eThekwini Municipality and Others v Westwood Insurance Brokers Proprietary Limited (AR230/2018) [2020] ZAKZPHC 2 (31 January 2020)

Key Facts

Issues

• Whether the court a quo had jurisdiction to raise adverse costs orders against officials not originally part of the litigation, given that these issues were not raised in the pleadings or affidavits.
• Whether the court a quo correctly inferred negligence or bad faith from the officials' failure to disclose information, without clear evidence of mala fides or gross negligence.
• Whether the court a quo's failure to formally join individual officials in the proceedings violated their constitutional right to a fair hearing, as they were not given a proper opportunity to respond to the costs orders.

Holdings

• The appeal succeeds because the court a quo committed a misdirection by raising new issues not traversed in the pleadings and failed to properly join affected parties to the proceedings. The adverse costs orders (paragraphs 96(2), 96(3), and 96(4)) in the costs judgment of 5 April 2017 are set aside. The court emphasized that courts must not make orders against parties without affording them a fair hearing and that the adversarial system requires parties to define disputes, not judges.
• The court a quo's decision to impose personal costs orders against officials was invalid as it lacked jurisdiction and violated constitutional principles of fair hearing and accountability. The judgment clarifies that public officials can only be held personally liable for costs if their conduct involved bad faith, gross negligence, or constitutional breaches, and such findings must be based on evidence, not inferences drawn from non-disclosure.

Remedies

• The Acting City Manager (Ms Nene) was ordered to report to the court on steps taken to recover costs under the judgment by 30 July 2017 and monthly thereafter until payment was complete. This reporting requirement was directed at ensuring accountability for cost recovery.
• The Mayor and Municipal Manager of eThekwini were directed to deliver affidavits by 20 January 2017, naming officials involved in the tender process. These officials, along with others, were given leave to submit affidavits by 31 January 2017 explaining their roles in the tender award. The court also required proof of service of the judgment and affidavits by 31 January 2017.
• The fourth respondent (South West) was ordered to indemnify the first respondent (eThekwini Municipality) by paying 50% of its costs. The remaining 50% was split equally among various officials and committees, including the Contracts Administrator, Divisional Manager, Manager Contracts and Materials, Head of Water and Sanitation, Deputy Head Supply Chain Operations, members of the Bid Evaluation Committee, members of the Bid Adjudication Committee, the eighth respondent, and the City Manager. These officials were required to pay costs de bonis propriis (from their own pockets).
• The court set aside the award of the tender for 'water loss insurance for underground leaks of individual dwelling units' by the first respondent (eThekwini Municipality) to the fourth respondent (NC South West Brokers CC). Additionally, the decision of the eighth respondent dismissing the appeal against this tender award was also set aside.
• The first respondent (eThekwini Municipality) was required to serve a copy of the judgment and order on the Mayor, Municipal Manager, and other named officials by 20 December 2016. This ensured all relevant parties were informed of the court's decisions.

Legal Principles

• The court emphasized judicial restraint under the rule of law, holding that courts should not raise new issues outside the pleadings. It cited Albutt and Four Wheel Drive cases to stress that judgments must be confined to the issues before the court. The decision also reinforced the principle that no one should be condemned without a hearing, aligning with section 34 of the Constitution which guarantees a fair hearing as foundational to the rule of law.
• The judgment applied costs principles from Black Sash Trust v Minister of Social Development, affirming that personal costs orders against public officials require proof of bad faith or gross negligence. It critiqued the court a quo for imposing costs without proper joinder or evidence of mala fides, noting that such orders must be justified by constitutional obligations to promote accountability while balancing institutional competence and procedural fairness.

Precedent Name

• MEC for Health, Gauteng v Lushaba
• Phillips & others v National Director of Public Prosecutions
• Bondev Midrand (Pty) Ltd v Puling & another
• Black Sash Trust v Minister of Social Development & others (Freedom Under Law NPC intervening)
• Fischer & another v Ramahlele & others
• Motswai v Road Accident Fund

Cited Statute

• Constitution of the Republic of South Africa, 1986
• Financial Services Board Act, 1998

Judge Name

• Masipa J
• Olsen J
• Vahed J

Passage Text

• The fourth respondent shall indemnify the first respondent by paying fifty per cent (50%) of its costs. The remaining fifty per cent (50%) of the first respondent's costs shall be paid in equal shares by multiple officials and committees.
• The award of the tender described by the first respondent as 'Water loss insurance for underground leaks of individual dwelling units (WS 6678)' by the first respondent to the fourth respondent is set aside.
• The appeal succeeds. Paragraphs 96.2, 96.3 and 96.4 of the order made on 5 April 2017 by the court a quo under Case No 8221/2016 are set aside.