Accountability, Estoppel and Bypassing of the Municipal Finance Management Act: A Note on Trilogy

• Jurisdiction: South Africa
• Date: 01 December 2022
• Pages: 1-20
• Author: Tumo Charles Maloka,Isaiah Mmatipe Sefoka
• Published date: 01 December 2022
• DOI: 10.25159/2522-6800/13240

Case Note

Southern African Public Law

https://doi.org/10.25159/2522-6800/13240

https://unisapressjournals.co.za/index.php/SAPL

ISSN 2522-6800 (Online), ISSN 2219-6412 (Print)

Volume 37 | Number 2 | 2022 | #13240 | 20 pages

© Unisa Press 2023

Accountability, Estoppel and Bypassing of the

Municipal Finance Management Act: A Note on

Merifon (Pty) Ltd v Greater Letaba Municipality

Trilogy

Tumo Charles Maloka

https://orcid. org/0000-0003-0474- 8297

University of Pretoria

tumo.maloka@up.ac.za

Isaiah Mmatipe Sefoka

https://orcid.org/0000-0002-9357-7153

University of Limpopo

mmatipe.sefoka@ul.ac.za

Abstract

Accountability and transparency reinforce the constitutional principles of

governance, which constitute equality before the law, separation of powers,

legality and the rule of law, which are central to the conception of modern

constitutional order. The trilogy of Merifon (Pty) Ltd v Greater Letaba

Municipality Limpopo Division, Case No 01/2014 (18 July 2019), Merifon (Pty)

Ltd v Greater Letaba Municipality [2021] ZASCA 50 and Merifon (Pty) Ltd v

Greater Letaba Municipality [2022] ZACC 25 poses fundamental questions

regarding the failure of a municipal manager and incompetent council to comply

with statutory prescripts. Although the narrow issue for determination

concerned the seller’s reliance on estoppel and the Turquand Rule to hold a

municipality to the unlawful and inflated sale of land agreement, the Merifon

litigation invites consideration of the practical reality of malfeasance in the local

government sphere. In this note the litigation history and the analytical

framework as well as the Municipal Finance Management Act 56 of 2003

(MFMA) are examined. The critical aspects of the three judgments regarding

the problematic reliance on estoppel and the Turquand Rule in the face of

peremptory prescripts of MFMA are subsequently examined.

Keywords: Accountability; corruption; estoppel; legality; malfeasance in public

office; ostensible authority; representation and capacity

Maloka and Sefoka

2

Introduction

At first blush, the Merifon

1

trilogy narrowly focuses on a specific performance claim by

an aggrieved seller relying on estoppel and the Turquand Rule (or alternatively known

as the ‘indoor management rule’) to circumvent peremptory provisions of the Local

Government: Municipal Finance Management Act 56 of 2003 (MFMA). However, a

closer look at the case reveals that the protracted litigation was firmly anchored in the

tension between accountability and malfeasance in public office. Against the backdrop

of the release of the State Capture Report Recommendations,

2

Merifon affords an

opportunity to interrogate the extent to which accountability together with other

normative value systems

3

(that serve as keystones to the constitutional framework) such

as transparency and openness are observed, fulfilled and respected. It should be noted

that an analysis of public accountability inevitably leads to the heart of constitutional

law as it implicates legality, which draws its strength from the rule of law. Besides an

in-depth scrutiny of section 19 of the MFMA, this note proceeds to examine the

application of estoppel and the Turquand Rule in transactions entered between private

parties and state organisations.

While this note focuses on Merifon, it remains crucial to look into public accountability,

particularly the meaning and its objective within the public sector as the core feature of

the Constitution, as it forms the central argument in the Merifon cases. It should be kept

in mind that the proper management and monitoring of public accountability demand a

 We are grateful to our colleagues in the Department of Mercantile and Labour Law for their helpful

comments and encouragement on an earlier version of this note presented at the Departmental Case

Law Discussion in June 2022. The authors are particularly indebted to Professor M Mhango for

detailed comments on previous drafts. The anonymous reviewers deserve credit for their careful

reading and constructive criticism. The usual disclaimer applies.

1

Merifon (Pty) Ltd v Greater Letaba Municipality (unreported judgment of the High Court, Limpopo

Division, Polokwane) Case No 01/2014 (18 July 2019) (Merifon I); Merifon (Pty) Ltd v Greater

Letaba Municipality [2021] ZASCA 50 (Merifon II) and Merifon (Pty) Ltd v Greater Letaba

Municipality [2022] ZACC 25 (Merofon III).

2

The Judicial Commission of Inquiry Report (2021) Part 1, Vol 1 – procurement 715. Further, see

generally, Daily Maverick ‘Here You Go: The Final State Capture Report Recommendations – At

Last’ <https://www.dailymaverick.co.za/article/2022-06-22-here-you-go-the-final-state-capture-

report-recommendations-at-last/> accessed 22 June 2022.

3

In Nyathi v MEC: Department of Health Gauteng 2008 (5) SA 94 (CC) paras 80–1 (Nyathi). Madala

J was satisfied that: ‘Certain values in the Constitution have been designated as foundational to the

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 are not carried out conscientiously,

we have a recipe for the constitutional crisis of great magnitude. In a state predicated on a d esire 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 the South African democracy.’ See generally, Tumo Maloka,

‘Recent Developments Regarding Costs Awards in Constitutional and Public Interest Litigation’

(2019) 34 SAPL 1 and ‘Biowatch Shield, Costs Liability for Abuse of Process and Crossfire

Litigation’ (2020) 41 Obiter 186; Tumo Maloka and Nokukhanya Jili, ‘The Role of the Judiciary in

Promoting Accountability, Responsiveness and Openness: Lessons From Life Esidimeni Arbitration

and Black Sash/SASSA Litigation’ (2019) 54 Journal of Public Administration 105.