Kopanong Local Municipality v Municipal Workers Retirement Fund and Others (4689/2021) [2021] ZAFSHC 243 (18 October 2021)

IN THE HIGH COURT OF SOUTH AFRICA,

FREE STATE DIVISION, BLOEMFONTEIN

In the matter between:

KOPANONG LOCAL MUNICIPALITY Applicant

and

MUNICIPAL WORKERS RETIREMENT FUND 1st Respondent

SHERIFF OF THE HIGH COURT,

TROMPSBURG/SMITHFIELD 2nd Respondent

FIRST NATIONAL BANK 3rd Respondent

CORAM: DAFFUE, J

HEARD ON: 11 OCTOBER 2021

APPLICATION DISMISSED ON: 11 OCTOBER 2021

REASONS DELIVERED ON: 18 OCTOBER 2021

The reasons were handed down electronically by circulation to the parties’ representatives by email, and release to SAFLII. The date and time for hand-down is deemed to be 16h30 on 18 OCTOBER 2021.

REASONS

I INTRODUCTION

[1] On 11 October 2021 I heard arguments in an alleged urgent application. I dismissed the applicant’s application with costs as taxed on an attorney and client scale, inclusive of the costs of two counsel. I stated that my reasons would follow in due course. These are my reasons.

[2] The applicant in the urgent application is a Local Municipality. It is akin to a sinking and rudderless ship in the middle of the ocean. Furthermore, its proverbial fuel tank is running empty: a few drops remain which it sought to siphon with the urgent court’s assistance to its captain and crew members. The engine is kaput, broken and unable to function. It needs a major overhaul.

II THE PARTIES

[3] The Kopanong Local Municipality is the applicant, herein represented by Adv LA Roux, instructed by Mhlokonya Attorneys.

[4] The first respondent is the Municipal Workers’ Retirement Fund represented by Advv P Van Der Berg SC and H Drake, instructed by Shepstone & Wyle, c/a McIntyre & Van Der Post. The sheriff and First National Bank are cited as second and third respondents respectively, but they have not filed any papers and were not represented before me.

III THE ISSUES

[5] The following issues needed to be addressed:

5.1 The alleged urgency of the application;

5.2 Applicant’s right to have execution steps based upon two writs of execution issued under case numbers: 3345/2017 and 5762/2019 stayed pending the determination of an application in terms of s 152(1) of the Local Government: Municipal Finance Management Act (“MFMA”)[1] issued under case number 4667/2021. It also seeks a final order in terms whereof the funds in its bank account held with FNB and attached in terms of the aforesaid writs be released immediately.

IV THE ALLEGED URGENCY

[6] Numerous factors and undisputed evidence played a role in adjudicating the applicant’s submission that the application was urgent. In order to appreciate the applicant’s stubbornness and its decision to sail a sinking ship into deeper and more troublesome waters, I shall briefly state some of the common cause facts:

6.1 The latest judgment granted against the applicant is dated 19 August 2021. In that judgment Hefer AJ dismissed the applicant’s application with costs and in the process discharged an interim order granted on 21 May 2021. The applicant in that application was unsuccessful in seeking the stay of execution of the two writs of execution mentioned in paragraph 5.2 supra. The writs were issued for the amounts of R6 505 277.04 plus interest and R19 908 149,91 plus interest respectively.

6.2 It is obvious that the applicant knew on the 19th of August 2021 that its account would remain frozen due to the aforesaid attachments. It did virtually nothing for more than 7 weeks. On 8 September 2021, more than two weeks since the court order, it tendered payment of R2 million towards the aforesaid judgments on condition that execution steps be stayed. This offer was rejected on 15 September 2021. Upon receipt of a payment plan, first respondent’s attorneys made it clear on 28 September 2021 that first respondent could not agree to down-payments, inter alia because of the peremptory provisions of s 13A of the Pension Funds Act and in so far as s 37 of that Act stipulates that non-payment of contributions is a criminal offence[2]. On 7 October 2021 its attorneys requested first respondent’s Bloemfontein attorneys to “consider uplifting the hold on the Municipality’s First National Bank as soon as possible.”[3]

6.3 First respondent’s attorneys were served with the letter at 09h46 on Friday, 8 October 2021. They were requested to respond before 15h00 that day.

6.4 On 8 October 2021 an application was issued on behalf of the applicant under case number 4667/2021 for relief in accordance with s 152(1) of the MFMA. The particular file was placed before me. By the time I heard the present application, which was issued under case number 4689/2021 on Monday morning 11 October 2021, there was no indication that the former application had been served. It may be mentioned at this stage that a number of 35 respondents were cited in application 4667/2021 inclusive of the MEC and the National Minister of Cooperative Governance and Traditional Affairs (“COGTA”).

6.5 Although the present application was issued by the High Court on Monday 11 October 2021, indicating that it would be heard at 14h00 that Monday, it is apparent that the notice of motion and founding affidavit were either delivered or emailed to first respondent’s attorneys on Friday afternoon as this allowed first respondent’s Johannesburg counsel to work over the weekend in order to enable them to draft an answering affidavit and short heads of argument. These were eventually served and filed with the court just before 12h00. I received the documents from the general office just before 13h00.

6.6 The parties, in cooperation with my secretary, arranged a virtual hearing. I requested Mr Roux from the onset whether the applicant intended to file a replying affidavit, but he stated that he had instructions to argue the matter on the papers as presented to the court, therefore forfeiting the right to reply.

6.7 Having given the aforesaid background as to how it came about that the matter was heard by me, it is apposite to refer to the history of the dispute. In 2016 the applicant started to fall behind and/or refused to pay its employees’ monthly retirement fund contributions in breach of the Pension Funds Act provisions. Since then it continued with non-payment of the contributions to the Municipal Workers’ Retirement Fund, cited herein as the first respondent.

6.8 The first respondent obtained judgment, issued a writ and arranged an auction to take place of the applicant’s movable property. The applicant approached the High Court on 7 November 2018 on an urgent basis with less than 2 hours’ notice, inter alia to obtain the setting aside of the sale in execution. It was successful. The judgment was set aside the next year by the full court under appeal number A67/2019 in a judgment delivered on 19 September 2019[4]. I, as the scribe of the unanimous judgment, particularly criticised the manner in which the senior counsel instructed by the applicant persuaded the judge in the urgent court to make the orders which were eventually made. I deem it unnecessary to quote from the judgment which speaks for itself. At that stage only the first writ of execution issued under case no 3345/2017 was in issue. The facts of this case indicate clearly that the applicant’s debt towards the first respondent has increased tremendously. In fact, it appears from the applicant’s s 152(1) application that the admitted claim has increased to R37 796 648,11.[5] The same document reflects the applicant’s indebtedness to creditors in an amount of R553 297 588,14, to wit in excess of half a billion rand.

6.9 The applicant has shown a total defiance for court orders and legislation. It does not comply with its constitutional obligations and it continues to transgress the Pension Funds Act and the MFMA, committing criminal offences every month. Furthermore, it fails to settle its indebtedness by paying the amounts as per the writs of execution. The history shows that it received millions of rands over the past few years. I accept that some amounts were earmarked for specific projects, but as first respondent has shown on the applicant’s own version, it elected to pay several other creditors with funds it received during July 2021, but failed to pay a cent towards settlement of the first respondent’s debt. The applicant received about R32 million in July 2021 as part of its equitable share, elected not to pay the first respondent, but proceeded to pay other creditors who have not even issued writs of execution against it.[6]

[7] Mr Roux referred me to the judgment of The Freedom Front Plus v The President of the Republic of South Africa and Others[7] in support of his view that I should not dismiss the application in so far as the applicant created its own urgency. I accept that a court would be willing to regard a matter as urgent where the delay in securing a definitive ruling would prejudice the public interest or the ends of justice and good governance. Notwithstanding his submission and the fact that dismissal of the application may cause harm to employees and even residents, I am not persuaded that the applicant’s inaction should be condoned and orders granted as requested.

V THE MERITS

[8] The applicant was advised more than two years ago in the judgment of the full bench of this division between the same parties, referred to supra, how it should go about in order to deal with its financial dilemma. Then, and also now, it is quite clear that the applicant would have been held to be commercially insolvent if it was a company. There is no doubt that it cannot fulfil its constitutional obligations towards its residents. It cannot even pay Bloemwater, the service provider that provides water to the various towns within its jurisdiction. The outstanding amount due to this important creditor is R468 321 438,31.[8]

[9] Rule 45A, on which reliance is placed, cannot assist the applicant as I have already found in the aforesaid judgment of the full bench. Judgments have been procured and granted and there is no application for rescission of the judgments. In fact, it is common cause that the debts are admitted.

[10] The provincial and national governments must have been aware of the applicant’s financial predicament and lack of service delivery over a period of at least five years, but ex facie the papers no finger was lifted to assist the ship from sinking. The captain and crew members of the ship are still on board, but their inability to steer it in an appropriate direction is evident.

[11] The applicant has failed to make out a case for an interim interdict, not to speak of a final interdict. I am not prepared to allow a situation where the applicant continues to commit a criminal offence. The moment I release the attached funds in the applicant’s bank account, I shall put the court’s stamp of approval on illegal conduct. That I am not prepared to do. In view of the judgment of the full bench and what I have said already herein, I do not deem it necessary to deal with each of the requisites for interim or final interdicts.

[12] The purpose of an application in terms of s 152(1) is to obtain temporary reprieve, to wit a stay of execution of a period of 90 days. The applicant has not complied with the requisites of the section in so far as no notice was given to the Cabinet Minister responsible for Finance and organised local government as defined in the MFMA. The so-called “Financing Strategy” attached to the founding affidavit in that application is not dated and when the document is considered in context, it appears to be out-dated. No data or other information for the 2020/2021 financial year is set out and the latest audit report referred to is for the 2018/2019 financial year. There is no hope of a restoration of the applicant’s financial position in the foreseeable future, unless it is miraculously saved by National Treasury. No facts point in that direction. There is no indication when the s 152(1) application will eventually be heard. Leave is sought in the present application not only for execution steps to be stayed pending finalisation of that application, but more importantly, an order that all funds in the bank account of the applicant be released immediately, this being a request for final and not interim relief.

[13] I have not dealt with all possible reasons why the applicant should not be assisted, bearing in mind that I dealt with the matter on the urgent roll and the applicant also caused me to work over a weekend in order to afford it a hearing.

VI CONCLUSION

[14] Save for the aspect mentioned in paragraph 13 supra, I confirm that this concludes my reasoning in dismissing the applicant’s application on the basis as set out in paragraph 1 supra.

J P DAFFUE, J

On behalf of Applicant : Adv LA Roux

Instructed by

: Mhlokonya Attorneys

Bloemfontein

On behalf of 1st Respondent : Advv P Van Der Berg SC & H Drake

Instructed by : Shepstone & Wyle

c/a McIntyre & Van Der Post

[1] Act 56 of 2003

[2] Act 24 of 1956 and the letters attached to the answering affidavit as NM9, NM10 & NM12

[3] Annexure FA1 to the founding affidavit (the reference is to the bank account) [4] Municipal Workers’ Retirement Fund v Kopanong Local Municipality (A67/2019) [2019] ZAFSHC 159 (19 September 2019) [5] Annexure F4 attached to the founding affidavit in application 4667/2021

[3] Annexure FA1 to the founding affidavit (the reference is to the bank account)

[4] Municipal Workers’ Retirement Fund v Kopanong Local Municipality (A67/2019) [2019] ZAFSHC 159 (19 September 2019)

[5] Annexure F4 attached to the founding affidavit in application 4667/2021

[6] Answering affidavit paras 35 & 36

[7] [ 2020] 3 ALL SA 762 (GJ) at paras 22 – 30

[8] Ibid