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[2014] ZAECGHC 94
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Equicent Eastern Cape Developments (Pty) Ltd v University of Fort Hare and Others (3562/2014) [2014] ZAECGHC 94 (28 October 2014)
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IN THE HIGH COURT OF SOUTH AFRICA
EASTERN CAPE DIVISION, GRAHAMSTOWN
CASE NO: 3562/2014
DATE HEARD: 16/10/2014
DATE DELIVERED: 28/10/14
NOT REPORTABLE
In the matter between:
EQUICENT EASTERN CAPE DEVELOPMENTS
(PTY) LTD APPLICANT
and
THE UNIVERSITY OF FORT HARE 1ST RESPONDENT
COUNCIL OF THE UNIVERSITY OF FORT HARE 2ND RESPONDENT
AFRICAN STUDENT ACCOMMODATION GROUP
(PTY) LTD 3RD RESPONDENT
ISONDLO INVESTMENTS (PTY) LTD 4TH RESPONDENT
JUDGMENT
PLASKET J
[1] This matter concerns the award of a tender by the first respondent, the University of Fort Hare (UFH), to a joint venture comprising of the third and fourth respondents, African Student Accommodation Group (Pty) Ltd and Isondlo Investments (Pty) Ltd (the JV). The applicant, Equicent Eastern Cape Developments (Pty) Ltd (Equicent), an unsuccessful bidder, has applied to review the decision to award the tender to the JV and, in these proceedings, it seeks an interim interdict to stop the JV performing, in terms of its contract with UFH, pending the determination of the review. The review is due to be argued on 4 December 2014.
[2] In order to qualify for the grant of an interim interdict an applicant must establish the following: (a) a prima facie right, although this right might be open to some doubt; (b) a well-grounded apprehension of harm if the interdict is not granted; (c) the absence of an appropriate alternative remedy; and (d) the balance of convenience in favour of the applicant.[1]
[3] The issues that arise in this case are three-fold. They are: (a) whether Equicent has established a prima facie right; (b) if so, whether the balance of convenience favours it; and (c) whether urgency remains a live issue and, if so, whether the application is urgent.
The facts
[4] On 3 June 2013, UFH published a request for proposals for the design and construction of what it termed a student village on its Alice campus. The student village was to comprise of 17 buildings to accommodate 2 046 students, a student centre, a parking area and walkways. The successful bidder was, in addition to constructing these facilities, also required to landscape the area and establish gardens. Dr Mvuyo Tom, UFH’s Vice Chancellor, described the project that was the subject of the tender as constituting the largest infrastructural development project to be undertaken by UFH since its inception. To give an idea of the size of the project, the price quoted by Equicent in its bid was R579 640 963 while the price quoted by the JV was R381 820 661.
[5] Equicent, the JV and other potential bidders attended a compulsory briefing on 14 June 2013. They, together with 11 other entities submitted bids. Those bids were considered by the bodies created for this purpose in terms of UFH’s supply chain management policy, namely the Bid Evaluation Committee (BEC) and the Bid Adjudication Committee (BAC). By the end of the process, Equicent’s bid was the only bid left, the other bids having fallen by the wayside due to non-compliance with mandatory criteria. (The mandatory criteria were set out expressly in the request for proposals.)
[6] On 29 November 2013, UFH’s Council approved the award of the tender to Equicent, subject to three conditions. These were that a background check be conducted on Equicent, consideration be given to the legal implications of entering into a contract with Equicent rather than its holding company and that UFH should attempt to persuade Equicent to reduce its price.
[7] At the next Council meeting, held on 4 April 2014, however, Tom reported that after the 29 November 2013 meeting he had ‘reviewed the process leading up to the approval of Equicent’. He had referred the process back to the BEC, the BAC and UFH’s internal auditors. After taking advice, Tom took a decision to ‘re-evaluate all the bidders de novo’. Now, however, this was done on the basis (to quote the BEC minutes of 15 to17 January 2014) of Tom’s instruction that ‘all evaluation criteria elements of phase 1 be removed except those that are legislated such as, Taxes, BBBBEE, and the compulsory briefing with RFP payment’. Tom, in his answering affidavit, said the following of this process:
‘The amendment to the mandatory criteria contained in the RFP document and the supplement extended to excusing non compliance with formalities so as to allow all bidders to proceed to evaluation and scoring and thereafter, if successful, adjudication. Thus Iyevest (Pty) Ltd was excluded because it did not supply a valid tax clearance certificate. Escotek Consortium did not provide a tax clearance certificate in respect of all of the members of its joint venture. CSV, LDM, C3 Consortium was excluded because none of the members of any of its constituents attended the compulsory site briefing. The remaining ten members proceeded to Phase 2 of the process’.
[8] In due course, four bidders, including both Equicent and the JV, were invited to make a presentation in order to clarify aspects of their proposals.
[9] On 4 April 2014 the Council resolved to approve the process followed after the conditional approval of Equicent on 29 November 2013 and to approve the JV as the preferred bidder, subject to it providing ‘a true statement/financial assurance’ that it could fund the project, and to do so within 30 working days.
[10] In June 2014, UFH and the JV entered into a principal building agreement. UFH then handed over the site to the JV on 28 July 2014. Site establishment and construction commenced.
Urgency
[11] The matter came before Alkema J on 18 September 2014. It was postponed to 16 October 2014. In postponing the matter, he ‘directed that the matter is urgent’ and set a time-table for the filing of papers and heads of argument.
[12] It was argued by Mr Gauntlett who, together with Mr Du Plessis, appeared for Equicent that this disposed of urgency as an issue. It was argued by Mr Quinn who, together with Mr Benningfield, appeared for UFH, that all Alkema J did was give directions as a judge usually does in chambers on the basis of a certificate of urgency and that he did not decide that the matter was, in fact, urgent.
[13] I consider that it is unnecessary to decide what Alkema J had in mind when he made the order because the matter is sufficiently urgent to justify the departures from the usual time periods that Equicent has imposed. I say this because, in my view, Equicent proceeded with reasonable haste in launching the application.
[14] The adverse decision was taken on 4 April 2014. It was communicated to Equicent on 8 April 2014. On 14 April 2014 it requested reasons and information from UFH. It received no response. On 21 May 2014 it wrote to UFH again. On 3 June 2014 UFH provided reasons but none of the information that had been requested.
[15] From 4 to 8 August 2014, Equicent obtained leaked documents which, according to it, showed that the award of the tender had been irregular. On 15 August 2014, its attorneys demanded an undertaking from UFH that the contract with the JV would not be implemented pending an application to review the award of the tender. UFH did not give the undertaking. This application was launched on 29 August 2014.
[16] Prior to August 2014, Equicent could not, on the information that it had, launch an application to review the award of the tender and, a fortiori, an application for interim relief pending the review. Despite having sought information that would have placed it in a position to assess its legal position, Equicent remained in the dark as to how the tender decision was taken until documents were leaked to it which indicated the possibility of irregularities. (As it happened, certain of the information in the leaked documents appears to have been erroneous.)
[17] Once it acquired those documents it proceeded with appropriate haste to demand an undertaking and launch these proceedings. The urgency of the matter is, in other words, not self-created. I conclude that the matter is urgent and I now proceed to the merits.
Prima facie right
[18] Equicent argued that a host of reviewable irregularities are evident in the process followed by UFH leading to the decision to award the tender to the JV. Any one of these, it argued, establishes the prima facie right that it seeks to protect.
[19] UFH and the JV (the latter represented by Mr Duminy and Mr De Waal) argued that the process was unimpeachable and that, as a consequence, Equicent has not established a prima facie right. In their submission, the application must be dismissed on this basis alone.
[20] I do not consider it either necessary or desirable to deal in any detail with the grounds of review put up by Equicent to establish its prima facie right. Whether any, some or all of them have merit is best left to the court that will hear the review on 4 December 2014.
[21] For present purposes, however, I am of the view that the process followed by UFH and its decision of 4 April 2014 after its Council had decided to award the tender conditionally to Equicent may well be irregular and that Equicent has established, on this basis, a prima facie right.
[22] I reach this conclusion because, when it was decided to revisit the decision, UFH, in order to allow bidders other than Equicent to qualify, abandoned criteria that UFH itself categorised as mandatory.
[23] These criteria are set out in a request for proposals. They are set out under a heading ‘Mandatory Proposal Requirements’. Paragraph 5.1, directly under the heading, states: ‘The following conditions are mandatory requirements of this RFP, and failure to adhere to any of them will automatically invalidate your proposal’. As was the case with respect to the invitation to apply for fishing rights in Minister of Environmental Affairs and Tourism & others v Pepper Bay Fishing (Pty) Ltd; Minister of Environmental Affairs and Tourism & others v Smith,[2] the language of the request for proposals in this case is clearly peremptory and the sanction for non-compliance is express and unambiguous.
[24] The mandatory requirements specified in the request for proposals are thus part of the legal requirements for a valid procurement process and are ‘not merely internal prescripts’ that may be disregarded ‘at whim’.[3] Even if a deviation from the mandatory requirements was permissible it would have had to have been effected in a procedurally fair manner. As the only bidder left, and a conditional decision having been taken in its favour in November 2013, Equicent would have been entitled to be heard before a new and different process was decided upon.[4] The decision, at the very least, had the capacity to affect Equicent’s rights.[5]
Balance of convenience
[25] An interim interdict is ‘an extraordinary remedy’ which is granted or withheld ‘within the discretion of the Court’. Once a prima facie right, a well-grounded apprehension of harm and the absence of an alternative remedy have been established, that discretion involves weighing ‘inter alia, the prejudice to the applicant, if the interdict is withheld, against the prejudice to the respondent if it is granted’.[6]
[26] It is argued on behalf of Equicent that the prejudice it will suffer if the interdict is not granted will be severe. As construction is under way, it may be faced with a so-called Sapela situation: because of the JV’s progress on phase 1, the court hearing the review may hold that, even if the decision was irregular, it will be impractical to set it aside.[7]
[27] I am of the view that this fear is overstated. The usual judicial response to administrative action that is unlawful, unreasonable or procedurally unfair is to set it aside. That is the default position.[8] The review has been brought on expedited time periods and will be heard on 4 December 2014, about six weeks from the date of this judgment. In that time, the JV will not, no matter how hard its employees and sub-contractors work, get close to the point of no return in respect of phase 1 of the project. In these circumstances, it appears to me, the Sapela situation is unlikely to stymie Equicent in the event of the review succeeding.
[28] UFH on the other hand, raises two matters of concern if construction is interdicted pending the determination of the review. They are: (a) the prejudicial effect an interim interdict will have in delaying the realisation of the ‘pressing need to create student accommodation, where no other accommodation exists or is possible within the rural area of Alice; and (b) the risk that the funding from the government for phase 1 of the project may be lost if construction is halted. To a large extent the short period from now until the review is decided will mitigate the harm that UFH anticipates.
[29] The JV and its sub-contractors will be severely prejudiced by the grant of an interim interdict. The position is summed up by Mr JC Schooling, the managing director of Isondlo Investments, who deposed to the answering affidavits on behalf of the JV, when he said:
‘22. In the event that an interdict is granted prohibiting further work on the project, even if this is only for a period of a few months, the JV and all its contractors, sub-contractors and professionals will find themselves in substantially the same position: until the final outcome of the review proceedings there will be no certainty that work will ever resume (however small the chance that it will not do so) and nobody can be expected to keep their work forces, materials etc on hand, given that limbo.
23. The time and resources that the JV has set aside for the further implementation of the contract means that it will be without work for that period, and will have to seek out substitute work to keep itself gainfully employed. The result would be that it cannot continually hold itself available to resume the contact without a period of some notice.’
[30] One hundred and fifty four people have been employed by the JV and the sub-contractors. The cost to the JV of retaining staff employed specifically for the project totals about R880 000.00 per month. If construction is interdicted, this amount will either have to be paid by the JV with no corresponding benefit to it, or the employees will have to be retrenched – again at a cost to the JV. In the latter event, of course, the effect on the employees will be serious. They will find themselves unemployed, with severance pay as cold comfort.
[31] Similar problems face those employed by one of the sub-contractors, Dewing Construction. It employs 100 people on the project. All of these employees are drawn from the surrounding areas where there is a ‘notoriously high unemployment rate’ and ‘most of these employees in turn are sole breadwinners for extended families’.
[32] The effect of an interim interdict on all of the sub-contractors will be devastating. Perhaps the hardest hit will be Dewing Construction. Mr Andrew Gericke, the managing director of Dewing Construction has spelt out the effects that an interim interdict will have as follows:
‘6.1 Dewing Construction will have to retrench this work force, remove its plant and equipment from site, and endeavour to find other work because it cannot afford to stand idle.
6.2 Even if at some indeterminate date in the future the interim interdict should be discharged, it will take several months thereafter before Dewing Construction would be willing or able to resume work: it would be required to reinstate plant on the site, re-employ the work force, and make the necessary logistical arrangements to pursue major construction works.
6.3 The anticipated loss which will be sustained by Dewing Construction if an interim interdict is granted – leaving aside the immeasurable prejudice which will be suffered by the retrenched work force – will amount to approximately R15 618 692 based on the contract for the full project.’
[33] R6 741 159 has already been expended on materials for the project. It is unlikely that if an interim interdict is granted, suppliers will be willing to take back these materials. Plant and equipment valued at R9 815 760 has been dedicated to the project and that cannot be re-engaged elsewhere.
[34] I have not lost sight of the fact that Equicent’s holding company, Born Free Investment 272 (Pty) Ltd, has tendered an undertaking in the event of an interim interdict being granted. That undertaking is to the effect that, if Equicent is unsuccessful in the review, it will be ‘liable to the respondents for any damages which the respondents can prove where caused directly by the interim interdict’ being granted. I appreciate that this is the best that Equicent can do to reduce the potential harm that UFH and the JV could suffer. In my view, however, it does not, and cannot, address the broader potential broader harm that the JV’s employees and sub-contractors and their employees face. For that reason, I find that the undertaking does not shift the balance of convenience in Equicent’s favour to any marked degree.
[35] For the reasons set out above, I find that despite Equicent having established a prima facie right – and I accept that irreparable harm and the absence of an alternative remedy have also been established – the balance of convenience is manifestly stacked against it and in favour of UFH and the JV. On this basis, the application cannot succeed.
Conclusion, directions and order
[36] All of the parties agree that the review should be heard as soon as possible. Equicent has proposed dates for the filing of papers and heads of argument. UFH and the JV agreed to the time-table that has been proposed and consent to me issuing directions in the terms proposed by Equicent.
[37] It is also accepted by the parties that costs, including the costs of two counsel, should follow the result.
[38] I according issue the following directions as to the further conduct of the review:
(a) It is noted that the record was to be filed by 17 October 2014.
(b) The applicant shall amend, add to or vary the terms of its notice of motion and supplement the founding affidavit by 28 October 2014.
(c) The respondents shall notify the applicant of any intention to oppose the order sought by 4 November 2014.
(d) The respondents shall deliver their answering affidavits, if any, by 18 November 2014.
(e) The applicant shall deliver its replying affidavit, if any, by 25 November 2014.
(f) The applicant shall deliver its heads of argument by 27 November 2014.
(g) The respondent shall deliver its heads of argument by 1 December 2014.
(h) The matter will be heard on 4 December 2014.
[39] I make the following order:
The application is dismissed with costs, including the costs of two counsel.
___________________
C PLASKET
JUDGE OF THE HIGH COURT
APPEARANCES:
For the applicant: Adv J Gauntlett SC and Adv M Du Plessis, instructed by Webber Wentzel, Johannesburg, and Netteltons, Grahamstown.
For the 1st and 2nd respondents: Adv R Quinn SC and Adv P Benningfield, instructed by McCallum Attorneys, Grahamstown.
For the 3rd and 4th respondents: Adv W E R Duminy SC and Adv H J De Waal instructed by Boqwana Burns, Port Elizabeth and N N Dullabh and Co, Grahamstown.
[1] Erikson Motors (Welkom) Ltd v Pretoria Motors ,Warrenton 1973 (3) SA 685 (A) at 691 C-F.
[2] Minister of Environmental Affairs and Tourism & others v Pepper Bay Fishing (Pty) Ltd; Minister of Environmental Affairs and Tourism & others v Smith 2004 (1) SA 308 (SCA) paras 32-33.
[3] Allpay Consolidated Investment Holdings (Pty) Ltd & others v Chief Executive Officer, South African Social Security Agency & others (1) 2014 (1) SA 604 (CC) para 40 (hereafter, Allpay (1)); Joubert Galpin Searle Inc & others v Road Accident Fund & others 2014 (4) SA 148 (ECP) para 57; Sanyathi Civil Engineering and Construction (Pty) Ltd & another v Ethekwini Municipality & others; Group Five Construction (Pty) Ltd v Ethekwini Municipality & others 2012 (1) BCLR 45 (KZP) paras 36-37.
[4] Allpay (1) (note 3) paras 40, 59-60; Logbro Properties CC v Bedderson NO & others 2013 (2) SA 460 (SCA) para 25.
[5] Grey’s Marine Hout Bay (Pty) Ltd & others v Minister of Public Works & others [2005] ZASCA 43; 2005 (6) SA 313 (SCA) para 23.
[6] Eriksen Motors (Welkom) Ltd v Protea Motors, Warrenton & another (note 1) at 691C-E; GS George Consultants and Investments Ltd v Datasys Ltd 1988 (3) SA 726 (W) at 732E-F; Matiso v Commanding Officer, Port Elizabeth Prison & another 1994 (3) SA 899 (SE) at 902J-903B.
[7] See Chairperson, Standing Tender Committee & others v JFE Sapela Electronics (Pty) Ltd & others 2008 (2) SA 638 (SCA) paras 20, 27-29.
[8] Allpay Consolidated Investment Holdings (Pty) Ltd & others v Chief Executive Officer, South African Social Security Agency & others (2) 2014 (4) SA 179 (CC) paras 20-30; Joubert Galpin Searle Inc & others v Road Accident Fund & others (note 3) para 97.