Ekurhuleni Metropolitan Municipality v Business Connexion (Pty) Ltd

The Ekurhuleni Metropolitan Municipality (Municipality) appointed Business Connexion (Pty) Ltd (BCX) to its panel of service providers to procure Oracle software licences. On 5 August 2020, the Municipality sent a Request for Quotation (RFQ) for acquisition of additional software licences. BCX's bid was successful. On 27 August 2020, the Municipality sent an ICT Instruction to Perform Work (IPW) agreement to BCX for the purchase of software licences and related services for R85,479,535.26. On 28 August 2020, BCX procured the specified licences and made payment. On 1 September 2020, Oracle sent a welcome letter to the Municipality c/o BCX confirming the purchase and availability of licences, which was emailed to BCX and to Mr Monyepao at the Municipality. On 23 September 2020, the Municipality sought to put the order on hold citing budget considerations. On 29 October 2020, the Municipality sent a letter requesting cancellation of the order, citing Covid-19 pandemic impacts on revenue collection and budget cuts. BCX refused the cancellation, stating the order was non-cancellable and it had already paid for the licences. BCX launched an application on 14 October 2021. The High Court found for BCX and ordered the Municipality to pay R85,479,535.26 plus interest. The Municipality's application for leave to appeal was refused by the High Court and on petition by two judges of the Supreme Court of Appeal.

• Whether there are exceptional circumstances warranting reconsideration of the refusal of leave to appeal in terms of section 17(2)(f) of the Superior Courts Act 10 of 2013
• Whether the Supreme Court of Appeal has jurisdiction to hear the matter
• Whether BCX delivered the software licences as required by the contract
• Whether it was a tacit term of the agreement that licences would only be delivered once the Municipality's infrastructure was upgraded
• Whether budget constraints and inability to pay constitute a valid defence to contractual performance
• Whether there was a genuine dispute of fact regarding delivery of the licences

The matter was struck from the roll. The applicant (Ekurhuleni Metropolitan Municipality) was ordered to pay the costs of the reconsideration including the costs of two counsel.

The binding legal principles established are: (1) In terms of section 17(2)(f) of the Superior Courts Act, it is the court to which a referral is made that must decide whether there are exceptional circumstances warranting reconsideration, and only if exceptional circumstances are established does the court have jurisdiction. (2) Exceptional circumstances must encompass something out of the ordinary and cannot involve re-hashing of old arguments unless it is strongly arguable that justice will be denied unless the possibility of an appeal can be pursued. (3) A genuine dispute of fact only exists where the party who raises the dispute seriously and unambiguously addresses the disputed facts; a bare denial is only sufficient where there is no other way open to the disputing party. (4) Inability to pay for a contract freely and voluntarily entered into is no defence to contractual performance, particularly where the other party has already performed its obligations and incurred costs in reliance on the contract. (5) Where tacit terms are alleged in a contract, such terms must be clearly and unambiguously supported by the circumstances and the express terms of the agreement.

The Court noted with apparent approval that the High Court found "no legal basis" for the Municipality's contention regarding non-delivery. The Court observed that if the parties had intended that the contract would be executed as and when certain upgrades were made, this would have been clearly and unambiguously stipulated in the agreement. The Court also commented that the tender office would not have confirmed rates for 12 months after approval if it had not anticipated that procurement would be within the year. The Court noted the significance of what was stated (and not stated) in the Municipality's formal letter of cancellation, suggesting that the reasons provided in that contemporaneous document carry particular weight in determining the true basis for a party's conduct. The judgment contains implicit criticism of the Municipality's approach in using bare denials and putting BCX to proof while failing to provide details of steps taken to verify its position regarding access to the licence codes.

This judgment provides important guidance on the application of section 17(2)(f) of the Superior Courts Act 10 of 2013 regarding applications for reconsideration after refusal of leave to appeal. It clarifies that the court to which a referral is made must determine whether exceptional circumstances exist, and only if they do does the court have jurisdiction. The case reaffirms that exceptional circumstances must encompass something out of the ordinary and cannot involve merely re-hashing old arguments unless justice will be denied. The judgment also reinforces principles regarding genuine disputes of fact in motion proceedings, emphasizing that bare denials are insufficient where other means are available to address disputed facts. The case illustrates that financial difficulties and budget constraints do not provide a valid defence to contractual obligations that have been freely and voluntarily undertaken, particularly where the other party has already performed and paid for goods or services on the basis of those obligations. The judgment provides guidance on the interpretation of procurement contracts and the requirements for establishing tacit terms in commercial agreements.