) at para 64.
[4]
Joubert
Galpin Searle Inc. and Others v Road Accident Fund and Others
2014
(4) SA 148
(ECP) A
2014 (4) SA p148
at para 57
.
See
also
WDR
Earthmoving Enterprises and Another v Joe Gqabi District
Municipality and Others
(ECG)
unreported case no CA 298/2016 of 13 March 2017.
[5]
2014 (1) SA 604
(CC) at para 40.
[6]
Section 33 of the Constitution provides:
‘
Just
administrative action
(1) Everyone has the right to
administrative action that is lawful, reasonable and procedurally
fair.’
[7]
Section 6 of the PAJA sets out a list of ‘grounds’ on
which courts can review administrative action. These grounds
of
review include illegality, procedural unfairness, irrationality,
unreasonableness, and other unconstitutional or unlawful
action.
[8]
WDR
Earthmoving
(note
4 above) at para 10.
[9]
[2014] 1 All SA 545
(SCA). See also
Alfred
Nzo Municipality and Others v Tekoa Consulting Engineers (Pty) Ltd
(ECG)
unreported case no CA07/2023 of 20 June 2023.
[10]
(392/2017) [2018] ZACSA 72 (30 May 2018) at para 21.
[11]
Ibid.
[12]
In terms of the Plascon Evans principle, when factual dispute
arises, relief should b egranted only if the facts stated by the
respondent, together with the admitted facts in the applicant’s
affidavits justify the order.
Plascon
Evans Paints Ltd v Van Riebeeck (Pty) Ltd 1984 (3) 623.