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2022
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[2022] ZAECMKHC 61
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Enoch Mgijima Local Municipality and Others v Twizza (Pty) Ltd and Others In re: Border-Kei Chamber of Business and Others v Eskom Holdings SOC Ltd and Others (CA115/2021) [2022] ZAECMKHC 61 (26 August 2022)
NOT
REPORTABLE
IN
THE HIGH COURT OF SOUTH AFRICA
(EASTERN
CAPE DIVISION, GRAHAMSTOWN)
CASE
NO. CA115/2021
In
the matter between:
ENOCH
MGIJIMA LOCAL
MUNICIPALITY
First Appellant
THE
EXECUTIVE MAYOR OF ENOCH MGIJIMA
LOCAL
MUNICIPALITY
NOMINE OFFICIO
,
BEING
MS LULEKA ELIZABETH
GUBHULA-MQINGWANA
Second
Appellant
THE
MUNICIPAL MANAGER OF ENOCH
MGIJIMA
LOCAL MUNICIPALITY
NOMINE
OFFICIO
,
BEING
MS NOKUTHULA CECILIA
MGIJIMA
Third Appellant
and
TWIZZA
(PTY) LTD
First
Respondent
CRICKLEY
DAIRY (PTY) LTD
Second Respondent
FARMHOUSE
FROZEN FOODS
CC
Third
Respondent
KING
FISHER INDUSTRIES
CC
Fourth Respondent
IN
RE
BORDER-KEI
CHAMBER OF
BUSINESS
First
Applicant
TWIZZA
(PTY) LTD
Second Applicant
CRICKLEY
DAIRY (PTY) LTD
Third Applicant
FARMHOUSE
FROZEN FOODS
CC
Fourth
Applicant
KING
FISHER INDUSTRIES
CC
Fifth Applicant
SIGHTFUL
142 CC t/a SHELL ULTRA
CITY
Sixth Applicant
and
ESKOM
HOLDINGS SOC LTD
First Respondent
THE
NATIONAL ENERGY REGULATOR OF
SOUTH
AFRICA
Second Respondent
ENOCH
MGIJIMA LOCAL
MUNICIPALITY
Third Respondent
THE
ADMINISTRATOR OF ENOCH MGIJIMA
LOCAL
MUNICIPALITY
NOMINE
OFFICIO
Fourth Respondent
THE
EXECUTIVE MAYOR OF ENOCH MGIJIMA
LOCAL
MUNICIPALITY
NOMINE
OFFICIO
Fifth Respondent
THE
ACTING MUNICIPAL MANAGER OF
ENOCH
MGIJIMA LOCAL MUNICIPALITY
NOMINE
OFFICIO
Sixth Respondent
THE
MEC FOR CO-OPERATIVE GOVERNANCE
AND
TRADITIONAL AFFAIRS,
EASTERN
CAPE PROVINCE
Seventh
Respondent
THE
MINISTER OF CO-OPERATIVE
GOVERNANCE
AND TRADITIONAL AFFAIRS
Eighth Respondent
FULL
BENCH APPEAL JUDGMENT
HARTLE
J
[1]
The appellants, with the leave of the court
below, sought on appeal to set aside a finding that they are in
contempt of a high court
order dated 12 December 2019 (“the
Mfenyana order”).
[2]
The
first appellant is the Enoch Mgijima Local Municipality (“the
municipality”). The second appellant is cited in her
official
capacity as mayor, and the third appellant as municipal manager of
the municipality.
[1]
[3]
The contempt order was granted against the
second and third appellants but leave to appeal was evidently granted
to all three parties
at their collective request to appeal their
conviction for contempt of court, and by necessary implication the
sanction imposed
upon them pursuant to such finding.
[4]
The order appealed against provides as
follows:
“
(a)
That Ms Luleka Elizabeth Gubhula-Mqingwana, and Ms Nokuthula Cecilia
Mgijima are convicted of contempt of
court for failing to comply with
the order of Mfenyana AJ, dated 12 December 2019, under case number
3413/2018;
(b)
That Ms Luleka Elizabeth Gubhula-Mqingwana, and Ms Nokuthula Cecilia
Mgijima are sentenced to six months
imprisonment, wholly suspended,
on condition that they give effect to the order of Mfenyana AJ, dated
12 December 2019, under case
number 3413/2018, within thirty (30)
days of the granting of this order;
(c)
That should Ms Luleka Elizabeth Gubhula-Mqingwana, and Ms Nokuthula
Cecilia Mgijima not give effect
to the said order within the
specified time, that the applicant may approach the court on the same
papers, duly amplified, for
an additional order in the following
terms:
(aa) That Ms
Luleka Elizabeth Gubhula-Mqingwana, and Ms Nokuthula Cecilia Mgijima
be held in contempt of court and that
the second and third
respondents be committed to prison for a period of twelve months,
alternatively, for such a period as the
Honourable Court may deem
meet;
(bb) That Ms
Luleka Elizabeth Gubhula-Mqingwana, and Ms Nokuthula Cecilia Mgijima
are to pay the costs of this application,
jointly and severally, the
one paying, the other to be absolved, on the scale as between
attorney and client;
(d)
That the first, second, and third respondents are to pay the
applicant’s costs of this application,
jointly and severally,
the one paying, the other to be absolved.”
[5]
The respondents in the present matter
operate businesses in Komani within the municipal area of
jurisdiction of the first appellant.
[6]
They
were co-applicants together with Border Kei Chamber of Business and
Sightfull 142 CC trading as Shell Ultra City in an antecedent
application launched in November 2018 against Eskom Holdings Soc
Limited (“Eskom”), the National Energy Regulator of
South
Africa, the municipality, an administrator who had at the time been
appointed pursuant to the provisions of section 139 (1)(c)
of the
Constitution,
[2]
the second
appellant, and the then acting municipal manager.
[3]
The latter three were all cited
nomine
officio
in
the original matter.
[7]
The purpose of the application was
ostensibly to obtain an interdict against the municipality and its
officials to cause them to
enter into and to enforce a payment plan
with Eskom. It is common cause that at the time the municipality owed
Eskom approximately
R265 million in arrears for electricity and had
proposed to interrupt its supply to the municipality to vindicate the
arrear situation.
[8]
The respondent and their cohorts had
conceived of the litigation as a means of averting the looming
disaster that would befall them
and countless end-users of the
electricity supply, not to mention the knock-on-knock effect that
this would have for so many, were
Eskom to implement its plans to cut
or disrupt the electricity supply to the municipality.
[9]
The
outcome of this application is that the parties reached a settlement
agreement on 12 December 2019 that was made an order of
court by
Mfenyana AJ. The order incorporated an acknowledgement of debt by the
municipality to Eskom as well as a carefully crafted
payment plan
vis-à-vis themselves that would in the parties’ view
provide a panacea to the problem and avert certain
disaster. It also
incorporated a structural interdict in the respondents’ favour
that entailed the municipality and a designated
person (the third
appellant) reporting to the respondents and Eskom and ensuring that
the municipality complied with its obligations
under the payment
plan.
[4]
[10]
The Mfenyana order which the appellants
were found by the court below to have been in deliberate defiance of,
provided as follows:
“
1.
THAT the acknowledgment of debt and payment agreement (referred to
collectively as “the payment
agreement”) reached between
the First Respondent’s (“Eskom”) and Third
Respondent (“Enoch Mgijima
Local Municipality”) and
attached marked “A” be and is hereby made an Order of
Court.
2.
THAT Eskom undertakes to supply electricity to Enoch Mgijima
Municipality in the ordinary
course, provided that Enoch Mgijima
Local Municipality complies with the payment agreement (and excepting
load shedding as may
be scheduled nationally from time to time).
3.
THAT Enoch Mgijima Local Municipality is to comply with the
conditions in the payment agreement.
4.
THAT Enoch Mgijima Local Municipality is to deliver written notice,
on affidavit, to this
Court, Mr. Jacques van Zyl of Metcalf Sahd &
Company by e-mail at
jacques@msco.co.za
,
and Eskom (through its attorneys of record) on or before the 8
th
day of each month indicating and providing evidence of its compliance
with its obligations under the payment plan, and its monthly
currently account obligations to Eskom.
5.
THAT Enoch Mgijima Local Municipality and the Fourth and Fifth
Respondents are to nominate
by name and designation, within 7 days of
the granting of this order, the responsible person(s), by name, and
designation, who
are mandated to ensure compliance with the terms of
its order and give effect thereto, by giving written details of such
person’s
name (or such persons’ names) and such person’s
designation or designations) to this Court, to Eskom (through its
attorneys
of record) and to the Applicants (through their attorneys
of record).
[5]
6.
THAT Enoch Mgijima Local Municipality is to pay the Applicants’
costs of suit, (Wheeldon
Rushmere & Cole Inc), (Netteltons and
Smith Tabata), such costs to include the costs of two counsel on the
opposed basis, and
all reserved costs.”
[11]
The
payment plan envisaged that the municipality would meet both its
current obligations to Eskom and at the same time would pay
off the
arrears owed to Eskom in instalments over an agreed period.
Significantly the agreement provided between debtor and creditor
what
would transpire in the event that the municipality defaulted in
respect of any of its payments, or if it entered into a compromise
with its creditors. In this respect it recorded its consent to
judgment being taken against it and reconciled itself to the further
eventuality that Eskom might without further notice take whatever
legal remedies were available to it including the disconnection
of
the supply of electricity to the municipality or the obtaining of
judgment against it by making the acknowledgement of debt
an order of
court.
[6]
The agreement (also
incorporated in the Mfenyana order) was signed by the third appellant
in her capacity as municipal manager
whose authority to execute the
agreement on behalf of the municipality was vouched for.
[12]
The first instalment of R23 144 474.65
under the payment plan was promptly paid in December 2019 and the
municipality
timeously made two payments in respect of its current
account in January and February 2020.
[13]
As is indicated above, the third appellant
was nominated as the responsible person in terms of prayer 5 of the
Mfenyana order to
ensure compliance with its terms and to give effect
thereto. Concerning the personal obligation on her to report arising
from the
Mfenyana order she duly complied in this respect as was
contemplated in terms of paragraphs 4 and 5 thereof until the end of
February
2022.
[14]
The municipality claims to have been fully
intent on meeting its obligations to Eskom in terms of the payment
plan, but a letter
penned on its behalf by its attorneys dated 26
March 2020, ostensibly written as a report of its situation in the
spirit of the
Mfenyana order, heralded that it would be entering a
tumultuous period of financial uncertainty as a result of the then
impending
COVID-19 crisis. It also disclosed that the implementation
of the payment plan was wreaking havoc on its ability to meet its
normal
operational expenses, impacting ultimately upon its service
delivery. It asserted that the continuation of the payments set out
in the plan in the short term was simply unsustainable and would lead
to its inevitable collapse. It consequently asked for a “reasonable”
extension of time to pay the two instalments of R30 million each due
on 31 March and 31 July 2020 respectively, spread over the
period
November 2020 to 31 July 2022, on the understanding that it would
continue to the best of its ability to service the current
Eskom
debt. It intimated that it would have to report to the court (as per
the Mfenyana order) that it was unable to comply with
its obligations
and would seek appropriate relief from the court thereanent.
[15]
Its attorneys attached a report ostensibly
prepared by the third appellant addressed “to whom it may
concern” dated
26 March 2020 which illustrated the
municipality’s dire financial position. In it the third
appellant refers to its approach
to Eskom with a view to reaching
agreement on the “rescheduling of the agreement pending
submission to the court” but
acknowledges having been informed
by Eskom that the municipality would be obliged to seek its recourse
by approaching the court
to effect such variation.
[16]
Despite noting the urgency of the situation
and repeating the municipality’s intention to do exactly that,
namely, to approach
the court “in pursuance of the stated
position”, it is common cause that it did not do so.
[17]
On 17 April 2020 the local attorneys of the
respondents (who are the beneficiaries of the monthly report
envisaged in prayer 4 of
the Mfenyana order) noted that the
“evidence” by the municipality of its compliance with its
obligations under the
payment plan (refer paragraph 4 of the order)
was lacking, and the appellants supposedly in contempt of court
thereby. They made
demand for proof of payment to be provided failing
which they intimated that the respondents would proceed with the
contempt application.
[18]
On 27 April 2020 the municipality’s
attorneys, observing that the legal representatives of the relevant
parties had not reverted
regarding its request for an extension under
the payment plan, laid bare the fact that the municipality’s
financial position
had considerably worsened in the intervening
period. Reasons for this conclusion were noted and attention was once
more drawn to
the fact that unless a re-negotiation was in the offing
and a settlement agreement could be reached involving new affordable
payment
terms, the municipality would be obliged to approach the
court for its intervention, on an urgent basis if necessary.
[19]
The respondents’ attorneys replied
with unbridled sarcasm that it was anticipated that the municipality
would blame all its
woes and contempt of court on the COVID-19 virus.
It further questioned what the municipality had done with revenue
earmarked for
the supply of electricity and insinuated that it was
“pillaging the Eskom funds again, for other purposes”. It
confirmed
that it would proceed with the contempt application against
all of the appellants.
[20]
Eskom’s attorneys in the meantime
unequivocally confirmed to the municipality’s attorneys that it
would not accede to
its request for a “payment holiday.”
It urged the first appellant to apply its share of the special
allocation to municipalities
to alleviate the effects of COVID-19 to
the payment of the debt owing to it, pointing out that this grant was
specifically intended
to enable municipalities to meet their
constitutional and contractual obligations despite the hardship
brought on by the COVID-19
pandemic.
[21]
On
11 June 2020 the respondents issued out the contempt application, on
the basis of the municipality’s failure to have paid
arrear
instalments and on the further basis of its intimation to Eskom in
separate correspondence that it was unable to meet payment
of its
current account.
[7]
[22]
In launching the proceedings for contempt,
the respondents articulated the twofold purpose of the application as
follows:
“
This
is an application to convict the first, second, and third respondents
for contempt of court, and in particular, for failing
to comply with
the order of the Honourable Madame Acting Justice Mfenyana, handed
down on 12
th
of December 2019, in case number 2313/2018.
8.
A further purpose is to
ensure compliance with that order by affording the first, second and
third respondents a final opportunity
to comply with the aforesaid
order, failing which, that the applicants be granted leave to enroll
this matter again for an order
committing the second and third
respondents to imprisonment for a period of twelve months,
alternatively, for such a period as
the Honourable Court may deem
meet.
9.
The first, second, and
third respondents are also required to pay the costs of this
application on the scale as between attorney
and client.”
[23]
The appellants accepted their collective
failure to have complied with the order in the obvious sense of the
municipality having
defaulted on its payments to Eskom as provided
for in the acknowledgement of debt and payment plan that had been
incorporated in
the Mfenyana order.
[24]
Thus,
they accepted that the respondents had proved the first three
requisites of contempt as provided for in
Fakie
NO v CCII Systems (Pty) Ltd
[8]
essential to establish in proceedings for civil contempt, namely the
order; service or notice; and non-compliance.
[9]
[25]
The concession notwithstanding, the
third respondent averred that contempt proceedings were not
appropriate in all the circumstances:
“
The
(respondents) seek an order declaring the (appellants) to be in
contempt in respect of that portion of the above Honourable
Court’s
order which amounts to a claim sounding in money; because the
(municipality) had not paid that which the Court ordered,
so the
(respondents) contend, they are in contempt of the above Honourable
Court’s order. I am advised, and it will be so
argued on behalf
of the (appellants), that the (respondents) have misconstrued their
remedy because contempt proceedings are not
appropriate in
circumstances such as the present.”
[26]
What
those peculiar circumstances entailed, so the appellants appeared to
suggest, is that the Mfenyana order was essentially an
obligation
imposed on the municipality to pay a money debt (an obligation
between itself and Eskom that could conceivably have
been enforced in
terms of the acknowledgement of debt and payment plan by way of
ordinary execution once judgment was obtained),
[10]
but missing in their appreciation is the fact that the obligation on
them to ensure compliance by the municipality for the payment
of its
debt had been cast in the Mfenyana order in the form of a structural
interdict as between the appellants and Eskom in the
first place, and
as between themselves and the respondents in the second place, since
the whole objective of the initial application
had been to procure a
payment plan that would appease Eskom and avert the disastrous
eventuality that it might disconnect the supply
of electricity to the
municipality.
[11]
The latter
concern self-evidently underpinned the whole basis for the
respondents to have sought the intervention of the court
in the first
instance.
[12]
[27]
As
for the fourth requirement for contempt proceedings, namely
wilfulness and
mala
fides
,
in this instance proof of which was required to be established by the
respondents beyond reasonable doubt,
[13]
the appellants denied any deliberate or criminal non-compliance with
the Mfenyana order. The third appellant purported to explain
to the
court below in an opposing affidavit filed on behalf of the
municipality how and why it had come to find itself in a difficult
situation financially which had impacted its ability to meet the
anticipated payments it had committed itself for.
[14]
She repeated what had been foreshadowed in the correspondence by the
municipality’s attorneys regarding what had contributed
to that
unfortunate predicament and its difficulties going forward.
[28]
She related that this had resulted
inter
alia
in the executive council for the
province resolving, on 11 March 2020, to reinstate an earlier section
139 (5) intervention imposing
a financial recovery plan on the
municipality and authorizing further measures as envisaged in section
139 (1) of the Constitution.
This occurred after the terms of two
previous administrators had ended and their respective efforts at
achieving a successful intervention
were purportedly frustrated. The
third respondent attempted to assure the court below (in the hope
that less austere payment terms
might instead be implemented) that
this intervention would be more effective than what had gone before
to secure a turnaround in
the municipality’s ability to fulfil
its executive obligations in terms of the Constitution and to be able
to pay Eskom in
particular.
[29]
She
explained that a financial recovery plan was already in place and
mandated by the court on 25 June 2020 in related litigation
that
essentially pivoted around the same dilemma that had at its core the
financial crisis of the municipality and its inability
to pay
Eskom.
[15]
A new
administrator, Mr. Monwabisi Somana, had also been appointed to the
position of administrator by the Provincial Executive
Committee on 19
March 2020.
[30]
She expressed the stated desire of the
municipality, in respect of the Eskom debt and its undertakings
arising from the Mfenyana
order in all the circumstances, to
renegotiate the previous payment terms because it could no longer
afford the payment terms it
had agreed to. She alluded to a process
underway with the Municipal Infrastructure Support Agency (“MISA”)
at the helm
under the auspices of the executive committee of the
province in related litigation (involving the province’s formal
intervention
and oversight of the municipality), which had already
made representations in this regard to Eskom concerning the arrears
of the
present municipality (amongst others) and how these could be
liquidated.
[31]
With regard to the terms of reference of
the administrator she suggested that it was really no longer in the
hands of the appellants
to carry forward the implementation of the
Mfenyana order since, and because of, his official appointment. In
other words, it was
out of her hands or sphere of influence how and
under what circumstances its indebtedness to Eskom might be
liquidated since the
administrator had assumed responsibility for the
implementation of the financial recovery plan.
[32]
She further expressed the view that the
order of 25 June 2020 in the related litigation (pursuant to which
the financial recovery
plan was made an order of court) had replaced
or rendered the provisions of the Mfenyana order “unenforceable”
or obsolete
so to speak.
[33]
She also explained, although in my view not
as the
primary
reason for the unfortunate turn of events, that the fight against the
COVID-19 pandemic had additionally been thrust upon the Municipality
and had had huge and devastating financial consequences for it since
local authorities had been required to mobilize and spend
enormous
and wholly unanticipated resources in seeking to combat the spread of
the virus. The pandemic had also affected the municipality’s
ability to recover revenue from customers who had suffered from the
economic downturn.
[34]
She repeated what had been heralded in
prior correspondence to Eskom and the respondents written on behalf
of the municipality that
it was unable to comply with the Mfenyana
court order and emphasized the necessity for those payment terms to
be varied.
[35]
Notwithstanding her allegation that the
payment terms necessarily had to be reviewed in the light of all the
circumstances, she
purported to assure the court below that the
initial agreement in terms of the Mfenyana order had been premised on
the genuine
expectation (before COVID-19) that the municipality could
successfully manage its already disastrous financial position in a
manner
that would ensure compliance with its terms.
[36]
Despite
having talked up what it was critically necessary to do because the
municipality could in the end not meet its obligations
to Eskom which
it had committed itself for, it is common cause that the appellants
failed to file a counterapplication or to bring
fresh proceedings for
the court to intervene on the basis set forth in Chapter 13 (Part 3)
of the Local Government: Municipal Finance
Management Act, No 56 of
2003 (“MFMA”).
[16]
[37]
In
determining the issue of whether the appellants were in criminal
contempt, the court below rejected the notion that the appointment
of
the administrator had had any role to play in the municipality’s
competence to comply with the Mfenyana order or that
this had shifted
responsibility away from the third appellant who had been nominated
to ensure compliance with the initial order
on behalf of the
municipality.
[17]
Indeed, at
the time the Mfenyana order had been agreed to an administrator was
also in place, but this had not detracted from the
third appellant’s
autonomy at the time to conclude the settlement agreement or,
initially, to have given effect thereto.
It also made short shrift of
the COVID-19 excuse raised by the parties evidently on an
anticipatory basis to absolve it from complying
with the terms of the
initial order. The disaster was only proclaimed towards the end of
March 2020 whereas the municipality was
already back peddling on its
obligations even before the COVID-19 onslaught was felt, leading the
court to question why it had
committed itself to the Mfenyana order
in the first place well knowing that it would not be able to keep up
with the payment plan.
It was additionally struck by evidence that
came to light days before the hearing that in the court’s view
seriously impacted
on the appellants’ credibility. It emerged
in this respect that the municipality had in fact been paid its
equitable share
by the National Treasury in July 2020 already of an
amount of R89 000 000.00 which the respondents had pleaded
could
obviously have been applied toward the payment of its debt to
Eskom, yet the municipal parties said nothing of this critical
development
in their answering papers.
[38]
One gets the impression that the
appellants’ failure to have disclosed this pointed information
in their answering affidavits
was the tipping point, leading the
court below to infer that this conduct (coupled with them having
taken the point of the material
misjoinder of both Eskom and the new
administrator, and the raising of implausible excuses to justify the
municipality’s
non-payment) demonstrated beyond a reasonable
doubt that “the non-compliance with the order was wilful and
male fides
.”
[39]
The respondents opposed the present appeal
citing the same complaints against the appellants of their criminal
lack of compliance
with the Mfenyana order but withdrew their
opposition and filed a notice to abide the outcome of this court’s
decision a
week or so before the matter was due to be heard. We were
advised by Mr. Rorke, who appeared for the appellants, that this was
in recognition of the fact that costs were running up and adding to
the financial burden of the municipality.
[40]
Mr. Rorke also informed the court that the
municipality had in the meantime further sought a rescission of the
Mfenyana order. We
were advised that that application too was opposed
by the respondents and was due to be heard in August 2022.
[41]
The
basis for the rescission application has to be understood in the
context of the judgment of the Supreme Court of Appeal in
Eskom
Holdings SOC Ltd v Resilient Properties (Pty) Ltd & Others; Eskom
Holdings SOC Ltd v Sabie Chamber of Commerce and Tourism
and Others;
Chweu Local Municipality and Others v Sabie Chamber of Commerce and
Tourism and Others (“Resilient”)
[18]
which he suggested might provide a basis for the municipality to set
aside the consent order on the basis that it had felt pressurized
to
agree to the payment plan in the first place as a result of Eskom’s
(unlawful) threat that it would interrupt the supply
of bulk
electricity to it. Implied in this revelation is the suggestion that
Eskom may have used the threat as a leverage to enforce
payments well
knowing that the municipality was in a parlous financial situation.
Reading between the lines the appellants are
hopeful that if
successful in rescinding the Mfenyana order, the issues in dispute
between Eskom and the municipality concerning
how its admitted debt
can and should be liquidated under the prevailing circumstances can
be revisited utilizing the machinery
at their disposal in terms of
sections 40
and
41
of the
Intergovernmental Relations Framework Act,
No. 13 of 2005
.
[19]
[42]
Although we were initially inclined of the
view that this might render the present appeal academic, Mr. Rorke
correctly persisted
in arguing the matter before us on the basis that
even if successful, rescission of the Mfenyana order will not expunge
the finding
of the court below that as at the date of the contempt
order (30 March 2020), the second and third appellants were found to
have
been culpably non-compliant with its terms on the facts found. I
add that there is obviously a further concern that looms and that
is
the ability of the second and third appellants to give effect to the
coercive order of the court below going forward since this
is the
premise upon which their incarceration for a “period of 6
months”, imposed as the sanction for their declared
contempt,
has been suspended. Further and in any event, the civil contempt
remedy of committal employed in this instance has material
consequences on the second and third appellants’ freedom and
security of their person.
[43]
The first question for determination before
us on appeal is whether it was competent for the respondent to have
sought a committal
order against the second and third appellants in
circumstances where the respondent’s claim was for one sounding
in money
or rather premised on an order involving as it were the
payment of a money judgment.
[44]
In this respect Mr. Rorke at the outset
filed supplementary heads of argument in which the point is taken on
behalf of the appellants
that it was in principle not competent for
the court below to have convicted them for contempt of court at all
in circumstances
where the municipality was alleged to be in breach
of what is in essence a money order.
[45]
Our
courts have at common law drawn a clear distinction between orders
ad
pecuniam solvendam
relating
to the payment of money, and orders
ad
factum praestandum
which require a person to perform a certain act or refrain from
specified action. Failure to comply with an order to pay money
was
not regarded as contempt of court, but the disobedience of an order
calling upon a party to perform an obligation under an
order, or to
refrain from specified action, was.
[20]
[46]
In
Mjeni
v Minister of Health and Welfare, Eastern Cape
,
[21]
the court endorsed the long line of authority that an order must be
ad
factum praestandum
before the court can enforce it by means of committal, the only
exception being in respect of orders to pay maintenance.
[22]
[47]
Did the Mfenyana order entail such an
obligation?
[48]
The
answer in my view lies in the nature of the proceedings and the
unique purpose sought to be achieved by the Mfenyana order.
Vis-à-vis
the appellants and the respondents, the Mfenyana order indeed imposed
positive obligations on the second and third
appellants (until the
appointment of the third respondent as the designated responsible
person) to monitor and supervise the payment
of the arrear and
current debt owing to Eskom and to ensure that the financial
obligations undertaken by the municipality to it
be met as and when
the payment targets arose. The purpose was specific to avoid the
municipality from failing to meet its constitutional
obligations
to
the respondents
which
would have resulted in disaster not only for themselves, but the
community served by the municipality in the area as well,
were Eskom
were to carry out its threat to interrupt the supply of bulk
electricity to the municipality. The application antecedent
to the
Mfenyana order was one to compel the municipality to meet its
constitutional obligations
to
the respondents
.
[23]
If Eskom had in my view sought to enforce the order (as opposed to
the respondents who were pursuing a
mandamus
based on their own unique interests), I can appreciate that we would
be dealing with an entirely different kettle of fish.
[49]
It is further plain from the pretext to the
Mfenyana order that the intention was to hold the second and third
appellants accountable
for its enforcement as the officials who would
ordinarily be liable to oversee its implementation.
[50]
I accept however that the papers do
not suggest exactly how or why the second appellant came to be the
subject of the order or rather
why, once the third appellant was
designated as the responsible person to keep her finger on the pulse
so to speak, it was necessary
to seek her committal. Mr. Rorke
correctly pointed out that given the requirement in the order that a
responsible person had to
be nominated it followed (as per the
parties’ agreement) that she was the only person that could be
held in contempt were
the eventuality of non-compliance with the
order’s terms to have arisen. I agree that she ought therefore
without further
ado to be exonerated from the committal order under
appeal.
[51]
As for the third appellant, despite the
conscious nomination of her as the responsible person (she was also
involved from the outset
as the signatory to the acknowledgement of
debt and payment plan),
the municipal manager of a
municipality would in the ordinary course be saddled with the burden
of overseeing the implementation
of court orders.
[52]
In
Meadow
Glen Homeowners Association v City of Tshwane Metropolitan
Municipality
[24]
the
court helpfully summarized the
numerous
legislative provisions regarding the person or persons responsible
for the administration of local authorities:
“
Section
82
of
the
Local
Government: Municipal
Structures Act 117 of 1998
determines
that the municipality must appoint a municipal manager as the person
responsible for the administration of the
municipality and such
person will also be the accounting officer of the municipality. In
terms of
s
56(3)
of
the same Act, the executive
mayor,
in performing his duties must monitor the management of the
municipality’s administration in accordance with the direction
of the municipal council
(s
56(3)(
d
))
and oversee the provision of services to communities in the
municipality in a sustainable manner
(s
56(3)(
e
)).
Section
54A
of
the
Local
Government: Municipal Systems Act 32 of 2000
also
provides that the municipal council must appoint a municipal manager
as the head of administration of the municipal council.
Furthermore,
s 55
sets
out the responsibilities of the municipal manager as head of the
administration, subject to the policy directions of
the municipal
council.
Section
55(1)
(
b
)
determines that the municipal manager is responsible and accountable
for the management of the municipality’s administration.
Section 60 of the Local Government: Municipal Finance Act 56 of 2003
provides that the municipal manager is the accounting officer
of the
municipality.”
[25]
[53]
As
was articulated in
City
of Johannesburg Metropolitan Municipality and Others v Hlophe
[26]
(endorsed
in
Meadow
Glen
),
[27]
the Municipality - as is the position with the State, can only act
through the functionaries that are responsible to perform the
specific function or act on its behalf.
[28]
[54]
MEC
for the Department of Welfare v Kate,
[29]
similarly
a judgment of the Supreme Court of Appeal
,
provides
direct authority for a
mandamus
on
pain of committal for contempt of court against the responsible
functionary:
“
It goes without
saying that a public functionary who fails to fulfil an obligation
that is imposed upon him or her by law is open
to proceedings for
a
mandamus
compelling
him or her to do so. That remedy lies against the functionary upon
whom the statute imposes the obligation, and
not against the
provincial government. If
Jayiya
has
been construed as meaning that the remedy lies against the political
head of the government department, as suggested by
the Court below,
then that construction is clearly not correct. The remarks that were
made in
Jayiya
related
to claims that lie against the State, for which the political head of
the relevant department may, for convenience,
be cited nominally in
terms of
s 2
of
the
State
Liability Act 20 of 1957
,
though it is well established that the government might be cited
instead. Moreover, there ought to be no doubt that a public official
who is ordered by a court to do or to refrain from doing a particular
act, and fails to do so, is liable to be committed for contempt,
in
accordance with ordinary principles, and there is nothing
in
Jayiya
that
suggests the contrary.
”
[30]
[55]
Indeed, it was never suggested
in
casu
that the third appellant had not
attracted personal obligations under the Mfenyana order in her
official capacity and, but for
the suggestion that the remedy of
contempt did not avail the respondents because a claim sounding in
money (enforceable through
execution upon judgment) was at the core
of it all, she appeared to accept that there was a burden on her,
arising from the Mfenyana
order, to take the necessary steps borne
out of the statutory and constitutional obligations that come with
her position as municipal
manager, to ensure that the terms of the
structural order were met to the extent that this was possible.
[56]
The
next question for determination then is whether the court below
correctly found the third appellant to have deliberately defied
the
order. I am inclined to find in the negative in this respect based on
the accepted facts and applying the criminal standard
of proof.
[31]
[57]
Firstly, even on the respondents own
showing, the municipality was clearly in dire financial straits, or
in deep financial crisis,
which fact was confirmed by a report of the
auditor general co-incidentally put up by the respondents themselves.
Indeed, in respect
of the financial year under consideration the
auditor general rendered his professional conclusion that the
liabilities of the
municipality exceeded its assets by a significant
degree, which in turn cast doubt on its ability to continue as a
going concern.
[58]
Even if it could be said that the third
appellant was reckless in agreeing to the payment plan on behalf of
the municipality, it
is common cause that the municipality was under
threat by Eskom to discontinue the bulk electricity supply to it.
Given the deleterious
effect that this would have had on the
respondents and members of the community, it is not unreasonable to
assume that this must
have played a huge part in the municipality’s
decision to agree to the Mfenyana order to avoid such disaster.
However commercially
naïve or insensible this decision may
appear (although the third respondent was optimistically of the view
that the municipality’s
already disastrous financial position
could be managed in a manner that would ensure compliance with the
terms of the court order),
this was simply the opposite of an
opportunistic
male fide
response.
[59]
When she realized the serious predicament
of the municipality further along the line after making the initial
payments (not a trifling
amount for a small municipality), other
steps (apart from pleading for an extension of time to pay) entailing
negotiations between
the administrator and Eskom were initiated. The
municipality also launched the rescission application which if
successful will
oblige the municipality and Eskom to meaningfully
engage with each other in the greater interests of the community
served by the
municipality to resolve the dispute between themselves
concerning how and when the municipality’s indebtedness to it
is to
be liquidated.
[60]
Further and more importantly, frank
reports of the municipality’s situation were given in the
spirit of the Mfenyana order
that required her to keep the parties
fully informed. This consistency was maintained even under the
constraints of managing the
COVID-19 pandemic.
[61]
Far from suggesting a basis for the
municipality to be absolved from its obligations under the order, the
third appellant’s
pleas for indulgences were properly premised
on an acceptance that compliance with the order was first and
foremost vitally necessary.
[62]
As for failing to disclose the fact that
the special grant had been paid in July 2020 (after the launch of the
contempt application
but before deposing to her answering affidavit)
Mr. Somana, who had become tasked with ensuring that a recovery plan
was devised
and implemented, as it was ultimately, explained in a
supplementary affidavit that he had met with representatives of Eskom
(admittedly
only after the revelation had come to light that the
municipality had been paid its equitable share by the National
Treasury of
R89 million in July 2020) to renegotiate a payment regime
which was followed up by a firm offer and payment to Eskom of the
first
instalment of R25 million already by 2 September 2020.
Evidently Mr. Somana was firmly in the driving seat by this time, and
whereas
it may have been more desirable for the third appellant to
have given a personal account of this development and to explain why
Eskom was not paid immediately after receipt of its grant from
National Treasury, the progression of the matter by then to the
stage
of provincial intervention seems to me to be a good reason why the
municipality’s legal advisors would have put Mr.
Somana up to
give the official explanation rather than the third appellant.
Nothing else points to any devious non-disclosure on
the part of the
third appellant or the municipality. As an aside, although Mr. Rorke
did not hesitate to concede that despite the
appointment of an
administrator the third appellant continued to accept without
reservation that she had been identified as the
responsible person to
give account for the municipality’s compliance with the
Mfenyana order, it would be counter intuitive
in my view for the
court below to have ignored the practical consequences of his
appointment or the impact of the order granted
in the related
litigation. Her obligations as municipal manager would surely have
required of her to get aboard the objective of
the provincial
intervention and to defer to the necessary extent to the lead of Mr.
Somana. If the third appellant can be criticized
for anything it
would be for failing to have sought a variation of the Mfenyana order
(the compliance with which she was specifically
mandated) or to have
insisted that it be formally substituted in the related litigation by
the new financial recovery plan that
was made an order of court.
[63]
Mr.
Rorke submitted that the appellants’’ collective
endeavour to meet the problem head-on was not dissimilar to the
scenario in
Matjhabeng
Local Municipality v Eskom Holdings Limited and Others; Shadrack
Shivumba Homu Mkhonto and Others v Compensation
Solutions (Pty)
Limited
[32]
in
which the court accepted on the basis of various attempts made by its
municipal manager and senior personnel to settle a dispute
with Eskom
that no case for wilfulness and
male
fides
on the part of the municipal manager was established or had been made
out.
[64]
I am inclined to agree with him that no
such case was made in the present instance either. Even from the
tenor of all the communications
addressed to those on the subject of
the municipality’s financial inability to comply with the
Mfenyana order, it is self-evident
that the third appellant was not
avoiding her responsibilities. To the contrary, what appears is a
clear admission of the municipality’s
indebtedness (and
acceptance of the existence of a valid and binding order the
implementation of which was in her hands) and a
genuine plea to
assist the municipality by granting it an indulgence of time. The
third appellant’s particular hands-on approach
and sensitivity
regarding the municipality’s obligation (and the devastation
its default might cause if left unchecked) were
carried forward in
the subsequent intervention by the administrator who took an active
part in trying to resolve the issues with
Eskom so as to alleviate
the concerns of the respondents.
[65]
In my view the evidence does not establish
a deliberate deviance of the terms of the Mfenyana order on the
criminal standard, and
the third appellant’s conviction
accordingly also falls to be set aside.
[66]
The order which I propose be made herein
takes account of Mr. Rorke’s intimation to the court that, by
agreement with the
respondents’ legal representatives, the
municipality would not persist with its claim for costs.
[67]
In the result we issue the following order:
1.
The appeal is upheld.
2.
The order of the court below is altered to
simply read as follows:
“
The
application is dismissed.”
B
HARTLE
JUDGE
OF THE HIGH COURT
I
agree,
R
BROOKS
JUDGE
OF THE HIGH COURT
I
agree,
S
RUGANANAN
JUDGE
OF THE HIGH COURT
DATE
OF HEARING: 3
May 2022
DATE
OF JUDGMENT: 26 August 2022
*Judgment
delivered electronically by email to the parties.
APPEARANCES
:
For
the appellants: Mr. S.C Rorke SC instructed by Whitesides,
Grahamstown (ref. Mr. Barrow).
For
the respondents: No appearance.
[1]
No
explanation was given why the second appellant attracted any
personal obligation under the Mfenyana order, but it appears to
have
been accepted that the order necessarily imposed a positive duty on
the third appellant to carry out certain obligations,
not only in
her capacity as municipal manger, but also pursuant to the
municipality’s nomination of her as the responsible
person to
oversee its compliance with the order’s terms.
[2]
The Constitution Act 108 of 1996.
[3]
The appellants filed a notice on 18 December 2019 after the
conclusion of the
mandamus
application nominating the third appellant as the responsible person
for purposes of par 5 of the Mfenyana order. She had not
been cited
before in the application. Instead, the acting municipal manager had
been included as the sixth respondent. The notice
additionally
indicated that the mandate of the then administrator, and the
appointment of the sixth respondent as acting municipal
manager at
the time, had terminated.
[4]
Given
what had preceded the granting of the order and the interests of the
respondents and general public in keeping the electricity
on, it is
clear that the parties had resolved to forge an instrument to deal
with a serious problem that went beyond simply recovering
a debt. In
Meadow
Glen Home Owners Association v City of Tshwane Metropolitan
Municipality
(767/2013)
[2014]
ZASCA 209
(1
December 2014)
(at
paragraph [35]) the court commended the grant of a similar order on
a consensual basis (in a scenario where the municipality
had failed
to pay its dues to Eskom) as a necessary tool to ensure that the
municipality both met its constitutional obligations
and involved
itself in the oversight of the implementation of the order crafted
to achieve exactly that end:
“
Both
this Court and the Constitutional Court have stressed the
need for courts to be creative in framing remedies to
address and
resolve complex social problems, especially those that arise in the
area of socio-economic rights. It is necessary
to add that when
doing so in this type of situation courts must also consider how
they are to deal with failures to implement
orders; the inevitable
struggle to find adequate resources; inadequate or incompetent
staffing and other administrative issues;
problems of implementation
not foreseen by the parties’ lawyers in formulating the order
and the myriad other issues that
may arise with orders the operation
and implementation of which will occur over a substantial period of
time in a fluid situation.
Contempt of court is a blunt instrument
to deal with these issues and courts should look to orders that
secure on-going oversight
of the implementation of the order. There
is considerable experience in the United States of America with
orders of this nature
arising from the decision in
Brown v
Board of Education
and the federal court supervised process
of desegregating schools in that country. The Constitutional Court
referred to
it with approval in the
TAC (No 2)
case. Our
courts may need to consider such institutions as the special master
used in those cases to supervise the
implementation of court
orders”. (Footnotes omitted)
[5]
See footnote 3 above.
[6]
Both
contractually (in terms of the relevant electricity supply
agreement) and in terms of section 21(5) of the Electricity
Regulation Act, no 4 of 2006 (“ERA”) Eskom would be
entitled to reduce or terminate the supply of electricity where
the
municipality contravenes the payment conditions of that license. In
Eskom
Holdings SOC Ltd v Resilient Properties (Pty) Ltd and Others; Eskom
Holdings SOC Ltd v Sabie Chamber of Commerce and Tourism
and Others;
Chweu Local Municipality and Others v Sabie Chamber of Commerce and
Tourism and Others
2021 (3) SA 47
(SCA) (“Resilient”)
the
court however held that despite such power Eskom - before it decides
to invoke its powers under section 21 (5) to interrupt
the supply of
electricity to an entire municipality, must, as an organ of state,
be mindful of its constitutional obligations.
In this respect it is
required to comply with sections 40 and 41 of the Intergovernmental
Relations Framework Act, no 13 of 2005
(“IRFA”) which
requires it to make every reasonable effort to settle disputes
between it and a municipality (including
financial disputes related
to the quantum of the debt and the manner in which the debt can be
liquidated) before it approaches
a court to resolve such a dispute.
[7]
It appeared from further correspondence addressed by Eskom to the
municipality dated 29 April 2020 that it had failed to pay
its
current account “for the past two months” which in the
respondents’ view was a further indication that
the
municipality was in contempt of court.
[8]
2006 (4) 326 SCA at 344.
[9]
At paras 41 and 42.
[10]
See
Mateis
v Plaaslike Munisipaliteit Ngwathe en Andere
(254/2002)
[2003] ZASCA 9
(7 March 2003) which confirms the
principle that a municipality’s assets can be seized under
execution of a money order.
In this instance though there was no
enforceable judgment that Eskom was entitled to execute against at
that point.
[11]
The
lis
was the municipality’s failure to meet its constitutional
obligations to the respondents and other end users.
[12]
What
was at stake for the respondents by the municipality’s failure
to pay, assuming Eskom invoked the right to disrupt
the supply of
electricity to it, was poignantly recognized by the court in the
similar matter of Resilient as follows:
“
Terminating
the supply of electricity to an entire municipality in the
circumstances provided for in s 21(5) would be a radical
step. Such
reduction or termination of the supply of electricity would
adversely affect every consumer within the affected municipality.
Indeed, it would have the effect of collapsing the entire
municipality, rendering it unable to fulfil its constitutional and
statutory mandate to provide basic services. The objects of local
government spelt out in s 152 of the Constitution would be
subverted. And a municipality whose electricity supply is terminated
by Eskom would not be able to ‘give members of the
local
community equitable access to the municipal services to which they
are entitled’ as required by s 4(2)
(f)
of
the Municipal Systems Act. Nor would such a municipality be able to
provide services in respect of water, sanitation
and electricity in
terms
of
s
9(1)
(a)
(ii)
of the
Housing
Act as
these
services rely on electricity for their functionality.”
[13]
This is the standard of proof required when an applicant in civil
contempt proceedings requires a committal order. A declarator
and
other appropriate remedies as a means of securing compliance with
court orders remain available to an applicant on proof
on a balance
of probabilities. (
Fakie
NO Supra
at paras 41 and 42.)
[14]
Once an applicant in contempt proceedings proves the order, service
or notice, and non-compliance, the respondent bears an evidential
burden in relation to wilfulness and
mala
fides
:
Should the respondent fail to advance evidence that establishes a
reasonable doubt as to whether non-compliance was wilful and
male
fide
,
contempt will have been established beyond reasonable doubt. (
Fakie
NO Supra
at paras 41 and 42.)
[15]
This application was colloquially referred to as the “Let’s
Talk Komani” matter. The applicants in that matter
with
similar interests and concerns sought an interdict to compel the
province to intervene in terms of section 139 (1) (b) of
the
Constitution. It appears that a financial recovery plan was
ultimately agreed upon to remediate the municipality’s
dire
financial crisis.
[16]
Mr. Rorke informed the court from the bar however that, apart from
the negotiations entered into with Eskom under the auspices
of the
province, the municipality had also in the meantime launched an
application to rescind the Mfenyana order.
[17]
The point of the material misjoinder of the administrator seems to
have been unfortunately taken and was certainly not repeated
or
relied upon in the present appeal. So too the claim that the effect
of the Mfenyana order had simply been overtaken by the
Lets Talk
Komani litigation. With hindsight the appellants should have sought
in that matter to have formally substituted the
payment plan under
the Mfenyana order with the financial recovery plan order. There was
however never any real suggestion that
the Mfenyana order was
unenforceable in the legal technical sense of the word.
[18]
Supra
.
See footnote 6 above.
[19]
The issue before the SCA concerned whether a decision taken by Eskom
to interrupt the bulk supply of electricity to two municipalities
(described
inter
alia
as “financial delinquents”) at scheduled times was
defensible on both constitutional and statutory grounds. Eskom
asserted that its principal objective in resorting to the drastic
measure was to contain the spiralling of the municipalities’
debt, which over the years had increased exponentially. The
municipalities signed acknowledgements of debt in which they
undertook
to pay off their accumulated debt in instalments but such
undertakings came to naught since both defaulted and also failed to
pay for their ongoing current consumption. Before imposing the
scheduled blackouts, it invited representations from members of
the
public and interested parties. Resilient comprises of private
companies that own a large mall located within the jurisdiction
of
the Emalahleni Local Municipality. Eskom was unmoved by
representations made by Resilient and forged ahead with their
controversial
decision. Ironically in justifying its stance it
stated that it was open to Resilient and other parties aggrieved by
the decision
to seek a mandamus directing the municipalities to pay
their debts which would then obviate the need for it to implement
its
decision to interrupt the supply of electricity. This
precipitated Resilient and the Sabie Chamber of Commerce and Tourism
bringing
an urgent application for interim and final relief, the
latter entailing a consideration
inter
alia
of whether section 21 (5) of the ERA is inconsistent with the
Constitution and invalid, and interdicting Eskom from disconnecting
the electricity supply for the purpose of compelling the
municipalities to pay their debts to it especially having regard to
the interests of Resilient and Sabie that were compromised by the
decision. The court examined the constitutional and statutory
framework applicable and remarked upon the unique roles of both
Eskom and the municipalities and their symbiotic constitutional
fealty owed to end users of electricity (an indispensable basic
municipal service), concluding that Eskom must as organ of state
be
mindful of its constitutional obligations before it can decide to
invoke the provisions of section 21 (5) of ERA to interrupt
the
supply of electricity to an entire municipality. One of those
obligations is to engage meaningfully with each other in terms
of
sections 40 and 41 of the IRFA before compromising end users by such
interruptions. In the whole scheme of things and bearing
in mind the
constitutional duties of both Eskom and municipalities to end users
it is impermissible and unlawful for Eskom to
invoke the provisions
of section 21 (5) of ERA to force its hand or use the
municipalities’ debt as leverage to extract
payment.
[20]
Coetzee
v Government of RSA; Matiso v Commanding Officer, Port Elizabeth
Prisons
[1995] ZACC 7
;
1995
(4) SA 631
at para 61.
[21]
2000 (4) SA 446 (Tk).
[22]
At
451D-F.
[23]
In
Resilient
(see paragraphs 29-37) the court helpfully outlines the
constitutional and statutory framework that should guide a
municipality
in appreciating what its constitutional mandate to the
community is concerning
inter
alia
the provision of services in a sustainable manner, the promotion of
social and economic development (that self-evidently can’t
happen without such a basic service) and of a safe and healthy
environment (that will notably be compromised when there are rolling
blackouts), and to be exemplary in its financial management so as to
be able to give priority to basic needs and to promote the
social
and economic development of the community. Further statutory
obligations arise from local government and related legislation,
in
particular the MFMA, which enjoins it to handle its financial
problems in a very specific way, especially when in financial
crisis. When seen from this perspective and properly understanding
the pretext to the Mfenyana order, it is abundantly plain
that the
order sought to compel the municipality to act as the Constitution
behoves it to act. The fact that a claim sounding
in money gave rise
to the peculiar situation
in
casu
rendering a
mandamus
necessary to nudge its payment along for a significant reason is a
mere coincidence.
[24]
See
footnote 4 above.
[25]
At
[23]. See also
City
of Johannesburg Metropolitan Municipality and Others v Hlophe and
Others
2015
All SA 251
(SCA) at [19] and
Pheko
& Others v Ekurhuleni Metropolitan Municipality (No. 2)
2015 (5) SA 600
(CC) at [58] and [59].
[26]
Supra.
[27]
At paragraphs 20-22 & 30.
[28]
At
[17].
[29]
2006
(4) SA 478 (SCA).
[30]
At
[30].
[31]
See
Fakie
supra
at
paras 41 and 42;
Pheko
supra
at [36].
[32]
[2017]
ZACC 35
.