Steenkamp NO v Provincial Tender Board, Eastern Cape
Jurisdiction | South Africa |
Judge | Langa CJ, Moseneke DCJ, Madala J, Mokgoro J, Nkabinde J, O'Regan J, Sachs J, Skweyiya J, Van Der Westhuizen J and Yacoob J |
Judgment Date | 28 September 2006 |
Citation | 2007 (3) SA 121 (CC) |
Docket Number | CCT 71/05 |
Hearing Date | 11 May 2006 |
Counsel | P B J Farlam for the applicant. R G Buchanan SC and S V Notshe SC for the respondents. |
Court | Constitutional Court |
Moseneke DCJ: A
Introduction
[1] This case raises the complex debate on the proper interface between private law and public law remedies in our constitutional dispensation. The narrow issue is whether financial loss caused by improper performance of a statutory or administrative function B should attract liability for damages in delict. On the facts, the issue may be rendered as whether a successful tenderer whose award is later set aside by a court on review may claim delictual damages from the tender board for out-of-pocket expenses incurred subsequent to and in reliance on the award. A secondary enquiry relates to whether the tender was valid at inception and if not, whether the tender board C nonetheless owed the initially successful tenderer a legal duty of care.
[2] These issues arise in an application to this Court for leave to appeal against the judgment and order of the Supreme Court of Appeal. It dismissed the applicant's appeal and upheld, albeit for somewhat different reasons, the decision of the Bisho High Court D (High Court) that the successful tenderer whose award was later nullified was not entitled to claim delictual damages from the tender board concerned.
Parties E
[3] The applicant, Jurgens Johannes Steenkamp, sues in a representative capacity as liquidator of Balraz Technologies (Pty) Ltd (Balraz). The original respondent was the Member of the Executive Council for Finance of the Eastern Cape province (MEC). The Provincial F Tender Board of the Eastern Cape (tender board) has replaced the MEC as respondent. The tender board was established in September 1994 under the provisions of the Provincial Tender Board Act (Eastern Cape) of 1994. [1]
Facts G
[4] The facts are neither contested nor complex. On 21 July 1995 the National State Tender Board [2] invited tenders from the public for the supply of three separate government services related to the introduction and implementation of an automatic cash payment system for social pensions and other welfare grants in the Eastern Cape province. The tender specifications originated from the Eastern Cape Department of Health and Welfare (Department of Health). H Later, in August 1995, the National State Tender Board revised the specifications of the invitation to tender and extended the closing date for submission of tenders to 8 September 1995.
[5] I digress to record that although the new provincial legislation [3] I
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establishing the tender board came into force in September 1995, its members were appointed only on A 25 October 1995 with retrospective effect. Nothing turns on this belated induction of the members of the provincial tender board. Suffice it to observe that the national legislation [4] under which the National State Tender Board issued the invitation to tender was in force in the Eastern Cape province at the time the invitation to tender was issued and immediately prior to the commencement of the provincial B legislation. [5]
[6] On 31 August 1995 members of Balraz signed its memorandum and articles of association but the company was incorporated and issued with a certificate to commence business [6] only some six weeks later, on 17 C October 1995. By then Balraz had submitted its tender to meet the deadline of 8 September 1995. Eight tenders, including the one in the name of Balraz, were submitted in response to the invitation to tender.
[7] The next significant milestone was 22 March 1996 when the tender board awarded Balraz the contract to supply the equipment and services for fingerprint and photo enrolment of social-welfare D beneficiaries. The tender was awarded in the face of material reservations of two successive technical committees convened by the Department of Health to evaluate the tenders and report to the tender board. The principal reservation was that Balraz lacked the technical expertise to meet its obligations under the tender. Be that as it may, Balraz warmly embraced the notice that it had won the tender and within E three days wrote to accept the award. The balance of the services on tender was awarded to another company, Pensecure (Pty) Ltd (Pensecure). Nearly two months later the Department of Health placed a written order with Balraz for the supply of services in terms of the tender awarded to it. However, this was not to happen. F
[8] No less than a year later, in March 1997, a dissatisfied tenderer, Cash Paymaster Services (Pty) Ltd, approached the High Court for an order to review and set aside the tenders awarded to both Balraz and Pensecure on the ground that the decision-making process of the tender board was vitiated by reviewable irregularities. On 6 June G 1997 the High Court found that the decision-making of the tender board had been irregular and administratively unfair. It set aside the tender awards. [7]
[9] As a sequel the tender board invited fresh tenders. However, Balraz could not take advantage of the second opportunity to tender. By H then, it had been placed under final liquidation. Contracts for the supply of the relevant services on tender were awarded to two other companies.
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[10] The applicant approached the High Court with a contractual claim for damages against the Department of Health on the basis that A the contract it had concluded with Balraz following the award of the tender had been wrongfully breached. In an alternative claim, Balraz sought delictual damages from the tender board. Each defendant excepted to the claim it was facing as not disclosing a cause of action. The High Court upheld the exception against the contractual claim and dismissed the action. In that way the Department of Health B fell off the litigation picture. In contrast, the Court refused to uphold the exception directed at the delictual claim, reasoning that 'it is unthinkable that the Board will have carte blanche to act as it pleases, irrespective of the loss which such actions may cause to others'. [8] C
[11] The premise of the delictual claim is that Balraz had incurred out-of-pocket expenses of R4,35 million as a result of relying on its success in obtaining the tender award. The expenses, says the applicant, were incurred after Balraz had been awarded the tender and in order to place itself in a position to fulfil its obligations under the tender contract. However, the expenses were wasted when the tender D was set aside on review as a result of the negligent failure of the tender board to perform properly its statutory functions in evaluating and awarding the impugned tenders. In this manner, the argument goes, the tender board acted wrongfully inasmuch as it breached a duty owed to Balraz. E
[12] The claim for delictual damages proceeded to trial before the High Court. In a pre-trial minute, the parties agreed to separate the issues. They invited the trial court to decide issues of liability - wrongfulness and negligence - only and to reserve causation and quantum of damages for later determination. In another pre-trial accord, the parties agreed that the issues of wrongfulness F and negligence were to be decided on the facts that emerged from the documentation jointly placed by the parties before court and did not present oral evidence.
[13] The High Court dismissed the action for damages. It held that the tender board did owe Balraz a duty of care and that in evaluating and awarding tenders it was obliged to act properly and with G due care and that in appropriate circumstances delictual liability may lie. However, it found that when Balraz submitted its tender it was not registered as a company and for that reason had no capacity to act. Its tender was invalid. Therefore, the High Court reasoned, the tender board could not reasonably foresee harm to an entity that lodged a void H tender. There was no relationship between Balraz and the tender board that could found a legal duty to prevent harm to the tenderer.
[14] The Supreme Court of Appeal dismissed the appeal on two distinct bases. First, it held that policy considerations precluded a disappointed tenderer in the position of the applicant from recovering I delictual
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damages that were purely economic in nature. Neither the statute under which the tender was issued nor the common law imposed a A legal duty on the tender board to compensate for damages where it had bona fide but negligently failed to comply with the requirements of administrative justice. Second, the Supreme Court of Appeal took the view that, given its conclusion on the substantive wrongfulness enquiry, it was unnecessary to reach the question relating B to the validity of the tender. However, for the sake of completeness, it found, as did the High Court, that the tender was a nullity at its very inception because on the closing date for submission of tenders Balraz had not been incorporated, it had no legal capacity to accept the invitation to tender and as a result had no standing to attack the C tender process as a disappointed tenderer. The Supreme Court of Appeal further held that the tender board, although unknown to it then, had no duty to consider an inchoate tender. Lastly, as it was unnecessary, the Supreme Court of Appeal, like the High Court, did not decide whether the tender board had acted negligently. D
[15] In this Court the applicant seeks leave to appeal the decision of the Supreme Court of Appeal and to have it replaced by a declarator that the tender board acted wrongfully and negligently in its decision to award the tender to Balraz and that it is liable to Balraz for private law damages represented by out-of-pocket expenses incurred in the preparation to implement the E tender. In another submission, the applicant challenges the correctness of the decision of the Supreme Court of Appeal that the tender was invalid at its...
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