- within International Law, Environment and Antitrust/Competition Law topic(s)
The Western Cape High Court recently delivered judgment in a dispute between Phuhlani Bafazi Construction (Pty) Ltd, trading as Chuma Security Services ("Phuhlani"), and the Passenger Rail Agency of South Africa ("PRASA"). The case concerned the lawfulness of PRASA's termination of security services and the enforceability of contractual constraints in a public procurement context. Phuhlani sought interim interdictory relief to continue providing services after PRASA issued a late-August 2025 instruction to vacate PRASA sites. For this, Prasa asserted that no lawful relationship existed between PRASA and Phuhlani.
The dispute originated from a 2011 master agreement between PRASA and High Goals Investments CC ("High Goals"), which traded as Chuma Security Services, for the provision of security services. The agreement was repeatedly extended and eventually operated on a month-to-month basis.
High Goals was liquidated in January 2021. In April 2022, the liquidators of High Goals concluded a sale agreement with Phuhlani, which purported to transfer, among other assets, the ongoing month-to-month service arrangement with PRASA. Phuhlani then began rendering services and, for roughly three years, continued to protect PRASA's infrastructure while issuing invoices largely in the name of High Goals and receiving payment.
In late August 2025, PRASA sent a notice asserting that Phuhlani had no lawful rights against PRASA, had acted under false pretences by passing itself off as High Goals, and that its involvement contravened section 217 of the Constitution and PRASA's supply chain policies. S217 of the Constitution requires procurement processes to be fair, equitable, transparent and cost-effective.
PRASA replaced Phuhlani's personnel with other service providers.
The central question before the High Court was whether Phuhlani had established an enforceable contractual right against PRASA. PRASA relied on four contractual defences: a pactum de non cedendo (no-cession clause) requiring PRASA's prior written consent for any cession, delegation, or assignment; a cancellation clause triggered by the liquidation of High Goals; a non-variation clause; and an arbitration clause. PRASA also argued that any tacit arrangement with Phuhlani would be invalid for non-compliance with section 217 of the Constitution and applicable procurement laws and policies.
The High Court rejected PRASA's argument that the sale agreement was invalid solely because it contravened the no-cession clause. The Court held that a no-cession clause operates between the parties to the agreement in which it is contained and does not invalidate a cession agreement between the cedent and cessionary. Instead, it empowers the non-ceding contracting party to resist enforcement in the absence of its prior written consent.
The High Court also found, on the probabilities, that a tacit agreement arose between PRASA and Phuhlani, under which Phuhlani replaced High Goals as the contracting party and continued rendering services for payment. Importantly, while the no-cession clause remained for PRASA's benefit, the Court concluded that PRASA had agreed to suspend its enforcement, thereby allowing performance and payment to continue.
The Court also stated that the non-variation clause did not bar a temporary suspension of enforcement, which is distinct from a waiver or contractual variation. As a result, PRASA remained entitled to terminate the suspension on reasonable notice going forward.
The High Court further stated that the cancellation clause did not assist PRASA. Although High Goals' liquidation gave PRASA a right to cancel, PRASA elected to continue with the extended arrangement, which bound it to that election. The arbitration clause likewise did not preclude the interim relief sought, as it expressly permitted urgent interim relief. The Court explained that PRASA's invalidity defence raised constitutional and procurement-law issues falling outside an arbitrator's jurisdiction.
Considering PRASA's invalidity defence, the High Court emphasised that a party seeking to avoid a contract for illegality or procurement non-compliance must plead and prove the specific legal basis under the applicable procurement system. It is insufficient to invoke section 217 in the abstract.
The Court stated that no evidence of PRASA's procurement policy or its breach was provided, and the Court could not take judicial notice of such a policy. The Court also noted National Treasury Instruction No. 8 of 2022/2023, which treats assignment of procurement contracts as impermissible, but observed that it came into effect after the tacit arrangement arose and does not operate retrospectively.
A further contextual element was the Sechaba litigation, in which supervisory orders required PRASA to continue using specified security providers (including High Goals) pending a lawful tender and an approved safety plan. Those orders shaped the environment in which PRASA continued month-to-month arrangements and informed the reasonableness of notice for termination. While the High Court accepted that PRASA could terminate the suspension of its right to resist verbal assignment on reasonable notice, it held that PRASA's two-to-three-day August 2025 termination was invalid for lack of reasonable notice. However, the Court found that PRASA had, by implication and thereafter unequivocally, given notice terminating the suspension, such that the tacit assignment would cease to have effect at the end of a reasonable period, which the Court determined to be 30 November 2025.
The High Court ultimately held that PRASA had acted unlawfully in denying the tacit arrangement and in seeking to terminate the contract without reasonable notice. It ordered that Phuhlani is entitled to continue rendering services on the month-to-month terms of the 2011 master agreement until 30 November 2025, and directed PRASA to pay 50% of Phuhlani's costs, including the costs of two counsel.
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