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[2015] ZASCA 135
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Randburg Management District v West Dunes Properties (451/2013) [2015] ZASCA 135; [2016] 1 All SA 59 (SCA); 2016 (2) SA 293 (SCA) (30 September 2015)
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THE SUPREME COURT
OF APPEAL
OF
SOUTH AFRICA
JUDGMENT
Reportable
Case No:
451/2013
In the matter between:
RANDBURG MANAGEMENT
DISTRICT
APPELLANT
and
WEST DUNES PROPERTIES 141
(PTY)
LIMITED
FIRST
RESPONDENT
CITY OF
JOHANNESBURG
SECOND RESPONDENT
Neutral
citation:
Randburg
Management District v West Dunes Properties
(451/2013)
[2015] ZASCA 135
(30 September 2015)
Coram:
Leach,
Tshiqi, Theron, Willis and Mathopo JJA
Heard:
02
September 2015
Delivered:
30
September 2015
Summary:
Local
government – formation of a city improvement district under the
Gauteng City Improvement Districts Act 12 of 1997 –
municipal
council may not delegate authority to approve a city improvement
district to mayoral committee by reason of
s 59(2)
of the
Local
Government: Municipal Systems Act 32 of 2000
read with
s 160(2)(
c
)
of the Constitution – levies imposed by a city improvement
district not validly formed not recoverable – such levies
in
any event offending s 229 of the Constitution as imposed by
provincial and not national legislation.
ORDER
On appeal
from:
Gauteng
Local Division, Johannesburg (Sutherland J sitting as court of first
instance):
The appeal is
dismissed.
JUDGMENT
Leach
JA
(Tshiqi,
Theron, Willis and Mathopo JJA concurring)
[1] At issue
in this appeal is the legality of certain levies imposed upon the
first respondent under the Gauteng City Improvement
Districts Act 12
of 1997 (the CID Act) which provides for the imposition of levies on
rateable properties
[1]
situated
within a ‘city improvement district’
[2]
(for
convenience I intend to use the acronym CID in place of this phrase).
These levies are then paid over to a management body
charged with the
implementation of a ‘city improvement district plan’ to
finance various services that, in terms of
s 6(4) of the CID Act, ‘.
. . must be in addition to or an enhancement of those provided by the
municipality’.
[2] The first respondent is the
owner of two immovable properties known as erven 1768 and 1978
Ferndale. Both properties are
situated within the municipal
area of the City of Johannesburg (the City), a municipality envisaged
by the CID Act. The properties
also fall within the geographical area
of what is known as the Randburg CID, purportedly established under
the CID Act in or about
2004.
[3] The appellant, an
association incorporated under s 21 of the Companies Act 61 of 1973,
is the ‘management body’
of the Randburg CID established
in compliance with s 4(2) of the CID Act (to which further reference
will be made in due course).
As such, under s 5(3) the appellant may
sue for and recover unpaid levies as a debt due to it.
[4] After the formation of the
Randburg CID, levies under the CID Act were imposed on properties
within its geographical area. The
first respondent refused to pay
certain of these levies imposed on its erven in Ferndale. In due
course the appellant, purporting
to exercise its rights under s 5(3),
instituted two separate actions in the court a quo seeking payment of
the amounts it contended
the first respondent owed. In its first
action (case number 53025/09) it claimed unpaid levies in respect of
erf 1768 for the periods
1 October 2005 to 1 May 2006 and 1 July 2009
to 1 December 2009, and in respect of erf 1978 over the period 1 July
2008 to 1 December
2009. In the second action (case number
11637/2011) its claim for both properties was calculated over the
period 1 January 2010
to 1 March 2011. Both actions were defended and
were subsequently consolidated for hearing. The City was joined as a
second defendant
before the trial, but declined the invitation to
appear or take part in the hearing – although counsel for the
appellant
informed the court that it had cooperated with the
appellant in making available witnesses and documents. (I should
mention that
the City was also cited as the second respondent in this
appeal but, again, took no part in the proceedings.)
[5] In any event, when the matter
came to trial the parties agreed to separate certain of the issues
under the provisions of Uniform
rule 33(4). The statement of issues
separated in terms of this rule, and which the court ordered were to
be determined separately
with the remaining issues being stayed until
they had been resolved, were the following:
‘
1.
Whether or not the [appellant] was duly established under and in
terms of the [CID
Act] for the area which included Erf 1978 Ferndale
. . . and Erf 1768 Ferndale . . . ?
2.
If question [1] is answered in favour of the plaintiff, whether or
not:
2.1
the first property; and/or
2.2
the second property are “rateable property” as defined in
the CID Act, as read
with the Local Authorities Rating Ordinance, 11
of 1977 . . . and the
Local Government Municipal Property Rates
Act 6 of 2004
. . . for the periods claimed in the summonses . . . .
?
3.
If questions 1 and 2 are answered in favour of the [appellant],
whether or not
the amounts claimed in these actions were duly levied
under and in terms of the CID Act?’
[6] Having heard evidence and
argument, the court a quo held in regard to the first of these issues
that the appellant had failed
to show that it had been duly
established. Although for that reason alone, the appellant’s
claim fell to be dismissed, the
court went on to decide a number of
further legal issues in order to resolve the controversies that had
been the subject of the
debate. Its ultimate conclusions relevant to
the issues raised in this appeal were the following:
‘
77.1
It has not been proven that the Randburg CID was formed in compliance
with Sections 2 and 4 of the CID Act.
77.2 It has not been
proven that the imposition of increased levies, from 2004 onwards
[was valid].
77.3 The decisions
of the [Randburg CID management board], from 11 September 2008 to
increase levies are
ultra vires
its powers and invalid,
regardless of whatever status the levies imposed prior thereto might
have enjoyed.
77.4 [Erf 1978] was
at all times throughout the era of the Rating Ordinance until 1 July
2008, exempt from rates because it qualified
in terms of section
5(1)(d), and accordingly, could not lawfully have been subjected to
any levy in respect of the CID.’
[7] Pursuant to these findings,
the appellant’s claims were dismissed with costs. The appeal to
this court is with leave of
the court a quo. The first respondent did
not appear on appeal.
[8] In the light of the stated
case and the findings made in regard thereto, the first issue that
falls to be decided is whether
the court a quo was correct in
concluding that the appellant had failed to prove that it had been
duly established under the CID
Act. The appellant conceded that
should the finding of the court a quo on this point be upheld, an
element essential to its claims
would not have been established and
its appeal should fail.
[9] In
considering this question, it is necessary to take account of the
process
that
has
to
be followed to form a CID as laid down in the CID Act and the
regulations promulgated thereunder.
[3]
In brief:
(a)
Under s 2(1)
of the CID Act, a municipal council is obliged to consider the
formation of a CID on receipt of a petition indicating
the support of
25 per cent of owners of rateable properties within the boundaries of
such a proposed district.
(b)
Section 2(4)
requires the petition to take the form of a CID plan ‘covering
a three year period . . . and must include the
prescribed
requirements and be in the prescribed form’.
(c)
Such
prescribed requirements and the prescribed form are set out in the
regulations which require, inter alia, that the CID
plan is to
set out the services and level of services being provided by the
municipality and the proposed services and levels thereof
to be
provided under the CID plan.
(d)
Sections 2(5)
to (10) of the CID Act and regs 10-15 prescribe certain procedures
for public participation in the consideration of
the approval of the
CID plan, including a public hearing, and both written and oral
objections and comments.
(e)
Under reg 11
notifications and advertisements are to be given to ratepayers and
the public and are to contain details of the date,
time and place at
which a public hearing is to be held, a place at which the proposed
CID plan will be available for inspection,
the location of boundaries
of the proposed CID plan, the additional services which are proposed
to be provided thereunder.
Importantly, these advertisements
and notices must detail the proposed levy to be imposed.
[4]
(f)
Once
this public meeting has been held and the associated consultative
process followed, the municipal council is called upon to
take a
decision on a petition. In that regard s 3(2) provides:
‘
A
municipal council may ─
(
a
)
approve the formation of a city improvement district and a city
improvement district plan;
(
b
)
approve the formation of a city improvement district and a city
improvement district plan with amendments or
conditions as the
municipal council considers in the public interest; and
(
c
) refer the
petition back to the petitioners with written reasons for not
approving the formation of a city improvement district
or city
improvement district plan indicating that the petition may be
resubmitted to the municipal council in the time period prescribed:
provided that if the resubmitted petition proposes an increased levy
for any owner of rateable property, the petitioner must notify
such
owner by registered mail.
(g)
It is only
after the establishment of a CID has been approved under s 3(2) that
it and its management board may be formed. In this
regard s 4 of the
CID Act provides, inter alia:
‘
(1)
After a petition is approved in terms of section 3, the city
improvement district may be formed only after written proof in
the
prescribed form is provided to the municipal council by the
petitioner indicating that more than 50 (fifty) percent of the
owners
of rateable property who represent more than 50 (fifty) percent of
the rate base in value of the
property in
the city improvement district, approve the formation of the city
improvement district and city improvement district
plan as approved
by the municipal council.
(2) After the
written proof mentioned in subsection (1) is acknowledged by the
municipal council, a city improvement district
management body must
be formed and incorporated in terms of section 21 of the Companies
Act (Act No 61 of 1973) or as any other
legal entity approved by the
MEC.’
[10] The
appellant was thus obliged to prove that a petition relating to the
formation of the Randburg CID under
s 3(2) had been properly approved
in terms of these provisions. For present purposes it can be accepted
that the necessary preliminary
requirements of public consultation
were fulfilled, and one would have expected it would then have been a
straightforward matter
to show that the plan was thereafter properly
approved. However, despite the assistance of the City that I have
already mentioned,
the appellant was unable to call any direct
evidence of such approval. The high-water mark of its case was a
letter dated 18 October
2004 addressed by a Ms Tau, then an employee
of the City, to Kagiso Urban Management (the company that had lodged
the petition
for the establishment of the Randburg CID and, after its
alleged formation, provided management services to the appellant).
The
letter reads as follows
‘
THE
RANDBURG IMPROVEMENT DISTRICT
Your application for
the establishment of a City Improvement District in the Randburg area
to be called The Randburg Improvement
District was approved by the
Mayoral Committee on Thursday 14 October 2004, item No 98 on the
minutes of the meeting.
This letter also
serves as confirmation that all the requirements in terms of the
Gauteng City Improvement District Act, 1997 (Act
No 12 of 1997) has
been complied with.
We
further acknowledge the receipt of a schedule and copies of voting
forms summarising 54.76% of number of rateable erven representing
55.36% of the rates value in favour of establishing a City
Improvement District in the abovementioned area.
’
[11] Ms Tau,
when called to testify, had no real recall of the circumstances under
which she had come to write
this letter, something which is
understandable given that a period of some eight years had since
elapsed. However, she stated that
she assumed that the City’s
mayoral committee on whose behalf she had written had been delegated
authority by the City’s
municipal council to consider the
approval of the Randburg CID, although she could not say whether that
had in fact been the case.
[12] It is
truly startling that neither the City nor the appellant was able to
produce any further direct or documentary
proof relating to the
approval and formation of the Randburg CID. The learned judge in the
court a quo was fully justified in remarking
that in this respect
both had been ‘guilty of dereliction of their duty towards the
public, to safeguard and keep accessible
public records, and have
been poor stewards of the trust reposed in them’. Be that as it
may, counsel for the appellant was
constrained to concede that the
decision to approve the establishment of the Randburg CID had
probably been made by the mayoral
committee and not by the municipal
council itself. He submitted, however, that Ms Tau’s assumption
had been correct and that
the municipal council must have duly
delegated the mayoral committee to deal with the petition.
Accordingly, so the argument went,
the latter’s approval of the
petition was valid and binding.
[13] The first
obstacle to this argument is, of course, that there is no proof,
documentary or otherwise, that
the municipal council had in fact
delegated authority to the mayoral committee to deal with the
approval of the Randburg CID petition.
But, assuming for present
purposes that such a delegation did take place, a second and
insurmountable hurdle facing the appellant
is that, for the reasons
set out below, that delegation was unlawful.
[14]
Section 60(1)(
a
)
of the
Local Government: Municipal Structures Act 117 of 1998
provides that if a municipal council has more than nine members, its
executive mayor may appoint a mayoral committee from amongst
the
municipal councillors (in the present case one must presume that this
was properly done). However, although
s 59(1)(
a
)
of the Local Government: Municipal Systems Act 32 of 2000 (the
Systems Act) provides that a municipal council may delegate certain
of its powers, s 59(2)(
a
)
goes on to provide that any such delegation ‘must not conflict
with the Constitution’. Section 160(2) of the Constitution,
in
turn, provides that a municipal council may not delegate ‘the
imposition of rates and other taxes, levies and duties’
.
Consequently
the imposition of a levy is a function that the City was not
permitted to delegate to its mayoral committee. If what
was imposed
under the CID Act indeed constitutes such a levy, then the delegation
upon which the appellant relies would be invalid.
[15]
The appellant sought to overcome this hurdle by arguing, first, that
levies under the CID Act are not imposed
by a municipality and,
second, that such levies are in any event not levies envisaged by s
160(2)(
c
)
of the Constitution. I shall deal with each of these contentions in
turn.
[16] In regard
to the first, at first blush the argument that a municipality does
not impose the levies flies
in the face of s 6 of the CID Act which,
inter alia, provides:
‘
(1)
Once a city improvement district has been formed, a municipality must
levy an amount on behalf of the management body from the
owners of
rateable property in the city improvement district in accordance with
the approved plan.
(2) Such amount must
be levied together with other amounts which the municipality may levy
from the owners of rateable property
in respect of rates and taxes
but the purpose of the amount must be indicated as a
separate item from other rates
and taxes levied by the municipality.
(3) The levies
collected by the municipality for the city improvement district must
be paid on a monthly basis to the management
body free of any
deductions or set-off for the purpose of implementing the city
improvement district plan.’
However,
relying upon the decision of
Kerkstreet
City Improvements District v Johnbuild Properties (Pty) Ltd &
another
2005
JDR 0501 (T), the appellant argued that the use of the word ‘levy’
in ss 6(1) and (2) meant no more than the municipality
is to
‘collect’ the levies as provided in s 6(3), rather than
to determine and impose them.
[17]
The issue in
Kerkstreet
was
whether it had been lawful for the municipality concerned to have
appointed an agent to collect the levies imposed under the
CID Act on
its behalf. In concluding that the agency agreement was not unlawful,
and that the second respondent was doing nothing
but collecting the
taxes and not levying them, the court accepted an argument that
‘levy’ in ss 6(1) and (2) connoted
the collection of
levies as specifically provided for in s 6(3). However it had not
been called on to decide whether or not the
municipality had ‘levied’
the monthly CID levies in the sense that it had determined and
imposed them.
[18] In any
event, it is clear from the structure of the prescribed process that
the levies are imposed by the
municipality under the CID Act. As I
mentioned earlier, s 2(4) requires the petition to take
the form of a CID plan
that complies with the requirements prescribed
by the regulations. Part D of the schedule to the regulations
requires details of
the proposed monthly levy to be given. Moreover,
Part E prescribes that there be attached a ‘Schedule of
Appointment of monthly
Levy to each Erf’. Consequently, the
proposed levy forms part of the CID plan that lies at the heart of
the public consultative
process, that is debated at the necessary
public hearing, and is thereafter considered by a municipal council.
If the plan is then
approved under s 3(2), and the necessary proof of
approval by ratepayers is thereafter given by the petitioner as
required under
s 4(1), the CID may be formed. Thereafter the levy, so
debated and then approved by the municipal council, will be levied by
the
municipality under s 6(1) ‘in accordance with the approved
plan’.
[19] In these
circumstances it cannot be said that the levy which a ratepayer
becomes obliged to pay under the
CID Act, albeit after having been
subjected to debate in the public participation process, was not
determined and imposed
by the municipality. Even if the monthly sum
is reflected on property owners’ accounts as a separate item
from other rates
and taxes, and is collected by the municipality
before being paid to the management board of a CID, it is clearly
imposed by the
municipal council and is not an amount merely
collected by the municipality.
[20]
I turn to the appellant’s alternative argument that, even if
the monthly amount a ratepayer becomes
due to pay under the CID is to
be regarded as a levy, it does not fall within the category of ‘rates
and other taxes, levies
and duties’ the imposition of which,
under s 160(2)(
c
)
of the Constitution, may not be delegated by a municipal council.
[21]
The argument in this regard was that CID levies was neither intended
to provide revenue to the State nor
unilaterally imposed upon
property owners but was, rather, ‘payable by the property
owners to their own private management
body consequent upon their
majority decision to form an improvement district’.
[5]
It was also
argued that as the persons who benefitted from the CID levies formed
only a portion of the
populus
of the larger
municipal area, the levies could not be regarded as being required
for municipal services.
[22] Neither of
these contentions can be accepted. At the outset, s 160(2)(
c
)
of the Constitution clearly seeks to impose a limitation upon a
municipal council’s power to delegate so as to ensure that
the
council, and only the council, is responsible for the function of
raising municipal revenue. Undoubtedly, this was such a function.
The
purpose of the CID Act is stated in its preamble to be:
‘
To
provide procedures for the formation and independent management of
city improvement districts to fund the provision of services
in
addition to those which a municipality ordinarily provides in order
to facilitate investment in the city improvement district;
to halt
further degeneration of cities; and to promote economic growth and
sustainable development within cities; and to provide
for matters
connected therewith
.
’
Moreover ss 6(4) to (7) of the
CID Act provide as follows:
‘
(4)
Services provided for in the city improvement district plan and
financed by the levy
charged to
the owners of rateable property must be in addition to or an
enhancement of those provided by the municipality.
(5)
Any increase in applicable services provided by municipalities
throughout its area
of jurisdiction must be matched with increases in
such services within the city improvement district.
(6)
The municipality must notify the management body in writing of any
reduction or substantial
change to services provided by the
municipality in the city improvement district.
(7)
If the level of services provided by the municipality in the city
improvement district
is reduced by the municipality without a
corresponding reduction of services throughout the
municipality’s area
of jurisdiction, the management body may,
by written notice, notify the municipality and require the
municipality to reinstate
such services within a period of 30
(thirty) days from such notice.’
[23]
Significantly in the present case, the CID plan prepared by Kagiso in
February 2004 (and ultimately approved
by the mayoral committee)
recorded the results of a perception survey of ratepayers in the
proposed CID carried out in March 2003.
This indicated that, in order
of importance, the following issues need to be addressed: safety and
security, public environment
(including maintenance of public
facilities), litter, cleaning of grime, public transport and traffic
flow, marketing, street lighting,
mini-bus taxis and parking, and
social issues. It further went on to state:
‘
The
perception survey indicates that the majority of respondents regard
litter in the public environment to be an area of concern,
and there
are a number of interventions that the CID must therefore undertake.
The CID manager will have to liaise closely with
a number of council
departments to ensure that the CID is able to undertake certain
actions to ensure a high quality of environmental
maintenance. The
CID manager will have to negotiate and monitor a performance level
contract with Pikitup, the council refuse collection
agency.
’
[24] From this it
appears that the whole purpose of the CID is for it, through its
management board, to work in conjunction
with the municipality to
provide services falling within the sphere of municipal government
but not at the time being adequately
provided by the municipality.
Consequently the services funded by the CID levies, while an adjunct
to those being provided by the
municipality itself, are of a
municipal nature and are designed to supplement and enhance those
which the municipality is able
to deliver.
[25]
Not only are a CID’s services municipal in nature but, despite
the appellant’s protestations
to the contrary, the amounts
payable by landowners under the CID Act constitute a revenue charge
of the nature of a tax or other
levy. In
South
African Reserve Bank & another v Shuttleworth & another
2015
(5) SA 146
(CC); (CCT 194/14, CCT 199/14
[2015] ZACC 17
(18 June
2015) the court was called upon to decide whether a particular amount
charged by the Reserve Bank as an exit charge upon
a resident
transferring capital out of this country was a tax or a regulatory
charge. In the majority judgment Moseneke DCJ, in
holding that the
exit charge was not calculated to raise revenue but was directed at
curbing or discouraging the export of capital,
said:
[6]
‘
So,
aside from mere labels, the seminal test is whether the primary or
dominant purpose of a statute is to raise revenue or to regulate
conduct. If regulation is the primary purpose of the revenue raised
under the statute, it would be considered a fee or a charge
rather
than a tax. The opposite is also true. If the dominant purpose is to
raise revenue then the charge would ordinarily be a
tax. There are no
bright lines between the two. Of course, all regulatory charges raise
revenue. Similarly, “every tax is
in some measure regulatory”.
That explains the need to consider carefully the dominant purpose of
a statute imposing a fee
or a charge or a tax. In support of this
basic distinguishing device, judicial authorities have listed
non-exhaustive factors that
will tend to illustrate what the primary
purpose is.’
[26]
The authorities to which the learned Deputy Chief Justice went on to
mention
[7]
include
Permanent
Estate and Finance Co Ltd v Johannesburg City Council
1952 (4) SA
249
(W) and
Maize
Board v Epol (Pty) Ltd
2009
(3) SA 110
(D), both of which were referred to by the appellant in
argument before this court. In
Permanent
Estate and Finance
the
court was called upon to decide whether a condition obliging the
developer of a township to pay as an endowment to the local
authority
a percentage of the land value of all erven sold constituted a tax.
The endowment had as its objective placing the municipality
in funds
to enable it to make available the services such as sanitation, water
and lights, and roads that the township would require.
The court
concluded that the imposition of the obligation to pay such an
endowment was not the imposition of a tax as:
‘
To
require any person who carries on business or who owns a dog or a
motor-car to pay a prescribed fee is, I think, to impose a
tax. The
money paid is taken into general revenue and is used for general
purposes; the person who pays receives no specific service
in return
for his payment. Endowment money paid by a township owner is quite a
different thing; it is an agreed payment for services
which are to be
performed for the improvement of the township and from which the
township owner will derive financial benefit.
To require the township
owner himself as a condition for the grant of permission to establish
a township to make the township habitable
by an urban community would
not be to impose a tax upon him, and where that work is to be
performed by a local authority, to require
him to pay for, or to
contribute towards the cost of, the work is likewise not to impose a
tax.
’
[8]
[27] Relying on
this, the appellant argued that the levies were not of the nature of
a tax as they are not to
be paid into the municipality’s
general revenue fund for general public use but, after collection by
the City, are to be
paid to the management board for the specific
services rendered in terms of the CID plan. That may well be so, but
an endowment
which was in effect to be used as payment to a
municipality for its costs in establishing the infrastructure of a
township is a
far cry from monthly levies being imposed to enable
what in effect amounts to the on-going provision of municipal
services. The
endowment related to a reimbursement of cost on
municipal services. Monthly CID levies, on the other hand, are akin
to rates: they
are levied on the value of an owner’s land and
give rise to an on-going obligation to pay a monthly contribution to
enable
services of a municipal nature to be provided.
[28]
The decision in
Permanent
Estate and Finance
thus
does not advance the appellant’s case. Neither does the
decision in
Maize
Board
.
In that matter the Maize Board sought to recover various levies
imposed under the Marketing Act 59 of 1968 as well as a maize
marketing scheme. The structure of the Act was to regulate the
production and sale of agricultural products with a view to ensuring
stability in the market. It was argued that the levies were imposed
for the purpose of benefitting the general public who would
then
enjoy an orderly market system, and was thus a tax. The court
concluded otherwise. It held that the levies were not imposed
upon
the public as a whole or on a substantial sector thereof; were
restricted in terms of the products to which they were related;
were
not utilised for public benefit as only a few members of the public
were to benefit; were not intended to raise public revenue
since they
were not used to support government activities in general; and
therefore did not constitute a tax.
[9]
[29]
For present purposes it is not necessary to decide whether the CID
levies are, strictly speaking, a ‘tax’
or merely a ‘levy’
as envisaged in s 160(2)(
c
)
of the Constitution. Whether a charge is a tax or a levy may well at
times be difficult to determine with precision. But in either
event,
CID levies clearly have as their purpose the raising of revenue to
fund the provision of services to enhance those actually
rendered by
a municipality. They are compulsory and not optional. They are
imposed by a municipality on a substantial sector of
the public,
namely those who own land within the CID. And the revenue derived
therefrom is utilised to provide services of a municipal
nature in
the general interest of those members of the public in the CID. The
dominant object of the CID levies is therefore ‘to
raise
revenue to fund the State and its public operations’.
[10]
The decision
in
Maize
Board
is
thus clearly distinguishable. Indeed, if anything, it shows that the
levies presently under consideration are in the nature of
a tax.
[30] For these
reasons, I conclude that the imposition of CID levies amounts to ‘the
imposition of rates
and other taxes, levies and duties’ as
envisaged by s 160(2)(
c
) of the Constitution. As the
imposition of such levies is therefore a function which could not be
delegated by a municipal council,
any delegation to the mayoral
committee to decide upon the approval of a CID plan under s 3 of the
CID Act is invalid; and consequently
a decision of the mayoral
committee to approve such a plan lacks legality.
[31] The
appellant’s entire case hinged upon an acceptance that the
mayoral committee had been entitled
to take the decision to approve
the Randburg CID. For the reasons I have given, it was not and, as a
result, the court a quo’s
finding that the appellant had not
discharged the onus it bore in proving that the CID had been properly
formed must be upheld.
The appellant conceded, correctly, that if
this court should find this to be the case, it had failed to show
that the CID was lawfully
established; that its claim for levies was
therefore unenforceable; that the claims of the appellant were
correctly dismissed by
the court a quo; and that the appeal must
fail.
[32] Strictly
speaking, this renders the various other issues debated in this court
unnecessary to decide. However,
like the court a quo, it may be of
assistance in local government circles if this court, albeit briefly,
deals with certain of
these issues.
[33] First, a
further problem facing the appellant is to be found in s 229(1) of
the Constitution which provides
that a municipality may impose:
‘
(
a
)
rates on property and surcharges on fees for services provided by or
on behalf of the municipality;
and
(
b
)
if authorised by national legislation
, other taxes, levies and
duties appropriate to local government or to 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.’ (My emphasis.)
CID levies,
which for the reasons already set out are embraced by ‘other
taxes, levies and duties’ envisaged in s 160(2)(
c
)
of the Constitution, must fall within the compass of ‘other
taxes, levies and duties appropriate to local government or
to the
category of local government into which that municipality falls’
as envisaged by this section. However, as is spelled
out in s
229(1)(
b
),
such levies can only be imposed ‘if authorised by national
legislation’. CID levies are not authorised by national
legislation. They are authorised by legislation passed by the Gauteng
Provincial Legislature. On this basis, too, the levy imposition
of
CID levies offends the Constitution and therefore lacks legality.
[34] Secondly,
even if the Randburg CID had been properly formed and the imposition
of its levies for the three
years after its formation was lawful, the
appellant faces yet a further difficulty in regard to establishing
the extent of the
first respondent’s liability. The entire
scheme envisaged by the CID Act is that a CID is to be established
for a period
of no more than three years in order to enhance the
services being delivered by the municipality during that period. That
is clear
from s 2(4) of the CID Act which states that the petition
‘must take the form of a city improvement district plan,
covering
a three year period taking into account the requirements of
this Act, and must include the prescribed requirements and be in the
prescribed form’. The prescribed form set out in the
regulations defines a ‘city improvement district plan’ as
meaning ‘a business plan for the operation of a city
improvement district covering a three year period from the
anticipated
date of approval of the district’. Under Part D of
the schedule to the regulations, particulars have to be given of the
CID
budget in respect of the three year period of the plan. All of
this shows that the life of a CID may be no more than three years.
[35] Despite this, it
was argued on behalf of the appellant that there is no indication in
either the CID Act or the
regulations of an intention on the part of
the legislature to limit the lifespan of a CID to three years; and
that the three year
period referred to in s 2(4) merely prescribes
the length of time which the CID plan should cover in the context of
the petition
submitted to the municipality. This was presumably, so
the argument went, that such period was considered to be sufficient
to enable
the municipality (and other interested parties) to properly
assess the merits or demerits of the proposed CID plan; and that once
a petition is approved and a CID formed, the relevance of the three
year period falls away.
[36] There is no
merit in this argument. The CID Act and its regulations simply just
do not provide for the suggested
scheme of details being given in the
petition for the initial three year period merely to illustrate the
advantages of approving
a CID plan. On the contrary, it is quite
clear from the legislative provisions I have mentioned that the CID
Act intended a CID
plan to endure for no longer than three years from
the date of its approval.
[37]
This conclusion is relevant to the amounts the Randburg CID could
have recovered even if it had been validly
formed (which it was not).
The precise date on which it came into existence is not clear but it
can be accepted that the initial
three year period after its
formation probably lapsed in 2007 (the court a quo found it was
probably ‘sometime in 2007 or
2008’). But, importantly,
it is common cause that at no time thereafter was the original CID
plan amended by an extension
(for which a procedure is
prescribed
[11]
)
nor was a fresh plan ever approved by the municipal council. Despite
that, the appellant and its agent, Kagiso, continued to do
business
not only as if the original plan remained in force, but by collecting
levies which it, without the approval of the municipal
council, had
increased and imposed from time to time in clear contravention of
both the CID Act and the Constitution.
[38] As appears
from the details of the appellant’s claims set out in para 4
above, all the levies claimed
by the appellant in Case No 11637/2011
and, probably, the majority of those claimed in Case No 53025/09,
relate to periods more
than three years after the CID was approved.
That being so, the levies claimed were not recoverable as they were
determined by
the appellant without lawful authority to do so.
[39] In view of
what is set out above, the issue whether the first respondent’s
two properties were ‘rateable
property’ as set out in
para 2 in the statement of issues becomes moot in the light of the
conclusion that the CID was not
lawfully formed. It is an issue which
is, in any event, fact sensitive and in which the general public have
no interest. In the
result, although it was an issue of considerable
debate and formed the subject of a finding in the court a quo
attacked by the
appellant in this court, it is unnecessary to deal
therewith.
[40]
On the other hand, it is necessary to record that the appellant
argued that, in the event of this court concluding
that the Randburg
CID had not been legitimately formed, it would be just and equitable
for an order to be issued under s 172(1)(
b
)
of the Constitution limiting the retrospective effect of a
declaration of invalidity to enable the appellant and the City to
remedy the situation. I see no reason to do so. In reaching its
conclusion this court has not determined that any statute or
legislation
is unconstitutional. The underlying ratio of this
decision is that the City’s mayoral committee took a decision
which, in
terms of the Systems Act, only the municipal council was
lawfully entitled to take, and there is no reason to in effect
declare
that which was unlawful to be lawful.
[41] Moreover,
there must be considerable doubt whether it is possible to lawfully
validate the imposition of
levies under the CID Act. The decision in
this case has been reached on the assumption that the CID Act is
valid. But in the light
of the provisions of s 229 of the
Constitution already mentioned, and its directive that levies can
only be imposed if authorised
by national legislation, I have grave
reservations as to whether the CID Act, being provincial legislation
under which a municipality
imposes levies on owners of immovable
property, can pass constitutional muster. As the necessary interested
parties to a decision
on the constitutional validity of the CID Act
were not joined and the issue was not properly ventilated either in
the papers or
in argument before this court, it would be
inappropriate to deal any further with it.
[42] As neither
of the respondents appeared, there is no necessity to make any order
as to costs.
[43] The appeal
is dismissed.
_______________________
L E Leach
Judge of Appeal
Appearances:
For the
Appellant:
A G Amiradakis
Instructed by:
Moodie &
Robertson, Braamfontein
Claude Reid
Inc, Bloemfontein
For the
Respondent:
None
[1]
‘
[R]ateable
property’ is defined in the CID Act as immovable property on
which a rate or rates may be levied in accordance
with the Local
Authorities Rating Ordinance (Ordinance No 11 of 1977).
[2]
Defined
in s 1 of the CID Act as meaning ‘a geographic district
approved in terms of s 3 of this Act’.
[3]
Regulations
in terms of the Gauteng City Improvement Districts Act 12 of 1997,
GNR 1145,
Provincial
Gazette
491,
11 May 1998.
[4]
Regulation
11(
e
).
[5]
I quote from
counsel for the appellant’s heads of argument.
[6]
Paragraph 48.
[7]
Paragraphs
49-51.
[8]
At 259A-C.
[9]
Paragraphs 27
and 28.
[10]
S A
Reserve Bank v Shuttleworth
para
52.
[11]
Section 7 of
the CID Act.