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WILSON J (with whom MABESELE J agrees):
1 The central question in this case is whether the appellant, Johannesburg
Water, is to be treated as an “organ of state” within the meaning given to that
term in the Institution of Legal Proceedings Against Certain Organs of State Act 40 of 2002 (“the Legal Proceedings Act”). In this judgment, we conclude that Johannesburg Water is an organ of state so defined, because it is an institution “performing a function in terms of the Constitution” under section 1
of the Legal Proceedings Act. The nature of that function is the provision of water as a basic municipal service under sections 27 (1) (b) and 152 (1) (b) of the Constitution, 1996 . Johannesburg Water was set up in terms of the
Municipal Systems Act 32 of 2000 (“the Systems Act”) to perform that function, and only that function, for the residents of Johannesburg. The mere fact that its activities are directly regulated by the Systems Act, the Companies Act 71 of 2008 and a contract with the City of Johannesburg, rather than by the
Constitution itself, makes no difference to the reality that it performs one of the
State’s constitutional functions, and is accordingly an organ of state under the Legal Proceedings Act.
The dispute
2 The respondent, Dark Fibre, owns and controls a network of underground
fibreoptic cables. It sells or leases the use of those cables to other entities who
require means of data transfer, whether for telecommunications, access to the internet, or otherwise. Dark Fibre says that Johannesburg Water, or contractors working for it, negligently damaged one of Dark Fibre’s cables while performing work on an underground water pipe in Greenside,
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Johannesburg. Dark Fibre instituted proceedings in the Johannesburg
Regional Court claiming just over R320 000 for what it said was the reasonable cost of repairing the damage caused.
3 Section 3 of the Legal Proceedings Act obliges anyone claiming a “debt”
against an organ of state to deliver, within six months of the debt falling due, a notice setting out the facts giving rise to the debt and the particulars of the debt insofar as these are known to the claimant. In defending Dark Fibre’s action, Johannesburg Water contended that Dark Fibre claimed a “debt” as defined in the Legal Proceedings Act, and raised the special plea that Dark Fibre had failed to give Johannesburg Water the notice section 3 requires.
4 The failure to deliver a section 3 notice can be condoned, but Dark Fibre did
not seek condonation. It instead argued that Johannesburg Water is not an organ of state within the meaning of the Legal Proceedings Act, and was for that reason not entitled to notice under section 3. The Magistrate below agreed with Dark Fibre and dismissed the special plea. Johannesburg Water now appeals.
The appeal
5 The Magistrate’s reasons are not easy to discern, but it seems from his
judgment ex tempore that the Magistrate took the view that, because
Johannesburg Water is not a national or provincial department of state, it
cannot be regarded as an organ of state for the purposes of the Legal
Proceedings Act. When given an opportunity to supplement his reasons under
Rule 51 of the Magistrates’ Court Rules, however, it appears to have occurred
to the Magistrate that what matters under the Legal Proceedings Act is the
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nature of the function an institution performs, rather than the identity or
affiliation of the institution that performs it. This is consistent with section 1 of
the Legal Proceedings Act, which sets out that an organ of state includes any
functionary or institution which exercises “a power or perform[s] a function in terms of the Constitution” – whether it is housed in a state department or not.
6 Nonetheless, relying on the decision in Haigh v Transnet Ltd 2012 (1) SA 623
(NCK) (“Haigh”), the Magistrate appears to have considered that Johannesburg Water could not be an organ of state under the Legal Proceedings Act because, though it performs a constitutional function, it does not do so “in terms of the Constitution”. In other words, the Magistrate appears to have reasoned that Johannesburg Water is not an organ of state because
it does not derive its powers or functions directly from the Constitution. The Magistrate does not spell this theory out in his written reasons. However, it
seems to me that this is the approach that in fact underpins those reasons.
Johannesburg Water is an organ of state under the Act
7 The approach I have imputed to the Magistrate below is ultimately derived
from the decision in Nicor IT Consulting (Pty) Ltd v North West Housing
Corporation 2010 (3) SA 90 (NW) (“Nicor”), which the decision in Haigh
followed. At paragraphs 7 to 14 of Nicor, Lever AJ reasons that an institution
does not “exercise a power or perform a function in terms of the Constitution”
unless it derives its powers or functions directly from the Constitution. On the
reasoning in Nicor and Haigh, Johannesburg Water is not an organ of state
under the Legal Proceedings Act because it is neither mentioned in, nor derives its powers or functions directly from, the Constitution. The fact that it
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indisputably performs a Constitutional function, by providing water to the
people of Johannesburg, is of no moment.
8 It appears to have weighed with the court in Nicor that to hold otherwise might
lead to absurd results: “[i]f, for example, a non-government organisation (NGO) had as its main objective the raising of funds for the provision of low-cost housing and in fact provides such housing to the indigent in South Africa . . . [it] would be an 'organ of State' and it would be entitled to notice . . .
within six months, as contemplated in s 3 of the Act” (Nicor paragraph 12).
9 These misgivings notwithstanding, it seems plain to me that Nicor and Haigh
were wrongly decided, at least on the point in issue. What matters is not the
proximity between the powers the institution exercises and the constitutional text, but whether the exclusive or dominant purpose of the institution is to exercise or carry out one o r more of the State’s constitutional powers or
functions.
10 This approach to the question, it seems to me, caters fully for the concerns
expressed in Nicor. It properly includes institutions, such as Johannesburg
Water, which are set up by the State and held at arms-length, but whose very purpose is to perform a function under the Constitution . It nonetheless
excludes contractors who may happen to perform constitutional functions on
the State’s behalf without that being their main purpose , or non-governmental
organisations whose main purpose is to give effect to a constitutional
entitlement as an act of charity, rather than because the non -governmental
organisation is obliged by the Constitution to do so.
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11 The need to draw this distinction is central to the purposes of the Legal
Proceedings Act. The Act seeks to regulate the process for collect ing debts
owed by organs of state. One feature of the process the Act sets up is the
prelitigation notice procedure to which Johannesburg Water says it is entitled
in this case. The idea is that the State, and the various institutions performing
constitutional functions on its behalf, will likely incur substantial liabilities while
exercising constitutional powers or performing constitutional functions. Those
liabilities are ultimately underwritten by the State as a whole. A process is
required to allow the State as a whole to keep track of its liabilities. Early notice
of a creditor’s claim, which is what section 3 provides for, is part of that process.
12 Johannesburg Water is a case in point. Johannesburg Water derives none of
its powers or functions directly from the Constitution. Nor does it describe itself
as an organ of state. It is nonetheless a municipal entity established as a
private company in terms of section 86B of the Municipal Systems Act. It is wholly owned and controlled by the City of Johannesburg (see 86G of the Municipal Systems Act). It is subject to the Public Finance Management Act 1
of 1999 . It must restrict its activities to those that the City of Johannesburg
would other wise legitimately undertake, and it has no competence to
undertake any others (see section 86D (1) (b) of the Municipal Systems Act).
In other words, Johannesburg Water’s only purpose is to provide water to the residents of the City of Johannesburg . The delict Dark Fibre alleges in the
court below was committed in the course of doing just that.
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13 It is, in my view, untenable to suggest that Johannesburg Water is not an organ
of state simply because it does not derive its powers and functions directly
from the Constitution. The City in particular, and the State as a whole, clearly
have an interest in keeping track of Johannesburg Water’s liabilities in the manner that the Legal Proceedings Act prescribes. This is because Johannesburg Water’s assets and liabilities are the City’s assets and liabilities. For that reason, Johannesburg Water’s liabilities are ultimately underwritten by the State itself.
14 It follows that Johannesburg Water is an organ of state for the purposes of the
Legal Proceedings Act because it is an institution performing a function in
terms of the Constitution: the provision of water as a basic municipal service
under sections 27 (1) (b) and 152 (1) (b) of the Constitution.
Relief
15 Accordingly, the court below should have upheld the special plea. Mr. van der
Merwe, who appeared for Johannesburg Water before us, conceded that this
does not spell the end of Dark Fibre’s action. It means only that Dark Fibre must now ask the court below to condone its failure to give the notice section 3 of the Legal Proceedings Act requires. The court below will grant that application if good cause has been shown, if Dark Fibre’s claim has not
prescribed, and if Johannesburg Water was not prejudiced by the failure to give notice. On the facts of this case, these seem to me to be slight hurdles indeed.
16 Ultimately, though, that is a question for the court below. Dark Fibre’s action
should be stayed until the court has had an opportunity to answer it.