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To Substitute, or Not to Substitute: When will the court grant a substitution order?

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Published Date: July 6, 2022

The South African courts have seen a rise in litigation dealing with substitution orders, within the area of public procurement law, since the seminal Constitutional Court judgement of Trencon Construction (Pty) Limited v Industrial Development Corporation of South Africa Limited 2015 (5) SA 245 (CC) (“Trencon”). Despite this rise, it would seem that orders of this nature are still largely misunderstood.

Historically, the courts have applied a conservative approach to substitution orders due to the separation of powers doctrine. Simply put, this principle denotes that it is not the place of the court to tell organs of state what to do, or better yet, to make decisions for them. The courts are generally reluctant to step into the shoes of an administrator, as the power to make decisions within the public sphere is directly vested in the executive branch of our government by the Constitution.

However, due to the rise of irregular public procurement practices in South Africa, the judiciary has taken a more robust approach in regulating the exercise of public power, specifically within the context of a tender process. In most instances, this happens when an organ of state fails to uphold its obligations in terms of section 217 of the Constitution, to ensure that a tender process is fair, equitable, transparent, competitive and cost-effective (widely considered as the five pillars of public procurement law in South Africa). This begs the question: what recourse is available to parties who have been subjected to an unfair tender process?

Ordinarily, a dissatisfied party could approach the court for an order to review and set aside the unfair decision of an administrator, after which the court would remit the decision back to the administrator for further consideration. But what happens when the facts of a matter irrefutably demonstrate that the administrator is incapable of making a fair decision? In these instances, litigants can ask the court to substitute the decision of the administrator with its own, in addition to requesting the court to review and set aside the decision.

A court will require compelling reasons to be placed before it, before granting a substitution order and encroaching on the powers of the executive in this manner – to be more specific, it can only do so under exceptional circumstances. If such circumstances exist, a disgruntled bidder would be entitled to approach the court to request that it awards the tender to it (a so-called substitution order). The court would essentially substitute the decision of the administrator with its own. Given the far-reaching implications of such an order, an applicant will need to place convincing facts before the court to persuade it of the merits of granting such an order.

In the recent Gijima judgement (Gijima Holdings (Pty) Ltd v State Information Technology Agency Soc Limited 2021 JDR 2656 (GJ)) handed down by the Johannesburg High Court, the court had to deal with these very issues and in doing so, reinforced the requirements which must be met for a substitution order to be granted.

In short, Gijima was dissatisfied with a tender process which was embarked upon by the State Information Technology Association SOC. This prompted it to launch an application to review and set aside the decision to award the tender to another bidder, namely In2IT Technologies (Pty) Ltd, in terms of the Promotion of Administrative Justice Act 3 of 2000. The review largely turned on the interpretation of the mandatory requirements of the tender. One such requirement was that bidders had to be an Original Equipment Manufacturer. In this regard, Gijima argued that it and its partner were the only entities in South Africa authorized to service and maintain the majority of the PBX models covered by the tender. They were consequently the only entities in South Africa that could satisfy the mandatory requirements of the tender, rendering the decision to award the tender to In2IT unlawful. The court ultimately found that SITA’s decision to award the tender to In2IT was not rationally connected to the information that was before it when it made its decision (as required by law) and set the decision aside.

Once a ground of review has been established, section 172(1)(a) of the Constitution requires that the decision be declared invalid. The court will then have the discretion to make an order that is just and equitable. Section 8(1)(c) of PAJA gives context to the meaning of “just and equitable” and allows the court to:

  • remit the matter for reconsideration by the administrator, with or without directions; or
  • in exceptional circumstances, substitute or vary the administrative action or correct a defect arising from the administrative action.

 

In Gijima, the court granted the substitution order, having regard to the principles laid down in Trencon. In this case, the Constitutional Court held that the following factors should be considered to determine whether exceptional circumstances exist for a court to order a substitution:

  • whether the court is in as good a position as the administrator to make a decision;
  • whether the decision is a forgone conclusion;
  • whether there has been undue delay; and
  • whether there is evidence of bias or incompetence on the part of the administrator.

If these circumstances can be established, it will be within a court’s powers to grant a substitution order after it has reviewed and set aside a decision of an administrator. However, as in all matters, the facts of each case will ultimately guide the court.

Nondumiso Goba
Associate
Thando Manentsa
Partner | Commercial Attorney

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