FirstRand Ltd t/a Rand Merchant Bank and Another v Scholtz NO and Others

• Jurisdiction: South Africa
• Court: Supreme Court of Appeal
• Judge: Harms JA, Farlam JA, Nugent JA, Combrinck JA and Malan AJA
• Judgment Date: 11 September 2006
• Citation: 2008 (2) SA 503 (SCA)
• Hearing Date: 24 August 2006
• Docket Number: 373/2005
• Counsel: BH Swart SC (with JWG Campbell SC) for the appellants. NGD Maritz SC (with JS Maritz) for the respondents.

Malan AJA:

[1] This is an application for leave to appeal which has been referred for G oral argument in terms of s 21(3)(c)(ii) of the Supreme Court Act 59 of 1959 against the order of Bertelsmann J: (1) declaring that the termination of the water supply of the respondents through the Lower Blyde River Pipeline Network by the appellants on 31 December 2004 H constituted a spoliation; (2) declaring that any such future termination without a final order of court would constitute a spoliation; (3) interdicting the appellants from terminating the said water supply without a final court order; and (4) ordering the appellants to pay the costs of the application. Bertelsmann J refused leave to appeal, hence this application. I

[2] The pipeline is a steel and concrete construction some 130 km long distributing water from the Blyde River Dam through an irrigation network to farmers and other users over an area of about 460 square kilometres. The first appellant, FirstRand Ltd, financed the construction J

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of A the pipeline and the second appellant, Blyde River Water Utility Co (Pty) Ltd, a wholly owned subsidiary of one of the first appellant's associated companies, is in control of the pipeline, its infrastructure, operation and maintenance. The first three respondents are the trustees of a trust (the trust). Both the trust and the fourth respondent own properties in the area serviced by the pipeline and use the water for their B farming operations.

[3] The flow of water from the pipeline to the individual farmers is controlled from a control room situated close to the Blyde River Dam wall and containing an isolating valve. No water can be released into the C pipeline when the valve is closed. The second appellant controls the operation of the valve. On each of the properties provided with water through the pipeline an irrigation off-take houses the equipment necessary to control the flow of water to those properties. The supply of water to each of them is regulated by control valves in the irrigation off-takes which can be controlled either manually or remotely by telemetry D signals. Sometime after midnight on 31 December 2004 the water supply to the respondents was cut off by the appellants' shutting off the control valves in the irrigation off-takes leading to their properties.

[4] By agreement reached on the next day the supply of water through the pipeline to the properties of the respondents was restored pending E resolution of the application by the respondents for restoration ante omnia. The respondents have as a consequence amended their notice of motion to seek, not a restoration order, but an order declaring that the conduct of the appellants constituted spoliation. The essence of the relief sought in prayer 1 therefore remained the same, ie whether the F appellants' conduct in terminating the water supply on 31 December 2004 constituted spoliation. The respondents have since the filing of their practice note and heads of argument abandoned paras 2 and 3 of the order appealed against. The matter is of considerable practical importance to the parties and counsel for the respondents correctly did not proceed with the argument that the appeal would have no practical G effect or result as envisaged by s 21A of the Supreme Court Act 59 of 1959.

[5] The respondents are members of the Blyde River Water Users Association (the WUA), the successor to the Blyde River Irrigation H Board, which is responsible for the supply of water to the respondents. [1] Before the construction of the pipeline the irrigation board and its successor, the WUA, supplied water to those entitled to it by means of a canal system and, to that effect, servitudes were registered in favour of the irrigation board over the land of the water users. Because the canal system was inefficient the irrigation board in March 1995 initiated a I

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project to construct an irrigation network by means of a pipeline, and the A first appellant was approached by the Department of Water Affairs and Forestry to finance it. The minister approved the construction of the pipeline and first appellant provided the finance for it.

[6] To give effect to the project a series of agreements was entered into B between the first appellant and the irrigation board: a partnership agreement between them; a construction agreement in terms of which the irrigation board undertook to oversee the construction of the pipeline as agent for the partnership; a works-lease agreement in terms of which the completed works were leased to the irrigation board against periodic rental payments; and a land-lease agreement in terms of which servitudes C over the land of the water users in favour of the irrigation board were leased to the partnership. For reasons that are not material the irrigation board withdrew from the project and the first appellant resolved to continue with the project as principal, completed the construction of the pipeline and appointed consulting engineers to operate it. The right of D the appellants to possess, operate and occupy the pipeline as well as the validity of the agreements in terms of which the pipeline was constructed and its ownership are the subject of other contested proceedings between the parties.

[7] From March 2003 water was supplied to certain farmers within the E irrigation area by way of the pipeline pursuant to interim agreements concluded by the first appellant with each of them. In January 2004, 80 farmers, including the trust and the fourth respondent, each concluded an agreement known as the Lower Blyde River Irrigation Pipeline Water Conveyance Agreement with the second appellant governing the F conveyance of water to them against payment of a fee for the period until 31 December 2004. The agreements expired on that day. Because the parties were unable to agree on the fee payable for the conveyance of water for 2005 the appellants indicated that they would cease such deliveries from 1 January 2005 and indeed did so after midnight on 31 December 2004. G

[8] The relevant terms of the water conveyance agreement are the following:

3

Use

3.1

The water user requires the use of the pipeline for the H conveyance by the water user for primary purposes on the farm/property specified in the schedule in respect of that number of hectares specified in the schedule ('the listed hectarage').

3.2

The water utility company [the second appellant] agrees, I subject to the terms and conditions set out in this agreement, to make use of the pipeline available to the water user for conveyance by the water user of the water which the water user requires in the manner and to the property referred to in clause 3.1, and the water user accepts such use from the water utility company. J

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4.

A Duration

The right of the water user to use the pipeline for the conveyance of water by the water user in terms of this agreement -

4.1

shall commence on 1 January 2004 ('the commencement date');

4.2

shall, unless terminated earlier in terms of this agreement, B terminate on...