South Africa


New ConCourt ruling could make it easier for government to undo corrupt contracts

New ConCourt ruling could make it easier for government to undo corrupt contracts

This week, the Constitutional Court handed down a judgment of significance in the context of efforts to undo the corruption of the past decade in South Africa. Though the details are technical, a precedent has been confirmed that may allow government entities to appeal their own decisions – where there is evidence that those past decisions were unlawful – potentially even after several years have passed, and even if their reasons for appealing are possibly questionable.

The Constitutional Court ruled this week that a 2014 decision by Buffalo City Municipality to award a contract to build RDP housing was “constitutionally invalid”.

The judgment is significant in that the court was willing to make a finding on the legality of the contract in question even though more than four years had passed since it was awarded, and even though the municipality had no good reason for having waited so long to appeal it.

Until 2017, a government entity seeking to appeal its own decision had only 180 days to do so in terms of the Provision of Administrative Justice Act (PAJA). Since a landmark 2017 ruling by the Constitutional Court known as Gijima, however, an organ of state looking to review its historical decisions has to do so under the principles of a legality review rather than PAJA.

A legality review, the Constitutional Court judges wrote in this week’s Buffalo City ruling, “has no similar fixed period”. If the delay in bringing the appeal can be explained and justified, it can be overlooked. And even if the delay cannot be properly justified, the Constitutional Court can still rule – as it did this week – that the government decision in question was unlawful.

This week’s Constitutional Court ruling both confirms and extends the Gijima judgment, applying its principles to a situation involving a municipal whistle-blower.

In the Buffalo City case, the municipality became aware that the 2014 contract it awarded to build RDP housing was irregular in August 2015, and subsequently commissioned a forensic investigation which resulted in the suspension of a number of senior municipal officials.

The dodgy contract was brought to their attention by a whistle-blower, former chief financial officer Vincent Pillay. However, the court wrote that the municipality had not adequately explained why it took a full year for the irregularity of the contract to be exposed.

Municipalities must have effective structures and mechanisms in place to ensure proper oversight for its service delivery projects. This is one of its core responsibilities,” the majority judgment, authored by Justice Leona Theron, reads.

What made the case more complex is that after filing to review the decision, Buffalo City Municipality subsequently attempted to withdraw its application in order to enter into a settlement agreement with the company to which the contract had been awarded, Atlas Construction.

The Constitutional Court took a dim view of this, writing: “Suddenly, the municipality’s concerns about compliance with [the law]…are disposed of by way of private negotiations behind closed doors with the respondent”.

This about-turn, wrote the court, “reek[s] of impropriety”.

Because the municipality did not act “in a manner that indicated a sincere effort to clean house and rectify past wrongs and unlawfulness”, the court could not overlook the length of time taken by the municipality to review the contract.

But it nonetheless found the underlying contract constitutionally invalid.

In a dissenting judgment, Justices Edwin Cameron and Johan Froneman wrote that the lack of adequate explanation for a delay in bringing the case meant that the Constitutional Court should not make a final determination on the unlawfulness of the contract.

The two dissenting justices held that the municipality’s conduct pointed to “a public body that seeks to evade the consequences of its prior decision without offering any explanation at all for its delay in coming to court”.

They further accused the municipality of “glaring arbitrariness and opportunism” – pointing to the fact that the municipality only raised the unlawfulness of the contract in question after Atlas Construction took the municipality to court for non-payment.

In these circumstances, for the municipality to ask the courts to be party to its assertion of a defence of unlawfulness is untenable,” the two justices wrote.

The majority judgment found, however, that the precedent set by Gijima means that the unlawfulness of the underlying contract could not be ignored – and that “this Court is obliged, as it did in Gijima, to set aside a contract it knows to be unlawful”.

In confirming and extending the Gijima precedent, the Constitutional Court judgment has particular significance in light of the upcoming elections and the attempts by the Ramaphosa administration to resuscitate South Africa’s state-owned entities.

The issues raised in this matter have a broader impact beyond the immediate parties. This is so given the current political context where many municipalities are changing administrations and undertaking to ‘clean house’,” Justice Theron wrote.

This case not only raises legal questions of import but also affords this Court the opportunity to provide guidance to organs of state who may wish to bring similar applications in the future and to lower courts dealing with these cases.”

If the outcome of the May elections sees municipalities change political hands, or even just leadership, the ruling provides welcome evidence that dodgy decisions made by previous administrations can successfully be challenged even after some years. The same applies to the new brooms attempting to sweep clean at state-owned entities. DM


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