Tenderer must prove fraudulent actions, says court 
14 May 2009

The Supreme Court of Appeal set aside a judgment of the North Gauteng High Court in Pretoria which had awarded damages of R60m to a tenderer which lost a Post Office contract to another bidder.

The South African Post Office invited tenders for a system to facilitate the payment of state pensions in the North West in 2001. One of the bidders was Cornastone company, in which Brian de Lacy and Barry Beadon were the driving force. When the contract was awarded to the rival Kumo consortium in 2002, Cornastone ceded any rights that it might have had to De Lacy and Beadon.

De Lacy’s and Beadon’s claim was for the recovery of profits that they claimed would have been made by Cornastone had it been awarded the contract. The high court upheld the claim.

The appeal court said cases concerning tenders in the public sphere, in which a claim by an unsuccessful tenderer, for damages arising from the award of the contract to a rival tenderer were coming before the courts with disturbing frequency. The courts had ruled in one category of cases that the law did not impose a legal duty on tender boards to compensate for damages where the board negligently and innocently bungled the tender process.

The Supreme Court of Appeal also ruled in another case that a claim would be valid only if it was established that the award of the contract to the rival was brought about by dishonest or fraudulent conduct by tender board members. The court said that in this case the unsuccessful bidders could not prove that there was dishonesty or fraudulent conduct on the part of the officials involved.

In his judgment setting aside the high court ruling, Appeal Court Judge Robert Nugent said counsel for De Lacy and Beadon had conceded that the claim would succeed only if it fell within the ambit of the decision in the Minister of Finance versus Gore case.  “Gore makes it clear … that irregularities falling short of dishonesty, incompetence on the part of those who evaluated the tenders, and even conduct that amounts to negligence, will not found a claim for damages at the hands of an unsuccessful tenderer.

“Perhaps there were irregularities, perhaps there was incompetence, perhaps officials might have been negligent, perhaps, even, Cornastone was more worthy of being awarded the contract, but none of that is enough. The respondents bore the onus of establishing that the contract was awarded to Kumo in consequence of dishonesty on the part of one or more of the officials concerned,” the judge said.

Ernest Mabuza, www.businessday.co.za