Emalahleni Local Municipality v Lehlaka Property Development (Pty) Ltd

Lehlaka Property Development (Pty) Ltd owned eight properties in Rietspruit Township which were invaded by unlawful occupiers. As the registered owner, Lehlaka had a consumer agreement with Emalahleni Local Municipality for the supply of electricity to these properties. After falling into arrears due to consumption by unlawful occupiers, Lehlaka concluded a settlement agreement with the Municipality in 2019. In February 2020, Lehlaka gave notice to terminate the consumer agreement in accordance with section 4(1) of the Electricity By-laws, giving 14 days' written notice. The Municipality acknowledged Lehlaka's right to terminate but refused to accept the termination, stating that Lehlaka needed to first inform the unlawful occupiers and put a plan in place to relocate them. The Municipality contended that it had discretion to refuse the termination. Lehlaka approached the high court seeking declaratory and interdictory relief confirming the termination of the agreement with effect from 15 May 2020 and declaring it was not responsible for electricity payments thereafter. The Municipality raised points in limine including non-joinder of the unlawful occupiers and that the matter should have been brought as a review under PAJA.

• Whether the unlawful occupiers should have been joined to the proceedings
• Whether the termination of the consumer agreement involves the exercise of administrative action subject to PAJA
• Whether Lehlaka validly terminated the consumer agreement in accordance with the Electricity By-laws
• Whether the Municipality has discretion to refuse to accept termination of a consumer agreement
• Whether there exists a 'special cluster of relationships' between Lehlaka, the Municipality and the unlawful occupiers that gives rise to public law obligations

The majority (Nicholls and Weiner JJA and Siwendu AJA) dismissed the appeal with costs, including the costs of two counsel, upholding the high court's order in favour of Lehlaka. The minority (Hughes and Mocumie JJA) would have upheld the appeal and set aside the high court's order, directing that the application be removed from the roll for Lehlaka to join the unlawful occupiers, with Lehlaka to pay the costs.

The binding legal principle established by the majority is that: (1) Private property owners have no constitutional or legal obligation to pay for electricity consumed by unlawful occupiers on their property in perpetuity. (2) The termination of a consumer agreement for electricity supply is a contractual matter governed by the terms of the contract and applicable by-laws. (3) Where municipal by-laws confer a right to terminate on requisite notice without conferring discretion on the municipality to refuse, the decision to accept termination is mechanical and not administrative action under PAJA. (4) The 'special cluster of relationships' doctrine applies to public law relationships between municipalities and occupiers, not to contractual relationships between private parties and municipalities. (5) Unlawful occupiers who have no contractual privity with either party to a consumer agreement do not have a direct, substantial and legal interest requiring joinder in a dispute about the termination of that agreement, even if they may be indirectly affected by its consequences.

Hughes JA (in the minority) observed extensively on the constitutional obligations of municipalities to provide basic services including electricity to all occupants within their jurisdiction, including unlawful occupiers, and discussed how this creates a 'special cluster of relationships' that engages administrative law principles. She emphasized that municipalities cannot avoid these obligations through contractual arrangements with private parties. Nicholls JA observed that while the Municipality complained of being overwhelmed by constitutional obligations towards 95,000 households requiring housing and 40,756 unlawful households, this cannot form a legal basis for transferring constitutional obligations to private landowners. She also noted that if the Municipality proceeds to cut electricity to unlawful occupiers after the contract termination, the occupiers would have rights to procedural fairness at that stage. Siwendu AJA observed that it would be speculative for a court to foretell what disputes might arise between the Municipality and unlawful occupiers in the future and express views on matters not yet ripe for adjudication.

This case clarifies the boundaries between public and private law in the context of municipal service delivery. It establishes that: (1) the 'special cluster of relationships' doctrine does not translate into imposing constitutional obligations on private individuals to provide basic services; (2) municipalities cannot transfer their constitutional obligations to provide services to private property owners; (3) a contractual relationship between a private party and a municipality does not become an administrative relationship merely because unlawful occupiers may be affected; (4) joinder is not required where parties have no contractual privity and no direct and substantial legal interest in the dispute; and (5) where by-laws do not confer discretion on a municipality to refuse a valid termination of a consumer agreement, the decision is mechanical and not administrative action subject to PAJA. The case demonstrates the limits of the Joseph and Joe Slovo jurisprudence and confirms these principles apply to relationships between organs of state and citizens, not between private parties and the state.