Merifon (Pty) Limited v Greater Letaba Municipality and Another

The Greater Letaba Municipality sought land for human settlement development but lacked funds. Through provincial intervention and the Housing Development Agency (HDA), certain land (Farm Mooiplaats) was identified. Merifon (Pty) Ltd purchased the property in 2012 for R14.5 million and later entered into a written agreement on 7 March 2013 to sell it to the Municipality for R52 million. A provincial department (CoGHSTA) issued a commitment letter stating it had budgeted funds to pay the purchase price. The Municipal Manager signed the agreement, and Council approved the commitment letter but did not approve the acquisition as a capital project nor appropriate funds in the municipal budget. Provincial Treasury later refused to authorise payment, citing the excessive price and lack of value for money. The Municipality failed to pay, and Merifon sued for specific performance and payment. The High Court and Supreme Court of Appeal held the agreement unenforceable for non-compliance with section 19 of the Municipal Finance Management Act (MFMA). Merifon sought leave to appeal to the Constitutional Court.

Leave to appeal was refused, and Merifon was ordered to pay the Greater Letaba Municipality’s costs, including the costs of two counsel.

The case reinforces the doctrine of legality and strict compliance with the Municipal Finance Management Act. It confirms that contracts concluded by municipalities in breach of peremptory budgetary and approval requirements are unenforceable, even against innocent third parties. The judgment underscores fiscal discipline, accountability, and good governance in local government and limits the application of estoppel and the Turquand rule in public-law contexts.