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[2019] ZAFSHC 241
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Tokologo Local Municipality v Eskom Holdings Soc Ltd and Others (4991/2018) [2019] ZAFSHC 241 (13 December 2019)
IN THE HIGH COURT
OF SOUTH AFRICA,
FREE
STATE DIVISION, BLOEMFONTEIN
Case
number: 4991/2018
In
the matter between:
TOKOLOGO
LOCAL
MUNICIPALITY
Applicant
and
ESKOM
HOLDINGS SOC
LTD
1
st
Respondent
NATIONAL
ENERGY REGULATOR OF SOUTH
AFRICA
2
nd
Respondent
MINISTER
OF
ENERGY
3
rd
Respondent
MINISTER
OF PUBLIC
ENTERPRISES
4
th
Respondent
HEARD
ON:
27 JUNE 2019
JUDGMENT
BY:
MATHEBULA, J
DELIVERED
ON:
13
DECEMBER 2019
Interim
interdict – Eskom entitled to cut back on the electricity
supply of the non-paying customers – Decision to do
so subject
to judicial scrutiny – Balance of convenience favours the
granting of the interim interdict.
Introduction
and parties
[1]
This matter involves a perennial problem of non-payment of
electricity accounts by several municipalities to Eskom which has
led
to several legal skirmishes in our courts throughout the country. The
applicant is a Local Municipality established in terms
of section 2
of Act 17 of 1998. It is licensed by Nersa to distribute and supply
electricity to consumers in the towns of Boshof,
Dealesville,
Hertzogville, Seretse, Dikgalaope and Kareehof. The first
respondent, Eskom is a state owned entity duly incorporated
in
accordance with the Company Laws of the Republic.
Relief
sought
[2]
In the application the applicant seeks a relief in the following
terms:-
“
2.1. Pending
the outcome of an application to review the decision of the First
Respondent to interrupt bulk supply of electricity
to the Applicant,
and further pending a determination of a dispute by the Second
Respondent declared by the Applicant against the
First Respondent, in
accordance with the provisions of the Electricity Regulation Act
2006, (which dispute will be formally lodged
with in one month of an
order being granted in this application), First Respondent is
interdicted and restrained from implementing
its decision published
on 28 September 2018 (“the interruption decision”) to
interrupt the bulk electricity supply
to the entire Tokologo Local
Municipality district.
2.2. That the
Respondents who opposed this application are directed jointly and
severally to pay the costs of the application.”
[3]
In the counter application, the first respondent seeks the following
relief:-
“
1.The
Municipality was, as at 3 December 2018, indebted to Eskom in the
amount of R35, 727, 195.00 being an amount due and payable
in respect
of the electricity supplied to it by Eskom;
2. The failure by the
Municipality to pay the aforesaid amount within 10 days as envisaged
in the Electricity Supply Agreement (“ESA”)
entered into
between the Municipality and Eskom, would entitle Eskom to
discontinue the supply of electricity to the Municipality
after
having given a further 14 days written notice of its intention to do
so;
3. This right of
discontinuation of the supply of electricity to the Municipality is
the subject to Eskom following a fair administrative
process,
especially with regard to third parties who may be affected by the
discontinuation of the electricity supply to the Municipality;
4. That the process
initiated by Eskom on/or about 14 November 2016, which caused a
notice of termination to be published in the
public media circulating
within the Municipality’s area of jurisdiction in terms of
which:
4.1. the public was
requested to submit written representation by no later than 15
December 2016, as to why Eskom should or should
not give effect to
the disconnection;
4.2 the public was
informed that the written representations would be considered and a
final decision made and published on 22 December
2016; and
4.3 in the event that
Eskom decided to continue with the disconnection, the disconnection
would occur on/or about 5 January 2017’
Was a fair process
envisaged by the Promotion of Administrative Justice Act 3 of 2000
(“PAJA”); 2.5 Eskom, to the extent
necessary, has
complied with its obligation of engaging in good faith as envisaged
in Section 4 of the Constitution of the Republic
of South Africa,
read with the provisions of the Inter-Governmental Relations
Framework Act 13 of 2005 (Cooperative Governments
Requirements”),
with the Municipality and provisional governmental representatives;
and
5. Eskom, as a result
is entitled to enforce its rights to discontinue electricity supply
to the Municipality;
6. The Municipality is
directed to:
6.1. Ringfence or
revenue received by it in respect of electricity supplied by it in
users;
6.2. Pay over to Eskom
all amounts due to it for electricity supplied to the Municipality in
terms of the ESA under the account
numbers held by the Municipality
with Eskom whose details are set out in paragraphs 1.2 hereof;
6.3. Alternatively to
4.2 above and only in the event that Municipality fails to pay any
part of or full amount due in terms of
the ESA to Eskom in any one
month, to deliver a written report to this court within seven
calendar days of such failure to pay,
accounting for the month
relating to the failure to make payments, the following:
6.3.1. The total
amount received in respect of electricity sold to its end users;
6.3.2. The amount of
equitable share received from National Treasury as well the portion
thereof allocated for the use of electricity
by the indigent; and
6.3.3. Reasons for the
non-payment of any party of or the full amount due to Eskom in
respect of electricity supplied.
7. Granting Eskom such
further or alternative relief as this Court may deem fit;
8. Directing the
Municipality and such other Respondent who opposes, the relief sought
herein, to pay costs of suit jointly and
severally the one paying the
other to be absolved.”
Chronology
[4]
It is an existing fact that the applicant owes the first respondent
millions of rands on its electricity account. On 28 September
2018
the first respondent issued a notice that it was embarking on a
scheduled electricity supply interruption as a last resort
to combat
escalating debt for the bulk supply of electricity. This is what
jolted the applicant into action to approach the court
for the relief
to interdict or restrain the first respondent from doing so.
[5]
Prior to the first respondent taking the drastic step, there has been
extensive engagement between the parties. It appears that
the arrears
have been gradually accumulating as far back as 2011. Given the
worsening state of affairs, the parties concluded a
written
acknowledgment of debt and repayment plan in favour of the first
respondent. This was followed by a revised financial recovery
plan.
In it the applicant clearly demonstrated its inability to pay the
current amount and settle the outstanding debt. The
applicant did not
comply with its repayment obligations thus breached the written
agreement.
[6]
On 8 October 2018 Mbhele J granted an Order per agreement between the
parties in the following terms:-
“
1.The applicant
shall pay to the 1
st
respondent the amount
of R2 869,819.34 on or before the 16
th
of
October 2018;
2. The applicant is
directed to pay to the 1
st
respondent all
further and future amounts payable and failing due to the 1
st
respondent in terms of the current accounts (account number
6784031577 and 8711160237) of the applicant with the 1
st
respondent
3. The 1
st
respondent undertakes to suspend the decision published on the 28
th
of September 2018 to interrupt the electricity supply to the Tokologo
Local Municipality district pending finalisation of this
application;
4. The 1
st
respondent shall file its opposing papers on or before the 22
nd
of October 2018;
5. The applicant shall
file its replying papers on or before the 5
th
of November 2018;
6. The applicant shall
file its Heads of Argument on the 7
th
of
November 2018;
7. The 1
st
respondent shall file its Heads of Argument on the 9
th
of November 2018;
8. The application is
postponed to the 15
th
of November 2018;
9. Costs of today to
be costs in the cause.”
The
applicant did not comply with it. This order is the genesis of the
counter-application.
Submissions
on behalf of the applicant
[7]
Mr Louw on behalf of the applicant, commenced his submissions by
sketching out the orders that are sought by both parties in
the main
and counter-application. He argued that the applicant is the
custodian of the rights of the consumers. In terms of section
156(1)(d) of Act 108 of 1996 (Constitution) the applicant has an
obligation to provide electricity to residents in its jurisdiction.
The interruption of supply of electricity to the residents was a
threat to their constitutional rights. The action of the first
respondent to cut supply was an unlawful act as it amounted to
self-help. He added that the first respondent was to be blamed
in that it allowed the arrears to accumulate to the point that it was
impossible to redeem.
[8]
He emphasized that the interruption of the supply of electricity will
have a catastrophic effect on the residents of the affected
towns.
Water reticulation and sewerage system will be affected in the sense
that waterborne diseases may spread at an alarming
rate. The very
fragile economy of these semi rural towns will be brought to its
knees forcing businesses to close down compounding
the existing
challenges of unemployment and poverty. The collapse of these basic
services may also cause volatile situation among
the residents.
[9]
Determined to strengthen his argument he quoted and relied on a
number of decided cases the common denominator of which is the
first
respondent. In all the matters referred to the applicants were
seeking a relief to interdict and/or restrain the first respondent
from interrupting or cutting the electricity supply.
[10]
In
Resilient
Properties (Pty) Ltd v Eskom and 5 others
[1]
the applicant brought an application for interim relief pending a
review of the decision to cut supply of electricity. In
that
matter the court held on the facts that the first respondent’s
proposed decision was irrational and the balance of convenience
favoured the applicant.
[11]
The Resilient matter was followed in this division in
Mieliehoofstad
Sakekamer and another v Eskom
.
[2]
The court confirmed that the first respondent is entitled to
terminate or interrupt the supply of electricity given contractual
default. However, the decision as to which option to follow
constitutes an administrative action which is reviewable in terms
of
the
Promotion of Administrative Justice Act -3
of 2000.
[12]
Reliance was also placed on
Sabie
Chamber of Commerce and Tourism v Thaba Chewu Local Municipality and
5 others
.
[3]
There the court held that interruptions cannot be used as debt
collection measures. Internal remedies must be exhausted
employing appropriate mechanism and procedures in dealing with
inter-governmental disputes. The learned judge specifically referred
to the provisions of the Intergovernmental Relations Framework Act 13
of 2000. This aspect was also emphasised by the court
in
Cape
Cate (Pty) Ltd v Eskom.
[4]
[13]
Turning to the counter application, he argued that the Order which is
the subject of the counter application, was an Order
sounding in
money. The first respondent had various remedies open to it including
provisional sentence. He pointed out that the
debtor in this matter
was an organ of state. The first respondent has never asked for
the ringfencing of the electricity
funds. In any event that route
will be burdensome on a small municipality with limited capacity and
resources like the applicant.
This will necessitate the employment of
extra staff members and separate books of accounts. Lastly he added
that the procedure
followed by the first respondent was insufficient.
Submissions
on behalf of the respondent
[14]
In response Mr Sibeko refuted the submission that the applicant was
acting on behalf of its consumers. He argued that
the relief
sought was encouraged by self-interest being an interim interdict
pending the determination of a review. In this
matter the
delinquent applicant initiated the proceedings purely with the object
of obtaining a payment holiday sanctioned by the
court in respect of
moneys owed and due by it to the first respondent as per agreement.
The applicant was seeking a relief in order
to resile its obligations
as per agreement between the parties.
[15]
He pointed out that the applicant essentially desired to prevent the
first respondent from exercising its rights by law as
imposed by
statute. He quoted Sima v Minister where the court held that the
interdict sought was to render an Act of Parliament
ineffective and
unconstitutional.
[5]
In this matter, the applicant instead of complaining of not being
supported, was the one not supporting the applicant to carry
out its
mandate ie to supply the electricity to all citizens and its
customers in neighbouring countries.
[16]
He added that the applicant consented to an order to pay about R2.8
million for electricity. It is clear that the promise was
never
intended to be complied with from the very beginning. On the issue of
ringfencing he emphasized that it was a statutory obligation
more
than what the first respondent desired for itself. This was
stipulated in the Municipal Financial Management Act 56 of 2003
that
the applicant had to comply with some duties in dealing with its
revenue.
[17]
He reiterated that there were remedies available to the applicant in
the event of the lack of revenue. The applicant could
have approached
the Provincial Treasury for assistance. The other option was to
request the Provincial Administration to be placed
under
administration. The applicant, aware of its problems over a period of
time, folded its arms and took no positive steps to
remedy the
situation. If the applicant had acted responsibly, these provisions
could have been invoked because there is nothing
preventing it to do
so.
[18]
On the issue of decided cases relied upon by counsel for the
applicant, he stated that none of the applicants were municipalities
like the applicant. In two (2) matters the applicants were Chambers
of Commerce representing end users. They had paid the municipalities
who in turn did not pay the applicant. Turning to the Cape Gate
matter he outlined that it was not authority and the facts are
distinguishable to the matter on hand. In that matter the Emfuleni
Municipality was under administration. In order to alleviate
its
woes, the Premier of the Province had prepared a financial recovery
plan. Lastly the municipality owed the respondent more
than R1
billion. He emphasized that the respondent participated in
intergovernmental dispute resolution mechanism per invitation.
Discussions
[19]
It is unquestionable that the first respondent is permitted to
interrupt and disconnect electricity against defaulting customers.
My view is that this power which has serious implications when
exercised must be subjected to judicial scrutiny. I say so because
the provisions and supply of electricity is recognised as a
constitutional right. It is also a fact that the applicant has not
complied with the payment conditions of the first respondent. The
applicant is not only owing money for past accounts but accumulating
debt for current consumption.
[20]
I am convinced that the applicant has demonstrated a clear right in
this regard. The applicant brings this application protecting
the
interest of the residents within its jurisdiction. It cannot be
expected that individuals can do so in trying to interdict
the first
respondent from cutting back the supply of electricity. I do not find
any merit in the argument that the applicant is
protecting a
self-interest. The applicant does not exist for its own sake but that
of its residents. Therefore it has a statutory
obligation to protect
their constitutional rights.
[21]
The consequences of the interruption of electricity supply will be
akin to human catastrophe. Counsel for the applicant dealt
with this
aspect at length. There is insurmountable evidence that where the
first respondent has embarked on this course, there
has been nothing
but disaster. Interestingly counsel for the first respondent did not
convincingly deal with it. The situation
is not simple that the
first respondent may switch off because the debt is due. On
this ground the applicant must succeed.
[22]
The adverse consequences that may be suffered by the inhabitants of
the applicant may not be undone. They may still be lingering
on even
years after the first respondent has embarked on his intended plan of
action. On the other hand the first respondent may
still enforce its
right through other means. These may include instituting of an action
by issuing summons culminating in judgement
being granted and such
debt collected via writ of execution. This leads me to the conclusion
that the balance of convenience favours
the granting of an interim
interdict.
[23]
It was argued that the applicant has many remedies available to it
including being placed under administration, approaching
Provincial
Treasury for assistance etc. Although these remedies are available to
the applicant, they do not happen overnight. It
is an elaborate
process with many implications. It will appear that the only remedy
available is the interim interdict to prevent
the first respondent
from interrupting the supply of electricity by engaging in unfair
procedures. What is certain in this matter
is that there was no
adequate engagement between organs of state within the legal
framework provided by the Legislature. It is
imperative that such an
avenue must be extensively explored. In my view there is no
alternative remedy available to the applicant.
The conclusion is that
the pre-requisites of the interim interdict laid in Setlegelo v
Setlegelo, followed and redefined in our
courts have been met.
[6]
[24]
Turning to the counter application, there are no cogent reasons
advanced that the applicant is in wilful default or acting
mala
fide
in not effecting payment. The respondent is seeking court
oversight on an issue that it can manage by applying the many
remedies
at its disposal. I have already lamented the fact that
deliberations and/or interventions at inter-governmental level have
not
been embarked upon. The applicant has raised many issues which
also compact on the exact amount of the debt to the respondent.
This will have a significant impact on the agreement relied upon. On
this basis the counter-application should fail.
Order
[25]
I make the following order:-
25.1. Pending the outcome
of an application to review the decision of the first respondent to
interrupt bulk supply of electricity
to the applicant, and further
pending a determination of a dispute by the second respondent
declared by the applicant against the
first respondent, in accordance
with the provisions of the Electricity Regulation Act 2006, (which
dispute will be formally lodged
within one month of an order being
granted in this application), first respondent is interdicted
and restrained
from implementing its decision published
on 28 September 2018 (“the interruption decision“)
to interrupt
the bulk electricity supply to the entire
Tokologo Local Municipality distinct.
25.2 The counter
application is dismissed.
25.3 Costs should stand
over to be determined in the review application.
__________________
M.
A. MATHEBULA, J
On
behalf of applicant:
Adv. M. Louw
Instructed
by:
Kruger Venter
Inc
C/O
Hill McHardy & Herbst Inc
BLOEMFONTEIN
On
behalf of 1
st
respondent:
Adv. L. T. Sibeko SC
Assisted
by
Adv. N H Moloto
Instructed
by:
Symington & De Kok
BLOEMFONTEIN
/roosthuizen
[1]
Case 2018 ZAGPJHC 527 (14 September 2018)
[2]
Case 4045/2018 (FS)
[3]
2019 ZAGPHC 112
( 7 March 2019)
[4]
2019 (4) SA 14 (GJ)
[5]
1995 (2) SA 401
(--) at 406 F
[6]
1914 AD 221