Out-Law / Your Daily Need-To-Know

South Africa court considers complexities of review applications

Out-Law Analysis | 01 Jul 2021 | 10:35 am | 5 min. read

The rules around whether the courts in South Africa will set aside a state body’s decision to contract with a private entity in response to allegations of irregularities or unlawfulness in the procurement process are complex, and will require proper evidence on the part of the entity making the allegation.

The courts will consider a number of factors when determining whether to grant the relief sought including the procedure; the extent of the delay; and the legal basis on which the review application is launched – whether in terms of the Promotion of Administration of Justice Act 3 of 2000 (PAJA) or the principle of legality.

In a recent decision, Special Investigating Unit and another v Engineered Systems Solutions (Pty) Ltd, the Supreme Court of Appeal confirmed that review applications launched by the Special Investigating Unit (SIU) or organs of the state must be in accordance with the principle of legality, rather than under PAJA. The case also shows that allegations of unlawfulness in a procurement process does not necessarily constitute evidence of this; and that the delay in launching a review application may not be overlooked by the courts.

The application for review

The SIU, as the main applicant, and the Department of Correctional Services (the Department), as the second applicant, applied to the High Court to review and set aside the Department’s decisions to award tenders and conclude contracts with Engineered Systems Solutions (Pty) Ltd (ESS) for the procurement of an electronic monitoring system (EMS). The review application was launched following an investigation by the SIU.

PAJA prescribes a 180-day period within which to launch the application; while a review under the terms of the principle of legality must be launched without undue delay based on an assessment of whether or not the delay is reasonable

The procurement process commenced in 2011 with a pilot tender, which was awarded to ESS for a contract duration of one year and value of R6,510,375 (US$456,150). The contract was later extended three times, resulting in an increase in the contract price. In 2014, the Department advertised a further tender for the procurement of a national EMS. This was also awarded to ESS for R301,611,722 (approx. US$21 million) for a duration of five years.

The SIU and the Department sought condonation from the court for the delay in launching the review application in terms of the common law principle of legality. Alternatively, they sought an extension of the 180-day period prescribed under PAJA. The High Court dismissed the review application on the grounds that the delay in launching the application was unreasonable. It did not, however, consider the issue of whether the delay should nonetheless be overlooked. The parties appealed the High Court’s decision to the SCA.

The SCA’s decision

The difference between a review application launched under PAJA and one under the principle of legality is the period within which the application must be launched. PAJA prescribes a 180-day period within which to launch the application; while a review under the terms of the principle of legality must be launched without undue delay based on an assessment of whether or not the delay is reasonable. In both cases, the clock starts ticking at the date on which the applicant becomes aware or reasonably ought to have become aware of the administrative action it is seeking to challenge.

In determining whether this review application fell under PAJA or the principle of legality, the SCA was guided by the Constitutional Court’s 2017 decision in State Information Technology SOC Ltd v Gijima Holdings (Pty) Ltd, in which it held that an organ of the state cannot apply for the review of its own decision under PAJA. The SCA said that this decision meant that only private persons enjoy rights under section 33 of the South African Constitution (Constitution) and, in turn, under PAJA; and doubted that the SIU constitutes a private person for purposes of launching a review application under PAJA. As a result, the SCA could only consider the review application by the SIU and the Department based on the principle of legality, not PAJA.

The SCA applied the two-pronged enquiry process established by the Constitutional Court in deciding whether to condone the delay. The first stage involved an assessment of the reasonableness of the delay, based on the explanations offered by the SIU and the Department. The second stage, to be applied if the delay was found to be unreasonable, was an assessment of whether the delay should be overlooked in the interests of justice. This required consideration of a number of factors including: the potential prejudice to affected parties; the possible consequences of setting aside the impugned decision; the nature of the impugned decision; and the conduct of the applicants.

The court in the Gijima case also held that, even if there is no basis to overlook the unreasonableness of the delay, section 172(1)(a) of the Constitution mandates a declaration of invalidity of any law or conduct inconsistent with the Constitution. However, the Constitutional Court confirmed in the later Buffalo City Metropolitan Municipality v ASLA Construction (Pty) Ltd case that this principle applies only when the unlawfulness is clear and undisputed on the facts.

In this case, the SIU and the Department launched the review application in 2018, seven years after the pilot tender was awarded and four years after the national EMS tender was awarded. The parties failed to provide the SCA with an explanation to justify the entire period of delay. The SIU could only account for the period from 2016 to 2018, when it gained knowledge of the irregularities from its investigation. The Department failed to provide an explanation for the delay between 2011 and 2016, instead filing supporting affidavits to the founding affidavit filed by the SIU by relying on hearsay evidence.

The SCA criticised the Department for failing to provide a factual account and merely confirmed the statements of the SIU in the founding affidavit. It described the blanket averments in the affidavit that “at all relevant times, the Department was not aware and did not appreciate that the contracts relevant to the pilot tender were unconstitutional, unlawful, invalid and void ab initio” as facile and unhelpful. The SCA referred to the Buffalo City case, where it was held that organs of state ought to become aware “much sooner” that their employees awarded a contract without complying with the procurement process because their core responsibility is to ensure that effective oversight structures are in place. A lack of oversight leads to dysfunctionality within organs of the state by creating loopholes for fraud and corruption.

In the absence of reasons to justify the entire period of delay, the SCA found the delay to be unreasonable.

The SCA then considered whether it should overlook the unreasonableness of the delay by testing the allegations of irregularities in the procurement process and the impugned decisions the parties sought to be reviewed and set aside. These allegations concerned:

  • the Department’s failure to comply with the State Information Technology Agency Act 88 of 1998 which required intervention from and referral to the IT Agency, as the works related to information technology;
  • ESS’ failure to register with the Private Security Industry Regulatory Authority and misrepresentation of its compliance with the Private Security Industry Regulation Act 56 of 2001; and
  • ESS’ misrepresentation, during the bidding phase, that it would onboard a 100% Black-owned company which was ultimately not onboarded when the agreement was concluded.

The SCA held that the SIU and the Department failed to show non-compliance with statutory requirements or the tender specifications, or misrepresentation on all of the allegations. Even if non-compliance was remotely shown in some instances, the SCA found that the degree of non-compliance was not so egregious as to invalidate the procurement process or the contracts concluded.

Consequently, the SCA dismissed the appeal and found that the inordinate delay in bringing the review application was not sufficiently explained, was unreasonable, and prejudiced ESS and other service providers; and taking into consideration other factors including the merits of the case, the delay was not overlooked. In addition, the SCA did not apply the principle in the Gijima case to declare the Department’s decision to award the tenders and conclude the contracts with ESS unconstitutional, as there was no clear evidence of unlawfulness presented by the SIU and the Department to justify this relief.

Co-written by Natalie Keetsi and Chantel Carreira of Pinsent Masons.