Post Office faces R1.3bn damages claim
The Post Office has suffered a major blow in its attempt to fend off a crippling R1.3- billion lawsuit involving a bungled cellphone contract.
The Pretoria High Court has dismissed an application by the Post Office for condonation and leave to appeal an earlier ruling which found the parastatal in breach of the contract and liable for damages.
The lawsuit was filed by Nasasa Cellular in December last year after the Post Office reneged a contract with the company.
Nasasa is a joint venture between cellular retailer GloCell and Nasasa Relations, representing the National Stokvels Association of SA.
The deal was signed by former Post Office chief executive Maanda Manyatshe in 2004, giving Nasasa exclusive rights to sell cellphones and airtime to the public through the parastatal’s 2500 outlets.
The deal was supposed to have run for a period of five years, but the Post Office cancelled it before it could be implemented.
Nasasa’s claim for damages comprises:
–R114-million for expenditure contractually incurred by Nasasa despite the fact that the agreement was not implemented;
–R496-million net profit before tax, which Nasasa claims it would have earned had the agreement been implemented; and
–R700-million that Nasasa says it would have realised on the sale of the cellphones and airtime.
Should the court grant the damages claim, the Post Office would have to fork out more than 25% of annual revenues, which were R5.6- billion in the previous financial year.
Post Office CEO Motshoanetsi Lefoka was behind the cancellation of the cellphone deal.
After Manyatshe’s departure three years ago, Lefoka, then acting CEO, wrote to Nasasa informing it that she had decided to “review” the cellphone agreement.
In the letter, Lefoka made it clear that the Post Office would not agree to give Nasasa exclusive rights to its retail infrastructure — an about-turn from the deal signed by Manyatshe.
After a series of meetings, the Post Office decided to cancel the cellphone deal altogether and appoint other cellphone providers.
Nasasa responded by launching the legal action. It won the first round of the legal battle in September last year when Pretoria High Court Judge Stanley Sapire found that the parastatal was in breach of the agreement and that Nasasa was entitled to claim for damages.
Judge Sapire said: “No sooner had the ink on the signatures to the agreement dried than the Post Office manifested a reluctance to give effect to the agreement and to avoid its obligations.”
Judge Sapire said the refusal to effect the agreement was “disdainful” and “lacking in commercial morality”.
The Post Office failed to appeal against Judge Sapire’s judgment within the prescribed period, but in April the state-owned entity applied for condonation for a late filing of an appeal, as well as for leave to appeal against the judgment.
Post Office spokesman Lungile Lose on Friday confirmed both applications had been dismissed last week.
“We have received the written judgment and we are studying it,” he said.
Lose added that the Post Office would decide on the next step once it has consulted its lawyers.
“We have been defending this matter and it is our intention to continue to do so,” he said.
Legally, the only option available to the Post Office now is to petition the Supreme Court of Appeal for a review of the High Court ruling.
If left unchallenged, the ruling would make the Post Office’s attempt to defend itself against Nasasa’s claim for damages difficult.
The Post Office has based its defence on the grounds that the cellphone deal was not legally binding as it did not meet legal requirements.
“The agreement purported to constitute a joint venture between Nasasa and the Post Office and, as such, required ministerial approval to be binding on the Post Office, which approval was not obtained,” read papers that the Post Office submitted in court.
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