Court dismisses Mchunu’s bid to halt IPP operations at Clanwilliam Dam

A high court application by Minister of Water and Sanitation Senzo Mchunu to stop the operations of an independent power producer (IPP) at Clanwilliam Dam has been dismissed with costs because of false testimony by the department’s chief director of engineering services.

Clackson Power holds a National Energy Regulations of South Africa (Nersa) licence, which is valid until the end of March 2028, for the operation of the hydropower plant at the dam.

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In terms of a power purchase agreement (PPA) concluded with the Cederberg Municipality in May 1998, Clackson Power sells all power generated by the power station to the municipality.

Clackson Power also concluded an operations agreement with the Department of Water and Sanitation (DWS) on 17 April 2001 to operate the plant.

Termination of the operations agreement required

The DWS has approved and embarked on a project to raise the dam wall by 13 metres, which will increase the yield of the dam by about 70 million cubic metres a year to augment water supplies to the Olifants River Irrigation Scheme and assist the development of resources for poor farmers.

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Remedial work to improve the dam’s safety is also required, all of which involve major construction works.

Mchunu’s founding papers said this project requires the termination of the operations agreement with Clackson Power, which resulted in the DWS addressing correspondence to Clackson Power terminating the agreement effective from 28 February 2022.

Follow-up letters were sent to Clackson Power, the most recent dated 13 September 2022, which again requested it to cease the power station operations and remove all the machinery from the site within 14 days.

Clackson Power responded in a letter dated 19 September 2022 in which it denied the DWS’s competence to terminate the operating agreement and refused to cease operations and vacate the property, leading to these court proceedings.

The operating agreement did not contain any provision at all related to its termination.

Mchunu claimed it was a contract of unspecified duration, and it was therefore a question of interpretation to ascertain what the intention of the parties was regarding termination.

He said the agreement contains no indication that the parties intended to be bound in perpetuity and, on a proper interpretation, a tacit term must be imported into the agreement to the effect that it would be terminable on reasonable notice by either party.

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Mchunu claimed reasonable notice of termination was given, the agreement has accordingly been lawfully terminated, and the DWS, as the property owner, is entitled to obtain an order that Clackson Power must cease its operations and vacate the property.

Necessary authority ‘lacking’

Clackson Power opposed the application and claimed the minister’s deponent “lacks the necessary authority to bring this application or depose the affidavit on behalf of the applicant [Mchunu]”.

It further said:

• Clackson Power has a Nersa licence, which is valid until March 2028 and authorises it to operate the hydropower plant and sell electricity to the municipality as well as four other clients;
• Clackson Power has a right to occupy the property and possess the land based on an agreement of servitude dated 31 March 1998, the contract of sale between it and the municipality dated 27 February 1998, the PPA dated 8 December 2011, and the operating agreement dated 17 April 2001;
• An “arrangement” has been reached that the DWS’s construction works will be managed in such a manner that Clackson Power will be able to proceed with its established business with minimal interruption; and
• The DWS’s intended construction works are unlawful.

Director-general or not?

In a judgment handed down on Wednesday, Judge DC Joubert only dealt with the issue of the authority of the minister’s deponent, Aloious Muwengwa Chaminuka.

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Joubert said Chaminuka, in his founding affidavit, stated that he is “an adult male Director-General of the Department of Water and Sanitation” and “I am duly authorised to depose to this affidavit and to institute the current application on behalf of the department”.

The judge said Clackson Power denied that Chaminuka is the director-general of the DWS, adding that it is public knowledge that this position is actually held by Dr Sean Phillips.

Judge Joubert said Clackson Power further pointed out that it appeared from one of the documents annexed to Mchunu’s own founding papers that Chaminuka is actually the “Chief-Director: Engineering Services”, which contradicts and disproves the statement made by Chaminuka under oath in his founding papers and “also shows that he [Chaminuka] was in fact not clothed with the necessary authority to bring the application on behalf of the Minister or to depose to the affidavit”.

Judge Joubert said “it is surprising, to say the least” that there was no attempt by Chaminuka in his replying affidavit to explain the false evidence given in his founding affidavit relating to his designation nor the purpose and effect of the general power of attorney and also no attempt at ratifying Chaminuka’s actions by an authorised official.

He said it is further simply incorrect for Chaminuka to deny, as he did in his replying affidavit, that he brought the proceedings on behalf of Mchunu.

“He based his authority on the false statement that he is the Director-General of the DWS,” said Joubert.

“When it appears so clearly from the papers, including the applicant’s [DWS] own papers, that the proceedings were not properly authorised, as it does in this matter, the application should be dismissed on that basis, and I do so.

“It is accordingly neither necessary nor sensible to deal with the remaining issues raised in this case.”

False evidence

Judge Joubert said Chaminuka falsely testified that he is the Director-General of the DWS and, on that basis, alleged authority to institute the proceedings on Mchunu’s behalf.

“When this was challenged by Clackson Power in its answering papers, one would have expected not only an explanation for the false evidence but also an apology, together with an attempt to rectify the problem by way of ratification of the proceedings by an authorised official.

“None of that was forthcoming, and instead, the Minister’s deponent [Chaminuka] simply changed tack by contending that the proceedings were instituted by the State Attorney on behalf of the Minister [Mchunu].

“In my view, this is the kind of conduct in litigating a matter that is deserving of an adverse special costs order,” he said.

Clanwilliam Dam legal challenges 

There have been other legal challenges to the Clanwilliam Dam project.

JSE-listed construction group Raubex lodged a high court application last year seeking an order compelling the DWS to provide reasons for the award of a tender for drilling and blasting for the Clanwilliam Dam foundation excavation and slope protection to a contractor whose bid price was a staggering R148.9 million more than its bid, the lowest and only other bid.

Phoenician submitted a bid of R807 590 184.50 for this tender. Raubex Construction submitted a bid of R658 657 543.57.

The department did not defend the application, which was intended to provide Raubex with information to determine if it should launch an application to review and set aside this tender award.

The DWS also concluded a settlement agreement in August 2023, which was made an order of the court to a high court application by Raubex to another Clanwilliam Dam tender awarded to Stefanutti Stocks.

Regarding that settlement agreement, the DWS had to launch a review within 10 days from the date of the order, which it confirmed it had done last year.

It followed Raubex’s application to the DWS for information about the award of this tender to enable it to determine if the award was fair, equitable and transparent.

Three bids were submitted for this tender. Raubex Construction submitted the lowest tender at R51 235 914.00. Stefanutti Stocks’ tender was the second lowest at R60 784 080.47.

This article was republished from Moneyweb. Read the original here