Court holds municipal workers liable for costs of 'wasteful litigation'

2017-05-03 22:23
High court. (Duncan Alfreds, News24)

High court. (Duncan Alfreds, News24)

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Johannesburg – A recent Durban High Court ruling could make municipal employees think twice before they engage in “wasteful litigation” to stop the review of improperly awarded tenders.

On April 5, Judge Dhaya Pillay ordered that several eThekwini Municipality workers should be held personally liable for half the costs of litigation involving a disputed tender, GroundUp reported.

Ordinarily, the government or department would be liable if the case is against individuals acting in an official government capacity. However, in the eThekwini case, Pillay found the employees had acted so carelessly that they should be liable for the costs of the application.

Background

The judgment follows an order Pillay made in December concerning the award of an R80m tender to NC South West Brokers (South West) by eThekwini Municipality. Westwood Insurance Brokers, an unsuccessful bidder, challenged the award of the tender on the grounds that South West did not meet its requirements.

In May 2015, the eThekwini Municipality advertised a tender to procure water loss insurance for damage from underground leaks. Bidders were required to provide some proof of underwriting insurance and had to be registered with the Financial Services Board. South West did not meet either of these requirements. In fact, it appears that South West’s bid does not provide water loss insurance. Instead, it offers professional indemnity insurance, something completely unrelated to the tender. The court found the difference between the two kinds of insurance should have been obvious to the employees who put out the tender.

When the award was challenged in court, eThekwini insisted that South West had met the requirements. Officials made sworn statements to this effect, but failed to produce any letters of undertaking or other evidence that South West provided water loss insurance. Eventually, the court ordered eThekwini to produce a letter of undertaking.

In response, the municipality submitted a letter of undertaking in which South West said it provided professional indemnity insurance.

The court subsequently found the award of the tender to South West was “highly questionable”. There was a “lack of transparency and accountability of public officials and persons performing public duty,” in the awarding of the tender to South West. The award was set aside.

The costs order

Ordinarily, the losing party would have to pay costs. However, in this case, the court decided the litigation was “wasteful” and that taxpayers should not have to pay for defending it. The court ordered that the officials and decision-makers involved in improperly awarding the tender to South West should be held personally liable, unless they could prove they had acted properly.

Pillay found the court had the discretion to make such an order under section 172(1)(b) of the Constitution, provided the order is just and equitable.

This is not the first time a court has sought to hold government officials personally liable for costs. The Gauteng High Court attempted to hold the province’s health MEC liable for costs on a punitive scale in 2015. However, the Constitutional Court overturned this order on the basis that the MEC had not been joined as a party to the case and was not given a fair hearing or opportunity to make representations.

Pillay’s order attempted to address this by giving all officials involved in the decision making process an opportunity to submit affidavits explaining why they should not be held personally liable. Officials were given until February 14 to file their affidavits and had until February 20 to request a court hearing.

All the individuals who were called upon to submit reasons did so, except Sandile Charles Ngcobo, the deputy head supply chain operations, and Mduduzi Christopher Nkomo. However, nobody explained how the entire procurement team could find that providing professional indemnity insurance met the requirements of the tender, essentially deciding that “chalk was cheese” as Pillay put it. He said the decision was so “bizarre that unsurprisingly even those who participated in making it cannot explain it”.

As a result, Pillay ordered South West to pay 50% of the costs. The rest must be paid by all the municipal employees served with the court order, except the municipal legal advisor since she was not involved in the decision to award the tender to South West. In his order, Pillay encouraged eThekwini Municipality to investigate the award of the tender.

At a time where many government agencies are under scrutiny for similar actions, this judgment may deter officials from using the courts as a delaying tactic.

It will likely be of concern to Social Development Minister Bathabile Dlamini, who recently had to file an affidavit with the Constitutional Court explaining why she should not be held personally liable for the court costs in the Sassa payments debacle.

Read more on:    durban  |  corruption  |  fraud

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