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2024
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[2024] ZAECMKHC 128
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Sthathu Funding (Pty) Ltd v Amathole District Municipality and Others (5049/2024) [2024] ZAECMKHC 128 (27 November 2024)
IN
THE HIGH COURT OF SOUTH AFRICA
(EASTERN CAPE
DIVISION, MAKHANDA)
Not Reportable
CASE NO. 5049/2024
In the matter between:
STHATHU FUNDING (PTY)
LTD
Applicant
and
AMATHOLE DISTRICT
MUNICIPALITY
First respondent
SKG AFRICA (PTY)
LTD
Second respondent
CHIPCOR DEVELOPERS
(PTY) LTD
Third respondent
KOLOSA PROJECTS (PTY)
LTD
Fourth respondent
JUDGMENT
LAING J
[1]
This is an urgent application to interdict the
first respondent from proceeding with a tender for the lease of
office accommodation,
pending review proceedings.
[2]
It is common cause that the first respondent
initially advertised a tender with a closing date of 12 June 2024.
The applicant submitted
a bid for R 54,841,646; the second
respondent’s bid was for R 96,226,627. The first respondent did
not proceed with the evaluation
of the bids because both were
non-responsive; they exceeded the price for the stipulated preference
point system, as prescribed
under the Preferential Procurement Policy
Framework Act 5 of 2000 (‘PPPFA’) and the regulations
thereto. It decided,
instead, to advertise a second tender, based
substantially on the first, but stipulating that either the 80/20 or
the 90/10 preference
point system would apply, depending on the value
of the lowest acceptable bid received. Points would be awarded for
price and specific
goals, which comprised four categories: black
youth (4 or 7 points), black women (4 or 7 points), people with
disabilities (1 or
3 points), and military veterans (1 or 3 points).
[3]
The first respondent’s advertisement of the
second tender prompted the applicant’s institution of the
present proceedings.
The issue of interim relief is before court,
which only the first respondent opposes.
[4]
In its papers, the first respondent challenged the
urgency of the matter, indicating that the applicant had known about
the second
tender when it was advertised on 28 October 2024. This
overlooks the fact, however, that the applicant made three separate
enquiries
about the status of the first tender and why the second
tender had been advertised. The final ultimatum was 14 November 2024.
The
first respondent simply refused or failed to respond,
constraining the applicant to launch its application. Mindful of the
closing
date for the second tender, being 28 November 2024
(tomorrow), the urgency is obvious.
[5]
Turning to the merits of the matter, the
requirements for interim relief are well-known. The applicant’s
claim to a
prima facie
right
is founded on the constitutional requirements for public procurement,
given effect through the PPPFA and its regulations.
Importantly, the
applicant recognizes that an organ of state such as the first
respondent is authorized to implement a procurement
policy that
provides for categories of preference in the allocation of contracts,
as well as the protection or advancement of persons
disadvantaged by
unfair discrimination. This is clear from section 217(2) of the
Constitution. The applicant also accepts that
section 2 of the PPPFA
provides a framework for the implementation of a preferential
procurement policy and that the first respondent’s
supply chain
management policy (‘SCMP’) is based thereon. At the core
of the applicant’s challenge, however,
is the argument that the
first respondent’s selection and inclusion of the specific
goals, as stipulated, as well as the
corresponding points to be
earned in relation to each category, was irrational. The inclusion of
the goals in question amounted
to a so-called ‘cut and paste’
exercise, using, without qualification, the example provided in the
SCMP. There was
no rational connection between the decision to
include such goals and the purpose of such decision. Consequently,
the applicant
contends that this gives rise to a reviewable
irregularity under the Promotion of Administrative Justice Act 3 of
2000 (‘PAJA’).
[6]
In contrast, the first respondent points out that
the inclusion of the specific goals was done in compliance with the
SCMP. That
was, on its own, sufficient.
[7]
The court is inclined to agree with the first
respondent. The Constitution expressly allows categories of
preference in the allocation
of contracts; it also allows for the
protection or advancement of persons disadvantaged by unfair
discrimination. Globally, public
procurement is recognized as a
mechanism by which the state can promote certain socio-economic
objectives. It can well be argued
that the first respondent’s
decision to include the goals stipulated in the second tender was to
facilitate the achievement
of,
inter
alia
, the socio-economic objectives
encapsulated in section 217(2) of the Constitution and given effect
through the PPPFA and its regulations.
There is a rational connection
between the decision and the purpose.
[8]
Regarding the points to be earned under each
category, the first respondent has clearly weighted the goals to give
preference to
black youth and black women. This is consistent with
the stated objective in its SCMP:
‘
[t]he
municipality endeavours to allocate projects to designated groups, in
particular, black women and black youth owned businesses.’
[9]
The SCMP goes on to state that the first
respondent’s procurement of goods and services will be done in
accordance with the
PPPFA, which permits the implementation of the
SCMP to achieve the goal of contracting with persons historically
disadvantaged
by unfair discrimination based on race, gender, or
disability. The decision to include people with disabilities as a
separate category
aligns with such purpose. Regarding military
veterans, it might well be debatable whether this is a category
envisaged in terms
of the legislative framework, but it cannot be
refuted that it is stipulated as such in the SCMP. The applicant has
challenged
neither the lawfulness of the category nor the lawfulness
of the policy itself.
[10]
In the present matter, the determination of
whether the applicant has a
prima facie
right overlaps to some extent with the
determination of whether the applicant has demonstrated a
well-grounded apprehension of irreparable
harm. Overall, the court is
not satisfied that the first respondent has infringed the applicant’s
prima facie
right
to just administrative action; more particularly, it has not
infringed the applicant’s right to a procurement process
that
complies with the relevant constitutional and legislative
requirements. The first respondent’s decision to select the
specific goals specified in the second tender is rationally connected
to the purpose contemplated under section 217(2) of the Constitution,
amplified in the PPPFA and its regulations, and expressed in the
first respondent’s SCMP. The court is also not satisfied
that,
if the procurement process is allowed to proceed, then irreparable
harm will be caused to the right in question.
[11]
The
applicant, in argument, placed considerable reliance on the decision
in
SMEC
South Africa (Pty) Ltd v South African National Road Agency
,
[1]
where Du Plessis AJ held that irreparable harm lay in the possibility
that a party’s constitutional rights would be infringed
if such
party was subjected to an unconstitutional scoring system.
[2]
A party such as the applicant could not be expected to participate in
a possibly unlawful and unconstitutional process. The learned
judge
held that the party’s inability to do so was harmful.
[3]
[12]
Because the court in the present matter has
already found that there is no indication that the applicant’s
prima facie
right
to a lawful procurement process has been or will be infringed, there
is no need to consider, further, the relevant principles
discussed in
SMEC
.
Nevertheless, irreparable harm means injury or damage that cannot be
rectified, remedied or made good. It is unclear why such
harm as
might be caused to the applicant by its participation in the second
tender would be irreparable when there was still the
possibility of
successful review proceedings.
[13]
Possibly the most problematic of the remaining
requirements is the question of the balance of convenience. In this
regard, the applicant
asserts that, without interim relief, it might
be required to participate in a procurement process that could be
reviewed and set
aside. If the interdict is granted, however, then
the first respondent could continue with the second tender where a
review court
finds that there were no reviewable irregularities. This
seems to ignore the common cause fact, however, that the existing
lease
between the applicant and the first respondent will expire on
28 February 2025. The date is slightly more than three months away.
The applicant has not indicated any intention or willingness to
extend the agreement; the first respondent does not, in any event,
wish to do so. The failure to secure alternative office accommodation
will, as the first respondent has argued, attract the risk
of
irregular expenditure as well as the more fundamental dilemma of
where and how to accommodate the numerous councillors and staff
involved. The potential inconvenience caused to the applicant,
however, is negligible.
[14]
Regarding the final requirement for interim
relief, it would appear to be indeed so that no alternative remedy
exists for the applicant.
Considering the court’s findings in
relation to the other requirements, however, the satisfaction of this
requirement advances
the applicant’s case no further.
[15]
It is
necessary, at this stage, to mention an additional aspect raised in
argument, viz. the extent to which interim relief would
infringe the
separation of powers doctrine. In
National
Treasury and Others v Urban Tolling Alliance and Others
,
[4]
the Constitutional Court warned that a temporary restraint against
the exercise of statutory power, well ahead of the final adjudication
of a claimant’s case, could be granted only in the clearest of
cases and after careful consideration of separation of powers
harm.
[5]
The principle was
confirmed in
Economic
Freedom Fighters v Gordhan and Others
,
[6]
where the Constitutional Court held that an interdict that prevented
a functionary from exercising public power impacts on the
separation
of powers and should therefore only be granted in exceptional
circumstances.
[7]
This court
accepts, however, that the case law appears to distinguish the
circumstances described above from matters where the
claimant seeks
interim relief in relation to a procurement process, pending review
proceedings.
[8]
Nothing more
needs to be said in that regard.
[16]
In conclusion, the court holds that the applicant
has not successfully demonstrated that it has met the requirements
for interim
relief. There is no reason why the successful party
should not be entitled to its costs, which, considering the
complexity and
value of the matter and its importance to the parties
concerned, attract the level of scale C.
[17]
The following order is made:
(a)
the application brought in terms of Part A of the
notice of motion is dismissed; and
(b)
the applicant is ordered to pay the first
respondent’s costs in accordance with scale C.
JGA LAING
JUDGE OF THE HIGH
COURT
APPEARANCE
For the
applicant:
Adv Watt
Instructed
by:
Drake Flemmer & Orsmond
Quenera
Office Park
12
Quenera Drive
Beacon
Bay
EAST
LONDON
angus@drakefo.co.za
c/o De
Jager & Lordan Inc
2
Allen Street
MAKHANDA
Tel:
046 622 2799
Emal:
stuart@djlaw.co.za
chantal@djlaw.co.za
Ref:
ST/cb/S733
For the
respondent:
Adv Nhlapo
Instructed
by:
Tsika Attorneys Inc.
Suite
D Knobel House
308
Oxford Street
EAST
LONDON
5200
Email:
admin@tsikalaw.co.za
Ref:
MBT/ADM
c/o
Mabece Tilana Attorneys
39 New
Street
MAKHANDA
6139
Email:
office@mtilaw.co.za
Date
heard:
26 November 2024.
Date of delivery of
judgment:
27 November 2024.
[1]
2023
JDR 3374 (GP).
[2]
At
paragraph [27].
[3]
At
paragraphs [31] and [32]. The court referred to the decision of
Rogers J in
SMEC
South Africa (Pty) Ltd v City of Cape Town
[2022]
ZAWCHC 131
(23 June 2022).
[4]
2012
(6) SA 223 (CC).
[5]
At
paragraph [47].
[6]
2020
(6) SA 325 (CC).
[7]
At
paragraph [42].
[8]
The
applicant cited several decisions, including one from this division,
Down
Touch Investments (Pty) Ltd v The South African National Road Agency
SOC Limited
2020
JDR 2278 (ECG), at paragraph [44].