Case   CCT291/21
[2022] ZACC 44

Hearing Date: 23  May 2022

Judgement Date: 23 December 2023

Post Judgment 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.

On Friday, 23 December 2022 at 10h00, the Constitutional Court handed down judgment in an application for leave to appeal against the judgment and order of the Supreme Court of Appeal. The Supreme Court of Appeal dismissed an appeal against the judgment and order of the High Court of South Africa, Gauteng Division, Pretoria (High Court). The application concerned whether the lower courts were correct to order Eskom, the applicant, to supply electricity to defaulting municipalities pending the institution of review proceedings.

The matter originates from two applications that were joined together before the High Court. In both applications, Eskom is the applicant. In the first application, the first respondent is the Vaal River Development Association (Pty) Limited, a non-profit organisation representing the residents of Ngwathe Municipality. In the second application, the first respondent is Lekwa Ratepayers Association, a non-profit organisation representing the residents of Lekwa Municipality. The first respondents in both applications are referred to as the “residents” or “Associations”. The remaining respondents did not participate in the proceedings.

In 2008, Eskom concluded a supply agreement with Ngwathe Municipality in terms of which it would supply bulk electricity to the municipality in accordance with the Notified Maximum Demand (NMD) stipulated in the supply agreement. The NMD is a contractual value of demand which binds Eskom and the customer (the municipalities). In 1981, Eskom concluded a similar supply agreement with Lekwa Municipality. In 2010, the contracted NMD for Lekwa Municipality was increased. The municipalities’ consumption of and need for electricity, however, exceeds the NMD supply levels agreed to. Eskom has been supplying electricity in excess of the contracted NMD to both municipalities for an extended period of time and charging monthly penalties to the municipalities. Despite these penalties, the municipalities have failed to pay Eskom for the electricity supplied to them and remain in serial default.

In 2020, Eskom decided to reduce the bulk electricity supply to the municipalities to the NMD levels set out in the supply agreements (reduction decisions). This meant that it would no longer supply electricity in excess of the contracted NMD levels. It informed the municipalities but did not inform the residents. This had a significant impact on essential services in the municipalities, such as water supply and the functioning of sewage works. Thus, the Associations instituted applications before the High Court on the residents’ behalf.

The High Court held that sufficient electricity supply is inextricably intertwined with the rights to healthcare, food, water and social security and therefore found that the Associations had established a prima facie right. Second, the Court found that the limited electrical supply had an adverse effect on all basic municipal services, resulting in irreparable harm. Third, the High Court determined the balance of convenience to favour the residents on account of the fact that Eskom’s prejudice was financial, compared with the irreparable harm suffered by the residents. Finally, the Court held that Eskom has a monopoly over the supply of bulk electricity leaving no other satisfactory remedy available to the residents other than approaching the Court for relief. The High Court ordered Eskom to increase, alternatively to restore the maximum electricity load supply to the level supplied prior to its decision pending final adjudication of the Associations’ application for a review of Eskom’s decision in terms of the Promotion of Justice Act 3 of 2000 (PAJA) and/or legality.

Aggrieved, Eskom sought leave to appeal to the Supreme Court of Appeal. The Court, relying on Resilient Properties (Pty) Ltd v Eskom Holdings SOC Ltd (Resilient), held that, given the nature and source of Eskom’s power, the exercise of this power amounted to administrative action for the purposes of section 33 of the Constitution and PAJA. The Court held the facts in Resilient were similar to the present case, that the principles enunciated therein were of equal application, that all the requirements for granting interim interdictory relief were established and that the High Court correctly granted the interim interdicts. The Supreme Court of Appeal also referred to section 41(3) of the Constitution and the Intergovernmental Relations Framework Act 13 of 2005 (IRFA). It held that Eskom was obligated to take reasonable measures to resolve the intergovernmental dispute it had with the municipalities before reducing the bulk electricity. The appeal was dismissed.

In the Constitutional Court, Eskom submitted that the question whether the application ought to be resolved in terms of IRFA or the Electricity Regulation Act 4 of 2006 (ERA) raises a constitutional issue. Eskom further submitted that the lower courts compelling it to supply sufficient electricity to the municipalities is at odds with the Constitutional Court’s decision in Mazibuko v City of Johannesburg where the Constitutional Court held that in terms of section 26(2) of the Constitution, the state must take reasonable legislative and other measures to progressively realise the right of access to adequate housing within available resources. Eskom contended that the lower courts failed to consider that (a) its circumstances have changed and it no longer has capacity to supply electricity exceeding the contracted NMD and; (b) the orders of the lower courts put a strain on the national grid and the electricity infrastructure. Eskom also contended that the municipalities have, as a result of the lower courts’ decisions, been absolved of their constitutional obligations. Eskom submitted that section 30 of ERA provides an internal remedy to resolve such disputes. Thus, the internal remedies provided by ERA should have been utilised before invoking IRFA and PAJA and approaching the courts.

The Associations submitted that the order of the High Court does not compel Eskom to exceed the agreed upon NMD. Rather, it is an interim decision pending a review of Eskom’s decision to decrease the electricity supplied to the municipalities. The residents submitted that they sought to enforce their public law rights because Eskom is an organ of state. Therefore, its decisions constituted administrative action and are reviewable under PAJA. As to the application of ERA, the residents contended that it was incumbent on Eskom to approach the National Energy Regulator (NERSA) and seek to resolve the dispute. The residents further contended that citizens have a public law right to electricity. Additionally, electricity supply is required to realise other fundamental rights such as the rights to water, education and a healthy environment.

The minority judgment, penned by Unterhalter AJ (Kollapen J, Majiedt J and Mlambo AJ concurring) found that the matter engaged the Constitutional Court’s constitutional jurisdiction. It found that determining Eskom’s constitutional and statutory duties and to whom these duties are owed raised a constitutional matter of importance.

The minority judgment then determined whether the lower courts were correct to grant the interim relief to the residents. The minority judgment analysed the standard required to demonstrate a prima facie right. The test is whether the applicant has furnished proof which, if uncontradicted at trial (here, in the review), would entitle the applicant to final relief. This was reiterated by the Constitutional Court in Economic Freedom Fighters v Gordhan. Thus, to secure interim relief, an applicant must establish their prospects of success of obtaining final relief to the required standard. There is thus a connection between interim relief and the likely outcome of the final proceedings.

The minority judgment disagreed with the majority judgment’s reliance on National Gambling Board v Premier, KwaZulu-Natal. The minority judgment held that National Gambling Board was only authority for the proposition that a court may grant interim relief even though it lacks jurisdiction to decide the main dispute. It is not authority for the position that the outcome of an application for interim relief entails that no final determination of the rights of the parties can occur. According to the minority judgment, if an application is premised upon an incorrect point of law, there is no reason why the court should not decide the legal question and dismiss the application. The question of law in the present case was whether the residents have a right to the supply of electricity from Eskom, and hence whether the Associations have prospects of success in the review. The minority judgment answered this question in the negative on the following bases.

First, the electricity industry is governed by ERA. ERA sets out Eskom’s duties and grants NERSA wide regulatory competences over Eskom, municipalities and the residents of municipalities as end users insofar as the electricity industry is concerned. NERSA’s powers include adjudicating disputes that may arise between these parties. Furthermore, the objects of ERA make it evident that any duty imposed on Eskom to provide electricity cannot be separated from its fiscal responsibilities so as to protect Eskom as the nation’s electricity provider. Municipalities play a central role in the distribution of electricity in the form of municipal services. This was confirmed by the Constitutional Court in Joseph v City of Johannesburg and is reaffirmed, inter alia, by the Constitution, the Local Government: Municipal Structures Act 117 of 1998 (Structures Act), the Local Government: Municipal Systems Act 32 of 2000 (Systems Act), as well as ERA. This regulatory framework gives effect to the constitutional duty of municipalities to supply electricity directly to their residents. Having set out the regulatory framework, the minority judgment asks on what basis Eskom can be held liable for providing municipal services (electricity in this case) directly to the residents. In other words, what rights do the residents claim to have that are enforceable against Eskom?

To decide this question, the minority judgment considered the "public law right to electricity” pleaded by the Associations. The minority judgment also considered the Associations’ averments that electricity is a means by which the rights in the Bill of Rights are realised. It found that the Associations had failed to show that the contents of the rights (rights to life, dignity, water, education and a healthy environment) they invoked included the right to the supply of electricity by Eskom. The minority judgment disagreed with the majority judgment’s position that it suffices for a court to examine the facts that have been pleaded as to the consequences of Eskom’s actions and derive the infringement of rights from those consequences. It found this conclusion to have missed a necessary step in its reasoning, namely, whether Eskom owes a duty to the residents to supply them with the electricity. The failure to assess the contents of the rights of the residents and Eskom’s correlative duties resulted in the unsustainable legal conclusion and reasoning of the majority judgment. As a result, the lower courts and the majority judgment erroneously ascribed municipal constitutional obligations to another organ of state, Eskom.

Second, the minority judgment considered the application of section 7(2) of the Constitution, as posited in the majority judgment. It held that indeed, as an organ of state, Eskom is bound to section 7(2). However, there is no right to electricity in the Bill of Rights. The minority judgment referred to Joseph. The Constitutional Court confirmed that the constitutional duty resting upon a municipality to provide basic services does not derive from the Bill of Rights. It finds its origins in the constitutional duties of the municipalities to provide municipal services. It found the residents’ contention that the supply of electricity is a means to realise other fundamental rights to be unsustainable. According to the minority judgment, a particular means by which a right may be secured does not make that means the content of the right. The state must determine the means by which these rights are progressively realised, not the courts. Ultimately, the minority judgment found that section 7(2) cannot be used to ascribe to a particular organ of state the duties of another state organ. This ignores an entire constitutional scheme that sets out the constitutional obligations of each organ of state. According to the minority judgment, the manner in which the majority judgment uses section 7(2) undermines this constitutional scheme. Furthermore, the majority judgment applies section 7(2) without establishing the residents’ right to be supplied electricity by Eskom. That cannot be done.

The minority judgment also considered the majority judgment’s position that the residents need not show that they have a right to claim from Eskom, the supply of electricity that it has reduced. The minority judgment found this position to be mistaken. According to the minority judgment, the right of the residents to claim electricity from Eskom is not a claim that stands apart from the rights in the Bill of Rights they relied upon. If that claim forms no part of the contents of the rights that the residents invoke, then they have no claim in law deriving from these rights. The minority judgment found the conclusion reached by the majority judgment that the right to life or to dignity not only found a claim to specific state resources but also to such resources as might be required to maintain a certain level of welfare is contrary to Constitutional Court’s decision in Government of the Republic of South Africa v Grootboom.

Third, the minority judgment considered whether the residents had made out a case for procedural fairness. In other words, were Eskom’s reduction decisions procedurally unfair? The minority judgment found that the pleaded case did not support the finding of the majority judgment. The minority judgment found that in the case advanced by the Associations in their account of the residents’ prima facie rights, they made no mention of procedurally fair administrative action. The absence of a properly pleaded case notwithstanding, the majority judgment held that the reduction decisions constitute administrative action. The minority judgment disagreed with this finding. The central question, according to the minority judgment, is this: do the residents have rights to assert against Eskom to restore the supply of electricity that the reduction decisions have reduced? The minority judgment answered this question in the negative because Joseph confirmed that municipal services, such as electricity, find their origins in municipal constitutional obligations. Eskom, which does not fall under the umbrella of local government does not have such a duty. Thus, Eskom had no duty to extend procedural fairness to the residents when taking the reduction decisions.

Fourth, the minority judgment considered the issue of subsidiarity. The minority judgment held that the residents failed to have recourse to the regulatory framework governing electricity supply, in particular ERA. The minority judgment disagreed with the majority judgment that the question of subsidiarity can do no more than cast some doubt on the residents’ prima facie rights. According to the minority judgment, the entire regulatory framework for electricity supply places constitutional obligations on municipalities as the sphere of government responsible for the supply of electricity to its residents. Eskom’s duties are designed to cohere with this scheme. ERA provides the statutory means by which residents may enforce their rights. Therefore, the residents’ recourse under ERA forms part of the regulatory and constitutional design and triggers the application of the principle of subsidiarity. The minority judgment accordingly found that the principle of subsidiarity excluded the claims of the Associations.

The minority judgment also considered the application of section 7(2) of PAJA which concerns the exhaustion of internal remedies before approaching the courts. It found that the residents had failed to make use of the internal remedy provided for in section 30 of ERA (the adjudication of disputes by NERSA). Thus, according to the minority judgment, the residents also failed to exhaust internal remedies. The minority judgment disagreed with the majority judgment’s conclusion that section 7(2) of PAJA plays no role in the determination of applications for interim relief pending a PAJA review. In this respect too, the minority judgment emphasised the relationship between an application for interim relief and the prospects of the applicants in securing final relief. It found that the majority judgment continuously failed to have regard to this. According to the minority judgment, a failure to exhaust section 30 means the court hearing the review will have no power to review the reduction decisions; save for exemption upon a showing of exceptional circumstances. This issue is not answered by saying that the application for interim relief is not the review.

Finally, the minority judgment considered the issue of the balance of convenience. The minority judgment recognised that the harm to human health and well-being suffered by the residents without interim relief may appear greater than the country’s collective interest in the integrity of the national grid. However, it found that this equation failed to take account of the true source of the problem: the municipalities. According to the minority judgment, if replicated, the majority judgment’s findings will require Eskom to discharge of the duties of municipalities all over the country that are in the same position as those in this case. This will ultimately give rise to considerable risk of the national welfare.

In the result, the minority judgment would have granted leave to appeal and upheld the appeal in both applications.

A majority judgment penned by Madlanga J, and concurred in by Mathopo J, Mhlantla J, Theron J and Tshiqi J, held that this matter is less about the residents’ right to a direct supply of electricity by Eskom (which is wrongly the focus of the minority judgment); it is about Eskom’s decision which – to the agreement of even Eskom – was taken without notice to the residents. In short, the majority judgment makes the point that the reduction decision was taken without following a fair procedure, something that is impermissible in terms of PAJA. That decision has had an adverse impact on the residents in that it has resulted in the breach of several of their rights protected by the Bill of Rights: the right to life, the right to dignity, the right of access to water, the right to basic education and the right to an environment that is not harmful to health or well-being. That renders Eskom’s decision reviewable in terms of section 6(2)(c) of PAJA. So, the residents have pleaded a viable case for purposes of the intended review. The only question that remains is whether the residents proved a case for the interim interdict that was granted.

The majority judgment disposed of the notion advanced by the minority judgment that the majority decision will imperil the national grid to the detriment of the general public. The majority judgment disclaimed that it does not hold that the residents are entitled to a continued supply of electricity in quantities that guarantee that the rights they assert are not infringed even in circumstances where Eskom is entitled to terminate or reduce supply in terms of section 21(5) of the ERA. The majority clarified that the extent of its holding is, pending the determination of the proposed PAJA review of Eskom’s exercise of the section 21(5) power, the residents must be afforded interim relief that directs Eskom to restore electricity supply to what it was before the reduction. This observation is crucial, because it cuts across what the minority judgment perceived as an ominous threat of a total collapse if Eskom is not allowed to reduce or terminate supply where that is warranted. The majority judgment declared the threat of collapse a bogeyman which should seen for what it is. It observed that the residents’ case does not stand in the way of warranted section 25(1) reductions or terminations of supply; that reductions or terminations must take place in a manner not susceptible to a PAJA review; and that the majority decision is no bar at all to warranted section 21(5) reductions or terminations. In relying on MEC for Health, Eastern Cape v Kirland Investments, the majority pronounced that Eskom, as an organ of state, bears a higher duty “to respect the law, to fulfil procedural requirements and to tread respectfully when dealing with rights. . . . It must do right, and it must do it properly”.

Madlanga J explained that all that majority judgment says is that Eskom is perfectly entitled to avert any ominous grid collapse that it perceives, but because ours is a constitutional state, Eskom must do so in accordance with the Constitution and the law. It is neither above the law, nor a law unto itself. From where the residents are situated, alleging as they do that Eskom did not give them notice, the substantial reduction came out of nowhere. On their uncontroverted version of the facts, they were denied even the very basic opportunity to make representations to Eskom. The importance of notice and an opportunity to make representations cannot be overemphasised. The opportunity is so important that authority says it must not be denied, even where it is thought the affected person cannot possibly have anything to say or that whatever they may say is not likely to influence the decision.

The majority accepted that where reductions or terminations of supply are warranted, by all means it is open to Eskom to act in terms of section 21(5) of ERA. There will thus be no threat of collapse of the national grid. Of course, Eskom must act in accordance with the law and the Constitution. And that includes compliance with PAJA. If it does not, it must be sure that affected residents will litigate.

Reverting to the question whether the residents have made out a case for the interim interdict, the majority judgment recounted that a litigant seeking an interim interdict must show: a prima facie right even if it is open to some doubt; a reasonable apprehension of irreparable and imminent harm to the right if an interdict is not granted; that the balance of convenience favours the grant of an interim interdict; and that the applicant has no other satisfactory remedy.

Here, the majority concluded that the residents have shown several constitutional rights that were infringed as a result of the reduction decision; and, but for the interim interdict, the infringements would have continued unabated. The deplorable nature of the violations amply demonstrates that the harm suffered by the residents would be irreparable. Ergo, the majority judgment determined that the balance of convenience unquestionably favours the residents; and, accordingly, would have the residents – purely on an interim basis – living lives that are as near as possible to wholesome, than subject them to the current “human catastrophe”. The majority judgment held that the residents have established a prima facie right.

On the majority’s reading of the minority judgment, the minority says there must be a direct correlation between what is sought to be restored through an interim interdict and the right alleged to have been breached; or, in other words, the right alleged to have been breached must be a right to the supply of electricity in order for a restoration of supply to be competent.

The majority judgment reasoned that the minority judgment’s proposition fails to take into account the fact that multiple rights protected in the Bill of Rights can be violated by a single action – with those rights not always being squarely or perfectly correlative or corresponding. The majority said that what informs the need for their vindication is the fact of their violation and, in the present matter, it is the sudden substantial reduction of electricity that resulted in the rights violations. The logical corrective measure to address the rights violations is the reversal of the causative act, namely the restoration of the usual electricity supply.

On the balance of convenience, the minority judgment emphasised the risk of collapse of the national grid. The majority judgment, however, characterised Eskom’s reliance on this risk as nothing but a subterfuge, with the truth being that Eskom did not fear a risk of the grid collapsing if the supply to the two municipalities was not reduced. The majority pointed out that Eskom promised one of the municipalities that it would not effect the reduction if that municipality paid the arrears owed to Eskom, rendering the reduction decision a thinly-veiled debt collection mechanism. Thus, the cry about the risk of collapse of the national grid rings hollow in the face of Eskom’s attempt to extract payment on pain of effecting a reduction in the electricity supply.

The residents’ evidence was also to the effect that there was no other satisfactory remedy. The High Court accepted this, and so did the Supreme Court of Appeal. The majority concluded that there is no appeal against that holding.

Therefore, on the majority’s holding, the residents have satisfied all the requirements for an interim interdict and the appeal fails.

 

The Full judgment  here