Buffalo City Metropolitan Municipality v Metgovis (Pty) Limited

Buffalo City Metropolitan Municipality and Metgovis (Pty) Limited entered into a software licensing agreement on 4 February 2008 for use of Metgovis' property valuation management system (Metval System). The written agreement terminated on 30 June 2013. However, the Municipality continued using the Metval System and Metgovis' technical support from July to October 2013, during which time Metgovis' technicians occupied municipal offices and provided support. On 4 July 2013, Metgovis wrote requesting a meeting regarding continued use and billing procedures. On 15 July 2013, Metgovis proposed to continue rendering services based on the existing agreement. On 10 October 2013, Metgovis' technicians were instructed to vacate the premises and were escorted off by security. Metgovis claimed payment for services rendered during July-October 2013 based on a tacit agreement. The Municipality disputed any agreement existed and, in the alternative, argued any such agreement would be unlawful for non-compliance with section 217 of the Constitution and public procurement legislation.

• Whether a tacit contract existed between the Municipality and Metgovis for the period July to October 2013
• Whether the Constitutional Court has jurisdiction to hear the matter
• Whether the common law test for tacit contracts with organs of state requires development to align with section 217 of the Constitution
• Whether the High Court misapplied the common law test for tacit contracts
• Whether any tacit agreement would be unlawful and void for non-compliance with public procurement requirements

The application for leave to appeal was dismissed. The Municipality was ordered to pay Metgovis' costs in the Constitutional Court.

The binding principles established are: (1) The mere misapplication by a lower court of an accepted common law rule does not ordinarily raise a constitutional issue that engages the Constitutional Court's jurisdiction under section 167(3). (2) Challenges based solely on disagreement with factual findings of lower courts do not constitute constitutional matters unless a separate constitutional issue is raised. (3) The existing common law principle that unlawful contracts are void ab initio is sufficient to address contracts (including tacit contracts) with organs of state that do not comply with section 217 of the Constitution and public procurement legislation - no separate enhanced test for tacit contracts with public functionaries is required. (4) Where determination of a matter requires revisiting factual findings made by a trial court based on assessment of witnesses and probabilities, the Constitutional Court lacks jurisdiction as the matter raises only factual questions, not constitutional matters.

The Court noted (without deciding) the tension between two tests for establishing tacit contracts: the "no other reasonable interpretation" test from Ocean Commodities and the "preponderance of probabilities" test from Joel Melamed. The Court referenced the Supreme Court of Appeal's recent attempt in Nurcha to reconcile these tests (requiring proof on a balance of probabilities of unequivocal conduct showing intention to contract), but found it unnecessary to pronounce on which test applies since the application was filed before Nurcha was decided and the issue was not addressed in the parties' papers. The Court also observed that the Municipality's submission that upholding the High Court judgment would set a dangerous precedent affecting how municipalities fulfill constitutional obligations to provide cost-effective services was misplaced, as the matter was merely a factual dispute about a specific tacit contract in particular circumstances, and the legal position regarding municipal procurement remained unchanged.

This judgment clarifies the Constitutional Court's jurisdiction under section 167(3) of the Constitution. It reinforces that mere misapplication of accepted common law rules does not raise constitutional issues warranting the Court's intervention. The case distinguishes between situations requiring development of common law to align with constitutional values (which may found jurisdiction) and mere factual disputes or alleged misapplication of settled law (which do not). The judgment affirms that existing common law principles regarding unlawfulness and voidness of contracts apply equally to tacit contracts with organs of state - no special test is required since section 217 compliance is already subsumed within the lawfulness requirement. It also confirms that this Court will be slow to interfere with lower courts' factual findings based on assessment of evidence and witness credibility, particularly where resolving the dispute would require the Constitutional Court to re-evaluate evidence and hear additional testimony.