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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