Legality principle examined: Self-help and self-review

Note: Footnotes omitted and emphasis added

THERON J (Basson AJ, Dlodlo AJ, Goliath AJ, Mhlantla J and Petse AJ concurring):

Introduction

[1] The applicant, Buffalo City Metropolitan Municipality (Municipality), seeks the review and setting aside of its own decision. It seeks leave to appeal against a decision of the Supreme Court of Appeal that held that the Municipality had not made out a case for condonation in terms of section 9 of the Promotion of Administrative Justice Act (PAJA) and, as a result, the review application could not be entertained. In this Court, the Municipality originally relied on a review in terms of PAJA, but following this Court’s decision in Gijima, the review must be dealt with in terms of the principle of legality.

Background

[2] The applicant is a municipality established in terms of the Local Government: Municipal Structures Act, which manages, among others, the area of East London. The respondent is Asla Construction (Pty) Limited, a company with limited liability duly registered and incorporated as such according to the laws of the Republic of South Africa.

[3] The Greater Duncan Village area in East London is home to between 70 000 to 100 000 people. Most of the residents reside in approximately 18 000 shacks. The residential density in the area ranges from 55 to 193 dwellings per hectare. Since 2003, the Greater Duncan Village area has been targeted for housing upgrading and development through the Duncan Village Redevelopment Initiative of 2003 – Local Spatial Development Framework (Redevelopment Initiative). After numerous drafts and public consultations the Redevelopment Initiative was approved by the Municipal Council in 2009.

[4] The key legislative instrument for implementing state-funded housing projects is the National Housing Code (Code), which was promulgated by the Minister of Human Settlements in terms of section 4 of the Housing Act. Section 4(6) of the Code provides that it is binding on provincial and local spheres of government. One of the contracting strategies that the Code authorises is turnkey contracting, which involves appointing a contractor through a public tender for all work related to the completion of a project. The Municipality used a turnkey contract for the Greater Duncan Village development. It decided to appoint an implementing agent that would be responsible for the design processes, construction and handling of services and top structures for the development.

[5] The Municipality issued a public invitation for tenders for the turnkey contract on 5 November 2013. The respondent tendered for the contract and the Municipality awarded this contract to it. On 2 May 2014, the City Manager advised the respondent that the Municipality had accepted its tender. On 30 May 2014, the Municipality and the respondent concluded an agreement (Turnkey contract). Thereafter the Minister acknowledged the appointment of the respondent.

[6] In terms of the Turnkey contract the respondent was to provide between 3 000 and 5 000 housing units for the Greater Duncan Village development. Under this contract, the respondent was appointed as an implementation agent for the development. The consideration for the contract was not a defined amount but instead consisted of the approved housing subsidy amount, grants and funds allocated to this project and bridge funding. The scope of the work was described in the contract as—

“3 000 to 5 000 housing units with services subject to land availability and other factors in the fully subsidised, social and affordable bonded market, on portions of land in and around Duncan Village in the . . . Municipality.”

[7] The Redevelopment Initiative was intended to permit a broader framework by extending geographically into areas located north and north-west of Duncan Village itself, including the new township of Reeston East. Reeston East comprised an area earmarked to provide 2 500 erven for housing development. During the period between 2011 and 2014, the Municipality went out on tender three times for initial engineering services and the subsequent construction of housing top structures within the area identified for development of 2 500 erven in Reeston East. Each of these tenders ultimately failed, either for budgetary reasons or poor work performance. The matter was ultimately referred back to the Municipality’s Department of Housing.

[8] On 7 August 2014, Mr Andile Fani, the then City Manager, wrote to the respondent indicating that the implementation of certain services, the 953 units originally encompassed under the Reeston contract, were now considered to be part of the Turnkey contract’s scope of work. In terms of a letter dated 7 September 2014, Mr Vincent Pillay, the Municipality’s Chief Financial Officer, “awarded” the Reeston contract to the respondent:

“Subsequent to an abortive procurement process due to budget challenges for this project the metro has cancelled the tender and in this regard would advise ASLA to continue with the implementation of 550 top structures on their appointment of 953 erven, of upgrading from level B services to level A services. Also to take over the management of Brayelen Extension 10 under their turnkey approach.”

[9] On 4 August 2015, Mr Pillay (then Acting City Manager) alleged that the Reeston contract was unlawful as it had been concluded without a lawful tender process. The Municipality then appointed an independent investigator, Ms York, to conduct an enquiry about the validity of the Reeston contract.

[10] In the interim, the respondent carried out its obligations in terms of the Reeston contract. The Municipality’s engineers issued a number of certificates certifying that the respondent had performed in terms of the contract and stating the value of the work performed. A payment dispute arose when the Municipality refused to make payment on the certificates.

[11] The respondent instituted provisional sentence proceedings in the High Court of South Africa, Eastern Cape Division, Grahamstown (High Court) based upon payment certificates issued by the Municipality’s agents. The Municipality opposed the provisional sentence proceedings on the ground, among others, that the Reeston contract was unlawful for not complying with the constitutional and statutory prescripts applicable to the procurement of goods and services. It launched review proceedings, in terms of PAJA, in which it sought to set aside the Reeston contract. It was common cause that these review proceedings were initiated out of time.

The High Court held that a proper case for condonation had been made out. In doing so, the High Court had regard not only to the explanation given for the delay, but also to the extent of the deviation from the required constitutional and statutory prescripts. The High Court found that the Reeston contract was patently unlawful. The High Court declared the award of the Reeston contract invalid and dismissed the contractual claims which formed the basis of the provisional sentence proceedings.

[12] The respondent was successful in its approach to the Supreme Court of Appeal. That Court held that a proper case for condonation in terms of section 9 of PAJA had not been made out. It deliberately declined to make any definitive findings with regard to the underlying legality or illegality of the contracts. It held that the approach of the High Court, in having regard to the merits, in its consideration of whether or not to condone the delay, was incorrect.

[13] The Municipality approached this Court on 11 March 2017 with an application for leave to appeal against the Supreme Court of Appeal’s judgment. That application was brought in terms of PAJA. On 14 November 2017, this Court handed down judgment in Gijima, which held that where an organ of state seeks to review its own decision, the review must be brought under the principle of legality. The Chief Justice issued directions on 15 November 2017 inviting the parties to file written submissions in light of the Gijima decision.

[14] The Municipality submitted that the approach to undue delay must be reconsidered as a result of Gijima, more specifically that the 180-day PAJA time limit within which to initiate a review must be revisited in the context of a legality review. The Municipality submitted that the delay was not undue because it had acted expeditiously once it became aware of the unlawfulness of the procurement process and requested that the delay be overlooked.

[15] As for the merits of its review, the Municipality submitted that the Reeston contract was invalid by reason of non-compliance with the provisions of section 217 of the Constitution because no competitive procurement processes were followed.

[16] The respondent supported the reasoning and conclusion of the Supreme Court of Appeal. It submitted that the Municipality’s review should not be entertained because it brought the review application in terms of PAJA rather than as a legality review. It further submitted that the review must fail because the Municipality unreasonably delayed in bringing the application and had not proffered an explanation for the delay. The respondent submitted that even if the delay is condoned, the application for leave to appeal must fail because the review application is without merit. This is because the Reeston contract was concluded on the basis of an earlier, valid contract between the parties – the Turnkey contract. The respondent thus submitted that there is nothing in our law that prevents the state and the successful tenderer from entering into sub-contracts that fall within the scope of an overarching and valid framework contract.

[17] In the event that the review is upheld, the respondent submitted that a just and equitable remedy is to order that the invalidity of the contract will not have the effect of divesting the respondent of rights which, but for the declaration of invalidity, it is entitled to.

Application for withdrawal

[18] On 16 November 2018, after the matter was heard on 4 September 2018, the Municipality filed an application in which it sought to have its application for leave to appeal withdrawn and a settlement agreement entered into between the parties made an order of this Court. The procedure for withdrawal is governed by rule 27 of the Rules of this Court, which states:

“Whenever all parties, at any stage of the proceedings, lodge with the Registrar an agreement in writing that a case be withdrawn, specifying the terms relating to the payment of costs and payment to the Registrar of any fees that may be due, the Registrar shall, if the Chief Justice so directs, enter such withdrawal, whereupon the Court shall no longer be seized of the matter.”

[19] On occasion, litigants in this Court have withdrawn matters, even after the matter has been set down for hearing. In the past 10 years, there have been no applications for withdrawal following the hearing of a matter. This does not mean that such an application will not be granted, only that it is highly unusual. Though there was no tender of costs contained in the Municipality’s application, this is not fatal and could have been rectified following directions from this Court. Were this solely an application for withdrawal, I may have been inclined to allow the matter to be withdrawn.

[20] The Municipality, in its withdrawal application, seeks not merely to have the matter withdrawn, but asks this Court to make the settlement agreement an order of this Court. It is clear from the terms of the settlement agreement as well as the relief sought in the withdrawal application that the application and the settlement agreement are integrally linked. The Municipality’s founding affidavit in the withdrawal application states:

“That settlement agreement has been approved by the applicant (through its Municipal Manager) and by the respondent (being represented by an authorised official) and is subject to it being made an order of the Constitutional Court and to the leave of the Honourable Chief Justice that the respondent withdraws its application for leave to appeal to the Constitutional Court.” (Emphasis added.)

[21] Of relevance is paragraph (K) of the preamble to the settlement agreement, which reads:

“[The settlement agreement] is subject to:
(i) leave being granted to [the Municipality] by the Chief Justice for the withdrawal of [the Municipality’s] application for leave to appeal in the Constitutional Court under case number CCT 91/17; and
(ii) the Constitutional Court issuing an order that the agreement incorporated herein being made an order of the Constitutional Court.”

[22] The request for withdrawal of the application for leave to appeal is contingent upon the settlement agreement being made an order of this Court. I must first consider the terms of the settlement agreement. The effect of a settlement order is to vest the terms of the settlement agreement with the status of an order of court.

[23] This Court, in Eke, cautioned that a court should not be mechanical in its approach to making a settlement agreement an order of court. A court can only make an order that is “competent and proper” and in accordance with the Constitution and the law.

Madlanga J, writing for the majority, stated:

“This in no way means that anything agreed to by the parties should be accepted by a court and made an order of court. The order can only be one that is competent and proper. A court must thus not be mechanical in its adoption of the terms of a settlement agreement. For an order to be competent and proper, it must, in the first place ‘relate directly or indirectly to an issue or lis between the parties’.
. . .
Secondly, ‘the agreement must not be objectionable, that is, its terms must be capable, both from a legal and a practical point of view, of being included in a court order’. That means, its terms must accord with both the Constitution and the law.”

[24] Froneman J, on behalf of the majority in ACSA, confirmed the principles emanating from Eke, and in particular that “a settlement agreement between litigating parties can only be made an order of court if it conforms to the Constitution and the law”.

[25] There are sound reasons why a court should carefully scrutinise a settlement agreement before making it an order of court. Once a settlement agreement is made an order of court, it is interpreted in the same way as any judgment or order and affects parties’ rights in the same way.

Madlanga J in Eke put the matter thus:

“The effect of a settlement order is to change the status of the rights and obligations between the parties. Save for litigation that may be consequent upon the nature of the particular order, the order brings finality to the lis between the parties; the lis becomes res judicata (literally, ‘a matter judged’). It changes the terms of a settlement agreement to an enforceable court order.”

In addition, an order from this Court is not appealable to any other court, so this Court’s pronouncement truly becomes final on the issue.

[26] The settlement agreement purports to regulate the provision of 5 000 housing units in Greater Duncan Village and the surrounding areas. Significantly, the settlement agreement imposes additional duties and obligations on the respondent in respect of the units and contemplates construction of additional units. This goes beyond the 953 erven contemplated in the Reeston contract.

[27] The settlement agreement further seeks to settle not only the litigation between the parties in this Court, but two other matters before the High Court under case numbers 1158/2017 and 313/2018. This Court is not privy to the details of these cases, save for the fact that they were stayed pending the outcome of this matter and emanate from the Turnkey contract. The settlement agreement traverses litigation unrelated to the proceedings in this Court. In the settlement agreement, the parties are contracting on matters outside the context of the litigation in this Court. They seek to have their agreement, which in part relates to matters to which this Court has no knowledge, made an order of court. This the Court cannot do.

Eke explains why:

“For an order to be competent and proper, it must, in the first place ‘relate directly or indirectly to an issue or lis between the parties’. Parties contracting outside of the context of litigation may not approach a court and ask that their agreement be made an order of court. On this Hodd says:
‘[I]f two merchants were to make an ordinary commercial agreement in writing, and then were to join an application to Court to have that agreement made an order, merely on the ground that they preferred the agreement to be in the form of a judgment or order because in that form it provided more expeditious or effective remedies against possible breaches, it seems clear that the Court would not grant the application.’
That is so because the agreement would be unrelated to litigation.” (Footnotes omitted.)

[28] This Court is not in a position to consider whether the order in respect of cases 1158/2017 and 313/2018 would be competent and in accordance with the Constitution and the law.

[29] The basis for the Municipality’s application for leave to appeal in this Court concerned the legality of two agreements,

• the Reeston contract and
• the Turnkey contract.

In respect of the Reeston contract, the Municipality contended that it was concluded without a competitive bidding process and thus fell afoul of section 217 of the Constitution. The Municipality’s explanation as to why this contention may be resolved by the settlement agreement is scant.

In the affidavit filed in support of the withdrawal application, it states briefly:

“8.2 [The respondent] indicated its willingness to continue to perform in terms of the disputed contract or contracts.
8.3 The Municipality was however concerned as to the legality of the underlying contract or contracts.
. . .
8.5 Without wishing to re-enter the merits of the written and oral arguments which have been submitted before the Constitutional Court, I respectfully submit that the settlement agreement enclosed herewith now adequately deals with the concerns of the Municipality.”

[30] There is no explanation in the withdrawal application as to how this settlement agreement cures the alleged defects in the Reeston contract. For reasons that will be detailed in this judgment, the Reeston contract was awarded to the respondent in breach of section 217 of the Constitution and is unlawful. This inconsistency with the Constitution cannot be cured by a settlement agreement. For this reason alone, the settlement agreement does not meet the Eke requirements for making it an order of court and is unlikely to be a lawful agreement that accords with the Constitution. The resultant order, if made by this Court, will be inconsistent with the Constitution.

[31] The parties have not explained why the settlement agreement is in accordance with the law and the Constitution. In addition, the scope of the agreement goes beyond the subject matter of this case and asks this Court to settle litigation and sanction the lawfulness of agreements of which it has little to no knowledge. The Court is being asked to sanction an agreement without being in a position to pronounce on its legality.

[32] I make a final point on this aspect that may be an additional indication of underlying maladministration within the Municipality. Paragraph 3 of a resolution adopted by the Municipality (attached to the withdrawal application) reads:

“That, in addition to implementing the option of entering into a Settlement Agreement with ASLA Construction (Pty) Ltd . . . the matter of the implication(s) thereof to the Council insofar as Messrs A. Fani and T. Matiwane, the then City Manager and Acting Chief Operating Officer, are concerned, also be addressed.”

[33] It will be recalled that it was Mr Fani who, on 7 August 2014, penned a letter to the respondent indicating that the implementation of an additional 953 units was now part of the Turnkey contract’s scope of work. Paragraph 3 of the resolution appears to be reflective of knowledge on the part of the Municipality that the two named senior officials were involved in the improper and invalid award of the tender. Despite this knowledge, the Municipality still concludes a settlement agreement that seeks to endorse this invalidity. This is inexplicable behaviour which is contrary to its public accountability duty. Even more surprising is its attempt to persuade this Court to endorse this settlement agreement and issue an incompetent order.

[34] For these reasons, I cannot make the settlement agreement an order of court nor accede to the parties’ request to withdraw the application for leave to appeal. I now deal with the main application.

Jurisdiction and leave to appeal

[35] There is a clear basis for jurisdiction as the matter concerns section 217 of the Constitution. It deals with procurement by an organ of state, judicial review of a decision by an organ of state and the question of a just and equitable remedy in terms of section 172(1)(b) of the Constitution. Lawful procurement is patently a constitutional issue.

[36] In this Court, the Municipality relies on a legality review. By its nature, legality review raises a constitutional question. It is founded upon the rule of law, which is a founding value of our Constitution.

[37] The issues raised in this matter have a broader impact beyond the immediate parties. This is so given the current political context where many municipalities are changing administrations and undertaking to “clean house”. This case not only raises legal questions of import, but also affords this Court the opportunity to provide guidance to organs of state who may wish to bring similar applications in the future and to lower courts dealing with these cases.

[38] The terrain of “self-review”, where a body seeks to review its own decision, has been dealt with in the decisions of this Court in Tasima I, Khumalo, Kirland, Aurecon and Gijima. However, because these cases – save for Khumalo and Gijima – dealt with PAJA reviews, it is necessary that we consider the principles emerging from these decisions and the extent of their application, if any, to legality reviews.

[39] There is a further basis for interfering with the Supreme Court of Appeal judgment, one that would ordinarily be sufficient to demonstrate that it is in the interests of justice for this Court to entertain the appeal. The Supreme Court of Appeal interfered with the High Court’s finding, among others, on the ground that it was improper for the High Court to have had regard to the merits before determining whether the delay ought to be condoned.

[40] The judgment of the Supreme Court of Appeal predated, by a matter of some months, the judgment of this Court in Gijima. However, it was made clear in Tasima I (a PAJA review where this Court found that the explanation for the delay was not satisfactory) that regard must still be had to the merits in deciding whether the delay should be condoned. The Supreme Court of Appeal’s decision in this matter does not align with the jurisprudence of this Court on this aspect and warrants interference.

[41] Prospects of success are not determinative, albeit important. The prospects of success in this matter have been enhanced by the judgment in Gijima. For these reasons, it is in the interests of justice to grant leave to appeal.

Issues

[42] The issues that arise are:

• (a) Did the Municipality unreasonably delay in bringing the review application?
• (b) Has the Municipality provided a satisfactory explanation for the delay? If not, should the delay be overlooked?
• (c) If the delay is unreasonable, and should not be overlooked, does Gijima and section 172 impel this Court nonetheless to declare that the Turnkey contract is unlawful and grant a just and equitable remedy?

[43] It is necessary, before addressing these issues directly, to consider the assessment of delay in a legality review vis-à-vis a PAJA review and offer guidance on the factors to be considered by a court in determining whether to exercise its discretion to overlook a delay.

Assessing delay under PAJA and legality

[44] For a considerable time, it was accepted that organs of state that seek to set aside their own decisions were entitled, and indeed obliged, to do so under PAJA. This inevitably involved a consideration and application of section 9 of PAJA with regard to any contentions of unreasonable delay.

[45] Following this Court’s decision in Gijima, it is now settled that an organ of state seeking to review its own decision must do so under the principle of legality and cannot rely on PAJA. What implications, if any, does this have for assessing the delay?

[46] There are four principles that answer this question. First, assessing delay under PAJA and legality differs in two respects, even though both hinge on reasonableness. The first difference is the role of the 180-day bar in section 7(1) of PAJA. Section 7(1) of PAJA stipulates:

“Any proceedings for judicial review in terms of section 6(1) must be instituted without unreasonable delay and not later than 180 days after the date—
(a) subject to subsection (2)(c), on which any proceedings instituted in terms of internal remedies as contemplated in subsection (2)(a) have been concluded; or
(b) where no such remedies exist, on which the person concerned was informed of the administrative action, became aware of the action and the reasons for it or might reasonably have been expected to have become aware of the action and the reasons.”

[47] However, this time period is not absolute. Section 9 of PAJA provides a mechanism for extensions:

“(1) The period of—
(a) 90 days referred to in section 5 may be reduced; or
(b) 90 days or 180 days referred to in sections 5 and 7 may be extended
for a fixed period, by agreement between the parties or, failing such agreement, by a court or tribunal on application by the person or administrator concerned.
(2) The court or tribunal may grant an application in terms of subsection (1) where the interests of justice so require.”

When the delay is longer than 180 days, a court is required to consider whether it is in the interests of justice for the time period to be extended.

[48] Legality review, on the other hand, has no similar fixed period. This Court in Khumalo endorsed the test enunciated by the Supreme Court of Appeal in Gqwetha for assessing undue delay in bringing a legality review application (Khumalo test).

• Firstly, it must be determined whether the delay is unreasonable or undue. This is a factual enquiry upon which a value judgment is made, having regard to the circumstances of the matter.
• Secondly, if the delay is unreasonable, the question becomes whether the Court’s discretion should nevertheless be exercised to overlook the delay to entertain the application.

[49] The standard to be applied in assessing delay under both PAJA and legality is thus whether the delay was unreasonable. Moreover, in both assessments the proverbial clock starts running from the date that the applicant became aware or reasonably ought to have become aware of the action taken. However, it is important to note that the assessment is not the same. A distinction between the assessments of the delay under PAJA versus the principle of legality turns on the prescribed time period of 180 days.

This distinction was succinctly described by the Supreme Court of Appeal in Opposition to Urban Tolling Alliance, which found that section 7 creates a presumption that a delay of longer than 180 days is “per se unreasonable”:

“At common law application of the undue delay rule required a two stage enquiry. First, whether there was an unreasonable delay and, second, if so, whether the delay should in all the circumstances be condoned. . . . Up to a point, I think, section 7(1) of PAJA requires the same two stage approach. The difference lies, as I see it, in the legislature’s determination of a delay exceeding 180 days as per se unreasonable. Before the effluxion of 180 days, the first enquiry in applying section 7(1) is still whether the delay (if any) was unreasonable. But after the 180 day period the issue of unreasonableness is pre-determined by the legislature; it is unreasonable per se. It follows that the court is only empowered to entertain the review application if the interest of justice dictates an extension in terms of section 9. Absent such extension the court has no authority to entertain the review application at all. Whether or not the decision was unlawful no longer matters. The decision has been ‘validated’ by the delay.”

[50] The approach to undue delay within the context of a legality challenge necessarily involves the exercise of a broader discretion than that traditionally applied to section 7 of PAJA. The 180-day bar in PAJA does not play a pronounced role in the context of legality. Rather, the question is first one of reasonableness, and then (if the delay is found to be unreasonable) whether the interests of justice require an overlooking of that unreasonable delay.

[51] The second difference between PAJA and legality review for the purposes of delay is that when assessing the delay under the principle of legality no explicit condonation application is required. A court can simply consider the delay, and then apply the two-step Khumalo test to ascertain whether the delay is undue and, if so, whether it should be overlooked.

[52] The second principle relating to delay under legality is that the first step in the Khumalo test, the reasonableness of the delay, must be assessed on, among others, the explanation offered for the delay. Where the delay can be explained and justified, then it is reasonable, and the merits of the review can be considered. If there is an explanation for the delay, the explanation must cover the entirety of the delay. But, as was held in Gijima, where there is no explanation for the delay, the delay will necessarily be unreasonable.

[53] Even if the unreasonableness of the delay has been established, it cannot be “evaluated in a vacuum” and the next leg of the test is whether the delay ought to be overlooked. This is the third principle applicable to assessing delay under legality. Courts have the power in a legality review to refuse an application where there is an undue delay in initiating proceedings or discretion to overlook the delay. There must however be a basis for a court to exercise its discretion to overlook the delay. That basis must be gleaned from the facts made available or objectively available factors.

[54] The approach to overlooking a delay in a legality review is flexible. In Tasima I, Khampepe J made reference to the “factual, multi-factor, context-sensitive framework” expounded in Khumalo. This entails a legal evaluation taking into account a number of factors. The first of these factors is potential prejudice to affected parties as well as the possible consequences of setting aside the impugned decision. The potential prejudice to affected parties and the consequences of declaring conduct unlawful may in certain circumstances be ameliorated by this Court’s power to grant a just and equitable remedy and this ought to be taken into account.

The interrelationship between prejudice and delay was explained by Khampepe J in Tasima I:

“But what is the prejudice suffered by Tasima in overlooking the delay? Condoning the delay does not prevent them from enforcing the court orders that have been granted in their favour. In addition, the contract extension itself has already expired. Setting aside the extension at this point should not, therefore, impact negatively on Tasima going forward. It is also a factor that this Court may rely on its section 172(1)(b) powers to ameliorate the prejudice suffered. It bears repeating that Tasima has, in addition, benefitted greatly from the extension. In my view, the prejudice suffered is minimal, particularly in comparison to the prejudice to be suffered by the Department and the Corporation if the counter-application is not condoned. This is consonant with the dicta in Khumalo that, ‘consequences and potential prejudice . . . ought not in general, favour the Court non-suiting an applicant in the face of the delay’.”

[55] A second factor relevant to overlooking delay is the nature of the impugned decision. This, in essence, requires a consideration of the merits of the legal challenge against that decision. In considering whether there had been an undue delay, albeit within the context of PAJA, the Supreme Court of Appeal, expressly, did not consider the merits. It held that a “full and proper determination of the merits of the review application was accordingly dependent upon a finding that the respondent’s failure had to be condoned”. In reaching this conclusion, it relied on Christelik Volskeie Onderwys, which rejected the proposition that a court is required to consider the merits before deciding whether to condone an undue delay in bringing a review application. It also relied on Opposition to Urban Tolling Alliance where it was decided that a court is compelled to deal with the question of condonation before examining the merits of the review application, because, in the absence of an extension, the Court had no authority to entertain the review application. It was on this basis that the Supreme Court of Appeal concluded that “[i]t was thus impermissible for the [High Court] to have entered into and decided the merits of the review application without having first decided the merits of the condonation application”. This conclusion is not in accordance with the jurisprudence of this Court.

[56] This Court has made plain that even within the context of PAJA, the extent and nature of the deviation from constitutional prescripts directly impacts upon an application for condonation in terms of section 7 of PAJA. In the context of a legality review, in Khumalo, Skweyiya J writing for the majority explained that “an additional consideration in overlooking an unreasonable delay lies in the nature of the impugned decision”. Skweyiya J added that this entails analysing the impugned decision and considering the merits of the legal challenge made against that decision.

In SANRAL, Navsa JA rejected a suggestion that the question of delay must be dealt with before the merits of the review can be entertained:

“It is true that in [the Supreme Court of Appeal’s judgment in Opposition to Urban Tolling Alliance] this Court considered it important to settle the court’s jurisdiction to entertain the merits of the matter by first having regard to the question of delay. However, it cannot be read to signal a clinical excision of the merits of the impugned decision, which must be a critical factor when a court embarks on a consideration of all the circumstances of a case in order to determine whether the interests of justice dictate that the delay should be condoned. It would have to include a consideration of whether the non-compliance with statutory prescripts was egregious.”

[57] This approach was confirmed by this Court in Aurecon where the explanation for the delay was found to be unsatisfactory:

“Nonetheless, due regard must also be given to the importance of the issue that is raised and the prospects of success. In this case that means considering the significance of the alleged procedural irregularities that were raised in the Ernst & Young report. It should be borne in mind that, when carrying out a legal evaluation a court must, where appropriate, ‘take into account the materiality of any deviance from legal requirements, by linking the question of compliance to the purpose of the provision’.”

[58] Furthermore, it is implicit from this Court’s judgment in Gijima that the extent and nature of the illegality may be a crucial factor in determining the relief to be granted when faced with a delayed review. Therefore, this Court may consider, as part of assessing the delay, the lawfulness of the contract under the principle of legality.

[59] A third factor to consider when deciding to overlook delay is the conduct of an applicant. This is particularly true for state litigants seeking to review their own decisions for the simple reason that often they are best placed to explain the delay.

This was recognised by Skweyiya J in Khumalo:

“The fact that the MEC has elected not to account for the delay, despite having had the opportunity to do so at multiple stages in the litigation, can only lead one to infer that she either had no reason at all or that she was not able to be honest as to her real reasons. Had the matter been brought by a private litigant, this aspect of the test might weigh less heavily. However, given that the MEC is responsible for the decision, that she is obliged to act expeditiously in fulfilling her constitutional obligations, and that she should have within her control the relevant resources to establish the unlawfulness of the decision she impugns, the unreasonableness of the unexplained delay is serious.” (Emphasis added.)

[60] This Court has repeatedly stated that the state or an organ of state is subject to a higher duty to respect the law.

As Cameron J put it in Kirland:

“[T]here is a higher duty on the state to respect the law, to fulfil procedural requirements and to tread respectfully when dealing with rights. Government is not an indigent or bewildered litigant, adrift on a sea of litigious uncertainty, to whom the courts must extend a procedure-circumventing lifeline. It is the Constitution’s primary agent. It must do right, and it must do it properly.”

[61] In Khumalo, it was explained that the standard against which a state litigant’s conduct is measured is high and ought to accord with the prescripts of the law.

In Merafong, Skweyiya J stated that it is the duty of state litigants to rectify unlawful decisions:

“This Court has affirmed as a fundamental principle that the state ‘should be exemplary in its compliance with the fundamental constitutional principle that proscribes self-help’. What is more, in Khumalo, this Court held that state functionaries are enjoined to uphold and protect the rule of law by, inter alia, seeking the redress of their departments’ unlawful decisions. Generally, it is the duty of a state functionary to rectify unlawfulness. The courts have a duty to insist that the state, in all its dealings, operates within the confines of the law and, in so doing, remains accountable to those on whose behalf it exercises power. Public functionaries ‘must, where faced with an irregularity in the public administration, in the context of employment or otherwise, seek to redress it’.”

[62] Even where the functionary has not acted as a model litigant or “constitutional citizen”, there may be a basis to overlook the delay if the functionary acted in good faith or with the intent to ensure clean governance.

In Tasima I, Khampepe J affirmed this principle:

“Merafong also holds that whether the failure to challenge the decision timeously was made in good faith may be a reason for overlooking the delay. The Department in this case, by its own admission, is plagued by poor management. The director-general who deposed to the counter-application admits that it was brought as a means to get the Department’s house in order. Nevertheless, the Department has not acted in bad faith in respect of the administrative decision. Its behaviour has been muddled, but not malicious.
This is borne out by the Department’s vigorous attempt to have the extension reviewed before the High Court. Not only is the decision-maker who made the decision now opposed to its enforcement, but this also forms part of a conscious effort by the Department to break with its dilatory past.”

[63] The fourth principle stems directly from Gijima. Even where there is no basis for a court to overlook an unreasonable delay, the Court may nevertheless be constitutionally compelled to declare the state’s conduct unlawful. This is so because “[s]ection 172(1)(a) of the Constitution enjoins a court to declare invalid any law or conduct that it finds to be inconsistent with the Constitution”.

[64] This principle is dealt with tersely in the judgment of my colleagues Cameron J and Froneman J (second judgment), which I have had the pleasure of reading. They agree with me that the delay was unreasonable and that it should not be overlooked. Yet they do not address the Gijima principle. They note that Gijima has not attracted universal favour among commentators. But the correctness or otherwise of Gijima was not at issue before us. It was not raised on the papers or ventilated at the hearing. This Court has on numerous occasions cautioned that it is undesirable to consider important legal questions without the benefit of legal argument from the litigants.

[65] The second judgment goes on to hold that this is not the case to consider overruling Gijima. This Court is bound by its own decisions by virtue of the doctrine of precedent. Not following previous decisions would undermine the rule of law and “invite legal chaos”. Departing from established precedent of this Court should not be done lightly, but only after due and careful consideration. Consequently, and this is where our judgments diverge, we are bound to apply the rule in Gijima, should it be applicable.

[66] When would the Gijima rule apply? Gijima dictates that where the unlawfulness of the impugned decision is clear and not disputed, then this Court must declare it as unlawful. This is notwithstanding an unreasonable delay in bringing the application for review for which there is no basis for overlooking. Whether an impugned decision is so clearly and indisputably unlawful will depend on the circumstances of each case.

[67] As the second judgment aptly remarks, this creates a certain tension in our law. On the one hand, there is a long line of cases explaining that the state must adhere to the procedural requirements of review, including timeous approaches to courts. On the other hand, Gijima implies that these procedural hurdles, while important, can sometimes yield to the injunction under section 172(1)(a) to declare invalid that which is inconsistent with the Constitution.

[68] The precise contours of this tension need not be drawn here. All that needs to be said is that interpreting and applying the Gijima principle, and the initial three principles detailed in this judgment, must be done with their purpose in mind. That is, to balance the objectives of the rules on delay with those objectives of declaring unlawful conduct as such.

In Khumalo, this Court cautioned against allowing procedural obstacles from preventing a court from looking into a challenge to the lawfulness of an exercise of public power.

Skweyiya J stated:

“In the previous section it was explained that the rule of law is a founding value of the Constitution, and that state functionaries are enjoined to uphold and protect it, inter alia, by seeking the redress of their departments’ unlawful decisions. Because of these fundamental commitments, a court should be slow to allow procedural obstacles to prevent it from looking into a challenge to the lawfulness of an exercise of public power.”

[69] However, the Court went on to note that the procedural requirement to bring review applications without undue delay serves a substantive purpose. It is based on sound judicial policy and in the public interest that there be finality and certainty in matters.

[70] In Tasima I, this Court reaffirmed the principle that a court should be slow to allow procedural obstacles to prevent scrutiny of a challenge to the exercise of public power, but went on to emphasise that it is a feature of the rule of law that undue delay should not be tolerated:

“Delay can prejudice the respondent, weaken the ability of a court to consider the merits of a review, and undermine the public interest in bringing certainty and finality to administrative action. A court should therefore exhibit vigilance, consideration and propriety before overlooking a late review, reactive or otherwise.”

[71] The Gijima principle should thus be interpreted narrowly and restrictively so that the valuable rationale behind the rules on delay are not undermined. At the same time, this is not a matter in which the Gijima principle can be ignored and thus impliedly overruled. So the injunction it creates – to declare invalid that which is indisputably and clearly inconsistent with the Constitution – must be followed where applicable.

[72] I now apply these established principles to the facts of this matter. In turn, I consider the reasonableness of the delay, whether it should be overlooked and the applicability of the Gijima principle to this case.

Was the delay unreasonable?

[73] In this matter, the clock started running on 4 September 2014 when the decision to award the Reeston contract to the respondent was made. The review application, brought in November 2015, was initiated 14 months after the decision was taken. The Municipality’s explanation is that it only became aware of the unlawful administrative action during October 2015. The Municipality immediately appointed Ms York to conduct a forensic investigation and her report became available on 21 October 2015. What followed on the part of the Municipality was the suspension of certain senior officials, including Mr Fani, and Mr Matiwane, who had been directly involved in the award and conclusion of the contract with the respondent.

[74] According to the Municipality it is quite clear that prior to August 2015, whilst it was aware of the award of the contract to the respondent in the general sense, it was not aware that the award had occurred unlawfully and without compliance with relevant constitutional and statutory prescripts. It further alleges that once it became aware of the underlying unlawfulness and irregularities, it became obliged to institute proceedings to set aside the relevant contracts. The Municipality maintains that it acted with appropriate expedition in doing so.

[75] A central actor on behalf of the Municipality in these events was Mr Pillay, who was the Municipality’s Chief Financial Officer, at the time the Reeston contract was awarded to the respondent and later became the Acting City Manager. On 4 September 2014, in his capacity as Acting City Manager, he instructed the respondent to undertake the work in respect of Reeston East as a result of failed procurement processes. Eleven months later, on 4 August 2015, having reverted to his position as Chief Financial Officer, Mr Pillay reported alleged irregularities on the part of the Municipal Manager to the Executive Mayor. He alleged that Mr Fani had signed an offer and acceptance form in respect of the Reeston contract when that contract was invalid.

[76] That remarkable and belated about-turn plainly required an explanation in order to be condoned under section 9 of PAJA, as found by the Supreme Court of Appeal. This explanation never came from the Municipality.

As the Supreme Court of Appeal put it:

“[Mr Pillay] would have been able to explain why the contract was awarded to the [respondent], why the contract was signed and why the [respondent] was thereafter instructed to proceed with the work. In addition, he would have been able to explain why the first payment was made, how he discovered that the award of the contract was irregular and why it took twelve months from the time the contract was awarded to discover this.”

[77] In addition, Mr Pillay’s silence is not explained by the Municipality. The result is that although the Court is given an explanation as to what transpired from August to November 2015, there is no explanation whatsoever for the delay of a year between the time of the award, in August 2014, and when Mr Pillay reported the alleged irregularities in August 2015.

[78] Where there is no explanation for the delay, the delay will be undue. In this matter, the Municipality’s explanation is that it was unaware of the irregularity until Mr Pillay came forward – in the fashion of a whistle-blower – and disclosed the irregularity. The Municipality has not provided a sufficient explanation for the delay. At the very least, it should have explained why it was not possible for Mr Pillay to disclose the facts within his knowledge. In Tasima I it was confirmed that the onus lies squarely on the Municipality to explain why the delay was not undue. This requires that the Municipality put forward all facts at its disposal.

[79] Though the threshold for such an explanation would not require proving the allegation, the Municipality ought to be held to a rigorous standard. As an organ of state, it bears constitutional obligations and thus, where an explanation may be obtained or is available the Municipality should provide it or take the Court into its confidence and explain its failure to provide an explanation. It is trite that the Municipality, as an organ of state, is subject to a higher duty to respect the law.

[80] A party applying for condonation must give a full and honest explanation for the whole period of the delay. The only explanation offered by the Municipality for the delay from August 2014 to August 2015 is that it was not aware at an earlier stage of the alleged unlawfulness of its conduct. The Supreme Court of Appeal correctly found that the Municipality had failed to furnish a full and reasonable explanation for the delay.

[81] I agree with the High Court that the Municipality “ought to have become aware much sooner than it did, (even prior to, and without the benefit of an independent investigation), that its employees awarded the Reeston contract without going through a procurement process”. Municipalities must have effective structures and mechanisms in place to ensure proper oversight for its service delivery projects. This is one of its core responsibilities. It must detect and prevent the abuse of taxpayer’s monies. A lack of effective oversight leads to dysfunctionality within municipalities by creating loopholes for fraud and corruption.

Should the delay be overlooked?

[82] In deciding whether to overlook the Municipality’s unreasonable delay, I first consider the nature of the impugned decision and then the conduct of the Municipality in approaching this Court. The latter alone is sufficient to refuse to overlook the delay.

[83] Regarding the nature of the impugned decision, the Municipality’s attack on the validity of the payment certificates upon which the provisional sentence claim was based was two-fold. First, that the Reeston contract was an unlawful extension of the Turnkey contract and awarded to the respondent without proper procurement procedures being complied with and thus invalid. Second, that the Turnkey contract was inchoate as it was subject to a funding agreement being concluded. I leave the question of the validity of the Turnkey contract explicitly open as the High Court did. It is not necessary for this Court to pronounce on that issue.

[84] Reeston East did not form part of the bidding specifications under the Turnkey contract. Specifically, the scope of work for the Turnkey contract is stated as “[the applicant] intends to develop roughly 3 000 to 5 000 housing units with services subject to land availability and other factors in the fully subsidised and affordable bonded market on portions of land in and around Greater Duncan Village in the Municipality”. The locality map attached to the Turnkey contract did not include Reeston East as part of the housing project area. In fact, it appears that Reeston East never formed part of the bidding process in relation to the Turnkey contract.

[85] The applicant advertised a tender for the appointment of an Implementing Agent on a turnkey basis for an urban housing project to address the housing needs of Greater Duncan Village in October 2013. In particular, it is worth noting that the Municipality advertised the tender for the Reeston contract both before and after the conclusion of the Turnkey contract.

[86] On 7 August 2014, Mr Fani wrote to the respondent indicating that the implementation of certain services were now considered to be part of the Turnkey contract’s scope of work. Specifically, the letter stated that “[the Municipality] recognise[s] that the layouts for this project were done some time ago and would therefore prefer the layout of this stage to be revisited. This is to ensure that an optimal number of opportunities are created”. As mentioned, on 4 September 2014, Mr Pillay wrote to the respondent explicitly advising it to take over the Reeston contract due to “an abortive procurement process”.

[87] These letters demonstrate that both parties were aware of two significant factors. First, that the Turnkey contract’s layouts did not originally encompass Reeston East. Second, that the Reeston contract’s scope of work had previously been the subject of failed tender processes.

[88] The respondent placed great emphasis on the fact that the wording of the Turnkey contract was broad enough to encompass the scope of work of the Reeston contract.

The High Court neatly put paid to this assertion:

“If the Yurnkey contract made provision for the work covered by the Reeston contract to be executed by the respondent in no uncertain terms, as the respondent would have it, the question arises why the second Reeston contract was formally concluded at all. Also why the same bid number of the first Reeston contract was allocated to it.”

[89] However, even if we were to assume that the respondent was correct, it is clearly not sufficient to bring the award of the Reeston contract within the prescripts of section 217 of the Constitution. Section 217 of the Constitution lays down the threshold requirements for a valid procurement process as one which is “fair, equitable, transparent, competitive and cost effective”.

The Supreme Court of Appeal elaborated on these requirements in Firechem:

“One of the requirements of such a procedure is that the body adjudging tenders be presented with comparable offers in order that its members should be able to compare. Another is that a tender should speak for itself. Its real import may not be tucked away, apart from its terms. Yet another requirement is that competitors should be treated equally, in the sense that they should all be entitled to tender for the same thing. Competiveness is not served by only one or some of the tenderers knowing what is the true subject of tender.”

[90] Given that the Reeston contract had been put to tender both before the Turnkey contract tender was advertised and after the Turnkey contract was concluded, and that bid specifications did not encompass Reeston East, it is curious how the respondent, or anyone else, could envision that the Turnkey contract would encompass the area covered by the Reeston contract as part of Duncan Village and its surrounds. It is also apparent that none of the parties originally envisioned the Turnkey contract to encompass the Reeston contract. The letter “awarding” the Reeston contract to the respondent acknowledges that the contract was only being “awarded” to the respondent as a result of failed tender processes.

[91] This is at odds with the most fundamental requirement of a constitutional procurement process: that the bidding process be open and transparent. The fact that the Reeston contract was awarded to the respondent without any competitive bidding process also violates the requirement that procurement processes be competitive.

[92] To hold otherwise would overlook overwhelming evidence on record reflecting the violation of section 217 of the Constitution and other statutory prescripts and endorse the view that the work in contracts like the Reeston agreement, which were previously concluded in pursuance of a proper procurement process, could simply be “awarded” to a different contractor purportedly on the basis of a previously concluded open-ended Turnkey contract. All this leads to one conclusion: there were blatant irregularities in the award of the Reeston contract to the respondent that render that contract unlawful and invalid.

[93] I reach this conclusion without relying on the controversial York Report and pronouncing on its admissibility. A careful reading of its judgment reveals that the High Court did not solely rely on the report, but also had regard to the documentary evidence attached to report, like meeting minutes, project plans, maps and tender documents. The validity and authenticity of these documents were not disputed by the parties and they now form part of the record in this matter. In addition, the timeline of the procurement processes in respect of the Reeston contract is common cause between the parties and this alone, as explained above, is a sufficient basis upon which to conclude that the Reeston contract failed to comply with section 217 of the Constitution.

[94] In the High Court, Revelas J found that the documents “speak for themselves”. This is clearly correct. There is no dispute with regard to the authenticity of the documents. To a large extent, both parties relied on these documents. The circumstances under which both the Turnkey and other contracts were concluded were common cause and not disputed.

[95] In my view, it is clear and undisputed that the Reeston contract was unlawful and based on admissible evidence and on documents accepted and relied upon by both parties. This finding is supported by the common cause and undisputed facts of this case.

[96] In awarding the Reeston contract to the respondent, the Municipality violated the provisions of section 217 of the Constitution. This section obliges every organ of state, regardless of the sphere under which it falls, to procure goods or services “in accordance with a system which is fair, equitable, transparent, competitive and cost effective”.

Corruption and maladministration are inconsistent with the rule of law and are the “antithesis of the open, accountable, democratic government required by the Constitution”.  In Steenkamp it was stated that the purpose of section 217(1) is to eliminate fraud and corruption in the public tender process and enable the state to secure goods and services at competitive prices.

[97] On the other hand, the conduct of the Municipality in bringing this application proscribes this Court from overlooking the delay. The goodwill emanating from this application being brought is undone by the Municipality’s about-turn in filing the withdrawal application.

[98] Suddenly, the Municipality’s concerns about compliance with section 217, the prescripts of the law and the Constitution more generally, are disposed of by way of private negotiations behind closed doors with the respondent. The Municipality’s case, its odd silence in respect of Mr Pillay and its flippant attitude toward its obligations under the Constitution reek of impropriety. While a court may be lenient in overlooking a delay where an organ of state attempts to put its house in order, the opposite is true where that organ seeks to perpetuate constitutionally invalid conduct by way of an unlawful settlement agreement.

[99] At no point did the Municipality take the Court into its confidence and explain its conduct. It simply presented the Court with whatever view it felt suited to at the time, vacillating between positions when convenient to it. This is outrageous behaviour from a state litigant, which must be robust in upholding its constitutional duties and is to be held publicly accountable. The Municipality’s conduct in this matter, particularly following the hearing, verges on bad faith. Had the Municipality acted in a manner that indicated a sincere effort to clean house and rectify past wrongs and unlawfulness, this Court may have had a basis to overlook the delay. The important principle at play in this matter is how this Court manages complex institutional settings of corruption and maladministration, particularly at local government level and where the organ of state has not taken the Court into its confidence.

[100] In conclusion, this matter is on the same footing as Gijima where the decision maker had failed to provide a satisfactory explanation for the delay and, for the reasons outlined, I am unable to find any basis upon which this delay may be overlooked.

Does the Gijima principle apply?

[101] However, this is not the end of the enquiry. On the authority of Gijima, this Court must, having established that the Reeston contract was clearly unlawful on undisputed facts, declare it invalid in terms of the provisions of section 172(1)(a) and set it aside. The unlawfulness of the Reeston contract cannot be ignored and this Court is obliged, as it did in Gijima, to set aside a contract it knows to be unlawful. Even on a restrictive interpretation of the Gijima principle, bearing in mind the need to hold the state to the procedural requirements of review, as explained above, I can see no reason to depart from it in this matter.

Relief

[102] I would adopt the same approach as that of the Supreme Court of Appeal in respect of the provisional sentence claim:

“The enquiry was rendered moot because we were informed by both Counsel that the respondent had in the interim made a without prejudice payment to the appellant in respect of the Reeston contract, in an amount in excess of R40 million. This payment was based upon the extent to which the respondent calculated that it had been unduly enriched by the appellant’s performance. It was agreed between Counsel that it would no longer be permissible to grant provisional sentence against the respondent, as the payment excused these earlier claims.”

[103] At the hearing there was some debate between the parties as to whether the amounts owed under the payment certificates had been fully paid. As it is unclear whether there are still amounts owing under the existing payment certificates, the parties’ previous concessions in respect of the provisional sentence claim stand. It is open to the parties to determine the further course regarding any outstanding disputes.

[104] When the Municipality took the view that the Reeston contract was invalid, the implementation of the contract had commenced and was continuing. The Municipality was content for the respondent to complete the contract (building low-cost houses) to the benefit of the Municipality and residents of Reeston. It was common cause that the work has been practically completed.

[105] In these circumstances, justice and equity dictate that the Municipality should not benefit from its own undue delay and in allowing the respondent to proceed to perform in terms of the contract. I therefore make an order declaring the Reeston contract invalid, but not setting it aside so as to preserve the rights to that the respondent might have been entitled. It should be noted that such an award preserves rights which have already accrued but does not permit a party to obtain further rights under the invalid agreement.

Costs

[106] Ordinarily in a commercial matter like this, even though there are broad issues of public interest at stake, costs would follow the result. Both parties have been partially successful in that the Reeston contract was declared unlawful but the payment obligations have been preserved. For this reason, there should be no order as to costs.

[107] The following order is made:

1. Leave to appeal is granted.
2. The appeal is upheld.
3. The order of the Supreme Court of Appeal is set aside and replaced with the following:
“The applicant’s decision to award contract number BCC/DES/PIU/HOUS/1122/2010 for Reeston Phase 3, Stage 2 (953 erven) to the respondent is declared constitutionally invalid.”
4. There is no order as to costs.