On 2 October 2024, the Constitutional Court dismissed an application for leave to appeal brought by a municipality against an order directing it to pay compensation for security services rendered pursuant to an unlawful tender process.  

The municipality had extended a contract with a security services provider without following a lawful tender process.  Despite the irregular contract extension, the services provider continued to perform work at the municipality’s request but the services provider was not compensated for the work.    

The municipality brought a self-review application to declare the contract extension unlawful and invalid.  The services provider responded with a counter-application for compensation for the work performed.  The High Court declared the contract extension unlawful and invalid and dismissed the claim for compensation. 

The services provider subsequently sued the municipality for unjustified enrichment.  The High Court decided in favour of the services provider, but the Supreme Court Appeal (SCA) found that the unjustified enrichment claim was not sustainable in law and ruled that the services provider was instead entitled to compensation in terms of section 172(1)(b) of the Constitution.  Section 172(1)(b) empowers a court to make any order that is just and equitable following a declaration that any law or conduct, including any contract, is constitutionally invalid.    

The municipality applied for leave to appeal against the SCA’s judgment.  The Constitutional Court dismissed the application with costs for the following reasons:

  • The municipality’s conduct was unethical and contrary to the standards of professional ethics imposed on it by the Constitution, in that the municipality assured the services provider of the legality of the contract extension and requested continued services, only later to refuse payment.
  • In those circumstances, it would be manifestly unjust for the services provider not to receive compensation for the services provided. 
  • Accordingly, the SCA’s decision to award compensation in terms of section 172(1)(b) was appropriate, as it addressed the injustice resulting from the municipality’s conduct.
  • Granting leave to appeal would therefore not serve the interests of justice, even if the municipality were to have had reasonable prospects of success on appeal, especially given that the services provider had been awaiting compensation for nearly a decade.   

The court emphasised that organs of state should not attempt to use their own unlawful conduct to avoid compensating innocent contractors. 

The matter was remitted to the High Court to determine the quantum of the compensation to be paid to the services provider.

The case is Greater Tzaneen Municipality v Bravospan 252 CC (CCT 342/22) [2024] ZACC 20 (2 October 2024).