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[2018] ZAFSHC 121
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Matjhabeng Local Municipality v Man in One CC and Others (3429/2018) [2018] ZAFSHC 121 (30 July 2018)
IN THE HIGH COURT
OF SOUTH AFRICA,
FREE
STATE DIVISION, BLOEMFONTEIN
Case
number: 3429/2018
In
the matter between:
MATJHABENG
LOCAL
MUNICIPALITY
Applicant
and
MAN
IN ONE CC
(Registration
No:
CK2006/19445/23)
1
st
Respondent
PHAKAMA
SECURITY SERVICES CC
(Registration
No;
2005/183456/23)
2
nd
Respondent
MBV
SECURITY (PTY) LTD
Registration
No:
2013/024158/07)
3
rd
Respondent
HEARD
ON:
12 JULY 2018
CORAM:
PE MOLITSOANE, J
JUDGMENT
BY:
PE MOLITSOANE, J
DELIVERED
ON:
30 JULY 2018
[1]
This is an opposed application in terms of which applicant seeks the
following on an urgent basis: The applicant seeks an order
staying an
execution of the judgment of this court of the 6
th
April 2018 in favour of the first respondent. Applicant further seeks
orders staying any potential and/or actual sales in execution
in
pursuance of the court orders against the applicant in favour of the
second and third respondents which might eventuate in the
future.
Lastly, applicant seeks an ancillary order requesting a Judge of this
court to mediate the dispute regarding applicant’s
envisaged or
intended payment terms in accordance with any court orders obtained
by respondents. This application is opposed.
[2]
The respondents obtained several judgments against the applicant as
more fully set out hereunder below:
2.1
On
the 6
th
August 2015 under Case No: 3116/2015 the second respondent obtained
judgment against the applicant in the amount of R4 275 143.95
with
interest and costs;
2.2
On
the 8
th
June 2017 under Case No: 2448/2017 the second respondent obtained
another judgment against the applicant in the amount of R9 955
505.91
with interest and costs. On the 14
th
July 2017,pursuant to this order, the applicant and second respondent
concluded and signed a payment agreement in respect of the
said
judgment debt ;
2.3
On
the 20
th
March 2018 under Case No: 3430/2018, the first respondent obtained a
judgment in the amount of R15 228 477.98 with interest and
costs
against the applicant;
2.4 On the 6
th
of April 2018 under Case No: 1239/2018, the
first
respondent obtained another judgment in the amount of R20 133 681.36
with interest and cost against the applicant.
[3]
Pursuant to the granting of the judgment in 2.4 above, the first
respondent caused a writ of execution to be issued and subsequent
to
that, the following vehicles were attached and removed by the
sheriff,
to wit
,
five Nissan bakkies of which three had canopies, 2 Nissan trucks, one
FAW truck, three Jurgens trailers and two blow mowers. It
is the
attachment and removal of these assets of the applicant which
triggered this application.
[4]
On the 3
rd
May 2018 under Case No: 1430/2018 the first respondent again obtained
judgment against the applicant for payment of R15 228 477.98
with
interest and costs.
[5]
Save for the writ of execution in case number 1239/2018, no other
attachment has been made by any of the respondents to enforce
their
judgments.
[6]
Adv. Lebala SC submitted in detail the constitutional obligations
expected of the applicant, inter alia, in ensuring the provision
of
services to the communities in a sustainable manner. He submitted
that the applicant did not dispute that it was indebted to
the
Respondents. The judgments and the orders against favour of the
applicant were also not placed in dispute.
[7]
He also alluded to the fact that the applicant had experienced
challenges in making full payments to the respondents’
indebtedness. He argued that the applicant took steps in an attempt
to resolve the issue of payment of the relevant debts.by the
applicant. He submitted that the applicant sought an undertaking that
its property would not be sold in execution but to no avail.
[8]
Adv. Lebala submitted that, in view of the fact that applicant
acknowledged that it had defaulted on the settlement and
payment plans it undertook with respondents, and had throughout
undertaken to submit affidavits in line with the conditional
undertaking
ordered by this court, a court sanctioned mediation would
serve the interests of all parties herein.
[9]
Adv. Lebala further indicated that the requirements of the
State
Liability Act, 20 of 1957
as amended (the SLA) had not been complied
with.
[10]
On behalf of the respondents, Adv. Louw argued that no case was made
for court sanctioned mediation. According to him the so
called
conditional payment orders given by this court in case numbers
3116/2018 and 1430/2018 as referred to by the applicant,
referred to
the invoices and not the judgment debts. He further argued that the
applicant failed to show that it will suffer irreparable
harm if the
order is not granted.
[11]
Adv. Louw submitted, further, on behalf of the respondents that the
SLA was not applicable to municipalities.
[12]
Mr Louw argued that the applicants had another remedy as set out in
Chapter 13 of the Local Government: Municipal Finance Management
Act
56 of 2003(the Act). He thus submitted that on this point alone the
instant application fell to be dismissed.
[13]
The main issue for determination is whether the applicant has made up
a case for an interdict to stay the sales or potential
sales, in
circumstances where the applicant cannot meet its financial
obligations with a view to request a Judge to mediate a payment
plan
between the parties.
[14]
The requirements for the granting of an interdict are settled. The
applicant will have to show the following: a clear right,
a
well-grounded apprehension of irreparable harm if an interdict is not
granted, the balance of convenience favouring the grant
of the relief
sought and the absence of any other ordinary remedy. See
Setlogelo
v Setlogelo
1914 AD 221
.
[15]
At the onset it has to be borne in mind that applicant does not
dispute that the issue of the writ of execution is a lawful
procedural step available to the respondents in order to enforce
satisfaction of their judgments.
[16]
The applicant avers that it has both statutory and constitutional
duties to discharge its functions. Applicant further avers
that it
achieves these functions by providing basic services to all the
people within its jurisdiction specifically the poor and
the
disadvantaged. It is submitted on behalf of the applicant that the
removal of these assets prejudices such obligations.
[17]
Although on the face of it, it appears convincing that the applicant
may fail to meet its statutory and constitutional obligations,
the
applicant has not indicated what its entire fleet of vehicles is, in
order to execute its statutory and constitutional mandate.
It has
further not provided any evidence as to the impact or likely impact
the attachment and removal of the vehicles and machinery
is likely to
be. Such evidence is necessary for this court to asses if the
applicant will not be in a position to meet its statutory
and
constitutional obligations. It is thus difficult to satisfy myself on
the available evidence that the applicant will suffer
irreparable
harm. Bald and unsubstantiated averments will fall short of
satisfying this court that the attachment and removal will
hamper
service delivery. See
Provincial
Government: North West Province and Another v Tsoga Developers CC and
others
[2016] ZACC 9
at par
[37]
and [38].
[18]
The applicant has mandatory and statutory steps to be taken in cases
of challenges and serious crisis in its finances. Both
the
Constitution and the Act provide for mandatory intervention by the
provincial government. Section 139(5) of the Constitution
requires
that:
“
(5) If a
municipality, as a result of a crisis in its financial affairs, is in
serious or persistent material breach of its obligations
to provide
basic services or to meet its financial commitments, or admits that
it is unable to meet its obligations of financial
commitments, the
relevant provincial executive must:
(a)
impose a recovery plan aimed at securing the municipality’s
ability to meet its obligations to provide basic services
or its
financial commitments, which
(i) is to be prepared in
accordance with national legislation;
and
(ii) binds the
municipality in the exercise of its legislative and executive
authority, but only to the extent necessary to solve
the crises in
its financial affairs […]”
[19]
Section 139 of the Act also provides as follows;
“
Mandatory
provincial interventions arising from financial crises
(1)
If a
municipality , as a result of a crisis in its financial affairs, is
in a serious crisis or persistent material breach of its
obligations
to provide basic services or to meet its financial commitments , or
admits that it is unable to meet its obligations
or financial
commitments, the provincial executive must promptly-
(a)
request
the Municipal Financial Recovery Service-
(i)
to
determine the reasons for the crisis in its financial affairs;
(ii)
to
assess the municipality’s financial state;
(iii)
to
prepare an appropriate recovery plan for the municipality;
(iv)
to
recommend appropriate changes to the municipality’s budget and
revenue-raising measures that will give effect to the recovery
plan:
and
(v)
to
submit to the MEC for finance of the province –
(aa)
the
determination and assessment referred to in subparagraphs(i) and (ii)
as a matter of urgency; and
(bb)
the
recovery plan and recommendations referred to in subparagraphs (iii)
and (iv) within a period ,not exceeding 90 days, determined
by the
MEC for finance; and
(b)
consult
the mayor of the Municipality to obtain the municipality’s
cooperation in implementing the recovery plan, including
the approval
of a budget and legislative measures giving effect to the recovery
plan.
(2)
The
MEC for finance in the province must submit a copy of any request in
terms of subsection(1)(a) and of any determination and
assessment
received in terms of subsection (1)(a)(v)(aa) to-
(a)
the
municipality;
(b)
the
Cabinet member responsible for local government; and
(c)
the
Minister.
(3)
An
intervention referred to in subsection (1) supersedes any
discretionary provincial intervention referred to in section 137,
provided that any financial recovery plan prepared for the
discretionary interventions must continue until replaced by recovery
plan for the mandatory intervention.”
[20]
It is contended on behalf of the applicant that the fact that the
applicant is unable to pay one creditor does not ignite an
intervention as envisaged in s139 of the Act. It is argued that the
applicant wants to pay and is not in such a crisis as would
require
an intervention. This argument is, however, not supported by the
evidence before the court. It is not in dispute that the
applicant is
indebted to the respondents in the total amount of R64 821 287.38
plus interest and costs in various cases
referred to above. It is not
in dispute that the applicant entered in at least two settlement/
payment plans with the first respondent.
It is also not in dispute
that the applicant failed to make payments as agreed in terms of the
payment plans and also failed to
satisfy the orders granted. By its
own admission, applicant prioritised the debts of Eskom and Sedibeng
Water over any of its debts
and thus failed to make good the
judgments in favour of the respondents.
[21]
The applicant wants to down play the seriousness of its financial
crisis. While there is no sufficient evidence to conclude
that the
applicant is in a serious financial crisis, there are clear pointers
that the respondent is unable to meet its financial
obligations.
Applicant even entered in settlement/ payment plans it was unable to
meet. Clearly on the little evidence before me
it is apparent that
applicant is unable to meet its financial obligations. Clearly
because of the challenges it has in settling
its debts, the applicant
is obliged as of law to seek intervention of the provincial
government as set out in Chapter 13 of the
Act. It is not so that
applicant has a hiccup in paying one creditor as it has been argued.
It is clear that the applicant has
an ordinary remedy in terms of the
Act as opposed to seeking the stay of the execution in this
application.
[22]
The applicant implores me to order a judge of this court to mediate
‘a dispute’ pertaining to payment. This argument
is
premised, firstly, on the contention that this court has inherent
powers to protect and regulate its own process taking into
account
the interest of justice as set out in s173 of the Constitution.
Secondly, on the need to exercise judicial activism as
envisaged in
Nyathi v MEC for Department
of Health, Gauteng and Another
[2008]
ZACC 8.
This second contention is also based on conditional
payment orders granted by this court in case numbers 3116/2015 and
1430/2018.
[23]
The court in the case of
Nyathi
(
supra
)
was seized with the certification of declaration of invalidity of s3
of the State Liability Act 20 of 1957.It is in my view unnecessary
to
go in depth in the said case save to refer to the following paragraph
of the said judgment;
“
[85]
It
is indeed unfortunate that judicial officers are placed in the
invidious position of having to oversee state action. However,
oversight is essential in the circumstances. In the interest of
justice and in an effort to uphold the rights and principles that
are
espoused in our Constitution, there can be no other effective manner
to ensure that the state complies with the order
.”
[24]
This paragraph must be understood in the context in which it was
said. The court in the case of
Nyathi
was grappling with the challenges in the enforcement of court orders
against the state in light of
s3
of the
State Liability Act which
,
inter alia, infringed on the right to equality enshrined in s(9) of
the Constitution as it unjustifiably differentiated between
a
judgment creditor who had an order against a private citizen and a
creditor who had a judgment against the state. The former
creditor
could usually enforce the order by levying execution on the property
of a debtor while the latter could not.
[25]
Unlike in the
Nyathi
case, where a creditor could not levy
execution against the state in view of the provisions of s3 of the
SLA,
in casu
, the applicant already has certain statutory and
constitutional remedies available to it as alluded to above.
The case of
Nyathi
cannot thus be invoked to request a judge
to mediate a payment plan between the parties in circumstances where
there is already
another remedy in place. In addition s157 of the Act
provides a machinery to stay any legal proceedings, including
execution against
the applicant where the legal proceedings,
including execution have already been initiated. Section 157 of the
Act provides as
follows:
“
If a
municipality is unable to meet its financial obligations, it may
apply to the High Court for an order to stay, for a period
not
exceeding ninety days, all legal proceedings, including the execution
of legal process, by persons claiming money from the
municipality or
a municipal entity under the sole control of the municipality”
[26]
I was further implored to consider the conditional orders granted in
case numbers 1430/2018 and 3116/2015 by this court. Reference
to
these orders was made with the request that the court should exercise
inherent jurisdiction and order judicial mediation between
the
parties. The specific orders referred to are as follows:
“
Should
respondent fail to effect payment of the full amount of any such
invoice, it shall report to the above Honourable Court in
writing
within 48 hours of the due date, by way of an affidavit sworn to
under oath by its municipal manager stating full reasons
for
non-payment, the steps it intends to take to rectify non- payment and
when compliance is anticipated.”
[27]
The above directive should be
understood in the context of all the paragraphs of these orders.
Firstly, the principal orders related
to the declaration of
indebtedness of the applicant to the respondents. Secondly, the
ancillary orders dealt with future monthly
invoices to be rendered by
the respondents in respect of security and guarding services by the
respondents. These are the so called
conditional orders according to
the applicant. The above-mentioned conditional orders related to the
invoices to be rendered in
the future and did not relate to any
existing judgment debts. It is incorrect to rely on the conditional
orders which did not relate
to existing debts as a basis for
requesting judicial mediation.
[28]
Even if it could be said that I am wrong in rejecting the argument
that the above-mentioned conditional orders cannot be used
as the
laying basis for the process of mediation by a judge, the conduct of
the applicant must be scrutinised post the said orders.
[29]
It is not the applicant’s case that it complied with the
conditional orders in question by submitting affidavits when
it
failed to pay the invoices. The applicant makes no effort even
in these proceedings to submit such affidavits. What the
applicant
avers is that, it has always been its intention throughout to submit
an affidavit to the court. The applicant wants this
court to believe
that it is the recalcitrant behaviour of the respondent’s’
attorneys that no such affidavits were
filed with the court. It seems
to have escaped the applicant that the obligation was on it to
“…
report to
this court in writing within 48 hours of the due date
(my emphasis)
...”
upon failure to make
payments. What purpose would it serve to request a Judge
to mediate when already the applicant
appears not to heed the order
to file an affidavit within 48 hours of failure to make good the
invoices rendered? This argument
stands to be rejected.
[30]
I hasten to add that mediation is a noble consensus-seeking process
for settling disputes. It allows warring parties to find
each other
to the benefit of all concerned resulting in them owning the outcome.
Mediation, noble as it is, is a voluntary process.
The success of a
mediation process is also dependant on the bona fides of the parties.
It cannot be forced down the throats of
the litigants. If it were to
be forced on the parties, the process would lose credibility and
would be difficult to implement.
Upon perusal of the correspondence
between the parties and the submissions made it is clear that the
parties could not find each
other, hence this application was
brought.
In casu,
respondents do not seek
mediation. It will thus be incorrect to authorise judicial mediation
between the parties in circumstances
where any of the parties is not
amenable to the process.
[31]
The other argument by the applicant is that the writ of execution
issued did not comply with the legal prescripts as there
was
non-compliance with the SLA. It is apposite to mention that no
evidence or submissions were made to indicate in what respects
the
said process was issued in contravention of the SLA .
[32]
Be that as it may, I wish to highlight the following with regard to
the applicability or otherwise of the SLA to municipalities.
Section
3 of the SLA was amended by the State Liability Amendment Act, 2011
following the decision in
Nyathi
(
supra
)..Section 3 of
the SLA (as amended) provides as follows:
“
Subject to
subsections (4) to (8), no execution, attachment or like process for
the satisfaction of a final court order sounding
in money may be
issued against the defendant or respondent in any action or legal
proceedings against the State or against any
property of the State,
but the amount, if any, which may be required to satisfy any final
court order given or made against the
nominal defendant or respondent
in any such action or proceedings must be paid as contemplated in
this action (section).”
[33]
Section 239 of the Constitution defines an organ of state to mean;
“
(a) any department
of state or administration, national, provincial or local sphere of
government; or
(b)…..”
[34]
Section 151(1) of the Constitution provides as follows:
“
The local sphere
of government consists of municipalities, which must be established
for the whole of the territory of the Republic.”
[35]
A municipality is, therefore, an organ of state in the sense that it
is a department or administration in the local sphere
of government.
It is now settled that the SLA is not applicable to municipalities.
In
Mateis v Ngwathe
Plaaslike Munisipaliteit en andere 2003(4) SA 361 (SCA)
the court held that ss2 and 3 of the SLA are concerned with the
liability of the central or provincial government. The court further
held that the liability of the municipalities, which were indeed also
a form of government, was not mentioned neither with regard
to cause
of action, nor as possible defendant. It was also not mentioned as a
possible paying party.
[36]
Any argument of non- compliance with the SLA must, therefore, be
rejected as the said Act is, in law, not applicable to Municipalities
and consequently to the Applicant.
[37]
It is my considered view that the applicant has failed to show that
it will suffer irreparable harm if the relief sought is
not granted.
Further the applicant has a constitutional and statutory remedy by
way of a provincial intervention available to it,
thus the relief
sought is not the only remedy available to the applicant.
[38]
This application should therefore fail. I cannot find any reason to
depart from the general practice that the costs should
follow the
cause and I accordingly make the following order:
ORDER
1.
The
application is dismissed with costs.
__________________
P.E.
MOLITSOANE, J
On
behalf of Applicant: Adv. S.M Lebala SC with him
Adv.
N. Khooe
Instructed
by: Bokwa Attorneys
BLOEMFONTEIN
On
behalf of Respondents: Adv. M. C Louw
Instructed
by: Hill McHardy and Herbst
BLOEMFONTEIN