South African Property Owners Association v Council of the City of Johannesburg Metropolitan Municipality and Others (2010/06597) [2011] ZAGPJHC 158; 2012 (3) SA 335 (GSJ) (24 May 2011)

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[2011] ZAGPJHC 158
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South African Property Owners Association v Council of the City of Johannesburg Metropolitan Municipality and Others (2010/06597) [2011] ZAGPJHC 158; 2012 (3) SA 335 (GSJ) (24 May 2011)

SOUTH GAUTENG HIGH COURT,
JOHANNESBURG
REPORTABLE
CASE NO
:
2010/06597
DATE:24/05/2011
In the matter between:
SOUTH
AFRICAN PROPERTY OWNERS ASSOCIATION
...............
Applicant
and
THE COUNCIL OF THE CITY OF JOHANNESBURG
METROPOLITAN
MUNICIPALITY
.............................................
First
Respondent
THE EXECUTIVE MAYOR OF THE CITY OF
JOHANNESBURG
METROPOLITAN MUNICIPALITY
.....
Second
Respondent
THE CITY OF JOHANNESBURG
METROPOLITAN
MUNICIPALITY
............................................
Third
Respondent
THE MEMBER OF THE EXECUTIVE COUNCIL
FOR LOCAL GOVERNMENT FOR THE
PROVINCE
OF
GAUTENG
......................................................
Fourth
Respondent
THE MEMBER OF THE EXECUTIVE COUNCIL
FOR
FINANCE FOR THE PROVINCE OF GAUTENG
..........
Fifth
Respondent
J U D G M E N T
MOSHIDI, J
:
INTRODUCTION
[1] The applicant seeks an order
firstly, to review and set aside the first respondent’s annual
budget for the year 2009/2010
as adopted by the first respondent at
its meeting held on 21 May 2009. Second, an order declaring null and
void and rescission
of the promulgation of the assessment rate tariff
amounting to R0,0154 in the Rand value of business, commercial and
industrial
properties. The latter properties are situated in the
third respondent’s area of jurisdiction. In the alternative,
to the
first prayer, the applicant seeks two further orders. First,
declaring that the first, second and third respondents failed to
comply with the prescribed legislative procedures and the principles
of legality when taking their decision on 21 May 2009 to increase
the
rate ratios applicable to business, commercial and industrial
properties from 3:1 to 3.5:1. The second alternative is an order

reviewing and setting aside the decision of the first respondent to
increase the rates ratio applicable to business, commercial
and
industrial property from 3:1 to 3.5:1.
THE PARTIES
[2] There is virtually no
dispute regarding the capacities of the respective parties to partake
in the present proceedings. The
same applies to their functions,
interests and roles in the matter. The applicant is the South African
Property Owners Association
(“
SAPOA
”),
an association incorporated not for gain in accordance with the
provisions of section 21 of the Companies Act 61 of 1973.
In the
founding papers, applicant’s chief executive officer, Mr N A
Gopal, describes the objectives of the applicant. These
objectives,
in the main include to actively represent, promote and protect the
commercial interests and activities of its members
within the
property industry. He says that fundamental to such protection is
the desire to obtain and foster recognition in all
the facets of
governmental governance of the principles relevant to a free and
democratic system. The bottom line in the context
of the present
matter is that the applicant seeks to ensure that the business and
industrial property sector’s rights are
recognised, and that
the role-players in that sector be treated fairly. The applicant,
with a membership representing approximately
90% of the commercial
and industrial property owners in South Africa, has regional
committees across the country. The membership
of the applicant
therefore predominantly consists of property-owning entities who, in
the main, are owners of commercial and industrial
properties in the
Republic of South Africa.
The first respondent is THE
COUNCIL OF THE CITY OF JOHANNESBURG METROPOLITAN MUNICIPALITY, a
body duly elected in terms of,
inter
alia
, section 22 of
the Local Government: Municipal Structures Act, 117 of 1998
(‘
Municipal
Structures Act
’),
and having as its objectives those set out in section 19 of the
Municipal Structures Act. The first respondent is
also the body
responsible for the approval of the third respondent’s annual
budget.
The second respondent is THE
EXECUTIVE MAYOR OF THE CITY OF JOHANNESBURG METROPOLITAN
MUNICIPALITY. The second respondent is
enjoined to exercise those
functions and powers as set out in section 56 of the Municipal
Structures Act. The second respondent
is cited herein in his
representative capacity as head of the first respondent and being
the person responsible for the tabling
of the third respondent’s
annual budget and any adjustments to the annual budget.
The third respondent is THE
CITY OF JOHANNESBURG METROPOLITAN MUNICIPALITY. The third
respondent is a category A municipality
as envisaged in section
155(1) of the Constitution of the Republic of South Africa, 108 of
1996 (‘
the
Constitution
’).
The fourth respondent is THE MEMBER OF THE EXECUTIVE COUNCIL FOR
LOCAL GOVERNMENT FOR THE PROVINCE OF GAUTENG, who is cited
herein
in her representative capacity as the person responsible for Local
Government in the Province of Gauteng.
The fifth respondent is THE
MEMBER OF THE EXECUTIVE COUNCIL FOR FINANCE FOR THE PROVINCE OF
GAUTENG, who is cited herein in
his/her representative capacity as
a person responsible for Local Government in the Province of
Gauteng.
2.6 No relief is claimed against both the fourth respondent and the
fifth respondent.
2.7 For the sake of convenience,
and unless specified where necessary, the first, second and third
respondents are referred to
henceforth, collectively as, “
The
City of Johannesburg
”.
THE ISSUES
[3] At the heart of the matter
are the events and processes followed by the first respondent leading
to its meeting held on 21
May 2009. It is common cause that at this
meeting the first respondent adopted its annual budget for the
financial year 2009/2010.
The crisp issue in this regard is whether
the City of Johannesburg when they increased the rate ratio where,
firstly, required
to comply with the legislative requirements relied
upon; and secondly, if so, whether they complied with the relevant
legislative
requirements.
[4] I must complete the nature
of the applicant’s relief by adding the following. At the end
of January 2011, the applicant
gave notice of an amendment of its
original notice of motion which incorporated a new prayer 1. The new
prayer seeks a declaratory
order that the first, second and third
respondents be precluded in terms of
section 19(1)(b)
of the
Local
Government: Municipal Property Rates Act 6 of 2004
, read with the
Municipal Property Rates Regulations on the Rate Ratio between
Residential and Non-Residential Properties published
in Government
Notice R636, Government Gazette 32061, from imposing property rates
on business, commercial and industrial properties
which exceeds a
rate ratio of 1:1. The amendment was not objected to and therefore
falls to be considered together with the rest
of the relief claimed.
[5] For the purposes of this
judgment, and henceforth, the term “
business
properties
” will
be used to indicate the category comprising business, industrial,
commercial, mixed use and “
business
sectional title
”
properties. This accords with the categories as defined in the City
of Johannesburg’s Rates Policy contained in Annexure
“FA3”,
and referred to later herein.
THE BUDGET PROCESS
[6] It is not in dispute that
the Municipal Council must at least 30 days prior to the commencement
of the budget year approve
the annual budget. In the context of the
instant matter, the annual budget is required to be approved by no
later than 31 May
of each year. In this instance the City of
Johannesburg tabled the annual budget (2009/2010) on 26 March 2009.
As required, it
contained a chapter specifically dealing with the
budget process. The chapter contains time frames for the approval of
the annual
budget set out in accordance with the requirements of
section 21 of the Local Government: Municipal Finance Management Act
56
of 2003 (“
the
MFMA
”). The
applicant has no qualms with the public participation process
followed up to this stage. However, the applicant contends
that the
subsequent events, with far-reaching changes to the proposed budget,
occurred with inadequate public participation and
without
consultation with particularly the applicant. These contentions, as
well as the City of Johannesburg’s response
thereto, are dealt
with later.
[7] The applicant equally has no
complaints regarding the City of Johannesburg’s proposal and
adoption of a 10% increase
in rates, across all categories of
properties in the budget, which occurred as follows. After the
meeting of the City of Johannesburg
on 26 March 2009, the accounting
officer of the City of Johannesburg published and made available the
tabled budgets to the public,
and invited the local community to
submit objections or representations. At the same time, the
accounting officer was further instructed
to submit the annual
budgets to the National and Provincial Treasury and other organs of
state. Thereafter the budgets, together
with such objections and
representations received had to be presented to the City of
Johannesburg, in particular, the first respondent,
for its
consideration and approval. The City of Johannesburg admit that the
accounting officer indeed submitted the annual budget
to the National
Treasury.
[8] At the same meeting of 26
March 2009, and prior to the tabling and noting of the annual
operating budget, the property rates
and rebates for the financial
year 2009/2010 were tabled. The minutes of the City of Johannesburg
show that at this meeting it
was resolved to accept the proposed
property rates and rebates (10% across all categories of properties).
This meant that the
rate in the Rand for business properties would
increase from 0,0120 cents in the Rand to 0,0132 cents in the Rand,
whilst residential
property, which reflected the same base rate,
would be increased from 0,004 cents in the Rand to 0,0044 cents in
the Rand. It
is also not in dispute that in terms of the applicable
legislative requirements, the tabled budget together with the
proposed increases
in the property rates were published in the local
media inviting the local community to become involved and submit
comments. It
was also resolved at the meeting that in the event of no
comments being received, that the proposed property rates be
published
in the Provincial Gazette with effect from 1 July 2009.
The closing date for objections and representations was the end of
April
2009. The City of Johannesburg’s meeting to adopt the
budget for 2009/2010 was 21 May 2009.
[9] On 6 May 2009, pursuant to
the completion of the public participation process (30/4/2009), the
Finance and Economic Development
Committee of the City of
Johannesburg was held. At this meeting the proposed 10% increase in
property rates was considered and
confirmed.
[10] What follows, and leading
up to the City of Johannesburg’s meeting held on 21 May 2009
(forming the subject-matter of
the present proceedings), is in
dispute. The applicant contends that during the meeting of 6 May 2009
no mention at all was made
by the City of Johannesburg of the
proposal to increase the rates on business property by an additional
18% over and above the
aforesaid 10%. The applicant contends that
the meeting of 6 May 2009 (meeting of the Finance and Economic
Development Committee)
was held after the City of Johannesburg had
already considered, discussed and agreed upon the contested and
additional increase
on business property rates. In support of its
contentions, the applicant refers to what became known as “
the
5 May Memorandum
”,
which I deal with instantly below.
[11] The May 5 Memorandum is
entitled, “
Alignment
of Commercial and Residential Property Rating
”,
and dated 5 May 2009. It is Annexure “FA11” to the
founding papers. The applicant contends it received a copy
of this
document fortuitously from the Johannesburg Chamber of Commerce on 7
May 2009. In the view of the applicant, the Memorandum
was rather
revealing and contains important statements which attempt to explain
and substantiate the alignment strategy therein
contained.
11.1 In the first paragraph of
the Memorandum, its purpose is stated as:
“
…
to review the alignment of the commercial and industrial property
rating structures so as to remain in line with the following key

principle embodied in the implementation of the Municipal Property
Rates Act, namely the retention of the rates contribution over
the
various sectors of the economy to the municipal tax base
”.
It explains that although the
Property Rates Act was implemented on 1 July 2008:
“
…
it was necessary for the Council to set its tariffs in advance of
the implementation of the Act
.
Accordingly, the rates
tariffs for the period 1 July 2008 to 30 June 2009 were premised on
the valuation roll that was prepared
but had not yet been subject to
the valuations objection process
”.
Further that:
“
The
tariffs for 2009/2010 were also premised on the valuation roll prior
to the objections being finalized. On this basis, a ten
percent
increase in the rates tariff across all categories of property was
proposed to Council at its March 2009 meeting
”.
The fifth paragraph of the
Memorandum states:
“
The
valuation roll was opened for objection during the period 27 February
2008 to 27 May 2008. The outcome of the objections only
finally
became evident at the end of April 2009 with the final revised
property valuations being entered into the Council’s
Billing
system. In total, a reduction in property valuations of some R88
billion was recorded. This equates to a revenue forfeiture
of
approximately R603 million.
”
11.2 The City of Johannesburg in the Memorandum then proceeds to
compare the property tax revenue per category for the year. The

comparison appears in the two tables reproduced as follows:
Sector
Modeled contribution
to Property Rates
Anticipated contribution
after Objection process
Variance in contribution to
total property rates
Business
R1,534,638,606
R1,343,250,124
-12%
Mixed Use
R127,870,323
R88,342,223
-31%
Business Sectional Title
R134,619,666
R91,855,637
-32%
Vacant
R867,905,351
R566,188,142
-35%
Residential
R1,056,245,027
R1,026,391,821
-3%
Residential Sectional Title
R252,066,820
R249,935,729
-1%
Sector
2006/2007
2007/2008
July 2008 to March 2009
Estimate 2009/2010 per
March 2009
Tariffs Proposal
Estimate 2009/2010 if Rates
Ratio Revised
Business
1,532,622,000
1,671,102,000
1,144,647,000
1,678,537,669
1,953,207,470
Residential
1,134,865,000
1,075,112,000
1,241,399,000
1,410,527,855
1,410,527,855
Vacant
269,459,000
317,621,000
476,348,000
622,806,957
622,806,957
Other
191,873,000
395,874,000
99,896,000
110,741,948
110,741,948
Total
3,128,819,000
3,459,709,000
2,962,290,000
3,822,614,429
4,097,284,230
CATEGORY
2006/2007
2007/2008
9 MONTHS TO MARCH 2009
BUDGET
2009/2010
PROPOSAL 2009/2010
Business
49%
48%
39%
41%
48%
Residential
36%
31%
42%
37%
34%
Vacant
9%
9%
16%
16%
15%
Other
6%
12%
3%
6%
3%
Total
100%
100%
100%
100%
100%
11.3 The Memorandum, in the reproduced table below, then sets out a
process in terms of which it calculates the percentage contribution

which the various categories of property owners previously
contributed to the annual budget. The table is reproduced as follows

below:
Business
48%
Residential
34%
Vacant
15%
Other
3%
Total
100%
The Memorandum then proceeds to
explain that the total contribution by business properties had
reduced during the nine month
period ending March 2009. The
explanation in this regard seems to be that the City of
Johannesburg regards the ratio in respect
of business properties to
be disproportionate to the other categories of property. On this
basis, the motivation and the reason
is put forward for the City of
Johannesburg’s proposal to increase the ratio rate from 3:1
to a ratio of 3:5:1 in respect
of business property. (There is
indeed a sharp contrast in argument about the ratio issue as seen
later.)
The Memorandum proceeds to state that:
“
The
impact of such a change in the ratio’s is that the business
property rates tariff would increase from the prevailing 1,2
cents in
the Rand to 1,54 cents in the Rand. This is an increase of 28%.
This however, has to be a once off adjustment in order
to restore
parity over the affected contributing sectors to the tax base.
Future changes to the rates tariffs will be related
to the Council’s
growth strategy, the Integrated Development Program and will be
implemented across all categories of property.
…
In conclusion:
It will be necessary for the
City to make changes to the tariff structure to ensure that it will
be able to meet its ongoing expenditure
and therefore service
delivery requirements;
Amend the ratio’s as
related to property rates is one instrument amongst other
initiatives.
This will necessitate that the
rates tariff report will have to be amended and presented to Mayoral
Committee and Council on 21
May 2009, for final approval. The
tariffs will have to be promulgated during June 2009 for
implementation on 1 July 2009. This
Memorandum is to solicit
comments from members of the business community since the submission
is a proposal. Comments should reach
our offices not later than
12h00 on Monday 11 May 2009.
”
The applicant, besides
complaining that the Memorandum was not sent to it as an important
role-player in the property industry,
attacks the document and its
handling by the City of Johannesburg on several grounds. Firstly,
that the City of Johannesburg
on realising that there would be a
significant shortfall of revenue as explained above, pursued an
ill-conceived exercise in
terms of which they sought ways and means
to implement the apparent deficit which had manifested itself.
That such solution
and approach is not only flawed and unjust, but
also discriminates against the property owners who hold property in
the same
category of property. Further, the applicant complains
that the Memorandum was also selectively and inadequately
published,
that it did not enjoy the wide distribution and
publication as required in terms of the Constitution and other
relevant legislative
provisions. That the City of Johannesburg
paid lip service to their obligation to seek and obtain comments
from members of
the business community.
The applicant also attacks the
contents of the Memorandum on the basis that the recorded reduction
in contribution by way of
rates from 48% to 39% by business
property, is not related to nor does it arise from the ratio which
had been previously determined
at 3:1. In this regard, the
applicant contends, rather strongly, that the reduction in revenue
to be derived from business
property arises from the fact that a
vast majority of business properties have been significantly
under-valued by the municipal
valuer whilst others are incorrectly
categorised for rating purposes in the records of the City of
Johannesburg. That, as
a consequence, for as long as a property is
under-valued, the owner of that property will continue to enjoy an
unfair advantage
in comparison to the property owner whose property
has been correctly valued. I deal in more detail later with the
controversy
regarding valuation of properties.
The applicant’s main bone
of contention is that the Memorandum was not sent to it as a main
role-player in the business
property industry. That the applicant
was excluded from the participation process. Further that the fact
that the draft budget
and amendments to the City of Johannesburg’s
Rates Policy had already been published and that comments thereon
had already
been invited, received and considered further resulted
therein that the community, including the applicant, did not
anticipated
further deliberations being invited. The applicant
suggests that it would have expected the City of Johannesburg to at
least
adhere to the same publication procedures in regard to the
Memorandum which they had followed during the earlier process when

the draft budget had been published for public comment. The
applicant also contends that the City of Johannesburg ought to
have
foreseen the shortfall in revenue but due to incompetent management
failed to do so.
[12] The City of Johannesburg
contend that once the initial public participation process ended on
30 April 2009, its then director
of Rates and Taxes, Ms Erika Naudé,
performed a calculation of the impact of the successful objections on
the rates income
for the 2008/2009 financial year in order to make a
projection for the 2009/2010 financial year. She prepared a report
entitled
“
Discussion
Document
” based
on her findings. She found that the effect of the corrections to the
valuation roll through successful objections
resulted in a predicted
revenue shortfall from property rates in the amount of R336 million.
Ms Naudé’s report was
distributed to other officials of
the City of Johannesburg, who prepared a further report entitled
“
2009/10 Draft
Budget-Pressures
”.
The total revenue shortfall was approximately R603 million. The
figure of R336 million mentioned above represented only
the shortfall
due to the successful objections, namely, corrections of
market-value. The City of Johannesburg then set about to
consider
various options to close the gap for the 2009/2010 budget. These
options included, reviewing the Rates Policy; correcting
sectional
title addresses, and further increases in the property rate tariffs.
The report then recommended that the business property
rates tariff
be increased to result in an increased ratio of 1:3.5 which would
result in 28% increase in the business tariff as
opposed to 10% in
other categories. All of this occurred whilst the public
consultations were in progress during April 2009 based
on the budget
as tabled.
The City of Johannesburg say that on 29 April 2009 invitations were
sent to members of the Johannesburg Business Forum and
a
representative of the applicant to a meeting on 5 May 2009 to
discuss a possible change in the tariff on business properties.
The
email invitation read:
“
You
are highly invited to a special meeting with Business re the property
Rates Tariff for 2009/10. The intention is to discuss
the proposed
property rates tariffs for the business category for the 2009/10
financial year. These proposals are not necessarily
the same as the
draft tariffs published for public comment.
”
The applicant did not attend the meeting.
The applicant has criticised Ms
Naudé, and questions her
bona
fides
in the manner
in which the invitation was sent out as well as the lateness
thereof. Further that the details of the proposed
increase were
not specified. The City of Johannesburg say that at that stage no
firm decision had been taken on the additional
increase. It was
only at the Mayoral Committee meeting on 7 May 2009, that a formal
proposal with regard to the additional
increase was made. At such
meeting of 7 May 2009, it was resolved,
inter
alia
, as follow:
“
1.
That the proposed Property Rates tariff be amended, that the
business current ratio of 1:3 for business is to increase to 1:3.5,

it would result in 28% increase on the business tariff as opposed to
the 10% on other categories.
2. That the approval be
granted to start the public participation process, in terms of
section 21 of Municipal Systems Act read
together with the Municipal
Finance Management Act, on the specific issues covered by the
report.
”
After the meeting of 5 May
2009, and on the same date, the City of Johannesburg’s Deputy
Director of Rates and Taxes,
Mr Florence, drafted the May 5
Memorandum, quoted above. The latter document was distributed by
email to various addresses
representing the business community. On
6 May 2009, a meeting was held with the Johannesburg Inner-City
Business Coalition,
at which Mr Florence again addressed the
audience. The May 5 Memorandum was circulated. The officials of
the City of Johannesburg
say that they regarded the applicant as
represented by Mr Richard Bennet because he was an executive member
of the National
Council of the applicant. I must point out that
there is a sharp contrast in versions on this aspect as Mr Bennet
in the replying
affidavit disputes that he in fact represented the
applicant at this meeting.
The City of Johannesburg advertised the proposal to re-align the
rates on business properties on 8 and 9 May 2009 in the Beeld

newspaper, The Star, The Sowetan and The Citizen newspapers.
Copies of the adverts are attached to the answering papers. The

notices invited submissions by 15 May 2009.
Several days before the
adoption of the budget, and on 15 May 2009, the City of
Johannesburg held a further meeting with the
Johannesburg Business
Forum. The attendance register contains the name of Mr Richard
Bennet on which basis the City of Johannesburg
contend that the
applicant was represented thereat. Once more, the applicant,
supported by Mr Richard Bennet, disputes that
Mr Bennet represented
it or had a mandate to do so. The applicant contends that Mr
Bennet attended the meeting as a representative
of iProp. Mr
Bennet, does however, serve on one of the applicant’s forums.
In any event, at the meeting the alignment
of business and
residential property rates were discussed. The intention with the
deadline mentioned above, the City of Johannesburg
say, was to
receive comments early enough to prepare a response for its council
meeting which was scheduled for 21 May 2009.
The City of Johannesburg, as a
consequence, received numerous comments to the proposed budget from
the local community. There
were comments arising from the Business
Forum meeting and the Johannesburg Inner-City Business Coalition on
the additional
18% increase.
It is common cause that on 21
May 2009 the City of Johannesburg approved the 2009/2010 budget
forming the subject-matter of
the instant proceedings. The City of
Johannesburg at the same time levied the rate for business
properties. This incorporated
the 28% increase from 0,0121 to
0,0154 cents in the Rand. The rates were later published in the
Provincial Gazette on 28 August
2009, as required by the Rates Act.
[13] I need to deal briefly with
certain events after the 5 May Memorandum, and before the adoption of
the budget on 21 May 2009.
On receipt of the 5 May Memorandum, the
issues advanced therein were considered by the Board of the
applicant. It was decided
to request an extension for the submission
of objections and comments. On 8 May 2009, the applicant’s
Legal Services Manager,
Mr T R Shilubane, sent an email to the City
of Johannesburg, requesting such extension. He was informed by Mr V
Hlophe of the
City of Johannesburg that the cut-off date (15 May
2009) had been agreed, and that no extension of time would be
afforded to the
applicant.
On 15 May 2009 the applicant,
through its attorneys of record, dispatched a further letter to the
City of Johannesburg requesting
an extension of time in order to
properly consider the proposal and possibly comment thereon. On 15
May 2009, the applicant
addressed a letter to the City of
Johannesburg which read,
inter
alia
, that:
“
SAPOA
has a membership database of over 900 members and we hereby request
an extension of the period afforded for comments in the

abovementioned notice, as insufficient time has been provided to
properly circulate and assess the proposal and to submit appropriate

comments to the COJ. As the proposal relates to the increase in
property rates, the council is obliged to follow a process of
Public
Participation in terms of section 4 and 5 of the Municipal Property
Rates Act 2004. In this regard the general public must
be provided
with
not less than 30 days
wherein comments and representation can be made to the council.
After consultation with our attorneys, we wish to advise you that

your proposal and/or various aspects thereof are impermissible as
there is no legal justification or basis therefor. We would
have
expected the COJ to base its budget on a valuation roll that has been
settled after the objection process. We are currently
considering
these aspects and it is imperative that a properly considered and
well-reasoned opinion be obtained for submission
to the council.
”
This letter evoked no response
from the City of Johannesburg. The applicant contends that it was
not party to the agreement regarding
the cut-off date of 15 May 2009.
The City of Johannesburg submit that the letter was not responded to
because it would have served
no useful purpose to meet a
representative of the applicant.
13.2 The applicant addressed
several letters to the City of Johannesburg, all resulting in no
tangible response. In August 2009
various members of the applicant
reported to the applicant that the proposal in the 5 May Memorandum
had been implemented, and
that the business property rates had been
increased by 28%. The applicant contends that the City of
Johannesburg failed to properly
advertise and publish the contents of
the 5 May Memorandum, and also failed to afford members of the public
sufficient opportunity
to comment on the proposals made and their
failure to consider and allow debate on the proposed increase of 28%.
The applicant
contends that the fact that the draft budget and
amendments to the Rates Policy had already been published, and that
the comments
thereon had already been invited, received, probably
considered, the applicant could not be expected to anticipate any
further
publication regarding further invitations for comments.
Further that, in any event, as the budgetary process for 2009/2010
had
substantially run its course, with the community having provided
its comments on the draft budget as tabled and published, it was
not
reasonable for the City of Johannesburg to spring such a grave matter
on the community, and the applicant, at such late stage
with little
or no time to appropriately consider and comment thereon. Although
the applicant and its members were contend to accept
the original 10%
increase on business property rates, it did not expect an additional
18% increase, resulting in a total 28% increase
on rates in respect
of business property.
[14] Having dealt rather
extensively with the factual allegations of the respective parties, I
proceed to deal with the procedure
to be followed by the City of
Johannesburg when adopting an annual budget, as well as the public
participation process. In this
regard, various legislative
requirements come into play. The City of Johannesburg’s Rates
Policy also finds application.
[15] The Constitution bestows local government with original powers
to impose rates and taxes. In this regard, section 229 of
the
Constitution provides:
“
(1)
Subject to subsections (2), (3) and (4) a municipality may impose –
(a) rates on property and surcharges on fees for services
provided by or on behalf of the municipality; and
if authorised by national legislation, other taxes, levies and
duties appropriate to local government or the category of local
government into which that municipality falls, but no municipality
may impose income tax, value-added tax, general sales tax or
customs
duty.
(2) The power of a
municipality to impose rates on property, surcharges on fees for
services provided by or on behalf of the municipality,
or other
taxes, levies or duties -
may not be exercised in any
way that materially and unreasonably prejudices national economic
policies, economic activities across
municipality boundaries, or the
national mobility of goods, services, capital or labour; and
may be regulated by national legislation.
(3 and 4)
(Not
directly applicable).
(5) National legislation
envisaged in this section may be enacted only after organised local
government and the Financial and Fiscal
Commission have been
consulted; and any recommendations of the Commission have been
considered.
”
In
Fedsure
Life Assurance v Greater Johannesburg TMC
[1998] ZACC 17
;
1999 (1) SA 374
(CC) at para
[45]
the Court said:
“
[
45]
It seems plain that when a legislature, whether national, provincial
or local, exercises the power to raise taxes or rates,
or determines
appropriations to be made out of public funds, it is exercising a
power that under our Constitution is a power peculiar
to elected
legislative bodies. It is a power that is exercised by democratically
elected representatives after due deliberation.
There is no dispute
that the rate, the levy and the subsidy under consideration in this
case were determined in such a way. It
does not seem to us that such
action of the municipal legislatures, in resolving to set the rates,
to levy the contribution and
to pay a subsidy out of public funds,
can be classed as administrative action as contemplated by s 24 of
the interim Constitution.
In the past, of course, the action of a
municipal council in setting rates was considered to be an action
that was subject to judicial
review on the principles of
administrative law, but the principles upon which that jurisprudence
was based are no longer applicable
as we have outlined above. It
follows that the imposition of the rates and the
A
levies and
the payment of the subsidies did not constitute 'administrative
action' under s 24 of the interim Constitution.
”
In
City
of Cape Town v Robertson
[2004] ZACC 21
;
2005 (2) SA 323
(CC), the powers of municipalities in matters of this
nature, were further set out at para [59] as follows:
“
…
The Constitution expressly precludes the national or a provincial
government from impeding the proper exercise of powers and functions

of municipalities. Thus a municipality has the right to govern the
local government affairs of its area and community.
Subsection
151(3) of the Constitution states:
'A municipality has the
right to govern, on its own initiative, the local government affairs
of its community, subject to national
and provincial legislation, as
provided for in the Constitution.'
However, the duties, powers
and rights of municipalities have to be exercised subject to national
or provincial legislation as provided
for in the Constitution.
”
15.1 From the above decisions,
it follows that the relief sought by the applicant, namely to review
and set aside the City of Johannesburg’s
decision to levy the
rate on business properties, is therefore not governed by the
provisions of the Promotion of Administration
Justice Act 3 of 2000.
The main enquiry by this Court is therefore limited to the question
whether the legislative requirements
and the Rates Policy of the City
of Johannesburg have been complied with by the City of Johannesburg.
15.2 In the main, two pieces of
legislation come into play. The first is the Local Government:
Municipal Property Rates Act
6 of 2004 (“
the
Rates Act
”),
also referred to as such earlier in this judgment. The other is the
MFMA. In the heads of argument counsel for the applicant
has
correctly and chronologically set out the provisions of the Rates Act
on which applicant relies. I find it convenient to follow
such
approach.
15.3 Section 1 of the Rates Act
defines “
rate
”
as “
means a
municipal rate on property envisaged in section 229(1)(a) of the
Constitution
”,
whilst rateable property denotes “
property
on which a municipality may in terms of section 2 levy a rate
”.
In dealing with the powers of a municipality to impose rates,
section 2 of the Rates Act provides as follows:
“
(1)
A metropolitan or local municipality may levy a rate on property in
its area.
(Not applicable)
A municipality must exercise its power to levy a rate on
property subject to –
(a) section 229 and any other applicable provisions of the
Constitution;
(b) the provisions of
this Act; and
(c) the rates policy it must
adopt in terms of section 3.
”
Relevant to the present matter
are subsections (1) and (2)(a)-(d), of section 8 which provide that:
“
(1)
Subject to section 19, a municipality may in terms of the criteria
set out in its rates policy levy different rates for different

categories of rateable property, which may include categories
determined according to the –
use of the property;
permitted use of the
property; or
geographical area in which the property is situated.
Categories of rateable property that may be determined in terms
of subsection (1) include the following:
Residential properties;
industrial properties;
business and commercial properties;
farm properties used for –
(i) agricultural purposes;
(ii) other business and commercial purposes;
residential purposes; or
(iv) purposes other than
those specified in subparagraphs (i) to (ii) …
”
Rates are expressed, imposed and
recovered by means of cents in the Rand value which the city valuer
has ascribed to a property.
The rate will be referred to as the base
rate, where necessary, being the cents in the Rand value.
Residential properties is
required to be equal to the base rate and
appears always to be at the rate ratio of 1:1.
15.2 In furthering its
contentions, the applicant continues to rely on various other
provisions of the Rates Act. Section 12 provides
that the rate
adopted by the municipality shall be levied for that particular year
only. This ensures that the municipality determines
what amount of
revenue is required in order to meet its expenses for the year; once
the demand has been established the municipality
will revise, and
consider possible increases to the base rate; in doing so, the
municipality determines the base rate it should
apply for the next
financial year in order to generate sufficient revenue to enable it
to meet its budgeted expenditure; and for
this reason, so the
argument proceeds, section 12(2) of the Rates Act enjoins a
municipality to annually review its base rate in
conjunction with the
annual budget. The applicant places great emphasis on the provision
that the municipality must, “
review
the amount in the Rand of its current rates in line with its annual
budget for the next financial year
”.
[16] The applicant’s main
attack, albeit somewhat belated, is that the City of Johannesburg is
precluded by the Rates Act
from imposing a rate ratio on
non-residential properties which exceeds the rate ratio imposed upon
residential property. Section
19 of the Rates Act provides as
follows:
“
19.
Impermissible
differentiation
A municipality may not levy –
different rates on residential properties, except as provided
for in sections 11(2), 21 and 89;
a rate on a category of
non-residential properties that exceeds a prescribed ratio to the
rate on residential properties determined
in terms of section
11(1)(a): Provided that different rates may be set in respect of
different categories of non-residential
properties;
rates which unreasonably discriminate between categories of
non-residential properties; or
additional rates except as provided for in section 22.
(2) The ratio referred to in
subsection (1)(b) may only be prescribed with the concurrence of the
Minister of Finance.
”
It is not in dispute that the
imposition and determination of property rates has over the recent
past years been the subject of
radical and fundamental changes. The
most important of which is arguably the manner in which the rateable
property is to be valued.
As opposed to valuations based on the land
value section 11 of the Rates Act now provides that a rate levied by
a municipality
on a property must be an amount in the Rand, “
on
the market-value of the property
”.
[17] The applicant argues that
in terms of section 8(1) of the Rates Act, a municipality may,
subject to section 19, and in terms
of the criteria set out in the
City of Johannesburg’s Rates Policy levy different rates for
different categories of rateable
property. The categories may be
determined according to the use of the property, the permitted use of
the property or the geographical
area in which the property is
situated.
[18] The applicant further
argues that in interpreting the above provisions, the true intention
of the legislature should be established.
Such intention is to be
found in the ordinary, literal and grammatical meaning of the words
used in the statute. This approach
is indeed correct. See
inter
alia, Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs
[2004] ZACC 15
;
2004 (4) SA 490
(CC)
at para
[89]
, where regard was also had to the broader context of the
legislation concerned, the purpose, scope, and even the background of
the legislation,
(section 18
of the
Marine Living Resources Act 18 of
1998
).
[19] Further that in terms of
section 19(2) of the Rates Act, the ratio referred to in section
19(1)(b), only be prescribed with
the concurrence of the Minister of
Finance. Save for the determination of a ratio in the Municipal
Property Rates Regulations
on the Rate Ratio between Residential and
Non-Residential Properties which the applicant contends clearly shows
a prescription
with the concurrence of the Minister of Finance. The
latter published the Regulations in GN R363 in Government Gazette
32061 of
27 March 2009 in which the rate ratio for residential
property was fixed at a ratio of 1:1 and agricultural property at
1:0.25
with public service infrastructure property at 1:0.25. The
rate ratio for residential property, as above, the applicant calls
the base ratio. This, together with other ratios for other property
categories, the applicant argues is in line with the provisions
of
section 19(1)(b) of the Rates Act.
[20] In the context of the
present matter, the applicant argues further that the City of
Johannesburg have determined and fixed
the ratio for business
properties, notwithstanding their understanding of section 19(1)(b),
at the rate ratio of 1:3.5. The applicant
argues therefore that the
ratio fixed for the business property clearly and substantially
exceeds that of residential property,
which offends not only the
provisions of section 19(1)(b) of the Rates Act, but also the very
essence of equality enshrined in
the Constitution. The applicant
submits on these grounds that the determination and the fixing of the
rate ratio for business
property at a rate of 1:3.5 is in fact not
permitted by the applicable legislation, and is thus
ultra
vires
and unlawful,
with the result that it calls to be set aside by this Court. It is,
at this stage, significant to note without proceeding
into detail,
that the City of Johannesburg’s response to this argument in
the answering papers is as follows:
“
I
also point out that what is determined by the municipality in terms
of the Rates Act is a rate in the Rand and not a ratio. The
latter
is an inference from two rates. It has its origin and function (as a
cap on differential rates) in section 19(1)(b) of
the Rates Act.
”
[21] I deal with the applicant’s
alternative attack. This is that the decision by the City of
Johannesburg to increase the
rate ratio to business properties from
1:3 to 1:3.5 is null and void. This submission is based on what the
applicant contends
to be the non-compliance by the City of
Johannesburg with the requirements of sections 20 and 21 of the Local
Government: Municipal
Systems Act 32 of 2000 (“
the
Systems Act
”).
It is appropriate to reproduce these sections. Section 20 provides:
“
20.
Admission of
public to meetings
-
(1) Meetings of a municipal council and those of its committees are
open to the public, including the media, and the council or
such
committee may not exclude the public, including the media, from a
meeting, except when –
it is reasonable to do so having regard to the nature of the
business being transacted; and
a by-law or a resolution of the council specifying the
circumstances in which the council or such committee may close a
meeting
and which complies with paragraph (a), authorises the
council or such committee to close a meeting to the public.
(2) A municipal council, or a
committee of the council, may not exclude the public, including the
media, when considering or voting
on any of the following matters:
Draft by-law in the council;
a budget tabled in the council;
a municipality’s draft integrated development plan, or any
amendment of the plan, tabled in the council;
the municipality’s draft performance management system, or
any amendment of the system, tabled in the council;
the decision to enter into a
service delivery agreement referred to in section 76(b); or
any other matter prescribed by regulation.
(3) An executive committee
mentioned in section 42 of the Municipal Structures Act and a mayoral
committee mentioned in section
60 of the that Act may, subject to
subsection (1)(a), close any or all of its meetings to the public,
including the media.
(4) A municipal council -
within the financial and administrative capacity of the
municipality, must provide space for the public in the chambers and
places
where the council and its committees meet; and
(b) may take reasonable steps
to regulate public access to, and public conduct at, meetings of the
council and committees.
”
[22] From the above provisions
it is plain that meetings of the City of Johannesburg and its
committees whereat issues such as
a draft by-law or a tabled budged
are discussed are open to the public and the media. There are,
however, exceptions where the
public and the media may be excluded if
it is, in the view of the council, reasonable to do so, taking into
account the nature
of the business to be discussed. An executive
committee of the council also has the discretion to close any or all
of its meetings
to the public and the media. Once more, there must
be reasonable grounds for doing so as envisaged in subsection (1)(a)
quoted
above. What is of particular significance are the provisions
of subsection (4)(b) which provide that the council “
may
take reasonable steps to regulate public access to, and public
conduct at, meetings of the council and its subcommittees
”.
[23] Section 21 of the Systems Act provides as follows:
“
21.
Communications
to local community
.
- (1) When anything must be notified by a municipality through the
media to the local community in terms of this Act or any other

applicable legislation, it must be done -
in the local newspaper or newspapers of its area;
in a newspaper or newspapers
circulating in its area and determined by the council as a newspaper
of record; or
by means of radio broadcasts
covering the area of the municipality.
(2) Any such notification
must be in the official languages determined by the council, having
regard to the language preferences
and usage within its area.
(3) A copy of every notice that must be published in the
Provincial Gazette or the media in terms of this Act or any other
applicable
legislation, must be displayed at the municipal offices.
(4) When the municipality
invites the local community to submit written comments or
representations on any matter before the council,
it must be stated
in the invitation that any person who cannot write may come during
working hours to a place where a staff member
or the municipality
named in the invitation, will assist that person to transcribe that
person’s comments or representations.
(5) (a) When a municipality
requires a form to be completed by a member of the local community, a
staff member of the municipality
must give reasonable assistance to
persons who cannot read or write, to enable such persons to
understand and complete the form.
(b) If the form relates to
the payment of money to the municipality or to the provision of any
service, the assistance must include
an explanation of its terms and
conditions.
”
These provisions,
inter
alia
, emphasise the
mode of communication with local communities, the publication thereof
in newspapers or radio broadcasts and Provincial
Gazette. It also,
very importantly, obliges the municipality when it invites the local
community to submit written comments or
representations on any matter
before the council, to ensure that assistance is available to
illiterate persons.
[24] The above provisions
clearly deal with the community participation process. The applicant,
argues that section 16 of the Systems
Act requires a municipality to
develop a culture of community participation in its affairs. Section
17 of the Systems Act sets
out the mechanisms, processes and
procedures, being the means by which community participation may be
established. The applicant
argues that the right of members of the
local community to be involved in and to participate in the affairs
of the municipality
is expressly recognised in section 5 of the
Systems Act.
[25] As mentioned before, the
applicant is plainly not unhappy with the publication of the public
participation process followed
by the City of Johannesburg in
announcing the original 10% increase in respect of rates for all
property categories. The 30/4/2009
was the date when comments,
following upon the public participation process were due. The
comments received consequent to the
public participation process
indicated that in most instances a 10% increase, albeit on the high
side, was generally acceptable
to the public. It is indeed what
followed after 30 April 2009, leading to the City of Johannesburg’s
decision to levy a
further 18% increase rate on property in the
business category, that is the bone of contention. The applicant
contends that the
process was unfair, not adequately publicised,
discriminatory, and prejudicial towards business property owners.
Further that
prescribed requirements in the applicable legislation
was not followed by the City of Johannesburg in reaching the
decision. The
applicant emphasises and argues that the rates and
taxes are not a bottomless pit from which the authorities can
unreservedly draw
revenue. In reference to
Mercian
Investments (Pty) Ltd v Johannesburg City Council
1990 (1) SA 560
(W), the applicant argues that the funds received in
the form of rates and taxes equate to trust money. That a statutory
body is
obliged to recover “
and
to apply in accordance with its statutory powers and duties
”
the revenue received. Further that in terms of section 195 of the
Constitution a municipality is enjoined to apply its resources
in an
efficient, economic and effective manner.
[26] The applicant’s
grouse is that whilst the process leading to the initial announced
increase of 10% in rates and taxes
across the board, as described
above, was underway, objections to the valuation roll were being
considered and finalised. That
it was a known fact to the City of
Johannesburg that the values had been or would be increased
substantially. A reduction of approximately
R34 billion in total on
business property values had been conceded by the City of
Johannesburg valuer by 16 March 2009. This,
according to the
applicant, resulted in a substantial reduction in the anticipated
income to be derived from rates and taxes.
Based hereon, the
applicant submits that it must have been patently obvious to all that
the reduction in income stream of the City
of Johannesburg would be
substantial with dire consequences in the event of no swift remedial
action being taken. That notwithstanding
such knowledge, the City of
Johannesburg, on 26 March 2009 approved its operating budget with no
proposed remedial action. The
applicant has serious concerns about
the City of Johannesburg’s valuation roll as well as the
supplementary valuation roll
at the time.
[27] The 5 May 2009 Memorandum
was discussed earlier in this judgment. The applicant contends that
it was only after the completion
of the public participation process
that the Memorandum was published. Further that in the Memorandum the
City of Johannesburg
makes no mention of an intention to increase the
rate ratio applicable to business properties. That if it is accepted
that a differentiation
in rates is permitted above the base ratio of
1:1, in that a re-alignment is permissible, as contended by the City
of Johannesburg,
then one would have expected the ratio between
business properties and/or residential properties to have been
addressed at a much
earlier date, prior to the commencement of the
budgetary process. It was surprising, says the applicant, that at
the meeting of
6 May 2009 a committee of the City of Johannesburg met
in order to consider the annual draft budget. At such meeting the
committee
considered the results from the public participation
process, and proceeded to approve and adopt a draft budget for
submission
and final approval by the City of Johannesburg on 21 May
2009.
[28] Based on the above, the
applicant argues that the conduct of the City of Johannesburg is not
only grossly irresponsible but
negated the rights of the public to be
consulted. That by the very latest on 9 April 2009, when Ms Naudé
prepared and published
her discussion document, the public
participation process should have been halted and the public informed
of the discovery made
(the deficit). The discussion document, “FA10”
to the founding papers, is entitled, “
Determination
of Property Rates and Rebates For 2009/10
”.
In terms of this document, the Finance and Economic Development
Committee of the City of Johannesburg, resolved to recommend
to the
City of Johannesburg that the rates for business properties and
residential properties be 0,0132, and 0,0044, respectively,
for the
financial year 2009/2010. The applicant argues that the discussion
document should have been accompanied by a clear and
unambiguous
indication that the budgetary process would have to be adjusted for
consideration. The City of Johannesburg therefore
failed to inform
the public timeously resulting in the public being lulled into a
false sense of security and satisfaction pertaining
to their future
obligations with reference to the payment of rates and taxes.
[29] It is not in dispute, as
contended by the City of Johannesburg, that the proposed amendments
to the property rates tariffs
for 2009/2010, were handed out by Mr
Florence of the City of Johannesburg at the Business Forum meeting on
5 May 2009. This is
the proposal for a 28% increase in respect of
business properties. It is Annexure “M15” to the
answering papers. The
proposed increase contained in Annexure
“FA11”, entitled “
Alignment
of Commercial and Residential Property Rating
”
as stated above, was also drafted by Mr Florence on 5 May 2009 after
the meeting referred to above. There was also a meeting
called by
the Johannesburg Inner-City Business Coalition on 6 May 2009 whereat
Annexure “FA11” was distributed. Annexure
“FA11”
was also distributed by email to various addresses representing the
business community. The mailing list shows
that Annexure “FA11”
was also forwarded to Mr R Bennet who is a member of the National
Council of the applicant. However,
as indicated previously, both the
applicant and Mr Bennet deny that Mr Bennet was mandated to represent
the applicant at any meeting
to discuss the proposed increase in
business property rates ratio. The applicant contends that the
distribution and circulation
of Annexure “FA11”, by the
City of Johannesburg was a half-hearted attempt if compared to the
earlier public participation
process. It is consequently, the
applicant’s contention that the City of Johannesburg even
though they have so-called original
powers to impose and recover
rates, have not complied with the applicable prescriptive legislation
and procedures. The increase
to 1:3.5 of the rate ratio to business
properties resulted in a total increase equalling 28% in the rates
and taxed payable by
business property owners.
[30] The City of Johannesburg,
on the other hand, counters extensively, and in my view,
persuasively, the contentions of the applicant
as detailed above. As
seen hereunder, they also introduce the argument that the applicant
in fact misinterprets the provisions
of section 19(1) of the Rates
Act. In the view of the City of Johannesburg, the current proceedings
instituted by the applicant
against their decision can only be
subject to a review to test the legality of the decision taken on 21
May 2009 under the Constitution.
See
Fedsure
Life Assurance v Greater Johannesburg TMC (supra)
,
at paras [45] and [59]. As a consequence, the City of Johannesburg
contend that the inquiry to be conducted by the Court is directed

solely at the question whether the requirements of the MFMA and the
Rates Act have been complied with. Since I agree with this
approach,
I proceed to conduct such inquiry.
[31] The Rates Act, quoted
extensively in the applicant’s argument, came into operation on
2 July 2005. It changed the basis
of valuation of property
fundamentally, as indicated earlier in this judgment. The City of
Johannesburg had to compile a new valuation
roll. At that stage
there were approximately 800,00,00, properties in Johannesburg. All
properties had to be re-valued. Under
the Rates Act there are
different rates for different property categories. Rates on
individual sectional title units for which
unit owners are liable
were levied for the first time under the Rates Act. The preliminary,
first valuation roll prepared under
the Rates Act was open for an
unofficial inspection period from September to October 2007. That
valuation roll became effective
on 1 July 2008. It had additionally
been open for inspection for 90 days from 27 February 2008 to 27 May
2008. As a result of
the innovation brought about by the Rates Act,
the financial year 1 July 2008 to 30 June 2009 was the first year
during which rates
were levied on values in the new valuation roll.
This is not in dispute.
[32] The following contentions
of the City of Johannesburg are equally not seriously disputed. When
the period for objections
expired, some 22 448 objections to
properties had been received, which objections had to be processed in
terms of section 51 of
the Rates Act by the municipal valuer. There
were successful objections by property owners. The process was only
completed in
March 2009, less than two months before the City of
Johannesburg approved the 2009/2010 budget now under discussion. The
City of
Johannesburg contend that at that stage, the full effect of
such objections could not have been known before. They had service

capacity problems. However, the applicant disputes this and instead
contends that all the alleged challenges were caused by mismanagement

and incompetence on the part of the City of Johannesburg.
[33] The City of Johannesburg
say that based on the above delayed process, the 2009/2010 budget was
based on rates income derived
from the 2008 valuation roll which was
still largely untested. The 2008/2009 budget and rates income were
used as a starting-point
for the compilation of the 2009/2010 budget.
The theoretical calculation of income based on various rates and
tariffs for purposes
of the 2009/2010 budget had to be undertaken
already in January 2009 because of the lead time for the submission
of reports to
the Mayoral Committee and council’s Committee.
[34] The City of Johannesburg
argue that on a proper interpretation of the MFMA and the Rates Act,
public participation is indeed
required in respect of the proposed or
tabled budget but not the levying of the rates. This presents a
fundamental difference
in the interpretation of the applicable
legislation adopted by the respective parties. There is a difference
between the “
approval
of an annual budget
”
which is regulated by section 24 of the MFMA, and the decision to
levy a rate which is taken by a municipal council in terms
of section
14(1) of the Rates Act.
[35] Section 24 of the MFMA provides as follows:
“
(1)
A municipal council must at least 30 days before the start of the
budget year consider approval of the annual budget.
(2) An annual budget -
must be approved before the start of the budget year;
is approved by the adoption by the council of a resolution
referred to in section 17(3)(a)(i); and
must be approved together with the adoption of resolutions as may
be necessary –
imposing any municipal tax for the budget year;
setting any municipal
tariffs for the budget year;
approving measurable
performance objectives for revenue from each source and for each
vote in the budget;
approving any changes to the municipality’s integrated
development plan; and
approving any changes to the
municipality’s budget-related policies.
(3) The accounting officer of
a municipality must submit the approved annual budget to the National
Treasury and the relevant provincial
treasury.
”
Emphasis is placed on “
together
with
” in
subsection (2)(c) quoted above. In terms of section 1 of the MFMA,
“
municipal tax
”
means property rates or other rates, levies or duties that a
municipality may impose. It is clear that a “
tax
”
includes property rates. For example, in
City
Treasurer and Rates Collector, Newcastle Town Council v Shaikjee and
Others
1983 (1) SA 506
(N), Kumleben J at 507F-G said:
“
The
crisp question to be decided is whether such ‘rates’ are
a form of ‘taxation imposed or levied’ within
the meaning
of this phrase in the said subsection. I have no doubt that they
are.
”
On the other hand, a “
tariff
”
is the remuneration for municipal services. See sections 73 and 86A
of the Systems Act.
[36] The wording of section
24(c) of the MFMA, quoted above, shows the intention that the
imposition of rates is not a part of
the budget. So too does section
17(3), under Chapter 4, which deals with “
municipal
budgets
”.
Section 17(3) of the MFMA prescribes the documents which should
accompany the annual budget when it is tabled in terms
of section
16(2) which provides:
“
In
order for a municipality to comply with subsection (1), the mayor of
the municipality must table the annual budget at the council
meeting
at least 90 days before the start of the budget year.
”
The documents include draft
resolutions “
imposing
any municipal tax and setting out municipal tariffs as may be
required for the budget year
”.
[37] Further provisions of the Rates Act come into play. Section 12
provides:
“
(1)
When levying rates, a municipality must levy the rate for a
financial year. A rate lapses at the end of the financial year
for
which it was levied.
(2) The levying of rates must
form part of a municipality’s annual budget process as set out
in Chapter 4 of the Municipal
Finance Management Act. A municipality
must annually at the time of its budget process review the amount in
the Rand of its current
rates in line with its annual budget for the
next financial year.
(3) A rate levied for a
financial year may be increased during the financial year only as
provided for in section 28(6) of the
Municipal Finance Management
Act.
”
It is clear that the levying of a
rate is for a single financial year (in the context of the present
matter 2009/2010), and that
a rate, once levied, lapses at the end of
the relevant financial year. Further that the levying of rates must
form part of a municipality’s
annual budget process. Section 14
of the Rates Act provides as follows:
“
(1)
A rate is levied by a municipality by resolution passed by a
municipal council with a supporting vote of a majority of its

members.
(2) A resolution levying rates in a municipality must be
promulgated by publishing the resolution in the Provincial Gazette.
(3) Whenever a municipality passes a resolution in terms of
subsection (1), the municipal manager must, without delay -
(a) conspicuously display the
resolution for a period of at least 30 days -
(i) at the municipality’s
head and satellite offices and libraries; and
(ii) if the municipality has
an official web site or a web site available to it as envisaged in
section 21B of the Municipal Systems
Act, on that web site; and
(b) advertise in the media a notice stating that -
(i) a resolution levying a
rate on property has been passed by the council; and
(ii) the resolution is
available at the municipality’s head and satellite offices and
libraries for public inspection during
office hours and, if the
municipality has an official web site or a web site available to it,
that resolution is also available
on that web site.
”
From these provisions, it is
plain that a rate is levied by a municipality by a resolution passed
by it. It is obligatory that such
resolution be promulgated by
publication in the Provincial Gazette. It is equally obligatory that
such a resolution be, not only
conspicuously displayed as indicated
in subsection (3), by the municipal manager, but also advertised in
the media. It is rather
significant to note that in the context of
the present matter, there is no corresponding requirement for the
annual budget. There
is also no public participation requirement save
for the publication and advertisement of the resolution. Publication
is required
after the resolution has been passed. The resolution to
levy a rate is part of the budget process but it is not a budget
decision.
The municipality must in terms of subsection (12)(2) of
the Rates Act, annually at the time of its budget process review the
amount
in the Rand of its current rates in line with its annual
budget for the next financial year. Section 160 of the Constitution
equally
distinguishes between the approval of budgets and the
imposition of rates by a municipality council.
[38] The City of Johannesburg
argue that in order to interpret the words “
in
line with
”
contained in subsection 12(2) of the Rates Act, according to the
purpose the section says, it is necessary to determine
what part of
the budget process the rates are. It contends that the budget is the
estimate of the expenditure for the next financial
year as envisaged
in section 18 of the MFMA which deals with the funding of
expenditure. Section 18(1)(a) of the MFMA provides
that:
“
An
annual budget may only be funded from –
(a) realistically
anticipated revenues to be allocated
”,
while section 18(2) provides that:
“
Revenue
projections in the budget must be realistic, taking into account –
(a) projected revenue for the current year based on collection
levels to date; and
(b) actual revenue collected
in previous financial years.
”
[39] Section 17 of MFMA, deals
with the contents of annual budgets and supporting documents. It
provides that an annual budget
of a municipality must be a schedule
in the prescribed format:
“
(a)
setting out realistically anticipated revenue for the budget year
from each revenue source;
(b) appropriating expenditure for the budget year under different
votes of the municipality;
(c) setting out indicative
revenue for revenue source and projected expenditure by vote for the
two financial years following the
budget year;
(d) setting out -
estimated revenue and expenditure by vote for the current year;
and
actual revenue and expenditure by vote for the financial year
preceding the current year; and
(e) a statement containing
any other information required by section 215(3) of the Constitution
or as may be prescribed.
”
Subsection (3) then proceeds to list various documents that must
accompany an annual budget when it is tabled.
[40] Based on the above, the
City of Johannesburg, correctly in the view of the Court, argue that:
(1) the revenue which is available for funding the expenditure is
determined, not with public participation, but by objective

standards, namely that which can realistically be anticipated, and
will be collected;
(2) how the anticipated income
is to be expended and the nature of the priorities of the expenditure
are indeed matters for public
participation in contrast to the amount
of the available revenue, which is not;
(3) property rates, which are a
form of taxation, have never been a topic for debate with the
taxpayers. On the other hand, the
formulation of the Rates Policy is
suitable for public participation;
(4) where the Rates Act requires
public participation its says so. Public participation is
significantly not mentioned in section
2(3) of the Rates Act. In
terms of section 87 of the same Act:
“
This
Act prevails in the event of any inconsistency between this Act and
any other legislation regulating the levying of municipal
rates
.”
[41] The gist of the argument of
the City of Johannesburg, based on the above, and as understood by
the Court, is that section
22 of the Rates Act does not prescribe any
particular requirements for the public participation process.
Instead, the section
refers to Chapter 4 of the Municipal Systems
Act, which also does not prescribe any detail. Further that where a
reduction in
rates revenue occurs, as in the present matter, there is
no requirement in either the MFMA or the Rates Act that it should be
the
subject matter for public debate. If the resultant shortfall in
revenue were to be augmented by a method that required an alteration

or amendment of the Rates Policy that would have required public
participation. In present matter the method of augmentation was

expressly provided for by the Rates Policy.
[42] The City of Johannesburg
submit, in the alternative, that section 23(2) of the MFMA provides
for an opportunity for the Mayor
to make such revisions to the
budget, after it has been tabled, and after such public participation
as may be required. Further
that the use of the words “
all
budget submissions
”
is wide enough, particularly contrast with “
views
”
in section 23(1) of the MFMA, to include submissions by municipal
departments. For the sake of completeness, section 23
of the MFMA
provides:
“
(1)
When the annual budget has been tabled, the municipal council must
consider any views of –
(a) the local community; and
the National Treasury, the
relevant provincial treasury and any provincial or national organs
of state or municipalities which
made submissions on the budget.
(2) After considering all
budget submissions, the council must give the mayor an opportunity -
to respond to the submissions; and
if necessary, to revise the
budget and table amendments for consideration by the council.
(3) The National Treasury may
issue guidelines on the manner in which municipal councils should
process their annual budgets, including
guidelines on the formation
of a committee of the council to consider the budget and to hold
public hearings.
(4) No guidelines issued in
terms of subsection (3) are binding on a municipal council unless
adopted by the council.
”
From the above, it is clear that
the consideration by the council of the views of both the local
community and the National Treasury
is obligatory. Thereafter the
council is equally obliged to afford the Mayor an opportunity to
respond to the submissions, and
if necessary to revise the budget and
table amendments for consideration by the council. In the present
matter, the City of Johannesburg
argue that the members of the public
were given an opportunity to respond, and did respond to the proposed
additional 18% increase.
Their views were put to council officials
at the meetings of 5, 6 and 15 May 2009. The report of the Mayoral
Committee and the
meeting of the City of Johannesburg on 21 May 2009
referred to the views of the public. The Mayor’s response in
terms of
section 23(2) of the MFMA was to revise the budget as tabled
by increasing the rate on business properties as recommended by the

Mayoral Committee since that is the category where the bulk of the
shortfall arose.
THE APPLICANT’S OTHER COMPLAINTS
[43] The applicant’s complaint under discussion is mirrored in
paragraph 3 of the founding affidavit in the following terms:
“
The
basis upon which the applicant seeks the relief set out in the notice
of motion is, in the main, premised thereon that the first,
second
and the third respondents (‘the respondents’) have failed
to follow and adhere to the prescribed procedures
and other
legislative provisions, leading up to and including the adoption of
the annual budget. More particularly it is the applicant’s

case that the respondents firstly failed to adequately publish the
draft budget and a proposed increase in the rates ratio to the
local
community in order to allow the members of the community to pass
comment on or object to the proposed budget and increase.
”
The second basis is, as
indicated, that the decision of the City of Johannesburg taken on 21
May 2009 in levying an additional increase
amounting to 18% over and
above the original proposed increase of 10% in the rates applicable
to business properties discriminated
against the owners of such
properties, and treating the owners of business properties unequally.
It is significant that the applicant
states that the City of
Johannesburg “
failed
to adequately publish a draft budget
”.
The applicant clearly does not complain about the public
participation process followed by the City of Johannesburg with

regard to the budget as a whole. Its grouse is directed rather at
the process followed with regard to the additional 18% which
forms
the basis of the accusations of discrimination and illegality.
[44] In
Kungwini
Local Municipality and Silver Lakes Home Owners Association
[2008] ZASCA 83
;
2008
(6) SA 187
(SCA) para [14], Van Heerden JA said:
“
In
a post-constitutional South Africa, the power of a municipality to
impose a rate on property is derived from the Constitution
itself:
the Constitutional Court has described it as an 'original power' and
has held that the exercise of this original constitutional
power
constitutes a legislative - rather than an administrative - act. The
principle of legality,
an incident
of the rule of law, dictates that in levying, recovering and
increasing property rates, a municipality must follow the
procedure
prescribed by the applicable national or provincial legislation in
this regard.
”
See also
Rates Action
Group of Cape Town
2006
(1) SA 496
(SCA) para [10]. In regard to public participation in
legislative process and in
Merafong
Demarcation Forum v President of the RSA
[2008] ZACC 10
;
2008 (5) SA 171
(CC), para [27], Van der Westhuizen J said:
“
The
obligation to facilitate public involvement may be fulfilled in
different ways. It is open to innovation. Legislatures have

discretion to determine how to fulfil the obligation. Citizens must,
however, have a meaningful opportunity to be heard. The question
for
a court to determine is whether a legislature has done what is
reasonable in all the circumstances. In determining whether
the
legislature acted reasonably, this court will pay respect to what the
legislature assessed as being the appropriate method.
The method and
degree of public participation that is reasonable in a given case
depends on a number of factors, including the
nature and importance
of the legislation and the intensity of its impact on the public. …
”
[45] In the present matter, it
is not disputed that the applicant received the 5 May Memorandum
proposing the increase to rates
in respect of business properties on
7 May 2009. It is however, in dispute whether Mr Richard Bennet, an
executive on the National
Council of the applicant, who attended
previous meetings where the proposed increase was discussed, in fact
represented the applicant.
It however appears unlikely that Mr
Bennet would have omitted to convey such crucial and vital
information to the applicant. On
receipt of the 5 May Memorandum on 7
May 2009, the applicant engaged an official of the City of
Johannesburg merely to seek an
extension of the deadline for making
submissions. This was some 14 days before the meeting of the City of
Johannesburg on 21 May
2009 whereat the increase to rates in respect
of business property was adopted. The applicant, in the view of the
Court, clearly
had adequate opportunity to prevent the adoption of
the 2009/2010 budget. In any event, the credible evidence is that the
proposal
to re-align the rates on business properties was advertised
extensively by the City of Johannesburg in various newspapers as far

back as 8 and 9 May 2009. The notices invited submissions by 15 May
2009. On the latter date, a further meeting of the Johannesburg

Business Forum was held where the proposed increase was discussed.
The version of the City of Johannesburg is once more that the

applicant was represented at this meeting by Mr Bennet. There was
plainly adequate publication and notification for the applicant
to
make submissions. In my view, the applicant has not succeeded to
prove any substantial deviation on the part of the City of

Johannesburg from the prescribed procedure. In any event whatever
the deviation that may have occurred does not necessarily mean
that
the whole process should be impugned. See
Nokeng
Tsa Taemane Local Municipality v Dinokeng Property Owners Association
and Others
[2010] ZA
SCA 128.
The City of Johannesburg’s interpretation of the
applicable legislative requirements and submissions has considerable
merit.
THE APPLICANT’S CLAIM OF DISCRIMINATION
[46] I deal with the applicant’s
contention that the approval of the 2009/2010 budget which levied the
rates for business
properties discriminates against the owners of
business properties. The contention is similarly articulated in
paragraph 3 of
the founding papers. The applicant contends that the
discrimination is firstly against owners of business properties, and
secondly,
amongst such owners. It is indeed extremely difficult to
fully appreciate the applicant’s complaint on this subject. It
is
not adequately set out in the founding papers. In paragraph 92 of
the founding affidavit the applicant refers to a supporting affidavit

of Mr D S Ogbu, the Chief Executive Officer of Liberty Properties.
Based on the supporting affidavit, the applicant proceeds to
allege
that:
“
It
is clear from the affidavit that the property owners who own property
in the same category are being discriminated against and
are not
being treated in accordance with the principles of equality as
provided for in the applicable municipal legislation.
”
In the heads of argument
reference is made to “
section
16 of the Rates Act echoes and builds onto the provisions of section
229 of the Constitution, whilst section 19 of the Act
echoes the
principle of equality enshrined for in the Constitution
”.
It is argued that, the City of Johannesburg, by increasing the rates
ratio applicable to business property and not the
base rate, which
would equally have affected all property owners, offended the
principle of equality enshrined in the Constitution.
Section 19 of the Rates Act,
contains a prohibition against “
impermissible
differentiation
”.
Section 19(1)(c), in particular, prohibits rates which
“
unreasonably
discriminate between categories of non-residential properties
”.
The crisp issue is whether the rate levied on business properties
of 0,0154 cents in the Rand discriminates against
the owners of
business properties.
The City of Johannesburg argue
that the mere differentiation with regard to rates levied between
one category and other categories
does not establish discrimination
or impermissible differentiation. Further that mere
differentiation that is not discriminatory
need not be fair. Its
validity is tested by the rationality standard. In
Rates
Action Group v City of Cape Town (supra)
para [85]:
“
The
Constitutional Court has summarised in Harksen v Lane NO and Others
1998 (1) SA (CC)
(1997 (11) BCLR 1489)
at para [54] how a Court is to
inquire into an allegation of unfair discrimination inconsistent with
the Constitution. In the
context of this case, the questions which
have to be answered are the following:
Does the provision differentiate between people or categories of
people? If so:
Does the differentiation
amount to unfair discrimination? This requires a two-stage
analysis:
(a) Does the differentiation
amount to ‘discrimination’? As it is on a specified
ground (race), discrimination has
been established.
(b) Does it amount to ‘unfair’ discrimination? As a
discrimination is on a specified ground, unfairness is presumed,
and
the onus is on the City to prove the contrary. The test of unfairness
focuses primarily on the impact of the discrimination
on the
complainants and others in their situation.
(3) If unfair discrimination
is found, can the provision be justified under the limitations
clause, s 36 of the Constitution?
”
The mere differentiation in
respect of rates levied between one and the other categories would
not be discriminatory. The other
issue whether the rate is rational
depends, in the present matter, on the reason for the rate of R0,0154
in the Rand. The question
therefore is, whether the rate can be
rationally connected to a legitimate governmental purpose of the City
of Johannesburg. See
Prinsloo
v Van der Linde
1997
(3) SA 1012
(CC) para [22]. The credible evidence in the instant
matter by the City of Johannesburg is that the increased rate was
levied
on business properties in order to augment the shortfall in
revenue. The latter in turn, was caused by the successful objections

to the over-valuations of properties on the valuation roll and the
re-categorization of properties. The City of Johannesburg say
that
the method used was to increase the rate on business properties. The
reason why this category was chosen was because it produced
the
largest reduction in the rates revenue. The City of Johannesburg by
so doing intended to restore the percentage of rates income
from
business properties to total rates income to what it was before. In
the view of the Court, these are perfectly acceptable
reasons. There
was no unfairness or discrimination. The argument of the applicant
to the contrary, including that the City of
Johannesburg had other
options available to them, has no merit at all. The supporting
affidavit of Mr D S Ogbu on which the applicant
relies largely for
its contention, is not helpful, and somewhat irrelevant to the matter
under discussion.
The complaint of the applicant
that there is discrimination amongst owners of business properties,
falls to fail for the same
reasons advanced above. The applicant
contends that the real reason for the shortfall in revenue is the
under-valuation of
a very large number of properties. There is,
however, no conclusive evidence on this aspect. There is similarly
no persuasive
evidence, as alleged by the applicant, that the
owners of business properties whose properties are correctly valued
are required
to pay a higher rate than those not. The problem faced
by the applicant in this regard is that until a valuation is
corrected
as described by section 32(1) of the Rates Act, the value
of a property as contained in the valuation roll is the only
relevant
value. See in this regard
Salandia
(Pty) Ltd v Vredenburg-Saldanha Municipality
1988 (1) SA 523
(A) 535C-F.
THE SHORTFALL
[47] Heavy weather was made in
argument on two other issues. The applicant contends that not only
was the shortfall foreseeable
at an early stage, but was also
avoidable. The applicant submits that the deficit could have been
remedied during the budget process.
Further that the City of
Johannesburg is non-suited to rely on the shortfall because it was
foreseeable. The Rates Policy of the
City of Johannesburg,
implemented from 1 July 2008, provides that the Council may,
inter
alia
, levy rates on
property to finance operational expenditure of Council. Clause 2(3)
of the Rates Policy provides that the Council,
must annually review,
and may, if necessary, amend the policy and proposals for reviewing
the policy and be considered by the Council
in conjunction with the
annual operating budget. Furthermore, clause 2(4) of the Rates Policy
provides that, the Council may levy
an additional rate on property in
a special rating area and in doing so, may differentiate between
categories of property. More
significantly, in the context of the
present matter, clause 6 of the Rates Policy, which deals with the
“
annual operating
budget
”, deals
with the criteria to be applied in determining the level of increases
in rates, one of these criteria is “
the
augmentation of any revenue shortfall
”.
See clause 6(3)(f). The criteria to be considered in determining
whether a differential rate should be applied, include
the need to
promote economic development; any administrative advantages; and the
need to alleviate the rates burden on the owners
of any particular
category of property.
[48] Whilst the applicant
correctly contends that by 16 March 2009 it was known that the
reduction in property values amounted
to some R34 billion, the
contention whether or not the shortfall was foreseeable appears
irrelevant in the light of the express
provisions of the Rates Policy
referred to in the preceding paragraph. There are several other
reasons against the contention
of the applicant. The City of
Johannesburg’s Department of Rates and Taxes still had to
process the vouchers to determine
the effect on the rates income,
particularly to determine what category of property was most
affected; there were admittedly thousands
of objections; and the
process leading up to the tabling of the preliminary budget is a long
one commencing in the previous year.
For these reasons, the effect on
the rates income cannot be said, as the City of Johannesburg contend,
to have been foreseeable.
Neither can it be said to have been
avoidable for a number of compelling reasons.
[49] The applicant argues,
strongly and consistently for that matter, that the cause of the
shortfall is the under-valuation of
properties. This, the applicant
ascribes to the City of Johannesburg’s failure to carry out
their work in a professional
and responsible manner. For its
contention, the applicant relies on several sources. The first is the
valuation it contends was
carryied out by an independent valuer, Mr
George Nel, of 50 major commercial properties. The applicant then
proceeds to rely on
what another independent valuer, Mr N R
Griffiths, states in his supporting affidavit what Mr George Nel’s
conclusion was.
However, it turned out that Mr Griffiths’s
understanding of Mr Nel’s mandate and duties was incorrect. Mr
Nel was
mandated to investigate the values of some 22 properties and
prepare appeals to the Valuation Appeals Board against the decision

of the municipal valuer. One of the business properties on the list
of Mr Nel was the Sandton City property. The City of Johannesburg

point out that the latter property was erroneously on the list as no
objection had been noted against its valuation. This contention
is
not controverted. Mr Nel nevertheless proceeded to value the Sandton
City property. He came to the conclusion that it was under-valued.

This property is currently included in the supplementary valuation
roll, and lay open for inspection. The City of Johannesburg,
however,
do not dispute that the Sandton City property was under-valued.
However, in the bigger scheme of things, this does not
validate the
contention that there is a large scale of under-valued properties.
As indicated earlier in this judgment, the applicant
also relies
mostly on the supporting affidavit of Mr D S Ogbu of Liberty
Properties. I have already dealt with the veracity of
this
affidavit. The applicant also relies on the supporting affidavit of
Mr Christo Myburgh, the managing member of Utility Administration

Services CC, which attends to the management and administration of a
large number of property owners’-accounts, as well as
related
affairs with the City of Johannesburg. The supporting affidavit of
Mr Myburgh is somewhat unhelpful. The names or descriptions
of the
properties which his company manages have been deleted from the
affidavit. The City of Johannesburg, in my view, correctly
adopt the
attitude that it is impossible to respond to the allegations
contained in Mr Myburgh’s affidavit.
[50] From the above, the evidence
on the alleged under-valuation of properties, it must be accepted
that Mr Nel’s mandate
had nothing to do with the
under-valuation of properties. There is no concrete evidence of a
general under-valuation of properties
save for the Sandton City
Property. The shortfall caused by the successful objections, which
the City of Johannesburg were obliged
to deal with, would have
existed whether there was a general under-valuation or not. The
contentions of the applicant in this regard
have not been proved
convincingly.
SUPPLEMENTARY HEADS OF ARGUMENT
[51] Subsequent to the hearing
of the matter, the parties filed supplementary heads of argument,
mainly on the question of the
interpretation of section 19(1) of the
Rates Act. I am grateful to both parties in this regard. I have
already dealt with this
aspect earlier in this judgment. In short,
the applicant, for the interpretation it contends, relies on the
Municipal Property
Rates Regulations (“
the
Regulations
”).
The Regulations were published in terms of section 19(1)(b) of the
Rates Act. On this basis the applicant contends that
the Minister
for Provincial and Local Government has made it impermissible for a
municipality to levy a rate on non-residential
property which exceeds
the rate levied on residential property. The Regulations were
published under GN R363 in GG 32061 on 27
March 2009, as indicated
above, and entitled, “
Municipal
Property Rates Regulations on the Rate Ratio Between Residential and
Non-Residential Properties
”.
It is Annexure “FA2”.
[52]
52.1 The applicant contends that
section 19(1) of the Rates Act deals not with the maximum ratios, but
rather with impermissible
differentiation which requires that a
municipality may not levy a rate on a category of non-residential
property which exceeds
any ratio prescribed, as determined by the
Minister by way of regulation, in respect of residential properties.
The argument proceeds
that the moment when a prescribed ratio has
been determined by the Minister with reference to residential
property, a municipality
will be barred from levying a rate on
categories of non-residential properties which exceeds that
prescribed ratio. The applicant
argues that the fact that the
legislature in section 19(1) of the Rates Act views the issue as an
impermissible differentiation,
rather than the mere placing of an
upper-limit, considered with the fact that National Treasury, prior
to the promulgation of the
Regulations, requires of local
municipalities to move towards and attempt not to exceed a ratio of
1:1, being the base rate, is
indicative, that historical imbalances
and principle of equality were being addressed rather than the mere
prescription of an upper-limit.
In my view, the interpretation
contended for by the City of Johannesburg is the more reasonable
one. In terms of the ‘
golden
rule
’ of
interpretation the language in the document is to be given its
grammatical and ordinary meaning, unless this would
result in some
absurdity, or some repugnancy or inconsistency with the rest of the
instrument. The mode of construction should
never be to interpret
the particular word or phrase in isolation by itself. See
Coopers
and Lybrand and Others v Bryant
[1995] ZASCA 64
;
1995 (3) SA 761
(A) at 767E-8768E. In the present matter the
Regulations clearly purported to prescribe a maximum ratio between
residential
property and two particularly specified categories of
non-residential property, namely, agricultural property and the
public
service infrastructure property, listed in the table. There
is no mention in the table of any other category of non-residential

property. In addition, the Regulations did not at all purport to
impose any limitation on the levying of rates in relation
to any
other category of non-residential properties. Furthermore, in
paragraph 2(b) entitled “
Rates
ratios to be applied
”,
the Regulation reads:
“
The
second number in the second column of the table represents the
maximum ratio to the rate on residential property that may be
imposed
on the non-residential properties listed in the first column of the
table.
”
The table then lists the three
properties categories and rates, respectively, as follows,
Residential 1:1, Agricultural 1:0.25,
and Public Service
Infrastructure 1:0.25.
Once more, there are only two
categories of non-residential properties listed. The interpretation
contended for by the City of Johannesburg
is plainly the one intended
when regard is had to the notice of approval granted by the Minister
of Finance for the commencement
of the Regulations in Government
Notice No. 364 published on 27 March 2009. The body of the Notice
reads:
“
…
the Minister of Finance has granted approval in terms of section
43(2) of the Local Government: Municipal Finance Management Act,

2003 (Act No. 56 of 2003), for the upper limits with respect to the
rate ratios between residential and non-residential properties
as
they relate to agricultural properties and public service
infrastructure properties, as prescribed in the Government Notice
No.
363 issued by the Minister for Provincial and Local Government,
(Annexure ‘FA2’), with my concurrence, in terms
of
sections 19(1)(b) and (2) of the Local Government Municipal Property
Rates Act, 2004 (Act No. 6 of 2004), to become effective
for
municipalities as from 1 July 2009.
”
(my insertion)
From this, it is clear that the
Minister of Finance recognised that the Regulations only related to
two categories of non-residential
properties. There could never have
been a different intention from the interpretation of the Regulations
in terms of the ‘
golden
rule
’ of
interpretation enunciated above. There are clearly other reasons
discernible from the provisions of section 19(1) and
the Regulations
in question which satisfy the Court that the interpretation advanced
by the applicant is untenable in the circumstances
of the matter. It
requires no elaboration, save to emphasise that neither section
19(1)(b) of the Rates Act, nor the Government
Notice aforementioned
prescribed a “
base
rate
”, or a
“
base ratio
”
or any other limitation on rates for business properties, as the City
of Johannesburg correctly contend.
ALTERNATIVE SOLUTIONS SUGGESTED BY THE APPLICANT
[53] The applicant proposes
alternative methods open to the City of Johannesburg instead of
increasing the rates payable by owners
of business properties. In the
light of the finding made above, it becomes unnecessary to deal
extensively with such proposed alternative
solutions. This, for the
simple reason that most, if not all, of the proposals are either
long-term or forming part of inherent
ongoing administration and
management. The first proposal is that the City of Johannesburg
should rather recover revenue from
their large debtors’ books
in respect of which substantial amounts have already been written
off. The short answer to this
is that debt recovery is a slow and
expensive process faced by numerous other municipalities. The second
alternative proposal is
that since the records of the City of
Johannesburg, more specifically with reference to the owners of
townhouses, are in a chaotic
state, it is impossible or difficult to
recover successfully rates and taxes due to the council in respect of
townhouses. Indeed,
in the answering papers, the City of Johannesburg
recognise the problems. The council say that after the Rates Act came
into operation,
they embarked on a project to establish the addresses
of sectional title units. Previously, under the applicable Ordinance,
sectional
title units were not rated separately. However, despite
all efforts by the council, there are presently a large number of
personal
postal addresses of owners of sectional title units unknown.
Once more, the City of Johannesburg say the process to establish the

addresses is ongoing. In my view, this is not an unreasonable
explanation. The applicant also proposes that the City of
Johannesburg
could have saved on its non-essential expenditure. In
this regard an example is given of the City of Johannesburg hosting a
Miss
World Pageant during the recent Soccer World Cup at a
significant loss to the coffers of the council. This, notwithstanding
that
the expenditure had not been properly and fully provided for in
the 2009/2010 budget. The amount involved is some R60 m. The short

answer to this contention is that it is irrelevant to the present
problem. It is also suggested that when the City of Johannesburg

became aware of the predicament in the budget process, they should
have resorted to and acted in terms of the provisions of section
28
of the Finance Management Act. The latter section provides for those
situations where an approved budget needs to be revised
or adjusted.
Instead, so the argument proceeds, it was perceived by the City of
Johannesburg to be far easier to burden a soft
target with additional
tax, increasing its rates and taxes imposed by 28%, which is
iniquitous, unheard of, and not to be tolerated.
Once more, and
regrettably, no factual basis has been laid to sustain this
allegation. It too, must fail. The rest of the suggested
alternative
solutions, especially based on what the applicant terms mismanagement
and incompetent cooperative governance on the
part of officials of
the City of Johannesburg, have not been proved persuasively. In my
view, this is certainly not a situation
as described in
Sehume
v Atteridgeville City Council and Another
1992 (1) SA 41
(A) at 57F, namely:
“
To
penalise virtue is unreasonable.
The
enabling statute contains no indication that a black local authority
can lawfully treat those under its jurisdiction in such
an
unreasonably unequal manner.
”
THE ESSENCE OF THE APPLICANT’S RELIEF
[54] The applicant seeks the
setting aside of the whole budget for the year 2009/2010. The
applicant’s grumble is the resolution
levying the rate on
business properties and more specifically the additional 18%
increase, not the original proposed 10% increase
across the board.
The allegations levelled against the City of Johannesburg of an
inadequate public participation programme as
well as the allegations
of discrimination and inequality all refer to the additional 18%
increase in the rate in respect of business
properties. In paragraph
4 of the notice of motion alternative remedies are suggested,
directed at what the applicant calls “
rates
ratio
”. In this
regard, the City of Johannesburg has demonstrated credibly that the
resolution of the council is to levy a certain
rate in the Rand, not
a certain ratio. Indeed, in the documentation motivating the proposed
additional increase of 18% there is,
as the City of Johannesburg
argue, references to an increase in the ratio between residential
properties and business properties.
This is simply a convenient
manner of expressing the intention of increasing the rate. A ratio
can plainly not be levied. There
is no evidence of any procedural
defect, notwithstanding. As a consequence, the relief claimed in
paragraph 4 of the notice of
motion ought to be denied.
[55] The City of Johannesburg,
in the answering affidavit, allude to the disastrous consequences for
their finances, and the City,
should the rate on business properties
be set aside now on any basis or the basis advanced by the applicant.
The most obvious result
is that the City of Johannesburg would be
bankrupt. It would not be able to perform its constitutional
functions as imposed by
sections 152, 153 and 156 of the
Constitution. The declaration of invalidity of the promulgation of
the rate is government by section
172(1)(a) of the Constitution.
Whilst a court “
must
declare
” that
the conduct of the Council is unlawful in the sense of being
inconsistent with the Constitution, if so proven, section
172(1)(b),
however, requires the court to make “
any
order that is just and equitable
”.
[56] In the context of the
present matter, and based on the established facts, it would plainly
not be just and equitable, in effect,
as the City of Johannesburg
argue, to absolve the owners of business properties of all liability
to pay rates for the year 2009/2010.
There is simply no denial on
the part of the applicant that such owners of business properties
received services from the City
of Johannesburg for that year, even
if the prescribed procedure was not fully complied with or there was
a measure of discrimination.
In this regard reference has already
been made to
Nokeng Tsa Taemane Local Municipality v Dinokeng Property
Owners Association and Others
para
[14]. See also
Pretoria
City Council v Walker
[1998] ZACC 1
;
1998 (2) SA 363
(A), paras [93] to [97].
[57] As stated earlier in this
judgment, there was a delay in launching the current proceedings.
The 2009/2010 budget is in any
event no longer in operation, and the
relief now sought in any form, is somewhat academic. Indeed, in
Sebenza Kahle Trade v
Emalahleni Local Municipality Council
[2003]
2 All SA 340
(T) at 350, the Court said:
“
Where
the issue is abstract, hypothetical or academic the courts will not
adjudicate upon a declaration of rights. This principle
has been
entrenched by the Constitutional Court in JT Publishing (Pty) Ltd v
Minister of Safety and Security
[1996] ZACC 23
;
1997 (3) SA 514
(CC) at 525A-B where
Didcott J said the following:
“…
A
declaratory order is a discretionary remedy, in the sense that the
claim lodged by an interested party for such an order does
not in
itself oblige the Court handling the matter to respond to the
question which it poses, even when that looks like being capable
of a
ready answer. A corollary is the judicial policy governing the
discretion thus vested in the Courts, a well-established and

uniformly observed policy which directs them not to exercise it in
favour of deciding points that are merely abstract, academic
or
hypothetical ones. I see no reason why this new Court of ours should
not adhere in turn to a rule that sounds so sensible.”
”
[58] In the present matter, the
City of Johannesburg advance credible reasons why it would in any
event not be in the interests
of good government to set aside,
retro-actively, the rate of R0,0154 in the Rand. They say, for
example, if the rate is set aside,
it means that all payments for the
2009/2010 financial year received in respect of the rate from the
owners of business properties
will have to be repaid. However, the
amount received as income on the budget under this heading clearly
will have been spent on
current expenditure during the 2009/2010
financial year (or now even later). An order setting aside the rate
will therefore put
the City of Johannesburg in a precarious financial
position. It will have to budget for an additional amount for the
repayment
of any loan capital in a future financial year. The
question will inevitably arise from which source the income will be
derived.
Alternatively, the Council will have to cut back its
expenditure in the said amount which will leave it in a position
where it
cannot deliver all the essential services in terms of its
constitutional obligations. This is clearly untenable. It will
clearly
not be in the public interest or in the interests of good
governance to set aside the City of Johannesburg’s decision to
levy the rate of R0,0154 in the Rand. In any event on the credible
evidence, no such case has been made out by the applicant.
The
applicant has equally not demonstrated that the rate was levied
unlawfully. What exacerbates the applicant’s contention

further is that the disputed rate no longer exists as it lapsed when
the new financial year commenced on 1 July 2010. The various

alternative relief sought by the applicant is unquestionably and
profoundly unjustified.
CONCLUSION
[59] I conclude that for all the
aforegoing reasons the application, although intended to protect the
interests of numerous business
property owners, who may be profoundly
unhappy, calls to be dismissed.
COSTS
[60] I deal with the issue of
costs. This matter is fairly complicated. The factual issues
presented are not capable of easy resolution.
There are several
pieces of legislation involved. It was wise and prudent for both
parties involved to brief senior counsel.
There is no reason why the
costs should not follow the result.
ORDER
[61] The following order is made:
1. The application is dismissed with costs, including the costs of
two counsel.
_____________________________
D
S S MOSHIDI
JUDGE OF THE SOUTH GAUTENG
HIGH COURT, JOHANNESBURG
COUNSEL FOR THE
APPLICANT
.................
R STOCKWELL SC
…
.....................................................................
ASSISTED
BY C McKELVEY
INSTRUCTED
BY
............................................
MASILO
INC
COUNSEL FOR THE
RESPONDENTS
.........
S J DU PLESSIS SC
…
......................................................................
ASSISTED
BY BENNIE MAKOLA
INSTRUCTED
BY
............................................
MOODIE
ROBERTSON
DATE OF
HEARING
........................................
22
FEBRUARY 2011
DATE
OF JUDGMENT
....................................
24
MAY 2011