Judge finds officials personally liable after R80m tender bungle

A Durban High Court judge has slammed city officials involved in awarding an R80 million tender and found 16 of them - including the city manager who confirmed it - personally liable for the costs of subsequent court action brought against the municipality. The judgment, handed down on Wednesday, comes after Social Development Minister Bathabile Dlamini was asked to explain why she personally should not pay costs in the grants matter. It also suggests the judiciary has adopted a firm stance to hold public officials to account. Judge Dhaya Pillay said in her judgment: “This inquiry, I emphasise, is about recovering costs incurred at the expense of the taxpaying public in a procurement process that was seriously flawed.”

Judge Pillay explained the significance of her judgment by saying if the matter had not come to court, people living in subsidised housing would have been uninsured for water leaks and the municipality - and by extension, taxpayers - would have had to pay. Last year Westwood Insurance Brokers took the eThekwini Municipality to court over a three-year water loss insurance tender it lost to South West Brokers. It turned out, South West had not complied with one of the conditions of the tender: that it supply the city with a letter of undertaking for water leak insurance. The brokers had instead submitted a quote for professional indemnity insurance. In December, Judge Pillay set aside the tender award and ordered the city to file affidavits naming all the officials involved in awarding it. Now she has ordered that, collectively, 16 of them pay the municipality 50% of the costs it was ordered to pay Westwood, and that South West pay it the other 50%.

She has also ordered the acting city manager to report back to her by July, on what steps have been taken to recover the money. After perusing the affidavits deposed by those officials, Judge Pillay found their joint decision to award the tender was “not merely irrational but bizarre” and “so bizarre that unsurprisingly even those who participated in making it cannot explain it”. “How did the entire procurement team of eThekwini unanimously decide that, firstly, a quotation is the equivalent of a letter of undertaking and, secondly, that provision of professional indemnity insurance qualifies as underwriting insurance for underground water leaks for individual dwelling units, which was the specified condition of tender?” she asked. "Metaphorically speaking, they decided that chalk is cheese.”

She said none of the deponents had advanced any possible explanations. Nor had they recognised the difference between professional indemnity insurance and underwriting insurance for water leaks; expressed remorse for their conduct; recognised the consequences of South West being allowed to stand; or explained why the city’s legal adviser Sbusiso Shezi’s opinion - proffered early on in a memorandum, that South West had failed to submit proof of underwriting insurance - was rejected. “All those involved in the decision to appoint South West persist in defending what is now manifestly indefensible by trying to justify their conduct in order to avoid having to pay costs,” she said. “Their responses fortify their failure and continuing refusal to be not only accountable and transparent but also remorseful for their manifestly inexplicable decision which renders them liable for costs.”

She said they denied liability for costs, claiming they did not act dishonestly, in bad faith or negligently. She found all who participated, including South West, liable. “However, I do distinguish South West from the rest,” she said. “No tenderer should be allowed to escape with impunity for deliberate misrepresentations in public procurement processes. South West created the situation that compelled this litigation. Walking away unscathed from this debacle is not an option.” Officials cited to pay costs include the head of water and sanitation, Ednick Msweli; deputy head of supply chain operations, Sandile Ngcobo, and members of the bid evaluation committee and bid adjudication committee. Instructing attorney for Westwood, Yahya Hassan of Larson Falconer Hassan Parsee Inc, yesterday told The Mercury he believed this was a “ground breaking judgment”.

“It places reliance on integrity in dealing with these tender matters,” he said. “City officials have to ensure that when a tender is awarded, it is done fairly, transparently and properly, and if they fail to uphold these high standards, then they can be held personally liable for any costs that the municipality might otherwise incur so taxpayers are not burdened with them.” Paul Hoffman, of the Institute for Accountability in Southern Africa, said this was an “emerging trend” and a “welcome development”. “The courts are gearing themselves up to award punitive costs against public administrative personnel in circumstances in which it is clear that there is either intentional wrongdoing or recklessness with public money,” he said. He compared Judge Pillay’s ruling with the Constitutional Court’s recent order that Dlamini file an affidavit explaining why she should not be held personally liable for the South African Social Security Agency (Sassa) payment disaster. Spokesperson for the eThekwini Municipality, Tozi Mthethwa, said the city received a copy of the judgment only yesterday. “It is premature to comment on the matter at this stage as the city is still studying the contents of the judgment,” she said.