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[2023] ZAFSHC 81
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Eskom Holdings SOC Ltd v Matjhabeng Local Municipality and Others (3367/2020) [2023] ZAFSHC 81 (17 March 2023)
THE
HIGH COURT OF SOUTH AFRICA
FREE
STATE PROVINCIAL DIVISION
Case
Number 3367/2020
In
the matter between:
ESKOM
HOLDINGS SOC LTD
Applicant
MATJHABENG
LOCAL MUNICIPALITY
1
st
Respondent
THE
EXECUTIVE MAYOR: MATJHABENG LOCAL MUNICIPALITY
2
nd
Respondent
THE
MUNICPAL MANAGER MATJHABENG LOCAL MUNICIPALITY
3
rd
Respondent
THE
SHERIFF BLOEMFONTEIN WEST
4
th
Respondent
ABSA
BANK LIMITED
5
th
Respondent
CORAM:
BERRY, AJ
HEARD
ON:
02 MARCH 2023
DELIVERED
ON:
This
judgment was handed down electronically by email to the parties'
representatives and by release to SAFLII. The date and time
for
hand-down is deemed to be 15h00 on 17 March 2023.
JUDGEMENT
BY:
BERRY, AJ
JUDGMENT
[1]
The
Applicant
obtained judgment for debt against the 1
st
Respondent under case
number 924/2013 on 18 September 2014.
[2]
The Applicant attached money held in a bank account by the 1
st
Respondent in execution of the judgment debt.
[3]
The 1
st
Respondent in today’s proceedings
approached the Court for relief and after negotiations between the
parties, the following
Order was made by agreement between the
parties on 11 September 2020.
“
IT
IS ORDERED THAT: (by agreement)
1. The First
Respondent (“
Eskom”
) shall immediately uplift the
attachment of funds in the bank account of Applicant (“
the
Municipality”
) held with ABSA Bank Limited (“
Absa”
),
which attachment was perfected on
4 September 2020
and for
this purpose, will immediately instruct the Second Respondent and
Absa, in writing, to uplift the uplift (sic) and release
the said
attachment of the account.
2. Pending the final
determination of the action under case number
5830/2019
:
2.1 the funds currently
in the bank account of the Applicant as at the date of attachment,
namely
R2 781 586.14
, will remain under attachment
with the Sheriff of Bloemfontein West, to be held in the Sheriff’s
trust account which is to
be a separate interest bearing account; and
2.2 Eskom undertakes not
to execute the terms of paragraphs 1 and 2 of the order of the above
Honourable Court under case number
924/2013
, dated
18
September 2014.
3. The Municipality
undertakes unconditionally to provide Eskom with security for the
judgment under case number 924/2013 and any
judgment which the above
Honourable Court may pronounce in respect of its claim in the main
action under case number
5830/2019
, for the amount of
R2 525 017 401.66
(‘
the Security”
).
4. The Security will be
provided in the form of the registration of a Covering Bond (“
the
Bond”
) to be registered over one hundred and thirty-nine
(139) farms registered in the name of the Applicant within its
municipal boundaries
(“
the Farms”
), all of which,
on date of registration of such bond will be unencumbered.
5. The Municipality will,
within fourteen (14) days of date of this order, provide Eskom’s
attorneys with a full description
of the Farms, as per an electronic
Deeds Search.
6. The Municipal Manager
of the Municipality shall immediately on request but no later than
twenty (20) days of this order provide
Eskom’s attorneys with
all such consents / authorisations required together with all
documents necessary and take all necessary
steps in order to secure
the registration of the Bond over the Farms.
7. Should the
Municipality fail to comply with any terms of this order, Eskom
shall, by delivering of written notice to the sheriff,
be entitled to
appropriate the funds held in trust by the Sheriff of Bloemfontein
West and proceed with further execution steps
in respect of the order
under case number 924/2013.
8. Eskom will instruct
its attorneys to attend to the registration of the Bond and the
Municipality will be responsible for –
and will pay the fees
and disbursements associated with the preparing and registration of
the Bond, which costs will be paid on
demand.
9. The Applicant
withdraws this application.
10. The costs of this
application stands (sic) over for adjudication with the main action
under case number 5830/19.”
[4]
The Applicant approached the Court to find the First
Respondent in contempt of the Order granted on 11 September 2020
and
direct the 1
st
Respondent to provide
the necessary security by executing and causing the registration of a
covering bond in favour of Eskom over
139 farms, registered in the
name of
Matjhabeng
Municipality which is
situated within its municipal boundaries.
[5]
The Applicant seeks further ancillary relief to implement the
11 September 2020 Order directing oversight to monitor
compliance and
implementation of the 11 September 2020 Order.
[6]
Paragraph 3 and 8 of the 11 September 2020 Order are the
issues of contention in this Application.
[7]
In Par 3 of the Order the 1
st
Respondent undertakes
to unconditionally provide Eskom with security for the judgment under
case number 924/2013 and any judgment
which the above Honourable
Court may pronounce in respect of its claim in the main action under
case number
5830/2019
, for the amount of
R2 525 017 401.66
(‘
the Security”
).
[8]
Par 8 provides that the Applicant will instruct its attorneys
to attend to the registration of the Bond and the 1
st
Respondent will pay the fees and disbursements associated with
preparation and registration of the Bond.
[9] The Applicant
also seeks an Order directing the 5
th
Respondent to pay
R13 371 059.91 to the Applicant’s attorney for the
cost of registering the covering bond in terms
of Par 8 of the 11
September 2020 Order.
[10] The dispute
between the parties arose about the terms of the covering bond and
the costs to register the bond.
[11] According to
the 1
st
Respondent, the Applicant contents that the
wording of Par 3 of the Consent Order enables it to stipulate the
conditions of the
bond.
[12] The 1
st
Respondent contents that the party’s failure to agree on the
terms of the bond, should be referred for Intergovernmental
Relations
Framework Dispute Resolution or Mediation, as both parties are
governmental institutions.
[13] The 1
st
Respondent elected to register the bond using their own attorneys
because of the cost implications if they were to use Applicant’s
attorneys, as provided for in Par 3 of the 11 September 2020 Order.
[14] When the 1
st
Respondent lodged a bond for registration over the 139 farms, the
Deeds Office raised queries which made registration of a bond
over al
139 farms impossible.
[15] The queries
ranged from the transfer of erven forming part of townships and erven
having been transferred to third parties.
Eventually only 69 of the
identified farms did not have encumbrances on them and the 1
st
Respondent could only register the bond over 69 farms.
[16] The Applicant
took the stance that the covering bond should contain an
acknowledgment of indebtedness for R2 525 017
401.66.
[17] The 1
st
Respondent disputes that this amount is indebted to the Applicant.
[18] The Applicant
demanded that the bond should contain an undertaking that the 1
st
Respondent will make payment in respect of all the amounts to be
covered by the bond.
[19] The 1
st
Respondent was not satisfied with the terms of the draft bond
provided to it by the Applicant’s attorneys.
[20] It had a
condition requiring the 1
st
Respondent to acknowledge its
indebtedness to the Applicant in the amount of R289 692 525.66
and it also required that the
rent income derived from the properties
would fall to the benefit of the Applicant.
[21] The main
issues in dispute are the amount to be secured by the bond and the
associated costs of registering the bond.
[22] The 1
st
Respondent disputed the claim instituted under case number 5830/2019
and instituted a counter claim; thus, it was not agreeable
to
register a bond for debt which formed the subject of ongoing
litigation.
[23] The monetary
judgment the Applicant has against the 1
st
Respondent is
for R2 525 017 401.66 under Case Number 924/2013.
[24] The 1
st
Respondent’s attorney addressed a letter to the Applicant’s
attorney on 03 December 2020 wherein the 1
st
Respondent
tendered that it would register the bond using its own attorneys to
save costs and proposed that the dispute about the
conditions of the
bond should be referred for Inter-Governmental Relations Framework
dispute resolution or mediation.
[25] In the letter
the attorney refers to Par 7 of the 11 September 2020 Order which
reads:
“
7. Should
the Municipality fail to comply with any terms of this order, Eskom
shall, by delivering of written notice to the
sheriff, be entitled to
appropriate the funds held in trust by the Sheriff of Bloemfontein
West and proceed with further execution
steps in respect of the order
under case number 924/2013.”
[26] The 1
st
Respondent’s attorney advised the Applicant’s attorney
that their remedy lies in Par 7 of the Order. He denied that
the 1
st
Respondent was in breach of the Order.
[27] The letter
contains, almost as if it was a side issue, a statement that the
funds attached by the Sheriff has in any
event been released.
[28] The
perception that the funds had been released by the Sheriff may have
been one of the reasons that the Applicant proceeded
with the
Contempt Application.
[29] I was advised
from the bench that the funds were not released by the Sheriff and
was still under his control at the
time of hearing this Application.
[30] This brings
us to Par 7 of the Order and the question whether contempt of Court
proceedings is the correct remedy under
the circumstances of this
case.
[31] Anyone has a
right to approach a Court for relief, but where the relief is already
stipulated in a Court Order, which
was granted by agreement between
the parties, the question arises whether a party can request relief
that differs from the relief
the parties agreed to in the Consent
Order.
[32]
Whilst we are dealing with a Court Order, one should not lose
sight of the fact that the Court Order simply reflects
the agreement
between the parties.
[33]
In
SA Sentrale Ko-op Graanmaatskappy v Shifren en Andere
1964 (4) SA 760
(A) the Court dealt with policy considerations
such as the need to avoid disputes, evidential difficulties often
associated with
oral agreements, the need for certainty and clarity
in a commercial environment, and the infringement of the right to
contractual
freedom.
[34]
Parties are bound to the agreements they conclude. The
principle of
Pacta Sunt Servanda
is fundamental to our
law.
[35]
In
its most basic form, the principle refers to private
contracts
and
prescribes that the provisions of the agreement is
law
between
the parties to the contract. If a party neglects to abide by the
terms of the agreement between them, the conduct
is against the law.
[36]
The Court found in
Shifren
that there is no basis upon
which a non-variation clause could be deemed to be against public
policy.
[37]
In
Brisley v Drotsky
2002 (4) 1 (SCA) at 11B-H the
Court held that
Shifren
gave greater weight to the parties’
original exercise of contractual freedom, than to their capacity to
undo their original
choice without limitation. The
Shifren
principle essentially delineates that - where such provisions are
itself entrenched in the agreement between the parties, the original
agreement is incapable of being validly altered without complying
with certain prescribed formalities.
[38]
The principle in
Shifren
is that where the parties
incorporated a formalities clause which entrenches a prohibition
against an oral variation, there was
no reason to find that one party
cannot hold the other party bound thereto.
[39]
The policy is one of certainty which aims to give effect to
the intention of the parties and to guard against disputes
and
difficulties of proof which can arise in oral agreements
[1]
.
[40]
In
Barkhuizen v Napier
[2007] ZACC 5
;
2007 (5) SA 323
(CC) at Par
[57]
the Constitutional Court held that public policy requires parties to
honour contractual obligations that have been freely and voluntarily
undertaken. The principle of
Pacta Sunt Servanda
is a
profoundly moral principle on which the coherence of any society
relies.
[41]
The majority held the
Pacta Sunt Servanda
principle –
“…
gives
effect to the central constitutional values of freedom and dignity.
Self-autonomy, or the ability to regulate one's own affairs,
even to
one's own detriment, is the very essence of freedom and a vital part
of dignity.”
[42]
At Par [69] the Court held that the onus rest on the party
seeking to avoid the enforcement clause to demonstrate why
its
enforcement would be unfair and unreasonable in the given
circumstances.
[43]
In clarification of what is required to avoid being bound by a
contractual term, freely and voluntarily agreed upon,
the Supreme
Court of Appeal considered the judgement of
Barkhuizen
in
Bredenkamp v Standard Bank of SA Ltd
2010 (4) SA 468
(SCA) and
held at Par [50]:
“
I
do not believe that the judgement in
Barkhuizen
held
or purported to hold that the enforcement of a valid contractual term
must be fair and reasonable, even if no public consideration
found in
the Constitution or elsewhere, is implicated.”
[44]
In
Nyandeni Local Municipality v MEC for Local Government
and Traditional Affairs and Another
2010 (4) SA 261
(ECM), the
Eastern Cape High Court considered what is required to avoid being
bound by a contractual term, freely and voluntarily
agreed upon, and
commenced its assessment of the question in relation to an
entrenchment clause by stating at paragraph 2:
“
As
the law stands at present, there are no exceptions to the application
of a Shifren principle, and there are no decided cases
not overturned
on appeal where the Shifren principle was relaxed.”
At
Par [50] in
Nyandeni
, the Court held:
“
In
terms of Shifren, it is the original contract which must be protected
and enforced, not a subsequent oral one, which effectively
ignores
the first. To enforce the second oral contract on the basis of
Pacta
Sunt Servanda
in
contravention of the original one, results in circuitous reasoning
and is destructive of the carefully constructed reasoning
in Shifren
and is offensive to all case law since 1964 following Shifren.”
The
Court referred with approval to the principle in that:
“
A
Court has no general discretion with reference to considerations of
fairness and equity to decide whether or not to enforce contractual
rights. The exercise of such general discretion is contrary to the
law of contract and the principle of
Pacta
Sunt Servanda
and
will result in the enforcement or otherwise of contractual rights and
obligations depending on the personal views of the Judge
on what is
fair and equitable (at 16B-E). Such general discretion will result in
contractual uncertainty and will. undermine their
Constitutional
Rights to freedom to contract and choose and agree on the terms.”
[45]
In this matter the Settlement Agreement between the parties
was made an Order of Court.
[46]
The Applicant seeks an Order declaring that the 1
st
Respondent is in contempt of the Court Order granted on 11 September
2020.
[47]
The principles of civil contempt are well established and have
formed the subject-matter of numerous judgments:
[2]
-
An Order was granted against the Respondent.
-
The Respondent was served with the Order or had knowledge of it.
-
The Respondent failed to comply with the Order.
[48]
Once these elements have been established, wilfulness and
mala
fides
are presumed, and the Respondent bears an evidentiary
burden to establish reasonable doubt.
[49]
The non-compliance with the Order must have been wilful and
mala fide
.
[50]
Should the Respondent fail to advance evidence that
establishes reasonable doubt as to whether non-compliance was wilful
and
mala fide
, contempt is established beyond reasonable
doubt.
Fakie
N.O. v CCII Systems (Pty) Ltd
[2006] ZASCA 52
;
2006 (4) SA 326
(SCA).
[51]
A refusal to comply that is objectively unreasonable may,
however, be shown to be
bona
fide
which
will then avoid a finding of civil contempt although unreasonableness
could establish evidence of a lack of good faith.
[3]
[52]
The 1
st
Respondent advised the Applicant through
their attorneys, of the list of properties and raised an objection
about the costs associated
with the Applicant’s attorney
registering the Mortgage Bonds.
[53]
The 1
st
Respondent was not willing to agree to the
terms of the proposed mortgage bond and proposed that the dispute be
referred for
Intergovernmental Relations Framework
Dispute Resolution or Mediation, as both parties are governmental
institutions.
[54]
The 1
st
Respondent registered a mortgage bond over
69 erven as the rest of the erven is encumbered.
[55]
This shows that there was no
mala fides
or wilfulness
in the conduct of the 1
st
Respondent.
[56]
The parties agreed on a remedy, should the 1
st
Respondent fail to comply with any terms of the Court Order.
“
7 Should the
Municipality fail to comply with
any
terms
of this order, Eskom
shall
,
by delivering of written notice to the Sheriff, be entitled to
appropriate the funds held in trust by the Sheriff of Bloemfontein
West and proceed with further execution steps in respect of the order
under case number 924/2013.” (My emphasis.)
[57]
The 1
st
Respondent could not register a covering
bond over 139 properties as it discovered on trying to register the
bond, that some of
the properties is encumbered.
[58]
The Applicant agreed what its remedy will be should the 1
st
Respondent fail to comply with the Court Order, and further the 1
st
Respondent did not act wilful or
mala fide.
ORDER
[59]
The following Order is made:
1.
The Application is dismissed with cost, including the cost of two
Counsel.
AP
BERRY, AJ
APPEARANCES:
For
the Applicant:
Adv.
L T Sibeko SC
with
Adv. H N Moloto
Instructed
by:
Phatsoane
Henney AttorneyS
BLOEMFONTEIN
For
the Defendant:
Adv.
N Snellenburg SC
with
Adv. M Louw
Instructed
by:
Hill
McHardy & Herbst Attorneys
BLOEMFONTEIN
[1]
Shifren
at 768 G-H.
[2]
Fakie
NO v CCII Systems (Pty) Ltd
[2006] ZASCA 52
;
2006
(4) SA 326
(SCA).
Pheko
v Ekurhuleni City
2015 (5) SA 600
(CC).
Secretary
of the Judicial Commission of Inquiry into Allegations of State
Capture, Corruption and Fraud in the Public Sector including
Organs
of State v Zuma and Others
2021 (5) SA 327 (CC).
[3]
Fakie
NO v CCII Systems (Pty) Ltd
supra
at
para [9].