Umgungundlovu District Municipality v Amaraka Investments 37 (Pty) Ltd

The Umgungundlovu District Municipality concluded a contract on 31 October 2011 with Amaraka Investments 37 (Pty) Ltd for the provision of sewerage carting services. The contract was later reviewed and declared constitutionally invalid by the KwaZulu-Natal High Court (Nkosi J) for failure to comply with constitutionally mandated procurement requirements and sections 76 and 78 of the Municipal Systems Act 32 of 2000. However, the declaration of invalidity was suspended. Amaraka had already rendered services in good faith and claimed payment of approximately R13 million for services rendered up to 11 April 2018. The municipality resisted payment, arguing that the suspension of invalidity was not retrospective and therefore did not preserve Amaraka’s right to payment for past services.

The appeal was dismissed with costs, confirming that the municipality was liable to pay the respondent for services rendered under the contract from 31 October 2011 until 11 April 2018.

The case reinforces the Constitutional Court and SCA jurisprudence on the use of section 172(1)(b) of the Constitution to craft just and equitable remedies when state contracts are declared invalid for procurement irregularities. It confirms that suspensions of invalidity can operate retrospectively to protect the rights of innocent private contractors and clarifies the contextual approach to interpreting court orders.