The Special Investigating Unit v Phomella Property Investments (Pty) Ltd and Another

In 2009 the Department of Public Works (DPW) concluded a long-term lease of the SALU building in Pretoria with Phomella Property Investments (Pty) Ltd to accommodate the Department of Justice and Correctional Services. The lease was concluded through a negotiated process rather than open bidding and was approved subject to a condition that a needs assessment of space requirements be conducted prior to signature. No comprehensive needs assessment was done, yet the lease was signed. The building and lease were later transferred to Rebosis Property Fund Limited. After the lease had expired, the Special Investigating Unit (SIU) applied to the High Court for a declaration that the lease was unlawful and sought repayment of approximately R103.9 million, alleged to be wasteful expenditure for excess space. The High Court declared the lease unlawful but refused to order repayment. The SIU appealed only against the refusal to grant further remedial relief.

The appeal was dismissed with costs, including the costs of two counsel. The High Court’s refusal to grant relief under s 172(1)(b) of the Constitution was upheld.

The case clarifies that remedial relief under s 172(1)(b) of the Constitution involves a true discretion and strongly limits appellate interference. It rejects the notion of a rigid 'no-profit-no-loss' rule in procurement invalidity cases and confirms that benefits under unlawful contracts may, in appropriate circumstances, be retained where justice and equity so require. The judgment provides important guidance on remedies following declarations of unlawfulness in public procurement and administrative law.