Khutala Property Consortium (Pty) Ltd v Mtubatuba Municipality and Others

Mtubatuba Municipality invited bids in 2009 for the long-term lease and development of municipal land (the old taxi rank). The bid of Alliance Property Group (Pty) Ltd was accepted subject to conditions, including authorisation by council resolutions and comments from the MEC for Co‑operative Governance and Traditional Affairs, KwaZulu‑Natal. Over time, various entities (including Crowned Cormorant Investments and later Khutala Property Consortium (Pty) Ltd) purported to step into the role of lessee. Despite repeated cautions from the MEC not to conclude any lease and despite unresolved objections to key clauses, a notarial lease was signed in 2011 by municipal officials relying on defective powers of attorney and inaccurately recorded council resolutions. The lease was registered. Later, the municipality re-advertised the tender and awarded it to Green Mile Investments 340 CC. Litigation followed, and the High Court declared Khutala’s lease invalid. Khutala appealed to the Supreme Court of Appeal.

The appeal was dismissed with costs, including the costs of two counsel. The High Court order declaring the notarial lease invalid remained in force.

The case reinforces the strict application of the principle of legality in municipal contracting and tender processes. It confirms that municipal officials cannot bind a municipality without clear and lawful council authorisation and required statutory oversight. The judgment also reiterates that estoppel cannot cure unlawfully concluded contracts involving the exercise of public power.