Case  CCT 342/22
[2024] ZACC 20

Ordered Date: 20 February 2024 

Judgement Date: 02 October 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 Friday, 27 September 2024 at 10h00, the Constitutional Court handed down judgment in an application for leave to appeal against a portion of a judgment and order of the Supreme Court of Appeal (SCA). The applicant is the Greater Tzaneen Municipality (Municipality) and the respondent is Bravospan 252 CC (Bravospan), a close corporation that renders security services. The Court unanimously agreed to dismiss the application for leave to appeal. It expressed strong disapproval of the Municipality’s unacceptable conduct in seeking to declare a contract invalid but refusing to pay for services that had been delivered in good faith.

Following a public and competitive bid process, the Municipality and Bravospan entered into a written service level agreement (SLA) in terms of which Bravospan was appointed to provide security services for a period of 12 months. Clause 5 of the SLA provided that should the Municipality wish to extend the 12 month period, an extension agreement would be negotiated and agreed to between the parties, specifically on pricing.

Pursuant to the conclusion of the SLA, Bravospan provided security services and delivered invoices to the Municipality on a monthly basis. All invoices were honoured and paid in full. Following negotiations between the parties, the agreement was extended for a further period of 24 months on an agreed amount (extension agreement) without an additional tender process. Bravospan provided services and delivered invoices to the Municipality in terms of the extension agreement. The Municipality failed to honour these invoices.

On 9 February 2015, the Municipality brought an application in the Limpopo High Court seeking a declaratory order to set aside the extension agreement as null and void on the basis that it was not concluded in line with its own procurement processes. On 19 August 2016, the High Court declared the extension agreement invalid but no order was made concerning compensation for services that had already been delivered. Subsequent applications by Bravospan for leave to appeal were refused by the Limpopo High Court and the SCA.

On 8 September 2017, Bravospan instituted a new application in the Limpopo High Court for payment of the invoices submitted to the Municipality for the duration of the extension agreement. The Limpopo High Court granted an order in favour of Bravospan, finding that Bravospan should be compensated based on the common law of unjustified enrichment. Aggrieved by this decision, the Municipality launched an appeal in the SCA.

In its judgment handed down on 7 November 2022, the SCA held that the Limpopo High Court was mistaken to order compensation to Bravospan as its reasoning was rooted in a general enrichment action which has not been recognised in South African law. Nevertheless, the SCA found that it would be manifestly unjust not to award compensation to Bravospan and that such an award could be rooted in section 172(1)(b) of the Constitution, a provision in which court’s are granted a discretion to grant a remedy that is ‘just and equitable’. The SCA held that it could see no reason, in principle, why relief in terms of section 172(1)(b) could not be granted in separate legal proceedings to a declaration of invalidity given in terms of section 172(1)(a). In the SCA’s view, exceptional circumstances warranted an order of compensation under section 172(1)(b). It is this portion of the order and judgment of the SCA that the Municipality sought to challenge in this Court.

In this Court, the Municipality submitted that Bravospan had not, in its pleadings or oral submissions, sought relief in terms of section 172(1)(b) and that the SCA raised it mero motu (of its own accord) during the hearing which it was not entitled to do. Moreover, the nub of the Municipality’s argument was that relief in terms of section 172(1)(b) cannot be granted in different court proceedings to those in which a declaration of invalidity was made in terms of section 172(1)(a).

Bravospan argued that it specifically pleaded and led evidence on a cause of action based on the Constitution entitling the SCA to make an order in terms of section 172(1)(b). Bravospan also argued that the SCA was correct that section 172(1)(b) could be invoked in separate proceedings to a declaration of invalidity where a basis for that relief was pleaded.

The Constitutional Court held that its jurisdiction was engaged in terms of section 167(3)(b)(i) of the Constitution, in that the application raises a constitutional matter. Specifically, it held that the matter concerned whether the SCA was correct to overturn the High Court’s finding on unjustified enrichment and, instead, utilise section 172(1)(b) of the Constitution as the basis to found liability for compensation in separate proceedings from those in which the contract was declared invalid. It found that this is a constitutional issue relating to the interpretation and application of a constitutional provision.

On the merits of the case, the Constitutional Court found that it is not in the interests of justice to grant leave to appeal, and that the matter is to be remitted back to the High Court for a determination of the quantum of compensation owed to Bravospan. The first judgment, penned by Bilchitz AJ (Mathopo J concurring), found that the appeal arose because the SCA briefly considered and rejected the finding of the High Court that compensation could be awarded on the basis of unjustified enrichment. The SCA then developed an alternative basis to award compensation rooted in section 172(1)(b) of the Constitution. The first judgment found that there is an obligation upon courts, where it is possible to do so, to develop the common law with due regard to the spirit, purport and objects of the Bill of Rights. The SCA did not engage with whether the common law should be developed to address the predicament of contractors such as Bravospan, even though on its face, the matter had many of the hallmarks of an unjustified enrichment action. The first judgment found that for such a cause of action to be successful, the Court would need to consider developing the common law and address a number of important legal questions, including whether the applicable condictiones (specific enrichment actions) could be extended to apply where services (and not money or goods) were delivered; and, potentially, whether it is desirable to develop the common law to recognise a general enrichment action.

The first judgment found that given that Bravospan did not cross-appeal against the finding of the SCA relating to unjustified enrichment and its potential development, this issue was not properly before it nor was there any detailed argument placed before it on this matter. Ordinarily, this Court has held that, when developing the common law, it should also have the benefit of reasoned judgments from the High Court and the SCA. The manner in which this matter unfolded in the lower courts meant that if this Court grants leave to appeal, the Court will be placed in the untenable position of making an authoritative pronouncement with far reaching implications with only an incomplete and partial view of the legal possibilities available. Accordingly, it found that it is not appropriate nor desirable in this case for the Court to grant leave to appeal.

The first judgment argued that there is an important but narrow difference between the first and second judgments. The first judgment found that the primary reason for refusing leave to appeal cannot be that the outcome of doing so accords with a judge’s sense of justice. It expressed grave reservations about interpreting the “interests of justice” test for leave to appeal to grant this Court a free-standing discretion to make ad hoc decisions, on the basis that it approves of the outcome of refusing leave.

The first judgment further observed that the circumstances of this case are not unique and reflect a trend where municipalities seek to overturn their own decisions and then avoid paying for services that they received in the process. It found that the conduct of municipalities who behave in this manner fails to meet the ethical standards that are expected from all government bodies exercising public power. On this basis, the first judgment concluded that it was not in the interests of justice for this Court to grant leave to appeal.

The second, majority judgment written by Chaskalson AJ (Madlanga J, Majiedt J, Mhlantla J, Theron J and Tshiqi J concurring), agreed with the first judgement that the application must be dismissed because it is not in the interests of justice to grant leave to appeal. However, it arrived at this conclusion by emphasising different considerations to the first judgment. First, it would not be in the interests of justice for the Municipality to avoid paying Bravospan fairly for services that Bravospan provided for nearly a decade. Justice in this matter demands that Bravospan be fairly compensated for the services. This approach sends a clear message to organs of state that they must pay for the services that they receive from an innocent contractor. Second, the peculiarities in the way this matter was pleaded make it an unsuitable case to pronounce on the scope for equitable relief to be granted under section 172(1)(b) of the Constitution in proceedings other than those in which a section 172(1)(a) order has been handed down. This Court should not express itself unnecessarily on issues unless it is confident that it can do so fully and properly. Therefore, the interests of justice militate against this Court deciding the merits of the appeal despite there being prospects of success on the issue arising.

In a third judgment, Dodson AJ agreed with the first and second judgments that it is not in the interests of justice to grant the Municipality leave to appeal. The third judgment agreed with the first judgment’s reasoning for this finding except for its questioning of Fraser and its passing remarks on the development of either an enrichment action or an action based on section 195 of the Constitution and ubuntu. The third judgment also agreed with the second judgment’s reasoning, apart from its finding that because refusing the Municipality leave to appeal leaves a just outcome in place, it is in the interests of justice to do so.

The Full judgment  here