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IN THE NORTH WEST HIGH COURT, MAFIKENG 

CASE NO:  UM 55/2018

In the matter between:

MAKGOSI CONSULTING CC                                          Applicant

and

THE RUSTENBURG LOCAL MUNICIPALITY              Respondent

DATE OF HEARING                                                           :           08 MAY 2018

DATE OF REQUESTING FOR REASONS        :           18 JUNE 2018

DATE OF REASONS FOR JUDGMENT            :        07 SEPTEMBER 2018

COUNSEL FOR THE PLAINTIFF                         :           ADV. ELS

COUNSEL FOR THE DEFENDANT                   :           ADV. ALLI

REASONS FOR JUDGMENT

HENDRICKS J

Introduction

[1]        On the 08^th May 2018 this Court granted an order in the following terms:

“1.     THAT:        This application be heard as an urgent application in

terms of the provisions of Rule 6(12) of the Uniform Rules of Court and that the necessary condonation be granted to the Applicant in respect of the non-compliance with the prescribed time limits, forms and service;

2.  THAT:          The respondent be and is hereby interdicted from implementing the cancellation of the electricity agreement (Bid No. RLM/BTO/069/20 15/16) and/or the water agreement (Bid No. RLM/BTO/06 1/2015/16), pending the final determination of an action to be instituted by the applicant against the Responded within 14(fourteen) days from the date of this application, in which action the Applicant will, inter alia, dispute the validity of the alleged cancellation of the aforesaid agreements;

3. THAT:           The costs of this application be costs in the action to be Instituted by the Applicant;

4. THAT:           In the event that the Applicant fails to institute action within Fourteen days from the date of this application, the order shall lapse and the Applicant shall in such an event be liable for the costs of this application.”

In a letter dated 18^th June 2018 received by the Registrar on 19^th June 2018 a request for reasons for judgment was made. This letter eventually found its way to my chambers after a long delay. The delay is regrettable. Be that as it may, here follows the reasons for the order granted.

Background

[2]        The Rustenburg Local Municipality (respondent) awarded two separate tenders to Mokgosi Consulting CC (applicant) to assist in implementing respondent’s credit control measures relating to water and electricity supply to customers of the respondent who fail to pay their accounts for water and electricity. Two service level agreements were subsequently concluded between the applicant and the respondent. Both these agreements commenced on the 01^st day of June 2016. The duration of both agreements is for a period of three (3) years until the 31^st of May 2019.

[3]        On Friday the 13^th April 2018, the respondent delivered a cancellation letter to the applicant, with the effective date of the thirty (30) day period from date of the receipt of the letter. Thus, the effective date of cancellation would be 13^th May 2018. The applicant launched this application on an urgent basis set down for the 08^th day of May 2018 in which it prays for interdictory relief against the respondent. It prays that the respondent be interdicted from implementing the cancellation of both agreements pending the final determination of an action to be instituted by the applicant against the respondent within fourteen (14) days from date of the application, in which action the applicant will inter alia, dispute the validity of the cancellation of the agreements. Coupled with this is also an application for costs and a paragraph stating that in the event that applicants fails to institute action within fourteen (14) days from the date of this application,  the order shall lapse and the applicant shall in such an event, be liable for the costs of this application.

[4]        Clause 4.1 of these agreements ends with the following sentence:

 “As from the 01^st June 2016 any party has the right to terminate this agreement for any reason.”

The termination letter states:

“1. The Rustenburg Local Municipality ("the Municipality") is currently engaged in an assessment of - the performances of certain service providers with which it contracts.

2. To this extent, Makgosi's performance under Service Level Agreements concluded between itself and the Municipality ("the Agreements") has come under review, for which review provision is made under clause 4.1 of the Agreements.

3.  The Agreements consist of:

3.1     the agreement in respect of providing revenue Enhancement Credit Control services in respect of electricity meters, as outlined under bid number RLM/BTO/069/2015/16 ("the Electricity Agreement"); and

3.2     the agreement in respect of providing revenue Enhancement Credit Control services in respect of water meters, as outlined underbid number RLM/BTO/061/2015/16 ("the Water Agreement").

4.    Preliminary findings indicate that Makgosi has not tendered proper performance in terms of the Agreements. The following examples (which are not exhaustive) bear relevance:

4.1     Makgosi has failed to deliver Notices to all defaulting customers whose accounts were up to 30 days in arrears;

4.2     Makgosi has failed to disconnect water meters of certain businesses whose. Accounts were in arrears for over 30 days;

4.3     During the physical inspection of meters of certain business debtors, the Municipality's representatives observed that certain meters, which had been reported as disconnected by Makgosi, were not disconnected;

4.4     Makgosi had been issuing. SMS notifications debtors on monthly basis. Subsequently, the Municipality's internal audit has revealed that some of these SMSs were not successfully delivered. The Municipality was charged and has paid an amount of R123,524.75 in relation to these unsuccessfully delivered SMSs;

4.5     Makgosi has billed the Municipality for the issuing final demand letters. Notwithstanding this fact, Makgosi has failed to either terminate or disconnect or restrict services per the demand letters and as required by the Agreements;

4.6     Despite installing water restriction devices, at certain debtors' premises (and for which the Municipality was billed), the Municipality found, during its audit, that the water pressure was not restricted at these premises.

5.    It is clear to the Municipality that, not only has Makgosi failed to 'properly render performance in terms of the Agreements, Makgosi's conduct has resulted in the Municipality sustaining financial loss as a result of Makgosi's conduct.

6.    To this extent, the Municipality cancels the Agreements, in accordance with clause 4.1 of the Agreements, which cancellation shall be effective from 30 days from receipt of this letter.

7.    The Municipality's rights, particularly its rights to claim damages against Makgosi, remain reserved.”

[5]        Clause 18 of the agreements states:

“18 BREACH AND TERMINATION

18.1       In the event that either party breached any provision of this agreement; and the breaching party is Rustenburg Local Municipality,, then in such event SERVICE PROVIDER shall give Rustenburg Local Municipality thirty (30) days written notice to rectify such breach failing which SERVICE. PROVIDER shall be entitled to cancel the agreement or claim specific performance and damages save where specifically prohibited herein.

18.2       The breaching party is SERVICE PROVIDER, then in such event Rustenburg Local Municipality shall give SERVICE PROVIDER thirty (30) days .written notice to rectify such breach failing which Rustenburg Local Municipality shall be entitled, without prejudice to their common law rights and such other remedies as are provided for herein, to cancel this agreement or to claim specific performance and in all cases to claim any damages suffered. Notwithstanding the a foregoing, Rustenburg Local Municipality shall not be required to give any notice to SERVICE PROVIDER in the event that:

18.2.1       The breach related to any breach of clauses 14 above; or

18.2.2       Rustenburg Local Municipality has given SERVICE. PROVIDER written notice to remedy any breach on one or more occasions during the period of the agreement.”

[6]        It is quite apparent that the last sentence in the clause 4.1 is in conflict with clause 18. Clause 4.1 states that any party has the right to terminate this agreement for any reason whereas clause 18 deals with the breach and termination of the agreement. In terms of clause 18 any party which is in breach of the agreement must be given notice of such breach and be allowed to rectify such breach within a period of thirty (30) days. In terms of clause 18, the respondent was suppose to inform the applicant of the allege breach of the agreement and allow the applicant an opportunity to rectify such breach within the period of thirty (30) days. In other words, the respondent was suppose in terms of clause 18, to place the applicant in mora, and only if the applicant fails to remedy the breach, can the agreement be cancelled.

[7]        The intended action that the applicant want to institute is for a declarator that the respondent is not entitled to cancel the agreements because of non-compliance with the provisions of clause 18 of the said agreements. Furthermore, for an order that the agreements be rectified by deleting the last sentence of clause 4.1 in both service level agreements. This was the main contention by the applicant.

[8]        The applicant also submitted that it has made out a case for the granting of the requisite interdictory relief. The requirements for interim interdictory relief are trite. An applicant must in an application for interim interlocutory relief show that it has a prima facie right to the relief claimed, that a well- grounded apprehension of irreparable harm exist if the interim relief is not granted and the ultimate relief is eventually granted, a balance of convenience in favour of the granting of the interim relief, and the absence of any other satisfactory remedy. All these requirements must be met in order for the relief to be granted.

In Tswane City v Afriforum 2016 (6) SA 279 (CC) at paragraph [49], the following is stated.

“[49]         To determine whether this is perhaps one of those cases where 'a proper and strong case' or 'the clearest of cases' has been made out for the interim relief, it is necessary to examine how Afriforum met the requirements for the grant of an interim interdict. Those requirements were of course set out in Setlogelo and Webster as (i) a prima facie right that might be open to doubt; (ii) a reasonable apprehension of irreparable and imminent harm to the right if the interdict were not granted; (iii) the balance of convenience favourable to the grant of the interdict; and (iv) the absence of any other adequate remedy.”

[9]        As far as a prima facie right is concerned, the applicant states that it did not consent to the last sentence of clause 4.1 which is at odds with clause 18. This sentence was not agreed upon and must have been inserted by mistake as a typing error. The respondent cannot without placing the applicant in mora, terminate the agreements with immediate effect. This amounts to repudiation of the agreements which the applicant does not accept. Adv. Alli, on behalf of the respondent, referred this Court to the judgment of the Supreme Court of Appeal in the case of Mohammed’s Leisure Holdings (Pty) Ltd vs Southern Sun Hotel Interest (Pty) Ltd 2018 (2) SA 314 (SCA) with regard to freedom of contract. In particular was reference made to paragraph [30] which states:

“[30]         The fact that a term in a contract is unfair or may operate harshly does not by itself lead to the conclusion that it offends the values of the Constitution or is against public policy. In some instances the constitutional values of equality and dignity may prove to be decisive where the issue of the party's relative power is an issue. There is no evidence that the respondent's constitutional rights to dignity and equality were infringed. It was impermissible for the high court to develop the common law of contract by infusing the spirit of ubuntu and good faith so as to invalidate the term or clause in question.”

[10]      Much as there may well be freedom to contract and that a term of the contract, harsh as it may be, does not offend the values of the Constitution or is against public policy, each case must be decided on its own merits. This case is quite distinguishable from the Mohammed Leisure case on the facts.  In this case, I am of the view that the applicant has made out a prima facie right to the relief claimed.

[11]      If it is accepted that the respondent does not have the right to unilaterally and without first placing the applicant in mora, terminate the agreements with immediate effect, then the action of the respondent is unlawful. It almost goes without saying that the applicant will suffer irreparable harm if this unlawful termination of the agreement would be allowed. It is not only monetary / financial harm that will be suffered by the applicant but the applicant has also in its employ thirty (30) fulltime employees that will suffer if their employment will be terminated because of the cancellation of the agreements between the applicant and the respondent. This in a time when the unemployment rate in South Africa is very high. Not only will the termination of these agreements impact negatively on the applicant, but also on the thirty (30) fulltime employees of the applicant.

[12]      The balance of convenience clearly favours the applicant. The applicant has rendered these services in excess of five (5) years to the respondent. The service cannot be terminated over night without first placing the applicant in mora and without affording it an opportunity to rectify any breach or defect in the delivery of the services in question. Furthermore, the respondent is in arrears with its payments to the applicant in excess of R4 million. When payment was requested, the respondent admitted its indebtedness to the applicant and state that it does not have the available funds to effect payment to the applicant. With regard to the annual review of the performance of the applicant, it is noteworthy that the termination happens almost a year after the review was conducted. To say the least, this is unfair.

[13]      There was apparently an internal audit conducted which informed the decision to terminate these agreements. The results of the internal audit was never given to the applicant. This makes the process even more unfair. There were also problems encountered with the billing system of the respondent which gave rise to enormous challenges that the applicant experienced with customers’ accounts. These are mistakes with meter numbers, wrong SMS notifications, incorrect cellphone numbers, etcetera that made it difficult, if not impossible, for the applicant to perform its functions and to deliver in terms of the said service level agreements. In my view the balance of convenience clearly favours the granting of the relief prayed for by the applicant.

[14]      The remedy prayed for is interim interdictory relief pending the institution of an action within fourteen (14) days form the date of this order. The basis for the action to be instituted is already alluded to earlier on in this judgment. In my view, there is no other satisfactory relief that will take care of the immediate interest of the applicant and its thirty (30) fulltime employees. The applicant want to enforce the agreements and does not accept its repudiation by the respondent. A claim for damages will amount thereto that the applicant accept the repudiation and it will imply that the respondent’s action of repudiation is lawful. The applicant disputes the validity of the cancellation of these agreements. It seeks to enforce these agreements by way of specific performance. Only if and when the applicant does not pursue its claim for specific performance will it have a claim for damages as an alternative relief.

Conclusion

[15]      It is for these reasons, amongst others, that I granted the relief as set out in paragraph 1, supra.

R D HENDRICKS

JUDGE OF THE HIGH COURT,

NORTH WEST DIVISION, MAHIKENG

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