In Buffalo City Metropolitan Municipality v Asla Construction (Pty) Ltd [2019] ZACC 15, the Constitutional Court dealt with a self-review application brought by the Municipality to set aside a construction contract.

The Municipality entered into a turnkey agreement with Asla, in May 2014, for the construction of 3,000 housing units in Duncan Village. In October 2014, the parties entered into a further agreement for engineering services and housing construction at Reeston.

A dispute arose between the parties with regard to the Reeston agreement. Asla sued the Municipality for unpaid payment certificates. In November 2015, the Municipality applied to the High Court for the review and setting aside of the Reeston agreement, arguing that there had been non-compliance with section 217 of the Constitution in relation to public procurement and that there should have been a separate tender process before the agreement was concluded.

The High Court declared the Reeston agreement to be unlawful and dismissed Asla’s claims for payment. On appeal, the Supreme Court of Appeal (SCA) held that the High Court had been incorrect.

On appeal from the SCA, a majority of the Constitutional Court held that the Municipality had failed to explain the delay in bringing the self-review application and accordingly the delay was unreasonable. Furthermore, the court found that the Municipality’s conduct during litigation had verged on bad faith; it had failed to take the court into its confidence with regard to the irregularities of the Reeston agreement.

Nevertheless, by reason of the clear unlawfulness of the Reeston agreement, the court declared it to be invalid. The principles of justice and equity dictated, however, that the court should not set aside the Reeston agreement, so as to preserve the contractual rights to which Asla might have been entitled. The order of the court preserved the rights that had already accrued to Asla but did not permit the company to obtain further rights under the invalid Reeston agreement.

In practical terms, the effect of the order was that the Municipality was still obligated to pay Asla under the payment certificates already issued.

A minority judgment of the court held that the Municipality’s delay in bringing the self-review application was so inexcusable that there was no public interest or constitutional necessity for the court to make a finding on the lawfulness of the Reeston agreement.