Brief Summary

Administrative Law — Review of administrative action — Investigation into allegations of maladministration — Applicants sought to review and set aside a forensic investigation report conducted under section 106(1)(b) of the Municipal Systems Act — Applicants contended that the investigation was ultra vires, procedurally unfair, and did not comply with the KwaZulu-Natal Commissions Act — Court held that the MEC's failure to conduct public hearings and allow affected parties to be heard constituted a breach of procedural fairness, rendering the investigation and report unlawful.

Comprehensive Summary

Summary of Judgment

Introduction

The proceedings took the form of a review application in which the applicants sought declaratory and review relief to have certain decisions and a forensic investigation report declared unlawful and set aside. The impugned conduct concerned a forensic investigation authorised by the provincial executive authority responsible for local government oversight in KwaZulu-Natal.

The parties were, on the one hand, the Zululand District Municipality (first applicant) together with three of its political office-bearers, namely the Speaker (second applicant), the Mayor (third applicant), and the Deputy Mayor (fourth applicant). On the other hand, the respondents were the MEC: Cooperative Governance and Traditional Affairs, KwaZulu-Natal (first respondent) and Mdledle Inc (second respondent), the entity designated to conduct the investigation.

In procedural history, the MEC authorised an investigation purportedly under section 106(1)(b) of the Local Government: Municipal Systems Act 32 of 2000. A forensic report was later presented to the municipal council, together with a letter from the MEC requiring tabling of the report and the provision of a council resolution and proposed actions. The applicants then challenged the process and legality of the investigation and report. The matter proceeded as an opposed application, with the court noting that only the MEC opposed the relief.

The general subject-matter of the dispute was whether a section 106(1)(b) forensic investigation into alleged maladministration, fraud, and corruption at a municipality in KwaZulu-Natal had to comply with the KwaZulu-Natal Commissions Act 3 of 1999 (as amended), and whether the investigation process had to meet the requirements of procedural fairness, including the audi alteram partem principle, before adverse findings and recommendations were made.

Material Facts

The court relied on a sequence of largely common-cause facts about how the investigation was initiated and conducted, and what process was (and was not) afforded to the affected parties.

In August 2019 the municipality was informed by the Head of Department in the MEC’s office, Mr Tubane, that the MEC had instituted an investigation purportedly in terms of section 106(1)(b) of the Municipal Systems Act into 16 allegations of maladministration, fraud, and corruption at the municipality. The second respondent was designated to conduct the investigation. The notifying letter recorded that it would be necessary for the investigators to liaise verbally and in writing with councillors, officials, stakeholders, and service providers of the municipality.

After this initial notification, the municipality received no further correspondence until May 2020. On 11 May 2020 the Speaker received an email from the MEC’s Senior Manager indicating that the investigation had been finalised, that a report was ready to be tabled, and requesting attendance for tabling at a virtual council meeting scheduled for 14 May 2020. At that virtual meeting, the investigators presented a report of 387 pages with 61 annexures, and a letter from the MEC (dated 1 May 2020 but signed on 14 May 2020) requiring the municipality to table the report and provide the MEC within 21 days with a certified council resolution and detailed comments and proposed actions, including possible disciplinary steps, civil recovery, and/or criminal charges.

The applicants, through attorneys, wrote to the MEC on 10 June 2020 pointing to deficiencies in the report and inviting the MEC to withdraw the directive pending resolution of the issues raised. A material complaint raised was that various affected persons were not given a hearing before the report was compiled, which was alleged to be unlawful and procedurally unfair.

In response, the MEC reiterated that the investigation had been completed and treated the report as final and “ripe for implementation”, while also indicating (as an asserted act of good faith) that the investigator would nevertheless afford implicated persons an opportunity to state their side of the story. However, the judgment records that the MEC ultimately pressed ahead with the investigation process without input from affected persons, and reaffirmed the stance that the KwaZulu-Natal Commissions Act was not peremptorily applicable to section 106(1)(b) investigations.

Two procedural facts were treated as not in dispute and central to the outcome. First, no hearings were held at all, whether public or otherwise. Second, the report was finalised and presented without the applicants having been afforded an opportunity to be heard on allegations implicating them, notwithstanding the earlier indication that liaison would occur. The MEC’s position (advanced through Mr Tubane) was that natural justice and audi rights were not applicable at the investigative/report stage because the report comprised recommendations and any audi rights would be afforded later in disciplinary proceedings, and that the report had no direct external legal effect.

Legal Issues

The central legal questions for determination concerned both law and the application of law to largely common-cause facts.

A first issue was whether, in KwaZulu-Natal, an investigation designated under section 106(1)(b) of the Municipal Systems Act had to comply with the KwaZulu-Natal Commissions Act 3 of 1999 (as amended), including provisions requiring public hearings unless the chairperson decides otherwise for good reasons. This was primarily a question of statutory interpretation and the legal consequences of non-compliance.

A second issue was whether, independently of statutory compliance, the investigation and report process had to comply with the requirements of procedural fairness, including the audi alteram partem principle, before a report containing serious findings and prejudicial recommendations could be finalised and acted upon. This involved an application of administrative-law fairness principles to the investigative process and an evaluation of whether the process was unfair given the nature and potential impact of the report and recommendations.

A third ground advanced by the applicants was that the evidence before the investigators was not rationally connected to the findings in the report. The court identified this as a review ground but ultimately did not decide it because it found the first two grounds sufficient.

Court’s Reasoning

On the applicability of provincial commission legislation, the court approached section 106 of the Municipal Systems Act as establishing a framework in which an MEC may either request information by notice (section 106(1)(a)) or, if necessary, designate persons to investigate (section 106(1)(b)). The court emphasised section 106(2), which provides that in the absence of applicable provincial legislation, sections 2 to 6 of the national Commissions Act 8 of 1947 (and regulations) apply to a section 106(1)(b) investigation.

The court treated it as settled that in KwaZulu-Natal there is applicable provincial legislation, namely the KwaZulu-Natal Commissions Act, and relied on the Supreme Court of Appeal’s statement in Minister of Local Government, Housing and Traditional Affairs, KwaZulu-Natal v Umlambo Trading 29 CC and Others 2008 (1) SA 396 (SCA) that the KwaZulu-Natal Commissions Act “certainly constitutes applicable provincial legislation” contemplated by section 106(2). On that footing, the court accepted that section 106(2) makes the national Commissions Act applicable only where there is no applicable provincial legislation, and therefore compliance with the KwaZulu-Natal Commissions Act was required for a section 106(1)(b) investigation in the province.

The court accepted that the KwaZulu-Natal Commissions Act regulates key procedural aspects of a commission-type investigation, including the taking of evidence and the conduct of sittings. A particular provision relied upon was section 3(2), which provides that, unless the chairperson for good reasons decides otherwise, all evidence and addresses must be heard in public, with notice given in a manner determined by the chairperson. Against that statutory background, the court treated the absence of any hearings as decisive: it was not disputed that no hearings were held, and thus the investigation did not comply with the applicable provincial statute. The court agreed with the applicants’ submission that compliance was not a mere formality because it gives effect to procedural rights and the requirements of fairness in an inquiry of this kind.

In evaluating why procedural protections mattered, the court relied on the Constitutional Court’s discussion in Secretary of the Judicial Commission of Inquiry into Allegations of State Capture, Corruption and Fraud in the Public Sector including Organs of State v Zuma [2021] ZACC 2; 2021 (5) SA 1 (CC); 2021 (5) BCLR 542 (CC), noting the distinction between commissions that gather information and those that are fact-finding inquiries aimed at conclusions. The court characterised the present investigation as falling within the latter category because it produced serious findings and prejudicial recommendations, including recommendations that the municipality consider criminal or civil proceedings against those implicated. This reinforced, in the court’s assessment, the public-interest character of the inquiry and the need for fairness.

On procedural fairness and audi, the court rejected the respondents’ position that audi rights were unnecessary at the investigation/report stage because affected persons could be heard later in disciplinary hearings. The court applied established administrative-law principles, drawing on South African Roads Board v Johannesburg City Council 1991 (4) SA 1, Administrator, Transvaal, and Others v Traub and Others [1989] ZASCA 90; 1989 (4) SA 731, and Du Preez and Another v Truth and Reconciliation Commission [1997] ZASCA 2; [1997] JOL 1149 (AD). These authorities were used for the propositions that the audi principle operates where a statute empowers action prejudicially affecting an individual’s rights or interests, or where there is a legitimate expectation entitling a person to be heard, unless excluded expressly or by implication; and that the duty to act fairly is concerned with the manner in which decisions are taken.

Applying those principles to the facts, the court relied on the undisputed features of the process. The court noted that the municipality had initially been told that investigators would liaise verbally and in writing, yet the applicants only heard again once the investigation was complete and the report finalised. The court accepted that the applicants were denied an opportunity to be heard, and regarded the MEC’s position—namely that the report comprised only recommendations and audi would come later—as insufficient, given the nature of the findings and the prejudicial character of the recommendations. On that basis, the court concluded that the investigators were under a duty to act fairly towards the applicants by affording an opportunity to be heard, and that the failure to do so constituted procedural unfairness warranting the setting aside of the impugned decisions.

Having found in favour of the applicants on the two grounds of non-compliance with the KwaZulu-Natal Commissions Act and procedural unfairness, the court considered it unnecessary to decide the further rationality ground relating to the connection between evidence and findings.

On costs, the court exercised a discretionary judgment based on the litigation stance of the parties. It recorded that only the MEC opposed the relief and concluded that there was no justification to burden the second respondent with costs.

Outcome and Relief

The court granted the application and made an order granting relief “in terms of para’s 1, 2, 3 and 4 of the notice dated 27 August 2020.” In substance, the relief encompassed the setting aside of the impugned section 106(1)(b) forensic investigation report and the MEC’s related decisions (including publication/adoption of the report and the refusal to comply with the KwaZulu-Natal Commissions Act in relation to the investigation), on the basis of unlawfulness arising from statutory non-compliance and procedural unfairness.

The court ordered that the first respondent (the MEC) pay the costs of the application, and it declined to impose costs on the second respondent because the MEC was the only party opposing the relief.

Cases Cited

Administrator, Transvaal, and Others v Traub and Others [1989] ZASCA 90; 1989 (4) SA 731.

Attorney-General, Eastern Cape v Blom and Others 1988 (4) SA 645 (A).

Du Preez and Another v Truth and Reconciliation Commission [1997] ZASCA 2; [1997] JOL 1149 (AD).

Minister of Local Government, Housing and Traditional Affairs, KwaZulu-Natal v Umlambo Trading 29 CC and Others 2008 (1) SA 396 (SCA).

Secretary of the Judicial Commission of Inquiry into Allegations of State Capture, Corruption and Fraud in the Public Sector including Organs of State v Zuma [2021] ZACC 2; 2021 (5) SA 1 (CC); 2021 (5) BCLR 542 (CC).

South African Roads Board v Johannesburg City Council 1991 (4) SA 1.

Van Huyssteen and Others NNO v Minister of Environmental Affairs and Tourism and Others 1996 (1) SA 283 (C).

Legislation Cited

Local Government: Municipal Systems Act 32 of 2000, section 106.

KwaZulu-Natal Commissions Act 3 of 1999 (as amended by the KwaZulu-Natal Commissions Amendment Act 4 of 2015), sections 2(1), 3, 4 and 8.

Commissions Act 8 of 1947, sections 1, 2, 3 and 4.

Constitution of the Republic of South Africa, 1996, section 127(2)(e).

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The court held that, in KwaZulu-Natal, an investigation designated under section 106(1)(b) of the Municipal Systems Act is subject to applicable provincial legislation, namely the KwaZulu-Natal Commissions Act, and that the investigation in issue was unlawful because it did not comply with those statutory requirements, including the conduct of hearings contemplated by the Act.

The court further held that the investigation and report process was procedurally unfair because the applicants were not afforded a meaningful opportunity to be heard before the report, containing serious findings and prejudicial recommendations, was finalised and presented. The argument that audi rights could be postponed to later disciplinary proceedings was rejected as insufficient in the circumstances.

The impugned decisions and report were accordingly set aside in terms of the notice of motion, and costs were awarded against the MEC, with no costs order against the investigator because the MEC alone opposed the relief.

LEGAL PRINCIPLES

Compliance with section 106(2) of the Local Government: Municipal Systems Act 32 of 2000 requires that, where there is applicable provincial legislation governing investigative mechanisms akin to commissions, that provincial legislation governs a section 106(1)(b) investigation; the national Commissions Act framework applies only in the absence of applicable provincial legislation.

In KwaZulu-Natal, the KwaZulu-Natal Commissions Act 3 of 1999 constitutes applicable provincial legislation for purposes of section 106(2), with the consequence that a section 106(1)(b) investigation must be conducted consistently with the procedural requirements laid down in that Act, including the statutory approach to public hearings unless good reasons justify a different approach.

The audi alteram partem principle forms part of the broader duty on administrative actors (and those exercising public power) to act procedurally fairly. Where an investigative process culminates in a report containing serious findings and prejudicial recommendations, fairness may require that those affected be given a meaningful opportunity to respond before the report is finalised, unless such fairness requirements are excluded by the empowering framework.

Procedural fairness focuses on the manner in which a decision or outcome is arrived at. A later opportunity to be heard (for example, in subsequent disciplinary proceedings) does not necessarily cure the unfairness of an earlier process where adverse findings and recommendations have already been made without hearing affected parties.

Zululand District Municipality and Others v MEC: Cooperative Governance and Traditional Affairs, KwaZulu-Natal and Another (5660/2020) [2022] ZAKZPHC 19 (6 May 2022)