Performing Arts Council of Free State v Commission for Conciliation, Mediation and Arbitration and Others (JR 82/18) [2021] ZALCJHB 70 (27 May 2021)

THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG

Not reportable

Case no: JR 82/18

In the matter between:

PERFORMING ARTS COUNCIL OF FREE STATE

(PACOFS)

Applicant

and

COMMISSION FOR CONCILIATION, MEDIATION

AND ARBITRATION

First Respondent

COMMISSIONER ANNA MARIA FOURIE N.O

Second Respondent

TEBOHO JOHANNES MACHOLO

Third

Respondent

Heard: 18 May 2021

Delivered: This judgment was handed down electronically by circulation to the parties' legal representatives by email, publication on the Labour Court’s website and released to SAFLII. The date and time for hand-down is deemed to be 10h00 on 27 May 2021.

Summary: Review application – arbitration is a hearing de novo and not a review of what transpired during the disciplinary enquiry – employee is an accounting officer – acted ultra vires his powers and in breach of PMFA – dismissal warranted.

JUDGMENT

NKUTHA-NKONTWANA, J

Introduction

[1] This is a review application in terms of section 145 of the Labour Relations Act[1] (LRA). The applicant impugns the arbitration award issued by the second respondent (Commissioner) under case number FSBF 3701-16 dated 4 December 2017 under the auspices of the Commission for Conciliation Mediation and Arbitration (CCMA). The Commissioner found the dismissal of the third respondent procedurally and substantively unfair and reinstated him with full back pay.

[2] The applicant’s main ground of review is that the Commissioner misconceived the nature of the enquiry and reached a conclusion that is at odds with the evidence that was before him. The third respondent is the only respondent defending the award and, in limine, impugns the authority of the deponent to the applicant’s founding affidavit, Mr Thabang Louis Mohapi (Mr Mohapi). Mr Mohapi is the applicant’s Demand and Acquisition Practitioner: Supply Chain.

Point in limine

[3] I deal first with third respondent’s point in limine so as to get it out of the way. The applicant contends that, since the third respondent does not challenge the authority of the

applicant’s attorneys to bring these proceedings, it does not avail him to challenge the authority of Mr Mohapi to depose to the founding affidavit. I agree.

[4] In Ganes and Another v Telcom Namibia Ltd 2004,[2] quoted with authority in Unlawful Occupiers, School Site v City of Johannesburg,[3] the Supreme Court of Appeal (SCA) stated that if the attorney is authorised to bring the application on behalf of the applicant, the application necessarily is that of the applicant and there is no need for any other person who becomes involved whether as a witness or someone to be additionally authorised. In the event that the respondent wishes to challenge the authority of a person allegedly acting on behalf of the applicant, Rule 7(1) of the Uniform Rules of the High Court (Uniform Rules) is an adequate remedy.

[5] Since the third respondent has no qualms with the authority of the applicant’s attorneys to institute these proceedings; and alternatively, failed to avail himself to the remedy provided by Rule 7(1) of the Uniform Rules, the point in limine is patently untenable.

[6] It follows that the point in limine is ill-conceived and must fail.

Background

[7] It is trite law that the procurement process by State Organs is effected through a process of tender and acceptance, creating a contract. The tender process, for obvious reasons, is strictly regulated by the Constitution, legislation envisaged by the Constitution, Regulations and National Treasury Guides. The present legal framework, within which the tender process operates, is summarised as follows:

7.1. Section 217 of the Constitution, which deals with ‘procurement’, provides for the award of tenders in accordance with a system that is fair, equitable, transparent, competitive and cost effective. Section 217(3) of the Constitution provides for the prescription by National Legislation of a framework within which a policy must be implemented, referred to in section 217(2) of the Constitution, which promotes preferential procurement policy to protect and advance persons or categories of persons disadvantaged by unfair discrimination.

7.2. The Public Finance Management Act[4] (PFMA) and the Preferential Procurement Policy Act[5] (PPPFA) constitute the national prescripts referred in section 271 of the Constitution. Section 2(1)(f) of the PPPFA provides that ‘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’.

7.3. While the in terms regulation 9 of the PPPFA Preferential Procurement Regulations of 2001[6] (2001 Regulations) , an organ of state could award a tender to a bidder that did not score the highest number of points on reasonable and justifiable grounds and despite regulations 3.(4), 4.(4), 5.(4), 6.(4) and 8.(8). The 2001 Regulations were repealed by the PPPFA Preferential Procurement Regulations of 2011[7] (2011 Regulations) which pertinently provide:

‘INVITATION OF BIDS

5. PLANNING, STIPULATION OF PREFERENCE POINT SYSTEM TO BE UTILISED AND THE DETERMINATION OF DESIGNATED SECTORS

Prior to the invitation of bids, AOs/AAs are required to:

…

5.3. Determine whether the services, works or goods for which an invitation is to be made has been designated for local production and

content in terms of Regulation 9 of the Preferential Procurement Regulations. This will entail the inclusion of a specific condition

in the bid documents that only locally produced services, works or goods or locally manufactured goods with a stipulated minimum

threshold for local production and content will be considered. This will subsequently have a direct impact on the evaluation of the bid.

16. AWARD OF CONTRACTS

16.1 A contract must be awarded to the bidder who scored the highest total number of points in terms of the preference point systems.

16.2 In exceptional circumstances a contract may, on reasonable and justifiable grounds, be awarded to a bidder that did not score the highest number of points. The reasons for such a decision must be approved and recorded for audit purposes and must be defendable in a court of law.’ (Emphasis added)

[8] It is common cause that the applicant is a State Owned Entity (SOE) and falls under the ambit of the above regulatory framework. The third respondent was its Chief Executive Officer (CEO). On 14 and 16 February 2014 the applicant advertised a tender for the provision of security services on Daily Sun and City Press newspapers, respectively, in accordance with the PMFA read together with PPPFA.[8] The bidding criteria was set out in the tender documents and did not state that preference would be given to a company that is based Free State.

[9] The Bid Adjudicating Committee (BAC) recommended a company known as Dinko Trading, which had the highest score and quoted a lower amount than a company known as Iceberg Trading. Subsequently, the BAC submitted its recommendation to the third respondent for approval. The third respondent decided to deviate from the BAC recommendation and discretely appointed Iceberg Trading.

[10] The third respondent’s reason for deviating from the BAC’s recommendation is that Iceberg Trading is a Free State based company and was going to create jobs for the local people. He conceded, though, that the locality of the bidder was not a requirement in the bidding criteria. Yet, he was adamant that he was empowered by the PMFA and procurement regulations to do so, a stance he persists with in this application.

[11] The applicant, on the other hand submitted that the third respondent acted irregularly and breached the PFMA when he appointed Iceberg Trading. That is so, it was further submitted, because in terms of regulation 5.3 of the 2011 Regulations, a condition that only locally produced services would be preferred had to be specifically mentioned in the bid documents. That condition would in turn directly impact on the evaluation of the bid. For that reason, the tender should have been re-advertise with specific reference that preference would be given to the companies that are based in Free State.

[12] In terms of section 81(1)(a) of the PFMA, disciplinary action must be taken against the accounting officer who wilfully or negligently fail to comply with procurement and provisioning system in terms of section 38 of the PFMA read with the pertinent regulations. The third respondent was accordingly charged, inter alia, as follows:

12.1. ‘…You are guilty of failing to act in the best interest of PACOFS in that you ailed outside of Section 2(1)(f) of the Preferential Procurement Policy Framework Act No. 5 of 2000 (“PPPFA”) by ignoring the recommendation of the SCM bid committee to award a security tender to Iceberg Trading instead of Dinko Trading that was BEE Level 3 (same as Iceberg) and also R105 336.00 cheaper than Iceberg Trading…’

12.2. ‘…You are guilty of failing to act in the best interest of the organisation, alternatively gross negligence in that you acted in direct contravention of the 'Treasury Regulations by overturning the recommendation of the bid committee without written reason(s) or compelling reasons as to why you awarded the tender to Iceberg Trading, despite that it did not score the highest in the bid results of security tender…’

[13] The third respondent was found guilty of several charges, including the above charges, and accordingly dismissed. He referred a dispute to the CCMA, challenging both the procedural and substantive fairness of his dismissal. The Commissioner found in his favour, hence in these proceedings the applicant impugns the award.

Legal principles and application and application

[14] The review test is trite and well expounded in Department of Education v Mofokeng & Others Mofokeng,[9] referred to with approval in Palluci Home Depot (Pty) Ltd v Herskowitz & Others,[10] that:

‘…for a defect in the conduct of the proceedings to amount to a gross irregularity as contemplated by s 145(2)(a)(ii) of the LRA, the arbitrator must have misconceived the nature of the enquiry or arrived at an unreasonable result'. Thus, as recognised in Mofokeng, it is not only the unreasonableness of the outcome of an arbitrator's award which is subject to scrutiny, the arbitrator 'must not misconceive the enquiry or undertake the enquiry in a misconceived manner', as this would not lead to a fair trial of the issues.’

[15] Turning to the present case, I deal first with the procedural fairness. It is apparent from the award that the third respondent’s main qualm as regards procedure was that the chairperson of the disciplinary enquiry did not apply his mind to the evidence pertaining to the charges under review. The Commissioner, upheld this impugn despite being patently flawed. This challenge had nothing to do with procedural irregularity if regard is had to the guideline on fair procedure in terms of item 4 of Schedule 8 of the LRA, Code of Good Practice on Dismissal[11] (Code), which, in essence, has codified the audi alteram partem rule. Also, it is well accepted that arbitration proceedings constitute a de novo hearing of the matter and as such, the Commissioner exceeded her powers when she reviewed the findings of the chairperson of the

disciplinary enquiry. In County Fair Foods (Pty) Ltd v CCMA,[12] the LAC stated that the decision of the arbitrator as to the fairness or unfairness of the employer’s decisions is not reached with reference to the evidential material that was before the employer at the time of its decision but on the basis of all the evidential material before the arbitrator.[13]

[16] The commissioner evidently misconceived the nature of the enquiry and, as such, his finding that the procedure was unfair is untenable.

[17] I now turn to the substantive farness issue. In my view, the enquiry into substantive fairness basically turns on the interpretation and application of the PFMA read together with PPPFA and relevant Regulations.

[18] For the reasons not clearly discernible from the record and award, the third respondent contends that he had authority in terms of PMFA to deviate from the BAC’s recommendation and appoint Iceberg Trading. Yet, he does not explicitly refer to the said provision. His counsel, Mr Manye, correctly conceded that the 2001 Regulations had been repealed by the 2011 Regulations. Similarly, he correctly summited that the 2017 Regulations are not applicable as they were promulgated after the impugned tender had been issued, this is in 2014.

[19] The 2011 Regulations clearly repealed regulation 9 of the 2001 which gave an organ of state a wide discretion to award tender to a bidder that did not score the highest number of points. As mentioned above, in terms of regulation 5.3 of 2011 Regulations, a specific condition that only locally based company shall be given preference had to be part of the bid documents.

[20] The third respondent concedes that he did not ensure that this requirement was adhered to. In addition, this regulation had nothing to do with deviation as it explicitly state that any condition that prefers a bidder on the basis of locality would directly impact on the evaluation of the bid. As correctly submitted by the applicant’s counsel, Mr Mosime, since the locality condition ought to have been part of the bid documents, it stands to reason that it was the BAC, and not the third respondent, that had powers to appoint a locally based company.

[21] Whereas, in terms of the regulation 16.2 it is only in exceptional circumstances and on reasonable and justifiable grounds that a tender may be awarded to a bidder that did not score the highest number of points. The reasons for such a decision must be approved and recorded for audit purposes and must be defendable in a court of law.

[22] I have no doubt in my mind that the third respondent’s decision to appoint Iceberg Trading was ultra vires the powers conferred upon him in terms PMFA read together with PPPFA. In Affordable Medicines Trust and Others v Minister of Health and Others,[14] the Constitutional Court stated that:

‘The exercise of public power must therefore comply with the Constitution, which is the supreme law, and the doctrine of legality, which is part of that law. The doctrine of legality, which is an incident of the rule of law, is one of the constitutional controls through which the exercise of public power is regulated by the Constitution. It entails that both the Legislature and the Executive “are constrained by the principle that they may exercise no power and

perform no function beyond that conferred upon them by law”. In this sense the Constitution entrenches the principle of legality and provides the foundation for the control of public power.’ (Emphasis added and footnotes omitted)

[23] I am, however, not oblivious to the fact that what serves before this Court is not a review of the tender process but a review of the Commissioner’s award that found the third respondent not guilty of breach of PMFA read together with supply chain regulatory framework. The third respondent’s contention that he did subsequently notify the Treasury about the deviation does not assist him at all. Likewise, the findings of the Public Protector do not absolve him from the financial misconduct in terms of section 81(1)(a) PFMA. The applicant was enjoined by the PMFA to take disciplinary measures against the third respondent for offending the supply chain regulatory framework.

Conclusion

[24] In all the circumstances, the Commissioner patently misconstrued the nature of the enquiry and consequently committed a reviewable irregularity. The award accordingly falls to be reviewed and set aside.

[25] Nonetheless, I deem it superfluous to remit that matter back to the CCMA in the interests of justice and in line with the LRA imperative that labour disputes must be resolved expeditiously. I also note that the adequacy of the record is not put in question.

[26] Given the deductions I have made above, I am satisfied that the third respondent was guilty as charged. When it comes to the sanction, the enquiry on the appropriateness thereof entails a consideration of the totality of circumstances which, inter alia, include the importance of the rule breached, the reason the employer imposed the sanction of dismissal, the basis of the employee's

challenge to the dismissal, the harm caused by the employee's conduct, whether additional training and instruction may result in

the employee not repeating the misconduct, the effect of dismissal on the employee and his or her long-service record.[15]

[27] The third respondent, as an accounting officer, was enjoined by section 38(a))(iii) of the PMFA to ensure that the applicant had and maintained an appropriate procurement and provisioning system which is fair, equitable, transparent, competitive and cost-effective, a responsibility he dismally failed to execute. While as a CEO, he was the custodian of discipline and yet he failed to lead by example or show any remorse. In my view, it is apparent from the conduct of the third respondent and the circumstances that led to his dismissal that the employment relationship is irreparably damaged and dismissal accordingly warranted.[16]

Costs

[28] Typically, this Court is slow in granting costs against the individual litigants in keeping with the dictates of law and fairness. In this instance, I am not convinced that the conduct of the third respondent was unreasonable so as to saddle him with costs.

[29] In the premises, I make the following order:

Order

1. The arbitration award issued by the Commissioner under case number FSBF 3701-16 and dated 4 December 2017 is reviewed and set aside and substituted with the following order:

‘The dismissal of the third respondent, Mr Tehoho Johannes Macholo, is procedurally and substantively fair.’

2. There is no order as to costs.

__________________

` P. Nkutha-Nkontwana

Judge of the Labour Court of South Africa

Appearances:

For the applicant: Advocate K Mosime

Instructed by:

Motaung Attorneys

For the third respondent: Advocate Manye

Instructed by:

Sesele Attorneys

[1] Act 66 of 1995, as amended.

[2] 2004 (3) SA 615 (SCA) at paras 18 and 19. See also: Eskom v Soweto City Council 1992 (2) SA 703 (W) at 705F-H.

[3] 2005 (4) SA 199 (SCA) at paras 14 and 15.

[4] Act 1 of 1999, as amended.

[5] Act 5 of 2000, as amended.

[6] Preferential Procurement Regulations, 2001 Pertaining to the Preferential Procurement Policy Framework Act: No 5 of 2000.

[7] Implementation Guide Preferential Procurement Regulations, 2011 Pertaining to the Preferential Procurement Policy Framework Act, ACT NO 5 OF 2000.

[8] See: PMFA: Amendment of Treasury Regulations in terms of Section 76 [Updated to 15 November 2013], regulation 16A3.2 which provides: ‘A supply chain management system referred to in paragraph 16A.3.1 must – (a) be fair, equitable, transparent, competitive and cost effective; (b) be consistent with the Preferential Procurement Policy Framework Act, 2000 (Act 5 of 2000)…’

[8] See: PMFA: Amendment of Treasury Regulations in terms of Section 76 [Updated to 15 November 2013], regulation 16A3.2 which provides:

‘A supply chain management system referred to in paragraph 16A.3.1 must –

(a) be fair, equitable, transparent, competitive and cost effective;

(b) be consistent with the Preferential Procurement Policy Framework Act, 2000 (Act 5 of 2000)…’

[9] [2015] 1 BLLR 50 (LAC) paras 31 – 33

[10] (2015) 36 ILJ 1511 (LAC) at paras 15 – 16; see also Aquarius Platinum (SA)(Pty) Ltd v Commission for Conciliation, Mediation and Arbitration and Others [2020] ZALAC 23; (2020) 41 ILJ 2059 (LAC); [2020] 11 BLLR 1071 (LAC) at para 10.

[11] See: Schedule 8 of the LRA, Code of Good Practice: Dismissal.

[12] 1999 20 ILJ 1701 (LAC) at para 11.

[13] See: Sidumo v Rustenburg Platinum Mines Ltd 2007 28 ILJ 2405 (CC) at para 61.

[14] [2005] ZACC 3; 2006 (3) 247 (CC) at para 49.

[15] Sidumo supra n 2 at para 78; Bridgestone SA (Pty) Ltd v National Union of Metalworkers Union of South Africa and Others [2016] ZALAC 40; (2016) 37 ILJ 2277 (LAC); National Commissioner of the SA Police Service v Myers and Others (2012) 33 ILJ 1417 (LAC) at para 82-85.

[16] See: Autozone v Dispute Resolution Centre of Motor Industry & Others (2019) 40 ILJ 1501 (LAC) at paras 12-13.