Maximum Profit Recovery (Pty) Ltd v Segomotsi Mompathi District Municipality and Another (UM138/2021) [2021] ZANWHC 76 (12 November 2021)

IN THE NORTH WEST HIGH COURT, MAFIKENG

CASE NO: UM138/2021

Reportable: NO

Circulate to Judges: NO

Circulate to Magistrates: NO

Circulate to Regional Magistrates: NO

In the matter between:

MAXIMUM PROFIT RECOVERY (PTY) LTD Applicant

2001/005576/07

AND

DR RUTH SEGOMOTSI MOMPATHI DISTRICT

MUNICIPALITY

1st Respondent

PK FINANCIAL CONSULTANTS CC

2nd Respondent

2001/037349/23

In re:

MUNICIPALITY

Applicant

PK FINANCIAL CONSULTANTS CC

1st Respondent

MAXIMUM PROFIT RECOVERY (PTY) LTD 2nd Respondent

And

PK FINANCIAL CONSULTANTS CC

Applicant

DATE OF HEARING

: 22 October 2021

DATE OF JUDGMENT : 12 November 2021

Appearances in the main application

FOR THE APPLICANT : ADV. NGD MARITZ SC

with him ADV. APJ ELS

FOR THE 1st RESPONDENT : ADV. T. MATHOPO

FOR THE 2nd RESPONDENT : ADV. AE AYAYEE

JUDGMENT IN THE APPLICATION FOR LEAVE TO APPEAL

BY THE FIRST AND SECOND RESPONDENTS

IN THE MAIN APPLICATION

PETERSEN J

ORDER

(i) The application for leave to appeal to the Supreme Court of Appeal or alternatively the Full Court of this Division is dismissed.

(ii) The first and second respondents are ordered to pay the costs of the application for leave to appeal, which costs shall include the costs of Senior and Junior Counsel as employed.

JUDGMENT

Introduction

[1] On 19 May 2021, this Court handed down judgment in favour of the applicant in the following terms:

“1. The decision of the first respondent to disqualify the applicant’s bid in Tender 13A is declared constitutionally invalid, reviewed and set aside;

2. The decision of the first respondent to award Tender 13A to the second respondent is declared constitutionally invalid, reviewed and set aside;

3. The service level agreement concluded between the first and second respondents pursuant to the awarding of Tender 13A to the second respondent, is set aside.

4. Tender 13A is awarded to the applicant;

5. The first and second respondents’, jointly and severally, are ordered to pay the applicant’s costs, including the costs of Senior and Junior Counsel as employed.”

[2] The applicants, as first and second respondents, in the main application filed notices of application for leave to appeal on 4 June 2021.

The grounds of appeal

[3] The grounds of appeal of the first respondent are as follows:

“BE PLEASED TO TAKE NOTICE that the Applicant (First Respondent in the main application) intends to apply on a date and time to be arranged with the Registrar of the above Honourable Court for leave to appeal to the Supreme Court of Appeal and/or alternatively to a full bench of the High Court of South Africa North West Provincial Division, Mahikeng against the whole judgment and order made by his Lordship the Honourable Acting Judge Petersen, which order and judgment was granted on the 19th day of May 2021, …

TAKE NOTICE FURTHER THAT THE GROUNDS UPON WHICH THE APPEAL IS FOUNDED ARE NOTED HEREUNDER:

“TAKE NOTICE FURTHER THAT the grounds upon which the appeal is founded are stated hereunder:

1. FIRST GROUND OF APPEAL: THE COURT IMPROPERLY DISMISSED THE APPLICANT’S POINT OF LAW

1.1 The Court a quo erred in dismissing the Applicant’s point of law in terms of Rule 6(5)(d)(iii) of the Uniform Rules of Court.

1.2 The Applicant (First Respondent in the main application) raised a point of law on the basis that the Respondent (Applicant in the main application) failed to comply with the imperative and mandatory provisions of Rule 41A(2)(a) of the Uniform Rule of Court by failing to serve upon the Applicant a Notice together with Notice of Motion indicating whether it agrees to or opposes referral of the dispute to mediation.

1.3 The Provisions of Rule 41A(2)(a) are peremptory.

1.4 The Respondent (Applicant in the main application) did not bring an application to condone its non-compliance with the peremptory provisions of Rule 41A(2)(a).

1.5 The Court a quo erred in overlooking the Applicant’s unopposed interlocutory Application in terms of Rule 30 of the Uniform Rules in terms of thereof it sought an order to declare the Respondent ‘s Form 27 an irregular step and to be set aside.

1.6 The Court a quo erred in proceeding with the main application whilst there was a pending interlocutory Application in terms of Rule 30 of the uniform Rules.

1.7 The Court a quo erred in mero motu condoning the Respondent’s non-compliance with Rule 41A(2)(a) of the Uniform Rules of Court without a substantive application.

2. SECOND GROUND OF APPEAL: (AUDI ALTERAM PARTEM)

2.1 The above Honourable Court at paragraph 19 of its judgment held that “Rule 41A(2) is novel enactment, which has not mustered scrutiny of our courts in great detail, in researching case law related to challenges for want of compliance with rule 41A(2), there is virtually no reported authority.”

2.2 The applicant cannot be said to have acted mala fide in its challenge to the novel rule.

2.3 The applicant requested in its argument that should the Court a quo dismiss the applicant’s Rule 6(5)(d)(iii) point of law and Rule 30 application, the hearing should be postponed allowing the applicant to file an answering affidavit.

2.4 In the adjudication and granting of relief emanating from a review application, the evidence of the state organ concerned is paramount

in the Court a quo findings and granting of a just and equitable remedy, especially where substitution is sought.

2.5 At paragraph 38 of the Judgment, the Court a quo in finding exceptional circumstances for substitution relief, relied on the lack of evidence from the applicant.

2.6 In dismissing the applicant’s point of law in terms of Rule 6(5)(d)(iii), the Court a quo erred in not allowing the applicant an opportunity to file an answering affidavit, where the applicant’s actions were not mala fide and the interests of justice demand evidence for the Court a quo to determine substitution relief.

2.7 The Court a quo should have postponed the hearing to allow the applicant an opportunity to file an answering affidavit on the merits or relief sought, following the dismissal of the applicant point of law.

3. THE GROUND OF APPEAL: THE COURT IMPROPERLY GRANTED A SUBSTITUTIONI RELIEF

3.1 The Court a quo erred in ordering that Tender 13A be awarded to the Respondent.

3.2 The second respondent raised a ground relief of review for the Court a quo to decide that functionality criteria 4, which required that at least one company director should be registered with the South African Institute for Chartered Accountants, was irrational.

3.3 At paragraph 29 of the Judgment the Court a quo stated the alternative argument by the second respondent that if functionality criteria 4 was indeed rational, then it should have been appointed. The second respondent then elected not to persist on the irrationality ground.

3.4 At paragraph 38 of the Judgment, the Court a quo held that if the second respondent were not excluded on functionality criteria 4, it would have been the successful bidder.

3.5 Four bidders were excluded in respect of functionality criteria 4, Further, 5 other bidders priced their bid percentages lower than the second respondent.

3.6 Section 217 of the Constitution demands that procurement must be in accordance with principles of fairness, equitability, transparency, competitiveness, and cost-effectiveness.

3.7 The Court a quo erred in finding that exceptional circumstances existed for the substitution relief for the following reasons:

3.7.1 The Court a quo failed to determine the rationality of functionality criteria 4;

3.7.2 If the court found that functionality criteria 4 was irrational, the other potential bidders, who had also been excluded as a result of the criteria, could have had a fair opportunity to be re-evaluated;

3.7.3 If the Court a quo had found that the requirement was rational, the other potential bidders should have been given a fair opportunity to be re-evaluated on pricing and functionality criteria 2. The applicant could have awarded the tenders to other bidders based on pricing and was not limited to awarding the tender mainly on functionality;

3.7.4 Rationality cannot be implied. If the court found that functionality criteria 4 was irrational, it would be unjust and inequitable to allow the second respondent to benefit from the irrationality and award it tender to the disadvantage of other bidders;

3.7.5 The applicant as the decision-maker is not limited to award a tender base on functionality criteria, it may be based on the rationale and requirements of its business and other criteria such as pricing (based on its budget), despite other bidders scoring higher on other criteria;

3.7.6 The respondent cannot by reforming the parameters of the criteria to suit itself, be allowed to limit the discharge of a judicial function of a court;

3.7.7 In terms of Section 217 of the Constitution, it would not be fair, equitable, competitive, and cost-effective to deny other potential bidders an opportunity to be re-evaluated where it is not a forgone conclusion that the second respondent would be the successful bidder, especially due to the possibility of the irrationality of functionality criteria 4 and lower pricing of other bidders;

3.7.8 It would be remiss of the applicant as a state organ, exercising public power, to subsist a tender where one of its functionality requirements is potentially irrational to the benefit of one bidder;

3.7.9 The availability of proper and adequate information and the institutional competence of the court to make the decision for the administrative

decision-maker are necessary prerequisites that must be present before a court can legitimately assume an administrative decision-making function.

3.7.10 Without the evidence of the municipality, uncertainty on the rationality of criteria 4 and fairness to other bidders, the Court a quo is not in a good position and thus as well qualified as the original authority to decide to award the tender to the second respondent.

3.7.11 The Court a quo thus should have:

3.7.11.1 Made a declaration of rationality on functionality criteria 4;

3.7.11.2 If functionality criteria 4 was found to be irrational, the Court a quo should have declared it constitutionally invalid, reviewed and set aside Tender 13A for remittal to the Applicant for a fresh decision;

4. The court a quo’s judgment and order thus fall to be set aside on appeal.

5. There exist reasonable prospects of success on appeal that another court would come to a different conclusion on the above grounds.

6. The above Honourable Court is requested to order the following relief:

6.1 Grant leave to appeal to the full bench;

6.2 Alternatively, grant leave to appeal to the Supreme Court of Appeal;

6.3 That the costs of the applications in the court a quo and leave to appeal, be costs in the appeal.”

[4] The grounds of appeal of the second respondent are as follows:

“KINDLY TAKE NOTICE THAT the applicant (the second respondent in the principal proceedings) hereby seeks appeal against the whole of the judgment and orders made by his Lordship the Honourable Acting Judge Petersen granted on 19 May 2021:

“First Ground: Court improperly exercised jurisdiction

1. In granting relief as sought by the respondent, the court a quo misdirected itself in exercising jurisdiction, despite its attention having been drawn to the peremptory provisions of section 7(2) of the Promotion of Administrative Justice Act 3 of 2000 (“PAJA”).

2. Specifically the court a quo’s attention had been drawn in supplementary heads of argument filed by the applicant that section 7(2)(a) of PAJA bars a court from reviewing administrative action, unless all internal remedies provided for in any other law has first been exhausted.

3. The provisions of section 7(2)(a) of the PAJA are peremptory, in that a Court may only overlook that failure in exceptional circumstances and only upon application in terms of section 7(2)(c) of the PAJA.

4. The court a quo was further referred to a plethora of decided cases where it has been held that section 62 of the Local Government: Municipal Systems Act 32 of 2000 (“the MSA”) provides an internal remedy which was available to the respondent. Such matter was emphasised in the context that the respondent had already raised an objection to the functionality criteria of the tender, prior to submitting its tender on 24 February 2020, and thus accordingly section 62 of the MSA was an internal remedy available to it.

5. In disposing of the respondent’s contention, that the said internal remedy was no longer available to it subsequent to the tender to the applicant, by virtue of the provisions of section 62(3) of the MSA, the court a quo’s attention was directed specifically to the decision of Evaluations Enhanced Property Appraisals (Pty) Limited v Buffalo City Metropolitan Municipality and Others, a full court decision of the Eastern Cape Provincial Division of the High Court (as referenced above.)

6. In rejecting the applicant’s legal submissions in its judgment, the court a quo states:

“[27] . . . in the absence of any evidence from the first respondent, picks up the cudgels for the first respondent and endeavours to argue several technical objections to the ripeness of the application and the applicant’s alleged failure to exhaust internal remedies. The second respondent logically cannot advance the matter insofar as the adjudication process by the first respondent is concerned. At most it may weigh in on what would be a just and equitable order, if this court find that the tender should be reviewed and set aside.”

7. The provisions of section 7(2) of the PAJA are peremptory, and are stipulations based on separation of powers considerations. They

express themselves clearly, a matter which has been confirmed by other courts of law. A court may not entertain a review application

unless internal remedies have been exhausted or in instances where an applicant has sought and obtained condonation in terms of section 7(2)(c) of the PAJA.

8. Section 7(2)(c) of the PAJA is a bar to the exercise by a court of its review authority, until its terms have been satisfied. It is not as the court a quo places it, mere considerations to be weighed up in the framing of a just and equitable order.

9. The court a quo accordingly erred in failing to give effect to the terms of section 7(2) of the PAJA and dismissing the submissions raised by the applicant, without with respect an appropriate enquiry, as to whether or not it was permitted at law to exercise review jurisdiction.

10. The orders of the court a quo setting aside the decision to disqualify the respondent’s bid, as well as the decision taken to appoint the applicant and conclude a Service Level Agreement with the applicant, thus fall to be set aside on appeal.

Second Ground – Substitution order improperly granted

11. The court a quo erred in ordering at paragraph 4 that tender 13A awarded to the respondent. The effect of this was to grant the respondent substitution relief in respect of a process which it had vehemently argued to be flawed and in contravention of section 217 of the Constitution.

12. There was further no basis for the grant of substitution relief, as it is common cause that the court a quo was not armed with the facts of the adjudication process, as the Municipality had not filed an answering affidavit on the merits.

13. The Court ought to have found that it was not in a position to grant substitution relief absent insight into the Municipality’s adjudication process.

14. Specifically, the facts of the application, were distinct from that in Trencon Construction (Pty) Limited v Industrial Development Corporation of South Africa Limited and Another 2015 (5) SA 245 (CC) at paragraphs 49 and 59 upon which the court a quo relied.

15. In the Trencon decision, the Constitutional Court determined that the IDC’s decision would be a foregone conclusion, as it was common cause that the IDC’s very own appointed consultant, who evaluated the bids received, had recommended that the tender be awarded to the applicant in that case. That is markedly different from the present situation.

16. Moreover it is not a foregone conclusion that the respondent would have been the highest bidder. The record provided by the Municipality reveals that there were other bidding entities, which had tendered at a price lower than both the applicant and the respondent’s bids.

17. On a determination that the inclusion of the “Chartered Accountant Director requirement”, is unfair and/or otherwise irrational, no less ten other bidding parties, would have also crossed the functionality threshold. Six of such bidders tendered at a price lower than that of the respondent, ex facie the record.

18. A review court is per trite authority, engaged in a process that primarily seeks to uphold the rule of law and in procurement matters, to achieve the objectives set out in section 217 of the Constitution.

19. The court a quo erred in granting substitution relief, without further consideration to the interest of other bidders that ex facie the record, stood to be appointed but for the functionality criteria that this very respondent impugned. This had the consequence of elevating the respondent, when it was not ex facie the record, next in line.

20. The court a quo further erred in that the judgment does not display that any consideration was given to the unenviable position that the applicant finds itself.

21. The court a quo ought to have found that these were circumstances requiring (at best) the setting aside of the applicant’s appointment, and remitting the matter back to the Municipality for a fresh decision, upon the consideration of the bids of all bidders. Alternatively, the court a quo should have required an explanatory affidavit to be filed by the Municipality, prior to exercising its discretion in terms of section 8 of the PAJA, in crafting a just and equitable remedy.

22. The court a quo’s judgment and orders may thus fall to be set aside on appeal.

23. There are no reasonable prospects on appeal, thus requiring the court a quo to grant leave to the applicant to the Supreme Court of Appeal (“the SCA”) or alternatively to a Full Court of the Division.

24. Therefore, may it please this Honourable Court to make the following orders:

24.1 Leave to appeal is granted to the SCA and/or alternatively to the Full Court; and

24.2 The costs of the application in the court a quo, the costs of the application for leave to appeal, are to be costs in the appeal.”

[5] At the hearing of the application for leave to appeal, Adv Ayayee, indicated that leave would no longer be sought against the whole of the judgment of the Court but only paragraph [4] of the order in terms of which Tender 13A was awarded to the Applicant.

The test applicable to an application for leave to appeal

[6] Section 17(1)(a)(i) of the Superior Courts Act 10 of 2013 provides, inter alia, that:

“Leave to appeal

17. (1) Leave to appeal may only be given where the judge or judges concerned are of the opinion that—

(a) (i) the appeal would have a reasonable prospect of success; or

(ii) there is some other compelling reason why the appeal should be heard, including conflicting judgments on the matter under consideration;

(b) the decision sought on appeal does not fall within the ambit of section 16(2)(a); and

(c) where the decision sought to be appealed does not dispose of all the issues in the case, the appeal would lead to a just and prompt resolution of the real issues between the parties.

(2) (a) Leave to appeal may be granted by the judge or judges against whose decision an appeal is to be made or, if not readily available, by any other judge or judges of the same court or Division.”

[7] It is widely accepted since the enactment of the Superior Courts Act, the test applicable to an application for leave to appeal is that leave to appeal may only be given where a judge is of the opinion

that the appeal would have reasonable prospects of success. The bar has accordingly been set much higher. The question is now “would” a different court come to different conclusion and not “might” a different court come to different conclusion. See Valley of Kings Thaba Motswere (Pty) Ltd v Mayya International[1] where the following is stated:

“There can be little doubt that the use of the word “would” in section 17 (1) (a) (i) of the Superior Courts Act implies that the test for leave to appeal is now more onerous. The intention clearly being to avoid our courts of appeal being flooded with frivolous appeals that are doomed to fail. I am, however, of the respectful view that the “measure of certainty” standard propounded by the learned judge in Mont Chevaux Trust (supra) may be placing the bar too high. It would, in my respectful view, be unreasonably onerous to require an applicant for leave to appeal to convince a judge – who invariably would have provided extensive reasons for his or her findings and conclusions – that there is a “measure of certainty” that another court will upset those findings. It seems to me that a contextual construction of the phrase “reasonable prospect of success” still requires of the judge, whose judgment is sought to be appealed against, to consider, objectively and dispassionately, whether there are reasonable prospects that another court may well find merit in arguments advanced by the losing party.”

Discussion

[8] I have had careful regard to the heads of argument filed by counsel in this application for leave to appeal. I do not propose to repeat the content, save to deal with the grounds of appeal and the prospects of success on appeal, if any. In respect of the application for leave to appeal by the first respondent, the first ground of appeal premised on the dismissal of the first respondent’s point in law, is respectfully without merit. Save for the fact that it is alleged that there was a pending rule 30 application of the first respondent which precluded this Court from proceeding with the application, it is alleged that this Court erred in mero motu condoning the applicant’s non-compliance with Rule 41A(2)(a).

[9] The first respondent’s rule 30 application and question of law raised in terms of rule 6(5)(d)(iii) is dealt with comprehensively in paragraphs [9] to [23] of the Court’s judgment. Whilst the issue of Rule 41A(2) is a novel issue which had not merited the attention of the Courts in many judgments at the time of this Court’s judgment, the novel nature of the issue in the context of the present matter, does not in itself merit the attention of a higher court. Seen in its proper context, rule 6(12) of the Uniform Rules of Court in respect of urgent applications, being the context in which the

matter made its way to the roll, in itself provides for dispensing with the forms and service provided for in the rules. There are accordingly, in my view, no prospects of success on appeal in this regard. The question of law raised by the first respondent may have been relevant when the application was first enrolled as an urgent application, but was clearly overtaken by time after the application was struck from the roll for lack of urgency and made its way to the opposed roll.

[10] The first respondent rather than file an answering affidavit elected to persist in its challenge on the issue of the failure of the applicant to serve upon it a notice indicating whether or not it agreed to mediation. I emphasize that the nature of the relief sought by the applicant was in any event not susceptible to mediation. The first respondent in its second ground of appeal contends that this Court should have allowed it, once dismissing its point of law, to file an answering affidavit. It is trite that when a point of law or point in limine is raised, one pleads over, in anticipation of the possible dismissal of the point of law or point in limine. In my view, the first respondent, should stand and fall on its decision not to file an answering affidavit and not seek the assistance of this Court in creating for it a special procedure.

[11] The first respondent’s third ground of appeal peaks to the substitution relief granted by this Court in circumstances where it has failed to file an answering affidavit. The first respondent seeks to answer a case which it did not oppose. In any event, the first respondent filed the record it was compelled by law to do and on which the applicant supplemented. The record speaks for itself. All indications from the record are that two horses were left in the race for Tender 13A, the applicant and the second respondent. The applicant was clearly excluded on the basis of not having an auditor as one of the requirements of the tender, where on the papers it clearly had an auditor. The applicant outscored the second respondent on most if not all scores. The appointment of the applicant holds a massive cost saving for the ratepayer as opposed to the retention of the second respondent.

[12] In my view, the first respondent has not demonstrated any prospects of success, that another court would come to a different conclusion.

[13] In respect of the second respondent’s application for leave to appeal, same has been limited to the fourth paragraph of this Court’s order, the substitution order. For the same reasons set out above in respect of the first respondent’s challenge, I find that there are no reasonable prospects of success on appeal on this ground.

[14] The respective applications for leave to appeal should accordingly fail with an appropriate order as to costs.

Order

[15] Resultantly, the following order is made:

(i) The application for leave to appeal to the Supreme Court of Appeal alternatively the Full Court of this Division is dismissed.

(ii) The applicant is ordered to pay the costs of the application for leave to appeal, which costs shall include the costs of Senior and Junior Counsel as employed.

A. H. PETERSEN

JUDGE OF THE HIGH COURT,

NORTH WEST DIVISION, MAHIKENG

APPEARANCES:

For the Applicant:

Adv NGD Maritz SC

with Adv APJ Els

Instructed by:

Albert Hibbert Attorneys

c/o Van Rooyen Tlhapi Wessels Inc.

For the First Respondent:

Adv T. Mathopo

Instructed by:

Ncube Inc Attorneys

c/o Zisiwe Attorneys

For the Second Respondent:

Adv AE Ayayee

Instructed by:

Morwaagae Attorneys

c/o Motshabi & Associates Incorporated

[1] (EL: 926/2016; 2226/2016) [2016] ZAECGHC 137 (10 November 2010)