Hermes Multimedia CC v MEC: Department on Finance, North West Province and Others (800/2010) [2011] ZANWHC 99 (27 October 2011)

NORTH WEST HIGH COURT, MAFIKENG

CASE NO. 800/2010

In the matter between:

HERMES MULTIMEDIA CC ........................................................................APPLICANT

and

THE MEC: DEPARTMENT OF FINANCE, NORTH WEST

PROVINCE .......................................................................................1ST RESPONDENT

NNOPO CONSULTING CC ............................................................2ND RESPONDENT

KONE STAFFING SOLUTIONS (PTY) LTD ........................................3RD RESPONDENT

PHETO DEVELOPMENT & RECRUITMENT ........................................4TH RESPONDENT

____________________________________________________________________________

JUDGMENT

GUTTA J.

A. INTRODUCTION

[1] The applicant applied for an order in the following terms:

“1. Reviewing and setting aside the decision of the First Respondent to award to the Second Respondent the tender for the Bid Advertising to the Provincial Departments in the North West for the period of 1 July 2009 to 30 June 2011.

2. Declaring the decision set out above by the First Respondent to be inconsistent with the Constitution, unlawful and invalid.

3. That the First Respondent’s decision set out above be substituted with the following:

3.1. That the matter be remitted to the First Respondent for reconsideration, subject to certain directions as this Honourable Court considers appropriate.

3.2. That the tender for the Bid Advertising to the Provincial Departments in the North West for the period 1 July 2009 to 30 June 2011 should have been awarded to the Applicant.

3.3. That the Applicant should be awarded the tender for the Bid Advertising to the Provincial Departments in the North West for a period of two years.

3.4. Alternatively, award the Applicant damages occasioned by the unconstitutional, unlawful and invalid decision of the First Respondent.

3.5. That the costs of this application be paid by any of the Respondents’ opposing this application.”

[2] At the commencement of the proceedings, Adv Baloyi, counsel for the applicant, submitted that the contract relating to the decision which the applicant is seeking to set aside was for the period 01 July 2009 to 30 June 2011, that the contract has run its course and is complete and that this has implications on the relief sought by the applicant.

[3] Adv Baloyi abandoned prayers 1, 3.1, 3.3 and 3.4.

[4] The only relief the applicant persisted with was for prayers 2, 3.2 and 3.5, namely:

“. . . . .

. . . . .

3.2 That the tender for the Bid Advertising to the Provincial Departments in the North West for the period 1 July 2009 to 30 June 2011 should have been awarded to the Applicant.

B. FACTS

[5] The first respondent, on 24 February 2009, advertised a bid for Recruitment and Bid Advertising for the Provincial Departments in the North West Province for the period 01 July 2009 to 30 June 2011.

[6] The bid document included the general conditions of tender and the adjudication criteria. The criterion prescribed therein was allocated as follows:

- Price - 90 points;

- Women equality - 2 points;

- Non-franchise - 2 points;

- Disability - 2 points;

- SMME’s - 2 points;

- Locality (NW Province) - 2 points.

[7] The Bid Evaluation Committee considered and evaluated all the bids which complied with the peremptory requirements of tender, based on the following criteria:

7.1 attendance of a compulsory pre-award meeting;

7.2 bid requirement documents;

7.3 evaluation criteria 90/10;

7.4 physical verification.

[8] The prices tendered by the applicant, second, third and fourth respondents were the following:

8.1 Applicant

a) recruitment: R530.79

b) bid/tender : R292.76

8.2 Second respondent

a) recruitment: R390.59

b) bid/tender : R259.98

8.3 Third respondent

a) recruitment: R345.03

b) bid/tender : R252.15

8.4 Fourth respondent

a) recruitment: R160.46

b) bid/tender : R62.07

[9] The bid evaluation committee submitted a report on 26 May 2009 to the Bid Adjudication Committee wherein they recommended that the tender be awarded to the following two tenderers:

9.1. Recruitment Advertisement – Kone Staffing Solutions (the third respondent);

9.2. Bid/Tender Advertisement – Pheto Development & Human Resources Services (the fourth respondent).

[10] The Bid Evaluation Committee identified the third respondent as obtaining the highest number of points for both recruitment and tender advertising, but recommended that the tender for bid advertising be awarded to the second respondent, who scored the

second highest points, to allow for an equitable distribution of work. Furthermore, the bid specifications provided that the first

respondent could award the contract in part or in whole.

[11] The bid adjudication committee, on 26 May 2009, resolved to award the tender to the following tenderers:

11.1 Recruitment Advertisement – third respondent;

11.2 Bid/Tender Advertisement – second respondent.

[12] The award was subject to the following conditions, that:

“― the current contract be extended for a period of one month effective from 01 June 2009 to 30 June 2009, to afford the approved service

providers enough time to prepare themselves;

― the contract should commence on 01 July 2009;

― interaction on regular reporting and guidance must be exercised by the Provincial SCM and Provincial Departments to support Nnopo Consulting because they are new entrants in the advertising marked;

― the exit clause must be highlighted in the Service Level Agreement in the event Nnopo Consulting fails to deliver and in that case the award for Bid Advertising should revert to Kone Staffing Solutions.”

C. THE APPLICANT’S CASE

[13] The applicant alleges that the decision by the first respondent in awarding the second respondent the Bid Advertising tender was unreasonable, unlawful and unfair for the following reasons:

13.1. the first respondent failed to follow a procurement system which is fair, equitable, transparent, competitive and cost effective as required by Section 217 of the Constitution of the Republic of South Africa (“the Constitution”) and the Public Finance Management Act No. 1 of 1999 (“PFMA”);

13.2. the first respondent, therefore, took a decision or administrative action which is unconstitutional and unlawful;

13.3. the first respondent took a decision or administrative action which was not authorized by the relevant empowering provisions, acted under a delegation of power which was not authorized by the empowering provision or which was biased or reasonably suspected of being biased;

13.4. the decision or administrative action of the first respondent was taken because irrelevant considerations were taken into account or relevant considerations not taken into account;

13.5. the decision was taken in bad faith, arbitrarily or capriciously by awarding the tender to a tenderer who does not meet all the requirements of the tender;

13.6. the decision or administrative action of the first respondent is contrary to law or is not authorized by the empowering provision;

13.7. the decision or administrative action taken by the first respondent is not rationally connected to the purposes for which it was taken, the purpose of the empowering provision, the information before the administrator or the reasons given for it by the first respondent;

13.8. the decision or administrative action is so unreasonable on the facts and the circumstances of this matter so as to give rise to the inference that, at the very least, the first respondent did not apply its mind to the matter.

[14] The applicant in its founding affidavit relied on the following grounds:

14.1. the bid evaluation committee acted in an improper manner when evaluating/inspecting the premises of the bidders;

14.2 the advertisement did not state that the tender may be divided;

14.3. the tender was wrongly awarded to the second respondent as it does not have the resources to execute the work required in the advertisement;

14.4. the tender should have been to a single bidder, the third respondent, alternatively the fourth respondent as it obtained the higher points than the second respondent.

[15] Adv Baloyi, in argument, did not pursue the grounds stated in paragraph 14.1–14.4 supra and only relied on the following irregularities in support of the submission, that the tender was unlawful, unreasonable and unfair:

15.1 lack of experience;

15.2 minimum information of financial standing;

15.3 price excluded VAT.

Lack of experience

[16] The first respondent disqualified bidders on the grounds that they had no experience in bid and recruitment advertising and the first respondent should have similarly disqualified the second respondent as the second respondent did not have any capability and lacked the experience to deliver the tender.

[17] Adv Baloyi submitted further that in terms of the bid specifications, the bidder must provide proof of experience and must supply evidence of involvement in similar projects and the word ‘must’ is prescriptive.

[18] The applicant relied on the Physical Compliance Inspector report compiled by the second respondent in the comment section of the heading ‘information on bid documents’, wherein the second respondent stated, “Not done before”, also the fact that the bid adjudication committee recommended the award of the tender to the second respondent with the condition that if the second respondent fails to deliver, the award will revert to the third respondent.

[19] Adv Molemoeng, counsel for the first respondent, submitted that a committee appointed by the first respondent, conducted an inspection of the second respondent’s premises and completed the physical compliance inspection report. Under the heading ‘Experience’, it reflected three years advertising in the Sowetan and the Mail. Adv Molemoeng submitted that the bid adjudication committee’s intention when awarding the tender to the second respondent, was to develop skills and allow for skill transfer. That the first respondent acknowledged the second respondent’s shortcomings and it is for this reason it made emergency provisions in its recommendation, namely, for the third respondent to assist the second respondent.

[20] He submitted further that the contract has in any event run its course and the second respondent has performed in terms of the tender/contract awarded to it.

[21] As a starting point when considering the above ground, it is necessary to look at the requirements stipulated in the tender

documents. Under the heading, ‘Company Requirements in the Bid Specification for Recruitment and Bid Advertisement’, paragraph 2.2 reads, “NB. These requirements, however no bidder will be disqualified if all the requirements are not met”.

[22] Paragraph 2.2.2 of the bid specification provides that “the bidder must provide proof of experience in recruitment and tender advertisement. The bidder must supply clients with evidence of previous involvement in similar projects”.

[23] Under the heading, ‘Experience’ in the Physical Compliance Inspection Report, for the second respondent, it reflected

“three years, advertised in Sowetan and the Mail”. Under the heading, ‘Information on bid documents’, the words “has experience from North West University, not done before” appear and under the heading, ‘Knowledge in bid advertising’, the words, “knowledgeable, though nothing done yet”, appear.

[24] It is apparent from the bid requirements as well as the documents submitted by the second respondent that the second respondent had little or no experience in tender/bid advertising.

[25] In the case of Eskom Holdings Ltd v New Reclamation Group (Pty) Ltd 2009 (4) SA 628 (SCA), a tender was awarded on the basis of the tenderers’ financial position, which was the prime consideration and it transpired that the tenderers’ financial ability was dependent on a third party.

[26] Certain bid specifications under paragraph 2.2, conclude with the words ‘Failure to submit the minimum information would

disqualify the bidder’. The requirement for proof of experience does not contain the provision that the tenderer would be

disqualified if he does not provide proof of experience in recruitment and tender advertisements. Hence there is no merit in the

argument that the second respondent should have been automatically disqualified. I am further of the view that the tenderers’

experience, in casu, was not the prime consideration when awarding the tender.

Minimum Information on Financial Standing

[27] A further ground relied upon by the applicant is that the second respondent did not provide minimum information about its financial

standing and should have been disqualified. Adv Baloyi submitted that the information provided by the second respondent consisted of a statement of income for the year tendered, 2009, which was inadequate and not verifiable as the second respondent failed to attach any other information to the statement.

[28] Adv Molemoeng submitted that the second respondent complied with this requirement as they submitted a report which reflected their financial standing and further that the tender has successfully run its course.

[29] Clause 2.2.7 of the tender specifications provides that, “A tenderer may be required on demand to furnish financial statements”.

[30] Although the information furnished by the second respondent is flimsy, as it only consists of a report on the second respondent’s

financial position, this requirement did not specify what documentation was required or that the tenderer would be disqualified

if he does not provide financial statements.

[31] The comments of Heher JA in Minister of Social Development & Others v Phoenix Cash and Carry–Pmb CC [2007] 3 ALL SA 115 (SCA) are apposite at this juncture and bear reference to the two grounds mentioned supra:

“Without attempting a comprehensive survey of circumstances which will offend against section 217(1), certain general observations are demonstrated as true by the facts of the present case ―

2. a process which lays undue emphasis on form at the expense of substance facilitates corrupt practice by providing an excuse for

avoiding the consideration of substances; it is inimical to fairness, competitiveness and costs effectiveness.

By purporting to distinguish between tenderers on grounds of compliance or noncompliance with formality, transparency in adjudication becomes an artificial criterion. In saying this I do not suggest that the tender board is not entitled to prescribe formalities which, if not complied with, will render the bid invalid, provided both the prescripts and the consequences are made clear. What I am concerned to suggest is the need to appreciate the difference between formal shortcomings which go to the heart of the process and the elevation of matters of subsidiary importance to a level which determine the fate of the tenderer.”

Also see GVK Siyazama Building Contractors v Minister of Building Works 2007 (4) ALL SA 992 at 1007–1009.

Price excluded VAT

[32] The applicant also relied on the ground that the pricing submitted by the second respondent did not include VAT. Adv Baloyi submitted that:

32.1. this is a minimum peremptory requirement as clause 12(c) of the Invitation to Bid provides that all bid prices ‘must be VAT Inclusive irrespective of whether you are registered for VAT or not’. Accordingly, the applicant submitted that the second respondent should have been disqualified;

32.2. the applicant’s price for bid advertising, namely, R292.76 Inclusive of VAT, while the price tendered by the second respondent exclusive of VAT is R259.98. However, if one were to include VAT, the second respondent’s price would be R296.37, which is higher than the price tendered by the applicant. Accordingly, the applicant should have scored more points than the second respondent for pricing.

32.3. The selection criteria was not applied fairly and consistently and the failure to disqualify the second respondent is irregular and unfair. The bid adjudication committee failed to apply its mind to this issue and the applicant was treated unfairly.

[33] Adv Molemoeng submitted that the second respondent was not registered for VAT and for this reason did not include VAT in its price. He submitted that there is no provision that the failure to include VAT in the price will eliminate the tender or render it non-responsive.

[34] Adv Molemoeng submitted that the first respondent operated within a legal matrix and there is no fault on the part of the second

respondent, and even if there is fault, it does not justify the order sought in paragraph 2 of the notice of motion.

[35] It is common cause that the price tendered by the second respondent was exclusive of VAT, which is contrary to the invitation to tender.

[36] The ground that the second respondent’s price excluded VAT was raised for the first time in the applicant’s replying

affidavit.

[37] In the review application, the applicant is afforded an opportunity to supplement its founding affidavit after receipt of the record. The applicant in casu elected not to file a supplementary affidavit and raised a new ground for review in its replying affidavit. This gave the applicant an unfair advantage over the respondents, as the respondents were denied the opportunity of replying to these allegations and are accordingly prejudiced. See Gauteng MEC for Health v 3P Consulting (Pty) Ltd [2010] JOL 26590 (SCA).

[38] Notwithstanding, I am of the view that the fact that the second respondent’s price excluded VAT, is not a decisive ground for the following reasons:

38.1. The applicant would still not have scored the highest points. In the Bid Evaluation Committee report to the Bid Adjudication Committee, the applicant ranked fifth for bid advertising. As stated supra, the third respondent was ranked first and the second respondent second and the Bid Evaluation Committee motivated the awarding of the tender to the second respondent so that there will be an equitable distribution of work as the third respondent was awarded the tender for recruitment advertising.

38.2. Furthermore, even if the second respondent’s price included VAT, the difference between the second respondent’s price, R296.37 inclusive of VAT, and the applicant’s price, R292.76 inclusive of VAT, is only R3.61 and is not significant.

38.3. The first respondent was not obliged to accept the lowest tender or any tender.

38.4 The matter is academic, as set out fully hereinbelow.

Academic

[39] Adv Molemoeng submitted that the applicant caused the delay, which resulted in the matter becoming academic and that a new tender has been awarded. The applicant did not seek an interdict to stop the running of the tender and delayed in complying with the rules of Court to such an extent that the first and third respondents launched an application to dismiss the application.

[40] Adv Molemoeng submitted further that even if the applicant is successful, it will be of no assistance to the applicant. That there is no life line or existing controversies and that it is not in the interests of justice that the merits be heard. That it is an exercise in futility. He relied on the cases of Independent Electoral Commission v Langeberg Municipality [2001] ZACC 23; 2001 (3) SA 925 (CC) and National Coalition for Gay and Lesbian Equality & Others v Minister of Home Affairs & Others 2000 (2) SA 1 (CC).

[41] Adv Baloyi submitted that it is within the discretion of the Court whether a matter is moot and the determining factor is the interest of justice.

[42] Adv Baloyi submitted further that recourse is available to the applicant, should he succeed, namely:

42.1 if there was corruption, to lay a complainant with the department;

42.2 to institute a civil claim against the department.

[43] In Independent Electoral Commission v Langeberg Municipality supra, at 931 paragraph (9), the Court referred to the judgment of Ackerman J in National Coalition for Gay and Lesbians Equality & Others v Minister of Home Affairs & Others 2000 (2) SA 1 (CC), where the Court said:

“A case is moot and therefore not justifiable if it no longer presents an existing or life controversy which should exist if the Court is to avoid giving advisory opinion on abstract propositions of law.”

[44] The Constitutional Court in the case of Independent Electoral Commission v Langeberg Municipality supra at page 932 stated further that:

“[11] This Court has a discretion to decide issues on appeal even if they no longer present existing or live controversies. That discretion must be exercised according to what the interests of justice require. A prerequisite for the exercise of the discretion is that any order which this Court may make will have some practical effect either on the parties or on others. Other factors that may be relevant will include the nature and extent of the practical effect that any possible order might have, the importance of the issue, its complexity and the fullness or otherwise of the argument 2001 (3) SA p933 YACOOB J and MADLANGA AJ advanced. This does not mean, however, that once this Court has determined one moot issue arising in an

appeal it is obliged to determine all other moot issues.

[12] There is no live controversy between the parties.”

[45] Section 8 of PAJA provides that a Court may grant ‘any order which is just and equitable’. The Court exercises a discretion, which discretion “constitutes the indispensable moderating tool for avoiding or minimising injustice when legality and certainty collide”. See Oudekraal Estates (Pty) Ltd v City of Cape Town & Others 2004 (6) SA 222 SCA para 36.

[46] In determining whether this matter is academic, it is perhaps prudent to consider the relief sought by the applicant. As the applicant abandoned the bulk of the relief sought in the notice of motion, the only relief that requires consideration is, firstly, the order to declare the decision of the first respondent to award the tender to the second respondent to be inconsistent with the Constitution unlawful and invalid, and secondly, that the respondents’ decision (to award the tender to the second respondent) be substituted with an order that the “tender for the Bid Advertising to the Provincial Departments in the North West for the period 01 July 2009 to 30 June 2011 should have been awarded to the applicant”.

[47] With regards the second relief, the Court cannot substitute the decision of the first respondent, when the decision of the first respondent has not been set aside.

[48] Furthermore, as stated supra, the applicant would not have been the highest bidder and would accordingly not be entitled to an order that the applicant should

have been awarded the tender.

[49] The question then arises, what the effect of the first relief, namely, the declaratory order would be in the circumstances.

[50] In the case of Inzinger v Hofmeyr 2010 JDR 1380 (GSJ) at page 21 paragraph 60 (unreported), the Court referred to the judgment of Family Benefit Society v Commissioner for Inland Revenue & Another 1995 (4) SA 1207 at 124G–126E, wherein the applicable principles for declaratory relief was summarized as follows:

“1. The applicant must be an ‘interested person’, not in vacuo, but interested in the right or obligation enquired into. . . A mere financial or commercial interest is not enough. A direct interest is required. P E Bosman Transport Works Committee and Others v Piet Bosman Transport (Pty) Ltd 1980 (4) SA 801 (T) at 804B–F.

2. There must be a right or obligation which becomes the object of enquiry. It may be existing, future or contingent but it must be more tangible than the mere hope of a right or mere anxiety about a possible obligation . . .

. . . .

4. . . . a party is not entitled to approach the Court for what amounts to a legal opinion upon an abstract or academic matter. The Court will not make a declaration of rights unless there are interested person upon whom the declaration would be binding.”

[51] Cloete JA in Eskom Holdings Ltd v New Reclamation Group (Pty) Ltd supra, at 638H held that:

“A declaratory order that the award of tender was invalid, suspended until the contract has run its course – would not fulfill any of these purposes.”

[52] In Steenkamp N.O v Provincial Tender Board, Eastern Cape 2007 (3) SA 131 (CC), Moseneke DCJ held that:

“Ultimately the purpose of a public remedy is to afford the prejudiced party administrative justice, to advance efficient and effective public administration compelled by constitutional precepts and at a broader level, to entrench the rule of law.”

[53] A Court may refuse a review application, even if it is shown that the process followed to have fallen short of Section 217 of the Constitution or its implementing legislation. See Chairperson Standing Tender Committee & Others v JFE Sepela Electronics (Pty) Ltd & Others 2008 (2) SA 638 (SCA).

[54] In the above case of Chairperson, Standing Tender Committee & Others v JFE Sepela Electronics (Pty) Ltd & Others, the Court refused to set an invalid award of tender aside because work had been performed between the launching of the proceedings and the judgment in the Court a quo and it was impractical to start the tender process over again for the completion of the remaining work.

[55] The applicant in casu, for reasons stated supra, would not have any recourse against the first respondent for damages and there is also no evidence of corruption.

[56] I am accordingly of the view that the declaratory order that the award is inconsistent with the Constitution is moot and not

justifiable. There is no existing or life controversy. The tender which is at issue has run its course and a new tender has been

awarded. I am further of the view that it is not in the interest of justice to make a finding in casu, as it would have no practical effect and is an exercise in futility.

D. NON COMPLIANCE WITH THE RULES OF COURT

[57] Although I have expressed my view that this matter is moot, the conduct of the applicant in its handling of this matter bears

reference.

[58] The application for review was filed in April 2009, which was not preceded by an application to interdict the first and second

respondents. On 18 May 2010, the first respondent filed its record of proceedings in terms of Rule 53(2) of the Uniform Rules of Court. In terms of Rule 53(4), the applicant had ten days to amend the notice of motion and supplement the affidavit.

[59] The applicant elected not to supplement the founding affidavit. In terms of Rule 53(6) read with Rule 6(5)(e), the applicant had to file the replying affidavit within 15 days but failed to do so.

[60] The first respondent launched an application to dismiss the applicant’s review application, which application it later

abandoned.

[61] A year later, the applicant filed its replying affidavit on 01 April 2001, wherein the applicant raised new grounds for review that were not included in its founding affidavit.

[62] The first respondent set the matter down for hearing for 11 August 2011.

[63] Brand JA in the case of Associated Institutions Pension Fund & Others v Van Zyl & Others 2005 (2) SA 302 (SCA) [2004] 4 ALL SA 133 in para 46, held that:

“First, the failure to bring a review within a reasonable time may cause prejudice to the respondent. Secondly, there is a public interest element in the finality of administrative decisions and the exercise of administrative functions.”

Also see Chairperson, Standing Tender Committee & Others v JFE Sepela Electronics (Pty) Ltd & Others supra at 650E.

[64] It is apparent from the aforegoing that the applicant did not comply with the rules of court and was lax in its handling of the matter, to its own peril.

[65] Notwithstanding the above, I will not grant a punitive order of costs against the applicant, as the respondents did not seek such an order.

[66] In the circumstances, I make the following order:

a) The application is dismissed with costs.

_________________

N. GUTTA

JUDGE OF THE HIGH COURT

APPEARANCES

DATE OF HEARING : 08 SEPTEMBER 2011

DATE OF JUDGMENT : 27 OCTOBER 2011

COUNSEL FOR APPLICANT : ADV M.S. BALOYI

COUNSEL FOR 1ST RESPONDENT : ADV K.M. MOLEMOENG

ATTORNEYS FOR APPLICANT : KGOMO MOKHETLE & TLOU ATTORNEYS

(Instructed by T P MABASA ATTORNEYS)

ATTORNEYS FOR 1ST RESPONDENT : STATE ATTORNEY, MAFIKENG

ATTORNEYS FOR 3RD RESPONDENT : MINCHIN & KELLY INC.

(Instructed by DARRYL ACKERMAN ATTORNEYS)