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2023
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[2023] ZAFSHC 192
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Mohokare Local Municipality v Centlec (SOC) Limited (616/2023) [2023] ZAFSHC 192 (25 May 2023)
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Case
Number 616/2023
In
the matter of:
MOHOKARE
LOCAL MUNICIPALITY
APPLICANT
And
CENTLEC
(SOC) LIMITED
RESPONDENT
CORAM: NAIDOO,
J
HEARD
ON: 9
MARCH 2023
DELIVERED
ON: 25 MAY 2023
JUDGMENT
[1]
This application came before this court as an urgent application and
the
order was granted on an urgent basis on 27 February 2023, in the
following terms:
“
1
the applicant’s non-compliance with the Uniform Rules of Court
in relation
to time periods, form and service is condoned and the
application is heard as an urgent ex parte application in terms of
Rule 6(12)
2
A rule nisi is issued, returnable on Thursday 9 March 2023 at 9h30,
or such
time as the court deems meet in terms of which respondents
(sic) are called upon to give reasons why the following orders should
not be made:
2.1
The Respondent is ordered to forthwith comply with its obligations in
terms of the Service
Level Agreement concluded between the Applicant
and respondent on 14 November 2007 at Zastron [“the
Service Level Agreement],
including the following, without derogating
from the generality of the order:
2.1.1 To
deploy technicians/consultants in the municipal area to render the
services in accordance with the terms and
conditions of the SLA;
2.1.2 To
register complaints or queries emanating from the Mohokare Local
Municipality or members of its community at
the Respondent’s
call centre and to issue instructions, without delay, to its
technicians/consultants to render the services
required to resolve
the complaint/query;
2.1.3 To
render the services as contracted for in the Service Level Agreement
on the standard as provided for in the
Service Level Agreement;
2.2
Save in the event of a cancellation in terms of clause 8 and 21 and
subject thereto that
the Respondent complies with the
requirements for cancellation in terms of the aforesaid clauses, the
Respondent is interdicted
and restrained from giving notice of
cancellation of the Service Level Agreement or purporting to cancel
the Service level Agreement
without duly complying with the
dispute resolution provisions stipulated in the Service Level
Agreement and thereafter duly
complying with the requirements for
cancellation on the service level agreement.
3.
The relief in prayer 2 above shall operate as an interim interdict
with immediate
effect, pending the finalisation of this application,
4.
The respondent pays the costs of the rule nisi proceedings and/or the
application
in the event of opposition.”
[2]
The applicant, Mohokare Local Municipality (Mohokare) and the
respondent, Centlec
Soc Ltd (Centlec) entered into a Service Level
Agreement (SLA) on 14 November 2007 for the provision,
inter alia
,
of the supply of electricity to the municipal area of Mohokare. Prior
to this, the provision of the electricity supply to Mohokare
was
serviced by the Mangaung Local Municipality (Mangaung), through its
electricity department known as Bloemfontein Electricity,
in terms of
a Service Delivery Agreement entered into between Mohokare and
Mangaung on 27 February 2002.
[3]
In 2002, Mangaung established Centlec, a company wholly owned by
Mangaung, whose main object was the
generation, distribution and
supply of electricity. On 15 March 2004, Mangaung entered into a sale
of business agreement with Centlec,
in terms of which, Mangaung sold
the business of the supply of electricity to Centlec, including its
total electricity and distribution
network in the area, for which it
held a distribution licence issued by the National Electricity
Regulator of South Africa (NERSA).
The distribution licence included
areas falling within the jurisdiction of Mangaung and Mohokare. NERSA
transferred to and re-issued
the distribution licence in the
name of Centlec, and the latter has since continued to carry out
Mangaung’s obligations
to supply electricity within Mangaung
area as well as to Mohokare’s municipal area.
[4]
The SLA makes specific provisions for termination of the SLA as well
as
for dispute resolution, specifying the procedure to be adopted, in
respect of each. It is not in dispute that Mangaung and thereafter,
Centlec have been supplying electricity to Mohokare’s municipal
area for over 20 years. This matter has its genesis in events
that
arose on 31 January 2023. The areas of Rouxville, Zastron and
Smithfield experienced heavy rainfall and thunderstorms, resulting
in
an electrical outage in the water treatment works supplying Uitkoms
and Rouxville. Both areas were, consequently without electricity
and
water. Two calls were logged by Mohokare’s officials to
Centlec’s call centre, but the problem was not attended
to on
that day or during the following day, 1 February 2023, resulting in a
further call being logged to Centlec’s call centre
at 16h00 on
1 February 2023.
[5]
The official, Mr
Thejane, was advised by a call centre agent that she received
instructions not to assist with any problems or reports from Mohokare
and that any complaints were to be referred directly to the
municipality. Mr Thejane made further enquiries about the
availability of Centlec technicians in the Zastron area and found
that
they were no longer residing there. Mohokare was unaware of when
they left. He then contacted one of the Centlec technicians, who
advised him that he had received instructions from Centlec not to
assist Mohokare with any electricity enquiries or issues. Mohokare
was obliged to engage an outside contractor in order to undertake the
repairs that were needed at the time.
[6]
Mohokare then wrote to a letter to Centlec, on 1 February 2023,
pointing
out that they are in breach of the SLA by not performing in
terms thereof and calling upon Centlec to rectify this breach,
failing
which, Mohokare will obtain a court order. Centlec’s
response, on 2 February 2023, was to point out a media statement made
by Mohokare three months earlier in November 2022 that there was no
valid Service Delivery Agreement between it and Centlec, and
that the
original agreement which was signed in 2007 was never revised.
Centlec proceeded to refer to a letter it had addressed
to Mohokare
in October 2022, in respect of monies owed by Mohokare to Centlec, to
which it never received a response. It also referred
to the monthly
expenditure it incurs to assist Mohokare, which is also owed to it by
the latter. In response to Mohokare’s
complaint that the
Centlec technicians have left the area, in breach of the SLA, Centlec
alleged that it still has “
some resources in Mohokare to
assist as and when required”.
Centlec’s letter ended
with the assertion that it expects outstanding payments from Mohokare
within fourteen days from the
date of receipt of that letter.
Mohokare alleges that it viewed this response by Centlec as a
repudiation of the SLA
[7]
On 5 February 2023, in order to resolve the matter and avoid
incurring
legal costs, a meeting was arranged with Centlec and
various roleplayers from the relevant municipalities and provincial
government
officials. The Mayor of Mohokare and the deponent to the
Founding Affidavit, being the Municipal Manager of Mohokare and
the Chief Executive Officer of Centlec were also present. Mohokare
alleges that Centlec demanded payment of grant monies allocated
by
the national government for electricity projects. Mohokare claims
that it only authorises payments, in accordance with work
done. The
monies are paid to another District Municipality, which, in turn,
pays to Centlec.
[8]
It is not clear if the issues were resolved, but Mohokare alleges
that
such is not relevant for this application, as it requires
Centlec to comply with the SLA. The contents of Annexure E, being the
letter that Centlec wrote on 2 February 2023, which included the
issue of of monies owed, is a matter for another forum to decide.
Mohokare alleges that Centlec cannot simply cease to provide services
it contracted to provide, without following the procedures
set out in
the SLA. There are still no technicians in the area to perform the
services in accordance with the SLA, Centlec has
neither cancelled
nor declared a dispute, as required by the SLA.
[9]
Centlec alleges that it has not cancelled the SLA and it has always
been complying
with the SLA, in that it has continued to provide
electricity as well as electricity maintenance services, via its
technicians
who are stationed in the Mohokare municipal area. Centlec
set out extensive details of the monies it claims that Mohokare owes
to it. Centlec appeared to agree with Mohokare that the SLA is still
in force and by implication, that both parties are bound by
the
provisions thereof. Centlec raised, in its Answering Affidavit, the
challenge that the relief claimed by Mohokare is incompetent
because
they seek specific performance, without tendering performance on
their part in terms of the SLA. With regard to prayer
2.2,
Centlec alleges that clauses 8 and 21 of the SLA regulate termination
of the SLA, and that clause 27, which provides for dispute
resolution, does not find application where a party elects to cancel
or terminate the SLA. I pause to mention that this prompted
Mohokare
to amend prayer 2.2, to include, at the beginning of the prayer, the
proviso that save in the event that Centlec cancels
the SLA and
complies with the requirements for cancellation, it would be
restrained from giving notice of cancellation of the SLA,
without
complying with the dispute resolution provisions of the SLA.
[10]
Centlec also raised certain preliminary points, being
the lack of authority of Mr Molatelo Johannes Kanwendo, the deponent
to the
Founding Affidavit and the lack of urgency. I note that the
matter was set for hearing on 23 February 2023, but Centlec
complained
that the Replying Affidavit was filed late and that it
needed time to consider the Replying Affidavit. Centlec also sought
leave
to file a further affidavit, which was granted, after the
application was opposed by Mohokare and the matter was argued. Heads
of Argument were filed by both parties and the matter was heard on 27
February 2023, and the order I referred to earlier was granted.
Centlec filed Supplementary Heads of Argument on 8 March 2023, the
day before the hearing in this court on 9 March 2023 This court’s
function is to decide whether the
rule nisi
granted on 27 February 2023 should be confirmed
[11]
The court on, 27 February 2023, clearly considered the case put
forward by each party,
including the various challenges raised by
Centlec against the case of Mohokare, and granted the order
accordingly. In argument
before me, Mohokare argued that Centlec
withheld its services and withdrew its technicians from the area,
without warning and following
a demand for payment of monies it says
were owed to it. Mohokare argues that this is contrary to the SLA, as
Centlec is aware that
it (Mohokare) does not have the capability to
undertake electricity generation or maintenance of the network.
It alleges further that Centlec repudiated the contract, without
following the procedure provided for in the SLA. In this regard,
Mohokare relies on exhibit E attached to the Founding Affidavit,
being a letter from Centlec dated 2 February 2023, in response
to
Mohokare’s letter dated 1 February 2023, which I have referred
to above.
[12]
Mohokare pointed out that Centlec’s version as appears from the
Answering Affidavit,
changed somewhat in the Further Affidavit that
it filed. This relates,
inter alia
, to the number of
technicians that were in the area and the withdrawal of some of them,
the assertion that its technician undertook
the repairs to the water
treatment works, the denial of the meeting on 5 February 2023 and the
denial that the District Municipality
is tasked with paying to
Centlec monies in respect of project grants. Mohokare also denied
that Centlec is entitled to rely on
the principle
exceptio non
adimpleti contractus
(the adimpleti principle)
.
Mohokare
persists in its prayer for the confirmation of the
rule nisi.
[13]
Centlec argued that Mohokare seeks specific performance, without
tendering its own
compliance with the provisions of the SLA and that
is impermissible. Therefore, it is entitled to rely on the
adimpleti
principle, namely that he does not have to perform in terms of
the agreement if there is no corresponding performance or tender of
performance from the other party. Mr Thompson argued that Centlec has
established that Mohokare owes it large amounts of money
and
has not denied owing it money. Therefore, Mohokare has failed to
establish its case, and Centlec seeks the dismissal of the
rule
nisi
, with costs.
[14]
As I indicated, this court’s function is to decide if the
rule
nisi
should be confirmed. It usually allows the respondent to
present evidence or give an explanation that would persuade the court
that the
rule
should be discharged. The challenges and
preliminary issues raised in the Answering Affidavit would have been
dealt with by the
court on 27 February 2023, leading to the grant of
the
rule nisi
on that day. Those issues were not pursued in
argument before me, and I accordingly find it unnecessary to deal any
further with
them. Mr Thompson dealt with the issues of its
compliance with the SLA and also pursued the argument that, in the
absence of a
tender of performance from Mohokare, together with the
fact it had established that Mohokare owes it money, it was entitled
to
invoke the
adimpleti
principle.
[15]
It is common cause that both parties regard the SLA to be still in
force and binding upon them,
that Centlec has, since the signing of
the SLA, been delivering the services in terms of the SLA and that
there were monies that
were historically due by Mohokare to Centlec,
which debt was incurred by the previous management of Mohokare. It is
also not in
dispute that both Mohokare and Centlec are entities
providing public services, and that Mohokare is constitutionally
mandated to
provide basic services to the members of the public in
its jurisdiction. The issues are that Centlec failed to deliver
services
to Mohokare in terms of the SLA and did not follow the
procedures for cancellation of dispute resolution prescribed in the
SLA.
The further issue is that Mohokare’s failure to tender
performance, namely the paying of monies owed in terms of the SLA to
Centlec, disentitles it to the order it seeks.
[16]
It is perhaps useful to start at the point which gave rise to the
dispute between the parties.
As I alluded to earlier, due to the
floods, the Water Treatment Works which supplies water to Uitkoms and
Rouxville needed urgent
repair. As was the practice, officials of
Mohokare logged calls to Centlec’s call centre but were told
that the call centre
staff were instructed not to assist but to refer
such reports or queries directly to the municipality. Upon
investigation Mohokare
ascertained that Centlec’s technicians
had left the area. Upon contacting one of them, Mr Els, the latter
advised Mohokare
that he was instructed by Centlec not to assist
Mohokare. This is denied by Centlec who insists that there were two
technicians
always available to render the required services, namely
Mr Andile Fonya and Mr Izak Christiaan Els.
[17]
Confirmatory Affidavits from both these officials were attached to
the Answering
Affidavit. Centlec denied that an outside contractor
undertook the urgent repairs that were needed and insisted that it
was in
fact Mr Fonya who did the repairs. A spreadsheet reflecting
Centlec’s call history, which included the dates in question,
were also attached to the Answering Affidavit. Mr Fonya alleges in
his Confirmatory Affidavit that he attended to a complaint at
Zastron
0n 30 January 2023 with reference number N230130161 and on 31
January 2023, he attended to complaints in Rouxville
bearing
reference numbers N230131574 and N230131533. He finalised and closed
the complaints on those same days.
[18]
Mohokare in its Founding Affidavit, alleged that Mr Raboko, a
technician at Mohokare logged a
call with Centlec’s call centre
early in the morning of 31 January 2023 to report the problem at the
water treatment works,
and was given reference number N230130161.
Later that morning, Mr Thejane, who is Mohokare’s Technical
Services Director,
logged a further call with Centlec to report the
problem and was furnished with reference number N230131533. By the
afternoon of
1 February 2023, the problem was not attended to and Mr
Thejane then followed up with a further call to Centlec’s call
centre
and was given the reference number N230131574. It was during
this call that he was informed that instructions were given by
Centlec
that Mohokare should not be assisted. Mr Thejane and Mr
Raboko also deposed to Confirmatory Affidavits in this regard.
[19]
The spreadsheet with the call log that I referred to reflects the
calls and reference numbers
I have alluded to above, but it is not
apparent what action was taken and by whom. Mohokare alleges that all
three calls related
Rouxville, while Mr Fonya alleges that he
attended to a complaint in Zastron and two in Rouxville. Centlec
provided no evidence,
in the form of documentation in this regard,
while it criticised Mohokare is criticised for only attaching a
quotation and authority
to perform the work in respect of the outside
contractor who had to be engaged urgently. Furthermore, no
explanations were furnished
on how to read the information contained
in the call log to enable a better understanding thereof.
[20]
In the Answering Affidavit, Centlec admits that there were six
technicians stationed in Mohokare’s
municipal area, but in the
Further Affidavit it alleges that there were two and it recalled
other technicians for operational reasons.
Mohokare further alleged,
and this does not appear to be in dispute, that Mr Fonya was
forcefully detained by the community to
prevent him leaving. They
removed the keys of his vehicle and handed it to the police station
for safekeeping.
[21]
Theses explanations by Centlec and the stance it adopted appears to
me to be an attempt to substantiate
its assertion that it had
continued to render services in terms of the SLA. It is not clear
whether the technicians did in fact
render any services, and in
addition it appears that two technicians would not have been able to
render a full and proper service
as required by the SLA , for the
entire Mohokare municipal area.
[22]
Another aspect which raises questions is Centlec’s outright
denial, in its Answering Affidavit,
that a meeting was held on 5
February 2023, as outlined by Mohokare, but seems to have had a
change of mind in the Further Affidavit,
in which it alleges that a
meeting (an ANC Legotla) was held on that day, and the meeting
referred to by Mohokare was incidental
to that “legotla”,
hence it did not consider it a proper meeting. No attempt was made in
the Answering Affidavit to
tender this explanantion Similarly it is
strange that Centlec would not be aware that the District
Municipality was making payments
of grant funding to it (Centlec). It
begs the question whether it queried why those payments were made to
it, if it was unaware
of the arrangement between the Department of
Minerals and Energy, Mohokare and Xhariep District Municipality.
[23]
It would appear that Mohokare did not have much choice but to
approach the court for urgent relief,
directing Centlec to comply
with its obligations in terms of the SLA. This is particularly so as
approximately Ten Thousand Two
Hundred and Fifty (10 250)
residents within Mohokare’s jurisdiction were without the basic
amenities of water and electricity,
obliging Mohokare to go beyond
the SLA and appoint an outside contractor to restore these amenities.
When it found that the attitude
of Centlec at the meeting of 5
February 2023 was still unrelenting, it launched this application.
[24]
The purpose of the
rule nisi
was to obtain interim relief in
order to protect the interests of the public affected by the conduct
of Centlec and give the latter
an opportunity to explain and give
reasons to assist the court in deciding whether the
rule
should be confirmed. The filing of the Further Affidavit gave no new
insights to persuade the court not to confirm the
rule
.
Centlec raised issues which would more appropriately be heard in
another forum after proper process in terms of the SLA is followed.
Centlec, in fact, agreed with this assertion made by Mohokare in its
Founding Affidavit. I, therefore, do not deem it necessary
to deal at
any length with the issues raised by Centlec. On its version it has
continued to provide services in terms of the SLA.
What is apparent
is that Centlec is determined to recover monies due to it by
Mohokare, and understandably so. Mohokare must also
perform in terms
of the SLA, as Centlec appears to be owed large sums of money.
However, the court is very mindful of the interests
of the people
resident within the Mohokare municipal area, and must safeguard those
interests, lest those residents become entangled
in legal battles,
not of their own making, and suffer the lack of basic amenities while
those disputes are being resolved.
[25]
Both parties should be mindful that they need to act within the
provisions of the SLA. Confirmation
of the
rule nisi
, will
cause no prejudice to Centlec, who alleges that it has always
provided the required services. The interests of the public
will be
protected and Centlec will still be able to proceed for the recovery
of the monies it alleges are due to it, after due
process is
followed. Both parties addressed me on costs, correctly pointing out
that the award of costs is in the discretion of
the court. Mohokare
proposed that each party be ordered to pay its own costs, while
Centlec sought an order for costs on the attorney
and client scale.
[26]
An award on the punitive scale as sought by Centlec would normally be
made to show the court’s
displeasure at the behaviour of a
particular litigant. In this matter. Both parties were eminently
aware of their obligations in
terms of the SLA and, more importantly,
to serve the public interest. It is the public purse that is
implicated in these proceedings,
and the court is very mindful of
that. Entities, such as the parties in this matter, ought to make a
greater effort to resolve
issues in accordance with the instruments
that bind them, and be very slow to fight their battles in court, at
the expense of the
public. The costs order that I will make will
attempt to be fair to both sides. The court had previously ordered
the respondent
to pay the costs of the application to file a Further
Affidavit. The costs of the application for 23 February 2023 stood
over.
In my view, the applicant’s failure to file the Replying
Affidavit timeously occasioned the postponement on that day, and
there is no reason why it should not pay those costs
[27]
In the circumstances I make the following order:
27.1
The
Rule Nisi
is confirmed;
27.2
The applicant is directed to pay the costs of 23 February 2023
26.3
Each party is directed to pay its own costs of the application
S
NAIDOO J
On
Behalf of the Applicants:
Adv
N Snellenburg SC with LA Roux
Instructed
by:
Peyper
Attorneys
101
Olympus Drive
Helicon
Heights
Bloemfontein
(Ref:
L Radley)
On
Behalf of the Respondent:
Adv
DR Thompson
Instructed
by:
Raynard
& Associates Inc
17
NP Van Wyk Louw Street
Langenhoven
Park
Bloemfontein
(Ref:
T Tshitlho)