IN THE HIGH COURT OF SOUTH AFRICA (NORTH GAUTENG HIGH ... THE HIGH COURT OF SOUTH AFRICA (NORTH GAUTENG HIGH COURT, PRETORIA) NOT ... the possible loss of profit while Telkom ... on paragraph 7.3.2 of the PRC ...

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  • IN THE HIGH COURT OF SOUTH AFRICA (NORTH GAUTENG HIGH COURT, PRETORIA)

    NOT REPORTABLE Date: 2009-04-17

    Case Number: 597/09

    In the matter between:

    MAREDI TELECOM & BROADCASTING (PTY) LIMITED Applicant and

    ERICSSON SOUTH AFRICA (PTY) LIMITED First Respondent TELSAF DATA (PTY) LIMITED Second Respondent TELKOM SA LIMITED Third Respondent

    JUDGMENT

    SOUTHWOOD J

    [1] This is an urgent application in which the applicant (Maredi) seeks

    interim relief interdicting the third respondent (Telkom) from entering

    into a contract with the first respondent (Ericsson) and the second

    respondent (Telsaf), alternatively, Ericsson, alternatively, Telsaf,

    pursuant to the tender by Ericsson and Telsaf to Telkom under tender

    number RFP085/07 (the tender) and interdicting Telkom from ordering

    from Ericsson and Telsaf any goods or services pursuant to the award

  • 2

    by Telkom to Ericsson and Telsaf of the tender pending the final

    determination of Maredis application to review and set aside the award

    of the tender by Telkom to Ericsson and Telsaf and remitting the tender

    back to Telkom for it to reconsider the award.

    [2] The award of the tender by Telkom to Ericsson and Telsaf was the

    culmination of a 16 month long process during which tenders were

    invited, received and evaluated at four levels by representatives of

    Telkom. On 1 December 2008 Telkom notified Ericsson and Telsaf

    that their tenders were successful and that they were awarded the

    tender in the ratio 40 % to 60 % respectively. On the same date

    Telkom notified Maredi that it was not successful. Maredi immediately

    took legal advice and requested Telkoms reasons for awarding the

    tender. On being informed that it failed to meet certain critical criteria

    Maredi prepared and served this urgent application on Ericsson, Telsaf

    and Telkom. Only Ericsson and Telkom oppose the application. Telsaf

    has not given notice of intention to oppose or filed an answering

    affidavit.

    [3] The parties have filed compendious affidavits which deal in great detail

    with the tender process with particular reference to the physical

    evaluation of the products and the final decision to award the tender.

    Maredis case in the founding affidavit is that in awarding the tender

    Telkom acted in breach of various provisions of the Promotion of

  • 3

    Administrative Justice Act, 3 of 2000 (PAJA) (which, it is common

    cause, applies to the award of tenders by Telkom).

    Maredi alleges that Telkom was biased in favour of Ericsson and says

    that Telkom ignored its own procedures to ensure that the tender was

    awarded inter alia to Ericsson and deliberately misrepresented the

    results of the technical testing that took place to ensure that the tender

    was not awarded to Maredi but inter alia to Ericsson. During the

    hearing, Maredis counsel informed the court that Maredi would not

    persist in the allegations of dishonesty in the papers. It accordingly

    became common cause that Maredi will have no right to claim

    damages from Telkom if Telkom wrongfully awarded the tender to

    Ericsson and Telsaf see Olitzki Property Holdings v State Tender

    Board & Another 2001 (3) SA 1247 (SCA) para 42; Steenkamp NO

    v Provincial Tender Board, Eastern Cape 2007 (3) SA 121 (CC)

    paras 55 and 56; Premier, Western Cape v Fair Cape Property

    Developers (Pty) Ltd 2003 (6) SA 13 (SCA) paras 40-49 and 50-59.

    [4] The applicant seeks interim relief. The applicant must therefore

    establish:

    (1) a clear right or, if not clear, that it has a prima facie right;

  • 4

    (2) that there is a well-grounded apprehension of irreparable harm if

    the interim relief is not granted and the ultimate relief (by way of

    the review proceedings) is eventually granted;

    (3) that the balance of convenience favours the grant of an interim

    interdict; and

    (4) that the applicant has no other satisfactory remedy. (LF Boshoff

    Invesments (Pty) Ltd v Cape Town Municipality; Cape Town

    Municipality v LF Boshoff Investments (Pty) Ltd 1969 (2) SA

    256 (C) at 267B-E.)

    When an applicant cannot show a clear right, and more particularly

    where there are disputes of fact relevant to a determination of the

    issues, the Courts approach in determining whether the applicants

    right is prima facie established, though open to some doubt, is to take

    the facts set out by the applicant, together with any facts set out by the

    respondent which the applicant cannot dispute, and to consider

    whether, having regard to the inherent probabilities, the applicant

    should (not could) on those facts, obtain final relief at the trial of the

    main action. The facts set out in contradiction by the respondent

    should then be considered and if serious doubt is thrown upon the case

    of the applicant it cannot succeed. (Webster v Mitchell 1948 (1) SA

    1186 (W); Gool v Minister of Justice and Another 1955 (2) SA 682

    (C) at 688C-E; LF Boshoff Investments (Pty) Ltd v Cape Town

  • 5

    Municipality (supra) at 267E-G; Beecham Group Ltd v B-M Group

    (Pty) Ltd 1977 (1) SA 50 (T) at 55B-E.)

    In Beecham Group Ltd v B-M Group (Pty) Ltd (supra) the court said

    with regard to the various factors which must be considered:

    I consider that both the question of the applicants prospects of

    success in the action and the question whether he would be

    adequately compensated by an award of damages at the trial

    are factors which should be taken into account as part of a

    general discretion to be exercised by the Court in considering

    whether to grant or refuse a temporary interdict. Those two

    elements should not be considered separately or in isolation, but

    as part of the discretionary function of the Court which includes

    a consideration of the balance of convenience and the

    respective prejudice which would be suffered by each party as a

    result of the grant or the refusal of a temporary interdict.

    Where the applicants right is clear and the other requisites of an

    interdict are present no difficulty presents itself about granting an

    interim interdict. Where, however, the applicants prospects of ultimate

    success are nil, obviously the Court will refuse an interdict (Olympic

    Passenger Services (Pty) Ltd v Ramlagan 1957 (2) SA 382 (D) at

    383C-D; Beecham Group Ltd v B-M Group (Pty) Ltd (supra) at

    54H-55B.

    [5] In the absence of a claim for damages, if Maredi establishes a prima

    facie right (i.e. a prima facie right to an order setting aside Telkoms

  • 6

    award of the tender to Ericsson and Telsaf) it will follow that there will

    be a well-grounded apprehension of irreparable harm if the interim

    relief is not granted and the ultimate relief is eventually granted. There

    is clearly no balance of convenience in favour of the applicant. In fact

    the balance of convenience is overwhelmingly in favour of the

    respondents. The applicant can point to no prejudice to it other than

    the possible loss of profit while Telkom has dealt extensively with the

    impact which interim relief will have on its business. It will not be able

    to proceed with its expansion and development plans and this will

    result in losses of approximately R50 million per month while the order

    is in force. It is fair to accept that it will take six to eight months to file

    the record and affidavits and obtain a date for the hearing of the main

    application. In addition to this time there is the time it would take to

    have the matter decided on appeal. Maredis counsel did not contend

    otherwise. The real issue is therefore whether Maredi established a

    sufficiently strong right to justify the court granting an interim interdict.

    Maredi contends that it has established a clear right whereas the

    respondents contend the opposite. This questions turns primarily on

    whether Maredi was properly excluded from consideration.

    [6] It must be recorded that in reply Maredis counsel handed to the court a

    written undertaking given by Maredi addressed to Ericsson, Telsaf and

    Telkom in which Maredi undertakes

  • 7

    RE: MAREDI TELECOM & BROADCASTING (PTY)

    LIMITED/ERICSSON SOUTH AFRICA/TELSAF DATA/TELKOM

    SA LIMITED CASE NO: 579/09

    We undertake that in the event that the interim interdict sought

    in case number 579/09 being granted to us and in the event that

    the review under the same case number ultimately fails we shall

    reimburse Ericsson, Telsaf Data and Telkom for any loss proved

    to have been sustained as a consequence of the granting of the

    interim interdict.

    This undertaking which is dated 20 February 2009 was marked A

    (p1373) by the court. I agree with Telkoms counsel that this

    undertaking does not affect the balance of convenience. It is given by

    a private company, apparently the subsidiary of the Japanese parent

    company, and there is no indication that this company will be able to

    reimburse any of the respondents for the loss they suffer as a

    consequence of the granting of the interim interdict.

    [7] In its founding affidavit Maredi alleges that the decision to award the

    tender to Telsaf and Ericsson must be reviewed on the following

    grounds (the references to the sections are to sections in PAJA):

    (1) The decision was procedurally unfair (s 6(2)(c));

    (2) The decision was biased or reasonably suspected of bias (s

    6(2)(a)(iii));

  • 8

    (3) The decision was taken for an ulterior purpose (s 6(2)(e)(ii));

    (4) The decision was taken because the relevant considerations

    were not considered (s 6(2)(e)(iii)); and

    (5) The decision was taken arbitrarily or capriciously (s 6(2)(e)(vi)).

    [8] In Maredis heads of argument Maredi relies only on the following three

    grounds

    (1) The ultimate award of the tender was premised on the fact that

    Maredi had confirmed that its tender did not comply with the

    requisite technical specifications this was wrong because a

    dispute existed between the applicant and representatives of the

    third respondent as to whether or not features that the

    applicants tender admittedly lacked were features that were

    required, on a correct construction of the technical critical

    criteria.

    Maredi contends that, for present purposes, the relevant issue is

    not the correctness of the applicants assertion that it complied

    with the technical critical criteria but the fact of the existence of a

    dispute as to this issue. Maredi argues that EXCO had sought

    an assurance that the applicant admitted its non-compliance and

  • 9

    the tender decision was premised on an erroneous belief that it

    had done so. Maredi argues further that if EXCO had been

    aware of the existence of the dispute as to the proper

    interpretation of the technical critical criteria it would have been

    called upon to determine whether the applicant was correct in its

    assertions in relation to this interpretation issue but it never

    considered that issue because it had been misled as to the

    applicants stance.

    (2) The decision is vitiated by the erroneous representation that

    Maredi did not meet the technical critical criteria. EXCO relied

    on paragraph 7.3.2 of the PRC recommendation. In fact Maredi

    did comply;

    (3) Improper favouritism and procedural unfairness in the test

    extensions granted to Ericsson. In summary the argument is

    that the fact of and the manner in which the date for the

    demonstration was extended indicates bias.

    [11] As already mentioned, in it answering affidavit Telkom describes in

    considerable detail the tender procurement process. This evidence is

    important background and is not in dispute. It may be summarised as

    follows:

  • 10

    (1) The following committees are involved in the procurement

    process (where the value of the tender is in excess of R40

    million):

    (i) An ad hoc Subject Matter Expert Team (SME);

    (ii) A Cross Section Functional Team (CSFT);

    (iii) The Procurement Review Council (PRC);

    (iv) The Executive Committee (EXCO).

    (2) A service organisation (the sponsor) requests the procurement

    of a product or service. The Chief of Operations bears the

    ultimate responsibility in respect of the procurement of network

    or IT related equipment. The Chief of Operations is the sponsor

    of the RPF085/07 tender.

    (3) The SME is project specific. It compiles the evaluation criteria

    which are to be applied to the tender. It utilises a prioritisation

    matrix to weigh the evaluation criteria. This assists in the

    selection of the most suitable vendor/s for Telkom. The SME

    first prepares and presents to the CFST for its approval the

    project plan for the relevant project. The plan contains the

    identities of the persons constituting the project team, the

  • 11

    evaluation criteria and weightings. The SME evaluates the bids

    received in accordance with the approved project plan. Based

    on the scores achieved by the vendors against the relevant

    criteria the SME prepares a recommendation to the CFST on

    the short listing of vendors. The CFST may approve the SMEs

    recommendation or it may reject it.

    (4) The CFST is a multi-disciplinary team whose primary purpose is

    the procurement of products. It consists of representatives from

    Telkoms various divisions (service organisations). It is

    responsible for all the preliminary steps which result in the

    eventual procurement of products or services. The CFST must

    consider whether the product required complies with Telkoms

    commercial goals and whether it advances Telkoms needs and

    interests. The CFST consists of executives (or their delegates)

    from Procurement and other functional portfolios. It meets every

    week. The CFST involved in the present case is the Network

    CFST because the product required fell under the Network

    Infrastructure Provisioning Functional Portfolio. The CFST had

    a number of specific duties and functions. The members of the

    CFST when the award of RPF085/07 was made were

    Name Service Organisation Level

    Christina Naidoo Procurement Services: Senior

  • 12

    Strategic Sourcing Manager

    Andrew Hadley Network Infrastructure Executive

    Provisioning: Technical

    Strategy and Integration

    Steve Lewis Network Infrastructure Executive

    Provisioning: Technical

    Product Development

    Billy Fick Network Infrastructure Executive

    Provisioning: Integrated

    Network Planning

    Robert George Network Call Operations: Executive

    High Level Support

    Cathy Magodie Procurement Services: Senior

    Black Economic Manager

    Empowerment

    Arnold van Huyssteen Sales and Marketing Executive

  • 13

    (5) The PRC is authorised to approve and issue all requests for

    bids, proposals and information for the supply of goods/services

    to Telkom in accordance with Telkoms business strategy;

    consider and approve the award of any tender/bid for the supply

    of goods/services to Telkom up to but not exceeding R40

    million; and consider and recommend the award of any

    tender/bid for the supply of goods or serv...

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