IN THE HIGH COURT OF SOUTH AFRICA

EASTERN CAPE LOCAL DIVISION, EAST LONDON

CASE NO: EL 848/2017

ECD 2148/2017

REPORTABLE

In the matter between:

BW BRIGHT WATER WAY PROPS (PTY) LTD Applicant

and

EASTERN CAPE DEVELOPMENT CORPORATION Respondent

Summary: Constitutional law - legality review - unreasonable delay - overlooking

delay - sections 172 and 217 of the Constitution - application and effect of Gijima

and Asla - costs

________________________________________________________________

JUDGMENT

________________________________________________________________

STRETCH J.:

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[1] On 20 December 2016 the applicant and the respondent entered into a

lease agreement providing for the applicant to lease portions A and B of the

remainder of farm 31, Coffee Bay, Mqanduli (“the property” where the Ocean View

Hotel is situated) for the period 1 November 2016 to 31 October 2036.

[2] The applicant alleges that the respondent has failed to provide it with vacant

and undisturbed possession of the property, a portion of which is unlawfully occupied

by one Leon Botha as the sole director and shareholder of Nenga River Lodge (Pty)

Ltd, and who is competing with the Ocean View Hotel.1

[3] The respondent not only contends that the applicant has failed to comply

with its obligations in terms of the lease, but has also launched a counter application

calling upon this court to review and set aside its decision to conclude the agreement

(which application the applicant argues is out of time).2 The respondent furthermore

alleges that the applicant ought to have joined the Bothas as a party to this

application.

The history

[4] The property3 was previously leased by the Transkei Development

Corporation to the South African College of Tourism who in turn (according to the

applicant), was sub-letting the property to Wild Coast Holiday Holdings. It is common

cause that during November 2011 Wild Coast Holdings attempted to evict the Bothas

who were at that time occupying a portion of the property and operating a hospitality

industry in competition with the hotel.

1 Nenga River Lodge, Leon Botha and those occupying under or through him will hereafter collectively be referred to as “the Bothas”. 2 For ease of reference BW Bright Water Way Props (Pty) Ltd will be referred to as the applicant and the Eastern Cape Development Corporation will be referred to as the respondent throughout this judgment. 3 The property was originally registered in the name of the South African Bantu Trust which was succeeded by the Minister of Rural Development and Land Reform. It effectively belongs to the Government of the Republic of South Africa. The respondent has custodial rights to the property.

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[5] The Transkei Development Corporation was subsequently dissolved by the

Premier of the Eastern Cape, with all its powers and functions devolving upon the

respondent. According to the applicant, its director, who is also the deponent to its

founding affidavit (Ian Crawford) acquired the Wild Coast Holiday Holdings share

portfolio during 2012. This allowed him to operate the hotel on the property.4 During

2013 the College of Tourism (and all persons occupying through or under it), was

evicted from the property by the respondent in its capacity as successor in title to the

Transkei Development Corporation, and as custodian of the property on behalf of the

South African Government. The College of Tourism complied with the order. The

Bothas did not. Instead, they managed to obtain an order restoring their possession

of a portion of the property, and are claiming R2 million in damages from the

respondent for unlawful eviction and the sequelae thereto. This dispute between the

Bothas and the respondent is allegedly lis pendens, with the respondent still

maintaining the view that the Bothas are in unlawful occupation, but claiming to have

been temporarily hamstrung in taking further action against the Bothas. The

respondent’s reasons for not having taken action against the Bothas are set forth in

its affidavit as follows:

‘The Respondent holds the view that Nenga River Lodge/Botha are not entitled to

occupy the property and that their contention that they occupy the property

by virtue of permission obtained from the Chief and Traditional Authority of

the Lower Nenga Administrative Area is without foundation.

It has at all times been the Respondent’s intention to institute the necessary action

against Nenga River Lodge/Botha but unfortunately, this can only be done

on the instruction and concurrence of the State Attorney inasmuch as the

property is not registered in the name of the Respondent but the

Government.

4 According to Crawford he was aware of the pending eviction proceedings against the Bothas when he acquired the shares in Wild Coast Holdings, and had factored their imminent eviction into the bargain when he acquired the shares.

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The Respondent has been liaising with the relevant State Attorney for some months

but as at the date hereof, no satisfactory resolution has been forthcoming

nor has the State Attorney expressly authorized the institution of legal action.

There have been various meetings with the State Attorney, more particularly the

State Attorney representative Mr S Tshitshi and Mr Mandla Mpikashe, the

Respondent’s Executive Manager Legal Compliance and Governance.

To illustrate the aforegoing, I annex hereto marked “ECDC7” a letter authored by

myself and addressed to the State Attorney Mthatha dated 3rd July 2017.

The contents of such letter are self-explanatory and set out the logistical

difficulty encountered by the Respondent to institute action.

The State Attorney’s response is to say the least ambivalent. It relies on the

provisions of Section 3(3) of the State Attorneys Act of 1957 and asserts that

they have to represent the Respondent in any proceedings.

As attorneys instructed by the Respondent and counsel have been seized with this

matter for a long time, permission was sought, as is apparent from

Respondent’s letter of the 3rd July 2017 addressed to the State Attorney, to

litigate.

Besides receiving certain queries from the State Attorney, no consent has at yet

been forthcoming.

It is hoped that the necessary consent will be forthcoming shortly.’

[6] There is not much detail regarding what transpired between 2013 and 2016.

On the papers, the narrative continues when the applicant and the respondent

concluded a lease agreement in respect of the property, which agreement was

sealed on 20 December 2016.

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The lease agreement

[7] Ex facie the document the agreement was signed by one S. Sentwa (Sandile

Sentwa) in his capacity as the respondent’s chief financial officer and “acting

property head” on the one side, and by Crawford representing the lessee when the

lease was entered into between the parties, on the other.

[8] The respondent alleges that Sentwa had no authority to enter into the

agreement and to sign the lease, and in so doing, he acted contrary to a resolution

taken by the respondent’s executive management committee.5 It is accordingly the

respondent’s contention that the lease agreement falls to be set aside as being both

unlawful and invalid, not only for lack of authority but also due to non-compliance

with certain statutory provisions.

The main application

[9] The applicant claims specific performance in terms of the contract. It is

accordingly incumbent on the applicant to allege and prove the terms of the contract

as well as compliance with any antecedent or reciprocal obligation to tender to

perform it fully. It must also allege non-performance by the respondent.6

[10] The respondent contends that the applicant is in breach of clauses 3.3

(improvements in terms of the project), 6.1 (non-payment of rent), 6.4 (further non-

payment), 6.5 (non-payment for utilities) and 7.1 (non-payment of the deposit) of the

agreement, and as such, is barred from claiming specific performance in any event. I

will deal with each of these clauses seriatim:

Clause 3.3 The Lessee shall, at its cost, alter or improve the

premises in accordance with the agreed project.

5 According to the respondent Sentwa’s act of entering into a lease agreement was contrary to the legislative prescripts relating to the disposal or the letting of the respondent’s property, and his conduct is subject to a disciplinary enquiry. 6 See Nkengana and another v Schnetler and another [2011] 1 All SA 272 (SCA)

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The respondent’s deponent has averred that the applicant has not complied

with this clause relating to improvements in accordance with the

agreed project. That is the sum total of its submissions on this point.

The applicant has replied that the agreed project was the addition of a

conference facility together with a general upgrade of various

components of the hotel facilities, and that this agreed project is

complete.

Clause 6.1 The rental payable by the Lessee to the Lessor for the

entire period of this Agreement of Lease shall be R32 000.00 (thirty two

thousand rand) per month plus VAT, escalating annually by 10%.

The respondent avers that the applicant is not paying this rental, but that it

has been paying a lower sum amounting to R8 000,00 per month which

(even if one assumes a valid agreement and a default on the

respondent’s part to provide the applicant with vacant occupation of

portion B and because of the fact that portion B is far smaller than

portion A), is no justification for the drastic reduction in rent which the

applicant has unilaterally imposed.

According to the applicant, it has been paying monthly rental in the sum of

R8 870,00 as “originally agreed” with the respondent. It contends that it

has been withholding the balance in terms of the agreement, and will

continue to do so, until the respondent complies with its contractual

obligation to grant it vacant and undisturbed occupation and

possession of the entire premises. It further contends that this much

was made abundantly clear to the respondent by virtue of the debit

order authorisation form which Crawford signed on the applicant’s

behalf on 30 November 2016, which purports to reflect that payment of

the sum of R36 480,00 monthly would commence once the applicant

had received vacant and undisturbed occupation and possession of the

entire premises.

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Clause 6.4 The Lessee undertakes to pay to the Lessor all

outstanding rental arrears totalling to R337 075.67 pertaining to the

current lease immediately after signing the lease agreement.

The respondent avers that the applicant has remained in breach of this clause

and that this amount has not been paid. The applicant does not dispute

this. Instead, Crawford has stated in his affidavit that he has been

advised, as a matter of law, that the applicant is entitled to a remission

of its rental obligation; alternatively, to withhold performance under the

lease agreement altogether pending the eviction of the Bothas.

Crawford has furthermore tendered full compliance with the lease

agreement immediately upon the eviction of the Bothas.

Clause 6.5 The Lessee shall pay or amicably settle O.R. Tambo

District Municipality’s outstanding (sic) which includes, but (sic) not

limited to rates, water, and electricity account in respect of the leased

premises immediately after signing the lease agreement.

The respondent avers that the applicant is also in breach of this clause.

According to the applicant this clause deals with its obligation to pay

rates and consumption charges to the district municipality. It is averred

that the applicant has been paying the municipality in accordance with

an agreement between it and the municipality. This being the position,

it is contended that the applicant is not in breach of this clause. By way

of example, the applicant recalls that at some point the respondent

“caused” the municipality to discontinue the applicant’s water supply.

The applicant brought an application against both the municipality and

the respondent for its water supply to be reconnected. The application

succeeded (with costs) on the basis that the applicant had complied

with its agreement with the municipality.

Clause 7.1 The Lessee shall pay a lease deposit amount of

R200 000.00 to the Lessor’s bank account.

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It is the respondent’s contention that the applicant has not paid this deposit.

This too, is not in dispute, with the applicant having repeated its

contention that it is entitled to withhold performance altogether pending

the eviction of the Bothas, and tendering immediate and full

compliance with the agreement once the Bothas have been evicted.

[11] The respondent, in raising the above contentions in answer to the applicant’s

claim against it, appears to seek reliance on the exceptio non adempleti contractus.7

The respondent has claimed that because the applicant is in breach of certain

obligations in terms of the contract, it cannot claim performance, and further, that the

respondent is entitled to an order setting aside the ‘decision’ to lease the property to

the applicant. Simultaneously, the respondent has also launched a counter

application for that very ‘decision’ to be reviewed and set aside.

[12] On 13 March 2017 the applicant’s attorneys reminded the respondent that it

was still in breach of its obligation to give the applicant vacant possession of the

premises in terms of clause 5.3 of the lease agreement. The respondent’s response

was that this was a suspensive condition, the performance of which was impossible

and that the agreement was accordingly void. No reference was made in this

communication to the respondent’s present contentions, which are that the applicant

has not complied with the aforesaid terms of the agreement, and that the lease is

unlawful in any event.

[13] The contention, that the agreement contains a suspensive condition which

remains unfulfilled, appears however to have been abandoned; alternatively, is not

seriously pursued by the respondent in its answering affidavit where the following is

stated:

‘Whether or not in law the clause is a suspensive condition or not is not relevant to

these proceedings as the agreement stands to be set aside.’8

7 See Grand Mines (Pty) Ltd v Giddey NO 1999 (1) SA 960 (A) 8 See for example Legator McKenna Inc v Shea 2010 (1) SA 35 (SCA)

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[14] The exceptio defence can only apply where the applicant’s performance has

to precede that of the defendant or where both parties have to perform

simultaneously.9 When a contract imposes reciprocal obligations on the parties,

performance and counter performance should generally take place at the same

time.10 Certain types of contracts form an exception to the rule. A lessor of property

for example (as in the case at hand), must usually perform before rental may be

demanded.11

[15] To this end the applicant contends that the lease agreement entrenches the

residual position by making the payment of rent subject to the respondent’s

compliance with clause 5.3 read with clause 6.3 of the lease agreement. The

relevant clauses state the following:

‘3.3 The Lessee shall, at its cost alter or improve the premises in accordance with

the agreed project.

5.3 Subject to clause 3.3 above, the Lessor shall give the Lessee vacant and

undisturbed occupation and possession of the entire premises, on the

commencement date which shall be subject to the eviction of any illegal

Occupant, from which date the premises shall be at the sole risk and profit of

the Lessee.

6.3 Upon fulfilment of clause 5.3 by Lessor rental shall be payable directly into the

bank account of the Lessor as advised by Lessor from time to time, the details

of which will be provided to the Lessee in writing. The Lessee shall

STRICTLY complete and sign Lessor’s Debit Order form for payment obligation

in respect of this lease agreement.’

[16] As I have said, the applicant contends that the agreement entrenches the

residual position by making the payment of rent subject to clause 5.3 thereof.12

Indeed the debit order authorisation form which accompanied the agreement

9 Morsner v Len 1992 (3) SA 626 (A) 10 See MAN Truck & Bus (Pty) Ltd v Dorbyl Ltd 2004 (5) SA 226 (SCA) 11 See Qwa Qwa Regeringsdiens v Martin Harris & Seuns OVS (Edms) Bpk 2000 (3) SA 339 (SCA) 12 See Thompson v Scholtz 1999 (1) SA 232 (SCA) at 247A-D

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stipulates the commencement of the debit order as being the date on which clause

5.3 has been fulfilled. The applicant has, in any event, tendered a willingness and an

ability to perform its side of the bargain upon the respondent’s compliance with

clause 5.3. To my mind, a further aspect which militates in the applicant’s favour is

that the respondent has, up until the institution of these proceedings, condoned

performance on the applicant’s part which it now, for the first time, claims to have

been defective.13

[17] Finally, the applicant in any event claims that it has indeed complied with

clause 3.3 of the agreement and has, at its own cost, improved the property in

accordance with the “agreed project”, which it alleges to have involved the addition

of a conference facility and a general upgrade. It is not in dispute that the applicant

has undertaken and completed these projects. In the absence of any suggestion

from the respondent that the “agreed project” involved something more than this, the

applicant’s version must be preferred, when the respondent, in alleging non

performance, has not furnished this court with any information setting forth the

nature and extent of the non performance.14 In my view the applicant is entitled in

any event, to withhold counter performance under the lease agreement in response

to the respondent’s failure to discharge its antecedent obligation provided for in

clause 5.3.

Concurrence of the State Attorney and joinder of the Bothas

[18] The respondent’s opposition to the main application is also founded in part in

averments that when the respondent (as successor in title to the Transkei

Development Corporation) previously obtained an eviction order by way of default

judgment in the Mthatha High Court on 23 May 2013 (evicting the South African

College of Tourism and persons claiming through it from the portion of the property

described as the Ocean View Hotel), the Bothas launched an urgent application for a

stay in execution and rescission of the judgment. On 12 June 2014 the Bothas

withdrew this application, the respondent having undertaken not to evict the Bothas

13 See BK Tooling (Edms) Bpk v Scope Precision Engineering (Edms) Bpk 1979 (1) SA 391 (A) 14 See HA Millard & Son (Pty) Ltd v Enzenhofer 1968 (1) SA 330 (T)

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pursuant to the eviction order granted on 23 May 2013 against the South African

College of Tourism in respect Ocean View Hotel. In spite of this undertaking not to

execute against the Bothas in terms of the Mthatha order (relating to Ocean View

Hotel), the parties before me are still ad idem that the Bothas remain in unlawful

occupation of another portion of the property (where Nenga River Lodge is situated).

[19] The respondent’s deponent has alleged on oath that due to difficulties such

as the respondent’s locus standi “at that point in time” and “more importantly” that

the Bothas were not occupying this portion of the property through or under the

South African College of Tourism, the Mthatha High Court granted an order setting

aside the eviction and directing the respondent to restore possession to Nenga River

Lodge and the Bothas.

[20] This is not a correct summation of what transpired. Indeed, according to the

papers the eviction order and the default judgment stand. All that was recorded on

12 June 2014 was the respondent’s undertaking (having successfully evicted the

College of Tourism from one portion of the property), to not also evict the Bothas

(from another portion of the property) in execution of the same order. I think it goes

without saying that failure to have joined the Nenga River Lodge and Botha who

seem not to have been enjoying occupation under the College of Tourism, presented

an insurmountable obstacle for the respondent at the time. The respondent has

expressed the manifest intention however to institute the necessary action against

the Bothas, but avers that it can only do so on the “instruction and concurrence of

the State Attorney” inasmuch as the property is not registered in the respondent’s

name but in the name of the Government of the Republic of South Africa. Not much

turns on this averment for the purposes of this application. It suffices to say that the

respondent’s locus standi did not present a problem when it secured default

judgment against the College of Tourism, nor did it get in the way of the respondent

not only opposing the present application before me, but also of delivering a counter

application in its own right (apparently sans instructions from the State Attorney).

Indeed, the affidavits deposed to by the respondent’s chief executive officer

pertinently state that he is authorised not only to oppose this application but also to

initiate litigation on the respondent’s behalf. This is borne out by a general and

exceptionally wide power of attorney which the Minister of Rural Development and

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Land Reform deemed prudent to bestow on the respondent’s chief executive officer,

to inter alia manage the property in the broader sense and to take all and any lawful

and necessary measures and steps with respect to the property in question,

including entering into lease agreements and instituting and defending legal actions

in relation to the property.

[21] As I have said, the parties are ad idem that the Bothas remain in unlawful

occupation of the property, notwithstanding their previous apparent contention that

they are lawfully entitled to do so. This being the de facto position, the respondent

contends that the failure of the applicant to have joined the Bothas as materially

interested parties is fatal to the applicant’s application, and that the application ought

to be dismissed with costs without further ado, on this point alone.

[22] Crawford, in his affidavit under reply, has expressed the view that this is an

ill-conceived attempt by the respondent to escape liability. He adds that he has also

been advised that non-joinder is a matter for argument, but nevertheless mentions

that the Bothas have no legally recognised interest in the applicant’s attempt to

enforce a bilateral agreement between the parties. It is further mentioned that

insofar as the Bothas do have an interest in any proceedings “aimed at their eviction

from the property”, such “proceedings do not yet exist”. Differently put, it is

contended on the applicant’s behalf that eviction of the Bothas is, in any event, not

sought by way of these proceedings and that success in this application will not

automatically result in an order for the eviction of the Bothas and accordingly will not

prejudice them in their rights.

[23] The question as to whether all necessary parties have been joined does not

depend on the nature of the subject matter of the suit, but upon the manner in which,

and the extent to which this court’s order may affect the interests of third parties.15

The test is whether or not a party has a ‘direct and substantial interest’ in the subject

matter of the litigation, that is, a legal interest which may be prejudicially affected by

this court’s judgment.16

15 See Transvaal Agricultural Union v Minister of Agriculture and Land Affairs 2005 (4) SA 212 (SCA) at 226F-227F 16 Absa Bank Ltd v Naude NO 2016 (6) SA 540 (SCA) at 542I – 543C

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[24] In determining whether the Bothas ought to have been joined, it is necessary

to scrutinise the relief which the applicant seeks, which is set forth as follows:

1. Declaring that the lease agreement concluded by the applicant and the

respondent on 20 December 2016 is valid, and of force and effect;

2. Directing the respondent to provide the applicant with vacant

possession of portions A and B of the remainder of farm 31 Coffee

Bay, Mqanduli by inter alia evicting from the property any unlawful

occupiers;

3. Directing the respondent to take all steps necessary to assist the

applicant in causing the lease agreement to be embodied in a notarial

deed and registered against the title deeds of the property within seven

days of being called upon by the applicant to do so;

4. Directing the respondent to pay the costs of this application.

[25] The applicant contends that the aforesaid relief does not make provision for

the eviction of the Bothas but simply seeks to enforce its common law and

contractual rights against the respondent. To state it differently, it is contended that

execution in terms of a successful application does not entail the eviction of the

Bothas, and accordingly does not prejudice them, nor do they have a direct or

substantial interest in the outcome of this litigation.

[26] I am inclined to agree with the applicant. There is a distinction to be drawn

between the application before me, and that which the respondent brought in the

Mthatha High Court. In that matter, the respondent before me sought to evict the

South African College of Tourism, being an institution which was, at the time, in

occupation of the Ocean View Hotel (being portion A of the property described as

parcel 31). According to the papers the College voluntarily vacated the Hotel,

whereafter the respondent sought to execute against the Bothas who were

occupying portion B of parcel 31 (the Nenga River Lodge). As pointed out by Mr

Leon Botha in his affidavit in support of an interdict preventing the respondent from

evicting him, he was not joined as a party to those proceedings wherein an actual

eviction order was granted, nor did he derive his occupation of portion B of the

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property from those occupying portion A. Significantly, the default judgment refers

to the Ocean View Hotel only, and not the entire parcel 31. It accordingly does not

surprise me that the respondent was constrained to give the Bothas an undertaking

not to evict them in response to the Mthatha order.

[27] In the matter before me however, the applicant seeks to enforce the terms

and conditions of a contract between itself and the respondent, and has not, in these

proceedings, attempted to seek consequential relief directly or indirectly implicating

the Bothas.

[28] In the premises I am satisfied that the applicant’s failure to join the Bothas in

these proceedings is not fatal to the main application. Nor, for that matter is the

problem which the respondent alleges it is experiencing with the State Attorney. On

its own version, and at best for it, the respondent seems in these instances to be

relying on temporary impossibility. Temporary impossibility does not automatically

bring the contract to an end. Such termination depends on factors such as the

materiality of the term involved and whether final impossibility is inevitable.17 This is

not the respondent’s case. Its deponent says otherwise. I repeat the last two lines of

the previously quoted passage from its affidavit18:

‘Besides receiving certain queries from the State Attorney, no consent has as yet

(my emphasis) been forthcoming.

It is hoped that the necessary consent will be forthcoming shortly (my emphasis).’19

[29] I now turn to the claim in reconvention.

The counter application: delay and prospects of success

17 See World Leisure Holidays (Pty) Ltd v Georges 2002 (5) SA 531 (W) 18 At para [5] of this judgment. 19 Paras 8.26, 8.31, 8.32 and 8.33 of the respondent’s answering affidavit in the main application.

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[30] The respondent has applied for the review and the setting aside of its own

decision to conclude the lease agreement on two grounds. Firstly, that Sentwa was

not authorised to sign the agreement amounting to failure to comply with internal

prescripts20, and secondly, that the agreement was entered into in disregard of the

statutory framework applicable in terms of the Constitution, in that the lease was not

put out to tender, and the agreed rental was out of sync with a market related price.

[31] It is common cause that the review which forms the subject matter of the

claim in reconvention deals with the question of legality, and accordingly the 180-day

period within which a review application must be brought in terms of PAJA21 does not

apply to it.22 It must nevertheless be brought within a reasonable period of time.

[32] The test enunciated by the Supreme Court of Appeal in Gqwetha23 for

assessing undue delay in bringing a legality review application was endorsed by the

Constitutional Court in Khumalo v Member of the Executive Council for Education,

KwaZulu Natal24 (hereinafter referred to as the Khumalo test). Firstly, the court must

determine whether the delay is undue or unreasonable. Secondly, if the delay is

found to have been unreasonable, the court nevertheless has the discretion to

overlook the delay and to entertain the application.

[33] The agreement was concluded on 20 December 2016. The application to

have it set aside was launched eight months later, on 28 August 2017, by way of a

counter application to the applicant’s claim. It is contended on the respondent’s

behalf that the respondent was only alerted to fully investigate the circumstances

leading up to the conclusion of the agreement when the applicant launched the

present proceedings in June 2017. Thereafter it obtained legal assistance and the

opinion of senior counsel who advised the respondent that the decision to conclude

the lease agreement fell to be set aside, and that the respondent should seek an

order declaring the lease to have been unauthorised and unlawful. This was on 10

August 2017. Apparently the respondent had also, during this time, embarked upon

20 According to the respondent’s Property Policy and Procedure Manual 21 Section 7(1) of the Promotion of Administrative Justice Act 3 of 2000 22 See State Information Technology Agency SOC Ltd v Gijima Holdings (Pty) Ltd 2018 (2) SA 23 (CC) 23 Gqwetha v Transkei Development Corporation Ltd 2006 (2) SA 603 (SCA )at para 33 24 2014 (5) SA 579 (CC)

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an investigation into Sentwa’s conduct which culminated in the decision to institute

disciplinary proceedings against him, and which required the formulation of an

appropriate charge sheet.

[34] It is contended on the respondent’s behalf that at the time it deposed to its

joint answering affidavit in the main application and founding affidavit in support of

the counter application, the Constitutional Court had not yet handed down the

judgment in Gijima which confirms that although organs of state are entitled to bring

self-reviews, these reviews do not fall within the purview of PAJA. It is nevertheless

contended before me that the 180 day cut-off period remains a useful guideline as to

what may be considered a reasonable delay, and that if the delay had been

measured in terms of PAJA, the 180 day period would have expired on 20 June, just

short of two months before the counter application was delivered, and just over two

weeks after counsel’s advices were obtained.

[35] I am not sure if I agree with the reasoning behind this argument. Nor does it

assist the respondent. As pointed out by Theron J in Buffalo City Metropolitan

Municipality v Asla Construction (Pty) Limited25, there is a distinction between a

legality review and a PAJA review. This distinction was described by the Supreme

Court of Appeal in Opposition to Urban Tolling Alliance v South African National

Roads Agency26, which found that s 7 of PAJA creates a presumption that a delay of

longer than 180 days is “per se unreasonable”:

‘At common law application of the undue delay rule required a two stage enquiry.

First, whether there was an unreasonable delay and, second, if so, whether

the delay should in all the circumstances be condoned … Up to a point, I

think, section 7(1) of PAJA requires the same two stage approach. The

difference lies, as I see it, in the legislature’s determination of a delay

exceeding 180 days as per se unreasonable. Before the effluxion of 180 days,

the first enquiry in applying section 7(1) is still whether the delay (if any) was

25 As yet unreported judgment dated 16 April 2019 (case CCT 91/17); neutral citation [2019] ZACC 15 at [49]. This judgment became available after the application was argued before me, which resulted in me affording both parties the opportunity to submit written argument (which they did) dealing with the effect of this judgment, if any, on the facts and circumstances of this application. 26 [2013] ZASCA 148; [2013] 4 All SA 639 (SCA) at 26

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unreasonable. But after the 180 day period the issue of unreasonableness is

pre-determined by the legislature; it is unreasonable per se. It follows that a

court is only empowered to entertain a review application if the interest of

justice dictates an extension in terms of section 9. Absent such extension the

court has no authority to entertain the review application at all. Whether the

decision was unlawful no longer matters. The decision has been ‘validated’ by

the delay.’

[36] This being the position, it seems that the 180 day bar in PAJA (whilst having

been referred to as a guideline) does not play a determinative or even a persuasive

role in legality matters. Reverting to the common law, the first hurdle with respect to

delay is one of reasonableness; the second, whether it is in the interests of justice to

overlook an unreasonable day. This also means that whilst a substantive application

for condonation is not required, the delay must be fully explained for the court’s

consideration and application of the two-step Khumalo test.

[37] In deciding whether the delay was reasonable, I am constrained to consider

the explanation offered therefor.27 If there is an explanation, it must cover the entire

period of the delay.28

[38] I now return to the facts and circumstances of this matter. To my mind the

respondent has lost sight of the fact that Sentwa’s notice of the disciplinary enquiry

(dated 4 August 2017) sets forth a charge of gross insubordination, in that as far

back as 20 March 2017 he was given two weeks to remedy his alleged unauthorised

signing of the lease during December 2016. Having failed to do so by 7 May 2017

(some seven weeks later), he was given a further reminder which he also ignored. I

am of the view that the initial dilatoriness on Sentwa’s part, ought to have been

sufficient cause for the respondent, of its own volition, to have taken the first steps to

have the agreement reviewed, say by no later than 7 May 2017. It made no attempt

whatsoever to do so. It has not explained why no such attempt was made. To my

mind, its failure to do so at that point or at least forthwith thereafter, is per se

unreasonable in circumstances such as these. A delay does not have to be

27 Khumalo (supra) paras 49-51 28 See Department of Transport v Tasima (Pty) Limited 2017 (2) SA 622 (CC) para 153

18

particularly long for it to be undue or unreasonable. Whether it is depends on the

facts and the circumstances of each case.

[39] The respondent has also not explained the lengthy delay between 7 May

2017 and 28 August 2017, when it sought what has been termed “reactive self-

review” for the first time, by all accounts, to avoid the applicant’s claim. In my view,

the delay was unreasonable.

[40] This raises the second question whether this court should not, in any event,

in the exercise of its discretion and having due regard to the interests of justice,

overlook the delay. There must however be a basis for a court to exercise its

discretion to overlook the delay. That basis must be gleaned from the facts or from

objectively available factors.29 Courts have in general exercised a more flexible

approach to overlooking delay in self-review proceedings. The approach entails a

legal evaluation taking into account factors such as potential prejudice and the

consequences of setting aside the impugned decision. These factors may, in certain

circumstances, be ameliorated by the court’s power to grant a just and equitable

remedy. Whilst a court must declare conduct which it finds to be unconstitutional

invalid, it need not necessarily set the conduct aside.30

[41] A further factor relevant to overlooking the delay is the nature of the

impugned decision. As stated in Khumalo, this, in essence, requires a consideration

of the merits of the legal challenge to that decision.31

[42] Another factor to consider is the conduct of the party claiming self-review,

particularly when that party is a government organisation wholly-owned by provincial

government, as in the matter before me. As Cameron J so aptly commented in

Kirland:

‘[T]here is a higher duty on the state to respect the law, to fulfil procedural

requirements and to tread respectfully when dealing with rights. Government

is not an indigent or bewildered litigant, adrift on a sea of litigious uncertainty,

29 Gijima above para 44. 30 Khumalo above paras 53 and 56; Asla above para 54. 31 Para 57.

19

to whom the courts must extend a procedure circumventing lifeline. It is the

Constitution’s primary agent. It must do right and it must do it properly.’32

[43] The applicant has opposed the granting of condonation, or to put it more

correctly, it has contended that this court should not overlook the delay. In support of

such opposition, counsel has referred me to the matter of Aurecon South Africa (Pty)

Ltd v City of Cape Town33 where the general approach to condonation is restated as

follows:

‘Whether it is in the interests of justice to condone a delay depends entirely on the

facts and circumstances of each case. The relevant factors in that enquiry

generally include the nature of the relief sought, the extent and cause of the

delay, its effect on the administration of justice and other litigants, the

reasonableness of the explanation for the delay which must cover the whole

period of the delay, the importance of the issues to be raised and the

prospects of success.’

[44] Taking this background into account, the respondent’s explanation (that it

only became aware of Sentwa’s conduct in June 2017 when this application was

brought) is in my view disingenuous and does not encourage this court to readily and

reasonably come to its assistance. Neither does it cover the entire period of the

delay. It seems to me, on a conspectus of the respondent’s version alone, that the

only thing which materially prompted it to launch the counter application was

because it had been compelled and propelled by the applicant’s institution of these

proceedings, to explain its conduct, furnish answers to the applicant’s claims and

make an attempt to put its house in order.

[45] It is also not in dispute that at the latest from March 2017 onwards, the

applicant had made concerted efforts to enforce the provisions of the lease

agreement. Indeed, the content of the attorney’s letter written on the applicant’s

32 Para 82. 33 [2016] 1 All SA 313 (SCA) at para 17

20

behalf on 13 March 2017 (addressed to the respondent’s chief executive officer who

is also the deponent to its affidavit) is instructive. It reads as follows:

‘Dear Sir

AGREEMENT OF LEASE EASTERN CAPE DEVELOPMENT CORPORATION /

BW BRIGHTWATER PROPS (PTY) LTD

PORTION A & PORTION B OF THE REMAINDER OF FARM 31, COFFEE BAY,

MQANDULI

The ECDC and our client concluded an Agreement of Lease in respect of the above

property on the 20th December 2016.

One of the material terms of the Lease Agreement contained in Clause 5.3 is: “the

Lessor was to give the Lessee vacant and undisturbed occupation and

possession of the entire premises, on the commencement date which shall be

subject to the eviction of any illegal occupant, from which date the premises

shall be at the sole risk and profit of the Lessee.” Our office has addressed

correspondence to your offices regarding its obligation to evict the “illegal

occupant” from a portion of the premises. We attach herewith copies of our

emails dated 17th February 2017 and 7th March 2017 which were addressed

to Advocate Kunene offices. We have not had a response from Advocate

Kunene nor has the “illegal occupant” been evicted from the portion of the

premises.

Our letter is addressed to you in terms of Clause 27 of the Lease Agreement which

deals with “Dispute Resolution”. You will note from Clause 27.2 that the

“dispute” is to be referred to the Chief Executive Officer of the ECDC who is to

act as mediator. This letter serves as a referral in terms of Clause 27.2 of the

Lease Agreement requesting you to mediate this matter.

You will note further that in terms of Clause 27.4 you are required to resolve the

dispute within 7 (seven) days of receipt of this referral.

21

In the circumstances kindly acknowledge receipt of this referral and confirm that you

will address the dispute with the relevant urgency.’

[46] Receipt of the letter was acknowledged the following day. It appears that it

was in reaction to this letter that Sentwa was instructed by the CEO on 20 March

2017 to remedy his conduct relating to the lease agreement, but when he failed to do

so, the respondent likewise failed to take appropriate legal steps to set aside his

conduct. Instead, it adopted what counsel refers to as the typically ‘supine attitude’

which the Supreme Court of Appeal warned against in Associated Institutions

Pension Fund v Van Zyl34 where Brand JA said the following:

[51] In my view there is indeed a duty on applicants not to take an indifferent attitude

but rather to take all reasonable steps available to them to investigate the

reviewability of administrative decisions adversely affecting them as soon as

they are aware of the decision. These considerations are, in my view, also

reflected in both s 7(1) of PAJA and in the provisions of s 12(3) of the

Prescription Act 68 of 1969. Whether the applicants in a particular case have

taken all reasonable steps available to them in compliance with this duty, will

depend on the facts and circumstances of each case. (Compare Drennan

Maud & Partners v Pennington Town Board 1998 (3) SA 200 (SCA).)

[47] Of relative significance is the importance of the claim in reconvention to the

respondent. It is not in dispute that the applicant’s Ian Crawford has been operating

the hotel on the property since 1 March 2012. There is nothing on the papers to

suggest that he was ever wilfully in, or suspected or accused of having been in

unlawful occupation. Indeed, it appears from the papers that it is only the Bothas’

occupation that is described throughout as unlawful. The respondent’s response to

the applicant’s first letter complaining about the Bothas (having averred that it had

called upon Sentwa to remedy the unauthorised signing of the lease before it

responded to this letter), was not to draw the alleged unlawfulness of the lease to the

applicant’s attention. On the contrary, for all intents and purposes, the letter, drafted

34 2005 (2) SA 302 (A) para 50.

22

by the respondent’s attorneys, relied upon a valid lease containing a suspensive

condition, which had lapsed due to the purported non-fulfillment of this condition.

[48] When the applicant took issue with this response and the interpretation of

the lease some two weeks later, the respondent again made no reference to the

unlawfulness of the lease and the pending disciplinary enquiry against its officer for

signing it. According to the respondent, it simply “chose” not to respond to this letter.

Indeed, the applicant heard for the first time that the lease was ostensibly signed by

an employee who was not authorised to do so, by virtue of the respondent’s claim in

reconvention to the legal proceedings which the applicant was constrained to

institute to enforce compliance with certain terms of what, by all accounts, purported

to be a bona fide lease agreement.

[49] The respondent’s intransigent conduct, in the circumstances, does not strike

me as being demonstrative of a state organ which is particularly perturbed by the

status quo and which is trying its best to get its house in order. Nor does it appear to

have viewed the alleged unlawfulness as having been demonstrably serious. How it

intended to rely upon Sentwa to correct the position is anybody’s guess. If, what

Sentwa had done smacked of manifest unlawfulness in gross contravention of the

Constitution, this to me, would have been a perfect opportunity for seeking early

redress in the form of self-review:

‘The delay rule should not be viewed solely through the ancestor lens of common

law review, but through our constitutional lens in which legality review serves

to promote open, responsive and accountable government.’35

[50] Applicant’s counsel has argued that the potential prejudice to the applicant if

this agreement is set aside at this stage is of dynamic proportions. Crawford has

been managing the Ocean View Hotel since 2012. He has built it up and refurbished

it with the concurrence of the respondent, who has, for all intents and purposes,

regarded and treated him as a legal tenant. He discharged his obligation to

complete the conference centre project (at a cost of some R2 million) in terms of the

35 Para 132 of the minority judgment of Cameron and Froneman JJ (Khampepe J concurring) in Asla above.

23

lease agreement. Despite him having been advised (wrongly by all accounts on the

respondent’s current version), that the respondent had failed to perform in terms of

the contract due to a suspensive condition therein that had not been fulfilled, the

respondent also made no efforts to have the contract set aside at its earliest

opportunity, as it now seeks to do. It is contended that the consequences of now

setting aside the impugned decision, to satisfy the respondent’s knee-jerk reaction to

the applicant having innocently drawn attention to the agreement in the course of

attempting to enforce one of its conditions, would be manifestly unfair and prejudicial

to the applicant.

[51] On the other hand the respondent’s deponent has submitted that:

‘… the interest of justice requires that the unlawful agreement be set aside, more

particularly where prime land and structures belonging to the State and which

are utilized for hotel and tourism purposes be set aside, more particularly

having regard to the inordinate period granted in terms of the agreement of

lease and the far below market rental recorded in the purported agreement of

lease.

Such a valuable hotel site on the Eastern Coast of South Africa should be utilized for

the benefit of all and in particular, the State should, in consideration for

granting a private entity the right to conduct a lucrative business from such

valuable properties, receive market related and adequate compensation for

the right to occupy and run the business.’

[52] As I have said, the potential prejudice to affected parties and the

consequences of declaring conduct unlawful may in certain circumstances be

ameliorated by the court’s power to grant a just and equitable remedy, and this

should also be taken into account:

‘Under the Constitution, however, the requirement to consider the

consequences of declaring the decision unlawful is mediated by a court’s

remedial powers to grant a ‘just and equitable’ order in terms of section

172(1)(b) of the Constitution. A court has greater powers under the

24

Constitution to regulate any possible unjust consequences by granting an

appropriate order. While a court must declare conduct that it finds to be

unconstitutional invalid, it need not set the conduct aside.’36

[53] Another important factor to consider is the nature of the decision made by

the respondent to enter into a lease agreement with the applicant, without invoking

the prescripts of section 217 of the Constitution. I hasten to mention that the

applicant has not conceded that the respondent’s conduct in entering into the lease

agreement in the manner in which it was done, was in any way unlawful or

egregious.

[54] The upshot of all of this then, is that even if there is no basis for a court to

overlook an unreasonable delay, the court may nevertheless be constitutionally

compelled to consider whether the impugned decision is so clearly and indisputably

unlawful that it attracts a declaration of invalidity. Once again, this will depend on the

circumstances of the case. This is so because section 172(1)(a) of the Constitution

enjoins a court to declare invalid, without hesitation, any law or conduct that it finds

to be inconsistent with the Constitution.37

The effect of the Asla judgment

[55] Before the Asla judgment, the court enjoyed a discretion, albeit limited,

whether to pronounce administrative action invalid. Indeed, this view still pertains in

the Asla dissenting minority view.38

36 Khumalo (above) para 53 37 Gijima (above) para 52 38 The Honourable Constitutional Court judges in Asla were divided (six to three) on the question as to whether, in the presence of inexcusable and undue delay, the court still had a discretion whether to uphold the self-review and set the impugned conduct aside. The majority judgment of Theron J is concurred in by Basson AJ, Dlodlo AJ, Goliath AJ, Mhlantla J and Petse J. The minority judgment of Cameron and Froneman JJ is supported by Khampepe J.

25

[56] The majority in Asla concluded that the delay had been unreasonable and

that there was no basis upon which it could be overlooked. In this regard Theron J

said the following:

‘The Municipality’s conduct in this matter, particularly following the hearing, verges

on bad faith. Had the Municipality acted in a manner that indicated a sincere

effort to clean house and rectify past wrongs and unlawfulness, this Court

may have had a basis to overlook the delay. The important principle at play in

this matter is how this Court manages complex institutional settings of

corruption and maladministration, particularly at local government level and

where the organ of state has not taken the Court into its confidence.’39

[57] Despite having reached this conclusion, the Court nevertheless found that

on the authority of Gijima, it must, having established that the contract in question

was clearly unlawful on undisputed facts (emphasis added), declare it invalid in

terms of the provisions of section 172(1)(a) of the Constitution and set it aside.40 To

motivate this decision, the Court held that “justice and equity dictate that the

Municipality should not benefit from its own undue delay and in allowing the

respondent to proceed to perform in terms of the contract.” It accordingly made an

order declaring the contract in question invalid, but not setting it aside so as to

preserve the rights to which the respondent might have been entitled. In so doing

the Court said the following:

‘It should be noted that such an award preserves rights which have already accrued

but does not permit a party to obtain further rights under the invalid

agreement.’41

[58] Writing for the minority, Cameron J and Froneman J suggested an

alternative route. The route suggested was, that in the absence of adequate

explanation for unreasonable delay, courts should not intervene to “inquire into a

final and determinative holding into unlawfulness”, unless the seriousness of the

39 At [99] 40 At [101] 41 At [105]

26

unlawfulness at issue warrants overlooking the manifest deficiencies in the state

actor’s case.

[59] In certain respects pertaining to issues of legality, I am inclined to agree with

the ends which are sought to be achieved as expressed in the majority judgment. In

interpreting and applying the various principles which I have made reference to, the

purpose ought to be to balance the objectives of the rules or principles relating to

delay with the constitutional objectives of declaring unlawful conduct to be exactly

that. In Khumalo, Skweyiya J expressed the principle to be applied, as follows:

‘In the previous section it was explained that the rule of law is a founding value of the

Constitution, and that state functionaries are enjoined to uphold and protect it,

inter alia, by seeking the redress of their departments’ unlawful decisions.

Because of these fundamental commitments, a court should be slow to allow

procedural obstacles to prevent it from looking into a challenge to the

lawfulness of an exercise of public power.’42

[60] In Department of Transport v Tasima (Pty) Limited43, the Constitutional Court

reaffirmed the principle that a court should be slow to allow procedural obstacles to

prevent a scrutiny of a challenge to the exercise of public power, but nevertheless

went on to emphasise that it is a principle of the rule of law that undue delay should

not be tolerated:

‘Delay can prejudice the respondent, weaken the ability of a court to consider the

merits of a review, and undermine the public interest in bringing certainty and

finality to administrative action. A court should therefore exhibit vigilance,

consideration and propriety before overlooking a late review, reactive or

otherwise.’

[61] It is the respondent’s case that the lease agreement ought to be set aside

because the peremptory public participation and a competitive system in line with the

42 At [45] 43 2017 (2) SA 622 (CC) para 160

27

principle of legality provided for in s 217(1) of the Constitution was not applied.

Section 217 reads as follows:

‘217. Procurement – (1) When an organ of state in the national, provincial or local

sphere of government, or any other institution identified in national legislation,

contracts for goods or services, it must do so in accordance with a system

which is fair, equitable, transparent, competent and cost-effective.’

[62] The respondent contends that it can never be said in the present instance

that a competitive system was employed in that the contract was not put out to

tender, so to speak, and that there has accordingly not been compliance with

legislative prescripts such as section 217 of the Constitution, the Preferential

Procurement Policy Framework Act 5 of 2000 (“the PPPFA), The Public Finance

Management Act 1 of 1999 (“the PFMA”) , Treasury Regulations published in terms

of the PFMA, and the respondent’s very own Property Policy and Procedure Manual.

[63] The authors Penfold and Reyburn44 are of the view that the word “contracts”

in s 217 would probably exclude contracts where the State is providing (as opposed

to procuring) the goods or services or other forms of benefit (as in the matter at

hand). Thus, according to the authors, where the State wishes to lease out its

property, s 217 probably does not apply. The authors contend that this interpretation

is consistent with the heading of s 217 viz “procurement”. The writers also refer to

article 2 of the UNCITRAL Model Law on Procurement of Goods, Construction and

Services, 1994, which defines “procurement” as the acquisition of goods,

construction or services.

[64] Dr Phoebe Bolton45 on the other hand, submits that the word “contracts” in s

217 refers to those instances where an organ of state contracts for the acquisition of

goods or services and when it contracts for the sale and letting of assets (as in the

matter before me). Dr Bolton contends that the non application of principles of

fairness, equity, transparency, competitiveness and cost-effectiveness to the letting

44 Woolman and Others: Constitutional Law of South Africa (Juta 2014 2ed ) Volume 1 at 25-7 and 25-8 45 Phoebe Bolton: The Law of Government Procurement in South Africa (Lexis Nexis Butterworths 2006)

28

of government assets would not be warranted by logic. The whole rationale for

prescribing a system that complies with these principles would be defeated if the

principles were to apply only to instances where organs of state contract for the

acquisition of goods and services, and that the non application of these principles to

letting and sale would be an unfortunate exclusion. The public, as taxpayers, have a

right to procurement procedures that comply with the principles in s 217 whenever

the state contracts, whether it is acquiring goods and services or whether it is selling

or letting assets. This is particularly so because the disposal of state property or the

letting out thereof has been held to constitute administrative action within the

meaning of s 33 of the Constitution, and must accordingly be executed in a manner

which is just, lawful, reasonable and procedurally fair.46

[65] According to Bolton, even though s 217 is headed “procurement”, the term

should be given a wide interpretation and should be read as referring to both

instances when an organ of state contracts to spend funds and when it contracts to

receive funds.47

[66] Section 217 deals specifically with the procurement of goods and service by

way of contract. It specifies that such procurement must be in accordance with a

system which is fair, equitable, transparent, competitive and cost-effective. No doubt,

these systems should allow for a certain degree of flexibility provided the aforesaid

five ingredients are present.

[67] In applying a literal or grammatical interpretation to the section, and having

regard to the ordinary or dictionary meaning of the words therein, I have some

difficulty in accepting that the clear and simple wording in section 217 standing alone

also incorporates the letting, selling and disposal of state assets. Although I tend to

agree with Bolton that “contracts” is intended to be a verb, I fail to see why the

section would not have extended the verb from its present frame of reference (which

is the expenditure and the outputof public funds at a level which serves the best

46 See Bullock NO and Others v Provincial Government, North West Province and Another 2004 (5) SA 262 (SCA); Greys Marine Hout Bay (Pty) Ltd and Others v Minister of Public Works and Others 2005 (10) BCLR 931 (SCA) 47 Bolton page 68. Bolton points out that during the drafting process of s 217, the clause was headed ‘Contracts for Goods or Services’.

29

interests of the tax payer) to the opposite frame of reference (which needs be must

give effect to the respondent’s policy of letting out property to which it has legal title,

at a market related value in order to contribute to the respondent’s income and

profitability).48 I do not suggest that the one is not as important as the other. On the

contrary, they are both equally important and to that extent, equal and relevant

legislative recognition must be sought (elsewhere if necessary). Only if none can be

found would it be incumbent for the purposes of interpreting section 217 to not only

“read-down” but to also “read-in”, using tools such as purposive, historical and

contextual interpretation in conjunction with literal interpretation. According to the

learned authors Currie and others, reading-down is a method of statutory

interpretation which s 39(2) of the Constitution demands of every court and other

tribunal or forum. The purpose is to avoid inconsistency between the law and the

Constitution. The technique is limited to what the text is reasonably capable of

meaning. Reading-in on the other hand, is a remedy which is usually granted by a

court after concluding that a portion or portions of a Statute are constitutionally

invalid. The Constitutional Court has stamped its approval upon giving the green

light to the reading of words into a statute, which it considers to be a corollary to the

remedy of severance.49

[68] In Chief Executive Officer, SA Social Security Agency NO & others v Cash

Paymaster Services (Pty) Ltd50, the SCA held that it is implicit in the provisions of

section 217(1) of the Constitution that “a system” with the attributes contemplated

therein “ has to be put in place by means of legislation or other regulation. Once

such a system is in place and the system complies with the constitutional demands

of section 217(1) the question whether any procurement is ‘valid’ must be answered

with reference to the mentioned legislation or regulation.”

[69] Counsel for the applicant contends that the relevant system is to be found at

regulation 16A7 of the Treasury Regulations which is specifically entitled ‘Disposal

and letting of state assets’ in no uncertain terms. As I understand it, counsel

contends that it is accordingly not necessary to apply reading-in to section 217,

48 See item 6.1.1.of the respondent’s Property Policy and Procedure manual. 49 Iain Currie & Johan de Waal (et al): The New Constitutional and Administrative Law Vol 1 (1ed 2011) 292 50 [2011] 3 All SA 23 (SCA) para 15

30

because the principles which provide for disposal and letting (as opposed to

procurement) are already clearly set forth in the Treasury Regulations. This, being

the only regulation which deals specifically with the letting of state assets, reads as

follows:

‘The letting of immovable state property (excluding state housing for officials and

political office bearers) must be at market-related tariffs, unless the relevant

treasury approves otherwise. No state property may be let free of charge without

the prior approval of the relevant treasury.’

[70] As a corollary, the argument is developed to suggest that it is plain that the

only requirement imposed by Treasury as constituting a system for the letting out of

state-owned assets is market related rental. I am inclined to think that the argument

would seem to suggest that once it is agreed that the rental is market related, it

follows that the use of a system which is fair, equitable, transparent, competitive and

cost-effective has been invoked. Rental which is market related would no doubt go

some way towards supporting the type of governing system which s 217(1)

envisages for procurement, only with the government in the position of creditor as

opposed to debtor.

[71] Clearly interpreting s 217 as applying to procurement only in the literal

sense, does not mean that public bodies are entitled to throw caution to the wind

when dealing with other public funds, particularly income. That could never have

been the intention of the drafters of chapters 2 and 13 of the Constitution and

subordinate legislation and regulations. That is why the Treasury Regulations make

a point of traversing the sale and letting of state assets in no uncertain terms. Having

said that, I agree with the view that the most emphatic manner in which an organ of

state can demonstrate the application of the five principles set forth in s 217, is

through a public, transparent tender process in which all tenderers are treated fairly

and equitably. A public tender is undoubtedly the preferred means of engaging in

public procurement and facilitating public participation and competition, although it

31

does not mean that the use of a tender process is always required in order to comply

with s 217.51

[72] Both the Treasury Regulations and the PFMA regulate the management of

finances in provincial government. They set out the procedures for efficient and

effective management of both revenue and expenditure, and both assets and

liabilities. The PFMA in particular establishes the duties and responsibilities of

government officials in charge of finances. The Act is clearly aimed, as is the

procurement policy set forth in s 217, to secure transparency, accountability and

sound financial management in government and public institutions. The National

Treasury is the main body that oversees the implementation of the NFMA. In this

regard it prescribes norms and standards to promote transparency and

accountability.

[73] The respondent’s own Property Policy and Procedure Manual also states

that the purpose of letting out its property is to contribute to its income and

profitability. The rider is that property will be rented out at a market related value. It

goes without saying that in letting out its property at nothing less than market related

rental, the respondent must be transparent and allow as many market related

tenders as possible, in order, at the end of the day, to take advantage of the highest

market related bid.

[74] It is common cause that in the matter before me, despite protracted and

intense negotiations between the parties before the lease was entered into, this was

undoubtedly an exclusive deal. These were closed and private negotiations. The

applicant had a sole mandate.

[75] The applicant contends that it has gone to great lengths to show that the

rental in question is market related, when the onus is on the respondent to prove that

it is not. This may well be the case. It is also undoubtedly so that negotiations

51 See D Pretorius ‘The Defence of the Realm: Contract and Natural Justice’ (2002) 119 SALJ 374,396: ‘[S 217(1) of the Constitution] does not necessarily mean that the conclusion of each and every contract for goods and services by an organ of state must be preceded by a tender process. The circumstances of each case will dictate whether the requirements of s 217 demand that a tender process be conducted.’

32

between the parties were lengthy and protracted and involved participation at various

levels of functioning. The respondent’s case that the agreed upon rental is not

market related as contemplated in Treasury Regulation 16A.7.4, is yet another bald

averment which stands totally unsubstantiated. Indeed, the respondent has made

little effort to comprehensively illustrate what a market related price was or presently

is. On the other hand the applicant went to some lengths to put up the results of

valuations, in particular after Crawford had improved the property, and to place on

record the respondent’s own version with respect to market related rental after

improvements had been effected. It appears from the applicant’s papers that on 10

March 2016 the respondent adopted a resolution that monthly rental would be no

less than R30 000,00 based on a valuator’s report that fair rental would be in the

region of R44 000,00 for the property (taking into account that the applicant had

already effected substantial improvements). The rental was furthermore to escalate

by ten per cent per annum, which according to the applicant, was two to three per

cent above the norm.

[76] Despite all of this, I am constrained to agree with the argument advanced on

behalf of the respondent. It is simply this. The relevant Treasury Regulations are

those published in GNR225 of 15 March 2005. Regulation 16A deals definitively with

supply chain management. In terms of regulation 16A.2 these provisions are of

application to the respondent. In terms of regulation 16.A.3.2 the supply chain

management system must be fair, equitable, transparent, competitive and cost

effective (a duplicate of what is set forth in section 217 of the Constitution).

[77] Whilst counsel for the applicant’s argument (that market related rental is the

only requirement) is compelling, it falls short of being persuasive, particularly in the

light of a liberal interpretation of the Constitutional imperatives pertaining to public

funds.

[78] Having come to this conclusion, it is not necessary for me to make a finding

with respect to the argument that the respondent’s signatory is estopped from now

relying on lack of authority. On the facts which are common cause or not hotly

disputed, the argument against estoppel would not have availed the respondent if I

were to find that the agreement was a valid one. The doctrine of estoppel may not

33

however be used to make legal what would otherwise be illegal and cannot replace

statutory requirements for the validity of contracts.52 Once it is found that the

agreement entered into between the parties lacked the makings of being at the very

least transparent and competitive (even if the rental was market related), the

agreement falls foul of being constitutionally valid.

[79] Sadly for the applicant, the probabilities favour such a finding. That being the

case, this court is bound by the majority decision in Asla. It does not have the

discretion to dismiss the respondent’s counter application on the question of delay

only, even when it is clear that the application for self-review is purely a reactive one.

[80] I am mindful however that in Asla it was pointed out that a refusal to set

aside the impugned contract would curiously have had the unsavoury result of

allowing the errant organ of state to benefit from its own delay. This is not the

position in the case before me. On the other hand, the application of justice and

equity to the circumstances before me, does not dictate both invalidating and entirely

setting aside the impugned lease agreement. I have sympathy for the fact that the

applicant was, in a manner, misled into believing that the respondent had the power

to enter into an agreement with it, without any transparent and open recourse to

public participation at the very least. This is most regrettable. The applicant’s

indignation at the 11th hour reactive stance adopted by the respondent is

understandable.

[81] According to s 172 of the Constitution I have limited choices in making an

appropriate order. The section reads as follows:

‘When deciding a constitutional matter within its power, a court –

(a) Must declare that any law or conduct that is inconsistent with the

Constitution is invalid to the extent of its inconsistency;

And

52 See Provincial Government of the Eastern Cape and others v Contractprops 25 (Pty) Ltd 2001 (4) SA 142 (SCA)

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(b) May make any order that is just and equitable, including –

(i) An order limiting the retrospective effect of the declaration of

invalidity; and

(ii) An order suspending the declaration of invalidity for any period and

on any conditions, to allow the competent authority to correct the

defect.’

[82] With this in mind, I intend making an order that is just and equitable, insofar

as the particular circumstances of this case and the Constitution permit me. It is

evident that I am constrained to declare the conduct embarked upon by the

respondent, (in concluding a lease agreement with the applicant without setting a

reserve price of market related rental, and/or without referring to market related

rental, and without following a transparent procedure of public and competitive

participation in agreeing on the terms, conditions and price of the lease) invalid.

However, I have a discretion not to set the agreement aside in an attempt to

preserve the rights which have accrued to the applicant in terms of the lease. As

stated in Asla, such an award is intended to preserve rights which have already

accrued to the applicant in terms of the agreement, but do not permit the applicant to

obtain further rights under the invalid agreement.

Costs

[83] Had the respondent not delivered a reactive self-review counter application, I

would have given serious consideration to entering judgment in the applicant’s

favour. Further, if the respondent’s counter application had relied solely on the

signatory’s lack of authority, I would also, in all likelihood (and by virtue of the

application of the principles of estoppel and the Turquand rule) have found in the

applicant’s favour. In my view this is relevant to the order I intend making. It is for

this reason that I devoted a portion of this judgment to traversing the merits of the

main application, despite the fact that this court cannot, to my mind, grant the

application specific performance in the furtherance of a constitutionally invalid

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contract. To do so would be to make a mockery of the rule of law and the democratic

values enshrined in the Constitution.

[84] Having said this, I am nevertheless of the view that the applicant should not

be mulcted with the costs of an application which it brought in good faith and in the

absence of any indication that the respondent would invoke reactive relief under the

principle of legality. The applicant should also not be mulcted in costs for relying,

inter alia, on the ground of undue delay for resisting the counter application. I have

no reason to believe that this ground of opposition was not well founded and

reasonable, particularly in that it was prosecuted before the Asla judgment was

handed down. Ironically, the respondent has only the applicant to thank for the

intervention of this court on the question of the validity of the agreement. The

respondent itself has made the barest of efforts to cure its position in this regard.

Notwithstanding the invalidity of the agreement, the respondent should not be seen

to benefit from having given the applicant false assurances around the legality of the

agreement, and for sitting idly by until the applicant took legal action.

[85] The fact that the respondent will achieve nominal success to the extent that

a declaration of constitutional invalidity is bound to follow, should not affect the

question of costs. Substantially, and not unlike the position in Gijima, it is the

applicant that succeeds. I say so because it is obvious that the respondent’s belated

efforts were directed at avoiding an otherwise binding agreement, whereas the

applicant, on the other hand, in good faith took legal action in seeking to enforce it.

For what it is worth at the end of the day, and to the extent that the applicant at the

very least is not to be divested of its accrued benefits of the contract, the applicant

has been successful.

[86] I make the following order:

(a) The main application is dismissed.

(b) The counter application succeeds only to the extent that the lease agreement

concluded between the parties on 20 December 2016 with respect to portions

A and B of the remainder of farm 31 Coffee Bay, Mqanduli, is declared

constitutionally invalid.

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(c) The respondent is directed to pay the costs of both the main application and

the counter application.

__________________

I.T. STRETCH

JUDGE OF THE HIGH COURT

Counsel for the applicant:

R. Quinn SC instructed by Russel Linde Attorneys

Counsel for the respondent:

A. Beyleveld SC instructed by BNI Attorneys, care of Gravett Schoeman Inc.

Date heard: 17 April 2019

Judgment handed down: 26 July 2019