Strata International (Pty) Ltd v Ekurhuleni Metropolitan Municipality

The Ekurhuleni Metropolitan Municipality owned a 103-hectare proclaimed township called Selcourt Extension 4, which remained undeveloped since its proclamation in December 1992. In March 2000, Mr Joseph Basil Johnson approached the municipality with a proposal to develop the property as an industrial park for small and medium industries. After negotiations, the municipality's Corporate Affairs Committee passed resolutions on 19 January 2004 and 30 August 2004 approving the disposal of the property to Mr Johnson (later through the appellants) via a Land Availability and Services Agreement. The agreement was signed on 17 September 2004. The second appellant adopted the agreement by December 2004, and transferred its rights to the first appellant in August 2009. However, no erven were disposed of or transferred, and by July 2006, reports of large-scale irregularities in respect of alienation of the municipality's immovable property emerged. The municipality subsequently refused to give effect to the agreement, considering it invalid. Critically, the municipality failed to comply with section 79(18) of the Local Government Ordinance 17 of 1939, which required public notice and publication calling for objections before disposal of immovable property. The municipality also failed to hold the required meeting open to the public as mandated by section 14(2) of the Municipal Finance Management Act 56 of 2003.

• Whether the resolutions of 19 January 2004 and 30 August 2004 gave rise to enforceable 'public law rights' independently of the invalid agreement
• Whether a municipality's decision to dispose of immovable property taken without compliance with statutory requirements for public participation and transparency can give rise to enforceable rights
• Whether non-compliance with section 79(18) of the Local Government Ordinance 17 of 1939 rendered the resolutions invalid
• Whether non-compliance with section 14(2) of the Municipal Finance Management Act 56 of 2003 invalidated the resolutions
• Whether invalid resolutions capable of ratification ex post facto

The appeal was dismissed with costs, including the costs of two counsel.

A municipal resolution to dispose of immovable property that is made without compliance with statutory requirements for public notice, publication and transparency, in contravention of Constitutional imperatives of accountability, responsiveness and openness, cannot give rise to enforceable rights. Such resolutions are fatally flawed and incapable of giving rise to enforceable 'public law rights' independently of any invalid agreement flowing from them. The Constitutional values of accountability (section 195(1)(f)), transparency (section 195(1)(g)), and democratic and accountable local government (section 152(1)(a)) inform section 14(5) of the MFMA, which requires that any transfer of ownership of municipal capital assets must be fair, equitable, transparent, competitive and consistent with supply chain management policy. Resolutions that contravene these principles cannot be enforced or ratified ex post facto.

The court noted that it found it unnecessary to express a view on several findings of the court a quo, including: (1) whether the resolution of 19 January 2004 was merely provisional and could not confer any rights on its own; (2) whether the power conferred in section 14(2) of the MFMA must be exercised by the municipal council and may not be delegated to a committee; and (3) whether invalid resolutions are capable of being ratified. The court did, however, observe that the resolution of 19 January 2004 was "a decision in principle that could have no binding effect in the absence of the further resolution that it envisaged" and that read together, the resolutions of 19 January 2004 and 30 August 2004 "constitute a final decision to dispose of immovable property of the municipality".

This case is significant in South African law as it reinforces the Constitutional imperatives of accountability, transparency and openness in local government decision-making, particularly in relation to disposal of municipal assets. The judgment establishes that municipalities cannot create enforceable rights through resolutions that bypass statutory requirements for public participation and transparency, even when dealing with private parties who may have relied on those resolutions. The case emphasizes that compliance with procedural requirements in legislation governing municipal affairs is not merely technical but reflects fundamental Constitutional values that cannot be circumvented. It confirms that private parties cannot enforce rights arising from municipal decisions made in contravention of Constitutional principles, regardless of their reliance or the commercial consequences. The case serves as a strong deterrent against municipalities accepting unsolicited private bids and disposing of public assets without proper public participation processes. It also clarifies that such fundamentally flawed decisions cannot be ratified ex post facto.