THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA

Case no:  372/2001
REPORTABLE

In the matter between:

LOGBRO PROPERTIES CC

Appellant

and

S A BEDDERSON, NO

First respondent
MINISTER OF HOUSING

Second respondent
NATIONAL HOUSING BOARD

Third respondent
MINISTER OF HOUSING, KwaZulu-Natal
Fourth respondent
BALSONS INVESTMENTS CC

Fifth respondent
K R GOVENDER

Sixth respondent
SB MKHIZE

Seventh respondent
K NAIDOO

Eighth respondent
J NARAINSAMY

Ninth respondent
R G MOODLEY

Tenth respondent
EVERSURE CARTAGE

Eleventh respondent
MOODLEY’S PROPERTY HOLDINGS
Twelfth respondent

Before:
Howie JA, Farlam JA, Cameron JA, Heher AJA,
Lewis AJA
Heard:
23 August 2002
Judgment:
18 October 2002

Tender – Constitutional requirements of administrative justice
apply to process – Fairness does not however require
administrator in reconsidering decision set aside by Court to ignore
supervening considerations – But affected party entitled to
opportunity to make representations if such considerations may
lead to adverse decision

JUDGMENT

_____________________________________________________

CAMERON JA:

[1] In 1997 the High Court ordered a provincial tender
committee to ‘reconsider’ a tender the appellant had submitted two
years earlier to buy a property.  This appeal raises the question
whether the committee when doing so was entitled to take into
account the fact that property values had increased since 1995, or
whether it should have adjudged the tender excluding this and
other supervening considerations.  The court below held that the
increase could properly be taken into account.  The appellant
challenges that conclusion.  If its main argument fails, it raises a
fresh question in this Court: should the tender committee in 1997
have given it an opportunity to be heard on the significance of the
price rise?

Background
[2] In February 1995, the KwaZulu-Natal provincial government
(‘the province’) awarded a tender for the sale of a well-situated
Richards Bay property, approved for development as a filling
station, to one Naidoo.  The appellant’s tender was rejected.  But it
challenged the award on the basis that Naidoo’s tender, although
by a considerable margin the highest, did not comply with the
tender conditions.  Its challenge prevailed.  In February 1997 Natal
Provincial Division of the High Court (McLaren J) set aside the

award.  It ordered the province’s assets committee (‘the
committee’) to reconsider the appellant’s and other tenders that
complied with the tender conditions.  Non-compliant tenders,
including Naidoo’s, were to be excluded.  There was no appeal
against the decision of McLaren J.

[3] So the matter came before the committee (of which the first
respondent later became chairman) less than a month after the
High Court decision.  The appellant’s tender was now the highest.
But the committee decided by 3 to 1 (the first respondent
dissenting) to accept neither the appellant’s nor any of the other
1995 tenders.  Instead, in view of the increase in Richards Bay
property values in the intervening two years, it recommended a call
for fresh tenders entirely.

[4] The appellant went back to court.  Its challenge, launched in
the Natal Provincial Division in December 1998 and argued in
September 2000, failed before Skweyiya J.  In a judgment
delivered in August 2001, he held that the meaning of McLaren J’s
order directing the Committee to ‘reconsider’ the qualifying tenders
required the committee to consider the matter anew: this left it free
to take into account new factors and circumstances, including the
increase in property values since the abortive 1995 process.  With

his leave the appellant appeals against that conclusion.  Of the
twelve respondents originally cited (including all the 1995
tenderers), only three oppose the appeal – the committee itself
(represented by the first respondent), and the national and
provincial executive members of government responsible for
housing (respectively the second and fourth respondents).

Was the committee in ‘reconsidering’ the tender
permitted to take the increase in property values into
account?
[5] The starting point must be that the tender process
constituted ‘administrative action’ under the Constitution.   This
entitled the appellant (and it does not matter in this case whether
the interim or the 1996 Constitution applied)1 to a lawful and
procedurally fair process and an outcome, where its rights were
affected or threatened, justifiable in relation to the reasons given
for it.2  I say ‘must be’ since in the light of several decisions of this

1 In terms of s 33 of the 1996 Constitution, read with item 23(2)(b) of Schedule 6, the
administrative justice provision of the interim Constitution (s 24) remained in force until the
Administrative Justice Act 3 of 2000 came into operation on 30 November 2000.
2 Section 24 of the fundamental rights chapter of the interim Constitution read:
Administrative justice
24.  Every person shall have the right to —
(a)  lawful administrative action where any of his or her rights or interests is affected or
threatened;
(b)  procedurally fair administrative action where any of his or her rights or legitimate
expectations is affected or threatened;
(c) be furnished with reasons in writing for administrative action which affects any of his
or her rights or interests unless the reasons for such action have been made public;
and
(d) administrative action which is justifiable in relation to the reasons given for it where
any of his or her rights is affected or threatened.

Court applying the Constitution’s administrative justice provisions
to governmental tender processes3 the statement seems obvious.
Yet counsel for the province asserted the contrary.  It is necessary
to deal with his argument, not because it has substance, but
because of the terms in which it was advanced.  Counsel
contended, distinguishing the cases referred to, that the tender
conditions the province stipulated gave it a contractual right to
withdraw the property from tender in 1997, which could be
exercised ‘without having to pass the scrutiny of lawful
administrative action’.  He invoked two decisions of this Court,
Mustapha and Another v Receiver of Revenue, Lichtenburg and
Others4 and Cape Metropolitan Council v Metro Inspection
Services (Western Cape) CC and Others.5

[6] It is correct that in the first litigation McLaren J held that the
province’s tender offer, accepted by the tenderers, gave rise to a
contract whose conditions the tenderers could enforce against the
province.  The tender conditions included:
‘1.1 The highest tender will not necessarily be accepted.
1.2
No reasons will be given for the acceptance or non-

3 Umfolozi Transport (Edms) Bpk v Minister van Vervoer en Andere [1997] 2 All SA 548 (SCA)
552-553; Transnet Ltd v Goodman Brothers (Pty) Ltd 2001 (1) SA 853 (SCA) 870; Olitzki
Property Holdings v State Tender Board and Another 2001 (3) SA 1247 (SCA) para 33.
Compare Premier, Free State and Others v Firechem Free State (Pty) Ltd  2000 (4) SA 413
(SCA) para 32 and Eastern Cape Provincial Government and Others v ContractProps 25
(Pty) Ltd  2001 (4) SA 142 (SCA) para 8.
4 1958 (3) SA 343 (A).
5 2001 (3) SA 1013 (SCA).

acceptance of [a] tender.
1.3
The Regional Housing Board, KwaZulu-Natal may at
any stage and without giving reasons withdraw a
property or properties from the tender.
1.4
Tenders which do not comply with the requirements set
out below should not be considered.
…’

[7] It was condition 1.4 that McLaren J held the appellant could
enforce to secure the exclusion of Naidoo’s and other non-
compliant tenders, though it is the others the province now seeks
to invoke.  But the argument is flawed.  Even if the conditions
constituted a contract (a finding not in issue before us, and on
which I express no opinion), its provisions did not exhaust the
province’s duties toward the tenderers.  Principles of administrative
justice continued to govern that relationship, and the province in
exercising its contractual rights in the tender process was obliged
to act lawfully, procedurally and fairly.  In consequence, some of its
contractual rights – such as the entitlement to give no reasons –
would necessarily yield before its public duties under the
Constitution and any applicable legislation.

[8] This is not to say that the conditions for which the province
stipulated in putting out the tender were irrelevant to its
subsequent powers.  As will appear, such stipulations might bear

on the exact ambit of the ever-flexible duty to act fairly6 that rested
on the province. The principles of administrative justice
nevertheless framed the parties’ contractual relationship, and
continued in particular to govern the province’s exercise of the
rights it derived from the contract.

[9] Counsel’s invocation of the Cape Metropolitan case as
authority to the contrary is mistaken.  There it was held that a local
authority’s cancellation of an agreement was not ‘administrative
action’ under the Constitution entitling the other contractant to
procedural fairness before termination.  Although the public
authority derived its power to conclude the contract from statute, it
was held that the same could not necessarily be said about its
power to cancel.  But the Cape Metropolitan case turned on its
own facts, and this Court was careful to delineate them.  In the first
place, the tender cases were expressly distinguished.7  Second,
the employment cases (where a public authority’s express
statutory power to dismiss public sector workers was held bound
by public duties of fairness notwithstanding that a corresponding
right existed at common law or that such a right might also have

6 Du Preez and Another v Truth and Reconciliation Commission 1997 (3) SA 204 (A) 231H-
233C, Premier, Mpumalanga, and Another v Executive Committee, Association of State-
Aided Schools, Eastern Transvaal  1999 (2) SA 91 (CC) para 39.  Compare now s 3(2)(a) of
the Promotion of Administrative Justice Act 3 of 2000.
7 2001 (3) SA 1013 (SCA) para 19.

been contained in a contract)8 were also distinguished.9  Third and
most importantly, the Court in Cape Metropolitan did not purport to
provide a general answer to the question whether a public
authority in exercising powers derived from a contract is in all
circumstances subject to a public duty to act fairly.  That question
was left open.  Instead, the Court’s judgment makes it plain that
the answer depends on all the circumstances.  The critical
passage in the reasoning of Streicher JA is this:
‘Those terms [ie entitling the public authority to cancel the
contract] were not prescribed by statute and could not be
dictated by the [public authority] by virtue of its position as a
public authority.  They were agreed to by the first
respondent, a very substantial commercial undertaking.  The
[public authority], when it concluded the contract, was
therefore not acting from a position of superiority or authority
by virtue of its being a public authority and, in respect of the
cancellation, did not, by virtue of its being a public authority,
find itself in a stronger position than the position would have
been had it been a private institution.  When it purported to
cancel the contract it was not performing a public duty or
implementing legislation; it was purporting to exercise a
contractual right founded on the consensus of the parties in
respect of a commercial contract.  In all these circumstances
it cannot be said that the [public authority] was exercising a
public power.’10

8 Administrator, Transvaal and Others v Zenzile and Others 1991 (1) SA 21 (A);
Administrator, Natal and Another v Sibiya and Another  1992 (4) SA 532 (A).
9 2001 (3) SA 1013 (SCA) paras 11-12.
10 2001 (3) SA 1013 (SCA) para 18.

[10] The case is thus not authority for the general proposition that
a public authority empowered by statute to contract may exercise
its contractual rights without regard to public duties of fairness.  On
the contrary: the case establishes the proposition that a public
authority’s invocation of a power of cancellation in a contract
concluded on equal terms with a major commercial undertaking,
without any element of superiority or authority deriving from its
public position, does not amount to an exercise of public power.11

[11] In the present case, it is evident that the province itself
dictated the tender conditions, which McLaren J held constituted a
contract once the tenderers had agreed to them.  The province
was thus undoubtedly, in the words of Streicher JA in Cape
Metropolitan, ‘acting from a position of superiority or authority by
virtue of its being a public authority’ in specifying those terms.  The
province was therefore burdened with its public duties of fairness
in exercising the powers it derived from the terms of the contract.

[12] For reasons not only doctrinal but historical, the province’s
invocation of Mustapha’s case is even less appropriate.  There the

11 The importance to the decision of the parties’ equality of bargaining power is rightly
emphasised by Iain Currie and Jonathan Klaaren The Promotion of Administrative Justice Act
Benchbook (2001) 72, 74.

Minister, mainly for racially discriminatory reasons, terminated a
statutory permit to occupy land.  This Court by a majority held that
since the permit was embodied in a contract, the termination
constituted the exercise of an absolute and unqualified contractual
power, rendering the racial discrimination permissible or at least
irrelevant.12  Schreiner JA delivered a strong dissent:
‘Although a permit granted under sec. 18 (4) of Act 18 of
1936 has a contractual aspect, the powers under the sub-
section must be exercised within the framework of the Act
and the regulations which are themselves, of course,
controlled by the Act. The powers of fixing the terms of the
permit and of acting under those terms are all statutory
powers. In exercising the power to grant or renew, or to
refuse to grant or renew, the permit, the Minister acts as a
state official and not as a private owner, who need listen to
no representations and is entitled to act as arbitrarily as he
pleases, so long as he breaks no contract. For no reason or
the worst of reasons the private owner can exclude whom he
wills from his property and eject anyone to whom he has
given merely precarious permission to be there. But the
Minister has no such free hand. He receives his powers
directly or indirectly from the Statute alone and can only act
within its limitations, express or implied. If the exercise of his
powers under the sub-section is challenged the Courts must
interpret the provision, including its implications and any
lawfully made regulations, in order to decide whether the

12 1958 (3) SA 343 (A) 356B-357C, per Ogilvie Thompson AJA.

powers have been duly exercised …’13

[13] The artificiality in the majority’s approach was pointed out at
the time.  It was observed that its reasoning ‘virtually severs the
agreement from the statute’, which was at least in part the
contract’s ‘progenitor’.  This in turn conferred on the agreement ‘an
ineffaceable orientation’,14 which rendered its termination an
inescapably public exercise of power.  The moral and political
implications of the majority decision also attracted censure.15  The
total fissure the majority attempted to effect between the statutory
source of the contract and the exercise of the powers the contract
conferred is clearly incompatible with Cape Metropolitan,
particularly the passage set out earlier, and it is necessary for
Mustapha now to be overruled, and for the dissenting judgment of
Schreiner JA to be recognised as correct.

[14] The significance of this analysis is that even if the terms the
province stipulated for the tender process entitled it to withdraw the
Richards Bay property, it could exercise that power only with due
regard to the principles of administrative justice.  It could not
withdraw the property capriciously or for an improper or unjustified
reason.  And this is the core of the appellant’s case: that the

13 At 347D-G.
14 Ellison Kahn 1958 Annual Survey 23.
15 John Dugard Human Rights and the South African Legal Order (1978) 320-321, 323.

property’s withdrawal because of the increase in property values
constituted improper and unjustified administrative action.

[15] Whether this is so does not in my view depend on the
precise meaning to be attached to the word ‘reconsider’, but rather
on determining what ‘reconsidering’ the appellant’s and other
compliant tenders entailed in the light of the principles of
administrative fairness.  In making this determination, the brunt of
the appellant’s complaint must be appreciated.  On the table
before the committee in both 1995 and 1997 were departmental
recommendations that the property be sold to the highest tenderer.
This implies two consequences.  First, had the committee
excluded non-compliant tenders from consideration in 1995, the
appellant’s tender would in all likelihood have been accepted.
Second, had the committee in 1997 omitted from consideration the
increase in property values, acceptance of the appellant’s tender
was a foregone conclusion.

[16] In other words, had the 1995 process been perfect, the
appellant would in all likelihood have received the benefit of a
property acquisition judged against then market values.  That
provides the basis for its current claim that in 1997 the committee
should have ignored the supervening increase in market values.

But the underlying question the appellant’s case raises is broad
and important, and its general force must be appreciated:  to what
extent is the administrative subject entitled to be immunised from
the adverse consequences of mistakes by an administrator?
Formulated differently, the question is to what extent the right to
administrative justice entails exemption from the prejudicial effects
of a functionary’s mistakes.

[17]    In a nuanced argument, Mr Marcus conceded that the
appellant was not entitled to a perfect process, free of innocent
errors, and that the administrative subject could not expect to be
immunised from all prejudicial consequences flowing from such
errors.  He also conceded also that in some cases it might be
appropriate for an administrator in repairing a previously botched
process to take changed circumstances into account.  Here,
however, he submitted, the reason for the changed circumstances
was a delay caused by the committee’s own error.  What was
more, the appellant, having succeeded in a competitive and secret
process in 1995 in judging the market and other conditions rightly,
should not be made to forfeit the profits of its labour and skill by
the tender process being re-opened.

[18]    It serves no purpose, however, in weighing the significance

of the disadvantage the appellant experienced, to categorise the
committee’s conduct in 1995 in awarding the tender to Naidoo
pejoratively as ‘unlawful’ or ‘improper’.  Such epithets represent
conclusions of law applicable to a wide range of administrative
errors, some innocent, some malign.  On the evidence before us,
the fact is that the committee made an innocent mistake, and Mr
Marcus on behalf of the appellant was constrained to concede as
much.  It took a judgment of the High Court to establish that the
condition specifying that non-compliant tenders ‘should not be
considered’ was enforceable.  In these circumstances the
appellant can found an entitlement to the benefit it failed to acquire
in 1995 on neither bad faith nor administrative perversity, and the
question becomes solely whether fairness required the committee
in 1997, having innocently erred in 1995, to ignore the supervening
increase in property values.

[19]    That increase was however not only a fact, but an obvious
fact.  The committee’s mandate was to dispose of public assets in
the public interest.  In determining what was fair to the appellant, it
could hardly have been proper for it to ignore competing claims on
the public purse – including the claims of those to whose material
advancement the department in which the committee functioned,
namely the department of housing, was committed.  The

committee rightly refers in its deposition to ‘the legitimate interest
of the State in obtaining the best possible price for the property’,
and points out that it was not only the appellant’s interests that
came into play when it had to decide the matter whether to
recommend re-advertisement.

[20]    The fact is that the committee’s performance of its duty in
1997 was a prime instance of what commentators have dubbed
‘polycentric decision-making’.  It was not a unilinear question
involving the assertion of one subject’s rights against the
administration.  The appellant had a right to a fair tender process
in 1995.  That right McLaren J vindicated with his order that the
committee ‘reconsider’ its tender. In doing so he rightly
emphasised that the appellant ‘is naturally not entitled to an order
that its tender should be accepted’, but only ‘to have its offer
considered without competition from [Naidoo’s] tender or any other
tender which does not comply with the tender conditions’.  When,
therefore, the committee set out to ‘reconsider’ the compliant
tenders, it undertook the typically complex task of balancing all the
public interests its mandate required it to fulfil.  This included fair
reconsideration of the appellant’s tender – but not to the exclusion
of considerations involving its broader responsibilities. These
included the public benefit to be derived from obtaining a higher

price by re-advertising the property.

[21]    It is in just such circumstances that a measure of judicial
deference is appropriate to the complexity of the task that
confronted the committee.  Deference in these circumstances has
been recommended as:
‘ … a judicial willingness to appreciate the legitimate and
constitutionally-ordained province of administrative agencies;
to admit the expertise of those agencies in policy-laden or
polycentric issues; to accord their interpretation of fact and
law due respect; and to be sensitive in general to the
interests legitimately pursued by administrative bodies and
the practical and financial constraints under which they
operate.  This type of deference is perfectly consistent with a
concern for individual rights and a refusal to tolerate
corruption and maladministration.  It ought to be shaped not
by an unwillingness to scrutinize administrative action, but by
a careful weighing up of the need for – and the
consequences of – judicial intervention.  Above all, it ought to
be shaped by a conscious determination not to usurp the
functions of administrative agencies; not to cross over from
review to appeal.’16

[22]    I agree.  The conclusion is unavoidable that the committee
in 1997 acted unimpeachably in considering that the increase in

16 Cora Hoexter ‘The Future of Judicial Review in South African Administrative Law’ (2000)
117 SALJ 484 at 501-502, citing A Cockrell ‘”Can You Paradigm?” – Another Perspective on
the Public Law / Private Law Divide’ 1993 Acta Juridica 227.

property values might point away from immediate disposal of the
property, and, albeit for somewhat different reasons, I agree
Skweyiya J’s conclusion.

The audi point
[23]    But in this Court Mr Marcus raised an entirely new point on
behalf of the appellant – that the committee before deciding not to
award the tender in 1997 should have given the appellant an
opportunity to make representations, at least in writing, on the
significance of the price increase.  That point, although not raised
in the affidavits or argued in the court below, may properly be
raised at this stage since not only are the facts before us clear, but
neither party wishes to adduce any further relevant evidence.  The
unquestioned fact is that the committee decided to recommend re-
advertisement without giving any of the compliant tenderers an
opportunity to make representations.

[24]    While, as Mr Marcus pointed out, it is no answer to a claim
to be heard that the subject might have had little or nothing to say
if such an opportunity had existed,17 it is certainly worth pointing
out that, if afforded, the opportunity might have been extremely
valuable.  The fact of an increase in property values between 1995

17 Administrator, Transvaal and Others v Zenzile and Others 1991 (1) SA 21 (A) 37C-F, per
Hoexter JA.

and 1997 was undisputed before us.  But its extent is unknown.
The appellant’s 1995 tender exceeded the property’s then market
value by more than 50%.  Did the increase over the next two years
surpass that margin?  We do not know.  Whether it did or not, the
appellant was entitled to try to persuade the committee that
accepting its 1995 offer would be more advantageous, taking all
factors into consideration, than a call for fresh tenders; and in any
event that, given its investment in time and money and its
employment of skill, fairness pointed notwithstanding any increase
to acceptance of its tender.

[25]    Procedural fairness in my view demanded that the
committee in reconsidering the tenders would afford the compliant
tenderers an opportunity to make representations, at least in
writing, on any factor that might lead the committee not to award
the tender at all.  That opportunity not having been afforded, the
committee’s 1997 decision must be set aside, and the matter
remitted to the appropriate authority to afford the appellant and the
other compliant tenderers the opportunity to make representations,
at least in writing, on any supervening consideration relevant to the
committee’s exercise of its powers in relation to the award or non-
award of the tender.

[26]    During the hearing the parties were asked, if this conclusion
were reached, to supply us with an agreed form of order.  After a
considerable delay, of nearly five weeks, two sets of draft orders
were supplied.  The order at the end of this judgment reflects in
material respects the parties’ respective proposals.  For the sake
of clarity, it is worth spelling out that the authority charged with
repairing the flawed process of 1997 is itself now entitled to take
into account any consideration material to the decision whether or
not to recommend the sale of the property on the basis of the 1995
tenders (including further increases in property values since 1997),
but must give the compliant tenderers an opportunity to respond,
at least in writing, to the considerations in question.

Costs
[27]    As pointed out earlier, the appellant raised the audi point in
written argument it submitted shortly before the hearing in this
Court.  The respondents’ stance in contesting at all stages the
relief sought is nevertheless relevant to determining what order will
be fair in respect of costs.  The main argument – in which the
respondents persisted before us, and persisted despite the audi
point being raised – was that the tender process was contractual,
not administrative, and that considerations of fairness were
irrelevant.  In the alternative, they argued that because the audi

point was not raised in the papers it could not be raised now.  This
does not suggest that had the audi point been raised earlier, the
respondents would have relented, and in these circumstances the
costs must follow the result.

[28]    There is therefore an order in the following terms:
1.
The order of the Court below is set aside, and in its place
there is substituted:
‘(a) The decision taken on 4 March 1997 by the assets
committee of the Province of KwaZulu-Natal, established
under s 12A of the Housing Arrangements Act 155 of
1993, that Lot 11113 Brackenham, Richards Bay,
KwaZulu-Natal, be re-advertised for sale by public tender,
is set aside.
(b)
The fourth respondent is directed:
(i) to appoint within 30 days of the date of this order a
committee (“the committee”) to reconsider the
tenders which were considered by the assets
committee on 4 March 1997;
(ii) to require the committee to call upon the appellant
and other tenderers whose tenders were before the
assets committee on 4 March 1997 to make, on or
before a date determined by the fourth respondent in
conjunction with the committee, such representations
as the appellant and the other tenderers may wish to
make as regards the market value of Lot 11113 as at
February 1995 and since;
(iii) to require the committee to consider such

representations and, within 60 days of the date of its
appointment, to declare its decision as to the sale by
tender of Lot 11113.’

2.
The first, second and third respondents are to pay the
appellant’s costs, jointly and severally, the one paying, the
other to be absolved.

E CAMERON
JUDGE OF APPEAL

HOWIE JA
)
FARLAM JA
)
CONCUR
HEHER AJA
)
LEWIS AJA
)