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[2008] ZAWCHC 62
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Manong & Associates (Pty) Ltd v City Manager, City of Cape Town and Another (9934/2005) [2008] ZAWCHC 62; 2009 (1) SA 644 (EqC) (12 November 2008)
REPUBLIC OF SOUTH AFRICA
IN THE HIGH COURT OF SOUTH AFRICA
(CAPE OF GOOD HOPE PROVINCIAL DIVISION)
REPORTABLE
EQUALITY COURT CASE No: 12478/08
In the matter between:
MANONG & ASSOCIATES (PTY) LTD Complainant
and
CITY MANAGER, CITY OF CAPE TOWN First Respondent
FUTUREGROWTH PROPERTY DEVELOPMENT
COMPANY (PTY) LTD Second Respondent
_____________________________________________________________________
SECOND LEG OF THE ENQUIRY
JUDGMENT DELIVERED : 12 NOVEMBER 2008
________________________________________________________________________
On behalf of Complainant : In Person
Attorney(s) :
On behalf of First Respondent : Adv I Jamie SC et Adv R Paschke
Attorney(s) : Webber Wentzel
On behalf of Second Respondent : Adv N Arendse SC et Adv M
Janisch
Attorney(s) : Cliffe Decker Hofmeyr
Heard on : 2007: November: 5, 6, 7, 8, 9, 12, 13, 14, 22
2008: March: 10, 11, 12, 14, 17
July: 28, 29, 30, 31
Aug: 6, 7, 8
CAV on 8 August 2008
Republic of South Africa
IN THE HIGH COURT OF SOUTH AFRICA
(CAPE OF GOOD HOPE PROVINCIAL DIVISION)
REPORTABLE
EQUALITY COURT CASE No: 9934/2005
In the matter between:
MANONG & ASSOCIATES (PTY) LTD Complainant
and
CITY MANAGER, CITY OF CAPE TOWN First Respondent
FUTUREGROWTH PROPERTY DEVELOPMENT
COMPANY (PTY) LTD Second Respondent
_____________________________________________________________________
SECOND LEG OF THE ENQUIRY
JUDGMENT DELIVERED : 12 NOVEMBER 2008
________________________________________________________________________
MOOSA, J:
Introduction
This is the second leg of the enquiry. The court delivered judgment
in respect of the first leg of the enquiry which related
to the
determination of certain preliminary issues of law. The judgment was
reported as
Manong & Associates (Pty) Ltd v City of Cape Town
and
Others
[2007] 4 All SA 1452
(C). Pursuant to the
court’s findings, the court issued two further directions with
regard to the issues to be adjudicated
upon in this leg of the
enquiry. They are:
Whether complainant has unfairly been discriminated against by
respondents on the basis of race in not being allocated the civil
engineering contract for the KBD (Twenty Fifth Direction);
Whether first and third respondents unfairly discriminated against
complainant on the basis of race in the allocation of any
other
civil engineering contracts for the area of Khayelitsha as a whole
(Twenty Sixth Direction)
The nature of the complaints
The complaints are set out in paragraph 7 of complainant’s
founding affidavit as follows:
“…
to review the policy of first
and second respondents in appointing civil engineering consultants to
do work in Khayelitsha in general
and for the proposed KBD in
particular which policy or practice is construed as deliberately and
unfairly limiting access to the
contractual opportunities for the
provision of professional services to the complainant.”
The specific prohibited grounds of unfair discrimination that
complainant relies on is its exclusion under respondents’
practice that appears to be legitimate, but which is aimed at
maintaining exclusive control by a particular race group. The effect
whereof is to deny complainant access to contractual opportunities
for rendering professional services at a fee or to mask respondents’
failure to take steps to reasonably accommodate complainant in
accessing such opportunities.
Response to the complaints
First respondent denied that complainant made out a case against it
in that complainant has been excluded from procurement opportunities
in Khayeltisha on the grounds of race. First respondent states that
it did not appoint consultants for the KBD project but, in
any case,
complainant is not seeking any relief against first respondent
arising from the proposed KBD project.
Second respondent averred that complainant had failed to set out a
factual basis that it has been guilty of the act of discrimination
against complainant on the basis of race. Similarly, the averment
that the appointment of Axis Consulting (“Axis”)
was
“
aimed at maintaining exclusive control by a particular
group”
is without any factual foundation. There is no
causal link between the appointment of Axis and second respondent as
the contractor,
WHBO, appointed Axis to the KBD project.
Third respondent, which is wholly owned by the Khayelitsha Community
Trust (“KCT”), has not opposed the proceedings
and is
not legally represented in these proceedings. In any case,
complainant is not seeking any relief against third respondent.
The
court has already found that third respondent is a municipal entity
and as such an organ of state.
The parties
It is common cause that, prior to the democratic elections of 27
April 1994, Khayelitsha was controlled and administered by
Lingelethu West Transitional Council (“Lingelethu”).
After such elections, Lingelethu was incorporated into the City
of
Tygerberg (“CoT”) and Khayelitsha was controlled and
administered by such municipal authority. Following the local
government elections of 2000, CoT was incorporated into the Unicity
of Cape Town and became part of the structure of first respondent.
Since then Khayelitsha was controlled and administered by first
respondent.
The civil engineering practice of complainant was founded by Stanley
Manong in 1995 under the name and style of Manong &
Associates.
It initially operated from Cape Town and concentrated on
developmental projects particularly in the black townships.
With the
passage of time, it became involved in more challenging projects in
the broader Cape Town area. As the demand for its
professional
services extended to other centres of the country, it expanded its
presence to such areas. It presently has offices
in most of the
major centres of the country. The practice at the same time expanded
exponentially from a one person practice
to a partnership and then
to a close corporation and finally to a private company. With the
passage of time, the professional
component of the staff also
increased exponentially as the demand for its services increased. It
presently has a professional
staff complement comprising four full
time directors who are qualified engineers, five professionals
heading the five offices
in the various centres, three professional
associates and eleven professional technical staff. The firm boasts
of appointments
as consulting civil, structural and developmental
engineers in large projects by the public, private and para-statal
sectors.
Second respondent is described as a property development and
management company which specialises,
inter alia
, in managing
retail development projects. Second respondent was drawn into the
KBD project by Rand Merchant Bank (“RMB”)
which was
appointed by first respondent to source and secure necessary private
sector funding for the project. Third respondent
appointed second
respondent as the developer of the project on a turn-key “
design,
develop and deliver”
basis.
Third respondent is the wholly owned company of the Khayelitsha
Community Trust (“KCT”) which was formed by first
respondent for the benefit of the community of Khayelitsha. The
court found that, like KCT, third respondent is a municipal entity
and as such an organ of state as defined in the Municipal Systems
Amendment Act of 2004. KCT assigned the leasehold and development
rights of the KBD site to third respondent.
The Rule of Law
The foundational values of our democracy are underpinned by human
dignity, the achievement of equality and the advancement of
human
rights and freedoms within the context of the rule of law. Section 9
of our present Constitution in broad outline sets
out the various
components making up the right of equality. They include the nature
of the right, the positive measures to achieve
such right and the
prevention and prohibition of unfair discrimination. The section
provided for National legislation to be enacted
within three years
of the coming into effect of the new Constitution, to promote
equality and to prevent and prohibit unfair
discrimination. The
Promotion of Equality and Prevention of Unfair Discrimination Act,
No 4 of 2000 (“PEPUDA”) was
enacted in pursuance to such
Constitutional injunction. The equality jurisprudence developed by
the constitutional court up to
that stage influenced the drafting of
PEPUDA. Such jurisprudence, the equality provisions of the
Constitution and the provisions
of PEPUDA are not mutually
exclusive. They in fact complement each other. In my view the
enquiry postulated by the 25th and 26th
Directions falls to be
determined under PEPUDA, but in consonance with S 9 of the
Constitution, as the facts with regard to the
two enquiries straddle
the periods both pre and post the coming into operation of PEPUDA. I
will return to this issue later.
Section 217 of the Constitution provides that when an organ of state
contracts for goods or services, it must do so in accordance
with a
system which is fair, equitable, transparent, competitive and
cost-effective and nothing prevents such organ of state
from
implementing a procurement policy providing for the protection or
advancement of person or categories of persons, disadvantaged
by
unfair discrimination.
The Constitutional Court identified dignity as a core value and
purpose of the right to equality and in
President of the RSA and
Another v Hugo
1997 (4) SA 1
(CC) at Para 41,
Goldstone J
said the following:
…
At the heart of the prohibition of
unfair discrimination lies a recognition that the purpose of our new
constitutional and democratic
order is the establishment of a society
in which all human beings will be afforded equal dignity and respect
regardless of their
membership of particular groups. The achievement
of such a society in the context of our deeply inegalitarian past
will not be
easy, but that is the goal of the Constitution should not
be forgotten or overlooked.”
Burden of proof
In terms of S 9 of the Constitution the onus is on the complainant
to establish discrimination on the basis of race. Once the
complainant has discharged such onus, S 9(5) creates a
rebuttable presumption of unfair discrimination. In such event the
burden of proof shifts to the respondents who must show, on a
balance of probabilities, that the discrimination is fair. In terms
of S 13 of PEPUDA all complainant is required to do in order to
discharge its onus, is to make out a
prima facie
case of
discrimination based on race. In that event the burden of proof
shifts to the respondents who must show either that discrimination
did not take place or that the impugned conduct is not based on
race. If respondents succeed, the matter ends there. If respondents
fail, the rebuttable presumption of unfair discrimination kicks in.
In that event, respondents must prove that the discrimination
is
fair. The overall onus, as we know it, at all times, rests with the
complainant who must prove on a balance of probabilities
that he has
been discriminated against by the respondents. The rebuttable
presumption which is an evidential burden assists complainant
to
cross the hurdle from
prima facie
proof to proof on a balance
of probabilities. ( See:
Tregea v Godart
1939 AD 16
at 28;
Pillay v Krishna
1946 AD 946
at
952
; and a
comprehensive discussion on the question of onus in the persuasive
minority judgment of
Grosskopf JA in the case During NO v Boesak
and Another
[1990] ZASCA 51
;
1990 (3) SA 661
at 666 et al)
.
Retrospectivity of the Equality Act and issue of prescription
During the course of the hearing counsel for first respondent
brought the attention of the court to a recent authority dealing
with the retrospectivity of the Equality Act. In
Maharaj v
National Horseracing Authority of Southern Africa
2008 (4) SA 59
(N), the court held that the Equality Act was not retrospective in
effect as there was no indication in the Equality Act that
the
legislature intended the provisions of the Act to operate
retrospectively. This issue was not raised in the papers. However,
there might be strong argument to be made out for a case of
retrospectivity of the Equality Act. Firstly, the right to equality
and the obligation to prevent and prohibit unfair discrimination are
Constitutional imperatives; secondly, the Constitution enjoins
the
legislature to enact legislation to promote equality and to prevent
and prohibit unfair discrimination within three years
from the
coming into operation of the final Constitution; thirdly, the
Equality legislation was designed to give flesh to the
Constitutional right and obligation pertaining to equality and
lastly, the Equality Act is essentially procedural in nature.
Adv
Jamie
submitted that the decision was persuasive as it
has been handed down by a bench comprising two judges and we should
accordingly
follow such authority. The doctrine of
stare decisis
obliges a court of lower jurisdiction to follow the decision of a
higher court. It is, however, not obliged to follow the decision
of
a court of equal standing. A decision of a fuller court in the same
division is binding on a lesser court of the same division.
However,
the decision of a fuller court of another division is not binding,
but is persuasive. (See:
Lawsa
: Second Edition, Volume 5 part
2 at para 163). We will accept the correctness of the
ratio
decidendi
of the
Maharaj
case
(supra)
for reasons
that follow: Firstly, the issue of retrospectivity was not fully
ventilated before us; secondly
,
the
Maharaj
case was
an appeal from a lower court and was heard by a bench comprising two
judges; thirdly, in our law, there is a presumption
against
retrospectivity; and fourthly, we cannot say with any degree of
certainty that the decision is wrong.
The relevant section of the Equality Act came into operation on 16
June 2003. Complainant instituted proceedings in this matter
in
March 2005. We will accordingly adjudicate on cause of action
pertaining to conduct, events, practices and policies that arose
after 16 June 2003. Although the issue of prescription was likewise
not raised in the papers, Adv
Jamie
, on behalf of first
respondent,
ex abundante cautela
, invoked the defence of
prescription in respect of all events that occurred before March
2002, should the court hold that the
Equality Act had retrospective
effect. Adv
Jamie
conceded that the court is entitled to have
regard to facts and circumstances prior to 16 June 2003, provided
they do not in
themselves constitute the cause of action.
The Broader Enquiry
Introduction
The court decided to hear evidence in respect of the enquiry arising
from the Twenty-sixth direction (“the broader enquiry”).
As such enquiry affected first and third respondents only and second
respondent had no interest in the outcome thereof, the parties
agreed and it was so directed (Twenty-Seventh Direction), that the
presence of second respondent and its legal representatives
be
excused from such enquiry. This was done to save costs. The broader
enquiry did not involve third respondent. For the purpose
of the
broader enquiry, complainant tendered the oral evidence of Stanley
Manong (“Manong”), Lyndon Davids (“Davids”)
and Dr Mlamli Magqwaka (“Magqwaka”) while first
respondent tendered the evidence of Hendrik Barnard (“Barnard”).
The complainant, in its further particulars, amplified its cause of
action against first respondent in respect of the broader
enquiry as
follows:
“
40.1 The complainant in its complaint of
unfair discrimination against the first respondent relies on its
exclusion from the procurement
process in Khayelitsha on direct
discrimination against it as witnessed by the behaviour of Barnard in
the Lookout Hill project;
40.2 …
40.3. The policy of first respondent of appointing consultants,
“HCB1” found on page 166 of the record is deemed to be
imposing conditions which are unfairly discriminating to the
complainant;
40.4 …
40.5. The prohibited grounds of unfair discrimination on which the
Complainant relies are sections 7(c) and 7(e) of the Act. The
rules
and practices are contained in HCB1…”
The first respondent’s policy contained in HCB1 is the
Preferential Procurement Policy Initiative which came into operation
in September 2003.
The facts
According to Manong, complainant, in or about 1998, started to
actively market itself and its professional services, both in
writing and orally, to Lingelethu and CoT which controlled and
administered the area of Khayelitsha. However, it found resistance
to its appointment from certain officials. Through the intervention
of certain politicians and officials, complainant received
two
appointments in Khayelitsha. The one was a joint appointment with
Wouter Engelbrecht for the planning of a sport facility
in which the
fees were limited to R50 000 and which had to be shared between the
joint appointees. This work fell essentially
within the expertise
and scope of townplanners and not civil engineers. The other was a
joint appointment with Eamon O’Rourke
Landscape Architects
(“O’Rourke”) for the first phase of the Lookout
Hill which was made in February 2000.
In February 2002, appointments
were made in respect of Phase 2 of the Lookout Hill project, but the
complainant was not re-appointed.
Manong testified that both the Khayelitsha projects were not
profitable and were financially disempowering. He maintained that
complainant was set up for failure which was racially motivated.
Besides the financial aspects, the project which impacted negatively
on complainant was the first phase of the Lookout Hill project.
Because there was no formal letter of appointment from CoT clearly
delineating the functions and responsibilities of the professionals,
there was some confusion as to who was the principal agent.
According to Barnard, they were equal consultants and there was no
principal and sub-consultant relationship. However, it appears
that
complainant claimed for “oversight” fees in that his
fees were calculated on the total value of work done on
the project
including work designed by O’Rourke.
According to the Minutes of the site meetings which were discovered,
certain issues were raised, as is customary, at the site
meetings
but they were never in the form of formal complaints. The Minutes
indicate that, depending on the nature of the issues,
the matter was
passed on to either complainant, O’Rourke or to the Contractor
for further attention. The Minutes also indicate
that a special
meeting was held on 13 December 2000 to discuss outstanding issues.
The meeting was attended by Barnard and Mr
Buhr representing CoT, Mr
D van Nieuwenhuizen representing O’Rourke and Davids
representing complainant. Certain issues
were of a structural nature
and were passed on to the complainant to sort out and others were of
an environmental nature and
passed on to O’Rourke to sort out.
Complainant was not appointed to the second phase of the Lookout
Hill projects despite the fact that Magqwaka & Associates,
as
the principal agent, recommended complainant. This project went out
on a proposal call and various disciplines grouped together
and
submitted their proposals to obtain the work. Magqwaka headed one of
the groups. Magqwaka testified that he dropped complainant
because
of the objection raised by Anton Groenewald (“Groenewald”)
and Barnard. The reason for the objection given,
was because of
underperformance in phase one of the project. Magqwaka was somewhat
ambivalent why complainant was not appointed
to the second phase of
the Lookout Hill project. Both Manong and Davids testified that at
no stage was such underperformance
ever communicated to complainant.
According to the objective evidence, the question of
underperformance, if any, was satisfactorily
resolved at a meeting
called by complainant with Barnard and held on 11 February 2002.
First respondent was burdened with the onus of showing on a balance
of probabilities that the discrimination did not take place
or that
the impugned conduct was not based on race or that the
discrimination was fair. The thrust of first respondent’s
case
was that the discrimination did not take place. Barnard was somewhat
ambivalent about the objection to the appointment of
complainant to
the second phase of the Lookout Hill project. He confirmed that his
reservation with complainant in respect of
the first phase of the
project was of a technical nature and he had no difficulty with
complainant’s appointment for the
second phase of the project.
It is common cause that complainant was not re-appointed to the
second phase of the project nor for any other projects in
Khayelitsha.
There was a duty on first respondent to have undertaken
a formal performance evaluation of complainant on completion of the
first
phase of the project. This may have resulted in the
implementation of remedial measures, if any, to ensure better
performance
on the part of complainant in the second phase of the
Lookout Hill project if it was appointed. In any case Barnard
indicated
that he had no problem with its re-appointment. It was a
policy of first respondent to re-appoint consultants who had been
appointed
to earlier phases of projects. Barnard could give no
reason why complainant was not re-appointed for the second phase of
the
Lookout Hill project.
The failure of first respondent to do a formal performance
evaluation of phase one, negatively impacted on complainant and
prejudiced it from being appointed to the second phase of the
Lookout Hill projects and to any other subsequent civil engineering
contracts in Khayelitsha. From the objective facts the only
reasonable inference we can draw is that complainant was excluded
from the second phase of the Lookout Hill project on the basis of
race and such exclusion continued on subsequent appointments.
Evaluation
With that background, we turn to discuss the measures introduced by
CoT to affirm the appointment of black professional firms.
First
respondent admitted in its papers that black individuals and
entities have historically been discriminated against on the
basis
of race more particularly in the Western Cape. But since 1994, there
have been clear and concerted strategies put in place
to halt and
reverse such discrimination. Barnard testified that prior to
September 2003 and while Khayelitsha was part of CoT,
it implemented
an affirmative action policy in terms of which 30% of the value of
the projects were reserved for persons who,
or entities that were
historically disadvantaged. He testified that entities with 1% black
ownership qualified for such status.
This threshold in respect of
entities diluted corrective and restorative measures designed to
protect and advance persons and
categories of persons disadvantaged
by unfair discrimination and cannot, by any stretch of one’s
imagination, amount to
a genuine attempt on the part CoT to have
affirmed black professional firms.
Professional firms previously advantaged could have obtained
disadvantaged status and benefited from such measure or practice
by
getting on board black professionals with 1% interest. Such move
would have defeated the very object of these measures and
undermined
genuine attempts to promote the achievement of equality. In our
view, such policy and practice while it appears to
be legitimate, is
actually aimed at maintaining exclusive control by members of the
white group.
Barnard in his evidence alluded to the fact that for certain periods
the target of 30% was not achieved. Surely there would have
been
sufficient takers in the black professional fraternity to meet the
target if a concerted effort was made to bring such opportunities
to
their attention. We know for a fact that complainant was “
begging”
for civil and structural engineering opportunities and was not
considered for such projects.
Barnard testified that the new Procurement Policy Initiative (“PPI”)
came into operation in September 2003. The application
of such
policy was dependent on the Tradeworld Database which had to provide
information as to the value of work obtained by
any particular
consultant during a pre-determined period. At the time the database
was defective and was unable to generate information
concerning the
value of contracts awarded to consultants and could not provide the
shortlist of candidates that had to be scored.
The particular
information was accordingly based on the official’s own
assessment of which consultants should be short
listed for the
purpose of the scoring exercise and the information was obtained
from the parties short listed. This entailed
a degree of
subjectivity. It is common cause that complainant was not short
listed for such appointments. We are satisfied that
there was
resistance from certain white officials of first respondent to
appoint complainant for projects in Khayelitsha. In
our view the
question of underperformance was a red herring. The only reasonable
inference the court can draw is that complainant
was excluded
because of race.
Barnard testified further that he and his colleague, Tertius De
Jager (“De Jager”) who was responsible for recommending
civil and structural engineers to a council committee, altogether
recommended 25 such appointments since 2000. Of these, half
of them
were reappointments and the rest were new appointments. Complainant
was not one of the 25. The re-appointments were justified
on the
basis that the consultants worked previously on the project or had
special expertise and skills. Barnard stated that such
re-appointment of consultants is specifically catered for in first
respondent’s procurement policy. In terms of such policy,
special circumstances could warrant deviation from the selection
process. This, however, does not detract from the constitutional
obligation of first respondent to empower and affirm consultants
which have been disadvantaged in the past because of race. Barnard
conceded that nothing prevented them from making joint appointments
but such possibility to affirm previously disadvantaged consultants
was not given consideration.
Historically, all major civil and structural engineering contracts
were awarded to white firms. It effectively meant that, in
terms of
this policy, any subsequent work to be performed on those sites had
to be awarded to the same firm. This flies in the
face of the
Constitutional measures “
to protect or advance persons or
categories of persons disadvantaged by unfair discrimination”
.
Generally, it makes good sense to make re-appointments, but where it
exclusively benefits those firms which have been advantaged
historically, such re-appointments would, in my view, not be
legitimate. It could, however, be legitimate if such re-appointments
were paired with black firms, in terms of which, the expertise of
the white firms, especially those with specialized skills,
were
transferred to such black firms to ensure that the playing field
becomes level with the passage of time. Such strategy would
not only
have been beneficial to the client, but would also have benefited
the white firms and at the same time have affirmed
the black firms.
We therefore conclude that such policy, although it appears to be
legitimate on the face of it, perpetuates
unfair discrimination on
the basis of race and has the effect of maintaining exclusive
control of such professional work in the
hands of white professional
consultants.
Can a juristic person be the victim of racial discrimination?
The final issue the court has to decide is whether complainant as a
company can be a victim of discrimination on the basis of
race. The
first defendant contended that an entity such as a complainant being
a juristic person, cannot suffer racial discrimination.
It submitted
that only natural persons can be victims of racial discrimination.
Consequently, it was argued that the complainant’s
complaint
is misguided. We will examine that proposition. In
Dadoo Ltd and
Others v Krugerdorp Municipality Council
1920 AD 530
, the
Appellate Division has recognised the separate legal personality of
a company as distinct from that of its shareholders.
Our company law
has also entrusted corporations with such status. In amplifying such
status,
Joubert AJA in Ngcwase v Terblanche
1977 (3) SA 796
(A) at 803H said that a corporation is “
a statutory
juristic person (persona juris) ...in law considered to be an
abstract legal entity which exists as a juristic reality
in the
contemplation of law despite the fact that it lacks physical
existence
”. Our courts have also recognised that a
juristic person or universitas has the right to a reputation, good
name and fame.
(
Dhlomono v Natal Newspapers (Pty) Ltd
1989
(1) SA 945
(A)), the right to privacy (
Financial Mail (Pty) Ltd v
Sage Holdings Ltd
[1993] ZASCA 3
;
1993 (2) SA 451
(A)) and the right to identity
(
Universiteit van Pretoria v Tommie Meyer Films
1979 (1) SA
441
(A)). It is therefore axiomatic that a juristic person, like a
natural person, could also enjoy the right to equality. These
rights, in my view, are distinct from and independent of the right
to dignity. A juristic person is likewise bound to the duties
and
obligations flowing from such rights.
The next question to be answered is whether a company as a juristic
person can be discriminated against on the basis of race.
Although a
company has a separate legal personality from that of its
shareholders, it is controlled by such shareholders. The
company, as
a juristic person, is a commercial mechanism used by its
shareholders to conduct a commercial enterprise for their
benefit.
In a dictum
Innes CJ
in
Dadoo Ltd and Others v Krugerdorp
Municipal Council
(
supra
) at 550/1 said the following:
“…
This conception of the existence
of a company as a separate entity distinct from its shareholders is
no merely artificial and technical
thing. It is a matter of
substance; … cases may arise concerning the existence or
attributes which in the nature of things
cannot be associated with a
purely legal persona. And then it may be necessary to look behind the
company and pay regard to the
personality of the shareholders, who
compose it.”
In
Daimler Co Ltd v Continental Tyre and Rubber Co (Great
Britain) Ltd
1916-1917 All ER Rep 191
(HL) the plaintiff company
was controlled by German shareholders and directors and the company
was accordingly held by the House
of Lords to be enemy alien.
Lord
Parker,
in commenting on the question of control, said that as
the shareholders character would imbue the company’s
character, it
was necessary: “
for certain purposes a Court
must look behind the artificial persona – the corporation –
and take account of and be
guided by the
personalities of the
natural persons, the corporators”.
In that case, reliance
was placed on the judgment of
Lord Lindley
in
Janson v
Driefontein Consolidated Mines Ltd
1902 AC 484
, in which the
House of Lords, on the question of corporate nationality, held that
during the British/Boer war a company registered
in the Transvaal
Republic did not cease to be an “
enemy company”
simply because the majority of its shareholders were English.
The constitution vests a juristic person with the rights in the Bill
of Rights to the extent required by the nature of the rights
and the
nature of the juristic person. In this matter we are seized with the
right to equality. The nature of such right is predicated
on the
premise that everyone is equal before the law and has the right to
equal protection and benefit of the law. There is nothing
to gainsay
that a company which has a separate legal personality cannot enjoy
equality before the law and protection and benefit
of the law. The
difficulty, however, arises when it comes to the prohibition of
unfair discrimination on certain specified grounds,
which
essentially embraces human attributes. One of those grounds that we
are called upon to consider in this matter is discrimination
on the
grounds of race. During the apartheid era, companies, in terms of
the Group Areas Act, were imbued with racial characteristics.
The
racial profile of the company was determined by the racial profile
of the shareholders controlling the company and the company,
despite
its separate corporate personality, suffered the same fate and
racial discrimination as its controlling shareholders.
I therefore
see no reason why in principle on the basis of public policy, such
companies cannot benefit from the constitutional
measures designed
to protect or advance persons (including juristic persons) or
categories of persons (including juristic persons)
disadvantaged by
unfair discrimination I am of the view that the racial profile of
the company can be determined by the racial
profile of its
controlling shareholders. The racial profile of each company will
depend on its own facts and circumstances. I
can see no reason why a
company in which women, the disabled, ethnic and religious
minorities and other disadvantaged class of
persons who hold the
controlling interest, cannot be discriminated against. I therefore
conclude that, as a matter of principle
and public policy, a
juristic person, like that of a natural person, can be discriminated
against on the grounds of race.
Complainant is a professional company of civil and structural
engineers and is wholly owned by professional black shareholders.
It
is accordingly, in my view, a disadvantaged juristic person. It is
entitled to enjoy the equality rights and benefits as contained
in
Article 9 of the constitution and bound to the duties imposed by
such rights insofar as they may apply to it and as more fully
amplified in Article 8 of the Constitution as well as in PEPUDA. In
the circumstances we find that the complainant can be a victim
of
discrimination based on race.
Finding in Respect of the Broader Enquiry (Twenty -Sixth
Direction)
In the premises, we are satisfied that first respondent has unfairly
discriminated against complainant on the basis of race by
firstly,
denying it (complainant) contractual opportunities for rendering
services for gain in the broader Khayelitsha area since
June 2003
and failing to take steps to reasonably accommodate the needs of
complainant and secondly, excluding complainant indirectly
under its
policy, rule, strategy or practice that appears to be legitimate,
but which is aimed at maintaining exclusive control
by white
professional firms.
Second and third respondents were not involved in the professional
appointments made in the broader Khayelitsha area and, in
the
circumstances, no adverse findings can be made against them. As the
cause of action to the non-appointment of complainant
to the second
phase of the Lookout Hill project arose prior to the relevant
sections of the Equality Act coming into operation,
this court has
no jurisdiction to make an order or grant relief in respect of such
a claim.
The KBD or CBD Enquiry
Introduction
We now turn to discuss the narrower issue of the non-appointment of
complainant as civil and engineering consultants to the Khayelitsha
Business District, also known as the Central Business District (KBD)
project. It is set out in the twenty-fifth direction and
reads as
follows: “
Whether complainant has unfairly been
discriminated against on the basis of race by respondents in not
being allocated the civil
engineering contract for the KBD”.
As we had mentioned earlier, the relief sought by complainant is
against second respondent only. The gravamen of the complaint is
that “
the appointment of Axis on the CBD project under
rules or practices that appear to be legitimate but which are
actually aimed
at maintaining exclusive control by a particular race
group”
, is unlawful and contrary to the Constitution and
the “
framework agreement”
. The complaint is
brought in terms of Section 7(c) of the Equality Act. The group
alluded to in such complaint is the coloured
group. In amplification
of such complaint Manong alleged that there was a conspiracy by
second respondent to use the turnkey
mechanism to exclude the
complainant which is wholly African owned and appoint Axis which was
in majority Coloured owned. He
also alleged that second respondents
in appointing civil engineering consultants “
is construed
as deliberately and unfairly limiting access to contractual
opportunities for the provision of professional services
to the
Complainant”.
This complaint would bring it also within
the ambit of Section 7(e) of the Equality Act.
In the past, as a matter as policy, there were degrees of
discrimination and deprivation of social and economic opportunities
amongst the various racial groups. In the Western Cape preferential
treatment by law was afforded to the coloured people over
African
people. The Western Cape was declared a Coloured labour preferential
area. Certain restricted trades were reserved for
the Coloured
people only. Africans “
lawfully”
resident in the
Western Cape were precluded from entering such trades. They were
restricted to perform menial tasks. Africans
from outside the
Western Cape were barred from seeking employment or for that matter
living in the Western Cape. Such discriminatory
policy was enforced
through the notorious pass law system and the movement of Africans
into the Western Cape was controlled by
such system. At the time,
thousands of work-seekers from the homelands were arrested, charged
and convicted of being illegally
in the Western Cape and repatriated
to their homelands.
Substantive equality recognises that inequality is sometimes present
in deeply rooted social and economic cleavages between groups
in
society. The effects and consequences of the past patterns of
disparity within the disadvantaged racial groups are succinctly
illustrated in the case of
Motala v University of Natal
1995
(3) BCLR 374
(D), where an Indian student was refused admission to
the medical faculty of the University of Natal on the basis that, as
a
matter of policy, preference was given to African students. The
court held at 383B-F that, although Indian students were
disadvantaged
by apartheid, African students had experienced greater
disadvantage because of the poor quality of African education. As a
result
the measure which preferred one black group over another was
lawful.
The Facts
It is common cause that third respondent appointed second respondent
as the developer of the KBD site on a turnkey “
design,
develop and deliver”
basis. Second respondent in turn
appointed WBHO Construction (Pty) LTD (WBHO”) as the
Contractors on the same turnkey basis.
WBHO appointed the
professional consultants. It is common cause that complainant was
not appointed by WBHO as the civil and structural
engineers despite
its involvement at risk on the project at the conceptual and design
stage and which stretched over many years.
Axis was appointed by
WBHO as the civil and structural engineers. It is the
non-appointment of complainant to the project as
the civil and
structural engineers that triggered the present enquiry.
The Framework Agreement
It is not in dispute that in 1999 and prior to the appointment of
second respondent as the developer, CoT set in motion an extensive
consultation process, which included the community and other
stakeholders. Complainant was part of that process. The consultation
process culminated in the acceptance of the framework agreement. It
provided for a tendering protocol which shall be fair and
equitable
and provide for preferential arrangements in favour of the
signatories to the agreement. On 25 January 2000, first
respondent
accepted the principles contained therein as mandate and directive
in order to proceed with the establishment of the
necessary
institutional entities to facilitate the development.
The Collaborative Agreement
First respondent entered into a collaborative agreement with RMB
(“collaborative agreement”) in terms of which the
latter
was to assist with sourcing and securing the necessary private
sector funding for the project. Second respondent, as a
property
developer, became involved through RMB. The land earmarked for the
KBD was sold by first respondent to KCT which established
third
respondent. KCT holds 100% of the shares in third respondent. We
found that both KCT and third respondent are municipal
entities and
as such organs of state. KCT granted third respondent leasehold and
development rights in respect of the land.
The Development Agreement
Third respondent and second respondent entered into a retail
development agreement in respect of KBD (“development
agreement”).
In terms of such agreement second respondent had
to deliver to third respondent a fully designed, built and tenanted
shopping
centre. The development agreement provided for black
economic empowerment. It provided that second respondent shall
firstly,
use reasonable endeavours whenever possible to appoint or
procure the appointment of professional consultants, contractors and
sub-contractors (other than the main building contractor) who are
majority black owned or who have a substantial black shareholding
in
connection with the works and the retail development; and secondly
undertake its best endeavours to ensure that either it
or the main
building contractor procures in total not less than 30% of the total
monetary value of the works and all professional
and other services
required in connection with the retail development from black
persons and small and medium black owned enterprises.
In the
agreement between second respondent and WBHO (“turnkey
agreement”) provision is made for the contractor to
comply
with the BEE obligations contained in the development agreement.
The Evidence
The complainant called two witnesses, namely Manong and Magqwaka. At
the conclusion of the complainant’s case in the KBD
enquiry,
first and second respondents moved an application for absolution of
the instance. The court assumed in favour of the
respondents that
the Equality Court was competent to entertain such an application
and found on the facts and the inferences
to be drawn from such
facts, that complainant had made out a
prima facie
case of
discrimination against the defendants. The onus accordingly shifted
to the defendants to show that the discrimination
based on race as
alleged by complainant either did not take place or that the
exclusion of complainant is not based on race or
that the
discrimination is fair. First respondent then called Andre Human
(“Human”) as a witness and second respondent
called
Wayne Clifford Van der Vent (“Van der Vent”) and
Geoffrey Parker (“Parker”) of WBHO as witnesses.
The court has found that third respondent is a municipal entity and
as such obliged to follow tender procedures applicable to
municipalities. It is common cause that it had failed to follow such
procedure when it appointed second respondent as the developer.
First respondent, which had set up the various entities connected to
the KBD development, had obtained legal advice with regard
to the
legal status of third respondent. In terms of such advice, third
respondent was not regarded as a municipal entity. First
and third
respondent acted on such advice and accordingly did not follow the
tendering procedure applicable to municipalities
at the time when
third respondent appointed second respondent. The complainant
submitted that had the tendering process been
followed, second
respondent would have been compelled to utilise the framework
agreement and more particularly the annexure “A”
list
attached thereto in the appointment of consultants. Complainant
accordingly had the legitimate expectation to be appointed
as the
civil and structural engineers on the project.
The evidence of Human is that first respondent acted on legal advice
that third respondent was not a municipal entity. It acted
on such
advice and did not follow the tender procedures. He said in
hindsight such advice was wrong. A written legal opinion
was handed
in as evidence in support of such evidence. There is no evidence
that the tender process was not followed in order
to exclude
complainant from being appointed as a consultant on the project. The
court accordingly finds that first and third
respondents did not
follow the tender procedure, not because they wanted to discriminate
against complainant, but because they
acted on wrong legal advice.
Evaluation
It is common cause that complainant was a signatory to the
agreement. First respondent ratified the principles of the framework
agreement subject to the rules and regulations it was bound to
follow. Complainant submitted that first respondent, by ratifying
the agreement, brought about a binding agreement between the
signatories and first respondent. The complainant argued that in
terms of the law, the framework agreement constituted an offer on
behalf of the signatories and the ratification of the principles
constituted an acceptance of the offer. First respondent was
accordingly bound to the principles of such agreement. The court,
without making a formal finding on the validity of such legal
argument, will assume in complainant’s favour that a valid
and
binding agreement came into existence. In such event, a breach of
such agreement as alleged by complainant will not in itself
constitute a cause of action within the ambit of the Equality Act.
It can only constitute such cause of action if it can be shown
that
such breach was as a result of discrimination based on race.
There are a number of factors that militate against complainant’s
argument. Firstly, such ground was never raised in the
papers. It
was raised for the first time in argument before us. Secondly, there
was a range of signatories consisting of various
entities and
individuals and comprising of various racial groups and many of whom
were not BEE compliant. Thirdly, the way we
understand complainant’s
case in this regard, is not that it was excluded because of race,
but had first respondent followed
the tendering process as required
in terms of the framework agreement, complainant would have been
appointed as the preferred
civil and structural engineering
consultants. We have already made a finding in respect thereof
above. In any case the failure
to adhere to the terms of the
framework agreement could never
per se
amount to racial
discrimination. We will return to the question of conspiracy later.
Fourthly, second respondent was not a party
to the framework
agreement and the relief sought by complainant in respect of the KBD
project is essentially against second respondent.
In the
circumstances, we find that there is no merit in this leg of
complainant’s argument. Even if there were to be merit
in this
argument, the Equality court is not the correct forum to bring a
case of breach of contract or legitimate expectation.
Complainant’s main ground of attack for its non- appointment
as the consultant in the KBD project was because of the turnkey
mechanism. Manong submitted that the turnkey method of appointing
consultants on the project unfairly discriminated against the
complainant on the basis of race in that the criteria used by WBO in
appointing Axis constituted an absolute barrier. Manong
maintained
that there was a conspiracy against complainant to use the turnkey
mechanism to exclude it and appoint Axis. Human
testified that he
was put in charge of the KBD project from its conception stage.
Despite an extensive marketing campaign in
which he was involved,
the only financial institution that showed an interest was RMB.
Other financial entities were not interested
for various reasons
including the fact that black areas like Khayelitsha were “
redlined”
by the banks.
It is common cause that RMB agreed to finance the KBD project
subject to the following conditions:
(a) that a “
turnkey design and build”
method of
construction be employed,
(b) that one of the big four construction companies be contracted to
construct on such basis and
(c) that payment of the contract price to be made in a single
lump-sum amount upon completion of the shopping centre and delivery
of the keys.
Second respondent concluded such a contract with WBHO. In terms of
such contract because WBHO was at risk, it retained the right
to
appoint the professional consultants. WBHO accordingly appointed
Magqwaka & Associates as architects, Axis Consulting as
civil and
structural engineers and Johaardien & Associates as mechanical
engineers. Complainant and Letchmia Daya Verachia,
who were involved
on the project at risk, were not appointed.
It is not disputed that Van der Vent expressly told Parker of WBHO
that he “
would like to run with black professionals”.
He put the name of complainant forward as one of the
professionals who was involved in the project at risk and requested
that
complainant be included in the project. On 30 January 2004, he
raised the matter once more with Parker in the context of the letter
from complainant (“MS10”) and had asked WHBO to
reconsider the appointment of complainant. Parker said he had worked
with Henry Herring (“Herring”) previously on the
International Convention Centre and was comfortable to work with
him. Complainant’s cause of action in respect of the KBD
project arises from its non-appointment as the civil and structural
engineers for the project.
Second respondent was not a party to the framework agreement and
whatever rights and obligations that might have flowed from
such
agreement, if any, were not binding on second respondent. If such
agreement were binding on the first and third respondents,
no relief
was sought against them and in the circumstances it is unnecessary
for this court to make a finding on the validity,
scope and
implication of such agreement. Manong contended that there was an
agreement between second respondent and the complainant
that it
would be appointed as the civil and structural engineers and
pursuant such agreement complainant was asked to assist
Magqwaka in
the production of structural engineering drawings. Complainant
produced such drawings which were tendered in evidence
as appendix
“A”. Van der Vent denied that such an agreement existed,
but stated that if second respondent had the
power to make the
appointments, it would have appointed the complainant to the
project. But matters were taken out its hands
when the financiers
insisted that the turnkey mechanism be used to develop the shopping
centre. The court is satisfied that second
respondent, through the
intervention of Van der Vent, used reasonable endeavours to procure
the appointment of complainant on
the project but was unsuccessful.
We now turn to discuss the complaint that the turnkey mechanism was
used to discriminate against complainant and appoint Axis,
the
principal of which is a close friend of Van der Vent and like him is
a member of the coloured group. The thrust of such complaint
is that
there was a conspiracy between first, second, third respondents and
WBHO to exclude the complainant from the project
and appoint Axis.
The discrimination is based on the exclusion of an African entity in
favour of a Coloured entity. It is common
cause that complainant is
a wholly owned African company whereas Axis is majority Coloured
owned.
It is not disputed that WBHO appointed the professional consultants,
including the civil and structural engineers in terms of
the turnkey
agreement as it carried the risk. Human testified that first
respondent had no say in the appointment of such consultants.
Parker
testified that he appointed Axis on behalf of WBHO and he was not
influenced by any official of first respondent, including
Human or
Barnard, to appoint Axis in place of complainant. He confirmed in
his evidence that he was approached by Van der Vent
to appoint
complainant as the consultant, but because he had worked with
Herring on another project he felt comfortable to appoint
Axis as
the consultants. He said WBHO appointed consultants that they knew
and had worked with before and this was the principal
reason why
Axis was appointed to the project. Van der Vent testified that
second respondent played no role in the appointment
of Axis on the
project. He refuted most emphatically Manong’s allegation that
complainant was excluded in favour of Van
der Vent’s coloured
friends. Van der Vent in fact testified that he did not know
Herring, the managing director of Axis.
Magqwaka did not confirm in
his evidence the allegations attributed to him by Manong that there
were “
sinister forces at play to remove complainant from
the project in favour of Van der Vent’s coloured friends”
.
The evidence is quite clear that second respondent had no say in the
appointment of professional consultants on the project.
It is common
cause that WBHO made such appointments. Van der Vent put the names
of complainant and Magqwaka forward to WBHO as
professional
consultants, but WBHO elected to appoint Magqwaka and not
complainant. Both were regarded as African entities. If
we have to
assume that the turnkey agreement was designed to exclude
complainant as an African in favour of Coloureds, then in
pursuance
to such design, there was no reason why Magqwaka was also not
excluded in favour of coloured architects. Such argument
is
therefore, in our view, misplaced. Such conclusion also flies in the
face of Van der Vent’s credentials that he was
prepared to
promote black including African professionals. This is evidenced by
the fact that he introduced Magqwaka to WBHO
and tried his best
endeavours to get complainant appointed.
Manong’s contention is that the criteria used by WBHO in the
appointment of Axis to the project, was an absolute barrier
and
accordingly discriminatory. WBHO who is not a party to these
proceedings and no finding can accordingly be made against it.
In
any case we have already found that second respondent was not a
party to the appointments of consultants to the project and
such
complaint cannot be levelled against it.
The Conspiracy
We now turn to the final issue, namely the question of conspiracy.
There is no evidence other than the
ipse dixit
of Manong that
there was a conspiracy on the part of the respondents to exclude
complainant as consultant from the project nor
are there facts from
which such conclusion can be inferred. The facts are egregiously to
the contrary. Van der Vent in fact went
out of his way to promote
and plead for the inclusion of complainant to the project. Manong’s
allegation that Barnard was
the mastermind behind the conspiracy is
not substantiated by the evidence or facts from which such inference
can be drawn. In
our opinion there is no substance to the allegation
of conspiracy.
Finding in Respect of the KBD or CBD Enquiry (Twenty- Fifth
Direction)
In the light of the totality of the evidence, the objective facts
and the probabilities, we are satisfied that the respondents
have
discharged the onus of showing that the respondents were not
responsible for the non-appointment of complainant to the project
and could therefore not have discriminated against it on the basis
of race. In our view the complainant has failed to discharge
the
overall onus of proving, on a balance of probabilities, as against
second respondent firstly, that the appointment of Axis
on the CBD
project under rules or practices that appear to be legitimate, but
which are aimed at maintaining exclusive control
by the Coloured
group is in violation of S 7(c) of the Equality Act and secondly, it
has the effect of unfairly limiting access
of contractual
opportunities for the provision of professional services from the
complainant in violation of S 7(e) of the Equality
Act.
The costs
The Equality Court is empowered in terms of S 21(2)(o) of the Act to
make an appropriate order of costs against any party to
the
proceedings. The Regulations promulgated under the Act provides, in
terms of S 12(2) that each party bears its own costs
unless the
presiding officer directs otherwise. The general rule is therefore
that each party pays its own costs unless there
are exceptional
circumstances entitling the presiding officer to direct otherwise.
This differs from the general rule in the
Magistrate’s Court,
High Court and the Supreme Court of Appeal that costs follow the
result unless the court directs otherwise.
Ackerman J
in
Ferreira v Levin NO and Others
;
Vryenhoek and Others v
Powell NO and Others
[1996] ZACC 27
;
1996 (2) SA 621
(CC) at 624B-F, referring
to the general rule in such courts, makes the following observation
in the context of constitutional
litigation:
“…
that the principles which have
been developed in relation to the award of costs are by their very
nature sufficiently flexible and
adaptable to meet new needs which
may arise in regard to constitutional litigation. They offer a useful
point of departure. If
the need arises the rules may have to be
substantially adapted; this should, however, be done on a case by
case basis. It is unnecessary,
if not impossible, at this stage to
attempt to formulate comprehensive rules regarding costs in
constitutional litigation.”
The spirit and ethos of that principle has found favour not only in
constitutional litigation but also in other public interest
litigation such as labour litigation, land claim litigation etc. The
same spirit and ethos are entrenched in the Equality legislation
which provides that each party shall pay its own costs unless the
Equality Court directs otherwise. The Equality Court has a
discretion to make a cost order against one or other of the parties
in the interest of equity and fairness. The Equality legislation
is
an extension of the right to equality embodied in S 9 of the
Constitution and “
endeavours to facilitate the transition
to a democratic society, united in its diversity, marked by human
relations that are caring
and compassionate and guided by the
principles of equality, fairness, equity, social progress, justice,
human dignity and freedom”
. The Equality Court must guard
against deterring
bona fide
litigants from exercising and
asserting their constitutional rights to equality, which is
underpinned by the foundational values
of human dignity and freedom,
by making adverse cost orders against them.
Adv
Arendse
SC submitted that complainant is not a
disadvantaged person seeking to remedy an inequality but is a
commercial entity litigating
for commercial gain and embarked on
frivolous and vexatious litigation. In such circumstances there
should be no diffidence about
making a costs order against
complainant. Adv
Jamie
SC expressed similar sentiments.
Manong, on the other hand, submitted that respondents abused the
court process by bringing various
abortive applications for the sole
purpose to frustrate complainant from asserting its constitutional
rights to equality.
In this matter the complainant has been involved with the project on
risk since its inception. It invested its intellectual capital
and
time in the project in the hope of getting appointed as the
structural and civil engineers should the project get off the
ground. In that event it would have been able to recoup its losses
it made while working on the project on risk. It also contributed
its intellectual capital and time after second defendant was
appointed by third defendant to act as the developer. This is
evidenced by exhibit referred to as “Appendix “A”.
The complainant, therefore, had the legitimate expectation
to be
appointed as a professional consultant but due to circumstances
beyond the control of second defendant Axis was appointed.
The court
has found that the complainant was not excluded on the ground of
race and it was therefore not entitled to any relief
in terms of the
Equality Act.
In the light of these circumstances, the court is of the opinion
that equity and fairness demand that the court applies the spirit
and ethos of the Equality legislation by making no order as to
costs.
.
A S S E S S O R S : We agree
………………………………
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..
M F DACHS V C HLOBO