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DRAFT 4

“IN THE HIGH COURT OF SOUTH AFRICA”

NORTH WEST DIVISION, MAHIKENG

CIV APP MAG 04/2017

REPORTABLE

In the matter between:-

DITSOBOTLA LOCAL MUNICIPALITY                                                                Appellant

And

IGA DADA PROPERTIES                                                                                 Respondent

JUDGMENT

GUTTA J.

A. INTRODUCTION

[1] This is an appeal against the whole judgment and order of Magistrate A Van Rooyen of the District Court, Lichtenburg handed down on the 2 May 2017 wherein she confirmed the Rule Nisi granted on the 20 October 2016 in terms of which the Court granted an urgent application for spoliation, directing the respondent to re-connect the electricity supply at 33 Nelson Mandela Drive (Dada Sentrum) Lichtenburg with immediate effect.

[2] The respondent did not oppose the appeal.

 

B. FACTS

[3] The facts briefly which are common cause facts on the affidavits filed in the District Court are the following:-

3.1 The respondent is the registered owner of the property and the building  situated at 33 Nelson Mandela Drive, Lichtenburg in the North West Province, known as Dada Sentrum (‘the property’).

3.2 The respondent and its tenants enjoy the appellant’s services, namely electricity, water and basic services which are associated with the property.

3.3 There are arrears on the property for basic services provided by the appellant such as electricity and water in the amount of R1 078, 751.66 (one million, seventy eight thousand, seven hundred, fifty one rand and sixty six cents).

3.4 During February 2016 the appellant and the respondent concluded a written repayment agreement for payment of the amount due to the appellant by the respondent for services. Payment was not forthcoming in terms of the agreement. On 7 October 2016, the respondent received a notice of disconnection. Notwithstanding, the respondent failed to pay the arrears in terms of the agreement.

3.5 A further notice of disconnection was sent to the respondent on 13 October 2016, and the respondent failed to make payment in terms of the agreement. The appellant disconnected the supply of electricity to the respondent on the 20 October 2016.

3.6 Pursuant to the disconnection, the respondent launched the urgent application for spoliation in the District Court, Lichtenburg on 20 October.  The application was served on the appellant at 14h27 and the respondent set the matter down for hearing at 15h30 on 20 October 2016.

3.7 The Court a quo granted the interim order with a Rule Nisi for the reconnection of the supply of electricity. On the return date, the Court directed the hearing of oral evidence. After hearing oral evidence, the Court a quo confirmed the Rule Nisi.

3.8 The respondent failed to disclose the repayment agreement concluded between the appellant and the respondent to the Court in the urgent application.

 

C. GROUNDS OF APPPEAL

[4] The appellant relies on the following grounds of appeal:

“4.1 The Learned Magistrate erred in law by failing to discharge the Rule Nisi granted on 20 October 2016 in favour of the respondent on the basis that the respondent failed to disclose material facts that were relevant to the application.

4.2 The Learned Magistrate erred in law and in fact by confirming the Rule Nisi even after the respondent’s witness confirmed, in his testimony that the respondent failed to honour a previous payment arrangement.

4.3 The Learned Magistrate erred in law and in fact by holding that the agreement between the parties could only have been validated after it was made an order of court and that parties were then obliged to have approached court on that basis.

4.4 The Learned Magistrate misdirected herself in the determination of the issues before her.

4.5 The Learned Magistrate misdirected herself by failing to appreciate the provisions of the legislation and authorities placed before her.

4.6 The Learned Magistrate misdirected herself by failing to appreciate the fact that the agreement between the parties made it abundantly clear that the respondent was to make payments of R 120 000.00 monthly to the appellant .

4.7 The Learned Magistrate misdirected herself in failing to dismiss or discharge the Rule Nisi with cost”.

 

D. APPELLANT’S SUBMISSION

[5] The appellant submitted inter alia the following:-

5.1 That the respondent failed to provide the court with a full and frank disclosure of the material facts relevant to the application in that it failed to disclose that it had previously entered into a repayment plan agreement before entering into another payment agreement on the 24 February 2016.

5.2 The discontinuance of the electricity supply to the property was solely as a result of the respondent’s failure to comply with the repayment agreement entered into between the appellant and the respondent.

5.3 Various notices were sent to the respondent informing it of a pending discontinuance of the electricity supply if its account is not settled and the agreement adhered to. The appellant refused to entertain the prospect of entering into another payment plan/agreement with the respondent as a result of the respondent’s prior conduct, namely the respondent failed to honour such payment plan agreements.

5.4 During cross-examination of the respondent’s witness, Mr Mohammed Zahir Dada (Mr Dada), he conceded that the respondent failed to honour the agreement it entered into with the appellant.

5.5 The amount shown on the list compiled by the respondent and on the appellant’s records show that not at any one time did the respondent make payments of the amount that was agreed to in the agreement. The appellant discontinued the electricity supply to the property as the respondent failed to honour the agreement.

5.6 The agreement entered into by the parties was a valid and legally binding agreement. It was entered into by the parties with the same intention. The validity of the agreement and its enforceability is not dependent upon it being made an order of court.

E. LEGISLATIVE FRAMEWORK

[6] The Municipal Systems Act 32 of 2000 gives municipalities the power to recovers monies owed to it for services used and rendered to the public.

a) Section 5(1)(g) reads:-

“members of the local community have the right to have access to municipal services  which the municipality provides, provided the duties in subsection (2)(b) are complied with.”

b) Section 5(2)(b) reads:

“members of the community have the duty to pay promptly services and fees, surcharges on fees, rates on property and other taxes, levies and duties imposed by the municipality.”

[7] Section 21(5) of the Electricity Regulation Act (”ERA”) states that “a licensee (municipality) may not reduce or terminate the supply of electricity to a customer, unless the customer has failed to honor, or refuses to enter into, an agreement for the supply of electricity.” The respondent failed to honour the agreement.

[8] The appellants adopted a Credit Control and Debt Collection policy in terms of Section 96 and 97 of the Municipal System Act, 2000 and the Ditsobotla Local Municipality Credit Control and Debt Collection Bylaws. The appellant’s Credit Control and Debt Collection Policy(the Policy) reads:-

a) Clause 3.1: “Current levies not paid by the indicated due date are in arrears and all debtors with arrears are subject to Credit Control and Debt Collection action”.

b) Clause 3.2: “The right of access to services, and consumption thereof, can only be exercised by debtors who are not in arrears on their municipal accounts or who have arranged to pay their arrears in terms of this Policy.”

c) Clause 4 of the Policy gives direction on how to demand payment. Under clause 4.1 a notice must be given and that “the reminder clearly states that a period of 7 days is allowed for payment or arrangement for payment, in the absence of which, service delivery to the property will be restricted.” In the absence of a reaction to the 7 day reminder, the electricity supply is discontinued together with a notice containing the reason for the discontinuance.

 

F. FAILURE TO HONOUR AN AGREEMENT

[9] As stated supra, there was an arrears on the payment of basic services on respondents’ property in the amount of R1 078 751.66. Pursuant thereto, the respondent and appellant concluded a debt repayment settlement agreement. The terms of the agreement concluded in February 2016 state, inter alia that:-

a) The debtor is the respondent, IGA Dada Property;

b) The debt stems from unpaid consumables which to-date remains unpaid;

c) The respondent agrees that, it is indebted to the appellant in the amount of R1 727 730.28 and undertakes to pay the debt as follows:-

“(i) a payment of R120 000.00 shall be made on a monthly basis to the appellant;

(ii) of that R120 000.00 the respondent’s tenants shall make a direct payment to the appellant in the amount of R 98 831.18 and the respondent shall make payment of R21 168.82; and

(iii) should the tenants fail to honour the payment agreement concluded between the respondent and its tenant, then the respondent would be liable for payment of the entire R 120 000.00 which was to be paid by the tentant”.

d) Should the respondent fail to pay any instalment in full on or before the due date, the full balance of the debt will immediately become due and payable within a seven days’ notice including cutting off of services without notice and the appellant shall elect to approach a competent Court for making the agreement an order of Court.

[10] The respondent in the court a quo submitted that its sole responsibility was the payment of the sum of R21 168.82 and not the entire R120 000.00 because the tenants were responsible for the payment of the R98 831.18. This submission is flawed for the following reasons:

10.1 The agreement expressly provides that the respondent will be liable for payment of R120 000.00 should the tenants fail to pay the amount of R98 931.18;

10.2 The respondent represented by Mr Dada conceded that the respondent bore the responsibility to pay the account.

10.3 Mr Dada further conceded during cross-examination that:

a) an amount of R120 000.00 was to be paid to the municipality every month;

b) payments made by him did not amount to the sum of R120 000.00; and

d) the respondent bore the sole responsibility to ensure that the account is paid with the respondent.

[11] The facts in Rademan v Moqhaka Municipality[1] are apasite and bear repetition. Ms Rademan did not pay her full municipal account and only paid the electricity portion because she alleged that the municipality provided a poor service. The municipality threatened to disconnect her electricity if she did not pay her full account. Notwithstanding, Ms Rademan failed to pay and the municipality disconnected her electricity. Ms Rademan, relying on spoliation, launched an application in the Magistrate Court to have the electricity restored. The Magistrate granted an order in her favour and ordered the electricity supply to be restored. On appeal to the High Court, the Court held that the municipality did not require a court order to terminate the supply of electricity, as Ms Rademan was indebted to the municipality. The Court further held that the fact that she was not in arrears with her electricity portion of the account did not preclude the municipality from disconnecting her electricity.

[12] On further appeal to the Supreme Court of Appeal, the SCA considered Section 102 of the Municipal Systems Act 32 of 2000 that provides that a municipality may consolidate accounts. The Court held that consolidation means consolidate any separate accounts of persons liable for payments to the municipality and that if Ms Rademan’s accounts are consolidated then she was in arrears and the municipality was justified in disconnecting her electricity. The SCA therefore dismissed the appeal.

[13] The matter came before the Constitutional Court. The Constitutional Court considered the following statutes:

a) Section 156(2) of the Constitution of the Republic of South Africa, 1996 which provided that a municipality may make bylaws for effective administration.

b) Section 102 of the Municipal Systems Act, 32 of 2000 that allows for the consolidation of accounts.

c) Section 25(1) of the municipalities’ bylaws that provide that a municipality may restrict or disconnect the supply of water and electricity or discontinue any other service to any premises wherever a user of any service fails to make payment on the due date or fails to make acceptable arrangements for the repayment of any amounts for services, rates or taxes.

d) Section 21(5) of the Electricity Regulation Act, 2006.

[14] The Court in Rademan v Moqhaka Municipality[2] had the following to say regarding the invocation of section 21(5)(b) of ERA :

“Section 21(5)(b) contemplates two scenarios. The one scenario is where there is an agreement between a resident and the municipality as to the supply of electricity by the municipality to the customer and the customer refuses to honour the agreement. The other scenario is where there is no agreement for the supply of electricity and the customer refuses to enter into an agreement. In either case the municipality would be entitled to cut off the electricity supply to the resident or customer if it was already supplying electricity to the customer.”

[15] The Constitutional Court in Rademan supra, found that Ms Rademan failed to settle her account as she withheld payment for rates. Although she paid her electricity account when consolidated, she was in arrears. Therefore, she contravened the municipality’s conditions of payment and the municipaility was entitled to disconnect her electricity. The Court in Rademan v Moqhaka Municipality held that:

“..the fact that the applicant had paid the electricity component of her account did not preclude the respondent from cutting of her electricity supply after she had failed to pay her account in full.”

[16] The facts in casu are similar in that the respondent contends that it paid its portion of the electricity while the tenants defaulted and failed to pay their portion. The respondent placed itself in the same position as the applicant in the Rademan case by failing to ensure that the entire electricity account was paid in full and not just its own component.

[17] As stated supra, the repayment agreement concluded between the appellant and the respondent expressly provides that the respondent would make payment to the appellant every month in the amount of R120 000.00.  It was further stated that these payments would be split between the respondent and its tenants and that in the event of non-payment by the tenants then the sole responsibility of payment would rest with the respondent.  The loss of income, land or stock of the tenants of the respondent cannot be attributed to the appellant because the respondent is obliged to ensure that the services are paid for, failing which services will be discontinued. The respondent failed to comply with the said terms, which fact can be gleaned from the banking statements and from Mr Dada’s concession that an amount less than R120 000.00 was paid to the appellant every month.

[18] The court in Rademan supra stated that “a municipality is obliged to collect all money that is due and payable to it, subject to the Systems Act and any other applicable legislation.” It was the appellant’s responsibility to ensure that it takes all reasonable steps to ensure that revenue due to it is collected and calculated on a monthly basis. The non-payment by debtors of their accounts has a direct negative impact on the appellant ability to deliver services to residents. Thus the appellant was entitled to take reasonable steps to collect debts due to the appellant.

[19] As the respondent failed to honour the payment agreement, the appellant was in my view entitled to disconnect the electricity supply to the respondent’s property.

 

G. THE AGREEMENT WAS NOT MADE AN ORDER OF COURT

[20] The Magistrate’s finding that “there was a prerequisite that a Court was to be approached, to make the agreement an order of Court” is misconstrued for the following reasons:

20.1 Paragraph 3 of the agreement concluded between the appellant and the respondent reads:

“Should the debtor fail to pay any instalment in full on or before the due date, the full balance of the Debt will immediately become due and payable within a seven days’ notice(working days) including cutting off of services without notice and the creditor shall elect to approach a competent Court for making this agreement an order of Court”. (own emphasis)

On a plain language interpretation of the agreement, the appellant could if the respondent failed to pay, disconnect the respondent’s electricity without giving the respondent notice. Furthermore, the Oxford dictionary[3] for the word elect is “opt for or choose to do something”. Thus in terms of paragraph 3 of the agreement the appellant had a choice whether or not it would approach a court to make the agreement an order of court. The clause does not impose a mandatory obligation on the appellant to make the agreement an order of court.

20.2 In terms of the Constitutional Court’s decision of Rademan supra, the Court found that as the respondent failed to settle her account, that she contravened the municipality’s condition of payment and that the municipality was entitled to disconnect the electricity. The municipality hence did not require a Court order before terminating the electricity supply to the property. When applying the principles expounded in Rademan supra, it is clear that the municipality was entitled in view of the respondent’s breach of the agreement, to disconnect the respondent’s electricity without applying to Court to disconnect the supply of electricity and without applying for the agreement to be made an order of Court.

 

H. FAILURE TO DISCLOSE MATERIAL FACTS

[21] It is trite law that where a party brings an ex parte application, such a party is obliged to disclose all material and relevant facts that may influence a presiding officer who will be making a decision on whether to grant orders sought or not. It is therefore of utmost importance that a full and frank disclosure by the applicant is made. In other words, where material facts are deliberately withheld or not disclosed in an ex parte application, a Court may, on that ground alone dismiss an ex parte application.

[22] In Cometal-Mometal SARL v Corlana Enterprises (Pty) Ltd[4] the Court formulated the three cardinal rules of ex parte applications thus:

“(1) in ex parte applications all material facts must be disclosed which might influence the Court in coming to a decision;

(2) the non-disclosure or suppression of facts need not be willful  or mala fide to incur the penalty of rescission (ie of the order obtained ex parte); and

(3) the Court, appraised of the true facts, has a discretion to set aside the former order or to preserve it”.

[23] In Schlesinger v Schlesinger[5] the Court stated the position as follows:

“..it appears to me that, unless there are very cogent practical reasons why an order should not be rescinded, the Court will always frown on an order obtained ex parte on incomplete information and will set it aside even if relief could be obtained on a subsequent application by the same applicant”

[24] The court in Standard Bank Ltd v Mcleans[6] stated that “absence of disclosure, one might almost say suppression of facts, would be sufficient to justify the Court in discharging the provisional order.”

[25] The urgent application was served on the appellants on less than 1hours notice. The Debt Repayment Settlement Agreement entered into by the appellant and the respondent on 24 February 2016 states that “The Creditor has previously entered into the payment agreement with the Debtor which was not honoured.” The respondent failed to disclose that it had previously concluded two repayments agreement with the appellant and that it failed to honour both agreements. The above constitutes material facts which may have influenced the Court in refusing the interim order sought on an urgent basis. The Court a quo erred by failing to take cognizance of the respondent’s non-disclosure and discharging the Rule Nisi.

 

I. ORDER

[26] In the result,

26.1 the appeal is upheld with costs;

26.2 the order of the Court a quo is set aside and substituted with the following:

(i) The Rule Nisi issued on 20 October 2016 is hereby discharged.

(ii) IGA Dada Properties is directed to pay the costs.

 

 

________________

N. GUTTA

JUDGE OF THE HIGH COURT

NORTH WEST DIVISION, MAHIKENG

 

I agree

 

 

__________________

R.D HENDRICKS

ACTING DEPUTY JUDGE PRESIDENT OF THE HIGH COURT

NORTH WEST DIVISION, MAHIKENG

 

 

APPEARANCES

DATE OF HEARING: 04 MAY 2018

DATE OF JUDGMENT: 07 JUNE 2018

ADVOCATE FOR APPELLANT: ADV CHWARO

ADV LOABILE-RANTAO

ADVOCATE FOR RESPONDENT: NO APPEARANCE

 

[1] 2013(7) BCLR 791(CC)

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