Case  CCT 06/25
[2026] ZACC 21

Hearing Date:  06 November 2025

 Judgement Date: 27 May 2026

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 Wednesday, 27 May 2026 at 10h00, the Constitutional Court handed down judgment in an application for leave to appeal against part of an order of the Supreme Court of Appeal.

The applicants are the Minister of Defence and Military Veterans and the Acting Director-General of the Department of Military Veterans. The respondent is Zeal Health Innovations (Pty) Limited (ZHI). This matter has its genesis in a procurement dispute concerning the provision of healthcare and wellness services to military veterans. Under the Military Veterans Act 18 of 2011, military veterans are entitled to healthcare services, including dedicated counselling and treatment for serious mental illness and post-traumatic stress disorder. In January 2015, the Department advertised an open tender for the provision of these services for the period June 2015 to May 2018. The budget approved for this programme, as per National Treasury’s Medium-Term Expenditure Framework estimates, was R31 625 492.31 for the entire three-year period. Prior to the main tender award, the Department appointed ZHI on an interim basis. In May 2015, ZHI was notified was notified of its successful bid in the main tender and a three-year contract was concluded for the provision of services. The total contract value was R198 159,360.00, structured on a capitated fee model whereby ZHI would receive fixed monthly payments per registered veteran regardless of their actual service utilisation.

ZHI began providing the services from 1 June 2015. When ZHI in early July 2015 submitted its first invoice for June 2015, the quantum gave rise to an investigation, pursuant to which the Department concluded that the contract had been irregularly awarded. The accompanying health reports revealed that a relatively small number of veterans had received services pursuant to the impugned contract during June and July 2015. In June 2015, only 1 113 veterans accessed primary healthcare services. July 2015 saw 1 096 veterans utilise services, with 327 registered for chronic management and 57 veterans using psychological services. For August 2015, merely 285 veterans accessed services, this reduction resulting from the suspension of services mid-month.

Upon recognising that the contract value vastly exceeded the allocated funds, the Department obtained legal advice that the contract infringed section 38 of the Public Finance Management Act, which prohibits accounting officers from committing organs of state to liabilities for which funds have not been appropriated. On 11 August 2015, the Department informed ZHI of its intention to institute judicial review proceedings. The Department consequently withheld payment of all three invoices. On 12 August 2015, ZHI suspended all healthcare services to military veterans. To ensure continuity of care, the Department immediately activated a Memorandum of Understanding with the Department of Defence, which was concluded on 16 March 2015, enabling veterans to obtain the services from military hospitals. On 28 September 2015 ZHI then approached the High Court on urgent basis for specific performance – representing the payments of its first two invoices. The Department filed opposing papers and, on 19 October 2015, instituted a counter-application for judicial review of the tender award and contract. This counter-application was brought within five months of the contract’s conclusion, a timeframe the Department emphasise as demonstrating the requisite expedition for state self-review. ZHI opposed the review on each ground raised by the Department. The urgent application was dismissed on 23 October 2015 for lack of urgency. The merits of both the main application and counter-application proceeded in the ordinary course.

On 7 October 2022, the High Court delivered its judgement finding that the contract price exceeded the budget allocation in violation of section 38(2) of the PFMA. It held that proper tender evaluation processes were not followed, with material irregularities in the composition and functioning of bid committees. The High Court dismissed ZHI’s claim for specific performance and upheld the review, declaring both the interim and main contracts unconstitutional, unlawful and void ab initio (from the beginning). Crucially, while the High Court found that ZHI was not complicit in the irregularities, it held that it would not be prudent or in the public interest to uphold the contracts. The High Court declined to grant any remedy under section 172(1)(b) of the Constitution and ordered each party to bear its own costs.

With leave of the High Court ZHI appealed to the Supreme Court of Appeal on two points: that the self-review should have been dismissed, and alternatively, that a just and equitable remedy should have been granted preserving its rights accrued before the declaration of invalidity. The Supreme Court of Appeal delivered judgment on 27 December 2024. It confirmed the declaration of constitutional invalidity, finding that the Acting Director-General lacked authority to commit the Department to expenditure exceeding allocated funds. The Supreme Court of Appeal held that the High Court erred in not considering a just and equitable remedy under section 172(1)(b). The court noted that ZHI had rendered services while the contract was invalid and had been found to be an innocent party.

The applicants submit that this matter engages this Court’s constitutional jurisdiction on the basis that this case concerns the interpretation and application of section 172(1)(b) of the Constitution. It also submits that this matter raises an arguable point of law of general public importance arising from an alleged conflict between decisions of the Supreme Court of Appeal. ZHI opposes the application and contends that neither prospects of success nor the interests of justice favour granting leave. On the merits, ZHI submits that the Supreme Court of Appeal exercised a true discretion judiciously. Moreover, it argues that no material misdirection of fact or law has been demonstrated warranting appellate interference instead the SCA correctly applied established principles from Gijima and Buffalo City which permit the preservation of accrued contractual rights.

In a majority judgment written by Mathopo J (Mlambo DCJ, Majiedt J, Mhlantla J, Musi AJ, Nicholls AJ, Rogers J, Savage J and Tshiqi J concurring) the Court found that the question whether a court may, in the exercise of its remedial discretion under section 172(1)(b), permit an innocent contractor to retain a benefit, including a profit margin, for services actually rendered under a contract subsequently declared invalid is undoubtedly a matter of constitutional interpretation and application. The Court further held that AllPay did not establish a rule that innocent contractors may never profit from services rendered. Rather, AllPay held that there is no right to benefit from an unlawful contract, but the absence of such a right does not mean that a court, in the exercise of its remedial discretion, may not permit a party to profit. The Court found that an innocent contractor that had rendered services pursuant to an invalid contract should be entitled to benefit through the preservation of accrued contractual rights, however each case must be assessed on its own merits. The Court further found that depriving innocent contractors of profits earned through legitimate performance may send an undesirable message to the business community.

The majority held that although benefits arising from an invalid contract may be considered in determining a just and equitable remedy, they cannot automatically be treated as an entitlement or substitute for an independent assessment of all relevant factors. The Court further reiterated that because the matter concerned a public tender involving funds from the national fiscus, a declaration of invalidity required public scrutiny, which in turn necessitated a just and equitable remedy serving the public interest.

Therefore, the majority further held the order of constitutional invalidity would not have the effect of divesting ZHI of any rights to which it would have been entitled under the contract in respect of the period from 1 June 2015 to 12 August 2015. The majority further ordered that, for the period from 13 August 2015 onwards, ZHI may claim compensation for actual out-of-pocket expenses incurred, if any, in maintaining its capacity to provide services or in providing emergency services to military veterans, such claim to be determined in separate proceedings or by agreement between the parties. In its reasoning it was said that the judgment of the SCA does not address the material distinction between the limited period during which ZHI actually rendered services and the much longer period for which the Supreme Court of Appeal’s order appears to preserve contractual rights. If the SCA’s order were to stand ZHI would be compensated for services never rendered.

The second judgment penned by Kollapen J disagreed with the first judgment’s conclusion that ZHI’s contractual rights in respect of the period during which it rendered services to the Department should be preserved, and in respect of the period beyond that, it should be entitled to its proven out of-pocket expenses. The second judgment begins by locating its assessment of the issues in the significance of the matter as it deals with the complex issue of how a court approaches the determination of a just and equitable remedy following the invalidation of a contract and in circumstances where there has been performance (partial or full) on the part of an innocent contractor.

The second judgment agreed with the first judgment’s finding that this Court’s decision in AllPay is authority for the proposition that an innocent contractor may never benefit from a contract that has been invalidated but should, at best, only be entitled to its out-of-pocket expenses. In doing so, the second judgment referred to this Court’s recent decision in Black Sash II which, whilst approving the SCA’s judgment of Mafoko, held that “[t]he mistake made by certain courts that have sought to understand AllPay II is to equate the absence of a right to benefit from an unlawful contract with the exclusion of such benefit from the exercise by the court of its just and equitable discretion. AllPay II does not say this. Indeed, it simply holds that any benefit derived ‘should not be beyond public scrutiny’. This means that any benefit derived from an unlawful contract falls to be scrutinised in order to determine how the court should exercise its just and equitable discretion.”

Arising from this, the second judgment found that while there is no right to benefit from an invalid contract, there is similarly no basis to exclude from the consideration of a just and equitable remedy such a benefit. However, according to the second judgment, what is required is the scrutiny of various factors in the determination of a just and equitable remedy. This scrutiny on the part of the Court cannot simply be the substitution of the previously agreed to contractual benefits as a just and equitable remedy. To do so would have the effect of elevating the benefits of an invalid contract to a right – which is, in fact contrary to AllPay.

The second judgment found that the first judgment effectively introduces and endorses a private law remedy, agreed upon by the parties in a contractual setting, in place of a public law remedy which a court is meant to arrive at after proper scrutiny of what would be just and equitable in the circumstances. According to the second judgment, such an approach would impose an inflexible rule on the courts’ wide discretion in arriving at a just and equitable remedy. To this end, the second judgment relied on this Court’s judgment in Bengwenyama which cautioned against adopting rules in the application of the just and equitable remedial discretion and presented a strong ‘case-by-case’ centric approach to ordering such remedies.

The second judgment problematised the level at which the first judgment fails to apply the principle of public scrutiny and raised the question whether the Court can exercise such scrutiny on what is before it in this matter. The second judgment found that the first judgment fails to exercise any level of public scrutiny in respect of the benefits it orders in favour of the innocent contractor because not enough has been placed before it to reach this decision. The second judgment emphasised that the role of scrutiny by a court in the exercise of its discretion in arriving at a just and equitable order is not confined to the conduct of the parties and the reasons for the invalidation.

The second judgment found that the first judgment avoids exercising public scrutiny in not remitting the matter to the High Court out of concern for protracted litigation. According to the second judgment, this avoidance of public scrutiny to prevent further litigation has the consequence that the first judgment then accepts that the retention of ZHI’s full contractual benefits for the period when it delivered services as a just and equitable remedy. The second judgment found that this cannot be correct in the absence of any scrutiny of such benefits and inadvertently has the effect of this Court substituting a public law remedy with a private law remedy. While we know what the contractual rate was; following the invalidation of the contract, this Court has no indication whatsoever what it would have cost ZHI to provide the services that it did. This is crucial to the determination of a just and equitable remedy concludes the second judgment.

In conclusion, the second judgment found that the limited facts in the matter demonstrate that scrutiny serves an important purpose in matters such as these as it enables a court, in the determination of a just and equitable remedy, to interrogate the facts and the surrounding circumstances thoroughly so that it is indeed able to arrive at a just and equitable remedy. Under those circumstances, the second judgment held that it must follow that this Court is unable to exercise its remedial discretion in ordering a just and equitable remedy. The second judgment finds that the High Court is best placed to assess the facts so that it can properly exercise its remedial discretion by fashioning a just and equitable remedy. It would have been ordered that the matter be remitted to the High Court to determine the appropriate order after securing the production of such evidence from the parties as it considered warranted.

The Full judgment  here