Greater Tzaneen Municipality v Bravospan 252 CC 2025 (1) SA 557 (CC)Commercial dealings between municipalities and organs of state (the state) on one hand and business entities on the other hand, is a common way of doing business in South Africa. However, such business dealings are sometimes marred by bad faith on the part of the state thus leaving innocent contractors stranded as to legal recourse. The recent case illustrating this theme is Greater Tzaneen Municipality in which similar events unfolded.
In Bravospan, the Greater Tzaneen Municipality (Municipality) concluded a Service Level Agreement with Bravospan 252 CC (Bravospan) following a competitive tender process. According to the agreement, Bravospan would provide security services to the Municipality for a period of 12 months. Towards the end of the agreement, the parties concluded an extension agreement extending the first agreement for a further 24 months. When Bravospan inquired from the Municipality about the validity of an extension agreement without a bidding process, the Municipality assured Bravospan that it had been legally advised that the parties could enter into the extension agreement without an additional tender process (see Greater Tzaneen Municipality v Bravospan 252 CC (SCA) (unreported case no 428/2021, 7-11-2022) (Zondi, Van der Merwe and Hughes JJA and Molefe and Chetty AJJA) at para 3).
When the Municipality had to pay for the services provided, it launched an application in the Limpopo Division of the High Court in Polokwane in which it sought to have the extension agreement declared null and void, alternatively, that the extension agreement be reviewed and set aside. Despite commencing litigation, the Municipality had asked Bravospan to continue providing security services until a new service provider was appointed. The Municipality enjoyed these services without paying Bravospan. In response, Bravospan launched a counter-application to recover compensation for services rendered thus far (see para 5). In the High Court, the Municipality succeeded in having the extension agreement declared null and void for lack of constitutionality and the counter-application launched by Bravospan was dismissed with costs (see para 6). Bravospan’s subsequent attempt to overturn the High Court’s decision failed (see para 7).
Bravospan then instituted a separate action against the Municipality for payment of R9 624 000 which was the total amount for security services rendered throughout the duration of the extension agreement. In this regard, Bravospan succeeded on the cause of action of unjustified enrichment (see para 7). The Municipality appealed the High Court decision that Bravospan had made out a case on unjustified enrichment. The Supreme Court of Appeal (SCA), relying on McCarthy Retail Ltd v Shortdistance Carriers CC [2001] 3 All SA 236 (A), found that High Court’s order granting Bravospan’s claim for unjustified enrichment was ‘not sustainable in law’ (see para 15).
Having disapproved the High Court’s decision of granting unjustified enrichment to Bravospan, the SCA found that Bravospan should be entitled to compensation for the services that it had given to the Municipality under the extension agreement as a ‘just and equitable remedy’ pursuant to s 172(1)(b) of the Constitution. The SCA pointed out that the effect of the High Court’s order was only to declare the extension agreement unconstitutional as contemplated in s 172(1)(a) of the Constitution because public procurement processes had not been followed. However, the fact that the High Court was not called on to determine a ‘just and equitable remedy’ in terms of s 172(1)(b) of the Constitution did not mean that such a claim could not be brought for consideration in separate consecutive proceedings (see para 21). The SCA found that Bravospan was not responsible for the unconstitutionality of the extension agreement as found by the High Court. This is because the Municipality persuaded Bravospan to enter into the extension agreement without an additional tender bid. In doing so, the Municipality assured Bravospan that it had been legally advised that there was nothing unlawful about entering into the extension agreement with Bravospan in that manner.
Furthermore, the SCA noted that even after instituting the review of application to set aside the extension agreement, the Municipality still persuaded Bravospan to continue giving security services to the Municipality and the latter undertook to pay for those services. Ultimately, the SCA found that Bravospan was entitled to compensation for services rendered although the determination of quantum for such compensation was referred back to the High Court. In this vein, such compensation took the form of a ‘just and equitable remedy’ in terms of s 172(1)(b) of the Constitution (see paras 22 – 24).
Subsequent to the SCA’s judgment, the Municipality took the decision on appeal to the Constitutional Court (CC). Nonetheless, the CC dismissed the Municipality’s application for leave to appeal because it was not in the interests of justice to allow the Municipality to avoid paying Bravospan. On this score, the CC found that, inter alia, dismissing the application will send a clear message to the state that it must pay for services that are provided to them by innocent contractors (see para 60).
Both the SCA and the CC judgments mark a crucial victory for innocent service providers who may find themselves in similar situations as that of Bravospan because they are now more likely to be fully compensated through constitutional damages for services they have given to the state. This might bring an end to the downright notorious practice by the state to review and set aside its own decisions affecting government procurement contracts with innocent contractors. However, this might serve as a lost opportunity for the development of common law governing the law of unjustified enrichment in order to alleviate the difficulty faced by service providers like Bravospan. As mentioned by Bilchitz AJ in the minority judgment of the CC, cases like this have qualities of a claim for unjustified enrichment. Moreover, developing the common law of unjustified enrichment in line with ss 39(2) and 173 of the Constitution would have given innocent contractors an additional legal recourse for compensation for services rendered (see paras 39 – 42).
In short, the SCA and the CC, as highlighted above, have demonstrated to both the state and service providers that when doing business – a deal is a deal – and constitutional damages can be awarded against the state to recover compensation. Although constitutional damages might discourage bad business practices by the state, there is still room to develop the common law of unjustified enrichment to accommodate innocent contractors.
Unathi Floyd Xokiso is a candidate legal practitioner at MC Letoka Attorneys Inc in Johannesburg.
This article was first published in De Rebus in 2025 (March) DR 50.
