Eskom Holdings SOC Ltd v Botha

The respondents (farm owners) instituted a damages action against Eskom Holdings SOC Ltd in August 2021, alleging that fires in September 2018 damaged their farms due to Eskom’s negligence. They relied on s 25 of the Electricity Regulation Act 4 of 2006, which creates a presumption of negligence in civil proceedings against Eskom arising from electricity-related damage. The respondents did not serve a written notice on Eskom in terms of s 3 of the Institution of Legal Proceedings against certain Organs of State Act 40 of 2002 (the Act) before instituting proceedings. Eskom raised a special plea, contending that it is an 'organ of state' as defined in s 1(1) of the Act. It argued that it either performs functions 'in terms of the Constitution' (s 1(1)(c)) or that National Treasury is liable for its debts (s 1(1)(g)). The High Court dismissed the special plea, the Full Court upheld that dismissal, and Eskom appealed to the Supreme Court of Appeal with special leave.

• Whether Eskom is an 'organ of state' as defined in s 1(1) of the Institution of Legal Proceedings against certain Organs of State Act 40 of 2002.
• Whether the phrase 'exercising a power or performing a function in terms of the Constitution' in s 1(1)(c) of the Act encompasses an entity whose powers and functions are derived solely from ordinary legislation.
• Whether National Treasury is liable for Eskom's debts for the purposes of s 1(1)(g) of the Act.
• Whether the decision in Pegma Thirteen Investments (Pty) Ltd v Free State Development Corporation on the interpretation of s 1(1)(c) was correct.

The appeal is dismissed with costs, including the costs of senior counsel.

The definition of 'organ of state' in s 1(1) of the Institution of Legal Proceedings against certain Organs of State Act is a closed, limited list and is materially narrower than the constitutional definition in s 239. For an entity to fall within s 1(1)(c) of the Act, it must exercise power or perform a function directly and immediately in terms of the Constitution itself; deriving functions solely from ordinary legislation does not suffice. Eskom is not an organ of state under s 1(1) of the Act. National Treasury is not liable for Eskom's debts merely by virtue of the Eskom Debt Relief Act, which provides loans and potential equity conversion rather than transferring liability; therefore Eskom does not fall within s 1(1)(g). Pegma Thirteen Investments was wrongly decided on the interpretation of s 1(1)(c) and is not to be followed.

The Court observed, without this being decisive for the statutory question, that Eskom qualifies as an organ of state under s 239 of the Constitution because it performs a public function in terms of legislation. The Court also made observations regarding the legislative history of the Act and the South African Law Commission reports, which indicated that Parliament did not intend the Act to apply to Eskom. Additionally, the Court remarked on the absurdity of permitting individuals harmed by Eskom's negligence to pursue claims directly against National Treasury, and noted that the Act's purpose was to harmonise existing notice periods rather than to create new protective notice requirements for entities not previously subject to them.

The judgment clarifies the critical distinction between the broad constitutional definition of 'organ of state' in s 239 of the Constitution and the narrower, closed statutory definition in the Institution of Legal Proceedings against certain Organs of State Act. It confirms that state-owned enterprises such as Eskom, which derive their functions from ordinary legislation rather than directly from the Constitution, are not entitled to statutory pre-litigation notice protections under the Act. The decision overrules the approach adopted in Pegma Thirteen Investments and reinforces the principle that legislation limiting the right of access to court must be interpreted narrowly. It also establishes that financial support and debt-relief mechanisms provided by National Treasury do not equate to statutory liability for an SOE's debts under s 1(1)(g).