Buffalo City Metropolitan Municipality v Asla Construction (Pty) Limited

Buffalo City Metropolitan Municipality ("Municipality") awarded a turnkey contract to Asla Construction (Pty) Limited ("ASLA") in May 2014 for housing development in the Greater Duncan Village area. Subsequently, in September 2014, the Municipality "awarded" ASLA an additional contract (the "Reeston contract") for 953 housing units without following a competitive tender process, citing failed previous procurement attempts. The Municipality's Chief Financial Officer, Mr Pillay, signed the letter awarding the Reeston contract. In August 2015, Mr Pillay, then Acting City Manager, raised concerns about the lawfulness of the Reeston contract. The Municipality commissioned an independent investigation by Ms York in October 2015, which confirmed irregularities. When ASLA sought payment under the Reeston contract, the Municipality refused and instituted review proceedings in November 2015, seeking to set aside the Reeston contract on grounds of unlawfulness. The High Court found the Reeston contract unlawful and set it aside. The Supreme Court of Appeal overturned this, holding that the Municipality had not made out a proper case for condonation of delay under section 9 of PAJA. The Municipality then approached the Constitutional Court. Following the Gijima judgment, the review was recharacterised as a legality review rather than a PAJA review. Before judgment, the Municipality sought to withdraw its application and have a settlement agreement with ASLA made an order of court.

• Whether the Municipality's delay in bringing the review application was unreasonable
• Whether the delay should be overlooked in a legality review
• Whether the court is obliged under section 172(1)(a) to declare conduct unlawful even where there is unreasonable delay (application of Gijima principle)
• Whether the settlement agreement should be made an order of court
• What constitutes a just and equitable remedy under section 172(1)(b) where a procurement contract is found to be unlawful

The majority order: (1) Leave to appeal granted; (2) Appeal upheld; (3) Supreme Court of Appeal order set aside and replaced with: "The applicant's decision to award contract number BCC/DES/PIU/HOUS/1122/2010 for Reeston Phase 3, Stage 2 (953 erven) to the respondent is declared constitutionally invalid"; (4) No order as to costs. The practical effect was that the Reeston contract was declared invalid but ASLA retained its right to payment for work already completed.

An organ of state seeking to review its own decision must do so under the principle of legality, not PAJA. In assessing delay in legality reviews: (1) the delay must first be assessed for reasonableness, which requires a full explanation covering the entire period; (2) if unreasonable, the court must determine whether to overlook the delay considering factors including potential prejudice, the nature of the impugned decision, and the conduct of the applicant; (3) organs of state are held to a higher standard and must act as model constitutional citizens; (4) even where delay is unreasonable and should not be overlooked, section 172(1)(a) of the Constitution may compel a court to declare conduct invalid where the unlawfulness is clear and undisputed (Gijima principle). Section 217 of the Constitution requires procurement to follow a system that is fair, equitable, transparent, competitive and cost-effective. A contract awarded without any competitive bidding process violates section 217 and is unlawful. Courts retain wide remedial discretion under section 172(1)(b) to craft just and equitable remedies, including declaring conduct invalid without setting it aside to preserve accrued rights of innocent parties.

The majority noted (obiter) that municipalities must have effective oversight structures to detect procurement irregularities and prevent abuse of taxpayer funds. The Court deliberately left open the question of the validity of the underlying Turnkey contract. On settlement agreements, the Court emphasized that parties cannot contract outside the context of litigation and ask a court to make that agreement an order - the agreement must relate to the litigation before the court and accord with the Constitution and law (applying Eke v Parsons). The minority expressed concerns about the Gijima approach, noting it has "not attracted universal favour among commentators" and may aggravate the problematic bifurcation between PAJA and legality review in South African administrative law. However, they acknowledged this was not the appropriate case to reconsider Gijima as the issue was not fully argued. The minority articulated that courts should adopt a "purpose-driven approach to procedure" in delay cases, weighing the importance of declaring unlawfulness against the importance of expeditious compliance with constitutional duties to ensure certainty and finality.

This case is significant for developing the jurisprudence on state "self-review" under the principle of legality following Gijima. It establishes that: (1) Where an organ of state seeks to review its own decision, legality review (not PAJA) is the appropriate pathway; (2) Even where delay is unreasonable and unexplained, section 172(1)(a) may compel a court to declare clearly and indisputably unlawful conduct invalid (the Gijima principle); (3) This principle should be interpreted narrowly and restrictively to avoid undermining the important rationale behind delay rules; (4) Courts have wide remedial powers under section 172(1)(b) to craft just and equitable remedies that balance the need to declare unlawfulness with fairness to innocent contracting parties; (5) Settlement agreements will not be made orders of court where they seek to validate unconstitutional conduct or cover matters beyond the court's knowledge; (6) The minority judgment articulates an important counterweight emphasizing that procedural compliance with delay rules serves substantive purposes of accountability and should not be lightly overlooked. The case demonstrates continuing tension in South African administrative law between declaring unlawfulness and enforcing procedural requirements, particularly in the procurement context.