Olitzki Property Holdings v State Tender Board and Another

• Jurisdiction: South Africa
• Judge: Hefer ACJ, Olivier JA, Marais JA, Zulman JA and Cameron JA
• Judgment Date: 28 March 2001
• Citation: 2001 (3) SA 1247 (SCA)
• Docket Number: 698/98
• Hearing Date: 26 February 2001
• Counsel: P Ginsburg SC (with D B Spitz) for the appellant. J L van der Merwe SC (with B H Swart) for the respondents.
• Court: Supreme Court of Appeal

Cameron JA:

[1] This appeal raises two questions. The first is whether the provision regarding procurement administration in F the interim Constitution (Constitution of the Republic of South Africa Act 200 of 1993) creates a right to claim damages for lost profit at the instance of a party claiming injury because of its infringement. The second is a similar question regarding breach of the administrative justice G provisions in that Constitution's Chapter on Fundamental Rights. The first question raises the not unfamiliar issue of the circumstances in which the breach of a statutory provision (one in this case embodied in the interim Constitution) gives rise to a civil claim for damages. The second is whether in the circumstances of this case damages for lost H profit are an appropriate remedy for the infringement of a fundamental constitutional right ('constitutional damages').

Jurisdiction

[2] The proceedings were commenced before the 1996 Constitution came I into effect on 4 February 1997. Both issues raise questions concerning the interpretation of the interim Constitution. Under that Constitution, this Court had no jurisdiction to decide such issues (ss 98(2) and 101(5)). Chapter 8 of the 1996 Constitution, however, grants such jurisdiction, which in terms of item 17 of Schedule 6 this Court may J

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exercise in regard to matters that arose when the interim Constitution was in force, provided that the interests of justice A require it to do so. The Constitutional Court has signalled its general view that 'compelling interests of justice' suggest that this Court should now exercise this jurisdiction, [1] while this Court has indicated that it will do so on an ad hoc appraisal of what the interests of justice in a particular case require. [2] B

[3] In the present matter, the Judge in the Court below granted leave to appeal to this Court; and the parties were agreed (the respondents having abandoned their opposition) that this Court should exercise its constitutional jurisdiction. Taking into account the course of the proceedings, the delay and the wasted costs that C would be occasioned if this Court declined to exercise its appellate jurisdiction in regard to the order of the Court below, and the consideration that in such circumstances it is undesirable that other courts should 'be denied the benefit of the experience and expertise' of this Court in matters involving the interim Constitution, [3] I am satisfied that interests of justice require us to deter- mine the matter. D

Factual averments, evidence and procedure

[4] In 1995, the provincial government of Gauteng began to make arrangements to relocate from Pretoria to Johannesburg. It invited E tenders for office accommodation to house various departments in an inner-city precinct. The appellant ('the plaintiff') obtained an option to purchase a building in the precinct, and tendered to provide office space in it to the provincial government. Its tender was not accepted. Thereafter it instituted a claim for damages against the first and second respondents ('the defendants'), respectively F the State Tender Board ('the Tender Board'), which awarded the tender, and the Province of Gauteng ('the provincial government') which the plaintiff alleged had misconducted itself during the tender process in specified ways with which the Tender Board has associated itself. The damages the plaintiff claimed allegedly arose from the G defendants' unlawful conduct in managing the tender process and in awarding the tender. They consisted in the profit the plaintiff asserted it would have made from rentals if it had been awarded the tender.

[5] The plaintiff pleaded its claim on two alternative bases. Claim A alleged that its entitlement to damages arose from the H defendants' breach of the plaintiff's right to a fair, public and competitive system of tendering embodied in s 187(2) of the interim Constitution. Claim B alleged in the alternative that the defendants' conduct constituted an infringement, I

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entitling the plaintiff to damages, of the fundamental right to administrative justice enshrined in A s 24(a), (b) and (d) of the interim Constitution.

[6] In the Court below the parties agreed to test the legal foundation for the plaintiff's claims before possibly protracted evidence supporting them would have to be led. They requested the Court to decide, on the basis that the factual allegations in claim A were B correct, whether the plaintiff was in law entitled to the damages it claimed. In regard to claim B, the Court was requested to assume the correctness of the same factual allegations, but, in addition, after hearing 'such evidence as the parties may tender . . . and which the Court regards as relevant' to a specified issue, to decide whether the plaintiff was similarly entitled. That issue was the plaintiff's C averment that an award of damages constituted 'appropriate relief' in terms of s 7(4)(a) of the interim Constitution since it had no other satisfactory remedy for the alleged breach of its fundamental right to administrative justice. In the event of a finding favourable to the plaintiff in regard to either claim A or B, the Court was D requested to postpone the matter for further hearing. Eloff JP, who heard the matter, expressed his support for this arrangement.

[7] The allegations that the Court below in upholding the defendants' challenge to the legal basis of the plaintiff's claim assumed to be correct were in essence that the defendants in E awarding the tender acted irregularly, unreasonably and arbitrarily. More particularly, the plaintiff alleged (and the Court assumed) that:

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The provincial government, an interested party which could not impartially appraise the tenders and formulate recommendations, had acted as an advisory body to the Tender Board. F

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The Tender Board took the provincial government's recommendations into account in awarding the tender.

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The Tender Board failed to appraise the plaintiff's tender independently and impartially, and acted partially in making a pre-selection of premises. G

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The Tender Board thus acted in breach of the plaintiff's right to a fair, public and competitive tender process as required by s 187 of the interim Constitution in that it permitted the provincial government to act in this way, and had in addition made itself party to those acts. H

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As a result the plaintiff was not awarded the tender, which would have been awarded to it had a fair, public and competitive tender process been followed.

[8] Eloff JP, after hearing evidence from the plaintiff regarding the appropriateness of constitutional damages (claim B), upheld the defendants' contention that both claims were I unsustainable in law. He considered that the availability to the plaintiff of the remedy of review precluded it from claiming damages for its lost profit under either s 187 or the administrative justice provisions of the interim Constitution. He accordingly granted with costs an order setting aside the two claims, J

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together with leave to file amended particulars. Against this order the plaintiff, with the A leave of Eloff JP, now appeals.

Claim A: Does breach of the procurement provisions of the interim Constitution give rise to a civil claim in damages for lost profit?

[9] Claim A was premised on the contention that s 187 of the interim B Constitution conferred a right to claim damages for lost profit on those injured by its breach. [4] Section 187 reads:

'187 Procurement administration

(1) The procurement of goods and services for any level of Government shall be regulated by an Act of Parliament and provincial laws, which shall make provision for the appointment of independent and C impartial tender boards to deal with such procurements.

(2) The tendering system referred to in ss (1) shall be fair, public and competitive, and tender boards shall on request give reasons for their decisions to interested parties.

(3) No organ of State and no member of any organ of State or any other person shall improperly interfere with the decisions and D operations of the tender boards.

(4) All decisions of any tender board shall be recorded.' [5]

[10] The question is whether the defendants' (assumed) unreasonable, irregular and arbitrary conduct in relation to the tender breached these provisions so as to constitute a civil wrong actionable E at the plaintiff's instance. In other words, did the section impose a legal duty on the defendants to refrain from causing the plaintiff the kind of loss it claims it suffered?

[11] It is well established that in general terms the question whether there is a legal duty to prevent loss depends on a value F judgment by the court as to whether the plaintiff's invaded interest is worthy of protection against interference by culpable conduct of the kind perpetrated by the defendant. The imposition of delictual liability (as Prof Honoré has pointed out) thus requires the court to assess not broad or even abstract questions of G responsibility, but the defendant's liability for conduct

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'described in categories fixed by the law'. [6] This process involves the court applying a general criterion of reasonableness, based on considerations of morality and policy, and taking into account its assessment of the legal convictions of the community [7] and now also taking into account the norms, values and principles contained in the Constitution. Overall, the existence of the legal duty to prevent loss 'is a conclusion of law depending on a consideration of all the circumstances of the case'. [8]

[12] Where the legal duty the plaintiff invokes derives from breach of a statutory provision, the jurisprudence of this Court has developed a supple test...