Thornburn Security Services (Pty) Ltd v South African Revenue Service and Others (27801/2018) [2018] ZAGPPHC 370 (17 May 2018)

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG DIVISION, PRETORIA

(1) NOT REPORTABLE

(2) NOT OF INTEREST TO OTHER JUDGES

(3) REVISED.

CASE NO: 27801/2018

17/5/2018

In the matter between:

THORNBURN SECURITY SERVICES (PTY) LTD

Applicant

and

SOUTH AFRICAN REVENUE SERVICE

First Respondent

FIDELITY SECURITY SERVICES (PTY) LTD

Second Respondent

ROYAL SECURITY CC

Third Respondent

BIDVEST PROTEA COIN TECHNICAL &

PHYSICAL SECURITY

Fourth Respondent

JUDGMENT

RAULINGA J,

1. The applicant seeks on urgent basis an interdict, in the form of a

mandamus, directing and compelling the first respondent ("SARS") to implement, or permit the implementation of the parties' verbal agreement, alternatively, the applicant's legitimate expectation, to provide security services to SARS on and from 1 May 2018.

2. The second respondent ("Fidelity") submitted an answering

affidavit in support of the relief sought by the applicant, as well as the relief sought in terms of its own counter-application.

3. SARS denies the existence of the parties' agreement, as no written

agreement was concluded, as required in the bid documents.

4. The applicant and Fidelity contend that SARS has for the first time,

insisted on conclusion of a written agreement when it, at all times since the awarding of the tender to the applicant, evinced an intention not to rely on the conclusion of a written agreement and to be content with the conclusion of a verbal agreement.

5. On the day of the hearing of this application, SARS conceded urgency in the matter and requested that the application and the counter-application be dealt with on that basis, albeit by allowing for the further exchange of affidavits including those of the fourth respondent ("Bidvest").

6. However, counsel for Bidvest is not before Court and that the fourth

respondent is a wrongly cited party. As such no relief is sought or persisted with against Bidvest. The parties then agreed that Bidvest had to be excused. Bidvest was subsequently excused on that basis.

7. It was contended by SARS that the applicant failed to join Bidvest as a party, which has a direct and substantial interest in the outcome of the proceedings in that it was one of the unsuccessful bidders.

8. The applicant is a new service provider to SARS, whereas Fidelity is

presently providing security services to SARS in three regions, to wit Gauteng East, Limpopo and Mpumalanga.

9. On 10 November 2017, SARS issued a request for proposals for the provision of security services. The applicant and Fidelity submitted bids in response to the RFP proposal. On 1 April 2018 SARS informed the applicant and Fidelity that their tenders had been successful in respect of their respective regions. In this regard the applicant was awarded tender in three regions, North West and Free State, Limpopo and Mpumalanga and the Eastern Cape.

10. The applicant and Fidelity had to build their capacity to provide the services to SARS in respect of the regions they were appointed for.

11. Although it was agreed between applicant and SARS that a letter of acceptance will only constitute a binding contract once the Service Level Agreement would have been signed, SARS reneged on this undertaking, because its officials never attended meetings for the signing thereof. However, on 12 April 2018 when SARS representatives met with the applicant they never indicated to the applicant that it would refer the matter for review due to a complaint received from an unidentified bidder.

12. In correspondence exchanged between the applicant and SARS ON 16 April 2018, it is clear that SARS was happy that the applicant was ready to commence work on 1 May 2018. SARS even thanked the applicant for its readiness.

13. On 25 April 2018, in a meeting between the applicant and SARS, the applicant was informed that SARS decided to postpone the start date of the parties' agreement to 31 May 2018, in view of the proposed review application. SARS also made it clear that implementation of the agreement could be suspended indefinitely until the final determination of the review application and possibly the implementation of a new tender process. This took the applicant by surprise, prompting it to launch the present application.

14. Regarding Fidelity, on 13 May 2018, SARS informed Fidelity that it had received complaints about the award from an unsuccessful bidder. However, SARS was of the view that the award was lawful and intended to implement the award. Fidelity relied on this assurance and continued to prepare to implement.

15. On 24 April 2018, SARS informed Fidelity that it had changed its mind. It was now of the view that one of the mandatory requirements of the RFP was ambiguous and that this rendered the award unlawful. At the same time SARS wrote to Fidelity to extend its existing terms and conditions, to which Fidelity agreed.

16. It must be mentioned that the applicant was also informed of the problem pertaining to the mandatory requirements.

17. As matters stand the applicant has employed about 290 people, whereas Fidelity has employed 350 new guards. Both the applicant and Fidelity have incurred significant expenses amounting to millions of rands to be ready to implement their tenders with effect from 1 May 2018.

18. The requirements for interim relief are:

18.1 Prima facie right;

18.2 Balance of convenience;

18.3 No adequate alternative remedy; and

18.4 Irreparable harm.

19. On 29 March 2018, SARS made an administrative decision to award the tenders to the applicant and Fidelity. SARS communicated that decision to both of them.

20. SARS predicates its argument on section 217 of the Constitution, which provides that 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. SARS also relied on section 51(1) (a) (iii) of the Public Finance Management Act[1] ("PFMA"), which imposes a statutory obligation on the accounting authority of inter alia SARS to maintain a system of procurement for goods and services that is fair, equitable, transparent, competitive and cost­ effective.

21. SARS submits therefore, that the bidding process was flawed in that the mandatory requirement appeared in terms that were too wide, vague and ambiguous, resulting in the aforementioned constitutional imperatives and the spirit and tenor of the PFMA not being honoured or complied with.

22. In my view, SARS seems to have a short memory in that, on 29 March 2018 it informed both the applicant and Fidelity that their tenders were approved. Further, that it is SARS that reneged on the signing of the Service Level Agreement.

23. In this regard, SARS seems to have lost sight of our courts' consideration of the consequences of an administrative decision that is alleged to be unlawful, but which has not yet been set aside by a court of law. Decisions on these aspects abound by both the Constitutional Court and the SCA.

24. An administrative decision has consequences in law and in fact unless and until it is set aside by a Court .[2]

25. In MEC for Health Eastern Cape v Kirkland Investments (Pty) Ltd t/a Eye & Laser lnstitute[3] the Constitutional Court explained the basis of this principle as follows:

"[101] The essential basis of Oudekraal was that invalid administrative action may not simply be ignored, but may be valid and effected and may continue to have legal consequences, until set aside by a proper process. The court expressed it thus:

'For those reasons it is clear, in our view, that the Administrator's permission was unlawful and invalid at the outset... But the question that arises is what consequences follow from the conclusion that the Administrator acted unlawfully. Is the permission that was granted by the Administrator simply to be disregarded as if it had never existed? In other words, was the Cape Metropolitan Council entitled to disregard the Administrator's approval and all its consequences merely because it believed that they were invalid provided that its belief was correct? In our view, it was not. Until the Administrator's approval (and thus also the consequences of the approval) is set aside by a Court in proceedings for judicial review it exists in fact and it has legal consequences that cannot be simply overlooked. The proper functioning of a modern State would be considerably compromised if all administrative acts would be given effect to or ignored depending upon the view the subject takes of the validity of the act in question. No doubt it is for this reason that our law has always recognised that even an unlawful administrative act is capable of producing legal valid consequences for so Jong as the unlawful act is not set aside.'

[103] The fundamental notion that official conduct that is vulnerable to challenge may have legal consequences and may not be ignored until properly set aside - springs deeply from the rule of law. The courts alone, and not public officials, are the arbiters of legality. As Khampepe J stated in Welkom:

"(t )he rule of law does not permit an organ of state to reach what may turn out to be a correct outcome by any means. On the contrary, the rule of law obliges an organ of state to use the correct legal process:

For a public official to ignore irregular administrative action on the basis that it is a nullity amounts to self-help. And it invites a vortex of uncertainty, unpredictability and irrationality. The clarity and certainty of governmental conduct, on which we all rely in organising our lives would be imperilled if irregular or invalid administrative acts could be ignored because officials consider them invalid." See also Economic Freedom Fighters v Speaker, National Assembly and others 2016 (3) SA 580 (CC) at para 74.

26. The decision of SARS was communicated to the applicant and Fidelity on 01 April 2018. The said decision can only be set aside following a proper review application by SARS, which should be held to the pain and duty of proper process. Until that has been done, the decision exists in law and in fact and must be given effect to.

27. Both the applicant and Fidelity have a prima facie right to have the administrative decision in their favour given effect to, unless and until it is set aside by a competent court.

28. In assessing the balance of convenience, this Court is entitled to have regard not only to the interests of the litigating parties, but also to the public interest.[4]

29. I agree with the applicant and Fidelity that in assessing the balance of convenience, this Court will compare the prejudice which will be suffered by the applicant and Fidelity if the interim relief is not granted but the review succeeds, and the prejudice which will be suffered by SARS if the interim relief is granted but the review relief is not.[5]

30. In casu, SARS does not suggest that it will suffer any prejudice if the interim relief is granted and its review ultimately succeeds. Nor could SARS suggest it will suffer prejudice. Instead, under the new award SARS will be paying less for security services than it is currently paying in terms its own contracts with its current service providers. On the contrary, the applicant and Fidelity will suffer prejudice in that they have already incurred immensely in preparations to begin providing the services from 1 May 2018. Moreover, Bidvest, which was disqualified from consideration of the tender, does not oppose the application for interim relief. In the circumstances, the balance of convenience favours the applicant and Fidelity.

31. The applicant and Fidelity contend that they have no adequate alternative remedy to make good their losses if the decision in their favour is not implemented pending the review. SARS responds by suggesting that

the applicant and Fidelity may have an action for damages against SARS. This suggestion is unsustainable and does not hold water at all.

32. It is notoriously difficult for an unsuccessful tenderer to recover damages for a contract it should have been given. Our courts have held that damages will not be considered to be an adequate remedy where the applicant is not likely to be able to recover the damages from the respondent. [6]

33. In Steenkamp N.O. v Provincial Tender Board[7], the Court held that:

"Imposing delictual liability on the negligent performance of functions of tender boards would open the prospect of potential claims of tenderers who had won initially. This will be to the detriment of the invaluable public role of tender boards. A potential delictual claim by every successful tenderer whose award is upset by a court order would cast a long shadow over the decisions of the tender boards. Tender boards would have to face review proceedings brought by aggrieved unsuccessful tenderers. And should the tender be set aside, it would then have to contend with the prospect of another bout of claims for damages by the initially successful tenderer. In my view, this spiral of litigation is likely to delay, if not weaken, the effectiveness of or grind to a stop the tender process. That would be to the considerable detriment of the public at large. The resources of our State Treasury, seem against the backdrop of vast public needs , are indeed meagre. The fiscus will ill-afford to recompense by way of damages disappointed or initially successful tenderers and still remain with the need to provide the same goods or service."

34. In my view, the applicant and Fidelity have no adequate alternative remedy.

35. If this application is not granted, the applicant and Fidelity will suffer irrecoverable losses, in the interim even before the administrative decision by SARS is reviewed.

36. The contention by SARS that the application be dismissed on the basis of constitutional invalidity because the tender process is flawed is plagued by the fact that Fidelity supports the application and Bidvest does not oppose it.

37. In the premises, based on the reasons advanced above in this judgment, the application must succeed.

38. The following order is made:

38.1 The application is heard as one of urgency, in terms of rule 6(12);

38.2 The first respondent is directed and compelled with effect from 1June 2018 , to implement and to permit the implementation of the tender award awarded in favour of the applicant and Fidelity by SARS in respect of RFP 26/2017 for the provision of security services by the applicant and Fidelity to SARS in the first respondent's regional offices located in the Eastern Cape, Free State, Limpopo, Mpumalanga, North West, South Gauteng, Western Cape, Limpopo/ Mpumalanga respectively.

38.3 The relief set out in paragraph 38.2 above will operate as an interim interdict pending the final determination of any review or further proceedings which may flow from this application or in respect of the tender award in respect of RFP 26/2017;

38.4 Condonation for the late filing of Fidelity's answering affidavit is granted;

38.5 The first respondent is ordered to pay the costs of this application, including the costs of two counsel.

TJ RAULINGA

JUDGE OF THE GAUTENG HIGH COURT

DIVISION

APPEARANCES

For the Applicant:

Adv.J. Wasserman SC

Instructed by:

Cliff Dekker Hofmeyer Inc

For the First Respondent: Adv. S.J. Bekker SC; Adv. N. Mathapo

Instructed by:

Ledwaba Mazwai Attorneys

For the Second Respondent: Adv. N. Ferreira

Instructed by:

Blake Bester De Wet & Jordaan

[1] Act 1 of 1999

[2] Oudekraal Estates {Pty) Ltd v Cape Town 2004 (6) SA 222 (SCA) at para 26

[3] 2014 (3) SA 481 (CC) paras 101-103

[4] See Cipla Medpro (Pty) Ltd v Aventis Pharma SA and Related Appeal 2013 (4) SA 579 (SCA) at paras 46-52

[5] Carnival Cinemas (Pty) ltd v London Film Productions Ltd 1949 (3) SA 201 (W

[6] Aetiology Today CC t/a Somerset Schools v Von Aswegen 1992 91) SA 807 (W) at 81SG-H

[7] 2007, Eastern Cape {3) SA 212 (CC)a t para 55