THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case no: 289/2018

In the matter between:
POLOKWANE LOCAL MUNICIPALITY
APPELLANT
and
GRANOR PASSI (PTY) LTD

FIRST RESPONDENT
REGISTRAR OF DEEDS

SECOND RESPONDENT

Neutral citation: Polokwane Local Municipality v Granor Passi (Pty)
Ltd (289/2018) [2019] ZASCA 5 (1 March 2019)
Coram: PONNAN, TSHIQI, WALLIS, ZONDI and DAMBUZA JJA
Heard:
19 February 2019
Delivered: 1 March 2019
Summary: Review – sale of land by municipality in 1988 – property not
transferred to purchaser – municipality resolving that purchaser had
provided insufficient proof that the purchase price had been paid – on that
basis resolving not to transfer land to purchaser – decision reviewable on
grounds of material error of fact – all evidence showed price had been
paid – decision set aside and referred back to municipality – factors to be
taken into account in deciding whether to proceed with transfer.

ORDER

On appeal from: Gauteng Division of the High Court, Pretoria (Thobane
AJ, sitting as court of first instance):
The appeal is dismissed with costs.

JUDGMENT

Wallis JA (Ponnan, Tshiqi, Zondi and Dambuza JJA concurring)
[1] On 7 December 1988 the appellant’s predecessor, the Pietersburg
Municipality,1 concluded an agreement with the respondent, Granor Passi
(Pty) Ltd (Granor), for the sale to it of an immovable property described
as lot 5665, Pietersburg Extension 12 (the property), for a purchase price
of R181 000. A deposit of 20 per cent of the purchase price was payable
in cash on the date of sale and the balance was payable thereafter in 60
equal monthly instalments, inclusive of interest. Possession of the
property was given immediately and Granor was obliged, within three
years of the date of conclusion of the agreement, to erect an industrial
building on the site to a minimum value of R100 000. If it failed to do so
the municipality would be entitled to take the property back.

[2] Granor claimed that it paid the purchase price in accordance with
the agreement and that the final instalment was paid by 1994. It was
common cause that it constructed industrial buildings on the site with the

1 I refer to the appellant and its predecessor individually and collectively as ‘the municipality’.

approval of the municipality. The current value of the improvements it
has made over the years was assessed as some R22 million. The property
and the buildings so constructed, together with two adjacent properties
owned by it, are used for the purpose of its business of processing fruits
into liquid concentrates. Since 1994 the municipality has demanded and
Granor has paid rates on the property on the footing that it was the owner.
From 2010 rates were not charged separately in respect of the property,
which Granor attributed to the consolidation of this rates account with
those of its other two properties. While the municipality denied this, it
gave no explanation for the sudden cessation of rates accounts and its
denial can safely be rejected. In approximately 2011, it was discovered
that the property was still registered in the name of the appellant
municipality, now the Polokwane Local Municipality. Granor’s
investigations suggested that the municipality had given instructions to
two separate firms of attorneys to attend to the transaction but this was
not done. Further investigation did not reveal why the property was not
transferred to Granor.

[3] On 22 November 2013 a letter was written on behalf of Granor to
the Municipal Manager of Polokwane asking that the municipality
authorise transfer of the property to Granor. Matters proceeded slowly
thereafter, and documents were furnished to the municipality with a view
to establishing that the purchase price had been paid. The last item of
correspondence was a letter dated 27 November 2014. Eventually on
26 February 2015 the council of Polokwane passed the following
resolution:
‘1. That Messrs Granor Passi’s audited financial statements as proof of Erf 5665
Pietersburg Ext 12’s loan repayment and further consents to transfer Erf 5665
Pietersburg Ext 12 to Messrs Granor Passi not be accepted.

2. That negotiations be conducted with Granor Passi in relation to a lease agreement.
3. That the Municipal Manager be mandated to enter into negotiations with Granor
Passi.’
The letter conveying this resolution to Granor concluded with the
following sentence:
‘Kindly advise Council within 7 days from date of this letter of your acceptance of the
above listed conditions.’

[4] On 4 August 2015 Granor launched the present proceedings to set
aside this resolution and for an order that the municipality transfer the
property to Granor. Thobane AJ granted the first order and remitted the
matter to the municipality for reconsideration in the light of the principles
set out in the judgment. From his judgment it is apparent that he thought
that the municipality needed to consider its constitutional obligations
especially in the light of its dealings with Granor over the previous 27
years. The appeal is with his leave.

The issues
[5] Counsel for the appellant submitted that there were three grounds
upon which the appeal should be upheld. As set out in the answering
affidavit and the heads of argument for the municipality, his starting point
was the contention that the main cause of action was a claim for specific
performance of the contract of sale. On this footing he advanced three
propositions. First, the claim to transfer of the property had prescribed.
Second, and in any event, the requirements for specific performance of
the sale contract were not satisfied, in that Granor had not proved its
contractual entitlement to specific performance. In particular he
contended that there was insufficient proof that it had paid the purchase
price in full. Third, he submitted that in the light of these problems the

resolution took the matter no further and was not relevant to the dispute
between the parties. Setting it aside served no purpose.

[6] This approach inverted the proper enquiry, by ignoring the way in
which the application was brought and dealt with in the high court. The
municipality’s resolution must be seen against the background that
Granor had furnished it with documents in proof of its payment of the
purchase price. In the light of that proof, it asked that the municipality
transfer the property to it. Paragraph 1 of the resolution stated that the
municipality’s council considered the tendered proof of payment
insufficient to satisfy it that the purchase price had been paid. For that
reason, and for that reason alone, it was unwilling to consent to transfer
of the property to Granor.

[7] The only issue under consideration at the council’s meeting on
26 February 2015 was whether Granor had furnished adequate proof that
it had paid the purchase price of the property. Granor asked that the
documents it had furnished be accepted as such proof. The request for
transfer of the property would, so it believed, flow automatically from
such acceptance. Prior to the council meeting there was no indication that
any other reason existed for not transferring the property in accordance
with the sale agreement. In the entire period between 2011, when Granor
first raised the issue, and February 2015 when the resolution was taken,
the municipality had not advanced any other reason for not transferring
the property to Granor.

[8] The application was expressly directed at reviewing and setting
aside the council’s resolution. The claim for transfer of the property
flowed from that. It was incorrect to say that the cause of action was a

claim for specific performance founded in the law of contract. Not only
did the prayer for relief start with an order for the review and setting aside
of the resolution, but the founding affidavit, after setting out the facts of
the case, proceeded under the heading “Reviewable Administrative
Action’. It would be hard to find a clearer indication that the case was
primarily based in public law and not the law of contract.

[9] That is how the high court understood the case before it. The order
it made set aside the resolution, but did not order the municipality to
transfer the property to Granor. The judge said that whether the
municipality should be ordered to transfer the property to Granor was a
question that would arise ‘in the event that the resolution is set aside’. He
then referred that question and any issues relating to it back to the
municipality for reconsideration in the light of various other
considerations set out in the judgment. The appeal is directed against the
order upholding the review and setting aside the resolution. There was no
cross appeal. Accordingly the question whether Granor is entitled to
transfer of the property into its name was not an issue before us in this
appeal. The only issue was whether the high court was correct to set aside
the resolution.

Reviewing the resolution
[10] In a manner that has repeatedly been deplored by the courts,
Granor’s founding affidavit relied on a cornucopia of grounds under
PAJA2 for setting aside the resolution. Each of ss 6(2)(a)(iii), (c), (d),
(e)(ii), (iii) and (vi), (f)(ii) and (h) was invoked, without any endeavour to
identify which was truly relevant and on what factual basis it was being

2 The Promotion of Administrative Justice Act 3 of 2000.

relied on. The judgment of the high court adopted a number of these in
setting aside the resolution.

[11]  In the high court the municipality contended that the resolution did
not embody administrative action in terms of PAJA and accordingly
could not be reviewed under that statute. It did not pursue the argument in
its heads of argument, or before us, so the point can be disposed of quite
simply. The resolution undoubtedly embodied a decision. Was it of an
administrative nature? In my view a decision regarding the
implementation of a contract to which the municipality is a party is an act
of administration. It was taken by an organ of state, exercising a public
power or function in relation to the enforcement of a contract concluded
in terms of the empowering provisions governing transactions of this
character.3 It had a direct, external legal effect and adversely affected
Granor’s rights. It did not fall within any of the statutory exceptions.
Accordingly, it was administrative action and reviewable under PAJA.4

[12] The municipality contended that Granor’s review was fatally
defective because it was not pursued in terms of rule 53 of the Uniform
Rules of Court. There was no merit in the point. This court long ago held
that this is ‘sterile formalism’ and that there is no obligation on a litigant
to pursue a review in terms of rule 53.5 The only impact of its not doing
so is that it deprives itself of the procedural advantages offered by the
rule.

3 The disposal of publicly owned land by a municipality has always been regulated by legislation and it
is not disputed in this case that provisions of the Local Government Ordinance 17 of 1939 had
governed the initial sale and that post-democracy legislation governing such transactions may have
been applicable to the actual transfer that Granor desired.
4 Minister of Defence and Military Veterans v Motau and Others [2014] ZACC 18; 2014 (5) SA 69
(CC) para 33.
5 Jockey Club of South Africa v Forbes 1993 (1) SA 649 (A) at 660D - 663D.

[13] The high court’s judgment dealt with several different grounds of
review. It said that the characterisation of Granor’s payments as ‘loan
repayments’ was clearly wrong. It held that the rejection of Granor’s
financial statements as proof of payment of the price was factually
incorrect and as a result irrelevant considerations were taken into account
or the action was not rationally connected to the facts before the decision
maker. Finally, it held that because the price had been paid; extensive
improvements had been constructed on the site with the municipality’s
approval; and Granor had been in occupation for over 25 years and had
paid rates and taxes, ‘the siren of irrationality rings loud’.

Factual error
[14]  It is only necessary to have regard to the ground of review that the
decision was based on clear factual error on the part of the municipality.
In Pepcor,6 factual error was recognised as a ground of review under the
common law, read in the light of s 33 of the Constitution. That was before
PAJA was enacted. It was, however, suggested in an obiter dictum that
this could fall within s 6(2)(e)(iii), on the basis that such factual errors
meant that irrelevant considerations were taken into account in taking the
decision. The approach has been endorsed in subsequent decisions of this
court and certain other provisions of PAJA have been identified as
supporting this ground of review.7 The scope of such review was

6 Pepcor Retirement Fund and Another v Financial Services Board and Another [2003] ZASCA 56;
2003 (6) SA 38 (SCA); [2003] 3 All SA 21 (SCA) paras 46 - 48.
7 Chairpersons’ Association v Minister of Arts and Culture and Others [2007] ZASCA 44; 2007 (5) SA
236 (SCA); [2007] 2 All SA 582 (SCA) para 48; Government Employees Pension Fund and Another v
Buitendag and Others [2006] ZASCA 166; 2007 (4) SA 2 (SCA); [2007] 1 All SA 445 (SCA) para
12; Chairman, State Tender Board v Digital Voice Processing (Pty) Ltd; Chairman, State Tender
Board v Sneller Digital (Pty) Ltd and Others [2011] ZASCA 202; 2012 (2) SA 16 (SCA); [2012] 2 All
SA 111 (SCA)  para 34; Minister of Home Affairs and Another v Public Protector  [2018] ZASCA 15;
2018 (3) SA 380 (SCA); [2018] 2 All SA 311 (SCA) para 53.

explained in Dumani,8 which held that factual error by a decision maker
vested with the power to determine the facts would only constitute
reviewable error if the error were one in regard to a material fact, where
the facts were uncontentious and objectively verifiable. Uncontentious in
this context does not restrict the enquiry to instances where the decision
maker has overlooked something and exclude cases where the decision
maker’s view of the facts is erroneous. It must be understood in
conjunction with the requirement that the facts be objectively verifiable.
If, on objective verification, there is no room for debate or argument
about the correct facts, they will be uncontentious.

[15]  The factual basis for the council’s decision was that there was no
adequate proof that Granor had paid the full purchase price. The high
court held this to be a material error of fact. I agree. The evidence before
the council pointed only in one direction, namely, that the price was fully
paid in accordance with the provisions of the contract of sale. The
cumulative effect of that evidence was irresistible.

[16] The starting point was the obligation to pay twenty percent of the
purchase price (R36 200) as a deposit. At a meeting between
representatives of Granor on the one hand, and Mr Maleka and Ms Muller
from the municipality on the other, the latter said that they had a copy of
the cheque with which the deposit was paid. There was no dispute that the
deposit was paid.

8 Dumani v Nair and Another [2012] ZASCA 196; 2013 (2) SA 274 (SCA); [2013] 2 All SA 125
(SCA) paras 32 and 33.

[17] Granor provided the municipality with extracts from its audited
annual financial statements reflecting its accounts from 1990 to 1994,
together with an affidavit from the auditor stating that payment for the
property was done by way of monthly instalments of R3 444.78 to
“Pietersburg Stadsraad’ and that these were reflected in the annual
financial statements. He said that the final instalment was paid during the
1994 financial year and that the debt to the municipality was reflected as
being fully paid during that year.

[18]  The audited annual financial statements bore out what the auditor
said in his affidavit. In 1990 they reflected the property as a fixed asset at
a cost of R181 000. The municipality was shown as a creditor for an
amount repayable in equal monthly payments of R3 444.78. The
outstanding balance at the end of the 1990 year, namely 28 February
1990, was R118 012. Accepting that by that stage fourteen instalments
had been paid, totalling R47 626.92, it is clear that a substantial portion of
these payments – some R21 000 – was attributable to interest on the
amount outstanding. In other words, as would occur with a loan secured
by a mortgage bond, the repayments were applied in the first instance to
interest and then to the reduction of capital. It is not surprising in those
circumstances that the notes to the annual financial statements
erroneously described the amount owing to the municipality as being
secured by a first mortgage bond over the property. That accorded with
their accounting treatment.

[19] In each of the following financial years the same picture emerged
from the annual financial statements. The property was shown as an asset
at cost and the indebtedness to the municipality diminished year by year
to R92 681 in 1991, R60 626 in 1992, R29 151 in 1993 and zero in 1994.

Although the point was not mentioned in the affidavits and therefore no
explanation for any perceived anomaly had been required from Granor,
counsel tried in argument to suggest that there was a problem with these
amounts as the decline in the capital owing from 1991 to 1992 was
marginally greater than the decline in the corresponding period from 1992
to 1993. He sought to suggest that for this reason and in the absence of an
amortisation schedule no reliance could be placed on the accounts. The
argument was a factual one, impermissibly raised in oral argument.
Granor had been afforded no opportunity to respond to it. It was,
accordingly, not open to the municipality to raise it. In any event,
whatever the explanation, which may have been nothing more than an
adjustment in the books of account of Granor, or the correction of an
error of calculation, it did nothing to undermine the unequivocal record of
monthly payments of R3 444.78.

[20] Those payments were what the sale agreement required. The
relevant clause said that the balance of the purchase price, after payment
of the deposit, was to be made in no more than sixty equal monthly
instalments together with interest calculated on the monthly reducing
balance, from the date of sale, at the same rate of interest applicable to the
municipality on the date of purchase on its ‘GLF’.9 Two points of
importance emerged from this. The first was that the monthly payments
were to be equal and calculated on the reducing monthly balance owing.
The second, contrary to counsel’s argument, was that the interest rate was
fixed at the outset and did not fluctuate from time to time during the

9 The agreement was couched in the Afrikaans language and the relevant clause read:
‘Die balans van die koopprys in hoogstens 60 gelyke maandelikse paaiemente tesame met rente
bereken op die maandelikse verminderende saldo, vanaf die koopdatum teen dieselfde rentekoers as
wat op die koopdatum op die Raad se GLF van toepassing is.’
The acronym GLF was not explained and an inaccurate translation furnished to the members of the
court said CLF.

payment period. That is what enabled the monthly payments to be
calculated accurately in advance. There is no reason to doubt that the
monthly repayments were calculated at the outset as being R3 444.78.

[21] The directors of Granor at the relevant times prepared the annual
financial statements. They did so long before any dispute arose and at a
stage when there was no reason for them to misrepresent the situation.
The auditor’s responsibility was to consider the statements, test the
entries, establish that the assets reflected in the assets register existed, and
check that the accounts did not contain any material errors or
misstatements. Having done that, which in a conventional audit is done
by testing the accuracy of the entries in the accounts against the internal
records of the company, the auditor certified that the annual financial
statements were a reasonable reflection of the financial position of the
company for the years in question in accordance with the requirements of
the Companies Act.10 The purchase of the property was a major
transaction, giving rise to a substantial indebtedness. It would necessarily
have been checked as part of the audit process. When the auditor deposed
to an affidavit confirming that the monthly payments were made and the
full purchase price discharged, there was no reason to disbelieve him.

[22] Apart from this financial material, Granor also provided the
municipality with a letter from its then town clerk – the equivalent of the
modern municipal manager – dated 1 December 1993 and recording a
council decision taken on 29 November 1993. The relevance of these
dates is that they correspond exactly with the date on which the final
payment in terms of the sale agreement was due. The letter dealt with a

10 At the time the Companies Act 63 of 1973.

proposal to consolidate the property together with two other properties,
one owned by the municipality and one by Granor, as well as a portion of
Kelsie Street, the cul-de-sac giving access to all three properties. In
exchange a portion of another property owned by Granor and abutting on
the proposed consolidated lot would be transferred to the municipality.
The letter is instructive. First, it referred to the consolidation of the
property (erf 5665) with the other erven forming the proposed
consolidated lot to be owned by Granor. Only if Granor owned all three
properties could that occur. In turn, that would only be the case if Granor
had paid the purchase price of the property. Given the date of this letter
there can be no doubt that it had done so. Second, the letter said expressly
that the municipality had disposed of all three properties to Granor. Third,
it described the property as being owned by Granor. Fourth, it recorded
that the municipality’s attorneys were to attend to the relevant
conveyancing at Granor’s expense.

[23] It is inconceivable that the decision by the council could have been
taken, or the letter written, if Granor had not paid the purchase price of
the property. Negotiations in regard to the exchange agreement appeared
to have progressed slowly because there was some later correspondence
in 1994 about the issue. One letter dated 14 October 1994 from the
municipality’s conveyancers was significant because it referred to the
exchange agreement (‘die verdere ooreenkoms’) and said that it would be
dealt with simultaneously with the other transaction (‘gelyktydig met die
ander transaksie’). In context that could only be a reference to the transfer
of erf 5665 (the property) to Granor.

[24] When the municipality passed the challenged resolution there is
nothing to indicate that it had any information before it to controvert

Granor’s contention that the purchase price had been paid. Certainly none
has been identified. The information it had been given was clearly the
best available from Granor’s side, as the original cheque stubs or other
records of payment would long since have been destroyed. If it consulted
its own records, which is uncertain because there is no reference to its
officials doing so, that did not produce any evidence refuting Granor’s
claim to have paid in full. As matters stood at that stage therefore,
everything available to the council pointed to the conclusion that Granor
had indeed paid the purchase price in full. Its conclusion to the contrary
was manifestly erroneous on the information before the council.

[25]    As the ground of review is material factual error, I accept in
favour of the municipality that, even if, on the material then available to
the decision maker, the decision appeared to be erroneous, if it later
transpired on the basis of subsequently discovered information that the
factual position was otherwise, or at least open to some doubt, the
requirement of the facts being objectively verifiable and uncontentious
would not be satisfied. In this case, however, not only has no such further
information been discovered, but there is also no indication that the
municipality has looked for it.

[26] The acting municipal manager deposed to the answering affidavit.
She said that in regard to legal submissions she acted on the legal advice
received and accepted by the municipality. I assume, in mitigation of her
and the municipality’s response to Granor’s application, that the legal
advisers guided the municipality in the approach it adopted in resisting
the review. If so they were ill advised for the reasons that follow.

[27] I have already adverted in para 8 to the misconception that the
application was one for specific performance as opposed to a review of
the council’s decision. On that erroneous footing the person who drafted
the answering affidavit thought that it was permissible to do so with a
minimum of factual enquiry and a minimum of facts from the council.
Instead, like a poorly drafted pleading, the affidavit contented itself with
bare denials of virtually everything, as if it were open to the municipality
simply to put Granor to the proof of everything. To this were added some
technical defences and the defence of prescription.

[28] Confining myself for the present to the question of payment, the
answering affidavit denied:
 Receipt of payment of the deposit;
 Receipt of payment of the sixty instalments of R3 444.78;
 Receipt of the final instalment during 1994;
 That Granor had established ‘due compliance with its payment
obligation’.

[29] Not a word was said of any search undertaken by municipal
officials in the records of the municipality to ascertain what payments had
been made. There was no suggestion that such records were not available.
Council minutes reflecting the dealings with the property would have
been relevant. The absence of any record of non-payment by Granor in
such minutes would have been a strong indication that payment had been
made. The municipality’s financial records and audited accounts should
have been examined for details of this transaction. It appears to have
undertaken the development of Pietersburg Extension 12 for business and
industrial purposes. There should in the ordinary course have been files

dealing with this, reports to council and references in council minutes,
and audited accounts in this regard.

[30]  A municipality is not like private persons or entities, which are
only obliged to retain records for limited periods in terms of legislation
governing income tax and other obligations to the fiscus. Bank accounts
for the period may have been available either in municipal records or
from its bankers. There is reference in the correspondence to two files
dealing with this matter in the possession of the municipality. They were
not produced, nor was there a suggestion that an attempt had been made
to find them and look at their contents. If the records had been sought and
could not be found for any reason, one would have expected this to be
explained.

[31]  The denial that the deposit was paid was extraordinary. The
municipality admitted Granor’s allegation that their representatives
attended a meeting with Mr Maleka and Ms Muller, where they were told
that the municipality was in possession of a copy of the cheque with
which the deposit was paid. How could they then deny payment? If they
had a cheque showing that payment was made in 1988, why did they not
look in their records for proof of payment of the instalments from that
date until 1993? The inevitable inference is that had they done so it would
have demonstrated that Granor was correct in saying that it had paid the
price.

[32] There appeared to be no appreciation that, in denying receipt of
payment of the instalments, the municipality was accusing the auditor, Mr
Ferreira, of lying in his affidavit and of having falsely certified Granor’s
annual financial statements for the relevant years as being a true

reflection of the financial position of the company. Those are serious
charges for which no factual foundation was laid.

[33]  Denials of this character were part of a pattern that recurred
throughout the affidavit. For example, the final letter written before the
council meeting where the resolution was taken was addressed to
Councillor Sello and referred to a meeting with him on 26 November
2014. The answering affidavit first said that the deponent did not know
who attended the meeting or what was discussed and therefore denied
that such a meeting took place. It then complained that the letter should
have been addressed to the deponent ‘as Municipal Manager’. The
deponent was not the incumbent of that post at the time. Although the
letter confirmed that Councillor Sello was in possession of all the
documents previously furnished to the municipality in proof of payment,
the affidavit complained that it did not contain any ‘source documents’
proving payment of the price and suggested that without them the council
could not be persuaded that the price had been paid.

[34] This was wholly obstructive. Councillor Sello, as a simple internet
search revealed,11 was at the time the member of the mayoral committee
responsible for Spatial Planning and Development. He was accordingly
the correct person for Granor to have approached in regard to this matter.
The deponent does not indicate whether she approached councillor Sello
for information before deposing to her affidavit. Nor did any member of
the council depose to an affidavit to explain on what basis they arrived at
their conclusion. Assuming that by ‘source documents’ she meant paid
cheques or deposit slips that was an impossible demand more than twenty

11 http://www.polokwanecity.co.za/driven-desire-serve-people/ accessed 23 February 2019.

years after the event. No attempt was made to identify any problems in
regard to the accuracy of the annual financial statements.

[35] This obstructive approach merely reinforced the conclusion that the
purchase price had been paid and that the municipality was not in a
position to say otherwise. Instead it resorted to bare denials in the hope
that it could succeed in resisting the review on a question of onus. It is to
my mind inconceivable that this approach would have been adopted if the
municipality had any factual basis for denying receipt of the purchase
price. Against that background the endeavour to exploit difficulties of
proof occasioned by the passage of time verged on the dishonest.12

[36] Furthermore, there were at least three things wrong with that
approach. First, it meant that the municipality produced no evidence in
support of its denials, even though these necessarily had as their corollary
positive statements that the price had not been paid. So there was no
evidence in support of its case and its denials, couched, as they were, in
the form of positive statements that the price had not been paid, alleged
dishonesty without a grain of proof.

[37] The second point was that much of the relevant evidence was
within its exclusive knowledge. An obvious illustration of this was the
attempted reliance on non-compliance with s 79(18) of the Local
Government Ordinance 17 of 1939. All records in that regard would have
been under its control and if there had been non-compliance it would
have known of it. The approach adopted was to say that Granor had failed

12 See the comments by Meer J in regard to similar conduct in litigation by an organ of state in Quinella
Trading (Pty) Ltd and Others v Minister of Rural Development and Land Reform and Others [2010]
ZALLC 14; 2010 (4) SA 308 (LCC) para 34.

to establish that there had been compliance with the requirements of this
section and ‘In the premises, such compliance is denied.’ That amounted
to an unfounded accusation that previous council officials and councillors
had acted unlawfully in concluding the original deed of sale.

[38] Granor was entitled to invoke the maxim omnia praesumuntur rite
esse acta in favour of compliance. Furthermore, where a matter is within
the exclusive knowledge of one of the litigants, less evidence will be
required from the other party to discharge the onus of proof.13 That is
particularly the case where the party possessed of the relevant knowledge
does not produce it. And if the evidence provided by the party on whom
the burden of proof lies calls for an answer, as was undoubtedly the case
here, the failure to produce countervailing evidence strengthens the case
for the party bearing the onus.14

[39] The third point, and most importantly in our constitutional
democracy, is that this approach ignored the obligations resting on the
municipality to deal openly, fairly, and in an accountable way with its
citizens, including its corporate citizens. One of the founding values of
our democracy is that government should be accountable, responsive and
open.15 The municipality’s approach was that this was simply a matter of
contract. That ignored authority in this court that, even when dealing with
matters arising in a contractual context, a municipality may be burdened
with obligations of procedural fairness.16 In Joseph the Constitutional

13 Union Government (Minister of Railways) v Sykes 1913 AD 156 at 173-4
14 Ex parte the Minister of Justice: in re Rex v Jacobson & Levy 1931 AD 466 at 479; Marine & Trade
Insurance Co Ltd v Van der Schyff 1972 (1) SA 26 (A) at 39G-H; Malan v City of Cape Town [2014]
ZACC 25; 2014 (6) SA 315 (CC); 2014 (11) BCLR 1265 (CC) para 73.
15 Constitution s 1(d) and s 41(1)(c). In regard to local government see s 152(1)(a).
16 Logbro Properties CC v Bedderson NO and Others [2002] ZASCA 135; 2003 (2) SA 460 (SCA);
[2003] 1 All SA 424 (SCA) para 10.

Court endorsed the need for administrative law to ‘regulate administrative
decisions which affect the enjoyment of rights, properly understood, at
least for the purposes of procedural fairness’. This demanded of organs of
state that they act in a manner that is responsive, respectful and fair when
fulfilling constitutional and statutory obligations.17

[40] Most recently, this court, in Sanparks18 returned to the topic of
when administrative law principles intrude into contractual relationships.
The following passages from the judgment of Navsa JA and Davis AJA
seem apposite to the present case:19
‘[37] There is no bright-line test for determining whether administrative principles
intrude in relation to a contract involving an organ of state and a private party.
However, there are indicators. One might rightly ask whether coercive state power
can be brought to bear by a state organ on the private party. Further, one will be
constrained to consider whether the public interest is affected by the exercise of the
contractual right … The contractual terms, seen contextually, will also be scrutinised
to determine how the parties envisaged disputes in relation to their agreement being
dealt with prospectively.
[38] Having regard to the authorities referred to by Dambuza JA20 … a court should
be concerned with whether, in the circumstances of the case, the state can be said to
be acting fairly, which  includes, but is not limited to, questions of procedural
propriety. It does not necessarily follow, where there is an equality of arms in relation
to the conclusion of a contract and where the public interest is not directly involved,
that the private party will be able to resort to administrative-law principles. Each case
has to be decided on its own merits and courts will exercise a value judgment.

17 Joseph and Others v City of Johannesburg and Others [2009] ZACC 30; 2010 (4) SA 55 (CC) paras
44-45
18 South African National Parks v MTO Forestry (Pty) Ltd and Another [2018] ZASCA 59; 2018 (5)
SA 177 (SCA) paras 24 to 27.
19 Paras 37 to 39.
20 The majority judgment in relation to which this was a concurrence.

[39] Proportionality is a constitutional watchword, the exercise of which can be
employed in adjudicating whether to import administrative-law principles into cases
involving an organ of state and a private party.’

[41] The net effect of the absence of countervailing evidence from the
municipality was to strengthen the conclusion that the council’s decision
was fatally infected by the material factual error that the purchase price
had not been paid. On the evidence before it the price had been paid and
it had to take any decision as to the fate of the sale on that basis. It did not
do so. Accordingly, the resolution embodying its decision was fatally
flawed and fell to be set aside. The decision of the high court to do so
cannot be faulted.

The remittal
[42] There was no suggestion by the municipality that the order for
remittal was incorrect or inappropriate. It would, however, be of
assistance to explain, in the light of this judgment, what considerations
should underpin the municipality’s reconsideration of Granor’s request
that it implement the sale agreement and transfer the property to Granor.

[43]  Firstly, the issue of payment of the purchase price has been
determined. The reconsideration must take place on the basis that Granor
paid the price in full as reflected in its annual financial statements.
Secondly, and as I trust is apparent from paras 37 and 38 above, unless,
after investigation in the records of the municipality, it appears that there
is a proper factual basis for the suggestion that there was non-compliance
with s 79(18) of the Local Government Ordinance 17 of 1939, or any
other statutory provision that applied to this sale when it was concluded,

the reconsideration should be on the basis that all requirements of law for
the validity of the sale were satisfied.

[44] Thirdly, in regard to the alleged non-compliance with s 14 of the
Local Government: Municipal Finance Management Act 56 of 2003 (the
MFMA), this is not a ground for deciding not to implement the
transaction and transfer the property. That is a question that must be
determined separately and at the outset. If the municipality concludes that
it should perform in terms of the agreement, it will then be obliged to
determine whether there are any legal requirements to be satisfied in
order for performance to occur. If there are, it must then take all the steps
necessary to perform. I make no finding on whether performance would
require compliance with s 14(2) of the MFMA and whether it is open to
rely on this legislation to disturb an existing sale of property (c/f s 14(3)).

[45] Fourthly, in regard to prescription, I point out that there is no
obligation on the municipality to invoke this to resist the claim for
transfer. In the circumstances of this case, it is not a defence that can be
raised simply by legal advisers or officials, without proper consideration
by the council of the municipality in the light of the municipality’s
constitutional obligations dealt with earlier in this judgment. The
Constitutional Court has suggested, admittedly in a different context,21
that there may be circumstances in which prescription is not available as a
mechanism for avoiding constitutional obligations. Whether this is such a
case warrants careful consideration by the municipality. The
consequences of seeking to upset a transaction that both sides believed

21 Njongi v MEC, Department of Welfare, Eastern Cape [2008] ZACC 4; 2008 (4) SA 237 (CC); 2008
(6) BCLR 571 (CC) paras 41 and 42.

for over 25 years had been implemented, so as to constitute Granor the
owner of the property, must be carefully weighed. This is a substantial
business that has made large contributions to municipal coffers for many
years by way of rates and payment for services. It is no doubt a
significant employer, both directly and indirectly. What would be the
consequences of the municipality evicting it and having to pay
compensation for improvements? All this must go into the decision-
making mix.

[46] These remarks should not be read as expressing a view as to the
merits of the defence of prescription. All that was required in order to
establish Granor’s ownership was that the formality of registration be
undertaken in the Deeds Registry. Until now the municipality has
recognised Granor as the owner of the property. In similar circumstances
dealing with the need to register the plaintiff’s ownership of shares in the
share register of a company, it was held that the ongoing recognition of
the plaintiff’s ownership constituted an ongoing acknowledgement of the
debt and an interruption of the running of prescription.22 Again, I express
no settled view on this, but mention it to make it clear that the contention
that the right to claim transfer of the property had prescribed is by no
means as unimpeachable as counsel for the municipality contended.

[47] The judge in the high court contemplated that these issues needed
to be considered by the municipality before it took a decision in response
to Granor’s request. He was also mindful of the need for that decision to

22 Lindhorst and others v Andersen and Others [2006] ZAECHC 70 (7 December 2006) per Leach J at
p 43.

be rational. That is why he remitted it to the municipality. He was correct
to do so.

Result
[48] The appeal is dismissed with costs.

__________________________
M J D WALLIS
JUDGE OF APPEAL

Appearances

For appellant:
A Liversage SC
Instructed by:
A M Carrim Attorneys, Polokwane;

Rossouws Attorneys, Bloemfontein

For first respondent:
J G Bergenthuin SC

Instructed by:
Bernard van der Hoven Attorneys, Pretoria;
Rosendorff Reitz Barry, Bloemfontein.