Case CCT78/18 
[2019] ZACC 09

Hearing Date: 21 November 2018
Judgement Date:28 February 2019

Post Judgment Media Summary  

The following explanatory note is provided to assist the media in reporting this case and is not binding on the Constitutional Court or any member of the Court.

On Thursday, 28 February 2019 at 10h00, the Constitutional Court handed down judgment in an application for leave to appeal against a judgment of the High Court of South Africa, Eastern Cape Division, East London (High Court). The matter concerned the existence of a tacit extension of a software licensing agreement (agreement) between Buffalo City Metropolitan Municipality (Municipality) and the respondent, Metgovis (Pty) Limited (Metgovis), for a computerised property valuation management system (Metval System). The Municipality brought an application against Metgovis, the owner of the Metval system that was licensed to the Municipality in terms of the agreement concluded in 2008.

The agreement terminated on 30 June 2011, but provided for automatic renewal for a further period of three years on the same terms and conditions if the agreement was not expressly terminated on three months’ written notice. The Municipality did not expressly terminate the contract and accordingly it was extended until 30 June 2013. At the end of the extended three-year period, the Municipality had no alternative system to replace the Metval System. Metgovis alleged that it was approached by various municipal functionaries and was requested to continue providing services until a new service provider could be appointed, which it did until October 2013. It is this period of July to October 2013 that the Municipality disputes was covered by an agreement (the impugned period). During the impugned period the Municipality, however, continued to use the Metval System. Metgovis continued to occupy municipal offices and provide technical support in the same way it had since 2008. The services terminated on 10 October 2013 when Metgovis’ technicians were instructed to vacate the municipal premises.

Metgovis instituted a claim in the High Court seeking payment for their services on the grounds that there had been an express or alternatively a tacit contract, and alternatively a claim on the grounds of unjustified enrichment based on their losses incurred during the months of the impugned period. The Municipality denied the existence of any contract for the impugned period.

The High Court found that there was indeed a tacit agreement and granted Metgovis its relief. It also held that, even if its finding of the existence of a month-to-month contract was wrong, Metgovis was still entitled to rely on its alternative claim of unjustified enrichment. Both the High Court and the Supreme Court of Appeal refused leave to appeal.

Before the Constitutional Court, the Municipality persisted in disputing the existence of any tacit agreement for the period in question and, in the alternative, submitted that any agreement of that nature is unlawful and void from the outset because of its non-compliance with public procurement legislation. The Municipality submitted that this Court should finally determine the onus on a party alleging a tacit contract between itself and an organ of state, developing the common law to harmonise it with section 217 of the Constitution.

Metgovis contended that there was a tacit agreement. In response to the Municipality’s allegation of unlawfulness, Metgovis persisted with its alternative claim based on unjustified enrichment, which it denied had prescribed. Metgovis submitted that, if this Court does not uphold any of its claims, this Court should exercise its discretion to grant a just and equitable remedy by ordering the Municipality to pay for the service it rendered during the period in question.

In a unanimous judgment penned by Khampepe J, the Constitutional Court finds that it has no jurisdiction to entertain the matter. This Court holds that while the development, or failure to develop, a common law rule by a lower court may constitute a constitutional matter in circumstances where that development, or failure to develop, is inconsistent with that court’s obligation under section 39(2) of the Constitution or another constitutional right or principle, the Municipality did not contend that the current common law tests are inconsistent with the Constitution insofar as they relate to public functionaries. The matter therefore concerns factual findings, rather than any constitutional issue, and thus this Court’s jurisdiction is not engaged. The application for leave to appeal was accordingly dismissed.             

The Full judgment  here.