Maluti-A-Phofung Municipality v Eskom Holdings SOC Limited and Others (2719/2020) [2021] ZAFSHC 3 (15 January 2021)

About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Free State High Court, Bloemfontein
SAFLII
>>
Databases
>>
South Africa: Free State High Court, Bloemfontein
>>
2021
>>
[2021] ZAFSHC 3
|

|

Maluti-A-Phofung Municipality v Eskom Holdings SOC Limited and Others (2719/2020) [2021] ZAFSHC 3 (15 January 2021)

IN
THE HIGH COURT OF SOUTH AFRICA,
FREE
STATE DIVISION, BLOEMFONTEIN
Case
number: 2719/2020
In
the matter between:
MALUTI-A-PHOFUNG
MUNICIPALITY
Applicant
and
ESKOM
HOLDINGS SOC LIMITED
1
st
Respondent
THE
SHERIFF, BLOEMFONTEIN-WEST
2
nd
Respondent
FIRST
NATIONAL BANK
3
rd
Respondent
JUDGMENT
BY
:
MHLAMBI J,
HEARD ON:
Matter disposed of without oral hearing in terms of
section 19(a)
of the
Superior Courts Act 10 of 2013
.
DELIEVERED ON:
This judgment was handed down electronically by circulation to the
parties’ legal representatives by email and release to SAFLI.
The
date and time for hand-down is deemed to have been 10h00 on 15
January 2021.
APPLICATION FOR
LEAVE TO APPEAL
MHLAMBI,
J
[1]
The applicant applies for leave to appeal to the Supreme Court of
Appeal in terms of Rule
49 (1) of the Uniform Rules of Court against
my judgment delivered on 09 October 2020 in which I ordered that:
“
1.
That the attachment in execution by the
first respondent of the applicant’s funds in its current bank
account with the third respondent, account number: 620 2615 3221, be
immediately uplifted;
2.
The third respondent be authorised to
release the funds of the applicant held by it on account number
62026153221;
3.
First respondent be prohibited,
pending the outcome of the intergovernmental relations framework
dispute resolution, already in process
as per the court order of 22
October 2018, from executing the judgments against the applicant
under case numbers 4723/2014 and 5523/2018;
4.
No order as to costs.”
[2]
The grounds for leave to appeal are briefly set out as follows in the
notice of application
for leave to appeal:
1.
The learned judge erred when he found in paragraphs 24; 25 and 27 of
the judgment that Eskom’s steps in execution of its judgments
pending the completion of the work of the Intergovernmental
Consultative Committee (hereinafter referred to as (“the ICC”),
were
premature and that Eskom acted in bad faith and failed in
relation to the court order of 22 October 2018;
1.1
to comply with its direction that it
should, together with other state organs, resolve the matter relating
to the dispute with MAP
and make every reasonable effort to settle
the dispute as suggested in the court order;
and
1.2
to substantiate why it contended that
the work of the intergovernmental consultative committee set up by
that order was a total failure.
2.
Having found in paragraph 15 that the R1
billion order was not the subject matter of the discussion that led
to or was included in
the agreement of 30 April 2019, nor part of
MAP’s claim, the learned judge erred in finding, at paragraph 27,
that the R1 billion
claim, of which default judgment was obtained on
31 January 2019, formed part of what was envisaged in the October
2018 order.
3.
The learned judge erred in refusing
Eskom’s counter claim and ought to have found that MAP was not
entitled to enforce the settlement
agreement in the light of its
breach of contract in failing to provide letters of support
from COGTA and the National Treasury
by no later than 30 May 2019.
[3]
The application is opposed by both the first respondent and an
intervening applicant,
SAMWU. The first respondent contended that the
appeal should fail on the basis that the order was not
appealable
[1]
as it was an
interlocutory order not having the effect of a final judgment
[2]
.
Even if the order were final in nature, it would not be in the
interests of justice for the interlocutory relief to be subject to
appeal as this would defeat the very purpose of that relief. The
intervening applicant contended that as per the order of Van Zyl,
J,
[3]
the order was interim in
effect and to show prospects of success, the applicant had to show
that exceptional circumstances existed
that will obligate the court
of appeal to interfere.
[4]
In its heads of argument, the applicant sought to show that the
judgment appealed against was susceptible
to appeal as it was final
in effect and met the threshold of the test for leave to appeal.
[4]
The pillars upon which the appeal is based are: i) the efficacy of
the 22 October 2018 order; ii) improper enforcement of the 30
April
2019 settlement agreement and iii) the compliance with section 41 of
the constitution.
Efficacy
of the 22 October 2018 order
[5]
The applicant contended that the
finding in paragraph 25 of the judgment,
[5]
failed to address that the regime created by the order of 22 October
2018 stipulated a 60-day period from 22 October,  within
which a
recovery plan was to be presented and another 15 days from the
expiry  of that period for the consideration and approval
of the
recovery plan by the other stake holders, none of which happened some
two years after the order was granted.
[6]
It
was therefore, not contemplated that the timeframe should endure
beyond 8 February 2019 and that during July 2019
[7]
,
when the attachment in execution was given effect to, the efficacy of
the regime of the 22 October 2018 order had accordingly run
its full
course.
[8]
There was no basis for
the finding that the applicant failed to comply with its cooperative
governance obligations or attachment steps
in execution beyond 8
February 2019.
[9]
[6]
It was contended furthermore, that the rationale for a financial
recovery plan contemplated by the 2018
court order, was to enable the
first respondent to meet its financial obligations. That order
restricted the applicant only from
implementing interruptions of
electricity supply but did not and was incapable of a construction
precluding the applicant from recovering
debt due to it.
[10]
It was therefore unnecessary to substantiate why the ICC
[11]
was a total failure as the facts spoke for themselves. It was common
cause between the applicant and the first respondent that neither
a
repayment nor a recovery plan resulted from the work of the ICC
within the time frames mandated by the 22 October 2018 order.
[12]
[7]
In paragraphs 24 and 25 of the judgment, it is stated that it was
common cause between the applicant and
the first respondent that as
at 21 May 2019, the ICC was still busy with its work and the
applicant had raised no complaint or dissatisfaction
with its work.
All court orders obtained against the first respondent were by
consensus
either
in an endeavour to assist the first respondent with the resolution of
its financial woes or to comply with the provisions of
section 41 of
the Constitution. The applicant was fully aware that the applicant
was “
insolvent,
mismanaged and no steps taken by both the Provincial Government and
the first respondent itself to implement the mandatory
intervention
by either the provincial or national government.”
[13]
The
applicant was, as at the time of the filing of the answering
affidavit,
[14]
fully aware
that the mandatory intervention in terms of section 139(5) of the
Constitution and 139(1) of the MFMA was suspended subject
to the
establishment of the ICC.
[15]
The
applicant realised that the parlous state in which the first
respondent was, warranted the intervention by either the provincial
government or the national government.
[8]
The applicant was not prepared
to wait for the process to unfold as it issued writs of execution
in
rapid succession for the recovery of the outstanding debts. As stated
in the judgment : “
The
fact that Eskom participated in the agreement of 30 April 2019 with
such principals confirms its acceptance of MAP’s incapacity
to meet
its obligations and that MAP’s problems could only be addressed
through its principals. It was incumbent on Eskom to return
to MAP’s
principals in the event of the latter’s default of payment or in
the event of its dissatisfaction with the progress
made by the
intergovernmental consultative committee.”
[16]
The question that arises is whether  section 41 of the
Constitution is applicable in these circumstances, especially when
viewed
in the light of the applicant’s contentions and the
over-arching question raised in its heads of argument, namely,
whether the
discharge of cooperative governance obligations  is,
or should be, a prerequisite to the execution of extant court
orders.
[17]
In fact, the
applicant contended that another court would not support the judgment
of this court in that it impelled the applicability
of the provisions
of section 41 of the constitution, which, read together with the
provisions of IRFA,
[18]
are
intended to apply prior to the institution of judicial
proceedings.
[19]
[9]
In
Eskom
Holdings SOC v Resilient Properties (Pty) Ltd
and Others,
[20]
one of the principal issues for adjudication was whether the
contractual and constitutional disputes relating to the moneys owed
to Eskom and, in particular, the manner in which Eskom sought to
recover them constituted intergovernmental  disputes as
contemplated
in section 41 of the Constitution and section 40 of the
IRFA. The subsidiary issue was whether, if section 41 of the
Constitution
and section 40 of the IRFA are found to apply, whether
Eskom failed first to exhaust the alternative avenues contemplated in
sections
41 and 40, respectively. The court stated that IRFA is the
legislative measure contemplated in section 41(2) of the
Constitution.
[21]
[10]
In paragraph 67 of the judgment, the court
expressed itself as follows in respect of IRFA:
“
Both
s 40 and s 41 make plain that an organ of state, as Eskom is, has a
constitutional and statutory duty to avoid judicial proceedings
before a genuine attempt has been made to settle the dispute. To that
end, state organs must make every reasonable effort, in good
faith,
to settle the dispute without recourse to litigation. Moreover, where
a dispute is of a financial nature, as in these proceedings,
Eskom,
and the ELM and the TCLM were required to promptly take all
reasonable steps necessary to resolve the dispute. To this end,
organs of state have a statutory duty to report the matter to the
National Treasury for the latter to mediate the dispute.
”
The
court
went on to state that
“
The
real disputes concerned the manner in which these two municipalities
could be enabled or empowered to pay their debts to Eskom
and thus
whether it was appropriate in the circumstances to interrupt the
supply of electricity to exact payment from them. It was
in relation
to these disputes that Eskom and the affected municipalities, in
collaboration with the other state role players, were
constitutionally obliged to make ‘every reasonable effort’ to
avoid or settle, but failed to do so.”
[11]
It was therefore not enough for the applicant to say that its
compliance with the provisions
of section 41 of the Constitution, as
mandated by the 22 October 2018 court  order, ceased with the
end of the efficacy of that
court order and that no case was made out
that the applicant did not comply with its obligations up to and
including 8 February 2029.
The applicant wanted to force the first
respondent to pay the arrear debt when it knew that this purpose
could not be achieved. The
applicant knew prior to 2018 that the
first respondent was unable to pay its debts but failed to suspend
the writ issued in October
2018
[22]
and
proceeded in January 2019 to take default judgment
[23]
against the first respondent unbeknown to it. These actions failed to
address the underlying reasons for the inability to pay both
the
arrear and current debt. The decisions taken by the applicant failed
to take into account relevant considerations that should
have
informed those decisions.
[24]
The
applicant should have complied with section 41(3) of the Constitution
and made every reasonable effort to settle the dispute.
Improper
enforcement of 30 April 2019 Settlement Agreement
[12]
The applicant contended that as it was expressly found that the first
respondent’s claim was predicated only
on the R2.4 billion under
case number 4723/2014 and the settlement agreement of 30 May 2019 and
that this claim was unrelated to
the R1 billion order or judgment
under case number 5523/2018, another court would find that the latter
order or judgment was singularly
perfectly capable of sustaining the
attachment.
[25]
To hold that
the judgment under case number 5523/2018 was subsumed by the regime
created by the October 2018 court order was an error
as that order
did not supersede the efficacy of the R2.4 billion order and did not
preclude the applicant from recovering debt due
to it.
[26]
[13]
The writs of execution under case numbers
4723/2014 and 5523/2018 were re-issued during July 2020 leading
to
the attachment of the funds in the first respondent’s bank account
on 22 July 2020, which gave rise to the urgent application
of 24 July
2020. Undertakings to settle the applicant’s debt in monthly
instalments and meetings to find a lasting solution to
the financial
crisis came to naught and were insufficient for compliance with the
precepts of section 41 of the Constitution and
sections 40 and 41 of
the IRFA.
[27]
Compliance
with section 41 of the Constitution
[14]
The applicant conceded that the compliance with
the provisions of section 41 of the Constitution was mandated
by the
22 October 2018 court order.
[28]
It
contended that the writs of execution were issued after the work of
the ICC was overdue and that the settlement agreement of 30
April
2019 was concluded without prejudice to its rights to execute
further. This argument has already been properly dealt with above.
In
Eskom
v Resilient
the
following passage is appropriate in this regard: “
A
situation where Eskom, as an organ of state, is driven to resorting
to all manner of ways to coerce municipalities which are a critical
sphere of government in the constitutional scheme,
to
pay when they are unable to do so
is
plainly undesirable. This dire situation obliges the national and
provincial governments to intervene, consonant with the letter
and
spirit of the constitutional
[59]
and
statutory prescripts to which reference has been made in this
judgment.”
[29]
[15]
I agree with the submissions of the first
respondent’s counsel that although the applicant sought an order
declaring that the agreement had lapsed because of non-compliance
with what it contended was a condition precedent, it did not make
out
a case as contended for.
[30]
The
applicant sought to have the agreement declared invalid and of no
force and effect when it failed to take the necessary steps
to cancel
the agreement for the alleged breach. There was therefore no cause of
action to found the counterclaim.
[16]
Section 17(1)(a)
of the
Superior Courts Act, 10 of
2013
provides that leave to appeal may only be given where the judge
or judges concerned are of the opinion that the appeal would have
a
reasonable prospect of success or there is some other compelling
reason why the appeal should be heard, including conflicting
judgments
on the matter under consideration. This application is
predicated on both
sections 17(1)(a)(i)
and (ii). In
The
Mont Chevaux Trust v Tina Goosen and 18 Others
[31]
it
was stated that the use of the word “would” in the statute
indicated a measure of certainty that another court would differ
from
the court which judgment is sought to be appealed against. The court,
on deciding whether there is a compelling reason why the
appeal
should be heard, should give careful and proper consideration to the
reason advanced before categorising it as compelling.
Section
17(1)(a)(ii)
should not be invoked for flimsy reasons.
[32]
I am therefore not persuaded that in the circumstances a rational
basis exists for the conclusion that the appellant has prospects
of
success on appeal and that there is a compelling reason that the
appeal should be heard. The appeal falls to be dismissed.
[17]
It is trite that the successful party is entitled
to a costs order. The dismissal of the applicant’s appeal
must
carry with it a costs order against the applicant.
[18]
In the result, I make the following order:
The
application for leave to appeal is dismissed with costs.
JJ MHLAMBI, J
Counsel
for the applicant:     Adv. M.C Louw
Instructed
by:
Phatsoane
Nenny Inc
35
Markgraaf Street
Westdene
Bloemfontein
Counsel
for the respondent: Adv. LT Sibeko SC
Instructed
by:
Hill
McHardy & Herbst
Inc
7 Collins Road
Arboretum
Bloemfontein
[1]
Zweni
v Minister of Law and Order
1993 (1) SA 523
(A); Economic Freedom
Fighters v Gordan and Others
2020 (8) BCLR 916
(CC);Mathale v Linda
and Others 2016 (2) SA 461 (CC).
[2]
Old
Mutual Ltd and Others v Moyo and Another (2019/22791) [2020] ZAGPJHC
315 (6 September 2020); Cronshaw and another v Coin Security
Group(Pty)Ltd
[1996] ZASCA 38
;
[1996] 2 All SA 435
(A).
[3]
Granted
on 9 November 2020 declaring “that the totality of the order
issued on 9 October 2020 under case number 2719/2020 by Mhlambi,J
is
an order as contemplated by the provisions of
section 18(2)
of the
Superior Courts Act, 10 of 2013
, and that the filing of an
application for leave to appeal does not suspend the operation of
the said order.
[4]
Applicant’s
heads of argument: para 13.
[5]
Which
reads as follows:
“
Eskom,
by failing to hold back the writ of execution issued on 2 October
2018 despite the court order of 22 October 2018, was not
bona fide.
The Intergovernmental Consultative Committee commenced with its
duties during November 2018. The judicial attachment
took place
during March 2019 and the settlement agreement was concluded and
signed on 30 April 2019
[5]
.
The aim of the agreement was to ensure that the movable assets were
returned to the Municipality. It is obvious therefore, that
the
agreement came about to address an ad hoc situation which was
brought about by Eskom when it executed against the movable property
in respect of the R 2.4 billion claim, soon after the court order of
22 October 2018. Eskom failed to appreciate or refused to
accept
that it was directed, as per that court, together with the other
respondents, to resolve the matter relating to the dispute
with MAP
and make every reasonable effort to settle the dispute as suggested
in that court order
[5]
.
Section
41 of the Constitution reads as follows….”’
[6]
Applicant’s
heads, para 33.
[7]
Should be July 2020-see para 11 of the judgment.
[8]
Para
35: Applicant’s heads of argument.
[9]
Ibid
36.
[10]
Ibid
37.1.
[11]
Intergovernmental
Consultative Committee
[12]
Ibid
39.
[13]
Para
18 of the judgment and para 5 of the answering affidavit.
[14]
See
ft note 12 above.
[15]
Para
20 of the judgment.
[16]
Para
31.
[17]
Para
27.
[18]
Intergovernmental
Relations Framework Act 13 of 2005
.
[19]
Para
53: applicant’s heads of argument.
[20]
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 (663/2019; 664/2019; 583/2019)
[2020] ZASCA 185 (29 December 2020) para 38(a).
[21]
Para
63.
[22]
Case
number 4723/2014.
[23]
Case
number 5523/18.
[24]
Eskom,
supra, para 91.
[25]
Para
44: Applicant’s heads of argument.
[26]
Ibid
42.
[27]
[27]
Eskom, supra,
para
82.
[28]
Para
49 of its heads of argument.
[29]
Supra,
para 97.
[30]
Para
38.3: heads of argument.
[31]
Land
Claims Court of South Africa Case number LCC 14R/2014 (unreported);
Acting National Director of Public Prosecutions and Others
v
Democratic Alliance, in re: Democratic Alliance v Acting National
Director of Public Prosecutions and Others
(19577/09)
[2016] ZAGPPHC 489 (24 June 2016)
[32]
School
Governing Body Grey College, Bloemfontein v Scheepers and Others
(South African Teachers Union Intervening) (2612/2018)[2019]
ZAFSHC
25 (17 January 2019)