Constitutional Court dismisses eThekwini Municipality's appeal over R30 million payout

The Constitutional Court has dismissed eThekwini Municipality in its long legal battle over R30 million payout to the service provider, Daily Double Trading 479 cc /Pholobas Projects.

The municipality had approached the apex to appeal an earlier Durban High Court and Supreme Court of Appeal ruling that favoured the service provider. The Constitutional Court said the application brought by the municipality bears no reasonable prospects. 

The city revoked its contracts after discovering anomalies in the company's tender award during its investigations a few years ago.

It was reported that in 2021, the company took the municipality to the Durban High Court, demanding that the cancellation of the contracts and blacklisting be declared unlawful, and for the court to rule that the municipality was indebted to it in the sum of R44.1m the amount owing for the cancelled contracts.

However, before the Concourt could hear the matter, an out-of-court settlement was reached by the parties. 

A deal was struck where a municipal attorney, identified as Mr Moloi at the time, agreed that the municipality would give Daily Double R30 million as a settlement for its illiquid damages.

According to the affidavit of City Manager Musa Mbhele, when this came to the attention of the former city manager, Sipho Nzuza, he refused to approve the R30 million payout. 

“He stated he would not approve such a transaction as no one, including himself, had the authority to sanction payments above R30 million. He said whoever had told Moloi to strike a deal with Daily Double had been misguided,” Mbhele wrote in his affidavit. 

Mbhele stated that Nzuza indicated that this matter would need to go before the eThekwini full council for a decision.

“This matter was never placed before the council, and Nzuza made it clear in his affidavit before the High Court that he had refused to sanction the questionable settlement,” he added. 

Mbhele said that to this day, he has no idea who authorised or told Moloi to offer the company R30 million.

“If the municipality were to pay this money, no one would account for it,” he said.

Additionally, Mbhele said this case raised questions of law that will impact not only eThekwini Municipality but also other municipalities throughout the country. 

He said the case required the Constitutional Court to clarify the ambit of an attorney’s competency to enter into settlements in respect of municipalities and similar organs of state.  

Mbhele indicated that due to this debacle, Moloi’s mandate was terminated.  

The court further decided to award costs, but not for the two counsels. It said a request for costs on Scale C was not appropriate because the scales for costs in the Uniform Rules of Court do not apply in that instance.

nomonde.zondi@inl.co.za