Brief Summary

Administrative Law — Review of municipal decision — Applicant sought to review and set aside the decision of the Dawid Kruiper Local Municipality to sell a property by public tender, alleging non-compliance with statutory provisions and failure to exhaust internal remedies — Legal issues included whether the applicant had pursued all available internal remedies and the applicability of the Municipal Finance Management Act and the Ordinance 20 of 1974 — Court held that the applicant failed to exhaust internal remedies as required, rendering the review application premature and dismissed the application.

Comprehensive Summary

Summary of Judgment

1. Introduction

The matter concerned an application in the Northern Cape Division of the High Court (Kimberley) to review and set aside administrative decisions taken by a local municipality in relation to the disposal of municipal immovable property by tender. The applicant was Oranje Watersport CC, and the principal respondent was Dawid Kruiper Local Municipality. Upington Hotel (Pty) Ltd was cited as the successful tenderer and purchaser, and the Registrar of Deeds, Vryburg was joined due to the property transfer implications.

The applicant sought the review and setting aside of the municipality’s resolution to sell Erf 15747, Olivier Park, Upington by public tender, the subsequent decision by the municipality’s tender adjudication committee awarding the tender to the second respondent, and consequentially any sale agreement concluded pursuant to that award. Costs and ancillary relief were also sought.

The application was argued before Phatshoane ADJP and Lever AJ on 13 November 2017. During preparation of judgment, the Court identified that regulations promulgated under the Local Government: Municipal Finance Management Act 56 of 2004 potentially bore on the question whether Cape Ordinance 20 of 1974 remained applicable. The Court invited written submissions on that regulatory framework and the implications for the dispute. The applicant sought to reopen the matter to place further evidence before the Court, but no substantive application to admit new evidence was brought; the Court therefore confined itself to the case made out on the papers, supplemented only by written representations on the regulatory question.

The general subject-matter of the dispute was the lawfulness and procedural regularity of a municipality’s decision to dispose of immovable property, including whether older provincial legislation still governed such alienations, whether the municipality complied with the statutory requirements of the MFMA, and whether the tender outcome was reviewable under the Promotion of Administrative Justice Act 3 of 2000.

2. Material Facts

The municipality resolved to dispose of municipal property described as Erf 15747, Olivier Park, Upington, by way of a public tender process requiring the submission of development proposals. The invitation to tender was published on 11 December 2015. Following adjudication, the tender was awarded to Upington Hotel (Pty) Ltd.

It was common cause that a written deed of sale was concluded between the municipality and the second respondent, and that the full purchase price had been paid to the municipality. This factual position was material to the Court’s assessment of the efficacy of internal remedies, particularly an appeal under section 62 of the Municipal Systems Act, given the statutory limitation that an appeal outcome may not detract from rights that have accrued as a result of the impugned decision.

The applicant had occupied the property for approximately 17 years on a rental basis and operated a recreation facility accessible to the public, charging a daily entrance fee. This operational history was relevant to the applicant’s contention that the property was used for a municipal function associated with recreation and that it should therefore not have been disposed of without compliance with protective statutory processes.

A further material factual feature was the tender condition that required a supporting document described as a “guarantee from a registered financial institution” confirming that the bidder qualified for financing to purchase the land and fund the development. The applicant submitted its bid without such a document by the closing date and only attempted to provide it after the tender had closed. The municipality treated the applicant’s bid as non-responsive on this basis.

As to disputed facts, the applicant relied on information relayed to it (through hearsay in the founding material) that its bid had been excluded because the “guarantee” was missing. The Court treated the absence of the required document by the closing date as decisive, and the applicant’s belated attempt to supplement its bid was not accepted as permissible within the tender framework.

In relation to internal remedies, the applicant attempted to invoke the municipality’s supply chain management dispute/objection procedure and requested the record of decision to formulate a complaint. The municipality did not provide the record at that time and gave no meaningful response, attributing administrative disruption to a municipal merger. The record was only supplied later in the litigation process, once review proceedings had been launched.

3. Legal Issues

The Court was required to determine a set of interrelated questions involving law, application of law to fact, and consequential evaluative judgments about statutory interpretation and tender responsiveness.

The central legal questions were whether the applicant was barred from review because it had allegedly failed to exhaust internal remedies, including remedies under the municipality’s supply chain management policy and an appeal under section 62 of the Local Government: Municipal Systems Act 32 of 2000.

A further legal issue was whether section 124 of Cape Ordinance 20 of 1974 remained applicable in the Northern Cape at the time of the municipality’s decision, or whether it had been impliedly repealed by the later constitutional and statutory framework, particularly section 14 of the Local Government: Municipal Finance Management Act 56 of 2004 together with regulations made under the MFMA.

If section 124 of the Ordinance was not applicable, the Court had to determine whether the municipality had complied with section 14 of the MFMA, including whether the statutory requirement that the decision be taken “in a meeting open to the public” implied additional obligations of prior advertisement and public objections, whether the property was a capital asset needed to provide the “minimum level of basic municipal services”, and whether the municipality had considered fair market value and community/economic value as required.

The Court also had to decide whether the tender adjudication committee lawfully excluded the applicant’s bid as non-responsive for failure to provide the required financing confirmation, and whether any alleged deviation from tender payment terms in favour of the second respondent rendered the sale unlawful and reviewable.

Finally, the Court had to determine whether any grounds of review under section 6(2) of the Promotion of Administrative Justice Act 3 of 2000 had been established on the facts presented.

4. Court’s Reasoning

On the preliminary objection concerning internal remedies, the Court considered two potential mechanisms. In relation to the supply chain management dispute procedure, the Court treated the applicant’s attempt to invoke that procedure as materially frustrated by the municipality’s failure to provide the record and a meaningful response. The Court rejected the suggestion that it would be just to insist on exhaustion where the municipality’s own non-responsiveness deprived the applicant of the practical ability to pursue the remedy in a substantiated manner. The municipality’s explanation that it was undergoing merger-related administrative difficulties was not accepted as excusing non-responsiveness to the public.

In relation to section 62 of the Municipal Systems Act, the Court’s reasoning turned on the statutory constraint in section 62(3) that an appeal outcome may not detract from rights that have accrued as a result of the decision. Given that a deed of sale had been concluded and the purchaser had paid the full purchase price, the Court reasoned that the successful tenderer had accrued rights. In that context, an internal appeal could not afford the applicant meaningful relief against the consequences of the sale decision. For that reason, the section 62 mechanism was held not to be an effective internal remedy capable of barring judicial review in the circumstances.

On the question whether section 124 of Ordinance 20 of 1974 applied, the Court accepted that the ordinance had not been expressly repealed in the Northern Cape, but treated the decisive issue as whether it had been impliedly repealed. The Court analysed the authority relied upon by the applicant, Majomatic 115 (Pty) Ltd v Kouga Municipality and 2 Others (303/09) [2010] ZASCA 17 (18 March 2010), and distinguished it on the basis that Majomatic concerned a factual and legislative context in November 2003, before the MFMA came into force on 1 July 2004. The Supreme Court of Appeal in Majomatic had held that, in the then-existing interim legislative framework, only the constitutionally repugnant parts of section 124 were impliedly repealed, while the remainder survived because there was no comprehensive replacement procedure regulating municipal disposals.

The Court then considered the reasoning in Sundays River Valley Municipality v Cinzano 180 (Pty) Ltd (2864/12) [2013] ZAECPEHC (14 March 2013), which addressed the post-MFMA environment. It agreed with that decision’s conclusion that the MFMA (together with its regulatory framework) constituted a specific and comprehensive statutory scheme governing municipal asset disposal, rendering continued reliance on section 124 of the Ordinance incompatible and unnecessary. The Court therefore held that section 124 had been impliedly repealed by the MFMA.

Turning to compliance with section 14 of the MFMA, the Court rejected the applicant’s submission that the phrase “in a meeting open to the public” necessarily implied an obligation to advertise the meeting specifically for the purpose of inviting objections to the proposed sale. The Court reasoned that, had the legislature intended such a requirement, it would have set it out expressly, as it did in other MFMA contexts such as budget processes. The Court also noted that the applicant’s approach was linked to a failure to engage with the MFMA regulatory framework during formulation of its case, although the review remained confined to the pleaded basis.

On whether the property was needed to provide the minimum level of basic municipal services, the Court undertook an interpretive assessment of the statutory definitions of “basic municipal service” and “municipal service” in the Constitution, the Systems Act, and the MFMA. It accepted the municipality’s submission that a distinction exists between a municipal service generally and a basic municipal service required at a minimum level. Although the applicant provided recreational services from the property, the Court concluded that parks and recreation fall within the broader category of municipal services but do not constitute the “minimum level of basic municipal services” contemplated in section 14(1) and section 14(2)(a). This conclusion was supported by the Court’s contextual reasoning that the statutory concept of basic services is directed at essential services whose absence would endanger health, safety, or the environment, and by the wording of section 14(2)(a) emphasising a minimum level.

On the applicant’s contention that the municipality could not have considered fair market value because a valuation was obtained after the resolution, the Court adopted a practical interpretation of section 14(2)(b). It held that the statute does not require a valuation to be physically before council at the moment of decision, but requires council to give consideration to fair market value in adopting the resolution. The Court found that the council resolution did this by resolving that the property would be sold at or above fair market value and by providing a mechanism for obtaining an expert valuation prior to sale.

The Court also considered whether the council had considered the economic and community value to be received in exchange for the asset. While the record before the Court consisted of an extract of minutes in resolution form, the Court inferred consideration of this factor from the resolution’s requirement that the tender be coupled with development proposals, enabling selection of a development with the most beneficial economic and community value. The Court further referred to the tender requirement that development occur within two years, viewing this as aligned with anticipated economic/community benefits and future municipal revenue implications. On this basis, it concluded that section 14 of the MFMA had been complied with.

Regarding tender responsiveness, the Court interpreted the tender requirement for a “guarantee” in clause 1 of the conditions of sale as a form of letter of comfort evidencing financing capacity for both purchase and development, rather than a conveyancing guarantee payable on transfer. This interpretation was reinforced by contrasting clause 1 with clauses 3 and 3.2, which explicitly contemplated a bank guarantee in the conveyancing sense for payment upon registration. The Court held that the second respondent had provided the required comfort documentation, while the applicant had failed to do so before closing and could not remedy non-compliance after closure. It therefore found the applicant’s tender was properly excluded as non-responsive.

The applicant’s contention that the second respondent received more lenient payment terms than those stipulated in the tender documentation was rejected on multiple grounds. The Court held that the point was not properly raised in the founding or supplementary affidavits and appeared for the first time in heads of argument, leaving the respondents without a proper opportunity to meet it. The applicant had also not established key facts necessary to prove deviation, including when the deed of sale was signed and when payment was made. In any event, the Court considered that even if there had been a minor adjustment, it would not have been material or unfair in circumstances where the second respondent was the only responsive bidder, the full purchase price had been paid, and the applicant could not show prejudice because its own bid was non-responsive.

Having reached these conclusions, the Court held that the applicant had not established a factual or legal basis for review under section 6(2) of PAJA.

On costs, the Court noted criticisms of both parties’ conduct, including the municipality’s earlier failure to respond meaningfully to the applicant’s supply chain management objection attempt and the applicant’s effort to interfere with the tender process after closure. However, it found no basis for a punitive costs order and applied the general principle that costs follow the event.

5. Outcome and Relief

The Court dismissed the application for review and setting aside of the municipality’s resolution, the tender award, and any consequential sale agreement.

The applicant was ordered to pay the costs of the application on the party-and-party scale.

Cases Cited

Majomatic 115 (Pty) Ltd v Kouga Municipality and 2 Others (303/09) [2010] ZASCA 17 (18 March 2010).

Sundays River Valley Municipality v Cinzano 180 (Pty) Ltd (2864/12) [2013] ZAECPEHC (14 March 2013).

CDA Boerdery (Edms) Bpk and Others v Nelson Mandela Metropolitan Municipality and Others 2007 (4) 276 (SCA).

Legislation Cited

Cape Province Ordinance 20 of 1974, section 124.

Local Government: Municipal Finance Management Act 56 of 2004, sections 14, 111, and 168.

Promotion of Administrative Justice Act 3 of 2000, section 6(2).

Local Government: Municipal Systems Act 32 of 2000, sections 62, 73, 74, and 76, and relevant definitions in section 1.

Constitution of the Republic of South Africa, 1996 (Act 108 of 1996), section 153.

Housing Act 107 of 1997, section 9(1).

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The Court held that the internal remedies relied upon by the municipality did not bar the review. The supply chain management dispute mechanism was not meaningfully available in circumstances where the municipality failed to provide the decision record and substantive responses, and an appeal under section 62 of the Municipal Systems Act could not afford effective relief because accrued rights had vested in the successful tenderer after conclusion of the deed of sale and payment of the purchase price.

The Court held that section 124 of Cape Ordinance 20 of 1974, insofar as it regulated municipal alienation procedures, had been impliedly repealed by the later statutory regime established by the MFMA (read with its regulatory framework), and was therefore not applicable to the impugned disposal.

The Court held that the municipality had complied with section 14 of the MFMA. It rejected the contention that section 14(2) implicitly required a specific advertisement and objection process, held that the property was not needed for the minimum level of basic municipal services because parks and recreation were not “basic municipal services” in the statutory sense, and found that the council had adequately considered fair market value and the economic/community value to be received.

The Court held that the applicant’s tender was properly excluded as non-responsive because it failed to provide the required financing confirmation document by the closing date and could not rectify that omission after closure. It further held that the alleged deviation from tender payment terms was not properly raised on the papers, was not factually established, and in any event was immaterial in the circumstances.

LEGAL PRINCIPLES

A purported internal remedy will not bar judicial review where, on the facts, it is not effective or practically available to vindicate the complaint. A municipality’s failure to provide a meaningful response and the materials necessary to formulate an objection may be relevant to whether an internal process can realistically be exhausted.

Section 62(3) of the Local Government: Municipal Systems Act 32 of 2000 limits the remedial reach of internal appeals by prohibiting appeal outcomes that detract from accrued rights. Where rights have accrued through a concluded sale and payment, an internal appeal may not provide effective relief against the consequences of the original decision.

The implied survival of older provincial municipal legislation regulating alienation of property, as recognised in pre-MFMA contexts, does not preclude a later finding of implied repeal once a comprehensive statutory framework (such as the MFMA and associated regulations) governs the same field and is inconsistent with continued parallel operation of the older provisions.

For purposes of section 14 of the MFMA, the statutory requirement that a council decision be taken “in a meeting open to the public” does not, on the reasoning adopted, inherently import additional procedural requirements of a prior objection process unless expressly provided for by legislation.

In assessing whether an asset is needed for the “minimum level of basic municipal services” under section 14 of the MFMA, the distinction between “basic municipal services” and municipal services generally is material. Parks and recreational facilities may constitute municipal services, but do not necessarily fall within the statutory conception of basic municipal services required at a minimum level.

Tender conditions requiring supporting documentation to demonstrate financing capacity may be treated as responsiveness requirements, and a bidder’s failure to provide such documentation by closing renders the bid non-responsive. Post-closing supplementation to cure non-responsiveness is impermissible within the tender framework as applied in the judgment.

Oranje Watersport CC v Dawid Kruiper Local Municipality and Others (2150/2016) [2018] ZANCHC 42 (6 July 2018)