A potential landmark case that will test whether State entities that fraudulently award tenders should be held liable for the loss of profit by the prejudiced bidders is headed to the Constitutional Court.
Esorfranki Pipelines, a construction group with headquarters in Gauteng, is dragging the Mopani District Municipality to the Concourt to have it held liable for the group losing out on a R421 million tender that was allegedly awarded fraudulently in 2010.
Esorfranki stressed in its papers that its case against Mopani, a Limpopo rural municipality, was distinct from previous litigations by other private groups or state entities that sought cancellation of fraudulently awarded contracts.
“This case is about whether a municipality should be held liable for the delictual damages of an unsuccessful tenderer for loss of profit where the award of a tender is vitiated by the fraudulent and dishonest conduct on the part of such municipality,” Esorfranki’s court papers stated.
The contract was awarded to a joint venture by companies identified as Tlong Re Yeng Trading and Base Major Construction.
Mopani’s project involved the installation of welded steel bulk pipelines and construction of a concrete reservoir.
This major work was done at and between the Nsami water treatment works in Giyani and Nandoni Dam in Thohoyandou.
Esorfranki maintained that Mopani should be held liable for its profit loss on the grounds that it would have won the tender had it not been prejudiced by fraud, collusion and bias.
The group previously took the case to the Limpopo High Court and the Supreme Court of Appeal (SCA). Both these courts ruled against Esorfranki.
But Esorfranki maintained in the papers filed at the apex court that both the high court and SCA confirmed that Mopani awarded the tender fraudulently.
The group wanted the municipality still held liable on grounds of the alleged fraud.
“The body of evidence in fact shows even greater dishonesty, collusion, mala fides and other fraudulent conduct than that found by the high court and confirmed by the SCA in the review proceedings,” said Esorfranki’s papers.
“The municipality elected not to cross examine the Esorfranki witnesses and not to place a shred of rebutting evidence before the court.”
Part of the alleged fraud was that the joint venture did not comply with requirements specified in the bid document. Esorfranki said its tender was also about R10m cheaper.
“The municipality deliberately and dishonestly took steps to prevent Esorfranki from being awarded the tender,” said the group.
In Mopani’s replying papers, municipal manager Quiet Kgatla denied that courts previously endorsed Esorfranki’s claims that the contract was awarded fraudulently.
He said the courts’ adverse findings against the municipality related to bias, ulterior purpose and bad faith, not fraud.
“I remind the (apex) court that both the high court and the SCA in the review application … did not find fraud and unlawfulness on the part of the (municipality).
“Findings of bias, ulterior purpose and bad faith do not give rise to a delictual claim,” Kgatla said.
He added that the majority of the SCA judges found correctly that Esorfranki had no legal basis to claim damages over the matter.
“The majority agreed with the (municipality’s) contention that the legislature did not legislate the entitlement … of members of the public to claim damages for lost profit arising from conduct in breach of section 217 of the Constitution and Preferential Procurement Policy Framework,” Kgatla said.
The Concourt will hear the case on May 5.
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