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[2019] ZASCA 5
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Polokwane Local Municipality v Granor Passi (Pty) Ltd and Another (289/2018) [2019] ZASCA 5; [2019] 2 All SA 307 (SCA) (1 March 2019)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
no: 289/2018
In the
matter between:
POLOKWANE
LOCAL
MUNICIPALITY APPELLANT
and
GRANOR
PASSI (PTY)
LTD FIRST
RESPONDENT
REGISTRAR
OF
DEEDS SECOND
RESPONDENT
Neutral
citation:
Polokwane Local
Municipality v Granor Passi (Pty) Ltd
(289/2018)
[2019] ZASCA 5
(1 March 2019)
Coram:
PONNAN, TSHIQI, WALLIS, ZONDI and
DAMBUZA JJA
Heard
:
19 February 2019
Delivered
:
1 March 2019
Summary:
Review – sale of land by
municipality in 1988 – property not transferred to purchaser –
municipality resolving
that purchaser had provided insufficient proof
that the purchase price had been paid – on that basis resolving
not to transfer
land to purchaser – decision reviewable on
grounds of material error of fact – all evidence showed price
had been paid
– decision set aside and referred back to
municipality – factors to be taken into account in deciding
whether to proceed
with transfer.
ORDER
On
appeal from:
Gauteng Division of the
High Court, Pretoria (Thobane AJ, sitting as court of first
instance):
The
appeal is dismissed with costs.
JUDGMENT
Wallis
JA (Ponnan, Tshiqi, Zondi and Dambuza JJA concurring)
[1]
On 7 December 1988 the appellant’s
predecessor, the Pietersburg Municipality,
[1]
concluded an agreement with the respondent, Granor Passi (Pty) Ltd
(Granor), for the sale to it of an immovable property described
as
lot 5665, Pietersburg Extension 12 (the property), for a purchase
price of R181 000. A deposit of 20 per cent of the purchase
price was payable in cash on the date of sale and the balance was
payable thereafter in 60 equal monthly instalments, inclusive
of
interest. Possession of the property was given immediately and Granor
was obliged, within three years of the date of conclusion
of the
agreement, to erect an industrial building on the site to a minimum
value of R100 000. If it failed to do so the municipality
would
be entitled to take the property back.
[2]
Granor claimed that it paid the purchase
price in accordance with the agreement and that the final instalment
was paid by 1994.
It was common cause that it constructed industrial
buildings on the site with the approval of the municipality. The
current value
of the improvements it has made over the years was
assessed as some R22 million. The property and the buildings so
constructed,
together with two adjacent properties owned by it, are
used for the purpose of its business of processing fruits into liquid
concentrates.
Since 1994 the municipality has demanded and Granor has
paid rates on the property on the footing that it was the owner. From
2010
rates were not charged separately in respect of the property,
which Granor attributed to the consolidation of this rates account
with those of its other two properties. While the municipality denied
this, it gave no explanation for the sudden cessation of
rates
accounts and its denial can safely be rejected. In approximately
2011, it was discovered that the property was still registered
in the
name of the appellant municipality, now the Polokwane Local
Municipality. Granor’s investigations suggested that the
municipality had given instructions to two separate firms of
attorneys to attend to the transaction but this was not done. Further
investigation did not reveal why the property was not transferred to
Granor.
[3]
On 22 November 2013 a letter was written on
behalf of Granor to the Municipal Manager of Polokwane asking that
the municipality
authorise transfer of the property to Granor.
Matters proceeded slowly thereafter, and documents were furnished to
the municipality
with a view to establishing that the purchase price
had been paid. The last item of correspondence was a letter dated 27
November
2014. Eventually on 26 February 2015 the council
of Polokwane passed the following resolution:
‘
1. That Messrs Granor Passi’s
audited financial statements as proof of Erf 5665 Pietersburg Ext
12’s loan repayment
and further consents to transfer Erf 5665
Pietersburg Ext 12 to Messrs Granor Passi not be accepted.
2. That negotiations be conducted with Granor Passi in
relation to a lease agreement.
3. That the Municipal Manager be mandated to enter into
negotiations with Granor Passi.’
The
letter conveying this resolution to Granor concluded with the
following sentence:
‘
Kindly advise Council within 7
days from date of this letter of your acceptance of the above listed
conditions.’
[4]
On 4 August 2015 Granor launched the
present proceedings to set aside this resolution and for an order
that the municipality
transfer the property to Granor. Thobane AJ
granted the first order and remitted the matter to the municipality
for reconsideration
in the light of the principles set out in the
judgment. From his judgment it is apparent that he thought that the
municipality
needed to consider its constitutional obligations
especially in the light of its dealings with Granor over the previous
27 years.
The appeal is with his leave.
The
issues
[5]
Counsel for the appellant submitted that
there were three grounds upon which the appeal should be upheld. As
set out in the answering
affidavit and the heads of argument for the
municipality, his starting point was the contention that the main
cause of action was
a claim for specific performance of the contract
of sale. On this footing he advanced three propositions. First, the
claim to transfer
of the property had prescribed. Second, and in any
event, the requirements for specific performance of the sale contract
were not
satisfied, in that Granor had not proved its contractual
entitlement to specific performance. In particular he contended that
there
was insufficient proof that it had paid the purchase price in
full. Third, he submitted that in the light of these problems the
resolution took the matter no further and was not relevant to the
dispute between the parties. Setting it aside served no purpose.
[6]
This approach inverted the proper enquiry,
by ignoring the way in which the application was brought and dealt
with in the high court.
The municipality’s resolution must be
seen against the background that Granor had furnished it with
documents in proof of
its payment of the purchase price. In the light
of that proof, it asked that the municipality transfer the property
to it. Paragraph
1 of the resolution stated that the municipality’s
council considered the tendered proof of payment insufficient to
satisfy
it that the purchase price had been paid. For that reason,
and for that reason alone, it was unwilling to consent to transfer of
the property to Granor.
[7]
The only issue under consideration at the
council’s meeting on 26 February 2015 was whether Granor
had furnished adequate
proof that it had paid the purchase price of
the property. Granor asked that the documents it had furnished be
accepted as such
proof. The request for transfer of the property
would, so it believed, flow automatically from such acceptance. Prior
to the council
meeting there was no indication that any other reason
existed for not transferring the property in accordance with the sale
agreement.
In the entire period between 2011, when Granor first
raised the issue, and February 2015 when the resolution was taken,
the municipality
had not advanced any other reason for not
transferring the property to Granor.
[8]
The application was expressly directed at
reviewing and setting aside the council’s resolution. The claim
for transfer of
the property flowed from that. It was incorrect to
say that the cause of action was a claim for specific performance
founded in
the law of contract. Not only did the prayer for relief
start with an order for the review and setting aside of the
resolution,
but the founding affidavit, after setting out the facts
of the case, proceeded under the heading “Reviewable
Administrative
Action’. It would be hard to find a clearer
indication that the case was primarily based in public law and not
the law of
contract.
[9]
That is how the high court understood the
case before it. The order it made set aside the resolution, but did
not order the municipality
to transfer the property to Granor. The
judge said that whether the municipality should be ordered to
transfer the property to
Granor was a question that would arise ‘in
the event that the resolution is set aside’. He then referred
that question
and any issues relating to it back to the municipality
for reconsideration in the light of various other considerations set
out
in the judgment. The appeal is directed against the order
upholding the review and setting aside the resolution. There was no
cross
appeal. Accordingly the question whether Granor is entitled to
transfer of the property into its name was not an issue before us
in
this appeal. The only issue was whether the high court was correct to
set aside the resolution.
Reviewing
the resolution
[10]
In a manner that has repeatedly been
deplored by the courts, Granor’s founding affidavit relied on a
cornucopia of grounds
under PAJA
[2]
for setting aside the resolution. Each of ss 6(2)(
a
)(iii),
(
c
), (
d
)
,
(
e
)(ii),
(iii) and (vi), (
f
)(ii)
and (
h
)
was invoked, without any endeavour to identify which was truly
relevant and on what factual basis it was being relied on. The
judgment of the high court adopted a number of these in setting aside
the resolution.
[11]
In the high court the municipality
contended that the resolution did not embody administrative action in
terms of PAJA and accordingly
could not be reviewed under that
statute. It did not pursue the argument in its heads of argument, or
before us, so the point can
be disposed of quite simply. The
resolution undoubtedly embodied a decision. Was it of an
administrative nature? In my view a decision
regarding the
implementation of a contract to which the municipality is a party is
an act of administration. It was taken by an
organ of state,
exercising a public power or function in relation to the enforcement
of a contract concluded in terms of the empowering
provisions
governing transactions of this character.
[3]
It had a direct, external legal effect and adversely affected
Granor’s rights. It did not fall within any of the statutory
exceptions. Accordingly, it was administrative action and reviewable
under PAJA.
[4]
[12]
The municipality contended that Granor’s
review was fatally defective because it was not pursued in terms of
rule 53 of the
Uniform Rules of Court. There was no merit in the
point. This court long ago held that this is ‘sterile
formalism’
and that there is no obligation on a litigant to
pursue a review in terms of rule 53.
[5]
The only impact of its not doing so is that it deprives itself of the
procedural advantages offered by the rule.
[13]
The high court’s judgment dealt with
several different grounds of review. It said that the
characterisation of Granor’s
payments as ‘loan
repayments’ was clearly wrong. It held that the rejection of
Granor’s financial statements
as proof of payment of the price
was factually incorrect and as a result irrelevant considerations
were taken into account or the
action was not rationally connected to
the facts before the decision maker. Finally, it held that because
the price had been paid;
extensive improvements had been constructed
on the site with the municipality’s approval; and Granor had
been in occupation
for over 25 years and had paid rates and taxes,
‘the siren of irrationality rings loud’.
Factual
error
[14]
It is only necessary to have regard to the
ground of review that the decision was based on clear factual error
on the part of the
municipality. In
Pepcor
,
[6]
factual error was recognised as a ground of review under the common
law, read in the light of s 33 of the Constitution. That
was
before PAJA was enacted. It was, however, suggested in an
obiter
dictum
that this could fall within
s 6(2)(
e
)(iii),
on the basis that such factual errors meant that irrelevant
considerations were taken into account in taking the decision.
The
approach has been endorsed in subsequent decisions of this court and
certain other provisions of PAJA have been identified
as supporting
this ground of review.
[7]
The scope of such review was explained in
Dumani
,
[8]
which held that factual error by a decision maker vested with the
power to determine the facts would only constitute reviewable
error
if the error were one in regard to a material fact, where the facts
were uncontentious and objectively verifiable. Uncontentious
in this
context does not restrict the enquiry to instances where the decision
maker has overlooked something and exclude cases
where the decision
maker’s view of the facts is erroneous. It must be understood
in conjunction with the requirement that
the facts be objectively
verifiable. If, on objective verification, there is no room for
debate or argument about the correct facts,
they will be
uncontentious.
[15]
The factual basis for the council’s
decision was that there was no adequate proof that Granor had paid
the full purchase price.
The high court held this to be a material
error of fact. I agree. The evidence before the council pointed only
in one direction,
namely, that the price was fully paid in accordance
with the provisions of the contract of sale. The cumulative effect of
that
evidence was irresistible.
[16]
The starting point was the obligation to
pay twenty percent of the purchase price (R36 200) as a deposit.
At a meeting between
representatives of Granor on the one hand, and
Mr Maleka and Ms Muller from the municipality on the other, the
latter said that
they had a copy of the cheque with which the deposit
was paid. There was no dispute that the deposit was paid.
[17]
Granor provided the municipality with
extracts from its audited annual financial statements reflecting its
accounts from 1990 to
1994, together with an affidavit from the
auditor stating that payment for the property was done by way of
monthly instalments
of R3 444.78 to “Pietersburg
Stadsraad’ and that these were reflected in the annual
financial statements. He said
that the final instalment was paid
during the 1994 financial year and that the debt to the municipality
was reflected as being
fully paid during that year.
[18]
The audited annual financial statements
bore out what the auditor said in his affidavit. In 1990 they
reflected the property as
a fixed asset at a cost of R181 000.
The municipality was shown as a creditor for an amount repayable in
equal monthly payments
of R3 444.78. The outstanding balance at
the end of the 1990 year, namely 28 February 1990, was R118 012.
Accepting that
by that stage fourteen instalments had been paid,
totalling R47 626.92, it is clear that a substantial portion of
these payments
– some R21 000 – was attributable to
interest on the amount outstanding. In other words, as would occur
with a
loan secured by a mortgage bond, the repayments were applied
in the first instance to interest and then to the reduction of
capital.
It is not surprising in those circumstances that the notes
to the annual financial statements erroneously described the amount
owing to the municipality as being secured by a first mortgage bond
over the property. That accorded with their accounting treatment.
[19]
In each of the following financial years
the same picture emerged from the annual financial statements. The
property was shown as
an asset at cost and the indebtedness to the
municipality diminished year by year to R92 681 in 1991, R60 626
in 1992,
R29 151 in 1993 and zero in 1994. Although the point
was not mentioned in the affidavits and therefore no explanation for
any perceived anomaly had been required from Granor, counsel tried in
argument to suggest that there was a problem with these amounts
as
the decline in the capital owing from 1991 to 1992 was marginally
greater than the decline in the corresponding period from
1992 to
1993. He sought to suggest that for this reason and in the absence of
an amortisation schedule no reliance could be placed
on the accounts.
The argument was a factual one, impermissibly raised in oral
argument. Granor had been afforded no opportunity
to respond to it.
It was, accordingly, not open to the municipality to raise it. In any
event, whatever the explanation, which
may have been nothing more
than an adjustment in the books of account of Granor, or the
correction of an error of calculation,
it did nothing to undermine
the unequivocal record of monthly payments of R3 444.78.
[20]
Those payments were what the sale agreement
required. The relevant clause said that the balance of the purchase
price, after payment
of the deposit, was to be made in no more than
sixty equal monthly instalments together with interest calculated on
the monthly
reducing balance, from the date of sale, at the same rate
of interest applicable to the municipality on the date of purchase on
its ‘GLF’.
[9]
Two points of importance emerged from this. The first was that the
monthly payments were to be equal and calculated on the reducing
monthly balance owing. The second, contrary to counsel’s
argument, was that the interest rate was fixed at the outset and
did
not fluctuate from time to time during the payment period. That is
what enabled the monthly payments to be calculated accurately
in
advance. There is no reason to doubt that the monthly repayments were
calculated at the outset as being R3 444.78.
[21]
The directors of Granor at the relevant
times prepared the annual financial statements. They did so long
before any dispute arose
and at a stage when there was no reason for
them to misrepresent the situation. The auditor’s
responsibility was to consider
the statements, test the entries,
establish that the assets reflected in the assets register existed,
and check that the accounts
did not contain any material errors or
misstatements. Having done that, which in a conventional audit is
done by testing the accuracy
of the entries in the accounts against
the internal records of the company, the auditor certified that the
annual financial statements
were a reasonable reflection of the
financial position of the company for the years in question in
accordance with the requirements
of the Companies Act.
[10]
The purchase of the property was a major transaction, giving rise to
a substantial indebtedness. It would necessarily have been
checked as
part of the audit process. When the auditor deposed to an affidavit
confirming that the monthly payments were made and
the full purchase
price discharged, there was no reason to disbelieve him.
[22]
Apart from this financial material, Granor
also provided the municipality with a letter from its then town clerk
– the equivalent
of the modern municipal manager – dated
1 December 1993 and recording a council decision taken on 29 November
1993. The relevance
of these dates is that they correspond exactly
with the date on which the final payment in terms of the sale
agreement was due.
The letter dealt with a proposal to consolidate
the property together with two other properties, one owned by the
municipality
and one by Granor, as well as a portion of Kelsie
Street, the cul-de-sac giving access to all three properties. In
exchange a portion
of another property owned by Granor and abutting
on the proposed consolidated lot would be transferred to the
municipality. The
letter is instructive. First, it referred to the
consolidation of the property (erf 5665) with the other erven forming
the proposed
consolidated lot to be owned by Granor. Only if Granor
owned all three properties could that occur. In turn, that would only
be
the case if Granor had paid the purchase price of the property.
Given the date of this letter there can be no doubt that it had
done
so. Second, the letter said expressly that the municipality had
disposed of all three properties to Granor. Third, it described
the
property as being owned by Granor. Fourth, it recorded that the
municipality’s attorneys were to attend to the relevant
conveyancing at Granor’s expense.
[23]
It is inconceivable that the decision by
the council could have been taken, or the letter written, if Granor
had not paid the purchase
price of the property. Negotiations in
regard to the exchange agreement appeared to have progressed slowly
because there was some
later correspondence in 1994 about the issue.
One letter dated 14 October 1994 from the municipality’s
conveyancers was significant
because it referred to the exchange
agreement (‘die verdere ooreenkoms’) and said that it
would be dealt with simultaneously
with the other transaction
(‘gelyktydig met die ander transaksie’). In context that
could only be a reference to the
transfer of erf 5665 (the property)
to Granor.
[24]
When the municipality passed the challenged
resolution there is nothing to indicate that it had any information
before it to controvert
Granor’s contention that the purchase
price had been paid. Certainly none has been identified. The
information it had been
given was clearly the best available from
Granor’s side, as the original cheque stubs or other records of
payment would long
since have been destroyed. If it consulted its own
records, which is uncertain because there is no reference to its
officials doing
so, that did not produce any evidence refuting
Granor’s claim to have paid in full. As matters stood at that
stage therefore,
everything available to the council pointed to the
conclusion that Granor had indeed paid the purchase price in full.
Its conclusion
to the contrary was manifestly erroneous on the
information before the council.
[25]
As the ground of review is material factual
error, I accept in favour of the municipality that, even if, on the
material then available
to the decision maker, the decision appeared
to be erroneous, if it later transpired on the basis of subsequently
discovered information
that the factual position was otherwise, or at
least open to some doubt, the requirement of the facts being
objectively verifiable
and uncontentious would not be satisfied. In
this case, however, not only has no such further information been
discovered, but
there is also no indication that the municipality has
looked for it.
[26]
The acting municipal manager deposed to the
answering affidavit. She said that in regard to legal submissions she
acted on the legal
advice received and accepted by the municipality.
I assume, in mitigation of her and the municipality’s response
to Granor’s
application, that the legal advisers guided the
municipality in the approach it adopted in resisting the review. If
so they were
ill advised for the reasons that follow.
[27]
I have already adverted in para 8 to the
misconception that the application was one for specific performance
as opposed to a review
of the council’s decision. On that
erroneous footing the person who drafted the answering affidavit
thought that it was permissible
to do so with a minimum of factual
enquiry and a minimum of facts from the council. Instead, like a
poorly drafted pleading, the
affidavit contented itself with bare
denials of virtually everything, as if it were open to the
municipality simply to put Granor
to the proof of everything. To this
were added some technical defences and the defence of prescription.
[28]
Confining myself for the present to the
question of payment, the answering affidavit denied:
·
Receipt of payment of the deposit;
·
Receipt of payment of the sixty
instalments of R3 444.78;
·
Receipt of the final instalment
during 1994;
·
That Granor had established ‘due
compliance with its payment obligation’.
[29]
Not a word was said of any search
undertaken by municipal officials in the records of the municipality
to ascertain what payments
had been made. There was no suggestion
that such records were not available. Council minutes reflecting the
dealings with the property
would have been relevant. The absence of
any record of non-payment by Granor in such minutes would have been a
strong indication
that payment had been made. The municipality’s
financial records and audited accounts should have been examined for
details
of this transaction. It appears to have undertaken the
development of Pietersburg Extension 12 for business and industrial
purposes.
There should in the ordinary course have been files dealing
with this, reports to council and references in council minutes, and
audited accounts in this regard.
[30]
A municipality is not like private persons
or entities, which are only obliged to retain records for limited
periods in terms of
legislation governing income tax and other
obligations to the fiscus. Bank accounts for the period may have been
available either
in municipal records or from its bankers. There is
reference in the correspondence to two files dealing with this matter
in the
possession of the municipality. They were not produced, nor
was there a suggestion that an attempt had been made to find them and
look at their contents. If the records had been sought and could not
be found for any reason, one would have expected this to be
explained.
[31]
The denial that the deposit was paid was
extraordinary. The municipality admitted Granor’s allegation
that their representatives
attended a meeting with Mr Maleka and Ms
Muller, where they were told that the municipality was in possession
of a copy of the
cheque with which the deposit was paid. How could
they then deny payment? If they had a cheque showing that payment was
made in
1988, why did they not look in their records for proof of
payment of the instalments from that date until 1993? The inevitable
inference is that had they done so it would have demonstrated that
Granor was correct in saying that it had paid the price.
[32]
There appeared to be no appreciation that,
in denying receipt of payment of the instalments, the municipality
was accusing the auditor,
Mr Ferreira, of lying in his affidavit and
of having falsely certified Granor’s annual financial
statements for the relevant
years as being a true reflection of the
financial position of the company. Those are serious charges for
which no factual foundation
was laid.
[33]
Denials of this character were part of a
pattern that recurred throughout the affidavit. For example, the
final letter written before
the council meeting where the resolution
was taken was addressed to Councillor Sello and referred to a meeting
with him on 26 November
2014. The answering affidavit first said that
the deponent did not know who attended the meeting or what was
discussed and therefore
denied that such a meeting took place. It
then complained that the letter should have been addressed to the
deponent ‘as
Municipal Manager’. The deponent was not the
incumbent of that post at the time. Although the letter confirmed
that Councillor
Sello was in possession of all the documents
previously furnished to the municipality in proof of payment, the
affidavit complained
that it did not contain any ‘source
documents’ proving payment of the price and suggested that
without them the council
could not be persuaded that the price had
been paid.
[34]
This was wholly obstructive. Councillor
Sello, as a simple internet search revealed,
[11]
was at the time the member of the mayoral committee responsible for
Spatial Planning and Development. He was accordingly the correct
person for Granor to have approached in regard to this matter. The
deponent does not indicate whether she approached councillor
Sello
for information before deposing to her affidavit. Nor did any member
of the council depose to an affidavit to explain on
what basis they
arrived at their conclusion. Assuming that by ‘source
documents’ she meant paid cheques or deposit
slips that was an
impossible demand more than twenty years after the event. No attempt
was made to identify any problems in regard
to the accuracy of the
annual financial statements.
[35]
This obstructive approach merely reinforced
the conclusion that the purchase price had been paid and that the
municipality was not
in a position to say otherwise. Instead it
resorted to bare denials in the hope that it could succeed in
resisting the review on
a question of onus. It is to my mind
inconceivable that this approach would have been adopted if the
municipality had any factual
basis for denying receipt of the
purchase price. Against that background the endeavour to exploit
difficulties of proof occasioned
by the passage of time verged on the
dishonest.
[12]
[36]
Furthermore, there were at least three
things wrong with that approach. First, it meant that the
municipality produced no evidence
in support of its denials, even
though these necessarily had as their corollary positive statements
that the price had not been
paid. So there was no evidence in support
of its case and its denials, couched, as they were, in the form of
positive statements
that the price had not been paid, alleged
dishonesty without a grain of proof.
[37]
The second point was that much of the
relevant evidence was within its exclusive knowledge. An obvious
illustration of this was
the attempted reliance on non-compliance
with s 79(18) of the Local Government Ordinance 17 of 1939. All
records in that regard
would have been under its control and if there
had been non-compliance it would have known of it. The approach
adopted was to say
that Granor had failed to establish that there had
been compliance with the requirements of this section and ‘In
the premises,
such compliance is denied.’ That amounted to an
unfounded accusation that previous council officials and councillors
had
acted unlawfully in concluding the original deed of sale.
[38]
Granor was entitled to invoke the maxim
omnia praesumuntur rite esse acta
in
favour of compliance. Furthermore, where a matter is within the
exclusive knowledge of one of the litigants, less evidence will
be
required from the other party to discharge the onus of proof.
[13]
That is particularly the case where the party possessed of the
relevant knowledge does not produce it. And if the evidence provided
by the party on whom the burden of proof lies calls for an answer, as
was undoubtedly the case here, the failure to produce countervailing
evidence strengthens the case for the party bearing the onus.
[14]
[39]
The third point, and most importantly in
our constitutional democracy, is that this approach ignored the
obligations resting on
the municipality to deal openly, fairly, and
in an accountable way with its citizens, including its corporate
citizens. One of
the founding values of our democracy is that
government should be accountable, responsive and open.
[15]
The municipality’s approach was that this was simply a matter
of contract. That ignored authority in this court that, even
when
dealing with matters arising in a contractual context, a municipality
may be burdened with obligations of procedural fairness.
[16]
In
Joseph
the
Constitutional Court endorsed the need for administrative law to
‘regulate administrative decisions which affect the enjoyment
of rights, properly understood, at least for the purposes of
procedural fairness’. This demanded of organs of state that
they act in a manner that is responsive, respectful and fair when
fulfilling constitutional and statutory obligations.
[17]
[40]
Most recently, this court, in
Sanparks
[18]
returned to the topic of when administrative law principles intrude
into contractual relationships. The following passages from
the
judgment of Navsa JA and Davis AJA seem apposite to the present
case:
[19]
‘
[37] There is no
bright-line test for determining whether administrative principles
intrude in relation to a contract involving
an organ of state and a
private party. However, there are indicators. One might rightly ask
whether coercive state power can be
brought to bear by a state organ
on the private party. Further, one will be constrained to consider
whether the public interest
is affected by the exercise of the
contractual right … The contractual terms, seen contextually,
will also be scrutinised
to determine how the parties envisaged
disputes in relation to their agreement being dealt with
prospectively.
[38] Having regard to the
authorities referred to by Dambuza JA
[20]
… a court should be concerned with whether, in the
circumstances of the case, the state can be said to be acting fairly,
which includes, but is not limited to, questions of procedural
propriety. It does not necessarily follow, where there is
an equality
of arms in relation to the conclusion of a contract and where the
public interest is not directly involved, that the
private party will
be able to resort to administrative-law principles. Each case has to
be decided on its own merits and courts will
exercise a value
judgment.
[39] Proportionality is a
constitutional watchword, the exercise of which can be employed in
adjudicating whether to import administrative-law
principles into
cases involving an organ of state and a private party.’
[41]
The net effect of the absence of
countervailing evidence from the municipality was to strengthen the
conclusion that the council’s
decision was fatally infected by
the material factual error that the purchase price had not been paid.
On the evidence before it
the price had been paid and it had to take
any decision as to the fate of the sale on that basis. It did not do
so. Accordingly,
the resolution embodying its decision was fatally
flawed and fell to be set aside. The decision of the high court to do
so cannot
be faulted.
The
remittal
[42]
There was no suggestion by the municipality
that the order for remittal was incorrect or inappropriate. It would,
however, be of
assistance to explain, in the light of this judgment,
what considerations should underpin the municipality’s
reconsideration
of Granor’s request that it implement the sale
agreement and transfer the property to Granor.
[43]
Firstly, the issue of payment of the
purchase price has been determined. The reconsideration must take
place on the basis that Granor
paid the price in full as reflected in
its annual financial statements. Secondly, and as I trust is apparent
from paras 37 and
38 above, unless, after investigation in the
records of the municipality, it appears that there is a proper
factual basis for the
suggestion that there was non-compliance with
s 79(18) of the Local Government Ordinance 17 of 1939, or any
other statutory
provision that applied to this sale when it was
concluded, the reconsideration should be on the basis that all
requirements of
law for the validity of the sale were satisfied.
[44]
Thirdly, in regard to the alleged
non-compliance with s 14 of the Local Government: Municipal
Finance Management Act 56 of
2003 (the MFMA), this is not a ground
for deciding not to implement the transaction and transfer the
property. That is a question
that must be determined separately and
at the outset. If the municipality concludes that it should perform
in terms of the agreement,
it will then be obliged to determine
whether there are any legal requirements to be satisfied in order for
performance to occur.
If there are, it must then take all the steps
necessary to perform. I make no finding on whether performance would
require compliance
with s 14(2) of the MFMA and whether it is
open to rely on this legislation to disturb an existing sale of
property (c/f s 14(3)).
[45]
Fourthly, in regard to prescription, I
point out that there is no obligation on the municipality to invoke
this to resist the claim
for transfer. In the circumstances of this
case, it is not a defence that can be raised simply by legal advisers
or officials,
without proper consideration by the council of the
municipality in the light of the municipality’s constitutional
obligations
dealt with earlier in this judgment. The Constitutional
Court has suggested, admittedly in a different context,
[21]
that there may be circumstances in which prescription is not
available as a mechanism for avoiding constitutional obligations.
Whether this is such a case warrants careful consideration by the
municipality. The consequences of seeking to upset a transaction
that
both sides believed for over 25 years had been implemented, so as to
constitute Granor the owner of the property, must be
carefully
weighed. This is a substantial business that has made large
contributions to municipal coffers for many years by way
of rates and
payment for services. It is no doubt a significant employer, both
directly and indirectly. What would be the consequences
of the
municipality evicting it and having to pay compensation for
improvements? All this must go into the decision-making mix.
[46]
These remarks should not be read as
expressing a view as to the merits of the defence of prescription.
All that was required in
order to establish Granor’s ownership
was that the formality of registration be undertaken in the Deeds
Registry. Until now
the municipality has recognised Granor as the
owner of the property. In similar circumstances dealing with the need
to register
the plaintiff’s ownership of shares in the share
register of a company, it was held that the ongoing recognition of
the plaintiff’s
ownership constituted an ongoing
acknowledgement of the debt and an interruption of the running of
prescription.
[22]
Again, I express no settled view on this, but mention it to make it
clear that the contention that the right to claim transfer
of the
property had prescribed is by no means as unimpeachable as counsel
for the municipality contended.
[47]
The judge in the high court contemplated
that these issues needed to be considered by the municipality before
it took a decision
in response to Granor’s request. He was also
mindful of the need for that decision to be rational. That is why he
remitted
it to the municipality. He was correct to do so.
Result
[48]
The appeal is dismissed with costs.
__________________________
M J D WALLIS
JUDGE OF APPEAL
Appearances
For
appellant: A Liversage SC
Instructed
by: A M Carrim Attorneys, Polokwane;
Rossouws
Attorneys, Bloemfontein
For
first respondent: J G Bergenthuin SC
Instructed
by: Bernard van der Hoven Attorneys, Pretoria;
Rosendorff
Reitz Barry, Bloemfontein.
[1]
I
refer to the appellant and its predecessor individually and
collectively as ‘the municipality’.
[2]
The
Promotion of Administrative Justice Act 3 of 2000
.
[3]
The
disposal of publicly owned land by a municipality has always been
regulated by legislation and it is not disputed in this
case that
provisions of the
Local
Government Ordinance 17 of 1939 had governed the initial sale and
that post-democracy legislation governing such transactions
may have
been applicable to the actual transfer that Granor desired.
[4]
Minister
of Defence and Military Veterans v Motau and Others
[2014]
ZACC 18
;
2014 (5) SA 69
(CC) para 33.
[5]
Jockey
Club of South Africa v
Forbes
[1992] ZASCA 237
;
1993
(1) SA 649
(A) at 660D - 663D.
[6]
Pepcor
Retirement Fund and Another v Financial Services Board and Another
[2003]
ZASCA 56
;
2003 (6) SA 38
(SCA);
[2003] 3 All SA 21
(SCA) paras 46
-
48.
[7]
Chairpersons’
Association v Minister of Arts and Culture and Others
[2007]
ZASCA 44
;
2007
(5) SA 236
(SCA)
;
[2007] 2 All SA 582
(SCA) para 48;
Government
Employees Pension Fund and Another v Buitendag and Others
[2006]
ZASCA 166
;
2007
(4) SA 2
(SCA)
;
[2007] 1 All SA 445
(SCA) para 12;
Chairman,
State Tender Board v Digital Voice Processing (Pty) Ltd; Chairman,
State Tender Board v Sneller Digital (Pty) Ltd and
Others
[2011]
ZASCA 202
;
2012
(2) SA 16
(SCA)
;
[2012] 2 All SA 111
(SCA) para 34;
Minister
of Home Affairs and Another v Public Protector
[2018] ZASCA 15
;
2018 (3) SA 380
(SCA);
[2018] 2 All SA 311
(SCA)
para 53.
[8]
Dumani
v Nair and Another
[2012] ZASCA 196
;
2013 (2) SA 274
(SCA);
[2013] 2 All SA 125
(SCA)
paras 32 and 33.
[9]
The
agreement was couched in the Afrikaans language and the relevant
clause read:
‘
Die
balans van die koopprys in hoogstens 60 gelyke maandelikse
paaiemente tesame met rente bereken op die maandelikse verminderende
saldo, vanaf die koopdatum teen dieselfde rentekoers as wat op die
koopdatum op die Raad se GLF van toepassing is.’
The
acronym GLF was not explained and an inaccurate translation
furnished to the members of the court said CLF.
[10]
At
the time the Companies Act 63 of 1973.
[11]
http://www.polokwanecity.co.za/driven-desire-serve-people/
accessed 23 February 2019.
[12]
See
the comments by Meer J in regard to similar conduct in litigation by
an organ of state in
Quinella
Trading (Pty) Ltd and Others v Minister of Rural Development and
Land Reform and Others
[2010]
ZALLC 14;
2010 (4) SA 308
(LCC) para 34.
[13]
Union
Government (Minister of Railways) v Sykes
1913
AD 156
at 173-4
[14]
Ex
parte the Minister of Justice: in re Rex v Jacobson & Levy
1931
AD 466
at 479;
Marine
& Trade Insurance Co Ltd v Van der Schyff
1972
(1) SA 26
(A) at 39G-H;
Malan
v City of Cape Town
[2014]
ZACC 25
;
2014 (6) SA 315
(CC);
2014 (11) BCLR 1265
(CC) para 73.
[15]
Constitution
s 1(
d
)
and s 41(1)(
c
).
In regard to local government see s 152(1)(
a
).
[16]
Logbro
Properties CC v Bedderson NO and Others
[2002]
ZASCA 135
;
2003 (2) SA 460
(SCA);
[2003] 1 All SA 424
(SCA) para 10.
[17]
Joseph
and Others v City of Johannesburg and Others
[2009]
ZACC 30
;
2010 (4) SA 55
(CC) paras 44-45
[18]
South
African National Parks v MTO Forestry (Pty) Ltd and Another
[2018]
ZASCA 59
;
2018 (5) SA 177
(SCA) paras 24 to 27.
[19]
Paras
37 to 39.
[20]
The
majority judgment in relation to which this was a concurrence.
[21]
Njongi
v MEC, Department of Welfare, Eastern Cape
[2008]
ZACC 4
;
2008 (4) SA 237
(CC);
2008 (6) BCLR 571
(CC) paras 41 and
42.
[22]
Lindhorst
and others v Andersen and Others
[2006]
ZAECHC 70
(7 December 2006) per Leach J at p 43.