THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable
Case no: 1112/2019

In the matter between:

MERIFON (PTY) LTD

APPELLANT

and

GREATER LETABA MUNICIPALITY
FIRST RESPONDENT

HOUSING DEVELOPMENT AGENCY       SECOND RESPONDENT

Neutral citation: Merifon (Pty) Ltd v Greater Letaba Municipality and
Another (1112/2019) [2021] ZASCA 50 (22 April 2021)

Coram:
PETSE AP, MAKGOKA and SCHIPPERS JJA and GORVEN
and POYO-DLWATI AJJA

Heard:
23 February 2021

Delivered: This judgment was handed down electronically by circulation to
the parties’ legal representatives by email, publication on the Supreme Court
of Appeal website and release to SAFLII. The date and time for hand-down is
deemed to be 09h45 on 22 April 2021.

Summary: Agreement for purchase and sale of immovable property –
validity – section 19 of the Local Government: Municipal Finance
Management Act 56 of 2003 – municipality concluding agreement without
compliance with peremptory provisions of s 19 – claim for specific
performance by seller – seller not entitled to order of specific performance –
no court competent to compel a party to commit an illegality.

ORDER

On appeal from: Limpopo Division of the High Court, Polokwane (Ledwaba
AJ sitting as court of first instance):
The appeal is dismissed with costs, including the costs attendant upon the
employment of two counsel.

JUDGMENT

Petse AP (Makgoka and Schippers JJA and Gorven and Poyo-Dlwati
AJJA concurring):

[1] The doctrine of legality and the rule of law lie at the heart of the
Constitution.1 There are numerous reported decisions of our courts that have
unequivocally affirmed the fundamental truism that the exercise of public
power derives from the law. Accordingly, no organ of state or public official
may act contrary to or beyond the scope of their powers as laid down in the
law.2 This is one of the foundational values of our constitutional democracy.

[2] In Nyathi v Member of the Executive Council for the Department of
Health Gauteng and Another [2008] ZACC 8; 2008 (5) SA 94 (CC); 2008 (9)
BCLR 865 (CC) Madala J aptly put it thus:
'Certain values in the Constitution have been designated as foundational to our democracy.
This in turn means that as pillar-stones of this democracy, they must be observed
scrupulously. If these values are not observed and their precepts not carried out
conscientiously, we have a recipe for a constitutional crisis of great magnitude. In a state
predicated on a desire to maintain the rule of law, it is imperative that one and all should
be driven by a moral obligation to ensure the continued survival of our democracy.'3

1 Section 1(c) of the Constitution of the Republic of South Africa Act 108 of 1996.
2 Affordable Medicines Trust and Others v Minister of Health and Another [2005] ZACC 3; 2006 (3) SA 247
(CC); 2005 (6) BCLR 529 (CC) para 49 and paras 75 to 77; Albutt v Centre for the Study of Violence and
Reconciliation and Others [2010] ZACC 4; 2010 (3) SA 293 (CC); 2010 (2) SACR 101 (CC); 2010 (5)
BCLR 391 (CC) paras 49-50; Electronic Media Network Limited and Others v e.tv (Pty) Limited and Others
[2017] ZACC 17; 2017 (9) BCLR 1108 (CC) paras 25, 110-112; Minister of Constitutional Development and
Another v South African Restructuring and Insolvency Practitioners Association and Others [2018] ZACC
20; 2018 (5) SA 349 (CC); 2018 (9) BCLR 1099 (CC) paras 27-29.
3 Paragraph 80.

[3] Almost ten years previously, in Fedsure Life Assurance Ltd and Others
v Greater Johannesburg Transitional Metropolitan Council and Others 1999
(1) SA 374 (CC);1998 (12) BCLR 1458 (CC), the Constitutional Court was
even more emphatic in underscoring the principle of legality. The Court said
the following:
'[A] local government may only act within the powers lawfully conferred upon it. There is
nothing startling in this proposition - it is a fundamental principle of the rule of law,
recognised widely, that the exercise of public power is only legitimate where lawful. The
rule of law - to the extent at least that it expresses this principle of legality - is generally
understood to be a fundamental principle of constitutional law.'4

[4] The central question which arises for determination in this appeal is
whether it would be appropriate, in the context of the facts of this case, for
this Court to grant an order of specific performance in favour of the appellant,
Merifon (Pty) Ltd (Merifon), together with consequential relief sought by
Merifon in this litigation. This question pertinently arises because of the
provisions of s 19 of the Local Government: Municipal Finance Management
Act 56 of 2003 (the MFMA). The section, which is headed 'Capital projects',
reads as follows:
'(1)
A municipality may spend money on a capital project only if–
(a)
the money for the project, excluding the cost of feasibility studies conducted by or
on behalf of the municipality, has been appropriated in the capital budget referred to in
section 17(2);
(b)
the project, including the total cost, has been approved by the council;
(c)
section 33 has been complied with, to the extent that that section may be applicable
to the project; and

4 Paragraph 56 (Citations omitted).

(d)
the sources of funding have been considered, are available and have not been
committed for other purposes.
(2)
Before approving a capital project in terms of subsection (1)(b), the council of a
municipality must consider–
(a)
the projected cost covering all financial years until the project is operational; and
(b)
the future operational costs and revenue on the project, including municipal tax and
tariff implications.
(3)
A municipal council may in terms of subsection (1)(b) approve capital projects
below a prescribed value either individually or as part of a consolidated capital
programme.'

[5] The factual background to this appeal may be summarised as follows.
For a considerable length of time, the Greater Letaba Municipality (the
municipality) had been in dire need of land for human settlement within its
area of jurisdiction. Yet it did not have the money to acquire land for this
purpose. As a result, it lost out, over several years, on the Limpopo
Government's provincial allocation of funds to municipalities in the province
to build low-cost houses for the less privileged citizens residing within its
municipal area because it did not have land.

[6] In order to extricate itself from this predicament the Executive Mayor
at the time, on 4 April 2011, wrote a letter to the Provincial Member of the
Executive Council (MEC) of the Department of Local Government and
Housing (the department) in which he proposed that the department purchase
three farms – identified in the letter – for the municipality. The department
expressed its willingness to assist. To this end, it engaged the Housing
Development Agency5 (the HDA) for assistance. The intervention of the HDA

5 The Housing Development Agency is an organ of state with juristic personality established in terms of s 3
of the Housing Development Agency Act, 23 of 2008 whose establishment is principally for the purposes of,

yielded positive results. Land was identified and negotiations with a
representative of the prospective seller for the purchase of a farm known as
Portion 5, 6, and the Remaining Extent of the Farm Mooiplaats 434 LT in the
Limpopo Province (the property), commenced. The negotiations bore fruit. In
the result, on 6 March 2013, the Head of the department addressed a letter to
the municipality in these terms:
'We refer to the above mentioned transaction and hereby [confirm] that the Department in
the current financial year ending 31 March 2013 has budgeted the required R52 Million
excluding VAT required to acquire the above mentioned property required for human
settlements development. The funds will be paid into the trust account of the transferring
Attorneys after the Deed of Sale between the Municipality and the Seller has been
concluded. The Department will furthermore pay the applicable transfer and registration
costs amounting to R209 892.90.'

[7] The letter from the Head of the department was placed before the
municipal council for adoption at its special meeting held on 22 March 2013.
Amongst the various resolutions adopted at this meeting was one under the
caption:
'COUNCIL RESOLUTION A. 1038/ 22/03/2013 / ACQUISITION OF REMAINING
EXTENT AND PORTION 5 AND 6 OF THE FARM MOOIPLAATS 434-LT'
And the resolution adopted by the council in relation thereto reads:
'1.
That the commitment letter from Department of Cooperative Governance, Human
Settlements and Traditional Affairs to purchase portion 5 and 6 of the farm Mooiplaats
434-LT is approved.'

[8] Pursuant to the adoption of the resolution described in the preceding
paragraph, Merifon concluded a written agreement of sale in respect of the

inter alia, facilitating the acquisition of land and landed property in order to compliment the capacity of
Government across all spheres and providing housing development services for the purpose of creating
sustainable human settlements.

property. It turned out, however, that before committing itself to pay the
purchase price for the property and transfer costs on behalf of the
municipality, the department had, on 18 October 2012, applied to the
Provincial Treasury seeking authorisation to disburse the amounts mentioned
in its letter of 6 March 2013. But, on 27 March 2013, the Provincial Treasury
declined the department's request on the grounds that, inter alia, the purchase
price was excessive. This had the effect of scuppering the transaction because
it meant that the department could no longer pay over the funds that it had
committed for the purchase price. And with the financial year-end being only
four days away, this meant that all of the entire unspent funds in the
department's 2012/2013 budget would have to be returned to the Treasury. In
the interim, Merifon was determined to enforce the agreement it had
concluded with the municipality. To that end, its attorneys addressed a letter
of demand to the municipality giving the latter 14 days within which to pay
the purchase price and transfer costs or, failing that, face legal proceedings
enforcing the agreement. This notice was not heeded.

[9] Consequently, during 2014 Merifon instituted an action in the Limpopo
Division of the High Court, Polokwane (the high court) against the
municipality as first defendant and the HDA as second defendant. Merifon
claimed payment, as against the municipality only, of the purchase price of
R52 million and transfer costs in the sum of R209 892.90. The foundation for
this claim was the agreement of sale for the purchase of property6 to which
reference has already been made in paragraph 8 above. No relief was sought
against the HDA. Consequently, the HDA did not enter the fray. It has

6 The agreement expressly provided that 17 industrial stands situated within the property were to be excluded
from the sale.

therefore played no part in this litigation either in the high court or in this
Court.

[10] In its particulars of claim, Merifon alleged that on 7 March 2013,7
represented by a Mr Mangena, and the municipality represented by its
municipal manager, Ms Mashaba, it sold the property to the municipality for
R52 million. The municipality also bound itself to pay the transfer costs
amounting to R209 892.90. Merifon alleged that Ms Mashaba was properly
authorised, alternatively, had ostensible authority to represent the
municipality.

[11] The municipality resisted the claim on several grounds. For present
purposes, it suffices merely to make reference to four of its defences. First, it
was denied that its representative had the requisite authority – whether actual,
ostensible or otherwise – to enter into the agreement. Second, it pleaded that
the agreement was 'illegal and null and void' for want of compliance with s 19
of the MFMA because the subject-matter of the sale constituted a capital
project. Third, it alleged that the municipal council 'never approved the
purchase of the property including the total costs thereof'. Fourth, it was
asserted that the municipality was precluded from incurring expenditure
otherwise than in accordance with 'an approved budget and within the limits
of the amounts appropriated . . . in the approved budget'.

[12] The municipality also filed a counter-claim in which it sought an order
declaring the agreement null and void and unenforceable. In the alternative –

7 There was a dispute at the trial in regard to the date of sale. The municipality's witness testified that she
signed the agreement after 22 March 2013. But nothing turns on this.

and conditional upon the first counter-claim being unsuccessful – the
municipality alleged that the agreement fell to be rectified because to the
knowledge of the parties the purchase price was to be paid not by the
municipality but by the Limpopo Provincial Government: Department of
Cooperative Governance, Human Settlements and Traditional Affairs
(CoGHSTA).

[13] The action came before Ledwaba AJ for trial who delivered his written
judgment on 18 July 2019. He dismissed the action and granted judgment in
favour of the municipality with costs, declaring the agreement 'null and void
and unenforceable'. After considering the import of the relevant provisions of
the MFMA, the learned Acting Judge in essence found, inter alia, that the
municipality's representative lacked the authority to sign the agreement
because the municipality had at no stage resolved 'to acquire the property'.
And the municipality had not appropriated funds for the acquisition of the
property either in its 2012/2013 annual approved budget or adjusted budget.
He further held that the municipal representative's authority to conclude the
agreement, actual or ostensible, had in any event not been established. Finally,
insofar as estoppel was concerned, upon which Merifon also relied, he held
that it did not avail Merifon. He reasoned thus:
'Failure by a statutory body to comply with the provisions which the legislature has
prescribed for the validity of a specified transaction cannot be remedied by estoppel
because that would give validity to a transaction which is unlawful and therefore ultra
vires.'
Subsequently, on 30 September 2019, Makgoba JP granted Merifon leave to
appeal to this Court on the basis that there was 'a compelling reason why the
appeal . . . should be heard . . .'.

[14] Apart from s 19 of the MFMA, there are also other provisions of the
MFMA to which reference has been made both in the judgment of the high
court and counsel's heads of argument. As these provisions play a significant
role in the determination of the issues that arise in this appeal, it is necessary
to give a brief overview of them before dealing with the issues in the context
of the relevant statutory framework.

[15] According to its preamble, the MFMA seeks to 'secure sound and
sustainable management of the financial affairs of municipalities and other
institutions in the local sphere of government; to establish treasury norms and
standards for the local sphere of government . . .'. One of the objects of the
MFMA is 'to secure sound and sustainable management of the fiscal and
financial affairs of municipalities . . . by establishing norms and standards and
other requirements for–
(a)
ensuring transparency, accountability and appropriate lines of
responsibility in the fiscal and financial affairs of municipalities and
municipal entities;
(b)
the management of their revenues, expenditures, assets and liabilities
and the handling of their financial dealings;
(c)
budgetary and financial planning processes and the co-ordination of
those processes with the processes of organs of state in other spheres of
government;
(d)
. . .
(e)
. . .
(f)
supply chain management; and
(g)
. . .'.8

8 See s 2.

[16] Section 3(1) provides that the MFMA applies to–
(a)
all municipalities;
(b)
all municipal entities; and
(c)
national and provincial organs of state to the extent of their financial
dealings with municipalities.
Section 3(2) in turn provides that where there is any inconsistency between
any provision of the MFMA and any other legislation which regulates any
aspect of the fiscal and financial affairs of municipalities, the provisions of
the MFMA shall prevail.9

[17] Section 15 provides for the appropriation of funds for expenditure. It
reads:
'A municipality may, except where otherwise provided in this Act, incur expenditure only–
(a)
in terms of an approved budget; and
(b)
within the limits of the amounts appropriated for the different votes in an approved
budget.'
The adoption of annual budgets for municipalities is provided for in s 16.10
Section 17(2) provides that an 'annual budget must generally be divided into
a capital and an operating budget in accordance with international best
practice, as may be prescribed'.

9 It reads:
'In the event of any inconsistency between a provision of this Act and any other legislation in force when this
Act takes effect and which regulates any aspect of the fiscal and financial affairs of municipalities or
municipal entities, the provision of this Act prevails.'
10 Section 16 is headed 'Annual budgets' and it reads:
'(1)
The council of a municipality must for each financial year approve an annual budget for the
municipality before the start of that financial year.
(2)
In order for a municipality to comply with subsection (1), the mayor of the municipality must table
the annual budget at a council meeting at least 90 days before the start of the budget year.
(3)
Subsection (1) does not preclude the appropriation of money for capital expenditure for a period not
exceeding three financial years, provided a separate appropriation is made for each of those financial years.'

[18] Finally, there is s 19 of the MFMA which is central to this appeal. Its
provisions have already been quoted in paragraph 4 above. In support of its
invocation of s 19, the municipality pleaded that: (a) the proposed acquisition
of the property constituted a capital project as contemplated; (b) it could spend
money on such a project only if– (i) the money for the project has been
appropriated in terms of s 17(2); (ii) the project has been approved by the
council; (iii) the sources of funding have been considered, are available and
have not been committed for other purposes. In addition, the council is
required to consider, before approving a capital project, that the projected cost
covering all financial years until the project is operational and future
operational costs and revenue on the project have been catered for.

[19] The municipality then asserted that: (a) the purchase price for the
property was never budgeted for; (b) its council never approved the project,
including the total cost thereof. Thus, the sources of funding were never
considered. Nor were projected costs covering all financial years until the
project is operational; and future operational costs and revenue considered.
Consequently, it was contended that the agreement that Merifon sought to
enforce was plainly unenforceable for want of compliance with the
peremptory provisions of s 19.

[20] It will be convenient first to deal with the most important issue in this
appeal for if it is determined in favour of the municipality that result would
render it unnecessary to delve into the other issues. This issue concerns the
question whether s 19 finds application in this litigation at all, to which I now
turn.

[21] The language of s 19 could not be clearer. It is by now well established
that in interpreting a statutory provision the language employed, its nature and
scope, the mischief sought to be prevented, consequences for non-compliance
and its purpose are all relevant factors.11 Equally important is the context in
which the provision under consideration is located.12 There can be no doubt
that one of the manifest underlying purposes of s 19 is to prevent
municipalities from spending money on capital projects that have not been
budgeted so as to ensure that transparency, accountability as well as fiscal and
financial discipline are fostered. Thus, it is beyond question that s 19 and the
other provisions adverted to above are intended to promote good governance
within the local sphere of government.

[22] Does s 19 apply to the transaction under consideration here? There can
be no denying that the procurement of land entails an acquisition of a capital
asset and thus a capital project as contemplated in s 19. There was no dispute
between counsel as to this categorisation. Nevertheless, counsel for Merifon
initially sought to argue that this section was not implicated in the litigation.

11 See, for example, Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] ZASCA 13; [2012]
2 All SA 262 (SCA); 2012 (4) SA 593 (SCA) para 18; Department of Land Affairs and Others v Goedgelegen
Tropical Fruits (Pty) Ltd [2007] ZACC 12; 2007 (10) BCLR 1027 (CC) ; 2007 (6) SA 199 (CC) para 53;
Independent Institute of Education (Pty) Limited v KwaZulu-Natal Law Society and Others [2019] ZACC
47; 2020 (2) SA 325 (CC); 2020 (4) BCLR 495 (CC) para 41; Bato Star Fishing (Pty) Ltd v Minister of
Environmental Affairs and Tourism and Others 2004 (4) SA 490 (CC); 2004 (7) BCLR 687 (CC) para 90;
Cool Ideas 1186 CC v Hubbard and Another [2014] ZACC 16; 2014 (4) SA 474 (CC); 2014 (8) BCLR 869
(CC) para 28.
12 See: Jaga v Dönges N O and Another; Bhana v Dönges, N O and Another 1950 (4) SA 653 (A) at 662G-
H in which Schreiner JA said:
'Certainly no less important than the oft repeated statement that the words and expressions used in a statute
must be interpreted according to their ordinary meaning is the statement that they must be interpreted in the
light of their context. But it may be useful to stress two points in relation to the application of this principle.
The first is that "the context", as here used, is not limited to the language of the rest of the statute regarded
as throwing light of a dictionary kind on the part to be interpreted. Often of more importance is the matter of
the statute, its apparent scope and purpose, and, within limits, its background.'

But when his attention was drawn to the provisions of s 3 (which explicitly
states that the MFMA applies to all municipalities) counsel was constrained
to accept that s 19 finds application in this case. This notwithstanding, counsel
argued that the MFMA does not apply to third parties such as private entities
like Merifon. Counsel's acceptance that s 19 binds the municipality raises the
question whether this section was in fact complied with by the municipality
when it concluded the agreement upon which Merifon relied for the relief it
seeks.

[23] Counsel for Merifon argued that the municipality had to all intents and
purposes complied with the prescripts of s 19. In developing his argument,
counsel submitted that the department had by letter, dated 6 March 2013,
confirmed the availability of the requisite funds. And, pursuant thereto, the
municipality had, on 22 March 2013, adopted a resolution to acquire the
property. In support of the latter contention counsel relied on the council
resolution adopted on 22 March 2013. Because of its centrality in counsel's
contention, it is necessary to quote this resolution again. It reads:
'1.
That the commitment letter from Department of Cooperative Governance, Human
Settlements and Traditional Affairs to purchase portion 5 and 6 of the farm Mooiplaats
434-LT is approved.'

[24] But as I see it, this resolution does not bear out counsel's proposition.
Even on a charitable interpretation of its terms, it cannot be read to mean that
the council in actual fact resolved to acquire the property. On its own terms,
it is no more than a mere recordal that '[t]he commitment letter from the
Department of Cooperative Governance, Human Settlements and Traditional
Affairs to purchase portion 5 and 6 of the farm Mooiplaats 434-LT is
approved' whatever this phraseology was intended to mean. This is neither a

case of being pedantic or indulging in pure semantics. Far from it. Rather, it
is because a prominent feature of the resolution heavily relied upon does not
support the case advanced by Merifon. As already indicated, all that the
municipality did was merely to 'approve' the commitment letter from
CoGHSTA. In contrast to the council resolution A901/29/04/2011 adopted on
29 April 2011 in relation to the purchase of portion 3 of the selfsame farm
Mooiplaats 434-LT which explicitly stated that '[c]ouncil approves that full
settlement of R4 million for the purchase of Portion 4 of the farm 434-LT
Mooiplaats in the current financial year 2010/2011', the 2013 resolution says
nothing of the sort. On the contrary, the 2011 resolution, unlike the one
adopted in 2013, is couched in explicit terms leaving no room for any doubt
as to its purport.

[25] It therefore follows that the high court was correct in concluding that
the agreement which is the foundation of Merifon's claim was legally
unenforceable on account of the municipality's non-compliance with the
prescripts of s 19. As the performance undertaken by the municipality under
the impugned agreement would have been unlawful it cannot be sanctioned
through the remedy of specific performance. This conclusion is indeed
determinative of the outcome of this appeal.

[26] But Merifon had another string to its bow. Relying on City of Tshwane
Metropolitan Municipality v RPM Bricks (Pty) Ltd [2007] ZASCA 28; 2008
(3) SA 1 (SCA) (RPM Bricks),13 Merifon invoked estoppel. However, its
counsel was cognisant of the fact that as a general rule estoppel cannot be
invoked in circumstances where to uphold it would be tantamount to a court

13 Paragraphs 11-13.

giving its imprimatur to an illegality.14 Accordingly, counsel argued that on
the facts of this case it was not incumbent upon Merifon to enquire whether
the municipality had observed the relevant internal arrangements or
formalities, but was entitled to assume that these were in actual fact complied
with.15

[27] Counsel's proposition is only correct so far as it goes. But in the context
of the facts of this case it is plainly unsustainable. This is because the
municipality's non-compliance with s 19 falls not in the category for which
counsel contended but in a different one where the conclusion of the
agreement in issue amounts to an act beyond or in excess of the statutory
powers of the municipality as a public authority. Thus, the principle of legality
is manifestly implicated for what the municipality had done was at odds with
the dictates of s 19. If the peremptory provisions of the MFMA were not
complied with, as I have found, the agreement to purchase the property cannot
be 'validated' through the doctrinal device of estoppel. To do so would render
the relevant provisions of the MFMA nugatory. And the public interest of
promoting transparency, accountability and good governance within the local
sphere of government, which is the underlying purpose of the MFMA, would
be undermined. And, as this Court made plain in RPM Bricks (para 13):
'failure by a statutory body to comply with provisions which the legislature has prescribed
for the validity of a specified transaction cannot be remedied by estoppel because that
would give validity to a transaction which is unlawful and therefore ultra vires.' (Citations
omitted.)
That is precisely the situation in this case in more than one respect.

14 See in this regard: Trust Bank van Afrika Bpk v Eksteen 1964 (3) SA 402 (A) at 411H-412B.
15 See also, National and Overseas Distributors Corporation (Pty) Ltd v Potato Board 1958 (2) SA 473
(A); Potchefstroom se Stadsraad v Kotze 1960 (3) SA 616 (A).

[28] It remains to deal with the last of Merifon's principal submissions. It
relates to the authority of the municipality's municipal manager to conclude
the impugned agreement on its behalf. It is not necessary to delve into this
aspect in the light of the earlier conclusion that the agreement is hit by s 19.
Suffice it to say that whether the municipality's representative had the
requisite authority, actual or ostensible, to conclude the agreement on its
behalf matters not, because the agreement itself is unenforceable for want of
compliance with the peremptory prescripts of the MFMA, and in particular s
19 for the reasons stated above.

[29] To sum up: it was plainly impermissible for the municipality to enter
into an agreement involving a capital project contrary to the prescripts of s 19.
This being the case, it must ineluctably follow that this Court cannot grant the
order for specific performance sought by Merifon in this litigation. To do so
in the face of the clear provisions of s 19 would, as Innes CJ said in Schierhout
v Minister of Justice 1926 AD 99 at 109,16 be tantamount to granting the
court's imprimatur to something proscribed by the law.17 The reason for this
principle is self-evident: no court can compel a party to flout the law and,
more fundamentally, the principle of legality which is the cornerstone of our
constitutional democracy. And sight should never be lost of the fact that in

16 Innes CJ put it thus:
'It is a fundamental principle of our law that a thing done contrary to the direct prohibition of the law is void
and of no effect . . . So that what is done contrary to the prohibition of the law is not only of no effect, but
must be regarded as never having been done - and that whether the law giver has expressly so decreed or
not; the mere prohibition operates to nullify the act.' (Emphasis added.)
17 Lester v Ndlambe Municipality and Another [2013] ZASCA 95; [2014] 1 All SA 402 (SCA); 2015 (6) SA
283 (SCA) paras 23-24 and the authorities therein cited; Home Talk Developments (Pty) Ltd and Others v
Ekurhuleni Metropolitan Municipality [2017] ZASCA 77; [2017] 3 All SA 382 (SCA); 2018 (1) SA 391
(SCA) paras 71-72; Cool Ideas 1186 CC v Hubbard and Another [2014] ZACC 16; 2014 (4) SA 474 (CC);
2014 (8) BCLR 869 (CC) para 99.

exercising their judicial functions, courts are themselves constrained by the
principle of legality.18 With all of Merifon's principal arguments having been
determined against it, this result renders it unnecessary to consider the other
related issues argued on its behalf.

[30] For all the aforegoing reasons, Merifon's appeal against the dismissal
of its action by the high court is ill-founded. It therefore falls to be dismissed.
In the result the following order is made:
The appeal is dismissed with costs, including the costs attendant upon the
employment of two counsel.

________________________
X M PETSE
ACTING PRESIDENT
SUPREME COURT OF APPEAL

18 National Director of Public Prosecutions v Zuma [2009] ZASCA 1; 2009 (2) SA 277 (SCA); 2009 (1)
SACR 361 (SCA); 2009 (4) BCLR 393 (SCA); [2009] 2 All SA 243 (SCA) paras 15-16.

Appearances

For appellant:

C A da Silva SC (with him D Prinsloo)
Instructed by:
Becker Attorneys Polokwane, Bellville

Symington & De Kok, Bloemfontein

For first respondent:
A B Rossouw SC (with him J A L Pretorius)
Instructed by:
Mohale Attorneys, Polokwane
Honey Attorneys, Bloemfontein

For second respondent: None

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
MEDIA SUMMARY OF JUDGMENT DELIVERED
Merifon (Pty) Ltd v Greater Letaba Municipality and Another (1112/2019)
[2021] ZASCA 50 (22 April 2021)
From:
The Registrar, Supreme Court of Appeal
Date:
22 April 2021
Status:
Immediate
The following summary is for the benefit of the media in the reporting of the
case and does not form part of the judgments of the Supreme Court of Appeal

The Supreme Court of Appeal (SCA) today dismissed an appeal against the judgment of the
Limpopo Division of the High Court, Polokwane (high court). On 18 July 2019 the high court
dismissed an action instituted by the appellant, Merifon (Pty) Ltd, against the first respondent,
Greater Letaba Municipality (the municipality) for payment of the sum of R52 million and
R209 892. 90 being the purchase price and transfer costs respectively in respect of immovable
property that the appellant had sold to the municipality on 7 March 2013 together with ancillary
relief.

The municipality resisted the claim on four principal grounds. First, it denied that its
representative was duly authorised to conclude the agreement on its behalf. Second, it pleaded
that the agreement was illegal and null and void for want of compliance with s19 of the Local
Government: Municipal Finance Management Act 56 of 2003 (the MFMA) because the
subject-matter of the sale constituted a capital project. Third, it alleged that the municipal
council never approved the purchase of the property. Fourth, it asserted that it was precluded
from incurring expenditure otherwise than in accordance with an approved budget and within
the limits of the amounts appropriated in the approved budget. The municipality also filed a

counter-claim in which it sought an order declaring the impugned agreement null and void. In
the alternative the municipality alleged that the agreement fell to be rectified because to the
knowledge of the contracting parties the purchase price and transfer costs were not going to be
paid by the municipality but by the Limpopo Provincial Government: Department of
Cooperative Government Human Settlements and Traditional Affairs (CoGHSTA).

Section 19 of the MFMA provides that a municipality may spend money on a capital project
like the acquisition of land only if the money for the project has been appropriated in the capital
budget subject to compliance with certain statutory requirements. The MFMA, asserted the
municipality, also provides that a municipality may not spend money that has not been
appropriated in terms of an approved budget and within the limits of the amounts appropriated
for the different votes in an approved budget.

It was not in dispute in this case that the municipality did not appropriate any funds in its capital
budget in terms of an approved budget for the 2012/2013 financial year. It was common cause
that both the purchase price and transfer costs were, as contemplated by the parties, to be paid
by the CoGHSTA from its budget and not from the municipality. Hence the municipality did
not budget for these amounts. Unsurprisingly, the municipality did not have funds appropriated
for the project. But the Provincial Treasury refused to authorise payment of the amounts
payable stating that the purchase price was exorbitant.

The SCA found that s 19 of the MFMA was of application to the parties' agreement. And as
the peremptory provisions of s 19 were not complied with the agreement was not enforceable.
The SCA also rejected Merifon's reliance on estoppel holding that as the agreement was invalid
for want of compliance with s 19 it could not be validated through the deployment of the
doctrine of estoppel. Hence Merifon's appeal was dismissed with costs, including the costs of
two counsel.

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