Leo Boonzaier | Constitutional Court preview: North West Provincial Govt v Tsoga Developers

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25 September 2015 – Next week Tuesday, the Constitutional Court of South Africa hears Provincial Government, North West Province and Another v Tsoga Developers CC and Others CCT 91/15 (court papers), a case belatedly tacked on to the Court’s third term of 2015.  It should not have been.  The government’s application is a disheartening mess.

Date of hearing:  Tuesday, 29 September 2015

Issue:  Why the Court has decided to countenance the provincial government’s last-ditch attempt to evade a consent order that requires it to pay R22m to a building contractor

Background:  In 2009, the North West Provincial Government contracted a joint venture to build a hospital in Brits.  Eight months later, one half of that joint venture, iLima, went into financial meltdown (an event which, coincidentally, spawned a previous Constitutional Court judgment).  The other half, Tsoga Developers, the respondent here, was willing to complete the contract, but the government chose instead to cancel it (pdf).  This is fair enough, but meant that the government had to pay Tsoga for the construction work it had already done (and, arguably, an additional amount in damages).  To that end, the parties began negotiating.

Several months later, the government made an offer to settle Tsoga’s claim in the very precise sum of R22,608,794.39.  This was in accordance with the advice of the government’s legal team, which said there was no bona fide defence to Tsoga’s claim.  Initially, Tsoga had wanted R8m more, but nevertheless signed the settlement agreement in June 2010.

Three years later, as the court hearing approached, the government’s lawyers repeated their advice that Tsoga’s claim should be settled, not defended.  It had specially flown in Jeremy Gauntlett SC, one of South Africa’s most experienced advocates, whose view was that there was “no adequate factual basis” to undo the settlement agreement “nor … any viable interpretation” of it that would permit the government to evade liability.  Accordingly, at the court hearing in May 2013, the government’s legal team, comprising Mr Gauntlett, a junior advocate and an attorney, both of whom had been involved in the matter from its inception, negotiated and formally agreed to a consent order requiring payment of the R22m to Tsoga.

Yet, amazingly, the government then brought an application for the rescission of the settlement agreement.  It argued that the settlement overstated its liability to Tsoga.  But it did not explain how or why, and had apparently forgotten that the whole point of a settlement agreement is to compromise the parties’ respective assessments of the claim, and thus to put an end to precisely these sorts of disputations.  Worse, the government scandalously alleged — without any evidence whatsoever, and indeed in the face of all the evidence — that its counsel had had no mandate to settle the claim on its behalf.

Hendricks J, in an appropriately robust judgment for the Mahikeng High Court, dismissed all the government’s complaints, describing the government’s application as “disgraceful and abusive … fall[ing] short of what is required by an organ of state”.  The Court imposed a punitive costs order on the government to “demonstrate its disquiet”.

Undeterred, the government refused to pay the judgment debt, and brought another court application (now with yet another set of lawyers).  This was for an interim interdict stopping its property from being attached.  The government again argued that the settlement agreement was invalid, this time saying, startlingly, that its own non-compliance with the principles of government procurement contained in section 217 of the Constitution (pdf) released it from its contractual obligations.  It also said that the writ of execution, which authorises the attachment of the Department’s bank account, violates section 226 of the Constitution, which lists the two circumstances in which there may be a direct charge against the province’s “Revenue Fund” — and mentions neither court orders nor a consequent writ.

The North West High Court (now Djaje AJ) gave both arguments short shrift, pointing out that the first could and should have been raised in the government’s previous application, and that the second was misconceived, because the Constitution impliedly recognises, in section 165, that court orders may constitute a direct charge against a revenue fund.  Finally, Djaje AJ agreed with Tsoga that the government’s application was an “abuse of process”, and imposed a punitive costs award.

Things to watch:  The government’s conduct in persisting in this litigation is dismaying.  It wisely acquiesced in the settlement agreement and consent order, on the clearly correct advice of the two sets of extremely expensive lawyers whom it had consulted — and then sought, with no sound legal argument or supporting evidence, to evade both its own contractual promise and the order of a High Court.  It has persisted pig-headedly in this stance, racking up two further adverse High Court judgments (both of which denounced its irresponsible conduct) and two punitive costs awards.  Yet it now believes it should have an audience before the highest court in the country.  Worse still, it is seeking interim relief — which is not normally appealable at all — and wants its case to be handled urgently.

So why has the Constitutional Court set the matter down?  Why has it made itself complicit in, and furthered, the government’s disreputable evasion of its creditors?  The Court’s set-downs have, in certain previous cases, disclosed a disappointing lack of gumption: it has obliged applicants’ flagrant abuse of the court process — even where, crucially, their noxious complaints raised no broader issues of principle or precedent.  (In the worst of these, Dengetenge, the applicant — like the government here — tried to skirt its own rightful concession by making baseless allegations that its counsel had acted contrary to his mandate.)  This unjustly subjects the respondent to further litigation and wastes the Court’s thinly stretched resources.  And it is simply galling to see an apex court willingly subjecting itself to manipulation by scurrilous litigants.

So what, to repeat, is going on?  The government’s new legal team, though it is led by the rightly revered Thembeka Ngcukaitobi, persists with several misconceived arguments.  On the other hand, its argument based on section 226 of the Constitution is not obviously wrong; and the authority on which the High Court relied to find that the Department’s bank account could be directly charged has been criticised.  And this is one argument that the government could not have raised in the first round of High Court litigation, since it is about the subsequent attachment process.

But if this is the issue the Constitutional Court wants to focus on, then it should’ve stated in its directions (as it often does) that it wants to hear submissions only on this point.  Its failure to do so here means that all the government’s arguments, including the disgraceful ones that should’ve died along with its first court application, must be ventilated again.

And, in any event, is this really the right case to decide the section 226 issue?  The issue will surely arise, and could be resolved, in some future case — one that is not a clear abuse of court process.

Leo Boonzaier

About Leo Boonzaier

Leo is an Editor for the African Legal Centre, and he reports on the Constitutional Court of South Africa. He has BSocSci and LLB degrees from the University of Cape Town and a BCL from the University of Oxford. He has worked as a visiting researcher at the Max Planck Institute for Private Law in Hamburg, Germany, and more recently as a law clerk at the Constitutional Court of South Africa. He is currently a doctoral student at the University of Oxford.