Caledon River Properties (Pty) Ltd t/a Magwa Construction and Another v Special Investigating Unit and Another

During the COVID-19 national state of disaster declared on 15 March 2020, the Minister of Public Works and Infrastructure issued a directive authorising emergency procurement for border fencing. On 17 March 2020, officials met with the applicants (Magwa Construction and Profteam CC) on site. The applicants were selected for a border fencing project at Beitbridge Border Post on 18 March 2020 because they were already on site performing work under a separate contract. The appointment was treated as a variation of the existing contract rather than a new procurement, bypassing competitive bidding required by s 217(1) of the Constitution. Within days, the applicants received advance payments representing approximately 60% of the contract value (R21,819,878.28 for Magwa and R1,843,004.92 for Profteam) before substantial performance. Despite the hard lockdown on 26 March 2020, the applicants completed the 40km fence by 20 April 2020. The necessary deviations were not recorded in accordance with Treasury Regulations. The contracts were ultimately conceded to be invalid due to non-compliance with s 217 of the Constitution, Treasury Regulations 16A.6.1 and 16A.6.4, and Regulation 11 of the Disaster Management Act regulations.

• What remedy is just and equitable under s 172(1)(b) of the Constitution following a declaration of invalidity of public procurement contracts?
• Whether contractors who are not entirely innocent may retain profits from constitutionally invalid contracts?
• What is the nature and scope of the discretion under s 172(1)(b) of the Constitution?
• Whether the 'no profit, no loss' principle applies rigidly to contractors who participated in irregular procurement processes?
• When is appellate interference with the exercise of discretion under s 172(1)(b) justified?

The application for reconsideration of the decision refusing special leave to appeal was dismissed. The applicants were ordered to pay the first respondent's costs, including costs of two counsel where so employed. The applicants were entitled only to reimbursement of proven and reasonable expenditure as determined through debatement of accounts, with no entitlement to retain profits.

1. The discretion under s 172(1)(b) of the Constitution to determine just and equitable remedies following a declaration of invalidity is broad, value-laden, and context-specific, requiring a balance between correcting constitutional invalidity, vindicating the rule of law, and avoiding unjust outcomes. 2. Appellate interference with the exercise of discretion under s 172(1)(b) is justified only where the discretion was not exercised judicially, was influenced by material misdirection on law or facts, or produced a result no reasonable court could reach. 3. No party should profit from unlawful conduct, and an invalid tender does not give rise to a right to benefit from an unlawful contract. 4. While an innocent tenderer acting in good faith may in appropriate circumstances retain some benefit, contractors who are active participants in irregular procurement processes (as opposed to passive recipients of unlawful state decisions) are not entitled to the normative benchmark of competitive commercial return. 5. The 'no profit, no loss' principle, while not a rigid rule excluding profit in all cases, appropriately applies where contractors are culpable participants in irregular procurement, even absent findings of fraud or corruption. 6. In reconsideration proceedings under s 17(2)(f) of the Superior Courts Act, reasonable prospects of success are necessary but insufficient; special circumstances must be shown.

The Court observed that acceptance of advance payments amounting to approximately 60% of contract value within days of appointment and before meaningful performance, when prohibitions in the PFMA and Treasury Regulations were well known, constitutes at best wilful blindness and could place contractors on the culpable end of the spectrum. The Court noted that justifying such payment on the basis of 'offices closing' when electronic banking remained functional during lockdowns was unreasonable. The Court commented that the public good is not inherently opposed to private gain and that legitimate public procurement relies on the normative benchmark of competitive return for service providers—but this applies to innocent tenderers, not culpable participants. The Court observed that urgency created by a State of Disaster does not displace procurement requirements or justify advance payments without safeguards. The Court noted that expert evidence on pricing is relevant only where a misdirection in exercise of discretion has been demonstrated.

This judgment is significant in South African public procurement law as it clarifies the application of s 172(1)(b) of the Constitution in cases of invalid procurement contracts. It reinforces that the discretion to grant just and equitable remedies is broad but not unlimited, and that contractors who actively participate in irregular procurement processes cannot claim the protection afforded to innocent tenderers. The judgment distinguishes between passive recipients of unlawful state decisions and active participants in irregular processes. It establishes that the 'no profit, no loss' principle, while not a rigid rule, appropriately applies where contractors are not entirely blameless. The case contributes to the jurisprudence on when appellate courts may interfere with remedial discretion under s 172(1)(b), emphasizing the highly contextual and fact-specific nature of such determinations. It also clarifies that emergency circumstances (such as the COVID-19 disaster) do not override fundamental procurement safeguards or justify advance payments without compliance with Treasury Regulations.