high court of south africa 11/1/11 - saflii · summary: delict - claim pursuant to an unlawfully...
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HIGH COURT OF SOUTH AFRICA
(GAUTENG DIVISION, PRETORIA) 11/1/11
ESORFRANKI PIPELINES
and
MOP ANI DISTRICT MUNICIPALITY
TLONG RE YENG CC
BASE MAJOR CONSTRUCTION (PTY) LTD
THE PREMIER OF LIMPOPO
THE MINISTER OF FINANCE
Not reportable
Not of interest to other Judges
CASE NO: 56730/2012
Plaintiff
First Defendant
Second Defendant
Third Defendant
Fourth Defendant
Fifth Respondent
Summary: Delict - claim pursuant to an unlawfully awarded tender which was
subsequently set aside by the court and ordered to be re-advertised - the plaintiff
re-submitting bid but again being unsuccessful - whether delictual liability of the
municipality arises.
ORDER
The plaintiffs action is dismissed with costs, including the costs consequent upon
the employment of two counsel.
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JUDGMENT
MAKGOKAJ
Introduction
[ 1] This is an action for delictual damages, which was instituted by the plaintiff
on 1 October 2012 pursuant to a failed bid to be awarded a tender. At the
commencement of the hearing, I made an order in terms of rule 33(4) of the
Uniform Rules of Court separating the issues of liability and quantum.
Accordingly, only the issue of liability is to be determined in this judgment. The
issue of quantum was postponed sine die.
[2] The plaintiff, Esorfranki Pipelines (Pty) Ltd (Esorfranki) seeks damages
against the first defendant, Mopani District Municipality (the municipality) for
loss of profit allegedly suffered as a result of not being awarded a tender for which
it had submitted a bid. The tender was for the installation of a water reticulation
scheme. It was awarded to a joint venture comprising the second defendant, Tlong
Re Y eng Trading CC (Tlong) and the third defendant, Base Major Construction
(Pty) Ltd (Base Major).
Background facts
[3] The factual background which gives rise to the action is largely common
cause, and can be summarized as follows. During August 2010 the municipality
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invited tenders for the construction of a pipeline between the Nandoni dam in
Thohoyandou and the Nsami water treatment works in Giyani, Limpopo
Province.
[4] The tender was awarded to the joint venture at the end of October 2010.
Esorfranki and another unsuccessful bidder, Cycad Pipelines (Pty) Ltd brought
an urgent application in this court and obtained an order on 27 January 2011 by
consent setting aside the award of the tender to the joint venture. Pursuant to the
re-adjudication of the tender, the tender was again awarded to the joint venture.
Litigation history
The review application in this court
[5] Subsequently, Esorfranki brought a review application in this court in
which it sought an order that:
(a) the decision to award the tender to the joint venture be reviewed and set aside;
(b) any contracts pursuant to the award of the tender be declared to be of no force
and effect, and be set aside;
( c) It (Esofranki) be declared to be the sole successful bidder and that the
municipality be directed to enter into a contract with it, or alternatively
( d) The matter be referred back to the municipality for reconsideration.
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[6] The review application came before this court (Matojane J) which
delivered its judgment on 29 August 2012. The court found that the tender
submitted by the joint venture did not comply with the bid specifications, that the
joint venture was guilty of fronting and that the municipality's decision was
motivated by bias and bad faith. It also found that the joint venture failed to
submit some of the information required by the tender specifications necessary to
assess the tender requirements relating to competence and functionality.
Members of the joint venture were also found to have made false representations
in their tender submission. Tlong, for example, falsely stated that it was
conducting its business at a given address when it was not, resulting in it being
awarded a point in the adjudication of the tender in respect of locality. It also
falsely claimed to have been in business for three years prior to the submission of
the tender.
[7] Base Major in tum falsely represented that its sole shareholder, a foreign
born national, obtained South African citizenship at birth, thereby improving its
score for equity promotion goals. In the joint venture agreement entered into
between Tlong and Base Major it was recorded that both entities individually had
experience in the construction industry when it was obvious that Tlong had no
such experience and was as a consequence unable to manage and execute its half
of the work. Lastly, by declaring that Tlong and Base Major were, contrary to the
terms of the joint venture agreement, to manage and execute the contract for the
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construction of the pipeline in equal shares, they managed to acquire additional
points in relation to equity promotion goals.
[8] The court also made a finding that Tlong was used as a front, for the
following reasons: Tlong was established as an entity only after publication of
the invitation to tender and a week before the tender was submitted; it had no
assets, employees or income; it did not conduct business at the time the tender
was submitted; it had no business address and did not exist at the address given
in the tender documentation, which was a residential house with only a few pieces
of furniture; and lastly, Tlong's sole member, Ms Malebate, was an employee at
an unrelated business.
[9] Despite having made the above findings, this court, however, declined to
grant an order sought by Esorfranki in terms of which it was to be declared the
only successful bidder, and the municipality be ordered to award it a contract to
complete the work. The court found that the order proposed by Esorfranki raised
a number of ' issues and practical difficulties ', and that the granting of such an
order would not serve to protect the interests of those who were to benefit from
the construction of the pipeline. The court remarked that practical issues such as
' the logistical, legal and financial viability of such a relief and ' the extent to
which the contract has been completed, the ownership of materials, whether if the
balance of the contract is legally and factually separable, it should be put out to
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tender etc ', had not been properly addressed. Consequently, it made the following
order:
'1. The tender process is declared illegal and invalid and is set aside.
2. The Municipality is ordered to independently and at the joint venture ' s costs, verify that
all the work has been done according to specifications and that the joint venture does
all the necessary remedial work and work is completed as soon as possible in terms of
the agreement.
3. Each party is ordered to pay its own costs.
4. Esorfranki Pipelines (Pty) Ltd is ordered to pay ninth respondents ' costs on the attorney
and own client scale, including the costs reserved on 3 and 4 October 2011. '
Supreme Court of Appeal
[10] With leave of this court, Esofranki appealed to the Supreme Court of
Appeal against the orders made in paragraphs 2, 3 and 4 of the order of this court,
referred to above. It sought the setting aside of those orders and the substitution
of an order to the effect that it be declared to have been the sole successful bidder
in respect of the tender; that the municipality enter into a contract with it for the
completion of the outstanding work on the pipeline, and ancillary orders.
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[11] On 28 March 2014 the Supreme Court of Appeal set aside this court' s
orders declining to set aside the contract. 1 It is not clear from the reading of the
judgment of the Supreme Court of Appeal whether the main relief sought by
Esorfranki (to be declared the successful bidder and to order the municipality to
contract with it to complete the works) was persisted with. It is not mentioned
anywhere in the judgment.
[12] Instead, it appears that the focus was very much on whether the tender
process should start afresh. Indeed, very early on in the judgment ( at para 15) Van
Zyl AJA rejected a contention by the municipality that any order dealing with the
validity of the contract concluded between the municipality and the joint venture
for the construction of the pipeline would not have any practical effect, because
the work would in all probability have been concluded by the time of the hearing
of the appeal. The court observed that the progress report of the Department of
Water Affairs and other evidence at that stage, showed that the work was not
complete. The court thus rejected the contention that the appeal may have become
moot.
[ 13] Later, in para 27 the learned acting judge of appeal said:
' I therefore conclude that the high court erred in the exercise of its discretion and that its
decision in effect to allow the continuation of the contract should be set aside. I am satisfied
1 Esorfranki Pipelines (Pty) Ltd and another v Mopani District Municipality and others [2014] 2 All SA 493 (SCA).
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that in the circumstances of this case, and weighing up the relevant interests, the only
appropriate order would be one expressly declaring the contract void and granting equitable
relief. As the work on the project is partially complete it would require the Department of Water
Affairs to assess the extent of the work already performed, and to determine not only the value
of the completed and uncompleted work but also what steps, if any, would be necessary to
complete the work on the project. In the interests of the communities who are to benefit from
the pipeline it is imperative that this be done as expeditiously as possible. I accept the
submission of Esorfranki and Cycad that because of the bias displayed by the municipality in
the adjudication of the tender and its conduct in the review and interlocutory proceedings, it
should play no part in any further tender process in relation to this project. '
[14] In the ultimate end, the Supreme Court of Appeal did not grant an order
declaring Esorfranki to be the successful bidder and substituting it for the joint
venture. Instead, it made the following order:
'1 The first and second appellants ' appeal against the orders in paras 2 and 3 of the order
of the high court is upheld with costs including the costs of two counsel, such costs to
be paid jointly and severally by the first and the third to fifth respondents on the scale
as between attorney and client.
2 The aforesaid orders are set aside and are substituted with the following orders:
' (a) Any contract entered into between the first respondent and the third to fifth respondents
pursuant to the award of the tender to the respondents for the construction of a pipeline
between the Nandoni dam and the Nsami water treatment works (Nandoni to Giyani
Pipe Project; project number LPRO 18), is declared void ab initio and is set aside.
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(b) The first respondent is ordered to formally approach the Department of Water Affairs
within seven days of the granting of this order to request that Department to do the
following:
(i) To take such steps as may be necessary to determine the extent of the works necessary
to perform remedial work and to complete the construction of the pipeline and the other
works as contemplated in the aforesaid tender, for purposes of publishing a tender for
the said remedial work and the completion of the works;
(ii) To prepare and publish an invitation to tender for the performance of the remedial work
and completion of the works as aforesaid;
(iii) To evaluate and adjudicate all bids received, and to make an award in respect of such
invitation to bid.
3 The first and the third to fifth respondents jointly and severally are ordered to pay the
costs of the review application by Esorfranki Pipelines (Pty) Ltd under case no
13480/2011 , and of the third Rule 49(11) application dated 27 August 2011 under case
no 13480/2011 , such costs to be on an attorney and client scale, and to be inclusive of
all the reserved costs and the costs of two counsel where applicable.
4 The first and the third to fifth respondents jointly and severally are ordered to pay the
costs of the review application by Cycad Pipelines (Pty) Ltd under case no 17852/2011,
such costs to be on an attorney and client scale, and to be inclusive of all the reserved
costs and the costs of two counsel where applicable.
5 The first appellant's appeal against the order in para 4 of the order of the high court is
dismissed with costs.'
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The re-advertised tender
[15] Pursuant to the judgment of the Supreme Court of Appeal, on 12 October
2015 the Department of Water Affairs called for tenders for the rehabilitation
work and for the completion of the pipeline. The tender was re-advertised
through the department' s agency, the Lepelle Northern Water. In November
Esorfranki responded to the tender by submitting a bid, in which it offered to
implement the tender for R421 854 618.88. Esorfranki was not successful, as the
tender was awarded to Vharanani Properties (Pty) Ltd (Vharanani).
[ 16] Aggrieved with this, on 31 May 2016 Esorfranki launched an urgent
application in this court to interdict the implementation of the tender by Lepelle
North Water as awarded to Vharanani, pending the launching of the review
application. That application was struck from the roll for lack of urgency, and
nothing further transpired in this respect, and it can safely be assumed that
Esorfranki ' s endeavours in this regard have died a natural death.
Civil action for delictual liablity
[17] In the current action proceedings, Esorfranki claims liability on the part of
the municipality. It alleges that the municipality had caused it to suffer damages
in not awarding the tender to it but to the joint venture. From the pleadings, it
seems that the following issues are common cause, or at least not disputed: that
the award of the tender to the joint venture was vitiated by bias, bad faith and
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ulterior purpose; that Ms Malebate, the only member of Tlong, was used by the
Base Major, the second defendant, for fronting; that both this court and the
Supreme Court of Appeal set aside the decision to award the tender to the joint
venture on one, more or all of the grounds mentioned above. However, the
municipality denies that any of these findings justify civil liability by it to
Esorfranki.
[18] Esorfranki's particulars of claim are premised primarily on the judgment
of this court in the review application. Initially, it was alleged that this court had
found that the municipality was guilty of corruption and fraud in awarding the
tender to the joint venture. In his opening address and during oral submissions,
counsel for Esorfranki correctly conceded that no such findings were made
against the municipality, either by this court or the Supreme Court of Appeal.
The issue
[19] The crisp issue for determination is whether in the circumstances of the
case, the municipality should be held delictually liable to Esorfranki. The parties
are agreed that this question should be determined with reference to the
following: the contents of the affidavits filed in the review application and the
findings of fact and law in the judgments of this court in the review application
and of the Supreme Court of Appeal.
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The affidavits in the review application
[20] I must first dispose of the relevance and effect of the contents of the
affidavits filed in the review application. As correctly submitted by Mr Mokhari
SC, counsel for the municipality, those affidavits formed part of the record before
this court in the review application, and have all been considered by the both this
court and the Supreme Court of Appeal. There is nothing in terms of evidentiary
value that those affidavits can add to the determination of the crisp issue in the
current proceedings. The findings of fact by this court, which were endorsed by
the Supreme Court of Appeal, were based on those affidavits. The upshot of this
is that no particular regard will be had to the contents of those affidavit outside
the parameters considered by the court in the review proceedings.
Does delictual liability arise?
Res judicata
[21] I tum now to Esorfranki ' s prayer for a declaration that the municipality is
liable to it for the damages it allegedly suffered as a result of not being awarded
the tender. Such a declaration must, perforce, be preceded by a finding that, but
for the municipality's conduct, Esorfranki would have been the successful bidder.
But Esorfranki has already failed in that respect - not once, but twice. Both in the
review application in this court and on appeal to the Supreme Court of Appeal,
Esorfranki expressly and pertinently sought that order.
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[22] Neither of the two courts acceded to its request. Despite negative findings
by both courts against the municipality, they were not sufficient to move either
of the courts to declare Esorfranki the successful bidder. It was submitted on
behalf of the municipality that as a result, this issue (whether Esorfranki was the
successful bidder) is res judicata between the parties and cannot be revisited. I
agree, and that should be the end of the matter, as this court is bound by the
conclusions arrived at ultimately by the Supreme Court of Appeal.
Causation
[23] There is another basis on which Esorfranki should be non-suited. It
concerns one of the requisites for delictual liability, namely, causation. Causation
represents a dual problem on different levels of enquiry: factual and legal, which
must both be met. There is no question that in the present case, factual causation
has been established by Esorfranki. It therefore remains to determine legal
causation. The test applied in such an enquiry is trite and settled: it is a flexible
one in which factors such as reasonable foreseeability, directness, the absence or
presence of a novus actus interveniens, legal policy, reasonability, fairness and
justice all come into consideration.
See Minister of Police v Skosana 1977 (1) SA 31 (A) at 34F-H and 35A-D;
International Shipping Co. (Pty) Ltd v Bentley 1990 (1) SA 680 (A) at 700E-H;
Siman & Co (Pty) Ltd v Barclays National Bank 1984 (2) SA 888 (A) at 914C-
918A; Tuck v Commissioner for Inland Revenue 1988 (3) SA 819 (A) at 832F-
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G; Silver v Premier, Gauteng Provincial Government 1998 ( 4) SA 569 (W) at
574D-G.
[24] In this regard, it is instructive that neither this court nor the Supreme Court
of Appeal made findings of fraud against the municipality. Those findings were
made against the joint venture. The municipality was criticized, warrantably so,
for its bias towards the joint venture and bad faith in adjudicating the tender.
Indeed, the municipality ' s conduct is reprehensible. But the finding of bad faith,
dishonesty, ulterior purpose does not without more, give rise to delictual liability ,
especially in light of the Supreme Court of Appeal declining to make an order of
substitution.
[25] Causation in the present case may be considered against the fact that had it
been successful in obtaining an order of substitution, the delictual claim against
the municipality would not have arisen. What is more, in ordering the tender
process to be re-advertised, Esorfranki was afforded another opportunity to
submit a bid for the tender. This constituted an alternative remedy for Esorfranki.
In fact, it was upon its submissions in the Supreme Court of Appeal, and the
evidence it placed before court, that the court found that the works commence by
the joint venture were far from being complete (para 15). Indeed, Esorfranki
responded to the re-advertised tender, but lost. Its efforts to set aside the awarding
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of the tender to another bidder were unsuccessful. In my view, this a classic case
of the presence of a novus actus interveniens.
[26] The re-advertised tender by Lepelle Nkumpi Water was a sequel to the
original tender which had been set aside by the Supreme Court of Appeal. Seen
in this light, the contention on behalf of Esorfranki that the re-advertised tender
was not the same is unsustainable, and it is mentioned merely to be rejected.
Esorfranki was happy to accept the result of the re-advertised tender only if the
tender was awarded to it. Its argument to the contrary is contrived, and it is
mentioned only to be rejected.
Summary and conclusion
[27] To sum up, the sine qua non of Esorfranki 's action, namely that it was the
successful bidder, has been finally determined by the Supreme Court of Appeal.
The point of res judicata was therefore well-taken on behalf of the municipality.
In addition, Esorfranki has failed to establish legal causation, as the link between
its damages and the municipality ' s conduct has been broken by the following:
this court and the Supreme Court of Appeal refusing to declare it the successful
bidder, and Esorfranki ' s subsequent bid in response to Lepelle Nkumpi ' s re
advertised tender. I am also of the view, under the circumstances of this case, that
legal policy does not favour delictual liability to arise against the municipality.
Accordingly, I conclude that Esorfranki ' s claim falls to fail.
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[28] With regard to costs, both parties employed two counsel, which I am of the
view, was warranted in the circumstances.
Order
[29] In the result the following order is made:
The plaintiffs action is dismissed with costs, including the costs consequent upon
the employment of two counsel.
APPEARANCES:
For the Plaintiff:
For the First Defendant:
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KW Luderitz SC (with him C Woodrow)
Instructed by:
Thomson Wilks Inc, Johannesburg
Barnard Inc, Pretoria
Pretorius le Roux Attorneys, Pretoria
W Mokhari SC (with him NC Motsepe)
Instructed by:
Mogaswa Inc., Johannesburg
Mafa Attorneys, Pretoria