South Africa: Home Affairs Minister Welcomes Supreme Court of Appeal Judgement

21 September 2021

The Supreme Court of Appeal on Monday dismissed with costs an application for leave to appeal by New Dawn Technologies and Valor IT.

The matter involved a portion of a contract for an Electronic Document Management System for the Department of Home Affairs.

The Supreme Court of Appeal dismissed the application because it found that "there is no reasonable prospect of success in an appeal and there is no other compelling reason why an appeal should be heard".

The summons of the two companies amount to R630 million, with New Dawn Technologies claiming R602 million and Valor IT, R28 million.

The sum of these monies amounts to about a third of the department's audited contingent liability of R2.1 billion in the 2019/2020 financial year.

Contingent liabilities, being the amount of claims, are recorded when summonses are issued and are removed only once a judgment is made.

The R2.1 billion contingent liability is the value of claims against the department and not an amount owed.

The judgment comes after the Auditor-General warned in January 2021 that possible claims against the department were too high and could compromise operations and service delivery if they became payable during a financial year.

Home Affairs Minister Dr Aaron Motsoaledi on Monday welcomed the decision of the court.

"The judgment frees executive time and resources to allow senior managers to continue focusing on the urgent task of providing services to people and to fight corruption.

"It also helps us to implement the recommendations of the Auditor-General," said Motsoaledi.

He said the judgment was also giving impetus to actively managing the risk of possible future claims against the department by taking outstanding claims to court or defending them, including looking at alternative dispute resolution mechanisms.

The Minister added that a lot of future possible claims against the department remained in the books of the department because they were not finalised in court.

Motsoaledi instructed the department's management to be more pro-active and bring matters on the contingent liability list to court even where the plaintiff has failed to take any further action after issuing summons.

Last year, the Gauteng North High Court found that there was no legally binding contract between the department and the two companies for the provision of an Electronic Document Management System.

In his judgment, Judge J Davis ruled that: "Both New Dawn and Valour IT had been unsuccessful in their claims that agreements had come into being between them and the DHA regarding certain portions of an Electronic Document Management System in respect of which bids (RFB 458) had been made in 2005 with the closing date 31 January 2006.

"The tender in respect of EDMS was for a 3-year project, which period has long ago expired without the EDMS ever being implemented.

"On 26 November 2020, this Court found that no award which complies with the statutory prescripts and the terms contained in the bid documents had been made to either of the applicants. Accordingly, no binding agreement came into being between the two parties... "

New Dawn Technologies has since petitioned the Constitutional Court on the matter and the department is opposing the application.

Valor IT has since withdrawn its claim against the department.

Consequently, the Minister has instructed the department to pursue its legal costs against Valor IT, which date back to 2010 when the initial claim was filed.

The recovery of costs against New Dawn will be determined by the outcome of the Constitutional Court ruling.

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