Dlamini INC. v Transnet SOC Ltd and Others (16593/19; 23785/19) [2022] ZAGPJHC 409 (2 June 2022)

Key Facts

Issues

• The court considered whether Dlamini's four-month delay in seeking clarification and subsequent litigation was unreasonable. It determined that the delay did not justify non-suiting the applicant, as the core claim (fronting in Dlamini 2) was not time-barred. The court highlighted that Transnet and EY's failure to provide records contributed to the delay and that access to justice required the case to proceed.
• The court examined whether EY's replacement of Dlamini with Shandu in Dlamini 2 constituted fronting under the B-BBEE Act. Fronting is defined as practices undermining the Act's objectives. The court concluded that Shandu's B-BBEE status and the contractual basis for the replacement meant there was no fronting. Dlamini's exclusion was not tied to misleading Transnet about its involvement, as EY genuinely intended to subcontract initially.
• The court considered the claim that Dlamini Inc. was unfairly discriminated against when excluded from the contract in contravention of s 9(2) of the Constitution. It concluded that the exclusion was based on Transnet's decision to have EY perform work different from its bid, not on Dlamini's racial and gender profile. The mere exclusion of a black women-owned firm was insufficient to establish discrimination under the Constitution.
• The court addressed the refusal of Transnet and EY to furnish a complete record of their decisions under Rule 53. This refusal was deemed unlawful, as it hindered Dlamini's ability to prove its claims of unconstitutional exclusion and fronting. The court emphasized that Rule 53 provides Dlamini with a legal right to access records for transparency and accountability, and the failure to comply prejudiced justice.
• The court addressed whether Transnet and EY's non-transparent decisions regarding subcontracting and scope changes violated sections 195 and 217 of the Constitution. These provisions mandate transparency in public administration. The court found that while the decisions were non-transparent and potentially unlawful, they did not constitute a direct constitutional breach. The lack of transparency alone did not invalidate the exclusion of Dlamini.

Holdings

• In Dlamini 2, the court held that there was no case in public law as the dispute centered on the breakdown of private negotiations between Dlamini and EY regarding the MSA. The court found it to be a matter of private law, and no public law issues were pleaded or proven. The application was dismissed accordingly.
• The court concluded that the allegations of fronting in both Dlamini 1 and Dlamini 2 were without merit. EY genuinely intended to involve Dlamini in the work it bid for, and Dlamini's exclusion did not undermine the B-BBEE Act's objectives. The work was performed by a Level 1 B-BBEE entity (EY), and there was no evidence of Dlamini being used as a front to mislead Transnet.
• Dlamini's case was dismissed on the merits as the facts do not support the contention that Dlamini was unfairly discriminated against. The exclusion was not due to its racial and gender profile but because Transnet chose to have EY perform work different from what EY initially bid for. The court found no violation of s 9(2) of the Constitution.

Remedies

• The court awards punitive costs against Transnet and EY for their unlawful refusal to provide records required by rule 53 of the Uniform Rules of Court. The costs include attorney and client scale taxation for two counsel.
• The application is dismissed. The first and second respondents are ordered to pay the costs of the application, including the costs of two counsel to be taxed on an attorney and client scale. A punitive costs order is awarded due to the respondents' unlawful refusal to furnish records, which prejudiced the applicant and frustrated the course of justice.
• The application is dismissed with no order as to costs. The court finds no case in public law and determines that the dispute is a matter between private parties (EY and Dlamini) that does not require judicial intervention.

Legal Principles

• The court applied the principle of substance over form to conclude that EY's replacement of Dlamini with Shandu, both Level 1 B-BBEE entities, did not undermine the B-BBEE Act's objectives. The focus was on the actual conduct and outcomes rather than formal contractual labels.
• The judgment acknowledged the principle that agreements must be kept (pacta sunt servanda), particularly in the context of the MSA between EY and Dlamini. It highlighted that EY's failure to finalize the agreement contributed to Dlamini's exclusion, but without sufficient evidence of breach, no contractual remedy was granted.
• The court relied on judicial review to evaluate the lawfulness of Transnet and EY's actions, including whether their decisions to exclude Dlamini were ultra vires statutory requirements or breached constitutional obligations. This encompassed proportionality and Wednesbury reasonableness standards to determine if the refusal to furnish records or exclude Dlamini was justified.
• The rule of law was a key consideration, as the court emphasized that Transnet and EY must not usurp judicial functions by unilaterally determining the applicability of public law principles. Their refusal to furnish records was deemed unlawful and prejudicial to justice.

Precedent Name

• Airports Company SA v ISO Leisure OR Tambo
• Britannia Beach Estate (Pty) Ltd v Saldanha Bay Municipality
• Trustees for the time being v BAE Estates
• KZN Joint Liaison Committee v MEC for Education
• Maphango v Aengus Lifestyle Properties
• Moropa v CINPF

Cited Statute

• Preferential Procurement Policy Framework Act
• Public Protector Act
• Constitution of South Africa
• Public Finance Management Act
• Companies Act
• Rental Housing Act
• Broad-Based Black Economic Empowerment Act
• Promotion of Administrative Justice Act

Judge Name

Passage Text

• [57] The work that was performed by EY was accordingly performed by an entity that possessed the B-BBEE status required in the bid documents... Dlamini's exclusion from the contract may have been wrongful but it did not frustrate or undermine the B-BBEE Act.
• [54] The facts do not support the contention that Dlamini, by its exclusion, was unfairly discriminated against in contravention of s 9(2) of the Constitution... Dlamini was excluded because Transnet chose to get EY to perform work that was very different from the work EY had bid for.
• [112] This is a case of two private parties failing to conclude a contract... a case in private law cannot be founded on these facts.