Greys Marine Hout Bay (Pty) Ltd and Others v Minister of Public Works and Others

The appellants were tenants on state-owned land at Hout Bay harbour. The first appellant (Greys Marine) operated a fish-processing facility, the second appellant (Hout Bay Yacht Club) had premises there, and the third appellant (C-Craft) built and repaired boats. An undeveloped section of the quayside known as Lot 86 was used by various occupants and visitors for access, passage, parking and launching boats. The Yacht Club had previously leased Lot 86 with an obligation to construct a clubhouse, but due to financial constraints and opposition from the Department of Environmental Affairs, it relinquished its lease in October 2001. The third respondent (Bluefin), a company established by historically disadvantaged women entering the fishing industry, applied to lease Lot 86 and an extended area (together Lot 86A) to construct a fish-processing facility and restaurant. In October 2001, the Minister of Public Works approved the lease to Bluefin, and a formal 20-year lease was concluded in June 2003. The appellants sought to review and set aside the Minister's decision, arguing it would cause traffic congestion, deprive them of parking and access, and constituted unfair administrative action.

• Whether the Minister's decision to lease state land constituted administrative action under the Promotion of Administrative Justice Act (PAJA)
• Whether the appellants' rights or legitimate expectations were materially and adversely affected by the decision
• Whether the appellants were entitled to procedural fairness, including consultation, before the decision was made
• Whether the Minister's decision was irrational or arbitrary
• Whether the proposed development's non-compliance with environmental and planning legislation affected the validity of the Minister's decision to grant the lease

The appeal was dismissed with costs, including costs of two counsel. The appellants were held jointly and severally liable for the costs.

The binding principles established are: (1) The disposal of rights in state property, including the granting of leases, constitutes administrative action under PAJA when made in the exercise of a public power conferred by legislation, in the ordinary course of administering state property, with immediate and direct legal consequences. (2) Section 3(1) of PAJA confers a right to procedural fairness only where administrative action materially and adversely affects rights or legitimate expectations. Rights in this context may include prospective rights but do not encompass mere interests or convenience. (3) A legitimate expectation arises either from an express promise by a public authority or from a regular practice which the claimant can reasonably expect to continue. The mere fact that property has been left undeveloped and available for informal public use does not create a legitimate expectation that this will continue. (4) The granting of a lease over state property does not authorize the lessee to use the property unlawfully or relieve it of obligations under environmental, planning, or other legislation. Non-compliance with such legislation may found an interdict against implementation but does not invalidate the decision to grant the lease itself. (5) The decision to lease property is logically anterior to obtaining consents that may be necessary for its development.

The court made several important observations: (1) While the state enjoys private rights of ownership, those rights are to be asserted within the framework of the Constitution (citing Kyalami Ridge). (2) The court expressed doubt (without deciding) whether interests falling short of prospective rights could ground procedural fairness rights under PAJA, noting that even Bullock's case (which appeared to recognize such interests) might actually have been concerned with legitimate expectations. (3) The court noted that the definition of 'administrative action' in PAJA should be construed consistently with section 33 of the Constitution to avoid constitutional invalidity. (4) The court suggested that PAJA's requirement that administrative action 'adversely affects rights' should not be read literally to characterize administrative action by its effect in particular cases, but rather to convey that administrative action is action that has the capacity to affect legal rights. (5) The court emphasized that determining what constitutes administrative action requires drawing difficult boundaries on a case-by-case basis considering factors including the source and nature of power, subject matter, whether it involves public duty, and how closely it relates to policy formulation versus implementation of legislation. (6) The court noted that administrative action occurs on a continuum with no bright line marking transitions between different forms of public power exercise.

This case clarifies important principles regarding administrative action in the context of state property disposal. It establishes that: (1) the disposal of state property (granting a lease) constitutes administrative action under PAJA; (2) however, procedural fairness rights under section 3(1) of PAJA are only triggered where rights or legitimate expectations are materially and adversely affected; (3) mere adverse impact on interests or convenience (such as traffic congestion or loss of informal access) does not constitute an adverse effect on rights; (4) legitimate expectations require either express promises or established regular practice; (5) the decision to grant a lease is logically anterior to compliance with environmental and planning legislation, and non-compliance with such legislation may ground an interdict against implementation but not review of the decision itself. The case demonstrates the limited scope for third parties to challenge governmental property disposal decisions absent demonstrable legal rights or established legitimate expectations.