Matjhabeng Local Municipality v Eskom Holdings Limited  Shadrack Shivumba Homu Mkhonto v Compensation Solutions (Pty) Limited

Media Summary
The following explanatory note is provided to assist the media in reporting this case and is not binding on the Constitutional Court or any member of the Court.

At 10h00 on 26 September 2017 the Constitutional Court handed down judgment in two consolidated applications for leave to appeal against decisions of the High Court of South Africa, Free State Division, Bloemfontein (Free State High Court), and the Supreme Court of Appeal (SCA). Both cases concern the procedural and substantive requirements for contempt of court proceedings.

In Matjhabeng Local Municipality v Eskom Holdings Limited (Matjhabeng) a Municipal Manager, Mr Lepheana, was held in contempt of court by the Free State High Court following summary proceedings. In Shadrack Shivumba Homu Mkhonto v Compensation Solutions (Pty) Limited (Mkhonto), the former Commissioner of the Compensation Fund was held in contempt of court by the SCA, which overturned a decision of the High Court of South Africa, Gauteng Division, Pretoria (Pretoria High Court).

The dispute in Matjhabeng involves a settlement agreement between the Matjhabeng Local Municipality (Municipality) and Eskom Holdings Limited (Eskom) regarding overdue electricity bills. A court order was issued to regulate the monthly payments by the Municipality to settle the arrears. Because of non-compliance, a second order was issued. In terms of the second order, certain obligations were imposed on the Municipality and on Mr Lepheana as Municipal Manager. A third order was subsequently granted, including a rule nisi calling upon Mr Lepheana, in his official capacity, to file a report justifying non-compliance with the second order.

Mr Lepheana filed an explanatory affidavit detailing various attempts to settle the dispute. He appeared before the Free State High Court and was cross-examined under oath. The Court held that his non-compliance was wilful and mala fide (in bad faith). He was held in contempt of court and sentenced to six months’ committal, which was suspended on condition of compliance with the order. Mr Lepheana unsuccessfully sought leave to appeal in the Free State High Court and the SCA.

Before this Court, the Municipality sought leave to appeal and argued that the process followed in the Free State High Court violated precepts of fairness and justice and that Mr Lepheana’s conduct did not meet the requisites for contempt of court. Eskom opposed the application.

In a unanimous judgment penned by Nkabinde ADCJ, this Court held that the first three requisites of contempt of court were present in relation to Mr Lepheana: the existence of an order, notice of that order, and non-compliance with that order. However, the final requisite, wilful and mala fide non-compliance, was not present. Where public officials are cited for contempt in their personal capacities, the officials themselves, rather than the institutional structures for which they are responsible, must have wilfully or maliciously failed to comply with an order. Moreover, this Court found that the Free State High Court seemed not to have considered the explanatory affidavit by the Municipality, which addressed the issues raised in the rule nisi. The various attempts by the Municipal Manager and other personnel of the Municipality to settle the dispute were not considered, and, accordingly, Mr Lepheana’s wilfulness and mala fides had not been made out.

This Court also held that, by convicting Mr Lepheana and imposing a suspended imprisonment term after he was cross-examined without leading evidence, the Free State High Court denied him procedural fairness in terms of section 35(3) of the Constitution. This constituted arbitrary deprivation of the right to freedom and security of the person in terms of section 12(1)(a) of the Constitution. This Court accordingly set aside the decision of the Free State High Court.

In the matter of Mkhonto, Compensation Solutions (Pty) Limited (CompSol) initially sought declaratory orders and a mandamus against the Compensation Commissioner, the Director-General: Department of Labour and the Minister of Labour. Mr Mkhonto was the Commissioner at that time. The Pretoria High Court, following unsuccessful efforts by CompSol to obtain the outstanding payments in respect of medical accounts submitted to the Commissioner, granted an order by agreement (first Mkhonto order). In that order, the Commissioner was specifically directed to process medical accounts submitted to him within a reasonable time from the date of submission and within 75 days in respect of the accepted medical claims.

The Commissioner failed to comply. Following three action proceedings for separate claims, CompSol launched two successive contempt proceedings against the Commissioner. Both proceedings were settled upon the Commissioner’s undertaking to pay the amounts due. CompSol would later institute another application in the Pretoria High Court seeking orders that Mr Mkhonto was in contempt of the first Mkhonto order. In a subsequent order by agreement (second Mkhonto order), CompSol and the Commissioner were directed to meet and, among others things, prepare a joint report relating to items in the agreement.

The Pretoria High Court later dismissed the contempt applications by CompSol because payment of the outstanding claims was made before the hearing. The Court held that the prior order was not enforceable by civil contempt proceedings.

CompSol was granted leave to appeal by the SCA, which overturned the Pretoria High Court’s decision and declared Mr Mkhonto in contempt of the first Mkhonto order. It further held that Mr Mkhonto failed to prove reasonable doubt of his wilfulness and mala fides. Mr Mkhonto was therefore held in contempt and was committed to three months’ imprisonment, which was conditionally suspended for five years on condition that he not be convicted of contempt within that period.

Mr Mkhonto and the Commissioner applied for leave to appeal to this Court. They submitted that all the monetary claims owed to CompSol had been resolved and that Mr Mkhonto was no longer the Commissioner and was thus unable to comply with the terms of the order as it contravened the claims process as prescribed in the Compensation for Occupational Injuries and Diseases Act (COIDA). They argued that the undisputed facts showed that there was no wilful or mala fide non-compliance with the orders and that committal was neither competent nor appropriate. CompSol opposed the application and submitted that the contempt requisites were established.

This Court held that the first three contempt requisites were present in relation to Mr Mkhonto. However, as in Matjhabeng, the final requisite, wilful and mala fide non-compliance, was not present. The evidence presented to the SCA explained that the reason for the failure to pay was logistical problems at the Compensation Fund. This Court found that the averments made in an explanatory affidavit, provided by an employee of the Commissioner, were telling and should have been investigated by the SCA before it held Mr Mkhonto in contempt and committed him to prison.

Common to both cases was the question of the requisite standard of proof. This Court held that that the criminal standard of proof – beyond a reasonable doubt – is required where the remedy sought may potentially impact rights under sections 12 and 35 of the Constitution. It further held that there are other contempt remedies, such as declaratory relief, mandamus, or a structural interdict, that do not have the consequence of depriving an individual of his or her right to freedom and security of the person. The Court held that in such instances, the civil standard of proof – a balance of probabilities – applies. In both matters, the fourth requisite, wilfulness and mala fides, was not proved beyond a reasonable doubt and committal was therefore not appropriate.

A further issue common to both matters was that of non-joinder. Both Messrs Lepheana and Mkhonto were convicted and sentenced without being joined as parties to the proceedings. This Court held that no court can make findings adverse to a party’s interests without that party first being named in proceedings before the court. This is necessary to allow affected individuals to prepare themselves in the knowledge that there are potential personal consequences, including committal, for non-compliance. Non-joinder was not appropriate and both Messrs Lepheana and Mkhonto should have been cited in their personal capacities, not just their official capacities.

On costs, this Court said that, although the applicants in both matters succeeded, the manner in which they discharged their obligations under the various orders left much to be desired. This Court’s displeasure was marked by depriving them of their costs in this Court despite their success.

Ultimately, this Court upheld the appeals in both matters and set aside the orders holding Messrs Lepheana and Mkhonto in contempt.

The Full judgment here.