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2025
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[2025] ZAFSHC 143
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Democratic Alliance v Acting Municipal Manager of the Metsimaholo Local Municipality and Others (6192/2023) [2025] ZAFSHC 143 (22 May 2025)
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Reportable/Not
reportable
Case number:
6192/2023
In
the matter between:
DEMOCRATIC
ALLIANCE
APPLICANT
and
THE
ACTING MUNICIPAL MANAGER OF THE
METSIMAHOLO
LOCAL MUNICIPALITY
FIRST
RESPONDENT
FUSI
JOHN MOTLOUNG
SECOND
RESPONDENT
HELGARDT
MULLER N.O.
THIRD
RESPONDENT
EHEILA
MARTINA HENDRIKA MULLER N.O.
FOURTH
RESPONDENT
HELGARDT
MULLER N.O.
FIFTH
RESPONDENT
CHANTE
GAIL COETZEE N.O.
SIXTH
RESPONDENT
CORRIE
PLOOS VAN AMSTEL N.O.
SEVENTH
RESPONDENT
EXECUTIVE
MAYOR OF THE METSIMAHOLO
LOCAL
MUNICIPALITY
EIGHTH
RESPONDENT
COUNCIL
OF THE METSIMAHOLO LOCAL
MUNICIPALITY
NINTH
RESPONDENT
THE
SPEAKER OF THE COUNCIL OF THE
METSIMAHOLO
LOCAL MUNICIPALITY
TENTH
RESPONDENT
THE
METSIMAHOLO LOCAL MUNICIPALITY
ELEVENTH
RESPONDENT
LUCAS
FISHER
TWELFTH
RESPONDENT
Coram:
Loubser J
Heard:
6 February
2025
Delivered:
22
May 2025
Summary:
Civil contempt proceedings – Court orders
not complied with – Whether non-compliance was willful and
mala
fide.
ORDER
1.
The application for an order declaring the First
and the Eleventh Respondents in contempt of this Court’s orders
dated 21
December 2023 and 15 February 2024 under case number
6192/2023, is dismissed.
2.
The First and the Eleventh Respondents are to pay
the Applicant’s costs in the application against them jointly
and severally
on the party and party scale up to 14 May 2024,
including the costs occasioned by the employment of two counsel on
Scale C.
3.
The application for an order declaring the Third,
Fourth, Fifth and Sixth Respondents in contempt of this Court’s
orders dated
21 December 2023 and 15 February 2024 under case number
6192/2023, is dismissed.
4.
The Third, Fourth, Fifth and Sixth Respondents are
to pay the Applicant’s costs in the application against them
jointly and
severally on the party and party scale up to 6
th
February 2025, including the costs occasioned by
the employment of two counsel on Scale C.
JUDGMENT
Loubser J
[1]
In this application the Applicant moves for
declaratory orders to the effect that the First and Eleventh
Respondents (hereinafter
referred to as the Municipality Respondents)
and the Third, Fourth, Fifth and Sixth Respondents (hereinafter
referred to as the
Trust Respondents) are in contempt of court in
that they have disobeyed the interim orders made by this Court on 21
December 2023.
The Trust Respondents are the trustees of the Lizelle
Sake Trust.
[2]
In addition, the Applicant seeks a sentence of 15
months imprisonment to be imposed on the two sets of Respondents,
alternatively
a sentence of 15 months imprisonment unless they
demonstrate within seven days that they have paid back the monies
they have received
and that they would now abide by the court order
in question. On top of it all, the Applicant seeks a fine of R50
000.00 to be
given to the Second Respondent and the Trust Respondents
each for their contempt of the Court order.
[3]
The
events leading up to
the present application can briefly be summarized as follows: During
2013 the Municipality concerned, and the
Trust, entered into a
services agreement for the provision and installation of engineering
services pertaining to water and sewer
systems. In terms of the
agreement, the installation of the systems would take place on land
owned by the Trust. The agreement
further provided that the
Municipality would not be liable for the costs of the design,
installation and provision of the systems.
It was envisaged that the
land would later become a township. However, a dispute arose two
years later between the parties concerning
the implementation of the
services agreement. In terms of the arbitration clause in the
agreement the dispute went to arbitration
and the Trust delivered a
statement of eight claims totaling roughly R138.5 million. Claim 1
was for an amounted of approximately
R42 million plus 10% interest
plus costs of suit.
[4]
At the time, the Municipality was advised by its
attorneys that, in terms of the agreement, the Municipality was not
indebted to
the Trust in any form or fashion, and that it was not
liable to pay any of the claims. Ignoring this advice, the
Municipality proceeded
to enter into a partial settlement agreement
with the Trust on 7 July 2023, in terms of which the Municipality
would pay the Trust
R27.8 million in respect of claim 1. This partial
settlement agreement prompted the Applicant to launch an urgent
application in
this Division to obtain interim relief pending future
review proceedings to have the partial settlement agreement reviewed
and
set aside. The matter came before Reinders, J who made an order
on 28 July 2023 to the effect that, pending the review, the
Municipality
and its officials are prohibited from making any
payments to the Trust in respect of the partial settlement agreement,
and that
the agreement is suspended.
[5]
By the end of the year, the Applicant came back to
court alleging that the Municipality and the Trust had taken a number
of steps
to circumvent the order of Reinders, J and that they had
made themselves guilty of contempt of court in the process. According
to the Applicant, these steps consisted of the following: The
Municipality and the Trust terminated the partial settlement
agreement
and informed the Arbitrator accordingly. The Trust then
filed an application for summary judgment in respect of claim1, which
application
the Municipality did not oppose by way of an answering
affidavit. Summary judgment was then entered by the Arbitrator
against the
Municipality in respect of claim 1 on 13 October 2023.
According to the Applicant, the Municipality’s total
liability
under the arbitration award amount to some R100 million.
[6]
It did not end there. After the arbitration award,
the Municipality and the Trust entered into a new settlement
agreement in terms
of which the Municipality would pay the Trust
R43.2 million by the payment of R5 million per month. The terms of
the new agreement
did not differ much from the arbitration award, but
the rate of interest was now higher.
[7]
The further application launched by the Applicant
in these respects came before this Court. The Applicant sought
certain interdictory
relief pending the adjudication of a future
review application in which certain declaratory relief will be
sought. The declaratory
relief in the review application is aimed at
finding the Trust and the Municipality guilty of contempt of court
for circumventing
the orders of Reinders, J and to have the decision
to waive the partial settlement, the arbitration award and the new
settlement
agreement reviewed and set aside. The Applicant will also
seek an order on review that the Trust return to the Municipality all
the payments it had already received pursuant to the impugned
decisions.
[8]
On 21 December 2023 this Court made certain
specific orders after finding that the Applicant has shown a
prima
facie
right for the interdictory relief
sought, having regard to the prospects of success it has in the
review proceedings. The orders
were all made pending the final
adjudication of the review application. Firstly, the Court
interdicted the Municipality Respondents
and the Trust Respondents
from taking any steps to implement the decision to terminate or waive
the partial settlement agreement,
the arbitration award dated 13
October 2023, the decision of the Council of the Municipality to
approve a new settlement agreement
with the Trust, and the new
settlement agreement itself. In addition, the Court suspended the
abovementioned waiver decision, the
arbitration award, the approval
decision and the new settlement agreement. Lastly, the trustees of
the Trust were directed to return
within seven days the full quantum
received by the Trust pursuant to the partial settlement agreement,
the waiver decision, the
arbitration award, the approval decision or
the new settlement agreement.
[9]
In the present application, it is these
orders the Applicant alleges have not been obeyed by the First and
Second Respondents, as
well as the trustees of the Trust. It is
alleged that subsequent to the handing down of the orders, the
Municipality continued
to pay the Trust a total amount of some R22
million up to 22 March 2024. Thereafter the Municipality stopped the
payments. It is
alleged that the Trust continued to receive the
payments from the Municipality after the Court order, and that it had
failed to
pay back the monies received within 7 days of the Court
order.
[10]
It needs mentioning that after the handing
down of the orders, the Municipality, its functionaries and the
trustees of the Trust
made application for leave to appeal against
the orders made by the Court. This Court dismissed the application,
and the said Respondents
then petitioned the Supreme Court of Appeal
for leave to appeal. This petition was also dismissed by the Supreme
Court of Appeal.
[11]
In their answering affidavit in the present
application the Municipality Respondents emphasized that they acted
upon legal advice
by their lawyers when they made the payments to the
Trust. After they instructed new lawyers, they stopped all payments
to the
Trust. They were therefore not
mala
fide
or willful when they made payments
to the Trust. They accepted the advice of their erstwhile legal
representatives that their application
for leave to appeal suspended
the orders handed down by this Court.
[12]
The Municipality Respondents further
alleged that the systems were installed by the Trust on land
belonging to the Municipality,
and that the Municipality therefore
benefitted from those installations. This new allegation is in stark
contrast to the view adopted
by the Applicant so far, namely that the
installations took place on land belonging to the Trust itself.
Should it be shown in
the review proceedings that the Municipality
indeed owned the land where the pipelines were installed, it would
perhaps raise the
question whether the Municipality was not in any
event liable to pay the Trust for such installations.
[13]
It is also pointed out by the Municipal
Respondents that they have made the last payment to the Trust in
March 2024 and that no
more payments will be made.
[14]
The Applicant filed a replying affidavit to
this answering affidavit on 16 July 2024, insisting that the payments
made to the Trust
were made
mala fide
and willfully. The Applicant pointed out that it
had warned the Municipality on numerous occasions that the
application for leave
to appeal in both this Court and the Supreme
Court of Appeal did not suspend the Court order on 21 December 2023.
However, at the
hearing of the contempt application, counsel
appearing for the Applicant informed the Court that the proceedings
are not aimed
at the Municipality Respondents any longer because they
have aligned themselves now with the Court’s orders, and in
addition,
they had made the payments to the Trust upon legal advice
by their erstwhile attorneys.
[15]
Consequently, the application against the
Municipality Respondents stands to be dismissed. As for costs, I am
of the view that it
would be fair in the circumstances to order the
Municipality Respondents to pay the Applicant’s costs up to the
14
th
of
May 2024, when the Respondents filed their answering affidavit, on
the party and party scale. Such costs should include the costs
occasioned by the employment of two counsel and their fees on scale
C.
[16]
In their answering affidavit, the trustees
of the Trust also state that the water and sewerage lines were not
installed on the land
of the Trust, but on Municipal land. The
Municipality must therefore pay them for the systems installed.
Subsequent disputes between
the Trust and the Municipality including
several rounds of litigation between them brought the Trust to the
brink of bankruptcy,
they say. Furthermore, they expressed the view
at the time that their petition to the Supreme Court of Appeal would
succeed and
the order of this Court dated 21 December 2023 would be
set aside. At the same time, they shared the view of the Municipality
that
their applications for leave to appeal had suspended the orders
of this Court automatically, with the result that they were not
obliged to obey the orders of the Court.
[17]
At this juncture reference needs to be made
to the provisions of
Section 18(2)
of the
Superior Courts Act 10 of
2013
which provides as follows: “. . .
the
operation and execution of a decision that is an interlocutory order
not having the effect of a final judgment, which is the
subject of an
application for
leave
to appeal or of an appeal,
is
not suspended pending the decision of the application or appeal.”
Both the Trustee Respondents and the Municipality
Respondents were
therefore patently wrong in assuming that the orders of this Court
were suspended and that they did not need to
comply with it.
Nevertheless, the Trustees maintain that they were
bona
fide
in
their belief, because the order that they must pay back the payments
they have received, constituted final relief. In this respect
they
are also wrong, because the Court pertinently made that order also
pending the outcome of the review proceedings.
[18]
Be it as it may, a supplementary affidavit
was handed in at the hearing of the application on behalf of the
Trustees with permission
of the Court. In this affidavit the Trustees
state for the first time that they acted on legal advice at all times
when they received
the payments from the Municipality, and therefore
they did not act
mala fide
.
In addition, they are not in contempt for not paying back the money
received, because they are financially unable to do so and
First
National Bank had declined them a loan to pay back the money in
compliance with the Court order. The Trustees also stated
that they
would not accept any further payments until the review application is
finalized.
[19]
Now
in contempt proceedings of the present kind, an applicant is required
to establish four requirements, namely an order that was
granted,
that the alleged contemnor knew of it, that he has failed to comply
with the order and that he has done so willfully and
with
mala
fides
.
When the first three elements have been established,
mala
fides
and
willfulness are presumed unless the contemnor is able to lead
evidence sufficient to create reasonable doubt as to their
existence.
[1]
[20]
It is clear from the application papers
before me that the Trust Respondents were well aware of this Court’s
order dated 21
December 2023, and that they have not complied with
the order. The only question before the Court is consequently
whether
they have established a reasonable doubt when it comes to the
question whether they were willful and
mala
fide
.
[21]
In argument the Applicant made much of the
fact that the Trust Respondents mentioned legal advice for the first
time in their supplementary
affidavit, while the Municipality
Respondents have mentioned right from the beginning that they had
acted on legal advice when
they made the payments. However, a letter
by the attorneys of the trust to the Applicant’s attorneys
dated 20 February 2024
shows that the Trust Respondents believed that
they had received the payments lawfully, because they have installed
pipelines on
the land of the Municipality and the payments made were
in respect of those pipelines. This letter at least shows that at a
very
early stage, and at the time that the Trust were receiving
payments from the Municipality, the Trust was assisted by a firm of
attorneys. There is no indication in this letter that the Trust was
advised not to receive any payments from the Municipality. On
the
contrary it was stated by the attorney that the order of this Court
showed elements of finality and was therefore appealable.
The filing
of applications for leave to appeal would consequently suspend the
orders of the Court. On the date of this letter,
the petition to the
SCA for leave to appeal was still in the making.
[22]
The papers filed by the Trust Respondents
show, firstly, the new allegation that pipelines were installed
on land owned by
the Municipality, and that the Municipality were
consequently indebted to the Trust in huge amounts. That is where the
payments
came from, they say. Secondly, their papers show that their
position does not differ much from the position of the Municipality
when the role played by legal advice comes into focus. To put it
differently, it cannot be said that the Trust acted entirely on
its
own when it continued to receive and accept the moneys paid by the
Municipality. Their own attorneys were at their side at
the time, and
more importantly, they believed that their application for leave to
appeal had suspended the orders of this Court.
Most probably, they
also found support for their belief in the conduct of the
Municipality in paying them.
[23]
As for the failure of the Trust to pay back
the R22 million received from the Municipality: The Trust Respondents
say they are not
financially able to pay back, and they were
unsuccessful in obtaining a loan from a bank for such a purpose. Can
this be called
mala fide
conduct? I think not.
[24]
In the premises, I come to the conclusion
that the Trust Respondents have presented sufficient evidence to
create a reasonable doubt
whether they were acting willfully and with
mala fides
when
they failed to comply with the Court order of 21 December 2023.
[25]
As for costs, I am of the view that the
Applicant had reason to approach the Court with the application
against the Trust Respondents.
Thereafter it was up to the Trust
Respondents to create a reasonable doubt as to their willfulness and
mala fides
,
which they managed to do. In the circumstances, the Trust Respondents
should pay the Applicant’s costs up to the 6
th
February 2025, when they filed their supplementary
affidavit during the hearing of the application.
[26]
The following orders are made:
1.
The application for an order declaring the First
and the Eleventh Respondents in contempt of this Court’s orders
dated 21
December 2023 and 15 February 2024 under case number
6192/2023, is dismissed.
2.
The First and the Eleventh Respondents are to pay
the Applicant’s costs in the application against them jointly
and severally
on the party and party scale up to 14 May 2024,
including the costs occasioned by the employment of two counsel on
Scale C.
3.
The application for an order declaring the Third,
Fourth, Fifth and Sixth Respondents in contempt of this Court’s
orders dated
21 December 2023 and 15 February 2024 under case number
6192/2023, is dismissed.
4.
The Third, Fourth, Fifth and Sixth Respondents are
to pay the Applicant’s costs in the application against them
jointly and
severally on the party and party scale up to 6
th
February 2025, including the costs occasioned by
the employment of two counsel on Scale C.
LOUBSER J
Appearances
For
the Applicant:
Adv.
A Stein SC, with him
Adv.
D Sive
Instructed by:
Minde
Schapiro & Smith Inc, Bellville
c/o
Symington and De Kok,
Bloemfontein
For
the 1
st
, 2
nd
, 8
th
, 9
th
,
10
th
and 11
th
Respondents:
Adv.
S. J. Van Rensburg SC with him
Adv.
M Nduli
Instructed
by:
Ntleru
Inc Attorneys, Pretoria
c/o
Amade & Company Inc, Bloemfontein
For
the 3
rd
, 4
th
, 5
th
and 6
th
Respondents:
Adv.
N. Snellenburg SC
Instructed
by:
Vuyani
Phenduka & Associates Inc,
Rivonia
c/o
EG Cooper Majiedt Inc,
Bloemfontein
[1]
Pheko
v
Ekurhuleni
Metropolitan Municipality
[2015]
ZACC 10
;
2015 (5) SA 600
para 36