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Gutman NO v Minister of Finance (1119/99) [2005] ZAGPHC 40 (6 April 2005)

BERNARD GUTMAN N.O.                                          Plaintiff
(in his capacity as Liquidator in
3D-ID SYSTEMS (PTY) LTD in liquidation)
against
THE MINISTER OF FINANCE                                      First Defendant
THE NATIONAL GOVERNMENT OF THE
REPUBLIC OF SOUTH AFRICA                                    Second Defendant
THE MINISTER OF WELFARE AND
POPULATION DEVELOPMENT                              Third Defendant
THE PREMIER OF THE WESTERN
CAPE PROVINCE                                                          Fourth Defendant

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IN THE HIGH COURT OF SOUTH AFRICA
         (TRANSVAAL PROVINCIAL DIVISION)
REPORTABLE
         In the matter between:   Case no. 1119/99
JUDGMENT
HARTZENBERG ADJP:
INTRODUCTION
[1] The ultimate question to be decided in this case is whether the State can be held "accountable to an unsuccessful tenderer who probably would have been awarded the tender but for corrupt conduct by officials of the State. The parties are, on the one hand, the liquidator of the unsuccessful tenderer, 3D-ID (Pty) Ltd (3D-ID) as plaintiff and, on the other hand, the State and some of the relevant State Departments as defendants. The first defendant is the Minister of Finance as Minister


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reponsible for the State Tender Board. The second defendant is the National Government of the Republic of South Africa. The third defendant is the Minister of Welfare and Population Development as Minister responsible for the payment of pensions. The fourth defendant is the Premier of the Western Cape Province in his official capacity as executive head of the Administration of that province.
[2] During the early nineties of the previous century the State departments involved in the payment of pensions and other State grants to individuals were subjected to large-scale fraud. The predecessor of the fourth respondent the then Cape Provincial Administration (the CPA) was no exception. The fraud relevant for the purposes of this case pertained to the system of cash payments to individuals who had to identify themselves by means of identity documents and finger prints. At the time that particular payment system was utilized to pay black pensioners.
[3] In order to qualify for a pension or a grant the person had to apply for the benefit. It entailed the filling out of forms from which an evaluation could be made as to the merits or demerits of the application. Matters such as age and available means were relevant considerations for the evaluation. Details from the identity document such as the identity number and the bar code were captured together with finger prints of the applicant. If the application was successful the information would be stored electronically in a central data base. Thereafter the particular individual would be entitled to receive the pension or other grant at a specified pay point. The CPA had 650 pay points.
[4] Officials of the CPA went to the pay points with lap top computers, loaded with the details of prospective payees, and money. At


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the pay points they were awaited by rows of payees. The officials identified the payees by their identity documents and took finger prints simultaneously. If the identity documents correlated with the detail, at their disposal, they paid out. A small portion of the fingerprints obtained were afterwards compared by experts with the fingerprints in the central data base, as a check. It was found that an exceptionally high number of irregularities were of the order of the day.

[5] Apart from the problem of high-jacking of CPA vehicles and the molestation and robbing of pensioners and grantees, it was accepted that fraud was committed on a massive scale. Some of the ways in which the fraud was perpetrated were:
(a) Registration of the same person more than once.
(b) Withdrawal of the monies by other persons than the ones entitled to the monies.
(c) Fraud by the paymasters in that they registered themselves or collaborators as pensioners or grantees and appropriated such
monies.
[6] Two enterprising individuals, Rabie and Pamensky, were aware of the problemsl. They realised that what was needed was a software program which could be run on an ordinary personal computer on which the following could be achieved:
I Pamensky, through a company, supplied pads on which fingerprints are captured, to State departments and to the SA Police. He imported the pads from the United States of America.




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(a) Identification of the fingerprints of the applicant, in the sense that duplications could be avoided.2
(b ) Verification of the fingerprints of the pensioner or grantee who comes to collect the monthly payment.3
(c) Activation of the ATM's in the security vehicles from which payments are made.4

(d) The ability to identify fraudsters and to make the necessary fingerprint evidence available for the successful prosecution of the perpetrators.
[7] Pamensky's supplier of fingerprint pads in California was a corporation known as Identicator. It was developing a program with the required characteristics. At that time the AFIS5 system was already internationally employed in crime investigation and criminal prosecutions. In the civil sphere however it had not yet been used, except for one instance in the United States in which Identicator was involved. Rabie, Pamensky and the individuals managing Identicator realised that a system addressing the South African problem with its own special needs had to be developed. Their motives were far from altruistic. Rabie and Pamensky visualised many lucrative government contracts and Identicator saw a market for a large quantity of their products.
2 The applicant's fingerprints must be compared with all the fingerprints in the central data base. The process is described as a "cold search" or a "one-to many" search. Furthermore all the fingerprints in the data base are to be compared to all the other fingerprints, a "many-to-many" search. Once all duplications have been eliminated a "clean" data base has been established.
3 It entails that when the individual comes to collect his/her monies his/her fingerprint is compared to the fingerprint stored in the data base together with the individual's identity number and bar code contained in the identity document. Such a search is known as a "one-to-one" search.
4 Upon verification of the identity of the individual the correct amount is to be counted out automatically and simultaneously documents are to be printed i.e. a receipt by the payee on which the fingerprint evidences receipt of the particular amount and a payment advice which the payee receives together with his money.
S Automatic Fingerprints Identification System


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[8] During August 1993 Rabie and Pamensky staged a presentation of a proposed system in Cape Town. Not only officials of the CPA were invited but also officials of other State departments and the police. Keagy of Identicator brought a computer from California. He attended the presentation. It was given over a number of days. The presentation whetted the appetite of the government officials. After some interaction and further demonstrations Rabie and Pamensky, who by now acted through a Close Corporation 3D-ID CC, undertook to do an enrolment of pensioners during October 1993 and thereafter to do the paying out to them during November 1993. The demonstrations went smoothly and 3D-ID's system was regarded as a possible answer to the problems.
[9] It was conveyed to Rabie and Pamensky that they were not to accept that, as they had spent a lot of time and money to develop the system and to demonstrate it, they would automatically get the contract with the CPA. It was indicated to them that tenders had to be called for. They were asked to assist the CPA with the compilation of the tender documents. They were more than willing to do so. In the process they invited the assistance of Identicator. They were pretty sure that at the time there was no other system that could fulfil the required functions. They knew that they had a lead on other prospective tenderers. They wanted the tender documents to call for the use of software that could do what their program could do. They realised that it was unlikely that such a program could be obtained from any other supplier than Identicator. They had an arrangement with Identicator that they would be Identicator's sole agent in South Africa.
[10] Eventually the calling for tenders was published, on 11 March 1994. The tenders consisted of Part A and a Part B. Part A called for the



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supply of the necessary equipment and software that would enable the officials of the CPA to administer the payment of pensions and grants. That was what was originally expected to be called for. Part B however called for a total solution and the outsourcing of the whole payment system to the private sector. The philosophy behind the outsourcing was that from the savings of monies previously paid in respect of fraudulent claims and the savings from the employment of personnel to administer the system the CPA could pay the tenderer and still be financially better off. To tender for Part B the tenderer was not limited to the equipment called for in Part A of the tender as long as the tenderer could achieve the necessary performance. It was not necessary for a tenderer to tender for both Part A and Part B and a number of tenderers only tendered for one of the two sections.
[11] Before they submitted tenders Rabie and Pamensky converted 3D-ID CC to 3D-ID (Pty) Ltd. The successful tenderer for Part B would require a great capital outlay. One Fuchs, who was lucky enough to amass a nest egg off in excess of one billion dollars before his fortieth birthday, acquired one third of the shares in the company. He, for tax purposes, lives for six months a year in Monaco and the other six months in South Africa. The successful tenderer for Part B would require quite a sizeable capital outlay. Fuchs would come in handy. From his point of view he could earn a few extra Rands. 3D-ID tendered for Part A in collaboration with Identicator and Olivetti. Olivetti was to supply the personal computers. It also tendered for Part B.

[12] There were a number of other tenderers. The others who also tendered for both Part A and Part B were Q-Data Consulting (Pty) Ltd ("Q-Data"), Coin Security Technology ("Coin Security") and




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Recognition Data Systems (Pty) Ltd ("RDS"). Six entities submitted tenders only for Part A. Amongst them were National Data Systems ("NDS) and a division of Datakor Holdings, Unidata. There were three tenders for Part B only. They were submitted by Nisec CC ("Nisec"), Fidelity Guards (Pty) Ltd ("Fidelity Guards") and Cash Paymaster Systems (Pty) Ltd ("CPS"). Nisec and Fidelity Guards tendered for Part B in conjunction with NDS and CPS tendered for Part B with the backing of Unidata. Nisec was a shelf entity that had been acquired by one Huisamen a week or so before the closing of the tenders. The Nisec tender price per head was significantly lower than that of 3D-ID. As a matter of fact the 3D-ID tender was the highest tender of all.
[13] The tenders were to be evaluated by an evaluation committee.
Dr Terblanche a director in the department who was responsible for the payment of pensions was to be chairman of the evaluation committee. In practice he delegated his functions in this regard to one Louw also a very senior official in the department with an impeccable record. On the evaluation committee there were experts in the computer field. Two of them were Ms. Brenda Faye and Mr. de Wit Coetzee. The evaluation committee was to make a recommendation to the CPA who in turn had to submit the tender to the State Tender Board.
[14] There was a compulsory meeting for tenderers. Absence from that meeting would lead to automatic disqualification. There were practical tests. Fidelity Guards was one of the tenderers. Mr. Philips who represented them and also gave evidence at the trial was rather upset that the evaluation committee did not see fit to inspect the vehicle which they had manufactured specifically for the tender. Rabie was also extremely upset. The reason for his concern was that in his view the tests conducted


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were superficial. He knew that the committee would be unable, on the strength of those tests, to ascertain whether a particular tenderer could in fact perform all the functions that the CPA wanted performed. He voiced his concern in a letter to Dr. Terblanche. He claims to have been told that if he writes a letter setting out his concerns he could forget ever to be awarded a tender by the CPA.
[15] The evaluation committee under the effective chairmanship of Louw recommended to the Tender Board that the Nisec tender be accepted for Part B. Dr. Stegman of the Tender Board had certain reservations. It was not clear to him what the cost implications of the whole project would be to the CPA. He was also of the view that the whole question of how payments were to be made in future had not been properly considered. Of the aspects that caused him concern were that the Eastern and the Northern Cape were also to be served by the tenderer and that there had not been proper liaison between the relevant departments and that as the tender only pertained to black pensioners it was not in accordance with the policy of the newly elected government as it had a racist element in it.
[16] Louw supplied answers to the Tender Board. He indicated that the position had been cleared with the Eastern and Northern Cape. He also indicated that at the compulsory meeting of tenderers the tenderers were informed and that they accepted that the tenders were to be broadened to all race groups. A letter prepared by Louw was taken to Mr. Rasool. In terms of the letter Mr. Rasool, who was the person who had to approve the award of the tender, accepted that it had to go to



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Nisec6. During June 1994 the tender was officially awarded to Nisec.
The State Tender Board resolved that a five year contract be concluded with Nisec.

[17] 3D-ID tried to stop Nisec from performing in terms of the tender award. It brought no fewer than three different applications in the CPD against some of the State departments and Nisec during the latter part of 1994 i.e. an application for an interdict, a review application and an Anton Piller application in order to secure documentary proof of the fraud that it alleged had been committed. The applications were hotly contested by the respondents, who denied any possible form of foul play. Dr. Terblanche explained to the court exactly how unblemished the tender procedure was. All the applications were unsuccessful as the allegations by 3D-ID were held to have been unfounded speculative and reckless. A punitive order for costs was made against 3D-ID in the Anton Piller application.
[18] On the strength of the orders for costs Nisec launched an application for the liquidation of 3D-ID on 14 February 1995. It obtained a provisional order on 9 March 1995. The company was finally wound-up on 19 September 1995. Despite this Rabie persisted with his attempt to seek redress. In September 1995 he made an affidavit for the Office for Serious Economic Offences ("OSEO"). It in turn investigated the tender process and found that Louw, Scholtz and Huisamen committed a fraud that led to the award of the tender to Nisec.
6 In an affidavit that he made for the purposes of an investigation by OSEO he stated that he was pressurized by Louw to sign the letter before he had time to consider it properly. On the other hand it also appears from the affidavit that he was well aware of the possible racial implications involved in an award of the tender for a service to black people only.




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[19] During 1995 the Provincial Administration of the Western Cape ("PAWC") suspected that Nisec was unable to fulfil what was required of it in terms of the tender specifications. An investigation was done by a French company, to which was referred to as Sagem during the trial. They produced a report and the auditors, Ernest and Young, also prepared a report. The findings were that Nisec did not possess the requisite technological capabilities to do what it had tendered to do. The PAWC cancelled the contract with Nisec on 17 December 1995. Nisec unsuccessfully applied to have the decision that the agreement be cancelled reviewed and set aside. The application was brought in the Cape High Court and was dismissed on 14 February 1997.
[20] The shareholders of 3D-ID obtained the papers in that application, including the memoranda motivating the cancellation of the Nisec agreement. They asked for and obtained senior and junior counsel's opinion on the plaintiff's chances of success if he were to institute action against the defendants. They were advised that there was still not sufficient information to substantiate allegations of fraud.
[21] The plaintiff then brought an application against OSEO to obtain documents and information about the tender process obtained by OSEO during its investigation. During September 1998 OSEO allowed 3D-ID to inspect certain documents. During November 1998 copies of certain documents were made available to 3D-ID. It could be established through one of those documents that the Nisec tender was typed on the computer of Dr. Terblanche's secretary on a public holiday a number of days before the close of tenders.





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[22] The plaintiff instituted action against the defendants on 14 January 1999. The defendants pleaded absence of knowledge of the alleged corruption in the tender process. There was a further round in the litigation against OSEO. The plaintiff obtained an order against OSEO for discovery of further documents. There was an unsuccessful appeal against that order. During October 2004 when an application for security for costs was being argued the defendants officially admitted that Louw, Scholtz and Huisamen acted fraudulently during the tender process and that Nisec obtained the tender as a result thereof. The fourth defendant contends that it only became aware of the fraud after receipt of the discovered documents from OSEO.
[23] When the defendants pleaded to the plaintiff's Particulars of Claim originally no one of the defendants filed a special plea of prescription. On 20 October 2004 the defendants gave notice of an application for an amendment of there pleas to incorporate a special plea, of prescription as a defence against the plaintiff's claim. To substantiate the application and the opposition thereto sizeable affidavits were filed. Attached to the defendants' papers motivating the application were extracts from the affidavits made by Rabie during 1994 and 1995. There was also reference to what he stated to OSEO during 1997. It was clear that the defendants would argue that the people behind 3D-ID was from the outset aware of precisely what had happened during the tender process and was in possession of enough information to issue summons. The plaintiff referred liberally to the affidavits of Drs. Terblanche and Stegmann, also made during 1994 and 1995 and to OSEO and stressed the fact that honestly or otherwise they stated that they were not aware of any fraudulent conduct and confirmed that the tender process was open, regular and free from any corruption. By the nature of things there were




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irresolvable disputes of fact. I came to the conclusion that the two most crucial aspects were: 1. exactly what the state of mind of the people behind the plaintiff was and 2. whether the conduct on behalf of the defendants was convincing enough to dissuade a prospective plaintiff from instituting action. It was my view that the speediest and cheapest way to dispose of the whole case would be to lead all the evidence and then to decide at the end of the case whether the defendants can rely on the defence of prescription. I realized that evidence would have to be led that would not have been necessary if only the question of the amendment was to be decided but also realized that a time consuming argument on the question whether the amendment was to be granted or not could be avoided altogether and that the court would have the benefit of the viva voce evidence of the people concerned. I directed that the case was to commence and that the question of prescription would be dealt with in the final judgment. The direction that I gave simultaneously disposed of the defendants' application for a separation of the prescription issue from the main case.
[24] The plaintiff has has framed its claim in the alternative:
(a) In the first place it contends that two former employees of the CPA, acting within the course and scope of their employment, fraudulently manipulated the tender process and thereby unlawfully interfered with 3D-ID's business activities and unlawfully frustrated its reasonable expectation to be awarded the tender. Its contention is that the tender would have been awarded to it. The plaintiff claims damages in excess of R102 million.
(b) In the first alternative claim the plaintiff alleges that one or more of the defendants breached a duty owed to 3D-ID to




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take reasonable care in the evaluation of the tender and in particular that it failed to compare the various tenders fairly and carefully and so frustrated its reasonable expectation to be awarded the tender. Its claim for damages on this basis is R50 million.
( c) The second alternative claim is brought upon the basis that the defendants represented that the tender process would be fair and honest, but that it was in fact contaminated by fraud. It alleges that if 3D-ID had not been misled to believe that the process would be fair it would not have tendered. It claims 3D-ID's expenses in respect of the tender. The amount claimed is of the order of R1,9 million.
[25] The issues to be decided are whether the plaintiff's claims became prescribed, whether the plaintiff has proved causation, vicarious liability and a legal basis to claim damages and costs.
PRESCRIPTION.
[26] The defendants contend that although the introduction of the plea of prescription is only sought at a very late stage the delay in itself is not necessarily a bar against allowing the amendment. They indicate that the alleged wrongful acts were committed during 1994 and that the summons was only issued in January 1999. More than four years have elapsed between the commission of the alleged unlawful acts and the issue of summons. The failure to have pleaded a defence of prescription originally is explained on the basis that counsel was not


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instructed to investigate a possible defence of prescription.7 Although it was originally contended on behalf of the plaintiff that the defendants waived their right to plead prescription Mr Loxton later on abandoned that argument.
[27] In my view it is unnecessary to deal with a number of peripheral issues in respect of the plea of prescription. I find it unnecessary to discuss the fact that a possible plea of prescription was only raised at the end of 20048. It is also unnecessary to discuss the question whether the provisions of the Limitation of Legal Proceedings (Provincial and Local Authorities) Act, No. 94 of 1970 are applicable in this case or not9. In my view, except to mention that there is a year's difference between the prescriptive periods in the two statutes, there is no further reason to dwell upon that difference.
[28] It is common cause that the onus is on the defendants to prove that the prescriptive period has run out before institution of actionlO. The defendants rely heavily upon certain dicta in Van Staden v Fourie, Absa Bank Bpk v Janse van Rensburg11 and Nedcor Bank Bpk v Die Regering van die Republiek van Suid-Afrika12, in which it was explained that section 12(3) of the Prescription Act does not defer the commencement of prescription until the creditor has full knowledge of all the facts from
7 Counsel instructed to plead must have noticed the time lapse. In such circumstances it would certainly not be wrong for counsel to enquire whether a plea of prescription ought not to be considered.
 8 In this regard sight must not be lost of the fact that virtually nothing was done to bring the case to finality between 1999 and the delivery of the judgment of the Supreme Court of Appeal in the
         application for discovery against OSEO.         
9 Assuming that the provisions of the Limitation Act apply in this case the parties were in agreement that the test for what minimum information a creditor must have before the prescriptive period starts to run is the same for the Prescription Act and the Limitation Act.
10 Gericke v Sack, 1978 (1) SA 821 (A) at 827 in fine- 828B; Eskom v First National Bank of Southern Africa Ltd[1994] ZASCA 186; , 1995 (2) SA 386 (A) at 392H; Drennan Maud & Partners v Pennington Town Board, [1998] ZASCA 29; 1998 (3) SA 200 (A) at 204F and Van Staden v Fourie, 1989 (3) SA 200 (A) at 216B
11 2002 (3) SA 701 (SCA) at 708 A-B.
122001 (1) 987 (SCA) at para 13.


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which he derives his claim, or that the creditor must have knowledge of sufficient facts to prove his case at the end rather than the minimum facts to start with it, or that the creditor must have sufficient knowledge to finally prove his claim rather than the material facts giving rise to his action, before prescription starts running.
[29] The defendants refer to the various affidavits to which Rabie has deposed and point out that the allegations made during 1994 and 1995 are virtually identical to the allegations in the particulars of claim. They say that the plaintiff as liquidator was fully aware of the litigation in die Cape Provincial Division and refer to letter written by him on 24 March 1995, addressed to creditors, which bear that submission out.
[30] I must immediately point out that in my view it would be artificial, in this case, to make a distinction between the knowledge possessed by the plaintiff as liquidator and the erstwhile directors and in particular Rabie. The driving force behind the present litigation is the effort of the erstwhile directors and not the desire of the liquidator to procure funds to pay creditors. Unless there was some or other circumstance beyond the control of the plaintiff which made it impossible for the erstwhile directors to inform him of new information, it can be accepted in this case that the plaintiff was aware of information as soon as the erstwhile directors became aware thereof.
[31] A vital distinction between the facts in this matter and the facts in the cases upon which the defendants rely is the fact that in this matter 3D-lD instituted proceedings against the defendants virtually immediately after it suspected that there had been something wrong with the tender process. In response thereto it was stated on oath by senior



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officials on behalf of the defendants that there was nothing wrong with the process. The allegations which the defendants now say indicate that 3D-ID had sufficient information to institute action were attacked and rejected by the court. They were not only rejected but were regarded as so irresponsible as to justify a punitive order as to costs. One has sympathy with 3D-ID and the liquidator for not rushing into litigation after losing the Anton Piller application dismally and after being liquidated directly as a result of making the allegations which the defendants insist they should have persevered with.
[32] To test the arguments on behalf the defendants I invited both Mr. Louw and Mr. Schippers to indicate to me what the plaintiff should have done. They both submitted that the plaintiff should have instituted action at an early stage. They mentioned as at the latest the time, February 1997, when the Nisec review, to have the cancellation of its contract set aside, failed. They submitted that at the same time 3D-ID should have proceeded with its endeavours to prove fraud through the intervention of OSEO.
[33] I accept the evidence of Rabie that 3D-ID had no more than a suspicion that Louw, Scholtz and Huisamen were involved in a fraud. They had the benefit of two telephone calls. One was from an unknown person in the CPA and the other from a fellow tenderer Mr Ian Wooff. Neither one of those sources could have been considered as a possible witness to substantiate fraud. The documents in the possession of the defendants had to be obtained and had to indicate the fraud. The stance taken up by the CPA was so convincingly and emphatically contradictory of such a possibility that one cannot fault the plaintiff for obtaining legal advice. Rabie's evidence that the advice, even after the failure of the


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Nisec review, was still that there was not sufficient evidence to institute an action based on fraud, is not under any suspicion and must be accepted. As I understand the evidence the discovery that the Nisec tender was typed on Dr. Terblanche's secretary's computer was only made by 0SEO through a special test and would not have been detected even if all the CPA documents had been discovered. In the circumstances the approach to defer the institution of the action to after that discovery cannot really be faulted.
[34] What would have happened if 3D-ID had instituted action at an early stage? It would have been dependant for success on a successful investigation by 0SEO. It had no control in respect thereof. It did not know whether OSEO would in fact carry on with the investigation and how far it would go. It did not know whether 0SEO would co-operate with it. It was always at risk that if the defendants pressed for the action to be finalized that it would be constrained to withdraw it and tender costs.
[35] Section 12(3) of the Prescription Act reads as follows:
"A debt shall not be deemed to be due until the creditor has knowledge of the identity of the debtor and of the facts from which the debt arises: Provided that a creditor shall be deemed to have such knowledge if he could have acquired it through exercising reasonable care"
[36] It is evident that in this matter 3D-ID at all relevant times had knowledge of the identity of at least one of the defendants, the CPA. The disputed question is whether it had knowledge of the facts from which its claim arises. On Rabie's evidence it did not have knowledge of the facts




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but a mere suspicion that facts exist that give rise to a claim against the defendants. In my view 3D-ID only acquired sufficient knowledge of the facts to realize that they give rise to an action when it became aware of the fact that Nisec's tender was typed on the secretary of Terblanche's computer. That, however, is not the end of the exercise. It must next be ascertained whether the plaintiff could not have acquired knowledge of those facts at an earlier stage, through the exercise of reasonable care, and if so, when.
[37] In stead of not taking reasonable care to find out what actually happened during the tender process, the conduct of those behind the plaintiff was exactly the opposite. Three applications were launched. The application for liquidation was opposed vigorously. Rabie stuck his neck out and went on oath to 0SEO in order to try and ascertain the true facts. When the Nisec review failed and some of the memoranda became available to the plaintiff it approached senior and junior counsel to be advised whether sufficient facts do not exist that it can institute an action. The advice was that there were not sufficient facts to do so.
[38] In the Nedcor Bank matter supra Schutz JA described the philosophy and aim of the Prescription Act as the golden mean between the unfairness on the one hand that a potential debtor can, ages after the happening of an incident, be threatened with legal action and the unfairness on the other hand that a potential creditor can be non-suited merely through the effluxion of time where, through no fault of his, he



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was unaware of the necessary information which would have enabled him to institute an action against the debtor13

[39] In this particular matter the unfairness to be guarded against is the dismissal of a claim that the plaintiff could not reasonably have been expected to have instituted. In my view there exists a further reason why the plea of prescription ought not to be upheld and that is the fact that the defendants denied the very facts that give rise to the action on oath and accused the representatives of 3D-ID of being speculative and vexatious.
[40] It follows that the special plea of prescription was doomed to fail. It is therefore unnecessary to grant an amendment of the pleadings to incorporate a plea of prescription. The applications by the different defendants for the amendment of the pleadings stand to be dismissed with costs. The defendants are also to be ordered to pay the costs occasioned by the application for a separation of the issues in terms of Rule 33(4).
VICARIOUS LIABILITY
[41] When Louw and Scholtz colluded with Huisamen to corrupt the tender process and right through the whole process until the tender was awarded to Nisec, they were respectively a director and assistant director in the CPA. The plaintiff maintains that the defendants are vicariously liable for their wrongful acts. The defendants do not accept that as correct.
13 "Wat die Wet nastreef, is 'n guIde middeweg tussen die onbillikheid aan die een kant, dat 'n potensi le skuldenaar 'n ewigheid na die plaasvind van die gewraakte gebeure skielik met hofverrigtinge bedreig word en die onbillikheid aan die ander kant, dat 'n potensi le skuldeiser sy aanspraak op regshulp bloot vanwe tydsverloop verbeur waar hy, sonder enige verwyt aan sy kant, nie oor die nodige inligting beskik om sodanige hofverrigtinge inmiddels van stapel te stuur nie." Per Schutz JA at p. 995I (para 9).



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[42] Counsel referred me to many of the relevant decided cases on vicarious liabilityl4. It is unnecessary to revert to the detail to which I have been treated. Suffice it to say that I accept that it is a factual question whether damages were caused within the course and scope of an employee's employment. To answer that question it is necessary to determine in the first place what the subjective state of mind of the employee was. The employee's act will only fall outside the course and scope of his/her employment if it was done solely to promote his/her own interests. If that question is answered affirmatively and it is found that the employee's intention was only to promote its own interests, it does not follow that the employer escapes liability. The law then requires that it must be determined, objectively, whether there is a sufficiently close link between the servant's acts and the business of the master, that it cannot be said that he/she acted outside the course and scope of employment. A good example of an instance where the court has found that although the employees only intended to promote their own interests but that the link between the acts of the servants and the employer was sufficiently close that the employer could not escape liability is the Japmoco casel5. The employees performed functions which they were required to perform.

14 Some of them are Feldman (Pty) Ltd v Mall, 1945 AD 733, Minister of Police v Rabie, 1986 (1) SA 117 (A), Minister of Law and Order v Ngobo, [1992] ZASCA 172; 1992 (4) SA 822 (A), Masuku v Mdlalose, 1998 (1) SA 1 (A), Absa Bank Ltd v Bond Equipment Pretoria (Pty) Ltd, [2000] ZASCA 136; 2001 (1) SA 372 (SCA), Ess Kay Electronics (Pty) Ltd and Another v First National Bank of Southern Africa Ltd, 2001 (1) SA 1214 (SCA), Van den Berg v Coopers and Lybrand Trust (Pty) Ltd, [2000] ZASCA 77; 2001 (2) SA 242 (SCA), Minister van Veiligheid en Sekuriteit v Japmoco BK, 2002 (5) SA 649 (SCA), Minister van Veiligheid en Sekuriteit vPhoebus Apollo Aviation BK 2002 (5) SA 475 (SCA), Costa da Oura Restaurant (Pty) Ltd tla Umdlote Bush Tavern v Reddy 2003 (4) SA 34 (SCA) and MEC for Department of Public Works (Eastern Cape) v Faltein 12004] 3 All SA 660 (SCA).
15 See footnote 14.
        
        


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[43] In this particular case I do not think that the defendants get past the first leg of the two-tier test. Although Louw and Scholtz wanted to promote their own interests they did so during a process where the endeavour was to improve the pay-out system. I do not think that it can be said that they, subjectively speaking, foresaw that the service that Nisec would render would not be an improvement on the existing system. After all they thought that the system would be effective and lucrative to such an extent that they wanted to get involved in it. It is unlikely that they would have wanted to be associated with Nisec if they knew that its system would simply be unable to function at all. The facts in this case are akin to the case of an employee who is to purchase and transport by truck the cheapest commodity for the sale thereof in the employer's business. The cheapest commodity can be bought from A and be transported on route X. The employee buys, at a higher price, from B, who gives him a kick-back, and transports the commodity on route Y. The employer still makes a profit. If the employee gets negligently involved in an accident while transporting the goods on route Y the employer will in my view obviously be vicariously liable. The employee is not only promoting his own interests but also those of his employer.
[44] Even if I am wrong in that approach I am satisfied that objectively speaking there was a close enough link between the duties of Louw and Scholtz and their actions that it cannot be but concluded that they acted within the course and scope of their employment. They were the key personnel who were to facilitate the calling for tenders and the implementation of a new system for the CPA. They performed their fraudulent acts whilst doing just that. It has not been argued that if the CPA and its successor the PAWC are to be held liable that the first three defendants can escape liability on some or other basis. It follows that if it



22
is found that the acts of Louw and Scholtz caused damage to the plaintiff if must be found that the defendants are vicariously liable.
CAUSATION.

[45] The performance of the defendants reminded of trench warfare. The first, second and third defendants did not, apart from a denial of liability, proffer any defence other than the defences raised by the fourth defendant. They support the fourth defendant though. In its pleadings the fourth defendant admitted that Nisec's tender did not comply with the technological requirements of what the tenderer was to provide. It denied that the tender of any other tenderer complied with those requirements. In respect of the 3D-ID tender its defence was that the tender would not have been awarded to it as it was the most expensive tender and as the evaluation committee did not see fit to recommend it. During the trial the fourth defendant's defences developed into:
(a) a contention that the 3D-ID tender did not comply with the tender specifications for Part A of the tender and in particular in relation to speed and ruggedization;
(b) a stance that even if the 3D-ID tender complied with the specifications there were other more attractive tenders that also complied with requirements;
(c) a denial that the security arrangements proposed by 3D-ID were adequate;
(d) a denial that the 3D-ID tender was acceptable because its proposal for future enrolments did not provide for a complete solution of the CPA's problems; and


23

(e) an argument that in an open, transparent and honest tender process the tender would in any event not have been awarded to 3D-ID.
[46] The plaintiff contends that these defences were not properly put in issue in the pleadings and were not even properly debated with the plaintiff's witnesses in cross-examination. The plaintiff maintains that they must be rejected out of hand. I am of the view that an open, honest and transparent tender process is to be presumed, in the atmosphere and climate that prevailed at the time and not one with the benefit of hindsight. In my view these aspects raised by the defendants would have been relevant considerations in a proper tender process. I decline Mr. Loxton's invitation to reject them out of hand.
[ 47] As the fourth defendant in its plea has raised the argument that since the evaluation committee did not see fit to recommend the 3D-ID tender when all the tenders were before it, it follows that it would not have awarded the tender to 3D-ID even if it were aware of the fraud of

Louw and Scholtz, that contention must be analysed. It must also be
analysed whether the fourth defendant's contention that 3D-ID's tender would have been rejected merely because it was the highest, is correct.
[48] There has been no attack upon the invitation to tender and the specifications contained therein. The complaints are levelled at Nisec's inside tender and Louw and Scholtz's conduct after receipt of the tenders. It must therefore be accepted that there was a proper call for tenders and that tenders were submitted in reply thereto. Those tenders had to be


24

evaluated by a transparent, open and honest evaluation committeel6. Before looking at price the committee should have ascertained which of the tenders complied with its requirements. If some of them complied and others not, those that did not comply had to be rejected. Until then price is not a relevant consideration at all. Thereafter the ones that complied had to be compared and the most suitable one price wise and otherwise had to be recommended to the State Tender Board. If there was only one compliant tender it was to be ascertained whether the price was such that the CPA could afford to accept it. If there was no tender that could be recommended to the State Tender Board, that would have been the end of that process and new tenders had to be sought. If there was a recommendation to the State Tender Board it still had to consider the recommendation and could have accepted or rejected it. It follows in my view that the fourth defendant's contention that because the actual evaluation committee, in practice chaired by Louw and indoctrinated by him and Scholtz, did not recommend 3D-ID's tender it necessarily means that its tender would have been rejected, is untenable. Likewise the contention that the price was the highest and that that on its own disqualified the 3D-ID tender is incorrect.
[49] On this aspect of price it was not only conceded by Dr.
Terblanche that it would have been financially to the advantage of the CPA to accept 3D-ID's tender, but Fuchs also gave positive evidence to that effect. It was not challenged or contradicted. If there were no other reasons to reject the 3D-ID tender, price was not an obstacle to it being accepted.
16 For the purposes of this case it is not necessary to give any attention to the question if the Nisec tender should have been considered at all as it is common cause that in any event it did not comply with the tender requirements and would not have been accepted.



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Did 3D-ID's tender comply with the CPA's requirements?

[50] In response to a question by the plaintiff the first, second and third defendants admitted during the pre-trial proceedings that the 3D-ID tender complied with the specifications. Furthermore the chairman of the State Tender Board, Mr. Wentzel, on 3 August 1994 wrote to the then attorney of 3D-ID that "it is not disputed that 3D-ID's tender was according to specification.. " Dr. Terblanche stated on oath in the review application, on 30 September 1994, that he did not doubt that the 3D-ID tender complied with the specifications. In the minutes of the evaluation committee's discussion of the Nisec tender it was stated that:
"Hierdie firma voldoen aan die minimum spesifikasies. Die voorgestelde wyse van dienslewering maak sin en is die enigste uitvoerbare implementeringsplan was ontvang is, afgesien van 3DID"
In a letter dated 27 May 1994, Dr. Jarodien on behalf of the DirectorGeneral of the CPA, wrote to the State Tender Board that 3D-ID complied with 90% of the minimum criteria but that its tender was unacceptable because it was the most expensive tender received.
[51] It is not surprising that it was accepted that the 3D-ID tender complied with the specifications. After all it was 3D-ID that demonstrated to the CPA (and other State departments) in a practical way, during October and November 1993, what it can do. It was as a result thereof that the CPA called for tenders. 3D-ID was requested to
                  _
formulate the requirements for tender purposes. It is highly unlikely that
it would have formulated it in a way that would have disqualified itself from being able to comply with the tender specifications. It is equally unlikely that it would have submitted a tender that would not have been


26

compliant. Its insistence that the tender process was tainted by fraud was primarily based on the firm knowledge that it, and only it, was able to comply with the specifications.
[52] The plaintiff called Mr. Bouwer as an expert. He prepared the tender on behalf of Q-Data. He realized then that unless the tenderer had the Identicator equipment it would not be able to submit a compliant tender. He tried, on behalf of Q-Data, to obtain the use of the Identicator product but was unsuccessful and half heartedly submitted a tender that he knew would not be accepted. Integray't which tendered in conjunction with Q-Data, on learning that 3D-ID was the sole supplier in South Africa, surreptitiously tried to get the product via the United Kingdom by representing that it was needed for use in Iran. Unidata, who would have supplied the equipment in the event of CPS being successful with Part B of the tender, also tried to obtain the Identicator system. It follows that it is highly probable that, technologically speaking, the 3D-ID tender complied with the CPA's requirements.
[53] The fourth defendant launched a belated attack against the technological ability of the 3D-ID's equipment. When Rabie gave evidence it transpired that the computer that was used for the 1993 demonstrations to the CPA and State departments was still available. The defendants wanted to test it. A whole contingent embarked upon a trip to Cape Town. The experts, and it would seem Rabie also, appear to have acted like prima donnas. Nevertheless the computer was tested before an impartial person, agreed upon by the parties. The computer searched in excess of 4 000 prints per minute and Bouwer's fingerprint which was captured ten years earlier was retrieved. It passed the test and a report to that effect forms part of the exhibits before the court.


27

[54] The defendants were not satisfied with that. If it is borne in mind that in computer language a 10 year old product is for all practical purposes obsolete the task which they set themselves was formidable. They wanted to assemble from different components of old computers, a computer which in their view was similar to the one used by 3D-ID for the demonstrations. They assembled such a computer and using the 3D-ID software they tested it and only achieved between 1700 and 1800 searches per minute. That test was used by their experts to allege that the 3D-ID equipment did not comply with the requirements. It led their expert Higginson also to contend that the equipment was not sufficiently ruggedized to be able to comply with the tender.
[55] It strikes me as strange and somewhat desperate to want to rebuild a computer when you have the very computer in question available and working. The conclusion to which Kloppers came was that the. 3D-ID computer was not an ordinary 486 computer with an 8-bit digitiser board but that it was equipped with a 16-bit digitiser board. I find it difficult to understand why that would make the computer noncompliant. 3D-ID was to buy the computers and to perform the service. If its computers were equipped with 16-bit digitiser boards, so be it. In this respect it is perhaps not unimportant to also bear in mind that the personal computer used by 3D-ID in the tender process was a later and certainly improved model of the 1993 Bi-Link that formed the object of the exodus to Cape Town. As far as the ruggedization is concerned it must be borne in mind that 3D-ID was to perform the service on its own computers. If their computers were too frail to perform the required functions they would have had to replace them. It must in any event be remembered that the mode of transport of the computers has a direct


28
bearing on the likelihood of damage during transportation thereof.

Rabie's evidence was that the tables in the vehicles on which the computers would be placed during transport were equipped with special springs that would serve as shock absorbers. The attack on the 3D-ID computers based on the speed at which it could search and the ruggedization was opportunistic, unimpressive and unfounded and is rejected.
[56] The attack upon the 3D-ID tender, which was structured on the basis that 3D-ID would have 75 personal computers equipped with 35 sets of enrolment software, 40 sets of verification software and one coldsearching venue, as not being compliant with the specifications, was equally unimpressive. The basis of the attack is that the equipment in Part A of the tender had to consist of 75 computers each of which had to perform an enrolment function, a verification function and a cold search function. The answer to that attack is that it was a Part B tender and that 3D-ID had planned its operation in such a way that it could do what was required of it. There was some argument about the question whether the equipment of a tenderer for Part B had to comply with the specifications required in Part A of the tender. The fourth defendant argued that it was not necessary. The plaintiff accepts that to be the position. As I see it, the CPA wanted to outsource the payment of pensions and grants to the private sector. It knew what the problems were and wanted to award the tender to someone who could address those problems. It meant that the tenderer had to have personal computers which could do enrolments, cold searches and verification. The tenderer had to propose a workable solution satisfying the CPA and the Tender Board that it could do those things effectively. In practice it meant that the tenderer had to have equipment which could perform the necessary functions. On the



29

evidence before me only Identicator equipment or equipment similar to it would be acceptable to a properly informed evaluation committee. A proper test on other equipment, existing at the time, would have exposed that equipment to the same shortcomings that manifested themselves during the Sagem and Ernest and Young investigations in respect of the Nisec tender. The answer is that although a Part B tenderer did not have to comply with the Part A specifications, in the sense that it had to provide the service precisely as the CPA planned to provide it with the Part A equipment, in practice it could not provide a workable solution unless it had Identicator equipment or equipment similar to it.
[57] The conclusion on this aspect is that the concessions by the defendants, during 1994 and 1995, to the effect that the 3D-ID tender complied with the specifications, were correctly made. The attacks against the equipment and the way in which the tender was formulated proffered at the trial were afterthoughts and without foundation.
Did the 3D-ID tender complv with the securitv requirements?
[58] It is not really necessary to deal with this aspect in any great detail. In its tender 3D-ID specified what it planned to provide by way of security. It mentioned the number of vehicles and the personnel. It mentioned that it obtained insurance from Lloyds of London for R300 000 in respect of each vehicle per occasion. In evidence Rabie indicated that if necessary they would have employed people with know-how or would have made use of the services of professional security institutions.
[59] During the 1994/5 attack by 3D-ID on the fairness or otherwise of the tender process no mention was made on behalf of the


30 .

defendants that the tender was defective because of inadequate provision for security. During the actual evaluation of the various tenders very little, if any, attention was given to the security aspects of the tenders. As a matter of fact Mr. Phillips of Coin Security was very upset. Coin Security had a special security vehicle built especially for demonstration during the tender process. Mr. Phillips invited members of the evaluation committee to have a look at the vehicle, obviously to impress them. His offer was declined. It was not really raised as a relevant factor until very shortly before the trial.
[60] It was conceded by Dr. Terblanche that the crux of the tender process was the technological ability to safeguard the pay-out process against fraud through the effective and quick use of fingerprints. Moreover as the tenderer accepted liability for loss of money the tenderer had a much bigger incentive to guard against robberies than the CPA. It was much more important for the tenderer to have an effective security arrangement than what it was for the CPA. To indicate how unimportant this aspect was to the CPA one must just refer to the fact that the tender was awarded to Nisec. It was a nine day old close corporation with one member and without any experience in the field of security. One cannot but regard this "defence" of the defendants as a red herring and an afterthought.
Was 3D-ID's proposal in respect of future enrolments so unacceptable that the tender could not have been awarded to it?
[61] Like with most of the other defences this one also surfaced at a late stage. It was not a factor during the 1994/5 skirmishes. In September 2004, just before the trial the defendants raised this defence,


31

_for the first time, in a different form. It was then stated that the 3D-ID tender required of the CPA to purchase extra hardware and software in the amount of some Rl,2 million. At that stage it was an attack against
the tender price. The emphasis changed. The final stance was that the tender did not provide a total solution, that it entailed a further capital layout by the CPA, that future enrolment at regional offices was not in accordance with the policy of providing the services as close to recipients as possible and in particular that enrolling recipients with CPA staff would be contrary to the main aim of the tender namely to provide a total solution.
[62] To understand this debate better it is necessary have regard to what happens in reality. A recipient applies for a pension or grant. To be successful the recipient must comply with certain norms, like for instance the recipient must be older than a certain age and must not have assets in excess of a certain amount. The evaluation of that application and the registration of the applicant are done by the CPA. It did not form part of the service that was intended to be outsourced. The evaluation took place at the regional offices, and once accepted, the relevant information was also captured in a central data base. In practice it means that the applicant goes to the pay point and completes the application form, fingerprint and all. The application is then sent to the regional office where the application is processed. If the application is accepted and the applicant registered the recipient will receive the first payment after two months or more.
[63] 3D-ID's proposal was that the recipient was to go to one of the thirteen regional offices and to apply there for the grant. A cold search can be done then and there and if the applicant qualifies he/she will be


32

told to go to the pay point indicated in the application on the next pay-out occasion and so would become entitled to the grant earlier than under the then existing system. The CPA had a number of branch offices (about 35) in other places than those where the regional offices were. They were often closer to the 650 pay points than the regional offices. If I understand Dr. Terblanche's evidence correctly he felt that the CPA personnel in the branch offices and the regional offices had to liaise with the tenderer in respect of the completion of the application forms and the capture of fingerprints. The forms were then to be sent to the regional offices for consideration. Upon registration the applicant's particulars were to be added to the list of recipients entitled to payment at the particular pay point, indicated by the applicant in the application form. The argument is that in that way it will not be necessary for an applicant who lives in or near Murraysburg for instance to travel to Oudtshoorn to have his application processed. The counter-argument is that he will only receive his first payment probably two months later if not more.
[64] One thing is clear. The CPA has to be involved with the processing of each and every application. The argument that if its staff is to be involved with the enrolment the solution is not a "total" one is therefore simply not correct. In any event it represents a small technical detail that can easily be adjusted by agreement between the parties. What is more the tender document indicated that enrolment could take place at head office, regional offices and/or the 650 pay points. In the light thereof the defendants are simply not entitled to raise this "defence". Another factor that cannot be overlooked is the fact that Dr. Terblanche's testimony changed significantly from 1994 to 1995, something that does not engender confidence in his reliability as a witness. He gave more the impression of the captain of a sinking ship who was trying to keep it


33

afloat at all cost. Again it is clear that the argument that there was noncompliance because 3D-ID failed to provide for future enrolments was an afterthought and was not germane to the evaluation process.
Was there any other tenderer whose tender complied with the tender specifications?
[66] In Particulars for Trial, dated 24 December 1999, the fourth defendant indicated that according to the evaluation committee the other tenderers did not comply with the technological and other requirements of the tender. Bouwer testified that only 3D-ID's tender both for Part A and Part B complied with the specifications in that its equipment could effect both identification and verification using the same algorithm and that he was not aware of another product anywhere in the world that, at that time, could do the same.
[67] That evidence was not attacked. A theory was mooted that sufficient munitiae of a fingerprint could be captured in the field, so that it could be converted to a template in an office environment. If the raw image was saved the fingerprint could be entered into a central database. There it could be cold-searched on a main-frame computer against other fingerprints using the algorithm in that computer. It was denied by Bouwer and not resurrected by Klopper. Klopper tried to indicate that CPS may have been able to develop such a capability. It was however clear that CPS could not do cold-searches. It utilized Cogent technology. Bouwer saw a demonstration by Cogent which made it plain that their equipment was not compliant. Brenda Faye did not think that the Cogent technology was compliant. Finally Klopper fell back on the NDS technology. That was the technology utilized by Nisec. It is common


34

cause that that technology does not comply with the tender specifications. The inference is irresistible that only the 3D-ID tender complied with the technological requirements.
Would the tender have been awarded to 3D-ID in an open, honest and transparent tender process?
[68] Because the 3D-ID tender was the only one that complied with the specifications it was the only tender that could be considered for acceptance. There was no other tender to compare it with, price wise or otherwise. Dr. Terblanche admitted that the acceptance of the tender would have saved the CPA money. The price was therefore not a factor that disqualified the 3D-ID tender from being accepted.
[69] There was considerable political pressure to do something about payment of pensions. The extent of the fraud had received considerable media coverage. Acceptance of the tender would relieve the CPA of many of its problems and would furthermore identify it as the province who introduced an answer to a country wide problem. Some feat!
[70] Dr. Stegman at the time raised a query whether the tender ought to be awarded in that it only dealt with pensions payable to black pensioners. He thought that it could be regarded as racist. He also had reservations because he was uncertain what the position in the Northern Cape and the Eastern Cape was and whether there was sufficient interaction between the officials of the different areas. It is clear that his reservations were of a political nature and not of a technical nature.


35

[71] I agree with Mr. Loxton that those considerations must have been prominently on the agenda when the decision was taken to call for tenders. If they weighed so heavily with the authorities tenders should not have been called for. Moreover the tender was awarded to Nisec. People like Mr. Rasool and Dr. Jarodien who were acutely aware of the political implications were instrumental in the award of the tender. There was also a notion in political circles that the programme could be extended to other race groups. Dr. Stegman seems to have been the only individual who really queried the soundness of awarding the tender. He was very easily persuaded to change his view.
[72] If an open, honest and transparent tender process is presumed the decision makers would by and large have been the same. One must just think Louw, Scholtz and Huisamen away and replace Louw and Scholtz with honest impartial people. Mr. Scholtz argues that Louw and Scholtz steamrollered the whole process through and that if it was not for their involvement no tender would have been awarded. I do not think that that submission is correct. If it was a proper procedure, in stead of the superficial tests called for by Louw, the practical tests would have been thorough. They would have demonstrated graphically to the evaluation committee what had been demonstrated during 1993 to the officials. It would have been seen as truly an answer to the serious problem. The approach would probably have been: Let us introduce it. If political problems emerge we shall address them. In the meantime the pension problem of black pensioners is so great that something must be done. In my view the tender would have been awarded to 3D-lD.


36

Conclusion.
[73] As is evident from what has been stated hereinbefore the tender would have been awarded to 3D-ID but for the fraudulent intervention of Louw and Scholtz. It must now be asked if there exists any particular reason why the natural result, i.e. that the defendants are to compensate the plaintiff for such loss as 3D-ID has suffered, should not follow. I did not understand either Mr. Scholtz or Mr. Louw to argue on behalf of the defendants that there is some or other legal disqualification against such a claim. Therefore, if 3D-ID suffered any damages as a result of the failure to be awarded the tender the loss is to be attributed to the fraudulent conduct. In the matter of Transnet Ltd. v Sechaba Photoscan (Pty) Ltd.17 the Supreme Court of Appeal held that loss of profits can be awarded to an unsuccessful tenderer which was through fraud deprived of a lucrative contract. In the unreported judgment of Webster J in this division in CCII Systems(Pty) Ltd v Minister of Defence and Others, (Case no. 21785/2002) after considering the impact of the Constitution, he came to the conclusion that to deny a tenderer who has been defrauded out of a tender award a claim for damages against the State, would amount to condonation of fraud, dishonesty and deceit. In that matter it was specifically argued that no action for damages. lies against the State. I can think of no reason in law why in a matter like the present, where a State Department corruptly handles a tender process, a tenderer who has been cheated out of a tender must be denied a claim for damages.

[74] In the light of the abovementioned finding it is not really necessary to discuss the alternative claim based on negligence. It is clear,
17 2005 (1) SA 299 (SCA)


37

however, that if there was proper control in the CPA administration that it would not have been possible for Louw and Scholtz to orchestrate the award of the tender to Nisec. If Dr. Terblanche for argument's sake did not delegate his functions to Louw or kept himself informed of the merits and demerits of each tender it would not have been possible for Louw to persuade the evaluation committee to recommend the award of the tender to Nisec. Similarly if Brenda Faye and De Wit Coetzee insisted on proper testing of all the equipment the shortcomings of the other tenders would have been exposed. It follows that the award of the tender to Nisec and not to 3D-ID can also be attributed to negligent conduct by officials in the CPA and by officials who were to make recommendations to the State Tender Board.
[75] In this matter the parties agreed to separation of the quantum and the question of liability. The claim for the quantum of damages has been formulated in the alternative. The main claim is for the loss off

expected profits of more than R102 million. The first alternative is a claim for R50 million being the alleged reasonable expectation of what the tender would have been worth to 3D-ID if the process was not tainted by fraud. In my view and in the light of the conclusion to which I have come it is not only unnecessary but it would also be premature to give indications at this stage as to what I think the basis ought to be upon which damages can be claimed. That is a matter which is to be decided by the court dealing with the issue of the quantum of damages.
COSTS




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[76] In the heads of argument the plaintiff asks for an order that all the costs incurred by the plaintiff in proving that the tender process was corrupt are to be paid on the attorney and own client scale. In addition thereto it asks for an order of costs of the hearing to date inclusive of the costs consequent upon the employment of two counsel. I have a fundamental problem with the request for the costs expended to prove that the tender process was corrupt. Those costs were incurred in different proceedings in other courts and in the approach to OSEO. If the plaintiff wanted to claim those costs it should have included it in its particulars of claim as a claim for damages in a specified amount. I am not aware of a procedure in terms of which a court can order a litigant to pay the costs of the other side in other proceedings as part of its order for costs. The quantification of the costs specified in such an order will, in any event, be problematical. The order will be vague. I have no problem to order the defendants to pay the costs of the hearing up to now which costs are to include the costs of two counsel.

[77] Because there is no dispute about it I am prepared to indicate that the second defendant will be liable to pay such damages as the plaintiff proves eventually.
ORDER
1.       The applications by the defendants to amend their pleadings are dismissed.
2.      
The defendants are ordered to pay the costs of those applications and of the application for a separation of the issues in the matter on the basis that the plaintiff was entitled employ two counsel.
3.      
The issues defined in paragraphs 1 to 14 of the Particulars of Claim are decided in favour of the plaintiff.



39

4. The costs of the hearing to date are awarded to the plaintiff, which costs include the costs incurred consequent upon the employment of two counsel.
5. It is indicated that the second defendant will be liable to pay such damages as the plaintiff proves eventually.
6. The matter is postponed to a date to be determined by the Registrar for the determination of the quantum of the damages.
............................. .....
W J HARTZENBERG
JUDGE OF THE HIGH COURT

Plaintiff's counsel: C D A Loxton SC and P J B Farlam
Plaintiff's attorneys: Solomon Nicolson Rein and Verster Inc
First, second and third defendants' counsel: J W Louw SC and M H Mabena
Fourth defendant's counsel: H M Scholtz SC and Ashton Schippers SC
The defendants' attorney: The State Attorney