Private construction company incur no constitutional obligations when it contracts to built low cost housing funded by the State

Supreme Court of Appeal of South Africa: In the appeal filed by the City of Cape Town in regard to improper construction of housings for residents in the lower income group, the Court held that since there was no reference to any constitutional obligation on the part of the private construction company when the contract was concluded and therefore, the constitutional duty of the State to provide housing cannot be outsourced.

In the present case, the City of Cape Town developed Witsand into a formal township for the residents in the lower income group. Peer Africa (Pty) Ltd, was appointed by the City as a developer to oversee the building project and Khaya (Pty) Ltd, was contracted by it to build the houses in Witsand. It was alleged that the houses were marked with severe defects. The City in the face of the present legislation maintained that while it bore a constitutional obligation as an organ of the state to provide adequate housing it sought an order from the court to the construction companies that when building for the State, they are also bound by constitutional obligations not to build defective houses.

The Court maintained that though an order shall have no practical effect in the instant matter, it is justified that the matter is dealt with in the interests of justice. It was observed that Peer Africa undertook to make sure that the buildings would comply with all legal requirements and regulations and there was no contractual nexus between the City and Khaya. Moreover, the concluded agreement between Peer Africa and Khaya, did not intend to create constitutional obligations for Khaya. Therefore, Khaya was under no constitutional obligation and neither could be called an organ of the State and also could not be held liable under Section 8(1) of the Bill of Rights for the socio-economic right of access to housing. While in regard to a constitutional relief by the Court, the argument of the respondents and amicus that the City had by-passed the statutory and contractual process as it seeks to avoid the available remedies, was upheld. The Court held that in the light of the settled law, the City cannot hold Khaya accountable on a constitutional basis.

As regard to arbitration proceedings between Khaya and Peer Africa regarding payment of the due, it was held that the same had not lapsed and the City could not be a party to it. Therefore, the appeal was dismissed. [City of Cape Town v Khaya (Pty) Ltd (158/15) [2016] ZASCA 107, decided on 26 July 2016]

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