MEB Energy (Pty) Ltd v Ndlambe Local Municipality and Another (466/2020) [2020] ZAECGHC 30 (28 April 2020)

IN THE HIGH COURT OF SOUTH AFRICA

(EASTERN CAPE DIVISION, GRAHAMSTOWN)

Case No: 466/2020

In the matter between:

MEB ENERGY (PTY) LTD

Applicant

And

NDLAMBE LOCAL MUNICIPALITY

First Respondent

QUALITY FILTRATION SYSTEMS (PTY) LTD Second

Respondent

JUDGMENT

BESHE J:

[1] The applicant approached this court for an order calling upon the respondent to show cause why it should not be interdicted from implementing or performing under the tender with notice number 285/2019 pending the review proceedings aimed at setting aside the said tender. The tender in question relates to the desalination of sea water so as to provide much needed water to the citizens of drought stricken Port Alfred and its surrounding arears.

[2] The applicant had submitted a tender to undertake the project in question but it was unsuccessful with the tender being awarded to the second respondent.

[3] Even though the issuing of the rule nisi was fully opposed when the matter served before Roberson J on the 3 March 2020, a rule nisi returnable on the 17 March 2020 was issued on the 5 March 2020.

[4] Roberson J expressed the view that applicant had succeeded in establishing a prima facie right to review the tender award in question, with a fairly strong prospect of success.

[5] Subsequent to the issue of the rule nisi, further affidavits were filed and both parties filed additional heads of argument.

[6] Applicant’s motivation for seeking to have the awarding of the contract to undertake to the desalination project to the second respondent is that process employed to award the tender was fraught with irregularities. The applicant contends that more irregularities emerged as more of the record was made available by the first respondent. As would appear from paragraph 61 onwards of the founding affidavit deposed to by Mr Aharon Even who is a director of the applicant, the tender irregularities initially delineated were, briefly the following:

Applicant was invited to submit proposals in respect of the services required by first respondent. The deadline for the submission of proposals was the 11 December 2019. However, unbeknown to the applicant, this date had been extended to 20 December 2019. On this date when the bids were opened, Messrs Batty and Dart who are employees of a company that assisted applicant in compiling the bid were in attendance. Bids having been opened, second respondent’s price turned out to be R90 000 000.00 lower than that of the applicant.

Mr Even stated that he had reason to believe the bidding process was mired in corruption. This was due to an incident involving two men who were present during the opening of the bids. The two later approached applicant’s representatives who had attended the bid opening. They spoke to Dart stating that they could arrange for the tender to be awarded to the applicant in return for a R1 000 000.00 payment, stating that they worked for the first respondent.

[7] Even though according to Mr Even, Mr Babama who it is common cause is the Deputy Director of Infrastructure of the first respondent would promptly respond to his enquiries about the status of the tender, he did not respond to the enquiries he made on the 11 February 2020. He only learnt from correspondence sent on 19 February 2020 that the tender was awarded to the second respondent on the 11 February 2020.

[8] First respondent did not provide adequate reasons for its decision not to award the tender to the applicant stating only that: “your company became the second highest acceptable tender during price evaluation as the appointed bidder was lower than your offer”. It was submitted that this in itself is a ground for review.

[9] Applicant outlined the elements of the bid, namely what it takes to perform according to the bid and concluded that based on that outline, it would not have been possible for the second respondent to perform the full scope of the work required for the price it quoted. That therefore its bid was not an acceptable tender.

[10] Applicant’s other complaint or suggestion is that the Bid Evaluation Committee was in all likelihood not properly constituted. This based on the fact that it did not include a technical expert.

[11] It was based on, amongst others, these reasons that it was submitted that the applicant had prima facie right to review the award of the tender, had made out a prima facie case for the reviewal of the tender award, and that it stood to suffer irreparable harm or damage if interim relief is not granted because the tender requires the work to be concluded within sixty (60) days.

[12] In response to applicant’s allegations, first respondent retorted as follows:

It was constrained to award the bid to second respondent because it only had a sum of R100 000 000.00 at its disposal which it secured from two grants from the Department of Co-operative Governance and Traditional Affairs and the Department of Water Affairs respectively. That first respondent could not afford the amount offered by the applicant for the work required.

[13] Regarding applicant’s suspicion that the awarding of the tender was marred in corruption based on the conduct of the persons who approached applicant’s associates after the opening of the tender: First respondent has this to say: It contends for the striking out of the averments relating to this aspect on the basis essentially that they amount to hearsay. This is in particular as regards the purported transcripts of the conversation that took place in this regard. The occurrences in this regard are confirmed by both Messrs Batty and Dart who were involved / part of the discussions. I do not see how this can be said to be hearsay evidence. Besides it became apparent that applicant was no longer placing as much reliance on this complaint.

[14] First respondent denies that the Bid Adjudication Committee was not properly constituted. The deponent to the opposing affidavit, Mr Mlungisi Michael Klaas, who is the Acting Municipal Manager states that the BAC was the usual committee and was chaired by him. Further that the tender process was managed by Ms Masiza who is the director of infrastructure who holds a B Tech Degree in Civil Engineering.

[15] Respondent denies that applicant will suffer irreparable harm if interim relief is not granted, and it is averred that instead irreparable harm will be caused to the municipality and the citizens who are in dire need of water. It is submitted that this also goes for the balance of convenience. Namely that it favours the respondent and its citizens.

[16] Having received, according to Mr Evens, the record of the decision that was taken by first respondent in this regard, more irregularities emerged therefrom. To that extent that not much reliance need be placed on the transcripts relating to the suspicion of corruption by people allegedly or who claimed they were working for the first respondent.

[17] The seven (7) irregularities that emerged from the record provided by first respondent are said to be the following:

(i) That second respondent did not submit an acceptable tender. Because its proposal did not include some aspects of the work required to complete the project in question.

(ii) Both bidders did not achieve the functional threshold which was 85 points. This appears to be common cause. Paragraph 41.47 of the opposing affidavit, Mr Klaas acknowledges that the bidders were required to score 85% for functionality, but both were allowed to proceed to the points’

calculation stage at 80 points each.

(iii) Second respondent’s bid that was accepted was not the one that was submitted when the bids closed.

(iv) A confusion regarding the prices quoted by the second respondent.

(v) The record does not reveal that the 90:10 price preference formula was used.

(vi) The award of the bid to the second respondent for the price of R100 000 000.00 and R111 000 000.00 was not authorised by the deviation report.

(vii) The first respondent invited bids for a 5 mega litre plant after the tenders were closed. According to the applicant, this was unlawful.

[18] From the further opposing affidavit filed by the first respondent and the applicant’s reply thereto, the following emerge:

Mr Klaas explains how the two responsive bidders, being the applicant and the second respondent were scored. As far as scoring for functionality is concerned, he explains that the terms and conditions of the bid do not state the manner in which functionality points should be allocated.

That points in this regard were allocated in the discretion of Mr Nkwelo and Mr Babama.

That even though the initial invitation for bids were for a 2ML installation, additional funding became available. This resulted in the two bidders being requested to provide first respondent with a price for a 5ML installation. This was also in accordance with the deviation authorization report.

[19] Mr Klaas explains that when it became apparent that 85 points for functionality had not been met by the bidders, on account of the emergency brought about by the shortage of water, a request for deviation to allow for 80 points instead of 85 points was sought.

[20] As regards the alleged confusion as to the price of the plant to be operated by the approved bidder (second respondent), attention is drawn to the Bid Committee minutes. The said meeting was held on the 7 February 2020. Attention was also drawn to the tender evaluation report as well as a request to deviate from the Standard Supply Chain Management Policy. This was in view of the fact that this was an exceptional case – critical water shortage and thus the extreme urgency of the tender. Klaas shows that the tender was awarded for an amount of R102 580 335.00. He also avers that the second respondent is capable of performing the work as required. To this end, so he states, steps were taken to arrange for a firm of engineers to visit second respondent’s premises to ensure the viability of the second respondent’s quotation and what they had undertaken to do. A confirmatory affidavit by Mr Louis Fourie was filed in this regard. According to Mr Klaas, based on the above stated factors, the applicant has not made out a case for an interim interdict pending a review. In particular, prove a prima facie case that it will be successful on review and contends that the balance of convenience favours the first respondent.

[21] In its replying affidavit, applicant identifies more irregularities which include impugned scoring regarding functionality. Pointing out that first respondent accepts that there were no guidelines for the functional scoring.

[22] I am not required to determine whether there are valid grounds for the reviewal and setting aside of first respondent’s decision to award the tender in question to the second respondent (the decision). What I am required to determine is whether the applicant has made out a case for the granting of and interim interdict to halt the implementation of the tender pending the review of the decision.

[23] It is trite that an interlocutory interdict is designed to protect the rights of an applicant pending an application / action to be brought by the applicant to establish those rights. The requisites which the applicant for an interlocutory interdict must satisfy are well known. They are:

(a) A prima facie right to the final relief sought in the review application;

(b) A well-grounded apprehension of irreparable harm if the interim relief is not granted and the ultimate relief is granted;

(c) A balance of convenience in favour of the granting of the interim relief, and

(d) The absence of any other satisfactory remedy.

It is also trite that these requirements should be considered in conjunction with each other in order to determine whether interim relief should be granted.

[24] The questions that should be answered are: Whether the applicant satisfied these requirements? Has the applicant established a prima facie right to the relief it will seek in the review application? On the facts before me, is the applicant likely to succeed in the review? This can be determined by considering the facts as set out by the applicant together with those set by the respondent which applicant cannot dispute and whether the applicant would on these facts obtain final relief on the review application.

[25] I have already alluded to the explanation given by respondent as regards the irregularities alleged by the applicant. Essentially, it is submitted on behalf of the respondent that due to the urgency of need to provide water to the citizens of the Ndlambe Local Municipality, it was compelled to invoke the deviation procedure in procuring the services in question. In this regard, reliance is placed on paragraph 38 (1) (a) (1) of Municipal Supply Chain Management Regulations of 2005. Applicant’s submission is that having embarked on a tender / procurement process, first respondent could not ditch that process halfway. Arguing that a tender process constitutes an administrative act. That therefore an accounting officer cannot mero motu tinker with the terms of an administrative act.

[26] Regulation 36 of the regulations provides for “Deviation from, and ratification of minor breaches of, procurement process”. Subsection 1 (a) provides that: A supply chain management policy may allow the accounting officer:-

(a) to dispense with the official procurement processes established by the policy and to procure any required goods or services through any convenient process, which may include direct negotiations, but only –

(i) in an emergency;

(ii)

(iii)

(iv)

(v)

(b) to ratify any minor breaches of the procurement processes by an official or committee acting in terms of delegated powers or duties which are purely of a technical nature.

[27] It is common cause that the scarcity of water within the first respondent and the need to source same presented an emergency. Sight should also not be lost of the fact that the availability of extra funding necessitated a process that would be in line with the available funds. This occurred after the tender in its original form had gone out. It was suggested on behalf of the respondent that this in addition to the emergency that has always been there, called for a new process of acquisition. That process included calling for further proposals from both the applicant and the second respondent, resulting in none of the parties being treated unfairly. I am inclined to agree with the first respondent in this regard. This in my view amounted to the deviation envisaged in Regulation 36 (1) (a). This is also apparent from one of the requests for authorisation to deviate from the standard Supply Chain Management procurement process dated the 7 February 2020 which recorded that due to the urgency of the project the municipality could not apply the standard Supply Chain Management process. In my understanding, this would have entailed the invitation of fresh tenders. Thereby starting

the procurement process from scratch and delaying the process of ensuring that the members of the community within first respondent

are provided with the water it urgently needed.

[28] I have already expressed the view that the evidence relating to the discussions between applicant’s representatives and persons purporting to work for the first respondent cannot be said to be hearsay evidence. It does not require to be struck out. Be that as it may, it has not been shown what effect these could have had on the outcome of the bidding. The respondent denies that it has any association with or that the two persons are working for it. The respondent has also given feasible explanations in respect of complaints raised by the applicant for purposes of this application (interim interdict).

[29] I am therefore not persuaded that the applicant has succeeded in establishing a prima facie right based on a probability of success of the review application. This is especially so in view of the fact that applicant does not say it does not have an alternative remedy available to it. It is suggested in argument that damages are not generally a suitable remedy to vindicate administrative law rights.

[30] There can be no doubt that there is a pressing need for the water crisis to be dealt with. That the

provision of water is an essential service to any community. That being the case, who does the balance of convenience favour? In my view, it favours first respondent on whose shoulders the responsibility to provide the community with water, clean water lies.

In Give Siyawa CC v Ndlambe Municipality and Another[1] an unreported decision of this decision, it was held that the balance of convenience cannot solely be in relation to the interest of the parties to the litigation. That public interest needed to be considered too. I am of the view that the interest of the community

that is served by the first respondent will be best served by the project being carried out as soon as possible.

[31] Accordingly, the application for an interlocutory interdict is dismissed with costs, such costs to include costs of two counsel where utilized.

_____________

NG BESHE

JUDGE OF THE HIGH COURT

APPEARANCES

For the Applicant : Adv: A J Boulle

Instructed by

: NETTELTONS ATTORNEYS

118A High Street

GRAHAMSTOWN

Ref: Mr Nettelton/M108

Tel.: 046 – 622 7149

For the 1st Respondent : Adv: Paterson SC & Adv: S H Cole

Instructed by

: WHEELDON RUSHMERE & COLE

119 High Street

Ref: Mr Brody/Glyn/S22926

Tel.: 046 – 622 7005

Date Heard

: 17 March 2020

Date Reserved : 17 March 2020

Deemed Date of Delivery : 28 April 2020

[1] Case number 395/2004.