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[2006] ZACC 16
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Steenkamp NO v Provincial Tender Board of the Eastern Cape (CCT71/05) [2006] ZACC 16; 2007 (3) SA 121 (CC); 2007 (3) BCLR 300 (CC) (28 September 2006)

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CONSTITUTIONAL COURT OF SOUTH
AFRICA
Case CCT 71/05
JURGENS JOHANNES STEENKAMP
N.O. Applicant
versus
THE PROVINCIAL TENDER BOARD OF
THE EASTERN CAPE Respondent
Heard on : 11 May 2006
Decided on : 28 September 2006
JUDGMENT
MOSENEKE DCJ:
Introduction
This case raises the complex
debate on the proper interface between private law and public law
remedies in our constitutional
dispensation. The narrow issue is
whether financial loss caused by improper performance of a
statutory or administrative function
should attract liability for
damages in delict. On the facts, the issue may be rendered as
whether a successful tenderer whose
award is later set aside by a
court on review may claim delictual damages from the tender board
for out-of-pocket expenses incurred
subsequent to and in reliance
on the award. A secondary enquiry relates to whether the tender
was valid at inception and if
not, whether the tender board
nonetheless owed the initially successful tenderer a legal duty of
care.
These
issues arise in an
application to this Court for leave to
appeal against the judgment and order of the Supreme Court of
Appeal. It dismissed the
applicant’s appeal and upheld, albeit
for somewhat different reasons, the decision of the Bisho High
Court (High Court) that
the successful tenderer whose award was
later nullified was not entitled to claim delictual damages from
the tender board concerned.
Parties
The applicant, Jurgens
Johannes Steenkamp, sues in a representative capacity as liquidator
of Balraz Technologies (Pty) Ltd (Balraz).
The original respondent
was the Member of the Executive Council for Finance of the Eastern
Cape province (MEC). The Provincial
Tender Board of the Eastern
Cape (tender board) has replaced the MEC as respondent. The tender
board was established in September
1994 under the provisions of the
Provincial Tender Board Act (Eastern Cape) of 1994.
1
Facts
The facts are neither
contested nor complex. On 21 July 1995 the national State Tender
Board
2
invited tenders from the public for the supply of three separate
government services related to the introduction and implementation
of an automatic cash payment system for social pensions and other
welfare grants in the Eastern Cape province. The tender

specifications originated from the Eastern Cape Department of
Health and Welfare (Department of Health). Later, in August 1995,
the national State Tender Board revised the specifications of the
invitation to tender and extended the closing date for submission
of tenders to 8 September 1995.
I digress to record that
although the new provincial legislation
3
establishing the tender board came into force in September 1995,
its members were appointed only on 25 October 1995 with
retrospective
effect. Nothing turns on this belated induction of
the members of the provincial tender board. Suffice it to observe
that the
national legislation
4
under which the national State Tender Board issued the invitation
to tender was in force in the Eastern Cape province at the
time the
invitation to tender was issued and immediately prior to the
commencement of the provincial legislation.
5
On 31 August 1995 members of
Balraz signed its memorandum and articles of association but the
company was incorporated and issued
with a certificate to commence
business
6
only some six weeks later, on 17 October 1995. By then Balraz had
submitted its tender to meet the deadline of 8 September 1995.

Eight tenders including the one in the name of Balraz were
submitted in response to the invitation to tender.
The next significant milestone
was 22 March 1996 when the tender board awarded Balraz the contract
to supply the equipment and
services for fingerprint and photo
enrolment of social welfare beneficiaries. The tender was awarded
in the face of material
reservations of two successive technical
committees convened by the Department of Health to evaluate the
tenders and report to
the tender board. The principal reservation
was that Balraz lacked the technical expertise to meet its
obligations under the
tender. Be that as it may, Balraz warmly
embraced the notice that it had won the tender and within three
days wrote to accept
the award. The balance of the services on
tender was awarded to another company, Pensecure (Pty) Ltd
(Pensecure). Nearly two
months later, the Department of Health
placed a written order with Balraz for the supply of services in
terms of the tender awarded
to it. However, this was not to
happen.
No less than a year later, in
March 1997 a dissatisfied tenderer, Cash Paymaster Services (Pty)
Ltd, approached the High Court
for an order to review and set aside
the tenders awarded to both Balraz and Pensecure on the ground that
the decision-making
process of the tender board was vitiated by
reviewable irregularities. On 6 June 1997 the High Court found
that the decision-making
of the tender board had been irregular and
administratively unfair. It set aside the tender awards.
7
As a sequel, the tender board
invited fresh tenders. However, Balraz could not take advantage of
the second opportunity to tender.
By then, it had been placed
under final liquidation. Contracts for the supply of the relevant
services on tender were awarded
to two other companies.
The applicant approached the
High Court with a contractual claim for damages against the
Department of Health on the basis that
the contract it had
concluded with Balraz following the award of the tender had been
wrongfully breached. In an alternative
claim, Balraz sought
delictual damages from the tender board. Each defendant excepted
to the claim it was facing as not disclosing
a cause of action.
The High Court upheld the exception against the contractual claim
and dismissed the action. In that way
the Department of Health
fell off the litigation picture. In contrast, the Court refused to
uphold the exception directed at
the delictual claim, reasoning
that “it is unthinkable that the Board will have
carte blanche
to act as it pleases, irrespective of the loss which such actions
may cause to others.”
8
The
premise of the delictual claim is that Balraz had incurred
out-of-pocket expenses of R4,35 million as a result of relying
on
its success in obtaining the tender award. The expenses, says the
applicant, were incurred after Balraz had been awarded
the tender
and in order to place itself in a position to fulfil its
obligations under the tender contract. However, the expenses
were
wasted when the tender was set aside on review as a result of the
negligent failure of the tender board to perform properly
its
statutory functions in evaluating and awarding the impugned
tenders. In this manner, the argument goes, the tender board
acted
wrongfully in as much as it breached a duty owed to Balraz.
The claim for delictual
damages proceeded to trial before the High Court. In a pre-trial
minute, the parties agreed to separate
the issues. They invited
the trial court to decide issues of liability – wrongfulness and
negligence – only and to reserve
causation and quantum of damages
for later determination. In another pre-trial accord, the parties
agreed that the issues of
wrongfulness and negligence were to be
decided on the facts that emerged from the documentation jointly
placed by the parties
before court and did not present oral
evidence.
The High Court dismissed the
action for damages. It held that the tender board did owe Balraz a
duty of care and that in evaluating
and awarding tenders it was
obliged to act properly and with due care and that in appropriate
circumstances delictual liability
may lie. However it found that
when Balraz submitted its tender it was not registered as a company
and for that reason had no
capacity to act. Its tender was
invalid. Therefore, the High Court reasoned, the tender board
could not reasonably foresee
harm to an entity that lodged a void
tender. There was no relationship between Balraz and the tender
board that could found
a legal duty to prevent harm to the
tenderer.
The Supreme Court of Appeal
dismissed the appeal on two distinct bases. First, it held that
policy considerations precluded a
disappointed tenderer in the
position of the applicant from recovering delictual damages that
were purely economic in nature.
Neither the statute under which
the tender was issued nor the common law imposed a legal duty on
the tender board to compensate
for damages where it had
bona
fides
but negligently failed to comply with the requirements of
administrative justice. Second, the Supreme Court of Appeal took
the
view that given its conclusion on the substantive wrongfulness
enquiry, it was unnecessary to reach the question relating to the
validity of the tender. However, for the sake of completeness, it
found, as did the High Court, that the tender was a nullity
at its
very inception because on the closing date for submission of
tenders Balraz had not been incorporated, it had no legal
capacity
to accept the invitation to tender and as a result had no standing
to attack the tender process as a disappointed tenderer.
The
Supreme Court of Appeal further held that the tender board,
although unknown to it then, had no duty to consider an inchoate
tender. Lastly, as it was unnecessary, the Supreme Court of
Appeal, like the High Court, did not decide whether the tender

board had acted negligently.
In this Court the applicant
seeks leave to appeal the decision of the Supreme Court of Appeal
and to have it replaced by a declarator
that the tender board acted
wrongfully and negligently in its decision to award the tender to
Balraz and that it is liable to
Balraz for private law damages
represented by out-of-pocket expenses incurred in the preparation
to implement the tender. In
another submission, the applicant
challenges the correctness of the decision of the Supreme Court of
Appeal that the tender was
invalid at its very inception and argues
that in any event the right moment to assess the validity of a
tender is not when it
is submitted but when it is decided upon.
Issues
The first issue that confronts
us is whether the application for leave to appeal implicates a
constitutional matter and, if it
does, whether it is in the
interests of justice to hear the appeal. The second relates to the
existence of wrongfulness in delict.
The third poses the question
whether the tender of Balraz is valid in law. The fourth question
concerns negligence. The third
and fourth questions arise only if
the preceding two issues are resolved in favour of the applicant.
I now look closely at each
issue.
Does the application raise
constitutional issues?
The
respondent urged us to dismiss the application for leave to appeal
on the threshold ground that it does not raise a constitutional
issue. The nub of the contention is that the finding of the
Supreme Court of Appeal and the High Court that Balraz is not owed
a duty of care because its tender is a nullity does not engage a
constitutional matter. The finding merely restates the
self-evident
rule that a valid contract comes into being only if a
contracting party has the requisite capacity to act. And what is
more,
the finding is independently decisive of the appeal. Relying
on section 168(3)
9
of the Constitution, the respondent submits that the decision of
the Supreme Court of Appeal, on appeal to it, is final and binding
upon the applicant and is not open to a further appeal.
The
respondent contends that once the High Court and the Supreme Court
of Appeal had found that the tender was invalid and no
legal duty
of care existed, the substantive test for wrongfulness should never
have arisen in either court. The respondent submits
that important
as the broader issues of wrongfulness in delict may be, they are
not decisive of the final outcome of the action
and consequently
need not be decided by us on appeal.
This
contention must fail. First, the Supreme Court of Appeal disposed
of the appeal to it on the substantive ground that the
loss arising
from the administrative breach of the tender board is not
actionable in delict. It expressly makes the point that
its
finding on the validity of the tender is for the sake of
completeness. The Supreme Court of Appeal is clearly correct.
Once it had found that the loss incurred by the successful tenderer
is not recoverable in damages it matters not whether the
tender was
valid or not on the closing day for submission of tenders. A
decision on the validity of the tender would not alter
the finding
that Balraz is not owed a duty of care. Second, it is an important
consideration that the applicant, as the party
aggrieved by the
decision of the Supreme Court of Appeal, seeks an appeal to lie
against the substantive decision on wrongfulness.
This Court is
seized with the matter and there is no good reason why it should
decline to resolve the substantive issue on appeal.
There are indeed other cogent
reasons why the application involves constitutional issues. First,
when
a tender board procures goods and
services on behalf of government it wields power derived first from
the Constitution itself
10
and next from legislation in pursuit of constitutional goals. It
bears repetition that the exercise and control of public power
is
always a constitutional matter.
11
Section 195
12
of the Constitution further qualifies the exercise of public power
by requiring that public administration be accountable, transparent
and fair.
Second, the question of the
private law liability of a tender board involves significant policy
considerations relating to fairness
and justice, which must now be
settled in the light of section 39(2)
13
of the Constitution.
Third,
although an
invitation to tender and its acceptance may be susceptible to
common law rules of contract, when a tender board evaluates
and
awards a tender, it acts within the domain of administrative law.
Its decision in awarding or refusing a tender constitutes
an
administrative action.
14
That is so because the decision is taken by an organ of state
which wields public power or performs a public function in terms
of
the Constitution or legislation and the decision materially and
directly affects the legal interests or rights of tenderers
concerned.
15
In this way,
the right to just administrative
action is now a constitutional imperative.
16
Lastly, ordinarily a breach of
the right to administrative justice entitles an aggrieved party to
“appropriate relief” within
the meaning of section 38
17
of the Constitution. Therefore, the enquiry into what is the just
and equitable remedy available to an aggrieved tenderer in
itself
triggers constitutional concern.
There can be no doubt that the
issues that arise for determination in this appeal concern
constitutional matters.
Is it in the interests of
justice to grant the application?
The respondent argues that it
is not in the interests of justice to hear the appeal because there
is no reasonable prospect that
this Court may alter the decision
appealed against. I take a different view. The submissions of the
applicant are far from
frivolous. As I see it, there is a prospect
that this Court may decide differently the issue whether an
initially successful
tenderer which incurs out-of-pocket expenses
is owed a duty of care. As the substantive judgments of the High
Court, the Supreme
Court of Appeal and the judgment of Langa CJ and
O’Regan J in this case show, the applicant has put up important
common law
issues that implicate the Constitution and bear some
prospect that the decision against which the appeal lies may be
varied.
In any event, prospects of
success on appeal though important, are certainly not the only or
decisive considerations in assessing
where the interests of justice
lie.
18
Other factors are also relevant in deciding what best advances
justice.
19
A decision by this Court is likely to clarify the new matter of
the scope of delictual liability of tender boards in relation
to
initially successful tenderers. The decision would be in the
public interest because it is likely to be of practical value
to
tenderers, on the one hand, and to state tender boards, on the
other, in their function to procure goods and services for
the
state. Happily there are no significant disputes of fact; the
evidence is sufficient and we enjoy the benefit of two prior
and
very helpful judgments.
It is clearly in the interests
of justice that the application for leave to appeal be granted.
Wrongfulness
The applicant’s claim is
couched in the private law of delict. The particulars of claim
aver that when the tender board considered
the tenders it owed
Balraz a duty in law to: (a) exercise its powers and functions
fairly, impartially and independently; (b)
take reasonable care in
the evaluation and investigation of tenders and (c) properly
evaluate tenders within the parameters imposed
by the tender
requirements so as to ensure that the award of the tender was
reasonable in the circumstances. The particulars
do not specify
whether the duty in law has a constitutional or statutory premise.
However, in this Court, unlike in the Supreme
Court of Appeal, the
applicant advanced its case on the basis that, first, the
invitation and consideration of tenders is an
administrative
function
20
and, second, that the legal duties pleaded do not derive from the
common law principles of administrative law but from the

Constitution and the controlling legislation.
21
That is indeed the correct approach to this matter.
I intimated earlier
22
that since the advent of our constitutional dispensation
administrative justice has become a constitutional imperative. It

is an incident of the separation of powers through which courts
review and regulate the exercise of public power.
23
The Bill of Rights achieves this by conferring on “everyone” a
right to lawful administrative action that must also be reasonable
and procedurally fair.
24
In this regard in
Bato Star Fishing
,
25
O’Regan J writing for a unanimous court reminded us that:
“
The grundnorm
26
of administrative law is now to be found in the first place not in
the doctrine of
ultra vires
, nor in the doctrine of
parliamentary sovereignty, nor in the common law itself, but in the
principles of our Constitution.”
[Footnotes omitted]
It goes without saying that
every improper performance of an administrative function would
implicate the Constitution and entitle
the aggrieved party to
appropriate relief.
27
In each case the remedy must fit the injury. The remedy must be
fair to those affected by it and yet vindicate effectively
the
right violated. It must be just and equitable in the light of the
facts, the implicated constitutional principles, if any,
and the
controlling law. It is nonetheless appropriate to note that
ordinarily a breach of administrative justice attracts public
law
remedies and not private law remedies. The purpose of a public law
remedy is to pre-empt or correct or reverse an improper
administrative function. In some instances the remedy takes the
form of an order to make or not to make a particular decision
or an
order declaring rights or an injunction to furnish reasons for an
adverse decision. Ultimately the purpose of a public
remedy is 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.
Examples of public remedies
suited to vindicate breaches of administrative justice are to be
found in section 8 of the PAJA.
It is indeed so that section 8
confers on a court in proceedings for judicial review a generous
jurisdiction to make orders that
are “just and equitable”.
28
Yet it is clear that the power of a court to order a
decision-maker to pay compensation is allowed only in “exceptional

cases”. It is unnecessary to speculate on when cases are
exceptional. That question will have to be left to the specific

context of each case. Suffice it for this purpose to observe that
the remedies envisaged by section 8 are in the main of a public
law
and not private law character. Whether a breach of an
administrative duty in the course of an honest exercise of a
statutory
power by an organ of state ought to be visited with a
private law right of action for damages attracts different
considerations
to which I now turn.
In this case the pivotal
question remains whether a successful tenderer whose tender award
is subsequently set aside by a court
on review, may claim damages
from the relevant tender board for out-of-pocket expenses incurred
in reliance on and subsequent
to the award.
The starting point must be the
Constitution. It is however necessary to establish whether the
interim or the final Constitution
applies. To that end I have to
explain that the tender was awarded in March 1996 when the interim
Constitution was in force
but was set aside on review in June 1997
after the new Constitution had taken effect. The claim for damages
was initiated only
thereafter. It follows that the proceedings were
not pending when the new Constitution took effect.
29
They were instituted after its inception. Even if it were
otherwise, in my view it is in the interests of justice that this
matter be disposed of under the new Constitution.
30
Section 217
31
of the Constitution is the source of the powers and function of a
government tender board. It lays down that an organ of state
in
any of the three spheres of government, if authorised by law may
contract for goods and services on behalf of government.
However
the tendering system it devises must be fair, equitable,
transparent, competitive and cost-effective. This requirement
must
be understood together with the constitutional precepts on
administrative justice in section 33 and the basic values governing
public administration in section 195(1).
It will be remembered that the
provincial tender board is the successor in title to the State
Tender Board within its province.
32
It owes its establishment to provincial legislation.
33
It exercises exclusive power to procure supplies and services for
the province, to enter into or terminate procurement agreements
on
its behalf and could claim damages presumably for breach of a
supply contract to which it is a party. It is duty bound to
exercise its powers fairly, impartially and independently although
in the main it acts as a procuring agent of the provincial
government. There is an express prohibition against any organ of
state, its member or any person from improperly interfering
with
its decisions and operations. On request it must furnish reasons
for its decisions. The tendering system it devises must
promote
efficiency and effectiveness. It must advance fair dealing and
equitable relationships among parties to provincial contracts.
There can be no doubt that in
procuring goods and services for the state, a tender board must act
consistently with its statutory
mandate. It must act fairly,
impartially and independently. Equally, it may not act with
negligent or reckless disregard for
the protectable interests of
tenderers. It must act within the legislative power conferred on
it and properly and honestly exercise
the discretion it may have.
A tender board must in doing its work act transparently and be held
accountable, when appropriate.
34
In other words it must in its work observe and advance the basic
values and principles governing public administration as envisaged
by section 195 of the Constitution.
None of the parties in this
case characterised the duties of a tender board differently. If
anything, both parties agree that
when we assess whether Balraz is
owed a duty of care we must do so on the footing that the decision
of the tender board in awarding
the tender was administratively
unfair. In the same vein, both parties accept that the tender
board acted in good faith.
However, a concession that the
tender board acted inconsistently with the tenets of administrative
justice is neither decisive
of the existence of a duty of care nor
is it of any avail to the applicant’s case. In our
constitutional dispensation, every
failure of administrative
justice amounts to a breach of a constitutional duty. But the
breach is not an equivalent of unlawfulness
in a delictual
liability sense. Therefore, an administrative act which
constitutes a breach of a statutory duty is not for that
reason
alone wrongful. Unlike in other jurisdictions,
35
this does not mean that the government enjoys delictual immunity
when performing its functions, but a negligent statutory breach
and
resultant loss are not always enough to impute delictual liability.
Policy considerations of fairness and reasonableness
have to be
taken into account when imposing a duty of care and ultimately
liability to make good harm suffered by a claimant.
Confronted with a similar
enquiry in the context of the exercise of a statutory power by a
local authority, Botha JA in
Knop v Johannesburg City Council
36
sharpens the analysis as follows:
“
In my view this argument
does not advance the case for the plaintiff, because it loses sight
altogether of the purpose of the enquiry
upon which we are engaged.
The enquiry into the intention of the legislature has as its object
to determine whether a local authority
owes a legal duty to an
applicant to exercise care in exercising the powers conferred upon
it by s 92 so as to avoid causing loss
to the applicant. The
existence of such a duty will entail a right in the applicant to sue
for damages upon its breach. The fundamental
question, therefore,
is this: did the legislature intend that an applicant should have a
claim for damages in respect of loss caused
by the negligence of the
local authority?”
37
Before probing the
“fundamental question”, a useful point of departure may be to
state briefly the common law test for determining
the existence of
whether a particular conduct is wrongful. It is now well settled
that delictual liability arises only if the
conduct that causes
harm or loss is both wrongful and negligent. Similarly an unlawful
act may not be accompanied by the two
elements of negligence
enunciated in
Kruger v Coetzee
.
38
We need say no more about negligence and the difficulty of keeping
its elements distinct from those of wrongfulness.
39
What is important is that wrongfulness lies in the failure to
fulfil a duty to prevent harm to another. In turn, whether or
not
a legal duty to prevent loss occurring exists calls for a value
judgment embracing all the relevant facts and involving what
is
reasonable and, in the view of the court, consistent with the
common convictions of society.
In the case of
Olitzki
40
the court was concerned with an unsuccessful tenderer who
sought to claim loss of profits from a state tender board. The case

before us relates to an initially successful tenderer for state
business who claims out-of-pocket expenses because the award was
subsequently set aside on review.
These factual differences
matter not in formulating a proper test for wrongfulness in the
context of state tenders. Cameron JA,
in
Olitzki
, correctly
observes that the focal point in determining whether a tender board
may be liable to a tenderer in the course of exercising
its
function is a question of the interpretation of the empowering
constitutional and statutory provisions. However where a
common
law duty is at issue the court has to engage in a broad assessment
of whether it is “just and reasonable” that a civil
claim for
damages should be accorded. He elaborates that:
“
The conduct is wrongful, not
because of the breach of the statutory duty
per
se
, but because it
is reasonable in the circumstances to compensate the plaintiff for
the infringement of his legal right. The determination
of
reasonableness here in turn depends on whether affording the
plaintiff a remedy is congruent with the court’s appreciation
of
the sense of justice of the community. This appreciation must
unavoidably include the application of broad considerations of
public policy also determined in the light of the Constitution”.
41
Therefore shortly stated, the
enquiry into wrongfulness, is
an after the fact, objective
assessment of whether conduct which may not be
prima facie
wrongful should be regarded as attracting legal sanction. In
Knop
v Johannesburg City Council
42
the test for wrongfulness was said to involve objective
reasonableness and whether the
boni mores
required that “the
conduct be regarded as wrongful”. The
boni mores
is a
value judgment that embraces all the relevant facts, the sense of
justice of the community and considerations of legal policy.
Both
of which now derive from the values of the Constitution.
Our courts -
Faircape,
Knop, Du Plessis
and
Duivenboden
43
-
and courts in other common law jurisdictions
44
readily recognise that factors that go to wrongfulness would
include whether the operative statute anticipates, directly or by

inference, compensation of damages for the aggrieved party;
45
whether there are alternative remedies such as an interdict, review
or appeal;
46
whether the object of the statutory scheme is mainly to protect
individuals or advance public good;
47
whether the statutory power conferred grants the public functionary
a discretion in decision- making;
48
whether an imposition of liability for damages is likely to have a
“chilling effect” on performance of administrative or
statutory
function; whether the party bearing the loss is the author of its
misfortune; whether the harm that ensued was foreseeable.
It should
be kept in mind that in the determination of wrongfulness
foreseability of harm, although ordinarily a standard for
negligence, is not irrelevant.
49
The ultimate question is whether on a conspectus of all relevant
facts and considerations, public policy and public interest
favour
holding the conduct unlawful and susceptible to a remedy in
damages.
50
The applicant contends that to
deprive an initially successful tenderer where the award is
subsequently set aside an appropriate
remedy is not consonant with
the legal convictions of the community, and it is inconsistent with
the constitutional values of
governmental transparency and
accountability. The common law should be developed because there
is no effective alternative remedy,
whether legislative or
contractual, other than delictual damages.
The applicant says the
Supreme Court of Appeal failed to distinguish between successful
and unsuccessful tenderers. Balraz was
not an unsuccessful
tenderer claiming damages, but rather, a successful tenderer
prejudiced by the negligence of the tender board.
The Supreme
Court of Appeal focused on a claim for damages in the form of loss
of profits, rather than pointedly on a claim
for damages in the
form of actual out-of-pocket expenses. The applicant submits that
there are good reasons why the legal convictions
of the community
might demand a remedy for a successful tenderer but not for an
unsuccessful tenderer. The successful tenderer
is obliged to spend
money in preparation of performing in the tender. If it fails to
perform, the resultant contract may be
cancelled.
The applicant submits that the
consequence of state liability in delict would not be unduly
onerous or expensive. It would relate
only to actual loss incurred
and not to loss of profits or consequential loss. Liability would
only be imposed if the state
acted negligently and if harm was
causally connected with the negligent conduct.
Lastly, the applicant also contends that liability in delict
is likely to enhance decision-making of tender boards in a manner

consistent with constitutional values.
51
Before
dealing with the applicant’s contentions it is convenient to
dispose of one hurdle in advance. The Supreme Court of
Appeal
preferred to decide this matter on the footing that the claim of
the applicant is for pure economic loss and that policy
considerations precluded a tender board from delictual liability
for pure economic damages, sustained merely because of a negligent
but
bona fide
award of a tender. Relying on
Telematrix
52
and
Faircape
,
53
the Supreme Court of Appeal observed that:
“
Subject to the duty of
courts to develop the common law in accordance with constitutional
principles, the general approach of our
law towards the extension of
the boundaries of delictual liability remains conservative.”
54
However, given the conclusion I
reach, it is unnecessary to decide this matter on the limited basis
that the claim of the applicant
amounts to pure economic loss and I
refrain from expressing an opinion in that regard.
I must at the outset say that
the submissions of the applicants are attractive but not
sustainable. The mainstay of the applicant’s
case is that the
controlling legislation does not expressly prohibit recourse by the
successful tenderer to action for damages.
That may be so. But
that alone cannot be decisive. One must keep in mind that the
statute does not grant a right of action
for damages. I agree with
the Supreme Court of Appeal that the empowering constitutional
provisions read with the governing
statute do not contemplate
affording a disappointed tenderer the right to delictual damages.
As we have seen earlier, the Constitution
envisages that decisions
on procurement should reside in a body the operative statute
creates. In turn the statute confers on
the tender board the
exclusive power to procure goods and services for the provincial
government and a wide discretion in the
exercise of its powers to
solicit, evaluate and award tenders. The statute requires that the
power must be exercised within
the framework of principles set out
in the guidelines. The guidelines are a set of principles
determined by national government
within which the procurement
process should function. What is more, the statute confers
independence on the tender board and
immunises its decisions and
operations from external interference. Nothing in the overall
constitutional and legislative scheme
explicitly or by implication
contemplates that an improper but honest exercise of the discretion
of the tender board must attract
a delictual right of action in
favour of a disappointed tenderer. In the words of Cameron JA,
“[in] these circumstances to
infer a remedy judicially would be
to venture far beyond the field of statutory construction or
constitutional interpretation.”
In a related complaint the
applicant makes the point that a successful tenderer whose award is
later nullified, is without alternative
remedies like an interdict
or review or appeal ordinarily available to a disappointed
tenderer.
55
But is the applicant right that a successful tenderer is without a
remedy? I am not persuaded that it is so.
First, when a tender is
nullified by a court on review an initially successful tenderer
alongside the disappointed tenderer at
whose instance the tender
was set aside and other interested parties have a renewed and equal
opportunity to tender. In this
case too there was a renewed
invitation to tender and fresh awards were made. The only event
that kept Balraz out of contention
was its intervening liquidation.
It had a clear remedy to tender again. If Balraz had won the
renewed tender would it still
be open to it to claim out-of-pocket
expenses? Again, if it had lost the second tender complex issues of
what caused the loss
of the initial out-of-pocket expenses would
arise.
Second, in my view a prudent
successful tenderer may, after winning the tender and if required
by the tender board to incur expenses
in reliance on the award,
negotiate the right to restitution of out-of-pocket expenses should
the tender award be set aside.
Once the tender is awarded the
state and the tenderer are no more than equal contracting parties
in an imminent sale.
56
In daily commerce purveyors of goods and services strike bargains,
which seek to mitigate their respective risks and to regulate
restitution should the bargain falter. A negotiated or contractual
remedy of this order is likely to be effective because it
would be
tailored to the peculiar facts connected to the actual delivery of
supplies and services to the state. This avenue
is bound to be
better suited than a blunt remedy of recognising a generic duty of
care in relation to out-of-pocket expenses
incurred on the back of
a tender award.
In the present matter the
review proceedings to set aside the tender were initiated very
late. It took the dissatisfied tenderer
a year to approach court.
The question must arise whether a review mounted so late should be
looked at favourably by our courts.
Be that as it may,
in
the ordinary course tenderers who dispute the correctness of an
award would challenge its correctness relatively quickly so
that
the question of out-of-pocket expenses would be unlikely to arise.
Even where there is a delay and a court nonetheless
set aside a
tender award,
I do not accept that ordinarily a
prudent and diligent successful tenderer whose award is reversed
later is without remedy. He
or she too may not leap without
looking.
On the facts, Balraz wasted no
moment to accept the tender award. But once the order to supply
goods and services was made by
the Department, Balraz should have
curbed its commercial enthusiasm as it was well within its right to
require that its initial
expenses not lead to its financial ruin
should the award be nullified. Balraz unnecessarily chose the more
hazardous course
which is to incur mainly salary expenses of its
directors without fashioning an appropriate safeguard. Its loss
could have been
easily curbed by prudent conduct and precaution.
The applicant made much of the
distinction between the position of an unsuccessful tenderer and of
an initially successful tenderer
whose award is later invalidated.
He was also at pains to distinguish his claim of out-of-pocket
expenses from one for lost
profits as was considered and disallowed
in
Olitzki.
57
It is clear that his claim is not for loss of profit and not
for out-of-pocket expenses in preparing the tender. In any event

the latter class of expenses is always irrecoverable whatever the
fate of the tender is. On any outcome, expenses for preparing
a
tender have to be incurred.
The residual question is
whether there is justification to develop the common law to embrace
this narrow claim for damages based
on out-of-pocket expenses in
favour of an initially successful tenderer where the award is
subsequently set aside by the court
and the tenderer retains the
right to participate in the subsequent tender process. I think
not. First, there is no magic in
characterising financial loss as
out-of-pocket. If public policy is slow to recompense financial
loss of disappointed tenderers
it should not change simply because
of the name the financial loss bears. Second, even if there may
not be a public law remedy
such as an interdict, review or appeal
this is no reason for resorting to damages as a remedy for
out-of-pocket loss. This is
so because first, as I found earlier,
the loss may be avoided and second it is not justified to
discriminate between tenderers
only on the basis that they are
either disappointed tenderers or initially successful tenderers.
To do so is to allot different
legal rights to parties to the same
tender process. There is no justification for this distinction
particularly because ordinarily
both classes of tenderers are free
to tender again should the initial tender be set aside.
It is unnecessary to traverse
every ground canvassed by the Supreme Court of Appeal in its
judgment. I agree with several significant
findings and the
conclusion of that Court on why a duty of care is not owed to
Balraz and in particular that:
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.
58
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.
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.
In all the circumstances I am
satisfied that in considering the tenders submitted by Balraz and
others, the tender board did not
owe Balraz a duty of care and
therefore its conduct in avoiding the tender was not wrongful. I
cannot find public policy considerations
and values of our
Constitution which justify adapting or extending the common law of
delict to recognise a private law right
of action to an initially
successful tenderer who has incurred a financial loss on the
strength of the award which is subsequently
upset on review by a
court order.
Was the tender valid?
I have noted earlier that the
High Court and the Supreme Court of Appeal declared invalid the
tender submitted by Balraz. Before
us the applicant argued that
the Balraz tender was not a nullity and that in any event the
Supreme Court of Appeal erred in finding
that that nullity would
necessarily preclude the existence of a legal duty to prevent harm
owed by the tender board to Balraz.
Neither the Act, nor the
regulations,
59
nor the tender documents precluded a tender by a company in the
process of being incorporated. On this argument, the formal
validity of a tender is to be assessed when the tender is
considered, and not when it is lodged. Relying on licensing cases
such as
Unitrans Passenger (Pty) Ltd t/a Greyhound Coach Lines v
Chairman National Transport Commission, and Others
60
the applicant says that an application for a licence does not
exist before the date on which it is considered. The applicant

argues that in any event, a legal duty can be owed to an entity
that did not exist at the time the tender was submitted because
the
legal validity of a tender is an aspect of the law of contract
rather than delict.
On another ground, the Supreme
Court of Appeal found that the Balraz tender breached the terms of
section 172
61
of the Companies Act because it commenced business by entering into
initial tender agreements with the tender board prior to
being
issued with a certificate to do so. During the hearing the
applicant properly abandoned the argument that the Supreme
Court of
Appeal overlooked section 172(5)(a)
62
of the Companies Act, which allows a company to conclude a
provisional contract that becomes final and binding only upon the
issue of a certificate to commence business. It may be said that
the provision does not rescue the cause of Balraz because when
it
tendered it was neither a company nor a holder of a certificate to
commence business.
Balraz was only registered and
incorporated some six weeks after the closing date for the tenders.
In its tender, Balraz created
the impression that it was a “wholly
owned black company especially incorporated for the express purpose
of handling payments
of social security grants and pensions.”
The tender board in turn accepted the correctness of the
statements.
It is trite that a company,
prior to its incorporation, has no corporate personality. Even so,
the applicant did not rely on
any pre-incorporation agreement under
section 35
63
of the Companies Act. The cases the applicant cites
64
are plainly distinguishable. They relate to licensing procedures,
which are markedly different from the tender process which
compels
strict and equal compliance by all competing tenderers on the
closing day for submission of tenders.
However, having disposed of
the appeal on the substantive issue of wrongfulness no purpose will
be served in arriving at a firm
conclusion on the validity of the
tender. For the same reason, I need not reach the issue of
negligence.
Costs
The applicant sought to
vindicate a constitutional right to administrative justice and to
have the common law developed to expand
the reach of delictual
liability related to government tenders. There is no valid reason
to mulct him, in his representative
capacity as liquidator of
Balraz, in costs. I keep in mind that the decision-making process
of the tender board, although honest,
was markedly flawed.
Further, the applicant in this
Court raised matters of considerable public importance. It would be
just and equitable that each
party carry its own costs. Therefore,
I propose to make no order as to costs.
Order
The following order is made:
The application for leave to
appeal is granted.
The appeal is dismissed.
No order as to costs.
Sachs J, Yacoob J, Nkabinde J,
Madala J, Skweyiya J and Van der Westhuizen J concur in the judgment
of Moseneke DCJ.
LANGA CJ and O’REGAN J:
We have had the privilege of
reading the judgment prepared in this matter by Moseneke DCJ. We
agree with his account of the facts,
the history of the litigation
and the issues that are raised before this Court. Indeed, we
differ in only one material respect
from him. That difference,
however, means that we cannot concur in his judgment, and
respectfully dissent for the reasons explained
here.
In his opening paragraph,
Moseneke DCJ identifies the key issue in this case as “whether a
successful tenderer whose award is
later set aside by a court on
review may claim delictual damages from the tender board for
out-of-pocket expenses incurred subsequent
to and in reliance on
the award.”
1
We agree that this is the key issue in the case. We also agree
that, on the claim as pleaded by the applicant, the question
is
whether a tender board which acts negligently in allocating a
tender in breach of an applicant’s rights to administrative
justice, thus causing a successful tenderer to incur out-of-pocket
expenses, acts wrongfully or unlawfully so as to give rise
to
aquilian liability.
The question whether the
Eastern Cape Tender Board (Tender Board) acted negligently is not a
matter for consideration by this
Court. Both parties agreed that
if the Court were to find the conduct of the Tender Board to have
been unlawful or wrongful
in the sense that it could give rise to
aquilian liability, the case should be referred back to the High
Court to determine the
question of negligence. The key question
for this Court is thus whether the conduct of the Tender Board is
wrongful or unlawful
in the sense that it could give rise to
aquilian liability.
We do consider that it is
clear that in this case the applicant is seeking damages arising
from pure economic loss. Unlike Moseneke
DCJ, therefore, we do not
avoid
deciding that question.
2
There is no suggestion on the papers that the losses incurred by
the applicant were anything other than financial. The
determination
of the quantum, of course, together with the issue of
causation have by agreement been separated from the determination
of wrongfulness
and will be determined by the High Court only if
this Court determines that in the circumstances of this case the
conduct of
the Tender Board was wrongful. In our view, it is
important to note that the damages claimed in the present case
arise from
pure economic loss as our courts have been far more
cautious to find that a defendant owes a legal duty to a plaintiff
in circumstances
where only economic loss has been occasioned.
The ordinary principle of our
law is that economic loss lies where it falls, even where
negligently caused, unless it can be established
that the conduct
giving rise to the economic loss was unlawful.
3
At times this question is formulated slightly differently to ask
whether the defendant owed the plaintiff a legal duty
4
in the circumstances where it acted negligently and thus caused the
plaintiff economic loss.
5
Answering this question in the positive will mean that aquilian
liability may arise if the other requirements of liability are
established.
Determining whether conduct is
wrongful or unlawful for the purposes of aquilian liability, as has
been stated on many occasions,
essentially involves a question of
legal policy which must be answered in the light of the norms and
values of our society and,
since 1994, in the light of the norms of
our Constitution.
6
Even though the question is a normative one, it is not to be
answered on the basis of “an intuitive reaction to a collection
of arbitrary factors”,
7
but instead requires an identification of the relevant norms
followed by an analysis and, if necessary, balancing of those norms
to determine the outcome.
In determining whether that
conduct was wrongful, the starting point in this case is the
statute in terms of which the Tender
Board acted and the
constitutional provisions relevant to it. The Tender Board was
established in terms of section 2 of the
Provincial Tender Board
Act (Eastern Cape), 2 of 1994 (the Act), which has since been
repealed. The primary function of the
Board is to procure supplies
and services for the Eastern Cape province.
8
It also has the duty to advise the responsible Minister on a range
of matters relevant to procurement, including the promotion
of
competition in procurement, promoting economy, efficiency and
effectiveness in procurement and promoting fair dealing and
equitable relationships among parties to provincial contracts.
9
The principles according to
which the tender process had to operate were identified in the Act.
Section 2(5) of the Act provided
that –
“
The Board shall exercise its
powers and perform its functions fairly, impartially and
independently.”
Section 4(2) also provided that
–
“
A tendering system devised
by the Board shall be fair, public and competitive.”
These provisions echoed the
relevant constitutional provision, section 187 of the interim
Constitution, which provided that –
“
(1) The procurement of goods
and services for any level of government shall be regulated by an
Act of Parliament and provincial
laws, which shall make provision
for the appointment of independent and impartial tender boards to
deal with such procurements.
(2) The tendering system
referred to in subsection (1) shall be fair, public and competitive,
and tender boards shall on request
give reasons for their decisions
to interested parties.”
There is no provision in the
Act which provides for appeals or reviews by dissatisfied tenderers
subsequent to a tender process.
This is an important consideration
as courts have often considered the availability of internal appeal
processes to indicate
that an aquilian action will not lie.
10
Accordingly, the ordinary rules of administrative law applied to
reviews of the tender process. Indeed, the tender award to
the
applicant was set aside by the Eastern Cape High Court on 6 June
1997. It should be emphasised that at the time the tender
in issue
in this case was awarded, and at all material times thereafter, the
Promotion of Administrative Justice Act, 3 of 2000
, had not yet
come into force.
The purpose of the legislation
is to ensure a fair, public and competitive process for the award
of tenders by an impartial and
independent agency. This purpose
needs of course to be construed in the light of our Constitution
which imposes the same obligations
on procurement processes.
11
It also needs to be understood in the light of the right to
administrative justice. Under the interim Constitution, section
24
provides as follows –
“
Every person shall have the
right to –
(a) lawful administrative
action where any of his or her rights or interests is affected or
threatened;
(b) procedurally fair
administrative action where any of his or her rights or legitimate
expectations is affected or threatened;
(c) be furnished with reasons
in writing for administrative action which affects any of his or her
rights or interests unless the
reasons for such action have been
made public; and
(d) administrative action which
is justifiable in relation to the reasons given for it where any of
his or her rights is affected
or threatened.”
This provision differs from
the equivalent provision in section 33 of the 1996 Constitution,
12
but in our view those differences are not material for present
purposes. Section 24 of the interim Constitution and section
33
both clearly establish a right to administrative justice. The
purpose of such a right is to ensure that those who interact
with
the State are entitled to be treated fairly and lawfully. In
construing the purpose of the Act, therefore, this right enshrined
in our Constitution must not be ignored. It is clear that an
important purpose of the Act is to establish a fair procurement
process in the public interest. In our view, one of the purposes
of the Act is to fulfil the right recognised in section 24
of the
interim Constitution (and now section 33 of the 1996 Constitution)
and so protect the right to administrative justice
of those engaged
in tender processes.
We agree with Moseneke DCJ
that there is no provision in the Act which stipulates that a
damages claim would lie against the Tender
Board for the
out-of-pocket expenses incurred by a successful tenderer pursuant
to a tender award where the tender is subsequently
set aside on
review. The absence of such a provision does not of itself defeat
the claim of the applicant. Although we agree
with Harms JA that
our case law is not yet clear when it comes to drawing a boundary
between liability due to the breach of a
statutory duty and that of
a common law one, we do not agree that if no conclusion as to
whether liability should arise can be
drawn from the statute, it is
“unlikely that policy considerations could weigh in favour of
granting a common-law remedy”.
13
If the statute is not clear on
the matter, it is our view that what needs then to be considered is
whether upon a consideration
of the relevant normative principles
such a claim lies. We would endorse the approach formulated by
Cameron JA in
Olitzki Property Holdings
–
“
[T]he answer . . . depends
less on the application of formulaic approaches to statutory
construction than on a broad assessment
by the court whether it is
‘just and reasonable’ that a civil claim for damages should be
accorded. ; ; ; The determination
of reasonableness here in turn
depends on whether affording the plaintiff a remedy is congruent
with the court’s appreciation
of the sense of justice of the
community. This appreciation must unavoidably include the
application of broad considerations of
public policy determined also
in the light of the Constitution and the impact upon them that the
grant or refusal of the remedy
the plaintiff seeks will entail.”
14
What are the normative
considerations in our legal system relevant to the question before
us?
Both Moseneke DCJ in his
judgment and Harms JA in the Supreme Court of Appeal rely on the
judgment of Cameron JA in
Olitzki Property Holdings
where he
reasoned as follows –
“
Certainly the contention
that it is just and reasonable, or in accord with the community’s
sense of justice, or assertive of the
interim Constitution’s
fundamental values, to award an unsuccessful tenderer who can prove
misfeasance in the actual award its
lost profit does not strike me
in this context as persuasive. As the plaintiff’s claim, which
amounts to more than R10 million,
illustrates, the resultant
imposition on the public purse could be very substantial, involving
a double imposition on the State,
which would have to pay the
successful tenderer the tender amount in contract while paying the
same sum in delict to the aggrieved
plaintiff. As a matter of
public policy the award of such an entitlement seems to me to be so
subject to legitimate contention
and debate as to impel the
conclusion that the scheme of the interim Constitution envisaged
that it should be a matter for decision
by the bodies upon whom the
legislative duties . . . were imposed. In these circumstances to
infer such a remedy judicially would
be to venture far beyond the
field of statutory construction or constitutional interpretation.”
15
[Footnotes omitted]
There is much of merit in the
reasoning of Cameron JA in relation to a claim by an unsuccessful
tenderer for loss of profits.
In our view, however, there are two
significant differences between the facts in issue in
Olitzki
and the facts in the current case. The first is that we are faced
here with a successful tenderer whose award was subsequently
(and
belatedly, as we shall discuss further later) set aside after it
had already instituted processes to comply with the contractual
obligations which arose subsequent to and consequent upon the award
of the tender. An unsuccessful tenderer who considers the
tender
award to have been unlawful or improper always has a remedy of
judicial review to set aside the tender and thereafter
to reapply
if the tender is re-advertised. A successful tenderer, however,
does not have this remedy and indeed is a bearer
of obligations to
comply with the contractual obligations it undertakes once the
tender has been awarded.
Secondly, the claim in
Olitzki
was for loss of profits, not for out-of-pocket expenses. Like
Cameron JA, we are of the view that an unsuccessful tenderer who
may have a tender award set aside and then re-tender should not in
addition be afforded an entitlement to claim loss of profits
in
respect of the original tender where the claim is based on
negligence.
16
Whatever the situation may be in societies wealthier than ours, to
afford an unsuccessful tenderer such a claim in our society
would
unduly burden the public purse that is already beset with more
legitimate claims than it can possibly meet.
A claim for out-of-pocket
expenses, however, is a far more modest claim. Moreover, the
inability to recover out-of-pocket expenses
may well render smaller
and less financially viable tenderers at risk of liquidation.
Indeed, such was the case here. In our
country, government
procurement is one of the key mechanisms for ensuring that those
previously locked out of economic opportunity
by the policies of
apartheid, are given an opportunity to participate. By definition
such companies and individuals are often
new, small and not
financially robust. In our view, this is an additional and
important factor which supports our conclusion
that both Moseneke
DCJ and the Supreme Court of Appeal are incorrect to conclude that
aquilian liability cannot arise on the
circumstances of this case.
In our view, these two
considerations — that the tenderer has been successful and has
incurred expenses pursuant to a contractual
obligation to do so,
and that the tenderer seeks only to be reimbursed for actual
expenses, not for loss of profits — are sufficiently
material to
render a conclusion different from that reached in
Olitzki
appropriate. Underlying the first of these considerations is the
principle that it would be an undesirable consequence for the
performance of government contracts, were successful tenderers to
be anxiously looking over their shoulders in case their contract
should subsequently be declared void. Moseneke DCJ impliedly
criticises the applicant (it “should have curbed its commercial
enthusiasm”)
17
for being quick off the starting blocks in seeking to perform its
contractual obligations. We cannot agree. In our view, it
would
be highly undesirable to suggest that a successful tender applicant
should hesitate before performing in terms of the contract,
in case
a challenge to the tender award is successfully brought. Such a
principle, in our view, would undermine the constitutional
commitments to efficiency and the need for delivery which are of
immense importance to both government and citizens alike.
The second difference to
Olitzki
relates to the difference between damages for loss
of profits and damages for out-of-pocket expenses. In his
judgment, Harms
JA expressed the view that there was no material
difference between the two. Again we cannot agree. In our view,
the notion
that a successful tenderer should be entitled to recover
for actual money spent in good faith by it in pursuance of
contractual
obligations is quite different to an unsuccessful
tenderer being able to recover fully those profits it cannot
realise as a result
of an improper tender award. The former
entitles an applicant to reimbursement for expenses it undertook
for the benefit of
the government. The latter does in a real sense
constitute a “windfall” claim,
18
as the disappointed tenderer will not need to do anything other
than litigate to put itself in the position it would have been
in
if it had performed the contract.
In relation to this latter
sort of claim, the considerations mentioned by Ackermann J in
Fose
seem apt –
“
In a country where there is
a great demand generally on scarce resources, where the government
has various constitutionally prescribed
commitments which have
substantial economic implications and where there are ‘multifarious
demands on the public purse and the
machinery of government that
flow from the urgent need for economic and social reform’, it
seems to me to be inappropriate to
use these scarce resources to pay
punitive constitutional damages to plaintiffs who are already fully
compensated . . . ”.
19
[Footnotes omitted]
The considerations are less apt
however in respect of a successful tenderer who incurs out-of-pocket
expenses for which it will
receive no compensation save through a
delictual claim.
Holding the Tender Board
liable in these circumstances will, of course, also enhance its
accountability. This principle will
not always require a
government agency to be held liable in delict, as Nugent JA held in
Van Duivenboden –
“
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.”
20
In this case, too,
accountability does not seem to us to be the determinative
criterion. A tender board can adequately be held
accountable
through the public law remedies of judicial review. In our view,
what tips the balance in the applicant’s favour
is the need to
ensure that it is compensated for its bona fide expenses, and that
it would be unwise not to do so because of the
harmful effect that
may have on the performance of tender obligations.
Arrayed against these
considerations, must be set the considerations given weight by
Moseneke DCJ in addition to those raised
in
Olitzki
which we
have already considered. They are the following –
The fact that a successful
tender has alternative remedies to mitigate any losses that may be
occasioned by the tender award being
subsequently set aside.
21
The important public
considerations which require tender board adjudicators to be immune
from damages claims in respect of their
negligent but honest
decisions.
22
The purpose of tender
legislation is to ensure a fair tendering process in the public
interest, rather than to protect participants
in the tender
process.
23
The chilling effect on the
tender process if numerous claims by successful tenderers whose
tenders are set aside.
24
These considerations do not
merit as much weight in the wrongfulness analysis, in our view, as
Moseneke DCJ attributes to them.
In the first place, we are not
persuaded that a successful tenderer has alternative and effective
remedies at its disposal.
As mentioned above, there are no
alternative remedies for the successful tenderer in the Act.
Moreover, unlike the unsuccessful
tenderer, it cannot challenge the
tender award by way of judicial review nor may it seek to have its
validity confirmed. It
is true that if the award is set aside, it
may enter the race for the tender again. However even if the
tender is repeated,
and the successful tenderer is again
successful, it still may not receive reimbursement for
out-of-pocket expenses incurred the
first time around. If it is
unsuccessful in the next round, it certainly will not have those
expenses reimbursed.
Moseneke DCJ also suggests
that a successful tenderer could negotiate for contract terms to
make clear that it does not bear the
risk in respect of
out-of-pocket expenses if the award is subsequently set aside.
There is no evidence on the record on this
issue. In our view, it
is unlikely that government contracts are negotiated in this
manner. It seems probable that government
contracts of this sort
are standard form contracts whose terms are stipulated in advance
by government. In the absence of evidence
to the contrary, we are
sceptical as to whether a successful tenderer is indeed able to
demand terms in its contract with government
which protect its
interests in the event of the tender award being set aside. Even
if it is possible for a successful tenderer
to do so, we are of the
view that the existence of such a possibility is not sufficient to
outweigh the considerations which
support the conclusion that the
Tender Board owes a successful tenderer, in the circumstances of
this case, a legal duty not
to act negligently in the adjudication
of the tender process.
Moseneke DCJ also relies on
the consideration that members of adjudicative agencies are not
ordinarily held liable for their decisions
taken bona fide but
negligently.
25
There is long-standing and, in our view, persuasive authority for
this proposition. The functions of the Tender Board are to
procure
goods and services for the State. This function is primarily an
executive function, not an adjudicative one. The award
of a tender
has been repeatedly held to constitute administrative action within
the terms of the Constitution.
26
It would be unhelpful to characterise it further in a manner that
would herald a return to the flawed exercise of determining
whether
administrative action is judicial, quasi-judicial or purely
administrative.
27
The question we need to answer is whether given the nature of the
functions of the Tender Board, the Tender Board cannot be
liable in
delict to those aggrieved by the tender process. In our view,
although it will often be so that no delictual claim
will lie
against the Tender Board for reasons such as those identified by
Cameron JA in
Olitzki
, there will be times when an action
for damages may lie.
Moseneke DCJ concludes that
the purpose of the Act, construed in the light of the Constitution,
is to promote fair tender procedures
in the interests of the
public. While we agree that this is one of the purposes of the
Act, it is our view, as stated above,
28
that another purpose of the Act is to seek to fulfil the right to
administrative justice enshrined in section 24 of the interim
Constitution (and section 33 of the 1996 Constitution). As such it
does seek to protect the rights of those participating in
the
tender process. This consideration supports a finding of aquilian
liability rather than the reverse.
The question of the chilling
effect that a delictual claim may have on the tender process is, in
our view, a consideration of
greater weight than the possibility of
alternative remedies. However, as we have said before, a claim for
out-of-pocket expenses
seems to us to be far less inhibitive than a
claim for loss of profits. Out-of-pocket expenses will be limited
to those expenses
proved to have been incurred as a direct result
of the contract arising from the tender award. Ordinary running
expenses of
businesses will not be included. If unable to claim
for such expenses, the successful tenderer will have to absorb
those expenses
itself or be liquidated. An ability to recover such
expenses, therefore, is not a windfall for the successful tenderer
but constitutes
compensation for loss it has incurred in order to
comply with its contractual obligations. As such, claims for
out-of-pocket
expenses, in these cases, fall squarely within the
compensatory purpose of modern aquilian liability.
In sum, we are of the view
that the weightiest of the considerations identified by Moseneke
DCJ supporting a conclusion that no
liability should lie are:
firstly, the nature of the functions of the Tender Board; and
secondly, the risk of impairing the efficiency
of the Tender Board
by rendering it liable in delict and simultaneously the risk of
overburdening the fiscus with such claims.
In our view, we have
identified important considerations which serve as counter-weights
to these factors. The first is the nature
of the damages claimed
in this case, and the desirability of reimbursing successful
tenderers for such expenses. The second
is that the Act properly
construed in the light of section 24 of the interim Constitution
(and section 33 of the final Constitution)
does seek to vindicate
the right to administrative justice of those who engage in the
tender process. The third is that the
efficient and speedy
performance of government contracts might be undermined were
successful tenderers to be left without remedy
for out-of-pocket
expenses. And the fourth is that given the role of government
procurement in promoting participation in the
economy of those
precluded from doing so under apartheid, many successful tenderers
will be new and small companies unable to
absorb the costs incurred
in performing a contract subsequently declared void which might
result in their liquidation. In our
view, in these circumstances,
there is a need to ensure that successful tenderers, such as the
applicant, will not be destroyed
by having no recourse for
out-of-pocket expenses incurred in good faith performance of
contractual obligations.
We conclude therefore that the
normative factors we have considered support conclusion that the
Tender Board did owe a legal duty
to the applicant in the
circumstances of this case. Those countervailing factors
identified by both Moseneke DCJ and the Supreme
Court of Appeal, in
our view, are not of sufficient weight to produce the contrary
conclusion.
We should conclude this aspect
of the judgment by repeating that PAJA does not govern this case.
It is inappropriate therefore
to speculate what the situation may
have been, had it been applicable. As mentioned by both Moseneke
DCJ and Harms JA, the remedies
for judicial review in PAJA are far
broader than the common-law remedies which existed before. Section
8 of PAJA provides –
“
(1) The court or tribunal,
in proceedings for judicial review in terms of section 6 (1), may
grant any order that is just and equitable,
including orders —
(a) directing the
administrator —
(i) to give reasons; or
(ii) to act in the manner the
court or tribunal requires;
(b) prohibiting the
administrator from acting in a particular manner;
(c) setting aside the
administrative action and —
(i) remitting the matter for
reconsideration by the administrator, with or without directions; or
(ii) in exceptional cases —
(aa) substituting or varying
the administrative action or correcting a defect resulting from the
administrative action; or
(bb) directing the
administrator or any other party to the proceedings to pay
compensation;
(d) declaring the rights of the
parties in respect of any matter to which the administrative action
relates;
(e) granting a temporary
interdict or other temporary relief; or
(f) as to costs.”
It may well be that the power
to direct the payment of compensation conferred by section
8(1)(c)(ii)(bb) will result in the development
of administrative
law principles governing the payment of compensation to vindicate
the constitutional right to administrative
justice. This is not a
matter for further consideration in this case, save to point out
that in many other jurisdictions the
rights and obligations of
parties to government procurement processes are regulated by
statute. In the European Union for example,
two directives
regulate the procurement of public works, supply and services
contracts, and utilities works and supply contracts.
29
These directives impose an obligation upon member states of the
European Union to provide contractors with remedies for the
review
of the award of public contracts. The directives also specify the
remedies that reviewing bodies should have at their
disposal.
One further aspect of PAJA
that merits mention is the rule that administrative review
proceedings must be launched timeously.
Section 7(1) provides that
the proceedings must be instituted “without unreasonable delay
and not later than 180 days after
the date” on which the grievant
became aware of the administrative action and the reasons for it.
30
One of the salutary effects of this rule is that substantial
delays in judicial review proceedings, such as occurred in the
present case, will be avoided. The further effect of this is that
a determination of the lawfulness or otherwise of the award
will
hopefully be made before successful tenderers have incurred
significant out-of-pocket expenses.
The last issue concerns the
question of the date of incorporation of the applicant. Both the
Supreme Court of Appeal and the
High Court conclude that at the
time that it lodged its tender, the applicant did not have legal
personality and its tender was
therefore void. There is much to
recommend this conclusion. However, given that this is a
dissenting judgment, it is not necessary
for us to reach a
conclusion in this regard. Like Moseneke DCJ, therefore, we say
nothing more about it.
Mokgoro J concurs in the
judgment of Langa CJ and O’Regan J.
SACHS J:
[99] I concur in the judgment
of Moseneke DCJ, subject to the following qualification. I do not
feel that PAJA
1
is irrelevant to the present matter. Even though its terms are not
applicable because it was adopted after the events in question
had
taken place, it does serve to articulate public policy as it was
emerging at the relevant time. Both the interim Constitution
and
the final Constitution envisage a right to just administrative
action. The implication is that a constitutionalised form of
judicial review is intended to cover the field, both in substantive
and remedial terms. To my
mind it would not only be
jurisprudentially inelegant and functionally duplicatory to permit
remedies under constitutionalised administrative
law, and remedies
under the common law, to function side by side. It would be
constitutionally impermissible. The provision in
PAJA to the effect
that in special circumstances a court reviewing administrative
action could award compensation, did not invent
the public law
remedy it articulates. On the contrary, it gave precise expression
to a remedy already implicit in the interim
Constitution and, later,
in the final Constitution.
[100] The existence of this
constitutionally-based public law remedy renders it unnecessary and
inappropriate to hybridise and stretch
the common-law delict of
injury beyond its traditional limits in this area. Just
compensation today can be achieved where necessary
by means of
PAJA.
2
In my view, it could have been achieved before PAJA was adopted by
means of an innovative constitutional remedy of the kind referred
to
in
Fose
,
3
based in public law, as befits the relationship between the parties
and the interests involved.
[101] Such an equitable,
constitutionally-based public law remedy was not pleaded or debated
in this case. Had it been, the problems
acknowledged in the
minority and majority judgments could have been resolved in a fair,
balanced and practical way.
The logical difficulties of
distinguishing between different kinds of damages would have fallen
away. Similarly the difficulties
facing a successful tenderer who
wished to guard him/herself against potential loss in the event of
the tender being invalidated,
could have been responded to on an
equitable basis. Though I am not persuaded that a prudent tenderer
could be expected to enter
into precautionary contracts or take out
insurance in the way the majority judgment suggests I am equally
unconvinced that it is
appropriate to develop private law remedies
to fill the gap. For these reasons, I agree with Moseneke DCJ that
the application
should be dismissed.
For the applicant: PBJ Farlam
instructed by Webber Wentzel Bowens.
For the respondent: RG Buchanan
SC and SV Notshe SC instructed by the State Attorney, King William’s
Town.
1
No 2 of 1994, which was repealed by the Provincial Tender Board
Repeal Act (Eastern Cape) 6 of 2004.
2
Established in terms of the State Tender Board Act 86 of 1968.
3
³
See above n 1.
4
See above n 2.
5
See section 11 of the Provincial Tender Board Act
(Eastern Cape) 2 of 1994.
6
Section 172 of the Companies Act 61 of 1973 prohibits a company from
commencing business unless and until it has been issued a
certificate entitling it to commence business.
7
The judgment of Pickard JP and Ebrahim AJ on the review is reported
as
Cash Paymaster Services (Pty) Ltd v Eastern Cape Province
1999
(1) SA 324
(Ck HC).
8
Per White J in the unreported judgment of the Bisho High Court,
The
Eastern Cape Provincial Administration and the Provincial Tender
Board Eastern Cape v Jurgens Johannes Steenkamp N.O
. Case No
148/2000, 16 August 2001, as yet unreported.
9
The section reads:
“
The
Supreme Court of Appeal may decide appeals in any matter. It is the
highest court of appeal except in constitutional matters,
and may
decide only—
(a)
appeals;
(b)
issues connected with appeals; and
(c)
any other matter that may be referred to it in circumstances defined
by an Act of Parliament.
”
10
The tender of Balraz was submitted and awarded in 1995 under the
interim Constitution [Act 200 of 1993]. However, it was set aside
by the Court on review in June 1997 and after the inception of the
Constitution in 1996 and the claim for damages was initiated
under
the present constitutional regime. Given the substantial similarity
between the provisions of section 217(1) of the Constitution
and
section 187 of the interim Constitution in this context it is not
necessary to decide which of the two constitutions applies.
I cite
both.
Section 217(1) provides:
“When an organ of state in the national, provincial or local
sphere of government, or any other institution identified in
national
legislation, contracts for goods or services, it must do so
in accordance with a system which is fair, equitable, transparent,

competitive and cost-effective.”
Section 187 of the interim Constitution provided:
“
(1) The procurement of goods
and services for any level of government shall be regulated by an
Act of Parliament and provincial
laws, which shall make provision
for the appointment of independent and impartial tender boards to
deal with such procurements.
The tendering system referred to
in subsection (1) shall be fair, public and competitive, and tender
boards shall on request give
reasons for their decisions to
interested parties.
No organ of state and no member
of any organ of state or any other person shall improperly
interfere with the decisions and operations
of the tender boards.
All decisions of any tender board shall be recorded.”
11
See for example,
Minister
of Health and Another v New Clicks South Africa (Pty) Ltd and Others
(Treatment Action Campaign and Another as
Amicus
Curiae
)
2006 (1) BCLR 1
(CC);
2006 (2)
SA 311
(CC) at para 313;
Affordable Medicines
Trust and Others v Minister of Health of RSA and Another
[2005] ZACC 3
;
2005 (6) BCLR 529
(CC) at para 49;
Kaunda
and Others v President of the Republic of South Africa and
Others
2005 (4) SA
235
(CC) at para 78;
Pharmaceutical
Manufacturers Association of SA and Another: In re Ex parte
President of the Republic of South Africa and Others
[2000] ZACC 1
;
2000 (3) BCLR 241
(CC);
2000 (2) SA 674
(CC) at para 20.
12
Section 195(1) of the Constitution sets out the
basic values and principles governing public administration:
“
Public administration must be
governed by the democratic values and principles enshrined in the
Constitution, including the following
principles:
A high standard of professional
ethics must be promoted and maintained.
Efficient, economic and
effective use of resources must be promoted.
Public administration must be
development-oriented.
Services must be provided
impartially, fairly, equitably and without bias.
People’s
needs must be responded to, and the public must be encouraged to
participate in policy-making.
Public administration must be
accountable.
Transparency must be fostered by
providing the public with timely, accessible and accurate
information.
Good human-resource management
and career-development practices, to maximise human potential, must
be cultivated.
Public
administration must be broadly representative of the South African
people, with employment and personnel management practices
based on
ability, objectivity, fairness, and the need to redress the
imbalances of the past to achieve broad representation.”
13
Section 39(2) provides:
“When interpreting any legislation, and when developing the common
law or customary law, every court, tribunal or forum must
promote
the spirit, purport and objects of the Bill of Rights.”
Section 35(3) of the interim Constitution provided:
“
In the interpretation of any law and the
application and development of the common law and customary law, a
court shall have due
regard to the spirit, purport and objects of
this Chapter.”
14
Steenkamp NO v Provincial Tender Board, Eastern Cape
2006 (3)
SA 151
(SCA);
Greys Marine Houtbay (Pty) Ltd and Others v
Minister of Public Works and Others
[2005] ZASCA 43
;
2005 (6) SA 313
(SCA);
Logbro Properties CC v Bedderson N.O. and Others
2003 (2) SA
460
(SCA);
Transnet Ltd v Goodman Brothers (Pty) Ltd
[2000] ZASCA 151
;
2001 (1)
SA 853
(SCA);
Olitzki Property Holdings v State Tender Board and
Another
[2001] ZASCA 51
;
2001 (8) BCLR 779
(SCA);
2001 (3) SA 1247
(SCA).
15
See the definition of administrative action in
section 1 of the Promotion of Administrative Justice Act 3 of 2000
(PAJA). Also
compare the recent decision of the SCA in
Grey’s
Marine
id at para 21-24.
16
Section 24 of the interim Constitution provided:
“
Every person shall have the
right to—
lawful administrative action
where any of his or her rights or interests is affected or
threatened;
procedurally fair
administrative action where any of his or her rights or legitimate
expectations is affected or threatened;
be furnished with reasons in
writing for administrative action which affects any of his or her
rights or interests unless the
reasons for such action have been
made public; and
administrative action which is justifiable in
relation to the reasons given for it where any of his or her
rights is affected
or threatened.”
Section
33(1) of the Constitution provides: “Everyone has the right to
administrative action that is lawful, reasonable and procedurally
fair.”
See also
Zondi
v Member of the Executive Council for Traditional and Local
Government Affairs and Others
[2004] ZACC 19
;
2005 (4) BCLR 347
(CC);
2005 (3)
SA 589
(CC);
Bato Star Fishing (Pty)
Ltd v Minister of Environmental Affairs and Tourism
[2004] ZACC 15
;
2004
(7) BCLR 687
(CC);
2004
(4) SA 490
(CC) at para 22 and
Pharmaceutical Manufacturers
above n 11 at paras 33-45.
17
Section 38 of the Constitution provides:
“the right to approach a competent court, alleging that a right in
the Bill of Rights has been infringed or threatened, and the
court
may grant appropriate relief, including a declaration of rights.”
Subsection 7(4)(a) of the interim Constitution provided:
“
W
hen an
infringement of or threat to any right entrenched in this Chapter is
alleged, any person referred to in paragraph (b) shall
be entitled
to apply to a competent court of law for appropriate relief, which
may include a declaration of rights.”
See also
National
Coalition for Gay and Lesbian Equality and Another v Minister of
Justice and Others
[1999] ZACC 17
;
2000
(1) BCLR 39
(CC);
2000 (2) SA 1
(CC) at para 65;
Fose
v Minister of Safety and Security
[1997] ZACC 6
;
1997 (7) BCLR 851
(CC);
1997 (3) SA 786
(CC) at para 56;
S
v Bhulwana; S v Gwadiso
[1995] ZACC 11
;
1995 (12) BCLR
1579
(CC);
1996 (1) SA 388
(CC) at para 12.
18
See for example,
National
Education Health and Allied Workers Union v University of Cape Town
and Others
2003 (3) SA 1
(CC) at para 25;
Ingledew v Financial Services
Board: In Re Financial Services Board v Van Der Merwe and Another
[2003] ZACC 8
;
2003 (8) BCLR 825
(CC);
2003 (4) SA 584
(CC) at para 31;
S v Boesak
[2000] ZACC 25
;
2001 (1) BCLR 36
(CC);
2001 (1) SA 912
(CC) at para 12.
19
See
Radio Pretoria v Chairperson of
the Independent Communications Authority of South Africa and Another
[2004] ZACC 24
;
2005 (3) BCLR 231
(CC);
2005 (4) SA 319
(CC) at para 19;
Fraser v Naude and Others
1998 (11) BCLR 1357
(CC);
1999 (1) SA 1
(CC) at para 7;
De
Freitas and Another v Society of Advocates of Natal (Natal Law
Society Intervening)
1998 (11) BCLR 1345
(CC) at paras 20-21;
Member of the Executive Council for Development Planning and
Local Government, Gauteng v Democratic Party and Others
[1998] ZACC 9
;
1998 (7)
BCLR 855
(CC);
1998 (4) SA 1157
(CC) at para 32;
S v Pennington
and Another
1997 (10) BCLR 1413
(CC);
1997 (4) SA 1076
(CC) at
paras 25-26.
20
See for examples
Transnet
above n 14 at 870D-F and
Umfolozi
Transport (Edms) Bpk v Minister van Vervoer en Andere
[1997] ZASCA 8
;
[1997] 2
All SA 548
(A) at 552j-553a. See also cases in n 14 above.
21
Zondi
above n 16;
Bato Star
above n 16;
Pharmaceutical
above n 11; and
President of the Republic of South Africa and
Another v Hugo
[1997] ZACC 4
;
1997 (6) BCLR 708
(CC);
1997 (4) SA 1
(CC).
22
Above at para 21.
23
Pharmaceutical
above n 11 at paras 45, 51, 79 and 85.
24
Section 24 of the interim Constitution and section 33 of the
Constitution. There is no material difference in the scope of the
right envisaged in both provisions.
25
Above n 16.
26
The South African Law Reports in
[2004] ZACC 15
;
2004 (4) SA 490
(CC) erroneously report this term as “groundnorm”. The correct
form is “grundnorm”.
27
New Clicks
above n 11
at para 95;
Pharmaceutical
above n 11 at para 51;
Zondi
above n 16 at paras 99 and 102;
Bato
Star
above n 16 at para 25.
28
I am not unmindful of the fact that when the tender was awarded and
subsequently when the claim for damages was instituted in June
2000
PAJA had not come into force. It only took effect on 30 November
2000. Its remedial provisions are cited merely to make
the point
that they provide in the main for public law remedies. PAJA is the
legislation that is meant to give effect to the constitutional
protection. Section 8 of PAJA provides:
“
(1) The court or tribunal, in proceedings for
judicial review in terms of section 6(1), may grant any order that
is just and equitable,
including orders—
directing the administrator—
(i) to give reasons; or
(ii) to act in the manner the court or tribunal
requires;
prohibiting the administrator from acting in a
particular manner;
setting aside the administrative action and
(i) remitting the matter for reconsideration by the
administrator, with or without directions; or
(ii) in exceptional cases—
(aa) substituted or varying the administrative action
or correcting a defect resulting from the administrative action; or
(bb) directing the administrator or any other party to
the proceedings to pay compensation;
declaring the rights of the parties in respect of any
matter to which the administrative action relates;
granting a temporary interdict or other temporary
relief; or
as to costs.
(2) The court or tribunal, in proceedings for judicial
review in terms of section 6(3), may grant any order that is just
and equitable,
including orders—
(a) directing the taking of the decisions;
(b) declaring the rights of the parties in relation to
the taking of the decision;
(c) directing any of the parties to do, or to refrain
from doing, any act or thing the doing, or the refraining from the
doing,
of which the court or tribunal considers necessary to do
justice between the parties; or
(d) as to costs.”
29
The Constitution came into force on 4 February 1997.
Section
17 of schedule 6 of the Constitution regulates transitional
arrangements relating to cases pending before courts. It provides
that:
“All proceedings which were pending before a court when the new
Constitution took effect, must be disposed of as if the new

Constitution had not been enacted, unless the interests of justice
require otherwise.”
30
The interests of the applicant are just as well
protected, if not better, under the new Constitution. None of the
parties sought
to argue its case under the interim Constitution.
And the administrative justice protections in the two constitutions
are, for
purposes of this case, similar in substance.
31
For the full text see above n 10.
32
See above para 3.
33
See above n 1, which sets out both the 1994 and 2004 Acts, the
latter repealed the former.
34
Rail Commuters Action Group and
Others v Transnet Ltd t/a Metrorail and Others
[2004] ZACC 20
;
2005 (4) BCLR 301
(CC);
2005 (2) SA 359
(CC) at paras 74-76 and 78;
Minister of Safety and Security v Van Duivenboden
2002 (6) SA
431
(SCA);
[2002] 3 All SA 741
(SCA) at para 21.
35
In India, the Supreme Court has carved out a
sphere of governmental activity within which the state will be
immune from civil suit.
The Court has described the actions
performed in that protected sphere as being “inalienable”
functions of the state, which
are derived from its sovereignty. See
for example,
N. Nagendra Rao & Co.
v State of A.P
(1994) 6 SCC 205
at
paras
24-27; AIR 1994
SC 2663 at paras 23-26.
In the United States, the government
generally enjoys sovereign immunity in tort unless the immunity is
waived by a particular state
constitution or other statutory
provision. Tort liability is therefore completely regulated by
statute and allows no room for
liability derived from the common
law. See
Keeton WP (ed)
Prosser
and Keeton on the Law of Torts
5ed
(West Publishing Co, Minnesota 1984) at 1034-1036 and 1038-1039.
See also S2671-S2680 of the Federal Tort Claims Act of 1946,
which
created a form of liability under which the government is liable for
certain torts committed by government employees.
36
1995 (2) SA 1
(A).
37
Id at 31C-D. Of course, it should be added, that
now one is obliged to have regard also to the values of the
Constitution.
38
1966 (2) SA 428
(A) at 430E-F. In this decision, Holmes JA held:
“For the purposes of liability
culpa
arises if—
(a) a
diligens paterfamilias
in the position of the
defendant—
(i) would foresee the reasonable possibility of his conduct injuring
another in his person or property and causing him patrimonial
loss;
and
(ii) would take reasonable steps to guard against such occurrence;
and
(b) the defendant failed to take such steps.”
39
Local Transitional Council
of Delmas and Another v Boshoff
[2005]
4 All SA 175
(SCA) at paras 18-21;
Gouda
Boerdery BK v Transnet Ltd
[2004] 4
All SA 500
(SCA) at para 12;
Van
Duivenboden
above
n 34 at para 12.
40
See above n 14.
41
Id at para 12. This statement has been approved in the
subsequent cases of
Minister of Safety and Security v Hamilton
2004 (2) SA 216
(SCA) at para 33;
Du Plessis v Road Accident
Fund
2004 (1) SA 359
(SCA) at para 18;
Premier Western Cape v
Faircape Property Developers (Pty) Ltd
2003 (6) SA 13
(SCA) at
para 33.
42
Knop
above n 36
at 27E-I. Also see
Van Duivenboden
above n 34, and cases cited in n 39 above.
43
Du Plessis
above
n 41;
Faircape
above n 41 at paras 37-40;
Van
Duivenboden
above n 34 at para 13;
Knop
above n 36.
44
The case law in the United Kingdom suggests that
the
question of whether a statutory duty can give rise to a
private cause of action is a question of construction of the
statute. It
requires an examination of the policy of the statute in
order to decide whether it was intended to confer a right to
compensation
for breach. In this regard, see for example,
Gorringe
v Calderdale
[2004] UKHL 15
;
[2004] 2 All ER 326
(HL) at paras 23 and 71;
Stovin
v Wise
[1996] UKHL 15
;
[1996] AC 923
(HL) at 952;
X (Minors) v Bedfordshire
County Council
[1995] UKHL 9
;
[1995] 2 AC 633
at 739;
Reg v Deputy Governor
of Parkhurst Prison, Ex parte Hague
[1992] 1 AC 58
(HL) at 159,
168-171.
In Australia it has been held that i
n
determining whether a public authority has breached a common law
duty by failing to exercise a statutory power, it is essential
to
examine the words and policy of the legislation. See for example,
Pyrenees Shire Council v Day
[1998] HCA 3
;
(1998)
192
CLR 330
at 377
[126]
per Gummow J;
Crimmins v
Stevedoring Industry Finance Committee
(1999)
200
CLR 1
at 19 [27] per Gaudron J, 59 [160] per Gummow J, 72
[203] per Kirby J;
Brodie v Singleton Shire Council
[2001] HCA 29
;
(2001)
206
CLR 512
at 540
[56]
per Gaudron, McHugh and Gummow JJ.
In some cases, the High Court has found that the statutory
provisions at issue indicate that
the legislature intended to cover
the field and exclude all common law duties of care. In this
respect, see
Crimmins
at 18-19 [26-27] per Gaudron J. For a
similar result in New Zealand, see
South Pacific Manufacturing Co
Ltd v New Zealand Security Consultants & Investigations Ltd
[1992] 2 NZLR 282
at 297-298 per Cooke P.
The Supreme Court of Canada has held that in order to determine
whether a duty of care will be owed by a statutory authority the
words of the empowering statute must be examined to determine
,
inter alia
, whether the statutory powers at issue have produced
a decision that was in the “policy” or “operational”
spheres. Decisions
on whether or not to exercise a statutory power
reside in the policy realm (and are thus immune from liability in
tort), whereas,
once the decision to exercise a statutory power is
made, the manner in which it is exercised may give rise to liability
in negligence.
See for example,
Kamloops v Nielsen
[1984] 2
SCR 2
at 11-13;
Just v British Columbia
[1989] 2 SCR 1228
at
1239-1245;
Brown v British Columbia (Minister of Transportation
and Highways)
[1994] 1 SCR 420.
45
Knop
above n 36;
Faircape
above n 41;
Lascon
Properties (Pty) Ltd v Wadeville Investment (Pty) Ltd and Another
[1997] 3 All SA 433
(W).
46
See above n 43.
47
See above n 42 and n 43.
48
Van Duivenboden
above n 34 at para 20.
49
See above n 42 and n 43.
50
Mkhatswa v Minister of Defence
2000 (1) SA 1104
(SCA);
[2000]
1 All SA 188
(A);
Kruger
above n 38;
Van Duivenboden
above n 34 at para 12;
Minister of Law and Order v Kadir
[1994] ZASCA 138
;
1995
(1) SA 303
(A) at 307D-308A;
VE v Minister of Safety and Security
[2001] 3 All SA 469
(T) at 475.
51
Section 33(1) above n 16. Section 195 sets out
the basic values and principles governing public administration.
Section 217(1)
above n 10.
52
Telematrix (Pty) Ltd t/a Matrix Vehicle Tracking v Advertising
Standards Authority SA
2006 (1) SA 461
(SCA).
53
Above n 41.
54
See also
Sea Harvest Corporation (Pty) Ltd & Another v Duncan
Dock Cold Storage (Pty) Ltd
and Another
2000 (1) SA 827
(SCA) at 837G-I where it was observed that in relation to claims for
pure economic loss the requirement of wrongfulness gains a
particular importance.
55
Knop
above n 36
, Faircape
above n 41
, Van
Duivenboden
above n 34
, Olitzki
above n 14
.
See
also the English cases relied upon by Harms J in
Telematrix
above n 52 and
Faircape
above n 41.
56
Steenkamp
above n 14 at para 12;
Cape Metropolitan Council
v Metro Inspection Services (Western Cape) CC and Others
2001
(10) BCLR 1026
(SCA);
2001 (3) SA 1013
(SCA) at para 18.
57
See above n 14.
58
Telematrix
above
n 52 at paras 13-14, 26 and
Van
Duivenboden
above n 34 at para 12.
59
The State Tender Board Regulations, Government
Gazette 11382 GN R1237, 1 July 1998 and the Tender Board
Regulations, 1995 (Eastern
Cape) published under PN 13 of 1995 (PG
73 of 26 June 1995). On the papers there is a dispute over which
set of regulations applies.
Given the decision I arrive at, it is
unnecessary to resolve that dispute.
60
1999 (4) SA 1
(SCA).
61
Section 172(1) provides:
“No company having a share capital shall commence business or
exercise any borrowing powers unless and until the Registrar has
under the provisions of this section issued under his hand and seal
a certificate entitling the company to commence business.”
62
Section 172(5)(a) provides: “Any contract made by a company before
the date on which it is entitled to commence business shall
be
provisional only and shall become binding on that date and not
earlier.”
63
Section 35 provides:
“Any contract made in writing by a person professing to act as
agent or trustee for a company not yet incorporated shall be capable
of being ratified or adopted by or otherwise made binding upon and
enforceable by such company after it has been duly incorporated
as
if it had been duly incorporated at the time when the contract was
made and such contract had been made without its authority:
Provided
that the memorandum on its registration contains as an object of
such company the ratification or adoption of or the acquisition
of
rights and obligations in respect of such contract, and that two
copies of such contract, one of which shall be certified by
a notary
public, have been lodged with the Registrar together with the
lodgement for registration of the memorandum and articles
of the
company.”
64
MG Holmes v National Transport Commission and Another
1951
(4) SA 659
(T) at 666H-667F;
Rajah & Rajah (Pty) Ltd and
Others v Ventersdorp Municipality and Others
1961 (4) SA 402
(A)
at 407B-G;
Yoonuce Pillay N.O. and Another
1964 (2) SA 286
(D) at 294H.
1
Judgment of Moseneke DCJ at para 1.
2
Id at para 46.
3
See
Harms JA in his judgment in the SCA in this
matter,
Steenkamp NO v Provincial Tender Board Eastern
Cape
2006 (3) SA 151
(SCA)
at para 1. See
also
Minister of Finance and Others v
Gore NO
[2006] SCA 97 (RSA), 8
September 2006, as yet unreported at para 82.
4
This term has been used by our courts in preference to the English
phrase a “duty of care” which arises from the tort of
negligence, although the term “duty of care” is also sometimes
used
by our courts. The phrase “duty of care” can be
misleading, in particular, because in English law it includes a
consideration
of the foreseeability of harm. In our law the
foreseeability of harm is central to a consideration of fault, and
if relevant at
all in the wrongfulness enquiry, not determinatively
so. See the discussion of the confusing nature of this term in
Boberg
The Law of Delict Vol 1 Aquilian
Liability
(Juta, Cape Town 1984) at 30
–33. See also the judgment of Harms JA in the instant matter at
para 17.
5
See, for example
Administrateur,
Natal v Trust Bank van Afrika Bpk
1979
(3) SA 824
(A).
6
See, for example
Carmichele
v Minister of Safety and Security and Another (Centre for Applied
Legal Studies intervening)
[2001] ZACC 22
;
2001 (4) SA
938
(CC);
2001 (10) BCLR 995
(CC) at para 54 and
Minister
of Safety and Security v Van Duivenboden
2002 (6) SA 431
(SCA) at paras 16 – 17.
7
See
Van Duivenboden
cited above n 6 at para 21.
8
Section 4(1) of the Act.
9
Section 10 of the Act.
10
See
Knop v
Johannesburg City Council
1995 (2) SA
1
(A) at 33B - E. That case concerned a local authority’s
decision to approve the subdivision of a suburban property which
approval
was subsequently withdrawn by the local authority on the
grounds that it had been granted in error and contrary to the
provisions
of the governing legislation. The appellant
unsuccessfully sought to recover the damages it had suffered as a
result. The court
held that the existence of an appeal procedure in
the Act in terms of which the applicant could have sought relief was
important
to its conclusion that no aquilian action lay.
11
See section 187 of
the interim Constitution cited
above para and section 217 of the 1996 Constitution which provides
that –
“(1) When an organ of state in the national, provincial or local
sphere of government, or any other institution identified in
national legislation, contracts for goods or services, it must do so
in accordance with a system which is fair, equitable, transparent,
competitive and cost–effective.
(2) Subsection (1) does not prevent the organs of state or
institutions referred to in that subsection from implementing a
procurement
policy providing for —
(a) categories of preference in the allocation of contracts; and
(b) the protection or advancement of persons, or categories of
persons, disadvantaged by unfair discrimination.
(3) National legislation must prescribe a framework within which the
policy referred to in subsection (2) must be implemented.”
12
Section 33 of the 1996 Constitution provides as
follows –
“(1) Everyone has the right to administrative action that is
lawful, reasonable and procedurally fair.
(2) Everyone whose rights have been adversely affected by
administrative action has the right to be given written reasons.
(3) National legislation must be enacted to give effect to these
rights, and must –
(a) provide for the review of administrative action by a court or,
where appropriate, an independent and impartial tribunal;
(b) impose a duty on the state to give effect to the rights in
subsections (1) and (2); and
(c) promote an efficient administration.”
13
Steenkamp NO v Provincial Tender Board
cited above n 2 at para 22.
14
Olitzki Property Holdings v State Tender Board
and Another
2001 (3) SA 1247
(SCA) at
para 12.
15
Id at para 30.
16
In
Minister of
Finance and Others v Gore NO
cited
above n 2 at para 81 - 90, the SCA concluded that where the tender
process was vitiated by corruption, an unsuccessful tenderer
could
claim loss of profits on the basis of vicarious liability if
causation could be established.
17
At para 52.
18
As Cameron JA termed it in
Olitzki
cited above n 9 at para 41.
19
Fose v Minister of Justice
[1997] ZACC 6
;
1997 (3) SA 786
(CC);
1997 (7) BCLR 851
(CC) at para 72.
20
Van Duivenboden
cited above n 1 at
para
21. See also
Rail Commuters Action
Group and Others v Transnet Ltd t/a Metrorail and Others
[2004] ZACC 20
;
2005
(2) SA 359
(CC);
2005 (4) BCLR 301
(CC) at paras 78 – 81.
21
At paras 49 – 50. See also the discussion in
the judgment of Harms JA at paras 41 – 44.
22
At para 55(a) citing
Telematrix
(Pty) Ltd v Advertising Standards Authority South Africa
2006 (1) SA 461
(A) at paras 13–14.
23
At para 55(b).
24
At para 55(c). See also the judgment of Harms JA
at paras 37 – 40.
25
See judgment at para 52(a). See also
Telematrix
(Pty) Ltd v Advertising Standards Authority SA
cited above n 17 at paras 17 – 26.
26
See, for example
Logbro Properties CC v
Bedderson NO and Others
2003 (2) SA
460
(SCA) at 465F – G; and
Transnet
Ltd v Goodman Brothers (Pty) Ltd
[2000] ZASCA 151
;
2001
(1) SA 853
(SCA) at 870D – 871C.
27
See
Traube v Administrator, Transvaal
1989 (1) SA 397
(A);
and
South African Roads Board v Johannesburg City Council
1991 (4) SA 1
(A) at 10 – 11
.
28
See para above.
29
See Directive 89/665/EEC and Directive 92/13/EEC
and the useful discussion of those directives in Tyrell and Bedford
Public Procurement in Europe:
Enforcement and Remedies
(Butterworths, 1997) at 1 - 9. See also the United Nations
Commission on International Trade Law (UNCITRAL) Model Law on the

Procurement of Goods, Construction and Services adopted at the 27
th
Session of UNCITRAL, Official Records of the General Assembly, 49
th
Session, Supplement No 17 (A/49/17) (1994). See also the discussion
in Arrowsmith and others
Regulating
Public Procurement: National and International Perspectives
(Kluwer,
2000) Chapter 2.
30
Or from the date upon which the grievant might reasonably have been
expected to have become aware of the administrative action.
Section
7(1) reads as follows:
“(1) Any proceedings for judicial review in terms of section 6(1)
must be instituted without unreasonable delay and not later
than 180
days after the date –
(a) subject to subsection (2)(c), on which any proceedings
instituted in terms of internal remedies as contemplated in
subsection
(2)(a) have been concluded; or
(b) where no such remedies exist, on which the person concerned was
informed of the administrative action, became aware of the
action
and the reasons for it or might reasonably have been expected to
have become aware of the action and the reasons.”
1
Promotion of Administrative Justice Act 3 of 2000
, discussed in the
majority judgment at para 30 and in the minority judgment at para
95.
2
Section 8(1)
provides that the court or tribunal, in proceedings for
judicial review . . . may grant any order that is just and
equitable, including
orders− . . .
(c) setting aside the administrative action and− . . .
(ii) in exceptional cases− . . .
(bb) directing the administrator or any other party to the
proceedings to pay compensation.
3
Fose v Minister of Justice
[1997] ZACC 6
;
1997 (3) SA 786
(CC);
1997 (7)
BCLR 851
(CC) at para 21 of the minority judgment.