Brief Summary

Administrative Law — Review — Promotion of Administrative Justice Act — Municipality's decision regarding share transfer in water services provider — High Court granting review based on alleged non-compliance with Council resolution — Supreme Court of Appeal varying relief — Constitutional Court upholding review, finding that the Municipal Manager's actions constituted administrative action subject to review under PAJA and legality principles.

Comprehensive Summary

Summary of Judgment

1. Introduction

These matters comprised three related applications for leave to appeal to the Constitutional Court from the Supreme Court of Appeal, which had itself heard an appeal from the High Court of South Africa, Mpumalanga Division, Mbombela. The central question was whether conduct by the Municipal Manager of the City of Mbombela Municipality (acting for the Municipality) was subject to judicial review either under the Promotion of Administrative Justice Act 3 of 2000 (PAJA) or under the principle of legality.

The proceedings arose from a review application instituted by Buhle Waste (Pty) Limited in the High Court. Buhle Waste sought to set aside municipal conduct connected to the Municipality’s contractual consent requirements relating to a change of control in Sembcorp Silulumanzi (RF) (Pty) Limited (Silulumanzi), a water services provider operating under a concession contract with the Municipality. The High Court upheld the review and set aside the impugned municipal conduct; the Supreme Court of Appeal substantially confirmed that conclusion but adjusted aspects of the relief.

In the Constitutional Court, the parties who had opposed the review below—Brain Gear Investments (Pty) Limited (Brain Gear), Silulumanzi, South African Water Works (Pty) Limited (SAWW), Sembcorp Utilities South Africa (Pty) Limited (SUSA), and Sembcorp Utilities (Netherlands) NV (SUN)—sought leave to appeal. The dispute concerned the classification of municipal conduct within South African administrative law, the availability of legality review where the immediate source of power is contractual, and whether the review should have failed due to unreasonable delay.

2. Material Facts

In April 1999, following a tender process, the Municipality concluded a concession contract with Silulumanzi for the supply of water in part of the municipal area, expiring in October 2029. The contract was concluded in a statutory context under the Water Services Act 108 of 1997, with the Municipality acting as a water services authority and Silulumanzi as a water services provider. The concession contract contained a change-of-control clause requiring the prior written approval of the Municipality’s Council for any share transfer producing a change of control.

By February 2018, control of Silulumanzi was held within the Sembcorp group: SUN held 48% of Silulumanzi shares and its subsidiary SUSA held 52%. The group sought to exit Africa, and on 22 February 2018 SUN, SUSA, SAWW and Silulumanzi concluded a sale agreement under which SAWW would acquire SUN’s direct and indirect interest in Silulumanzi. A suspensive condition required unconditional Council approval within a defined period.

When SAWW and Silulumanzi sought the Municipality’s approval, the Municipality sought inclusion of a Mbombela-based BEE entity as a minority shareholder in Silulumanzi. Although the Municipality received legal advice that it could not insist on this as a condition for consent, the parties negotiated an arrangement under which a process would be followed to make a 28% shareholding available to a local BEE entity.

That arrangement was recorded in a Council resolution of 28 June 2018, granting conditional consent subject to suspensive conditions requiring SAWW and Silulumanzi to run a selection process for a 28% local BEE shareholder within 90 days. The resolution envisaged municipal oversight of the process and required the Acting Municipal Manager, as accounting officer, to confirm that the conditions had been met, failing which the conditional consent would lapse.

A structured selection process followed. Silulumanzi appointed PwC to assist. A steering committee (including municipal representatives) met repeatedly between July and September 2018. Requests for information were issued to selected local BEE entities, including Buhle Waste and Brain Gear. Three timely bids were received. PwC performed integrity due diligence and produced a ranking report in which Brain Gear outscored Buhle Waste; SAWW conducted additional evaluation and selected Brain Gear. An agreement for Brain Gear’s acquisition of the 28% shareholding was concluded on 28 September 2018.

Municipal correspondence revealed that the Acting Municipal Manager had expressed concerns regarding the integrity and compliance of the process, but internal legal advice dated 17 October 2018 concluded that the process had complied with the resolution. On 14 November 2018, an agreement between the Municipality and Silulumanzi recorded that Silulumanzi had, to the Municipality’s satisfaction, selected the local BEE shareholder, and the Municipality confirmed fulfilment of the Council’s conditions and gave unconditional and irrevocable consent to the change in control from an effective date stated as 28 September 2018. The court treated this municipal confirmation as the impugned conduct.

Buhle Waste launched review proceedings on 17 July 2019, later supplementing its case after receipt of the rule 53 record. It expanded its criticisms to include alleged conflicts of interest and asserted that municipal oversight and consultation had been inadequate. Further litigation steps occurred concerning production of documents, including the February 2018 agreement. During the High Court hearing in May 2022, Buhle Waste and SUN concluded a settlement order clarifying that Buhle Waste did not seek relief invalidating the February 2018 agreement or the June 2018 Council resolution, and that those instruments were valid and binding.

The High Court condoned the delay in bringing review proceedings and set aside the impugned municipal conduct, remitting the matter for reconsideration with directions. The Supreme Court of Appeal rejected defences based on internal remedies and delay, confirmed the finding that PAJA applied, upheld the setting aside of the decision, but removed certain paragraphs of the High Court’s remedial order as unnecessary.

3. Legal Issues

The Constitutional Court was required to determine, as a threshold matter, whether the impugned municipal conduct amounted to a reviewable act, either as administrative action under PAJA or as an exercise of public power reviewable under the principle of legality. This required legal characterisation of conduct occurring within a contractual framework, and thus involved questions of law and the application of law to fact.

Within that overarching enquiry, the Court addressed whether the Supreme Court of Appeal’s order had unintended consequences for the settlement order between Buhle Waste and SUN, and whether the relevant decision was indeed the act recorded on 14 November 2018. It further considered whether, even if legality review applied, the review should have been refused because Buhle Waste brought proceedings after an unreasonable delay and whether such delay should be overlooked. Although internal remedies under section 62 of the Local Government: Municipal Systems Act 32 of 2000 had featured below, the Court ultimately treated it as unnecessary to decide that issue given its conclusions on PAJA and delay.

4. Court’s Reasoning

The Court accepted that its constitutional jurisdiction was engaged because the appeal raised questions concerning the scope and application of PAJA and legality review, and related issues such as delay, internal remedies, and the remedial consequences of review. Leave to appeal was granted to Brain Gear and the SAWW parties because the issues were important in administrative law and there were reasonable prospects of success. SUN’s application was treated as conditional and ultimately became unnecessary once the Court clarified the consequences of the settlement order and the relief.

On the effect of the settlement order, the Court reasoned that a strict reading could suggest that if the Council’s conditions were not lawfully fulfilled, the conditional consent would lapse and in turn the suspensive condition in the February 2018 agreement would fail, potentially undoing the transaction between SUN and SAWW. However, the Court emphasised that review remedies are not mechanically determined by strict private-law logic, and it analysed the settlement order as intending to isolate and protect the validity of the February 2018 agreement and the June 2018 resolution while leaving open disputes about the fulfilment of the obligation to accommodate a local BEE shareholder. Since the Supreme Court of Appeal had set aside the High Court’s paragraph that had declared the suspensive conditions unfulfilled, the settlement order’s intended effect was not undermined in the way SUN feared. This meant SUN did not require further appellate relief.

On whether a relevant decision occurred on 14 November 2018, the Court acknowledged arguments that confirmation might have been given earlier (including by endorsement on a letter of 19 September 2018). It concluded that the case had been litigated below on the footing that the operative confirmation decision occurred on 14 November 2018, that this approach was justified on the affidavits, and that any misdating would in any event not have materially affected the pleaded grounds or defences.

The Court then addressed whether the 14 November 2018 confirmation constituted administrative action under PAJA. It rejected the contention that the confirmation was merely clerical or mechanical: it had legal consequences because it was the mechanism that rendered the Council’s consent unconditional and confirmed that the Council’s conditions had been met. The Court held that this could adversely affect rights and have direct, external legal effect.

However, the decisive obstacle under PAJA was the requirement in paragraph (a)(ii) of PAJA’s definition of “administrative action” that an organ of state must exercise a public power or perform a public function “in terms of any legislation”. The Court treated that phrase as requiring a meaningful legislative source for the specific power being exercised, and not a remote or general connection to legislation merely because the actor is a statutory body or operates in a regulated field. It reasoned that while the original concession contract arose from a procurement process and existed within the Water Services Act framework, the specific power being exercised in 2018 was the Municipality’s contractual power to grant or withhold consent to a change in control, as created by the concession contract. It was common cause that neither the Water Services Act nor other legislation required the concession contract to contain such a change-of-control clause. Similarly, the arrangement for selecting a local BEE shareholder was not imposed by legislation; it resulted from negotiation, notwithstanding that the Municipality may have been motivated by constitutional or statutory transformation objectives. The Council’s resolution, and the Municipal Manager’s later confirmation of compliance with it, therefore were not acts performed “in terms of any legislation” for PAJA purposes. On this basis, the High Court and Supreme Court of Appeal were found to have erred in treating the conduct as reviewable administrative action under PAJA.

The Court then turned to legality review. It restated that the exercise of public power must comply with legality constraints, including acting within lawful power and avoiding arbitrariness through rationality. Applying the factors used to distinguish private from public power, the Court held that the Council’s exercise of the contractual consent power—and thus the Municipal Manager’s confirmation that finalised that consent—was, on the facts, an exercise of public power. The Court emphasised that the concession contract was a public-function contract under the Water Services Act for delivery of a vital service; that the consent requirement existed to protect proper performance of the public function by controlling who might control the concessionaire; and that the Municipality possessed a significant position of power in granting or withholding consent. It also accepted that the Municipality’s insistence on local BEE participation pursued local economic and transformation aims. These features, taken together, sufficed to bring the conduct within legality review, even though PAJA did not apply.

Having found legality review applicable, the Court addressed delay using the legality framework rather than PAJA’s fixed 180-day period. It applied the two-stage enquiry: whether delay was unreasonable, and if so whether it should be overlooked. The Court treated the nature of the transactions as calling for prompt challenge: the decision enabled large commercial arrangements involving share acquisition, funding arrangements, and dividend flows, creating escalating prejudice and “unscrambling the egg” difficulties over time. Buhle Waste launched review almost eight months after it said it became aware of the decision. The Court found the explanation for that period materially deficient, noting the absence of specific evidence showing that post-decision information requests or settlement efforts accounted for the delay.

In determining whether to overlook the unreasonable delay, the Court considered prejudice and practical consequences. It found evidence that the transactions had progressed significantly and that parties (including Brain Gear and SAWW) had incurred costs and conducted affairs in reliance on implementation; by December 2019 the key agreements had been fully implemented. It also considered the nature of the alleged unlawfulness, characterising it as not egregious and largely framed as municipal passivity rather than corruption or dishonesty. The Court further evaluated the merits as a factor relevant to delay and found that the strength of Buhle Waste’s case was not as clear-cut as the lower courts had suggested, particularly because the Council resolution gave SAWW and Silulumanzi the primary role in administering and making the selection, with the Municipality’s role framed as oversight and consultation; the Municipality itself did not complain of non-consultation.

The Court concluded that there was no realistic prospect of crafting a remedy that could meaningfully mitigate the prejudice and practical disruption after such elapsed time, particularly since the entire structure of the price and effective date was tied to the earlier point in the concession’s lifespan. It accordingly held that this was not a case where the Court’s discretion should overlook the unreasonable delay. Because the delay point disposed of the legality review, it was unnecessary to decide internal remedy questions or to reach final determinations on the substantive merits and remedy.

Costs were approached through constitutional litigation principles. The Court applied Biowatch protection such that the Municipality bore its own costs, and it treated Silulumanzi (performing a public function in terms of the concession) similarly. It held that private parties who successfully resisted the review—Brain Gear, SAWW and SUSA—were entitled to their costs against Buhle Waste, including the costs of two counsel where employed. SUN bore its own costs given the procedural posture and that no adverse argument was pressed against it.

5. Outcome and Relief

The Constitutional Court made no substantive order on SUN’s application for leave to appeal (save costs), because SUN’s concern fell away once the settlement order’s intended effect was clarified. Leave to appeal was granted to Brain Gear and to Silulumanzi/SAWW/SUSA, and their appeals succeeded.

The Supreme Court of Appeal’s order was set aside and replaced with an order upholding the appeals, setting aside the High Court’s order, and dismissing Buhle Waste’s review application. The Court ordered that the Municipal Manager, the Municipality, the Council Chairperson and Silulumanzi bear their own costs in the High Court, while Buhle Waste was ordered to pay the costs of Brain Gear, SAWW and SUSA in the High Court, the Supreme Court of Appeal, and the Constitutional Court, including costs of two counsel where employed. SUN and Silulumanzi were ordered to bear their own costs in the Supreme Court of Appeal and Constitutional Court.

Cases Cited

Buhle Waste (Pty) Ltd v Municipal Manager City of Mbombela Municipality [2022] ZAMPMBHC 70; Brain Gear Investments (Pty) Ltd v Buhle Waste (Pty) Ltd [2024] ZASCA 168; Mazibuko v City of Johannesburg [2009] ZACC 28; 2010 (3) BCLR 239 (CC); 2010 (4) SA 1 (CC); Esorfranki Pipelines (Pty) Ltd v Mopani District Municipality [2022] ZACC 41; 2023 (2) SA 31 (CC); 2023 (2) BCLR 149 (CC); Grey’s Marine Hout Bay (Pty) Ltd v Minister of Public Works [2005] ZASCA 43; [2005] 3 All SA 33 (SCA); 2005 (6) SA 313 (SCA); 2005 (10) BCLR 931 (SCA); 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); Chirwa v Transnet Ltd [2007] ZACC 23; [2008] 2 BLLR 97 (CC); 2008 (3) BCLR 251 (CC); 2008 (4) SA 367 (CC); (2008) 29 ILJ 73 (CC); Cape Metropolitan Council v Metro Inspection Services (Western Cape) CC [2001] ZASCA 56; 2001 (3) SA 1013 (SCA); 2001 (10) BCLR 1026 (SCA); Logbro Properties CC v Bedderson N.O. [2002] ZASCA 135; [2003] 1 All SA 424 (SCA); 2003 (2) SA 460 (SCA); Government of the Republic of South Africa v Thabiso Chemicals (Pty) Ltd [2008] ZASCA 112; 2009 (1) SA 163 (SCA); [2009] 1 All SA 349 (SCA); South African National Parks v MTO Forestry (Pty) Ltd [2018] ZASCA 59; 2018 (5) SA 177 (SCA); R (West) v Lloyds of London [2004] EWCA Civ 506; [2004] 3 All ER 233; Plover’s Nest Investment v De Haan [2015] ZASCA 193; Fedsure Life Assurance Ltd v Greater Johannesburg Transitional Metropolitan Council [1998] ZACC 17; 1998 (12) BCLR 1458 (CC); 1999 (1) SA 374 (CC); Pharmaceutical Manufacturers Association of South Africa: In re Ex Parte President of the Republic of South Africa [2000] ZACC 1; 2000 (2) SA 674 (CC); 2000 (3) BCLR 241 (CC); AMCU v Chamber of Mines of South Africa [2017] ZACC 3; 2017 (3) SA 242 (CC); 2017 (6) BCLR 700 (CC); [2017] 7 BLLR 641 (CC); (2017) 38 ILJ 831 (CC); Maqoma v Sebe N.O. 1987 (1) SA 483 (CK); [1987] 3 All SA 414 (Ck); Hayes v Minister of Housing, Planning and Administration, Western Cape 1999 (1) SA 1229 (C); Port Louis Corporation v Attorney General of Mauritius [1965] AC 1111 (PC); Minister of Home Affairs v Scalabrini Centre [2013] ZASCA 134; [2013] 4 All SA 571 (SCA); 2013 (6) SA 421 (SCA); Tlouamma v Mbethe, Speaker of the National Assembly of the Parliament of the Republic of South Africa [2015] ZAWCHC 140; [2016] 1 All SA 235 (WCC); 2016 (1) SA 534 (WCC); 2016 (2) BCLR 242 (WCC); Khumalo v MEC for Education, KwaZulu-Natal [2013] ZACC 49; 2014 (3) BCLR 333 (CC); 2014 (5) SA 579 (CC); (2014) 35 ILJ 613 (CC); Department of Transport v Tasima (Pty) Ltd [2016] ZACC 39; 2017 (1) BCLR 1 (CC); 2017 (2) SA 622 (CC); Buffalo City Metropolitan Municipality v Asla Construction (Pty) Ltd [2019] ZACC 15; 2019 (4) SA 331 (CC); 2019 (6) BCLR 661 (CC); Opposition to Urban Tolling Alliance v South African National Roads Agency Limited [2013] ZASCA 148; [2013] 4 All SA 639 (SCA); Biowatch Trust v Registrar, Genetic Resources [2009] ZACC 14; 2009 (6) SA 232 (CC); 2009 (10) BCLR 1014 (CC); Nu Africa Duty Free Shops (Pty) Ltd v Minister of Finance [2023] ZACC 31; 2023 (12) BCLR 1419 (CC); 2024 (1) SA 567 (CC).

Legislation Cited

Constitution of the Republic of South Africa, 1996 (including sections 9(2), 27(1)(b), 33(3), and 239); Promotion of Administrative Justice Act 3 of 2000; Water Services Act 108 of 1997; Local Government: Municipal Systems Act 32 of 2000 (section 62); Broad-Based Black Economic Empowerment Act 53 of 2003; Employment Equity Act 55 of 1998; Promotion of Access to Information Act 2 of 2000; Legal Succession to the South African Transport Services Act 9 of 1989.

Rules of Court Cited

Uniform Rules of Court, rule 53.

Held

The Court held that the Municipal Manager’s confirmation decision (treated as having been taken on 14 November 2018) was not “administrative action” under PAJA, because the relevant power was exercised under a contractual consent clause and not “in terms of any legislation” as required by PAJA’s definition. The Court held further that the decision nevertheless constituted an exercise of public power on the particular facts and was therefore susceptible to legality review.

However, the Court held that Buhle Waste brought the legality review after an unreasonable delay, that the explanation for the delay was inadequate, that the prejudice and practical consequences were substantial, and that the delay should not be overlooked. The review application should therefore have been dismissed, rendering it unnecessary to decide internal-remedy issues or finally determine the merits and remedial questions addressed in the courts below.

LEGAL PRINCIPLES

The judgment applied the principle that, due to subsidiarity, whether conduct is “administrative action” must be determined primarily by PAJA’s statutory definition rather than by a free-standing reliance on section 33 of the Constitution, and under-inclusiveness in PAJA would require a frontal challenge rather than judicial expansion.

It affirmed that for conduct by an organ of state to be “administrative action” under PAJA where paragraph (a)(ii) is relied upon, it is not sufficient that the actor is a statutory body or operates within a legislated field; the relevant decision must be an exercise of public power or performance of public function “in terms of any legislation”, and an overly remote connection to legislation would render that requirement meaningless.

The judgment further applied the principle that legality review extends to exercises of public power, and that the classification of power as public or private is context-sensitive, informed by factors including the actor’s public character, the source and nature of the power, superiority or coercive capacity, the relationship to public functions, and the public interest impact. Even where the immediate source of power is contractual, the power may be public on the facts.

Finally, it applied the legality-review doctrine that delay is addressed through a two-stage enquiry: whether the delay is unreasonable and, if so, whether it should be overlooked in the court’s discretion. The discretion is exercised through a multi-factor assessment that includes explanation, prejudice, consequences of setting aside, the feasibility of just and equitable relief, the nature and seriousness of the alleged illegality, and the overall merits insofar as relevant to the delay enquiry.

Brain Gear Investments (Pty) Ltd v Buhle Waste (Pty) Ltd and Others; Sembcorp Silulumanzi (RF) (Pty) Ltd and Others v Buhle Waste (Pty) Ltd and Others; Sembcorp Utilities (Netherlands) NV v Buhle Waste (Pty) Ltd and Others (CCT 11/25; CCT 12/25; CCT 25/25) [2026] ZACC 41 (9 October 2026)