THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable
Case No: 119/2021

In the matter between:

CENTRAL ENERGY FUND SOC LTD                          FIRST APPELLANT
STRATEGIC FUEL FUND ASSOCIATION
NPC                                                                                SECOND APPELLANT

and

VENUS RAYS TRADE (PTY) LTD                                 FIRST RESPONDENT
GLENCORE ENERGY UK LTD                            SECOND RESPONDENT
TALEVERAS PETROLEUM
TRADING DMCC                                                            THIRD RESPONDENT
CONTANGO TRADING SA                                     FOURTH RESPONDENT
NATIXIS SA                                                                     FIFTH RESPONDENT
VESQUIN TRADING (PTY) LTD                                SIXTH RESPONDENT
VITOL ENERGY (SA) (PTY) LTD                        SEVENTH RESPONDENT
VITOL SA                                                                     EIGHTH RESPONDENT
THE MINISTER OF ENERGY                                          NINTH RESPONDENT
THE MINISTER OF FINANCE                                   TENTH RESPONDENT
ORGANISATION UNDOING TAX ABUSE                          AMICUS CURIAE

Neutral citation: Central Energy Fund SOC Ltd and Another v Venus Rays
Trade (Pty) Ltd and Others (Case no 119/21) [2022]
ZASCA 54 (13 April 2022)
Coram:
MAYA P, DAMBUZA, SCHIPPERS and PLASKET JJA and
MEYER AJA
Heard:

24 February 2022
Delivered:            This judgment was handed down electronically by circulation
to the parties' representatives by email, publication on the
Supreme Court of Appeal website and release to SAFLII. The
date and time for hand-down is deemed to be 09h45 on
13 April 2022.
Summary: Review under principle of legality and Promotion of Administrative
Justice Act 3 of 2000 – rotation of country’s strategic oil stock – decisions and
resultant transactions reviewed and set aside – just and equitable relief – factors
relevant to assessment – misconduct by state officials – contracting parties
innocent – compensation for out-of-pocket expenses appropriate – appeal
dismissed.

________________________________________________________________
ORDER
________________________________________________________________

On appeal from: Western Cape Division of the High Court, Cape Town (Rogers
J sitting as court of first instance):
The appeal against paragraphs 7(b) to 14 and paragraphs 15(b) to 17 of the order
of the court below is dismissed, with costs. Such costs shall in relation to the third
respondent, be limited to the costs of one counsel, and as regards the fourth to
eighth respondents, include the costs of three counsel.

________________________________________________________________
JUDGMENT
________________________________________________________________
Schippers JA (Maya P, Dambuza and Plasket JJA and Meyer AJA
concurring)

[1] This appeal arises from a successful application by the appellants, the
Central Energy Fund SOC Limited (CEF) and the Strategic Fuel Fund
Association NPC (SFF), to review and set aside certain decisions taken in 2015
and 2016, concerning the rotation of South Africa’s strategic stock of some
10 million barrels of crude oil (the strategic stock), and the transactions that
followed. The strategic stock comprised 5 million barrels of Basrah Light, an
Iraqi oil, and 5 million barrels of Bonny Light, a Nigerian oil. The SFF is
responsible for the management of the strategic stock and is a wholly owned
subsidiary of the CEF. The decisions and transactions were approved by the ninth
respondent, the Minister of Energy (the Minister). Neither the Minister nor the
tenth respondent, the Minister of Finance, participated in the proceedings below.

[2] The Western Cape Division of the High Court, Cape Town (the high court),
reviewed and set aside the decisions and resultant transactions. It made an order
granting the fourth and fifth respondents, and the sixth to eighth respondents,
compensation for their out-of-pocket-expenses as contemplated in s 172(1)(b) of
the Constitution and s 8(1)(c) of the Promotion of Administrative Justice Act 3
of 2000 (PAJA). The issue in this appeal, which is before us with the leave of the
high court, is whether that order is appropriate.

The basic facts
[3] The basic facts are uncontroversial. The rotation of the strategic stock was
done by way of sale and purchase agreements, coupled with storage agreements
in terms of which the SFF continued to store the oil in underground tanks at its
storage facility at Saldanha Bay in the Western Cape. The SFF sold 3 million
barrels of crude oil to the first respondent, Venus Rays Trade (Pty) Ltd (Venus).
Venus immediately on-sold it to the second respondent, Glencore Energy UK Ltd
(Glencore). Venus played no part in the proceedings in the high court. Glencore
opposed the review application but in the course of those proceedings came to a
settlement with the appellants.

[4] On 28 December 2015 the SFF, acting through its then Chief Executive
Officer (CEO), Mr Sipho Gamede, entered into three sale and purchase
agreements with the third respondent, Taleveras Petroleum Trading DMCC
(Taleveras). Two of these agreements were for the in-tank sale to Taleveras of
2 million barrels of Basrah Light crude oil in Tank 2 at the SFF’s storage facility,
and 2 million barrels of Bonny Light in Tank 6. The third agreement was a back-
to-back purchase agreement in terms of which the SFF undertook to purchase
4 million barrels of crude oil from Taleveras. On 29 January 2016 the SFF and
Taleveras concluded an addendum to the first and second sale and purchase

agreements after the quality of the oil was established and certified, and the price
determined.

[5] These transactions were financed by the fourth respondent, Contango
Trading SA (Contango), and the fifth respondent, Natixis SA (Natixis). Natixis
undertook a risk analysis and required that the financing arrangement be
structured with certain guarantees in place to address potential risks. The
financing risk was met by ensuring that Contango became owner of the oil. The
risk of Taleveras defaulting on its obligation to repurchase the oil was addressed
by the fact that Contango would be able to sell the oil to a third party.

[6] On 2 February 2016 Natixis approved a $165 million repo credit line
granted to Contango in order to conclude a repo transaction for the 4 million
barrels of crude oil. On 5 February 2016 Contango entered into a put option
agreement with Total Oil Trading SA, which provided Contango with a ready
buyer for the oil in the event of Taleveras defaulting on its obligation to
repurchase the 4 million barrels of crude oil.

[7] In accordance with the approval of the repo transaction by Natixis, on
8 February 2016 Contango and Taleveras concluded a Master Repurchase
Agreement (MRA). The MRA provided that upon purchasing the oil from the
SFF, Taleveras simultaneously on-sold it to Contango and transferred to
Contango all its rights in respect of the oil (including those against the SFF under
the sale and storage agreements) for a total sale price of $164 322 400. Taleveras
was obliged to repurchase the same or equivalent oil from Contango on the
repurchase date (5 April 2018) at a price based on the average Dated Brent price
for March 2018. If Taleveras failed to repurchase the oil on the repurchase date,
Contango was entitled to terminate the agreement and sell the oil at market price
to a third party.

[8] On 10 February 2016 Natixis provided a letter of credit to the SFF in
respect of the purchase by Taleveras of the 4 million barrels of crude oil ‘in tank’
from the SFF. The funds were paid by Natixis around 25 February 2016.

[9] The SFF sold 3 million barrels of crude oil to the sixth respondent, Vesquin
Trading (Pty) Ltd (Vesquin), a subsidiary of the seventh respondent, Vitol Energy
(SA) (Pty) Ltd (Vitol SA). Vesquin appointed Vitol SA to execute the agreement
on its behalf. In what follows these entities will be referred to as ‘Vitol’, because
they share an identity of interests. The Vitol agreement was concluded on
20 January 2016 and comprised two transactions: (i) a sale and repurchase
agreement in terms of which the SFF sold to Vitol 3 million barrels of crude oil
from Tank 2 at Saldanha Bay, and the SFF agreed to repurchase the same quantity
of crude oil at a future date; and (ii) a storage agreement in terms of which the
SFF leased to Vitol up to 3 million barrels of storage space in Tank 2 for three
years (subject to options to renew).

[10] The oil was still in the tanks at the SFF’s storage facility when in
September 2017, the appellants gave notice of their intention to launch a review
application to declare the above agreements and related transactions unlawful and
invalid (the review notice). The review application was launched on 12 March
2018 – more than two years after the agreements were concluded.

[11] The SFF brought the review application essentially as a self-review under
the doctrine of legality. The CEF applied in terms of PAJA. Taleveras did not
oppose the review but filed an explanatory affidavit in which it denied that it had
engaged in collusion or corruption in the sale of the oil, and stated that it accepted
the appellants’ offer to refund the purchase price and storage fees plus interest.
Contango, Natixis and Vitol opposed the review application and asked that it be
dismissed with costs. Alternatively, and in the event that the impugned decisions

and transactions were reviewed and set aside, they contended that they should be
compensated for the losses they had suffered as a result of the impugned
agreements being declared invalid.

[12] The appellants’ review papers were materially incomplete when they
launched the application. They had not yet commissioned a forensic investigation
of the transactions by Gobodo Forensic Investigative Accounting (Pty) Ltd
(Gobodo), upon which they came to rely. Gobodo furnished its report to the
appellants on 30 April 2019, in the light of which they supplemented the review
papers on 28 February 2020. The Gobodo report was provided to the respondents
only on 20 April 2020.

[13] The application came before Rogers J. He observed that it was only on
28 February 2020, when the appellants’ delivered their supplementary founding
papers, that the respondents finally knew the case they had to answer – more than
four years after the trigger date for launching review proceedings. Even then, the
supplementary founding papers did not represent the appellants’ complete case.
The replying papers delivered on 22 July 2020 contained new matter and as a
result, the respondents had to file supplementary opposing papers.

[14] The high court found that the appellants’ delay in instituting and
prosecuting the review was ‘unreasonable, egregious, and unexplained or
unsatisfactorily explained’. It held that the delay was unreasonable for legality
purposes, and the inadequacy of the explanation for the delay was a factor against
condonation as envisaged in PAJA.

[15] The court however condoned the delay. It held that the principle enunciated
in Gijima1 was applicable – even where an unreasonable delay is not condoned,
s 172(1)(a) of the Constitution may nonetheless oblige a court to declare the
impugned conduct invalid. The court declared the impugned decisions invalid
because their illegality was clear and indisputable.2 Further, the respondents had
admitted that the decisions were invalid on some of the review grounds. The judge
was of the view that the remaining grounds, even if not admitted, had clearly been
established.

[16] There were other reasons why the appellants’ delay had to be condoned,
which the judge explained as follows:
‘Although the Gijima principle compels this result, there are other factors which justify
condoning/overlooking the delay, at least for the limited purpose of a declaration of invalidity.
The decisions related to the national interest in energy supply and to a quantity of oil of large
value. The oil was sold for $280,831,000, equating to R3,317 billion in March 2018 and R4,36
billion in November 2020. The illegalities were serious and pervasive with wholesale disregard
of corporate governance and transparency. In the case of Taleveras, the irregularities included
bribery, while in Venus’ case there must have been an improper basis for its being favoured.’

[17] The grounds upon which the impugned decisions and transactions were
reviewed and set aside, included the following. The Minister’s decision
approving the disposal of the strategic stock was tainted by misrepresentations by
Mr Gamede, who had acted with improper motives. The SFF did not follow a
fair, equitable, transparent and competitive process, in violation of its
constitutional duties to observe administrative justice and legality, and the CEF’s
procurement policy. Mr Gamede’s insistence on private negotiation rather than
competitive bidding, and the disposal awards, were irrational.

1 State Information Technology Agency SOC Limited v Gijima Holdings (Pty) Limited [2017] ZACC 40; 2018 (2)
SA 23 (CC) para 52. See also C Hoexter and G Penfold Administrative Law in South Africa 3 ed (2021) at 730.
2 Buffalo City Metropolitan Municipality v Asla Construction (Pty) Ltd 2019 (4) SA 331 (CC) paras 66 and 71.

[18] Mr Gamede’s conduct was riddled with improprieties, and he had no
problem with taking bribes. He issued requests for proposals even before he had
obtained the Minister’s approval to sell the strategic stock. He failed to disclose
this to the Executive Committee or the Board of the SFF, and excluded the
officials and structures of the SFF from the evaluation of the bids to purchase the
oil. He repeatedly misled the Minister. He justified the rotation of the strategic
stock on the basis that it was losing its relevance to the South African market,
when this was not true for the Bonny Light oil. He obtained the approval for the
relevant transactions by stating that they had been assessed by the SFF, when in
fact the SFF was unaware of them and no due diligence had been carried out. He
failed to inform the Minister of the terms of the transactions and that the
conditions for their conclusion had not been met.

[19] The most serious and troubling review ground was that Mr Gamede had
accepted bribes to procure some of the transactions. Between 24 November 2015
and 4 February 2016, he received four deposits totalling R2.6 million into the
trust account of his dormant legal practice, from a person associated with
Taleveras. These payments, the high court found, were bribes. Between
29 January 2016 and 7 April 2016, Mr Gamede received payment of R20 million
into his bank accounts through anonymous cash deposits, made in tranches of
between R15 000 and R20 000.

[20] The high court concluded that the SFF was itself culpable. It said:
‘Although Gamede was driving the improper disposal process and to a large extent made
decisions on his own, he could not have achieved what he did without the acquiescence or
supineness of SFF’s senior managers and directors.’

[21] The court specifically criticised the SFF’s executives, Mr Luvuyo Mayaphi
and Ms Daphne Chili, for their role in the transactions. Mr Mayaphi, the SFF’s

General Manager, had not been frank about his involvement in the transactions.
In November 2015 he had been informed that prior approval for the transactions
had to be obtained from the Minister and the national Treasury. He failed to
ensure that those approvals were obtained. He instructed the SFF’s legal
department to prepare the Vitol agreements in mid-December 2015, witnessed
the Taleveras transaction on 28 December 2015 and was present when
Mr Gamede signed Vitol’s contracts on 20 January 2016. At each stage he knew
that the SFF’s internal prerequisites for these transactions had not been met, but
allowed the transactions to go ahead nonetheless. The court found that Ms Chili,
the SFF’s Acting General Counsel, had ‘vetted disposal contracts without raising
red flags . . .’.

[22] Concerning the role of the directors of the SFF, the court stated:
‘[T]he directors lamely approved the Taleveras and Vitol transactions and effectively did the
same for the Venus transactions even though they must have known that they did not have
enough information and that such information as they did have had been sprung on them at the
last moment. They knew what CEF’s procurement policy required, yet they were supine in the
face of a patently uncompetitive process. The board did not proactively intervene to ensure that
SFF and the country’s interests were safeguarded.’

[23] The SFF Executive Committee became aware of the impugned transactions
by 19 January 2016, yet no one informed the Board that the strategic stock had
been sold until 5 February 2016. The high court described this non-disclosure as
a ‘staggering conspiracy of silence’.

[24] The SFF Board failed in its duty of oversight of the SFF. It approved the
Vitol transaction and ratified the Taleveras transaction at a Board meeting on 5
February 2016. On the appellants’ own version:
‘[T]he SFF board made no enquiry into the process in terms of which the traders had been
selected, the content of the bids, the evaluation and adjudication criteria adopted in relation to

the bids, the extent to which Mr Gamede had complied with the applicable regulatory and
policy framework in concluding the agreements or the extent to which the necessary approvals
had been obtained. Moreover, the SFF Board did not have copies of any of the sale contracts
before it when it deliberated on the Impugned Agreements concluded at that stage.’

[25] Mr Jawoodeen, the Chairperson of the Board, conceded that it should have
done more to ensure that due process was followed. Despite having been
informed on 8 February 2016 about concerns relating to the sale of the strategic
stock, in a report to the Minister dated 23 June 2016, he supported a written
submission by Mr Gamede that the process followed in concluding the
agreements was in accordance with the CEF’s procurement policy, ministerial
directives and Treasury regulations.

[26] The SFF was also reckless in entering into the transactions without any
hedge instruments in place, thereby exposing the SFF (and indirectly, the fiscus)
to substantial risk, since an increase in the price of oil in the market would
ultimately be borne by the SFF when it replaced the strategic stock. This risk was
amplified by the fact that the SFF sold the stock when the market was in contango
(put simply, the oil market was likely to experience increased prices over time)3,
without having taken any steps to protect itself against a change in the oil price
by the time the SFF replenished the strategic stock.

[27] The Minister and the CEF likewise failed in their duty. The high court
found that the Minister did not apply her mind prior to approving the SFF’s
decision to dispose of the entire strategic stock, and the transactions for the
rotational sale and purchase of the stock. She also failed to exercise proper

3 Contango markets are in effect when the futures price is higher than the current or expected spot price, implying
that future prices are rising over time (Contango: Definition and Backwardation Differences – 2022 – MasterClass
https://www.masterclass.com).

executive authority over the CEF and SFF, as required by the Public Finance
Management Act 1 of 1999.

[28] The CEF was aware of the transactions by 5 February 2016 but did nothing
to prevent or challenge them. Instead, the CEF justified them in the media and
later lauded them in the 2015/2016 annual financial statements. Even after being
advised that the disposal of the oil and the consequent transactions were unlawful,
the CEF delayed in instituting review proceedings.

[29] As to the procurement of the impugned decisions and the transactions that
followed, the high court came to the following conclusion:
‘Accordingly, and quite apart from the gross and unsatisfactorily explained delay, the rot which
allowed the impugned transactions to be concluded and implemented was pervasive, even if
one man was the linchpin.’

[30] The court held that since the decisions of the SFF and the Minister were
invalid, the contracts concluded on the strength thereof could not stand. It
examined, in detail, the role of each party in the conclusion of the contracts. It
rejected Taleveras’ denials of corruption as far-fetched and untenable, and
concluded that the bribes to Mr Gamede were paid with a view to advancing
Taleveras’ interests. The court found that Glencore’s failure to call for a board
resolution did not show that it had turned a blind eye to rogue conduct, and that
it was an innocent third party. Contango, which had taken proactive steps to
ensure that things were in order, was also an innocent third party. And there were
no peculiar improprieties in the conclusion of the contracts with Vitol: it too, was
an innocent third party.

[31] Given the appellants’ egregious delay and misconduct, and the fact that
Contango and Vitol were innocent parties, the high court formed the view that

either their contracts should be allowed to stand so that they could pursue
contractual remedies, or be set aside subject to payment of compensation for out-
of-pocket expenses. It chose the latter remedy which, it held, effectively
vindicated the rights violated by the impugned decisions and transactions, and
was fair to the affected parties. The compensation was limited to out-of-pocket
expenses and excluded profit. This remedy, the court said, would give Vitol and
Contango less than their contractual rights, but would ensure that they did not
suffer fruitless expenditure because of the unlawful conduct of the SFF and the
Minister.

[32] Consequently, the high court declared the impugned decisions and
contracts invalid, and set them aside. It made the following orders in relation to
Taleveras, Contango, Natixis and Vitol:
‘Taleveras, CTSA and the fifth respondent (“Natixis”)
(7)
The applicants jointly and severally must pay CTSA:
(a)
$123,865,600 as restitution of purchase price and storage fees;
(b)
$84,837,048 as just and equitable compensation for out-of-pocket expenses other than
interest;
(c)
further amounts, in dollars, as just and equitable compensation in respect of interest,
compounded monthly in arrears and calculated on the following amounts and from the
following dates up to 4 April 2018 at the rate of 0.695% and from 5 April 2018 to date of
judgment at the rates set out in the schedule attached hereto as “J1”:
(i)
on $112,000,000 from 25 February 2016;
(ii)
on $800,000 from 5 February 2016;
(iii)
on storage fees totalling $11,865,600, on each month’s fee from the “assumed date of
payment” reflected in the schedule attached as “J2”,
(iv)
on insurance premiums totalling $408,853, from each date of payment to the extent that
a date of payment is reflected in the schedule attached as “J3”, and on the remaining premiums
from 1 June 2018;
(v)
on inspection fees totalling $28,195, from the first day of the second month following
the month of “invoice date” in the schedule attached as “J4”;

(vi)
on $83,600,000, from 5 April 2018.
(8)
The total of the compensation set out in para (7) shall bear interest, from date of
judgment to date of payment, at the rate of 1,81%, compounded monthly in arrears.
(9)
The following undertaking, given by CTSA and Natixis, shall be operative in relation
to the compensation awarded to CTSA in terms of this order:
“CTSA and Natixis will not seek to recover from Taleveras or Charmondel Holdings Ltd any
amounts which they receive pursuant to this order, and any such amounts will be taken into
account, in accordance with English law, to reduce their claims in any other proceedings they
may bring against Taleveras or Charmondel.”
(10)
Subject to the fulfilment of the conditions stated in (11) below, the applicants jointly
and severally must pay further compensation to CTSA in the amount of $22,568,426 (being
the net amount of the purchase price for the oil paid by CTSA to Taleveras in terms of the sale
conformation dated 5 February 2016 issued in terms of the master repurchase agreement
concluded between CTSA and Taleveras on 5 February 2016).
(11)
The liability to pay the compensation in (10) above shall only come into existence and
be enforceable if, and to the extent that, CTSA is unable to recover the said amount from
Taleveras after exhausting all reasonable steps to do so.
(12)
The applicants must pay CTSA and Natixis’ costs, including the costs of three counsel.
(13)
No restitution or compensation shall be payable by the applicants to Taleveras pursuant
to the setting aside of the contract between those parties.
(14)
No order as to costs is made as between the applicants and Taleveras.
Vitol
(15)
The applicants jointly and severally must pay Vitol:
(a)
$86,826,000 as restitution of purchase price and storage fees;
(b)
$19,049,944 as just and equitable compensation for out-of-pocket expenses other than
interest;
(c)
further amounts, in dollars, as just and equitable compensation in respect of interest,
calculated at the rates set out in the schedule attached as “J5” up to 31 October 2020 and at the
rate of 1.81% thereafter to date of judgment, compounded monthly in arrears, as follows:
(i)
on $78,606,000, from 11 March 2016 to 31 October 2020 in the amount of $6,874,030
plus further interest from 1 November 2020 to date judgment;

(ii)
on each month’s storage fees, in total $8,220,000, from date of each payment to
31 October 2020 in the amount of $668,817, plus further interest from 1 November 2020 to
date of judgment;
(iii)
on $37,530 (cost of letter of credit), from 21 January 2016 to date of judgment;
(iv)
on each month’s insurance premiums (in total $933,487), from the first day of the
month immediately following the month in which such premium was paid as set out in the
schedule attached as “J6” to date of judgment;
(v)
on $18,078,928 (hedging losses), from 7 May 2020 to date of judgment,
(16)
The total of the compensation set out in para (15) shall bear interest, from date of
judgment to date of payment, at the rate of 1.81%, compounded monthly in arrears.
(17)
The applicants must pay Vitol’s costs, including the costs of three counsel.’

[33] The appellants were granted leave to appeal paragraphs 7(b) to 14 and
15(b) to 17 of the high court’s order. Vitol was granted leave to cross-appeal
paragraphs 2 and 3 (insofar as those paragraphs related to Vitol), and
consequentially paragraphs 15 to 17 of the high court’s order granting it just and
equitable relief.

[34] Vitol’s initial stance was that the effect of declaring the Vitol contracts
invalid from inception and setting them aside, deprived it of a contractual
damages claim it would otherwise have been entitled to pursue. Those damages
would have included a claim for lost profits. However, shortly before the hearing
of the appeal, Vitol abandoned its cross-appeal.

[35] Consequently, the remaining issues to be decided are firstly, whether the
relief granted by the high court was just and equitable in the circumstances, and
secondly, costs. The appellants, Contango and Vitol accepted that if the impugned
agreements were set aside, the oil should be restored to the SFF, and the purchase

price and storage fees, plus interest, repaid. The dispute relates to whether the
SFF should, in addition, pay the expenses that Contango and Vitol incurred in
reliance on the transactions (their out-of-pocket expenses).

Just and equitable relief: principles
[36] A court in review proceedings, whether under the principle of legality or
the provisions of PAJA, has a wide discretion to craft an appropriate remedy
based on what is just and equitable in the circumstances of the case.4 The remedy
must be fair to all those affected by it, and yet effectively vindicate the rights
violated.5 In terms of s 172(1)(b) of the Constitution, a court is authorised to make
any order that is just and equitable pursuant to a declaration of constitutional
invalidity.6

[37] It is settled law that s 172(1)(b) of the Constitution confers on the courts
very wide powers to craft an appropriate or just remedy even in ‘exceptional,
complex or apparently irresoluble situations’.7 The Constitutional Court has held
that ‘[t]he power to grant a just and equitable order is so wide and flexible that it
allows courts to formulate an order that does not follow prayers in the notice of
motion . . . ’ and enables them ‘. . . to address the real dispute between the
parties’.8

4 Allpay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer of the South African
Social Security Agency and Others (No 2) [2014] ZACC 12; 2014 (4) SA 179 (CC) para 71.
5 Steenkamp NO v Provincial Tender Board of the Eastern Cape 2007 (3) BCLR 300 (CC); 2007 (3) SA 121 (CC)
para 29.
6 Section 172(1) of the Constitution provides that when deciding a constitutional matter, a court:
‘(b) may make any order that is just and equitable, including –
(i) an order limiting the retrospective effect of the declaration of invalidity; and
(ii) order suspending the declaration of invalidity for any period and on any conditions, to allow the competent
authority to correct the defect.’
7 Electoral Commission v Mhlope and Others [2016] ZACC 15; 2016 (8) BCLR 987 (CC); 2016 (5) SA 1 (CC)
para 132.
8 Economic Freedom Fighters and Others v Speaker of the National Assembly and Another [2017] ZACC 47;
2018 (3) BCLR 259 (CC); 2018 (2) SA 571 (CC) para 211.

[38] Section 8(1) of PAJA gives effect to the wide remedial discretion conferred
by s 172 of the Constitution.9 The relief it permits is not narrower than that
available under a court’s original remedial discretion. The language and context
of s 8(1) make that clear: a court in judicial review proceedings may grant ‘any
order that is just and equitable, including orders . . . setting aside the
administrative action’ and in exceptional cases, ‘directing the administrator or
any other party to the proceedings to pay compensation’.10 The orders listed in
s 8(1) do not comprise a closed list.

[39] The Constitutional Court has developed two guiding principles for crafting
an appropriate remedy in cases that entail setting aside a contract. The first is the
corrective principle, which is aligned with the rule of restitution in contract,
namely that neither contracting party should unduly benefit from what has been
performed under a contract that no longer exists. In Allpay (No 2) the Court
described the rationale for the corrective principle as follows:
‘Logic, general legal principle, the Constitution and the binding authority of this court all point
to a default position that requires the consequences of invalidity to be corrected or reversed
when they can no longer be prevented. It is an approach that accords with the rule of law and
the principle of legality.’11

[40] The application of the corrective principle was explained thus:
‘This corrective principle operates at different levels. First, it must be applied to correct the
wrongs that led to the declaration of invalidity in the particular case. This must be done by
having due regard to the constitutional principles governing public procurement, as well as the
more specific purposes of the Agency Act. Second, in the context of public procurement
matters generally, priority should be given to the public good. This means that the public
interest must be assessed not only in relation to the immediate consequences of invalidity – in

9 Bengwenyama Minerals (Pty) Ltd and Others v Genorah Resources (Pty) Ltd and Others (Bengwenyama -ye-
Maswati Royal Council Intervening); [2010] ZACC 26; 2011 (3) BCLR 229 (CC); 2011 (4) SA 113 (CC) paras
82 and 83.
10 Section 8(1)(c)(ii) of the Promotion of Administrative Justice Act 3 of 2000.
11 Allpay No 2 fn 4 para 30. See also paras 29 and 32.

this case the setting aside of the contract between SASSA and Cash Paymaster – but also in
relation to the effect of the order on future procurement and social security matters.’12

[41] The second guiding principle is the ‘no-profit-no-loss’ principle which the
Court articulated as follows:
‘It is true that any invalidation of the existing contract as a result of the invalid tender should
not result in any loss to Cash Paymaster. The converse, however, is also true. It has no right to
benefit from an unlawful contract.’13

[42] The law draws a distinction between parties who are complicit in
maladministration, impropriety, or corruption on the one hand, and those who are
not, on the other. The category into which a party falls has a significant impact
on the appropriate just and equitable remedy that a court may grant. Parties who
are complicit in maladministration, impropriety or corruption are not only
precluded from profiting from an unlawful tender, but they may also be required
to suffer losses.14 On the other hand, although innocent parties are not entitled to
benefit from an unlawful contract, they are not required to suffer any loss as a
result of the invalidation of a contract.15

[43] The exercise of a remedial discretion under s 172(1)(b) of the Constitution
and s 8(1) of PAJA, constitutes a discretion in the true sense. It may be interfered
with on appeal only if this Court is satisfied that it was not exercised judicially,
or had been influenced by wrong principles or a misdirection of the facts, or if
the court reached a decision which ‘could not reasonably have been made by a

12 Allpay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer of the South African
Social Security Agency and Others (No 2) [2014] ZACC 12; 2014 (4) SA 179 (CC) para 32.
13 Ibid para 67.
14 Millennium Waste Management (Pty) Ltd v Chairperson Tender Board: Limpopo Province and Others [2008]
2 All SA 145 (SCA); 2008 (2) SA 481 (SCA) para 26; Passenger Rail Agency of South Africa v Swifambo Rail
Agency (Pty) Ltd 2017 (6) SA 223 (GJ); [2017] 3 All SA 971 (GJ) para 118, confirmed on appeal in Swifambo
Rail Leasing (Pty) Ltd v Passenger Rail Agency of South Africa [2018] ZASCA 167; 2020 (1) SA 76 (SCA).
15 Black Sash Trust v Minister of Social Development and Others (Freedom under Law intervening) [2017] ZACC
8; 2017 (3) SA (CC) 335 (Black Sash I) paras 40 and 50.

court properly directing itself to all the relevant facts and principles’.16 Put
simply, the appellants must show that the high court’s remedial order is clearly at
odds with the law.17

The compensation order
[44] After declaring the various impugned decisions and agreements unlawful
and invalid, the high court made an order granting Contango and Vitol
compensation for their out-of-pocket expenses, including hedging losses,
insurance, letters of credit, the costs of inspections and in the case of Contango,
the option fee with Total SA.

[45] At the outset, it should be noted that the appellants’ case is based on the
misconception that the award of out-of-pocket expenses amounted to
compensation akin to damages for the loss of the contracts in question. But
properly understood, requiring the SFF to repay those expenses is a consequence
of restitution: it serves to restore Contango and Vitol to the status quo ante. The
obligation to repay out-of-pocket expenses accords with the guiding principles
for crafting appropriate relief, referred to above.

[46] Counsel for the appellants submitted that the compensation order for out-
of-pocket expenses was neither competent nor appropriate, on three main
grounds. The first was that the court gave insufficient attention to the public
interest in preventing parties from benefiting from unlawful and corrupt
contracts; the second, that Contango and Vitol should have brought a counter-
application for just and equitable relief; and the third, that the order for
compensation ‘infringes the principle of subsidiarity’.

16 Trencon Construction (Pty) Ltd v Industrial Development Corporation of South Africa Limited and Another
[2015] ZACC 22; 2015 (10) BCLR 1199 (CC); 2015 (5) SA 245 (CC) para 88.
17 Ibid para 89.

[47] The thrust of the appellants’ argument on the first ground of appeal was
that the high court did not properly consider the public interest in preventing
bribery and ‘protecting the public purse from funding corrupt transactions’. The
court, so it was argued, failed to have proper regard to the no-profit principle,
since Contango and Vitol had failed to do basic due diligence and were not
innocent parties.

[48] The argument that Contango was not an innocent party or that it failed to
conduct basic due diligence, is unsustainable on the evidence. Contango and
Natixis were not accused of nor did they engage in any wrongdoing. They acted
as reasonable credit providers, by ensuring that the contracts they had concluded
were regular. They deliberately structured the financing transaction so that they
would take ownership of the oil, and not be reliant on any remedies against
Taleveras. They sought and were repeatedly given assurances by the SFF that
Contango’s title to the oil was good. After Mr Gamede departed as CEO of the
SFF, Contango representatives met with the SFF in Saldanha Bay in January
2017, to ensure that Contango’s interests were protected. They were told that
Contango remained the holder of valid legal title to the oil. Contango and Natixis
relied on these assurances, as they were entitled to do.

[49] Then there is the appellants’ egregious and unexplained delay in instituting
the review proceedings. It is an established principle that where a court condones
a delay, it must factor that delay into the determination of a just and equitable
remedy.18 The SFF failed to inform Contango and Vitol that there were doubts
about the validity of the transactions until the review notice in September 2017.
Throughout the period that the appellants delayed in instituting review
proceedings, the SFF repeatedly assured Contango that it recognised its

18 State Information Technology Agency SOC Limited v Gijima Holdings (Pty) Limited [2017] ZACC 40; 2018
(2) SA 23 (CC) paras 53 and 54.

ownership of the oil, continued to invoice Contango for storage fees up to March
2018 and permitted inspections of the oil. Contango and Natixis continued to rely,
in good faith, on the impugned decisions and agreements, and expended
significant costs in doing so.

[50] In November 2017 Contango and Natixis put the SFF on notice as to the
prejudice caused by its approach, setting out the impending losses that Contango
would suffer, including hedging costs, if it was not given possession of the oil by
6 April 2018. The SFF refused to release the oil to Contango, no repurchase by
Taleveras could take place and Contango had to meet its hedge obligations of
$83,680,000.

[51] It was submitted that Vitol was not an innocent party for the following
reasons. First, it was the ‘catalyst’ for the impugned transactions, which were
‘flawed and a sham from the outset’. Second, Vitol knew that a procurement
process was being followed and attempted to skew it in Vitol’s favour through
improper exchanges with Mr Gamede. Third, Vitol had a conflict of interest that
precluded it from advising the SFF on an appropriate stock rotation strategy or
the terms of its request for proposal. Fourth, Vitol must have known that the
Ministerial preconditions to the transactions had not been met and proceeded with
its contract nonetheless.

[52] These submissions also, have no basis in the evidence. Vitol, which had a
long-standing relationship with the SFF, made a number of overt proposals to the
SFF regarding optimisation of the strategic stock between 2011 and 2015. There
was nothing improper in doing so. Mr Harvey Foster, the South Africa Country
Manager of the Vitol Group, had often made commercial proposals directly to
both PetroSA and the SFF over the years. Chevron, Mecuria, Morgan Stanley,

Taleveras and Total (all of whom also had storage contracts with the SFF)
similarly engaged directly with the SFF CEO and staff.

[53] Vitol’s stock optimisation proposals broadly entailed the SFF relinquishing
control over its oil reserves to a trader on terms that would allow it access to a
supply in an emergency, whilst also leasing its storage space. The statutory
regime does not preclude the SFF from doing this. From November 2014 (prior
to the appointment of both the relevant Minister and Mr Gamede) the SFF itself
considered stock optimisation plans. There is no reason to believe that the plan to
rotate its stock and commercialise its storage space was a sham or that the SFF
would not follow a proper process in doing so.

[54] The appellants sought to draw an adverse inference from the fact that Mr
Gamede had sent a draft expression of interest to Mr Marc Ducrest, Vitol’s
Managing Director, for his professional input, and the latter’s response that SFF
should call for a pledge of the corresponding oil for the duration of any rotation.
The evidence however shows that the SFF commonly reached out to companies
in the industry for suggestions on commercial transactions. And as the high court
found, ‘[i]t was natural that Ducrest should promote his company’s interests’, and
the idea that the SFF should favour a party which could pledge a quantity of oil
equivalent to the strategic stock purchased, was not sinister. Apart from this, the
SFF’s final request for expressions of interest did not include the term that
Mr Ducrest had proposed, and Vitol derived no benefit from having been sent an
earlier draft of the expression of interest.

[55] Although Vitol was aware by late October 2015 that the SFF intended to
invite proposals for participation in the rotation, sale and purchase of the strategic
stock, by way of a closed bid and negotiation process, there was nothing
inherently irregular in that process. The SFF was permitted under

regulation 16A.7 of the Treasury Regulations and its own direct negotiation
policy, to sell the oil by procuring price quotations rather than by way of open
tender and had done so in the past. In fact, the strategic stock was sold in a closed
bid because that process was likely to fetch a better price.

[56] Vitol provided a full account of its conduct, put up all the relevant
documents and explained all the exchanges between Mr Foster and Mr Ducrest
on the one hand, and the SFF personnel, including Mr Gamede, on the other. The
evidence demonstrates that Vitol sought to promote its own interests in its
engagements with the SFF, but acted properly throughout.

[57] Finally, on this aspect, the failure to meet the Minister’s preconditions for
the transactions cannot be attributed to Vitol. A person contracting with an organ
of state in good faith is entitled to assume that the latter has complied with its
internal arrangements and formalities.19 And the evidence shows that Mr Gamede
had misled Vitol into believing that its transaction had been properly approved
and that internal prerequisites had been met. Thus, Vitol’s understanding that its
transaction was authorised was reasonable, and the high court’s conclusion that
it was an innocent party cannot be faulted.

[58] That brings me to the appellants’ contention that the high court failed to
properly consider the public interest when granting the compensation order. It is
true that the public interest ought to feature prominently in the exercise of a
court’s remedial powers. But the public interest in preventing bribery is not
advanced by requiring innocent third parties, such as Contango and Vitol, to make
losses.

19 City of Tshwane Metropolitan Municipality v RPM Bricks (Pty) Ltd [2007] ZASCA 28; 2008 (3) SA 1 (SCA)
paras 11-12.

[59] The appellants also disregard the public interest in the secure provision of
credit in relation to transactions involving the State, which, in my opinion,
promotes both transparency and accountability in public procurement. The public
interest is adversely affected if creditors cannot safely finance transactions with
organs of state, and are constantly at risk of incurring losses if it turns out that the
State acted unlawfully.

[60] As the appellants would have it, innocent third-party financiers such as
Contango and Natixis, are required to incur significant losses when the State acts
unlawfully, even when they are given assurances by the state entity concerned,
and take steps to secure the loans. If these are indeed the risks involved in
providing credit, then there is a real danger that it will have a chilling effect on
financing, which may become prohibitively expensive. International banks and
finance institutions would be reluctant to finance major transactions – crucial to
the economy – not only in oil but also in infrastructure and capital projects.
Accordingly, the compensation order in this case, it seems to me, serves the
broader public interest.

[61] The appellants have demonstrated a startling failure to accept any
responsibility for the unlawfulness of the transactions. They go so far as to portray
themselves as the victims of the unlawfulness, rather than its perpetrators. They
say that the wrongs in this case were not committed against Contango and Vitol,
but against them. But as the high court rightly found, it was the appellants who
sought a public law remedy to vindicate the rule of law; it was the SFF, not
Contango and Vitol, which violated the principle of legality in taking the
impugned decisions and concluding the transactions that followed; and it was the
appellants who violated the principle of legality by grossly delaying the
institution of review proceedings.

[62] The court, correctly in my view, held that requiring Contango and Vitol ‘to
suffer the loss of their out-of-pocket expenses, while allowing SFF to keep the oil
and do no more than return the money would [not] promote an efficient and
effective public administration grounded in the rule of law’. The court recognised
that there is significant public interest in holding state entities to account for their
irregular transactions. There would otherwise be little incentive to avoid loss by
running an efficient and honest administration. When those transactions result in
losses suffered by innocent third parties, requiring the State to make good such
losses is likely to have a deterrent effect on future unlawful conduct. Not
compensating innocent parties for their losses would, as the judge put it, ‘send
out a message to officialdom that no matter how poorly they administer a State
entity’s affairs, the court will see to it that the entity suffers no loss’.

[63] The no-profit-no-loss principle required Contango and Vitol to be
compensated for their out-of-pocket expenses (including hedging costs) incurred
in reliance on the relevant agreements and transactions, but not for lost profits.
As the high court observed, such compensation resulted in complete restitution:
the position in which they would have been had they never contracted with the
SFF.

[64] The appellants, however, contended that no compensation in relation to the
hedging transactions was permissible because the hedging costs were not incurred
for purposes of acquiring the strategic stock, but were directed at preserving
profits. That is not so. Contango and Vitol entered into hedging arrangements to
protect themselves against the risk of incurring losses, as a result of oil price
fluctuations – an intrinsic feature of oil sale agreements throughout the world.

[65] What is more, on the papers, the appellants accepted that hedging
arrangements are a standard and appropriate step to take on the back of oil

transactions of this kind. In fact, they criticised as irrational, the SFF’s failure to
enter into hedging agreements to protect its position when the strategic stock was
sold. Having done so, they cannot belatedly claim, on appeal, that those costs
were not incurred in reliance on and in direct consequence of the impugned
transactions.

[66] The remaining grounds of appeal – that Contango and Vitol should have
brought a counter-application for out-of-pocket expenses and that the principle of
subsidiarity precluded their award – can be dealt with shortly. They are
insupportable in law and on the facts.

[67] The high court emphasised that its order of compensation for out-of-pocket
expenses was not an award of either contractual or constitutional damages. The
former would have been computed differently to include lost profits but exclude
wasted costs, and have far exceeded the out-of-pocket expenses claimed. Instead,
Contango and Vitol sought restitution of the status quo ante, and therefore were
not required to counterclaim for their losses or prove their damages in action
proceedings.

[68] On the contrary, Contango and Vitol were entitled to claim payment of
their out-of-pocket expenses pursuant to the relief sought by the appellants. In
Part A of the notice of motion they sought an order reviewing and setting aside
the impugned decisions and agreements, and the notice stated that the parties were
entitled to file additional affidavits addressing the issue of a just and equitable
remedy, after the orders sought in Part A were handed down. In Part B the
appellants asked for an order for just and equitable relief on the basis of the
affidavits filed in Part A, together with the additional affidavits, if any. Thus, the
appellants asked the court to set aside the impugned agreements and to craft
appropriate relief.

[69] Concerning the relief sought, three points are required to be made. First,
no counter-application was necessary because the issue of compensation was an
integral part of the assessment as to whether setting aside orders should be granted
and if so, on what terms, as the high court observed. Second, the orders sought
by the appellants were not confined to the repayment of the purchase price and
storage fees. And third, the respondents were invited – by the appellants, no less
– to place evidence on affidavit before the court as to what would constitute a just
and equitable remedy if the review were to succeed, which they did.

[70] Moreover, there were no factual disputes relating to the claim for
compensation by Contango and Natixis, and in the case of Vitol, the appellants
failed either to place the expenses incurred properly in issue or to establish a basis
for limiting them. For these reasons, this case is distinguishable from Simcha
Trust,20 upon which the appellants relied for their contention that a claimant for
compensation must initiate its own proceedings. There, it was held that a
compensation remedy is not available where remittal has been ordered.21
Application proceedings were therefore plainly appropriate in this case. Further,
and as noted by the high court, no party sought a referral to oral evidence.

[71] It was submitted that the high court judgment infringes the principle of
subsidiarity, in that there are ‘suggestions’ in the judgment that the compensation
order was not made in terms of s 8(1) of PAJA nor as an award of constitutional
damages. The appellants say that the court ‘implied’ that a third category of
compensation was possible: as an antidote to the harshness of a setting-aside
order, which may not be contemplated in s 8(1), and may instead be sourced in

20 Simcha Trust v De Jong and Others [2015] ZASCA 45; [2015] 3 All SA 161 (SCA); 2015 (4) SA 229 (SCA).
21 Ibid para 27. This Court also expressed the view that in circumstances where a dispute about the validity of an
impugned decision had been settled and only the question of costs remained, it was inappropriate to permit a
respondent to file an affidavit seeking compensation against a co-respondent.

the broad just and equitable jurisdiction conferred by the Constitution and PAJA.
However, the court did not decide this question.

[72] The high court did not imply nor create a new category of compensation.
The appellants elected to launch the review application under both the principle
of legality and PAJA. Having done so, they cannot criticise the high court for
considering the remedies available under both. It is not open to the appellants to
argue that the compensation award breaches the principle of subsidiarity because
they do not like the remedy ultimately selected by the court.

[73] In conclusion, the high court was called upon to determine just and
equitable relief in a case where the issue was not simply whether an
administrative decision should be set aside, but one presenting a combination of
features of substantial importance. The irregularities were a serious violation of
the rule of law. The agreements had been in existence for some years. Contango
and Vitol were innocent parties who had incurred significant expenses in reliance
on the appellants’ conduct and those agreements. The extent of those costs was
exacerbated by the appellants’ delay in launching and prosecuting review
proceedings. Setting the agreements aside would deprive Contango and Vitol of
their contractual rights. In that event, a balance had to be struck taking into
account the public interest, and whether the status quo ante could be restored to
an equitable extent.

[74] The high court considered that justice and equity would best be served by
an order setting aside the impugned decisions and agreements, and granting
Contango and Vitol compensation for the losses they suffered as a result of the
impugned agreements being declared invalid.22 The appellants have not

22 Electoral Commission v Mhlope and Others [2016] ZACC 15; 2016 (8) BCLR 987 (CC); 2016 (5) SA 1 (CC)
para 132.

established that the court erred in law or reached a plainly unreasonable decision.
It follows that the appeal must be dismissed.

Costs
[75] The appellants contend that they should not have been held liable for
Contango and Vitol’s costs; that at the very least, there should have been no order
as to costs; and that they were substantially successful. As regards Taleveras, it
was submitted that its explanatory affidavit was ‘in opposition to the relief sought
by the appellants’, which they were required to address, and Taleveras ‘should
have been ordered to pay at least a portion of the appellants’ costs’.

[76] In the review proceedings the appellants sought costs against only the
opposing respondents. Taleveras did not oppose the review. In their replying
affidavit the appellants excluded Taleveras from the category of opposing
respondents. In their heads of argument, they submitted that any order for costs
should exclude Taleveras. So, the prospect of a costs order adverse to Taleveras
did not arise on the papers in the proceedings in the high court, and cannot now
be sought on appeal.

[77] For the same reason, the costs orders sought in the appellants’ notice of
appeal, namely that the appellants and Taleveras be held liable, jointly and
severally, for the costs of Contango and Natixis, cannot be granted. Aside from
this, any order that Taleveras pay the appellants’ or Contango and Vitol’s costs
would be punitive. It is impermissible to seek a punitive costs order without
hearing the party against whom such order is sought.23 Given that Taleveras’
participation in the appeal related solely to the question of costs, the costs of two
counsel are not justified.

23 Member of the Executive Council for Health, Gauteng v Lushaba 2017 (1) SA 106 (CC) para 19.

[78] It is a settled principle that courts exercise a true discretion in relation to
costs orders.24 An appellate court will not likely interfere with the exercise of a
true discretion, which involves a choice between the number of equally
permissible options.25 The appellants have not identified any factual or legal
misdirection by the high court that would warrant this Court’s interference in its
costs award.

[79] Contango and Natixis achieved substantial success and were accordingly
entitled to their costs. As for Vitol, the appellants’ basic complaint is that Vitol’s
opposition to the review was unreasonable because it included a challenge to the
CEF’s standing and the merits of the review. But those challenges were made in
good faith, based on the information available to Vitol at the time. After
disclosure of relevant information in the answering papers of the other parties and
in reply, Vitol did not persist in opposing the merits of the review (if the
appellants’ delay was condoned). Even in the absence of Vitol’s opposition, the
appellants had to deal with their grounds of review in full. As the high court
pointed out, those grounds were relevant to assessing condonation of the delay,
but also had to be comprehensively traversed in the interests of transparency and
accountability.

[80] As the high court observed, the most contentious issues concerned
compensation. On this aspect Contango, Natixis and Vitol achieved substantial
success. They were appropriately awarded costs. There is no basis for interfering
with the high court’s discretion in this regard.

[81] In the result the following order is made:

24 Public Protector v South African Reserve Bank [2019] ZACC 29; 2019 (9) BCLR 1113 (CC); 2019 (6) SA 253
(CC) para 144.
25 Zuma v Office of the Public Protector and Others [2020] ZASCA 138 para 20.

The appeal against paragraphs 7(b) to 14 and paragraphs 15(b) to 17 of the order
of the court below is dismissed, with costs. Such costs shall in relation to the third
respondent, be limited to the costs of one counsel, and as regards the fourth to
eighth respondents, include the costs of three counsel.

___________________
A SCHIPPERS
JUDGE OF APPEAL

Appearances:

For appellants:
T Motau SC (with him R Tshetlo, S Scott,
U Gcilishe and A Pillay)
Instructed by:

Webber Wentzel Attorneys, Cape Town

Phatshoane Henney Attorneys, Bloemfontein

For third respondent:

L Kuschke SC (with him U Naidoo)
Instructed by:

Knowles Husain Lindsay Inc, Cape Town

McIntyre Van der Post, Bloemfontein

For fourth and fifth
G Marcus SC (with him K Hofmeyr SC and
respondents:
M Mbikiwa)
Instructed by:

Norton Rose Fulbright SA Inc, Johannesburg

Webbers Attorneys, Bloemfontein

For sixth to eighth
W Trengove SC (with him I Goodman and N
respondents:
Nyembe)
Instructed by:

Herbert Smith Freehills SA LLP, Johannesburg

Symington De Kok Attorneys, Bloemfontein
THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF
APPEAL
From:
The Registrar, Supreme Court of Appeal
Date:
13 April 2022
Status:
Immediate
The following summary is for the benefit of the media in the reporting of this case and does
not form part of the judgments of the Supreme Court of Appeal.
Central Energy Fund SOC Ltd and Another v Venus Rays Trade (Pty) Ltd and Others
[2022] ZASCA 54
The Supreme Court of Appeal (SCA) today dismissed with costs, an appeal by the appellants,
the Central Energy Fund SOC Limited (CEF) and the Strategic Fuel Fund Association NPC
(SFF), against an order by the Western Cape Division of the High Court, Cape Town (the high
court), in terms of which it granted the respondents, Contango Trading SA (Contango), Natixis
SA (Natixis) and Vitol Energy (SA) (Pty) Ltd (Vitol) just and equitable compensation for their
out-of-pocket expenses, arising from the review and setting aside of certain decisions by the
SFF in 2015 to rotate South Africa’s strategic stock of some 10 million barrels of crude oil (the
strategic stock).
In 2017 the appellants launched an application in the high court to review and set aside their
own decisions relating to the rotation of the strategic stock and the transactions that followed.
The SFF concluded three sale and purchase agreements with the third respondent, Taleveras
Petroleum Trading DMCC (Taleveras), for the sale of 4 million barrels of crude oil at the SFF’s
storage facility in Saldanha Bay. These transactions were financed by Contango and Natixis.
The SFF entered into a sale and repurchase agreement with Vitol for 3 million barrels of crude
oil, and a storage agreement in terms of which the SFF leased to Vitol storage space for 3
million barrels of crude oil, for three years.

The high court set aside the impugned decisions and transactions on the following grounds.
The CEO of the SFF, Mr Sipho Gumede, had been bribed by a person associated with
Taleveras, to procure the transactions – four deposits totalling R2.6 million were paid into his
account. Between January and April 2016 Mr Gamede received payment of R20 million into
his bank accounts through anonymous cash deposits. The decision by the Minister of Energy
(the Minister) to dispose of the strategic stock was tainted by misrepresentations by Mr
Gamede, who acted with improper motives. The SFF failed to follow a fair, equitable,
transparent and competitive process, in violation of its constitutional duties and the CEF’s
procurement policy. The Board failed to intervene to ensure that the SFF’s and the country’s
interests were safeguarded. The Minister failed to apply her mind when taking the decision to
approve the sale of the strategic stock. Despite being aware of the transactions, the CEF did
nothing to prevent or challenge them.
The high court found that a delay of some four years by the appellants in the institution and
prosecution of the review proceedings was unreasonable, egregious and unexplained. It held
that an order setting aside the impugned decisions and transactions, subject to payment of
compensation for out-of-pocket expenses (such as hedging losses, insurance and letters of
credit, which excluded profit) incurred by Contango, Natixis and Vitol, who were innocent
parties, effectively vindicated the rights violated and was fair to the affected parties.
The SCA held that this approach could not be faulted. It rejected the appellants’ arguments that
the high court paid insufficient regard to the public interest in preventing parties from
benefiting from unlawful contracts, as Contango, Natixis and Vitol were not innocent parties;
that a separate counter-application should have been launched for just and equitable relief; and
that the order for compensation infringed the principle of subsidiarity, because the
compensation order was not made in terms of section 8(1) of the Promotion of Administrative
Justice Act 3 of 2000, nor as an award of constitutional damages .
The SCA found that Contango and Natixis were not accused of nor did they engage in any wrongdoing.
They acted as reasonable credit providers by ensuring that the contract they concluded was regular. The
appellants’ claim that Vitol attempted to skew the procurement process in its favour and was aware that
the ministerial preconditions for the transactions had not been met, had no basis in the evidence. Although
Vitol sought to promote its own interests in its engagements with the SFF, it had acted properly
throughout. The public interest in preventing bribery is not advanced by requiring innocent parties to make
losses. The appellants disregarded the public interest in the secure provision of credit: it is adversely

affected if creditors cannot safely finance transactions with organs of state, who are at risk of incurring
losses if it turns out that the State acted unlawfully. The order that the appellants should pay just and
equitable compensation was a consequence of restitution: Contango, Natixis and Vitol were placed in the
position in which they would have been had the agreements with the SFF not been concluded.

It was not necessary for Contango, Natixis and Vitol to institute a counter-application for payment of their
out-of-pocket expenses, because the issue of compensation was an integral part of the assessment as to
whether setting aside orders in the review application should be granted. Moreover, the appellants had
invited the respondents to place evidence on affidavit before the high court as to what would constitute a
just and equitable remedy if the review were to succeed, which they did. There was no infringement of
the principle of subsidiarity: the high court did not imply nor create a new category of compensation.

The SCA held that the appellants could not, on appeal, seek a costs order against Taleveras because it had
not opposed the review proceedings, and the appellants in those proceedings had asked that any costs
order should exclude it. Televeras was therefore entitled to its costs of appeal, limited to the costs of one
counsel. The appellants failed to establish that the court erred in law or reached a plainly unreasonable
decision. The appeal was accordingly dismissed with costs, including the costs of three counsel.