20 October 2020 by and Dispute Resolution Alert

Legality review, unreasonable delay and the Supreme Court of Appeal’s view on the subject

The evolution of the principle of legality from a residual pathway to judicial self-review by organs of state to a compulsory one-directional road has been exhaustively critiqued by commentators from the Constitutional Courts decision in Fedsure through to Gijima and subsequently Asla Construction. But howling at the gates has done little to change the minds of the judges that occupy seats on our appellate benches. If anything, the latest Supreme Court of Appeals judgment in Altech Radio Holdings (Pty) Limited and Others v City of Tshwane Metropolitan Municipality [2020] ZASCA 122 (5 October 2020) reaffirms that the state must launch its challenge under the principle of legality when it seeks to set aside its own decisions.

It is worth noting at the outset that the facts underlying the dispute between the parties was muddied by politics. In 2014, the African National Congress had control over the City of Tshwane Metropolitan Municipality by virtue of its representation in the Municipal Council. The Municipality, under the ANC’s control intended on developing a “smart” city to improve service delivery and provide socio-economic development. Accordingly, the Municipality published a Request for Proposals in respect of the municipal broadband network project. Eight bids were received in response to the RFP and, after consideration, the Municipality’s Bid Evaluation Committee resolved to recommend Altech Radio Holding (Pty) Ltd as the successful bidder. On 9 June 2015 the Municipality awarded the tender to Altech. The agreement was to be executed through a special purpose vehicle (SPV) for the successful funding of the project, which would be the second appellant, Thobela Telecoms (RF) (Pty) Ltd. Upon the award of the tender the third appellant, ABSA Bank Limited, together with the Development Bank of Southern Africa, committed to financing the envisaged project.

On 28 April 2016, the Municipal Council passed a resolution approving the conclusion of a Build Operate and Transfer Agreement (BOT Agreement) with Thobela. At that Council meeting, the official opposition in the Municipality, the Democratic Alliance, recorded its objections to the transaction. Then, on 5 May 2016 the BOT Agreement was executed by the Municipality and Thobela. Separately, ABSA (supported by the DBSA), Thobela and the Municipality concluded a Tripartite Agreement in which ABSA agreed to make funds available to Thobela to the tune of R934 million, which formed 70% of the total funding of the project (being R1,335 billion). In terms of its obligations under the BOT Agreement, the Municipality had to pay an annual service fee of R244 million which was to be paid monthly and on a phased-in approach proportional to the number of designated service sites installed.

On the day prior to the signing of the Tripartite Agreement, the 2016 municipal elections took place, which as history records, resulted in the ANC losing control over the Municipality to a coalition government led by the DA. On 19 August 2016, the new municipal councillors were sworn.

Having won control of the Municipality, the DA set its sights on a number of procurement contracts, including the BOT Agreement, which, so it stated, had been targeted for “review and possible cancellation”. But at least a year was to pass before the Municipality applied on 22 August 2017 to the Gauteng Division of the High Court, Pretoria for an interdict coupled with a review application. On appeal, the Supreme Court of Appeal found that waiting for a year was unreasonable, given the DA was well aware of the BOT Agreement and had recorded its objections to it when the Bid Evaluation Committee report served before the Municipal Council more than a year before it launched the review application.

The Supreme Court of Appeal did not deviate from the Constitutional Court decisions in Gijima and Asla Construction where it was held that even if the delay is unreasonable, where the administrative action is offensive to the Constitution it must be set aside. Meaning that even when the delay is brought years later, the courts must have regard to the merits of the review. Thus, in this matter, having found that the explanation for the delay was unreasonable based on an analysis of the facts set out above, the Supreme Court of Appeal considered the merits of the review.

On the merits, the Supreme Court of Appeal began by confirming a previously held view of the Court that not every flaw in the administration of tenders by organs of state must be visited by judicial sanction. Rather, only those flaws that amount to a material irregularity should be sanctioned by the courts. With respect to the grounds of review, the Municipality claimed that when it concluded the BOT Agreement it failed to follow the mandatory processes required by the Local Government: Municipal Finance Management Act, 2003, particularly section 33 and the provisions regulating public-private partnerships. The Court disagreed with the Municipality on both grounds of review. Having found that the delay was unconscionable and that the Municipality’s grounds of review were meritless, the Supreme Court of Appeal upheld the appeal and set aside the High Court’s judgment.

Judgments often acquire fame or infamy when new legal principles are introduced. One only needs to look at the number of critical publications that followed Gijima. Seldom does the application of legal precedent attract an equal amount of attention. This is predominantly because the application of legal precedent signals the settling of law, which is important because it allows litigants to avoid uncertainty and confusion, to protect vested rights and legitimate expectations as well as to uphold the dignity of the court. So as far as stories are concerned, the Supreme Court of Appeal may be sending a message to critics of Gijima that there is no such thing as a never ending story; and that may be time to draw the curtain and end this play.

download PDF

The information and material published on this website is provided for general purposes only and does not constitute legal advice.

We make every effort to ensure that the content is updated regularly and to offer the most current and accurate information. Please consult one of our lawyers on any specific legal problem or matter.

We accept no responsibility for any loss or damage, whether direct or consequential, which may arise from reliance on the information contained in these pages.

Please refer to the full terms and conditions on the website.

Copyright © 2020 Cliffe Dekker Hofmeyr. All rights reserved. For permission to reproduce an article or publication, please contact us cliffedekkerhofmeyr@cdhlegal.com

You may also be interested in