Esorfranki Pipelines (Pty) Ltd v Mopani District Municipality (916/2018) [2021] ZASCA 89; [2021] 3 All SA 686 (SCA); 2022 (2) SA 355 (SCA) (24 June 2021)

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[2021] ZASCA 89
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Esorfranki Pipelines (Pty) Ltd v Mopani District Municipality (916/2018) [2021] ZASCA 89; [2021] 3 All SA 686 (SCA); 2022 (2) SA 355 (SCA) (24 June 2021)

THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
no: 916/2018
In the matter
between:
ESORFRANKI
(PTY) LTD

APPELLANT
and
MOPANI
DISTRICT MUNICIPALITY

RESPONDENT
Neutral citation:
Esorfranki
Pipelines (Pty) Ltd v Mopani District Municipality
(Case
no 916/2018)
[2021] ZASCA 89
(24 June
2021)
Coram:
PETSE AP and NICHOLLS and MBATHA JJA
and GOOSEN and POYO-DLWATI AJJA
Heard
:
19 February 2021
Delivered
:
This judgment was handed down electronically by circulation to the
parties’ legal representatives by email,
publication on the
Supreme Court of Appeal website and release to SAFLII. The date and
time for hand-down is deemed to be 09h45
on 24 June 2021.
Summary:
Constitutional law
– procurement of goods and services by organ of state –
delictual action for damages for loss of
profits by an unsuccessful
tenderer – claim founded on alleged breach of constitutional
duty by organ of state subverting
dictates of s 217 of the
Constitution – organ of state deliberately manipulating
selection process in order to advantage
a tenderer that did not meet
the tender requirements –
held
that appellant had
failed to establish legal causation of loss – appeal dismissed
with costs.
ORDER
On
appeal from:
Gauteng
Division of the High Court, Pretoria (Makgoka J, sitting as court of
first instance):
The
appeal is dismissed with costs, such costs to include the costs
consequent upon the employment of two counsel.
JUDGMENT
Goosen AJA
(Petse AP concurring):
[1]
This appeal concerns the
liability, in delictual damages, of a municipality to an unsuccessful
tenderer where the award of the tender
is vitiated by fraudulent or
dishonest conduct.
[2]
The appellant, Esorfranki
Pipelines (Pty) Limited (Esorfranki), instituted a claim for damages,
based on a loss of profit, against
the Mopani District Municipality
(Mopani); Tlong Re Yeng CC (Tlong); and Base Major Construction (Pty)
Ltd (Base Major) as first,
second and third defendants respectively.
It is common cause that Tlong and Base Major had formed a joint
venture (the Joint Venture)
for the purposes of securing and
executing a contract offered by way of tender. As the successful
tenderer, the Joint Venture was
awarded a contract with Mopani.
[3]
Esorfranki’s claim for
damages against Mopani and the Joint Venture was founded upon the
allegation that the award of the
tender was as a result of wrongful
and intentional conduct, amounting to dishonesty and fraud.
It
was alleged
that the decision of Mopani to award the contract to the Joint
Venture was vitiated by bias, bad faith, ulterior purpose
and
dishonesty.            In
consequence, Esorfranki was alleged to have
suffered damages based on
the profit it would have earned had the contract been awarded to it
as the successful tenderer as it
should have been.
[4]
On 29 April 2015 judgment was
granted by default against the Joint Venture members for payment of
damages, interest and costs. The
relief claimed against Mopani was
postponed sine die. The high court trial against Mopani commenced on
15 May 2017 in respect only
of the issue of liability. Makgoka J
dismissed the claim on 17 January 2018. The high court subsequently
refused leave to appeal.
The appeal therefore comes before this Court
with leave having been granted on petition.
Background
and litigation history
[5]
In August 2010 Mopani invited
tenders for the construction of a water pipeline between the Nandoni
Dam, Thohoyandou and the Nsami
water treatment works in Giyani (the
first award). In October 2010 the contract was awarded to the Joint
Venture. Esorfranki and
another unsuccessful tenderer, Cycad
Pipelines (Pty) Ltd (Cycad) brought an urgent application in the
Gauteng Division of the High
Court, Pretoria to interdict the
implementation of the award pending further review relief. On 27
January 2011, Preller J granted
an order by consent between the
parties, setting aside the award of the tender and directing that the
tender be re-adjudicated.
[6]
In February 2011, the tender
bids were re-adjudicated and Mopani again awarded the contract to the
Joint Venture (the second award).
On              1
March 2011, Esorfranki commenced an urgent application
to interdict
implementation of the award pending the outcome of review
proceedings. On 22 March 2011, Fabricius J granted an interim
order
interdicting and restraining Mopani from implementing the contract.
[7]
What followed the grant of the
interim order was a series of applications. In response to a failure
to comply with the order of
Fabricius J, Esorfranki commenced
contempt proceedings. Mopani brought an application for leave to
appeal the interim order. When
the hearing of the latter application
was delayed, Esorfranki brought an interlocutory application in terms
of rule 49(11)
of the uniform rules. Esorfranki sought an order
suspending all operations and actions by the Joint Venture pending
the finalisation
of the application for leave to appeal. All the
while the Joint Venture proceeded with the works. Webster J granted
an order in
terms of rule 49(11) on 1 April 2011. That order was
extended, on various occasions, to 10 May 2011, when the application
for leave
to appeal was heard. Leave to appeal the order of Fabricius
J was refused on 11 May 2011. Mopani thereupon, on 19 May 2011, filed

a petition for leave to appeal the interim order with this court.
When no undertaking was provided in respect of the continuation
of
the contract works, Esorfranki commenced a second rule 49(11)
application to stay the implementation of the contract. An interim

order was granted on 24 May 2011, pending the hearing of the rule
49(11) application.
[8]
On 31 May 2011, when the
second rule 49(11) application came before De Vos J certain
undertakings given by Mopani and the Joint
Venture, effective until
10 June 2011, were made orders of court. The hearing of the
application was postponed to that date. It
was then further
postponed. On       24 June 2011 De Vos
J discharged the order incorporating the
undertakings and postponed
the rule 49(11) application sine die.
[9]
Since the implementation of
the tender contract was proceeding, Esorfranki launched a third
interim interdict application. This
was heard by Kollapen J on 6 July
2011. On 8 July, Kollapen J granted the order. Despite this order the
implementation of the contract
proceeded. A further contempt
application was heard by Jordaan J on 19 July 2011 when an order was
granted by consent.
[10]
On 2 August 2011, this court
dismissed the application for leave to appeal against the interim
order granted by Fabricius J. The
respondents then filed an
application for leave to appeal with the Constitutional Court on
24 August 2011. They continued,
in the light thereof, to
implement the contract. On 6 September 2011, Tuchten J granted a
further interdict restraining implementation
of the contract. The
Constitutional Court thereafter dismissed the application for leave
to appeal.
[11]
The judgment in the review
application which Esorfranki had commenced in March 2011 was
delivered by Matojane J on 29 August 2012.
[1]
The learned Judge issued an order, inter alia, in the following
terms:
‘
1.
The tender process is declared illegal and invalid and is set
aside.
2.        The
municipality is ordered to independently and at the Joint Ventures
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.’
[12]
The
learned Judge also made an order that Esorfranki should pay the costs
of Mopani’s attorney, a Mr Mahowa, who had been
joined, on a
punitive scale. Esorfranki and Cycad obtained leave to appeal against
the remedy (principally paragraphs 2 and 3 of
the high court order
set out in the preceding paragraph) to this Court. Matojane J denied
Esorfranki and Cycad their costs on the
basis that there was evidence
of collusion between them in the manner in which they had conducted
the litigation. He also found
that they had sought to induce the
award of the tender to Esorfranki, in an improper manner.
[13]
The
appeal against the order of Matojane J was heard on 4 March 2014 and
judgment was delivered on 28 March 2014.
[2]
This court upheld the appeal against paragraphs 2 and 3 of Matojane
J’s order. It set those orders aside and substituted
them. The
relevant portion of the substituted order reads as follows:
‘
(a)
Any contract entered into between [Mopani] and the [Joint Venture]
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
LPR018), is declared void
ab
initio
and is set aside.
(b)
[Mopani] 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.’
[14]
It is
necessary to touch briefly on Matojane J’s finding regarding
the conduct of Esorfranki and Cycad. This is so because
my colleague
Nicholls JA accords some weight to Matojane J’s finding in the
context of relevant public policy considerations
at play in relation
to the element of wrongfulness.
[3]
The reliance is, with respect, misplaced.
[15]
This
court rejected Matojane J’s finding on the basis that there
were no facts to support the finding. The judgment records
the
following:
[4]
‘
The
finding of the High Court that the parties were to pay their own
costs in respect of the relevant applications was essentially
made on
the basis of what the court described as the “unreasonable and
unconscionable manner in which Esorfranki and its
attorney including
Cycad conducted this litigation”. It found that the appellants
made themselves guilty of collusion. That
finding is not supported by
the facts. Esorfranki and Cycad are separate legal entities, they
separately submitted tenders, instituted
legal proceedings and
instructed separate firms of attorneys to act on their behalf. The
mere fact that they were the joint beneficiaries
of a tender awarded
to them in another province,
[5]
and that there may have been similarities in the papers filed by them
in the present proceedings, does not support a finding of
collusion,
the import of which after all is the presence of dishonesty. There is
nothing untoward in one litigant aligning itself
with another and
co-operating in the quest to achieve a particular result in legal
proceedings.’
The trial action in the high
court
[16]
As
stated earlier, the trial commenced before Makgoka J on 15 May 2017.
It proceeded only in respect of the liability of Mopani.
At the
commencement of the proceedings counsel for Esorfranki commenced with
an opening address, as is customary. I shall return
to this later in
this judgment since it featured prominently in argument before this
Court. For present purposes it suffices to
record that counsel, with
the consent of Mopani’s counsel, submitted a bundle of
documents which comprised the affidavits
deposed to on behalf of
Esorfranki in the review application heard by Matojane J. The bundle
also included affidavits which had
been filed in the rule 49(11)
applications.
[17]
It was
pointed out that each of the deponents to the affidavits would be
called as witnesses for the purposes of confirming their
respective
affidavits so that the content of the affidavits would serve as
evidence in the trial. The witnesses would be available
to be
cross-examined should counsel for Mopani wish to do so. In
consequence of this, counsel who appeared for Mopani at the trial

indicated that it would not be necessary for each of the witnesses to
be called. The affidavits could be received as evidence before
the
trial court. I shall return to this aspect since, before this court,
there was some debate about the status of the affidavits
as served
before Makgoka J.
[18]
The
upshot of the agreement was that Esorfranki submitted the affidavits
and thereupon closed its case. Mopani in turn closed its
case without
tendering any evidence before the trial court.
The findings of the high court
[19]
Makgoka
J dismissed Esorfranki’s action against Mopani with costs. The
learned Judge held that a declaration that Mopani is
liable to
Esorfranki in damages must, necessarily, be preceded by a finding
that Esorfranki would have been the successful bidder.
This issue, it
was held, was
res
judicata
as between the parties inasmuch as the review court and this Court on
appeal were not persuaded to declare Esorfranki the successful

bidder. Consequently, the learned Judge held that he was bound by
this court’s findings and that this was decisive of the
matter.
[20]
Notwithstanding
his conclusion, the learned Judge still considered the question of
legal causation. In this regard the court said:
‘…
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,
or 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.’
[21]
The high
court went on to find that the relief granted by this Court, namely
the order requiring the advertisement of a tender in
respect of
remedial work (under the auspices of the Department of Water
Affairs), effectively afforded Esorfranki another opportunity
to
submit a bid. Since Esorfranki did submit a bid, albeit unsuccessful,
this constituted a
novus
actus interveniens
.
Accordingly its claim was dismissed.
The issues on appeal
[22]
In the
light of the judgment of the high court, several issues in this case
require consideration. The first of these concerns the
nature and
effect of the evidence which served before the trial court. The
second relates to the findings of this Court in the
review appeal.
These are to be considered against the backdrop of the doctrine of
res
judicata
.
The third issue concerns the question of legal causation. This will
require consideration of the finding in relation to
novus
actus interveniens
made by the trial court. The fourth issue concerns the question of
the relevant policy considerations which bear upon imposition
of
delictual liability in the context of tender impropriety.
The status of the affidavits
before the high court
[23]
There
was some debate before this Court as to the effect of the admission
of the affidavits filed on behalf of Esorfranki in the
review
application. As I understood the position of counsel for Mopani, it
was that the agreement meant no more than that the affidavits
could
be received as being the affidavits properly deposed to by each
deponent. The record of the opening address, however, does
not
support such a construction. To the contrary, it is clearly recorded
that the affidavits were received as evidence before the
trial court.
It was accepted by Mopani that the deponents need not be called since
there was to be no cross-examination of them.
It was on this basis
that Esorfranki closed its case. It was accordingly simply wrong to
suggest that Esorfranki did not present
evidence to support its
pleaded case. The evidence it presented in the trial was, by reason
of the failure to cross-examine witnesses
or to lead evidence in
rebuttal, uncontested. As will be seen hereunder this is of
considerable significance in the outcome of
the appeal.
[24]
The
trial court was alive to the fact that the contents of the affidavits
were properly before it as evidence. The court however
took the view
that the affidavits added ‘nothing in terms of evidentiary
value’ to the determination of what it considered
the crisp
issue before it. The crisp issue was described as whether ‘in
the circumstances of the case, the municipality should
be held
delictually liable to Esorfranki’. That issue, as has been
indicated above, concerns several interrelated questions.
In the
light of this approach to the affidavits the trial court determined
that ‘no particular regard will be had to the
contents of those
affidavits outside the parameters considered by the court in the
review proceedings’.
[25]
For
reasons which will become apparent hereunder, the trial court erred
in its approach to the evidence which was properly before
it. The
trial court took this view of the evidence given its approach to the
question of
res
judicata
.
In consequence the trial court did not determine whether the evidence
before it established the pleaded cause of action upon which

Esorfranki relied. I shall return to this question later in this
judgment.
[26]
Before
turning to the first issue, namely that of
res
judicata
,
it is appropriate to make one further observation about the evidence
before the trial court. Both Nicholls JA and Mbatha JA express
some
reservation about the evidence before the trial court because of the
manner in which it was presented. I am, however, respectfully,
unable
to discern where the difficulty arises. The fact that the same
evidence, consisting of allegations of fact, was presented
by
Esorfranki in the review (and related applications) as it presented
at the trial is of no moment. The same facts may support
different
causes of action. Whether the proven facts, ie those accepted by a
court, allow for the conclusion by that court that
a party has
discharged its onus, is a matter of adjudication according to the
principles of the law of evidence.
[27]
There is
no procedural impediment to the reception of evidence, by a trial
court, by way of affidavit. If the parties agree that
facts may be
placed before a court by way of affidavit and agree that the deponent
will not be cross-examined, then the factual
allegations contained in
the affidavit stand unchallenged. Where that occurs, no dispute of
fact arises.
[28]
It must
be emphasised that Mopani was not obliged to accept the manner in
which the evidence was placed before the trial court.
It was entitled
to challenge the evidence by subjecting the witnesses to
cross-examination. Not only did it not do so, it also
elected not to
present any evidence at all, despite being possessed of affidavits
which had been presented in the review application
and in the
numerous interlocutory applications. The upshot of this was that the
only evidence before the trial court was the extensive
allegations of
fact presented by Esorfranki’s witnesses.
[29]
The
trial court was not required to resolve factual disputes as would a
court dealing with opposing sets of affidavits. It was required
to
evaluate and assess the facts as presented, weigh probabilities as it
ordinarily would do with evidence presented orally, and
consider what
inferences could be drawn from the proven facts. This, I shall
demonstrate hereunder, the trial court failed to do.
Res judicata
[30]
A plea
of
res
judicata
requires the party who relies thereupon to establish each of the
three elements upon which the exception is based, namely that
the
same cause of action between the same parties has been litigated to
finality i.e. the same relief has been sought or granted.
[31]
In this
instance, although the parties are undoubtedly the same, the cause of
action and the relief sought in the trial action is
plainly not the
same as that pursued before the review court. The latter litigation
concerned the exercise of a court’s review
jurisdiction under
the Promotion of Administrative Justice Act 3 of 2000 (PAJA) and the
relief which may properly be granted in
relation thereto. The trial
action, on the other hand, was based upon a delictual cause of action
to establish liability for damages
for loss of profit arising from
Mopani’s wrongful and culpable conduct causing loss to
Esorfranki.
[32]
It
appears, from a reading of the high court’s judgment, that it
considered the doctrine to apply in relation to the determination
of
an issue which was before him.
In
Royal
Sechaba Holdings (Pty) Limited v Coote and Another
2014 (5) SA 562 (SCA)
[6]
this
Court held:
‘
The
expression “issue estoppel” is a convenient description
of instances where a party may succeed despite the fact
that the
classic requirements for
res
judicata
have not been complied with because the same relief is not claimed,
or the cause of action differs, in the two cases in question.
The
common-law requirements of same thing and same cause (
eadem
res
and
eadem
petendi causa
)
have been relaxed by our courts in appropriate circumstances. As was
pointed out by Lewis JA in
Hyprop
Investments Ltd v NSC Carriers and Forwarding CC and others
,
the relaxation and the application of issue estoppel effectively
started in
Boshoff
v Union Government
,
where it was held that the strict requirements for a plea of
res
judicata
(
eadem res
and
eadem
petendi causa
)
should not be understood literally in all circumstances and applied
as inflexible or immutable rules.  Despite some debate
as to the
approach of Greenberg J in Boshoff, Botha JA in
Kommissaris
van Binnelandse Inkomste v Absa Bank Bpk
confirmed the correctness of the approach and added that in
particular circumstances these requirements may be adapted and
extended
in order to avoid the unacceptable alternative that the
courts would be obliged:
“
.
. . om met letterknegtige formalisme vas te klou aan stellings in die
ou bronne, wat onversoenbaar sou wees met die lewenskragtige

ontwikkeling van die reg om te voorsien in die behoeftes van nuwe
feitelike situasies.”Following the decisions in
Boshoff
and
Kommissaris
,
Scott JA in
Smith v Porritt
summarised the development of the law in this regard:
“
.
. . the ambit of the
exceptio
rei judicata
has over the years been extended by the relaxation in appropriate
cases of the common-law requirements that the relief claimed
and the
cause of action be the same (
eadem
res
and
eadem
petendi causa
)
in both the case in question and the earlier judgment.
Where
the circumstances justify the relaxation of these requirements those
that remain are that the parties must be the same (
idem
actor
)
and that the same issue (
eadem
quaestio
)
must arise. Broadly stated, the latter involves an inquiry whether an
issue of fact or law was an essential element of the judgment
on
which reliance is placed.
Where the plea of
res
judicata
is raised in the absence of a commonality of cause of action and
relief claimed it has become commonplace to adopt the terminology
of
English law and to speak of “issue estoppel”. But, as was
stressed by Botha JA in
Kommissaris
van Binnelandse Inkomste v Absa Bank Bpk
1995 (1) SA 653
(A) at 669D, 670J–671B, this is not to be
construed as implying an abandonment of the principles of the common
law in favour
of those of English law; the defence remains one of
res
judicata
.
The recognition of the defence in such cases will however require
careful scrutiny. Each case will depend on its own facts and
any
extension of the defence will be on a case-by-case basis.
(
Kommissaris
van Binnelandse Inkomste v Absa Bank
(
supra)
at 670E–F.) Relevant considerations will include questions of
equity and fairness not only to the parties themselves but
also to
others. As pointed out by De Villiers CJ as long ago as 1893 in
Bertram v
Wood
(1893) 10 SC 177
at 180, “unless carefully circumscribed, [the
defence of
res
judicata
]
is capable of producing great hardship and even positive injustice to
individuals”.’
(Emphasis added.)
[33]
What
requires consideration therefore is whether the high court was
correct in concluding that the issue, namely whether Esorfranki
was
the successful bidder, was an essential element of either or both of
the high court and Supreme Court of Appeal judgments.
In order
to answer this question it is necessary to consider (a) the issues
(both factual and legal) that the high court was required
to decide
and what its findings were; (b) the remedial jurisdiction of the high
court in review proceedings; and (c) the reasons
given for the
remedy. Once this analysis is conducted regard must be had to the
issue(s) which the high court was called upon to
decide.
[34]
In
regard to the proceedings before Matojane J, it is common cause that
this involved a judicial review of administrative action
which
Esorfranki alleged was unlawful. It based its case upon several
factual and legal grounds. It alleged that: (a) the Joint
Venture did
not, as a matter of fact, meet the qualifying criteria for
consideration of its bid; (b) the Joint Venture had failed
to furnish
proof of its capacity to conduct the works; (c) the Joint Venture had
misrepresented facts upon which Mopani based its
adjudication of the
bid; and (d) the facts disclosed bias, bad faith and ulterior purpose
on the part of Mopani in awarding the
contract to the Joint Venture.
As was recorded by Van Zyl AJA in the review appeal before this
Court:
[7]
‘
The
high court found that the tenders submitted by the joint venture did
not comply with the bid specifications, that it was guilty
of
fronting and that the municipality’s decision was motivated by
bias and bad faith.’
[35]
A court
of review is, as a general rule, called upon to determine whether the
impugned administrative conduct or decision is liable
to be set aside
on one or more cognizable grounds of review. These are enumerated in
s 6 of PAJA. Once it has been determined that
the decision is liable
to be set aside, the review court must declare the decision unlawful
and then set it aside. Thereafter,
the review court will be required
to consider an appropriate or just and equitable remedy in accordance
with the dictates of s
172(1)
(b)
of the Constitution.
[8]
[36]
It
stands to reason that in deciding whether a ground of review is
established under section
6 of
PAJA, a review court may make factual findings or draw conclusions of
law which could be susceptible to a plea of issue estoppel.
In this
instance it was contended that since neither the high court nor this
Court had found that the tender was fraudulently awarded
to the Joint
Venture, it was not open to Esorfranki to rely upon fraud on the part
of Mopani. That being so, no liability on the
part of Mopani could
arise in delict for reasons of public policy.
[37]
The
argument was contorted. The absence of a positive finding of fraud on
the part of Mopani does not constitute a finding that
its conduct was
not fraudulent. I shall address this aspect in greater detail later
in the judgment when evaluating the evidence
before the trial court
and its effect.
[38]
In
dealing with the central issue which was before it on appeal, namely
whether the remedy granted by Matojane J on review was appropriate
or
just and equitable, this Court said the following:
[9]
‘
‘
On
the findings made by the court the tender process was clearly flawed
in material respects rendering it reviewable and liable
to be set
aside. Consistent with s 172 (1) of the Constitution s 8 of PAJA
empowers a court in judicial review to grant “any
order that is
just and equitable”. Section 8 confers on the court undertaking
judicial review a “generous discretion”.
The discretion
in s 8 must be exercised judiciously. The remedies in s 8 are not
intended to be exhaustive: they are examples of
public remedies
suitable to vindicate breaches of administrative justice. The
ultimate purpose of the public law remedy is said
to “…
afford the prejudiced party administrative justice, to advance
efficient and effective public administration
compelled by
constitutional precepts and at a broader level, to entrench the rule
of law.” Ultimately the remedy must be
fair and just in the
circumstances of the particular case.’
[39]
This
Court then considered the basis upon which Matojane J had formulated
the remedy granted. It found as follows:
‘
No
doubt it was the consideration of pragmatism and practicality that
weighed heavily with the high court in ordering the continued

execution of an invalid contract. It apparently made that decision in
response to a claim by Esorfranki that an appropriate order
would be
one 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 the order sought by
Esorfranki would not serve to protect those who were to benefit
from
the construction of the pipeline. These issues, which it found not to
have been properly addressed included inter alia “the

logistical, legal and financial viability of such a relief and the
extent to which the contract had been completed, the ownership
of
materials, whether if the balance of the contract is legally and
factually separable, it should be put out to tender etc”.’
[40]
Matojane
J did not make a finding that Esorfranki was not or would not have
been the successful bidder. Nor, as the above passage
bears out, was
the relief premised on such a finding of fact. The same is true of
this Court’s finding in relation to the
relief granted on
appeal. This Court found that the high court’s decision to give
effect to an unlawful contract was flawed
for several reasons. Chief
among these was that the
parties
to the contract
[10]
had acted dishonestly and unscrupulously. It also found that the
invalidity of the tender process was not the result of negligence
or
incompetence. Rather, that the tender process and the consequent
contract was tainted by dishonesty and fraud.
[41]
Having
come to this conclusion, the court held that the only appropriate
remedy would be one declaring the contract void and granting

equitable relief. In framing the relief, two considerations were
decisive; namely the fact that the work was partially complete
and
that it would be necessary to determine what remedial work would be
required and what further steps would be required to complete
the
project. The second issue was its acceptance that Mopani, by virtue
of the bias displayed by it in the adjudication of the
tender and its
conduct in the litigation, was disqualified from participating in any
further tender process that may arise in relation
to the project.
[42]
The
court was therefore equally motivated by considerations of pragmatism
and practicality in determining the appropriate relief.

In

formulating that relief, it made no finding in relation to whether or
not Esorfranki was ‘the successful bidder’.
[43]
What the
trial court was required to determine was whether the conduct of
Mopani (found to be in breach of s 217 of the Constitution
and in
violation of the right to just administrative action by the review
court) was wrongful and culpable in the context of a
delictual claim.
It was also required to consider whether as a fact, but for that
conduct, Esorfranki would have been awarded the
contract and what
consequences flowed from Mopani’s failure to do so. This issue
was not one that was an essential basis
for the judgment in the
review proceedings. The trial court was accordingly not precluded
from consideration of this issue by reason
of
res
judicata
.
[44]
My
colleague Mbatha JA comes to the conclusion that the court
a
quo
was correct to find that the matter was
res
judicata
,
on the basis of a broad interpretation of the meaning of the cause of
action.
I
respectfully disagree for the reasons already outlined. In addition,
it must be emphasized that the review relief was premised
upon
several grounds of review and not solely upon a finding that there
was fraud on the part of Mopani. In any event, the fact
that a
finding of fraud or what is tantamount to fraud in review proceedings
is made, cannot preclude Esorfranki from pursuing
other relief based
on that finding. A plea of
res
judicata
is not available to Mopani in such circumstances. It would, however,
be available to Esorfranki if Mopani sought to challenge such
a
finding.
Novus
actus interveniens
[45]
The
trial court accepted that the evidence established factual causation.
In dealing with legal causation, that is whether the harm
suffered
was sufficiently closely connected to the act or omission causing
harm, the high court approached the issue from the perspective
that
this Court, by ordering the tender process to be re-advertised, had
afforded Esorfranki another opportunity to submit a bid
for the
self-same tender. The court held that this constituted an alternative
remedy and was a case of
novus
actus interveniens
.
[46]
The trial court rejected an
argument that the tender which flowed from the appeal court order was
not the same as the original tender.
I am unable to discern on what
basis the court came to this conclusion. This Court made it plain
that by the time an appropriate
remedy was to be formulated, although
the project as a whole was incomplete, some work had been completed.
This is also apparent
from the high court judgment, delivered at a
much earlier stage in the litigation process. Indeed in the latter
judgment it was
recognized that ownership of delivered materials and
remedial work would need to be considered.
[47]
It is necessary to say
something about the ‘new’ tender which followed the order
made by this Court. It was common cause,
as indicated in Mbatha JA’s
judgment, that Esorfranki submitted a bid in an amount considerably
higher than its bid in the
tender at issue and that it was
unsuccessful. It was also common cause that the successful bidder had
submitted a bid which was
in excess of Esorfranki’s bid. The
successful bidder was Vharanani Properties (Pty) Ltd and a contract
in an amount of almost
R600 million was awarded to it.
[48]
The evidence before the review
court included affidavits, which were filed by Esorfranki in the
various interlocutory applications
by which it sought to stop the
implementation of the contract. These included affidavits filed in
opposing the attempts by Mopani
to obtain leave to appeal against the
interim orders. Esorfranki sought to demonstrate that Mopani and the
Joint Venture were proceeding
with the contract as rapidly as
possible, ostensibly to render any review process academic. What is
relevant for present purposes,
is the evidence regarding the state of
the contract works.
[49]
Gibbons, Esorfranki’s
managing director, alleged that the Joint Venture had dumped sections
of the pipes in large stockpiles,
that these were unprotected and
damaged. Sections of the pipeline trenches had been filled; but not
in accordance with specifications;
and that there was evidence of
poor workmanship. The significance of this evidence, which was before
this Court in the review appeal,
is that it established a need for
remedial work, not only to correct defective work on the project but
to redo work already done.
It is against this background that the
order requiring the Department of Water Affairs to assess the extent
of the work required
and to prepare a tender for such remedial work
and for the completion of the project, must be seen.
[50]
The further tender advertised
might have been a sequel to the original tender but it was manifestly
not the original tender. The
fact that Esorfranki was able to bid for
that contract does not constitute ‘an alternative remedy’.
Nor does the availability
of a further and different contract
opportunity constitute a
novus
actus
for purposes
of breaking the causal chain.
[51]
Esorfranki’s claim was
one for loss of profit. Its cause of action, as pleaded, was premised
upon the failure of Mopani to
award it a specific contract for which
it had bid. And in relation to which it was the only party that had
actually met the bid
requirements. The availability to it of another
contract requiring the delivery of a set of services different from
those required
in the original contract and at a different price does
not interrupt causation of loss in relation to the first or original
contract.
At best, assuming it was awarded the second contract,
whatever profit it earned from the second contract would have to be
brought
to account in determining its loss on the first contract.
That is so for the simple reason that the second contract only arises

on account of the setting aside of the first contract which was
unlawfully not awarded to Esorfranki. Nor does Esorfranki’s

failure to secure the second contract alter the fact that it may, as
asserted, have suffered a loss of profit on the first contract.
[52]
It follows from this that the
trial court’s reasoning in relation to the existence of a
novus
actus interveniens
cannot be sustained. The inquiry, however, does not end there.  It
is still necessary to consider, having regard to the evidence
before
the trial court, whether Esorfranki succeeded in establishing each of
the elements of its delictual cause of action. It
is also necessary
to consider whether, as the trial court found, the circumstances of
the case are such as to preclude delictual
liability on the basis of
public policy. This latter aspect requires consideration of the
nature of the wrongful and unlawful conduct
of the part of Mopani.
Wrongfulness
and fault
[53]
These two elements will be
dealt with together in what follows. It is appropriate at this
juncture to return to the debate concerning
the ambit of the case as
presented at trial. Counsel for Mopani, submitted that the
‘parameters’ of what was before
the trial court was set
out in the opening address. He argued that counsel for Esorfranki had
disavowed any reliance upon fraud
as vitiating the award of the
tender. Such disavowal accorded with the fact that the reviewing
court and this court had made no
finding of fraud on the part of
Mopani. This finding was, he submitted both to the trial court and
this Court, binding upon the
parties by reason of
res
judicata
. It could
accordingly not be revisited.
[54]
However, a careful reading of
counsel for Esorfranki's opening address does not reveal any
statement disavowing Esorfranki’s
reliance on fraud on the part
of Mopani. In an exchange with Makgoka J, Mr. Luderitz submitted that
in so far as the element of
wrongfulness was concerned the findings
by the high court and this court were sufficient. Nevertheless,
counsel accepted, quite
correctly, that no finding of fraud was made
against the municipality in either of the two judgments. That is a
far cry from disavowing
reliance upon the pleaded case on behalf of
Esorfranki.
[55]
The particulars of claim make
it abundantly clear that Esorfranki relied upon deliberate and
intentional dishonesty on the part
of Mopani and its employees or
officials. It was also specifically averred that its claim was
founded upon fraudulent conduct.
In the light of the pleadings there
can be no question that fraud, by way of deliberately dishonest
conduct, to favour the Joint
Venture at the expense of Esorfranki,
remained an integral part of the case to be adjudicated at trial.
[56]
This brings me to the
contention that the trial court could not go beyond the findings of
the review court in relation to the wrongfulness
of Mopani’s
conduct. The contention was one advanced in the context of the
application of the
exceptio
rei judicata
.
[57]
I have already dealt with the
principles applicable to
res
judicata
above. As
indicated, the trial court’s finding that
res
judicata
precluded
consideration of the nature of the wrongful conduct and its impact
upon the pleaded cause of action cannot be sustained.
What remains to
consider is the evidence tendered in relation to that pleaded case.
[58]
Esorfranki’s particulars
of claim contained several allegations relating to the wrongful and
culpable conduct of Mopani and
its employees in awarding the tender
to the Joint Venture. It was alleged, inter alia, that Mopani or its
employees:
with
knowledge of the irregularities alleged in respect of the first award
to the Joint
Venture:
‘…
intentionally
and deliberately dishonestly, and by virtue of its alternatively,
their dishonest conduct, awarded the tender to the
Joint Venture in
terms of the second award.’
[59]
In substantiation of the
allegation of bias in favour of the Joint Venture, it was alleged
that:
‘…
employees,
officials and/or representatives of [Mopani],
manipulated
the scoring
of the [Joint Venture] and
increased certain of [the Joint Venture’s] scores in respect of
the second award to [the Joint
Venture]
to
ensure that the [Joint Venture] was awarded the second award
.’
(My emphasis.)
[60]
In regard to fraudulent
misrepresentations made by the Joint Venture, regarding amongst
others its qualifications and experience
and its contractor’s
rating, (averments which were common cause between the parties), the
particulars of claim alleged that:
‘
Despite
knowledge on the part of [Mopani] and/or on the part of the
employees, officials and/or representatives of [Mopani], of
the
aforesaid frauds committed by the [Joint Venture] on [Mopani] and
despite knowledge of the true facts [Mopani]… intentionally

and deliberately dishonestly, and by virtue of its alternatively,
their dishonest conduct, nonetheless awarded the tender to the
[Joint
Venture] in terms of the second award.’
[61]
In regard to the evidence
before the court it should be emphasized that it was uncontested. The
facts alleged in the affidavits
of, inter alia, Mr Arne Rheeder
(Rheeder), the contracts director of Esorfranki and Mr David Gibbons
(Gibbons) the managing director
of Esorfranki, who deposed to the
main founding affidavits in the review application and several
affidavits in the rule 49(11)
applications, must be accepted.
[62]
Rheeder explained that in the
first application which came before Preller J it was alleged by
Esorfranki that, inter alia, the Joint
Venture was not compliant with
the required contractor’s rating (its CIDB rating) which had
been stipulated as a tender qualification.
The Joint Venture ought on
this basis to have been disqualified. It was further alleged that the
contract had been awarded to the
Joint Venture despite its bid price
being higher than in eleven other bids. The significance of this
evidence lies in the fact
that the award was set aside by Preller J,
by agreement between the parties, and the tenders were required to be
re-adjudicated.
The reason for Mopani’s agreement to the order
matters not. What matters is that the re-adjudication of the tenders
which
followed occurred in circumstances where Mopani was aware of a
significant deficiency in the Joint Venture’s bid, namely its

CIDB rating. It is in the light of this knowledge that the conduct of
Mopani and its officials is to be evaluated in making the
second
award to the Joint Venture.
[63]
The evidence of Rheeder,
Gibbons and Thompson, in particular, shows that the adjudication of
the bids for the second award occurred
not only on the basis of a
failure to disqualify the Joint Venture by reason of non-compliance,
but
upon a
deliberate manipulation of the points allocated in the scoring system
which applied
. (My
emphasis). This manipulation, by allocating points to which the Joint
Venture was not entitled, had the effect that the Joint
Venture
notionally scored a higher total of points than Esorfranki. It was
upon this basis that the award was made to the Joint
Venture.
[64]
The high court found that the
second award of the contract to the Joint Venture was unlawful by
reason of, inter alia, bias in favour
of the Joint Venture, bad faith
and ulterior purpose. This finding was based on the fact that the bid
documents submitted by the
Joint Venture established that: (a) it did
not meet the required CIDB grading and that Mopani had relied on its
subsequent justification
of the award in the litigation, upon a
document which was dated a year later after the award of the
contract; (b) the Joint Venture
had not submitted documents required
to establish its qualifications and experience in the conduct of such
works; and (c) upon
proper investigation in the light of what was
submitted it would have been established that the Joint Venture was
using the device
of ‘fronting’.
[65]
This Court, on appeal,
considered the basis of those findings, as was necessary to determine
the appeal in respect of the remedy.
None of the findings were
challenged. It then concluded that:
‘…
the
parties to that contract had acted dishonestly and unscrupulously and
the Joint Venture was not qualified to execute the contract.'
[66]
The trial court had before it
a pleaded cause of action which encompassed an allegation of fraud
and deliberate dishonesty. It had
before it uncontested evidence
which unequivocally established deliberate and intentional conduct to
subvert the prescripts of
s 217 of the Constitution.           It
was open to the high court to consider
the evidence and to find that
the unlawful conduct attributable to Mopani was indeed
in
fraudem legis
, i.e.
fraudulent. Had it properly evaluated the evidence it would have
found that Mopani had acted dishonestly, intentionally and
wrongfully
in awarding the tender to the Joint Venture. On the facts, it would
and should have found that the conduct of Mopani
was vitiated by bad
faith, ulterior purpose and fraud.
[67]
There remains the question of
whether Mopani’s deliberate dishonesty in the tender
adjudication and in its award of the contract
to the Joint Venture
was wrongful in the context of a delictual claim brought by
Esorfranki. Consideration of this involves questions
of legal or
public policy.  The trial court found that in the circumstances
of this case legal policy does not favour delictual
liability to
arise against Mopani. The trial court advanced no reasons for coming
to this conclusion.
[68]
Before this Court it was
argued that in the absence of fraudulent conduct on the part of
Mopani, delictual liability in relation
to public procurement ought
not to be imposed. Reliance for this proposition was placed on
Steenkamp NO v
Provincial Tender Board of the Eastern Cape
2007
(3) SA 121
(CC) and
Olitzky
Property Holdings v State Tender Board and Another
2001
(3) SA 1241
(SCA)
.
[11]
[69]
Neither of these judgments,
however, is authority for an absolute bar to delictual liability for
wrongful and unlawful conduct in
the context of public procurement.
In
Steenkamp
the wrongful conduct resulting in the administrative conduct being
impugned involved a negligent breach of a statutory duty. The

Constitutional Court, dealing with policy considerations which are
relevant to the imposition of delictual liability in the context
of
public procurement, said the following:
‘
(a)
Compelling public considerations require that adjudicators of
disputes, as of competing tenders, are immune from damages claims
in
respect of their incorrect or negligent but honest decisions.
However, if an administrative or statutory decision is made in
bad
faith or under corrupt circumstances or completely outside the
legitimate scope of the empowering provision, different public
policy
considerations may well apply.
(b)
Legislation governing the tender board in this case is primarily
directed at ensuring a fair tendering process in the public
interest.
Where legislation has a manifest purpose to extend protection to
individual members of the public or groups, different
considerations
may very well apply. Again whether or not delictual liability ought
to attach even in that case will be dependent
on the factual context
and relevant policy considerations.
(c)
Imposing delictual liability on the negligent performance of
functions of tender boards would open the prospect of potential

claims of tenderers who had won initially. This will be to the
detriment of the invaluable public role of tender boards. A potential

delictual claim by every successful tenderer whose award is upset by
a court order would cast a long shadow over the decisions
of tender
boards. Tender boards would have to face review proceedings brought
by aggrieved unsuccessful tenders. And should the
tender be set aside
it would then have to contend with the prospect of another bout of
claims for damages by the initially successful
tenderer. In my view
this spiral of litigation is likely to delay, if not to weaken the
effectiveness of or grind to a stop the
tender process. That would be
to the considerable detriment of the public at large. The resources
of our state treasury, seen against
the backdrop of vast public
needs, are indeed meagre. The fiscus will ill-afford to recompense by
way of damages, disappointed
or initially successful tenderers and
still remain with the need to procure the same goods or service.’
[12]
[70]
Steenkamp
accordingly recognizes that different
policy considerations apply where it is found that a decision-maker
has acted dishonestly,
mala fide or fraudulently.  In
Odifin
(Pty) Ltd v Reynecke
2018
(1) SA 153 (SCA)
[13]
this court held that there is no
difficulty in imposing liability where the decision-maker acts
dishonestly or corruptly.
[14]
In
Telematrix (Pty)
Ltd t/a Matrix Vehicle Tracking v Advertising Standards Authority of
SA
[2005] ZASCA 73
(SCA),
[2006] 1 All SA 6
(SCA) it was stated:
‘
In
different situations courts have found that public policy
considerations require that adjudicators of disputes are immune to

damages claims in respect of their incorrect and negligent decisions.
The overriding consideration has always been that, by the
very nature
of the adjudication process, rights will be affected and that the
process will bog down unless decisions can be made
without fear of
damages claims, something that must impact on the independence of the
adjudicator. Decisions made in bad faith
are, however, unlawful and
can give rise to damages claims.’
[15]
[71]
It bears emphasis that in this
instance the decision-maker acted deliberately and dishonesty, with
bias in favour of the Joint Venture.
It acted in bad faith, with an
ulterior purpose and, fraudulently. And what aggravates matters is
that Mopani acted in the manner
it did not once but twice in the face
of serious allegations of wrongdoing levelled against it by
Esorfranki. One would have thought
that Mopani would instead pause
for reflection and correct its unseemly conduct. On the contrary,
Mopani became even more resolute
to frustrate Esorfranki at every
turn. The series of interlocutory applications brought by Esorfranki
against Mopani all confirm
one thing, i.e. that Mopani had clearly
evinced a determination not only to award the tender to the Joint
Venture come what may,
but also to ensure that its implementation
proceeded notwithstanding court orders restraining it from executing
the contract. Quite
clearly therefore, its conduct was the antithesis
of what is to be expected from an organ of the state.
[72]
In
Minister
of Finance and Others v Gore NO
2007
(1) SA 111
(SCA) (
Gore
),
this Court considered an argument similar to that advanced before us
in relation to public policy limitations. It said the following:
‘
In
the language of the more recent formulations of the criterion for
wrongfulness: in cases of pure economic loss the question will
always
be whether considerations of public or legal policy dictate that
delictual liability should be extended to loss resulting
from the
conduct at issue. Thus understood, it is hard to think of any reason
why the fact that the loss was caused by dishonest
(as opposed to
bona fide negligent) conduct, should be ignored in deciding the
question. We do not say that dishonest conduct will
always be
wrongful for the purposes of imposing liability, but it is difficult
to think of an example where it will not be so.
In our
view, speaking generally, the fact that a defendant’s conduct
was deliberate and dishonest strongly suggests that liability
for it
should follow in damages, even where a public tender is being
awarded. In Olitzki and Steenkamp, the cost to the public
purse of
imposing liability for lost profit and for out-of-pocket expenses
when officials innocently bungled the process was among
the
considerations that limited liability. We think the opposite applies
where deliberately dishonest conduct is at issue: the
cost to the
public of exempting a fraudulent perpetrator from liability for fraud
would be too high.’
[16]
[73]
In
Gore
the claim against the organ of state concerned was premised upon
vicarious liability arising from the conduct of its employees.
The
court nevertheless went on to state that:
‘
These
considerations would indicate that liability should follow even if
the plaintiff’s case were based on dishonesty on
the part of
the State Tender Board itself.’
[17]
[74]
In this instance the claim
against Mopani asserts direct liability of the organ of state by
reason of deliberate dishonest conduct
on its part in the award of
the tender to the Joint Venture. Based on the findings of deliberate
dishonesty made by the high court
in the review proceedings and this
Court on appeal to it, there is, in my view, no reason of public or
legal policy to exclude
liability of Mopani for such economic loss as
Esorfranki may have suffered.
[75]
As I understand Nicholls JA’s
judgment she does not hold that  considerations of public policy
preclude a claim in damages
even in circumstances where a tenderer
was unsuccessful as a result of dishonest or fraudulent conduct by an
organ of state. She
considers instead, that since no direct finding
of fraud was made against Mopani and since Esorfranki’s
integrity was also
questioned
[18]
,
on a conspectus of all the facts, liability should not be imposed.
[76]
Nicholls JA finds that the
effect of this Court’s order in the review appeal was to ‘set
aside the original tender’.
This public law remedy resulted in
there not being an extant tender in which Esorfranki lost the
opportunity to bid and thus make
a profit. Nicholls JA accordingly
finds that wrongfulness is not established by reason of the
non-existence of a duty owed to Esorfranki
which could be breached.
[77]
I am respectfully unable to
agree with this reasoning. This Court set aside the contract
concluded between the Joint Venture and
Mopani. It did so having
found that the adjudication of the tender i.e. the process which
resulted in the administrative decision
to award the contract to the
Joint Venture, was tainted by bias and deliberate dishonesty. The
effect of the remedy is not to expunge
the unlawful conduct, it is to
correct it prospectively. This is achieved by determining appropriate
relief by which to vindicate
the right to administrative conduct that
is lawful and fair. The fact of the unlawful conduct remains and
there is no reason why
that established breach of a duty owed to
Esorfranki cannot found a claim in damages.
Causation
[78]
I turn now to the element of
causation. Esorfranki pleaded that but-for the unlawful conduct on
the part of Mopani, it would have
been awarded the contract. In
support of this assertion, the evidence presented by it established
that it presented an eligible
or valid bid, i.e. one that complied
with all of the qualifying criteria. Its price was the lowest
presented. The differential
between the price of the Joint Venture
and that of Esorfranki was approximately R10 million. The bid
adjudication report made available
by Mopani after the second award
indicated that Esorfranki scored the second highest number of points
after the Joint Venture.
The difference was a mere half a point. As
already indicated, the points allocated to the Joint Venture were
manipulated in order
to ensure that it scored the highest number of
points. Accordingly, had the points allocation not been manipulated
Esorfranki would,
without doubt, have secured the highest points
tally. The evidence asserting this proposition was unchallenged, and
no evidence
to suggest that Esorfranki would not, for some or other
objective reason, have been awarded the contract, was presented.
[79]
The further question is
whether the harm suffered by Esorfranki is sufficiently closely
linked to the wrongful and unlawful conduct
to establish liability.
Esorfranki’s claim is one for loss of profit being the economic
loss it suffered in consequence of
it not being awarded the contract
and therefore not being able to conduct the works in accordance with
the contract.
[80]
In
International
Shipping Company (Pty) Ltd v Bentley
1990
(1) SA 680 (A), [1990] 1 All SA 498 (A)
[19]
it was held:
'On the other
hand, demonstration that the wrongful act was a causa sine qua non of
the loss does not necessarily result in legal
liability. The second
inquiry then arises. That is whether the wrongful act is linked
sufficiently closely or directly to the loss
for legal liability to
ensue or whether, as it is said, the loss is too remote. This is
basically a juridical problem in the solution
of which considerations
of policy may play a part.’
[81]
The test for legal causation
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 play a
part.
[20]
[82]
In
Minister
of Safety and Security v Van Duivenboden
2002
(6) SA 431 (SCA)
[21]
it was held that:
‘
A
plaintiff is not required to establish the causal link with
certainty, but only to establish that the wrongful conduct was
probably
a cause of the loss, which calls for a sensible
retrospective analysis of what would probably have occurred, based
upon all the
evidence and what can be expected to occur in the
ordinary course of human affairs rather than an exercise in
metaphysics.’
[83]
In this instance it must be
accepted that it was reasonably foreseeable that Esorfranki would
have generated a profit in the ordinary
course of carrying out the
works in terms of the contract had it secured that contract. Such
loss of profit was proximate to and
not too remote from the unlawful
conduct of Mopani. Upon a sensible retrospective analysis of the
probabilities therefore, legal
causation is clearly established.
[84]
That brings me to the question
of the existence or otherwise of a
novus
actus interveniens
.
I have dealt above with the factual considerations earlier in this
judgment. What remains to be said is that the order directing
that a
tender be re-advertised or that a further process be initiated to
correct the unlawful administrative conduct is not an
unusual nor
generally unexpected result in the context of public law remedies. On
the contrary such remedies are specifically provided
for in s 8 of
PAJA. As was held in
OK
Bazaars
[22]
the test for legal causation,
‘When directed specifically to
whether a new intervening cause should be regarded as having
interrupted the chain of causation
(at least as a matter of law if
not as a matter of fact) the forseeability of the new act occurring
will clearly play a prominent
role   (
Joffe &
Co Ltd v Hoskins and another
1941 AD 431
at 455–6;
Fischbach v Pretoria City Council
1969 (2) SA 693
(T);
Ebrahim
v Minister of Law and Order and others
1993 (2) SA 559
(T) at
566B–C; Neethling
et al, supra,
2015; Boberg
The Law
of Delict
441). If the new intervening cause is neither unusual
nor unexpected, and it was reasonably foreseeable that it might
occur, the
original actor can have no reason to complain if it does
not relieve him of liability.’
[85]
That is precisely the case in
the present matter. By the time the high court heard the review
application the contract had already
been implemented to a
considerable extent. That was all the more so by the time the appeal
was heard. The factual circumstances
that prevailed at that stage
were quite different to those that prevailed when the award was
originally made. Indeed, Mopani had
advanced the contention in the
intervening litigation that no practical effect or purpose could be
served by an appeal precisely
because the contract had largely run
its course. It could therefore hardly not be foreseeable that a court
on review might order
that such outstanding work as was still
required to be done, be subject to another tender process.
Accordingly, the order of this
court to fashion a just and equitable
order to address the prevailing circumstances cannot, by any stretch
of the imagination,
be construed as having interrupted the chain of
causation in relation to the loss suffered by Esorfranki by reason of
being unlawfully
deprived of the original contract.
[86]
It follows in my view, that
the appeal must succeed. I would accordingly make the following
order:
1.       The appeal is
upheld with costs, such costs to include the costs consequent upon
the employment
of two counsel.
2.
The order of the high court is set aside and replaced with the
following:
2.1     It is declared that the
first defendant, Mopani District Municipality, is liable to the
plaintiff, Esorfranki
(Pty) Ltd, for such loss of profits as may be
agreed between the parties or as the plaintiff may prove in relation
to tender bid
number MDN2011-005 for the construction of a raw bulk
water line from Nandoni Dam to Nsami Water Treatment Works plus
interest
thereon.
2.2     The first defendant is
ordered to pay the plaintiff's costs, such costs to include the costs
of two
counsel.'
________________________
G
GOOSEN
ACTING
JUDGE OF APPEAL
Nicholls JA (Poyo-Dlwati AJA concurring):
[87]
I have read the judgment of my
colleague Goosen AJA and agree with his rendition of the facts and
litigation history. I am also
in agreement with his findings on
res
judicata
.
Regrettably, I cannot agree with his conclusion that the Mopani
Municipality should be held liable for Esorfranki’s loss
of
profits.
[88]
The requirements for a
delictual claim are trite - a wrongful act or omission, fault in the
form of negligence or intention, causation,
and finally damages in
the form of patrimonial or non-patrimonial loss. Delictual claims for
pure economic loss have had a more
gradual recognition in the
development of our common law.
[23]
It is now acknowledged that early Roman Dutch law did not only
recognise claims for loss caused by physical harm to one’s

person or property but extended claims for all patrimonial loss,
including financial. Aquilian liability for pure economic loss
was
conclusively recognised in
Administrateur,
Natal v Trust Bank
[24]
in 1979.
[89]
The issue today is not so much
whether such liability is recognised in principle but the
circumstances in which such liability should
be imposed. The general
principle, frequently stated, is that every person has to bear the
loss he or she suffers.
[25]
It is universally accepted that there must be some limitation on
wrongdoer’s liability. The brake on limitless legal liability

takes the form of wrongfulness and causation, both of which are
‘measures of control’.
[26]
[90]
Although these are independent
and distinct enquiries, both are impacted upon by policy
considerations taking into account constitutional
norms and values.
Conduct causing pure economic loss is not prima facie wrongful
and whether a defendant is to be liable for
compensation must be
viewed through the prism of public policy and the legal convictions
of society at large.
[27]
The fact that an act constitutes an administrative illegality does
not mean that delictual damages should be awarded against a
public
authority if other administrative remedies were available.
[28]
There are various decisions from both this Court and the
Constitutional Court where liability for financial loss suffered by
unsuccessful
bidders in public tenders has not resulted in an award
of damages against government institutions.
[29]
It is settled law that negligence and incompetence is insufficient to
ground liability in the context of public procurement. Only
where
there is ‘something more’ can a plaintiff recover her
lost bargain.
[30]
In the same vein s 8(1)(
c
)(
ii
)(
bb
)
of PAJA provides that only in exceptional circumstances could payment
of compensation be a just and equitable remedy. It appears
that
‘something more’ or an ‘exceptional
circumstance’ occurs where the tender is vitiated by fraud
or
where there was bad faith and malice on the part of the tender board.
There are two cases of this Court of significance in this
regard.
[91]
The legal position that loss
of profit suffered by an unsuccessful tenderer as a result of
dishonesty and fraud is claimable in
delict, should all the other
requirements of delict be met, was confirmed by this Court in
Transnet v Sechaba
Photoscan.
[31]
Prior to this, courts had inclined towards the principle set out in
Trotman and Another
v Edwick,
[32]
namely that a litigant who sues on a contract sues to have his or her
bargain or its equivalent in money. Whereas a litigant who
sues in
delict sues to recover the loss which was sustained because of the
wrongful conduct, that is to recover the extent by which
his or her
patrimony was reduced by the conduct. Damages in delict seek to
restore the plaintiff to the position she would have
occupied had the
delict not been committed. In
Transnet
an argument that
the tenderer sought to have the benefit of its bargain (as in a
contractual claim) and that accordingly loss of
prospective profits
was not recoverable in delict, was rejected. It was held that the
principles set out in
Trotman
were wide enough to
include a delictual claim for loss of profits in certain
circumstances, as the court was careful to guard against
a formula
applicable to all fraud which induced a contract. However, in
general, contractual damages concern the recovery of profits,
whereas
the measure of damages in delictual claims is different, namely to
place the plaintiff in the position it would have been
had the harm
not occurred.
[33]
[92]
The next crucial decision of
this Court is
Minister
of Finance and Others v Gore.
[34]
It dealt with a tender for the automated fingerprint identification
for the payments of social grants which was designed to address
the
massive fraud taking place in the payments of grants. The two public
officials concerned corruptly negotiated contracts of
employment with
the successful bidder and caused the company to pay substantial
amounts of money as bribes into the bank accounts
of their wives.
This Court held that where there is deliberate dishonesty on the part
of government officials, this is strongly
suggestive that delictual
liability should follow. This Court did not say that dishonest
conduct would always be wrongful for the
purposes of imposing
delictual liability, but that it was difficult to think of a
situation where it would not be.
[35]
Further, it found that public officials should not be shielded with
immunity and the government institution was therefore held

vicariously liable for the corrupt conduct of its employees. Whilst
acknowledging the impact this may have on scarce resources
urgently
needed for economic and social reform, the cost of the fraud was
found to outweigh the effect such a finding may have
on the public
purse.
[93]
In the present matter there is
no direct finding of fraud against Mopani in either the high court or
this Court’s review judgments.
Nor do the facts approximate the
fraud and corruption that was described in
Gore
.
Nonetheless, bound as we are by the factual findings in the judgments
in the review proceedings, I cannot fault Goosen AJA’s
finding
that the municipality displayed
mala
fides
, an element
of dishonesty and an ulterior purpose in awarding the tender to the
Joint Venture.
[94]
It should not be overlooked
that the honesty of Esorfranki was also impugned in Matojane J’s
judgment. At paragraph 47 he
stated:
‘
This case
cannot be properly decided without first having regard to the manner
in which Esorfranki, a civil engineering group with
a turnover of 1.9
billion conducts this litigation. Esorfranki and Cycad, despite their
protestations to the contrary are not independent.
The
Esorfranki-Cycad joint venture was awarded a tender by the Ethekwini
Municipality for the construction of the Western Aqueduct
Phase Two.
The Kwazulu Natal High Court in the matter of
Sanyathi
Civil Engineering and Consultants v Ethekwini Municipality
reviewed and set aside the award of the tender to the
Esorfranki-Cycad joint venture as the court found that corruption
could
not be ruled out in the tender process.’
[95]
Notwithstanding the bias
alluded to, I have some difficulty attributing wrongfulness to the
municipality under these circumstances.
Public law acts for the
public good rather than the furtherance of private interests.
Delictual claims in the context of public
procurement bring into
sharp focus the intersection and uneasy relationship between public
and private law. The ultimate question
in every case is whether on a
conspectus of all the facts and considerations, public policy,
infused by the values of the Constitution,
requires that the conduct
be compensable. The first point to be made is that the Constitution
does not create a right to claim
damages for loss of profits in the
arena of procurement administrative law. This much was stated by this
Court in
Olitzki
Property Holdings v State Tender Board
[36]
and
SA Post Office v
De Lacy
[37]
and confirmed by the Constitutional Court in
Steenkamp
NO v Provincial Tender Board.
[38]
Thus, the constitutional guarantee of a fair tender does not provide
the basis for imposing a legal duty to compensate for loss
arising
from the breach of the guarantee.
[39]
[96]
In this particular case,
public policy considerations undoubtedly require that the relevant
public officials face the full might
of the law, including possible
criminal charges. But the question is whether public policy
considerations require that a municipality
(and hence ultimately the
rate payers), more than ten years later, should be held liable to pay
a private company such as Esorfranki
for loss of profits for work
that it did not do. On the one hand the law cannot countenance
corrupt local government officials
who do not act for the public
good. After all, it is the municipalities that are the direct
interface between the community and
government. They are the organs
of state constitutionally mandated to deliver basic services to our
communities. A municipality,
cash-strapped as a result of the
dishonest conduct of its officials, cannot deliver the necessary
municipal services. Inevitably,
it is the poorest who will suffer
most. On the other hand do the legal convictions of the community
permit a private company, with
a turnover of billions, to claim for
its loss of profits? It is to this issue that I now turn.
[97]
Esorfranki challenged the
tender awarded to the Joint Venture by way of review before the
courts. It was successful. The tender
awarded to the Joint Venture
was set side, and a new tender process was ordered by this Court.
Esorfranki used a public law remedy
to right the wrong that it had
suffered. Esorfranki was entitled to bid again in the new tender
process that followed the order
of this Court. It did tender and was
unsuccessful. Esorfranki does not complain of that failure. The
question is whether it can
still claim in delict for the wrongful
conduct that vitiated the tender awarded to the Joint Venture, even
though it secured the
opportunity to bid afresh in a fair and
competitive new tender process? I think not for following reasons.
[98]
Esorfranki obtained a public
law remedy that set aside the original tender, which became void
ab
initio
. That public
law remedy has private law consequences. If, as a matter of public
law, the tender was set aside by an order of court,
there was no
extant tender in which Esorfranki lost the opportunity to bid and
thus make a profit. As a result the wrongful conduct
perpetrated by
the municipality does not attach to any existing tender. This means
that there was no legal duty owing to Esorfranki
by the municipality
to permit it to profit from a fair and competitive tender process
because it was expunged as an incident of
the order made to set aside
the tender. In other words, if there was no tender, there was no
legal duty that was owing. Once that
is so, there is no wrongfulness
that Esorfranki can rely upon to establish its cause of action.
[99]
I am fortified in this view by
the following consideration. The point of the review was to restore
the position so that a fair,
equitable, transparent, competitive and
cost effective tender process could be followed as required by s 217
of the Constitution.
Esorfranki’s opportunity to make a private
profit from public procurement was anchored in the new tender process
that followed
this Court’s order. Esorfranki could never claim
that it stood to make two profits for the same work that was the
subject
of the tender. It was unsuccessful in the only lawful
opportunity it had to profit. It cannot use the law of delict to
resurrect
another opportunity to make a profit that had been expunged
by operation of law. Nor can the state be saddled with the liability

to compensate private companies for profits lost in a tender process
that has been set aside, while also burdening the state with
the cost
of paying the company that wins the tender in a fair process. The
Constitution requires procurement that is cost-effective.
Public
policy should not tolerate a situation where a company retains a
claim in an unlawful tender process that is set aside,
in
circumstances where that same company fails in the lawful process
that follows. That entails a double charge upon the state,
and a
double entitlement on the part of Esorfranki to profit. Neither is
justifiable. In my view no wrongfulness arises in these

circumstances.
[100]
There is a further basis upon
which I hold that Esorfranki cannot succeed in its appeal. That is
causation.
[101]
A fundamental difficulty with
the present matter is the manner in which the evidence was placed
before court. No witnesses were
called. The parties saw fit to accept
the affidavits in the various applications and the factual findings
in judgments of the high
court and this Court, in the review
proceedings, as constituting evidence in the trial court. A claim for
damages inevitably involves
a dispute of fact and requires evidence
to be led. What is required to bring a successful review of a tender
on motion proceedings
is not the same as that for a delictual action.
This immediately puts this matter on a different footing to
Gore
where extensive oral evidence was led in the trial and, on the
evidence before it, the court found that causation had been proven.
[102]
Esorfranki must show
causation, both factual and legal. Factual causation, as its
name suggests, is a factual enquiry as to
whether the impugned
conduct or omission is factually linked to the harm caused. In other
words, does the one fact follow from
the other? The ‘but-for’
test has received universal acceptance in common-law jurisdictions as
being the appropriate
test for determining factual causation.
[40]
If the harm would not have occurred ‘but for’ the
happening of a certain event, then that event is the cause. If the

harm would have occurred in any event, it is not the cause. The test
is set out in
International
Shipping Co (Pty)
Ltd v Bentley
[41]
as follows:
‘
The enquiry as
to factual causation is generally conducted by applying the so-called
“but-for” test, which is designed
to determine whether a
postulated cause can be identified as the
causa
sine qua non
of the loss in question.
In order to apply this test one must make a hypothetical enquiry as
to what probably would have happened
but for the wrongful conduct of
the defendant.
’
[103]
The question is whether the
conduct in fact amounted to a
causa sine
qua non
, rather
than whether it ought to have been the cause. This is a factual test.
Where there has been positive conduct one eliminates
the conduct to
establish whether the same result would ensue. In the case of an
omission, the inquiry involves ‘the mental
elimination of the
wrongful conduct and the substitution of a hypothetical course of
lawful conduct and the posing of the question
as to whether upon such
hypothesis plaintiff’s loss would have ensued or not’.
[42]
This requires a retrospective analysis of what would have occurred
and is to a large measure dependant on common sense and experience
as
well as reliable evidence on the probable outcome.
[104]
The Constitutional Court
decision of
Lee v
Correctional Services
led to a debate whether policy considerations play any part in this
leg of the enquiry.
[43]
In that matter the Constitutional Court said that what was required
was ‘postulating hypothetical non-negligent conduct,
not actual
proof of that conduct’. The debate whether
Lee
changed the test for factual causation has been resolved by the
Constitutional Court in
Mashongwa
v PRASA
[44]
which categorically stated that
Lee
had not replaced the traditional approach to factual causation but
rather emphasised the long-standing flexibility of the test
where the
harm is closely connected to an omission of a defendant who has the
duty to prevent harm.
[105]
The judgment of Goosen AJA
accepted Esorfranki’s evidence that it submitted a tender which
was valid, and more cost effective
than that of the Joint Venture.
Esorfranki vigorously disputed that it should have been placed 12
th
in the tender process and pointed out that its tender was R10 million
lower than that of the Joint Venture. In regard to the
second award,
the bid adjudication report indicated that there was only half a
point dividing the Joint Venture and the appellant,
and therefore,
argued Esorfranki, there is no doubt that it would have had the
highest point allocation had Mopani not acted dishonestly,

intentionally and wrongfully. Because these went unchallenged and
there was no ‘other objective reason’ to suggest

that Esorfranki would not have been awarded the tender, the judgment
finds that the threshold for factual causation has been met.
[106]
My respectful view is that
this starts from the wrong premise. Instead of finding there was no
evidence led to suggest that Esorfranki
would not have been awarded
the tender, it was incumbent on Esorfranki to show on a balance of
probabilities that it would have
been awarded the tender. Much was
made, in the affidavits of Esorfranki, of how it deserved to have
been awarded the tender on
the basis of the point system and because
the Joint Venture did not comply with the standards of the
Construction Industry Development
Board (the CIDB). However,
understandably, because the application was for a review and setting
aside of the irregular tender,
evidence on what would have occurred
had the tender not been awarded to the Joint Venture is absent.
Merely because Esorfranki
had the highest point allocation after the
Joint Venture, or that its bid was for a lessor amount, does not
axiomatically mean
that the tender would have been awarded to it. In
fact the tender itself, in the invitation to bid makes this
manifestly clear.
It provides: ‘Mopani District Municipality
does not bind itself to accepting the lowest or any other bid’.
[107]
There is nothing in the papers
before the court to suggest that Esorfranki would have been awarded
the tender had it not been awarded
to the Joint Venture. As indicated
in the judgment of Matojane J, Esorfranki itself was under a cloud
and suspected of fraudulent
conduct with Cycad, another unsuccessful
bidder. Cycad had brought a parallel application to review and set
aside the award to
the Joint Venture and sought an order that the
tender be awarded to it. It later changed its prayer to one that the
tender be awarded
to Esorfranki. Whether these allegations played a
role in the evaluation of the tender we cannot know in the absence of
evidence,
but they have an impact on causation.
[108]
Neither reviewing court saw
fit to substitute Esorfranki as the successful bidder despite a
prayer to this effect. Mindful that
there was a discretion to be
exercised by the public body, the court required that the matter be
remitted for the exercise of that
discretion. There was nothing in
the judgments to indicate how that discretion should be exercised.
[109]
One cannot discount the
possibility that no tender would have been awarded at all. The
invitation to bid pertinently stated that
there was no obligation to
award the tender. No evidence was led that there was any compunction
for the tender to be awarded. This
situation differs from that of
Gore
where evidence was led on this aspect, and rejected.
Gore
dealt with racialised social pensions. The State Tender Board and the
Cape Provincial Administration were both under great political

pressure to award the tender and were very eager to do so. As the
Court held: ‘
Ultimately it is
clear that both the CPA and the State Tender Board were desperately
keen to award the tender. Enormous pressures
were brought to bear
upon them to find a solution for the fraud that was rampant with
welfare payments, not least because the extent
of the fraud had
received considerable coverage in the press. Apart from the enormous
financial consequences, it therefore also
became a political
embarrassment. . .
’
[45]
[110]
This matter dealt with an
entirely different scenario. Relying on the affidavits in the review
applications as amounting to the
totality of evidence in the trial
court was ill-conceived. The considerations in an application to set
aside a decision to award
a tender are different to those that are
required to prove all the elements of delict. For this reason, I
agree that the high court
was incorrect in finding that the matter
was
res judicata
.
However, absent any cogent evidence to show otherwise, I am of the
view that Esorfranki has not shown that it would have been
awarded
the contract absent fraudulent conduct on the part of the
municipality. For  the reasons stated above Esorfranki has
not
shown factual causation on a balance of probabilities.
[111]
Once a plaintiff fails to
establish factual causation that should be the end of the matter and
it is not necessary to deal with
legal causation. In this matter
Esorfranki fails on both legs of the enquiry.
[112]
The purpose of legal
causation, which has been described as the remoteness of damage, is
to fix the outer limit of liability by
determining whether or not a
factual link between the conduct and the consequence should be
recognised in law. Various tests for
legal causation have been used
over the years. They include reasonable foreseeability,
[46]
adequate cause,
[47]
direct consequence
[48]
as well as notions of reasonableness, fairness, legal policy and
justice. No test for legal causation should be applied dogmatically

and all the theories are but factors making up the elastic criteria
of legal causation.
[49]
[113]
Legal causation has been
differentiated from factual causation in the following manner in
LAWSA:
‘
Although a
factual link exists between the conduct and the harmful consequences,
courts must strike a proper and equitable balance
between the
interests of the wrongdoer and of the innocent victim, even if it
does on occasion result in anomalies. In essence,
therefore, the
question of legal causation is not a logical concept concerned with
causation but a policy-based reaction, involving
a value judgment and
applying common sense, aimed at assessing whether the result can
fairly be said to be imputable to the defendant.
In reaching that
conclusion, constitutional imperatives also play a part.’
[50]
[114]
The high court accepted that
factual causation had been shown. In this respect it erred. The
difficulty it had was with legal causation,
firstly because
Esorfranki had not been substituted as the successful bidder in
either the high court or this Court in the review
proceedings.
Secondly because it had an opportunity to bid for the re-advertised
tender by the National Department of Water Affairs
(the Department).
The high court held that because this Court in the review appeal
found that the works commenced by the Joint
Venture were far from
completion, the re-advertised tender was merely a sequel to the
original tender. As it had failed again to
win the tender, this was a
‘classic case’ of
novus
actus interveniens.
[115]
A
novus
actus interveniens
is
an independent event which, after the wrongdoer’s act has been
concluded, either caused or contributed to the relevant
consequences.
It usually refers to the intervening act of a third party which
breaks the chain of causality or, in some instances,
the actions of
the wronged party itself. A
novus
actus interveniens
is one of the myriad of factors to be considered when determining
causation. It can go to legal causation or factual causation.
Where
it extinguishes the causal connection between the act of wrongdoer
and harmful result of the act, it is a determining factor
in factual
causation.
[116]
Legal causation is implicated
where the
novus actus interveniens
influences the
result to such an extent that the result can no longer be solely
imputed to the actor, although its conduct remains
the factual cause
of the result. This occurs when the impugned conduct is the initial
cause of the harm but there is an intervening
act which materially
reduces the extent of the harm suffered. It goes to limitation of
liability and thus whether policy considerations
of reasonableness,
justice and equity dictate the consequence of the conduct be imputed
to the wrongdoer. Foreseeability and direct
consequence are not
discarded as determinants of legal causation but rather play a
subsidiary role in this flexible approach.
[51]
[117]
Cycad’s and Esorfranki’s
review appeal was partially upheld by this Court. It declared that
the contract between the
Joint Venture and Mopani was void
ab
initio
and set
aside. Instead of substitution, it was ordered that the Department
determine the extent of the required remedial works
and the total
work required to complete the works. Once this was completed the
tender was to be re-advertised. The bids would be
evaluated,
adjudicated upon and an award made. This was carried out by the
Department and, in accordance with the order of this
Court, Mopani
played no role.
[118]
Esorfranki again put in a bid
in the sum of approximately R421 million. It should be noted
that Esorfranki’s original
tender was for approximately
R207 million, some R10 million less than the
Joint Venture’s bid, and a substantially
lesser amount
than the bid submitted for the Department’s tender. Again
Esorfranki was unsuccessful. The tender was awarded
to Vharanani
Properties (Pty) Ltd who put in a substantially higher bid, for
almost R594 million. This was more than R170 million
higher
than Esorfranki’s bid, as compared to the R10 million
difference between Esorfranki and the Joint Venture’s
initial
tender bids. Again Esorfranki sought to urgently interdict the award
of the tender, this time to Vharanani. The matter
was struck from the
roll due to lack of urgency and, it seems, has not been taken
further.
[119]
The judgment of Goosen AJA
accepted Esorfranki’s argument that this tender was for
remedial works and the completion of the
works and therefore was not
the same contractual opportunity. While it may have been ‘a
sequel’ to the original tender,
the judgment finds that it is a
manifestly different tender. It thus does not constitute a
novus actus interveniens
for purposes of
breaking the causal link. I cannot agree. While the re-advertised
tender might not directly impact on factual causation,
if one
applies the flexible criteria of legal causation, it certainly
mitigates against a finding of imputability. The view favoured
by
academics is that theories of legal causation are at the service of
imputability and not
vice
versa
. In other
words, courts should do the best they can to be fair to both parties
and be not strait jacketed by any particular theory
of legal
causation. A court is not bound by a single theory but should strive
for an outcome that serves the reasonableness and
justice as embodied
by the legal convictions of the community.
[52]
This may be an imperfect solution but is nonetheless the best that
can be expected of a court.
[120]
In light of the above
considerations, neither the threshold for factual causation nor
legal causation in the context of public
procurement has been met. I
am also of the view that wrongfulness has not been shown.
[121]
In the result I would make the
following order:
The
appeal is dismissed with costs, including the costs consequent upon
the employment of two counsel.
___________________
C
NICHOLLS
JUDGE
OF APPEAL
Mbatha
JA
[122]
I have
had the benefit of reading the judgment of my colleague Goosen AJA.
He found in favour of the appellant in respect of
all the issues on
appeal. I respectfully hold a different view. I endorse the
conclusion of the court a quo in terms of which the
appellant was
non-suited on the bases that the issue of fraud on the part of the
respondent was
res
judicata
;
and the failure of the appellant to prove legal causation. The basis
upon which my view diverges from the judgment of Goosen AJA
are
elucidated below.
[123]
The
elements of the defence of
res
judicata
are set out in para 30 of Goosen AJA’s judgment. The most
contentious of these elements is whether it can be said that the

appellant relied on the same cause of action as before. The concept
of 'cause of action', which is well-established in our law,
entails
‘an inquiry into whether an issue of fact or law was an
essential element of the judgment on which reliance is placed’

(
Royal
Sechaba Holdings (Pty) Limited v Coote and Another
[2014] ZASCA 85
;
2014 (5) SA 562
(SCA);
[2014] 3 All SA 431
(SCA) paras 12-13
).
[124]
In the
context the meaning of cause of action, it is important to bear in
mind that the defence of
res
judicata
is based first, on public policy, in that there should be an end
to litigation; and second, on the hardship to the litigant,
in that
they should not be sued twice for the same cause. (See
Carl-Zeiss-Stiftung
v Rayner and Keeler Ltd and Others
[1966] 2 All ER 536
at 549).
[125]
The
genesis of the defence of
res
judicata
in
this matter arises from the judicial review of administrative action
proceedings that were initially instituted in the high court
(before
Matojane J) and subsequently appealed to this Court. The findings of
both courts are final and binding on all the parties.
The appellant’s
present claim for delictual damages against the respondent is based
on the same affidavits that served before
the courts in the review
application. The appellant further relies on the findings of the
courts insofar as they found that there
was dishonest conduct on the
part of the respondent, which the respondent disputed.
[126]
My view
is that the matter is
res judicata
on the basis that certain issues of fact and law, which are presently
before this Court in the delictual proceedings, were disposed
of in
the review proceedings. In the review proceedings the appellant not
only sought that the award be set aside, but it also
sought an order
substituting it as the successful bidder. Both the high court and
this Court dismissed this prayer. Nonetheless,
in order to conclude
that the award of the tender was unlawful, the high court and this
Court made factual findings that there
had been acts of fraud on the
part of the respondent.
[127]
In the
circumstances, the review proceedings relied on the factual assertion
that there was fraud on the part of the respondent
to establish the
relief claimed. In the present proceedings, although the appellant
sues in delict, it relies on the factual finding
that there was fraud
on the part of the respondent. In the circumstances, on the broad
interpretation of the meaning of cause of
action, it can be said that
the cause of action in the present proceedings was the same as that
of the review proceedings.
[128]
As will
be demonstrated below, the appellant could have invoked, even in the
alternative, the claim to monetary compensation in
its prayers for an
administrative law remedy in the review proceedings. The question
then arises as to why the appellant should
be allowed to make
submissions necessary for a finding of fraud but refrain from
pursuing a claim for monetary compensation in
the review proceedings
and opt instead to subsequently pursue a claim for delictual damages
for loss of profit.
This
would essentially mean that the respondent would be called to defend
the same assertions that arose from the same facts that
had been made
and conclusively determined in previous court proceedings, which is
the precise basis for the existence of the defence
of
res
judicata
.
[129]
In sum,
the review proceedings that culminated in the tender process being
set aside and the subsequent tender process that followed
made
findings with respect to the fraudulent acts of the respondent. Thus,
it extinguished any claim, if any, against the respondent.
I find
that the judgment of Matojane J and that of this Court, on appeal to
it, are binding and final and all the elements of
res
judicata
are, as a result, satisfied.
[130]
In spite
of my finding that the defence of
res
judicata
was established, I shall nonetheless proceed to consider the merits
of the appellant’s claim, specifically whether it established

legal causation. This is in the light of the review proceedings that
set aside the award and ordered a fresh tender process for
the
evaluation of bids for the performance of the remaining work under
the contract.
[131]
The court a quo held that the
appellant failed to prove legal causation. It reasoned that had the
appellant been successful in obtaining
an order for substitution, the
delictual claim against the respondent would not have arisen. The
tender was re-advertised, the
appellant responded to it, but lost. It
found that this was a classic case of the presence of the
novus actus interveniens
.
This broke the link to establish legal causation. I agree with the
conclusion that legal causation was not established.
[132]
The test for legal causation
is trite. The enquiry is whether the wrongful act was sufficiently
closely or directly related to the
loss for legal liability to arise
or whether the loss is too remote. In determining whether legal
causation was established considerations
of public policy apply. Case
law is replete with dicta regarding the extent to which public policy
militates against delictual
liability being extended to cases that
involve administrative law breaches.
[133]
In
Steeenkamp
NO v Provincial Tender Board,
Eastern
Cape
2007 (3) BCLR 300
(CC);
2007 (3) SA 121
paras 28 and 29 the
Constitutional Court acknowledged that everyone is entitled to lawful
administrative action that must be reasonable
and procedurally fair
and that every improper performance of an administrative function
entitles the aggrieved party to appropriate
relief. It further held
that ordinarily a breach of administrative justice attracts public
law remedies.
[134]
The
appellant sought administrative law remedies including those
available in s 8 of the PAJA, where a court could grant a just
and
equitable remedy that includes monetary compensation where
appropriate (see
President
of the
Republic
of South Africa and Another v Modderklip Boerdery (Pty) Ltd
[2005] ZACC 5
;
2005 (8) BCLR 786
(CC); 2005 (5) SA (CC) para 57). It is common cause
that the appellant never sought monetary compensation. Instead, the
appellant
sought substitution which may be granted by a court only in
exceptional circumstances where the outcome is inevitable or a
foregone
conclusion (see
Gauteng
Gambling Board v Silverstar Development Ltd and Other
2005 (4) SA 67
SCA;
Trencon
Construction (Pty) Ltd v Industrial Development Corporation of South
Africa and Another
[2015]
ZACC 22
(CC);
2015 (5) SA 245
(CC) para 47). Of all the available
remedies in the review proceedings, exceptional or otherwise, of its
own volition the appellant
elected to seek a review and setting aside
of the award and, flowing therefrom, substitution and not monetary
compensation even
in the alternative.
[135]
In its
order, this Court set aside the award and ordered a fresh evaluation
of the remaining work of the same contract in a new
tender process.
In spite of the assertion by the appellant that, on the strength of
its bid, it should have been the successful
bidder in the initial
tender it did not appeal this decision of the SCA nor did it
thereafter institute proceedings for delictual
damages arising out of
its loss of profit. The tender was then re-advertised by the
Department of Water Affairs in compliance with
the order of this
Court. The appellant submitted a new bid. The tender was awarded to
Vharanani Properties (Pty) Ltd (Vharanani).
The appellant did not
succeed although its tender was considerably lower than Vharanani and
although the process was conducted
in a fair and transparent manner,
by an independent body.
[136]
In
participating in the new tender process, the appellant thereby
exercised an administrative law remedy granted to it by this Court.

The appellant can therefore not rely on the old cause of action,
which was interrupted by the review proceedings and its submission
of
a new bid to the new tender process. Accordingly, the court a quo was
correct in holding that the tender process by the Department
of Water
Affairs, specifically the submission of a bid by the appellant,
constituted a
novus
actus interveniens
.
It interrupted the chain of events that had arisen from the initial
unlawful tender process which had been conducted by the respondent.

Had the appellant strongly felt entitled to the tender, on any basis,
it could have approached the court to review the decision
of the
Department of Water Affairs. It has not taken this Court into
its confidence as to why it abandoned such process and
opted to
pursue a claim for delictual damages against the respondent.
[137]
This
Court in
Olitzki
Property Holdings v State Tender Board and Another
[2001] ZASCA 51
;
2001 (8) BCLR 779
(SCA);
2001 (3) SA 1247
(SCA) para 42 held that the
loss of profit claimed by the plaintiff would not be an appropriate
constitutional remedy in those
circumstances but at the same time
this Court was of the view that ‘[i]t is, however, not
necessary to decide that a lost
profit can never be claimed as
constitutional damages’. It nonetheless held that
considerations of public policy did not
allow for such a claim.
[138]
Odifin
(Pty) Ltd v Reyneke
[2017] ZASCA 115
;
2018 (1) SA
153
(SCA) paras 16-17
clarified the position pertaining to the delictual liability for pure
economic loss arising from a breach of administrative law.
There, it
was stated that where there was a breach of a statute pursuant to
which the administrative action was taken, and if such
statute on a
proper interpretation confers a delictual remedy, then delictual
liability is possible. The court held that in instances
where the
tender was negligently awarded contrary to the principles of
administrative justice, policy considerations precluded
the
unsuccessful tenderer from recovering delictual damages that were
purely economic in nature.
[139]
In
Trustees,
Simcha Trust v De Jong and Others
[2015]
ZASCA 45
;
2015 (4) SA 229
(SCA);
[2015] 3 All SA 161
(SCA) (para 27)
this Court held that compensation is not available where the
unlawful administrative decision is remitted
back to the
administrator.
Simcha
Trust
further stated (para 28) that the determination of whether the case
is ‘exceptional’ to make an order requiring payment
of
compensation, turns not so much on whether the administrative
decision was ‘conspicuously bad’, but rather on whether

there are unusual circumstances which make it appropriate to order
compensation and not the usual remedy of setting aside and remittal.

Nothing exceptional has been shown by the appellant.
Simcha
Trust
(paras 18 and 28) also held that there is nothing exceptional when a
litigant has an alternative remedy such as the setting aside
and
remittal or even substitution which will effectively rectify that
violation of the right to just administrative action. It
went on to
state that whether a potential damages claim in delict or contract
would constitute an effective alternative remedy,
which could prevent
a case from being ‘exceptional’ is an open question.
[140]
I am
mindful that there are judgments that recognise that delictual
liability should follow where there is dishonest or wrongful
conduct
by the employees of a municipality.
[53]
However, judgments like
Minister
of Safety and Security v Van Duivenboden
2002
(6) SA 431
(SCA);
[2002] 3 All SA 741
(SCA) recognise that redress
can be sought in different ways. There, this Court said the following
(para 21):
‘
When
determining whether the law should recognize the existence of a legal
duty in any particular circumstances what is called for
is not an
intuitive reaction to a collection of arbitrary factors but rather a
balancing against one another of identifiable norms.
Where the
conduct of the state, as represented by the persons who perform
functions on its behalf, is in conflict with its constitutional
duty
to protect rights in the Bill of Rights in my view the norm of
accountability must necessarily assume an important role in

determining whether a legal duty ought to be recognised in any
particular case. The norm of accountability, however, need not always

translate constitutional duties into private law duties enforceable
by an action for damages, for there will be cases in which
other
appropriate remedies are available for holding the state to account.
Where the conduct in issue relates to questions of state
policy, or
where it affects a broad and indeterminate segment of society,
constitutional accountability might at times be appropriately
secured
through the political process, or through one of the variety of other
remedies that the courts are capable of granting.
No doubt it is for
considerations of this nature that the Canadian jurisprudence in this
field differentiates between matters of
policy and matters that fall
within what is called the “operational” sphere of
government though the distinction is
not always clear. There are also
cases in which non-judicial remedies, or remedies by way of review
and
mandamus
or interdict, allow for accountability in an appropriate form and
that might also provide proper grounds upon which to deny an
action
for damages. However where the state’s failure occurs in
circumstances that offer no effective remedy other than an
action for
damages the norm of accountability will, in my view, ordinarily
demand the recognition of a legal duty unless there
are other
considerations affecting the public interest that outweigh that norm.
For as pointed out by Ackermann J in
Fose
v Minister of Safety and Security
in
relation to the Interim Constitution (but it applies equally to the
1996 Constitution):
“
.
. . without effective remedies for breach [of rights entrenched in
the Constitution], the values underlying and the right entrenched
in
the Constitution cannot properly be upheld or enhanced. Particularly
in a country where so few have the means to enforce their
rights
through the courts, it is essential that on those occasions when the
legal process does establish that an infringement of
an entrenched
right has occurred, it be effectively vindicated. The courts have a
particular responsibility in this regard and
are obliged to “forge
new tools” and shape innovative remedies, if needs be, to
achieve that goal.”’
[141]
I
reiterate that in this case the appellant received redress in the
form of an administrative law remedy. Even then, the criminal
justice
system should play its part where dishonest conduct is proved against
state organs, functionaries or officials, rather
than imposing a
financial burden on the public purse and the tax payer for the type
of infractions perpetrated by respondent's
officials in this case.
[142]
In the circumstances, the
appellant has failed to establish legal causation, because of the
presence of the
novus
actus interveniens
and
particularly in light of the interests of public policy which
militate against the extension of delictual liability in these

circumstances. Accordingly, I would dismiss the appeal with costs
including the costs of two counsel.
Y
T MBATHA
JUDGE
OF APPEAL
Appearances
For
appellant:          K W
Luderitz SC (with him C Woodrow)
Instructed by:
Thomson Wilks Inc.,
Sandton
Webbers., Bloemfontein
For
respondent:        W R Mokhare SC
(with him SC Motsepe)
Instructed
by:
Mogaswa Inc., Johannesburg
Morobane Inc., Bloemfontein
[1]
Both Esorfranki and Cycad had commenced review
applications claiming substantially similar relief. The two
applications were consolidated
for hearing purposes.
[2]
Esorfranki Pipelines (Pty) Ltd v Mopani
District Municipality
[2014] ZASCA 21;
[2014] 2 All SA 493 (SCA).
[3]
See para 95 below.
[4]
Ibid at paras 29–30.
[5]
This is a reference to a tender which formed the
subject matter of litigation in the Kwa-Zulu Natal Division of the
High Court
which is to be found in paragraph 47 of Matojane J’s
judgment and is cited by Nicholls JA at para 94 hereunder.
[6]
Paragraphs 12 and 13.
[7]
Esorfranki
(supra)
at para 10.
[8]
Constitution of the Republic of South Africa Act 108 of 1996.
[9]
Esorfranki
(supra)
paragraph 18.
[10]
My emphasis.
[11]
At
1261.
[12]
Paragraph 55.
[13]
Paragraph 23.
[14]
See also
The
Trustees of the Simcha Trust v De Jong and others
[2015] ZASCA 45
;
2015 (4) SA 229
(SCA) at para 30;
South
African Post Office v De Lacy and another
2009 (5) SA 255
(SCA) para 14.
[15]
Paragraph 26.
[16]
Paragraphs 87-88.
[17]
Paragraph
89.
[18]
I have set out in par 15 above why this finding is misplaced.
[19]
At 517.
[20]
Standard Charted Bank of Canada v Nedperm Bank
Limited
1994 (4) SA at 765A-B,
OK
Bazaars (1929) Proprietary Limited v Standard Bank of SA Limited
2002 (3) SA 688
(SCA) para 23.
[21]
Paragraph 25.
[22]
OK Bazaars
(supra)
at para 33.
[23]
In
The
Cape of Good Hope Bank v Fischer
(1885-1886) 4 SC 368
it was found that Roman Dutch Law had extended
Aquilian liability to ‘every kind of loss’ sustained as
a result of
a person’s wrongful actions even if the loss had
not been caused by damage done to corporeal property. In
Dickson
and Co. v Levy
(1894) 11 SC 33
it was
held that a false representation causing damage was only actionable
if it was fraudulent.
Perlman v
Zoutendyk
1934 CPD 151
endorsed the
Dickenson
approach that liability for pure economic loss would only result if
the wrongful conduct was intentional rather than negligent.
[24]
Administrateur, Natal v Trust Bank van Afrika
BPK
1979 (3)
SA 824
(A);
[1979] 2 All SA 270
(A) where
it was accepted that a person who negligently
causes pure economic loss to another could incur delictual liability
if a duty of
care is owed to the wronged person. This requires an
assessment of whether public policy required that the offender ought
to
be placed under a legal duty to compensate that person.
[25]
Telematrix (Pty) Ltd t/a Matrix Vehicle
Tracking v Advertising Standards Authority of
SA
[2006] 1 All SA 6
(SCA);
2006 (1) SA 461
(SCA) para 12;
Home
Talk Developments (Pty) Ltd and Others v
Ekurhuleni Metropolitan Municipality
[2017]
ZASCA 77
;
[2017] 3 All SA 382
(SCA);
2018 (1) SA 391
(SCA) para 1.
[26]
Fourway Haulage SA (Pty) Ltd v SA National
Roads Agency
Ltd
[2008] ZASCA 134
;
2009 (2) SA 150
(SCA);
[2009] 1 All SA 525
(SCA) para 31.
[27]
Telematrix
para
13;
Trustees Two Oceans
Aquarium Trust v Kantey and Templer
(Pty) Ltd
2006
(3) SA 138
(SCA) para 12;
MV MSC Spain;
Mediterranean Shipping Company v Tebe Trading
(Pty) Ltd
[2007] ZASCA 12
; [2007] SCA 12 (RSA);
2008( 6) SA 595
(SCA);
[2007] 2 All SA 489
(SCA) para 14.
[28]
Fose v Minister of Safety and Security
[1997] ZACC 6
;
1997 (3) SA 786
(CC);
Steenkamp v
Provincial Tender Board of the Eastern Cape
[2006] All SA 478
(SCA) held that delictual damages would be
inappropriate against a public authority if there were public law
remedies available;
Steenkamp NO v
Provincial Tender Board, Eastern Cape
2007 (3) SA 121
(CC) para 46.
[29]
Olitzki Property Holdings v State Tender Board
2001 (3) SA 1247
(SCA);
Steenkamp v
Provincial Tender Board, Eastern Cape
2007 (3) SA 121
(CC);
South African
Post Office v De Lacy
and
Another
[2009] ZASCA 45; 2009 (5) SA
255 (SCA); [2009] 3 All SA 437 (SCA).
[30]
Steenkamp v Provincial Tender
Board, Eastern Cape
2007
(3) SA 121
(CC) para 27; see also C Okpaluba ‘Bureaucratic
bungling, deliberate misconduct and claims for pure economic loss in
the
tender process’ (2014) 26 SA Merc LJ 387.
[31]
Transnet Ltd v Sechaba Photoscan (Pty) Ltd
2005 (1) SA 299 (SCA).
[32]
Trotman and Another v Edwick
1951 (1) SA 443
(A) at 449B-C.
[33]
In German law the ‘loss of a chance’
to conclude a favourable contract is primarily a policy issue: 68
RGZ
163;
2
BGHZ
310.
[34]
Minister of Finance
and Others v Gore NO
2007 (1) SA 111 (SCA); [2007] 1 All SA 309 (SCA).
[35]
Ibid para 87.
[36]
Olitzki
Property
Holdings
v
State Tender Board
2001 (3) SA 1247
(SCA) para 31.
[37]
South African Post Office v De Lacy and
Another
[2009] ZASCA 45
;
2009 (5) SA
255
(SCA);
[2009] 3 All SA 437
(SCA) paras 2 and 3.
[38]
Steenkamp
v
Provincial Tender Board, Eastern Cape
2007 (3) SA 121
(CC) para 56.
[39]
See also
Gore
above
note 12 para 83.
[40]
See UK cases:
McGhee
v National Coal Board
[1972] 3 All ER
1008
(HL);
Barker v Corus (UK) Plc
[2006] UKHL 20
;
Sienkiewicz v Greif
(UK)
Ltd
[2011] UKSC 10.
Canadian cases which
re-affirmed the but-for test for factual causation are
Resurfice
Corp v Hanke
(2007) SCC 7
,
[2007] 1
SCR 333
para 21;
Clements (Litigation
Guardian Of) v Clement
s
(2010) BCCA
581
para 40-41. The Australian case
March
v E and MH Stramere Pty Ltd
[1991] HCA 12
;
(1991) 171
CLR 506
concluded that the but-for test is not conclusive, rather
causation should be determined by common sense.
[41]
International Shipping Company (Pty) Ltd
v
Bentley
[1990] 1 All SA 498
(A) at 516.
[42]
Ibid at 516.
[43]
Lee v Minister of Correctional Services
[2012] ZACC 30
;
2013 (2) BCLR 129
(CC);
2013 (2)
SA 144
(CC);
2013 (1) SACR 213
(CC) para 39.
[44]
Mashongwa v Passenger Rail Agency South Africa
[2015] ZACC 36
;
2016 (2) BCLR 204
(CC);
2016
(3) SA 528
(CC) para 65.
[45]
Gore
above note
12 para 79.
[46]
According to the reasonable
foreseeability test a defendant is held liable only for those
factual consequences of his or her conduct
which were reasonably
foreseeable.
[47]
According to this test
if
the harm is the likely result of a normal course of events, then the
cause is said to be ‘adequate’ for the purposes
of
liability.
[48]
According to the theory of
direct causation, the defendant is liable for the direct factual
consequences of his or her wrongful
conduct.
[49]
Fourway Haulage
SA (Pty) Ltd v
SA National Roads Agency
Ltd
[2008] ZASCA 134
;
2009 (2) SA 150
(SCA);
[2009] 1 All SA 525
(SCA)
paras 33-35;
Standard Chartered Bank of
Canada v Nedperm Bank Ltd
[1994] ZASCA 146
;
1994 (4) SA
747
(AD);
[1994] (2) ALL SA 524
(A);
S
v Mokgethi
1990 (1) SA 32
(A).
[50]
15
Lawsa
3
ed para 181.
[51]
S v Mokgethi
1990 (1) SA 32
(A) 40-41;
Fourway
Haulage (Pty) Ltd v National Roads Agency
[2008] ZASCA 134
; 2009 (2) 150 (SCA);
[2009] 1 All SA 525
(SCA) para
34;
Premier of Western Cape and Another
v Loots NO
[2011] ZASCA 32
; See also J
Neethling
and J M Potgieter
Law
of Delict
7
th
ed (2014) at 200-203.
[52]
J C Van der Walt and J R Midgley
Principles
of Delict
4
th
ed (2016) at 295; J Neethling and J M Potgieter
Law
of Delict
7
th
ed (2014) at 202;
Minister of Safety
and Security and Another v Rudman and Another
2005 (2) SA 16
;
[2004] 3 All SA 667
(SCA) para 81.
[53]
Telematrix (Pty) Ltd t/a Matrix Vehicle
Tracking v Advertising Standards Authority of SA
[2005] ZASCA 73
;
[2006] 1 All SA 6
(SCA) paras 13-14;
Black
v Joffe
2007
(3) SA 171 (C)
;
[2007]
2 All SA 161
(C)
at
23-25.