Case  CCT 228/22
[2024] ZACC 10

Hearing Date: 23 September 2023

Judgement Date: 31 May 2024

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 31 May 2024 at 09h00, the Constitutional Court handed down judgment in an application for leave to appeal against the order and judgment of the High Court, Gauteng Division, Johannesburg (High Court). The High Court had refused the rescission of a consent order (consent order).

The parties to the consent order were the City of Ekurhuleni Metropolitan Municipality (City), the unlawful occupiers of certain residential properties within the City (occupiers), the owners of these properties (owners), the Member of the Executive Council for Human Settlements, Gauteng Province (MEC), and the Sheriff for Germiston South (Sheriff). The consent order, amongst other things, compelled the City to purchase the owners’ residential properties housing the occupiers. The occupiers, MEC and Sheriff did not participate in the application before this Court.

The unlawful occupation of the owners’ properties took place during October and November 2017. The owners applied to evict the occupiers. The High Court over a period of time encouraged the parties to find a solution to avoid the eviction. This was to no avail and in October 2018, Victor J granted the eviction orders. The occupiers then brought an urgent application at the High Court to stay the eviction orders on the grounds that no alternative accommodation was provided to them by the City or MEC. In response, the owners launched a counter-application for relief, claiming that the City and the MEC violated their property rights by failing to provide the occupiers with alternative accommodation.

On the day the stay application was set down for hearing, the City was purportedly represented by its erstwhile attorney, Mr Maluleke. Mr Maluleke and the other parties negotiated and reached a settlement which the High Court incorporated in the consent order. In addition to ordering the City to purchase the owners’ unlawfully occupied properties, the consent order required the City to reverse and write-off all the rates and taxes incurred since the occupiers’ unlawful occupation began and provided for a loss of income claim by the owners, also to be decided by the High Court. The consent order further directed that the purchase price of the properties be determined in terms of the Expropriation Act, and allowed the MEC three months to fund the City’s purchase of the properties, failing which the owners could get a warrant of execution against the MEC for the purchase price.

The City contended that it was unaware of these developments and that its attorney acted without authority to agree to the consent order. When, after a delay said to have been caused by the Covid lockdown, it learned of the order, it terminated Mr Maluleke’s mandate and launched an application to rescind the consent order. Its rescission application was based on Mr Maluleke’s alleged lack of authority to bind the City to the consent order; the consent order purporting to dispose of disputes about the properties’ rates and service charges when those disputes were not before the Court; the Expropriation Act being introduced when it was irrelevant; and the consent order’s failure to settle the stay application, which was the main dispute before the Court.

The High Court refused to rescind the consent order, reasoning that Mr Maluleke had implied authority to settle the matter without the City’s consent and that he did so in good faith and in the City’s best interests. The City was also estopped from denying his authority. The High Court further found that the consent order met the three requirements for a settlement to be made an order of court, as established in Eke.

Both the High Court and the Supreme Court of Appeal refused the City’s applications for leave to appeal the High Court’s refusal of rescission. The Supreme Court of Appeal refused the City’s further application for reconsideration.

In a unanimous judgment penned by Dodson AJ, this Court held that the City’s application for leave to appeal engaged this Court’s constitutional jurisdiction. The Court found that this matter raised at least the following constitutional issues. Firstly, the consent order ends the legal proceedings, potentially depriving parties of their right to a fair public hearing under section 34 of the Constitution. Secondly, the City argued that the order bypasses procurement and municipal resolution requirements under sections 217 and 160(3) of the Constitution. Additionally, it raises concerns about compliance with the statutes regulating the acquisition of immovable property by the City and with the rule of law under section 1(c). Finally, it also raises questions regarding the remedies for alleged deprivation of property rights of owners under section 25(1) due to failure to meet the housing rights of occupiers under section 26. Thus, the Court has jurisdiction under section 167(3)(b)(i) of the Constitution.

The Court found that the City’s delays in filing the application for leave to appeal, the record and its written submissions should be condoned. It was also satisfied that it was in the interests of justice to grant leave to appeal.

The City contended that the High Court erred in refusing rescission of the consent order because their attorney lacked authority to settle the matter, the consent order did not comply with section 79(24) of the (Transvaal) Local Government Ordinance (LGO), or the Alienation of Land Act, or the Local Government: Municipal Rates Act, or the State Liability Act. It was further not compliant with section 217 of the Constitution pertaining to procurement or with the Eke requirements.

The owners submitted that Mr Maluleke’s authority was a factual, not legal, question and that the City had not adduced facts to show constraints on his authority. The owners contended that the consent order’s mechanisms ensured that fair value would be paid, catering to section 217 and the concerns regarding the Local Government Ordinance. The owners cited Modderklip as authority for the consent order. They argued that the Eke requirements were satisfied. Finally, it was argued that the City did not establish the requirements for the grant of rescission.

This Court went on to find that the High Court was not correct in declining the rescission of the consent order.

Regarding the first Eke requirement, namely that the consent order relates directly or indirectly to a lawsuit or issue between the parties, this Court found that the consent order did not resolve the main issues before the High Court, namely the unenforced eviction orders and the occupiers’ application to stay them. The High Court erred in finding that Eke’s first requirement was satisfied.

This Court held that the High Court also erred in finding that the terms of the consent order were consistent with the Constitution, law and public policy, the second Eke requirement. The Court noted that a number of the legal points taken by the City had not been raised in the founding affidavit in the rescission application. On whether to allow these new legal points, this Court applied Fujitsu and summarised the criteria that a court must apply in deciding whether or not to allow new legal points to be argued on appeal. Applying these criteria, this Court held that the challenges to the consent order based on section 217 of the Constitution, the Alienation of Land Act, the Local Government: Municipal Property Rates Act and the State Liability Act could not be considered on appeal

This Court held that the LGO point was on a different footing and could be considered on appeal. The factual basis for its consideration was to be found in the owners’ pleadings. Section 79 of the LGO contemplates that there must be in place a valid decision of the municipal council for the purchase of immovable property. For a valid decision of the municipal council, section 160(3) of the Constitution requires a majority vote at a meeting of the council attended by a majority of its members. This requirement is echoed in section 30(1) and (3) of the Local Government: Municipal Structures Act.

Section 79(24) of the LGO also requires a valuation by a qualified valuer before a council can purchase immovable property, with additional approval being required if the property’s purchase price exceeds the valuation by 5%.

There was no evidence that the City complied with these constitutional and statutory requirements before the settlement recorded in the consent order was concluded. There was no council resolution in place. The owners’ argument that there was substantial compliance with the duty to secure a valuation report because the terms ensured that the City received fair value for money, was found to not withstand scrutiny. This was because compliance with a statute is not achieved by complying with a different statute that seeks to achieve similar ends.

Given that the City did not satisfy the statutory requirements for the purchase of the properties, it was in no position to authorise its attorney to do so. Further, this Court held that the City could not be estopped from denying its attorney’s authority because this would give rise to an illegality.

The Court considered the third and final Eke requirement, namely that the consent order holds some practical or legitimate advantage. The courts favour a settlement. It reduces demands on the courts and allows them to reallocate their limited resources to other cases. The Court held that the consent order does not achieve this. It birthed more litigation than it purported to settle. No practical or legitimate advantage could be gained by that. The High Court erred in finding that Eke’s third requirement was satisfied.

This Court found that even if the High Court had come to the correct conclusion on the Eke requirements, it still had to consider whether a case was made out for the rescission of the consent order. The fact that an order may be incorrect or in conflict with the Constitution is not, on its own, a reason for its rescission.

A rescission application must be brought within a reasonable time, any delay must have a reasonable explanation. The City acknowledged its application’s delay and asserted that the COVID-19 lockdown was primarily the cause. The Court found that while the City’s explanation lacked detail, COVID-19’s disruptive effect could not be denied. The Court considered the decisions of the Supreme Court of Appeal in Valor IT and Oppressed ACSA Minority, where longer delays had not precluded the grant of rescission. Given the serious breach of the rule of law that grounds the rescission application and the substantial degree of non-compliance of the consent order with the Eke requirements, the Court did not refuse rescission on account of delay.

On the merits of the rescission application, this Court considered Berea, where this Court overturned the High Court’s refusal to rescind an eviction order granted by consent on the ground of justus error (justifiable mistake), finding an error to be justus where (a) there is a reasonable explanation of the circumstances in which the consent order was granted; (b) that the application is made in good faith; and (c) the applicant has a bona fide defence on the merits with prospects of success. This Court found that the City had shown that these three requirements were met.

The Court went on to say that a court considering a rescission application enjoys wide discretion to refuse it if justice and equity demand it, notwithstanding formal compliance with the requirements for granting rescission. The Court held that the constitutional and statutory non-compliance in this case was fundamental. The unenforced eviction orders and the unresolved stay application were a significant problem. Accordingly, the Court did not exercise its discretion in favour of the owners to refuse rescission. The Court accordingly found that the High Court erred in not granting rescission.

The Court, therefore, upheld the appeal, overturned the order of the High Court and replaced it with an order granting the rescission of the consent order and remitting the matter to the High Court for adjudication of the stay application.

Regarding costs, the Court found that the City’s delays in filing the application for leave to appeal, the record and written submissions, meant that no award of costs should be made in its favour. Each party was ordered to bear its own costs in this Court and in the Supreme Court of Appeal.

The Full judgment  here