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[2019] ZAECELLC 20
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BW Bright Water Way Props (Pty) Ltd v Eastern Cape Development Corporation (EL848/2017; ECD 2148/2017) [2019] ZAECELLC 20; [2019] 4 All SA 27 (ECL); 2019 (6) SA 443 (ECG) (26 July 2019)
IN
THE HIGH COURT OF SOUTH AFRICA
EASTERN
CAPE LOCAL DIVISION, EAST LONDON
CASE
NO: EL 848/2017
ECD
2148/2017
REPORTABLE
In
the matter between:
BW
BRIGHT WATER WAY PROPS (PTY) LTD
Applicant
and
EASTERN
CAPE DEVELOPMENT CORPORATION Respondent
Summary:
Constitutional law - legality review - unreasonable delay -
overlooking delay - sections 172 and 217 of the Constitution -
application
and effect of
Gijima
and
Asla -
costs
JUDGMENT
STRETCH
J.:
[1]
On
20 December 2016 the applicant and the respondent entered into a
lease agreement providing for the applicant to lease portions
A and B
of the remainder of farm 31, Coffee Bay, Mqanduli (“the
property” where the Ocean View Hotel is situated) for
the
period 1 November 2016 to 31 October 2036.
[2]
The
applicant alleges that the respondent has failed to provide it with
vacant and undisturbed possession of the property, a portion
of which
is unlawfully occupied by one Leon Botha as the sole director and
shareholder of Nenga River Lodge (Pty) Ltd, and who
is competing with
the Ocean View Hotel.
[1]
[3]
The
respondent not only contends that the applicant has failed to comply
with its obligations in terms of the lease, but has also
launched a
counter
application
calling upon this court to review and set aside its decision to
conclude the agreement (which application the applicant
argues is out
of time).
[2]
The respondent furthermore alleges that the applicant ought to have
joined the Bothas as a party to this application.
The
history
[4]
The
property
[3]
was previously leased by the Transkei Development Corporation to the
South African College of Tourism who in turn (according to
the
applicant), was sub-letting the property to Wild Coast Holiday
Holdings. It is common cause that during November 2011 Wild
Coast
Holdings attempted to evict the Bothas who were at that time
occupying a portion of the property and operating a hospitality
industry in competition with the hotel.
[5]
The
Transkei Development Corporation was subsequently dissolved by the
Premier of the Eastern Cape, with all its powers and functions
devolving upon the respondent. According to the applicant, its
director, who is also the deponent to its founding affidavit (Ian
Crawford) acquired the Wild Coast Holiday Holdings share portfolio
during 2012. This allowed him to operate the hotel on the
property.
[4]
During 2013 the College of Tourism (and all persons occupying through
or under it), was evicted from the property by the
respondent in its
capacity as successor in title to the Transkei Development
Corporation, and as custodian of the property on behalf
of the South
African Government. The College of Tourism complied with the
order. The Bothas did not. Instead, they
managed to obtain an
order restoring their possession of a portion of the property, and
are claiming R2 million in damages from
the respondent for unlawful
eviction and the sequelae thereto. This dispute between the
Bothas and the respondent is allegedly
lis
pendens
,
with the respondent still maintaining the view that the Bothas are in
unlawful occupation, but claiming to have been temporarily
hamstrung
in taking further action against the Bothas. The respondent’s
reasons for not having taken action against the Bothas
are set forth
in its affidavit as follows:
‘
The
Respondent holds the view that Nenga River Lodge/Botha are not
entitled to occupy the property and that their contention that
they
occupy the property by virtue of permission obtained from the Chief
and Traditional Authority of the Lower Nenga Administrative
Area is
without foundation.
It
has at all times been the Respondent’s intention to institute
the necessary action against Nenga River Lodge/Botha but
unfortunately, this can only be done on the instruction and
concurrence of the State Attorney inasmuch as the property is not
registered in the name of the Respondent but the Government.
The
Respondent has been liaising with the relevant State Attorney for
some months but as at the date hereof, no satisfactory resolution
has
been forthcoming nor has the State Attorney expressly authorized the
institution of legal action.
There
have been various meetings with the State Attorney, more particularly
the State Attorney representative Mr S Tshitshi and
Mr Mandla
Mpikashe, the Respondent’s Executive Manager Legal Compliance
and Governance.
To
illustrate the aforegoing, I annex hereto marked “ECDC7”
a letter authored by myself and addressed to the State Attorney
Mthatha dated 3
rd
July 2017. The contents of such letter
are self-explanatory and set out the logistical difficulty
encountered by the Respondent
to institute action.
The
State Attorney’s response is to say the least ambivalent. It
relies on the provisions of Section 3(3) of the State Attorneys
Act
of 1957 and asserts that they have to represent the Respondent in any
proceedings.
As
attorneys instructed by the Respondent and counsel have been seized
with this matter for a long time, permission was sought,
as is
apparent from Respondent’s letter of the 3
rd
July
2017 addressed to the State Attorney, to litigate.
Besides
receiving certain queries from the State Attorney, no consent has at
yet been forthcoming.
It
is hoped that the necessary consent will be forthcoming shortly.’
[6]
There
is not much detail regarding what transpired between 2013 and 2016.
On the papers, the narrative continues when the applicant
and the
respondent concluded a lease agreement in respect of the property,
which agreement was sealed on 20 December 2016.
The
lease agreement
[7]
Ex
facie the document the agreement was signed by one S. Sentwa (Sandile
Sentwa) in his capacity as the respondent’s chief
financial
officer and “acting property head” on the one side, and
by Crawford representing the lessee when the lease
was entered into
between the parties, on the other.
[8]
The
respondent alleges that Sentwa had no authority to enter into the
agreement and to sign the lease, and in so doing, he acted
contrary
to a resolution taken by the respondent’s executive management
committee.
[5]
It is accordingly the respondent’s contention that the lease
agreement falls to be set aside as being both unlawful and invalid,
not only for lack of authority but also due to non-compliance with
certain statutory provisions.
The
main application
[9]
The
applicant claims specific performance in terms of the contract. It is
accordingly incumbent on the applicant to allege and prove
the terms
of the contract as well as compliance with any antecedent or
reciprocal obligation to tender to perform it fully. It
must also
allege non-performance by the respondent.
[6]
[10]
The
respondent contends that the applicant is in breach of clauses 3.3
(improvements in terms of the project), 6.1 (non-payment
of rent),
6.4 (further non-payment), 6.5 (non-payment for utilities) and 7.1
(non-payment of the deposit) of the agreement, and
as such, is barred
from claiming specific performance in any event. I will deal with
each of these clauses seriatim:
Clause
3.3 The Lessee shall, at its cost, alter or
improve the premises in accordance with the agreed project.
The
respondent’s deponent has averred that the applicant has not
complied with this clause relating to improvements in accordance
with
the agreed project. That is the sum total of its submissions on this
point. The applicant has replied that the agreed project
was the
addition of a conference facility together with a general upgrade of
various components of the hotel facilities, and that
this agreed
project is complete.
Clause
6.1 The rental payable by the Lessee to the
Lessor for the entire period of this Agreement of Lease
shall be
R32 000.00 (thirty two thousand rand) per month plus VAT,
escalating annually by 10%.
The
respondent avers that the applicant is not paying this rental, but
that it has been paying a lower sum amounting to R8 000,00
per
month which (even if one assumes a valid agreement and a default on
the respondent’s part to provide the applicant with
vacant
occupation of portion B and because of the fact that portion B is far
smaller than portion A), is no justification for the
drastic
reduction in rent which the applicant has unilaterally imposed.
According
to the applicant, it has been paying monthly rental in the sum of
R8 870,00 as “originally agreed” with
the
respondent. It contends that it has been withholding the balance in
terms of the agreement, and will continue to do so, until
the
respondent complies with its contractual obligation to grant it
vacant and undisturbed occupation and possession of the entire
premises. It further contends that this much was made abundantly
clear to the respondent by virtue of the debit order authorisation
form which Crawford signed on the applicant’s behalf on 30
November 2016, which purports to reflect that payment of the sum
of
R36 480,00 monthly would commence once the applicant had
received vacant and undisturbed occupation and possession of the
entire premises.
Clause
6.4 The Lessee undertakes to pay to the
Lessor all outstanding rental arrears totalling to R337 075.67
pertaining to the current lease immediately after signing the lease
agreement.
The
respondent avers that the applicant has remained in breach of this
clause and that this amount has not been paid. The applicant
does not
dispute this. Instead, Crawford has stated in his affidavit that he
has been advised, as a matter of law, that the applicant
is entitled
to a remission of its rental obligation; alternatively, to withhold
performance under the lease agreement altogether
pending the eviction
of the Bothas. Crawford has furthermore tendered full compliance with
the lease agreement immediately upon
the eviction of the Bothas.
Clause
6.5 The Lessee shall pay or amicably settle
O.R. Tambo District Municipality’s outstanding
(sic) which
includes, but (sic) not limited to rates, water, and electricity
account in respect of the leased premises immediately
after signing
the lease agreement.
The
respondent avers that the applicant is also in breach of this clause.
According to the applicant this clause deals with its
obligation to
pay rates and consumption charges to the district municipality. It is
averred that the applicant has been paying
the municipality in
accordance with an agreement between it and the municipality. This
being the position, it is contended that
the applicant is not in
breach of this clause. By way of example, the applicant recalls that
at some point the respondent “caused”
the municipality to
discontinue the applicant’s water supply. The applicant brought
an application against both the municipality
and the respondent for
its water supply to be reconnected. The application succeeded (with
costs) on the basis that the applicant
had complied with its
agreement with the municipality.
Clause
7.1 The Lessee shall pay a lease deposit
amount of R200 000.00 to the Lessor’s bank account.
It
is the respondent’s contention that the applicant has not paid
this deposit. This too, is not in dispute, with the applicant
having
repeated its contention that it is entitled to withhold performance
altogether pending the eviction of the Bothas, and tendering
immediate and full compliance with the agreement once the Bothas have
been evicted.
[11]
The
respondent, in raising the above contentions in answer to the
applicant’s claim against it, appears to seek reliance on
the
exceptio
non adempleti contractus.
[7]
The respondent has claimed that because the applicant is in breach of
certain obligations in terms of the contract, it cannot
claim
performance, and further, that the respondent is entitled to an order
setting aside the ‘decision’ to lease the
property to the
applicant. Simultaneously, the respondent has also launched a
counter
application
for that very ‘decision’ to be reviewed and set aside.
[12]
On
13 March 2017 the applicant’s attorneys reminded the respondent
that it was still in breach of its obligation to give the
applicant
vacant possession of the premises in terms of clause 5.3 of the lease
agreement. The respondent’s response
was that this was a
suspensive condition, the performance of which was impossible and
that the agreement was accordingly void.
No reference was made
in this communication to the respondent’s present contentions,
which are that the applicant has not
complied with the aforesaid
terms of the agreement, and that the lease is unlawful in any event.
[13]
The
contention, that the agreement contains a suspensive condition which
remains unfulfilled, appears however to have been abandoned;
alternatively, is not seriously pursued by the respondent in its
answering affidavit where the following is stated:
‘
Whether
or not in law the clause is a suspensive condition or not is not
relevant to these proceedings as the agreement stands to
be set
aside.’
[8]
[14]
The
exceptio
defence
can only apply where the applicant’s performance has to precede
that of the defendant or where both parties have to
perform
simultaneously.
[9]
When a contract imposes reciprocal obligations on the parties,
performance and counter
performance
should generally take place at the same time.
[10]
Certain types of contracts form an exception to the rule. A
lessor of property for example (as in the case at hand),
must usually
perform before rental may be demanded.
[11]
[15]
To
this end the applicant contends that the lease agreement entrenches
the residual position by making the payment of rent subject
to the
respondent’s compliance with clause 5.3 read with clause 6.3 of
the lease agreement. The relevant clauses state the
following:
‘
3.3
The Lessee shall, at its cost alter or improve the premises in
accordance with the agreed project.
5.3
Subject to clause 3.3 above, the Lessor shall give the Lessee vacant
and undisturbed occupation and possession of the entire
premises, on
the commencement date which shall be subject to the eviction of any
illegal Occupant, from which date the premises
shall be at the sole
risk and profit of the Lessee.
6.3
Upon fulfilment of clause 5.3 by Lessor rental shall be payable
directly into the bank account of the Lessor as advised by Lessor
from time to time, the details of which will be provided to the
Lessee in writing. The Lessee shall
STRICTLY
complete and sign Lessor’s Debit Order form for payment
obligation in respect of this lease agreement.’
[16]
As
I have said, the applicant contends that the agreement entrenches the
residual position by making the payment of rent subject
to clause 5.3
thereof.
[12]
Indeed the debit order authorisation form which accompanied the
agreement stipulates the commencement of the debit order as being
the
date on which clause 5.3 has been fulfilled. The applicant has, in
any event, tendered a willingness and an ability to perform
its side
of the bargain upon the respondent’s compliance with clause
5.3. To my mind, a further aspect which militates in
the applicant’s
favour is that the respondent has, up until the institution of these
proceedings, condoned performance on
the applicant’s part which
it now, for the first time, claims to have been defective.
[13]
[17]
Finally,
the applicant in any event claims that it has indeed complied with
clause 3.3 of the agreement and has, at its own cost,
improved the
property in accordance with the “agreed project”, which
it alleges to have involved the addition of a
conference facility and
a general upgrade. It is not in dispute that the applicant has
undertaken and completed these projects.
In the absence of any
suggestion from the respondent that the “agreed project”
involved something more than this, the
applicant’s version must
be preferred, when the respondent, in alleging non
performance,
has not furnished this court with any information setting forth the
nature and extent of the non
performance.
[14]
In my view the applicant is entitled in any event, to withhold
counter
performance
under the lease agreement in response to the respondent’s
failure to discharge its antecedent obligation
provided
for in
clause
5.3.
Concurrence
of the State Attorney and joinder of the Bothas
[18]
The
respondent’s opposition to the main application is also founded
in part in averments that when the respondent (as successor
in title
to the Transkei Development Corporation) previously obtained an
eviction order by way of default judgment in the
Mthatha High
Court on 23 May 2013 (evicting the South African College of Tourism
and persons claiming through it from the portion
of the property
described as the Ocean View Hotel), the Bothas launched an urgent
application for a stay in execution and rescission
of the judgment.
On 12 June 2014 the Bothas withdrew this application, the respondent
having undertaken not to evict the Bothas
pursuant to the eviction
order granted on 23 May 2013 against the South African College of
Tourism in respect Ocean View Hotel.
In spite of
this undertaking not to execute against the Bothas in terms of the
Mthatha order (relating to Ocean View Hotel), the parties before
me
are still
ad idem
that
the Bothas remain in unlawful occupation of another portion of the
property (where Nenga River Lodge is situated).
[19]
The
respondent’s deponent has alleged on oath that due to
difficulties such as the respondent’s
locus
standi
“at that point in time”
and “more importantly” that the Bothas were not occupying
this portion of the property
through or under the South African
College of Tourism, the Mthatha High Court granted an order
setting
aside
the eviction and directing the
respondent to restore possession to Nenga River Lodge and the Bothas.
[20]
This
is not a correct
summation
of what
transpired. Indeed, according to the papers the eviction order and
the default judgment stand. All that was recorded on
12 June 2014 was
the respondent’s undertaking (having successfully evicted the
College of Tourism from one portion of the
property), to not also
evict the Bothas (from another portion of the property) in execution
of the same order
.
I think it goes without saying that failure to have joined the Nenga
River Lodge and Botha who seem not to have been enjoying
occupation
under the College of Tourism, presented an insurmountable obstacle
for the respondent
at the time.
The respondent has expressed the
manifest intention however to institute the necessary action against
the Bothas, but avers that
it can only do so on the “instruction
and concurrence of the State Attorney” inasmuch as the property
is not registered
in the respondent’s name but in the name of
the Government of the Republic of South Africa. Not much turns
on this
averment for the purposes of this application. It
suffices to say that the respondent’s
locus
standi
did not present a problem
when it
secured
default judgment against
the College of Tourism, nor did it get in the way of the respondent
not only opposing the present application
before me, but also of
delivering a counter application in its own right (apparently
sans
instructions from the State Attorney). Indeed, the affidavits
deposed to by the respondent’s chief executive officer
pertinently state that he is authorised not only to oppose this
application but also to initiate litigation on the respondent’s
behalf. This is borne out by a general and exceptionally wide
power of attorney which the Minister of Rural Development and
Land
Reform deemed prudent to bestow on the respondent’s chief
executive officer, to inter alia manage the property in the
broader
sense and to take all and any lawful and necessary measures and steps
with respect to the property in question, including
entering into
lease agreements and instituting and defending legal actions in
relation to the property.
[21]
As
I have said, the parties are
ad idem
that the Bothas remain in unlawful
occupation of the property, notwithstanding their previous apparent
contention that they are
lawfully entitled to do so. This being
the
de facto
position, the respondent contends that the failure of the applicant
to have joined the Bothas as materially interested parties
is fatal
to the applicant’s application, and that the application ought
to be dismissed with costs without further ado, on
this point alone.
[22]
Crawford,
in his affidavit under reply, has expressed the view that this is an
ill-conceived attempt by the respondent to escape
liability. He
adds that he has also been advised that non-joinder is a matter for
argument, but nevertheless mentions that
the Bothas have no legally
recognised interest in the applicant’s attempt to enforce a
bilateral agreement between the parties.
It is further
mentioned that insofar as the Bothas do have an interest in any
proceedings “aimed at their eviction from the
property”,
such “proceedings do not yet exist”. Differently put, it
is contended on the applicant’s behalf
that eviction of the
Bothas is, in any event, not sought by way of these proceedings and
that success in this application will
not automatically result in an
order for the eviction of the Bothas and accordingly will not
prejudice them in their rights.
[23]
The
question as to whether all necessary parties have been joined does
not depend on the nature of the subject matter of the suit,
but upon
the manner in which, and the extent to which this court’s order
may affect the interests of third parties.
[15]
The test is whether or not a party has a ‘direct and
substantial interest’ in the subject matter of the litigation,
that is, a legal interest which may be prejudicially affected by this
court’s judgment.
[16]
[24]
In
determining whether the Bothas ought to have been joined, it is
necessary to scrutinise the relief which the applicant seeks,
which
is set forth as follows:
1.
Declaring that the lease agreement
concluded by the applicant and the respondent on 20 December 2016 is
valid, and of force and
effect;
2.
Directing the respondent to provide the
applicant with vacant possession of portions A and B of the remainder
of farm 31 Coffee
Bay, Mqanduli by
inter
alia
evicting from the property any
unlawful occupiers;
3.
Directing the respondent to take all
steps necessary to assist the applicant in causing the lease
agreement to be embodied in a
notarial deed and registered against
the title deeds of the property within seven days of being called
upon by the applicant to
do so;
4.
Directing the respondent to pay the
costs of this application.
[25]
The
applicant contends that the aforesaid relief does not make provision
for the eviction of the Bothas but simply seeks to enforce
its common
law and contractual rights against the respondent. To state it
differently, it is contended that execution in terms
of a successful
application does not entail the eviction of the Bothas, and
accordingly does not prejudice them, nor do they have
a direct or
substantial interest in the outcome of this litigation.
[26]
I
am inclined to agree with the applicant. There is a distinction
to be drawn between the application before me, and that
which the
respondent brought in the Mthatha High Court. In that matter, the
respondent before me sought to evict the South African
College of
Tourism, being an institution which was, at the time, in occupation
of the Ocean View Hotel (being portion A of the
property described as
parcel 31). According to the papers the College voluntarily
vacated the Hotel, whereafter the respondent
sought to execute
against the Bothas who were occupying portion B of parcel 31 (the
Nenga River Lodge). As pointed out by
Mr Leon Botha in his
affidavit in support of an interdict preventing the respondent from
evicting him, he was not joined as a party
to those proceedings
wherein an actual eviction order was granted, nor did he derive his
occupation of portion B of the property
from those occupying portion
A.
Significantly,
the
default judgment refers to the Ocean View Hotel only, and not the
entire parcel 31. It accordingly does not surprise
me that the
respondent was constrained to give the Bothas an undertaking not to
evict them in response to the Mthatha order.
[27]
In
the matter before me however, the applicant seeks to enforce the
terms and conditions of a contract between itself and the respondent,
and has not, in these proceedings, attempted to seek consequential
relief directly or indirectly implicating the Bothas.
[28]
In
the premises I am satisfied that the applicant’s failure to
join the Bothas in these proceedings is not fatal to the main
application. Nor, for that matter is the problem which the
respondent alleges it is experiencing with the State Attorney.
On its own version, and at best for it, the respondent seems in these
instances to be relying on temporary impossibility. Temporary
impossibility does not automatically bring the contract to an end.
Such termination depends on factors such as the materiality
of the
term involved and whether final impossibility is inevitable.
[17]
This is not the respondent’s case. It
s
deponent says otherwise. I repeat the last two lines of the
previously quoted passage from its affidavit
[18]
:
‘
Besides
receiving certain queries from the State Attorney, no consent has as
yet
(my
emp
hasis
) been forthcoming.
It
is hoped that the necessary consent
will
be forthcoming shortly
(my emphasis).’
[19]
[29]
I
now turn to the claim in reconvention.
The
counter application: delay and prospects of success
[30]
The
respondent has applied for the review and the setting aside of its
own decision to conclude the lease agreement on two grounds.
Firstly, that Sentwa was not authorised to sign the agreement
amounting to failure to comply with internal prescripts
[20]
,
and secondly, that the agreement was entered into in disregard of the
statutory framework applicable in terms of the Constitution,
in that
the lease was not put out to tender, and the agreed rental was out of
sync with a market related price.
[31]
It
is common cause that the review which forms the subject matter of the
claim in reconvention deals with the question of legality,
and
accordingly the 180-day period within which a review application must
be brought in terms of PAJA
[21]
does not apply to it.
[22]
It must nevertheless be brought within a reasonable period of time.
[32]
The
test enunciated by the Supreme Court of Appeal in
Gqwetha
[23]
for
assessing undue delay in bringing a legality review application was
endorsed by the Constitutional Court in
Khumalo
v Member of the Executive Council for Education, KwaZulu Natal
[24]
(hereinafter
referred to as the
Khumalo
test).
Firstly, the court must determine whether the delay is undue or
unreasonable. Secondly, if the delay is found to have been
unreasonable, the court nevertheless has the discretion to overlook
the delay and to entertain the application.
[33]
The
agreement was concluded on 20 December 2016. The application to
have it set aside was launched eight months later, on
28 August 2017,
by way of a counter application to the applicant’s claim. It is
contended on the respondent’s behalf
that the respondent was
only alerted to fully investigate the circumstances leading up to the
conclusion of the agreement when
the applicant launched the present
proceedings in June 2017. Thereafter it obtained legal
assistance and the opinion of senior
counsel who advised the
respondent that the decision to conclude the lease agreement fell to
be set aside, and that the respondent
should seek an order declaring
the lease to have been unauthorised and unlawful. This was on
10 August 2017. Apparently the
respondent had also, during this time,
embarked upon an investigation into Sentwa’s conduct which
culminated in the decision
to institute disciplinary proceedings
against him, and which required the formulation of an appropriate
charge sheet.
[34]
It
is contended on the respondent’s behalf that at the time it
deposed to its joint answering affidavit in the main application
and
founding affidavit in support of the counter application, the
Constitutional Court had not yet handed down the judgment in
Gijima
which confirms that although organs
of state are entitled to bring self-reviews, these reviews do not
fall within the purview of
PAJA. It is nevertheless contended
before me that the 18
0
day cut-off
period remains a useful guideline as to what may be considered a
reasonable delay, and that if the delay had been
measured
in terms of PAJA, the 180
day period
would have expired on 20 June, just short of two months before the
counter application was delivered, and just over two
weeks after
counsel’s advices were obtained.
[35]
I
am not sure if I agree with the reasoning behind this argument. Nor
does it assist the respondent. As pointed out by Theron J
in
Buffalo
City Metropolitan Municipality v Asla Construction (Pty) Limited
[25]
,
there
is a distinction between a legality review and a PAJA review. This
distinction was described by the Supreme Court of Appeal
in
Opposition
to Urban Tolling Alliance v South African National Roads Agency
[26]
,
which found that s 7 of PAJA 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 a court is only empowered
to entertain a 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
the decision
was unlawful no longer matters. The decision has been
‘validated’ by the delay.’
[36]
This
being the position, it seems that the 180
day
bar in PAJA (whilst having been referred to as a guideline) does not
play a determinative or even a persuasive role in legality
matters.
Reverting to the common law, the first hurdle with respect to delay
is one of reasonableness; the second, whether it is
in the interests
of justice to overlook an unreasonable day. This also means
that whilst a substantive application for condonation
is not
required, the delay must be fully explained for the court’s
consideration and application of the two-step
Khumalo
test.
[37]
In
deciding whether the delay was reasonable, I am constrained to
consider the explanation offered therefor.
[27]
If there is an explanation, it must cover the entire period of the
delay.
[28]
[38]
I
now return to the facts and circumstances of this matter. To my mind
the respondent has lost sight of the fact that Sentwa’s
notice
of the disciplinary enquiry (dated 4 August 2017) sets forth a charge
of gross insubordination, in that as far back as 20
March 2017 he was
given two weeks to remedy his alleged unauthorised signing of the
lease during December 2016. Having failed
to do so by 7 May
2017 (some seven weeks later), he was given a further reminder which
he also ignored. I am of the view that the
initial dilatoriness on
Sentwa’s part, ought to have been sufficient cause for the
respondent, of its own volition, to have
taken the first steps to
have the agreement reviewed, say by no later than 7 May 2017. It made
no attempt whatsoever to do so.
It has not explained why no such
attempt was made. To my mind, its failure to do so at that point or
at least forthwith thereafter,
is per se unreasonable in
circumstances
such as these.
A
delay does not have to be particularly long for it to be undue or
unreasonable. Whether it is depends on the facts and the
circumstances of
each case
.
[39]
The
respondent has also not explained the lengthy delay between 7 May
2017 and 28 August 2017, when it sought what has been termed
“
reactive self-review
”
for the first time, by all accounts, to avoid the applicant’s
claim. In my view, the delay was unreasonable.
[40]
This
raises the second question whether this court should not, in any
event, in the exercise of its discretion and having due regard
to the
interests of justice, 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 or from objectively
available factors.
[29]
Courts have in general exercised a more flexible approach
to
overlooking delay in self-review proceedings. The approach
entails a legal evaluation taking into account factors such as
potential prejudice and the consequences of setting aside the
impugned decision. These factors may, in certain circumstances,
be ameliorated by the court’s power to grant a just and
equitable remedy. Whilst a court must declare conduct which it finds
to be unconstitutional invalid, it need not necessarily set the
conduct aside.
[30]
[41]
A
further factor relevant to overlooking the delay is the nature of the
impugned decision. As stated in
Khumalo
,
this, in essence, requires a consideration of the merits of the legal
challenge to that decision.
[31]
[42]
Another factor to consider is the
conduct of the party claiming self-review, particularly when that
party is a government organisation
wholly-owned by provincial
government, as in the matter before me. As Cameron J so aptly
commented 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.’
[32]
[43]
The
applicant has opposed the granting of condonation
,
or to put it more correctly,
it
has contended that this court should not overlook the delay. In
support of such opposition, counsel has referred me to the matter
of
Aurecon
South Africa (Pty) Ltd v City of Cape Town
[33]
where the general approach to condonation is restated as follows:
‘
Whether
it is in the interests of justice to condone a delay depends entirely
on the facts and circumstances of each case. The relevant
factors in
that enquiry generally include the nature of the relief sought, the
extent and cause of the delay, its effect on the
administration of
justice and other litigants, the reasonableness of the explanation
for the delay which must cover the whole period
of the delay, the
importance of the issues to be raised and the prospects of success.’
[44]
Taking
this background into account, the respondent’s explanation
(that it only became aware of Sentwa’s conduct in
June 2017
when this application was brought) is in my view disingenuous and
does not encourage this court to readily and reasonably
come to its
assistance. Neither does it cover the entire period of the delay. It
seems to me, on a conspectus of the respondent’s
version alone,
that the only thing which materially prompted it to launch the
counter application was because it had been compelled
and propelled
by the applicant’s institution of these proceedings, to explain
its conduct, furnish answers to the applicant’s
claims and make
an attempt to put its house in order.
[45]
It is also not in dispute that at the
latest from March 2017 onwards, the applicant had made concerted
efforts to enforce the provisions
of the lease agreement. Indeed, the
content of the attorney’s letter written on the applicant’s
behalf on 13 March
2017 (addressed to the respondent’s chief
executive officer who is also the deponent to its affidavit) is
instructive.
It reads as follows:
‘
Dear
Sir
AGREEMENT
OF LEASE EASTERN CAPE DEVELOPMENT CORPORATION / BW BRIGHTWATER PROPS
(PTY) LTD
PORTION
A & PORTION B OF THE REMAINDER OF FARM 31, COFFEE BAY, MQANDULI
The
ECDC and our client concluded an Agreement of Lease in respect of the
above property on the 20
th
December 2016.
One
of the material terms of the Lease Agreement contained in Clause 5.3
is: “the Lessor was to give the Lessee vacant and
undisturbed
occupation and possession of the entire premises, on the commencement
date which shall be subject to the eviction of
any illegal occupant,
from which date the premises shall be at the sole risk and profit of
the Lessee.” Our office has addressed
correspondence to your
offices regarding its obligation to evict the “illegal
occupant” from a portion of the premises.
We attach herewith
copies of our emails dated 17
th
February 2017 and 7
th
March 2017 which were addressed to Advocate Kunene offices. We have
not had a response from Advocate Kunene nor has the “illegal
occupant” been evicted from the portion of the premises.
Our
letter is addressed to you in terms of Clause 27 of the Lease
Agreement which deals with “Dispute Resolution”. You
will
note from Clause 27.2 that the “dispute” is to be
referred to the Chief Executive Officer of the ECDC who is to
act as
mediator. This letter serves as a referral in terms of Clause 27.2 of
the Lease Agreement requesting you to mediate this
matter.
You
will note further that in terms of Clause 27.4 you are required to
resolve the dispute within 7 (seven) days of receipt
of this
referral.
In
the circumstances kindly acknowledge receipt of this referral and
confirm that you will address the dispute with the relevant
urgency.’
[46]
Receipt
of the letter was acknowledged the following day. It appears
that it was in reaction to this letter that Sentwa was
instructed by
the CEO on 20 March 2017 to remedy his conduct relating to the
lease agreement, but when he failed to do so,
the respondent likewise
failed to take appropriate legal steps to set aside his conduct.
Instead, it adopted what counsel refers
to as the typically ‘supine
attitude’ which the Supreme Court of Appeal warned against in
Associated
Institutions Pension Fund v Van Zyl
[34]
where
Brand JA said the following:
[51]
In my view there is indeed a duty on applicants not to take an
indifferent attitude but rather to take all reasonable steps
available to them to investigate the reviewability of administrative
decisions adversely affecting them as soon as they are aware
of the
decision. These considerations are, in my view, also reflected
in both s 7(1) of PAJA and in the provisions
of
s 12(3)
of the
Prescription Act 68 of 1969
. Whether the applicants in a
particular case have taken all reasonable steps available to them in
compliance with this duty,
will depend on the facts and circumstances
of each case. (Compare
Drennan Maud & Partners v Pennington
Town Board
[1998] ZASCA 29
;
1998 (3) SA 200
(SCA).)
[47]
Of
relative significance is the importance of the claim in reconvention
to the respondent. It is not in dispute that the applicant’s
Ian Crawford has been operating the hotel on the property since 1
March 2012. There is nothing on the papers to suggest that
he
was ever wilfully in, or suspected or accused of having been in
unlawful occupation. Indeed, it appears from the papers
that it
is only the Bothas’ occupation that is described throughout as
unlawful. The respondent’s response to the applicant’s
first letter complaining about the Bothas (having averred that it had
called upon Sentwa to remedy the unauthorised signing of
the lease
before it responded to this letter), was not to draw the alleged
unlawfulness of the lease to the applicant’s attention.
On the contrary, for all intents and purposes, the letter, drafted by
the respondent’s attorneys, relie
d
upon a valid lease containing a suspensive condition, which had
lapsed due to the purported non-fulfillment of this condition.
[48]
When
the applicant took issue with this response and the interpretation of
the lease some two weeks later, the respondent again
made no
reference to the unlawfulness of the lease and the pending
disciplinary enquiry against its officer for signing it.
According to the respondent, it simply “chose” not to
respond to this letter. Indeed, the applicant heard for
the
first time that the lease was ostensibly signed by an employee who
was not authorised to do so, by virtue of the respondent’s
claim in reconvention to the legal proceedings which the applicant
was constrained to institute to enforce compliance with certain
terms
of what, by all accounts, purported to be a
bona
fide
lease agreement.
[49]
The
respondent’s intransigent conduct, in the circumstances, does
not strike me as being demonstrative of a state organ which
is
particularly perturbed by the status quo and which is trying its best
to get its house in order. Nor does it appear to
have viewed
the alleged unlawfulness as having been demonstrably serious. How it
intended to rely upon Sentwa to correct the position
is anybody’s
guess. If, what Sentwa had done smacked of manifest
unlawfulness in gross contravention of the Constitution,
this to me,
would have been a perfect opportunity for seeking early redress in
the form of self-review:
‘
The
delay rule should not be viewed solely through the ancestor lens of
common law review, but through our constitutional lens in
which
legality review serves to promote open, responsive and accountable
government.’
[35]
[50]
Applicant’s
counsel has argued that the potential prejudice to the applicant if
this agreement is set aside at this stage
is of dynamic proportions.
Crawford has been managing the Ocean View Hotel since 2012. He
has built it up and refurbished
it with the concurrence of the
respondent, who has, for all intents and purposes, regarded and
treated him as a legal tenant.
He discharged his obligation to
complete the conference centre project (at a cost of some R2 million)
in terms of the lease agreement.
Despite him having been
advised (wrongly by all accounts on the respondent’s current
version), that the respondent had failed
to perform in terms of the
contract due to a suspensive condition therein that had not been
fulfilled, the respondent also made
no efforts to have the contract
set aside at its earliest opportunity, as it now seeks to do.
It is contended that the consequences
of now setting aside the
impugned decision, to satisfy the respondent’s knee-jerk
reaction to the applicant having innocently
drawn attention to the
agreement in the course of attempting to enforce one of its
conditions, would be manifestly unfair and prejudicial
to the
applicant.
[51]
On
the other hand the respondent’s deponent has submitted that:
‘…
the
interest of justice requires that the unlawful agreement be set
aside, more particularly where prime land and structures belonging
to
the State and which are utilized for hotel and tourism purposes be
set aside, more particularly having regard to the inordinate
period
granted in terms of the agreement of lease and the far below market
rental recorded in the purported agreement of lease.
Such
a valuable hotel site on the Eastern Coast of South Africa should be
utilized for the benefit of all and in particular, the
State should,
in consideration for granting a private entity the right to conduct a
lucrative business from such valuable properties,
receive market
related and adequate compensation for the right to occupy and run the
business.’
[52]
As
I have said, the potential prejudice to affected parties and the
consequences of declaring conduct unlawful may in certain
circumstances
be ameliorated by the court’s power to grant a
just and equitable remedy, and this should also be taken into
account:
‘
Under
the Constitution, however, the requirement to consider the
consequences of declaring the decision unlawful is mediated by
a
court’s remedial powers to grant a ‘just and equitable’
order in terms of section 172(1)(b) of the Constitution.
A court has
greater powers under the Constitution to regulate any possible unjust
consequences by granting an appropriate order.
While a court must
declare conduct that it finds to be unconstitutional invalid, it need
not set the conduct aside.’
[36]
[53]
Another important factor to consider is
the nature of the decision made by the respondent to enter into a
lease agreement with the
applicant, without invoking the prescripts
of section 217 of the Constitution. I hasten to mention that
the applicant has
not conceded that the respondent’s conduct in
entering into the lease agreement in the manner in which it was done,
was in
any way unlawful or egre
gious.
[54]
The
upshot of all of this then, is that even if there is no basis for a
court to overlook an unreasonable delay, the court may nevertheless
be constitutionally compelled to consider whether the impugned
decision is so clearly and indisputably unlawful that it attracts
a
declaration of invalidity. Once again, this will depend on the
circumstances of the case. This is so because section 172(1)(a)
of
the Constitution enjoins a court to declare invalid
,
without hesitation,
any law or conduct that it finds to be inconsistent with the
Constitution.
[37]
The
effect of the Asla judgment
[55]
Before
the
Asla
judgment,
the court enjoyed a discretion, albeit limited, whether to pronounce
administrative action invalid. Indeed, this view
still pertains in
the
A
sla
dissenting minority view.
[38]
[56]
The
majority in
Asla
concluded
that the delay had been unreasonable and that there was no basis upon
which it could be overlooked. In this regard Theron
J said the
following:
‘
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.’
[39]
[57]
Despite
having reached this conclusion, the Court nevertheless found that on
the authority of
Gijima
,
it
must, having established that the contract in question was
clearly
unlawful on undisputed facts
(emphasis
added), declare it invalid in terms of the provisions of section
172(1)(a) of the Constitution and set it aside.
[40]
To motivate this decision, the Court held that “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.” It accordingly
made an order
declaring the contract in question invalid, but not setting it aside
so as to preserve the rights to which the respondent
might have been
entitled. In so doing the Court said the following:
‘
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.’
[41]
[58]
Writing for the minority, Cameron J and
Froneman J suggested an alternative route. The route suggested was,
that in the absence
of adequate explanation for unreasonable delay,
courts should not intervene to
“
inquire
into a final and determinative holding into unlawfulness
”
,
unless the seriousness of the unlawfulness at issue warrants
overlooking the manifest deficiencies in the state actor’s
case.
[59]
In certain respects pertaining to issues
of legality, I am inclined to agree with the ends which are sought to
be achieved as expressed
in the majority judgment. In
interpreting and applying the various principles which I have made
reference to, the purpose
ought to be to balance the objectives of
the rules or principles relating to delay with the constitutional
objectives of declaring
unlawful conduct to be exactly that. In
Khumalo,
Skweyiya
J expressed the principle to be applied, as follows:
‘
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.’
[42]
[60]
In
Department
of Transport v Tasima (Pty) Limited
[43]
,
the
Constitutional Court reaffirmed the principle that a court should be
slow to allow procedural obstacles to prevent a scrutiny
of a
challenge to the exercise of public power, but nevertheless went on
to emphasise that it is a principle 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.’
[61]
It
is the respondent’s case that the lease agreement ought to be
set aside because the peremptory public participation and
a
competitive system in line with the principle of legality provided
for in s 217(1) of the Constitution was not applied. Section
217
reads as follows:
‘
217.
Procurement
– (1) When an organ of state in the national,
provincial or local sphere of government, or any other institution
identified
in national legislation, contracts for goods or services,
it must do so in accordance with a system which is fair, equitable,
transparent,
competent and cost-effective.’
[62]
The
respondent contends that it can never be said in the present instance
that a competitive system was employed in that the contract
was not
put out to tender, so to speak, and that there has accordingly not
been compliance with legislative prescripts such as
section 217 of
the Constitution, the Preferential Procurement Policy Framework Act 5
of 2000 (“the PPPFA), The Public Finance
Management Act 1 of
1999 (“the PFMA”) , Treasury Regulations published in
terms of the PFMA, and the respondent’s
very own Property
Policy and Procedure Manual.
[63]
The
authors Penfold and Reyburn
[44]
are of the view that the word “contracts” in s 217 would
probably exclude contracts where the State is providing (as
opposed
to procuring) the goods or services or other forms of benefit (as in
the matter at hand). Thus, according to the
authors, where the
State wishes to lease out its property, s 217 probably does not
apply. The authors contend that this interpretation
is consistent
with the heading of s 217
viz
“procurement”. The writers also refer to article 2 of the
UNCITRAL Model Law on Procurement of Goods, Construction
and
Services, 1994, which defines “procurement” as the
acquisition of goods, construction or services.
[64]
Dr
Phoebe Bolton
[45]
on the other hand, submits that the word “contracts” in s
217 refers to those instances where an organ of state contracts
for
the acquisition of goods or services
and
when
it contracts for the sale and letting of assets (as in the matter
before me). Dr Bolton contends that the non
application
of principles of fairness, equity, transparency, competitiveness and
cost-effectiveness to the letting of government
assets would not be
warranted by logic. The whole rationale for prescribing a system that
complies with these principles would
be defeated if the principles
were to apply only to instances where organs of state contract for
the acquisition of goods and services,
and that the non
application
of these principles to letting and sale would be an unfortunate
exclusion. The public, as taxpayers, have a right to
procurement
procedures that comply with the principles in s 217 whenever the
s
tate
contracts, whether it is acquiring goods and services or whether it
is selling or letting assets. This is particularly
so because
the disposal of state property or the letting out thereof has been
held to constitute administrative action within the
meaning of s 33
of the Constitution, and must accordingly be executed in a manner
which is just, lawful, reasonable and procedurally
fair.
[46]
[65]
According
to Bolton, even though s 217 is headed “procurement”, the
term should be given a wide interpretation and should
be read as
referring to both instances when an organ of state contracts to spend
funds and when it contracts to receive funds.
[47]
[66]
Section
217 deals specifically with the procurement of goods and service by
way of contract. It specifies that such procurement
must be in
accordance with a system which is fair, equitable, transparent,
competitive and cost-effective. No doubt, these systems
should allow
for a certain degree of flexibility provided the aforesaid five
ingredients are present.
[67]
In
a
pplying
a literal or grammatical interpretation to the section, and having
regard to the ordinary or dictionary meaning of the words
therein, I
have some difficulty in accepting that the clear and simple wording
in section 217 standing alone also incorporates
the letting, selling
and disposal of state assets. Although I tend to agree with Bolton
that “contracts” is intended
to be a verb, I fail to see
why the section would not have extended the verb from its present
frame of reference (which is the
expenditure and the
output
of
public funds at a level which serves the best interests of the tax
payer) to the opposite frame of reference (which needs be
must give
effect to the respondent’s policy of
letting
out
property
to which it has legal title, at a market
related
value in order to contribute to the respondent’s income and
profitability).
[48]
I do not suggest that the one is not as important as the other.
On the contrary, they are both equally important and
to that extent,
equal and relevant legislative recognition must be sought (elsewhere
if necessary). Only if none can be found
would it be incumbent
for the purposes of interpreting section 217 to not only “read-down”
but to also “read-in”,
using tools such as purposive,
historical and contextual interpretation in conjunction with literal
interpretation. According
to the learned authors Currie and
others, reading-down is a method of statutory interpretation which s
39(2) of the Constitution
demands of every court and other tribunal
or forum. The purpose is to avoid inconsistency between the law
and the Constitution.
The technique is limited to what the text
is reasonably capable of meaning. Reading-in on the other hand,
is a remedy which
is usually granted by a court after concluding that
a portion or portions of a Statute are constitutionally invalid.
The
Constitutional Court has stamped its approval upon giving the
green light to the reading of words into a statute, which it
considers
to be a corollary to the remedy of severance.
[49]
[68]
In
Chief
Executive Officer, SA Social Security Agency NO & others v Cash
Paymaster Services (Pty) Ltd
[50]
,
the
SCA held that it is implicit in the provisions of section 217(1) of
the Constitution that “a system” with the attributes
contemplated therein “ has to be put in place by means of
legislation or other regulation. Once such a system is in place
and
the system complies with the constitutional demands of section 217(1)
the question whether any procurement is ‘valid’
must be
answered with reference to the mentioned legislation or regulation.”
[69]
Counsel for the applicant contends that
the relevant system is to be found at regulation 16A7 of the Treasury
Regulations which
is specifically entitled ‘
Disposal
and letting of state assets’
in
no uncertain terms. As I understand it, counsel contends that it is
accordingly not necessary to apply reading-in to section
217, because
the principles which provide for disposal and letting (as opposed to
procurement) are already clearly set forth in
the Treasury
Regulations. This, being the only regulation which deals
specifically with the letting of state assets, reads
as follows:
‘
The
letting of immovable state property (excluding state housing for
officials and political office bearers) must be at market-related
tariffs, unless the relevant treasury approves otherwise. No state
property may be let free of charge without the prior approval
of the
relevant treasury.’
[70]
As
a corollary,
the argument is developed to
suggest that it is plain that the only requirement imposed by
Treasury as constituting a system
for the letting out of state-owned
assets is market related rental. I am inclined to think that the
argument would seem to suggest
that once it is agreed that the rental
is market related, it follows that the use of a system which is fair,
equitable, transparent,
competitive and cost-effective has been
invoked.
R
ental which is market
related would no doubt go some way towards supporting the type of
governing system which s 217(1) envisages
for procurement, only with
the government in the position of creditor as opposed to debtor.
[71]
Clearly
interpreting s 217 as applying to procurement only in the literal
sense, does not mean that public bodies are entitled to throw
caution
to the wind when dealing with other public funds, particularly
income. That could never have been the intention of
the
drafters of chapters 2 and 13 of the Constitution and subordinate
legislation and regulations. That is why the Treasury Regulations
make a point of traversing the sale and letting of state assets in no
uncertain terms. Having said that, I agree with the view
that the
most emphatic manner in which an organ of state can demonstrate the
application of the five principles set forth in s
217, is through a
public, transparent tender process in which all tenderers are treated
fairly and equitably. A public tender is
undoubtedly the preferred
means of engaging in public procurement
and
facilitating
public participation and competition, although it does not mean that
the use of a tender process is always required in order to
comply
with s 217.
[51]
[72]
Both the Treasury Regulations and the
PFMA regulate the management of finances in provincial government.
They set out the
procedures for efficient and effective management of
both revenue and expenditure, and both assets and liabilities.
The PFMA
in particular establishes the duties and responsibilities of
government officials in charge of finances. The Act is clearly
aimed, as is the procurement policy set forth in s 217, to secure
transparency, accountability and sound financial management in
government and public institutions. The National Treasury is the main
body that oversees the implementation of the NFMA. In this
regard it
prescribes norms and standards to promote transparency and
accountability.
[73]
The respondent’s own Property
Policy and Procedure Manual also states that
the purpose of letting out its property is to contribute to its
income and profitability.
The rider is that property will be rented
out at a market
related value. It goes
without saying that in letting out its property at nothing less than
market
related rental, the respondent
must be transparent and allow as many market
related
tenders
as possible, in order, at the
end of the day, to take advantage of the highest market
related bid.
[74]
It is common cause that in the matter
before me, despite protracted and intense negotiations between the
parties before the lease
was entered into, this was
undoubtedly
an
exclusive deal. These were closed and
private
negotiations. The applicant had a sole
mandate.
[75]
The applicant contends that it has gone
to great lengths to show that the rental in question is market
related, when the onus is
on the respondent to prove that it is not.
This may well be the case. It is also undoubtedly so that
negotiations between the parties
were lengthy and protracted and
involved participation at various levels of functioning. The
respondent’s case that the agreed
upon rental is not market
related as contemplated in Treasury Regulation 16A.7.4, is yet
another bald averment which stands
totally unsubstantiated. Indeed,
the respondent has made
little effort
to
comprehensively illustrate what a market related price was or
presently is. On the other hand the applicant went to some
lengths to put up the results of valuations, in particular after
Crawford had improved the property, and to place on record the
respondent’s own version with respect to market
related
rental after improvements had been effected. It appears from the
applicant’s papers that on 10 March 2016 the respondent
adopted
a resolution that monthly rental would be no less than R30 000,00
based on a valuator’s report that fair rental
would be in the
region of R44 000,00 for the property (taking into account that
the applicant had already
effected substantial improvements).
The rental was furthermore to escalate by ten per cent per annum,
which according to the applicant, was two to three per cent above
the
norm.
[76]
Despite all of this, I am constrained to
agree with the argument advanced on behalf of the respondent. It is
simply this. The relevant
Treasury Regulations are those published in
GNR225 of 15 March 2005. Regulation 16A deals definitively with
supply chain management.
In terms of regulation 16A.2 these
provisions are of application to the respondent. In terms of
regulation 16.A.3.2 the supply
chain management system must be fair,
equitable, transparent, competitive and cost effective (a duplicate
of what is set forth
in section 217 of the Constitution).
[77]
Whilst counsel for the applicant’s
argument (that market related rental is the only requirement) is
compelling, it falls short
of being persuasive, particularly in the
light of a liberal interpretation of the Constitutional imperatives
pertaining to public
funds.
[78]
Having
come to this conclusion, it is not necessary for me to make a finding
with respect to the argument that the respondent’s
signatory is
estopped from now relying on lack of authority. On the facts
which are common cause or not hotly disputed, the
argument against
estoppel would not have availed the respondent if I were to find that
the agreement was a valid one. The
doctrine of estoppel may not
however be used to make legal what would otherwise be illegal and
cannot replace statutory requirements
for the validity of
contracts.
[52]
Once it is found that the agreement entered into between the parties
lacked the ma
kings
of being at the very least transparent and competitive (even if the
rental was market related), the agreement falls foul of being
constitutionally valid.
[79]
Sadly for the applicant, the
probabilities favour such a finding. That being the case, this court
is bound by the majority decision
in
Asla.
It does not have the discretion to
dismiss the respondent’s counter
application
on the question of delay only, even when it is clear that the
application for self-review is purely a reactive one.
[80]
I am mindful however that in
Asla
it was pointed out that a refusal to
set aside the impugned contract would curiously have had the
unsavoury result of allowing the
errant organ of state to benefit
from its own delay. This is not the position in the case before me.
On the other hand,
the application of
justice
and equity
to
the circumstances before
me, does not dictate both invalidating and entirely setting aside the
impugned lease agreement.
I have sympathy for the fact that the
applicant was, in a manner, misled into believing that the respondent
had the power to enter
into an agreement with it, without any
transparent and open recourse to public participation at the very
least. This is most regrettable.
The applicant’s indignation at
the 11
th
hour reactive stance
adopted by the respondent is understandable.
[81]
According
to s 172 of the Constitution I have limited choices in making an
appropriate order. The section reads as follows:
‘
When
deciding a constitutional matter within its power, a court –
(a)
Must declare that any law or conduct
that is inconsistent with the Constitution is invalid to the extent
of its inconsistency;
And
(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)
An order suspending the declaration of
invalidity for any period and on any conditions, to allow the
competent authority to correct
the defect.’
[82]
With
th
is
in mind, I intend making an order
that is just and equitable, insofar as the particular circumstances
of this case and the Constitution
permit me. I
t is
evident that
I am constrained to declare the
conduct embarked upon by the respondent, (in concluding a lease
agreement with the applicant without
setting a reserve price of
market related rental, and/or without referring to market related
rental, and without following a transparent
procedure of public and
competitive participation in agreeing on the terms, conditions and
price of the lease) invalid
.
However,
I have a discretion not to set the agreement aside in an attempt
to preserve the rights which have accrued to the applicant in terms
of the lease. As stated in
Asla
,
such an award is intended to preserve rights which have already
accrued to the applicant in terms of the agreement, but do not
permit
the applicant to obtain further rights under the invalid agreement.
Costs
[83]
Had
the respondent not delivered a reactive self-review counter
application, I would have
given serious
consideration to entering
judgment in the
applicant’s favour. Further, if the respondent
’s
counter application had relied solely on the signatory’s lack
of authority, I would also, in all likelihood (and
by virtue of the
application of the principles of estoppel and the Turquand rule) have
found in the applicant’s favour.
In
my view this is relevant to the order I intend making. It is
for this reason that I devoted a portion of this judgment
to
traversing the merits of the main application, despite the fact that
this court cannot, to my mind, grant the application specifi
c
performance in the furtherance of a constitutionally invalid
contract. To do so would be to make a mockery of the rule of law
and
the democratic values enshrined in the Constitution.
[84]
Having
said this, I am nevertheless of the view that the applicant should
not be mulcted with the costs of an application which
it brou
ght
in good faith and in the absence of any indication that the
respondent would invoke reactive relief under the principle of
legality. The applicant should also not be mulcted in costs for
relying, inter alia, on the ground of undue delay for resisting
the
counter application. I have no reason to believe that this ground of
opposition was not well founded and reasonable, particularly
in that
it was prosecuted before the
Asla
judgment was handed down.
Ironically, the respondent has only the applicant to thank for the
intervention of this court on the question
of the validity of the
agreement. The respondent itself has made the barest of efforts to
cure its position in this regard. Notwithstanding
the invalidity of
the agreement, the respondent should not be seen to benefit from
having given the applicant false assurances
around the legality of
the agreement, and for sitting idly by until the applicant took legal
action.
[85] The
fact that the respondent will achieve nominal success to the extent
that a declaration
of constitutional invalidity is bound to follow,
should not affect the question of costs. Substantially, and not
unlike the position
in
Gijima,
it is the applicant that
succeeds. I say so because it is obvious that the respondent’s
belated efforts were directed at avoiding
an otherwise binding
agreement, whereas the applicant, on the other hand, in good faith
took legal action in seeking to enforce
it. For what it is worth at
the end of the day, and to the extent that the applicant at the very
least is not to be divested of
its accrued benefits of the contract,
the applicant has been successful.
[86]
I make the following order:
(a) The main
application is dismissed.
(b) The
counter application succeeds only to the extent that the lease
agreement concluded between the parties on 20
December 2016 with
respect to portions A and B of the remainder of farm 31 Coffee Bay,
Mqanduli, is declared constitutionally invalid.
(c) The order of
constitutional invalidity in paragraph (b) above does not have the
effect of divesting the applicant of any
rights to which it is
entitled under the lease contract, but for the declaration of
invalidity.
(d) The
respondent is directed to pay the costs of both the main application
and the counter application.
__________________
I.T.
STRETCH
JUDGE
OF THE HIGH COURT
Counsel
for the applicant:
R.
Quinn SC instructed by Russel Linde Attorneys
Counsel
for the respondent:
A.
Beyleveld SC instructed by BNI
Attorneys, care of Gravett Schoeman Inc.
Date
heard: 1
7
April 2019
Judgment
handed down: 26 July 2019
[1]
Nenga River Lodge, Leon Botha and those occupying under or through
him will hereafter collectively be referred to as “the
Bothas”.
[2]
For ease of reference BW Bright Water Way Props (Pty) Ltd will be
referred to as the applicant and the Eastern Cape Development
Corporation will be referred to as the respondent throughout this
judgment.
[3]
The property was originally registered in the name of the South
African Bantu Trust which was succeeded by the Minister of Rural
Development and Land Reform. It effectively belongs to the
Government of the Republic of South Africa. The respondent has
custodial rights to the property.
[4]
According to Crawford he was aware of the pending eviction
proceedings against the Bothas when he acquired the shares in Wild
Coast Holdings, and had factored their imminent eviction into the
bargain when he acquired the shares.
[5]
According to the respondent Sentwa’s act of
entering into a lease agreement was contrary to the legislative
prescripts relating to the disposal or the letting of the
respondent’s property, and his conduct is subject to a
disciplinary
enquiry.
[6]
See
Nkengana
and another v Schnetler and another
[2011] 1 All SA 272 (SCA)
[7]
See
Grand
Mines (Pty) Ltd v Giddey NO
1999 (1) SA 960 (A)
[8]
See for example
Legator
McKenna Inc v Shea
2010 (1) SA 35 (SCA)
[9]
Morsner
v Len
1992
(3)
SA 626 (A)
[10]
See
MAN
Truck & Bus (Pty) Ltd v Dorbyl Ltd
2004 (5) SA 226 (SCA)
[11]
See
Qwa
Qwa Regeringsdiens v Martin Harris & Seuns OVS (Edms) Bpk
2000 (3) SA 339 (SCA)
[12]
See
Thompson
v Scholtz
[1998] ZASCA 87
;
1999 (1) SA 232
(SCA) at 247A-D
[13]
See
BK
Tooling (Edms) Bpk v Scope Precision Engineering (Edms) Bpk
1979 (1) SA 391 (A)
[14]
See
HA
Millard & Son (Pty) Ltd v Enzenhofer
1968 (1) SA 330
(T)
[15]
See
Transvaal
Agricultural Union v Minister of Agriculture and Land Affairs
2005 (4) SA 212
(SCA) at 226F-227F
[16]
Absa
Bank Ltd v Naude NO
2016 (6) SA 540
(SCA) at 542I – 543C
[17]
See
World
Leisure Holidays (Pty) Ltd v Georges
2002 (5) SA 531 (W)
[18]
At para [5] of this judgment.
[19]
Paras 8.26, 8.31, 8.32 and 8.33 of the respondent’s answering
affidavit in the main application.
[20]
According to the respondent’s Property Policy and
Procedure Manual
[21]
Section 7(1)
of the
Promotion of Administrative Justice Act 3 of
2000
[22]
See
State
Information Technology Agency SOC Ltd v Gijima Holdings (Pty) Ltd
2018 (2) SA 23 (CC)
[23]
Gqwetha
v Transkei Development Corporation Ltd
2006 (2) SA 603
(SCA )at para 33
[24]
2014 (5) SA 579
(CC)
[25]
As
yet u
nreported
judgment dated 16 April 2019 (case CCT 91/17); neutral citation
[2019] ZACC 15
at
[49]
. This judgment
became
available
after the application was argued before me, which resulted in me
affording both parties the opportunity to submit written argument
(which they did) dealing with the effect of this judgment, if any,
on the facts and circumstances of this application.
[26]
[2013] ZASCA 148
;
[2013] 4 All SA 639
(SCA) at 26
[27]
Khumalo
(supra) paras 49-51
[28]
See
Department
of Transport v Tasima (Pty) Limited
2017 (2) SA 622
(CC) para 153
[29]
Gijima
above para 44.
[30]
Khumalo
above paras 53 and 56;
Asla
above
para 54.
[31]
Para 57.
[32]
Neutral citation:
MEC
for Health, Eastern Cape and Another v Kirland Investments (Pty) Ltd
[2014] ZACC 6
[82]
[33]
[2016] 1 All SA 313
(SCA) at para 17
[34]
2005 (2) SA 302
(A) para 50.
[35]
Para 132 of the minority judgment of Cameron and Froneman JJ
(Khampepe J concurring) in
Asla
above.
[36]
Khumalo
(above)
para 53
[37]
Gijima
(above) para 52
[38]
The Honourable Constitutional Court judges in
Asla
were
divided (six to three) on the question as to whether, in the
presence of inexcusable and undue delay, the court still had
a
discretion whether to uphold the self-review and set the impugned
conduct aside. The majority judgment of Theron J is concurred
in by
Basson AJ, Dlodlo AJ, Goliath AJ, Mhlantla J and Petse J. The
minority judgment of Cameron and Froneman JJ is supported
by
Khampepe J.
[39]
At [99]
[40]
At [101]
[41]
At [105]
[42]
At [45]
[43]
2017 (2) SA 622
(CC) para 160
[44]
Woolman and Others: Constitutional Law of South Africa (Juta 2014
2ed ) Volume 1 at 25-7 and 25-8
[45]
Phoebe Bolton: The Law of Government Procurement in South Africa
(Lexis Nexis Butterworths 2006)
[46]
See
Bullock
NO and Others v Provincial Government, North West Province and
Another
2004 (5) SA 262
(SCA);
Greys
Marine Hout Bay (Pty) Ltd and Others v Minister of Public Works and
Others
2005 (10) BCLR 931 (SCA)
[47]
Bolton page 68. Bolton points out that during the drafting process
of
s 217
, the clause was headed ‘Contracts for Goods or
Services’.
[48]
See item 6.1.1.of the respondent’s Property Policy and
Procedure manual.
[49]
Iain Currie & Johan de Waal (et al): The New Constitutional and
Administrative Law Vol 1 (1ed 2011) 292
[50]
[2011] 3 All SA 23
(SCA) para
15
[51]
See D Pretorius ‘The Defence of the Realm: Contract and
Natural Justice’
(2002) 119 SALJ 374
,396: ‘[S 217(1) of
the Constitution] does not necessarily mean that the conclusion of
each and every contract for goods
and services by an organ of state
must be preceded by a tender process. The circumstances of each case
will dictate whether the
requirements of s 217 demand that a tender
process be conducted.’
[52]
See
Provincial
Government of the Eastern Cape and others v Contractprops 25 (Pty)
Ltd
2001 (4) SA 142
(SCA)