Esorfranki Pipelines (Pty) Ltd v Mopani District Municipality

Mopani District Municipality invited tenders in 2010 for the construction of a major water pipeline. The tender was awarded to a joint venture between Tlong Re Yeng CC and Base Major Construction (Pty) Ltd. Esorfranki Pipelines (Pty) Ltd, an unsuccessful bidder, challenged the award through urgent interdicts and review proceedings. The tender was twice awarded to the joint venture and repeatedly interdicted. Ultimately, in review proceedings, the tender process was declared unlawful and the contract void ab initio due to non-compliance with tender requirements, fronting, and bias and bad faith on the part of the municipality. Despite this, the works largely proceeded. Esorfranki then instituted a delictual claim for damages against Mopani, alleging that fraudulent, dishonest and biased conduct in the tender process caused it to lose the profits it would have earned had it been awarded the contract. The High Court dismissed the claim, and Esorfranki appealed to the Supreme Court of Appeal.

The appeal was dismissed with costs, including the costs of two counsel.

The case clarifies the limits of delictual liability of organs of state in unlawful procurement processes. It confirms that even where a tender process is constitutionally invalid and tainted by bad faith, an unsuccessful bidder must still prove legal causation and loss to succeed in a damages claim. The judgment reinforces caution against readily awarding loss-of-profit damages in public procurement disputes.