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[2015] ZAFSHC 30
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Matjhabeng Local Municipality v Eskom Holdings Soc Ltd and Others (924/2013) [2015] ZAFSHC 30 (19 February 2015)
FREE
STATE
HIGH COURT,
BLOEMFONTEIN
REPUBLIC
OF SOUTH AFRICA
Case
No.: 924/2013
In
the matter between:
MATJHABENG
LOCAL MUNICIPALITY
…................................................................
Applicant
and
ESKOM
HOLDINGS SOC LTD
…..........................................................................
1
st
Respondent
MEMBER
OF THE EXECUTIVE COUNCIL,
LOCAL
GOVERNMENT, FREE STATE PROV
…..............................................
2
nd
Respondent
NATIONAL
ENERGY REGULATOR OF SA
…...................................................
3
rd
Respondent
NATIONAL
MINISTER OF MINERALS AND
ENERGY
…................................................................................................................
4
th
Respondent
THE
MINISTER OF PROVINCIAL AND LOCAL
GOVERNMENT,
RSA
…..........................................................................................
5
th
Respondent
JUDGMENT
BY:
DAFFUE, J
HEARD
ON:
6 NOVEMBER 2014
DELIVERED
ON:
19 FEBRUARY 2015
I
INTRODUCTION
[1]
An unsavoury battle is being fought by two public bodies with money
coming from the public purse. Matjhabeng Local Municipality,
(“Matjhabeng”) the second largest municipality in the
Free State Province, owes Eskom Holdings Soc Ltd, (“Eskom”)
millions of Rands which amount increases every month as the
municipality is unable to settle its debts. In company law
parlance
Matjhabeng, being unable to pay its debts and commercially
insolvent, would be a suitable candidate to be wound up in terms of
section 344 of the Companies Act, 61 of 1973.
II
THE PARTIES
[2]
Matjhabeng is cited as the applicant in a so-called notice of motion:
interlocutory application filed on behalf of Eskom who
is cited in
the application as first respondent. The MEC for Local
Government, Free State Province, the National Energy Regulator
of
South Africa, (“Nersa”), the National Minister of
Minerals and Energy of South Africa and the Minister of Provincial
and Local Government of South Africa are cited as second, third,
fourth and fifth respondents respectively. These last mentioned
four respondents do not feature at all in the application as the main
protagonists are Matjhabeng and Eskom. Adv N.H. Moloto
appeared
for Eskom and adv M.C. Louw for Matjhabeng.
[3]
The parties are incorrectly cited. Eskom as applicant should
have applied for substantive relief in a new application
instead of
using the citation of the parties and the same case number allocated
to Matjhabeng’s 2013 application referred
to
infra
.
However this matter has been dealt with finally by Kruger J and does
not require any further comments, save for the reference
thereto
infra
.
III
The relief sought by Eskom
[4]
Initially Eskom sought several orders,
inter
alia
that the order granted by me by
agreement between the parties on 28 March 2013 be set aside and a
structural interdict intended
to ensure payment of the amounts due to
it by Matjhabeng and several other related relief be granted.
The relief contained
in the notice of motion is not set out now to
prevent duplication, but the reader is referred to paragraph 11
infra
for the order eventually granted by
Kruger J on 31 July 2014.
[5]
At this stage of the proceedings I have to adjudicate whether or not
Matjhabeng’s acting municipal manager should be convicted
of
contempt of court, bearing in mind the aforesaid order of 31 July
2014 and the further order by Kruger J on 18 September 2014,
both
which are quoted fully
infra.
IV
The factual and undisputed background
[6]
Eskom supplies electricity to Matjhabeng which incorporates the Free
State towns of Allanridge, Hennenman, Odendaalrus, Riebeeckstad,
Ventersburg, Virginia, Welkom and Whites. Eskom as the dominant
player in the business of generating, transmitting and distributing
electricity in the Republic of South Africa entered into an
electricity supply agreement with Matjhabeng in 2004 which agreement
was effective from 26 March 2000 and would endure for an indefinite
period unless terminated by either party upon three months’
written notice. It was agreed that Matjhabeng would purchase
electricity for the purpose of distributing it to its customers
within its licensed area of supply and that Eskom would furnish
Matjhabeng with a reliable and continuous supply of electricity
in
bulk. Matjhabeng would be liable to make monthly payments on
due dates reflected on statements provided by Eskom to it
at Eskom’s
standard prices applicable from time to time and approved by Nersa in
terms of the applicable laws. Matjhabeng
did not pay the full
monthly account of Eskom prior to July 2012, but during that month
all arrears were paid in full. However,
it then failed to
comply with its obligations again and in January 2013 the arrears
amounted to about R145 million.
[7]
Eskom indeed threatened to disconnect electricity supply to
Matjhabeng if the arrears were not paid in two instalments, the
last
instalment to be paid on the 31
st
March 2013. However it is clear from the papers filed on behalf
of Matjhabeng that Eskom intended to make use of a public
participation process in terms of the
Promotion of Administrative
Justice Act, 3 of 2000
, in terms whereof all stakeholders, affected
parties and the public were invited to participate in such process.
The deadline
for submissions was 28 March 2013.
[8]
During that time Matjhabeng raised certain disputes and even
indicated to Nersa that an arbitration process should be instituted
to iron out the disputes. Nothing further transpired in this
regard.
[9]
On 7 March 2013 Matjhabeng issued a notice of motion, (its 2013
application bearing the same case number – 924/2013),
intending
to apply on an urgent basis on 28 March 2013 for an order in terms
whereof Eskom be interdicted from terminating electricity
supply to
Matjhabeng pending the finalisation of the dispute between the
parties. Eskom was cited as first respondent and
the parties
referred to
supra
were cited as second to fifth respondents respectively. Second,
fourth and fifth respondents indicated their intention to
oppose the
application, but withdrew their opposition eventually and filed a
notice indicating that they would abide the judgment
of the court.
Eskom opposed the application, but did not file any answering
affidavits. On 28 March 2013 the legal
representatives of the
parties approached me as duty judge in chambers with a deed of
settlement which I made an order of court
by agreement. In
terms thereof Matjhabeng
inter alia
had to pay the arrears of just over R145 million in instalments.
Costs of the application were to stand over.
[10]
On 7 March 2014, exactly one year after the launching of Matjhabeng’
s
2013
application, Eskom caused its so-called notice of motion –
interlocutory application to be issued by making use of the same
case
number, case 924/2013 and citing the parties as in the original
application of Matjhabeng. Eskom sought several orders,
inter
alia
an order setting aside the order
granted by me on 28 March 2013 by agreement as well as orders that
can be labelled a structural
interdict.
[11]
Matjhabeng opposed the application, but instead of filing an
answering affidavit, relied on a notice in terms of
rule
6(5)(d)(iii)
, raising two questions of law which were eventually
adjudicated in favour of Eskom by Kruger, J on 31 July 2014 who then
also made
the following order by agreement:
“
1.
The court set aside the order granted on
28
March 2013
by the Honourable His
Lordship Daffue.
2. The applicant to
provide the following information by
6 August 2014
:
2.1 Copies of the
delegated powers of the Municipal Manager from 1999 until present;
2.2 Copies of the
agendas, minutes and resolutions of all committees and council with
regards to the approval of Council’s
budgets and in particular
Council’s electricity tariffs.
2.3 Copies of all
correspondence and submissions to NERSA with regards to approval of
Matjhabeng’s electricity tariffs between
the period of 1999
until present.
2.4 Copies of the
agendas, minutes and resolutions of Council that relate to the
alleged discrimination against Matjhabeng.
2.5 A copy of
resolution of Council or any committee authorizing the municipal
Manager to bring the application that was instituted
against Eskom.
2.6 Matjhabeng’s
recovery rate of bad debt relating to electricity supply to all
categories of consumers for the last 10 years.
2.7 Should the
recovery rate be less than 90%, the reasons or factors affecting the
recovery rate.
2.8 The percentage
or amount that the Matjhabeng Municipality budget has made provision
for in terms of bad debt related to electricity
supply for the last
10 years.
2.9 If Matjhabeng
Municipality’s recovery rate is less than the amount budgeted
for in terms of bad debts, what steps have
been taken to rectify the
problem, and when they were carried out.
2.10 Copies of all
the reports or recommendations by committees or consultants, internal
or external, as well as resolutions which
have been taken by
committees and council regarding the recovery of bad debts in
Matjhabeng Municipality’s jurisdiction.
2.11 All resolutions
taken by Council or any committee regarding the electricity supply
agreement form (sic) the date of amalgamation
of Welkom and Virginia
Municipalities to form Matjhabeng Municipality, until present.
3. The parties to
enter into consultations commencing on 12 August 2014, to be
concluded on 19 August 2014, and to report to the
above Honourable
Court on or before 11 September 2014 the position of the disputes
between the parties, including the internet
(sic) rate to be charged
on arrears.
4. The applicant to
resume payments of the current account for electricity supplied
during July 2014 and thereafter on due date,
failing which, the
municipal manager is directed to report to the above Honourable Court
reasons therefor with 14 calendar days
of the default.
5. The applicant to
pay arrears that have accrued since June 2013, together with interest
a tempore morae,
on payment terms to be agreed between the
parties in terms of the provisions of clause 3 of this order, failing
such agreement
or payment, first respondent shall be entitled to
terminate the supply of electricity after following due procedure in
terms of
the
Promotion of Administrative Justice Act 3 of 2000
.
6. The applicant to
pursue payment of whatever amount it expects from SARS, to keep first
respondent informed of such steps and
to make payment to the first
respondent within 3 days of the applicant receiving it.
7. The applicant to
disclose to the first respondent and the above Honourable Court the
status of money collected from end users,
in lieu of electricity
usage, from June 2013 to present, and what it has been utilized for
before or on 6 August 2014.
8. The applicant pay
interest of 15.5%
a tempore morae
on all amounts for
electricity consumption effective July 2014.
9. Any one of the
parties shall be entitled to approach the court for any unresolved
disputes within 120 days of the conclusion
of the consultations
contemplated in paragraph 3 of this order.
10.
Costs are reserved.”
[12]
Paragraphs 2, 4 and 7 of the order of 31 July 2014 are of particular
importance for the purposes of the adjudication of the
application
presently before me. Matjhabeng was supposed to provide
numerous documentation and information to Eskom by not
later than 6
August 2014 to enable the parties to enter into meaningful
consultations to commence on 12 August 2014 and to be concluded
on 19
August 2014 where after the parties had to report to the court on or
before 11 September 2014. Furthermore, Matjhabeng
had to resume
payment of the current electricity account in respect of electricity
supply during July 2014 and thereafter on due
date, failing which the
municipal manager was directed to report to the court reasons for the
default within fourteen days of such
default. In terms of paragraph 7
Matjhabeng was directed to provide information to enable the court to
establish how monies collected
by it from consumers for electricity
usage was utilised during the relevant period.
[13]
When the matter was heard on 31 July 2014 the arrears outstanding in
respect of the supply of electricity amounted to R335 495 358,34.
[14]
Although Eskom was not provided with all the documents and
information set out in the order of 31 July 2014 consultations were
held with Matjhabeng officials. No agreement could be reached
in respect of various aspects, but the minutes of the meeting
reflect
that Matjhabeng committed itself to pay the future monthly accounts
in full when they become due and payable. This
is in line with
paragraph 4 of the 31 July 2014 order.
[15]
Eskom reported to the court in accordance with the court order of 31
July 2014. No report from Matjhabeng was forthcoming
which
caused Kruger J to make the following order on 18 September 2014 (the
matter having been postponed from 11 September to 18
September 2014):
“
1.
The applicant pay the arrear amount outstanding in respect of
electricity supplied for the period June 2013 to July 2014 in the
sum
of R371 908 124;
2. The applicant to
pay interest at the prevailing a
tempore morae
rate when the
amounts making up the debt fell due;
3. The applicant
institute legal proceedings aroung (sic) issues it has relating to
the urgent application under case number 924/2013
within 120 days
from date of this order, failing which the applicant’s right to
do shall lapse and the supply agreement shall
be enforceable, and the
applicable rate of interest on the amount payable in terms of
paragraph 1 of this court order shall be
the prime plus 5% as charged
by First National Bank;
4. The applicant, as
represented by the Municipal Manager, is to be called to give reasons
why they have not complied with the court
order of 31 July 2014,
specifically:-
a. Why it has not
kept up with payments for current electricity consumption as
contemplated in paragraph 4 of the court order of
31 July 2014;
b. Having regard to
the reports in the applicant’s possession and contained in
pages 407 to 437 of the application, when and
what septs (sic) the
applicant has taken to address the issues raised int hose (sic)
reports;
c. Why the amount in
paragraph 1 should not be payable no later than 31 March 2015 having
regard to the applicant’s history
of non compliance with the
court orders of March 2013 and July 2014;
d. Why the municipal
manager should not be held in contempt of court for non compliance
with the order of 31 July 2014;
5. The applicant, as
represented by the Municipal Manager, provide such reasons and
explain its conduct by way of an affidavit to
be served and filed
with the Registrar no later than 6 October 2014 and to be present in
person in court on 6 November 2014;
6. The first
respondent to reply, if any, by no later than 13 October 2014.
Any heads that may be necessary, to be filed the
following week.
7.
Costs of suit of the urgent application of March 2013 and this
application to be paid by the applicant, such costs to include
the
costs of junior and senior counsel, on an attorney and client scale.”
The
dates in paragraphs 5 and 6 of the order should have been 13 October
2014 and 24 October 2014 respectively.
[16]
The arrears have by then increased to R371 908 124 and
judgment was granted against Matjhabeng for payment of this
amount
together with interest at the prevailing
a
tempore morae
rate when the respective
amounts making up the debt fell due.
[17]
It is apparent from the court order that the municipal manager of
Matjhabeng was called upon to give reasons why there was
no
compliance with the court order of 31 July 2014 and why he shall not
be held in contempt of court for such non-compliance.
The
matter was to be heard on 6 November 2014.
[18]
Thereafter the acting municipal manager of Matjhabeng, Mr Mothusi
Frank Lepheana, appointed as such effectively from 1 July
2014, filed
an explanatory affidavit, albeit late, as well as an affidavit in
support of a condonation application. In his
affidavits he
tries to explain why he should not be convicted of contempt of court
and I shall deal with his reasons
infra
.
[19]
Notwithstanding the court order in terms whereof judgment was granted
by Kruger J in favour of Eskom against Matjhabeng in
the amount of
R371 908 124 and interest, which order has not been set
aside or appealed against, Eskom indicated that
it would be prepared
to accept down payments of this amount on the basis that the full
arrears are paid by not later than 31 March
2015. Matjhabeng,
on the other hand, caused a so-called payment plan to be adopted by
its council in terms whereof provision
was made for down-payments of
the arrears in instalments with the final payment to be made at the
end of September 2015 only.
[20]
Notwithstanding the undertaking to pay the monthly account timeously
Matjhabeng failed to pay the August account and paid only
R15 million
towards the September account.
V
LEGAL PRINCIPLES
[21]
The orders granted by Kruger J have become known as structural orders
and are sometimes referred to as structural interdicts,
but as
pointed out by the Supreme Court of Appeal in
Meadow
Glen Home Owners Association v City of Tshwane Metropolitan
Municipality
(767/2013)
[2014]
ZASCA 209
(1 December 2014) the reference to structural interdicts is
often a misnomer in relation to an order that combines elements of an
interdict and a mandatory order.
[22]
A major challenge that courts are facing nowadays is the emergence of
a trend of non-compliance with judgments and particularly
money
judgments against the State and other public bodies. A
structural order/interdict has rich potential to facilitate
an
interactive process in order to solve disputes between parties.
A mandamus combined with a structural interdict and contempt
of court
proceedings are therefore often resorted to by parties. It is
accepted that money judgments cannot be enforced against
the State
through contempt of court proceedings, but courts are not powerless
to ensure compliance with court orders. It
is therefore
possible to call upon a particular functionary to advance reasons why
he shall not be held to be in contempt of court
and to explain to the
court why he has not complied with the order and how he intends to
comply.
[23]
A court issuing a structural interdict seeks to control compliance
with its order and thereby an organ of state can be ordered
to
perform its constitutional obligations and to report on its progress
in doing so from time to time. In the process the
court
exercises some form of supervisory jurisdiction to ensure that its
order is implemented. See
LAWSA
,
volume 11, 2
nd
edition, para 411.
[24]
Madala J, writing for the majority in
Nyathi
v Member of the Executive Council for the Department of Health,
Gauteng and Another
2008 (5)
SA 94
CC commented as follows in para [80]:
“
Certain
values in the Constitution have been designated as foundational to
our democracy. This in turn means that as pillar-stones
of this
democracy, they must be observed scrupulously. If these values
are not observed and their precepts not carried out
conscientiously,
we have a recipe for a constitutional crisis of great magnitude.
In a State predicated on a desire to maintain
the rule of law, it is
imperative that one and all should be driven by a moral obligation to
ensure the continued survival of our
democracy. That in my view
means at the very least that there
should
be strict compliance with court orders
.”
(emphasis added.)
[25]
In regard to the possibility of contempt of court proceedings being
instituted against State functionaries in cases where the
State fails
to pay the monies owed to a judgment creditor and bearing in mind
section 3
of the
State Liability Act, 20 of 1957
which prevented
attachment of State assets, Madala J suggested that the committal of
public officials would only result in “naming
and shaming”
of such officials and would produce no real remedy for the aggrieved
litigant who is primarily concerned with
the payment of the judgment
debt. See
Nyathi
loc cit
at
para [76]. It must be emphasised that the court concluded that
section 3
of the particular Act was inconsistent with the
Constitution and in finding such it tried to alleviate the burden
placed on a successful
litigant seeking payment of the judgment debt.
The court continued at para [78] as follows:
“
Secondly,
State administration is inefficient and ineffective. The
conduct of State officials undermines the legitimacy of
both the
judiciary and the State. ... These State institutions need to look at
these failings holistically and consider the best
manner in which to
deal with the problems at hand. …”
In
para [79] the following remark is made:
“
However,
contempt of court proceedings do not put money in the pocket or food
on the table.”
In
para [83] the court found that it was necessary for it to oversee the
process of compliance with court orders (there were about
200 odd
unresolved cases against the State for payment of judgment debts) and
to ensure ultimately that compliance is both lasting
and effective.
Consequently a structural interdict was issued as well. In my
view the Constitutional Court did not
find that contempt of court
orders can never be made against State functionaries, but it is
apparently so that meaningless orders
should be avoided.
[26]
Conradie JA mentioned in
Jayiya v MEC
for Welfare Eastern Cape
2004 (2)
SA 611
SCA at para [17] the following: “Wholesale
non-compliance with court orders is a distressing phenomenon in the
Eastern
Cape that has caused the Courts in that province to try to
devise ways of coming to the assistance of social welfare applicants
whom the provincial government has failed.”
The
court eventually found that the application for committal for
contempt of court was misconceived in a number of respects and
the
appeal was consequently dismissed. The judgment is not
authority that recalcitrant public officials may never be convicted
of contempt of court.
[27]
Wilful disobedience of an order of court made in civil proceedings is
a criminal offence. Applications on notice of motion
are often
brought in the high court for committal for contempt of court in
order to bring about a proper discharge of obligations
under an order
ad factum praestandum
or under a prohibitory interdict. See Farlam
et
al,
Erasmus, Superior Court
Practice
,
B1-58F-3
.
The requirements have been crystallised
and the position summarised as follows in
Fakie
NO v CCII Systems (Pty) Ltd
[2006] ZASCA 52
;
2006
(4) SA 326
SCA at para [42]:
“
(a)
The civil contempt procedure is a valuable and important mechanism
for securing compliance with court orders, and survives
constitutional scrutiny in the form of a motion court application
adapted to constitutional requirements.
(b) The respondent
in such proceedings is not an ‘accused person’, but is
entitled to analogous protections as are appropriate
to motion
proceedings.
(c) In particular,
the applicant must prove the requisites of contempt (the order;
service or notice; non-compliance; and wilfulness
and mala fides)
beyond reasonable doubt.
(d) But once the
applicant has proved the order, service or notice, and
non-compliance, the respondent bears an evidential burden
in relation
to wilfulness and mala fides: should the respondent fail to advance
evidence that establishes a reasonable doubt as
to whether
non-compliance was wilful and mala fide, contempt will have been
established beyond reasonable doubt.
(e)
A declarator and other appropriate remedies remain available to a
civil applicant on proof on a balance of probabilities.”
[28]
Even if it appears that the defaulting party might have been wilful,
he may yet escape liability if he can show that he was
bona
fide
in his disobedience, i.e. that he
genuinely, although mistakenly, believed that he was entitled to
commit the act or the omission
alleged to be a contempt of court.
Fakie NO
loc cit
at
333B – E. There must be a deliberate and intentional
violation of the court’s dignity, repute or authority.
Honest belief that non-compliance is justified or proper is
incompatible with that intent.
[29]
A municipality is under a constitutional duty to comply with court
orders and to lead by example. Upon non-compliance
of a court
order, complaints of contempt may be proceeded with against the
functionaries of the Municipality responsible for ensuring
compliance
with the order. See
Mchunu v
Executive Mayor, Ethekwini Municipality
2013 (1) SA 555
KZD at 560I – 561B and 561F – 562B and
563D – E and
Meadow Glen Home
Owners Association
loc
cit
at para [32] where a municipality’s
obligations and that of its staff members,
inter
alia
to serve the public
interest, is referred to.
[30]
The Supreme Court of Appeal made it clear in
Meadow
Glen Home Owners Association
loc
cit
at para [3] that in a country based
on the rule of law it cannot be countenanced, particularly when it
involves an organ of state
at the third tier of government, that
court orders are not complied with.
[31]
The following is stated at para [8] of
Meadow
Glen Home Owners Association
:
“
Having
said that, the Municipality consented to the court making an order in
those general terms. That obliged it to make serious
good faith
endeavours to comply with it. That is what we are entitled to expect
from our public bodies. If they experienced difficulty
in doing so
then they should have returned to court seeking a relaxation of its
terms. …, it was not appropriate for the
Municipality to wait
until the appellants came to court complaining of non-compliance in
contempt proceedings. It should have taken
the initiative and sought
clarification from the court. Its failure over a protracted period to
take these steps is to be deprecated.”
[32]
The court continued at para [16] and further, relying on the judgment
in
Fakie NO
loc cit,
that although some punitive element is involved in contempt of court
proceedings, the main objectives thereof are to vindicate
the
authority of the court and to coerce litigants into complying with
court orders.
[33]
Plasket AJ (as he then was) pointed out in
Victoria
Park Ratepayers’ Association v Greyvenouw CC
[2004]
3 ALL SA 623
SE at paras [19] and [23] that contempt of court has
obvious implications for the effectiveness and legitimacy of the
legal system
and the legal arm of government and that there is a
public interest element in every contempt committal. Viewed in
the constitutional
context, it is clear that contempt of court is not
merely a mechanism for the enforcement of court orders. The
jurisdiction
of the high courts to commit recalcitrant litigants for
contempt of court when they fail or refuse to obey court orders has
at
its heart the very effectiveness and legitimacy of the judicial
system. These
dicta
were
referred to with approval in
Meadow
Glen Home Owners Association
loc
cit
at para [18].
[34]
The Supreme Court of Appeal eventually concluded in
Meadow
Glen Home Owners Association
loc
cit
at para [35] as follows:
“…
Contempt
of court is a blunt instrument to deal with these issues and courts
should look to orders that secure on-going oversight
of the
implementation of the order.”
With
reference to
Brown v Board of
Education
, a United States of
America case, the SCA concluded:
“
Our
courts may need to consider such institutions as the special master
used in those cases to supervise the implementation of court
orders.”
Again,
I do not understand the judgment to say that it will never be
appropriate to make use of contempt of court procedure to deal
with
recalcitrant public servants. In fact, the SCA endorsed the
dictum
of
Nugent JA in
MEC, Department of
Welfare, Eastern Cape v Kate
[2006] ZASCA 49
;
2006
(4) SA 478
(SCA) para [30] that “there ought to be no doubt
that a public official who is ordered by a court to do or to refrain
from
doing a particular act, and fails to do so, is liable to be
committed for contempt, in accordance with ordinary principles.”
[35]
The municipal manager, including the acting municipal manager, of a
municipality is the accounting officer of the municipality.
His
responsibilities are tabulated in
section 55
of the
Local Government:
Municipal Systems Act 32 of 2000
. As such he is
inter
alia
responsible and accountable for
all income and expenditure of the municipality, all assets and the
discharge of all liability of
the municipality and the proper and
diligent compliance with the Municipal Finance Management Act.
See section 55(2) of the
Systems Act and also
section 82
of the
Local
Government: Municipal Structures Act, 117 of 1998
. In
Mogale
City Municipality v Fidelity Security Services (Pty) Ltd
572/2013
[2014] ZASCA 172
(19 November 2014) the SCA quoted with approval the
following warning expressed by that court in
Gauteng
Gambling Board and Another v MEC for Economic Development, Gauteng
2013 (5) SA 24
SCA at para 54: “It
is time for courts to seriously consider holding officials who behave
in a high-handed manner described
above, personally liable for costs
incurred. This might have a sobering effect on truant public
office bearers.”
In my view this is a clear indication of
the frequency of not too dissimilar incidences across the country and
the SCA’s
disapproval of such behaviour.
[36]
The duties of municipalities pertaining to electricity reticulation
are set out in section 27 of the Electricity Regulation
Act, 4 of
2006. In terms thereof a municipality is
inter
alia
obliged to keep separate financial
statements, including a balance sheet, of the reticulation business.
[37]
I agree with the sentiments expressed in
Laubscher
v Laubscher
2004 (4) SA 350
(T) at
para [25] that if the judiciary cannot function properly, the rule of
law must die. In order to prevent this, special
safeguards have
been in existence for many years, one of them being civil contempt of
court.
VI
EVALUATION OF THE EVIDENCE AND APPLICATION OF THE LEGAL PRINCIPLES
[38]
Matjhabeng’s acting municipal manager, Mr Lepheana, filed an
explanatory affidavit in general and almost meaningless
terms,
relying in several instances on inadmissible hearsay evidence.
Affidavits from people with first-hand knowledge of
the relevant
facts were conspicuously absent. In some instances bare or
unsubstantiated denials are relied upon. The
objective facts
submitted by Eskom cried out for an answer, but unfortunately Mr
Lepheana imperilled his position by failing to
put up any cogent
explanation as to why he should not be found to be in contempt of
court.
[39]
I find that he was informed of the terms of the court order of 31
July 2014 on that day as this order was made by agreement.
[40]
Contrary to what was expected of a municipal manager in his position,
he failed to ensure that all the documents and information
set out in
paragraph 2 of the order of 31 July 2014 were provided to Eskom by 6
August 2014. If this was impossible I would
have expected him
to report this immediately instead of waiting for contempt of court
proceedings. On his version he only
appeared to react to the
order on 11 August 2014, a day before consultations were to be
commenced as set out in paragraph 3 of
the order. I find his
explanation for not complying satisfactorily with the order totally
improbable and indicative of the
lackadaisical approach adopted by
Matjhabeng over a long period of time which probably started before
2012, judging from the disputes
between the parties. Several
documents and information are still outstanding. The Matjhabeng
Municipality is a mendacious
litigant and the same applies to its
acting municipal manager who not only wilfully disregard two court
orders, but made conflicting
and mutually contradictory statements.
The acting municipal manager, a duly admitted advocate, also failed
to comply with
paragraph 4 of the order of 31 July 2014. The
July 2014 current account was not paid in full, no payment was made
in respect
of the August current account and part payment was made in
respect of the September 2014 current account. He cannot be
found
to be in contempt of court based on Matjhabeng’s failure
to pay, but he did not report to court the reasons for the default
as
he was obliged to do.
[41]
The order of 18 September 2014 issued by Kruger J gave a further
opportunity to Matjhabeng and its acting municipal manager
to comply
with the court order of 31 July 2014 as is evidenced by paragraph 4
thereof. Mr Lepheana was given another opportunity
to provide
reasons and to explain his or his municipality’s conduct or
inaction by way of an affidavit to be filed not later
than 13 October
2014. He did not only miss the deadline, but eventually
presented an inadequate response. I shall deal
with some of his
allegations in the next paragraphs.
[42]
Mr Lepheana was not a newcomer on the scene although he was appointed
as acting municipal manager from 1 July 2014 only.
He was
appointed Director: Corporate Services of Matjhabeng the previous
year and in that capacity had to lead and direct the legal
services
of the municipality, provide legal services and ensure compliance
with all municipal legislation. Surely, in his
position he
should have been aware of the application brought by Matjhabeng in
March 2013, if not actively involved, the ensuing
litigation, and the
consequent agreements and court orders referred to
supra
.
I am not prepared to accept that he was not aware of the full extent
and nature of the litigation.
[43]
His version that he was informed that it was doubtful whether
Matjhabeng would be able to pay the July 2014 electricity account
in
full is contradicted by the minutes of the meeting between the
delegates of Eskom and Matjhabeng on 12 August 2014 and also
flies in
the face of the agreement made an order of court a few days earlier.
His version that he believed that it would
be “unnecessary”
to burden the court with unnecessary affidavits and reports are
unbelievable. He had to comply
with a court order and that is
the long and short of it. It is furthermore unbelievable that
Matjhabeng, led by its acting
municipal manager could agree to a
court order on 31 July 2014 and a few days later breached the terms
thereof as “the municipality
could simply not meets its
obligations”. Instead of reporting to the court as he was
supposed to do in terms of the
court order he wilfully and
mala
fide
failed to respond. When he
was called upon to respond to the contempt of court proceedings, he
belatedly replied in an inadequate
manner.
[44]
The vague averments in respect of the financial bailout from either
the provincial or the national government cannot be accepted.
These are firstly hearsay and secondly not sufficient response to
satisfy the evidentiary burden placed upon Mr Lepheana.
It
would be easy to explain in a written report the failure to pay the
monthly accounts, the reasons for the failure and the remedial
steps
taken or to be taken to rectify the default. He goes so far to
seek an indulgence from the court in not having to report
in future
on a monthly basis the reasons for Matjhabeng’s non-payment and
thus the non-compliance of its obligations towards
Eskom in terms of
the existing court order. He is apparently asking the court to
condone in advance future non-payment of
the monthly bills due and
payable to Eskom from time to time. This is nothing but an
unreasonable request.
[45]
Mr Lepheana placed no acceptable evidence before me pertaining to the
alleged discussions between him and the relevant MEC’s
and
other government officials, the nature of the negotiations and
whether or not Matjhabeng will be bailed out financially, and
if so,
when. His primary duty to explain Matjhabeng’s failure to
comply with the court order rested with the court,
but he dismally
failed. In any event, his explanations had to be made in terms
of the court order and not belatedly and whilst
confronted with
contempt of court.
[46]
He relies on hearsay pertaining to the allegations that Nersa
rejected applications for tariff increases in the past.
It was
these very applications by Matjhabeng and the responses of Nersa that
were requested and that Matjhabeng was supposed to
make available in
terms of the court order of 31 July 2014. Mr Lepheana failed to
attach any documentary or other admissible
evidence to his response.
His version that recovery of amounts by Matjhabeng was eventually
less than that billed by Eskom
based on the rejection of Matjhabeng’s
applications is in total contrast with the reports of the expert
employed by Matjhabeng
who made it clear that Matjhabeng deliberately
charged lower tariffs than agreed to by Nersa to certain end
suppliers.
[47]
While knowing that the proposed new tariffs for the 2014/2015 year
which were supposed to be implemented from 1 July 2014,
are being
contested in the high court, Mr Lepheana states under oath that the
introduction of the new tariff structure will help
to address
Matjhabeng’s problem. This is uncertain to say the least
and one does not know what the outcome of that
application will be.
I have reason to believe that he deliberately tried to mislead the
court. The reference to annexure
“ML1”, an
application to Nersa, is uncertain. There is no indication when
the application was made and what the
outcome thereof was.
There is also no indication why these documents were not provided to
Eskom in accordance with the aforesaid
court order.
[48]
Mr Lepheana’s allegations pertaining to the monthly obligations
of the municipality of just over R10 million and
the average
monthly income of just over R64 million, based on a document by an
unidentified author attached as “ML2”
which is undated
does not make any sense. If the monthly obligations are just
over R10 million there cannot be a massive
shortfall as the alleged
average income exceeds the monthly obligations by far. This is
a clear indication that Mr Lepheana
relies on incorrect hearsay
information, that the information is far-fetched, false and cannot be
relied upon, but Mr Lepheana
apparently fails to recognise this at
all.
[49]
I allowed Mr Lepheana the opportunity to testify under oath on the 6
November 2014 when I heard oral argument on behalf of
the parties.
Unfortunately his evidence was not helpful and did not go any further
than the generalisations and hearsay evidence
contained in his
written explanation. He has not provided sufficient evidence to
displace the evidentiary burden that rested
upon him. His
non-compliance was not only wilful and
mala
fide,
but an indication of the
high-handed approach adopted by so many senior public officials.
His lack of interest in being of
assistance to the court is apparent
from the very moment when Matjhabeng failed to comply with the
dealine of 6 August 2014, his
failure to attend the meeting ordered
by the court for the full duration thereof, his shifting of the goal
posts in that meeting
and his failure to report to the court as
directed on 31 July 2014. His attitude throughout is baffling
and his conduct undermines
the esteem in which the office of
municipal manager ought to be held.
[50]
Under the circumstances I am satisfied that it has been proven beyond
reasonable doubt that Mr Lepheana, the acting municipal
manager of
Matjhabeng, is guilty of contempt of court and I shall make such an
order. The whole purpose of the structural
order was defeated
by Mr Lepheana’s recalcitrant attitude. Both counsel
conceded that a sentence of six months’
imprisonment would be a
suitable and reasonable sentence, although Mr Louw requested me to
rather postpone the sanction pending
compliance with the court
order. I am not prepared to adhere to his request as I believe
that such order would have less
deterrent value than a suspended
sentence.
[51]
Bearing in mind the disastrous financial situation of Matjhabeng who
would probably stand in for the payment of any penalty
to be imposed
in this case, I have decided against issuing a fine. In my view
the seriousness of the matter is such that
Mr Lepheana should be
sentenced to imprisonment and I am of the view that a period of six
months would suffice. However I
am mindful of the fact that his
absence of office will cause further disruption in the administration
of Matjhabeng and therefore
the sentence will be suspended on certain
conditions as set out in the order. A suspended sentence will
also be a weapon
of deterrence against the reasonable possibility
that Mr Lepheana will fall into the same error. Such element of
coercion
will hopefully compel him to comply with this court’s
order.
[52]
Matjhabeng has been delaying payment of its dues to Eskom over a
considerable period of time. Under normal circumstances
I would
not be in a position to act as a court of appeal or on review in
respect of a judgment made by a colleague of mine, but
in so far as a
structural interdict was issued and bearing in mind the purpose of
structural interdicts, I am inclined to allow
Matjhabeng time to
settle the arrears. As the order of Kruger J stands as this
stage, the amount is due and payable immediately
and Eskom would be
entitled to either issue a writ for the full amount, alternatively to
carry on with procedures to have the electricity
reticulation to
Matjhabeng terminated. The last option will have a devastating
effect on law-abiding citizens within the
municipal area who pay
their bills as they fall due. Business in the Goldfields will
come to an abrupt halt. Eskom
seeks full payment of the arrears
by the end of March 2015 whilst Matjhabeng seeks an extension until
30 September 2015 in terms
of a payment plan adopted by its council.
I am of the view that in so far as Eskom is also to be blamed for
allowing the
arrears to accumulate, and in so far as Matjhabeng would
in any event not be in a position to pay such huge amount in full by
the
end of March 2015, it would be fair to both parties to grant an
extension and this will be set out in more detail in my order.
I intend to do this whilst mindful of the authorities relied upon by
Mr Moloto which I believe are not on all fours with the facts
in
casu.
Matjhabeng seeks leniency
from the court and I shall oblige. However this will probably
be its last opportunity to get its
house in order.
[53]
On 18 September 2014 Kruger J made a costs order and also in respect
of all costs that were reserved earlier. There is
no reason why
Mathjabeng shall not be held liable for the costs since then.
VII
ORDER
[54]
Therefore the following orders are issued:
1. Mr Mothusi Frank
Lepeana is convicted of contempt of court for failing to comply with
the court orders dated 31 July 2014 and
18 September 2014 under the
above case number.
2. Mr Lepheana is
sentenced to six months’ imprisonment, wholly suspended on the
following conditions:
(2.1) he shall in
future strictly comply with paragraph 4 of the order of 31 July 2014
by reporting in writing to the court, with
a copy simultaneously
provided to Eskom, within fourteen calendar days of Matjhabeng’s
failure to pay its monthly account
due to Eskom in full, the reasons
for such default;
(2.2) he shall
disclose in writing the status of money collected from end users in
lieu of electricity usage from June 2013 to 31
March 2015 on or
before 30 April 2015;
(2.3) he shall
report in writing to the court, with a copy simultaneously provided
to Eskom, within fourteen calendar days, the
reasons for any default
in respect of the monthly instalments payable relating to the arrears
mentioned in paragraph 3
infra.
3. Matjhabeng is
granted an extension to pay the full arrears, including interest, as
at the date of this order in eight equal instalments,
starting on 28
February 2015 with a final payment on 30 September 2015, but in the
event of failure to pay any instalment on due
date the full
outstanding amount at that stage will become due and payable,
entitling Eskom to terminate Matjhabeng’s electricity
supply
after following due procedure in terms of the
Promotion of
Administrative Justice Act, 3 of 2000
.
4. Matjhabeng shall
be obliged to pay the future monthly accounts for electricity supply
in full on due date, failing which Eskom
shall be entitled to
terminate its electricity supply in the manner prescribed in
paragraph 3
supra.
5. Matjhabeng shall
pay Eskom’s costs of the application incurred since the order
of 18 September 2014 on an attorney and
client scale.
6.
This application is postponed to 8 October 2015, but leave is
granted to either party to enrol the application with 14 days
written
notice, indicating in detail the factual and legal bases for any
relief sought and/or the reasons for the set down.
______________
J.
P. DAFFUE, J
On
behalf of applicant: Adv. M. C. Louw
Instructed
by:
Moroka
Attorneys
BLOEMFONTEIN
On
behalf of respondent: Adv. N.H.Moloto
Instructed
by:
Phatshoane
Henney Inc.
BLOEMFONTEIN