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2023
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[2023] ZAFSHC 496
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Democratic Alliance v Acting Municipal Manager of the Metsimaholo Local Municipality and Others (6192/2023) [2023] ZAFSHC 496 (21 December 2023)
IN
THE HIGH COURT OF SOUTH AFRICA,
FREE
STATE DIVISION, BLOEMFONTEIN
Reportable:
YES/NO
Of
Interest to other Judges: YES/NO
Circulate
to Magistrates: YES/NO
Case
number:
6192/2023
In
the matter between:
DEMOCRATIC
ALLIANCE
Applicant
and
THE
ACTING MUNICIPAL MANAGER OF THE
METSIMAHOLO
LOCAL MUNICIPALITY
1
st
Respondent
FUSI
JOHN MOTLOUNG
2
nd
Respondent
HELGARDT
MULLER N.O.
3
rd
Respondent
EHEILA
MARTINA HENDRIKA MULLER N.O.
4
th
Respondent
HELGARDT
MULLER N.O.
5
th
Respondent
CHANTE
GAIL COETZEE N.O.
6
th
Respondent
CORRIE
PLOOS VAN AMSTEL N.O.
7
th
Respondent
EXECUTIVE
MAYOR OF THE METSIMAHOLO
LOCAL
MUNICIPALITY
8
th
Respondent
COUNCIL
OF THE METSIMAHOLO LOCAL
MUNICIPALITY
9
th
Respondent
THE
SPEAKER OF THE COUNCIL OF THE
METSIMAHOLO
LOCAL MUNICIPALITY
10
th
Respondent
THE
METSIMAHOLO LOCAL MUNICIPALITY
11
th
Respondent
LUCAS
FISCHER
12
th
Respondent
CORAM:
LOUBSER, J
HEARD
ON:
6 DECEMBER 2023
DELIVERED
ON:
21 DECEMBER 2023
[1]
This is an urgent application that came before this court on 6
December 2023. The application
papers comprised of more than
1200 pages, and in the circumstances, judgment was reserved.
The applicant is a registered
political party, commonly known as the
DA. The second respondent is the acting municipal manager of
the municipality in question,
in his personal capacity. The
third to seventh respondents are the trustees of the Lizelle Sake
Trust. The seventh
respondent is the arbitrator in arbitration
proceedings to which reference will be made later herein. The twelfth
respondent is
the speaker of the council of the municipality, in his
personal capacity.
[2]
The applicant seeks certain interdictory relief on an urgent basis
pending the final adjudication
of a future review application in
which certain declaratory relief is sought. The declaratory
relief is aimed at finding
the trust and the municipality guilty of
contempt of court, and declaring a certain waiver decision, the
arbitration award, an
approval decision and the new settlement
agreement unlawful and to review it and set it aside. The
applicant avers that it
is making these applications in order to,
inter alia
, safeguard public funds held by the municipality
against unlawful appropriation and to guard against contemptuous
conduct by the
municipality. In the review application, the
applicant will also seek an order that the trust return to the
municipality
all the payments it had already received pursuant to the
impugned decisions.
[3]
The starting point of the applicant’s case is a services
agreement entered into between
the municipality and the trust during
2013 for the provision and installation of engineering services
pertaining to water and sewer
systems. This agreement made it
plain that the municipality is not liable for the costs of the
design, installation and provision
of the water and the sewer
systems, which would take place on land owned by the trust and to be
applied for as a township establishment.
Only two years later,
however, a dispute arose between the parties concerning the
implementation of
inter alia
this services agreement. Invoking
the arbitration clause in the services agreement the matter went to
arbitration and the trust
delivered a statement of eight claims
during 2019, totalling roughly R138.5 million. Claim 1 was for an
amount of roughly R42 million
plus 10% interest calculated over a
period plus cost of suit.
[4]
The claims advanced by the trust were not founded on the
express terms of agreement but upon “the
surrounding
circumstances against which the water and sewage agreement was
concluded”. Eventually the municipality was advised
by its own
attorneys that in terms of the agreement, the municipality was not
indebted to the trust in any form or fashion and
that it did not have
to pay any of the claims. Despite this advice, the municipality
proceeded to enter into a partial settlement
agreement with the trust
on 7 July 2023. In terms of this partial settlement agreement, the
municipality would pay the trust R27.8
million in respect of claim 1.
It appears that these payments were not budgeted for in the budget of
the municipality.
[5]
When the applicant became aware of this partial
settlement agreement, it launched proceedings in this Division
on an
urgent basis to obtain interim relief pending future review
proceedings to have the partial settlement reviewed and set aside.
The matter came before Reinders, J who made an order on 28 July 2023
to the effect that, pending the review, the municipality and
its
officials are prohibited from making any payments to the trust in
respect of the partial settlement agreement and that the
agreement is
suspended. In the present application, which is founded on the same
facts and circumstances as set out above, the
applicant alleges that
the municipality and the trust then took a number of steps to
circumvent the order of Reinders, J and made
themselves guilty of
contempt of court in the process. In the envisaged review
proceedings, the applicant seeks to have those steps
reviewed and set
aside, while it also seeks to have those involved committed for
contempt of court.
[6]
It needs mentioning that Reinders, J in her order also ruled that the
normal time limits and procedures will
apply in respect of the review
proceedings. So far the municipality has filed no opposing papers in
the review proceedings, and
those proceedings are presently stalled.
[7]
The steps taken by the trust and the municipality to circumvent
the order of Reinders, J are the following,
according to the
applicant and the papers before the court: The municipality and the
trust informed the arbitrator that they have
abandoned their rights
and obligations in the partial settlement agreement. In other words,
that the partial settlement agreement
did not exist any more. The
arbitrator then proceeded with the arbitration proceedings by
entertaining an application for summary
judgement by the trust in
respect of claim 1, which application the municipality did not oppose
by way of an answering affidavit.
Summary judgement was then granted
in favour of the trust. The applicant does not criticize the
arbitrator, but contends that the
respondents have mislead him to
continue with the arbitration despite the order of Reinders, J. The
municipality could not resort
to self-help abandoning the partial
settlement agreement. They could only do so with the intervention of
a court of law in a so-called
self-review application.
[1]
The applicant estimates that the municipality’s liability under
the arbitration award is around R100 million.
[8]
It would appear then that the applicant has a reasonable
prospect of success in the application to review
and set aside the
waver decision of the municipality and the arbitration award that
followed. To make things worse the municipality
entered into a new
settlement agreement with the trust in terms of which the trust would
be paid R43.2 million, by the payment,
inter alia,
of R5
million per month. This payment is also not budgeted for, as required
by legislation. The terms of the new agreement do not
differ much
from the arbitration award, but the rate of interest is now much
higher. Again, it would appear that there is a reasonable
prospect
that the decision to enter into a new agreement for payment to the
trust, could be successful. If so, the new agreement
could also be
set aside.
[9]
Now in urgent applications for an interim interdict, an applicant
must show urgency, a
prima facie
right (even if open to some
doubt), a well-grounded apprehension of irreparable harm, that the
balance of convenience favours the
granting of the relief, and that
the applicant has no other satisfactory remedy. Here the urgency lies
in the fact that monthly
payments are made to the trust in
substantial amounts and in terms of the new agreement. The applicant
avers that it is acting
in the public interest in an effort to
safeguard public funds held by the municipality against unlawful
appropriation. I therefore
find that the applicant has shown a
prima
facie
right in respect of the interim relief sought. On the facts
of the matter, the remaining requisites for interim relief have also
been complied with.
[10]
Lastly, it is clear that a court has to consider the review
application to determine weather a
prima
facie
right
has been shown.
[2]
The prospects
of success of the review application, as discussed above, therefore
supports the finding that the applicant has succeeded
in showing a
prima
facie
right.
[11]
In the premisses, I grant the following order:
11.1
The applicant’s non-compliance with the Uniform Rules of Court
relating to forms, service and time periods is condoned and this
application is dealt with as a matter of urgency under Uniform
Rule
6(12).
11.2
Pending the final adjudication of the review application:
11.2.1
the first, second, third, fourth, fifth, sixth, ninth, tenth,
eleventh and twelfth respondents
are interdicted from taking any
steps to implement the eleventh respondent’s decision to waive
and/or abandon its rights
(“
the waiver decision
”)
in respect of the partial settlement agreement concluded on 7 July
2023 between the eleventh respondent and the Lizelle
Sake Trust
(which was suspended by this Court’s order of 28 July 2023
under case number 3570/2023 (“
the order
”));
11.2.2
the waiver decision is suspended:
11.2.3
the first, second, third, fourth, fifth, sixth, seventh, ninth,
tenth, eleventh and twelfth
respondents are interdicted from taking
any steps to implement the arbitration award made by the seventh
respondent on 13 October
2023 in respect of the first of eight claims
advanced by the Lizelle Sake Trust (“
the arbitration
award
”);
11.2.4
the arbitration award is suspended and/or stayed;
11.2.5
the first, second, third, fourth, fifth, sixth, seventh, ninth,
tenth, eleventh and twelfth
respondents are interdicted from taking
any steps to implement the decision taken by the Council on 19
October 2023 to approve
a new settlement agreement with the Lizelle
Sake Trust (“
the approval decision
”);
11.2.6
the approval decision is suspended;
11.2.7
the first, second, third, fourth, fifth, sixth, seventh, ninth,
tenth, eleventh and twelfth
respondents are interdicted from taking
any steps to implement the settlement agreement concluded between the
eleventh respondent,
the second respondent, the Lizelle Sake Trust
and/or the fifth respondent (“
the new settlement
agreement
”);
11.2.8
the new settlement agreement is suspended; and
11.2.9
the third, fourth, fifth and sixth respondents are directed, within
seven days, to return to
the eleventh respondent the full quantum of
any funds received by the Lizelle Sake Trust pursuant to the partial
settlement agreement,
waiver decision, arbitration award, approval
decision or new settlement decision.
11.3
The costs of Part A of this application, including the costs of two
counsel, are
costs in the review proceedings.
11.4
Opposing papers in the review proceedings, if any, must be filed no
later than 15
February 2024, whereafter the normal rules shall apply.
PJ
LOUBSER, J
On
behalf of the Applicant:
Adv.
A. Stein SC, with him Adv. D. Sive.
Instructed
by:
Minde
Schapiro & Smith Inc, Bellville,
c/o
Symington & De Kok,
Bloemfontein.
On
behalf of the Third to Sixth
Respondents
(the Trust):
Adv.
J.G. Smit
Instructed
by:
NLA
Legal Inc, Sandton,
c/o
E.G. Cooper Majiedt Inc,
Bloemfontein.
On
behalf of the Third to Sixth
Respondents
(the Trust):
Adv.
M. Khoza SC, with him Adv. R.M. Mahlatsi
Instructed
by:
Raphela
Attorneys Inc, Sandton,
c/o
Fixane Attorneys,
Bloemfontein.
[1]
EFF
v Speaker, National Assembly and Others
2016 (3) SA 580
(CC) at
par.74.
[2]
Eskom
Holdings v Vaal River Development Association 2023(5) BCLR 527 (CC)
par 62-67.