The Constitutional Court has denounced the Greater Tzaneen Municipality’s attempt to evade compensating a security contractor who continued rendering services despite a disputed contract.
In a decision that underscores a critical stance against governmental bodies exploiting procedural missteps to avoid their financial obligations to contractors who act in good faith, the apex court said in a judgment on October 2 that state organs should not use their own unlawful conduct to avoid compensating innocent contractors.
The Constitutional Court also ordered the municipality to pay Bravospan’s costs, including those of two lawyers. “The municipality has not been granted leave to appeal, and it also behaved in a disreputable manner in representing that the extension was lawful, requesting that services continue to be provided and failing to pay Bravospan,” ruled Acting Judge David Bilchitz and Judge Rammaka Mathopo in the split judgment.
Acting Judge Matthew Chaskalson, with five other judges concurring, ruled in a second judgment that the municipality’s appeal should rightfully be dismissed, but for “different considerations.” “The municipality has behaved unconscionably. The municipality wrongly assured Bravospan that it could lawfully extend the contract without a new tender process,” Chakalson ruled.
“It accepted services from Bravospan under the extended contract without paying for these services. After it launched its review application, it induced Bravospan to continue providing services under the extended contract while the review application was pending. It took the benefit of those services. Yet, it still failed to pay Bravospan for the services,” he concluded.
In a third judgment, Acting Judge Alan Dodson presented various arguments in support of his colleagues. “I agree with the “additional reasons” given in the second judgment for refusing leave to appeal, pertaining to the message it sends to municipalities and other organs of state to pay for services provided by an innocent contractor.”
The saga began when the municipality awarded a security services contract to Bravospan in 2013, initially valued at R2.7-million over 12 months, with a potential extension of 24 months.
However, the contract’s extension bypassed the requisite tender process, contravening the Constitution, which mandates a fair and transparent system for public procurement. This procedural lapse prompted the municipality to seek nullification of the extension agreement, leading to protracted litigation.
Despite the legal challenges, Bravospan continued to provide services under the extension agreement, expecting compensation for their work. When the municipality withheld payments, Bravospan sought legal recourse to claim the amount owed, which totalled R9.6-million.
In the initial round of litigation, the High Court sided with Bravospan, citing the common law of unjustified enrichment. However, the municipality contested this ruling, arguing that the contract’s extension was invalid due to its non-compliance with constitutional procurement processes. The dispute ascended to the Supreme Court of Appeal, which ultimately reaffirmed Bravospan’s right to compensation but under a different legal premise.
The Supreme Court’s judgment highlighted that, although the contract extension was declared void, Bravospan, as an “innocent contractor,” was entitled to compensation for services rendered in good faith.
The court’s rebuke of the municipality’s actions was unequivocal. “It is unacceptable conduct for organs of state to use their own unlawful conduct to avoid compensating innocent contractors,” the court stated. The ruling emphasised the principle that governmental bodies cannot hide behind procedural errors to shirk their responsibilities, particularly when the other party acted under the belief that the agreement was lawful.
The court’s decision drew attention to the doctrine of unjustified enrichment, noting that while it traditionally concerns reclaiming transfers made under void contracts, it must evolve to protect contractors like Bravospan. The judgment emphasised that a contractor should not suffer due to administrative oversights by the state, especially when their services have contributed to the public good.
