Maximum Profit Recovery (Pty) Ltd v Mogalakwena Local Municipality and Others (13528/2022) [2023] ZALMPPHC 111 (14 November 2023)

REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA;

LIMPOPO DIVISION; POLOKWANE

CASE NO: 13528/2022

In the matter between: MAXIMUM PROFIT RECOVERY (Pty) Ltd : APPLICANT (Registration No:2001/005576/07) and MOGALAKWENA LOCAL MUNICIPALITY : FIRST RESPONDENT THE MUNICIPAL MANAGER: M.M MALULEKA : SECOND RESPONDENT PK FINANCIAL CONSULTANTS (Pty) Ltd : THIRD RESPONDENT

JUDGMENT

Heard on: 04 SEPTEMBER 2023

Delivered: This judgment is handed down electronically by circulation to the parties through their legal representatives' email addresses. The date for the hand-down is deemed to be 14 November 2023.

CORAM: MOKWENA, AJ

INTRODUCTION

[1] In this matter the Applicant brought a review application and subsequently, requested this Court to grant an Order in the following terms:

"the decision of the first respondent to award Tender 07-2022/2023 in respect of VAT recovery and review of VAT returns ("the tender”) to the third respondent is declared constitutionally valid, reviewed and set aside.

the service level agreement concluded between the first respondent and the third respondent pursuant to the tender award in favour of third respondent is set aside; Tender 07-2022/2023 in respect of VAT recovery and review of VAT returns is awarded to the applicant;

The first respondent is ordered to provide the office of Auditor General with a comprehensive reconciliation of all amounts paid by the first respondent to the third respondent pursuant to the tender award within one month of the granting of the order;

The first respondent is ordered to provide the applicant with a copy of the comprehensive reconciliation; and

The first, second and third respondents, jointly and severally, are ordered to pay the applicant's costs on an attorney and client scale".

[2] All the Respondents have opposed the application and have raised point in Limine of non- joinder, amongst others, of the successful bidders who were awarded or given letters of appointment in the tender process.

[3] Initially this application was brought as an urgent application on 15 December 2022 and set- down for a hearing on the urgent Court for 28 February 2023, however due to the voluminous affidavits and record, the application was removed from the urgent roll. The matter effectively became a third motion court matter, had to be dealt with in terms of the provisions of clause 13.4 of the Practice Directives of this Court.

[4] The Applicant sought a consent from the Office of the Acting Judge President to determine the date of the hearing of this application. Pursuant to the consent by the Acting Judge President, this matter was enrolled on the 22 August 2023, however by consent between the parties the proceedings were adjourned until the 4th of September 2023.

[5] The application was heard on the 4th of September 2023, it must be said, it took a day for the issues herein to be ventilated by all the parties. At the end of it all, Judgment was reserved.

BACKGROUND

[6] Some scenario and background are necessary in order to asses or evaluate the totality of the issues raised by the parties as far as points in limine are concerned.

[7] The first Respondent advertised a tender for the appointment of panel of ten (10) Service Providers for the provision of financial management support program for a period of 36 months as and when the need required. The tender was advertised under bid number:07-2022/2023 on the 30th of September 2022. The closing date was the 28 October 2022 at 12h00 PM.

[8] In terms of the tender the scope of work was stated as follows:

1 Preparation of annual financial statements;

2 Assets management;

3 Compliance;

4 Internal auditing

5 Vat Recovery

6 General financial management and support;

7 Debt collection

8 Landfill and rehabilitation disclosure provision;

9 Salaries and MSCOA

10 Actual valuation of employee benefits

Tenders will not be regarded as an acceptable tenderer/ responsive if it fails to achieve the minimum of qualifying score of 70 points (70%) out of a maximum of 100 points and will not be evaluated further.

[9] The Applicant submitted the bid only in respect of one discipline namely VAT reviews on or about 06 October 2022. On the 3rd of November 2022, the Bid Evaluation Committee ('BEC') eliminated the Applicant on the ground that it had failed to meet pre- qualification criteria specified in the functionality evaluation.

[10] According to the BEC the successful bidders are:

1 Future Chartered Accountants

2 Blitz Forensics

3 TPN Ntiyiso JV

4 Emitrix (Pty) Ltd tla Meodi Chartered Accountants

5 Akhile Management and Consulting

6 PK Financial Consultant cc

7 MMB Consulting

8 KEP Consulting

9 MM Financial Consultancy

10 FBN Consulting

[11] All these bidders were awarded the tender and received the same appointment letters. The appointment letters were issued by the first Respondent on the 09 November 2023. The implication of the appointment is that, all these companies formed a panel for tender No. 07-2022/2023. It follows that tender No. 07-2022/2023 is constituted by 10 companies.

[12] The letter of appointment conveyed an instruction to the successful bidders and amongst others stated as follows: "the Municipality does not guarantee the panelist any work and will issue a request to quote with terms of reference and such will be subjected to evaluation and adjudication processes. The successful bidder will be issued with an appointment letter and shall conclude a service level agreement with the Municipality within two weeks of appointment thereof'.

[13] Following the appointment and establishment of the panel, the first Respondent on the 15 November 2022, issued a request for quotation for provision of VAT professional services and the request for quotation closed on the 22 November 2022. Only three companies from the panel were invited to wit: Futureca (Pty) Ltd, Blitz Forensics and PK Financial Consultants (the third Respondent). The third Respondent was eventually appointed for provision of VAT professional services for the first Respondent.

[14] The Applicant is aggrieved by its elimination and instituted a review application. The review application is premised on the following: the applicant was irregularly disqualified and a completely irregular process, that deviated from a tender document, was followed to appoint PK Financial. The Applicant so argued.

[15] The first and second Respondents raised one point in limine. The first and second Respondents assert that the Applicant failed to join the parties that were issued with letters of appointment. The third Respondent also raised three points in limine. It challenges the Applicant's lack locus standi and entitlement to review the impugned decision, that the Applicant failed to join successful bidders and the fact that, the Applicant acquiesced to the appointment of the successful bidders.

[16] The point in limine of non- joinder must be determined at the outset. This could prove decisive considering the grounds of review and the Orders pursued by the Applicant. In my view non- joinder is an issue that is very much relevant to these proceedings.

[17] The first and second Respondents submitted that the non- joinder is demonstrated by applicant's attack on the appointment of panelists to a panel by the Applicant. These Respondents submitted further that; the Applicant suggest that the Municipality deviated from the tender specification. If this argument is upheld, it follows that the appointment of all panelist (not only those who concluded Service Level Agreements) are imperiled. The implication is that they should have been joined. They have an obvious legal interest in the subject matter to be decided on by the Honourable Court. The effect of the finding sought is fatal to all panelists. The first and second Respondents submitted further that, the Applicant cannot then succeed with substitution relief- the implication being that other bidders will also fall foul of illegal tender process and that their appointments will also necessarily be impugned.

[18] The third Respondent submitted that the awarded companies will be affected by any suggestion that the tender process was unfair. Any finding that has the implication of suggesting that the applicant is a preferred candidate, not only against the third respondent, but against all other companies that are on the panel, will affect the awarded companies. The third Respondent submitted further that, when the third respondent was appointed to panel, the only document that was sent to the third respondent as the award for the main tender was the appointment letter which is the same as the letters sent to all the other awarded companies. These companies were awarded for the same tender on the same terms as that of third respondent.

[19] The Applicant contends, in reply, that the only relief that the Applicant seeks in the review application is to set aside the tender award made in favour of PK Financial. Consequently, only the third Respondent will be prejudicially affected by the relief sought. The Applicant argued further that, parties are joined with reference to the relief sought, and not with reference to allegations made in affidavits.

NON- JOINDER

[20] Strydom J held in J.C.S v J.J.S and Others[1]:

"The test in a joinder application is whether or not the party has a "direct and substantial interest" in the subject matter of the action, i.e. a legal interest in the subject matter of litigation, which may be affected prejudicially by the judgment of the court. If such interest is shown this will amount to a joinder out of necessity".

[21] In Kethel v Kethel's Estate 1949 (3) SA 598 (A) at 610 the Court held that the general rule is that any party is a necessary party and should be joined if such a person has a direct and substantial interest in any order the Court might make, or if such an order cannot be sustained or carried into effect without prejudicing that party, unless the Court is satisfied that the particular party has waived his or her right to be joined.

[22] The issues here are complicated where numerous responsive tenderers are affected. The right which is the subject matter is the responsive tenderers' right to just administrative action and an equitable tender process. The responsive tenderers were awarded the same tender the third Respondent was awarded. If the application is granted, their awards would be set- aside. They would lose the awards without having been heard. Accordingly, they would clearly be prejudiced by such a judgment.

[23] If a person has a direct and substantial interest in an order that may be given by a Court or that cannot be implemented without causing prejudice to such person, then he or she must be joined unless he or she has clearly communicated his or her intentions to abide by the Order to be given or otherwise waived the right to participate in the proceedings.

[24] The Applicant had a duty to take steps to notify potential or necessary parties about the relief sought. In Road Accident Fund v Legal Practice Council[2], the parties took various steps to notify necessary parties about the relief that was sought. The Court held as follows: "this matter, in my view, is one where joinder of the many thousands of parties, that could be affected by the order of this court, is unnecessary in the light of the steps taken by the RAF to notify as many parties of its application as possible. The steps taken are adequate. The number of affected parties is substantial, and the steps taken by the RAF to notify the sheer volume of parties that could be affected were sufficient to effect their joinder. Only the seventeenth to twenty- third respondents responded and were joined in these proceedings. The failure to respond by those who were notified can be taken to equate to a waiver of the right to be joined'.

[25] The point is that, a notification must be given to the responsive tenderers. In the present matter the applicant argues that, the Applicant seeks to set aside the tender award made in favour of PK Financial and as a result only the third Respondent will be prejudicially affected by the relief sought.

[26] I think that this argument overlooks the subject matter of the review application and the effect the Judgment would be on the responsive tenderers and contrary to the trite principle relating to what is a direct and substantial interest.

[27] In its heads of Argument in particular para 8.5 and during oral submissions, the Applicant relied on Judicial Service Commission and Another v Cape Bar Council and Another[3], "where the Court confirmed that it had become settled law that the joinder of a party was only required as a matter of necessity where that party has a direct and substantial interest that may be affected prejudicially by the Judgment of the Court. The mere fact that a party may have an interest in the outcome of the litigation did not warrant a plea of non- joinder; the right to raise such an objection was limited". The test for joinder has been met, so this decision is of no assistance in the present matter.

[28] In this review application, a proper procedure was followed by the Applicant by invoking Uniform Rule 53, subsequently, the first Respondent dispatched a record. From the record the details of the responsive tenderers are apparent. Based on the record disclosed by the first Respondent, the Applicant had the opportunity to shape its cause of action, work out the nature of relief sought and identify the necessary parties. The Applicant seems to have missed the point somewhat. It was up to the applicant, as dominis litis, to have identified the necessary parties beforehand and to have prepared and executed an appropriate strategy with regard to joinder.

[29] The point in limine must therefore succeed. The current application has shortcomings, of which non- joinder is simply the most obvious one, sufficient to deny the relief sought by the Applicant. Therefore, it is not necessary to deal with any other preliminary point raised by the Respondents.

COSTS

[30] Although the issue of costs remains the discretion of the court, the discretion cannot be exercised arbitrarily, but judicially on grounds upon which a reasonable person could have come to the conclusion arrived at. In R v Zackey 1945 AD 505 with reference to Fripp v Gibbon & Co 1913 AD 354 at 363, the Appellate Division said the following in respect of the exercise of the discretion on costs:

"Questions of costs are always important and sometimes difficult and complex to determine, and in leaving the magistrate a discretion the law contemplates that he should take into consideration the circumstances of each case, carefully weighing the various issues in the case, the conduct of the parties and any other circumstances which may have a bearing upon the question of costs, and then make such order as to costs as would be fair and just between the parties. And if he does this and brings his unbiased judgment to bear upon the matter and does not act capriciously or upon any wrong principle, I know of no right on the part of a Court of appeal to interfere with the honest exercise of his discretion".

[31] Each party petition this Court to grant costs in the event they are successful, this is so because the basic principle is that the successful party should, as a general rule, have his or her costs. However, this principle is subject to number of exceptions where a successful party is deprived of his or her costs. I am not inclined to grant costs in this matter because, prima facie the merits of the application are well considered and to certain extent the Counsel for the first and second Respondent conceded this point. The Respondents only achieved technical success only.

ORDER

[32] In the result, it is ordered:

32.1. The point in limine of non- joinder is upheld.

32.2. The Application is postponed sine die.

32.3. The Applicant is to apply for the joinder of successful responsive tenderers if they so wish.

32.4. No order as to costs.

K Mokwena

Acting Judge of the High Court

Limpopo Division, Polokwane

DETAILS OF THE HEARING & APPEARANCES Date of the Hearing : 04 September 2023 Date of the Judgment : 14 November 2023 Counsel for the Applicant : Adv APJ Els Counsel for the 1st & 2nd Respondents : Adv D Williams, SC Counsel for the 3rd Respondent : Adv M Maunatlala Attorneys for the Applicant : Albert Hibbert Attorneys Pretoria jaco@hibbertlaw.co.za Attorneys for the 1st & 2nd Respondents : Popela Maake Attorneys Polokwane pcmaake@pkmaakeattorneys.co.za Attorneys for the 3rd Respondent : Ncube Attorneys Inc Lebo.m@ncubeinc.co.za

[1] J.C.S v J.J.S and Others (82452/2015) [2021] ZAGPPHC 647

[2] 2021 (6) SA 230 (GP), at paragraph 10

[3] 2013 (1) SA 170 (SCA) at para 12