Brain Gear Investments (Pty) Ltd and Others v Buhle Waste (Pty) Ltd and Another

The City of Mbombela Municipality had a concession agreement with Sembcorp Silulumanzi (RF) (Pty) Ltd (Silulumanzi) as a water services provider. In June 2018, the Municipality conditionally consented to a change of control in Silulumanzi following a share purchase by SAWW. The consent was subject to conditions requiring: (a) 28% of shares to be acquired by a Mbombela-based BBBEE shareholder; (b) the selection process to be overseen by the Municipality's Executive Mayor and Acting Municipal Manager; and (c) the selection to be made in consultation with the Municipality's representatives. PwC administered a selection process on behalf of Silulumanzi and SAWW. Brain Gear was selected as the 28% BBBEE shareholder in September 2018. On 14 November 2018, the Municipality gave final unconditional consent to the change of control, confirming that the conditions had been fulfilled. Buhle Waste, an unsuccessful bidder, applied to review this decision on the basis that the Municipality had not overseen or been consulted in the selection process as required by the conditions, and that Brain Gear was a shelf company without water sector experience, incorporated only five months before selection.

• Whether the decision of 14 November 2018 constituted administrative action reviewable under PAJA and the principle of legality
• Whether there was unreasonable delay in launching the review application
• Whether the Municipality complied with the conditions it imposed in its June 2018 resolution
• Whether the impugned decision was lawful, reasonable and rationally connected to its purpose
• Whether the Municipality misconceived its own decision and failed to exercise oversight as required

The appeal was upheld in part. Paragraphs 118.3 to 118.7 of the high court order (dealing with directions for reconsideration, timelines, suspension and declarations) were set aside as unnecessary or tautologous. The core review and setting aside of the 14 November 2018 decision was maintained. The appeal was otherwise dismissed with costs, including costs of two counsel where employed.

Where a municipality grants conditional consent to a change of control in a water services provider, and imposes conditions requiring municipal oversight and consultation in the selection of a BBBEE shareholder, subsequent confirmation that those conditions have been fulfilled constitutes a distinct administrative decision that is reviewable under PAJA. Such a decision is unlawful where: (a) the municipality played no role in overseeing the selection process contrary to the express conditions it imposed; (b) the selection was not made in consultation with municipal representatives as required; (c) the selected entity did not meet the qualifications contemplated; and (d) the municipality misconceived the nature of its own prior decision. The exercise of powers relating to water services provision (a constitutional obligation) constitutes administrative action even when performed within a contractual framework, as the focus is on the function performed, not the form. A decision-maker cannot avoid administrative law obligations by characterizing its decision as purely contractual when the source and subject matter of the decision is public law.

The Court observed that consultation must be undertaken when proposals are at a formative stage, must include sufficient reasons to allow intelligent consideration and response, adequate time must be given, and the product of consultation must be conscientiously taken into account. The Court noted that certain relief granted by the high court was unnecessary or tautologous, including: declaratory orders that merely restate the legal position following a successful review; suspension orders pending reconsideration; and detailed prescriptive directions to the decision-maker about how to exercise its discretion on reconsideration, including time limits and filing requirements. Such relief should generally not be granted unless specifically necessary in the circumstances. The Court also observed that conflicts of interest by those administering a selection process (where decision-makers of the selecting entity were also directors of the entity being selected) are incompatible with the objective of transparent and objective adjudication.

This case establishes important principles regarding: (1) The nature of administrative action in the context of public-private partnerships and concession agreements for essential services - conduct by a municipality relating to water services provision constitutes administrative action even when exercised within a contractual framework. (2) The binding nature of conditions imposed by administrative decision-makers - organs of state must comply with their own conditions and cannot retrospectively characterize their decisions as purely contractual to avoid administrative law obligations. (3) The requirement for meaningful consultation and oversight when specified as a condition - mere rubberstamping is insufficient. (4) Conflicts of interest in procurement and selection processes affecting public services. (5) The distinction between conditional and unconditional administrative decisions and when each becomes reviewable. The case reinforces that the focus in determining whether action is administrative is on the function performed, not the form or instrument used, particularly where constitutional obligations (such as water services provision) are at stake.