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[2018] ZAGPJHC 584
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Resilient Properties (Pty) Ltd v Eskom Holdings SOC Limited and Others (2018/11316) [2018] ZAGPJHC 584; 2019 (2) SA 577 (GJ); [2019] 2 All SA 185 (GJ) (14 September 2018)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO: 2018/11316
In
the matter between:
RESILIENT
PROPERTIES (PTY)
LTD
Applicant
and
ESKOM
HOLDINGS SOC
LIMITED
First
Respondent
GAMAGARA
LOCAL
MUNICIPALITY
Second
Respondent
MEC:
COOPERATIVE GOVERNANCE,
HUMAN
SETTLEMENT AND TRADITIONAL
AFFAIRS
(NORTHERN
CAPE)
Third
Respondent
MINISTER
OF
ENERGY
F
ourth
Respondent
NATIONAL
ENERGY REGULATOR OF
SOUTH
AFRICA
Fifth
Respondent
THE
MINISTER OF WATER AND
SANITATION
Sixth
Respondent
MEC:
ECONOMIC DEVELOPMENT AND
TOURISM
(NORTHERN
CAPE)
Seventh
Respondent
MINISTER
OF
FINANCE
Eighth
Respondent
JUDGMENT
Summary:
application by shopping mall owner in area of jurisdiction of local
authority to interdict Eskom from interrupting supply
of electricity
on a particular basis to local authority for non-payment, pending
review of Eskom’s decision for being non-compliant
with its
Constitutional obligations and with its licence conditions and thus
unlawful;
Applicant
submitting that Eskom had no power in terms of its licence read with
s.21(5) of the Electricity Regulation Act 4 of 2006
to interrupt
supply of electricity to local authority for non-payment;
Applicant
submitting that human catastrophe will follow if supply of
electricity were interrupted, given past experience in like
circumstances;
Applicant
submitting court should grant interim order permitting direct payment
of its local authority bill for electricity to Eskom,
by-passing
local authority, which would be obliged to credit applicant, coupled
with an order interdicting Eskom from interrupting
supply of
electricity to local authority;
Eskom
supporting applicant’s proposed interim order, but local
authority supporting Eskom’s proposed interruption of
supply of
electricity;
Held:
on proper construction of s.21(5) of the Electricity Regulation Act 4
of 2006, read with Electricity Supply Agreement between
Eskom and
local authority, Eskom entitled to interrupt supply of electricity to
local authority for non-payment;
Held
further: Eskom’s proposed decision qualifying as administrative
action for purposes of s.33 of Constitution and PAJA,
and required to
meet reasonableness standard but at least baseline test of
rationality;
Held
further: on the facts, Eskom’s proposed decision irrational and
balance of convenience favouring applicant;
Held further: main interim relief
sought by applicant and supported by Eskom not supported by balance
of convenience and not granted,
and lesser interim interdict granted
compelling local authority to comply with obligations of
acknowledgment of debt in favour
of Eskom, and interdicting Eskom
from implementing particular interruption decision pending main
review application.
Van
der Linde, J:
Introduction
[1]
This application for interim
relief pending a review was brought by way of urgency in the last
week of the midyear recess in July.
It competed for priority with
other urgent matters, hence the delay in preparing this judgment.
[1]
The application is about an owner of a shopping mall, who also
conducts the business of landlord in respect of the shops it lets
in
its mall, and who scrupulously pays its electricity bill to the local
authority, but who is now confronted by a decision of
the first
respondent (“Eskom”) to cut electricity supply to the
local authority (the second respondent, “GLM”)
on a
particular basis, because GLM does not pay Eskom’s account. The
applicant (“Resilient”) wants to review
Eskom’s
decision in due course, and asks for an interim interdict in the
meantime to prevent its implementation.
[2]
The papers disclose that this is a phenomenon currently well
prevalent throughout the country. Resilient says GLM’s
mismanagement
has forced Eskom’s hand. GLM says general
economic hardship suffered by its constituents is to blame. Eskom
says it cannot
survive and fulfil its national function of providing
electrical supply unless it is paid; and unless it sets in motion its
specific
decision of a phased discontinuance of supply, it will not
be paid. Resilient says that if Eskom implements its decision a human
catastrophe will follow.
[3]
The papers started off in the normal way on 19 March 2018, with
Resilient asking for interim relief in part A of its notice
of motion
pending its intended review in due course under part B of the notice
of motion. Shortly thereafter Eskom reached a compromise
with GLM,
the threatened discontinuance receded and the urgency subsided. When
the matter was called on 27 March 2018, the court
was asked to make a
consent order to hold the
status quo
.
[4]
The part B proceedings thereafter progressed apace. Eskom made the
record of the decision available under rule 53, Resilient
filed a
supplementary founding affidavit, and Eskom filed its answering
affidavit. GLM did not file an answering affidavit, despite
the fact
that in part B Resilient asked for direct payment relief against GLM,
entitling it to pay its GLM electricity bill to
Eskom and not to GLM.
[5]
GLM defaulted on its arrangement with Eskom, which had taken the form
of an acknowledgment of debt (“AOD”). Eskom
notified on
13 June 2018 that it would implement its specific interruption
decision on 8 July 2018. Resilient then set the matter
down for
urgent hearing on 3 July 2018, filing a further supplementary
affidavit, and Eskom responding by filing an answering affidavit.
[6]
On 3 July 2018 Resilient and Eskom reached an agreement that Eskom
would not implement its interruption decision pending finalisation
of
part B of Resilient’s application – call it the main
review application – provided Resilient was able to obtain
additional interim relief that protected Eskom’s interests
against GLM in the interim period. The application was accordingly
postponed to Tuesday, 24 July 2018, and allocated for hearing on
Friday, 27 July 2018.
[7]
In consequence, what came
before this court on 27 July 2018 was a new part A,
[2]
which had better now be spelt out:
“
(a) The Second respondent is
directed to pay the First Respondent all amounts falling due to the
First Respondent in terms of the
Acknowledgment of Debt signed by the
Second Respondent on 14 February 2018, as and when those amounts fall
due;
(b) The Applicant, and any other
electricity consumers in the area of jurisdiction of the Second
Respondent who have agreed in writing
to join the class action
described in prayer 4 of Part B of the principal notice of motion, be
authorised to discharge the debts
that they incur to the Second
Respondent in respect of the ongoing supply of electricity to them by
making payment of the amount
of such debts directly to the First
Respondent and furnishing the Second Respondent with proof of such
payments to the First Respondent;
(c) the First Respondent is
interdicted and restrained from implementing its decision (“the
interruption decision”)
to interrupt the bulk electricity
supply to the entire Gamagara Municipality;
(d) in the alternative to
paragraphs (a) to (c) above, the First Respondent is interdicted and
restrained from implementing the
interruption decision.
”
This
relief is sought pending the relief sought in part B of “
the
principal
” notice of motion, and also pending a
determination by the National Energy Regulator of South Africa
(“NERSA”)
of the dispute between Resilient and Eskom in
accordance with the provisions of the Electricity Regulation Act 4 of
2006 (“ERA”).
The
parties’ respective positions
Resilient’s
position
[8]
Resilient made it clear in its new affidavit that the
prima facie
right it relies on for its asserted entitlement to the interim
interdict still remains as set out in its original founding and
supplementary urgent affidavits. Part B of the original notice of
motion notifies that Resilient intends applying for an order
declaring that Eskom’s specific decision to interrupt the
electricity supply to GLM published on 14 March 2018 is
unconstitutional
and invalid, and for an order reviewing and setting
aside what it called the “
interruption decision”.
[9]
Further, a declaration will be sought that section 21(5)(c) of ERA is
inconsistent with the Constitution and invalid.
Leave will be
sought authorising Resilient to claim certain further relief against
Eskom and GLM, and against the National Executive
and the Provincial
Executive of the Northern Cape, in particular declaring that their
failure to have intervened in GLM in terms
of Part 2 of Chapter 13 of
the Municipal Finance Management Act 56 of 2003 (“MFMA”),
is inconsistent with the Constitution
and invalid.
[10]
Resilient will apply for the certification of a class in terms of
section 38(c) of the Constitution of all members of electricity
consumers in the area of GLM who are not in arrears with their
electricity accounts, and who have signed a written document
indicating
their intention to join the intended class action.
[11]
Acting on behalf of that class, Resilient will then seek an order
directing the National Executive represented by the Minister
of
Finance: to intervene in GLM in terms of section 150 of the MFMA; to
prepare a financial recovery plan for GLM; to serve on
all parties
and to file with the court a copy of the financial recovery plan
within three months of the court order; and
to serve on all
parties and file with the court within three months of commencement
of the first financial year of GLM after adopting
the financial
recovery plan, a report on the implementation of the financial
recovery plan. Finally costs are sought against
Eskom and GLM,
jointly and severally, and also against any other party that might
choose to oppose the relief sought.
[12]
In subsequent affidavits Resilient made it clear that the
unlawfulness on which it relied for its
prima facie
right as
against Eskom was that Eskom’s decision was inconsistent with
its electricity distribution licence because that
licence obliges
Eskom – on the argument – to supply electricity to all
customers, such as GLM, and also end-users of
customers, such as
Resilient. Resilient contends that the licence does not authorise
Eskom to disconnect a municipal customer for
failure to pay its
electricity accounts.
[13]
Resilient relies
[3]
on the differences between the licence issued to GLM and that issued
to Eskom in support of its submissions. Resilient contends
that under
clauses 3.1 and 3.2 of the Eskom licence the latter is obliged to
supply electricity to all end-users of local authorities.
In
contrast, it says there is no such obligation on GLM, referring to
clauses 4.1 and 5.1.1 of that licence. All that that licence
says,
according to the argument, is that GLM is obliged to supply to a
consumer who is in a position to make satisfactory arrangements
for
payment. So it contemplates the case of a landlord who does not pay,
but has tenants who want to pay – and GLM is obliged
to supply
electricity to them.
[14]
But says Resilient,
[4]
by contrast Eskom does not have a like power to supply electricity
only to selected (the paying) end-users who will therefore be
prejudiced if Eskom were to (unlawfully) discontinue the supply of
electricity to GLM. Since Eskom cannot make selective alternative
arrangements for these innocent customers – as a local
authority like GLM can – therefore (given Eskom’s
obligation
to supply electricity to all end users in accordance with
clauses 3.1 and 3.2 of its licence) Eskom’s licence does not
permit
it to discontinue electrical supply to an entire local
authority for non-payment. It is limited to either suing the local
authority,
or referring the complaint to NERSA.
[15]
Resilient also makes it plain
that the interim interdict it seeks is not pending the referral of
the complaint to NERSA:
[5]
“
The applicant relies
on its Constitutional rights and its right to review an
administrative act as contemplated in PAJA
.”
[6]
The contractual rights as between GLM and Eskom have no bearing on
the matter, it says.
[16]
According to Resilient,
s.21(5)(c) of the ERA does not avail Eskom, because on a proper
construction of that provision, it contains
a prohibition against
termination, with an exception to the prohibition; in other words, it
does not contain a positive power to
terminate.
[7]
The power could conceivably reside in the ESA with GLM, but even if
it does, Eskom’s decision to terminate is administrative
action, and the contract cannot vest Eskom with the power to act in
conflict with its licence.
[8]
[17]
Therefore, ultimately:
[9]
“
As submitted in my
founding and supplementary affidavits, the interruption decision is
inconsistent with Eskom’s distribution
licence because that
licence does not allow Eskom to disconnect electricity to an entire
municipality and thus violate its licencing
obligations to supply end
users with electricity.
”
So it comes back to clauses 3.1 and 3.2 of the Eskom licence, a
matter to which I return below.
[18]
Constitutionally, the Resilient attack relies on the contentions that
the decision: involves impermissible self-help, offending
the rule of
law under s.1(c) of the Constitution and access to a court under
s.34; offends s.151 (4) of the Constitution; is substantively
reviewable under s.6(2)(e)(iii) of the Promotion of Administrative
Justice Act 3 of 2000 (“PAJA”), because relevant
considerations were not considered, particularly the potential damage
to the environment by damaging water and sewage systems,
inconsistent
with clauses 4.3 and 5.4 of the Eskom licence.
Eskom’s
position
[19]
Eskom disputes the legal bases of Resilient’s claims against
it. It points out that there is no contractual privity between
it and
Resilient, and it denies having breached any constitutional
obligation owed to GLM. The relevant contract is one between
Eskom
and GLM, and in terms of clause 9.2 of that contract it has the
explicit right either to discontinue the supply of electricity
or to
terminate the electricity supply agreement (“ESA”)
altogether.
[20]
Eskom contends also that it derives the power to cut supply from
s.21(5)(c) of ERA, and so it contends that any Constitutional
right
which Resilient has, is properly limited under s.36 of the
Constitution by this subsection of ERA. Eskom supports in
principle the direct payment relief claimed by Resilient, but fears
that GLM will use such an order as an excuse not to pay Eskom
anything at all; as a “payment holiday”, as it was put in
argument.
[21]
It paints a dark picture of municipal debt generally. In November
2017 it amounted to approximately R13 billion. Eskom is responsible
for the generation of all electricity in South Africa, and urgent
intervention is needed, it says, for it to remain financially
viable
and sustainable, so that it can generate and supply electricity for
the benefit of all South Africans.
[22]
It explains that the licence issued to it by NERSA does not allow it
to supply direct to the end-users of local authorities;
it refers to
the terms of the licence which says that the licence excludes
customers being supplied by municipalities. It explains
that GLM is
itself licenced by NERSA to supply electricity. It explains
that in terms of s.51((b)(i) of the Public Finance
Management Act 1
of 1999 (“PFMA”), it has a duty to collect all revenue
due to it.
[23]
Eskom does accept that its entitlement to reduce or terminate supply
of electricity to GLM due to the latter’s non-payment
is
subject to it complying with procedural fairness in terms of PAJA.
Specifically, it refers to Joseph and Others v City
of
Johannesburg,
2010 (4) SA 55
(CC) for the submission that it was
obliged in terms of s.3(2) of PAJA to provide adequate notice before
disconnecting the supply
of electricity to affected residents.
[24]
According to Eskom, it is GLM who has a constitutional duty to
provide electrical reticulation to those in its area of jurisdiction.
It contends that GLM has breached multiple Constitutional and other
statutory duties, referring to s.152(1)(b) of the Constitution;
s.153(a) of the Constitution;
s.4(2)(f)
of the
Local Government,
Municipal Systems Act 32 of 2000
(the “Systems Act”);
s.73 of the Systems Act;
s.9(1)(a)(iii)
of the
Housing Act 1 of 1997
;
and
s.27(i)
of the ERA (the obligation to ring-fence revenue
collected from electricity sales). In this latter regard it points to
the fact
that GLM purchases electricity from Eskom at R87,56 per kWh,
and on-sells it at R1,60 per kWh, a profit of 95%.
GLM’s
position
[25]
As said, GLM did not initially
file an answering affidavit, but this time emailed an unsigned
affidavit on 20 July 2018, a week
before the hearing. The affidavit
takes the points that the application is not urgent; that Resilient
cannot get the relief it
seeks against GLM because its own
non-payment has triggered the full outstanding balance under the AOD
and so it can no longer
pay instalments in terms of that document “
as
and when they fall due for payment”
;
that for reasons advanced by Eskom Resilient cannot succeed against
Eskom in part B; that it has been held that
s.21(5)(c)
is not
constitutionally offensive;
[10]
and that Resilient has no entitlement to any rights under the Bill of
rights as a juristic person.
[26]
It denies that it did not ring-fence its electricity revenue. It
refers to the ever-increasing cost of services, the general
decline
in the economy, the increasing number of indigent residents and the
ever-increasing cost of electricity as reasons for
its failure to
service its debts. Also, it has recently changed its billing system
and that resulted in substantial errors in billing.
[27]
It aligns itself with Eskom and accepts that the proposed
interruptions would be reasonable. It says there is a culture of
non-payment and if the interruptions are implemented, this will
“
assist GLM in swaying the culture of non-payment for the
better.”
[28]
It says it could never afford the direct payment relief sought by
Resilient. This would place an excessive burden on its staff
to
administer the credits; and importantly the effect of large portions
of consumers paying bills direct to Eskom will severely
decrease
revenue and will have serious auditing complications.
[29]
In its affidavit replying to
this GLM affidavit, Resilient points out that there is no explanation
at all for GLM’s failure
to have disconnected non-paying
consumers as it is authorised to do in terms of its licence. It
submits that the GLM affidavit
illustrates it “
to
be a financially delinquent municipality that is in serious and
material breach of its financial commitments to Eskom and is
plainly
ignorant of its constitutional duties relating to financial matters
and the provision of electricity services to its local
community.”
[11]
Expanded
background facts
[30]
Resilient operates a retail shopping mall known as Kathu Village Mall
at a property owned by Resilient in Kathu, a town which
is within the
area served by GLM known as Gamagara Local Municipality, situated in
the Northern Cape Province. Kathu is 45
minutes away by car
from Kuruman and serves the well-known Sishen iron ore mine.
[31]
Resilient consumes electricity supplied by and pays it, and rates and
taxes, to GLM. Its electricity bill is up-to-date,
and it
distributes electricity in turn to some 72 tenants who operate retail
businesses within the mall. Resilient asserts
that it brings
the application in its own interest as well as in the interest of the
public generally in terms of s.38(d) of the
Constitution, and on
behalf of the class (to be certified) of electricity consumers and
residents of GLM who are up-to-date with
their electricity account
payments to GLM.
[32]
Eskom supplies bulk electricity to GLM who on-distributes electricity
to consumers within its area of jurisdiction. Eskom
is an organ
of state. GLM is a local municipality duly established in terms
of the
Local Government Municipal Structures Act 117 of 1998
, and it
is licensed by NERSA to distribute and supply electricity to
Resilient’s mall and to other consumers within the area
of
jurisdiction of GLM.
[33]
The immediate precursor to the urgent application is the specific
decision by Eskom announced on 14 March 2018 that it would
interrupt
electricity supply to GLM on a daily basis for a certain number of
hours. Resilient says that this particular interruption
would have
catastrophic effects on the mall and on the citizens of GLM. It
will destroy GLM’s water articulation and
waste water treatment
systems and will have life-threatening consequences to parts of the
population of GLM. It will lead
to shutdown of schools and will
compromise the operation of old-age homes, security companies and
healthcare providers.
[34]
The particular power cuts that were envisaged would have commenced on
29 March 2018 and would have entailed a week-long electricity
interruption of four hours per day during the week and five hours per
day during weekends. This would have escalated during
the
following week to respectively six and a half and seven hours per day
and the week thereafter electricity would be cut indefinitely
for the
entire working day and beyond.
[35]
Resilient asserts in its founding affidavit that for years now many
municipalities have failed to collect electricity payments
from
consumers, or have failed to use the revenue from electricity
payments to pay Eskom for the electricity that Eskom provides
to the
local authorities. This has resulted in an ever-growing
municipal debt due to Eskom, but until relatively recently
Eskom had
taken no steps to regularise its debtor-creditor relationship with
local authorities. Eskom has now, over the last
two years only,
decided to achieve its objectives through the sudden and mass
termination of supply of electricity to a large number
of
municipalities.
[36]
During 2017 Eskom became embroiled in many instances of litigation
following upon interruption decisions in various municipal
jurisdictions. In most of those cases the issues are the same
and it would appear that in many of them, initial interim relief
was
granted either by agreement between the parties or otherwise.
[37]
Resilient says that it would appear that Eskom concedes that when the
balance of convenience is considered, horrendous consequences
would
follow this particular interruption of electricity, and the balance
of convenience favours, clearly, those that are prejudiced
by the
interruption.
[38]
Resilient points out that in a matter in which it brought an
application in the North Gauteng High Court against Eskom and
Emalahleni under Case Number 2017/5358, Eskom conceded an interim
order similar to the order sought in part A in the current
application.
[39]
Also, in the matter involving Lekwa (aka Standerton) under Case
Number 2017/4545 in the North Gauteng High Court, Eskom agreed
to the
interim relief sought. Finally, in a similar matter in the
Sabie, Lydenburg and Graskop areas a similar application
was brought
in the Mpumalanga High Court under Case Number 2017/2295. Eskom
initially opposed the application successfully
on a technical point,
but a subsequent urgent application resulted in interim relief being
granted.
[40]
Resilient contends that the threatened violation of the basic human
rights of the population of GLM in the present matter is
at stake;
but also issues of national, social and economic importance.
[41]
Incorporating by reference the contents of its attorney’s
letter of 15 December 2017, Resilient asserts that Eskom was
applying
a double standard by failing to take steps to collect arrears
amounting to R5 billion for its direct supply to non-paying
end-users
in Soweto, while threatening to disconnect entire municipalities and
thus prejudicing account-paying consumers who were
wholly innocent of
any non-payment of electricity bills. Resilient in that letter
gave notice of its intention to declare
a dispute with NERSA if Eskom
were to proceed with the threatened action.
[42]
In the same letter Resilient emphasised the irrationality of the
decision, pointing to a World Bank report which concluded
that only
4% of Eskom’s current account deficit was due to debt
collection issues, whereas 15% was due to overstaffing, and
81% due
to under-pricing.
[43]
It would appear that there was some stalling on the part of Eskom at
the end of 2017 and the beginning of 2018 in implementing
an earlier
decision to interrupt electricity supply on the basis that it had
reached a payment plan with GLM. It appears
however that GLM
failed to adhere to the payment plan to which it had itself agreed,
and that this failure was the immediate precursor
to the decision of
14 March 2018 to disconnect the municipal supply of electricity with
effect from 29 March 2018.
[44]
Before turning to deal with Resilient’s asserted
prima facie
right, it is necessary to say something more about the catastrophe
that Resilient says will befall the community if Eskom implements
its
interruption decision. It fits best under the rubric of “balance
of convenience”.
Balance
of convenience
[45]
Resilient makes out a case that far-reaching consequences would
follow if Eskom were to carry out its threatened interruption
of
electricity supply to GLM. It points out that those
consequences are to be distinguished from what is known as “load
shedding”. In the case of the latter, peak consumption is
reduced with minimal adverse consequences to electricity
consumers.
Load shedding time periods are infrequent and of such short duration
that essential services, such as the water supply
and sewerage works,
can survive the interruption.
[46]
However in the case of the
interruption decision threatened by Eskom and described above, the
entire municipality is affected and,
according to the applicant, this
“…
will almost
certainly result in the total disruption of the water supply to the
inhabitants, the destruction of the sewerage network,
and various
other irredeemable deleterious consequence”.
[12]
[47]
These consequences are
highlighted with reference to the experience when electrical supply
was interrupted to Emalahleni by Eskom
in 2017. Resilient
describes what occurred there as “
catastrophic
socio-economic and humanitarian consequences”
.
Having regard to the facts asserted in the founding affidavit of
Sandra Lee van der Walt on behalf of Resilient, these assertions
are
not hyperbolic. Importantly for present purposes is the fact that
Eskom does not challenge them.
[13]
[48]
There are of course dire consequences for Eskom if its bills are not
paid; and those consequences inure for the country as
a whole.
However, the short-term consequences for the community are more
immediately drastic, and so – for immediate
purposes – in
my view the balance of convenience favours Resilient. The real
questions, as I see it, in this application
are accordingly whether
the applicant has established a
prima facie
right, even if
open to some doubt; and if it has, what the appropriate relief would
be.
Resilient’s
prima facie
right
[49]
There is an inverse
relationship in interim interdicts between the requirements of a
prima facie
right and the balance of convenience: the stronger the one, the
weaker the other is permitted to be. Resilient
need
only establish a
prima
facie
right, although open to doubt. It must show that on its version,
together with the allegations of Eskom and GLM that it cannot
dispute, it should obtain the relief sought in part B. If, having
regard to Eskom’s and GLM’s contrary version and
the
inherent probabilities, serious doubt is then cast on Resilient’s
case, it cannot succeed.
[14]
[50]
This
tried and tested approach was significantly qualified by a full bench
of this court in Ferreira v Levin, NO and Others; Vryenhoek
and
Others v Powell, NO and Others.
[15]
Ferreira, subsequently approved in the Constitutional Court,
[16]
lowered the bar set by Gool. Gool required that on the asserted case
the applicant “
should”
obtain final relief at trial; the former requires only “
a”
prospect of success, albeit “
weak.”
[51]
Holmes,
J (then) in Olympic Passenger Service (Pty) Ltd v Ramlagan,
[17]
approved by himself in Erikson Motors (Welkom) Ltd v Protea Motors,
Warrenton, and Another,
[18]
in
turn followed by Ferreira, and approved by the Constitutional Court,
formulated the approach as follows (emphasis supplied):
“
It
thus appears that where the applicant's right is clear, and the other
requisites are present, no difficulty presents itself about
granting
an interdict. At the other end of the scale,
where
his prospects of ultimate success are nil, obviously the Court will
refuse an interdict
. Between
those two extremes fall the intermediate cases in which, on the
papers as a whole, the applicants' prospects of ultimate
success may
range all the way from strong to weak. The expression 'prima facie
established though open to some doubt' seems to
me a brilliantly apt
classification of these cases. In such cases, upon proof of a
well-grounded apprehension of irreparable harm,
and there being no
adequate ordinary remedy, the Court may grant an interdict - it has a
discretion, to be exercised judicially
upon a consideration of all
the facts. Usually this will resolve itself into a nice consideration
of the prospects of success and
the balance of convenience -
the
stronger the prospects of success, the less need for such balance to
favour the applicant
: the weaker
the prospects of success, the greater the need for the balance of
convenience to favour him. I need hardly add that
by balance of
convenience is meant the prejudice to the applicant if the interdict
be refused, weighed against the prejudice to
the respondent if it be
granted.”
[52]
The approach approved then by these
authorities is that “
a prima facie
right, though open to some doubt”
conveys that the strength of the right is allowed to fluctuate from
strong to weak: if it is strong, the other requirements for
an
interim interdict may be weak; if it is weak, the other requirements
for an interim interdict may be strong.
[53]
The
remedy remains “
an
extraordinary remedy within the discretion of the Court,”
as Erikson Motors underscored,
[19]
but
that is a description apt for the entire discretion-exercising
process, not only the first element of it.
The
prima facie
right against GLM
[54]
The first interim prayer is
against GLM, directing it to pay all amounts to Eskom as and when
they fall due for payment in terms
of the AOD dated 14 February 2018.
Ultimately, Resilient will ask the court to declare that GLM’s
failure to pay its arrear
debts is unconstitutional and invalid.
[20]
Eskom does not resist the interim order sought. GLM’s
resistance is based on its own default: that the full arrears have
been triggered by it not keeping up the instalments, and so it cannot
be ordered to pay the instalments under the AOD as and when
the fall
due for payment.
[55]
If Resilient is proved correct
at the final relief stage then, by raising this defence as a bar to
interim relief in favour of Resilient,
GLM is relying on its own
default. This is not permissible. As has been said In Comwezi
Security Services (Pty) Ltd and Another
v Cape Empowerment Trust
Ltd
[21]
by Van Zyl, AJA in an analogous context (emphasis supplied):
“
[12] The
rationale for this rule is twofold: A party to a contract should not
by its own unlawful conduct be allowed to obtain an
advantage for
himself to the disadvantage of his counterpart. ‘
It
is a fundamental principle of our law that no man can take advantage
of his own wrong
’ and ‘to
permit the repudiating party to take advantage of the other side’s
failure to do something, when that
failure is attributable to his own
repudiation, is to reward him for his repudiation’. The
converse is that the innocent
party is not expected to make the
effort or incur the expense of performing some act when, by reason of
the repudiation, ‘it
has become nothing but an idle gesture’.
This is consistent with the general principle that the law does not
require the
performance of a futile or useless act. These principles
are of general application and may find application in a variety of
circumstances.
The doctrine of fictional fulfilment of contractual
terms is, for example, similarly based on the principle that a
contractant
cannot take advantage of its own wrongful conduct to
escape the consequences of the contract.
”
[56]
GLM was obliged to have paid
Eskom in terms of the AOD. GLM is obliged to ensure the provision of
services to its community in a
sustainable manner.
[22]
It must pay its bills in 30 days.
[23]
It
must ring-fence its electricity reticulation business.
[24]
GLM’s denial of the allegation that it did not do it, is
bald.
[25]
In GLM’s AFS for 30 June 2017 the unaccounted electricity unit
losses amount to 28,5 million, up from 4 million a year before
as of
30 June 2016.
[26]
[57]
The explanation furnished is tepid and does not engage at all with
the reason for the dramatic increase:
“
Electricity losses occur due
to technical and non-technical losses (technical losses –
inherent resistance of conductors,
transformers and other electrical
equipment; non-technical losses – the tampering of meters, the
incorrect ratios used on
bulk meters, faulty meters and illegal
electricity connections). The problem with tampered meters and
illegal connections is an
ongoing process, with regular action being
taken against defaulters. Faulty meters are replaced as soon as they
are reported.”
[58]
As dramatic is the increase,
year on year, of the distribution loss:
[27]
from R4m at year-end 2016 to R25,3m at year-end 2017. This seems
directly related to the fact that in 2016 GLM billed 96% of the
electricity system input, but in 2017 only 73%. The notes to the AFS
do not make mention of the billing problems that appear to
have
arisen only early in the new financial year.
[28]
[59]
If the deponent to GLM’s affidavit is correct, then the 2018
financial year will report even worse results for the electrical
reticulation business. The deponent concludes disquietly on this
aspect of the evidence:
“
It appears from my
inspection of the financial records that the billing of consumers
from the past number of months, specifically
in respect of
electricity, has been far less than Eskom’s monthly bill. I
have requested the officials in the office of the
CFO to investigate
the reasons therefor. I have, however, already been informed that it
has firstly to do with the new billing
systems which I have referred
to, the problems which occurred in relation thereto, and because of
the large volume of electricity
that is ‘lost’ from the
grid in circumstances which I have already explained. I will ensure
that a task team be put
together, consisting of representatives of
GLM’s financial department, its technical department and
delegates of Eskom, to
address the latter aspect.”
[60]
It is difficult to comprehend why at this late stage the response of
GLM is to promise to fix up in the future what went wrong
in
financial year 2018, when already financial year 2017 has shown up
the dramatic losses, and nary a word is said about those
problems –
pre-dating as they do the current problems. It is equally difficult
to avoid the conclusion, at
prima facie
level, that
mismanagement is the true source of GLM’s failure to have paid
its Eskom bill.
[61]
I do not accept that the
defence put up by GLM to the effect that it cannot comply with the
terms of the AOD
[29]
because the full outstanding balance has been triggered, has
substance. In truth, all parties, particularly Eskom, are desirous
only of obtaining payment of the instalments due under that AOD. It
is no answer for GLM to say that because the full outstanding
balance
has been triggered therefore it does not have to pay anything at all.
[62]
If then GLM’s conduct is Constitutionally unlawful and
inconsistent with the Constitution, “
just and equitable”
relief under s.172(1)(b) is implicated. Directing, at the
instance of a non-contracting but clearly interested party, that
GLM
complies with its AOD contractual obligations towards Eskom, seems to
me to be comfortably included within the wide reach of
that section.
[63]
It follows that in my view
Resilient’s potential case for final relief against GLM
[30]
has accordingly been sufficiently established at the level required
for the interim relief it seeks in prayer (a) of part A, and
such an
order – modified to provide for the instalment obligation -
issues at the end of this judgment.
The
prima facie
right against Eskom
[64]
The interim relief sought in prayers (b) and (c) (and (d)) of the
updated notice of motion quoted above implicate also the
position of
Eskom, and so it is appropriate next to consider Resilient’s
case against it.
[65]
Resilient’s argument has been set out above. To recap, it
starts with Eskom’s position as an organ of state in
the
national sphere of government. From there it moves to the particular
interpretation of the Eskom and GLM licences respectively,
whereby:
Eskom is obliged to supply electricity to all end users in accordance
with the licence; Eskom has no power (in its licence)
to interrupt or
terminate supply to customers who are in arrears; GLM is however
obliged to supply electricity only to those customers
who are able to
make arrangements for payment; and GLM has the power to interrupt or
terminate supply to customers who are in arrears.
So it is
self-evidently up to GLM to cut electrical supply to non-paying
end-users while Eskom continues to supply bulk electricity
to GLM –
as it must in terms of its licence.
[66]
The implications of these licence conditions – so interpreted –
were refined during argument. Since Eskom derives
no power from its
licence to interrupt or terminate supply to GLM, it must either sue
GLM for payment, or refer its dispute with
GLM to NERSA. It has no
power to by-pass GLM and supply only innocent paying customers of GLM
direct; in contrast GLM has the power
to by-pass non-paying customers
and supply electricity direct to end-users.
[67]
And so, given Eskom’s
status as organ of state in the national sphere of government, if it
should interrupt or terminate supply
of electricity to GLM, that
decision would be unlawful for offending a number of Constitutional
imperatives: it would be inconsistent
with the rule of law, a
founding principle of our Constitutional arrangement;
[31]
it
would amount to self-help, offensive to the fundamental right of
access to courts;
[32]
and it would be inconsistent with Eskom’s obligation under
s.151(4) (read with s.152(1)(b) and s.156(1)(a), read with part
B of
schedule 4) not to compromise or impede GLM’s ability to
perform its functions (by terminating only the non-paying customers
and not also the paying customers).
[68]
Resilient’s argument depends for its validity on the premise
that the Eskom licence confers no power on it to interrupt
or
terminate electricity supply to GLM; that that conclusion forecloses
the countervailing argument about its power to interrupt
or
terminate; and that whatever Eskom’s contractual entitlements
in terms of the ESA cannot override the power source of
what is
ultimately administrative action in the context of s.33 of the
Constitution and PAJA.
[69]
With respect, I do not agree, for these reasons. First, in Rademan
Zondo, J (then) for the Court considered s.21(5) of ERA
and said
(emphasis supplied):
“
[35] During the hearing
there was much debate about whether there is a conflict between s
21(5) of the ERA and the bylaws which
confer power upon a
municipality to cut a ratepayer's electricity supply off in certain
circumstances. Section 21(5) reads as follows:
'(5) A licensee may not reduce or
terminate the supply of electricity to a customer, unless —
(a) the customer is insolvent;
(b) the customer has failed to
honour, or refuses to enter into, an agreement for the supply of
electricity; or
(c) the customer has contravened
the payment conditions of that licensee.'
[36] The condition in (a) is clear
and not in issue. Section 21(5)(b) contemplates two scenarios. The
one scenario is where there
is an agreement between a resident and
the municipality as to the supply of electricity by the municipality
to the customer, and
the customer refuses to honour the agreement.
The other scenario is where there is no agreement for the supply of
electricity and
the customer refuses to enter into an agreement.
In
either case the municipality would be entitled to cut off the
electricity supply to the resident or customer if it were already
supplying electricity to the customer.
Section 21(5)(c) is
very important. It contemplates conditions of payment that the
municipality may have stipulated even if they
were not agreed to with
the customer or resident. If the condition in s 21(5)(c) is not
applicable,
then that means that the municipality cannot
rely upon s 21(5)(c) to terminate the electricity supply to a
resident's property
.
”
[70]
The unavoidable implication of the underscored unqualified
dicta
in the context in which they appear, is that the cut-off power
resides in s.21(5), despite negative form in which the language
in
introductory portion of s.21(5) is cast. Take the wording of
s.21(5)((a): “
A licensee may not reduce or terminate the
supply of electricity to a customer, unless —
(a)
the customer is insolvent
…”.
[71]
On Resilient’s argument all that this does is to set a
prohibition against terminating the supply of electricity to a
customer, but then to lift that prohibition when the customer is
insolvent; but without also empowering Eskom to terminate when
the
customer is in fact insolvent. More is required, on the
argument.
[72]
As I see it, Rademan decided that no more is required. It held with
reference to s.21(5)(c) that that paragraph “…
contemplates conditions of payment that the municipality may have
stipulated even if they were not agreed to with the customer…”.
It follows that properly construed, Eskom has the power under
s.21(5) to terminate supply if GLM “…
failed to
honour … an agreement for the supply of electricity…”.
[73]
But second, and in any event, neither the ERA nor the Eskom licence
preclude Eskom from entering into an agreement regulating
the supply
by Eskom to a local authority of electricity; to the contrary, as
already indicated, s.21(5)(b) expressly envisages
it. Further,
neither of these two instruments precludes a term in such an
agreement whereby Eskom would be entitled to decline
to supply a
local authority with electricity in the future until the local
authority will have paid Eskom for electricity supplied
to it in the
past.
[74]
In my view therefore, in
principle Eskom has the power under s.21(5) of ERA to terminate or
interrupt the supply of electricity
to GLM, given its contractual
default. Given the nature and source of Eskom’s power its
exercise is, however, administrative
action for the purposes of s.33
of the Constitution and PAJA, and constrained if not by the
requirement of reasonableness
[33]
then – at best for Eskom - at least by the baseline standard of
rationality.
[34]
[75]
If it acts irrationally in
exercising that public power to terminate or interrupt, its decision
is thus potentially open to attack
under s.6 of PAJA for offending
s.33 of the Constitution. It would have acted irrationally if the
exercise of the power is not
rationally connected to the purpose for
which it was given.
[35]
[76]
Is this particular decision to interrupt the electricity supply to
GLM in the manner proposed rationally connected to the purpose
for
which that power was conferred? That is a fact-driven enquiry and one
must turn back to consider them. Ordinarily, the power
to interrupt
or to terminate supply of electricity would have been intended to
prevent Eskom from having to supply electricity
when it will not be
paid for it. But I do not accept that the power could have been
intended to be exercised in such a manner that
it would in a given
circumstance result in wide-spread human catastrophe.
[77]
On the facts of this case, weighted in favour of Resilient as they
must be in applications for interim relief, a human catastrophe
awaits the implementation of Eskom’s particular interruption
decision. This situation was undoubtedly brought about by GLM
default, conduct which I have found is – on a
prima facie
level – unlawful.
[78]
It requires no expert evidence for a court to appreciate that debtors
that are allowed to grow out of all proportion become
all the more
difficult to collect for that reason. To the extent that GLM was at
fault in this regard, so too was Eskom. I accept
fully that Eskom’s
riposte is potentially that this particular interruption decision is
everything but irrational, because
it involves a delicate phased-in
process whereby GLM would be coaxed into paying up its arrears
without too much disruption to
the community.
[79]
The difficulty for that argument is the detailed Resilient evidence
of the proven previous experience when electricity supply
was
terminated to the intended extent. Given Eskom’s direct
involvement in and thus knowledge of these events, one
cannot
conclude that Eskom’s decision to implement this particular
interruption decision was rationally connected to the
purpose for
which it was given. The consequences that the termination of
electrical supply to the intended extent spells in this
case, at this
time, are too far removed from the notional temporary inconvenience
that a recalcitrant debtor will experience.
[80]
In my view this conclusion is enough to establish for Resilient a
prima facie
case, although open to some doubt, for a review
down the line at the part B hearing of this particular interruption
decision.
[81]
As to whether this leads to relief under prayer (b) and (c) involves
further consideration of the balance of convenience. And
although
GLM’s default has not been faultless (at a
prima facie
level), if its legitimate margin from electricity on-sales were
endangered, or if its ability to deal accounting-wise with having
to
credit Resilient and its (certified) class in respect of its payments
to Eskom will cause greater confusion, then those who
will be
prejudiced will include also the paying customers, directly or
indirectly through further failing infrastructure. These
are issues
that must abide the final relief stage when all considerations will
be before the court.
Conclusion
and order
[82]
In my view the correct order at this interim stage is in principle
one in terms of prayers (a) and (d), appropriately refined.
Some
comments are called for. First, one appreciates that Resilient did
not ask for relief in that combination, but for reasons
set out above
the comprehensive relief sought should not be granted. Second,
potential difficulties may arise should GLM again
default –
particularly in the context of the question whether there should be
reciprocity between prayers (a) and (d) of
the orders.
[83]
Third, what is being
interdicted is Eskom’s particular intended interruption
decision referred to in this application and
judgment, i.e.
implementing the “
termination
notice”
dated 14
March 2018 annexed at page 66, or any substantially similar notice,
and not every conceivable interruption or reduction
decision. Eskom
may well conceive – after appropriate notice and consultation -
of a form of reduction of supply of electricity
(“
load-shedding”
as Resilient calls it
[36]
)
that will not result in the human catastrophe Resilient has pleaded
in this case.
[84]
Regrettably those issues must for now be deferred, but they will
hopefully incentivise the parties to approach the Deputy Judge
President for an urgent hearing of part B. Some provision is
made in the order below for delays in getting before a court
on part
B. Costs should be in the cause.
[85]
In the result I make the following interim order, pending the final
determination of the part B relief:
(a) The second respondent is directed
to pay to the first respondent all amounts falling due to the first
respondent in terms of
the instalments provided for in the
Acknowledgment of Debt signed by the second respondent on 14 February
2018, as and when those
amounts fall due;
(b) the first respondent is
interdicted and restrained from implementing the “
termination
notice”
dated 14 March 2018 as defined in the founding
affidavit and annexed at page 66, or any substantially similar
notice;
(c) any party may, on the same papers
appropriately supplemented, enrol this application for
reconsideration of this interim order
in the light of changed
circumstances since date of this order;
(d) costs are costs in the cause of
the main application.
______________________
WHG
van der Linde
Judge,
High Court
Johannesburg
For
the applicant: Adv. M Chaskalson, SC
Adv.
C van der Spuy
Instructed
by: Kokinis Incorporated
Applicant’s Attorneys
Erex House
Corner Geneva and Eileen Roads
Blairgowrie
Email: steven@kokinisinc.co.za
Tel:
(011) 781 8900
Ref: SKokinis/R574
For
the first respondent:
Adv. TJB Bokaba, SC
Adv.
M Gwala
Instructed
by: Ngeno and Mteto Incorporated
First
Respondent’s Attorneys
Unit C-C50,
Brooklyn Office Park
488 Ferhsen
Street
Brooklyn,
Pretoria
Tel:
(012) 004 0424
Email:
liwalam@ngenomtetoinc.co.za
Ref:
Mr Jafta\ESK8153\LIT
For
the second respondent: Adv. MC Louw
Instructed
by: Peyper Attorneys
Second
Respondent’s Attorneys
Tel:
(051) 444 2254
Ref:
Mr L Radley
Email:
louis@peyperattorneys.co.za
c/o Moodie
and Robertson
12
th
Floor, East Wing Libridge Building
25 Ameshoff
Street
Braamfontein,
Johannesburg
Tel: (011) 628 860
Email:
darthur@moodierobertson.co.za
Ref: D Arthur\P307832
[1]
I am grateful for the parties’ agreement that the electrical
supply to the local authority would not be interrupted pending
this
judgment.
[2]
Page 524, notice of set down.
[3]
Page 471, paras 15, 16.
[4]
Page 472, para 17.
[5]
Page 517, para 8.
[6]
Page 518, para 12.
[7]
Rademan v Moqhaka Local Authority,
2013 (4) SA 225
(CC) at [36]
seems to foreclose the point against Resilient; more about this
anon.
[8]
Page 519, para 13.3.
[9]
Page 519, para 13.4.
[10]
It did not say which decision it had in mind, but it could have been
referring to Rademan or Afriform NPC and Others v Eskom
Holdings SOC
Limited and Others (99984/2015) [2017] ZAGPPHC 199;
[2017] 3 All SA
663
(GP) (24 May 2017).
[11]
Page 583, para 13.
[12]
Page 18, para 25, met by a bare denial be Eskom at page 324, para
172.
[13]
Page 329, para 183.
[14]
Webster v Mitchell,
1948 (1) SA 1186
(W) at 11189, as qualified by
Gool v Minister of Justice and Another,
1955 (2) SA 682
(C) at 688E.
[15]
1995 (2) SA 813 (W).
[16]
South African Informal Traders Forum and Others v City of
Johannesburg and Others,
2014 (4) SA 371
(CC) at [25].
[17]
1957 (2) 382 (D) at 383 D.
[18]
1973 (3) SA 685
(A) at 691.
[19]
At 691.
[20]
Page 5, prayer 7.a.
[21]
(759/2011)
[2012] ZASCA 126
(21 September 2012).
[22]
S.152(1)(b), read with s.152(2) of the Constitution.
[23]
S.65(2)(e) of MFMA.
[24]
S.27(i) of ERA.
[25]
It is not sufficient for it merely to complain about insufficient
resources, without providing detail: compare Rail Commuters
Action Group v Transnet Ltd t/a Metrorail (CCT 56/03)
[2004] ZACC
20
;
2005 (2) SA 359
(CC);
2005 (4) BCLR 301
(CC) (26 November 2004),
para 88:
“
In
particular, an organ of state will not be held to have reasonably
performed a duty simply on the basis of a bald assertion
of resource
constraints. Details of the precise character of the resource
constraints, whether human or financial, in the
context of the
overall resourcing of the organ of state will need to be provided.
The standard of reasonableness so understood
conforms to the
constitutional principles of accountability, on the one hand, in
that it requires decision-makers to disclose
their reasons for their
conduct, and the principle of effectiveness on the other, for it
does not unduly hamper the decision-maker’s
authority to
determine what are reasonable and appropriate measures in the
overall context of their activities.”
[26]
Page 167.
[27]
Ibid.
[28]
Page 558, par 35.3; page 559, para 35.6; page 564, para 44.2.
[29]
Pages 403 – 406.
[30]
Page 57 in fin to page 58, para 137.2.
[31]
S.1(c).
[32]
S.34.
[33]
Compare Afriform at [153]: “
In
summary, any exercise by Eskom of the power in section 21(5) of ERA
will be administrative action reviewable by the courts
on the
grounds of legality, reasonableness and procedural fairness under
section 33 of the Constitution and PAJA.”
[34]
(2015) 7 Constitutional Court Review, p82; compare Parkscape v MTO
Forestry (Pty) Ltd and Another,
2018 (1) SA 263
(WCC) at [66] ff.
[35]
See generally Albutt v Centre for the Study of Violence and
Reconciliation and Others (CCT 54/09)
[2010] ZACC 4
;
2010 (3) SA 293
(CC) ;
2010 (2) SACR 101
(CC) ;
2010 (5) BCLR 391
(CC) (23 February
2010) at [49] ff; Masetlha v President of the Republic of South
Africa and Another (CCT 01/07)
[2007] ZACC 20
;
2008 (1) SA 566
(CC);
2008 (1) BCLR 1
(3 October 2007) at [81].
[36]
Page 25, para 35 ff; Eskom does not challenge Resilient’s
differentiation: page 329, para 181 ff.