Cape Gate (Pty) Limited and Others v Emfuleni Local Municipality and Others (2018/27317) [2019] ZAGPJHC 39 (6 February 2019)

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

CASE NO: 2018/27317

DATE: 6TH February 2019

In the matter between:

CAPE GATE (PTY) LIMITED First Applicant

ATC (PTY) LIMITED t/a CBI-ELECTRIC: AFRICAN CABLES Second Applicant

SCAW SOUTH AFRICA (PTY) LIMITED Third Applicant

NALEDI RINGROLLERS, a subsidiary of:

NALEDI HOLDINGS (PTY) LIMITED Fourth Applicant

CONSOLIDATED WIRE INDUSTRIES (PTY) LIMITED Fifth Applicant

CLOTAN STEEL (PTY) LIMITED Sixth Applicant

SOUTH AFRICA ROLL COMPNAY (PTY) LIMITED Seventh Applicant

EMERALD SAFARI RESORT (PTY) LIMITED Eight Applicant

and

EMFULENI LOCAL MUNICIPALITY First Respondent

ESKOM HOLDINGS SOC LIMITED Second Respondent

NATIONAL ENERGY REGULATOR OF SOUTH AFRICA Third Respondent

THE PREMIER, GAUTENG PROVINCIAL GOVERNMENT Fourth Respondent

NKOANE, DITHABE O N.O. Fifth Respondent

NKOANE, DITHABE O Sixth Respondent

JUDGMENT

ADAMS J:

[1]. I have before me two opposed urgent applications for declaratory orders. The one application is by the first applicant and the second application is by the second to fourth applicants. The relief sought by the applicants in these two applications, which were heard together, is simirlar and to the effect that it be declared that the first, fifth and sixth respondents would be in contempt of an Order of the Full Court of this Division should they act on certain threats made by them to the applicants.

[2]. The order of the Full Court of the 8th of November 2018, provides as follows at par [174] of the Judgment of that Court:

‘(a) The dispute between the four respondents concerning the non – payment by the 2nd respondent to the 1st respondent for bulk electricity supply and the manner and timing of its resolution given the intervention of the 4th respondent is, in terms of s 41(4) of the Constitution, referred back to the respondents for resolution in terms of s 41(3) of the Constitution.

(b) In the event that the said dispute is not resolved within six months of date of this order, any party may set down this application for the determination of Part B.

(c) The 1st respondent is interdicted from implementing interruptions in electricity supply to the second respondent pending resolution of the aforesaid dispute within six months of date of this order or, if the dispute is not so resolved, pending the outcome of the final determination of Part B of this application, whichever is the earlier.

(d) For as long as the interim interdict ordered above applies:

(i) the applicants are authorised, subject to appropriate oversight by the 3rd respondent in the discharge of its statutory obligations pursuant to the judgment of this court, to discharge the debts that they incur to the 2nd respondent in respect of the ongoing supply of electricity to them, by:

(aa) making payment directly to the 1st respondent for electricity they consume at the rate of the Eskom tariff, and furnishing to the 2nd respondent proof of such payments to the 1st respondent;

(bb) continuing to pay, in the case of the 2nd to 8th applicants, the difference between the municipal tariff and the Eskom tariff (i.e. the municipal portion) to the 2nd respondent;

(ii) the 2nd respondent is directed, in invoicing the 5th to 8th applicants, to specify separately the Eskom tariff which the 2nd respondent would have paid to the 1st respondent in respect of the electricity supplied by the 2nd respondent to the 5th to 8th applicants under that invoice, were it not for this order, and the municipal tariff in respect of such electricity;

(iii) the 2nd respondent is interdicted from interrupting supply of electricity to the applicants for any reason other than that the applicants will not have complied with their payment obligations as set out in this order;

(iv) the respondents, including the 3rd respondent, are directed to do all things necessary and to take all reasonable steps to give effect to this temporary order.

(e) Nothing in this order shall detract from the existing obligations and duties owed by the 2nd respondent to the applicants in terms, inter alia, of the licence granted to the 2nd respondent by the 3rd respondent, or in terms of any other law.

(f) … ...’

[3]. In the urgent application before the Full Court, Eskom Holdings Limited (‘Eskom’) was the first respondent and the Emfuleni Municipality (‘Emfuleni’) was the second respondent. In this application Eskom is the second respondent and Emfuleni is the first respondent. So as to avoid any confusion, I shall refer to the parties by name, as did the Full Court in its judgment and order.

[4]. The first to fourth applicants seek the urgent declaratory order to ensure that the Emfuleni Municipality does not carry out its threat to interrupt the supply of electricity to the applicants. It is common cause that in the event of Emfuleni interrupting the supply of electricity in accordance with its threat, the consequences for the applicants, the communities served by the Municipality, and the economy thereof, would be both catastrophic and devastating. There is no dispute about the extent of the consequences, and it can safely be accepted that the consequences would be calamitous.

[5]. There is a long – running dispute between Eskom and numerous municipalities, including Emfuleni, which is not paying Eskom for the bulk electricity that it supplies to the Municipality. The debt owed by the Municipality to Eskom runs into the hundreds of millions of Rand. As a result of the vast and increasing debt, Eskom threatened to cut off the supply of electricity to the Municipality. The problem with that action is that it would have devastating consequences, not so much for the Municipality as for the consumers in the Emfuleni district to which the Municipality on – sells the electricity.

[6]. Accordingly, when Eskom threatened to cut off the supply of electricity to the Municipality, various consumers, including the applicants in this application, approached this Court, on an urgent basis, for an interdict to preclude Eskom from doing so. That application was heard by a Full Court of this division on the 15th and the 16th October 2018.

[7]. The interdict was sought in Part A of the application. The Full Court heard and determined Part A of the application. In Part B, which is still to be determined, the applicants seek an order reviewing and setting aside Eskom's decision to interrupt electricity supply to the Municipality.

[8]. The Full Court faced a difficult task. On the one hand, it had innocent and paying consumers who would suffer catastrophic consequences if the electricity was cut off. On the other hand, it had Eskom which had a legitimate complaint about being required to supply substantial quantities of electricity in circumstances where it was not being paid. In the middle was the Municipality, which was seemingly the cause of the whole problem.

[9]. The Full Court accordingly fashioned a just and equitable remedy, relying on its power to do so, as conferred by section 172 of the Constitution. The Court gave Eskom and the Municipality six months to resolve their dispute, and established an interim regime that it felt was fair and equitable to all parties, and which would govern their relationships during the six – month period, while the dispute was being resolved. The interim regime fashioned by the Full Court balanced the interests of all the parties. Eskom was interdicted from cutting off the supply of electricity to the Municipality. The applicants were required to continue paying for their electricity, but were authorised to pay the Eskom tariff directly to Eskom, and the Municipality's mark – up to the Municipality. The Municipality, in turn, was interdicted from interrupting services to the applicants, provided the applicants honoured their aforesaid payment obligations.

[10]. Importantly, this interim regime was established, and the ‘direct payment' regime authorised, despite the Municipality's protests inter alia to the effect that the Court did not have the power to authorise payment direct to Eskom, that direct payment contravened the relevant

licences and the applicable regulations, and that the Municipality would be severely prejudiced by such an arrangement. The Municipality

raised these same arguments in these applications.

[11]. The applicants then proceeded to act in accordance with the Full Court's Order. They established what Eskom's share was, and what remained due to the Municipality, and duly paid those amounts to Eskom and Emfuleni respectively, in compliance with the payment regime authorised by the Full Court’s Order.

[12]. Despite the fact that the applicants are complying with their obligations under the Full Court's Order, and therefore that, as far as they understand matters, the Municipality is interdicted from interrupting services to them, the Municipality, during January 2019, sent them letters stating that it intended to cut off their electricity supply.

[13]. The Municipality contends that the direct payment regime has not yet come into operation, and therefore that applicants remain bound by the payment obligations they had prior to the direct payment regime authorised by the Full Court. Those obligations were to pay all amounts to the Municipality. Since the applicants are not adhering to that obligation, so the argument goes on behalf of the Municipality, it is not bound by, or is entitled to avoid, the interdict.

[14]. The order handed down by the Full Court on the 8th of November 2018 was carefully crafted under the powers conferred on it by section 172(i)(b) of the Constitution to ‘make any order that is just and equitable’.

[15]. It was submitted by Mr McNally, Counsel for the first applicant that, in interpreting the Full Court's Order, I am bound by the principles set out in Firestone SA (Pty) Ltd v Gentiruco AG, 1977 (4) SA 298 A at 304 D-H, where Trollip JA stated:

‘The basic principles applicable to construing documents also apply to the construction of a court's judgment or order: the court's intention is to be ascertained from the language of the judgment and order as construed according to the usual, well – known rules ... Thus, as in the case of a document, the judgment or order and the court's reasons for giving it must be read as a whole in order to ascertain its intention.’

[16]. I find myself in agreement with these submissions. In terms of the Order, the Full Court essentially established an interim regime in terms of which Eskom, the Municipality, the Premier and NERSA (the regulator) would be given an opportunity to resolve the dispute among them. The Court set a period of six months within which the dispute should be resolved. The Full Court held that this period was reasonable and would be appropriate given the background of the matter. It then established a payment regime that would operate on an interim basis, during the period that the government entities were seeking to resolve their dispute.

[17]. The regime established by the Full Court was specifically directed at balancing the interests of all the parties while the government entities did what they had a constitutional responsibility to do, namely to resolve their dispute. The Full Court appreciated, and the Order was framed in a manner that recognised, that the applicants were wholly innocent bystanders, who should not be prejudiced by the failure of the organs of state to find a solution to their long –running dispute.

[18]. In order to achieve this aim, and to go as far as it could, to oblige the state organs to act responsibly, without infringing upon the separation of powers doctrine, the Court made its Order. The dispute between the state organs was referred back to them, for them to seek to resolve matters within a period of six months. In the interim, and while the attempt at resolution was being pursued, it established a regime that would protect the applicants during that process. To this end, it interdicted Eskom from cutting off the supply of electricity to the Municipality, notwithstanding the vast amounts that the Municipality owed Eskom and was not paying. In recognition of the parlous position that Eskom, however, found itself in, the Full Court ordered the applicants to pay Eskom directly for the electricity consumed by them (thereby bypassing the Municipality). It then interdicted the Municipality from cutting off the supply of electricity to the applicants, provided that they complied with the payment obligations established under the Order, that is their obligations to pay Eskom directly.

[19]. The interdict against the Municipality falls under paragraph 174(d) of the Order, and therefore, as stated at the commencement of that paragraph, operates ‘for as long as the interim interdict ordered above applies’. The ‘interdict ordered above’ was the interdict precluding Eskom from cutting off the supply of electricity to the Municipality, which interdict was clearly to operate for the duration of the period during which the government entities were required to attempt to resolve their dispute. That period was expressly stated to be a period of six months starting from the dated of the Order.

[20]. Accordingly, the interdict against the Municipality would expressly operate over the same period, i e from the date of the Order being handed down (the 8th November 2018) until the end of the six – month period, or the date on which the dispute was resolved (whichever was the earlier).

[21]. As such, the Municipality was immediately (from the 8th of November 2018), and is currently, interdicted from interrupting the supply of electricity to the applicants. The period of operation

of the interdict is from the 8th November 2018 until the dispute is resolved, or, if it is not resolved within the period of six months, until the determination of Part B of the main application. The interdict does not, however, apply if the applicants do not comply with their payment obligations

as set out in [the Full Court's Order.

[22]. The payment obligations set out in the Full Court's Order are those that require the applicants to make payment in accordance with the provisions of paragraph 174(d)(i)(aa) and (bb), i e directly to Eskom.

[23]. It is the case of the Municipality that the applicants' right to pay Eskom directly is ‘subject to appropriate oversight by NERSA’. NERSA is not providing appropriate oversight. Therefore, the applicants' right to pay Eskom directly has not yet come into being, which means, so Emfuleni contends, that the applicants remain obliged to pay the Municipality, which they are not doing. This then entitles the Municipality to interrupt the supply of electricity to the applicants, because the applicants are not complying with their payment obligations as set out in the Full Court's Order.

[24]. There is no merit in this contention by the Municipality. I am in agreement with the submissions on behalf of the applicants that the Municipality’s reasoning is flawed.

[25]. The payment obligations as set out in the Full Court's Order are the obligations on each of the applicants to pay the Eskom tariff directly to Eskom, and the balance to the Municipality. Such obligations apply, by virtue of the prefacing words (‘for as long as the interim interdict ordered above applies’), immediately upon the coming into existence of the interim interdict in paragraph 174(c) of the Order, which is immediately upon the handing down of the Order (i.e. 8 November 2018).

[26]. It is clear from the wording of the Order itself that the direct payment regime commences immediately upon the Order being handed down. That is the start of the six – month period granted for the government entities to resolve their dispute, and the direct payment regime is to operate over that period.

[27]. When read in the context of the judgment as a whole, the Order was intended to operate immediately. The government entities had only six months within which to resolve their dispute, and it is clear that that period of six months commenced immediately upon the handing down of the Order. In my view, it is equally clear that the direct payment regime was to operate co – extensively with the interdict against Eskom, which expressly operates ‘pending resolution of the aforesaid dispute within six months of the date of this order'.

[28]. Furthermore, in the context of the Order, the words ‘subject to appropriate oversight by NERSA', do not create a condition precedent to the coming into effect of the authorisation to the applicants to pay Eskom directly. In my judgment, such an interpretation would be entirely destructive of the whole mechanism for the resolution of the dispute, which was carefully and deliberately established by the Order.

[29]. The ‘appropriate oversight' by NERSA is to be ‘in the discharge of its statutory obligations pursuant to the judgment of this Court’. NERSA's oversight is not a requirement for the coming into effect of the direct payment regime. On the contrary, the reference to NERSA's oversight is no more than a recordal of the fact that NERSA has certain statutory powers which must be respected.

[30]. I am in agreement with the submission on behalf of the applicants that the ‘oversight' provision was for the benefit of the court and the applicants, and would be available during the interim period (if and when needed).

[31]. Therefore, in my judgment, there is no basis on which the Municipality can avoid the interdict against it. It is bound by the interdict, and is thus precluded from interrupting the supply of electricity to the applicants, while they are complying with their direct payment obligations.

[32]. Emfuleni furthermore contends that the Full Court's Order is suspended as a result of its application for leave to appeal. On that basis, the Muncipality argues that it can avoid the interdict because the applicants should not be paying Eskom directly and they are, therefore, in breach of their payment obligations.

[33]. The Municipality's argument in this regard is unsustainable. The Full Court's Order is manifestly an interim order. Section 18(2) of the Superior Court's Act, 10 of 2013, reads as follows:

‘(2) Subject to sub-section (3), unless the court under exceptional circumstances orders otherwise, 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.’

[34]. An interim order, that does not have the effect of a final judgment, is not suspended by an application for leave to appeal.

[35]. The Municipality contends that the Full Court's Order is an order having final effect. There is however no basis for such contention, which is in any event belied by the plain and express wording of the order itself. The Order quite clearly governs only the period during which the government entities are required to attempt to resolve their dispute. The direct payment regime is co –extensive with the interim interdict. On any interpretation of the Order of the Full Court, its directions are of an interim nature and are not final in effect.

[36]. In my judgment, therefore, the order is not suspended by the Municipality’s application for leave to appeal.

[37]. In the circumstances, I am of the view that the first to fourth applicants are entitled to the relief sought in their notices of motion.

Costs

[38]. The general rule in matters of costs is that the successful party should be given his costs, and this rule should not be departed from except where there are good grounds for doing so, such as misconduct on the part of the successful party or other exceptional circumstances. See: Myers v Abramson, 1951(3) SA 438 (C) at 455.

[39]. I can think of no reason why I should deviate from this general rule.

[40]. It has been submitted on behalf of the applicants that I should grant punitive cost orders against the Municipality and its Municipal Manager, Mr D O Nkoane. I should do so, so the applicants contend, to demonstrate my displeasure at the manner in which the Municipality has conducted itself in relation to the Order of the Full Court.

[41]. I do not believe that a case has been made out for such orders. I therefore intend granting an ordinary cost order, which I believe would be just and equitable.

[42]. I therefore intend awarding cost in favour of the applicants and the second respondent against the first respondent only.

Order

Accordingly, I make the following order:-

1. The applications are enrolled as urgent applications, and the forms prescribed by the Rules of this Court are dispensed with and the applications are heard as ones of urgency under Rule 6(12) of the Uniform Rules of Court.

2. The Municipal Manager of the Emfuleni Municipality, Mr D O Nkoane, be and is joined in these proceedings in both his official and his personal capacities, as the fifth and sixth respondent respectively.

3. It is declared that the payment regime set out in paragraph (d)(i) of the order of the Full Court under case number: 27317/2018, handed down on the 8th of November 2018 (‘the Full Court's Order’), came into effect from the 8th of November 2018.

4. It is declared that the Full Court’s Order is an interlocutory order not having final effect, and that the operation of the Full Court’s Order is not suspended by the service by the Emfuleni Municipality of the application for leave to appeal, dated the 30th November 2018, against the judgment and order of the Full Court (‘the application for leave to appeal’).

5. It is declared that, in the circumstances, the Emfuleni Municipality has no legal basis on which to interrupt the supply of electricity to the applicants as threatened in the letters from the attorneys of the Emfuleni Municipality dated the 11th January 2019 and the 18th January 2019 (but only sent on the 20th January 2019).

6. It is declared that,b should Emfuleni interrupt the supply of electricity to the applicants in accordance with their correspondence to the applicants during January 2019, Emfuleni’s conduct would amount to contempt of the Order of the Full Court dated the 8th of November 2018.

7. Emfuleni Municipality be and is hereby interdicted from acting on its threat to interrupt the supply of electricity to the applicants.

8. The first respondent (‘Emfuleni Municipality’) shall pay the costs of these urgent applications of the first, second, third and fourth applicants, including the costs consequent upon the employment of two Counsel, where applicable.

9. The first respondent (‘Emfuleni Municipality’) shall pay the costs of these urgent applications of the first respondent (‘Eskom’).

_________________________________

L R ADAMS

Judge of the High Court

Gauteng Local Division, Johannesburg

.

HEARD ON: 5th February 2019 JUDGMENT DATE: FOR THE FIRST APPLICANT: 6th February 2019 Advocate J P V McNally, together with Advocate B Manentsa INSTRUCTED BY: Webber Wentzel FOR THE SECOND TO FOURTH APPLICANTS: Adv Max Du Plessis, together with Advocate Sarah Pudifin – Jones INSTRUCTED BY: Joubert Galpin Searle Incorporated FOR THE FIRST, FIFTH AND SIXTH RESPONDENTS: Adv S Langa INSTRUCTED BY: Seleka Attorneys FOR THE SECOND RESPONDENT: Advocate … INSTRUCTED BY: Gildenhuys Malatji Incorporated