Siphindlela Majojobela (Pty) Ltd v Member of the Executive Council for the Rural Development and Agrarian Reform, Eastern Cape and Others (573/2017) [2017] ZAECBHC 8 (6 October 2017)

IN THE HIGH COURT OF SOUTH AFRICA

(EASTERN CAPE DIVISION, BHISHO)

CASE NO: 573/2017

NOT REPORTABLE

In the matter between

SIPHINDLELA MAJOJOBELA (PTY) LTD Applicant and THE MEMBER OF THE EXECUTIVE COUNCIL FOR RURAL DEVELOPMENT AND AGRARIAN REFORM, EASTERN CAPE First Respondent THE HEAD OF THE DEPARTMENT OF RURAL DEVELOPMENT AND AGRARIAN REFORM, EASTERN CAPE Second Respondent THE MEMBER OF THE EXECUTIVE COUNCIL FOR FINANCE, EASTERN CAPE PROVINCE Third Respondent THE HEAD OF THE DEPARTMENT OF THE PROVINCIAL TREASURY, EASTERN CAPE Fourth Respondent

JUDGMENT IN RESPECT OF

APPLICATION FOR INTERIM RELIEF

HARTLE J

1. The applicant seeks an interim order, on a semi-urgent basis, interdicting the first respondent from evaluating, adjudicating and awarding, alternatively taking any further steps to implement a decision to award a tender for the supply and delivery of three types of fertilizer to the OR Tambo District – SCMU8/17/18/0099 (“the re-advertised tender”), pending the finalization of a review application in which the applicant asks that that court set aside the first respondent’s decision to cancel an earlier tender in which it was a participant for the supply and delivery of a single kind of fertilizer to the OR Tambo District under reference SCMU8/17/18/0045 (“the original tender”) and, if successful in respect of such relief, directing that all the bids received in response to the original tender (including its own) be referred back to the first respondent’s bid evaluation committee for the purposes of evaluation.

2. It is common cause that the original tender was closed on 13 June 2017 (in anticipation of the formal process ultimately concluding by the tender being awarded to one of the compliant bidders), but was cancelled on 4 August 2017 when the department published notice thereof. The reason given for such cancellation, in the public notice, was that the tender specification was incorrect. Simultaneously, the department published a notice of re-advertisement of the tender in which the department sought a service provider for the supply and delivery of the following to the O.R Tambo district for a period of 3 years:

“17.1 Fertiliser + Zn impreg 3:2:1, concentration 30;

17.2 Fertiliser + Zn impreg 4:3:4 (40) concentration: 40; and

17.3 Fertiliser LAN 28%.”

3. In the original tender in which the applicant participated the department had sought the supply and delivery of only a single kind of fertilizer specified as follows:

“17 010 x 50kg bags of base fertilizer 4:3:4 (40) +0.5% Zn”

4. After having seen the advertisement for the original tender the applicant duly purchased the tender document on 16 May 2017 and attended a briefing session on 23 May 2017.

5. On 2 June 2017 the department issued an addendum to the tender advertisement in which it sought to vary it in certain respects. These requirements are not relevant for present purposes. Suffice it to say that they do not relate to the specifications of the goods sought to be supplied.[1]

6. The applicant duly complied with the requirements set out in the original tender advertisement, as amended by the addendum, and submitted its tender accordingly.

7. On 14 August 2017, shortly after the notice had come to its attention, the applicant notified the department in writing of its objection to the cancellation of the original tender on the basis that its procedural rights were infringed because it was not afforded an opportunity to make representations bearing upon the decision to cancel, and that the cancellation was unlawful for want of compliance with regulation 13 (1) of the Preferential Procurement Regulations, 2017 (“the PP Regulations”).[2] It did not agree that, because the tender had been re-advertised with an increased scope, that this fell within the ambit of regulation 13.

8. I digress to set out what regulation 13 provides:

“Cancellation of tender

13. (1) An organ of state may, before the award of a tender, cancel a tender invitation if-

(a) due to changed circumstances, there is no longer a need for the goods or services specified in the invitation;

(b) funds are no longer available to cover the total envisaged expenditure;

(c) no acceptable tender is received; or

(d) there is a material irregularity in the tender process.

(2) The decision to cancel a tender invitation in terms of subregulation (1) must be published in the same manner in which the original tender invitation was advertised. (3) An organ of state may only with the prior approval of the relevant treasury cancel a tender invitation for the second time.”

9. The department purported to explain away their cancellation of the original tender on the basis that when the evaluation took place on 3 July 2017, the experts (scientists who analyzed soil tests) noticed an “irregularity” in the specification. It claimed that this applied across the board to all the districts in the province. There are none that have homogeneous soil types, so they clarified, hence it was impossible to get away with only one fertilizer type. A top dressing was necessary considering the high rainfalls in the area. To have gone with only the one kind of fertilizer specified in the previous tender, so they reasoned further, would have a devastating impact on the farmers because poor yields per hectare would be realized. They agree that paragraph 13(1)(a) of the Regulations was applicable to the scenario. Why their decision fell under the umbrella of this sub-regulation, so they asserted, is because it had been made clear to the Superintendent General (the author of the letter) by the technical team that it would be “fruitless expenditure” to proceed with only the base fertilizer without the other nutrients required.

10. The applicant was not satisfied with this response and, in an attempt

to exhaust every internal mechanism available to it, appealed to the second respondent (Treasury) to intervene and/or assist in resolving the dispute. It also requested an undertaking that the decision to cancel the tender would, in the meantime, not be implemented.

11. Whilst acknowledging a need to “respond on (the)

matter”, Treasury indicated in reply that they would have to wait until the Department itself had responded. It gave no assurance that the applicant’s rights would be secured in the interim, which preempted the launch of the present application.

12. It is evident from the court file that an attempt was first made by the applicant on 13 September 2017 to enroll the matter on the basis of urgency pursuant to the provisions of paragraph 12(1)(a) the Joint Rules of Practice, which was foiled when the duty judge failed to agree that the matter was compelling enough to have it enrolled on a day other than a day on which the motion court sits. The matter was accordingly placed before the court at its next sitting, with the applicant still maintaining a basis for urgency at the later date.[3]

13. The first and second respondents oppose the application.

They deny that the matter is urgent or that the applicant has established all the pre-requisites for the grant of an interim interdict. On the substantive issue of the cancellation, the department has repeated the explanation on the basis outlined in the correspondence exchanged between the parties summarized above. Concerning the alleged procedural flaws in the process (which were amplified in the application), they assert that the decision was properly taken by the Superintendent General (“SG”) who has the authority both to make and cancel awards. Although the Bid Evaluation Committee (“BEC”) and Bid Adjudication

Committee (“BAC”) appear to the applicant to have made or influenced the decision, they seek to assure it that these committees would only have made recommendations to SG. The first and second respondents have however not dealt at all with the applicant’s complaint that the Audi alteram partem rule was not observed by the SG in the summary cancellation of the original tender.

14. The respondents have added a pseudo altruistic justification for the cancellation and re-advertisement in the following terms:

“To supply the same fertiliser to all parts of the district would simply lead to disaster and defeat the very purpose of the Department providing support to farmers to enhance their harvest as it would be a mere waste in some parts, resulting in wasteful expenditure.”

15. In resisting the applicant’s assertion that the balance of

convenience favours the grant of the interim relief to it, the first and second respondents have placed much emphasis on the “greater

inconvenience” that would ensue to the farming community (for whom much help is apparently needed in the face of the persistent

drought currently experienced in large parts of the land), the province and its people if the award of the re-advertised tender were to be delayed by the grant of the interim relief.

16. It is trite that in order to obtain an interim interdict the applicant is enjoined to establish the following prerequisites namely:

(1) prima facie proof of a right to the final relief the applicant seeks in the contemplated review;

(2) irreparable harm if the interim relief is not granted and the ultimate relief is eventually granted;

(3) the balance of convenience favouring the granting of the interim interdict; and

(4) the absence of another adequate remedy.

17. If I may dispense with the issue of urgency first, it is evident in my view even on the basis of the respondents’ own version that there are grounds why the interim relief sought on an urgent basis is warranted without delay. Ironically the reason the first and second respondent assert to prefer the urgency of an award being made under the re-advertised tender gives credence to the applicant’s alleged urgency in its favour. In this regard the respondents have emphasized that the fertilizer specified in the re-advertised tender must be delivered to the farmers in the current month. They also say that the tender process is now at a stage where the award can be made at “any time”. Obviously once the re-advertised tender has been awarded for the three-year period, rights will vest in the successful bidder however and the proposed review will be rendered moot and no practical remedy will avail it, even if it is ultimately vindicated.

18. I am therefore satisfied, as averred by the applicant, that these two instances alone justify the hearing of the matter on an urgent basis. I am also inclined to find in this regard that the applicants did not unduly delay in bringing this application after appealing to the respondents to meet them halfway, to no avail. Indeed, the supine position taken by the third and fourth respondents in deferring to the Department in respect of a cancellation that must of necessity concern them is very worrisome. Further, as it turns out, the applicant was obliged to launch this application without knowing the identity of the other parties who might have an interest in the outcome of the review because the Department was “obstructive”. In this regard it claims that they have refused to give them any records or information that will assist them to discern this important detail. As a result, they have had to content themselves with an undertaking to join the interested parties once their identities become known to them, lest they be seen to have acted precipitately in issuing the application without citing them.

19. Having said that the matter is urgent, it is apparent that the contemplated review should be dealt with with some alacrity to ameliorate the first and second respondent’s protest that this inconvenient challenge to its handling of the tender process will prejudice the farmers who vitally depend on the agrarian support from the Department. Although a balance is to be struck between the

parties’ convenience only in establishing the requisites for the grant of an interim interdict, I accept that a court should, in exercising its discretion in this respect, be woke to the knock-on effect that the grant of the relief may have on the public when a state tender is involved. Revelas J in the matter of Freedom Stationery (Pty) Ltd v Member of the Executive Council for Education, Eastern Cape,[4] in a similar application for interim relief pending the review of an unlawfully cancelled tender by the Department of Education for the provision of stationery to the poorest schools in the province, was astute to notice the irony of the education department’s

proposition that the proposed review of the cancellation of the tender and urgent interdict which was heard by her was the

“sole cause of the (affected) learners’ constitutional rights being infringed.” Instead she found that the problems

that had beset the Department were of its own making. So too she found that the Department should find its own solutions to the

dilemma which redounded to the learners by the delay in awarding the tender and which would continue to impact them by the grant of the interim interdict which she ordered. She was not inclined, even in these egregious circumstances affecting the scholastic needs of the learners, to “trampl(e)” on the rights of the applicants by denying them a remedy at the children’s’ expense. Instead she found a compromise:

“[36] To protect the rights of all those involved, was not entirely possible. By granting the urgent interdict sought, the applicants’

rights would not be ignored, but the learners would have to wait a while longer for stationary. By burdening the court roll with an expedited date for set down of the hearing of the review, the learners would be spared waiting unduly long for their stationary.

The first and second respondents would also then be given the opportunity to award the contracts in question, lawfully.”

20. The same position pertains in the present instance for the reasons

which follow. I intend to factor in a similar concession in the order which I make herein in the interest of the farmers and the community who I expect will obviously suffer prejudice by the delay in a tender being awarded, whatever the reason may be for the upheaval.

21. As indicated above the prima facie right which the applicant purports to assert in this matter, pro tempore, is located in its likely success in the proposed review. The applicant complains both of procedural flaws in the process as well as substantive administrative unfairness.

22. In the latter regard the applicant submits that the department’s

decision to cancel the tender is unlawful and unconstitutional in that it violates, amongst others, sections 1(c) and 217 of the

Constitution read with the PP Regulations. In respect of this strand of its case, the applicant hopes to impugn the department’s

decision on two grounds which are: (1) that in making the decision to cancel the original tender the BEC exercised a power it does not have and thus acted ultra vires; and (2) that the purported cancellation was in contravention of regulation 13. As indicated above, the respondents deny that the BEC made a decision as opposed to a mere recommendation to the Superintendent General who they say made the final decision to cancel the tender. Assuming the SG is the person empowered to make such a decision, the first ground relied upon is somewhat attenuated by the denial. In arguing the matter before me Mr. Madonsela, who appeared together with Ms. da Silva on behalf of the applicant, impressed upon me that the Department’s alleged non-compliance with regulation 13 was a more important basis upon which the applicant rests its prima facie proof of a right to the final relief that it seeks in the review.

23. In this regard the relevant decision-maker was to have formed the opinion to cancel as a necessary prerequisite to the exercise of the power to cancel. It is the “jurisdictional fact” that must exist before there can be a cancellation.[5] I expect therefore that the review court will have to find that the respondents’ justification is brought within the ambit of the sub-regulation, a determination that may have less to do with the respondents’ reasons asserted in the correspondence and answering affidavit than an interpretation, firstly, of what the sub-regulation requires to justify the cancellation and, thereupon,

whether the facts underpinning those reasons as averred by the respondents and the reasons themselves establish the jurisdictional

fact. The way I see it, it may go either way on review. It is questionable, for example, whether the discovery of an

“irregularity on the specification” amounts to a “changed circumstances” as the sub-regulation requires for the exercise of a valid discretion. Contrariwise, the Department having discovered the irregularity, may convince the court that due to changed circumstances arising thereupon there is no longer a need for the goods or services as originally specified in the tender invitation.

24. That leaves the complaint of the applicant that its constitutional

right to procedurally fair administrative justice was infringed by the Department’s failure to respect its right to be heard

before the cancellation. It is not in dispute that the cancellation was effected abruptly and that the applicant first came to learn of it after the fact when the public notices of cancellation and re-advertisement of the tender were simultaneously published.

25. I accept the submission on behalf of the applicant that the decision to cancel the tender comprises an administrative decision within the meaning envisaged in the Promotion of Administrative Justice Act, No 3 of 2000 (“PAJA”);[6] that in the absence of any procedure set forth in the PP Regulations providing for the specific manner in which a cancellation is required to be effected, and against the backdrop of the provisions of section 217 of the Constitution[7] which provide for a fair public tender process, that the provisions of section 3 of PAJA are probably of application; that - based on the unchallenged facts averred by the applicant, the tender has materially and adversely affected, at the very least, its legitimate

expectation to a fair outcome in the closed bid for the original tender; that the unchallenged failure on the part of the

first and second respondents to have allowed the applicant to be procedurally privy to the administrative action may have been

compromised; and that the alleged breach of the applicant’s right to procedural fairness in a manner that was compliant with the provisions of section 3 (2) (b) of PAJA affords it a basis to approach this court on review and to seek appropriate redress

therefor.[8]

26. On the issue of legal standing, the applicant does not have to make out a case that the bid would have been granted to it, or that it was poised for success in respect thereof, if the tender process had run its course but for the untimely cancellation thereof. It establishes such standing instead in my view on the basis of its legitimate expectation to a fair outcome in the tender process which, after the bids were closed, left it and its co-bidders in a race to the conclusion entailing an evaluation of the competing compliant bids in due course and a proper adjudication thereof, even if the recommendation flowing from such process was going to be that the tender should be re-advertised.[9]

27. In the result I am satisfied that the applicant has set out facts and the legal basis establishing the existence of a prima facie right to the relief sought in the contemplated review, even if that review yields a finding only that the applicant’s procedural

rights were not respected in the formal tender process by the summary cancellation of the original tender.

28. By virtue of the fact that the first and second respondents were not inclined to give the applicant the undertaking it sought that its rights would be protected in the interim pending the review, I am satisfied that it has also established the requirement of a well-grounded apprehension of harm. Its fear that its ultimate

remedy upon review may become moot if the interim relief is not ground appears to me to be a very real one.

29. Absent the undertaking sought by the applicant whilst pursuing its contemplated review, which was not unreasonable given the unexpected cancellation of the original tender, the applicant in my view finds itself between a rock and a hard place. It cannot pursue a damages claim for loss of profits unless the review reveals fraud or dishonesty in its exclusion from the process assuming an award is made instead pursuant to the re-advertised tender.[10] In the result the applicant has no suitable alternative remedy at its disposal, except to prevent the award of the re-advertised tender, whilst prosecuting its review.

30. I have dealt above with the requirement of balance of convenience.

I agree with the submission on behalf of the applicant that it is in the best interests of the parties for certainty to be obtained as to whether or not the cancellation of the original tender was lawful or not as this may have repercussions on the lawfulness of the award of any re-advertised tender.

31. In summary then, the applicant has established all the necessary

requirements for the grant of the interim relief sought.

32. In the result I issue the following order:

(1) The first respondent is interdicted and restrained from evaluating, adjudicating and awarding, alternatively, taking any further steps to implement a decision to award the tender for the supply and delivery of fertilizer to the O.R Tambo District – SCMU8/17/18/0099,

pending the finalization of the contemplated review referred to in Part 2 of the application;

(2) The first and second respondents, jointly and severally, the one paying the other to be absolved, are directed to pay the costs of the application arising upon Part 1, including such costs occasioned by the employment of two counsel;

(3) The parties are directed to forthwith reach agreement on truncated time periods for the delivery of a review record, if applicable; the furnishing of relevant documentation; the need to bring an interlocutory application for the joinder of any interested parties; and the exchange of further papers in respect of the relief sought in Part 2, in order to facilitate the earliest hearing of the review;

(4) The applicant is requested to arrange a conference with the case management judge, within at least two weeks, in order to record the parties’ agreement pursuant to the provisions of prayer 3 above; to monitor compliance with that prayer; and to seek the judge’s intervention in securing an early enrolment of the review application on such terms as may be appropriate to the situation.

B HARTLE

JUDGE OF THE HIGH COURT

DATE OF HEARING: 3 October 2017

DATE OF JUDGMENT: 6 October 2017

Appearances: For the applicant : Mr Madonsela SC & Ms Da Silva, Instructed by Gordon McCune Attorneys, King William’s Town (ref. Mr G McCune). For the respondents : Mr. Ntsaluba SC, Instructed by The State Attorney, King William’s Town (ref. 683/17-P13 (Mrs Tyani).

[1] I question why the tender specification could not have been amended in similar mode at this juncture.

[2] These regulations are promulgated in terms of the Preferential Procurement Policy Framework Act, No 5 of 2000. They were published in GG40553 dated 20 January 2017 (GN 32 of 2007).

[3] The matter was set down during recess on the unopposed motion court roll. Motion Court in Bhisho sits fortnightly.

[4] 2011 JDR 0192 (ECB) at [34].

[5] GNH Office Automation CC v Provincial Tender Board, Eastern Cape, 1998 (3) SA 45 (SCA) at 51 D – E.

[6] Logbro Properties CC v Bedderson & Others 2003 (2) SA 460 at para [5].

[7] Section 217 provides as follows: “ (1) When an organ of state in the national, provincial or local sphere of government, or any other institution identified in national

legislation, contracts for goods or services, it must do so in accordance with a system which is fair, equitable, transparent,

competitive and cost-effective. (2) Subsection (1) does not prevent the organs of state or institutions referred to in that subsection from implementing a procurement policy providing for— (a) categories of preference in the allocation of contracts; and (b) the protection or advancement of persons, or categories of persons, disadvantaged by unfair discrimination. (3) National legislation must prescribe a framework within which the policy referred to in subsection (2) must be implemented.”

[7] Section 217 provides as follows:

“ (1) When an organ of state in the national, provincial or local sphere of government, or any other institution identified in national

legislation, contracts for goods or services, it must do so in accordance with a system which is fair, equitable, transparent,

competitive and cost-effective.

(2) Subsection (1) does not prevent the organs of state or institutions referred to in that subsection from implementing a procurement policy providing for— (a) categories of preference in the allocation of contracts; and (b) the protection or advancement of persons, or categories of persons, disadvantaged by unfair discrimination.

(3) National legislation must prescribe a framework within which the policy referred to in subsection (2) must be implemented.”

[8] See section 6(1) of PAJA, read together with section 6(2)(c) for the applicant’s entitlement to review on the basis complained. See also section 8(1), which provides for appropriate remedies to redress the unfairness of the administrative action.

[9] Legbro Properties, Supra, at para [23]. Interestingly Cameron JA found that procedural fairness in such a situation, where supervening considerations of a price increase arose over the course of a tender process, demanded that such affected party be afforded an opportunity to make representations if such considerations might lead to an adverse decision such as not awarding the tender at all. The same applies in casu in my view. The irregularity in specification sought to be addressed by the re-advertised tender in effect rendered the

acceptable tender of the applicant (and other competitors in the process) non-compliant with the specification and conditions of the original tender by the change, without affording them an opportunity to make representations on the “supervening consideration” relevant to the decision maker’s exercise of his powers in relation to the award or non-award of the tender , instead pulling the carpet from beneath their feet by cancelling the tender without any warning or opportunity to make representations in this respect.

[10] South African Post Office v De Lacy & Another 2009 (5) SA 255 (SCA).