NAD Property Income Fund (Pty) Ltd v Bushbuckridge Local Municipality and Another

NAD Property Income Fund (Pty) Ltd concluded a construction agreement with Bushbuckridge Local Municipality in February 2016 in terms of which NAD undertook to construct three driveway roads and water infrastructure serving a shopping mall it was developing, with the understanding that the Municipality would reimburse NAD in future financial years despite lacking budgetary provision at the time. A dispute arose when the Municipality failed to pay approximately R23.5 million claimed by NAD. The Municipality defended the claim on the basis that the agreement contravened s 217 of the Constitution and provisions of the Municipal Finance Management Act because it was concluded without a competitive procurement process and without proper authorisation. The dispute was referred to arbitration, where the arbitrator declared the agreement unlawful and invalid for constitutional and statutory non-compliance. NAD sought to review and set aside the arbitration award, contending that the arbitrator exceeded his powers. The High Court dismissed the review, and NAD appealed to the Supreme Court of Appeal.

The appeal was upheld with costs. The order of the High Court was set aside and substituted with an order reviewing and setting aside the arbitration award dated 7 June 2021. The Municipality was ordered to pay the costs of the review application, including the costs of two counsel.

This case affirms that arbitrators lack jurisdiction to determine constitutional validity and public procurement legality involving organs of state. It reinforces the exclusive role of courts as arbiters of constitutional legality under s 172 of the Constitution and clarifies the limits of arbitration in disputes implicating public law and municipal procurement. The judgment is significant for delineating the boundary between private dispute resolution and constitutional adjudication in South African law.