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To Substitute, Or Not To Substitute: When Will The Court Grant A Substitution Order? – Trials & Appeals & Compensation



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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 ofTrencon
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.

InGijima, the court granted the substitution order,
having regard to the principles laid down inTrencon. 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.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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