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IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE DIVISION, CAPE TOWN)
JUDGMENT
Reportable
Case no: 2025-155065
In the matter between:
PHUHLANI BAFAZI CONSTRUCTION (PTY) LTD Applicant
t/a CHUMA SECURITY SERVICES
and
PASSENGER RAIL AGENCY OF SOUTH AFRICA LTD First Respondent
THE CHAIRPERSON OF THE BOARD OF THE Second Respondent
PASSENGER RAIL AGENCY OF SOUTH AFRICA
THE GROUP CHIEF EXECUTIVE OFFICER OF Third Respondent
THE PASSENGER RAIL AGENCY OF S AFRICA LTD
SECHABA PROTECTION SERVICES Fourth Respondent
WESTERN CAPE (PTY) LTD
CHIPPA TRAINING ACADEMY CC Fifth Respondent
t/a CHIPPA PROTECTION SERVICES
Neutral citation:
Coram: ROUX AJ
Heard: 5 September 2025
Delivered: 1 October 2025
Summary: Pactum de non cedendo , subject to the prior written consent of a
contracting party – Does not render an assignment between the other contracting
party and a third party invalid – operates inter partes.
Non-variation clause – Does not prevent suspension of the enforcement of the right
to resist a verbal assignment.
Arbitration clause – Inapplicable if the arbitrator lacks jurisdiction to determine one or
more of the defences raised. Compliance by an organ of state with the legal
framework for procurement raises a constitutional issue, and , if applicable, the
exercise powers conferred on a court by section 172(1) of the C onstitution, all of
which fall outside the jurisdiction of an arbitrator.
Invalidity of contract - Alleged failure to comply with legal framework for procurement
– General reliance on section 217 of the Constitution is insufficient in the case where
the accounting official has given effect to section 217 of the Constitution and the
Public Finance Management Act by establishing a lawful procurement system –
Party relying on invalidity is required to allege and prove the specific breach of the
relevant provision of the procurement system.
Notice of termination – Invalid notice does not preclude a contracting party from
relying on a subsequent notice – Validity of notice depends on compliance with legal
requirements and may, where applicable, be implied – Averments made in pleadings
or affidavits in motion proceedings may constitute a valid notice.
Legitimate expectation to be heard – Where contractual rights are procur ed in a
procurement setting through cession, thereby circumventing an open and public
procurement process, the regulation of such rights through a no -cession clause
cannot give rise to a legitimate expectation to be heard.
ORDER
(a) The applicant is entitled to continue rendering services in terms of a
(a) The applicant is entitled to continue rendering services in terms of a
month-to-month agreement concluded with PRASA in or about April
2022, on the terms and conditions contained in the master agreement,
dated 3 May 2011, and attached to the founding paper s under the
abovementioned case number as annexure “LN1”, until 3 0 November
2025.
(b) The respondent is ordered to pay 50% of the applicant’s costs, including
the costs of two counsel, on scale C in respect of the (senior) junior
counsel and on scale B in respect of junior counsel.
JUDGMENT
ROUX AJ:
A. INTRODUCTION
[1] The appl icant seeks interim interdictory relief on the premise that the first
respondent, being the Passenger Rail Agency of South Africa Ltd (“PRASA”)
unlawfully terminated the parties’ contract . It is contended that, as a
consequence, the applicant’s entire business, including the positions of its 329
employees, is placed at risk. PRASA disputes th at the applicant has any
prima facie or clear contractual right. It contends that the applicant is not
without an alternative remedy, asserting its entitlement to claim damages, and
further disputes that the balance of convenience favours the grant of the
interim relief sought by the applicant.
[2] The applicant , Phuhlani Bafazi Construction (Pty) Ltd trading as Chuma
Security Services (hereinafter referred to as “Phuhlani”), is a private
company duly registered in 2017 . The second and third respondents are,
respectively, the chairperson of the board and the CEO of PRASA. The fourth
and fifth respondents are other security service providers engaged in the
relevant sector.
B. BACKGROUND FACTS AND CIRCUMSTANCES
[3] It is common cause that PRA SA and High Goals Investments CC, which
traded as Chuma Security Services (hereinafter referred to as “High Goals”),
in 2011 concluded a written agreement in terms whereof High Goals t/a
Chuma rendered security services to PRASA for a period of one year (“the
master agreement”).1 It is further common cause that from time to time the
master agreement was extended in writing and continued to operate on a
month-to-month basis on the same terms and con ditions (hereinafter referred
to as “the extended master agreement”).2
[4] Unfortunately for High Goals its commercial fortunes took a turn for the worse
and it was finally wound up on 20 January 2021.
[5] The liquidators proceeded to realise the value in the extended master
agreement by ‘selling’3 it to Phuhlani. In terms of the sale agreement Phuhlani
purchased the business assets and name 4 of High Goals , which assets
included the agreement described as the “current month to month service
agreement with PRASA”, which was expressly stated to be subject to clause 5
thereof (hereinafter referred to as “the sale agreement” ). Clause 5 of the
sale agreement provides that the service agreement between High Goals and
PRASA has expired and is operating on a month -to-month basis . It is also
expressly recorded that Phu hlani accepted the risk that the said agreement
might not be continued. The liquidators, for their part, expressly disclaimed the
ability to give any guarantee in that regard.
[6] The sale agreement was concluded on 14 April 2022. On 25 April 2022
Phuhlani, acting through its managing director Ms Ngcwangu, purported to
notify PRASA’s Western Cape regional manager , Mr Maseko, that it had
acquired the business of Chuma t/a Security through a sale agreement, which
was alleged to have been attached to the email. The notice was directed to
the email address r[...]. The said email address is inconsistent with the email
address subsequently employed for communication with Mr Maseko, namely
R[...], which issue will be addressed hereinbelow.5
[7] It is ex plained that the p urported notification was intended to ensure th e
continuity of High Goals ’ ongoing operations. It is alleged that following the
continuity of High Goals ’ ongoing operations. It is alleged that following the
purported notification Phuhlani continued to render security services under the
1 Para 42-43 of founding papers.
2 See footnote 1 above.
3 Properly characterised, the rights arising from the agreement were ceded for value.
4 That is the name ‘Chuma Security Services’.
5 See annexures LN5, 6, 7 and 14 attached to the founding papers.
master agreement, thereby ensuring continuity of employment and
uninterrupted protection of PRASA’s infrastructure .6 In the circumstances it
appears that the liquidat ors of High Goals continued to render services under
the master agreement until Phuhlani purported to step into the shoes of High
Goals through the purported assignment of the extended master agreement.
[8] Phuhlani continued to render the services in question at various sites until 1
September 2025, when, at the instance of PRASA, employees of the fourth
and fifth respondents were deployed to those sites, thereby displacing and
excluding the employees of Phuhlani from performing their duties.
[9] The said displacement was preceded by a purported notice of termination,
sent by PRASA to Phu hlani on 29 August 2025 at 16h31, in which Phuhlani
was directed to vacate and handover all PRASA sites. In the said notice it was
asserted that no lawful legal relationship existed between PRASA and
Phuhlani. It was alleged that Phuhlani was unlawfully passing itself off as High
Goals, and that the said conduct also constituted a contravention of section
217 of the Constitution of South Africa , as well as the supply chain
management policies of PRASA. The notice thus served as the formal
precursor to the displacement, framing PRASA’s rationale for excluding
Phuhlani’s employees from the sites.
[10] Phuhlani ultimately seeks the review and setting aside of PRASA’s decision to
terminate the services of Phuhlani’s by means of the said notice . For
purposes of the present application , it seeks interim relief pending the review
of the purported notice of termination, in the form of a declaratory order to the
effect that Phu hlani is entitled to continue rendering services on the same
terms and conditions previously contracted for, as well as an order
suspending the appointment of any other security service provider to perform
such services.
C. LEGAL REQUIREMENTS
6 Para 52-53 of the founding papers.
[11] It is trite that in order for Phu hlani to be successful i t must establish a prima
facie right – though open to s ome doubt – a reasonable apprehension of
irreparable harm to the right if the interdict is not granted , that the balance of
convenience favours the granting of interim relief, and the absence of another
satisfactory remedy. The stronger the right is, the less need there is for
the balance of convenience to be considered. The Court must weigh the
prejudice the applicant will suffer if the interim interdict is not granted against
the prejudice to the respondent if it is.
[12] The proper approach in determining whether to grant an interim interdict is to
take the facts set out by the applicant, together with any facts set out by the
respondent which the applicant cannot dispute, and to consider whether,
having regard to the inherent probabilities, the applicant should on those facts
obtain final relief at the trial (or, in the present matter, on the date when final
relief is sought : Erasmus op cit at E8-10; Gool v Minister of Justice 1955 (2)
SA 682 (C) at 688D -E). The facts set up in contradiction by the respondent
should then be considered and, if serious doubt is thrown upon the case of the
applicant, it cannot succeed. It is not necessary for an urgent court to make a
final determination on the legal issues.7
[13] The main disp ute in the matter relates to the question whether Phu hlani has
established a contractual right enforceable against PRASA for the rendering
of security services.
D. CONTRACTUAL RIGHT AND THE DEFENCES THERETO
[14] In its founding papers, Phuhlani pinned its colours to the mast of the tacit
assignment of the extended master agreement entered into between PRASA
and High Goals . It is expressly alleged that PRASA from time to time issued
extension letters to High Goals pursuant to which it continued to render
security services to PRASA on the same terms and con ditions, that is the
security services to PRASA on the same terms and con ditions, that is the
same terms and conditions contained in the master agreement . In the
7 Ezaga Holdings (Pty) Ltd v National Student Financial Aid Scheme Coinvest Africa (Pty) Ltd and
Others [2024] ZAWCHC 190
circumstances, the sale agreement purported to assign the rights and
obligations contained in the extended master agreement to Phuhlani.
[15] Phuhlani asserts that it notified PRASA of the said assig nment. Thereafter, for
a period of about three years , it rendered the same security services
previously provided by High Goals , and claimed and received payment for
those services . On this basis, it is co ntended, a tacit assignment of the
extended master agreement was effected.
[16] PRASA denies that Phu hlani acquired any rights under the extended master
agreement. In advancing the said denial, it relies on a number of provisions
contained in the master agreement.
[17] First, the master agreement contain s a pactum de non ce dendo (“the no -
cession clause”). The language is clear – it provides that High Goals shall not
cede, delegate or assign any of its righ ts and/or obligations under th e
agreement to any third party without the prior full written consent of PRASA ,
which consent may be withheld for any reason whatsoever.
[18] Second, the master agreement provides that in the event that High Goals is
liquidated PRASA shall be entitled, without notice , to cancel the agreement
(“the cancellation clause”).
[19] Third, the master agreement contains a standard non-variation clause.
[20] Fourth, the Master agreement contains a standard arbitration clause.
[21] PRASA also contends that the tacit agreement upon which Phuhlani seeks to
[22] rely is invalid and unenforceable, as it was not concluded in compliance with
section 217 of the Constitution, the applicable public procurement legislation,
nor with PRASA’s own supply chain management policies.
E. THE NO-CESSION CLAUSE
[23] PRASA, invoking the no -cession clause, asserts that the sale agreement is
invalid on the basis that it was concluded in breach of the no-cession clause.
The said contention is legally unsustainable. It rests on the fundamentally
flawed premise that a clause inser ted exclusively for PRASA’s own benefit —
prohibiting cession without its prior written consent — has the legal effect of
rendering void and of no force and effect any agreement of cession concluded
between High Goals and a third party.
[24] The said appr oach is inconsistent with the doctrine of contractual privity . It is
trite that, as a general rule, a contract cannot confer rights or impose
obligations on any person - except the parties to it. As such, third parties
cannot sue or be sued on contracts to which they were not privy to. 8 The said
rule of contract law has many exceptions, one of which is cession.
[25] That means , as between the parties to the master agreement, the rights
procured by High Goals are not transferable through cession , that is a third
party cannot through cession step into the shoes of High Goals, in its capacity
as a contracting pa rty to the master agreement , unless the jurisdictional
requirement is met, being prior written consent.9
[26] In addition, notwithstanding the absence of prior written consent, PRASA is
also free to waive10 or suspend its right to insist upon prior written consent . In
the case of a waiver the no-cession clause shall have no effect - in the case of
a suspension, it shall have no effect for the duration of such suspension.11
[27] Accordingly, unless the jurisdictional requirements are met or PRASA
otherwise elects not to exercise its said contractual right, the contractual right
precluding cession operates only inter partes, that is between the contracting
parties to the (extended) m aster agreement and not against third parties
insofar as they contract independently or separately with one of the parties to
insofar as they contract independently or separately with one of the parties to
the (extended) m aster agreement . The rights created in terms of the
8 Christie’s, The Law of South Africa, 7th Edition, at p. 302.
9 Capespan (Pty) Ltd v Any Name 451 (Pty) Ltd 2008 (4) SA 510 C; Born Free Investments 364 (Pty)
Ltd v Firstrand Bank Ltd 2014 (2) All SA 127 SCA.
10 In terms of clause 39.1 it is required that any waiver be recorded in writing and signed by the
parties.
11 See the case law referred to hereinbelow under the heading ‘pactum de non petendo’.
(extended) master agreement cannot be enforce d against such third party in
relation to a separate contract , as it was not privy to the (extended) m aster
agreement. Simply put, the creation of personal contractual rights between A
and B , cannot bind C, unless one of the exceptions to the doctrine of
contractual privity is applicable.
[28] Cession constitutes an exception to the said rule for the reason that it has the
legal effect of substituting one party with another. It is this act of stepping into
the shoes of a contracting party that allows for the relaxation of the rule of
contractual privity. Through the said act , the third party becomes privy to the
contract, and therefore becomes bound to the rights and obligations created
through such contract. Accordingly, it is the third party’s act of enforcement of
the rights purportedly ceded – against the holder of the right precluding
cession without its prior written consent – which brings the two within the
range of contractual privity. It is in this contractual setting that the holder of the
said right is entitled to resist the enforcement of any of the rights purportedly
ceded on the basis that, as between the parties to the said contract, such
rights are incapable of cession, unless the jurisdictional requirements for their
valid cession have been met or has been waived or the protection afforded
against cession has been suspended by agreement.
[29] In the circumstances , the agreement of sale is not rendered invalid or of no
force and effect, as contended for by PRASA. The no-cession clause does not
constitute a public prohibition against cession as if it has legislative effect. The
characterisation of rights as non -transferable simply means that such rights
are non -transferable as between the parties to the contract. That does not
mean that the liquidators of High Goals, who by operation of law stepped into
the shoes of High Goals, cannot enter into a lawful contract in terms whereof it
the shoes of High Goals, cannot enter into a lawful contract in terms whereof it
undertakes to cede the rights of High Goals , procured under the master
agreement, to a third party such as Phuhlani.
[30] The law of contract acknowledges many instances where party A contracts
with party B on the basis that B’s performance owed to A would involve B
having to buy something from a third party called C. For instance, B ma y sell
C’s property to A notwithstanding the fact that B has no right to sell C’s
property. If B proceeds to enter into such an agreement with A’s knowledge,
on the basis that he undertakes to acquire C’s property or to obtain the right to
sell it to A, su ch an agreement would be perfectly valid. (See: SA Mohair
Brokers v Louw and Others 2011 JOL 27450 (SCA) at para. 6 thereof.) The
fact that A contracts with B on the basis that B will have to enter into some or
other agreement with C is of no concern to A. It does not affect their
consensus. Their consensus is that B will deliver the property to A. In this
context, the reasoning of the Appellate Division in the matter of Frye’s (Pty)
Ltd v Ries 1957 (3) AD 575 at p. 581 B is illuminating:
“Furthermore, it matters little whether things are one’s own or belong to
others, insofar as the seller is put under obligation to buy up such
property in the other person’s hands and to make it good, unless it
prefers to have judgment given against him for damages if he has
knowingly sold the property of another …”
[31] Having regard to the aforesaid, it is clear that there is no principle of law which
prevent parties from contracting in relation to the property of another 12,
thereby contemplating some further agreement by one of the parties with the
owner of the property. There is no conceivable reason why the said principle
should not be equally applicable to the cession of rights for value or otherwise.
[32] In the present matter the liquidators of High Goals expressly contracted on the
basis that it could give no guarantee that the extended master agreement
would be continued. Hence, the parti es expressly regulated the risk of non -
continuance, which - in the absence of any admissible evidence - means that
Phuhlani agreed to bear all such risks, including PRASA’s potential reliance
on the no -cession clause . There are many legitimate business rea sons for
undertaking such a risk , one of which may be that Phuhlani felt confident that
undertaking such a risk , one of which may be that Phuhlani felt confident that
it could persuade PRASA to waive the said right of non -transferability or to
agree to its suspension.
[33] In the circumstances, PRASA’s defen ce premised on the alleged invalidity of
the sale agreement must fail. However, insofar as Phu hlani purports to
12 The general principle is self-evidently subject to all the ordinary exceptions which vitiate consensus.
enforce the cession embodied in the sale agreement against PRASA, it is fully
entitled to resist such enforcement through reliance on the no-cession clause.
[34] It is common cause that Phuhlani has failed to establish that the jurisdictional
requirement for a valid cession ha s been met – that is (full) prior written
consent.
[35] In an atte mpt to avoid the reach of the no -cession clause Phuhlani, in a note
filed after the hearing , contended that the extended master agreement
constituted a new agreement and not an extension of the master agreement.
It further contended that the allegations made in the founding papers to the
effect that Phuhlani rendered services pursuant to the master agreement
constituted concessions of law made in error which are not binding on the
Court.
[36] The said contentions do not address the common cause facts that High Goals
rendered services to PRASA on the same terms and conditions contained in
the master agreement. The fact that a new agreement or multiple new
agreements were concluded through each extension does not detract from the
said fact.
[37] Accordingly, PRASA is fully entitled to rely on the terms of the extended
master agreement to dispute that Phu hlani acquired any right enforceable
against PRASA under the extended master agreement through the sale
agreement and the cession contained t herein, unless Phuhlani was able to
overcome the barrier created by the no-cession clause.
F. PACTUM DE NON PETENDO
[38] Phuhlani attempted to do so by relying on a tacit contract on the following
facts and circumstances:
(a) It informed Mr Maseko, the Western Cape regional manager of
PRASA on 25 April 2022 that it had purchased High Goals in terms
of the sale agreement and that it would continue rendering security
services to PRASA under the trading Chuma (Security Services) and
would mak e available its bank account details for payment . The
transmission of the said email was not addressed by PRASA in its
answering papers, although the use of the email address r[...] is
inconsistent with the email address subsequently employed for
communication with Mr Maseko, namely R[...], raising doubt s about
the effectiveness and rec eipt thereof. However, the said doubt is
dispelled by further evidence.
(b) In a termination notice addressed to the liquidators of High Goals on
29 August 2025 by Mr Papadopulo, the acting group chief security
officer of PRASA, he acknowledged that PRASA had discovered
during a routine compliance review in 2022 that Phuhlani was
rendering security ser vices to PRASA since 2022 under the alleged
‘false pretense’ that it was High Goals. Most notably, it was alleged
that Phuhlani, acting as such, defrauded PRASA. It was also alleged
that the said conduct ‘contravened’ the no -cession clause . In
addition, it was alleged that the rendering of security services by
Phuhlani contravened the provisions of section 217 of the
Constitution, the applicable legislation and PRASA’s supply chain
management policies. Consequently, it was asserted that the
rendering of the said services did not vest any legal rights in
Phuhlani.
(c) The alleged discovery in 2022 renders the allegations of fraud and
‘passing off’ incomprehensible. The reference to the year 2022 either
constitutes a colossal error on the part of PRASA – which was not
corrected -, alternatively PRASA inexplicably failed to appreciate the
significance thereof. In this regard Phuhlani continued to render
security services to PRASA pursuant to the extended master
agreement until the displacement of its employees on 1 September
2025, that is for a period of about three years depending on the
exact date of the discovery made in 2022.
(d) It is self-evident that PRASA’s conduct in receiving security services
from Phuhlani, in place of High Goals , from the date of discovery in
2022 to 29 August 2025, with full knowledge of the fact s concerning
the identity of the actual party rendering the s ervices and the party
who contractually was obliged to render it , in effect constitutes the
substitution of High Goals by Phuhlani, which in turn amounts to the
delegation of the obligation to render such services.
(e) The said delegation must be considered in conjunction with the
notices sent by Phuhlani to Mr Nkhuna of PRASA on 27 March 2024
and 3 April 2024 respectively. In the said notices it was made clear
that payment was requested to be made into Phuhlani’s bank
account.
(f) In addition, the liquidators of High Goals on 30 August 2024
addressed an email to Mr Papadopulo, in terms whereof it informed
PRASA that Phuhlani had purchased the business of High Goals13
and requested that all payments for the rendering of security
services by Phuhlani should be made directly into their bank
account.
(g) The said notice is significant, as it puts the only evidence adduced
by PRASA on this issue in perspective. PRASA asserted that the
fact that Phuhlani continued to render invoices in the name of High
Goals constituted proof t hat it falsely represented to be High Goals .
It attached all the said invoices to its answering papers and on the
strength thereof asserted that PRASA did not contract with Phuhlani.
However, it is clear that PRASA, for the reasons stated, knew that
the services were rendered by Phuhlani. Accordingly, the inferences
sought from the fact that invoices were issued in the name of High
Goals are inconsistent with PRASA’s own direct evidence on the
issue.14 Furthermore, the inference s sought to be drawn are also
13 The heading read together with the contents make it clear that the reference to Chuma S ecurity
was meant to be a reference to High Goals t/a Chuma.
was meant to be a reference to High Goals t/a Chuma.
14 That it knew since 2022 that Phuhlani was rendering security services to PRASA.
inconsistent w ith the notices sent to Messrs Nkhuna and
Papadopulo. In terms of the said notices, it is clear that Phuh lani, as
well as the liquidators , not only informed PRASA that Phuhlani was
the person who was claiming payment for the services rendered, but
also attempted to correct the error that payments were continued to
be made into High Goals’ bank account.
(h) Phuhlani in reply explained the said state of affairs by stating that a
certain official of PRASA, one Mr Fusa, informed Mrs Ngcwangu, the
managing director of Phuhlani, that it would be difficult to change the
particulars on the system and that Phuhlani should in the meantime
continue raising invoices in the name of High Goals. 15 It was alleged
that Mr Fusa assured Mrs Ngcwangu that the ‘Hlophe order’16 would
protect Phuhlani. The said explanation raises serious concerns .
However, in the absence of any evidence from PRASA, apart from
the attachment of the invoices, Phuhlani’s explanation for the raising
of invoices in the name of High Goals has to be accepted.
Accordingly, on the papers PRASA made payment to High Goals for
the security services rendered by Phuhlani, which is consistent with
the cession of the right to payment in terms of the extended master
agreement.
(i) It is important to bear in mind that Mr Papadopulo, who is the acting
head group chief security officer of PRASA deposed to the
answering affidavit and did not deal with the notice sent to him by the
liquidators. Furthermore , it is clear from Mr Papadopulo’s emails
attached to the papers that he communicated with Messrs Nkhuna
and Fusa on the subject of security services rendered by security
service providers who were party to the so -called ‘Hlophe order’.
Accordingly, the said gentlemen are persons who are required, as
part of their duties owed to PRASA, to receive correspondence from
Phuhlani.
15 Par 10.9, where this issue is dealt with in t he replying affidavit , is illegible and incomplete. The
Court was handed an unsigned copy of the said part of the affidavit, which properly set out Phuhlani’s
version. The unsigned affidavit was by agreement admitted as evidence.
16 The background to the said order will be addressed hereinbelow.
[39] In my view, t he most probable conclusion from the aforesaid facts and
circumstances is that PRASA and Phuhlani entered into a tacit agreement , in
terms whereof Phuhlani replaced High Goals a s the contracting party to the
extended master agreement , and , pursuant thereto, rendered security
services to PRASA in return for payment (hereinafter referred to as “the tacit
agreement”).17 The no-cession clause was clearly intended to operate solely
for the benefit of PRASA . PRASA, by entering into the tacit agreement ,
agreed to suspend the enforcement of the no -cession clause. 18 Such an
agreement is not precluded by the non -variation clause, as it does not have
the effect of varying the terms of the extended master agreement .19 It only
temporarily suspends PRASA’s right to insist on its prior written consent for
any assignment (or cession or delegation) , However, PRASA is fully entitled
to enforce such right at any time upon reasonable notice.
G. CANCELLATION CLAUSE
[40] PRASA also relies on the cancellation clause . The said clause confers on
PRASA the right to cancel the extended master agreement in the event of
High Goals’ liquidation. It is common cause that High Goals wa s liquidated on
20 January 2021. Hence, PRASA acquired the right to cancel the extended
master agreement , should it so elect. However, the said e lection had to be
exercised within a reasonable time and , once exercised , PRASA was
precluded from altering course - it became legally bound by its election.
[41] PRASA, on its own version , elected to continue with the extended master
agreement after High Goals had been finally liquidated. I n fact, it opposes the
17 Joel Melamed and Hurwitz v Cleveland Estates (Pty) Ltd; Joel Melamed and Hurwitz v Vorner
Investments (Pty) Ltd [1984] ZASCA 4; 1984 (3) SA 155 (A);
18 Impala Distributors v Taunus Chemical Manufacturing Co (Pty) Ltd 1975 (3) SA 273 T; Kovacs
18 Impala Distributors v Taunus Chemical Manufacturing Co (Pty) Ltd 1975 (3) SA 273 T; Kovacs
Investments 724 ( Pty) Ltd v Marais 2009 ZASCA 84 para 18 and 21; Klub Lekkerrus/Liebertas v
Troye Villa (Pty) 2011 3 All SA 597 SCA;Phoenix Salt Industries (Pty) Ltd v The Lubavitch Foundation
of Southern Africa 2024 ZASCA 107.
19 The verbal waiver of the no -cession clause, as oppose to a verbal agreement to suspend the
enforcement of the right created in terms of the said clause, has the effect of varying the terms of the
agreement, which the non -variation clause prevents from having legal effect . Similarly, the reference
in the non-variation clause to the suspension of a provision or term is not sufficiently clear or wide to
preclude a verbal agreement to suspend the enforcement of a right. In this reg ard, it is important to
bear in mind that non-variation clauses are interpreted restrictively.
matter on the basis that it continued to pay the liquidators for the services
purportedly rendered by High Goals . Accordingly, PRASA elected not to
cancel the extended master agreement and is boun d by its election . Its
attempt to cancel the extended master agreement in August 2025 is therefore
of no force and effect. For the said rea son, the defence based on the
cancellation clause must also fail.20
H. THE ARBITRATION CLAUSE
[42] The defence based on the arbitration clause must also be seen in context.
First, Phuhlani is seeking an interim interdict . The arbitration clause does not
preclude it from doing so. Clause 35.4 of the master agreement expressly
provides that the arbitration clause does not preclude any party from obtaining
interim interlocutory and other relief on an urgent basis from a court of
competent jurisdiction.
[43] Second, PRASA contends that any tacit contract alleged by Phuhlani is invalid
and unenforceable, as it was concluded in co ntravention of section 217 of the
Constitution, the applicable public procurement legislation, and PRASA’s own
supply chain management policies. The said issue involves the determination
of a constitutional issue . Furthermore, should PRASA be successful with its
defence based on invalidity, a court will have to consider the powers conferred
on it by section 172(1) of the Constitution. Such powers cannot be exercised
by an arbitrator. Accordingly, PRASA’s reliance on the arbitration clause is
inapplicable – inasmuch as i t seeks to enforce an arbitration clause in
circumstances where it raises a defence which cannot be decided by an
arbitrator.21
I. INVALIDITY
20 Consol Ltd v Twee Jonge Gezellen (Pty) Ltd 2005 (4) All SA 517 C.
21 Fleet Africa (Pty) ltd v Polokwane Local Municipality 2023 JOL 61642 SCA at par 29. Independent
Development Trust (IDT) v Bakhi Design Studio CC and Others [2023] ZAGPPHC 2128; Tintswalo
Lodges (Pty) Ltd v MEC for Finance, Economic Development and Tourism, Mpumalanga and Others
Lodges (Pty) Ltd v MEC for Finance, Economic Development and Tourism, Mpumalanga and Others
(2653/2017) [2020] ZAMPMBHC 46.
[44] PRASA made the bare st of allegations on the issue of invalidity. No
particulars were given of the applicable procurement legislation , nor of the
relevant supply chain management policies.
[45] The issue must be considered within the specific context of the matter.
Phuhlani filed a supplementary affidavit in which it made specific reference to
the judgment delivered on 3 November 2023 in the matter of Sechaba
Protection Services CC (Pty) Lts and Others v PRASA 2023 ZAW CHC 280
(“the Sechaba matter”), which judgment was annexed to the said affidavit.
[46] In terms of the said judgment, supervisory orders were issued on 19
November 2019 directing PRASA to continue utilising the services of the
applicants on the same terms and conditions as had previously been
contracted for (referred to as “the first order”).22 PRASA was further ordered
to report to the Court on the status of the completion and implementation of
the 2019 tender and to present an adequate contingency safety plan ,
approved by the Railway Safety Regulator (“the requirements”).
[47] PRASA unsuccessfully attempted to obtain the discharge of the said order on
the basis that it was about to start an open and competitive procurement
process – referred to by bid number HO/SEC/002/05/2023 - and the allegation
that the safety plan had been duly approved. The Court found that there had
not been compliance with either of the requirements. Instead of simply
dismissing the application , the Court decided to replace the first order and,
inter alia, ordered that PRASA had to file an affidavit in which it was required
to state the date on which any security provider appointed in terms of the
tender would be able to commence providing security services and to provide
confirmation that the safety plan had been approved by the National Safety
Regulator (“the second order”).
[48] The second order provides that upon consideration of the affidavit the Court
[48] The second order provides that upon consideration of the affidavit the Court
shall, inter alia, consider permitting PRASA to terminate the applicants’
services on 60 days’ notice or issue further orders.
22 Referred to as ‘the Hlophe order’.
[49] Having regard to the aforesaid, it is clear that PRASA and a number of
applicants, which included High Goals, were party to the Sechaba matter . In
the said matter the Court considered PRASA’s constitutional obligation to
comply with the provisions of section 217 of the Constitution , the Public
Finance Management Act23 (“the PFM Act”) and the Preferential Procurement
Policy Framework Act24 in the context of PRASA’s further constitutional
obligation to ensure that reasonable measures are taken to provide for the
security of all rail commuters. The Court issued the aforesaid orders to ensure
the continuity of the security services provided by the applicants until the
appointment of service providers pursuant to a public tender process and
confirmation of the adequacy of the safety plan.
[50] Section 217 provides that an organ of state must contract for goods and
services in accordance with a system which is fair, equitable, transparent,
competitive and cost-effective.
[51] Section 51(1)(a)(iii) of the PFM Act provides that an accounting authority for a
public entity must ensure and maintain an appropriate procurement and
provisioning system which is fair, equitable, transparent, competitive and cost-
effective.
[52] One of the applicants in the Sechaba matter purported to rely on regulation
16A.6 of the National Treasury Regulations 25. PRASA is in fact listed as a
national government business enterprise under schedule 3 B of the Public
Finance Management Act. Regulation 16A is limited to public entities listed in
schedules 3A and 3C of the PFM Act. Accordingly, the said regulation is not
applicable.
23 Act 1 of 1999.
24 Act 5 of 2000.
25 Treasury Regulations for Departments, Trading Entities, Constituti onal Institutions and Public
Entities, GN R225 in GG27388 of 15 March 2005, as amended.
[53] Although no particulars were provided of PRASA’s procurement system, it
may, as a bare minimum be accepted that it requires compliance with section
51(1)(a)(iii), which mirrors section 217 of the Constitution.
[54] Having regard to the facts of the matter, it appears t hat Phuhlani procured the
assignment of the extended master agreement by means of the sale
agreement - without the knowledge of PRASA or any other potential supplier -
and thereafter informed PRASA of its intention to enforce the agreement
against it. This, in turn, gave rise a tacit contract, the pertinent feature of which
is that it arose without any notice or opportunity being afforded to other
potential suppliers . Accordingly, irrespective of the exact provisions of
PRASA’s procurement system or policies, in this instance no opportunity was
given to other potential suppliers to bid or otherwise offer their services.
[55] However, the said tacit contract was concluded within the specific context of
the Sechaba matter and the first and second orders. It is clear from the said
judgment that since 20 11 until the date hereof PRASA has, on some
unspecified basis , extended the respective contracts of all the applicants
without following any public tender process . Although no definitive finding can
be made on the papers, the inference – on the probabilities - is inescapable
that PRASA, by its conduct in repeatedly extending the said contracts over an
extended period, acted on the premise that it possessed the requis ite power
to do so under its procurement policy. In this context, i t is instructive that
PRASA did not allege or contend that the tacit contract, on which Phuhlani
relies, was ultra vires its procurement policy.
[56] While no particulars of PRASA’s procur ement policy have been placed before
the Court, it is a matter of common occurrence that such policies vest the
accounting officer or other relevant decision -maker with a discretion to depart
accounting officer or other relevant decision -maker with a discretion to depart
from their strict terms in defined or exceptional circumstances .26 In the
circumstances, a p lausible explanation for PRASA’s conduct in extending the
contracts of the applicants in the Sechaba matter, as well as for the
conclusion of the alleged tacit agreement with Phuhlani, is that, from PRASA’s
26 AllPay Consolidated investment Holdings (Pty) Lts and others v Chief Executive Officer, South
African Social Security Agency and others 2014 (1) SA 604 CC at par 40.
perspective, such conduct fell within the ambit of the exceptions or
discretionary deviations contemplated under its procurement policy.
[57] It is well-established that a litigant who seeks to avoid a contract on the basis
of alleged illegality or unlawfulness is required to do so expressly and with
particularity in its pleadings (in this case PRASA’s answering papers) , and
bears the onus of pro ving the factual and legal basis for such illegality , unless
it appears ex facie the transaction or from the evidence before a court, in
which case the court may mero motu decide the issue.27
[58] PRASA has failed to discharge this onus. No evidence has been placed
before the Court as to the content of PRASA’s procurement policy. This Court
cannot take judicial notice of PRASA’s procurement policy . It has to be
established under oath . It is insufficient to merely restate the provisions of
section 217 of the Cons titution and allege non -compliance therewith. This is
not a matter where the absence of a procurement system is alleged,28 nor one
in which the system itself is challenged as falling short of the requirements of
section 217. It does not appear to be in disp ute that PRASA has given effect
to section 217 through its procurement system. The question that arises is
whether PRASA has breached its system in tacitly agreeing to the assignment
of the extended master agreement. It is self -evident that the Court canno t
interpret or apply PRASA’s procurement policy without being furnished with
the relevant provisions and supporting evidence. In the absence of such
evidence, any allegation of illegality or breach is unsustainable and must fail.29
[59] In preparing this judgment the Court came across National Treasury
Instruction No 8 of 2022/2023, issued in terms of section 76(4)(c) of the PFM
Act,30 which provides that contracts that result from public procurement
27 F & I Advisors (Edms) Bpk and another v Eerste Nasionale Bank van Suidelike Afrika Bpk 1998 (4)
All SA 480 SCA; Koth Property Consultants CC v Lepelle -Nkumpi Local Municipality Ltd 2006 (2) SA
25 T at par 19.
28 Eastern Cape Rural Development Agency and another v Agribee Beef Fund (Pty) Ltd and others
2022 JOL 51939 SCA at par 37.
29 See: Koth Property Consultants (supra) at par 22 thereof.
30 Section 76(4)(c) of the PFM Act provides that the Treasury may make regulations or issue
instructions applicable to all institutions to which the PFM Act applies concerning the determination of
a framework for an appropriate procurement and provisioning s ystem which is fair, equitable,
transparent, competitive and cost-effective.
processes are required to comply with the requirements of all supply chain
management legislative prescripts (“the instruction”). The instruction provides
that assignment of contracts is not allowed and is considered to be contrary to
the principles derived from section 217 of the Constitution.
[60] The Court brought the said instruction to the parties’ attention after oral
argument had been concluded and granted the parties an opportunity to make
written submissions about the legal effect thereof.
[61] PRASA contends that the instruction has the effect of rendering the tacit
assignment of the extended master agre ement invalid. However, it did not
deal with the fact that the instruction only came into effect on 1 September
2022, that is after the conclusion of the tacit contract of assignment on which
Phuhlani relies. The instruction derives its power from secti on 76(4)(c) of the
PFM Act and constitutes a legislative instrument. It is trite that legislation does
not operate retrospectively, unless it expressly provides otherwise.
[62] The instruction , properly construed, intends to prescribe to institutions what
they are required to do in respect of the issues dealt with in the instruction,
which include the assignment and cession of procurement contracts. Sections
38 and 51 of the PFM Act provides that the accounting offi cers or authorities
of departments, constitutional institutions, and public entities , listed in
schedules 2 and 3 of the P FM Act, are obliged to take all necessary steps to
ensure that their respective procurement systems and policies give effect to
the pr ovisions of the instruction. It follows that the instruction contemplates
compliance through the respective procurement systems, which serve as the
operative instruments for its implementation.
[63] In the premises , the instruction is clearly not intended to operate
retrospectively. As a result, it does not have any legal effect on the validity of
the tacit assignment on which PRASA relies.
the tacit assignment on which PRASA relies.
J. CONCLUSION
[64] It is important to bear in mind that Phuhlani’s rights under the extended
master agreement remain precarious, being subject to PRASA’s right to
terminate the agreement on reasonable notice. Albeit not strictly necessary to
decide, the question arises whether the second order ha ve the effect of
preventing PRASA from exercising the said right against Phuhlani other than
in accordance with the said order.
[65] The orders granted in the Sechaba matter were intended to ensure PRASA ’s
continued compliance with its constitutional obligation to safeguard the safety
of rail commuters through the services provided by the applicants , pending
PRASA’s fulfilment of the two conditions imposed by the Court - namely, the
confirmation of the approval of the safety plan and th e appointment of security
service providers pursuant to a lawful tender process . It follows that the
restrictions imposed upon PRASA’s right to terminate the agreements did not
derive from the contractual provisions themselves, but from the overarching
constitutional imperative to protect commuter safety. That said, the necessary
corollary of such restrictions was to fortify the position of the applicants, in that
the agreements could no longer be terminated on reasonable notice
simpliciter, but only on 60 days’ notice and subject to PRASA’s prior
compliance with the Court-imposed conditions.
[66] Accordingly, the Court by implication did pronounce on the applicants’
contractual rights and in fact augmented it. In the circumstance s, the
augmentation of High Goals’ rights through the second order did not solely
derive from the constitutional obligation at play or independently from the
applicants’ contractual rights. The constitutional obligation involved had the
effect of providing content to the reasonableness of any notice of termination,
namely that unless the conditions have been met , any purported termination
would not be considered reasonable in the circumstances.31
would not be considered reasonable in the circumstances.31
[67] In the circumstances , it appears that the tacit assignment of the extended
master agreement had the effect of transferring the rights , acquired by High
Goals in terms of the second order, to Phuhlani.
31 Byron v Duke Inc (339/2001) [2002] ZASCA 58; [2002] 3 All SA 235 (A); 2002 (5) SA 483 (SCA)
[68] Notwithstanding the aforesaid, the orders granted do not, whether expressly
or by necessary implication, derogate from or diminish PRASA’s right, upon
the giving of reasonable notice, to terminate the suspension of the
enforcement of its right to resist any purported verbal assignment of the
extended master agreement. That right did not arise for adjudication in the
Sechaba matter and, accordingly, remained unaffected thereby.
[69] Having regard to the terms of the second order, a period of 60 days -notice
may reasonably be regarded as sufficient. However, it appears from the notice
of motion that Phuhlani considers 30 days-notice as reasonably sufficient.
[70] Irrespective, it is clea r from the position adopted by PRASA in its answering
affidavit that it has given Phuhlani notice of the termination of the suspension
of the enforcement of the said right. Although the said notice was given by
implication, it is unequivocal and clear as daylight.
[71] Furthermore, PRASA has not disputed that insofar as notice is concerned,
Phuhlani is entitled to reasonable notice. Accordingly, the said implied notice
complies with the requirements of clarity, unambiguity, and reasonableness as
to time .32 Although PRASA’s notice dated 29 August 2025, purport ing to
terminate the extended master agreement through a notice period of two/three
days, was invalid for want of a reasonable notice period33, such invalidity does
not preclude PRASA from relying on another valid notice of termination of the
said suspension .34 In the circumstances, I am of the view that PRASA has
duly notified Phuhlani of the termination of the said suspension, which means
that the assignment of the extended master agreeme nt will have no legal
32 Kragga Kamma Estates CC v Flanagan 1995 (2) SA 367 AD at 374-375.
33 Insofar as termination of the suspension is concerned. In the case or termination upon reasonable
notice, the notice also fell short on account of the non-fulfilment of the conditions imposed in terms of
the second order.
34 Molusi v Voges NO 2015 JDR 0864 SCA; the matter went on a ppeal to the Constitutional Court;
however, the SCA’s decision on the common law right to terminate on reasonable notice remained
unaltered, although the CC did caution that the said rule of contract law does not alter the rules
applicable to motions and p leadings; See: Molusi and Others v Voges N.O. and Others [2016] ZACC
6.
effect from the elapse of a reasonable period, which would be at the end of
November 2025.35
[72] Phuhlani had another string to its bow. It further contended that it had a
legitimate expectation of being heard prior to PRASA’s exercise of its right to
terminate the extended master agreement by giving reasonable notice. The
said issue has already been adjudicated in the Sechaba matter and is subject
to a supervisory order , being the s econd order. The second order expressly
affirms PRASA’s right to terminate subject to a 60 day -notice period and
compliance with the conditions imposed therein. Moreover, and in any event,
the notice dated 29 August 2025 has already been found to be invalid.
Accordingly, the claim to a legitimate expectation has been su pplanted by the
first, and thereafter, the second order.
[73] The question also arises whether PRASA possessed a legitimate e xpectation
to be heard in respect of the decision to terminate the suspension of the
enforcement of PRASA’s right to resist a verbal assignment . The right to
terminate the said suspension derives solely from the terms of the extended
master agreement, and the strict rules of contract law. There is no evidence to
suggest that PRASA, in exercising its right to terminate the suspension, was
acting from a position of superior strength because of its power as an organ of
state.
[74] Any termination of the extended master agreement has a bearing on PRASA’s
constitutional obligation to safeguard rail commuters, including the supervisory
order made in the Sechaba matter. 36 However, the reach of both the first and
second orders were limited to PRASA’s right to terminate the agreements of
the respective security service providers on reasonable notice. The orders did
not adjudicate PRASA’s right to terminate the suspension of the enforcement
of its right to resist any verbal assignment of a security servic e agreement. To
the contrary, the matter was decided on the basis that the security service
the contrary, the matter was decided on the basis that the security service
35 In line with the authority that the end of a notice period must coincide with the end of the particular
contract period, which in this case is the end of the first month following the elapse of a full 30 day
period.
36 South African National Parks v MTO Forestry (Pty) Ltd and another 2018 (5) SA 177 SCA at para
27 to 40.
providers would continue rendering security services on the same terms and
conditions as contracted for.
[75] Furthermore, PRASA’s decision to terminate the said suspension was
directed at regulating its contractual relationship with Phuhlani, who was never
a party to the Sechaba matter. Phuhlani, not only agreed to PRASA’s rights in
terms of the no-cession clause, but otherwise would not have had any right at
all. Its position was precarious from the start. It must be borne in mind that the
terms of the master agreement emanated from the original procurement
process. Phuhlani was not a party thereto. In fact, Phuhlani was never a party
to any open and competitive procurement process. Phuhlani only succeeded
in circumventing the ordinary procurement process through a tacit
assignment, which is regulated by the no-cession clause . However, it came
with strings att ached – PRASA was entitled to resist any verbal assignment.
Accordingly, there can be no question of any duty to act fairly arising from
holding Phuhlani strictly to the terms under which it was permitted to
circumvent the ordinary requirements of an open and competitive
procurement process. To recognise a legitimate expectation in Phuhlani’s
favour would be inconsistent with both the nature of the said right and the
underlying facts and circumstances that gave rise to it.
[76] In the result, Phuhlani is entitled to continue rendering security services
pursuant to the extended service agreement, but only until 3 0 November
2025. Such an order renders the remainder of the relief sought of no
consequence.
[77] Although Phuhlani only obtained limited success, it was required to come to
Court and was vindicated, in the sense that PRASA’s conduct, in denying the
parties’ tacit contract and purporting to effect the termination of the extended
service agreement, was found to unlawful. In the circumstances , the Court is
of the view that it is entitled to be reimbursed for 50% of its costs.
of the view that it is entitled to be reimbursed for 50% of its costs.
[78] Accordingly, the following order is issued:
(a) The applicant is entitled to continue rend ering services in terms of the
month-to-month agreement concluded with PRASA in or about April
2022, on the terms and conditions contained in the master agreement ,
dated 3 May 2011 , and attached to the founding papers under the
abovementioned case number as annexure “LN1”, until 3 0 November
2025.
(b) The respondent is ordered to pay 50% of the applicant’s costs, including
the costs of two counsel, on scale C in respect of the (senior) junior
counsel and on scale B in respect of junior counsel.
_____________________________
W ROUX
ACTING JUDGE OF THE HIGH COURT
Appearances
For Applicant: Advs. Khoza and Qaba
Instructed by: Mr Maphanga
For respondent: Advs. Jacobs and Coetzee
Instructed by: Mr Horner