THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

REPORTABLE
Case No: 572/2013

In the matter between:
MOGALE CITY MUNICIPALITY

Appellant
and
FIDELITY SECURITY SERVICES (PTY) LTD      First Respondent
MAFOKO SECURITY SERVICES (PTY) LTD   Second Respondent
BOSASA SECURITY SERVICES (PTY) LTD       Third Respondent
RED ANT SECURITY SERVICES (PTY) LTD    Fourth Respondent
NATIONWIDE SECURITY CC

Fifth Respondent
CHANGING TIDES 208 (PTY) LTD

Sixth Respondent

Neutral citation: Mogale City Municipality v Fidelity Security Services
(Pty)
Ltd
(572/2013)[2014]
ZASCA
(19
November 2014)
Coram:
NAVSA ADP, WALLIS, SALDULKER, MBHA and
ZONDI JJA.
Heard:
7 November 2014
Delivered: 19 November 2014
Summary: Tender –review – irregular procedure – Uniform Rule 30 –
discussion of effect of blacklisting by National Treasury – bids not

properly considered – tender process defective – just and equitable
remedy – warning to errant officials.

ORDER

On appeal from: South Gauteng High Court (Meyer J sitting as court of
first instance):
The following order is made:
Paragraph 3 of the order of the court below is amended to replace
the period of four weeks with a period of two weeks.
An additional paragraph to be numbered 5 is added to the order of
the court below reading as follows:
‘The order of invalidity in paragraph 2 hereof is suspended for a period of
three weeks from the date of this order, whereafter it will take effect.’
The references in paragraphs 3 and 5 of the order of the court
below to  ‘the date of this order’ are to be construed as meaning the date
on which this judgment is delivered.
The appeal is otherwise dismissed with costs, such costs to include
those consequent upon the employment of two counsel.

JUDGMENT

Wallis JA (Navsa DP, Saldulker, Mbha and Zondi JJA concurring)
[1] On 4 July 2011 the appellant, the Mogale City Municipality (the
Municipality) published a tender, SS(T&S) 01/2012, for the provision of
security services to the Municipality for a period of three years. The first

respondent, Fidelity Security Services Proprietary Limited (Fidelity),
which was already providing those services in terms of an existing
contract with the Municipality, submitted a tender. Its tender, and that of
the fourth respondent, Red Ant Security Services (Pty) Ltd (Red Ant),
scored highest in the bid evaluation process, but for different reasons both
were ultimately excluded from consideration by the Bid Adjudication
Committee (BAC), acting on the recommendation of the Bid Evaluation
Committee (BEC). Instead the contract was offered to and accepted by
Mafoko Security Services (Pty) Ltd (Mafoko), which has been
performing it since 2012. As has become virtually the norm in relation to
high value tenders, that outcome was challenged, initially by Red Ant and
finally by Fidelity. The latter’s challenge was upheld by Meyer J in the
South Gauteng High Court and an order was granted setting aside the
award of the tender and ordering the Municipality to re-evaluate the bids
within a period of four weeks. Meyer J then gave leave to appeal to this
Court.

[2] At the commencement of the appeal we dealt with an application
by Fidelity to lead further evidence on appeal. It was dismissed with
costs, including the costs of two counsel. The proposed evidence was, in
substance, already before the court, and in any event there were no
circumstances warranting the admission of further evidence at this stage
in accordance with the test that this Court applies in such cases.1

[3] The Municipality advanced two arguments in its heads of
argument. First, it contended that the proceedings were irregular and that
on that ground alone the appeal should be upheld. If that argument was

1 De Aguiar v Real People Housing (Pty) Ltd 2011 (1) SA 16 (SCA) para 12.

rejected, it argued secondly that the BAC was correct to exclude
Fidelity’s tender from consideration and that as a result Fidelity lacked
the necessary locus standi to pursue any other objections to the tender
process. The latter contentions on the merits were not persisted with in
oral argument. In the result oral argument was confined to the procedural
objection and the terms of the order granted by the court below. The
procedural argument will be addressed first. That requires an outline of
the course that the litigation took in the high court.

[4] When the outcome of the tender process became known, Red Ant
challenged it in review proceedings before the South Gauteng High
Court. Fidelity was cited as the fourth respondent in those proceedings. It
delivered an affidavit supporting Red Ant’s contention that the tender
process was legally flawed and complained of the fact that its tender had
not been considered. It opposed the request for an order that the
Municipality be directed to award the tender to Red Ant. Instead, Fidelity
argued that the tender process should be re-evaluated.

[5] After the record of the deliberations of the BEC and the BAC had
been delivered and all parties had also delivered their affidavits, the
litigation took an unexpected turn when, on 6 December 2012, Red Ant’s
attorneys delivered a notice of withdrawal of the proceedings. Apparently
this was because Red Ant and Mafoko had negotiated a compromise in
terms of which they would share the benefits of the contract. There is
some indication that this had the tacit approval of the Municipality. This
prompted Fidelity to launch what it described as a counter-application,
seeking an order reviewing and setting aside the decision of the
Municipality to award the tender to Mafoko and ordering that the tender
process be re-evaluated. In the ‘founding’ affidavit delivered in support

of the counter-application Fidelity contended that its disqualification from
the tender process was unlawful and invalidated the entire process. It also
contended that the process was invalid on certain other grounds. The
Municipality filed further answering and replying affidavits in response
to the counter-application and the matter was then argued before Meyer J.

[6] Although Meyer J held that this procedure was irregular, he said
that the issues in dispute between the parties had been fully canvassed
without objection by the Municipality and accordingly refused to dismiss
the application on this ground. In my view that was plainly correct. There
are three approaches any of which justify that conclusion. The first is that
the review application commenced by Red Ant was still in existence, if
only because the notice of withdrawal had not contained a tender to pay
the costs of the other parties. It was therefore still open to the other
parties, including Fidelity, to set the matter down for argument on costs
or take other steps, such as delivering the counter-application. The second
is that Fidelity was in any event a party to the existing lis with a distinct
interest in its outcome. It was already engaged in seeking to set aside the
tender and was entitled to continue to do so as against the Municipality,
notwithstanding Red Ant’s withdrawal. The third is to accept that the
original proceedings had terminated and to treat the ‘counter application’
as a procedurally defective application for review, which is what Meyer J
did in the court below. Accepting that all of these may possibly have
involved a procedural irregularity, if the Municipality wished to object to
it they should have done so by way of an application in terms of rule 30
of the Uniform Rules of Court. They did not do so when the irregular step
was taken and thereafter took a further step in the proceedings, with
knowledge of the irregularity. In terms of the rule that disqualified them
from pursuing any objection. This is clear and the only surprising feature

is that neither the court below nor the parties referred to the provisions of
rule 30.

[7] Even if an application had been brought in terms of the rule, the
court would have had a discretion in terms of sub-rule 3 whether or not to
set the counter-application aside. It is plain that Meyer J would have
exercised his discretion against the Municipality, not least because the
objection was not initially raised but was made at a late stage of the
proceedings. As Schreiner JA put the matter in Trans-African Insurance
Co Ltd v Maluleka:2
‘. . . technical objections to less than perfect procedural steps should not be permitted,
in the absence of prejudice, to interfere with the expeditious and, if possible,
inexpensive decision of cases on their real merits.’

[8] Appellant’s counsel sought to argue that this was not in reality a
point about irregular procedure, but a point about jurisdiction. He
contended that if Fidelity had instituted fresh review proceedings they
could have been met by an objection that the review had been instituted
outside the period of 180 days provided in s 7 of PAJA.3 But that is a
procedural objection, not a question of jurisdiction, and, if the point had
been raised in the court below it had a discretion to condone the late
application. Bearing in mind the circumstances in which the issue arose
and the manner in which the court below dealt with the procedural
objection once it was raised, it seems inevitable that it would have
condoned the delay. But it is unnecessary to speculate, as the point was
not raised in the court below and it is not open to the Municipality to raise
it at this late stage. Fidelity has not had an opportunity to respond to it by

2 Trans-African Insurance Co Ltd v Maluleka 1956 (2) SA 273 (A) at 278F-G. This approach has been
accepted on many other occasions.
3 The Promotion of Administrative Justice Act 3 of 2000.

evidence or to seek condonation for the delay. The procedural objection is
therefore rejected.

[9] Turning to the merits, Fidelity’s tender was rejected by the BAC in
the following circumstances. All tenderers were required to complete a
document headed ‘Declaration of Bidder’s Past Supply Chain
Management Practices’. Clause 3 of that document reads as follows:
‘The bid of any bidder may be rejected if that bidder, or any of its directors have:
a
abused the municipality’s/municipal entity’s supply chain management system
or committed any improper conduct in relation to such system;
b
been convicted for fraud or corruption during the past five years;
c
wilfully neglected, reneged on or failed to comply with any government,
municipal or other public sector contract during the past five years; or
d
been listed in the Register for Tender Defaulters in terms of section 29 of the
Prevention and Combatting of Corrupt Activities Act (No 12 of 2004).’
The tenderers were then required to answer certain questions. The first of
these was whether the bidder or any of its directors were listed on the
National Treasury’s data base as a company or person prohibited from
doing business with the public sector. Fidelity answered this in the
negative.

[10] Unbeknown to Fidelity, when the tender was submitted Mr
Godfrey Jack, one of its directors, had been so listed on the National
Treasury’s data base. It was not disputed that the data base was not
accessible either to companies or to individuals, but only to public bodies
on application to National Treasury, and therefore the erroneous answer
to the question posed in the declaration was inadvertent and unavoidable.
There is a note in the declaration suggesting that companies or people
who are placed on the data base will be informed of that by National
Treasury, but neither Fidelity nor Mr Jack had been so informed. Fidelity

became aware of Mr Jack’s listing on the data base on 4 September 2011,
which was after the submission of its tender. It acted speedily and Mr
Jack resigned as a director on 6 September 2011.

[11] The Municipality only became aware that Mr Jack’s name had
appeared on the National Treasury’s data base, when it received a letter
from the auditor general on 8 November 2011. That letter related to the
existing contract between the Municipality and Fidelity for the provision
of security services, and not the tender. It appears to have generated some
panic among the officials of the Municipality. On the same day Ms
Liebenberg, the Manager: Supply Chain Management, had a telephonic
discussion with Fidelity’s Tenders Administrator, Ms Madondo. She
raised the matter of Mr Jack’s status with Ms Madondo, who informed
her that Mr Jack had resigned as a director on 6 September 2011. Later
that morning Ms Madondo sent an e-mail to Ms Liebenberg informing
her that Fidelity had become aware of Mr Jack’s position on 4 September
2011 and that he had resigned on 6 September 2011. She attached all the
relevant CIPC documents in substantiation of that.

[12] Ms Liebenberg referred this e-mail to various other officials,
including the Municipality’s legal advisor. She was concerned whether
the existing contract with Fidelity should be terminated and whether the
expenditure on it should be treated as irregular. She also wrote to Mr
Fourie, the General Manager: National Tenders of Fidelity on 8
November 2011. The heading to that letter referred to the existing
contract between the Municipality and Fidelity for the provision of
security services. The body of the letter read as follows:
‘The award of the abovementioned contract has reference.

It has come to our attention that one of your directors, Mr Godfrey Jack, has been
prohibited by National Treasury to do business with any organ of state, due to
misrepresentation, for the period 20/11/2003 until 19/11/2013.
After a telephonic [conversation] between our Ms Renell Liebenberg and your Ms
Priscilla Madondo on the 07 November 2011, your office has forwarded copies of the
Cipro documentation with regard to the change of director. We also want to enquire
from yourselves as to why your company withheld this important information to
ourselves which the Municipality believes that you had a legal obligation to do so.
It will however be appreciated if you can officially respond to the statement by the
Auditor-General as the expenditure that Mogale City has incurred to date in respect of
this contract, is now regarded as irregular expenditure.’

[13] On 18 November 2011 Ms Madondo wrote to the municipal
manager of the Municipality attaching a number of documents, most of
which were those previously furnished to Ms Liebenberg, but they also
showed that a Mr Mahlangu had been appointed a director in place of Mr
Jack. One document did not, however, deal with Mr Jack’s position. It
was a letter that Ms Liebenberg had addressed to Fidelity on 14
November 2011 asking it to agree to extend the validity of its tender for
the contract SS(T&S) 01/2012 to 31 December 2011. That was the tender
in dispute in this case. Fidelity was asked if it was willing to hold its
tender valid for the further period. The answer, given by Fidelity on 18
November 2011, was in the affirmative. Ms Madondo’s letter to the
municipal manager bore the tender reference as its heading. Accordingly,
while clarity was being sought and given in regard to Mr Jack’s position,
Fidelity was asked by the very official responsible for supply chain
management to extend the validity of its tender and it agreed to do so.

[14] It is against that background that the BEC met on 13 January 2012
to consider the different tenders. It had before it a report, from the

Manager: Traffic, Security and VIP Protection, recommending that the
contract be split between the two highest scoring tenderers, namely, Red
Ant and Fidelity (itself an unexplained irregularity in the tender
proceedings as there was nothing in the tender documents permitting such
a split). It also had all the documents provided by Fidelity in relation to
Mr Jack’s position and his resignation as a director. During the course of
the meeting, the BEC sought and obtained the advice of the acting
manager of legal services in the Municipality about the validity of
Fidelity’s tender. His advice was that it fell to be rejected on the grounds
that at the time that the tender was submitted Mr Jack’s name appeared
on the National Treasury data base.

[15] That advice was embodied in the BEC’s recommendation to the
BAC, which read as follows:
‘Fidelity Security Services is rejected based on the fact that the information as
provided in their tender submission is based on the details of the company
shareholding with Mr Godfrey Jack still listed as a shareholder – blacklisted
shareholder. The advice from the Legal Section was that information obtained during
the quotation process, cannot be used for a different procurement process. The tender
has to be evaluated based on the information as provided in the tender submission.’
At its meeting on 12 March 2012 the BAC adopted this advice. In the
result Fidelity’s bid was not considered. The advice was, however,
patently wrong, as counsel for the municipality accepted. A bar on
awarding a tender does not mean that a possible obstacle to the award of
the tender cannot be removed before the decision on the tender is made.
The exclusion of Fidelity was accordingly wrong and a reviewable error
in terms of PAJA.

[16] It is largely unnecessary to canvass the other complaints by
Fidelity about the tender process. I should, however, highlight two of

them. The first is that in scoring the tenders for functionality that of the
ultimately successful tenderer, Mafoko, received such a poor mark that it
should have been disqualified at that stage. In circumstances that remain
obscure its score was revised so as to afford it a qualifying score and kept
it under consideration. That was itself an irregularity warranting the
setting aside of the award of the tender. The second is that the BEC
recommended that the contract be awarded in arbitrarily determined
proportions to Red Ant and Fidelity. That was inconsistent with the
advertised basis of the tender and was also irregular and warranted the
setting aside of the award of the tender.

[17] The adjudication of the tender was therefore in breach of Fidelity’s
right to fair administrative action. The award of the tender accordingly
fell to be set aside. The high court made the following order:
‘1 The decision(s) of the first respondent of 19 March 2012 and/or thereafter to award
tender No SS (T&S) 01/2012 to the second respondent is reviewed and set aside.
2 The contract between the first respondent and the second respondent pursuant to
tender No SS (T&S) 01/2012 is set aside and declared void ab initio.
3 The first respondent is to re-evaluate the bids submitted for tender No SS (T&S)
01/2012 and re-award the contract within 4 weeks of the date of this order.
4 The first respondent is ordered to pay the fourth respondent’s costs of the counter-
application, including the costs of two counsel.’

[18] There is no objection to the first paragraph of this order and there
clearly could not be in the light of the Constitutional Court’s judgment in
Allpay.4 Nor was it disputed that the result of the award of the tender
being set aside, had to be the invalidation of the contract concluded
pursuant thereto and the re-evaluation of the bids. The only concern with

4 Allpay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer, South
African Social Security Agency and Others 2014 (1) SA 604 (CC) paras 25 and 56.

the second and third paragraphs of the court below’s order was that an
immediate invalidation of the contract awarded to Mafoko would leave
the Municipality without a service provider in respect of security services
in its area of jurisdiction.

[19] In order to address this concern counsel for the Municipality
submitted that we should craft an order that was conditional on the
outcome of the re-evaluation of the bids, along the lines of the order in
Millennium Waste,5 in which an order of invalidity in respect of the
existing contract would issue only if, after the re-evaluation process, the
contract was to be awarded to a bidder other than the existing contractor.
Fidelity, on the other hand, argued that it would be more appropriate to
make an order of invalidity in respect of the contract, but to suspend the
operation of that order for a period sufficient to enable the re-evaluation
of the bids to take place and, thereafter, to provide enough time for an
orderly hand-over (assuming that to be the outcome of the re-evaluation)
from Mafoko to the successful bidder. It pointed to the relief eventually
granted in Allpay in support of this submission.6 In my view that is the
more appropriate course to follow, especially as it may be that Mafoko’s
bid is disqualified from consideration in the re-evaluation process. That
serves to distinguish this case from Millennium Waste, where the original
successful tenderer might still have been awarded the contract after a re-
evaluation of the bidding process.

5 Millennium Waste Management (Pty) Ltd v Chairperson, Tender Board: Limpopo Province and
Others 2008 (2) SA 481 (SCA) para 35.
6 Allpay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer, South
African Social Security Agency and Others 2014 (4) SA 179 (CC) para 78.

[20] The parties agreed that two weeks was adequate to enable the
Municipality to re-evaluate the bids. We were informed from the bar, on
instructions obtained in the course of the hearing, that the Municipality
will not seek to take the matter on further appeal to the Constitutional
Court. In those circumstances there should not be any delay in
undertaking the re-evaluation or awarding a contract for the balance of
the tender period.7  The suspension of the order of invalidity for a period
of three weeks from the date upon which this judgment is delivered
should therefore ensure that the Municipality does not find itself deprived
of security services. However, it is not always feasible for a court, on the
basis of limited and frequently imperfect information, to cater for every
possible eventuality. It is accordingly appropriate to record that if any
dispute arises in the process of re-evaluation or as to the award of a
contract pursuant to that process it must be dealt with in fresh
proceedings before the high court having jurisdiction. In other words we
do not retain jurisdiction to oversee the bid re-evaluation process and its
outcome.

[21] One final comment is required. The tender process in this case was
so defective and involved so many flaws that it seems extraordinary to
think that a public authority could engage in such a farcical endeavour.
To recapitulate, the successful tenderer should have been disqualified in
the initial evaluation of tenders. The two tenders that were evaluated as
the best, namely those of Red Ant and Fidelity, were clearly so much
better than those of the other bidders that the decision should have been
to award it to one of them. Instead the recommendation was that the

7 Unlike in Allpay we were not asked to order that any fresh contract be awarded for a period extending
beyond the period of the existing contract.

contract should be split between them in arbitrarily determined
proportions contrary to the terms of the tender and without any apparent
investigation as to whether that was an appropriate or feasible basis for
security services to be provided to the Municipality. Red Ant was allowed
to continue as a bidder (and at one time the preferred bidder) at a time
when it was sponsoring a major function for the Municipality, which both
elected and employed officials attended and where they were the
recipients of gifts. Then, when the review proceedings were underway,
and with the apparent agreement of the Municipality, Red Ant and
Mafoko entered into an agreement under which they would share the
contract between them. This litany of errors is such that it is appropriate
to remind the Municipality that it runs the risk, if there is a recurrence of
such conduct, either at the re-evaluation stage or when dealing with other
tenders, that a court may be minded to take the decision out of its hands
and, rather than referring it back, to order that the tender be awarded to
the bidder to whom, in the court’s view, it should have been awarded had
a proper process been followed.8 That may also result in identifiable
officials responsible for that situation being ordered to pay the costs
personally, because:
‘It is time for courts to seriously consider holding officials who behave in the high-
handed manner described above, personally liable for costs incurred. This might have
a sobering effect on truant public office bearers.’9

[22]  In the result the following order is made:
1 Paragraph 3 of the order of the court below is amended to replace
the period of four weeks with a period of two weeks.

8 Gauteng Gambling Board v Silverstar Development Ltd and Others 2005 (4) SA 67 (SCA) paras 28-
29 and 38-40.
9 Gauteng Gambling Board and Another v MEC for Economic Development, Gauteng 2013 (50 SA 24
(SCA) para 54.

2 An additional paragraph to be numbered 5 is added to the order of
the court below reading as follows:
‘The order of invalidity in paragraph 2 hereof is suspended for a
period of three weeks from the date of this order, whereafter it will
take effect.’
3 The references in paragraphs 3 and 5 of the order of the court
below to  ‘the date of this order’ are to be construed as meaning the
date on which this judgment is delivered.
4 The appeal is otherwise dismissed with costs, such costs to include
those consequent upon the employment of two counsel.

M J D WALLIS
JUDGE OF APPEAL

Appearances

For appellant:
I W Maleka SC (with him N Mayet)(the heads of
argument having been prepared by I W Maleka SC
and S Yacoob)
Instructed by:
TGR Attorneys, Sandhurst, Johannesburg
Webbers Attorneys, Bloemfontein
For respondent:
Carol Steinberg (with her Nick Ferreira)
Instructed by:
Blake Bester Inc, Roodepoort
Phatshoane Henney Inc, Bloemfontein.

Supreme Court of Appeal of South Africa

MEDIA SUMMARY– JUDGMENT DELIVERED IN THE SUPREME
COURT OF APPEAL
From:
The Registrar, Supreme Court of Appeal
Date:
19 November 2014
Status:
Immediate
Please note that the media summary is intended for the benefit of the
media and does not form part of the judgment of the Supreme Court of
Appeal.
Mogale City Municipality v Fidelity Security Services (Pty) Ltd
The SCA today dismissed an appeal by the Mogale City
Municipality against an order of the South Gauteng High Court setting
aside the award of a tender for the provision of security services to the
municipality for a period from 2011 to 2014. The court ordered that the
municipality re-evaluate the original tenders within a period of two weeks
from the date of its order and reach a fresh decision on the award of the
tender. It provided a further week to enable an orderly hand-over of
services from the existing contractor to the tenderer to whom the balance
of the contract was awarded.
The tender was set aside because the tender by Fidelity Security
Services, which was at the time the existing provider of security services
to the municipality, was wrongly disqualified by the Bid Evaluation
Committee and the Bid Adjudication Committee. In addition the court
highlighted a number of other irregularities in the tender adjudication
process. These included an unexplained rescoring for functionality of the
bid of the ultimately successful tenderer, whose tender should have been
excluded from consideration on these grounds; a decision to recommend
that two separate contracts be awarded to different tenderers and the

continued consideration of one tender when the bidder was sponsoring a
function for the municipality that involved the giving of gifts to
municipal officials. The court also expressed disquiet over the fact that
the initial review proceedings were withdrawn after the successful
tenderer and the unsuccessful tenderer that instituted the proceedings
agreed to share the contract, with the apparent approval of the
municipality.
The Court sounded a warning that in cases such as these it might in
future hold that the decision to award a tender be taken out of the hands
of the municipality and taken by the court. It also warned that in future
errant officials might be held personally liable for the costs of similar
proceedings.