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REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

CASE NO: 32719/2015

(1)           REPORTABLE: YES

(2)           OF INTEREST TO OTHER JUDGES: YES

In the matter between -

MOGALE CITY MUNICIPALITY                                                                   First Appellant

SIDAS GUARDING (PTY) LTD                                                                Second Appellant

DAN MASHITISO                                                                                         Third Appellant

RENELL LIEBENBERG                                                                            Fourth Appellant

and

FIDELITY SECURITY SERVICES                                                                     Respondent

REASONS FOR JUDGMENT

Urgent appeal ito section 18 of the Superior Court Act 10 of 2013 against an order putting into operation an order requiring Mogale City to reinstate a security contract with Fidelity, pending a competitive bidding process. 

Appeal dismissed, but for different reasons.

Unorthodox sequence of events precipitating the chief controversy – after the order requiring the reinstatement of Fidelity as the security provider, Mogale City indicated it would appeal the order. Fidelity then brought an application in terms of section 18 to put the order into operation and lodged it before a notice of intention to appeal had been lodged.  However before the hearing of the application, the application for leave to appeal had been lodged. Mogale City argued before the court hearing that the application that it was premature and irregular because it had been lodged before the leave to appeal application had been lodged. That court held that the application was not irregular, interpreting section 18 to mean that such an application was, having regard to constitutional considerations, not bound by any timelines when to be instituted. The order putting the main order into operation was then granted.

On appeal – the correctness of that finding was challenged and also whether irreparable harm was indeed present if the execution of the order had to wait upon the conclusion of the appeal process.  

Held: That the lodging of the section 18 application to put the order into operation was premature and irregular, however when, after that irregular step had been taken, Moagale City did not seek to have it set aside as contemplated by rule 30, but itself took a further step in lodging its application for leave to appeal, the tion was regularised and Mogale City was thereby estopped from complaining.

Held further: That although the prescripts for seeking an order putting into operation an order  pending appeal were contained in a section of a statute and not a rule of court, the purpose and scope of section 18 was wholly  procedural and susceptible to being cured by further procedural steps.

Held further: That in any event it was odious to court process that form could triumph over substance and because to hold otherwise in these circumstances could serve only a dilatory aim, and be wasteful of costs and court time, a court in exercising its inherent power to protect the court process would condone the irregularity which caused no prejudice to any other party.

Held further; That the order reinstating Fidelity, if not given effect to at once, would be utterly academic after an appeal process had been exhausted as the nature of the relief was to render a service during a period of time that would, on the probabilities, elapse before the completion of an appeal – on the facts, the notions of a suitable alternative remedy were fanciful – irreparable harm was indeed present – the threshold of irreparability was not insolvency of a business

Held further: A submission by Fidelity to make punitive costs order against Mogale City owing to its protracted rear-guard resistance in long running litigation with Fidelity over irregular tender processes, this case being the fifth judgment of a court in the ongoing saga,  was refused owing to the court not being possessed of the optimal information to draw a pejorative inference against Mogale City;  moreover, an urgent appeal proceeding  was not the ideal, and perhaps not the appropriate proceeding, for such an enquiry. However, there were sufficient prima facie indications that the litigation may have gotten out of hand and that public funds might not have been managed appropriately so that it was appropriate to refer the matter to the MEC for Local Government and to the Minister of Local Government for investigation of the protracted litigation, and that they be requested to report to this court in 12 months’ time on the outcome.

SUTHERLAND J:

Introduction

[1]        An appeal pursuant to section 18(4) of the Superior Courts Act 10 of 2013 (SCact)[1] was heard by us on 26 July 2016. It was, axiomatically, convened urgently. At the conclusion of the hearing the following order was made:

‘(1)      The appeal is dismissed with costs including the costs of two counsel.

(2)       The wasted costs occasioned by the postponement of the hearing from

            21 July to 26 July shall be borne by the first, third and fourth appellants

             jointly and severally, the one paying, the others to be absolved.’[2]

 

[2] These are our reasons, which were filed on 4 August 2016.

[3] The second appellant (Sidas) played no active role in the matter. It was cited by reason of its ostensible interest in an agreement concluded between it and the first appellant (Mogale City) to which reference shall made in due course. The third appellant is the municipal manager of Mogale City, and where necessary, shall be referred to as such in this judgment. The fourth appellant is an employee of Mogale City, whose role was not expressly addressed in the debate. The respondent shall be referred to as Fidelity.

[4] The principal adversaries are Mogale City and Fidelity. Litigation has raged between them since 2012. The dispute is essentially about whether Mogale City has improperly awarded tenders for security services and improperly not awarded a tender to Fidelity.  Fidelity believes itself to have been unlawfully wronged by the actions of Mogale City, whose chief agent has been the municipal manager. Thus far, judgments handed down on four occasions have vindicated that stance.[3] Because the history of this saga has already been captured in those earlier judgments, including one in the SCA, and also in a fifth judgment which is the subject of the appeal in terms of section 18(4), it is inappropriate to regurgitate a further account.

[5] For the purposes of this appeal it is sufficient to record that the proximate controversy stems from the fourth judgment, in which an order was made by Du Toit AJ on 27 May 2016. The portion of that order directly relevant is in paragraph 51.4:

“Pending the lawful conclusion of a new contract pursuant to a competitive bidding process, [Mogale City] is directed to reinstate the previous month –to –month contract with [Fidelity] on the same terms.”

[6] Subsequently, on 9 June 2016, a section 18(1) application to execute, or put into effect, this order was instituted by Fidelity. Kathree-Setiloane J, a quo, granted that order on 8 July 2016. The order reads:

“Paragraphs [51.2, 51.3 and 51.4] of the order of Du Toit AJ under case number 32719/15 is declared to be effective and enforceable pending the application for leave to appeal, and, if granted, the appeal.”

An order of costs on the attorney and client was also ordered against Mogale City.

[7] In response to that order, Mogale City launched an appeal as contemplated in section 18(4) of the SCact.

[8] In the appeal hearing before us on 26 July 2016, argument was pressed on two discrete issues, and it is upon these two issues that the appeal turns.

8.1.      First, whether or not the application to execute the order of Du Toit AJ  ought to have been heard at all, owing to the fact that when the application to execute was lodged on 9 June, Mogale City  had not yet lodged an application for leave to appeal, doing so only on 20 June.

8.2.      Second, whether the finding of fact by Kathree-Setiloane J that Fidelity would suffer irreparable harm if the order to execute was not made is incorrect. (Although other aspects of the findings were earlier challenged in written heads of argument they were not pursued in argument, and correctly so.)

The challenge to the propriety of the section 18(1) application per se

[9] The controversy which arises is a question of law, framed by the following common cause facts, the chronology of which is important:

9.1.      27 May 2016: Judgment by Du Toit AJ was handed down.

9.2.      31 May 2016: Letters were exchanged between Mogale City and Fidelity in which Mogale City states that it will not comply with the court order and will apply for leave to appeal.

9.3.      31 May 2016: Mogale City, unbeknown at the time to Fidelity, contracts with Sidas to perform security services (The subject matter of the court order) for six months.

9.4.      9 June 2016: Fidelity lodges a section 18(1) application.

9.5.      20 June 2016: Mogale City lodges application for leave to appeal

9.6.      21 June 2016: the section 18(1) application to execute is heard.

[10] The court a quo addressed several dimensions of the constitutional guarantees of access to the courts and the power of the court to effectively regulate its own process and reasoned that an interpretation could be placed upon section 18 which spares a successful party from linking the lodgement of an application to execute pending an application for leave to appeal to an actual lodgement of such application for leave to appeal, and because of an absence of any express or implied injunction in the text of the section as to when such application to execute can or must be lodged, a lodgement of an application to execute, in anticipation of an actual application for leave to appeal, is action which is consistent with the procedure provided for in the section, purposively interpreted. The effect of such an interpretation is that a successful party could by pre-emptive action, preclude an order being suspended by a subsequent application for leave to appeal.

[11] We are of the view that the facts of this case are such that it is unnecessary to conclude that such pre-emptive action is necessarily contemplated by section 18, properly interpreted, and that the result found by the court a quo, i.e. that it was proper to entertain the application, in the circumstances, can be reached on a narrower legal basis.

[12] On the facts of this case, the application for leave to appeal was lodged before the hearing. Thus, at the time of the hearing, all the jurisdictional facts required by section 18 were indeed present. To illustrate the significance of this circumstance it may be imagined that had no application for leave to appeal ever having been lodged by the time of the hearing: in such circumstances,  it is difficult to suppose that the application to execute could have had a factual basis, because the defeated party would at that stage still be obliged to comply with the order, it having not been suspended, and immediately the defeated party refused to comply, it would be in default, exposing it to the risk of a contempt application.[4] In short, there would be no suspension of the order for an application to execute to reverse.

[13] By contrast, the facts in this case also show that at the time of the hearing there had indeed been both an application for leave to appeal and an application to execute lodged. All that was necessary in order to entertain the application was present, albeit that the application to execute was the earlier event of the two. Helpfully, it is incontrovertible that the substance of an application for leave to appeal, i.e. setting out why an appeal would be appropriate, could not trespass into the domain of the considerations relevant to an application to execute pending such appeal because the substance of each application is distinct; hence no question can arise about an application to execute ‘responding’ in the slightest way to the substance of an application for leave to appeal.

[14] The critical argument levelled by Mogale City at the judgment of the court a quo is that notwithstanding that at the time of the hearing in terms section 18(1), an application for leave to appeal had been lodged, section 18 requires an actual application for leave to appeal to have been lodged before there can be an application lodged to uplift the suspension of the order. There is, in our view, considerable force in this argument.  The architecture of section 18 provides for three realms.  The first is that when an order of court is made, there is at once an obligation by the defeated party to comply. The second is that the obligation to comply is suspended, a circumstance created by the action of lodging an application for leave to appeal. The third realm is the reversal of the suspension on the grounds provided for in section 18. Therefore, inescapably, there can be no upliftment of a suspension before a state of suspension exists.  On this view, the preferable interpretation of section 18 would be to recognise that an application to execute in terms of section 18(1) is a defence mechanism that a successful party may put up to resist the harm wrought by a suspension of the obligation to comply. Accordingly, there is no occasion to raise a shield unless and until a sword is drawn.

[15] Therefore, it must follow that when Fidelity lodged an application to execute before an application for leave to appeal had been lodged, in our view, Fidelity took an irregular step. What could Mogale City have done about this irregularity? It could have invoked Rule 30 of the Uniform Rules[5] in terms of which it could have applied to have the irregular step set aside. It did not. Instead it embarked on two parallel courses of action. On 17 June it responded with answering affidavit, which addressed the premature lodgement and the merits of the application to execute. Also, it lodged the application for leave to appeal. In our view, Mogale City took ‘further steps’ as contemplated by Rule 30(2) (a) of the Uniform Rules of Court, having the effect of ‘advanc[ing] the proceedings one step nearer completion’[6].  By taking such further steps Mogale City, in effect, forfeited a right to complain about the premature lodging of the application to execute. The non-compliance with the section, of which Fidelity was guilty, was, in effect, thereby purged.

[16] An attempt was made to argue that the premature lodging of an application to execute could not be the subject matter of Rule 30, on the footing that there had to be what was, initially described as a ‘complete cause of action’ when the lodgement occurred, but which, as the argument became refined in the course of debate, was contended to be the necessary presence of a jurisdictional fact.  We disagree. The controversy is wholly to do with compliance with the section. The section peremptorily prescribes certain requirements. Although section 18 is obviously not a mere rule of court, the section is wholly procedural in character and its purpose is to facilitate rapid relief to parties in the given circumstances and has been enacted to replace the procedure formerly regulated by Rule 49 (11) of the Uniform Rules.[7] The irregularity, in our view, was wholly of form and not of substance, and once the application for leave to appeal was lodged, the irregularity was no longer susceptible to complaint. It is true that such an example has not hitherto been recognised as an irregularity contemplated by Rule 30. That novelty is no obstacle to it being recognised now.

[17] Part of the argument advanced by Mogale City was in effect to contend that the application to execute was a nullity. If an application for leave to appeal had not been lodged, that point might have been warranted examination, but, on these facts, the need to decide that point does not arise.

[18] No prejudice to Mogale City exists. On the contrary, the application to execute was launched only after a formal communication by Mogale City’s attorney to Fidelity’s attorney that it would not comply with the order of Du Toit AJ in which it was cheekily stated ‘it shall do so within the time prescribed by the Rules’, a virtual admission of a dilatory objective. What also occurred on 31 May 2016 is even more unsavoury. Mogale  City clandestinely contracted with Sidas for a six months contract in flagrant defiance of its obligations to comply with the order of Du Toit AJ, at that moment still fully in force, and then when revealing this occurrence in its answering affidavit (dated 16 June) to the application to execute, submitted that this act of skulduggery be taken into account in refusing the application to execute. [Record; p74, para 20.]

[19] A mechanical application of the section, genuflecting to a rigidity of the order of precedence of the jurisdictional preconditions could serve only a dilatory objective, an outcome wholly inconsistent with the purpose of the section to afford urgent relief. In our view, independently of the regulation provided by Rule 30, the dismissal of the application to execute would have been so obviously wasteful and the delay in Fidelity coming again later on fresh identical papers so inimical to the aims of section 18, that a court exercising its inherent power to regulate its process effectively, ought to have allowed the matter to proceed and mero motu condoned the irregularity.

[20] In may also bear mention that the Courts’ patience with dilatory litigious behaviour, and unconstructive tactical manoeuvrings is exhausted, and increasingly, it shall be expected of legal practitioners to manage and conduct litigation with at least a semblance of awareness that it is irresponsible to engage in Fabian skirmishes which consume the resources of opponents and of the legal system. If counsel are to be thought of as officers of the court it is incumbent of them that see that there are clear manifestations that they are deserving of such an identity by promoting the resolution of disputes through the process and not indulge in the manipulation of the process to arrest progress.

[21] Accordingly in our view, the court a quo ought to have heard the matter, was correct in doing so, albeit that we reach that conclusion for different reasons.

Is the finding that Fidelity would suffer irreparable harm if the order was not executed incorrect?

[22] The discernment of ‘irreparable harm’ by a court is a factual finding. It was stated in Incubeta Holdings (Pty) Ltd & Another   v  Ellis & Another 2014(3) SA 189 (GJ) at [24]:

‘The second leg of the s 18 test,[, [i.e., the presence or absence of irreparable harm to either party] in my view, does introduce a novel dimension. On the South Cape test, No 4 (cited supra), an even-handed balance is aimed for, best expressed as a balance of convenience or of hardship. In blunt terms, it is asked: who will be worse off if the order is put into operation or is stayed. But s 18(3) seems to require a different approach. The proper meaning of that subsection is that if the loser, who seeks leave to appeal, will suffer irreparable harm, the order must remain stayed, even if the stay will cause the victor irreparable harm too. In addition, if the loser will not suffer irreparable harm, the victor must nevertheless show irreparable harm to itself. A hierarchy of entitlement has been created, absent from the South Cape test. Two distinct findings of fact must now be made, rather than a weighing-up to discern a 'preponderance of equities'. The discretion is indeed absent, in the sense articulated in South Cape. What remains intriguing, however, is the extent to which even a finding of fact as to irreparable harm is a qualitative decision admitting of some scope for reasonable people to disagree about the presence of the so-called 'fact' of 'irreparability'.

 

[23] Irreparability is a dimension of the exceptional circumstances essential to justify the reversal of the default position as regards the immediate enforceability of the order. Among the possible range of exceptional circumstances, it was further stated in Incubeta:

‘[27] Do these circumstances give rise to 'exceptionality' as contemplated? In my view the predicament of being left with no relief, regardless of the outcome of an appeal, constitutes exceptional circumstances which warrant a consideration of putting the order into operation. The forfeiture of substantive relief because of procedural delays, even if not protracted in bad faith by a litigant, ought to be sufficient to cross the threshold of 'exceptional circumstances”.

“[28] The plight of the victor alone is probably all that is required to pass muster. Nonetheless, I am not unconscious of the undesirable outcome that relief granted by the court becomes a vacuous gesture. A court order ought not to be lightly allowed to evaporate, a fate which, seems to me, would tend to undermine the role of courts in the ordering of social relations.’

[24] The argument advanced on behalf of Mogale City was that denying  the enjoyment the relief granted to Fidelity could not cause Fidelity irreparable  harm because:

24.1.   First, Fidelity had an alternative damages claim in delict for loss of profits against Mogale, based on the corrupt conduct of the municipal manager, and others acting for Mogale.

24.2.   Second, having to wait however long to conclude such an action aimed merely at obtaining money, and which would be capable of institution only after the appeal was decided, would not bankrupt Fidelity.

A delictual action?

[25] The very idea that, as a fact, any delictual claim exists, is hotly disputed. The claim upon which Fidelity succeeded before Du Toit AJ was not in delict. Fidelity sought relief in terms of its rights to fair administrative action from an organ of state, i.e. Mogale City. Fidelity brought a review application against Mogale City. The relief sought was to set aside Mogale City’s allegedly unlawful contract with Sidas and to direct Mogale City to reinstate a contract between them, on the same terms as that previously in force, on an interim basis, pending a lawful competitive bid process. The relief granted was as prayed.

[26] The contentions advanced on behalf of Mogale City concede, correctly, that if the application to execute on the order of Du Toit AJ was refused, that relief can never at a later stage be enjoyed. (This consequence is self -evident with an order ad factum ad praestandum.) However, notwithstanding that sacrifice, the forfeiture does not cause irreparable harm to Fidelity because, in years to come, once the appeal is dismissed, Fidelity can sue for damages in delict.

[27] In our view, the proposition is misconceived in principle. The implication is that if the fruits of these proceedings are sacrificed, Fidelity can institute fresh proceedings on another cause of action and get some money at some time in the future.  That scenario does not address the irreparable harm of losing the efficacy of the relief Fidelity has already obtained. Moreover, Fidelity must incur the usual risks of litigation in another action, including the burden of proving fraud by Mogale and quantifying the quantum of its losses.

[28] In any event, the prospects of such a delictual action being available is itself highly speculative. Mogale City recognises that an action against an organ of state for damages owing to tender irregularities is fraught with certain vulnerabilities. Proof of fraud and corruption are the fount of such a claim, not mere negligent irregularities. In Steenkamp N. O.  v Provincial Tender Board, Eastern Cape 2007 (3) SA 121 (CC) at [55] this proposition was made clear. Ever since the fate of the aggrieved plaintiff in Olitzki |Property Holdings   v State Tender Board and Another 2001(3) SA 1247 (SCA), who sought such damages based on irregularities and was rebuffed by the courts, litigants who seek recompense from state organs for unlawful treatment have trod warily. The only plaintiff to have hitherto succeeded, insofar as the law reports represent a record, is that illustrated in Minister of Finance  v Gore N.O. 2007(1) SA 111 (SCA). The restriction, on policy grounds, to holding organs of state liable in damages only when officials were proven to have perpetrated fraud or other corrupt acts was reaffirmed in Country Cloud Trading CC  v  MEC, Department of Infrastructure Development 2015 (1) SA 1 (CC) at [44] - [47].

[29] It is no part of Fidelity’s case in the action concluded by the judgment of Du Toit AJ that Mogale City acted corruptly. Indeed, the notion, nursed by Mogale, that corruption is evident and available to add to Fidelity’s quiver of legal arrows, stems not from any allegation pleaded by Fidelity, but from condemnations by Vermeulen AJ in one of the earlier matters remarking upon the inconsistencies between two affidavits deposed to by the municipal manager. The notion of delictual claim available to Fidelity is therefore fanciful both on grounds of it very premises, and in relation to the facts of the case.

The norm of Irreparability and the risk of bankruptcy

[30] As to the second point about there being no risk of bankruptcy, the idea of irreparable harm can never mean the financial annihilation of a litigant.  A well-heeled litigant may suffer irreparable harm, in the sense contemplated by the section, even if it experiences no discomfort whatever. The core meaning to be attributed to the concept of irreparable harm is the irretrievable loss of what the litigant is entitled to in terms of the court order. In this case, Fidelity is entitled to render security services forthwith for reward as previously contracted until a certain event. Moreover, it is no part of the process contemplated by section 18 that the court hearing such a matter second-guesses the propriety of the relief granted, because it might be thought there is another way to prosecute a claim to advance a litigant’s interests. What is and remains at stake is the relief granted.

Criticism of the conduct of the litigation

[31] Fidelity has been critical of the resistance put up by Mogale City to its claims. As alluded to earlier, this shall be the sixth judgment delivered in the litigation epic between Fidelity and Mogale City. Fidelity is bold to say that it is weary of what it perceives, perhaps accurately, as reckless rear-guard litigation by Mogale City. In particular, Fidelity points to the not inconsiderable dismay that all citizens of South Africa should have at the spectacle of an organ of state losing six court cases in a row, all funded by the taxpayer.  As a result Fidelity seeks penal costs and that individual officials of Mogale City be held liable. We are not unconscious of these considerations. However, we have not been placed in a position to determine, reliably, all the relevant circumstances, especially whether identifiable persons are in any way culpable of inappropriate conduct. In particular, bearing in mind that this is an urgent appeal, convened hurriedly, and dealt with speedily, in our view this is not an appropriate forum to address these concerns.

[32] What does seem appropriate, in the public interest, is that the circumstances be drawn to the attention of the Minister of Local Government and the MEC for Local Government, Gauteng.  Accordingly, we shall direct the registrar to forward to those officials copies of the six judgments given in the course of the litigation between the parties, with a request to investigate the matter and determine whether any grounds exist to suppose public funds are being wastefully expended such as contemplated by the Local Government: Municipal Finance Management Act 56 of 2003. Furthermore, The Minister and the MEC shall be requested to report to the Judge President of this Division, their findings, within 12 months of the referral to them of the judgments.

 

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Sutherland J (with whom Windell and Modiba JJ agree)

 

______________________

Windell J

 

________________________

Modiba J

 

Hearing and order:                                          26 July 2016

Reasons for Judgment filed:                          4 August 2016

For the first, third and fourth Appellants:     Adv M C Erasmus SC, with him, Adv J Roux and Adv WTB Ridgard,

Instructed by:                                                    Makhubela Attorneys.

 

For the respondent:                                        Adv Carol Steinberg, with her, Adv Nick Ferreira and Adv Musatondwa Musandiwa,

Instructed by:                                                    Blake Bester De Wet and Jordaan.

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