Esorfranki (Pty) Ltd v Mopani District Municipality

• Jurisdiction: South Africa

Esorfranki (Pty) Ltd v Mopani District Municipality
2022 (2) SA 355 (SCA)

2022 (2) SA p355

Citation	2022 (2) SA 355 (SCA)
Case No	916/2018; [2021] ZASCA 89
Court	Supreme Court of Appeal
Judge	Petse AP, Nicholls JA, Mbatha JA, Goosen AJA and Poyo-Dlwati AJA
Heard	June 24, 2021
Judgment	June 24, 2021
Counsel	KW Luderitz SC (with C Woodrow) for the appellant.; WR Mokhare SC (with SC Motsepe) for the respondent.

Flynote : Sleutelwoorde

Delict — Liability — Fraud in government procurement — Award vitiated by fraud — Municipality awarding tender to third party — Unsuccessful bidder alleging fraud integral to award and absent such it would have received tender — Claiming its lost profits.

Government procurement — Fraud — Award vitiated by fraud — Delictual action for damages for loss of profits by unsuccessful tenderer — Claim based on state organ's breach of constitutional duty to implement fair tender process — Wrongfulness, public policy and causality where tender set aside and aggrieved tenderer would not have won, even absent fraud.

Headnote : Kopnota

The Mopani District Municipality had awarded a tender to a third party but Esorfranki (Pty) Ltd, an unsuccessful tenderer, obtained rescission on the ground of illegality (see [2] and [11]). Esorfranki thereafter appealed certain other aspects of the Pretoria High Court's rescission order and obtained their substitution in the Supreme Court of Appeal (SCA) (see [11] and [13]).

Esorfranki instituted an action for damages in the High Court (see [16]). Its claim was that fraudulent conduct was integral to the award and that, absent it, it would have won the tender and reaped the associated awards. Esorfranki claimed its lost profits as damages. (See [3].)

The action was dismissed by the High Court on two grounds (see [4]). Firstly, because Mopani's liability was contingent on a finding that Esorfranki would have been the successful bidder, in circumstances in which the review court and the SCA had already ruled that it would not have been (see [19]); and, secondly, because legal causation was not established: neither the review court nor SCA had found the municipality's conduct to be fraudulent (see [20]). Moreover, Esorfranki's unsuccessful second bid, submitted after the tender was readvertised pursuant to the SCA's order, was a novus actus interveniens (see [21]).

Esorfranki approached the SCA on appeal. The court returned a split judgment.

The minority — per Goosen AJA, Petse AP concurring — would have upheld the appeal (see [86]). Goosen AJA reached the following conclusions:

•

The evidence that had served before the trial court had been properly before it. The question as to whether it was properly before the court arose because Esorfranki had presented its affidavits from the review proceedings as its evidence at the trial without objection or countervailing evidence from Mopani. This had the effect that the only (and hence uncontested) evidence at the trial was Esorfranki's (see [23] and [28]). In this regard Goosen AJA, in response to reservations from the minority, noted that it was of no significance that evidence from one proceeding could serve at another (the same facts could support different causes of action), and that it was unobjectionable for evidence to be presented at a trial on affidavit (see [26] and [27]).

2022 (2) SA p356

•

Neither the review court nor the SCA had decided that there was no fraud involved in the grant of the tender to the third party; nor had those courts decided that Esorfranki would in any event (in a lawful contract process) have failed in its tender bid (see [40]).

•

Esorfranki's failure to win the readvertised tender did not constitute a novus actus interveniens (see [52]). This because the readvertised tender was an entirely different one to the first and so could not appropriately be a factor in any assessment of causation (see [50]).

•

The evidence before the trial court established fraud on Mopani's part in its award of the tender to the third party (see [66]).

•

Considerations of policy militated for finding that the conduct was wrongful (see [67] and [74]). These included Mopani's attempts to avoid an order restraining implementation of the tender pending its review, the deliberateness of its conduct, and its derogation from the standard of behaviour expected of an organ of state (see [70] – [72]).

•

But for Mopani's conduct, Esorfranki would have been awarded the tender (see [78]); and Esorfranki's loss was closely enough linked to the fraud to establish legal causation (see [79]): it was reasonably foreseeable that Esorfranki would have profited from the tender (see [83]). Conversely, readvertisement of the tender lacked the requisites to constitute a novus actus interveniens: it was neither unforeseeable nor unexpected or unusual (see [84] – [85]).

Given all of the above, had Goosen AJA commanded the majority, he would have upheld the appeal, set aside the High Court's order, and have declared Mopani liable to Esorfranki for Esorfranki's loss of profits (see [86]).

The majority (per Nicholls JA, Poyo-Dlwati AJA concurring) in dismissing the appeal took account of the following (see [121]):

•

Militating against wrongfulness were that breach of the constitutional guarantee of a fair tender process had been held to not ground a delictual claim (see [95]); that the setting-aside of the tender expunged any delictual duties attaching to it (see [98]); and that public policy did not permit a claim in circumstances in which an aggrieved bidder on a voided tender subsequently failed in a bid for a lawful-successor tender (see [99]).

•

The evidence failed to establish that, but for the fraudulent conduct, Esorfranki would have won the tender (see [110]).

•

Seen in the light of the renewed opportunity to bid, it would be, insofar as legal causation was concerned, unfair to find the municipality liable for Esorfranki's loss (see [119]).

Mbatha JA, writing separately, would have dismissed the appeal (see [142]). In his view the matter was res judicata, with fraud grounding both the review and delictual proceedings, and the same relief — monetary compensation — availing, albeit not being pursued in both (see [126] – [128]). Moreover, legal causation was excluded both by the novus actus interveniens (Esorfranki's failure to win the readvertised tender) and on policy grounds (Esorfranki had received an administrative law remedy, and allowing a claim in such circumstances would unjustifiably burden the public purse) (see [131] and [141] – [142]).

Cases cited

Southern Africa

Administrateur, Natal v Trust Bank van Afrika Bpk 1979 (3) SA 824 (A): referred to

Black v Joffe 2007 (3) SA 171 (C) ([2007] 2 All SA 161): referred to

Dickson and Co v Levy (1894) 11 SC 33: referred to

2022 (2) SA p357

Esorfranki Pipelines (Pty) Ltd and Another v Mopani District Municipality and Others [2014] 2 All SA 493 (SCA) ([2014] ZASCA 21): referred to

Fose v Minister of Safety and Security 1997 (3) SA 786 (CC) (1997 (7) BCLR 851; [1997] ZACC 6): referred to

Fourway Haulage SA (Pty) Ltd v SA National Roads Agency Ltd 2009 (2) SA 150 (SCA) ([2009] 1 All SA 525; [2008] ZASCA 134): dictum in paras [33] – [35] applied

Gauteng Gambling Board v Silverstar Development Ltd and Others 2005 (4) SA 67 (SCA): referred to

Home Talk Developments (Pty) Ltd and Others v Ekurhuleni Metropolitan Municipality 2018 (1) SA 391 (SCA) ([2017] 3 All SA 382; [2017] ZASCA 77): referred to

International Shipping Co (Pty) Ltd v Bentley 1990 (1) SA 680 (A) ([1989] ZASCA 138): dictum at 700I applied

Lee v Minister for Correctional Services 2013 (2) SA 144 (CC) (2013 (1) SACR 213; 2013 (2) BCLR 129; [2012] ZACC 30): dictum in para [39] applied

Mashongwa v Passenger Rail Agency of South Africa 2016 (3) SA 528 (CC) (2016 (2) BCLR 204; [2015] ZACC 36): referred to

Minister of Finance and Others v Gore NO 2007 (1) SA 111 (SCA) ([2007] 1 All SA 309; [2006] ZASCA 98): considered

Minister of Safety and Security and Another v Rudman and Another 2005 (2) SA 16 (SCA) ([2004] 3 All SA 667): referred to

Minister of Safety and Security v Van Duivenboden 2002 (6) SA 431 (SCA) ([2002] 3 All SA 741; [2002] ZASCA 79): referred to

MV MSC Spain: Mediterranean Shipping Co (Pty) Ltd v Tebe Trading (Pty) Ltd 2008 (6) SA 595 (SCA) ([2007] 2 All SA 489; [2007] ZASCA 12): referred to

Odinfin (Pty) Ltd v Reynecke 2018 (1) SA 153 (SCA): referred to

OK Bazaars (1929) Ltd v Standard Bank of South Africa Ltd 2002 (3) SA 688 (SCA): referred to

Olitzki Property Holdings v State Tender Board and Another 2001 (3) SA 1247 (SCA) (2001 (8) BCLR 779; [2001] ZASCA 51): dictum in para [31] applied

Perlman v Zoutendyk 1934 CPD 151: referred to

Premier of the Western Cape Province v Loots NO [2011] ZASCA 32: referred to

President of the Republic of South Africa and Another v Modderklip Boerdery (Pty) Ltd (Agri SA and Others, Amici Curiae) 2005 (5) SA 3 (CC) (2005 (8) BCLR 786; [2005] ZACC 5): referred to

Royal Sechaba Holdings (Pty) Ltd v Coote and Another 2014 (5) SA 562 (SCA) ([2014] 3 All SA 43; [2014] ZASCA 85): referred to

S v Mokgethi en Andere 1990 (1) SA 32 (A) ([1990] 1 All SA 320): referred to

South African Post Office v De Lacy and Another 2009 (5) SA 255 (SCA) ([2009] 3 All SA 437; [2009] ZASCA 45): dictum in paras [2] – [3] applied

Standard Chartered Bank of Canada v Nedperm Bank Ltd 1994 (4) SA 747 (A): referred to

Steenkamp NO v Provincial Tender Board, Eastern Cape 2006 (3) SA 151 (SCA) ([2006] 1 All SA 478; [2005] ZASCA 120): referred to

Steenkamp NO v Provincial Tender Board, Eastern Cape 2007 (3) SA 121 (CC) (2007 (3) BCLR 300; [2006] ZACC 16): referred to

2022 (2) SA p358

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