On Thursday the court dismissed with costs Transnet’s appeal against a R57 654 550 damages award made in the Johannesburg High Court in favour of printing company Sechaba Photoscan. The award was made as a result of Sechaba losing a tender bid to purchase Transnets printing operation, roduction House. Transnet had admitted the tender process was ”irregular, fraudulent and dishonest”. The tender was awarded to Skotaville Press.
In a February 2003 exposé the Mail & Guardian revealed that Skotaville was alleged to have a 20% ANC shareholding held by a nominee. Affidavits from members of Sechaba alleged their fortunes had taken a turn for the worse after Sechaba rebuffed an offer by ANC fundraiser Miles Nzama to influence the tender in their favour in return for 15% of Sechaba’s shares.
The M&G also revealed that a recommendation by Transnet that the award go to Sechaba was overturned after an intervention by then- Public Enterprises Director-General Sivi Gounden – a move apparently supported by Radebe. Gounden has claimed his intervention was based purely on the fact that Skotaville tendered R1-million higher.
M&G had shown that the recommendation from Transnet raised doubt about the ability of Skotaville to pay. The trial judge determined the damages award based on three years of the projected profits for the privatized Production House, whose main assets consisted of agreements with Transnet divisions, essentially granting it right of first refusal on their printing requirements for that period. The amount was based largely on figures presented in Transnet’s own prospectus, prepared for the sale of Production House.
On appeal, Transnet argued that Sechaba could only claim ”out-of-pocket” expenses for mounting its bid, not projected loss of earnings as a result of the fraud. The Supreme Court of Appeal dismissed this argument in a decision that has important implications for other damages cases, including the multimillion-rand claim against the Department of Defence lodged by Richard Young flowing from his failure to secure a particular sub-contract during the arms-deal acquisition process.
But the cases are different in that Transnet admitted the tender process was fraudulent, whereas Young still has to prove that the decision to award the contract to supply the Information Management System of the navy’s new corvettes to a rival company, Detexis, was similarly tainted. Transnet’s crucial admission came after its legal team had attempted to argue that the decision in favour of Skotaville had been taken by Radebe and Gounden – for whom subpoenas had been prepared provoking a furious response from the former director-general.
Gounden has claimed that Public Enterprises had ”recommended” Skotaville to Transnet, and not ordered that it be favoured. As a result, and apparently in retaliation, Transnet caved in and argued the case in respect of the amount of damages that should be awarded. On appeal, Transact argued that because Sechaba’s claim against it was delictual (for a wrongful act), the most Sechaba could claim was its out-of-pocket expenses in the failed bid.
The court disagreed: ”The idea that loss of profit is not recoverable in delict is not historically founded,” Judge President CT Howie found. ”Moreover, it is commonly the subject of an award of damages for loss of earning capacity in personal injury cases. Why should it matter that the injury is not physical but economic, as long as the loss is one of earning capacity? ”Take the example of the owner of a taxi that is negligently damaged.
He has a claim for the profit lost while the vehicle is out of action. ”Can it make any difference if, subject to quantification, the delict is committed when he has just bought the vehicle, before commencing business? ”I think not. Nor can it matter if the loss were caused by fraudulent conduct, not negligence.”
