South African Post Office v De Lacy and Another (19/08) [2009] ZASCA 45; 2009 (5) SA 255 (SCA) ; [2009] 3 All SA 437 (SCA) (13 May 2009)

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South African Post Office v De Lacy and Another (19/08) [2009] ZASCA 45; 2009 (5) SA 255 (SCA) ; [2009] 3 All SA 437 (SCA) (13 May 2009)

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THE
SUPREME COURT OF APPEAL
REPUBLIC
OF SOUTH AFRICA
JUDGMENT
Case
No: 19/08
SOUTH
AFRICAN POST OFFICE
Appellant
and
BRIAN
PATRICK DE LACY First Respondent
BARRY
JACK BEADON Second Respondent
Neutral citation:
S
A Post Office v De Lacy
(19/08)
[2009] ZASCA 45
(13 May 2009)
Coram:
FARLAM,
NAVSA, NUGENT, VAN HEERDEN and MLAMBO JJA
Heard:
23
FEBRUARY 2009
Delivered:
13
MAY 2009
Summary:
Tender
– claim for damages by unsuccessful tenderer – whether facts
establish dishonesty.
________________________________________________________________________
ORDER
________________________________________________________________________
On appeal from: High Court Pretoria (Hartzenberg J
sitting as court of first instance)
The following orders are made:
The appeal is upheld and the cross appeal is dismissed,
in each case with costs, which are to include the costs occasioned
by
the employment of two counsel.
In taxing those costs
(a) the costs associated with the preparation and
submission of the original heads of argument that were filed by the
appellants
in this court, and any costs associated with the receipt
and perusal of the heads of argument that were submitted by the
respondents
in reply, are to be disallowed, and
(b) to the extent that costs recoverable by the
appellant are related to the record in this appeal those costs are to
be assessed
as if the record comprised 70 volumes.
The orders of the court below are set aside and the
following order is substituted:
‘
The claims are dismissed with costs, which are to
include the costs occasioned by the employment of two counsel.’
________________________________________________________________________
JUDGMENT
________________________________________________________________________
NUGENT JA (FARLAM, NAVSA, VAN HEERDEN and MLAMBO JJA
concurring)
[1] Cases concerning tenders in the public sphere are
coming before the courts with disturbing frequency. This is another
such case.
It concerns a claim by an unsuccessful tenderer for
damages arising from the award of the contract to a rival tenderer.
[2] A claim of that kind came before this court in
Olitzki Property Holdings v State Tender
Board.
1
In that case an unsuccessful tenderer sought to rely upon the
provisions on procurement administration in s 187 of the interim

Constitution to recover profits that it lost by not being awarded a
contract because of irregularities on the part of the State
Tender
Board. Expressing the question before him as ‘whether [that
provision] creates a right to claim damages for lost profit
at the
instance of a party claiming injury because of its infringement’,
Cameron JA concluded that
‘in s 187 I can find no basis of interpretation and no
applicable principle of public policy entitling the plaintiff to

claim its lost bargain.’
2
[3] The principles underlying that decision were
affirmed by this court, and subsequently the Constitutional Court,
when an even
narrower claim was dismissed in
Steenkamp
NO v Provincial Tender Board, Eastern Cape
.
3
In that case the claim was by a successful tenderer (in liquidation
at the time the claim was brought) for the loss of the expense
it had
incurred in preparing and submitting its tender, when its contract
was subsequently set aside on review. Dismissing the
claim, Harms JA
said in this court:
4
‘[T]he existence of an action by tenderers, successful or
unsuccessful, for delictual damages that are purely economic in
nature
and suffered because of a
bona fide
and negligent
failure to comply with the requirements of administrative justice
cannot be inferred from the statute in question.
5
Likewise, the same considerations stand in the way of the recognition
of a common-law legal duty [not to act negligently] in these

circumstances.’
Endorsing that conclusion, Moseneke J said in the
Constitutional Court:
6
‘… I am satisfied that in considering the tenders submitted by
Balraz [the company in liquidation] and others, the tender board
did
not owe Balraz a duty of care and therefore its conduct in avoiding
the tender was not wrongful. I cannot find public policy

considerations and values of our Constitution which justify adapting
or extending the common law of delict to recognise a private
law
right of action to an initially successful tenderer which has
incurred a financial loss on the strength of the award which
is
subsequently upset on review by a court order.’
[4] But generally, the position will be different where
the loss of a contract has been brought about by dishonesty or fraud
on
the part of the public officials concerned. That was the
conclusion reached by this court in
Minister
of Finance v Gore NO.
7
That was another claim for damages (the
nature of the damages does not appear from the report) by an
unsuccessful tenderer. The
conduct that caused the contract to be
awarded to the rival tenderer at the expense of the plaintiff was
described as follows:
8
‘An OSEO examination of Terblanche’s secretary’s computer hard
drive eventually revealed that, ten days before the closing
date [for
tenders], Louw and Scholtz
9
– fraudulently conspiring with Huisamen
10
and Mr André Scholtz, Scholtz’s brother (a provincial
employee in Port Elizabeth) – had put together Nisec’s
11
tender on Friday 1 April 1994 at the CPA offices; that Louw and
Scholtz had corruptly negotiated contracts of employment for
themselves
with Nisec, plus substantial bribes (which Huisamen paid
into their wives’ banking accounts); that Louw, left to steer the
evaluation
committee and to draft submissions to the new provincial
executive and to the State Tender Board, had, with lies and
distortions,
manipulated the entire process to secure the award to
Nisec.’
[5] That conduct on the part of the officials concerned
was held to found a claim against them for damages, for which their
employer
was vicariously liable. Cameron and Brand JJA said the
following:
12
‘[T]he question is: is there any conceivable consideration of
public or legal policy that dictates that Louw and Scholtz (and

vicariously, their employer) should enjoy immunity against liability
for their fraudulent conduct? We can think of none. The fact
that the
fraud was committed in the course of a public-tender process cannot,
in our view, serve to immunize the wrongdoers (or
those vicariously
liable for their conduct) from its consequences. And we find no
suggestion in
Olitzki
and
Steenkamp
that the tender
process itself must provide government institutions with a shield
that protects them against vicarious liability
for the fraudulent
conduct of their servants.’
[6] Although the present claim was launched after
Olitzki
had been
decided (but before the decisions in
Steenkamp
and
Gore
), the
particulars of claim paid little regard to what was said in that
case. What was fired in support of the claim was a barrage
of
allegations that would have been the pride of a battery of artillery.
It was alleged, amongst other things, that the persons
who evaluated
the tenders were ‘unqualified to do so and [were] guilty of
misconduct and/or corruption’, that there were ‘anomalies’
in
the process, that the process was not ‘objective, equitable and
transparent’, that other bidders were given an ‘unfair
or
improper advantage’, that ‘back-handers and bribes entered into
the process’, and that the tender process was ‘biased,
inadequate
and generally unsatisfactory’. An equally impressive salvo of
defences was returned in the plea but most of those
defences are not
relevant to this appeal and I need not recite them. It was
unfortunate that the matter was pleaded in that way
because it set
the scene for an unfocused battle that was waged on every front,
exhausting everything there was to say about this
tender, and a
record of some 12 000 pages, much of which is immaterial or
repetitive. Some 8 000 of those pages comprise
scattered
documentation that is arranged in no particular order.
[7] SCA rule 10 requires the parties to an appeal to
file ‘main heads of argument’ and that rule serves an important
purpose.
Judges cannot be expected to find their way through a morass
of evidence without a compass. The heads of argument are intended to

be that compass and they can serve that purpose effectively only if
they are concise. Practitioners might, no doubt, choose to
file more
elaborate argument in addition if they consider that to be advisable,
but that does not detract from their obligation
to comply with the
rule. What the rule requires was explained by this court in
Caterham
Car Sales & Coachworks Ltd v Birkin Cars (Pty) Ltd
13
as follows:
‘There also appears to be a misconception about the function and
form of heads of argument. The Rules of this Court require the
filing
of main heads of argument. The operative words are “main”,
“heads” and “argument”. “Main” refers to the
most
important part of the argument. “Heads” means “points”, not a
dissertation. Lastly, “argument” involves a process
of reasoning
which must be set out in the heads.’
[8] What was presented by both sides in this case were
tomes that made
War and Peace
light reading in comparison. In response to our insistence that they
comply with the rule, the parties filed further heads of argument

that had the advantage at least of being relatively short.
Practitioners should not be surprised to find appeals being summarily

removed from the roll if there is no compliance with the rule, nor
should they take it amiss if their failure to comply with the
rule is
reflected in orders for costs, as I have it in mind to do in this
case.
THE BACKGROUND TO THE CLAIMS
[9] The various provincial governments in this country
have the task of seeing to the payment of state pensions and other
social
benefits. Fraud and other considerations make that task
particularly challenging. The South African Post Office (SAPO), with
offices
and infrastructure that reach remote parts of the country,
has a tradition of paying government pensions and other benefits. In

the circumstances SAPO decided that it would offer to provide a
secure electronic payment service to the government of the North
West
Province in return for a fee for each transaction. SAPO would, in
turn, contract with a private concern to design, operate
and maintain
the system, at the cost of the contractor, in return for which the
contractor would receive a fee for each transaction
processed. The
system that SAPO had in mind was called a ‘biometric payment
system’. It is not necessary to delve into the
technical aspects of
the system. It is sufficient to say that it would link payment points
to data bases holding information concerning
the beneficiary. The
system is called ‘biometric’ because it identifies the
beneficiary and his or her entitlements by way
of fingerprints.
[10] One of the tenderers was a company within the
Cornastone group of companies. Precisely which company that was is
not altogether
clear (more on that presently) and for convenience I
will refer to the company concerned merely as Cornastone.
Cornastone’s principal
role in the project was to contribute ‘black
economic empowerment’ (BEE) credibility to the tender and its role
was otherwise
minimal. Instead, the driving force behind the project
was Mr De Lacy and Mr Beadon, the respondents in this appeal. When
the contract
was awarded to a rival tenderer – a consortium that I
will call Kumo – Cornastone had no interest in pursuing the matter
further
and it ceded any rights that it might have had to the
respondents.
THE CLAIMS
[11] Three claims were brought by the respondents as
cessionaries. The first claim (claim A) was for the recovery of the
profits
that they alleged would have been made by Cornastone had it
been awarded the contract, which were said to amount to a little
under
R108 million. The second claim (claim B) was presented as a
separate claim but, in truth, it is an extension of claim A. The
respondents
claimed that, had Cornastone been awarded the contract
for the North West Province, it would have gone on to secure similar
contracts
for the other provinces. It thus claims for the recovery of
the profits that it would have made on those contracts amounting to

about R406 million. The third claim (claim C) was an alternative
claim (although it was not framed as such) that would arise only
if
the preceding claims failed. The respondents alleged that SAPO later
used Cornastone’s ‘technology’ to establish its own
payment
system and was thereby ‘unjustly enriched at Cornastone’s
expense’. For that the respondents claimed an order directing
SAPO
to ‘render an account…of the biometric payment system operated by
[SAPO]’, to debate that account, and to pay to the
respondents
‘whatever amount appears to be due to [them] upon debate of the
account’.
[12] The court below upheld claim A in part. An
adjustment was made to the claim in the course of argument, bringing
it to R120
million. After allowing for what the court below called a
‘contingency factor’ of 50 per cent it awarded the respondents
R60
million. Claims B and C were dismissed. Although SAPO was
successful in defending claims B and C it was ordered to pay all the
respondents’ costs. With the leave of the court below SAPO appeals
against the whole of the order made in respect of claim A and
the
order for costs. The respondents cross-appeal against the amount that
was awarded on claim A and against the dismissal of claim
B, and they
persist in claim C in the event that those claims fail.
CLAIM A
THE BASIS OF THE CLAIM
[13] In argument before us it was correctly conceded by
counsel for the respondents that claim A can succeed only if it is
brought
within the ambit of the decision in
Gore.
That makes it unnecessary to consider the welter of evidence relating
to other defences raised by SAPO, which took up a considerable
part
of the trial.
[14]
Gore
makes
it clear, when read together with
Steenkamp
,
that irregularities falling short of dishonesty, incompetence on the
part of those who evaluated the tenders, and even conduct
that
amounts to negligence, will not found a claim for damages at the
hands of an unsuccessful tenderer. A claim will lie only
if it is
established that the award of the contract to the rival was brought
about by dishonest or fraudulent conduct on the part
of one or more
of the officials for whose conduct SAPO is vicariously liable, but
for which the contract would have been awarded
to the complainant.
Needless to say, the onus rested upon the respondents to establish,
as a matter of probability, that the award
of the contract was
brought about by conduct of that kind, and if that onus was not
discharged the claim had to fail.
ISSUES RELATING TO MR TOPPER
[15] The court below found that the contract was indeed
awarded to the Kumo Consortium through ‘dishonest manipulation and
corruption’
and the focus in that regard fell upon a certain Mr
Topper, at the time a SAPO employee, who was said to have been
‘touting for
a bribe’ and to have ‘fraudulently supported the
bid [of Kumo]’. The court went on to find that Topper could not
have achieved
his purpose alone and that he must have been acting
with the connivance of one or other unidentified persons ‘higher up
in the
hierarchy’. It is as well to put to rest at the outset those
findings relating to Topper, and to do so I need to sketch some of

the background.
[16] De Lacy and Beadon have a background in the
information technology industry. In about 2000 De Lacy was a
consultant to a company
known as Smarthold. Smarthold supplied
technology, apparently to ABSA Bank, for a biometric payment system
known as ‘ABSA AllPay’,
which was then being used to disburse
social grants for the government. SAPO was interested in acquiring
the use of that technology
but Smarthold was unable to do business
with SAPO because of restrictions in its contractual arrangement with
ABSA. De Lacy saw
the approach by SAPO as an opportunity to enter
business on his own account (in association with Beadon and a certain
Mr Pieterse
who had technical expertise in the field) providing
‘outsourced biometric payment services’. So he terminated his
relationship
with Smarthold (that seems to have been at about the end
of 2000) and he started fostering a business relationship with SAPO,
government’s
then preferred channel for the payment of social
benefits. The income projections from this source reflected a most
lucrative business
opportunity.
[17] During the following months De Lacy came to be
associated with SAPO and other parties who made unsuccessful attempts
to secure
contracts for the provision of payment systems for the
Eastern Cape Province and the Northern Province. During that time he
had
regular dealings with Topper and Ms Moagi who were both employed
by SAPO in its pensions division.
[18] In meetings with Topper and Moagi during November
2001 De Lacy and Beadon suggested that SAPO should turn its attention
to
securing a contract for the payment of social benefits in the
North West Province and then ‘appoint a company as its partner’

to provide the service. No doubt the partner that De Lacy had in mind
was himself and his associates. Topper and Moagi were receptive
to
the idea because they soon told De Lacy that a contract with the
North West Province was ‘in the pipeline’ and that SAPO
would
soon be inviting tenders for the provision of the service. That
commenced the process that culminated in the award of the
contract
that is now in issue and I will return to that process presently.
[19] Meanwhile, on four or five occasions during their
association, before there was talk of the tender, Topper had asked De
Lacy
whether he was able to offer him employment, and had also asked
him to give a position to a certain Mr Inman, who was a friend.
De
Lacy paid no attention to these approaches because, as he put it,
‘these were said in passing and you get that all the time
when you
deal with companies’. De Lacy said that at times ‘it might have
been said in jest, “have you guys got a job for
me”, you know,
“can you get me out of this place”’, and that it went ‘in one
ear and out the other ear’.
[20] On another occasion, in October or November 2001,
Topper asked De Lacy to advance to him the sum of R150 000. De
Lacy
asked Topper why he needed the money but Topper would not
disclose the reason. De Lacy asked Topper why he did not approach a
bank
if he needed money. Topper’s response was that the banks would
not advance money for the purpose he had in mind. De Lacy brushed
the
matter aside, but Topper raised the topic again a short time later.
De Lacy testified that he responded once more by asking
why Topper
did not approach a bank and said that ‘basically we never pursued
it again, he just went away’.
[21] These approaches all occurred before tenders were
invited for the project that is now in issue. There was no suggestion
by
De Lacy that he understood Topper to be soliciting a ‘bribe’
or to be offering anything in return for the favours he was asking.

On the contrary, on two occasions under cross-examination, he denied
that that was the case. Topper’s approaches were considered
by De
Lacy to be of no consequence and he said nothing more about them.
[22] But matters took a different turn after the
contract was awarded to Kumo in September 2002. De Lacy became
enraged and his
rage was directed particularly at Topper. De Lacy
approached the CEO of SAPO, who referred him to Mr Rulashe, the
independent ombudsman
for SAPO. After an initial interview De Lacy
deposed to an affidavit that purported to provide the ombudsman with
‘a statement
of events that have taken place’ in consequence of
which Cornastone ‘has been substantially compromised in the
adjudication
and subsequent awarding’ of the contract.
[23] In his affidavit De Lacy recorded what he alleged
took place during the ‘20 month tenure (March 2001 to September
2002)’
of his dealings with Topper. He recorded that during that
period Topper had on two occasions asked him to provide employment to

Inman in which event De Lacy would be ‘assured of having a “winning
team”; that Topper had on two occasions asked De Lacy
to provide
him with R150 000; and that on at least six occasions Topper had
asked to be provided with employment and that
he would ‘ensure
we…get the business.’
[24] De Lacy’s statement that this took place in the
period up to September 2002 (when in fact the last of these events
had occurred
not later than November 2001), and the remarks that he
attributed to Topper, in the context within which the affidavit was
furnished,
were clearly calculated by De Lacy to lead the ombudsman
to believe that Topper had attempted to solicit bribes in relation to
the tender, and that the rebuff to these approaches could have
influenced the award of the contract.
[25] That the ombudsman indeed understood it in that way
is apparent from a letter that he wrote to De Lacy on 19 November
2002
reporting on a preliminary investigation he had made, in which
he said, amongst other things, the following:
‘On the 18
th
September 2002, I was approached by Messrs
De Lacy and Beadon hereafter referred to as the complainants who had
been mandated by
an IT company Cornastone to report alleged
irregularities committed by Post Office Employee Andrew Topper which
irregularities
resulted in the Kumo Consortium being awarded
preferred bidder status as a result of acts by Mr Topper. In support
of their allegations
Messrs Beadon and De Lacy subsequently furnished
me with sworn statements to the effect that Mr Topper had on at least
2 occasions
tried to extort an amount of R150 000 from Mr De Lacy at
a time when De Lacy and his company Cornastone were interested in
securing
a contract with the Post Office in respect of Biometric
based pension payouts. It was stated further in their affidavit that
Mr
Topper wanted them to employ one Tim Inman at Cornastone and by
doing so Cornastone would be assured of having a winning team. This

team ostensibly would be bidding for the Biometric tender. The
complainants refused to comply with Topper’s demands or
extortions.’
He added that the affidavits also revealed that
‘on at least 6 occasions Mr Topper made a request that they get him
out of the Post Office by making him an offer and in return
he would
ensure that the complainants “win the business”.’
He concluded that
‘in the light of the extortions made by Mr Topper to the
complainants and his request that they fix Mr Inman with a job, Mr
Topper would be in no position to adjudicate Cornastone’s tender
fairly or impartially by any stretch of imagination.’
[26] De Lacy replied to that letter, principally to
express disquiet at the way in which the matter was being dealt with
by the
ombudsman. He must have known from the letter that the
ombudsman was under the impression that Topper had attempted to
extort money
from De Lacy in connection with the tender, and had
sought favours in return for lending his weight to the tender, but De
Lacy
said nothing to dispel the ombudsman’s view.
[27] Acting on that distortion of what had occurred, and
certain other ‘irregularities’ that the ombudsman said he had
identified
in the course of his preliminary investigation, the
ombudsman recommended that an enquiry be conducted by independent
auditors.
In the course of that enquiry allegations were also made
against Moagi and against a certain Ms Richter (more of her later in
this
judgment). Topper was later dismissed (the precise grounds for
his dismissal do not appear from the record).
[28] There can be little doubt that the alleged attempt
at ‘extortion’ by Topper, and the favours that were said to have
been
asked in return for his support on the tender, set in train the
enquiries and concerns that followed, and has imparted colour to
this
matter ever since. I think that care must be taken not to permit the
poison that De Lacy planted with the ombudsman, and then
left to
spread, to infect this case, as it seems to have done in the court
below.
[29] There is no basis in the evidence for the finding
by the court below that Topper was ‘touting for bribes’. There is
also
no basis in the evidence, whether directly or by inference, for
the finding by the court below that Topper ‘fraudulently supported

the bid [of Kumo]’. It hardly needs saying that the allegations of
‘extortion’ by the ombudsman were also baseless, as De
Lacy well
knew. There is no suggestion in the evidence of De Lacy that Topper
expected anything in return when he made his approaches,
or that they
were at all related to the tender, and all indications are to the
contrary. I might add that De Lacy said in his evidence
that
throughout the process he was given no reason to think that Topper
was in some way dishonestly going about his task.
[30] For completeness I should add that we were invited
by counsel for the respondents to take account of the findings that
were
made by the auditors who were appointed on the recommendation of
the ombudsman but it is an invitation that I must decline. Apart
from
the fact that the evidence of their findings constitutes inadmissible
hearsay, their report makes it clear that their conclusions
were
tentative, based on an incomplete examination of all the evidence,
and were expressly stated to be subject to various disclaimers.
I do
not think that in those circumstances they can be accorded any
weight. It is for a court, not auditors, to decide this case,
and to
do so upon evidence that is properly before it.
THE ALLEGATIONS OF DISHONESTY
[31] A singular feature of this case has been the
abandon with which accusations of dishonesty have been levelled by
the respondents.
In a request for particulars for trial the
appellants asked: ‘Who on behalf of [SAPO] was allegedly a party to
fraudulent and
dishonest conduct in awarding the tender to Kumo’;
which elicited the expansive reply: ‘[SAPO] in all its components,
namely
the Accounting Authorities, Review Panel, the Tender
Evaluation Committee, the Tender Board Executive Committee and the
Post Office
Board’. Accusations that were at times as sweeping, and
at times more limited, were reiterated by De Lacy when he gave
evidence.
Apart from attributing it to Topper, the court below also
attributed dishonesty to persons ‘higher up in the hierarchy’
without
identifying who they might have been.
[32] That there was a conspiracy amongst all the
officials who were involved in this tender can be rejected summarily.
That would
have entailed such a massive and intricate conspiracy,
coupled with consistent play-acting throughout the process deserving
of
a string of Oscars, that it simply could not have occurred. As for
the prospect of a more limited conspiracy, as the court below
found
there to have been, it needs to be borne in mind that we are not
dealing in this case with a diffuse group of unidentifiable

individuals. All those who recommended to the SAPO board the
acceptance of Kumo’s tender were identified in the evidence. A
Tender Board recommended to the SAPO board that the contract should
be awarded to Kumo, after considering recommendations that were
made
to it by an Evaluation Committee. No basis at all was laid for
suggesting that the members of the SAPO board did anything
other than
to consider and accept in good faith the recommendations of the
Tender Board. If there was indeed dishonesty it must
have been on the
part of one or more members of the Evaluation Committee and/or the
Tender Board, all of whom are identified in
the evidence. I do not
see how it is possible for the evidence to disclose that there was
dishonesty on the part of one or more
of them without simultaneously
identifying the person or persons concerned.
[33] Argument before us by the respondents’ counsel
was marked by vacillation on the question of who had been dishonest.
It was
first said to have been these persons, and then it was said to
have been those persons, and then accusations were retracted, and

then they were revived, and so it went on. Yet notwithstanding the
accusations, not once in the cross-examination of the three
witnesses
called by the appellant who were amongst those who were accused in
the particulars for trial was it suggested that he
or she had been
dishonest. It seems to me that counsel’s vacillation on the
identity of the culprit or culprits merely demonstrates
that the
evidence does not reveal that there was a culprit at all.
THE RESPONDENTS’ APPROACH TO THE EVIDENCE
[34] The respondents’ case as it was advanced before
us was necessarily founded upon inference, because there was no
direct evidence
of fraud or dishonesty. The approach that was taken
by the respondents, both in the ‘presentation’ (more of that
presently)
that De Lacy made to the trial court, and in argument
before us, was simplistic and flawed. That approach was to point to
features
of the tender process that were said to have been
‘irregular’, and then to submit that the existence of those
irregularities
justified the inference that the contract must have
been awarded dishonestly. What was left out of account altogether in
making
those submissions was the context within which the
‘irregularities’ occurred and the probabilities as revealed by
the remaining
evidence.
[35] The process of inferential reasoning calls for an
evaluation of all the evidence and not merely selected parts. The
inference
that is sought to be drawn must be ‘consistent with all
the proved facts: If it is not, then the inference cannot be drawn’
14
and it must be the ‘more natural, or plausible, conclusion from
amongst several conceivable ones’
15
when measured against the probabilities.
THE PRESENTATION BY DE LACY
[36] A further matter that calls for mention before
turning to the evidence is the manner in which the respondent
presented its
case. It is usual in our practice for argument to be
separated from the evidence. Counsel for a plaintiff might open the
case,
sketching the issues and the evidence that will be presented,
and then call witnesses to establish the material facts. In this case

De Lacy was the first witness called on behalf of the respondents. He
proceeded along a most unconventional line. Instead of confining

himself to evidence he delivered what is called a ‘PowerPoint’
presentation, that was no less than a full presentation of the

respondents’ case, with reference to key points noted on electronic
slides, that combined evidence with hearsay, commentary,
supposition,
opinion, argument and inference. It seems to me that many of the
fallacies in the argument presented on behalf of
the respondents have
their origins in the presentation that was put together by De Lacy
with little understanding of how evidence
is evaluated in a court of
law.
[37] I think it is most undesirable that a presentation
of that kind should be placed before a trial court by a witness under
the
guise of presenting evidence because it tends to introduce
confusion. It is illustrated in this case by written submissions that

were sent to us by the respondent’s counsel after the conclusion of
the hearing of the appeal. Amongst them were submissions
that
‘evidence’ given by De Lacy had not been rebutted and must be
taken to have been proved. What was referred to in each
case was not
evidence at all but mere assertions – principally accusations of
dishonesty – that were made by De Lacy in the
course of his
presentation. Assertions, whether made in the pleadings, in opening
argument, or under the guise of evidence, do
not call for ‘rebuttal’.
[38] On a related matter, counsel for the respondents
presented to us in the course of argument a list of people whom the
appellant
might have called as witnesses and we were urged ‘to draw
an inference’ against the appellant for not having done so.
Precisely
what inference we were asked to draw in each case was not
elaborated upon. But it seems that what counsel had in mind is that
we
should find that, because the appellants failed to call witnesses
who were in a position to disprove the accusations of dishonesty,
we
should find the accusations to have been proved. I think it bears
repeating that the respondents bore the onus of proving their
case
and it was not incumbent upon the appellant to present witnesses for
cross-examination merely because they happened to be
on hand. When
there is evidence properly before a court that on the face of it
establishes a particular fact, it might well be
inferred from the
failure to call a witness in rebuttal that the evidence is not
capable of being challenged, but that is another
matter.
THE CENTRAL COMPLAINT
[39] SAPO’s general policy, which was incorporated in
the invitation to tender (called the Request for Proposal or RFP), is
to
evaluate tenders by allocating points to each tender in three
weighted categories. In this case Cornastone received more points

overall but Kumo was nonetheless awarded the contract. When the
matter is viewed as a whole that seems to me to lie at the heart
of
the respondents’ case. It seems to me that they reason from the
premise that Cornastone was entitled to the contract because
it
scored the most points. The inference to be drawn from the fact that
Cornastone was not awarded the contract to which it was
entitled, so
the respondents’ reason, is that there must have been a conspiracy
dishonestly to deprive it of the contract. The
clearest articulation
of that reasoning appears from the following extract from the
evidence of De Lacy: ‘If we have a look at
everything we see that
Cornastone was by far the top scorer’ and ‘that is my case’.
[40] Needless to say, that reasoning would be sound only
if, as I have already indicated, a dishonest conspiracy is the ‘more
natural, or plausible, conclusion from amongst several conceivable
ones’ for not awarding the contract to Cornastone notwithstanding

that it scored the most points. But in this case there is no need for
conjecture as to why that occurred. It is revealed explicitly
in the
evidence. The explanation that emerges from the evidence is that the
Evaluation Committee and the Tender Board were of the
view that it
was not appropriate in this case slavishly to adhere to the general
policy. Whether they were right or wrong in the
view that they took
of the matter is neither here nor there. What is at issue is only
whether they were honestly of that view.
And on that score there is
no reason to think that they were not. On the contrary, it is
perfectly understandable why they took
that view.
[41] The three criteria against which tenders are to be
evaluated according to the general policy, and the relative weighting
that
is to be accorded to each, are described in the standard
procedure as ‘technical (ability, quality, proposed solution)’
(40
per cent), ‘commercial’ (30 per cent), and ‘BEE’ (30 per
cent). A slavish adherence to the general policy has the potential

that a tenderer who offers a sub-standard product but has full marks
for BEE is capable of beating a tenderer whose product is
perfect but
who has no or minimal BEE credentials. A person evaluating tenders
for the supply of major technological infrastructure,
as the
officials were doing in this case, where performance is critical,
might understandably be hard-pressed to award the contract
slavishly
according to the formula, and that is what occurred in this case.
[42] A report placed before the Tender Board reflects
the scores of the two tenderers as follows (out of a maximum of 100
points):
Cornastone Kumo Difference
Technical (Ability) 26.33 34.58 8.25
Commercial (Price) 20.75 13.88 6.87
BEE 26.25 16.25 10.00
TOTAL 73.33 64.71 8.62
[43] It will be seen that Kumo’s score for technical
ability was significantly higher than that of Cornastone but that
difference
was outstripped by Cornastone’s BEE points. The combined
scores for technical and commercial, leaving aside BEE, placed Kumo
slightly ahead of Cornastone.
[44] The question why Kumo should be awarded the
contract notwithstanding that it came second on points was the very
question that
the Tender Board asked the Evaluation Committee. And
the answer that was given by the Evaluation Committee reflects the
observation
that I made earlier, which was that the committee
believed that the standard weighting was not appropriate to this
contract, a
view with which the Tender Board must have agreed. This
is what the committee said in answer to the question by the Tender
Board:
‘The evaluation committee drew up the scores prior to presentation
of bidders. After presentation the evaluation committee [were]

unanimous in their decision that the technology offered by Kumo was
superior and was thus in line with the RFP requirements. It
was also
felt that the overriding criterion for selection had to be a
technology solution and thus this weighed larger than Price
and BEE.
The scoring that was done prior to presentation [was] used to select
the bidders for presentation and after the presentation
the decision
would be made.’
[45] When one starts from the premise that there was a
conspiracy, as the respondents do in this case, it is usually quite
simple
to select facts that can be fitted to that premise. But courts
go about things the other way round – they evaluate the evidence
to
determine whether it reveals a conspiracy. The mere fact that the
contract was awarded to Kumo when it did not have the highest
score
does not by itself justify the inference that that was done
dishonestly. It is clear from the reasons given by the committee
for
its recommendation to the Tender Board that it considered that SAPO’s
interests were best served by the Kumo system, notwithstanding
that
Cornastone was materially better than Kumo on BEE points. When the
evidence is viewed as a whole, and weighed against the
probabilities,
I find no proper grounds for inferring that its view was not honestly
held in good faith. On the contrary, there
is ample evidence that it
was a justifiable and rationally based view.
SAPO’S STANDARD TENDER EVALUATION PROCEDURE
[46] SAPO’s standard procedures for the evaluation of
tenders are recorded in a document under that name. It provides that
SAPO
will ‘select the bidder which it perceives to present the best
combination of ability to perform, affordable contract arrangements

and BEE compliance’. It provides for the establishment of an
Evaluation Committee that must make recommendations in the three

weighted categories that I referred to earlier. (That weighting for
the three categories was also incorporated in the RFP).
[47] The three categories are to be evaluated by
separate Review Panels whose functions are to ‘assess compliance
with procedural
requirements of the RFP,’ to ‘evaluate the
proposals/bids against the substantive requirements of the RFP,
completing the Score
Sheets provided’, and to ‘consolidate the
Score Sheets of all the Review Panels into the Calculation Sheets’.
Points are
to be awarded in various sub-categories in a range from 1
(‘poor, below minimum RFP requirements’) to 4 (‘far exceed
minimum
RFP requirements’). Those scores are then converted to a
weighted score according to the weighting of the particular
sub-category.
[48] A ‘three-phased’ scoring process is provided
for. First, members of the Review Panels must read the proposals
independently
and formulate their initial scores. The second phase
takes place ‘after the Review Panels convene for consolidation of
the scores
and (as a full Evaluation Committee) discuss and motivate
their findings.’ The final phase of the scoring takes place, if
applicable,
after presentations have been made by short-listed
bidders. The process is designed to ‘ensure that [evaluation
committee] members
have an opportunity to interrogate the correctness
of their scores on more than one occasion.’
[49] After the Review Panels have completed their task,
the Evaluation Committee, which comprises the members of all the
Review
Panels, is required to ‘discuss the proposals/bids received
with respect to content and scores; compile a
motivation/recommendation
for the Tender Board; and report their
findings and recommendations to the Tender Board.’ After the
scoring the ‘overriding
considerations’ to be applied by the
Evaluation Committee in reviewing proposals are: ‘conformity with …
mandatory requirements
– critical criteria: ability; affordability;
and empowerment thresholds (commercial and employment equity)’. The
procedure
provides that ‘should any bidder not conform to the
requirements of [any one of those criteria] the [evaluation
committee] may,
at its discretion, disqualify that bidder’ and must
then report the reasons for the disqualification to the Tender Board.
THE INVITATION TO TENDER (REQUEST FOR PROPOSAL)
[50] I have pointed out that De Lacy and Beadon were
instrumental in the project being initiated, by suggesting to Topper
and Moagi
that SAPO secure a contract with the government of the
North West Province and then appoint a partner to supply it with the
necessary
service. The province duly expressed an interest in the
project and SAPO set about inviting tenders. Moagi told the
respondents
that if they were going to be serious contenders for the
contract, they needed to make sure that they had a strong ‘black
economic
empowerment partner’, because that would be an important
component of the tender.
[51] At first the contract was to be awarded by ‘closed
tender’ and four tenderers were invited to make proposals,
16
but later SAPO decided to invite tenders publicly, which they did in
February 2002, by issuing the RFP. The specifications for
the service
that was to be provided, some of which were provided by the
respondents, were set out in considerable detail but I
need not deal
with them. Reduced to its basics, the service envisaged an electronic
system for the registration of social benefit
beneficiaries that
would interface with data banks of the relevant government
departments that allocated social benefits. The system
would capture
the personal details of the beneficiary concerned, including his or
her fingerprints, on a microchip embedded in
a plastic card. The
card, containing a photograph of the beneficiary, would be issued to
the beneficiary concerned, who would present
the card at designated
payment points, be identified by his or her fingerprints, and be able
to draw part or all of the moneys
that were due.
[52] On 1 March 2002 an ‘information meeting’ was
held for the evaluation committee, which had by that time been
selected. The
chairman of the evaluation committee was Mr Ngqobe.
According to the minute of that meeting, which was attended by only
some of
those who evaluated the tenders,
17
its purpose was to ‘inform the evaluation team of the process to be
followed for the evaluation of tenders’ and to ‘determine
the
sub-criteria for evaluation purposes’. It recorded that it was
‘critical that the system is compatible with the Hanis [Home

Affairs National Identification] System of the Department of Home
Affairs’; that ‘it was decided that the “Technical” people
on
the evaluation team would look through the tenders received to
identify the ones that comply with the Hanis system’; and that
only
those would be evaluated.
[53] Sealed tenders were required to be submitted to
SAPO by no later than 18 March 2002.
18
Five tenders were received, marked for identification, and placed
under lock and key, under the supervision of independent auditors,

where they remained until the evaluation process commenced.
EVALUATION OF THE TENDERS
BLACK ECONOMIC EMPOWERMENT
[54] I pointed out earlier that Cornastone’s major
advantage over Kumo lay in its BEE points and it is not surprising
that matters
relating to BEE played a significant role in this case.
The context in which it arose was twofold. First, the respondents
sought
to persuade us that Kumo’s BEE points were in truth so low
as to disqualify its tender and were dishonestly adjusted upwards to

keep it in the race. Secondly, the respondents sought to suggest that
SAPO dishonestly permitted Kumo to improve its BEE credentials
midway
through the process and evaluated the Kumo tender accordingly. I will
deal with the first issue now. The second issue will
be dealt with
later in this judgment.
[55] The introduction to the RFP stated, under the
heading ‘objective’, that this was, amongst other things, to:
‘Provide
respective bidders with sufficient information on the
proposed Post Office Biometric Payment System. Ensure prospective
bidders
shall comply with the Post Office BEE (Black Economic
Empowerment) requirements. Should bidders not comply and/or meet
these requirements
they will not be considered for evaluation.’
[56] The ‘Post Office BEE requirements’ were not
stated in the RFP. They are also not stated in the ‘Procedure for
the Evaluation
of Tenders’, contrary to what De Lacy said in his
presentation (highlighting once more the dangers of placing a case
before a
court in that way). There is a document amongst the exhibits
that proclaims itself to be ‘Notes for info meeting’, but the
evidence does not disclose the status of that document or how it was
used, if it was used at all. That document records the following:
‘A shortlist of bidders will be drawn up based on the following
BEE rating (the lowest acceptable rate is 50%)
Overall rating (including Price, Ability & BEE)
Total price (with reference to the “Mean Price”)
Positive aspects of the proposals received, and
Negative aspects of proposals received.’
According to De Lacy, tenderers were told at a briefing
that was held on 22 February 2002, in answer to a question, that
‘[T]he Post Office policy requires that BEE compliancy must be at
least 50%. Companies that are unable to meet this minimum are

therefore encouraged to form joint ventures or consortiums to ensure
a minimum of 50% is achieved. Please do not waste your or
our time if
you do not have 50% BEE compliancy.’
[57] Following the recommendations of Moagi, De Lacy and
Beadon had approached the Cornastone group of companies to be its
‘BEE
partner’. There are a number of companies in the Cornastone
group. As I mentioned earlier, precisely which company was the
tenderer
is not altogether clear. The covering letter under which the
tender was submitted was in the name of Cornastone e-Commerce
Services
(Pty) Ltd. In response to the requirement of the RFP that
the bidder had to submit its latest audited financial statements,
accompanying
the tender were the financial statements of Cornastone
Technology Holdings (Pty) Ltd. Under the section of the document
requiring
information concerning the bidder it was referred to as
Cornastone (Pty) Ltd. But whichever company was intended to be the
tenderer
is not material for the moment. I have thus far referred to
the tenderer – whoever it might truly have been – merely as
Cornastone
and for convenience I will continue to do so.
[58] Cornastone was referred to in the evidence as a
‘black empowerment company’. It was said to be a ‘100% black
owned company’
by which was meant that it was owned by two black
men, Mr Nevhutalu and Mr Ratshefola, and was said to be the ‘leading
black
empowerment IT (information technology) company.’ What made
Cornastone additionally attractive to De Lacy and Beadon was that
it
had already associated with SAPO on other projects.
[59] The Kumo tender was submitted by a consortium of
four members, of which Kumo Technology was the ‘BEE partner’. One
of the
members of the consortium – Retail Logic Ltd – was a
company based in the United Kingdom.
[60] Being a UK company, Retail Logic had no BEE
credentials. When the BEE component of the Kumo tender was evaluated,
the credentials
(or lack of them) of only three of the consortium
members (Kumo Technology, Trans-Xact Systems and Square One) were
brought to
account.
[61] The evidence does not disclose whether the
evaluation method used by SAPO required a foreign company to be
brought to account
in determining the BEE score of the consortium,
nor why it was left out of account if that was required, but I have
assumed for
present purposes, as submitted by the respondents, that
it ought indeed to have been brought to account.
[62] The weighting that was to be given to BEE (30 of
the total 100 points) was broken down into four categories, each of
which
carried 7.5 points: ‘ownership/shareholding’, ‘management
control’, ‘black supplier procurement’, and ‘skills transfer

and social responsibility’.
[63] De Lacy presented a calculation of what the Kumo
scores would have been had Retail Logic been included and, once more,
I have
accepted that calculation for present purposes. For
convenience I list the relevant scores in three columns: the first
and second
being the weighted scores actually recorded for Cornastone
and Kumo respectively, and the third column reflecting the Kumo score

as adjusted by De Lacy, in each of the four categories:
Cornastone Kumo Kumo Adjusted
Ownership 7.50 5.00 3.75
Management 7.50 5.00 4.08
Procurement 5.00 2.50 2.50
Skills Transfer 6.25 3.75 2.20
TOTAL 26.25 16.25 12.53
[64] The significance of the adjusted score is this: It
will be recalled that the RFP said, under the heading ‘objectives’,
amongst other things, that prospective bidders must comply with the
Post Office BEE requirements, failing which they would not be

considered for evaluation. It will also be recalled that, although
neither the RFP nor the standard procedures stated what that

‘requirement’ was, there is some evidence suggesting that it was
to be 50 per cent of the weighting that had been allocated
to BEE (15
of the 30 points allocated to BEE), and for present purposes I accept
that that was indeed the threshold. Thus Kumo
passed the threshold on
the score that it was allocated (16.25 points), but fell short of the
threshold on the score as adjusted
by De Lacy to account for Retail
Logic (12.53).
[65] On that basis it was submitted by the respondents
that Moagi and Moahlo (the BEE Review Panel), conscious of that
threshold,
deliberately and dishonestly left Retail Logic out of
account in their scoring, so as to ensure that Kumo remained in the
race.
[66] I find the submission – founded on nothing more
than the effect that their actions had – to be startling. Other
possible
explanations for their conduct immediately come to mind –
not least of which is that they simply erred. Indeed, there is a
clear
indication from their score-sheets that, at least initially,
they did not even have a proper understanding of how to go about the

evaluation. The categories had to be scored on points in the range 1
to 4, but at times both evaluators entered scores of ‘0’
on their
score-sheets, which then had to be altered in each case.
[67] But what is more important is that the submission
simply ignores the probabilities, as if they are of no account. The
failure
to bring Retail Logic to account would have been quite
apparent to the internal auditor who supervised the evaluation and to
the
person who later tabulated the scores. If Moagi and Moahlo had
been dishonest in their evaluation they must have been well aware

that their dishonesty would come to light by the glaring omission of
Retail Logic. (Unless, of course, it is also to be suggested
that the
four of them were acting in conspiracy, for which there is no basis
at all.) Moreover, had they wished to ensure that
Kumo passed the
threshold, they would surely have simply increased the score of one
of the other three members of the consortium,
bearing in mind that no
more than 1 point (2.47 weighted points) was required in order to do
so. Furthermore, they could not have
acted in the way that the
respondents allege unless they were in conspiracy with others who
would later ensure that Kumo won the
bid. There is no evidence to
support such a conspiracy. There is also no apparent motive for Moagi
and Moahlo to have acted dishonestly.
Moagi had worked with De Lacy
and Beadon for a considerable time before the tenders were invited
and gave no indication to De Lacy
that she was hostile. On the
contrary, she had been the person that advised him to find a strong
BEE partner. The evidence reveals
nothing of Moahlo but there is also
no apparent reason why she should have acted dishonestly in
conspiracy with Moagi. The inference
that Retail Logic was
deliberately left out of the picture is simply not supported by the
probabilities. If Retail Logic was incorrectly
overlooked it is far
more likely that the omission was innocent.
[68] The respondents approached each so-called
irregularity along the same lines. In each case they sought to draw
an inference
of dishonesty from the fact alone that there was an
‘irregularity’, viewed in isolation from the remaining evidence,
and with
no regard for the probabilities. I do not intend to overly
burden this judgment by dealing with each and every ‘irregularity’

that they sought to rely upon in that way, but will deal with only
those that were emphasised in the argument before us. It is

sufficient to say that none of the so-called irregularities, viewed
alone or in combination, justifies the inference that there
was
dishonesty in the process.
PRICE EVALUATION
[69] The Review Panel that evaluated price and other
financial considerations had four members. Although they were amongst
those
who were encompassed by the respondents’ initial sweeping
accusation of dishonesty, they were released from the net by De Lacy

in the course of his presentation and I need say no more about them.
TECHNICAL EVALUATION
[70] Topper seems to have had some technical knowledge
of the system, but the same cannot be said of Prins and Richter.
Prins was
a reluctant participant in the process. He was employed as
a ‘technical consultant’ but his functions related to equipment
that had no relationship with the tender. He had no experience of
evaluating tenders and no more than a layman’s knowledge of

information technology. He told his supervisor, Ngqobe, that he was
not qualified to evaluate the tender, but Ngqobe instructed
him to be
on the team, in accordance with a ‘cross functional’ management
policy of SAPO. When asked in cross examination why
he did not
refuse, Prins said, disarmingly, that he could not disobey an
instruction if he wanted to keep his job.
[71] It was also Richter’s first experience of
evaluating tenders. She began working for SAPO in the internal audit
department
and was later transferred to the information technology
department, but had neither formal training in the field nor
technical
expertise.
[72] The technical evaluation took place in the presence
of a representative of the auditing firm KPMG. This was the first
occasion
upon which Prins met Topper. At the outset they identified
three absolute requirements of the tenders – ‘EMV level 2
compliancy’
(I will return to what that meant), various
International Standard Organisation (ISO) standards, and
compatibility with the Hanis
system – each of which was to result
in summary disqualification if it was not met.
[73] Of the five tenders, one was summarily discarded
for want of compliance with various requirements of the RFP.
The remaining four tenders – those of
Cornastone, Kumo, Transpay and Aplitec – were then evaluated and
ultimately the Aplitec
tender was also discarded.
[74] Each member of the team was given a score-sheet
upon which to score the tenders with reference to a number of
specified criteria.
Once more the weighting that was to be given to
this aspect of the tenders (40 points out of 100) was sub-weighted
with reference
to various criteria. The extent to which the system
met SAPO’s requirements attracted more than half the weighting (23
points
out of 40), with the remaining 17 points being shared amongst
seven criteria that were more peripheral.
[75] According to Prins, supported by Richter, each
member initially completed his or her score-sheet independently,
without reference
to the others, and when that had been done they
came together to compare scores and debate some of the issues upon
which they differed.
[76] By the nature of things, neither Prins nor Richter
(perhaps not even Topper) had the knowledge to make an informed
assessment
of the various components of the proposed systems. They
performed what might best be described as an audit of the tenders –
comparing
the relevant portions of each tender against the RFP
requirements to determine the extent to which those requirements were
said
in the tender to have been met – and allocated points
accordingly.
[77] I need deal only with the scores for Cornastone and
Kumo. The tables that follow reflect the points allocated by the
evaluator
in each case to ‘user requirement compliance’, and the
aggregate points awarded for the remaining seven criteria. The actual

points awarded on a scale from 1 to 4 appear first, and alongside
that is the weighted score.
Weight Cornastone Kumo
PRINS
user requirement compliance 23 2 11.50 4 23.00
other 17 15 8.75 22 13.25
TOTAL 40 17 20.25 26 36.25
TOPPER
user requirement compliance 23 3 17.25 4 23.00
other 17 19 11.25 23 13.75
TOTAL 40 22 28.50 27 36.75
RICHTER
user requirement compliance 23 3 17.25 3 17.25
other 17 22 13 22 13.5
TOTAL 40 25 30.25 25 30.75
Those scores were then averaged to produce the following
weighted scores:
Cornastone Kumo
user requirement compliance 23 15.33 21.08
others 17 11.00 13.50
TOTAL 40 26.33 34.58
[78] What will be seen is that both Prins and Topper
scored Kumo above Cornastone on user requirement compliance. The
reason for
that is not difficult to see. Central to the Kumo tender
was the company I referred to earlier – Retail Logic – whose role
in the project was comparable to the role of De Lacy and Beadon.
Retail Logic was described in the Kumo tender as being ‘at the

heart of the proposed system for SAPO’ and its expertise was
described, amongst other things, as follows:
‘Retail Logic is now the dominant player in the UK [electronic
funds transfer] market and has a growing international presence.
Over
165 000 points of sale rely on our products to process their payment
transactions; equating to 60% of the UK integrated [electronic
funds
transfer] market. In the retail sector, customer base includes four
of the top five supermarkets and a wide range of top
high street
names including Woolworths plc, Bhs Ltd, Harrods plc, House of Fraser
plc and Littlewoods Retail Ltd. The retail and
banking sectors have
demanding requirements for reliable and resilient systems capable of
processing a high volume of transactions.
Retail Logic’s products
have proven capability in these markets.
Retail Logic’s products have also been deployed in other sectors
within the payment industry, and these include travel and
entertainment,
financial services, mail/telephone order, e-commerce,
mobile telephony and others.’
[79] Against that was to be measured the system proposed
by De Lacy and his associates, which had yet to be fully developed
and
tested, and they had no direct experience upon which to rely. It
might be that their system would indeed have been up to the task,
but
it is clear that both Prins and Topper had good and rational grounds
upon which to have had greater confidence in the Kumo
system, as
reflected in the differentials in their scores. And while Richer at
first scored the two systems equally, later, after
she had attended a
presentation by the various tenderers, she became more impressed with
the Kumo system. There were thus justifiable
and rational grounds for
recommending to the Tender Committee that Kumo be awarded the tender
notwithstanding that Cornastone had
the advantage on BEE points.
[80] The court below found that ‘the evidence…leads
to the conclusion that Topper dishonestly manipulated the scoring by
the
members [of the technical Review Panel]’ but did not elaborate
upon what that evidence might have been. That finding flies in
the
face of the evidence.
[81] I have pointed out that the undisputed evidence is
that each evaluator scored the tenders independently of one another
and
it is difficult to see on what basis it could be said that they
were manipulated by Topper. Neither Prins nor Richter felt that

Topper had attempted to unduly influence them. Certainly Topper
explained features of the tenders to the others, but that is to
be
expected, bearing in mind that he had greater technical knowledge
than they did. Had he been intent on manipulating the scores
so as to
favour Kumo, one would expect that his scores would be at least as
high as the highest score of the others. Yet his scores
are more
favourable to Cornastone than the scores of Prins (described by the
court below as a ‘decent and solid citizen’).
And Richter scored
the two tenders almost equally, which is hardly consistent with
manipulation by Topper so as to favour Kumo.
[82] There is no basis in the evidence for inferring
that Topper ‘manipulated’ either Prins or Richter in the
evaluation of
the tenders. The probabilities all point the other way.
[83] There is one further matter I need to refer to
before leaving the technical evaluation. One of the RFP stipulations
was that
the system that was offered had to be ‘EMV level 2’
compliant. ‘EMV’ is an acronym for three major credit card
organisations
– Europay, Mastercard and Visacard – which have
established an institute to evaluate electronic payment systems for
compliancy
with security standards.
[84] Prins had not been at the information meeting held
on 1 March 2002 (it was attended by Topper and Richter). Prins said
that
on the day that the tenders were evaluated he asked Topper for a
brief ‘overview’ of what the tender was about. He was told
to
look out in particular for the three absolute requirements I have
referred to. He did not understand what was meant by ‘EMV
level 2’
compliant and was given an explanation by Topper. (Whether he
correctly understood the explanation is neither here nor
there.)
[85] The Kumo tender was accompanied by certification
that its system was ‘EMV level 2 compliant’. The Transpay system
was not
compliant. The Cornastone system, which had yet to be
implemented, naturally had no such certification, and in response to
that
requirement in the RFP the Cornastone tender recorded the
following:
‘EMV level 2 compliancy is applicable at the application level, (eg
banking applications) and the EMV Level 1 compliancy is at
the
hardware level. We confirm that our hardware devices are EMV Level 1
certified (compliant) and can host EMV level 2 certified

applications. It will be necessary to have applications that will be
hosted on the devices EMV level 2 certified at the EMV laboratories.

This cannot be achieved in the timeframes of this tender response. We
have included the cost of the EMV 2 certification for our
application
only and will agree the certification timetable in the [service level
agreement] following discussions with the EMV
laboratories.
Indications from the EMV laboratories suggest that we allocate 3
months for the certification process. This will
in no way affect the
rollout of the project.’
[86] A considerable part of the trial was taken up with
whether the Cornastone system was indeed ‘EMV level 2’ compliant,
with
SAPO contending that it was not and thus ought to have been
disqualified. The court below said that ‘EMV level 2 compliance
could
not be achieved before installation of a system and before it
had been tested for some time after installation’. The court below

went on to say that a ‘statement made that [because] Cornastone was
not level 2 compliant at the time of the submission of the
tender it
should have been disqualified’ was ‘absolute nonsense as it was
an impossible requirement for any bidder to comply
with’. It might
indeed have been an impossible requirement but for purposes of this
appeal that is not material. What is material
is only how the
evaluators saw the matter (correctly or incorrectly).
[87] The points given by the three evaluators on ‘user
requirement compliance’ (in the range from 1 to 4) were as
follows:
:
Cornastone Kumo Transpay
Prins 2 4 1
Topper 3 4 2
Richter 3 3 2
Prins noted on his score-sheet in relation to
Cornastone: ‘EMV L2 not compliant yet’, but nonetheless gave a
score of 2. Richter
noted: ‘bidder gives what is required and will
conform to all standards’. Topper also gave a score of 3.
[88] When the matter was discussed, according to Prins,
it was agreed that notwithstanding the apparent failure on this issue
of
Cornastone and Transpay, their tenders would nonetheless be
evaluated because, if there was only one tenderer, SAPO would need to

invite fresh tenders. (We need not decide whether that was indeed
correct.) While that might have been why the evaluators themselves

did not disqualify the two tenders, the fact is that all three
tenders were duly included by the Evaluation Committee in the
recommendations
that were made to the Tender Board.
[89] That Cornastone was kept in the race,
notwithstanding that at least Prins thought it had not met one of the
‘absolute requirements’,
is on the face of it inconsistent with a
dishonest intent to withhold the contract from Cornastone and award
it to Kumo instead.
But it was suggested in the course of argument
that, although they believed that Cornastone could be disqualified,
they kept it
in the race as a ploy so as to enable them to avoid
inviting fresh tenders, which would have precluded them from
dishonestly awarding
the contract to Kumo. No suggestion of that was
made either to Prins or to Richter in the course of
cross-examination. In my view
the submission only demonstrates the
lengths to which the respondents were forced to go in order to
sustain their submission that
the evaluation panel acted dishonestly.
It has no merit and I need say no more about it.
THE ‘LABAT’ ISSUE
[90] Once the panels had completed their task the
Evaluation Committee met to discuss the various tenders and prepare
recommendations
to the Tender Board. What occurred at various Tender
Board meetings is recorded in the minutes of those meetings.
[91] At a Tender Board meeting on 8 April 2002 the
evaluation committee reported on the progress of the evaluation. By
then a shortlist
of three bidders had been prepared (Aplitec had been
excluded). The minute of that meeting records that various
instructions were
given to the Evaluation Committee and that ‘a
presentation by the short listed bidders must be done, and a list of
standard questions
must be compiled’.
[92] That presentation took place on 18 April 2002 and
much was sought to be made of what occurred at the presentation. A
certain
Mr van Rooyen, who was the Group Chief Executive Officer of a
group of companies that I will call ‘Labat’, turned up at the

meeting and participated in the presentation of the Kumo tender. The
essential points that he made in the course of his presentation
were
recorded in a series of slides. According to De Lacy, Labat was
recognised in the industry to be a BEE company.
[93] Some explanation is required before turning to the
significance of Labat’s presence. I have pointed out that the
weighting
that was to be given to BEE (30 of the total 100 points)
was broken down into four categories, each of which carried 7.5
points,
two of which were ‘ownership/shareholding’ and
‘management control’.
[94] It will be readily apparent that when a number of
participants come together to tender, the points to be earned in the
first
two categories will depend largely upon how the various
participants are structured in the tender, and the scores in those
two
categories are thus susceptible to arbitrary variation. In this
case Cornastone presented itself as the sole tenderer and not
surprisingly
it earned full marks (a total of 15 weighted points) in
those two categories (and an overall score across the four categories
of
26.25). In the case of Kumo, however, the participants were
arranged as a consortium, which necessarily meant that the
credentials
of the ‘BEE partner’ (Kumo Technologies) were diluted
by its co-members, and it earned only 10 weighted points in those two

categories (and an overall score of 16.25).
[95] In truth Cornastone’s advantage in those two
categories was more apparent than real. While Cornastone presented
itself as
the tenderer, thus earning full marks in those categories,
in truth there was no intention that Cornastone itself would be
responsible
for executing the contract. In ‘heads of agreement’
signed on 19 June 2002 by Cornastone, De Lacy, Beadon and a certain
Mr
Hope, they agreed that if the contract was awarded to Cornastone,
it would be executed by a company that was still to be incorporated.

Sixty per cent of that company would be owned by Cornastone and 40
per cent would be owned by De Lacy, Beadon and Hope in equal
shares.
In effect, the tenderer was not Cornastone, but a consortium
comprising Cornastone and De Lacy and his associates, much
in the
same way as the Kumo tenderer had been constructed. Had Cornastone’s
true intention been reflected in the tender, then
Cornastone’s
‘100% BEE points’ in the two categories mentioned would have been
diluted materially by the presence of its
‘white’ associates and
would have been far closer to those of Kumo.
[96] But Kumo’s points were compromised by the
tenderer having been constructed as a consortium. Van Rooyen now
presented the
tender as if Labat Africa Limited was the tenderer in
place of the consortium, with the associated ‘white’ parties
relegated
to the background as sub-contractors to Labat, much as
Cornastone had presented itself as the tenderer with its ‘white’
associates
relegated to the background. According to Van Rooyen’s
evidence (he was called by the respondents), Labat had concluded an
agreement
of some sort with Kumo at some time before the presentation
was made (but apparently after the tender had been submitted). The
terms of that contract were not explored in the evidence.
[97] The prospect that Kumo might reconstruct its tender
so as to present Labat as the tenderer, thereby placing itself
structurally
on a par with Cornastone, naturally caused considerable
consternation to De Lacy, and he wrote to the CEO of SAPO expressing
his
disquiet. That De Lacy was anxious is not surprising, bearing in
mind the advantage that Cornastone had on BEE points, which was

capable of being neutralized if Kumo were to re-arrange its tender in
the way that Cornastone had done, and thereby attract more
BEE
points.
[98] In argument before us much was sought to be made of
the fact that Van Rooyen was permitted to present the Kumo tender in
that
way, which was said to have been a major irregularity because
Labat did not feature in Kumo’s original tender. It was submitted

that SAPO thereafter dishonestly evaluated the Kumo tender taking
account of Labat’s BEE credentials and that the tender was
in fact
not awarded to Kumo but was awarded to Labat.
[99] But the evidence shows clearly – contrary to what
was submitted by counsel for the respondents – that the appearance
of
Labat had no effect on the evaluation of the tender. Although for
a while the appearance of Labat caused some confusion amongst
the
members of the Evaluation Committee and of the Tender Board, the
matter was eventually cleared up. The Kumo tender was evaluated

precisely as it had been presented, with no consideration being given
to Labat, whether in the allocation of BEE points or otherwise,
and
the contract was awarded to Kumo, not to Labat.
[100] A comprehensive written report of the Evaluation
Committee dated 22 April 2002, containing a detailed analysis of the
three
tenders and the disadvantages and advantages of each, was
submitted to a Tender Board meeting held on 29 April 2002. I will
return
to that report later in this judgment. For the moment I need
only say that the report referred to Kumo as the ‘Labat bidder’

and brought the appearance of Labat to the attention of the Board as
follows:
‘Labat now indicated as the prime contractor and company which
tender will be signed. The evaluation committee was not clear
as to
whether this was legal
and did not take it into consideration on
the evaluation of the BEE of KUMO. Legal opinion is required as to
whether this change
of status is acceptable or legal.
’
(Emphasis in the original).
[101] The response to this from the Tender Board was
recorded in the minutes as follows:
‘Advice must be sought in writing from the Legal and Audit
departments regarding the position of Kumo and Labat. (Note that this

advice is seen as separate from the advice received from within this
meeting).’
[102] On 8 May 2002 Ngqobe sent a memorandum to the
internal auditor (Mr Stoltz) and a SAPO legal adviser (Mr Naudé)
informing
them of what had occurred and requesting them to ‘assist
the evaluation team by stating the position the team should be taking

in this regard.’
[103] On the same day Richer sent an e-mail letter to
Stoltz and Naudé, which was copied to other members of the
team, asking
for a ‘formal response’ on the issue, because ‘we
would like to present to the [Tender Board] on Monday’. Further
e-mails
were exchanged, including one in which Richter told Naudé
and Stoltz that ‘we would like to recommend Kumo and forget about

Labat (would this be advisable as we now know of the position of
Labat)?’
[104] Naudé responded to Richter (once more with
copies to the other members of the team) as follows:
‘Changing the structure or composition of any consortium almost at
the end of the process (or at any time after submission of
the
proposals) would have serious legal ramifications for the PO and it
will be unfair to the other bidders as well, which might
be
challenged by them.’
[105] From the minutes of the Tender Board meetings that
followed on 6 May 2002 and 13 May 2002 it appears that the written
advice
that they had requested at their earlier meeting was not
forthcoming because the instruction that was contained in the minutes
of 29 April 2002 (as above) was repeated in the minutes of both those
meetings.
[106] The minutes of 27 May 2002 record that a ‘new
Tender Board has been nominated and accepted at EXCO’, which
included a
number of those who had previously been on the board. Ms
Motsepe was to be the chairperson, though the previous chairperson,
Mr
Mabote, remained as a member. At that meeting it was decided to
refer various matters back to the Evaluation Committee for
consideration.
No mention was made of the Labat issue. (It seems that
the Tender Board never received the written advice that it had
requested.)
[107] A further report was prepared by the evaluation
committee for consideration by the Tender Board at its meeting on 18
June
2002. By then, of course, the Evaluation Committee had received
the advice of Naudé mentioned earlier. There can be no
question
that it accepted that advice and prepared its report
accordingly. There is simply no basis in the evidence for suggesting,
as the
respondents did, that the appearance of Labat indicates
dishonesty on the part of the officials concerned, in some way that
was
never fully explained. It is perfectly clear from the evidence
that the ‘Labat issue’ was a red herring and that the appearance

of Labat had no effect on the evaluation and award of the tenders.
THE DECISION TO AWARD THE CONTRACT
[108] In its earlier report to the Tender Board dated 22
April 2002 the Evaluation Committee had expressed the view that ‘no
one
provider could be singled out to supply a total solution’ and
it had recommended that ‘Labat bidder 3 [in fact Kumo] and
Cornastone
bidder 2 be appointed to provide a total solution’. It
listed various parts of the system that should be provided by each.
It
then offered two alternatives, the first being the ‘utilisation
of bidder 3 [Kumo] and negotiate the price of bidder 2 [Cornastone]

to the price of bidder 3 [Kumo]’ The second alternative was to
‘use…bidder 2 [Cornastone ] as is and look at developing the

additional technology gaps at a later stage’.
[109] The report submitted to the 18 June meeting of the
Tender Board repeated those recommendations. It noted that at the
earlier
meeting on 27 May, the Tender Board had asked it to report on
various issues, amongst which were the following: ‘If a joint bid

is accepted what is the impact as well as the risks involved for this
option as well as the other two options’, and ‘why has
the
highest bidder to points scored been changed and what were the
reasons for such’. (There had been no ‘change of bidders’,
and
I think that what was meant was rather why had the two bidders been
inter-changed, which was how the Evaluation Committee understood
the
question). In response to the first point the report set out the
advantages and disadvantages of the various options. The response
on
the second question was as I expressed it earlier but I will repeat
it for convenience:
‘The evaluation committee drew up the scores prior to presentation
of bidders. After presentation the evaluation committee [were]

unanimous in their decision that the technology offered by Kumo was
superior and was thus in line with the RFP requirements. It
was also
felt that the overriding citeria for selection had to be a technology
solution and thus this weighed larger than Price
and BEE. The scoring
that was done prior to presentation [was] used to select the bidders
for presentation and after the presentation
the decision would be
made.’
[110] The Tender Board declined to appoint joint
contractors – the first option offered by the Evaluation Committee
– and decided
unanimously to award the contract to Kumo subject to
a number of conditions, including that ‘BEE be increased to 40%’
and that
‘the price must be re-negotiated’. It was submitted for
the respondents that the award of the contract subject to those
conditions
was not permitted and constituted a further irregularity.
Whether or not that is so is not now
material.
[111] At first the Evaluation Committee objected to the
Tender Board rejecting its recommendation (to appoint joint
contractors)
without giving it the opportunity to review the
position. It voiced its objection to the Chief Executive Officer, who
took the
matter up with the Tender Board. The matter was eventually
resolved at a special meeting of the Tender Board on 12 August 2002
(attended by Ngqobe and seven other members of the evaluation
committee, including Topper, Richter and Prins), during which the

Tender Board confirmed its earlier decision to award the contract to
Kumo. According to the minutes, Mabote (who chaired the meeting
in
the absence of Motsepe) said, in effect, that the Tender Board could
not simply rubber-stamp the recommendation of the Evaluation

Committee and had made a ‘business decision’. It was also noted
that ‘conflicting information regarding Cornastone was always

present, ie the issue of EMV level 2 compliancy’, and that, due to
its lack of compliance, Cornastone should not have been evaluated
at
all.
[112] According to the minute of the Tender Board
meeting on 2 September 2002, the award of the contract to Kumo was
approved by
EXCO and by the SAPO board. On 28 August 2002 SAPO sent a
letter by telefax addressed to the Kumo Consortium informing it that
its tender had been accepted on the various conditions stipulated by
the Tender Board, and that was accepted on behalf of Kumo on
30
August 2002.
THE AFTERMATH
[113] Within days De Lacy began meeting with various
people to complain about the award of the tender, alleging, amongst
others
things, fraud and corruption. This culminated in his meeting
with the ombudsman on 18 September that I have referred to; the
submission
of the affidavits; the preliminary enquiry by the
ombudsman; his recommendation that an investigation be held; and the
investigation
and submission by Ernst & Young of their
preliminary findings on 19 November 2002.
[114] No doubt that flurry got the wind up SAPO. On 30
October 2002 Mabote sent an e-mail to the secretariat of the tender
board,
Mr Mngqibisa, recording that the award of the tender had been
‘suspended due to the investigations [being] conducted against one

of the retail officials’. He said that he had had a meeting with
the ombudsman on 29 October ‘regarding progress with his
investigations’ and had been advised that SAPO needed to ‘cancel
the award of the tender to Kumo due to irregularities during
the
tender process’, and requested Mngqibisa to ‘cancel the award
with immediate effect’. Precisely what occurred after that
is not
clear but on 27 November 2002 Mngqibisa wrote to Kumo advising it
that ‘the advertised tender…has been cancelled for
operational
reasons’.
[115] Meanwhile Ms Lancaster, who had considerable
knowledge of the information electronics at SAPO and was head of ‘New
Ventures’,
encountered the CEO of SAPO, Mr Manyatshe, at a meeting
in November. After the meeting he told her that he was ‘having
difficulty
with pensions in terms of getting the biometric system off
the ground’ and asked her advice. She told him that there was no
need
to seek outside suppliers because SAPO already had most of the
necessary systems and it was just a question of bringing them
together
to come up with a solution. He asked her to take over the
project and come up with a proposal on how the existing systems could

be used without the need to again invite tenders. Whether this was
before or after the Kumo award had been ‘cancelled due to

operational reasons’ is not clear. In January 2003 Lancaster set
about the project and I will continue with that later in this

judgment.
CONCLUSIONS RELATING TO CLAIM A
[116] I can find no evidence of manipulation or
dishonesty on the part of any of the members of the Review Panels.
The evidence
also does not disclose dishonest manipulation in the
course of the deliberations of and reporting by the Evaluation
Committee,
nor on the part of the Tender Board.
[117] What is perhaps most significant in that regard is
that the Evaluation Committee recommended to the Tender Board, as its
first
choice, the joint appointment of Cornastone and Kumo to carry
out the project. That is altogether at odds with an intention on its

part to dishonestly prefer Kumo above Cornastone. In his presentation
De Lacy sought to explain that inconvenient fact away by
suggesting a
Machiavellian ploy on the part of the Evaluation Committee that was
so elaborate as to be bizarre and I do not need
to deal with it. It
is not surprising that the respondents’ counsel declined to repeat
it in argument before us. That contradiction
alone seems to me to be
destructive of the inference that the respondents sought to draw.
[118] Perhaps there were irregularities, perhaps there
was incompetence, perhaps officials might have been negligent,
perhaps, even,
Cornastone was more worthy of being awarded the
contract, but none of that is enough. The respondents bore the onus
of establishing
that the contract was awarded to Kumo in consequence
of dishonesty on the part of one or more of the officials concerned.
In my
view they failed to discharge that onus and Claim A should have
been dismissed.
CLAIM B
[119] Claim B was dependant upon the success of Claim A
and must similarly fail. I might add that the claim was in any event
so
remote as to be no more than speculative and the court below was
correct to dismiss it on those grounds.
CLAIM C
[120] After SAPO purported to ‘cancel’ the tender it
set about constructing its own payment system under the supervision
of
Ms Lancaster, who employed outside contractors in the course of
doing so, one of whom gave evidence at the trial. The respondents

allege that in the course of constructing its own system SAPO
appropriated Cornastone’s technology and was thereby ‘unjustly

enriched at Cornastone’s expernse’. The court below, although not
strictly called upon to do so, considered this claim and
found that
it had no merit. I agree.
[121] The identity of the technology to which the
respondents laid claim remained nebulous throughout the trial. But
that apart,
it is clear from the evidence of Ms Lancaster, and of the
contractor who was employed in the course of the process, that no use

was made of technology (whatever that technology might have been)
that had been disclosed by Cornastone, and on that ground alone
the
claim had to fail.
[
122] The following orders are made:
1. The appeal is upheld and the cross appeal is
dismissed, in each case with costs, which are to include the costs
occasioned by
the employment of two counsel.
2. In taxing those costs
the costs associated with the preparation and
submission of the original heads of argument that were filed by the
appellants
in this court, and any costs associated with the receipt
and perusal of the heads of argument that were submitted by the
respondents
in reply, are to be disallowed, and
to the extent that costs recoverable by the appellant
are related to the record in this appeal those costs are to be
assessed
as if the record comprised 70 volumes.
3. The orders of the court below are set aside and the
following order is substituted:
‘
The claims are dismissed with costs, which are to
include the costs occasioned by the employment of two counsel.’
________________
R
W NUGENT
JUDGE
OF APPEAL
APPEARANCES:
For appellant: H J Fabricius SC
H F Jacobs
Instructed by:
Mahlangu Inc, Pretoria
Claude Reid Inc, Bloemfontein
For respondent: M Nowitz
Instructed by:
Nowitz Attorneys, Craighall
Honey Attorneys Inc, Bloemfontein
1
2001 (3) SA 1247
(SCA).
2
Para 31.
3
2006 (3) SA 151
(SCA);
2007 (3) SA 121
(CC).
4
Para 46.
5
The statute that was there referred to was the Provincial Tender
Board Act (Eastern Cape) 2 of 1994.
6
Para 56.
7
2007 (1) SA 111
(SCA).
8
Para 10.
9
Senior employees of the Cape Provincial Administration, which had
invited the tenders.
10
The sole member of the successful tenderer.
11
The successful tenderer.
12
Para 90.
13
[1998] ZASCA 44
;
1998 (3) SA 938
(SCA) para 37.
14
R v Blom
1939 AD 158
at 202-3.
15
Ocean Accident and Guarantee Corporation Ltd v Koch
1963 (4)
SA 147
(A) at 159B-D, citing
Wigmore on Evidence
3ed para 32.
16
African Legend Payment, Mchunu Mashinini & Associates, Transpay
Technologies and Aplitec. African Legend was the then BEE
partner of
De Lacy and Beadon.
17
The minute records the attendees as being Zakhe Ngqobe, Sheila
Moagi, Andrew Topper, Connie Richter and Hensa van Niekerk.
18
The initial date of 4 March was extended.