The eThekwini municipality has reached the end of its legal road in its attempts to avoid paying more than R30m to an electrical company that claims it lost contracts after it was “blacklisted” at the behest of an alleged crooked official.
This week, the Constitutional Court refused to hear the city’s application for leave to appeal a 2022 ruling by Durban high court acting judge Murray Pitman, directing it to pay Daily Double Trading (trading as Pholobas Projects) R30m plus interest from February 2018.
Pitman later that year declined to grant leave to appeal his ruling.
The city approached the Constitutional Court. But in an order dated June 4 this year, that court said “it bears no reasonable prospects of success”. It ordered the city to pay costs.
Attorney Anusha Ganas, who acts for Pholobas, told TimesLIVE Premium it had been a “long haul”. She said with interest, her client was now owed R52m and that excluded costs awarded against the municipality by the courts.
“So it ends here. Our client awaits payment and will proceed with the necessary steps if we don’t. We will be sending a letter of demand,” she said.
In response to a query on the city's reaction to the ruling and whether it would pay the service provider, spokesperson Gugu Sisilana said “yes” and didn’t elaborate further.
The dispute has a controversial past and has been before several judges over many years.
Pholobas Projects initially approached the court for an order declaring it had been unlawfully blacklisted by the city, demanding R44m in damages for this.
In his affidavit, director Bekezela Ngcobo said his company had an “unblemished record” when it was granted contracts in 2011 to disconnect illegal electricity connections in the city. However, the contracts were cancelled at the behest of a revenue protection senior manager who had a “vendetta” against him.
Ngcobo said his actions had been reported to the City Integrity and Investigation Unit.
He attached a copy of a “confidential” investigation report to his court papers, which reflected the manager had conducted a “surprise audit” early in the morning and before all employees had reported for duty. The audit was done in the parking lot and not on site.
The inference is unavoidable, on a balance of probabilities, that [Moloi] was provided with a valid and legitimate instruction, duly authorised by representatives of the respondent to make an offer of settlement which the applicant accepted
— Acting judge Murray Pitman
The manager then deemed the company did not have enough staff to handle the contract. He reported this to the Bid Adjudication Committee and the contracts were cancelled.
The report concluded: “The investigation proves that [the manager] and Ngcobo had a close relationship, which ended in a fallout, leading to a vendetta against Pholobas Projects.” It stated his actions had prejudiced the municipality, which would now incur legal fees and was at risk of a civil claim.
While the city initially opposed Pholobas’ claim of R44m, it then entered into the purported “confidential” settlement agreement, offering R30m. It also recorded no formal steps would be taken to blacklist the company.
But the city didn’t pay the money. Pholobas wanted the agreement to be made an order of court, but the municipality then disputed the authority of its attorney to act on its behalf.
Under the order of judge Johan Ploos van Amstel, both the municipal manager at the time, Sipho Nzuza, and attorney Siphiwe Moloi were instructed to file affidavits explaining how the agreement had come about.
Nzuza, in his affidavit, said he was only delegated to approve payments of R500,000 and, in his view, the settlement would have to get the approval of full council. He said he did not know who had authorised it.
Moloi said he had been instructed to offer the R30m after consultation with city legal advisers. He said, however, communications between himself and city officials were privileged. He said he had “documented responses” which he was not prepared to give to the court, but he would place them in a “sealed envelope with the president of the Law Society or the registrar”.
Then, in a second affidavit, he changed tack and said it was his understanding that the approval of the CFO or municipal manager had to be obtained first to finalise settlement and he “could not have consented to an order that the relevant amount be paid if he had no instructions from his client to do so”.
Pholobas persisted with its court application, saying the settlement was valid and lawful.
The dispute was referred for the hearing of oral evidence which came before judge Pitman.
Pitman noted the city had not challenged documents, including the proposed settlement agreement and Nzuza and Moloi had not testified.
Moloi's “sealed documents” were never produced.
Pitman said he was surprised that the municipality had not called Moloi as a witness to explain what had happened.
“The inference is unavoidable, on a balance of probabilities, that [Moloi] was provided with a valid and legitimate instruction, duly authorised by representatives of the respondent to make an offer of settlement which the applicant accepted,” he said.
In refusing the city’s application for leave to appeal, Pitman said there were no compelling reasons why it should be allowed, given Moloi had recorded in the agreement that he had been “instructed” to make the offer and the city could not deny that he had that authority.
TimesLIVE Premium understands the city then petitioned the SCA but has been ultimately unsuccessful in all of its appeal attempts.
At one stage during the fracas — after Pitman refused leave to appeal — the sheriff attached vehicles, computers, telephones, desks and other office equipment from the electricity department at the behest of Pholobas Trading. The staff were sent home.
However, when the city noted further applications for leave to appeal, that warrant of execution was stayed.
Meanwhile, KZN MEC for co-operative governance and traditional affairs (Cogta) Thulasizwe Buthelezi has asked the municipality to recover taxpayer monies from responsible officials after the ruling.
He has asked mayor Cyril Xaba to ascertain the total legal costs incurred by the city and to ensure proper measures are taken against officials who have placed the city in this position.
“The city is now obligated to pay R30m to the service provider and potentially further millions in legal costs, while it faces ongoing financial challenges and service delivery issues affecting residents and the business community,” he said.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.