Defensor Electronic Security (Pty) Ltd v Centlec SOC Ltd and Another (3372/2021) [2021] ZAFSHC 315 (3 December 2021)

IN THE HIGH COURT OF SOUTH AFRICA,

FREE STATE DIVISION, BLOEMFONTEIN

Reportable: NO

Of Interest to other Judges: NO

Circulate to Magistrates: NO

Case number: 3372/2021

In the application between:

DEFENSOR ELECTRONIC SECURITY (PTY) LTD (Registration No. 2012/038837/07) and

CENTLEC SOC LTD (Registration No. 2003/011612/30)

IGNITE

SECURITY Registration No. 2014/043462/07) Applicant 1st Respondent 2nd Respondent

CORAM: JP DAFFUE, J et JJ MHLAMBI J

HEARD ON:

29 NOVEMBER 2021

DELIVERED ON: 03 DECEMBER 2021

This judgment was handed down electronically by circulation to the parties’ representatives by email, and release to SAFLII. The date and time for hand-down is deemed to be 09:00 on 03 December 2021.

I

INTRODUCTION

[1] This is yet another dispute between an unsuccessful bidder on the one hand and an organ of state and the successful bidder on the other. It will be shown soon that concessions were made on behalf of the organ of state and the successful bidder during the hearing of the opposed review application and consequently, this judgment will be as brief as possible.

II

THE PARTIES

[2] The applicant is Defensor Electronic Security (Pty) Ltd. Initially, Adv APJ Els attended to the matter on the instructions of Albert Hibbert Attorneys of Pretoria, but due to his unavailability for the reasons set out infra, he was substituted at the hearing by Adv PG Cilliers SC, assisted by Adv KN Peterson.

[3] Centlec Soc Ltd, a state owned company duly registered and incorporated as such, is cited as the first respondent. Adv WR Mokhare SC, assisted by Adv C Lithole, appeared on instructions of Tshangana and Associates Inc of Bloemfontein.

[4] The successful bidder, Ignite Services CC, cited as the second respondent in the application, was represented by Mr LM Mokhele, a local attorney.

[5] A virtual hearing was held by agreement with all the legal representatives to facilitate counsel from out of town.

III

THE RELIEF SOUGHT

[6] The issue of urgency having become moot, the following relief was sought in the amended notice of motion:

“2. That the decision of the first respondent to award Tender CD37/2020: Provision of Security Services (guarding, armed reaction/response) including Supply, Delivery, Installation, Commissioning and Maintenance of Security Equipment (“the Tender”) to the second respondent, be declared constitutionally invalid, reviewed and set aside;

3. That any service level agreement concluded between the first respondent and the second respondent pursuant to the tender award in favour of the second respondent be set aside;

4. That the first respondent be ordered to pay the applicant’s costs, alternatively, and only in the event that the application is opposed by the first and second respondents, that the respondents, jointly and severally, be ordered to pay the applicant’s costs.”

IV

HISTORY OF THE LITIGATION

[7] In so far as the history of the litigation may play a role in the adjudication of the costs orders to be made, the following steps are relevant:

7.1 The applicant intended to bring a review application on an urgent basis. The application was issued on 23 July 2021 and the intention was to obtain the required orders on Thursday, 2 September 2021.[1] In order for the court to deal with the matter on an urgent basis, the time periods provided for in rule 53 have been truncated; e.g. the first respondent was called upon to deliver the record of its decision (“ROD”) on/or before Monday, 2 August 2021.

7.2 On 12 August 2021 an amended notice of motion in which the same relief was claimed as in the original notice of motion was filed together with a supplementary founding affidavit. At that stage a portion of the first respondent’s ROD had been provided to the applicant. Contrary to the averments in the founding affidavit initially filed, the applicant made it clear in the supplementary affidavit that it decided not to reserve the right to seek equitable relief as contemplated in s 8(1)(c)(ii)(aa) of the Promotion of Administrative Justice Act,[2] (“PAJA”) and provided for in s 172(1)(b) of the Constitution.[3]

7.3 On 16 August 2021 the applicant filed a second supplementary affidavit.

7.4 Although the first respondent filed its answering affidavit on 23 August 2021 and the applicant responded thereto on 27 August 2021, the matter was eventually not heard on 2 September 2021. The second respondent filed its answering affidavit on 1 September 2021 to which the applicant replied on 6 September 2021. The matter was then set down for hearing on 16 September 2021.

7.5 On 16 September 2021 the application was postponed to 21 October 2021 with further orders pertaining to the filing of affidavits. Costs were reserved.[4]

7.6 On 30 September 2021 the first respondent’s supplementary affidavit was filed to which the applicant replied on 7 October 2021.

7.7 Second respondent failed to file its supplementary affidavit timeously. It was only done on 20 October 2021. Condonation had to be sought. On 2 November 2021 the applicant replied to the second respondent’s supplementary answering affidavit.

7.8 When it became clear that the matter could not be heard by a single judge on 21 October 2021, the applicant sought leave from the Judge President for preferential allocation of the application and as a result Monday, 15 November 2021 was allocated.

7.9 It was soon evident that the first and second respondents’ legal representatives were not available for the hearing on 15 November 2021, but notwithstanding their requests for a postponement the applicant was adamant that the matter should proceed on the 15th.

7.10 On being appointed as presiding officers and after a brief perusal of the review record and correspondence between the parties, my colleague and I decided that instead of having to hear arguments on the 15th pertaining to whether the matter should proceed or not, the parties should be advised that the application be postponed to 29 November 2021, the date suggested by the respondents’ legal representatives. All agreed. Unfortunately, Adv Els who appeared for the applicant throughout the proceedings, was not available, but Advv Cilliers SC and Peterson were eventually briefed to deal with the matter on behalf of the applicant.

7.11 The applicant and first respondent filed heads of argument in accordance with the court order of 16 September 2021, but the second respondent failed to do so. In fact, in its application for condonation it sought condonation for the late filing of its supplementary answering affidavit as well as heads of argument. As mentioned, the supplementary answering affidavit was filed, but no heads of argument. When the matter was called, Mr Mokhele indicated that he did not intend to present us with any heads of argument.

V

GROUNDS OF REVIEW

[8] Several grounds of review were relied upon in the applicant’s papers and the heads of argument drafted by Mr Els, but Mr Cilliers who argued the matter made submissions only in respect of the following three grounds:

8.1 The tender validity period. It is the applicant’s case that the first respondent awarded the tender to the second respondent after expiry of the tender validity period and without a prior request for extension and approval of all relevant bidders. The tender validity period expired on 2 March 2021. Although the first respondent relied on letters addressed to applicant and second respondent dated 1 March 2021, the day before expiry of the tender, there is no proof that the request for extension was communicated to the bidders prior to expiry and that bidders consented to extension of the period prior to expiry thereof.[5] In fact, applicant has proven that the request for extension was sent by email to it as late as 23 March 2021. It is the applicant’s case that once the tender validity period has expired, it was not possible to resuscitate it. A new bid process had to be initiated in order to ensure that all interested parties were provided a further opportunity to tender. I am in respectful agreement with the judgment of Southwood J in Telkom SA Ltd v Merid Training (Pty) Ltd and others; Bihati Solutions (Pty) Ltd v Telkom SA and others[6] relied upon by Mr Cilliers. I therefore also agree with applicant’s counsel that in the absence of the required proof there was after the expiry date no longer any valid tender process. The tender award has to be set aside for this reason alone.

8.2 Irregular point scoring. The second irregularity relied upon is the irregular point scoring. It is common cause that the 80/20 preference point system had to be used. For a reason unknown to us, the relevant Annexure E referred to in the report of the Bid Evaluation Committee (“BEC”), apparently indicating how the bidders were scored on price, does not form part of the ROD and is missing.[7] This document, if it was relied upon, would have shown the BEC calculations pertaining to the tendered prices for the whole tender period of 36 months. Bearing in mind the common cause facts, it has to be assumed that if the bidders were in fact evaluated on price, the second respondent could outscore the applicant only on the basis of the tender prices for one month only, instead of for the whole period of 36 months as pointed out by the applicant. The bidders were required to provide a price on two separate issues, to wit a once-off installation price for specific equipment and a rate that would be charged for security guards. I fully agree with the criticism of the applicant.[8] Based on its assumption in the absence of Annexure E referred to earlier, and its calculations, it should have outscored the second respondent if the total cost over the full period of the contract was calculated. Bearing in mind the Procurement Regulations,[9] the contract had to be awarded to the

applicant who scored the highest overall points.[10] Clearly, the first respondent could not and did not rely on any objective criteria in order to justify the award to second respondent. The facts in this case are not on all fours with the facts in Airports Company South Africa Soc Ltd v Imperial Group Ltd and others,[11] but it is important to remember that the Supreme Court of Appeal reiterated the mandatory nature of the requirement of objective criteria or justifiable reasons for not awarding a tender to the bidder who scored the highest points. An important issue pertaining to the award of the bid in casu is the incorrect assumption by the first respondent’s Chief Executive Officer (“CEO”) that he had a discretion in awarding the tender. Contrary to his belief, he could not simply select one of the four so-called “appointable” bidders whose names were forwarded to him by the Bid Adjudication Committee (“BAC”).[12] No authority was relied upon for the CEO’s alleged discretion. In acting as he did, the CEO totally ignored the peremptory provisions of s (2)(1)(f) of the PPPFA and s 217(1) of the Constitution. The requirements for the lawful procurement of goods and services are well-known: these have to be procured in accordance with a system which is “fair, equitable, transparent, competitive and cost-effective.” No doubt, one of the constitutional imperatives is cost-effectiveness. This implies clearly that calculations to be done pertaining to pricing should be done on the basis of the total price over the full period of the contract. The application should succeed in respect of this ground of review as well.

8.3 Second respondent’s failure to comply with a mandatory requirement. Thirdly, the point was taken that the second respondent ought to have been disqualified during the evaluation of the bids in so far as it failed to comply with a mandatory requirement, i.e. the completion of the MBD3.3 form. This document contains the pricing schedule for professional services, e.g. the costs of a technical manager and manager in charge of the security guards, as well as related costs. The CEO admitted this mandatory requirement. Notwithstanding allegations in the answering affidavits as well as the heads of argument of first respondent that this document was included in the second respondent’s bid documents and formed part of the ROD, neither I, nor the applicant’s legal representatives could find it. An opportunity was provided to the respondents to attach this document to their supplementary answering affidavits, but they failed to do so.

[9] I am satisfied that the irregularities relied upon by the applicant are far from inconsequential and that it has succeeded in establishing the grounds of review relied upon. An order in terms of s 172(1)(a) of the Constitution is called for. The decision of the first respondent should be declared unlawful and consequently, prayers 2 and 3 of the amended notice of motion should be granted. As mentioned, the applicant does not seek a just and equitable order under s 172(1)(b) of the Constitution read with s 8 of PAJA.

VI

THE OPPOSITION

[10] Notwithstanding a fierce defence having been presented by the first respondent and to a lesser extent, the second respondent, in their answering affidavits as well as the heads of argument of first respondent, Mr Mokhare immediately conceded from the onset during his oral submissions that applicant was entitled to the relief sought. He also conceded that costs should follow the event and did not make any specific submissions pertaining to the costs that were previously reserved. Mr Mokhele also conceded that the application should succeed, although he submitted that no costs order should be granted against second respondent who was merely a beneficiary of the first respondent’s award. No doubt, the second respondent should have recognised that costs would not be sought against it, save in the event of opposition. In my view the second respondent did not meaningfully contribute in its papers to the dispute and there is no reason why it should not be ordered to pay the costs of the successful applicant, jointly and severally with the first respondent.

VII

A NEW BIDDING PROCESS

[11] Against the backdrop of the concessions made on behalf of first and second respondents and in anticipation of an order in favour of the applicant, Mr Cilliers requested the court to consider directing the first respondent to initiate a new bidding process within a certain time frame in order to prevent unnecessary delay. Mr Mokhare conceded that such an order could and should be made. I agree. Having considered the matter, the fact that we are entering the festive season and bearing in mind the legislative framework to be complied with, it would be unfair to first respondent and all other interested persons to order that the new bidding process should be initiated in haste and to provide for a closing date to submit bids within this month or even during the first half of January 2022. In my view a new bidding process providing for a closing date of 31 January 2022 shall be initiated forthwith. Such an order will be made.

VIII

THE RESERVED COSTS

[12] As mentioned the costs were reserved on 16 September 2021. Hereafter the first respondent filed a supplementary answering affidavit timeously, but as mentioned above, the second respondent’s supplementary answering affidavit was filed out of time. None of these two supplementary affidavits deal meaningfully with the allegations in the applicant’s papers. It must also be taken into consideration that the respondents sought an indulgence to file their supplementary answering affidavits. Having said this, the review application could not be heard by a single judge in the opposed motion court. It had to be set down on a Monday for hearing by two judges in the review court. Our Practice Directives[13] also make specific provision for the filing of heads of argument 15 days (by the applicant) and 10 days (by the respondent) before the hearing, unlike in the case of opposed motions. The parties should in my view each pay their own wasted costs.

[13] Also, each of the parties shall be responsible for their own costs in respect of any wasted costs occasioned by the postponements on 21 October 2021 and 15 November 2021. In respect of 21 October 2021, the matter could not have been heard by a single judge in the opposed motion court, but on 16 September 2021 the parties agreed to a postponement to that date. Although this agreement was made an order of court by an acting judge who does not practise in the Free State, the parties should have known better. There are different Practice Directives in all courts throughout the country. If a practitioner needs to litigate in a specific jurisdiction, he/she should ensure that the relevant Practice Directives are complied with. Secondly, and although the Judge President allocated 15 November 2021, it is apparent that the first and second respondents immediately indicated that the date did not suit their counsel and consequently, any wasted costs in this regard should also be borne by the parties themselves.

X

ORDERS

[14] The following orders are issued:

1. The decision of the first respondent to award Tender CD37/2020: Provision of Security Services (guarding, armed reaction/response) including Supply, Delivery, Installation, Commissioning and Maintenance of Security Equipment (“the Tender”) to the second respondent, is declared constitutionally invalid, reviewed and set aside;

2. The service level agreement concluded between the first respondent and the second respondent pursuant to the tender award in favour of the second respondent is set aside;

3. The first respondent is directed to forthwith initiate a new bidding process and to invite all interested persons to tender for Provision of Security Services (guarding, armed reaction/response) including Supply, Delivery, Installation, Commissioning and Maintenance of Security Equipment with a bid closing date not later than 31 January 2022;

4. The first and second respondents are ordered to pay the applicant’s costs of the application, excluding the costs mentioned in prayer 5 infra, jointly and severally, the one to pay the other to be absolved;

5. The parties shall be liable for the payment of their own costs in respect of the wasted costs of 16 September 2021, 21 October 2021 and 15 November 2021.

J P DAFFUE, J

I concur

J J MHLAMBI, J

On behalf of Applicant : Advv PG Cilliers SC and

KN Peterson

Instructed by : Webbers Attorneys

BLOEMFONTEIN

On behalf of 1st Respondent : Advv WR Mokhare SC and

C Lithole

Instructed by : Tshangana & Associates Inc

On behalf of 2nd Respondent : Mr LM Mokhele

Instructed by : L.M Mokhele Attorneys Inc

[1] Record p 1

[2] Act 3 of 2000

[3] Act 108 of 1996

[4] See annexure “RAA1” p 501

[5] As stipulated in clause 24.8.1.5.3 of the relevant Supply Chain Management Policy (“SCMP”), annexure DS4, p 218 – 331

[6] [2011] ZAGPPHC 1 at paras 12 & 14; see also Joubert Galpin Searle Inc and others v Road Accident Fund and others 2014 (4) SA 148 (ECP), a judgment by Plasket J (as he then was) at paras 63 - 70 and Takubiza Trading Projects CC v The City of Ekurhuleni (case no 1438/2021, an unreported judgment by Victor J delivered on 14 June 2021) at paras 63, 67, 74 & 76

[7] Report of BEC at para 14 on p 36 of ROD and the applicant’s submissions in this regard; I could also not find Annexure E in the

ROD

[8] Particularly in para 17 of the second supplementary affidavit, pp 375 - 7

[9] The Procurement Regulations issued in 2017 under the PPPFA

[10] Section 2(1)(f) of the Preferential Procurement Policy Framework Act (“PPPFA”) which reads: “(f) the contract must be awarded to the tenderer who scores the highest points, unless objective criteria in addition to those contemplated in paragraphs (d) and (e) justify the award to another tenderer.”

[11] 2020 (4) SA 17 (SCA) at paras 48 & 49, a minority judgment, but the principle was not overruled in the majority judgment

[12] See answering affidavit paras 30, 36 & 44 and ROD p 1 & 2

[13] Rules 12.1, 12.2 and 13.4 quoted in Erasmus, Superior Court Practice, 2nd ed, vol 3 at G1 - 7