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A judgment decided last year, Arocon Mbokodo CC v Mogalakwena Local Municipality (LP) (unreported case no 2650/2024, 7-6-2024) (Monene AJ) is laudable for a number of reasons. The judge, Monene AJ, demonstrated an understanding of the practical realities of the public-private function of organs of state. At the same time the judgment took cognisance of the vulnerability of service providers in contractual relationships with organs of state. This article comments on key aspects of the judgment that highlight this appreciation.
This matter concerned a road construction contract between the Mogalakwena Local Municipality (the municipality) and a service provider, Arocon Mbokodo CC (Arocon). A valid contract had been concluded and remained in place when the municipality published a tender for the same scope of work.
Arocon bought an urgent application to interdict the municipality from continuing with the tender process. The interdict was interim relief pending the finalisation of action proceedings for specific performance.
The municipality admitted that its contract with Arocon subsisted when it published the tender advertisement for the same work but disputed the urgency of Arocon’s application to court. Further, the municipality argued that Arocon had not complied with the requirements of an interdict, including that Arocon has an alternative remedy in the form of a damages claim. The remedy which Arocon sought in the pending action proceedings was specific performance, not damages.
The judgment included weighty statements of disdain for maladministration by organs of state in general and the municipality in particular.
The judge quickly dismissed the municipality’s lack of urgency argument by pointing out that the matter received a special allocation by agreement between the parties. The court held that in these circumstances lack of urgency is no longer an argument. To find otherwise would be a waste of scarce judicial resources and cannot be in the interest of justice.
The court held that in any event Arocon will not receive substantial redress in due course because the tender would have been awarded and implemented by the time it receives a judgment in respect of its request for specific performance. The matter was, therefore, urgent.
The trite requirements of an interim interdict are that the applicant must have –
‘(a) a prima facie right … ;
(b) a reasonable apprehension of irreparable and imminent harm to the right if an interim interdict is not granted;
(c) the balance of convenience must favour the granting of the interdict; and
(d) the applicant must have no other remedy’ (National Treasury and Others v Opposition to Urban Tolling Alliance and Others 2012 (6) SA 223 (CC)).
In finding that each of the requirements of an interim interdict was satisfied, the court not only came to legally sound conclusions, but took a commercially considerate approach as set out below.
Justice is rarely achieved where judges exercise reasoning in a silo or rigidly apply legal principles resulting in conclusions that are not reflective of the South African reality. The Arocon judgment in many respects is grounded in economic reality, having regard to the dynamics of the relationship between the state and its contractors. This can be discussed under four main and overlapping themes in the judgment: scarcity of resources, accountability, legal certainty and sustainability.
In this matter, the court took into account the current reality of scarce resources both in our judicial system and the public purse in general. An example of this appreciation was the court’s approach to the agreed special allocation already discussed above. It is no secret that our courts are facing major funding challenges at present. This is most evident in the allocation times for court proceedings, particularly action proceedings.
In relation to the arguments on irreparable harm, the court noted the meagreness of the public purse and criticised the municipality’s condonation of fruitless and wasteful expenditure. The municipality suggested that if damages are successfully claimed by Arocon in due course, the municipality could pay those damages.
The judge condemned this argument in the strongest terms. The judge stated at para 27 that it is an understatement to say that the municipality’s reasoning ‘floors the court with manifest shock’. The court said suggesting that the municipality pay twice for the same services was a brazen defence of irregular and unlawful conduct by advocating for irregularly and fruitlessly spending.
The court only fell short of noting that the mere raising of the defence is a breach of the municipality’s public duties. A defence in litigation that promotes unlawful conduct falls short of the higher standard of conduct expected of organs of state to respect the law and when dealing with rights (MEC for Health, Eastern Cape and Another v Kirland Investments (Pty) Ltd t/a Eye & Lazer Institute 2014 (3) SA 481 (CC) at para 82).
The Constitution establishes an independent judiciary that interprets and applies the law impartially and without fear, favour or prejudice (s 165(2) of the Constitution). This judgment is an example of a court fulfilling this duty by not mincing its words. For example, it called the municipality’s argument in relation to the balance of convenience ‘a ruse’.
The municipality argued that the balance of convenience favours speedy service delivery to the public and the new tender will be less expensive. The court was not convinced that the municipality was led by economic expediency in light of its readiness to pay twice for the same services. It also was not convinced that the municipality was concerned with speedy service delivery as the relevant road construction services had gone undelivered since 2020.
A court condemning arguments in this way will not only deter similar arguments in the future but also give confidence to the public that the court will not tolerate smokescreens. A court being clear about the credibility of an argument maintains the integrity of the court and the rule of law. This is the case particularly in relationships where the power balance is skewed in favour of the organ of state.
The Supreme Court of Appeal recognised this vulnerability of contractors in contractual relationships with government and impressed on organs of state the importance of respecting the rights of those it contracts with (MEC: Department of Police, Roads and Transport, Free State Provincial Government v Terra Graphics (Pty) Ltd t/a Terra Works and Another [2015] 4 All SA 255 (SCA); 2016 (3) SA 130 (SCA)).
Another way courts show condemnation for reprehensive conduct on the part of a litigant is through exercising its discretion to award a punitive cost order. The court’s comments in this matter regarding the municipality’s defences and conduct could be argued to justify a punitive costs order. However, the court stopped short of awarding punitive costs in this matter.
The court provided clarity on a number of issues which are useful in understanding contractual relationships with organs of state.
For example, the judge in this matter showed a clear understanding of the difference between remedies available at the tender evaluation stage and those available after the conclusion of the contract in paras 35 to 38. The court differentiated between a claim for damages against tender boards in respect of decisions made during the tender process and a claim for contractual damages based on a breach of contract.
The court explained that judgments prohibiting a claim for damages at the tender stage against tender boards does not apply to a contractor’s claim for contractual damages. A claim for contractual damages is competent in contractual relationships with organs of state.
Although this distinction was not a deciding factor in this matter, this appreciation of the intersection of public and private law in tender awards expressed by the court will be useful in future matters. Clarity by the courts on contractual relationships and remedies provide commercial and legal certainty.
Sustainability is a business approach to creating long-term value by taking into account an organisation’s relationship with its environment or broader context.
In considering whether Arocon satisfied the interdictory requirement that it has no alternative remedy, the court concluded that a conceivable claim for damages where specific performance is claimed, does not in this context suffice. As part of the court’s reasoning, it took into account commercial sustainability. It is worth quoting in full:
‘[39.3] Furthermore, entities like the applicant do not only benefit monetarily from tenders won such that damages may be a sufficient alternative balm. They ordinarily also seek to establish and grow a brand and to build a resume of work previously done as a steppingstone for sustainability in future endeavours of a commercial lifetime.’
The state has an obligation to create an environment in which businesses are sustainable. This surely must extend to a direct and lateral relationship with businesses.
The court did not make specific reference to the construction industry but its reasoning in this paragraph is particularly true in that industry. Construction companies receive gradings which are regarded as their ‘license to trade with government’. A construction contractor’s grading determines what projects it can execute and is partly based on track record (www.cidb.org.za, accessed 20-2-2025).
Therefore, the ‘resume of work’ which the court refers to is particularly important to the sustainability of construction contractors. The fact that project completion is a factor in a contractor’s grading would motivate a decision to choose specific performance as a remedy over cancellation and damages.
Considering sustainability when assessing whether damages are a sufficient remedy shows the court’s appreciation for business strategies and the commercial environment within which tenderers operate.
In circumstances where the state displays legally irrational and unlawful conduct as in this matter, ruling on such conduct with the condemnation it deserves falls squarely within the interest of justice. The court in this matter not only recognised the state’s responsibility in creating a healthy business environment but also contributed to it by delivering a judgment that is commercially cognisant. The more courts do this, the more balanced the relationship dynamics between tenderers and the state become, and the more competitive tender processes may become.
Sharné Zimri LLB LLM (Wits) MBA (THUAS) is a legal practitioner at Zimri Attorneys in Johannesburg.
This article was first published in De Rebus in 2025 (April) DR 20.
