CONSTITUTIONAL COURT OF SOUTH AFRICA


Case CCT 06/25

In the matter between:


MINISTER OF DEFENCE AND MILITARY VETERANS First Applicant

ACTING DIRECTOR-GENERAL, DEPARTMENT
OF MILITARY VETERANS Second Applicant

and

ZEAL HEALTH INNOVATIONS (PTY) LIMITED Respondent



Neutral citation: Minister of Defence and Military Veterans and Another v Zeal
Health Innovations (Pty) Ltd [2026] ZACC 21

Coram: Mlambo DCJ, Kollapen J, Majiedt J, Mathopo J, Mhlantla J,
Musi AJ, Nicholls AJ, Rogers J, Savage J and Tshiqi J


Judgment: Mathopo J (majority): [1] to [100]
Kollapen J (dissenting): [101] to [136]

Heard on: 6 November 2025

Decided on: 27 May 2026

Summary: Section 172(1)(b) of the Constitution — just and equitable remedy
— true discretion — grounds for appellate interference established

No profit, no loss principle — narrow application to suspension
orders — not a general exclusionary rule — benefit from unlawful
contract subject t o scrutiny, not automatic exclusion and is
fact-dependent

ORDER



On application for leave to appeal from the Supreme Court of Appeal (hearing an appeal
from the High Court of South Africa, Gauteng Division, Pretoria):
1. Leave to appeal is granted.
2. The appeal is upheld in part.
3. Paragraph 2 of the order of the Supreme Court of Appeal dated
27 December 2024 is amended by replacing the quoted paragraph 2 (that
is, paragraph 2 of the substituted order which the High Court of South
Africa, Gauteng D ivision, Pretoria should have granted) with the
following:
“2. (a) The order of constitutional invalidity in paragraph 1 above
does not have the effect of divesting Zeal Health
Innovations (Pty) Limited of any rights to which it would
have been entitled under the contract referred to in
paragraph 1 above in respect of the period from 1 June 2015
to 12 August 2015.
(b) In respect of the period 1 to 12 August 2015, the right
contemplated in (a) above shall be a right to a pro -rated
portion of the amount to which Zeal Health Innovations
(Pty) Limited would have been entitled had it rendered
service for the whole of that mo nth, such pro-rated portion
being based on the fraction 12/31.
(c) For the period 1 3 August 2015 to May 2018, Zeal Health
Innovations (Pty) Limited may claim compensation for
actual out -of-pocket expenses incurred (if any) in
maintaining its capacity to provide services or in providing
emergency services to military veterans, such claim to be

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determined in separate proceedings or by agreement
between the parties.”
4. Paragraph 3 of the order of the Supreme Court of Appeal, and the words
“with costs” in paragraph 1 of that order, are set aside.
5. Each party is to bear its own costs in the Supreme Court of Appeal and in
this Court.



JUDGMENT




MATHOPO J ( Mlambo DCJ, Majiedt J, Mhlantla J, Musi AJ, Nicholls AJ, Rogers J,
Savage J and Tshiqi J concurring):


Introduction
[1] This is an application for leave to appeal against part of an order of the Supreme
Court of Appeal.1 That Court upheld a High Court of South Africa, Gauteng Division,
Pretoria (High Court) judgment2 declaring invalid a contract for the provision of
healthcare services to military veterans but, in the exercise of its remedial discretion
under section 172(1)(b) of the Constitution, made an order preserving the contractual
rights of the respondent, Zeal Health Innovations (Pty) Limited (ZHI), notwithstanding
the invalidity. The order was framed on the basis that the declaration of constitutional
invalidity did not divest ZHI of any rights to which it would have been entitled under
the contract, but for the declaration of invalidity.

[2] The application is brought by the applicants, being the Minister of Defence and
Military Veterans (Minister) and the Acting Director -General of the Depa rtment of

1 Zeal Health Innovations (Pty) L imited v Minister of Defence and Military Veterans [2024] ZASCA 183 (Zeal
Health SCA).
2 Zeal Health Innovations (Pty) L imited v Minister of Defence and Military Veterans , unreported judgment of
theHigh Court of South Africa, Gauteng Division, Pretoria, Case No 77188/2015 (7 October 2022).

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Military Veterans (collectively the Department). It concerns the remedial discretion
that a court enjoys under section 172(1)(b) of the Constitution, once th at court has
declared the award of a tender invalid pursuant to its duty to do so in ter ms of
section 172(1)(a). The Department submits that the Supreme Court of Appeal
incorrectly granted the order preserving ZHI ’s contractual rights. It contends that the
Supreme Court of Appeal failed to exercise its remedial discretion under
section 172(1)(b) judiciously; that the order is ambiguous and capable of entitling ZHI
to substantial contractual damages for services never rendered; and that ZHI should be
limited to recovery of its out-of-pocket expenses without any profit.

[3] ZHI opposes the ap plication. It contends that the Department’s complaint
misconstrues the authorities, and that an order preserving its accrued contractual rights
was appropriate in the circumstances. ZHI submits that it is an entirely innocent party
that rendered service s for which it has never been paid. It argues that innocent
contractors should not suffer loss as a result of an organ of state’s failure to comply with
its constitutional and statutory obligations, particularly where the contractor is
blameless in the irregularity that led to the contracts being declared invalid. ZHI further
submits that the so -called “no profit, no loss” principle upon which the Department
relies has been rejected as a general rule, and that each case must be assessed on its own
facts in the exercise of the court’s remedial discretion under section 172(1)(b).

[4] The question that then arises for this Court’s determination is this: does the
absence of a right to benefit from an unlawful contract amount to an exclusion of such
benefit from t he exercise by a court of its just and equitable discretion under
section 172(1)(b)? Expressed differently, may a court, in fashioning a just and equitable

section 172(1)(b)? Expressed differently, may a court, in fashioning a just and equitable
remedy, permit an innocent contractor to retain a benefit, including a profit margin, for
services actually rendered under a contract subsequently declared invalid?

Factual background
[5] The salient facts are as follows. In January 2015, the Department advertised a
tender for the provision of healthcare and wellness services to approximately 16 000

MATHOPO J
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military veterans over a three -year period. The tender was made pursuant to the
Department’s obligations under the Military Veterans Act,3 which provides for benefits
to which military veterans are entitled and establishes the institutional mechanisms to
give effect to those benefits.

[6] According to the Department, the approved budget for the three-year period was
R31 625 492.31. ZHI disputes this figure, contending that the budget was R122 million
over three years. What is common cause is that three pricing models were presented to
the Department during the tender evaluation: a fee -for-service model, a capitation
model and a hybrid model combining both approaches. The Department selected the
capitation model. On 21 May 2015, ZHI was awarded the tender. The contract value
was R198 159 360 over three years, calculated on a capitated fee basis. Under this
model, ZHI would receive R365.48 per registered veteran per month in the first year,
and R333.30 per veteran per month in the second and third years. The fee was payable
regardless of whether each veteran actually sought treatment ; that was the essence of
the risk allocation inherent in a capitation model.

[7] On 27 May 2015, the contract was signed by Dr Malik Vazi, ZHI ’s Chief
Executive Officer, and Mr Tsepe Motumi, the erstwhile Director-General of the
Department.4 The contract was to commence on 1 June 2015 and run until
31 May 2018. The actual database of veterans numbered 14 346 rather than the
estimated 16 000. ZHI commenced providing services in terms of the contract on
1 June 2015, having done so on an interim basis during April and May 2015. It
established a managed healthcare network comprising general practitioners, specialists,
pharmacies and other healthcare providers. During June 2015, according to ZHI ’s
health reports, 1 155 veterans accessed primary healthcare services. Similar numbers
were recorded for July and August 2015. ZHI submitted its first invoice on 6 July 2015,

were recorded for July and August 2015. ZHI submitted its first invoice on 6 July 2015,

3 18 of 2011.
4 The contract form (SBD 7.2) was signed by ZHI on more than one occasion. ZHI signed versions dated
21 May 2015, 27 May 2015 and 31 July 2015, with the last being backdated to 27 May 2015. This forms part of
the procedural irregularities identified by the Department, though the parties proceeded on the basis that the
operative contract date was 27 May 2015.

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claiming R5 243 176.08 for services rendered in June 2015. This amount was
calculated by multiplying 14 346 veterans by the capitated fee of R365.48.

[8] The invoice gave rise to concerns within the Department. On 27 July 2015, the
Acting Chief Financial Officer wrote to ZHI requesting a copy of the signed contract
and a detailed breakdown of services provided. Unfortunately, ZHI did not respond to
this request. On 31 July 2015, Mr Motumi, still the Director -General, appr oved a
memorandum recommending payment of ZHI’s first invoice. However, this instruction
was never carried out. On 1 August 2015, Mr Motumi’s term of office expired. He was
replaced by Mr Lifeni Maake as Acting Director-General.

[9] The evidence suggests that the Acting Director-General took a different view of
the contract. An email dated 1 June 2015 from Mr Maake to Mr Motumi, which only
emerged later in the proceedings, revealed that the Deputy Minister had instructed that
the tender should be withdrawn because it should have included provision for veterans’
dependants. Mr Maake expressed indignation that Mr Motumi had proceeded “in
defiance of the Deputy Minister ’s instruction”. The Minister subsequently informed
Parliament that she had instructed that ZHI not be paid because the contract was too
expensive.

[10] ZHI submitted its second invoice on 31 July 2015, for services rendered in
July 2015, in the amount of R5 261 084.61. Earlier that same day, faced with the
Department’s failure to pay its first invoice, ZHI had forwarded a memorandum to its
service provider network informing it that, due to the Department’s failure to pay for
services provided in May, June and July, the providers should, as of 1 August 2015,
require military veterans to pay cash for consultations. On 11 August 2015, the
Department informed ZHI that it intended to seek judicial review of the procurement
process. The following day, ZHI formally suspended all healt hcare and wellness

process. The following day, ZHI formally suspended all healt hcare and wellness
services to military veterans, instructing its provider network to provide only emergency
services (as legally required of healthcare professionals) and to require cash payment
for non-urgent cases, with an undertaking that veterans woul d be refunded once ZHI

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was paid. ZHI submitted a third invoice on 31 August 2015 for the month of August,
also in the amount of R5 261 084.61, though by this time services had been substantially
curtailed. None of these invoices were paid.

[11] The three inv oices totalled R15 765 345.30. ZHI has never been paid for the
services it rendered during June, July and August 2015. Once ZHI suspended the full
suite of services in mid -August 2015, the Department resorted to alternative
arrangements for the provision of healthcare services to military veterans. It activated
a memorandum of understanding (MOU) with the Department of Defence that had been
concluded earlier, on 16 March 2015, in anticipation of a possible need for
supplementary healthcare provision. This MOU allowed military veterans to access
military health care facilities throughout the Republic operated by the South African
Military Health Service (SAMHS), with the Department undertaking to reimburse the
Department of Defence for services rendered according to an agreed reimbursement
model.

[12] The evidence indicates that these alternative arrangements proved more
expensive than the contract with ZHI would have been. The Department spent
R67 265 000 on the Health and Wellness sub -programme during the 2015/16 financial
year. This represented approximately 73% overspending against the original budget.
By contrast, the contract with ZHI would have cost R52.4 million for the remaining
10 months of that financial year. Moreover, the SAMHS facilities were not always
conveniently located for veterans, many of whom lived far from military bases.

Litigation history
High Court
[13] On 28 September 2015 , ZHI launched an urgent application in the High Court
seeking payment of R10 504 260.69, being the first two invoices plus interest (payment
of the third invoice was not yet due) . On 19 October 2015, the Department filed a
counter-application seeking judicial review of the procurement decisions and the

MATHOPO J
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contract. The urgent application was struck from the roll on 23 October 2015 for lack
of urgency. The matter then proceeded in the normal course. ZHI opposed the review
on each ground raised by the Department. ZHI also amended its notice of motion to
include payment of the third invoice, bringing the total capital amount claimed to
R15 765 345.30. On 4 April 2018, shortly before the contract’s expiry date of
30 May 2018, ZHI cancelled the contract on the ground that the Department had
repudiated the contract. On 30 March 2021, ZHI issued a combined summons claiming
damages in the amount of R73 233 228, representing loss of profit from
1 September 2015 to 30 May 2018. Those proceedings were stayed pending resolution
of the review application and subsequent appeals.

[14] For reasons that are unexplained in the record, t he application for specific
performance and the counter -application for review were only heard some six years
later, in February 2021. On 7 October 2022, the High Court delivered its judgment,
dismissing ZHI’s application for specific performance and granting the Department’s
counter-application in full.

[15] The Court reviewed and set aside all procurement decisions relating to both the
interim contract 5 (which had preceded the main contract) and the main contract. It
declared the se contracts unconstitut ional, unlawful and void ab initio (from the
beginning). The Court found that the contract price of R198 million far exceeded the
available budget, thereby violating section 38(2) of the Public Finance Management
Act6 (PFMA), which prohibits an accounting officer from committing to a liability for
which money has not been appropriated. The High Court observed that, although there
was no evidence that ZHI was complicit in any irregularities, it would not be prudent
or in the public interest to uphold the contracts. However, having declared the contracts
invalid, the High Court made no remedial order under section 172(1)(b) of the

invalid, the High Court made no remedial order under section 172(1)(b) of the

5 The interim contract, concluded on 1 April 2015, provided for ZHI to render basic healthcare services to 1 300
military veterans for a three -month period on a fee -for-service basis pending award of the main tender. In the
event, the interim contract was superseded after two months by the three -year contract. ZHI’s entitlement to
payment in respect of the interim contract is no longer in dispute.
6 1 of 1999.

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Constitution. It did not consider what remedy, if any, would be just and equitable to
compensate ZHI for the services it rendered or to protect its position as an innocent
contractor. The order simply declared the contracts unconstitutional, unlawful and void
ab initio, and set aside the contracts.

Supreme Court of Appeal
[16] With the leave of the High Court, ZHI appealed to the Supreme Court of Appeal
against the whole judgment and order of the High Court. Its primary ground of appeal
was that the review should have been dismissed. In the alternative, ZHI sought an order
under section 172(1)(b) preserving its contractual rights notwithstanding the declaration
of invalidity. ZHI relied on the approach adopted by this Court in Gijima.7 The
Department opposed the appeal on the merits.

[17] The submissions in this Court reflect a disagreement as to what the Department’s
position was on remedy in the Supreme Court of Appeal:
(a) According to the Department, its contention was that the appropriate order
would be one limiting ZHI to the recovery of its out-of-pocket expenses,
without any profit margin. The Department states that it relied on what it
characterised as the “no profit, no loss ” principle articulated in this
Court’s decision in AllPay.8 The Department also urged the Supreme
Court of Appeal to consider making an order similar to that made by it in
Bravospan SCA,9 namely a n order entitling ZHI to compensation for
services rendered rather than preservation of contractual rights.
(b) According to ZHI, the Department made a bare submission that the
contract should not be preserved, advancing no further argument on a just
and equitable remedy. The Department did not mention Bravospan. The

7 State Information Technology Agency SOC L td v Gijima Holdings (Pty) Ltd [2017] ZACC 40; 2018 (2) SA 23
(CC); 2018 (2) BCLR 240 (CC).

(CC); 2018 (2) BCLR 240 (CC).
8 AllPay Consolidated Investment Holdings (Pty) Ltd v Chief Executive Officer, South African Social Security
Agency [2014] ZACC 12; 2014 (4) SA 179 (CC); 2014 (6) BCLR 641 (CC).
9 Greater Tzaneen Municipality v Bravospan 252 CC [2022] ZASCA 155.

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Department did not even say that ZHI should be allowed its out-of-pocket
expenses. According to ZHI, the Department’s unwavering stance, until
the application in this Court, was that ZHI was entitled to no payment at
all.

[18] On 27 December 2024, the S upreme Court of Appeal dismissed ZHI’s appeal
against the declaration of invalidity but granted a Gijima-type order. 10 The Court’s
reasoning on remedy appears at paragraphs 23 to 25 of its judgment. It will suffice to
provide a recapitulation of only its salient features. The Supreme Court of Appeal
rightly understood section 172(1)(b) to confer a true discretion which must be exercised
judiciously on a case-by-case basis. The Court observed that, although the contract was
invalid, ZHI had rendered services under it, was not involved in per petuating
irregularities and was found by the High Court to be an innocent party. The Supreme
Court of Appeal framed its reasoning thus: “ [u]nder those circumstances, it should be
entitled to payment of any amount it is able to establish”. It concluded:

“In all the circumstances, the appeal must be upheld in part. Although the appeal
against the counter-application is dismissed, [ZHI] was successful in so far as it seeks
the preservation of its rights to pursue payment for services provided, as a just a nd
equitable remedy.”11

[19] The operative part of the S upreme Court of Appeal’s order, at paragraph 2(2),
reads:

“The order of constitutional invalidity in paragraph 1 above does not have the effect of
divesting [ZHI] of any rights to which it would have been entitled under the contract
referred to in paragraph 1 above, but for the declaration of invalidity.”


10 This type of order safeguards the contractor’s interests, in that such an order of constitutional invalidity does
not have the effect of divesting the contractor’s rights to which it would have been entitled under the

constitutionally invalid contract but for the declaration of invalidity. See Gijima above n 7 at para 54.
11 Zeal Health SCA above n 1 at para 25.

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11
[20] The central question that thus arises in this appeal is whether the Supreme Court
of Appeal’s exercise of its remedial discretion under section 172(1)(b) of the
Constitution was vitiated by any error of law or material misdirection, and if so, what
remedy would be just and equitable in the circumstances of this case.

In this Court
Department’s submissions
[21] The Department submits that this Court ’s jurisdiction is engaged on two bases.
First, it contends that the case concerns the interpretation and application of
section 172(1)(b) of the Constitution, making it a constitutional matter in terms of
section 167(3)(b)(i). The Department submits that the proper approach to just and
equitable remedies under section 172(1)(b), particularly in protecting the position of
innocent contractors when public contracts are declared invalid, raises questions of
constitutional interpretation and application that require authoritative determination by
this Court.

[22] Second, the Department submits that this Court has jurisdiction under
section 167(3)(b)(ii) on the basis of an alleged conflict between decisions of the
Supreme Court of Appeal. The Department points to what it characterises as
conflicting decisions: on the one hand are Gijima and Buffalo City,12 which preserved
contractors’ accrued contractual rights; and on the other hand, there is Bravospan,
which, according to the Department , supports limiting contractors t o out -of-pocket
expenses, and Phomella,13 which, so the Department contends, wrongly rejected the “no
profit, no loss” principle. The Department cites CEF14 as correctly adopting the “no
profit, no loss” principle.


12 Buffalo City Metropolitan Municipality v Asla Construction (Pty) Ltd [2019] ZACC 15; 2019 (4) SA 331 (CC);
2019 (6) BCLR 661 (CC).
13 Special Investigating Unit v Phomella Property Investments (Pty) Ltd [2023] ZASCA 45; 2023 (5) SA 601
(SCA).

(SCA).
14 Central Energy Fund SOC Ltd v Venus Rays Trade (Pty) Ltd [2022] ZASCA 54; 2022 (5) SA 56 (SCA).

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12
[23] On the merits, the Department advances several grounds for impugning the
Supreme Court of Appeal order. First, it contends that the Supreme Court of Appeal
failed to exercise its discretion judiciously. The Supreme Court of Appeal’s reasoning,
the Department says, was sparse and bereft of analysis. The judgment ma de no
reference to AllPay and no attempt to distinguish this case from Gijima or Buffalo City.
Most importantly , the Supreme Court of Appeal failed to grapple with the limited
duration of ZHI’s performance, only two and a half months, and the implications of this
regarding an appropriate remedy.

[24] Second, the Department submits that the Supreme Court of Appeal’s order is
ambiguous. It is not clear whether the order only preserves ZHI’s right to the three
invoices for June to August 2015 or whether it preserves ZHI’s right to claim damages
for the entire three -year contract period, including lost profits . The Department’s
understanding, shared by ZHI, is that the order bears the broader int erpretation. But if
that is correct, the Department argues, the order would entitle ZHI to recover not merely
compensation for services rendered but substantial damages for services never provided
over a 33-month period. That, it argues, cannot be just and equitable.

[25] Third, the Department relies on the “no profit, no loss” principle which it
contends flows from AllPay. The principle means that where a contract is declared
invalid, an innocent contractor should not be out of pocket but equally should not profit
from an unlawful arrangement. The Department acknowledges that AllPay involved a
forward-looking suspension of invalidity, whereas this case is backward -looking. But
the underlying principle, so the Department submits, should apply with equal for ce:
innocent contractors should be compensated for their actual costs, but should not be
enriched at public expense through contracts that violate constitutional and statutory
norms.

norms.

[26] Fourth, the Department points to several factual circumstances which, it says,
the Supreme Court of Appeal failed to consider. ZHI voluntarily suspended services on
12 August 2015. The Department acted promptly, within less than three months, to

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launch its self -review. ZHI vehemently opposed all grounds of review, claiming that
there were only minor and immaterial mistakes in the procurement process. The
contract term expired in May 2018. ZHI cancelled the contract in April 2018 to pursue
a damages claim for lost profits. The Department had to make alternative arrangements
through the MOU with the Department of Defence and has thus already paid for the
self-same services in respect of which ZHI claims damages for lost profit s. All these
factors, the Department submits, should have informed the Supreme Court of Appeal’s
remedial discretion.

[27] Fifth, the Department submits that there is a material distinction between this
case and Gijima or Buffalo City. In the latter cases, the contractors continued to render
services throughout the contract period or a substantial part of it. The state allowed the
contractors to perform and derived the benefit of that performance over an extended
period. Only much later did the state seek to review the contracts. Here, by contrast,
services were rendered for only two and a half months, and the Department acted
relatively promptly to challenge the contract.

[28] The Department proposes that the appropriate remedy would be an order limiting
ZHI to recovery of its out -of-pocket expenses for the period from 1 June to
12 August 2015. If ZHI can establish that it incurred additional out-of-pocket expenses
after 12 August 2015 in maintaining capacity or providing emergency services, those
too should be recoverable. But ZHI should not be entitled to any profit margin, and
certainly should not be entitled to lost profits for services never rendered.

ZHI’s submissions
[29] ZHI submits that the Department has failed to identify any true conflict in the
jurisprudence. ZHI points out that Bravospan SCA involved an unjust enrichment claim
brought in separate action proceedings, not a contractual claim of the kind advanced

brought in separate action proceedings, not a contractual claim of the kind advanced
here. Moreover, when this Court dismissed the application for leave to appeal in

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Bravospan CC,15 it did so on the basis that it was not in the interests of justice to grant
leave, not because the order in Bravospan SCA was correct. The two cases are thus
distinguishable on their facts, and there is no conflict requiring resolution.

[30] ZHI accepts that our constitutional jurisdiction is engaged. The proper
interpretation and application of section 172(1)(b) are indeed constitutional matter s.
However, ZHI contends that it is not in the interests of justice to grant leave to appeal.
The Supreme Court of Appeal exercised a true discretion, and the Department has not
established that the discretion was exercised in a manner that was not judicious, or was
influenced by wrong principles or was based on a misdirection of fact. The
Department’s complaint, pr operly understood, is that the S upreme Court of Appeal
should have weighed the relevant factors differently, but that is not a basis for appellate
interference with a discretionary decision.

[31] ZHI emphasises that this is a case where an innocent contractor rendered services
for which it was never paid, despite the Department having approved payment. The
Department then engaged in what ZHI characterises as an unconscionable and cynical
attempt to justify its refusal to pay by searching for grounds of review. The
Department’s conduct, ZHI submits, makes this an inappropriate case for limiting the
contractor to out-of-pocket expenses.

[32] On the merits, ZHI submits that the Supreme Court of Appeal’s order should be
upheld. It argues that w hile the reasoning coul d have been more elaborate, it is
sufficient to show that the Supreme Court of Appeal exercised its discretion judiciously.
ZHI disputes that the order is ambiguous. ZHI submits that , properly read, the order
preserves its accrued contractual rights, notwithstanding the declaration of invalidity of
the contract.

the contract.


15 Greater Tzaneen Municipality v Bravospan 252 CC [2024] ZACC 20; 2025 (1) BCLR 1 (CC); 2025 (1) SA 557
(CC).

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[33] ZHI contests the Department’s reliance on the “no profit, no loss” principle. That
principle, ZHI submits, has been comprehensively analysed and rejected as a general
principle by the S upreme Court Appeal in Phomella, which overruled its earlier
judgment in CEF. AllPay did not establish a rule that innocent contractors may never
profit from services rendered. Rather, AllPay held that there is no right to benefit from
an unlawful contract, but the absence of such a right does not mean that a court, in the
exercise of its remedial discretion, may not permit a party to profit. Each case must be
assessed on its own facts.

[34] ZHI emphasises what it characterises as the Department’s unconscionable and
unconstitutional conduct. The contract was signed by the Director -General,
Mr Motumi, on 27 May 2015. On 31 July 2015, his last day in office, Mr Motumi
approved a memorandum recommending payment of ZHI’s first invoice. However, this
instruction was never carried out. On the following day, 1 August 2015, Mr Maake
assumed office as the Acting Director -General. ZHI contends that the change in
leadership precipitated a reversal in the Department’s approach, driven by political
considerations rather than genuine concerns about procurement irregularities.

[35] ZHI points to several pieces of evidence in support of this contention . First, an
email dated 1 June 2015 from Mr Maake ( the then Deputy Director -General) to
Mr Motumi revealed that the Deputy Minister had instructed that the tender should not
proceed because it should have included provision s for veterans’ dependants, and
expressed indignation that Mr Motumi had proceeded “in defiance of the [Deputy
Minister’s] instruction”. Second, the then -Minister subsequently informed Parliament
that she had given an instruction that ZHI should not be paid because she considered
the contract too expensive. Third, when the Department’s Acting Chief Financial

the contract too expensive. Third, when the Department’s Acting Chief Financial
Officer was asked why p ayment had not been approved, he provided a demonstrably
false explanation, namely that ZHI was already contracted under the interim services
agreement, when in fact the complete approval document (which only came to light
when provided to ZHI by an anonym ous third party) showed that payment had been
recommended and supported by the relevant officials.

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16

[36] ZHI submits that this evidence reveals a self -serving and cynical attempt by the
Department to justify the Minister’s political decision not to pay by retro spectively
searching for grounds of review. ZHI characterises the Department’s
counter-application as a post -hoc (ex post facto) rationalisation designed to give legal
cover to what was in truth a repudiation of the contract for reasons of political
expediency. Throughout the litigation, the Department maintained that it was not
obliged to pay ZHI anything for services rendered under an invalid contract, despite
ZHI having performed in good faith and incurring substantial costs in doing so.

[37] ZHI submits t hat the capitation model was the Department ’s choice. Three
pricing models were presented. The Department selected the capitation model because
it provided certainty and predictability. Under that model, ZHI bore the risk that more
veterans would seek t reatment than anticipated and that the necessary health care
services would exceed those anticipated . Conversely, it stood to benefit if fewer
veterans sought treatment or if the necessary health care services were less extensive
than anticipated. The fact that only a fraction of the veterans actually accessed services
between June to August 2015 does not undermine ZHI ’s entitlement to the capitated
fee. That was the bargain struck. The Department never challenged the invoices during
the litigatio n on the basis that the capitation model was inappropriate or the rates
excessive.

[38] ZHI points out that the Department incurred greater expenditure s through the
alternative arrangements with SAMHS than it would have under the contract with ZHI.
The Depart ment spent R67. 2 million in the 2015/16 financial year, compared to
R52.4 million that ZHI would have cost. Moreover, the location of SAMHS facilities
did not adequately meet veterans’ needs. This, ZHI submits, undermines any suggestion

did not adequately meet veterans’ needs. This, ZHI submits, undermines any suggestion
that compensating ZHI at the contractual rate would be unjust or inequitable.

[39] Finally, ZHI relies on this Court ’s recent judgment in Bravospan CC. In that
case, this Court emphasised that organs of state must pay for services provided to them

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17
by innocent contractors. 16 The Court spoke of “a broader phenomenon of organs of
state seeking to rely on their own unlawful conduct to avoid compensating innocent
contractors” and stated that “conduct of this sort will not be tolerated ”.17 ZHI submits
that the present case is a textbook example of such conduct and that the Supreme Court
of Appeal’s order should be upheld as a just and equitable remedy.

Discussion
Jurisdiction and leave to appeal
[40] The Department invokes our constitutional jurisdiction on the basis that this case
concerns the interpretation and application of section 172(1)(b) of the Constitution. It
also submits that this matter raises an arguable point of law of general public importance
arising from an alleged conflict between decisions of the Supreme Court of Appeal.

[41] The proposed appeal is said to be a constitutional matter on the following basis.
Section 172(1)(b) of the Constitution confers upon a court that has declared conduct or
legislation to be invalid a discretion to make any order that is just and equ itable. The
proper interpretation and application of this provision, particularly in the context of
contracts declared invalid where one party is entirely innocent, raise questions of
constitutional interpretation. Moreover, the Department submits that this case concerns
the interaction between section 172(1)(b) and the protection of constitutional rights and
access to courts. ZHI, as an innocent contractor that rendered services and incurred
costs, has constitutionally -protected interests that must be b alanced against the public
interest in not rewarding parties to invalid contracts.

[42] I am satisfied that our constitutional jurisdiction is engaged. The question
whether a court may, in the exercise of its remedial discretion under section 172(1)(b),
permit an innocent contractor to retain a benefit, including a profit margin, for services

permit an innocent contractor to retain a benefit, including a profit margin, for services
actually rendered under a contract subsequently declared invalid is undoubtedly a matter

16 Bravospan CC above n 15 at para 60.
17 Id.

MATHOPO J
18
of constitutional interpretation and application. Although the legal principles governing
the exercise of remedial discretion under section 172(1)(b) are well -established, their
application to cases of the present kind, and the proper approach to protecting innocent
contractors, raise questions that fall squarely within this Court’s c onstitutional
jurisdiction.

[43] Whether our general jurisdiction is engaged on this basis is, in my view,
doubtful. The invocation of an alleged conflict between the Supreme Court of Appeal’s
decisions is not well-founded. Bravospan SCA involved an unjust e nrichment claim
brought in separate action proceedings after a contract had been set aside on review, not
a section 172(1)(b) remedy fashioned contemporaneously with the declaration of
invalidity. The Court in Bravospan SCA granted an order entitling the contractor to
compensation for services rendered; language which does not, on its face, preclude the
inclusion of a profit margin as part of such compensation. Phomella, for its part, is
express in rejecting any blanket “no profit, no loss” principle and emphasises that the
exercise of remedial discretion under section 172(1)(b) must be undertaken on a case -
by-case basis, having regard to the particular circumstances of each matter. The factual
matrices of Gijima, Buffalo City, Bravospan SCA and Phomella differ materially, and
it is not immediately apparent that they establish conflicting legal principles that rise to
the level of being an arguable point of law that would ground our general jurisdiction.

[44] There might even be some tension between Gijima and AllPay in that regard,
since Gijima permitted the innocent contractor to recover its contractual remuneration
(including profit) for services actually rendered, whereas AllPay spoke of ensuring that
the innocent contractor suffers no loss but also derives no gain. But as will become
apparent from my analysis of the recent decision of the Supreme Court of Appeal in

apparent from my analysis of the recent decision of the Supreme Court of Appeal in
Mafoko,18 the apparent tension dissolves upon a proper un derstanding of AllPay.
Accordingly, to a greater or lesser extent, I entertain some doubt that this Court has

18 Mafoko Security Patrols (Pty) L td v Mjayeli Security (Pty) L td [2025] ZASCA 179 . See also Caledon River
Properties (Pty) Ltd t/a Magwa Construction v Special Investigatin g Unit [2026] ZASCA 5 (Caledon River) at
para 18.

MATHOPO J
19
general jurisdiction on the basis of the alleged conflict between decisions of the
Supreme Court of Appeal. The question presented by this case is not one that requires
us to choose between conflicting lines of authority in the Supreme Court of Appeal.
Rather, it requires us to interpret and apply section 172(1)(b) of the Constitution in
circumstances where an innocent contractor rendered services under a contract that was
subsequently declared invalid. This is quintessentially a matter of constitutional
interpretation.

[45] It is, however, unnecessary to resolve the question of general jurisdiction given
the existence of constitutional jurisdiction. Accordingly, I proceed on the basis that this
Court has jurisdiction to entertain the application for leave to appeal. However, the fact
that the matter engages our jurisdiction does not mean, without more, that it is in the
interests of justice to grant leave to appeal.19

[46] The interests of justice must warrant the granting of leave to appeal, and several
considerations point in favour of granting leave to appeal in this matter. First, the
amount at stake is substantial. The three invoices that remain u npaid total
R15 765 345.30. Beyond that, ZHI has issued a summons claiming R73 233 228 in lost
profits for the remainder of the contract period. Those proceedings have been stayed
pending resolution of the present appeal. The remedial order made by the
Supreme Court of Appeal has significant financial implications for both parties and,
given the involvement of public funds, for the fiscus.

[47] Second, the question of how to protect the position of innocent contractors when
public contracts are declared inva lid is one that arises with considerable frequency in
our law. Organs of state enter into numerous contracts for goods and services. Where
such contracts are subsequently declared invalid, whether on grounds of
non-compliance with procurement legislation , budgetary constraints or other

non-compliance with procurement legislation , budgetary constraints or other
constitutional or statutory requirements, courts are routinely called upon to fashion just

19 General Council of the Bar of South Africa v Jiba [2019] ZACC 23; 2019 (8) BCLR 919 (CC) at para 35.

MATHOPO J
20
and equitable remedies. Clarity as to the relevant considerations and approach would
serve the public interest.

[48] Third, the principles governing remedial discretion under section 172(1)(b) have
application across a wide range of circumstances where state action is declared invalid.
This judgment may thus have utility beyond the specific context of procurement
contracts.

[49] Lastly, as I shall explain in due course, there are grounds for concluding that the
Supreme Court of Appeal did not exercise its remedial discretion judiciously. The
reasoning provided by the Supreme Court of Appeal was sparse. The judgment does
not address the mate rial distinction between the limited period during which ZHI
actually rendered services and the much longer period for which the Supreme Court of
Appeal’s order appears to preserve contractual rights. Nor does it consider the
Department’s conduct, the pro mptness with which the review was launched or the
factual differences between this case and Gijima or Buffalo City. If these concerns are
well-founded, appellate intervention would be warranted.

[50] The question whether it would be in the interests of justice to grant leave to
appeal turns substantially on the applicant’s prospects of success. For reasons on which
I shall elaborate, I am satisfied that the Department has reasonable prospects of success
on appeal, at least in part. It is accordingly in the interests of justice to grant leave to
appeal.

The standard for appellate interference with a true discretion
[51] Before addressing the merits, it is necessary to consider the standard that applies
when this Court is asked to review the exercise of remedial powers under
section 172(1)(b). It is now well established that the determination of a just and

MATHOPO J
21
equitable remedy involves the exercise of a true discretion. In Ekapa,20 this Court
recently confirmed that the discretion exercised in terms of section 172(1)(b) is a true
discretion, to be exercised on a case-by-case basis, and may only be interfered with on
appeal if the court of appeal is satisfied that the discretion was not exercised judiciously,
was influenced by wrong principles or was based on a misdirection of fact. 21

[52] The rationale underpinning appellate restraint in such circumstances is sound. It
preserves judicial comity, fosters certainty and favours finality. However, appellate
restraint does not mean appellate abdication. Where a court has failed to exercise its
discretion judiciously, that is, where it has not brought its unbiased judgment to bear
upon all relevant circumstances, or has been influenced by wrong principles, or has
made material errors of fact, an appellate court is entitled, indeed required, to intervene.

[53] A court exercises discretion judici ously when it considers all relevant
circumstances and makes an order it considers fair and just on substantial reasons, not
capriciously. Where a court ’s reasoning is so sparse that one cannot discern what
factors were considered, or why a particular option was chosen over others, this may
indicate that the discretion was not exercised judici ously. The question is not whether
the c ourt cited every authority or distinguished every potentially relevant case.
Section 172(1)(b) contemplates a flexible, fact-sensitive approach. But the exercise of
discretion does require consideration of material circumstances and an explanation,
however succinct, of why the chosen remedy is just and equitable in the particular case.

Application of the standard
[54] With the above principles in mind, I turn to consider whether the Supreme Court
of Appeal exercised its remedial discretion judiciously. The Supreme Court of Appeal’s

of Appeal exercised its remedial discretion judiciously. The Supreme Court of Appeal’s
reasoning on remedy appears at paragraphs 23 to 25 of its judgment. At paragraph 23,
the Court correctly noted that section 172(1)(b) confers a true discretion which must be

20 Ekapa Minerals (Pty) L td v Sol Plaatje Local Municipality [2025] ZACC 1; 2025 (5) BCLR 505 (CC); 2025
(6) SA 1 (CC).
21 Id at para 57.

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22
exercised judiciously on a case -by-case basis. It then observed that, although the
contract was invalid, ZHI had rendered services under it, was not involved in
perpetuating irregularities and was found by the High Court to be an innocent party.
The Supreme Court of Appeal state d that “[u]nder those circumsta nces, it should be
entitled to payment of any amount it is able to establish” . The Court conclude d that
although the appeal against the review order is dismissed, “ZHI was successful in so far
as it seeks the preservation of its rights to pursue payment f or services provided, as a
just and equitable remedy”. This reasoning, whilst not as elaborate as might be
desirable, does identify certain salient considerations : ZHI’s innocence, the fact that
services were rendered and that some form of payment was appropriate. The order itself
follows the formulation adopted by this Court in Gijima and Buffalo City.

[55] However, the S upreme Court of Appeal’s reasoning does not grapple with
several material considerations that distinguish this case from Gijima and Buffalo City.
Most significantly, the Supreme Court of Appeal does not address the critical question
of the duration of ZHI ’s performance. When did performance cease, and why? The
judgment refers to ZHI having “rendered services under the contract ” but does no t
distinguish between services actually rendered and services that were never provided.
There is no consideration of whether the remedy should vary as between the period
during which ZHI performed (June to mid -August 2015) and the remainder of the
three-year contract period.

[56] This matters, because the practical effect of the Supreme Court of Appeal order
is ambiguous. Does the order preserve only ZHI ’s right to payment for the period
during which it actually performed? Or does it preserve ZHI ’s right to claim the full
contract price, including damages for breach in respect of the entire three -year period?

contract price, including damages for breach in respect of the entire three -year period?
On one reading, the order preserves ZHI ’s “accrued contractual rights ” – rights that
accrued during the period of performance. On another reading, the order preserves all
rights “to which [ZHI] would have been entitled under the contract ”, which would
include its right to sue for lost profits in respect of the full contract period.

MATHOPO J
23
[57] Both parties understand the S upreme Court of Appeal’s order as bearing the
broader interpretation with the effect of preserving ZHI’s rights for the full three -year
contract period, and not merely for the two-and-a-half-month performance period. The
Department expressed concern that the order would leave it with no defence to ZHI’s
claim for lost profits in respect of the balance of the three-year period , a period of
slightly more than 33 months. ZHI, for its part, has instituted separate action
proceedings claiming approximately R73 million in lost profits for the period from
September 2015 to May 2018. Those proceedings have been stayed pending the
outcome of this appeal. The present appeal would likely not have been pursued had the
Supreme Court of Appeal’s order been limited to the three invoices for June to
August 2015.

[58] The Supreme Court of Appeal’s judgment does not consider several factual
circumstances that are material to the determination of a just and equitable remedy.
These include: the Department’s conduct in approving and then reversing payment; the
change in leadership that precipitated the reversal; the evidence of political
considerations influencing non-payment; the absence of any challenge to the quantum
of ZHI’s invoices during the litigation; and the comparative costs of the alternative
arrangements. Nor does the judgment distinguish between the period during which ZHI
performed and the much longer period during which it did not.

[59] To be clear, a court exercising its remedial discretion under section 172(1)(b)
need not address every factual nuance or c ite every potentially relevant authority. But
it ought to identify the key considerations that have influenced its choice of remedy and
explain why that remedy is just and equitable in the particular circumstances. The
Supreme Court of Appeal’s reasoning, whilst not incorrect in what it says, is too sparse

Supreme Court of Appeal’s reasoning, whilst not incorrect in what it says, is too sparse
to demonstrate that the discretion was exercised judiciously with proper regard to
material circumstances.

[60] I am fortified in this conclusion by the ambiguity of the order itself, coupled with
the disju ncture between the order and the reasoning that underlies it. If the

MATHOPO J
24
Supreme Court of Appeal had intended to confine ZHI to payment for services actually
rendered during June to August 2015, it would have expressed itself explicitly . If,
conversely, it intended to preserve ZHI’s full contractual rights, including its claim for
lost profits for the entire contract period, one would have expected reasoning as to why
that would be just and equitable , given that services were rendered for only a small
fraction of that period. The absence of such clarity suggests a failure to grapple with
the essential question: what rights are being preserved, and why is that remedy just and
equitable in these particular circumstances?

[61] I conclude, therefore, that grounds ex ist for this Court to interfere with the
Supreme Court of Appeal’ s exercise of its remedial discretion. That said, w e are at
large to reconsider what remedy is just and equitable in the circumstances of this case.

The appropriate remedy
First period (1 June to 12 August 2015)
[62] I turn then to consider what remedy is appropriate. It is necessary, in my view,
to distinguish between two periods: first, the period from 1 June to 1 2 August 2015,
during which ZHI rendered services; and second, the period thereafter, being 13 August
2015 to May 2018. For the period during which ZHI actually rendered services, I
consider that a remedy preserving ZHI’s contractual rights is just and equitable. Several
considerations weigh in favour of this conclusion.

[63] First, ZHI was an entirely innocent party. The High Court found that there was
no evidence of complicity in any irregularities, and the Department did not challenge
that finding on appeal. This is an important starting point. The law rightly draws a
clear distinction between parties who are complicit in maladministration and those who
are not. Where a contractor has done no wrong, it should not be required to suffer loss
as a result of an organ of state ’s failure to comply with its own constitutional
obligations.

MATHOPO J
25
[64] Second, ZHI rendered actual services pursuant to the contract. It established and
managed a healthcare network. It provided primary healthcare, chronic disease
management and psychological counselling services to military veterans as
contemplated by th e contract. These services assisted the Department in complying
with its statutory obligations under the Military Veterans Act. The Department obtained
the benefit of those services.

[65] Third, ZHI incurred costs in setting up and operating this network. It had to pay
healthcare providers for the services they rendered to veterans. The invoices submitted
by ZHI for June, July and August 2015 totalled approximately R15.7 million. While
the Department expressed concern about the quantum of these invoices, i t never
challenged them on the basis that the services were not provided or that the invoicing
was fraudulent.

[66] Fourth, the Department’s conduct was not exemplary. The contract was signed
by the Director-General on 27 May 2015. On 31 July 2015, the same Director-General
approved a memorandum authorising payment of ZHI ’s first invoice. But this
instruction was never carried out. The evidence suggests that there was a change of
leadership at the Department, with an Acting Director -General taking office on
1 August 2015. The Minister apparently instructed that ZHI should not be paid because
she considered the contract too expensive. Only then did the Department embark upon
the process of self-review.

[67] Fifth, although the Department submits that it acted promptly, it did so only after
ZHI had already begun performance and incurred substantial costs. The contract
commenced on 1 June 2015. The Department did not notify ZHI of its intention to seek
judicial review until 11 August 2015, by which time more than two months had elapsed.
During this period, the Department allowed ZHI to continue performing, creating a
reasonable expectation that it would be paid.

MATHOPO J
26
[68] Sixth, once ZHI stopped providing the full suite of services in mid-August 2015,
the Department had to find alternative arrangements. It resorted to a n MOU with the
Department of Defence, under which military veterans could access military healthcare
facilities. The evidence before this Court indicates that this proved more expensive than
the contract with ZHI would have been and that the alternative arrangements were less
satisfactory in meeting veterans ’ needs, particularly for those living far from military
installations.

[69] In these circumstances, I consider it just and equitable that ZHI should be entitled
to recover payment at the contractual rate for the period during which it actually
rendered services. This means that ZHI should be compensated in accordance with the
contract for June, July and the portion of August 2015 during which it provided the full
suite of services.

The “no profit, no loss” principle
[70] I do not accept the Department ’s submission that ZHI should be limited to out -
of-pocket expenses without any profit margin. The Department relies on the “no profit,
no loss” principle, which i t contends was articulated in AllPay. This requires careful
consideration. In AllPay, this Court was confronted with the problem that if its
declaration of invalidity was not suspended, Cash Paymaster Services (CPS) could
simply cease operations, leaving welfare recipients without a means of securing social
grant payments until a lawful tender process had been concluded. This Court found that
CPS continued to bear constitutional obligations to ensure a payment system remained
in place. In that context, this Court said:

“It is true that any invalidation of the existing contract as a result of the invalid tender
should not result in any loss to [CPS]. The converse, however, is also true. It has no
right to benefit from an unlawful contract. And any benefit that it may derive should
not be beyond public scrutiny.”22

not be beyond public scrutiny.”22


22 AllPay above n 8 at para 67.

MATHOPO J
27
[71] The “no profit, no loss” principle put forward by this Court in AllPay has narrow
application. Properly understood, the principle, as this Court explained in Shabangu,23
was developed in the specific context where this Court suspended the declaration of
invalidity so as to require CPS to continue rendering services for an extended period
despite the constitutional invalidity of the contract. The principle was designed to
regulate the forward-looking suspension of an invalid contract where the contractor was
required to continue performing in the public interest.

[72] Very recently, the Supreme Court of Appeal, in Mafoko,24 clarified the proper
interpretation of AllPay. Unterhalter JA, delivering the judgment of that Court,
explained that the dictum (pronouncement) in AllPay does not establish a principle that
innocent tenderers cannot profit from services rendered pursuant to invalid contracts. 25
Rather, what AllPay holds is that there is no right to benefit from an unlawful contract.
But the absence of such a right does not mean that a court, in the exercise of its just and
equitable discretion, may not permit a party to enjoy the benefit of a contract, including
the profits that may have already accrued. As the Supreme Court of Appeal observed,
any benefit derived from an unlawful contract “should not be beyond public scrutiny”.26
This means that such benefit falls to be scrutinised in determining how the court should
exercise its remedial discretion. It does not mean that the benefit is excluded from
remedial consideration.

[73] The reasoning in Mafoko accords with the earlier decision of the Supreme Court
of Appeal in Phomella. T he position is clear: there is no rigid rule that inno cent
contractors may never profit from services rendered pursuant to invalid contracts.
Whether such profit should be allowed depends upon all the circumstances of the case,

23 Shabangu v Land and Agricultural Development Bank of South Africa [2019] ZACC 42; 2020 (1) BCLR 110 ;
2020 (1) SA 305 (CC).
24 Mafoko above n 18. That decision has been reaffirmed in Caledon River above n 18 at para 18.
25 Mafoko id at para 11.
26 Id.

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28
properly considered in the exercise of the court ’s remedial discretion under
section 172(1)(b).

[74] This case differs materially from AllPay. The contract was declared invalid by
the High Court in 2022, and that declaration was upheld by the S upreme Court of
Appeal. The contract is not being suspended; it has been cancelled and would in any
event have expired. What this Court is concerned with here is not the forward-looking
continuation of an invalid arrangement but the backward -looking question of how to
compensate an innocent contractor for services already rendered by the contractor and
accepted by the organ of state . In the circumstances prevailing in Gijima and Buffalo
City, this Court considered that the innocent contractor which had rendered services
pursuant to the invalid contract should be entitled to benefit through a preservation of
accrued contractual rights.27 There is no good reason to depart from that approach here,
at least for the period during which services were actually rendered. Indeed, the
reasoning in Mafoko strongly supports this conclusion. In that case, the Supreme Court
of Appeal noted that where a firm is entirely blameless and has been required to render
services over an extended period, profit should not automatically be excluded from
consideration. The Court explained that lawful public procurement is secured by the
state at a competitive price, which includes a return for the provider.28 Where a provider
is blameless, the imposition of a duty to provide public services should be infl uenced
by this normative benchmark – that is, compensation at a competitive price that includes
a reasonable return.

[75] If the contractual rights are preserved for the period from June to
mid-August 2015, ZHI will be entitled to the contractual rate. That rate, in the nature
of things, includes a profit margin. The preservation of “accrued contractual rights”

of things, includes a profit margin. The preservation of “accrued contractual rights”
does not mean putting the contractor in the position it would have occupied had the
entire contract been performed. Rather, it means compensating th e contractor, at the

27 Gijima above n 7 at para 54.
28 Mafoko above n 19 at para 19.

MATHOPO J
29
contractual rate, for services actually rendered during the period of performance . It is
backward-looking in that it concerns what has been done, not what might have been
done had the contract continued.

[76] This is materially different from an expectation interest in future performance.
If a three -year contract is entered into but only two months of services are rendered
before the contract is challenged and set aside, the contractor – but for the order of
invalidity – would have accrued rights in respect of those two months. It would not
have accrued rights in respect of the remaining 34 months, because no performance
would have occurred during that period. At most, it may have a claim for damages for
breach or repudiation, but that i s a different matter. The distinction matters because it
determines the scope of the remedial order under section 172(1)(b).

[77] The correct approach is therefore to distinguish between the period of actual
performance and the period of non -performance. For the former, it will often be
appropriate to allow the contractor’s rights to be preserved at the contractual rate ,
particularly where the review does not attack the contractual rate as such. That rate, in
the nature of things includes a profit margin. No tenderer submits a bid without
factoring in some profit. If a contractor performs efficiently, the contractual rate will
cover its costs and yield a profit. If it performs inefficiently, the profit margin will be
eroded. But the contractor takes that risk when it enters into the contract. The point of
preserving accrued contractual rights is to honour the contractual bargain for the period
of actual performance, not to rewrite it. This puts the contractor in the position it would
have occupied had th e contract been valid for the period during which the contractor
performed. For the period after performance ceased , the contractor has not accrued

performed. For the period after performance ceased , the contractor has not accrued
contractual rights through performance, and preservation of such rights would amount
to a windfall. All of this flows solely from the exercise of a court’s just and equitable
discretion under section 172(1)(b) of the Constitution.

[78] I am mindful of the disparity between the number of veterans who actually
sought treatment (approximately 1 113 in June 2015) and the number for whom ZHI

MATHOPO J
30
invoiced (14 346). However, as already noted, the capitation model was the
Department’s choice. ZHI assumed the risk that more veterans would seek services
than anticipated, driving up costs. Conversely, it stood to ben efit if fewer veterans
sought services. That was the agreed bargain.

[79] It would be unjust to deny ZHI the benefit of that bargain for the period during
which it performed, particularly when the Department never challenged the invoices
during the litigation on the basis that the capitation model was inappropriate or that ZHI
had overcharged. The Department’s review application was premised primarily on the
budget shortfall and various procurement irregularities, not on any contention that the
pricing model itself was unlawful or that the rates were excessive. Indeed, when the
Department initially received ZHI’s first invoice, its concern was to verify the existence
of a signed contract and to request a breakdown – it did not suggest that the invoiced
amount was inflated or unreasonable given the capitation model that had been agreed.

[80] Moreover, to confine ZHI to out -of-pocket expenses would raise difficult
practical questions. What exactly would constitute out -of-pocket expenses? Would it
include only the amounts paid to service providers, or also the costs of establishing and
maintaining the network, the call centres and the administrative systems? What profit
margin, if any, would be allowed? How would one distinguish between reasonable
costs and excess ive costs ZHI incurred in setting up ? These are questions that could
lead to protracted and costly litigation. We should not condemn the parties to such
litigation in respect of a period of only two and a half months, when the contractual rate
provides a clear, lawful and fair basis for compensation.

[81] It is significant that the Department did not, during the course of the litigation,
mount any sustained attack on the reasonableness of the tender award price. The

mount any sustained attack on the reasonableness of the tender award price. The
contract was the product of a competitive tender process. ZHI was the successful
bidder. Absent fraud or corruption , and there is no suggestion of either , there is
generally no basis for a court to substitute a different rate for the rate that emerged from

MATHOPO J
31
the competitive process. The Department’s complaint was that the contract exceeded
its budget, not that the pricing was inherently excessive or unreasonable.

[82] There are broader considerations that support this conclusion. The incentive
effects of remed ies must be considered. If orga ns of state could avoid paying for
services rendered merely by establishing procedural irregularities, even where the
contractor is entirely innocent, they would have little incentive to ensure sound
procurement practices at the outset, and every incentive to search for grounds of review
when a contract proves inconvenient or politically expensive. Depriving innocent
contractors of profits earned through legitimate performance might also send an
undesirable message to the business community. I conclude, t herefore, that for the
period from 1 June to 1 2 August 2015, ZHI is entitled to compensation at the
contractual rate.

Second period (post -12 August 2015) and concerns relating to the second
judgment
[83] The position is very different for the period after 1 2 August 2015. From that
point, ZHI did not render the full suite of services contemplated by the contract. On
12 August 2015, it instructed its provider network to suspend non -emergency services
and to require cash payment for consultations. The August invoice, for R5 261 084.61,
covered the period 1 to 31 August, by which time services had been substantially
curtailed from 1 2 August 2015 to May 2018. I recognise that this creates a temporal
anomaly: the third invoice covers a month during which full services were provided for
only 12 days. Neither party has suggested that the third invoice should be pro -rated or
challenged on this basis. Be that as it may, this Court can mero motu (of its own accord)
consider the issue of pro-rating the August 2015 invoice. This would allow ZHI to be
compensated for services rendered. Since ZHI rendered services from 1 to 12 August

compensated for services rendered. Since ZHI rendered services from 1 to 12 August
2015, there is no reason why it should be compensated for the entire month of August
2015. I therefore conclude that ZHI is entitled to pro-rated compensation for the
12 days of August 2015.

MATHOPO J
32
[84] For the period from 13 August 2015 to May 2018, the position is very different.
There is limit ed evidence in the record as to what services, if any, ZHI continued to
provide. The Department’s evidence is that once ZHI suspended services, the
Department immediately resorted to the MOU with the Department of Defence to
ensure continuity of healthcare provision to military veterans. ZHI’s evidence suggests
that it maintained some limited capacity to respond to emergency cases and incurred
ongoing costs in doing so during August, September and October 2015.

[85] In these circumstances, I do not consider it just and equitable to preserve ZHI’s
contractual rights for the remainder of the three -year contract period. Several
considerations point to this conclusion. First, and most fundamentally, ZHI did not
render the contracted services after August 2015. The contract contemplated a
comprehensive managed healthcare programme providing primary healthcare, chronic
disease management, psychological counselling and medical assessments for
compensation claims to all registered military veterans on an ongoing b asis. That
programme operated from 1 June to mid -August 2015. Thereafter, at best, ZHI
maintained limited emergency capacity for a brief transitional period. ZHI was no
doubt willing to render the services for the full contract period if the Department were
willing to accept the services and pay for them, but as a fact , practically no services
were rendered for the balance of the contract period.

[86] Second, to preserve ZHI’s contractual rights for the full three-year period would
potentially entitle ZHI to claim lost profits in respect of 33 months of non-performance.
ZHI’s separate action, instituted in March 2021, claims approximately R73 million in
lost profits for the period from September 2015 to May 2018. This accounts for services
that were never rendered, in circumstances where the Department had notified ZHI of

that were never rendered, in circumstances where the Department had notified ZHI of
its intention to review the contract and had made clear that it would not be calling on
ZHI to continue performing.

[87] To do so would potentially entitle ZHI to claim the full contract price of
approximately R198 million, or at least substantial lost profits in respect of the

MATHOPO J
33
33-month period from September 2015 to May 2018, despite having rendered the
contracted services for only two and a half months. That would be a windfall, not
compensation. During oral argument, counsel for ZHI submitted that ZHI remained
willing and able to perform throughout this period, and that as a matter of private
contract law, it would be entitled to claim damages for the Department ’s repudiation.
There is force in this submission from the perspective of ordinary contract law. But as
a matter of constitutional law, the remedy must be just and equitable, having regard to
all the circumstances.

[88] This case is materially distinguishable from Gijima, Buffalo City and similar
cases where courts have preserved contractors’ accrued rights for extended periods. In
those cases, the contractors continued to render services throughout the contract period,
or a substantial part thereof. The State allowed, and indeed required, the contractors to
perform and derived the benefit of that performance over extended periods, in some
cases, for years. The State’s delay in challenging the contracts, coupled with its
continued acceptance of performance, created strong equitable considerations in favour
of preserving contractual rights. Here, by contrast, the Department notified ZHI of its
intention to seek judicial review within less than three months of the contract
commencing, and instituted formal review proceedings in O ctober 2015. ZHI did not
continue performing thereafter, save possibly for limited emergency services. The
factual foundation for preserving contractual rights for the full contract period is thus
simply absent.

[89] Whilst one might debate whether the Depar tment’s conduct was as prompt and
proper as it should have been, it cannot be said that the Department engaged in the kind
of extended delay seen in cases like Gijima. The Director -General who signed the
contract left office on 31 July 2015. The Acting Director-General took a different view

contract left office on 31 July 2015. The Acting Director-General took a different view
of the contract . Whether that view was driven by legitimate budgetary concerns or
improper political considerations is a question I need not resolve for present purposes.
What matters is that by mid-August 2015, less than 11 weeks after the contract

MATHOPO J
34
commenced, the Department had made clear that it disputed the validity of the contract
and would be seeking to set it aside.

[90] However, I emphasise that limiting the preservation of contractual rights to the
first period does not mean that ZHI should receive nothing for the post -August 2015
period if it can establish that it incurred costs. If ZHI did maintain some capacity to
provide emergency services during September and October 2015, and if it can establish
the quantum of genuine out -of-pocket expenses incurred in doing so, those expenses
should be recoverable. This would not include any profit margin, but would encompass
actual costs reasonably incurred in maintaining transitional capacity or responding to
emergency cases.

[91] The difficulty is that there is insufficient evidence before this Court to determine
the nature, extent or quantum of any such post-August 2015 services or expenses. ZHI’s
primary claim throughout these proceedings has been for payment at the contractual
rate (the three invoices) and for lost profits (the separate action). It has not advanced
an alternative claim quantifying out -of-pocket expenses for the post-August 2015
period, nor has it led evidence establishing what those expenses might be. These
matters will need to be resolved, if necessary, through the separate proceedings or by
agreement between the parties.

[92] If ZHI did incur genuine out-of-pocket expenses in maintaining some transitional
capacity to provide emergency services, or in responding to emergency cases presented
by military veterans from 13 August 2015, those expenses should be recoverable. By
out-of-pocket expenses I mean actual costs reasonably and necessarily incurred, for
example, payments to healthcare providers for emergency services actually rendered,
or unavoidable fixed costs of maintaining minimal capacity during a brief transitional
period. This would not include any profit margin, nor would it include speculative or

period. This would not include any profit margin, nor would it include speculative or
inflated claims for costs that were not genuinely incurred or were not reasonably
necessary.

MATHOPO J
35
[93] I have had the pleasure of reading the judgment of my Brother Kollapen J
(second judgment) and I briefly deal with the approach favoured by him. I disagree
with the second judgment to the extent that it reads my judgment as having introduced
into a just and equitable remedy the element of contractual autonomy and the need to
honour an invalidated contract. 29 My judgment does not create a default position that
an innocent contractor to an invalid contract has a right to benefit from such an invalid
contract. The basis for the preservation of contractual rights for ZHI in the present
matter is that it is just and equitable to do so , considering the particular facts and
circumstances of this case. The mere fact that, but for the invalidity of a contract, certain
contractual rights would have accrued does not automatically mean that those
contractual rights should be preserved. Each case must depend on its own merits.

[94] The second judgment acknowledges that there are six considerations in my
judgment whic h underpin the preservation of ZHI ’s contractual rights. 30 The six
considerations set out earlier are fact -specific considerations which favour the
preservation of ZHI’s contractual rights in this case. The only point of difference with
the second judgment is that it posits a remittal to the High Court for determination of
what it describes as a failure by the High Court to conduct an enquiry into a just and
equitable remedy. On the contrary, the six considerations alluded to above constitute a
proper exercise of a just and equitable remedy.

[95] It is important to underscore that t he precedent set by this Court in Gijima and
Buffalo City points towards non-remittal. As a result of the disjuncture between the
reasoning of the Supreme Court of Appeal and the o rder that it made, this Court is
entitled to interfere and make a determination of a just and equitable remedial action

entitled to interfere and make a determination of a just and equitable remedial action
under the circumstances. Therefore, my judgment is consistent with the principle of
AllPay which held that there is no right to benefit from an unlawful contract, but the
absence of such a right does not mean that a court, in the exercise of its remedial

29 See the second judgment at [121].
30 See the second judgment at [129].

MATHOPO J
36
discretion, may not permit a party to profit. In the present case, this Court in the exercise
of its remedial discretion has permitted ZHI to benefit from the invalidated contract for
the limited period during which it actually rendered full performance.

[96] The Department did not attack the tender award , nor did it make out any case
that the contractual rate was extortionate. Ad ditionally, it would be very difficult for
this Court to define what a reasonable non-contractual compensation would be and what
profit margin should flow from this non -contractual compensation. In the
circumstances, the appropriate course in my view is t o leave the question of any
recoverable out -of-pocket expenses for the period as from 13 August 2015 to be
determined, if necessary, in the separate proceedings or by agreement between the
parties.

Costs
[97] Both parties have had partial success. The Department succeeds in limiting
ZHI’s remedy to the performance period. ZHI succeeds in retaining its entitlement to
payment at the contractual rate for that period. In these circumstances, each party
should bear its own costs in this Court.

[98] The High Co urt ordered the parties to pay their own costs. In the High Court,
ZHI was the applicant, and it was claiming specific performance for the three invoices.
The High Court dismissed that application, because ZHI was not entitled to payment of
the three inv oices as a matter of specific performance , which was the basis of its
application. In relation to the Department ’s counter -application for review, the
Department succeeded on the merits. The High Court should have preserved ZHI ’s
accrued rights, but only in respect of the period June 2015 to 1 2 August 2015. So
practically speaking, pursuant to section 172(1)(b), ZHI would get most of the payment
it was claiming in its application,31 but nothing more. Therefore, an order for the parties
to pay their own costs in the High Court is fair.

to pay their own costs in the High Court is fair.

31 The full amounts for June and July 2015, and the fraction 12/31 for August 2015.

MATHOPO J
37

[99] As to the costs in the Supreme Court of Appeal, ZHI was entirely unsuccessful
on the merits – the declaration of invalidity was upheld. Its success lay in obtaining a
remedy preserving its contractual rights. However, we have now significantly restricted
the scope of that remedy, confining it to the first two months and the pro-rated days of
August 2015 rather than the full contract period. The thre e invoices for June 2015 to
August 2015 total approximately R15.7 million. ZHI’s lost profits claim for the
remainder of the contract period is approximately R73 million. ZHI thus loses a claim
worth more than four times what it retains. This substantia l diminution in success
makes it inappropriate for ZHI to recover costs in the Supreme Court of Appeal. Each
party should therefore bear its own costs in that Court.

Order
[100] I accordingly make the following order:
1. Leave to appeal is granted.
2. The appeal is upheld in part.
3. Paragraph 2 of the order of the Supreme Court of Appeal dated
27 December 2024 is amended by replacing the quoted paragraph 2 (that
is, paragraph 2 of the substituted order which the High Court of South
Africa, Gauteng Division, Pr etoria should have granted) with the
following:
“2. (a) The order of constitutional invalidity in paragraph 1 above
does not have the effect of divesting Zeal Health
Innovations (Pty) Limited of any rights to which it would
have been entitled under the co ntract referred to in
paragraph 1 above in respect of the period from 1 June 2015
to 12 August 2015.
(b) In respect of the period 1 to 1 2 August 2015, the right
contemplated in (a) above shall be a right to a pro -rated
portion of the amount to which Zeal Health Innovations
(Pty) Limited would have been entitled had it rendered

MATHOPO J / KOLLAPEN J
38

service for the whole of that month, such pro -rated portion
being based on the fraction 12/31.
(c) For the period 1 3 August 2015 to May 2018, Zeal Health
Innovations (Pty) Limited may claim compensation for
actual out -of-pocket expenses incurred (if any) in
maintaining its capacity to provide services or in providing
emergency services to military veterans, such claim to be
determined in separate proceedings or by agreement
between the parties.”
4. Paragraph 3 of the order of the Supreme Court of Appeal, and the words
“with costs” in paragraph 1 of that order, are set aside.
5. Each party is to bear its own costs in the Supreme Court of Appeal and in
this Court.



KOLLAPEN J


Introduction
[101] I have read the comprehensive judgment of my Colleague Mathopo J
(first judgment) in which he concludes that this Court is entitled to interfere with the
order made by the Supreme Court of Appeal to the extent that the latter misdirected
itself in exercising its true discretion in the determinatio n of a just and equitable
remedy.32 I agree with that conclusion and broadly with the reasoning underpinning it,
although I would justify interference with the Supreme Court of Appeal’s order for
different reasons which I will explore fully later on. The first judgment then in dealing
de novo (afresh) with what would constitute a just and equitable remedy concludes that
ZHI’s contractual rights in respect of the period during which it rendered services to the
Department should be preserved, and in respect of the period beyond that, it should be

32 See the first judgment at [61].

KOLLAPEN J
39
entitled to its proven out-of-pocket expenses.33 I disagree with that part of the order and
the reasoning advanced in support of it.

[102] I associate myself with and endorse the background facts, litigation history and
submissions of the parties which are comprehensively set out in the first judgment, and
do not intend to traverse any of those matters except to the extent that it may be
necessary in advancing my reasoning and conclusion.

[103] This is a matter of some significance as it deals with the complex issue of how a
court approaches the determination of a just and equitable remedy following the
invalidation of a contract and in circumstances where there has been performance
(partial or full) on the part of an innocent contractor.

[104] In AllPay, this Court in speaking to the consequences that would generally flow
from the invalidation of a contract said—

“[i]t is true that any invalidation of the existing contract as a result of the invalid tender
should not result in any loss to [CPS]. The converse, however, is also true. It has no
right to benefit from an unlawful contract. And any benefit that it may derive should
not be beyond public scrutiny.”34 (Footnote omitted.)

[105] There has been some debate whether AllPay is authority for the proposition that
an innocent contractor may not benefit from a contract that has been invalidated but
should, at best, only be entitled to its out-of-pocket expenses. To the extent that such
uncertainty has existed, it has firmly and decisively been put to bed by the judgment of
this Court in Black Sash II.35


33 Id at [62], [69] and [83].
34 AllPay above n 8 at para 67.
35 Black Sash Trust v Minister of Social Development [2026] ZACC 12 at paras 24-5.

KOLLAPEN J
40
[106] In Black Sash II, this Court in explaining the outer and inner perimeters of AllPay
on the question of contractual benefits in the context of a just and equitable remedy
quoted with approval the dictum of the Supreme Court of Appeal in Mafoko which
said—

“[t]he mistake made by certain courts that have sought to understand AllPay II is to
equate the absence of a right to benefit from an unlawful contract with the exclusion of
such benefit from the exercise by the court of its just and equitable discretion. AllPay II
does not say this. Indeed, it simply holds that any benefit derived ‘should not be beyond
public scrutiny’. This means that any benefit derived from an unlawful contr act falls
to be scrutinised in order to determine how the court should exercise its just and
equitable discretion. It does not mean that the benefit of an unlawful contract is
excluded from remedial consideration, for then the benefit would indeed be beyo nd
public scrutiny because it would fall outside the very exercise the court undertakes to
weigh relevant considerations so as to arrive at a just and equitable order.

The exclusion of benefit, and more particularly profit, from remedial consideration
could also have perverse and undesirable consequences. The conduct of a person
awarded a tender that is found to be unlawful falls within a spectrum of culpability.
Such a person may be complicit in the unlawful conduct or innocent of it, with degrees
of turpitude or blamelessness between these polarities.”36

[107] The first judgment adopts the same approach as in AllPay, and I extract two
principles from that approach that find relevance in this matter. First, while there is no
right to benefit from an invalid contract, there is similarly no basis to exclude from the
consideration of a just and equitable remedy such a benefit. It falls to be considered but
is not the default position, nor can the fact that the parties in an earlier contractual setting

agreed on the benefits assume some dispositive or undue place in deciding what is just
and equitable. What is required is a consideration of various factors in the determination
of a just and equitable remedy and not simply the substitution of previously agreed
contractual benefits as a just and equitable remedy. To do so would have the effect of

36 Mafoko above n 18 at paras 14-15.

KOLLAPEN J
41
elevating the benefits of an invalid contract to a right – something that AllPay is clear
in not supporting.

[108] Second is the need to exercise scrutiny in respect of the benefits that would form
part of a just and equitable remedy. In a public law setting, the funds that may be paid
come from the pub lic purse and flow from a contract that is invalid and therefore the
need for public scrutiny is crucial. After all, the underlying contract and the one whose
invalidation triggers the need for a just and equitable remedy is one entered into for the
public benefit. Courts are therefore enjoined to exercise a level of scrutiny befitting the
proper use of public funds an d the principles of contractual autonomy hold no sacred
place in this process.

[109] In these proceedings , this Court can only interfere with the exercise of the
Supreme Court of Appeal’s discretion in making a just and equitable order if it is
satisfied that either the discretion was not exercised judiciously or was influenced by
wrong principles or a misdirection on the facts, or the lower court had reached a decision
which could not reasonably have been made by a court properly directing itself to all
the relevant facts and principles. 37 In this regard, there is a disjuncture between the
reasoning of the Supreme Court of Appeal and the order that it finally made. I turn to
explain this disjuncture below.

[110] In its reasoning, the Supreme Court of Appeal took the view that because ZHI
had rendered services in terms of the contract and was an innocent party, “it should be
entitled to payment of any amount it is able to establish”. 38 The Supreme Court of
Appeal said further that the quantum of the services so rende red had not been
determined, and that it was open to the parties to determine the further course to quantify
the payment to be made to ZHI for the provision of the services it had provided. In the

37 Trencon Construction (Pty) Ltd v Industrial Development Corporation of South Africa Ltd [2015] ZACC 22;
2015 (5) SA 245 (CC); 2015 (10) BCLR 1199 (CC) at para 88 relying on National Coalition for Gay and Lesbian
Equality v Minister of Home Affairs [1999] ZACC 17; 2000 (1) BCLR 39 (CC); 2000 (2) SA 1 (CC) at para 11.
38 Zeal Health SCA above n 1 at para 24.

KOLLAPEN J
42
order, however, the Supreme Court of Appeal directed that the order of constitutional
invalidity “does not have the effect of divesting [ZHI] of any rights to which it would
have been entitled under the contract . . . but for the declaration of invalidity”. 39 As
such, what is contemplated in the reasoning is not carried through in the order and there
is indeed no reasoning in the judgment to support the order made. At first sight this
appears to have been an error or a misdirection on the part of the
Supreme Court of Appeal in making the order that it did – one at variance with the
reasoning and remedy it had proposed in the judgment. This would certainly be a basis
for this Court to interfere with that order.

[111] Flowing from the finding that the Supreme Court of Appeal misdirected itself,
this Court would then be in a position to consider a just and equitable remedy de novo.

[112] My disagreement with the first judgment is firstly at the level of principle. While
it endorses Black Sash II in the proper approach to a just and equitable remedy, it
impermissibly determines that the retention by ZHI of its full contractual benefits must
follow because it would be unjust to deny ZHI the benefit of the bargain it had struck
in the contract with the Department. It says:

“The point of preserving accrued contractual rights is to honour the contractual bargain
for the period of actual performance, not to rewrite it. This puts the contractor in the
position it would have occupied had the contract been valid for the period during which
the contractor performed.”40

[113] The effect of this holding is that a contractual benefit that has been agreed upon
must be honoured and it would be unjust to deny an innocent party such a benefit
because the contractor must be put “in the position it would have occupied had the
contract been valid for the period during which the contractor performed”. This, with

contract been valid for the period during which the contractor performed”. This, with
respect, is not what the law requires – the contractor has no right to such an entitlement.

39 Id at para 27.
40 See the first judgment at [77].

KOLLAPEN J
43
It is a proposition wholly inconsistent with this Court’s holding in AllPay. It is also a
stance that has the unintended consequence of revising the test this Court set out in
AllPay for reasons I will set out hereunder.

[114] The first judgment says that where parties have struck an agreement then it would
be unjust in determining a just and equitable remedy to deny an innocent party the
benefit of the agreement. It goes further to say that even if that agreement results in a
bargain for the innocent party, it would be unjust to deny such a party the benefit of
such a bargain.41 Of course, a court may, after exercising public scrutiny, decide that a
just and equitable remedy is the payment of the benefit the parties agreed to
contractually. In that ca se it would be just and equitable not because that is the
agreement reached between the parties but because the court is satisfied, after
scrutinising the benefit, that it is indeed a just and equitable remedy. In Steenkamp,42
this Court characterised the difference between a public law and private law remedy
when it said:

“It is nonetheless appropriate to note that ordinarily a breach of administrative justice
attracts public law remedies and not private law remedies. The purpose of a public law
remedy is to pre-empt or correct or reverse an improper administrative function.”43

[115] The first judgment effectively introduces and endorses a private law remedy
agreed upon by the parties in a contractual setting, in place of a public law remedy a
court is meant to arrive at after scrutiny and one which must be just and equitable. Such
an approach would impose an inflexible rule on the courts’ rich discretion in arriving at
a just and equitable remedy. Speaking to a just and equitable remedy in terms of the
Promotion of Administrative Justice Act,44 this Court in Bengwenyama45 cautioned

41 Id at [79].

41 Id at [79].
42 Steenkamp N.O. v Provincial Tender Board, Eastern Cape [2006] ZACC 16; 2007 (3) SA 121 (CC); 2007 (3)
BCLR 300 (CC).
43 Id at para 29.
44 3 of 2000.
45 Bengwenyama Minerals (Pty) Ltd v Genorah Resources (Pty) Ltd [2010] ZACC 26; 2011 (3) BCLR 229 (CC);
2011 (4) SA 113 (CC).

KOLLAPEN J
44
against adopting rules in the application of this discretion and presented a strong
“case-by-case” centric approach to ordering such remedies. It stated as follows:

“I do not think that it is wise to attempt to lay down inflexible rules in determining a
just and equitable remedy following upon a declaration of unlawful administrative
action. The rule of law must never be relinquished, but the circumstances of each case
must be examined in order to determine whether factual certainty requires some
amelioration of legality and, if so, to what extent. The approach taken will depend on
the kind of challenge presented – direct or collateral; the interests involved , and the
extent or materiality of the breach of the constitutional right to just administrative
action in each particular case.”46 (Footnotes omitted.)

[116] Similarly, this Court in Mhlope47 reinforced the view that a just and equitable
remedy must only be guided by the principles of justice and equity in the context of
each case. It stated as follows:

“Section 172(1)(b) clothes our courts with remedial powers so extensive that they ought
to be able to craft an appropriate or just remedy , even for exceptional, complex o r
apparently irresoluble situations. And the operative words in this section are ‘any order
that is just and equitable ’. This means that whatever considerations of justice and
equity point to as the appropriate solution to a particular problem, it may justifiably be
used to remedy that problem. If justice and equity would best be served or advanced
by that remedy, then it ought to prevail as a constitutionally sanctioned order
contemplated in section 172(1)(b).”48

[117] I have some difficulty in understanding how it can be unjust to deny the innocent
party the benefit of the bargain in the absence of any scrutiny of the bargain. This
scrutiny is what the first judgment acknowledges when it says that “any benefit derived

scrutiny is what the first judgment acknowledges when it says that “any benefit derived
from an unlawful contract ‘should not be beyond public scrutiny’. This means that such
benefit falls to be scrutinised in determining how the court should exercise its remedial

46 Id at para 85.
47 Electoral Commission v Mhlope [2016] ZACC 15; 2016 (5) SA 1 (CC); 2016 (8) BCLR 987 (CC).
48 Id at para 132.

KOLLAPEN J
45
discretion.”49 A court in the exercise of scrutiny would be required to ask whet her the
terms of the bargain are just to both parties and, in the context of a public law remedy
of the kind we are dealing with, whether it is also just to the public purse. If it is not,
then it would be difficult to justify it as a just and equitable remedy. This is fortified by
the decision taken by this Court in AllPay, wherein a just and equitable remedy in public
procurement was decided upon, with priority given to “the public good”.50 Thus, while
the terms of the bargain may be ordinarily enforcea ble in a contract, its status in
determining a just and equitable remedy is no higher than one of the many factors a
court is required to consider.

[118] What the reasoning adopted in the first judgment suggests is that where
performance has occurred , the invalidation of an agreement should not result in an
innocent party losing the benefit it would have been entitled to un der the invalid
agreement. Such an approach is contrary to th is Court’s approach in AllPay, since its
effect would be that the right that an innocent party has to the benefit , which AllPay
says comes to an end on invalidation, is de facto (in reality) restored by the court.
Without more, the benefit is characterised as a just one because it was arrived at through
consensus. While t he first judgment goes on to suggest that it does not intend to
establish a normative principle in this regard, it has framed the issues 51 and considered
the engagement of this Court’s general jurisdiction52 in broad terms, making the answers
thereto necessarily normative law-making. It is these doctrinal implications on the just
and equitable remedy principle in circumstances of invalid contract settings that are
concerning.

[119] Such an approach prevents or avoids any scrutiny of the benefit as the object is
to preserve the bargain secured under the invalid contract. The first judgment uses the

to preserve the bargain secured under the invalid contract. The first judgment uses the
term “bargain” to denote a windfall, but scrutiny of the benefit must follow whether or

49 See the first judgment at [72].
50 AllPay above n 8 at para 32.
51 See the first judgment at [4].
52 Id at [43] to [45].

KOLLAPEN J
46
not it may be described as a bargain. If proper scrutiny results in the conclus ion that
the preservation of the contractual benefit is just and equitable, then so it must be. But
then it will be preserved as a benefit, not just because it was agreed to, but because
proper scrutiny has led to the conclusion that it is indeed a just a nd equitable remedy.
A court cannot substitute its duty of scrutiny by simply resorting to the terms of the
contract. Such an approach will mean that the terms of an invalid contract will continue
to endure and have dispositive consequences even after th e contract has been
invalidated.

[120] It is incumbent on this Court and justifiably expected of it, as the apex court, to
provide clear and unambiguous guidance to the judicial system as a whole through its
judgments. This advances certainty, predictability and consistency in a uniform legal
system. There is the real risk that this may not occur if this Court blurs the lines between
contractual autonomy and its outcomes , and the determination of a just and equitable
remedy when that contract has been invalidated. The suggestion that a party is, without
more, entitled to the bargain it has struck when the Court determines a just and equitable
remedy effectively blurs the test set out in AllPay.

[121] As indicated, there is nothing in AllPay that supports the view that contractual
bargains must be honoured when the contract is set aside. At best, AllPay would support
the proposition that if, in the particular circumstances of a case and after scrutiny of the
benefits, a court is of the view that it would be just and equitable to preserve the
contractual benefits then it may do so. A bargain cannot be just and equitable simply
because it was arrived at through consensus – this approach introduces into a just and
equitable remedy the element of contractual autonomy and the need to honour that when
a contract has been invalidated.

a contract has been invalidated.

[122] My further disagreement with the first judgment is at the level at which it fails
to apply the principle of public scrutiny , and in particular the question whether we are
able to exercise su ch scrutiny on what is before us. Having endorsed the stance that

KOLLAPEN J
47
public scrutiny of the benefits that should f ollow is crucial, the first judgment fails to
exercise any level of public scrutiny in respect of the benefits it orders.

[123] The role of scrutiny by a court in the exercise of its discretion in arriving at a just
and equitable order is not confined to the conduct of the parties and the reasons for the
invalidation. A party may be entirely blameless but that is not the end of the enquiry ,
and, when benefits are scrutinised, blameworthiness cannot be decisive as it is the
benefits that must be scrutinised and that must ultimately meet the standard of being
just and equitable. It must therefore follow that it cannot be unjust to deny a party their
full contractual benefits when scrutiny of those benefits does not conclude that their
payment would be just and equitable. This is the critical issue in this appeal and
ultimately this Court must be satisfied that to allow ZHI to retain its benefits under t he
contract would be just and equitable.

[124] Its failure however, in fairness, is not of its own doing, but is occasioned by the
absence of sufficient evidentiary material to enable this Court to meaningfully exercise
its duty of public scrutiny. Let me explain.

[125] The Department in its counter -application in the High Court sought the
invalidation of the contract and that Court was obliged, but failed, to make an order that
was just and equitable. The Supreme Court of Appeal on the other hand made an order
that was ambigu ous to some e xtent but one that in the main enab led ZHI to retain its
full contractual benefits even if only in respect of the period when it delivered services.
In its reasoning, however, the Supreme Court of Appeal took the view that ZHI wou ld
be entitled to payment of any amount it was able to establish. The parties largely took
starkly opposing views on the question of remedy. ZHI’s stance was that it was entitled

starkly opposing views on the question of remedy. ZHI’s stance was that it was entitled
to retain its full contractual benefits, while the Department’s view was that ZHI was, at
best, entitled to its out-of-pocket expenses. Neither of the parties meaningfully engaged
on what would be a just and equitable remedy because of the respective stance s they
adopted (both of which were wrong). They thus failed to place any relevant material
before the Supreme Court of Appeal to enable it to consider a just and equitable remedy.

KOLLAPEN J
48

[126] In the first judgment, various pertinent questions are raised which all point to the
elements of and need for effective public scrutiny. Those questions are captured as
follows in the first judgment:

“Moreover, to confine ZHI to out -of-pocket expenses would raise difficult practical
questions. What exactly would constitute ou t-of-pocket expenses? Would it include
only the amounts paid to service providers, or also the costs of establishing and
maintaining the network, the call centres and the administrative systems? What profit
margin, if any, would be allowed? How would on e distinguish between reasonable
costs and excessive costs ZHI incurred in setting up? These are questions that could
lead to protracted and costly litigation. We should not condemn the parties to such
litigation in respect of a period of only two and a half months, when the contractual
rate provides a clear, lawful and fair basis for compensation.”53

[127] This approach, at least in respect of the questions the first judgment poses,
accords in large measure with the kind of enquiry the Supreme Court of Appeal in
Mafoko said should be undertaken. That Court said:

“As I have indicated, to make an order that is just and equitable, in the circumstances
of this case, requires the consideration of a number of matters. Was Mafoko entirely
blameless for the unlawful award of the tender to it? Did its incumbency as a service
provider burden it with constitutional duties to continue to provide the service? If so,
what is the content of that duty and for how long should it have endured? What benefits
and burdens accrued to the [South African Broadcasting Corporation] and Mafoko in
the performance of the services rendered by Mafoko? What profit did Mafoko enjoy?
How closely did any such profit conform to a normal return for a firm in a competitive
market for security services? Was such a return necessary and deserved, given the

market for security services? Was such a return necessary and deserved, given the
period over which Mafoko rendered its services? I do not suggest that all of these
questions must be answered to make a just and equitable order, nor that these questions
are exhaustive of the issues that may be relevant. What these questions do demonstrate
is that a just and equitable order is not a binary choice between Mafoko retaining all
the profits it may have made or being required to disgorge its profits. Justice and equity

53 Id at [80].

KOLLAPEN J
49
are capacious concepts. Its boundaries may be uncertain, but it is designed to render a
nuanced judgment as to what order will be just and equitable. Such an order was not
rendered by the high court, but, at the same time, an order that simply permits Mafoko
to retain its profits would amount to an order made in advance of answering some
central questions that need to be posed.”54

[128] And so, while the first judgment asks the right questions , it then inexplicably
concludes that the answer to such questions will result in further protracted litigation
which should be avoided. This avoidance of public scrutiny in order to avoid further
litigation has the consequence that the first judgment then accepts the retention of ZHI’s
contractual benefits for the period when it delivered services as a just and equitable
remedy. That cannot be correct in the absence of any scrutiny of such benefits and
inadvertently has the effect of this Court substituting a public law remedy with a private
law remedy. T he first judgment says that interrogating the questions that it correctly
poses should be avoided in the interest of preventing further and protracted litigation.55
It is worth pointing out in this matter that the order for the retention of the contractual
benefits for the period 1 June 2015 to mid-August 2015 amounts to some R15.7 million
– a significant amount of money by any measure which , in my view, requires scrutiny
and such scrutiny cannot be avoided in order to prevent protracted litigation when that
very litigation will provide the opportunity for the necessary scrutiny so as to arrive at
a just and equitable remedy.

[129] The first judgment lists six considerations in suppor t of the just and equitable
order it makes from the period 1 June 2015 to mid-August 2015. All but one of those
reasons relate to the conduct of the par ties and the provision of the services that
occurred. Only one of those reasons addresses the costs and benefits that are implicated

occurred. Only one of those reasons addresses the costs and benefits that are implicated
by the remedy ordered. This is what the first judgment says about that:

“Third, ZHI incurred costs in setting up and operating this network. It had to pay
healthcare providers for the services they rendered to veterans. The invoices submitted

54 Mafoko above n 18 at para 28.
55 See the first judgment at [80].

KOLLAPEN J
50
by ZHI for June, July, and August 2015 totalled approximately R15.7 million. While
the Department expressed concern about the quantum of these invoices, it never
challenged them on the basis that the services were not provided or that the invoicing
was fraudulent.”56

[130] This is the highwater mark of any scrutiny of the sum of R15 .7 million. We do
not know what part of that amount represents expenses, including those that relate to
the setting up and maintenance of the network of service providers, we do not know
what part of that amount represents profit and we do not know how the profit margin
compares to what generally prevails in the industry. In truth, we probably know too
little of the figure of R15.7 million except for how it was arrived at. In fact, that is the
only figure before us. It is not possible to exercise any meaningful scrutiny when all
we know is that the parties contracted on a benefit. That can never be dispositive in
exercising scrutiny. The Supreme Court of Appeal was also unable to reach a
conclusion on the quantum of the services rendered by ZHI. Under these circumstances,
meaningful scrutiny is simply not possible and the failure by the Department to
challenge those invoices is of no moment. That failure does not bind this Court, but in
any event, absent the invalidation of the contract, there would have been no basis to
challenge the quantum of the invoices as they simply reflected the consensus arrived at
between ZHI and the Department.

[131] Returning to the question of scrutiny, even on the sparse facts before us, the need
for scrutiny becomes self-evident. On what we know:
(a) The capitation model provided for the provision of healthcare services for
some 14 346 military veterans while the services actually rendered
reached about 1 113 military veterans. This suggests that about only 8%
of military veterans had a need for such services during the period when

of military veterans had a need for such services during the period when
services were delivered while the capitation model was based and costed
on the basis that it would support 14 346 military veterans.

56 Id at [65].

KOLLAPEN J
51
(b) The business model that ZHI used with its network of service providers
was that it would pay such service providers only for services actually
rendered. Thus, ZHI was only required to pay for actual services rendered
by its network of service providers while it, on the other hand, was entitled
to invoice the Department for services not actually rendered but in respect
of which it would be obliged to render, if so requested.
(c) Prior to the conclusion of the contract, wh ich was invalidated, ZHI
entered into an interim contract with the Department for the provision of
healthcare services to military veterans. That contract was based on an
actual services model and not a capitation model . The amount the
Department was req uired to pay ZHI was R198 754.26 for services
provided in April 2015 and R276 230.37 for services provided in
May 2015.

[132] The limited facts demonstrate that scrutiny serves an important purpose in
matters such as these. It enables a c ourt, in the determina tion of a just and equitable
remedy, to interrogate the facts and the surrounding circumstances thoroughly so that it
is indeed able to arrive at a just and equitable remedy. The first judgment does not, and
cannot, do this in the absence of relevant fact ual material that the parties have simply
not put up.

[133] Under those circumstances it must follow that this Court is unable to exercise its
remedial discretion in ordering a just and equitable remedy. For such a remedy to be
properly considered will require consideration of further facts of the kind referred to in
Mafoko. T he High Court is well-placed to deal with how that happens so that it can
properly exercise its remedial discretion in fashioning a just and equitable remedy.

[134] For the reasons given, this Court is unable to exercise the scrutiny required and
of the kind that AllPay says must happen. It must accordingly follow that a remittal of

of the kind that AllPay says must happen. It must accordingly follow that a remittal of
the matter to the High Court is ordered so that the High Court can require of the parties
all necessary information to make a determination of what is just and equitable. While

KOLLAPEN J
52
what it may ultimately decide will vary in respect of the period during which ZHI
delivered services and the period beyond that, there is no need for separate enquiries .
The task the High Court will be required to undertake will of necessity consider as a
relevant factor the difference in the kin d of remedy that should follow when services
were rendered and when they were not, and this Court should not be prescriptive in this
regard but should allow the High Court to properly exercise the discretion it has in terms
of section 172(1)(b).

Costs
[135] Each party would bear its own costs, given that the failure by the parties to be
open with the Court and share relevant information with regard to the determination of
a just and equitable remedy has largely resulted in the decision to remit the matter to
the High Court.

Order
[136] I would make the following order:
1. Leave to appeal is granted.
2. The order of the Supreme Court of Appeal is set aside.
3. Each party must bear its own costs in the Supreme Court of Appeal and
in this Court.
4. The matter is remitted to the High Court to determine the appropriate
order in terms of section 172(1)(b) of the Constitution, after securing the
production of such evidence from the parties as it considers warranted and
inviting further submissions from the parties.

For the Applicants:


For the Respondent:


I Ellis SC instructed by the Office of the
State Attorney, Pretoria

I Currie instructed by Allan Levin and
Associates