The Constitutional Court on Wednesday dismissed – with costs – litigation by New Dawn Technologies and Valor IT regarding an abandoned billion rand department of home affairs’ contract for an electronic document management system.
The Constitutional Court dismissed the application because it found that the application “lacks reasonable prospects of success”.
Consequently, the Constitutional Court ruled leave to appeal must be refused with costs.
The ruling has been welcomed by the department of home affairs which said on Thursday: “Home Affairs Minister Dr. Aaron Motsoaledi is ecstatic at the powerful decision delivered by Constitutional Court.”
The matter goes back several years when the department of home affairs awarded a R1.5 billion tender to digitise its records.
The tender was awarded to three companies – New Dawn, Valor IT, and Ideco.
However,ny contract could be signed, or service level agreement could be finalised, the National Treasury warned that there was no money for such a huge tender.
As a consequence, the home affairs could not go ahead with this contract. Ideco understood the position of the government and let matters rest there.
However, New Dawn and Valor IT somehow decided they were entitled to state money in this regard and litigated against the department for R602 million and R28 million respectively.
Because of litigation by these two companies, the department’s audited contingent liability shot up to R2.1 billion in the 2019/20 financial year.
Contingent liability in home affairs is the amount that companies and individuals claim by way of litigation either for contracts, as is the case in this one, or for immigration or civic matters.
As long as a public institution has contingent liability on its books, the Auditor-General will flag it each year as a risk because if the department cannot successfully defend the litigation and the money became payable, the budget of the department would be severely impacted.
However, in this case, the department said it vigorously defended the matter and contended that there was no contract signed.
But New Dawn claimed that they had bought equipment which, despite persistent requests for evidence by the department, they could not produce.
The two entities took the matter to the Gauteng North High Court and lost.
They then went to the Supreme Court of Appeal and lost before finally proceeding to the Constitutional Court, where they lost again in a judgment issued on Wednesday, 22 December 2021.
“It baffles the mind that the two companies could pursue the State for this huge amount of money, going right up to the Constitutional Court, despite knowing that they had never provided any service to the department,” said Minister Motsoaledi.
“We are aware that it is the Constitutional right of individuals and companies to utilise the various courts of the country in pursuit of justice.
“However, we believe it is sheer opportunism, bordering on theft and corruption, for anybody to demand State money when they didn’t provide any services. We strongly discourage this kind of behaviors”.
Motsoaledi has instructed the department to pursue its legal costs against New Dawn and Valor IT, which date back to 2010 when the initial claim was filed.
The department said the minister intends to write a letter to the National Treasury to request that these two companies be blacklisted from doing business with the State.
“This is not vindictiveness but it’s a warning to individuals and companies who believe that they can receive millions in public funds via spurious litigation,” said Motsoaledi.
