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[2014] ZASCA 119
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Illovo Opportunities Partnership #61 v Illovo Junction Properties (Pty) Ltd and Another (490/13) [2014] ZASCA 119 (19 September 2014)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 490/13
In
the matter between:
ILLOVO
OPPORTUNITIES PARTNERSHIP
#61
.......................................................
APPELLANT
and
ILLOVO
JUNCTION PROPERTIES (PTY)
LTD
.........................................
FIRST
RESPONDENT
CITY
OF JOHANNESBURG METROPOLITAN
MUNICIPALITY
...........................................................................................
SECOND
RESPONDENT
Neutral
citation:
Illovo Opportunities
Partnership #61 v Illovo Junction Properties
(490/13)
[2014] ZASCA 119
(19 September 2014)
Coram
:
Maya, Cachalia, and Zondi JJA and Schoeman and Dambuza AJJA
Heard
:
2 September 2014
Delivered
:
19 September 2014
Summary
:
Application for declaratory order under s 19(1)
(a)
(iii) of the
Supreme Court Act 59 of 1959 – Whether direct and substantial
interest established – Proper construction
given to ss 48 and
63 of the Town Planning and Townships Ordinance 15 of 1986.
ORDER
On
appeal from:
Gauteng Local Division,
Johannesburg (Potgieter AJ sitting as court of first instance):
The
appeal is dismissed with costs including the costs of two counsel.
JUDGMENT
Cachalia
JA (Maya and Zondi JJA and Schoeman and Dambuza AJJA concurring)
[1]
This is an appeal from the Gauteng Local Division, Johannesburg, of
the high court (Potgieter AJ), dismissing an application
for
declaratory relief.
[2]
The appellant, Illovo Opportunities Partnership #61 sought a
declaration that the first respondent, Illovo Junction Properties
(Pty) Ltd, was liable for the payment of approximately R8.8 million
to the second respondent, City of Johannesburg Metropolitan
Municipality (the City). The City had levied the amount as a
contribution after the first respondent’s property was rezoned
to permit further development. The contribution was meant to fund the
cost of engineering services, parks and open spaces for the
property.
The appellant purchased the property from the first respondent (the
seller), before the contribution was levied, but
took transfer
thereafter.
[3]
The appellant’s case is that the seller is liable for the
payment because the contribution was levied against the owner
of the
property, ie, the seller, before the appellant took transfer of the
property. The seller denies liability. It contends that
the liability
to pay the contribution will rest on the owner – the appellant
in this case – once it chooses to develop
the property in line
with the rezoning. The high court did not consider the merits of the
dispute because it dismissed the application
on the ground that the
appellant lacked standing. It held that the appellant had no legal
interest in the relief claimed because
it concerned the rights and
obligations between third parties (the City and the seller); it did
not concern the appellant’s
own rights. It is therefore
necessary first to determine the issue of the appellant’s
standing to seek the declaration, and
if necessary to then deal with
the merits of the dispute. The City has not taken any steps to obtain
payment from either party.
[4]
It will be helpful to set out some of the background facts to better
understand the dispute between the parties. The appellant
concluded a
sale agreement with the seller during September 2009 to purchase a
property situated in Illovo, Johannesburg, for approximately
R35,5
million. The seller had earlier that year applied to the City for the
property to be rezoned so that its primary development
rights would
include offices, residential buildings and shops. In March 2009 the
seller informed the appellant that the City had
approved the
application. However, at the time when the agreement was concluded,
the City had not yet published a notice to this
effect.
[5]
In October 2009, a month after the agreement was concluded, the
seller obtained a clearance certificate from the City indicating
that
its outstanding levies on the property had been settled. The seller
maintains that it had thus discharged all its debts to
the City. It
then began to give effect to the agreement by taking steps to
transfer the property to the appellant.
[6]
On 4 November 2009 the City published a notice in the provincial
gazette for the property to be rezoned in terms of an amendment
scheme (the scheme), which became effective on 30 December 2009. This
meant that the property could now be developed in a manner
consistent
with its new use rights.
[7]
On 5 January 2010, before the property was transferred to the
appellant, the City informed the seller, which was still the owner,
that an amount of R 8 749 758.04 was due for a ‘bulk
services contribution’ in terms of s 63(1) of the Town-
Planning and Townships Ordinance 15 of 1986 (the Ordinance).
[1]
On 19 January 2010, the appellant became the owner of the property on
registration of transfer. The appellant now wishes to sell
the
property to a developer or develop the property itself, and needs
clarity in regard to where liability to pay the contribution
lies.
[8]
In July 2011 the appellant instituted proceedings in the high court
to resolve the dispute. The main relief sought was an order
declaring
the seller liable to pay the contribution. Prayer 2 was for
consequential relief for the seller to pay the City in the
event of
the main relief being granted. The appellant added an alternative
prayer for relief against the City, but later abandoned
it, as it did
the consequential relief it sought against the seller. In the high
court the only relief sought, as it seeks in this
appeal, is an order
declaring the seller liable to pay this amount to the City. The City
has been joined in these proceedings but
is content to adopt a
non-committal stance. It abides the decision of this court.
[9]
In its founding affidavit, and in the high court, the appellant
relied on the sale agreement read with s 63(1) of the Ordinance
to
establish its cause of action. Clause 5.2 upon which particular
reliance was placed, reads:
‘
5.2
From the date of possession –
5.2.1
. . .
5.2.2
. . .
5.2.3
The purchaser shall be liable for all rates, taxes and other
imposts
levied against the property by any authority. Should the seller have
prepaid any such rates and taxes beyond the date of possession,
the
purchaser shall refund to the seller all amounts paid beyond the said
date on demand. For the purpose of this clause the words
“Assessment
rates” includes the electricity levy charged with respect to
property not consuming electricity.’
(my emphasis)
Accordingly,
the appellant contended that until it obtained possession, which is
when transfer was effected, the seller was liable
to pay rates, taxes
and other imposts for the property.
[10]
The founding affidavit asserts that it was ‘an express,
alternatively tacit, further alternatively implied term’
of the
contract that the seller would pay the contribution to the City. This
is because the parties assumed that once the scheme
came into
operation, and the City had directed the seller to pay the
contribution, the seller would pay. And further, that the
City’s
direction to the seller under s 63(1) of the Ordinance to pay the
contribution amounted to the levying of an
impost
against the
property within the meaning of clause 5.2.3 of the agreement. The
seller is therefore liable for the payment to the
City. The appellant
thus contended, for the purpose of establishing its standing, that it
has a direct and substantial interest
in ensuring that the seller
discharges its obligation to the City.
[11]
The high court found that the appellant’s founding papers had
not established the contractual term for which it contended.
And it
followed that the declaration sought – that the seller is
liable to pay the contribution to the City – did not
concern
the appellant’s
own
rights under the contract but rather
related to a ‘concomitant right’ that the City may have
against the seller, which
the City has not asserted. Consequently the
appellant had established no more than a ‘derivative interest’
–
that it would be compelled to pay the City if it wished to
develop the property – and not a direct and substantial
interest
in the grant of the declaratory order. The learned judge
thus dismissed the application but granted leave to this court.
[12]
In its heads of argument prepared for the appeal the appellant
persisted with its submission that under the sale agreement
the
seller was and remains liable for the payment of the contribution.
But, before us, counsel abandoned any reliance on the agreement
as
there was no express term providing for the payment and simply no
basis for reading a tacit or implied term to this effect into
it.
[13]
Instead he submitted that if the appellant is compelled to pay the
contribution, the seller would still incur liability on
the basis of
unjust enrichment or
negotiorum gestio
. Simply put, the
appellant says that the seller is liable for the payment under the
Ordinance, and if the appellant is obliged
to discharge the seller’s
debt, the latter would be unjustly enriched at its expense. This
submission was not advanced in
the court a quo but now forms the
basis for the legal interest the appellant contends it has in the
relief claimed. It is to this
issue that I now turn.
[14]
Section 19(1)
(a)
(iii)
of the Supreme Court Act 59 of 1959,
[2]
empowers a high court to grant declaratory relief,
‘
.
. . in its discretion, and at the instance of any interested person,
to enquire into and determine any existing, future or contingent
right or obligation, notwithstanding that such person cannot claim
any relief consequential upon the determination.’
The
existence of a dispute between the parties is not a prerequisite for
the court to exercise its power under this sub-section.
The court
must, however be satisfied that the applicant seeking the relief has
a legal interest – a direct and substantial
interest – in
the order sought and also that the order would be binding upon
interested parties. It is insufficient for the
applicant to have an
indirect interest such as a financial or commercial interest in the
outcome of the litigation. It is also
inadequate for the interest to
be derivative in the sense that it depends upon the validity and
existence of some other right.
[3]
[15]
On behalf of the seller it was submitted that the appellant’s
interest in whether the first respondent is liable under
the
Ordinance to pay the contribution to the City is not direct and
substantial because it concerns the rights and obligations
of third
parties – the City and the seller – and not its own
rights. It is thus a typical example of an indirect interest,
which
disentitles it to the relief claimed and means that it lacks standing
to claim the relief. Before I consider this submission
it is
necessary to examine the nature of the relief claimed.
[16]
It is common ground that a court must approach the question of
standing on the assumption that the allegations of fact in the
founding affidavit are correct. The appellant has abandoned reliance
on the sale agreement. What remains are two material allegations
that
now form the basis of the claimed relief: first, that the seller is
liable for the payment of the contribution to the City,
and secondly,
that if the seller does not pay the City, the appellant shall be
compelled to make the payment to enable it to transfer
the property
to a prospective buyer or to apply for building plans to exercise its
zoning rights under the Ordinance.
[17]
In effect the appellant asserts that it has a legal interest in both
the existing right of the City to demand payment from
the seller and
also in the seller’s corresponding obligation to pay the City.
It also has a contingent right to demand payment
from the seller in
the event of the seller failing to meet its payment obligations to
the City. For, it will then have to step
into the seller’s
shoes and pay the City so that it can exercise the zoning rights, and
thereafter reclaim the money from
the seller, which would have been
unjustly enriched at the appellant’s expense.
[18]
Notwithstanding the fact that the appellant’s application for
declaratory relief is outwardly aimed at establishing the
rights and
obligations of third parties, the court’s decision has a
material bearing on its ability to exploit the development
rights in
the property, and if necessary its own right to claim a repayment
from the seller in the event it is compelled for practical
reasons to
pay the contribution. Furthermore, properly understood, the order
sought carries with it the necessary implication that,
if granted,
the appellant shall have the right to resist an application by the
City to enforce a claim for the contribution against
it, if it
chooses to exercise its rights under the scheme. Finally, whether or
not the appellant succeeds in its application, the
outcome of this
court’s judgment on the merits, ie, on the proper construction
to be given to the Ordinance, will be
res
judicata
between
the parties, determining the legal rights inter se of all three
parties. That is an important factor in deciding the standing
issue.
[4]
[19]
In my view the appellant has, therefore, established a legal interest
in the relief sought. It follows that the seller’s
objection to
the appellant’s standing was not well taken.
[20]
I turn to consider whether or not the City’s notice delivered
to the seller on 5 January 2010 had the effect of
imposing an
obligation on the seller to pay the contribution as the appellant
contends it did. If this question is answered in
the affirmative, it
means that appellant may exercise the new use rights under the
scheme, without incurring any liability to the
City. The answer
resides in the construction that is given to the relevant provisions
of the Ordinance, namely ss 48 and 63.
[5]
[21]
The liability to pay a contribution rests with the owner of the land.
Thus s 63(1) permits the local authority, by registered
letter, to
direct the owner within a period of 30 days of the commencement
of the scheme to pay the contribution. The local
authority may claim
the contribution only if it is necessary to enhance or improve the
engineering services or to provide for open
spaces and parks
following the commencement of a scheme.
[6]
The owner must be informed of the amount of the contribution, how it
was determined and the purpose for which it is required.
[7]
[22]
Notwithstanding the exhortation in s 63(1) for the owner to ‘pay
a contribution’, it is not a payment demand. Its
purpose is to
fix the amount of payment when the scheme commences. Thus an owner,
who receives the ‘direction’ to pay
from the local
authority and wishes to avoid paying the contribution, may within 60
days of having received the notice request
the local authority to
repeal or amend the scheme to reduce the contribution payable.
[8]
The owner, who receives the direction to pay the contribution, may
take the steps contemplated in s 63(2) to avoid paying or reduce
the
amount of the contribution.
[23]
It follows that an owner who has received the direction and fails to
take any steps contemplated in s 63(2) to avoid or reduce
the amount
of the contribution will have his liability fixed, and he will have
to pay the amount. The purpose of the section is
therefore evidently
to ensure that the owner pays the fixed contribution that is
necessary to fund the engineering services, open
spaces or parks
envisaged in the scheme. The question that arises is when, exactly,
is the payment due and payable?
[9]
[24]
The seller relies heavily on ss 48(6)
(b
) and
(c)
to
support its submission that the obligation to pay arises only when
the rezoning is implemented, because these sections say that
the
contribution must be paid before a building plan is approved or the
land is used in accordance with the scheme. This implies
that the
contribution does not have to be paid if the rezoning is not
implemented.
[25]
The seller submits that s 48(7) also supports this construction. It
provides for a prospective buyer to furnish an acceptable
undertaking
to pay the contribution when he exercises the new rights in
accordance with the scheme. The import of this, so it is
submitted,
is that after transfer, the local authority may no longer insist on
payment from the previous owner; it can only do
so from the new
owner, and then only if the latter chooses to exercise its new use
rights. It follows, so the submission goes,
that where the land is
transferred after a direction is issued in terms of s 63(1), as
occurred here, the obligation to pay rests
with the new owner when it
elects to exercise the new use rights.
[26]
In summary, when these sections are read together this is what they
contemplate. The local authority fixes an amount of the
contribution
and directs the owner of the land, within 30 days of the scheme
coming into operation, to pay. If the owner takes
no steps to avoid
payment or to reduce the amount of the contribution the full amount
is payable. But it only becomes due when
the owner elects to
implement the scheme by applying for building plans to be approved or
uses the land in a manner contemplated
in the scheme, not before
this.
[27]
Where the land is sold before the contribution is paid or the new use
rights have been implemented the prospective buyer must
furnish an
undertaking to the satisfaction of the local authority to the effect
that the contribution shall be paid should he exercise
any new right
envisaged in the scheme. This can only mean that the contribution
need not be paid if the new rights are not exercised.
[28]
This brings me to s 48(8), which says that when the payment is due in
the circumstances mentioned in ss 48(6)
(b)
and
(c)
the
local authority may allow the contribution to be paid in instalments
over a period not exceeding three years, or postpone the
payment for
this period where security for the payment is given to its
satisfaction. If the local authority allows this it may
impose any
condition, including a condition for the payment of interest. It
therefore follows that if neither the owner nor the
prospective buyer
choose to implement the scheme s 48(8) does not apply.
[29]
It seems odd that ss 48(6), (7) and (8), when applied mutatis
mutandis to the payment of the contribution in s 63(1), appear
to
allow an owner or prospective buyer to postpone implementing the
scheme – and thus liability for payment of the contribution
indefinitely – without any financial penalty. Counsel for the
appellant thus submits, with some force, that this could never
have
been what the Ordinance contemplated. He thus contends that s 48(6)
does not affect the date on which the owner of the land
becomes
liable for the payment of the contribution, which is when he has been
directed to do so.
[30]
There are, however, several pointers that weigh against the
appellant’s submission. First, s 63 does not in terms specify
a
date when the contribution must be paid; it cannot be on the day when
the owner is directed to pay because he has 60 days after
that to
avoid or reduce it. Secondly, no time period is stipulated for the
implementation of the scheme. If there was, one would
have expected
the Ordinance to say so clearly. Thirdly, it is not unreasonable for
the Ordinance to require the contribution to
be payable only if the
new use rights are exercised because the City incurs these costs only
as a consequence of the implementation
of the scheme. Finally, s
48(8) provides for the payment of instalments or the furnishing of
security and interest payments in
the circumstances contemplated in s
48(6)
(b)
and
(c)
. It would be incongruous for the
Ordinance to permit this indulgence to an owner or prospective buyer
only when the new use rights
are exercised and not immediately after
the direction to pay was issued, which would be the consequence if
the appellant’s
contention were correct. This suggests strongly
that the owner need not pay the contribution immediately upon receipt
of the directive.
This, I think, is the proper construction to be
given to ss 48 and 63.
[31]
It follows that the appellant’s contention that the seller
became liable for the payment of the contribution when it
received
the directive on 5 January 2010 must fail and consequently its
application for declaratory relief cannot be upheld.
[32]
The following order is made:
The
appeal is dismissed with costs including the costs of two counsel.
__________________
A
CACHALIA
JUDGE
OF APPEAL
APPEARANCES
For
Appellant: H F Oosthuizen
Instructed
by:
Hooyberg
Attorneys, Johannesburg
Webbers,
Bloemfontein
For
First Respondent: J Suttner SC (with him A Lamplough)
Instructed
by:
Edward
Nathan Sonnenbergs, Johannesburg
McIntyre
& Van der Post, Bloemfontein
For
Second Respondent: No attendance
Instructed
by:
Lennon
Moleele & Partners, Johannesburg
[1]
See
fn 4 below.
[2]
Section
19(1)
(a)
(iii)
has now been replaced by
s 21(1)
(c)
of the
Superior Courts Act 10 of 2013
.
[3]
United
Watch & Diamond Co (Pty) Ltd v Disa Hotels Ltd
1972
(4) SA 409
(C) at 417B-C.
[4]
Ex
Parte Nell
1963
(1) SA 754
(A) at 760C.
[5]
Section
48:
‘
Contribution
in respect of engineering services, open spaces or parks.
—
(1)
. . .
(2)
. . .
(3)
. . .
(4)
. . .
(5)
. . .
(6)
Subject to the provisions of subsections (7) and (8), a contribution
contemplated in subsection (1) payable in respect of
any particular
land shall be paid to the local authority before—
(
a
)
a written statement contemplated in section 50 (1) of the Local
Government Ordinance, 1939, is furnished in respect of the land;
(
b
)
a building plan is approved in respect of—
(i)
(i) the proposed alteration of or addition to an existing building
on the land;
(ii)
(ii) the erection of a new building on the land,
where
that building plan, were it not for the commencement of the
amendment scheme contemplated in subsection (1), would have
been in
conflict with the town-planning scheme in operation;
(
c
)
the land is used in a manner or for a purpose which, were it not for
the commencement of the amendment scheme contemplated in
subsection
(1), would have been in conflict with the town-planning scheme in
operation.
(7)
Where an amendment scheme which gave rise to a contribution
contemplated in subsection (1) has been prepared by a local
authority and a prospective transferee of the land in respect of
which the contribution is payable furnishes an undertaking to
the
local authority, which is to the satisfaction of the local
authority, to pay the contribution should he exercise any new
right
conferred in respect of the land by the scheme—
(
a
)
the statement contemplated in subsection (6) (
a
) shall, where
such land is acquired by the transferee as a beneficiary in a
deceased estate;
(
b
)
the statement contemplated in subsection (6) (
a
) may, in any
other case,
be furnished before the contribution
is paid.
(8)
A local authority contemplated in subsection (1) may—
(
a
)
in the circumstances contemplated in subsection (6) (
b
) or
(
c
), allow payment of the contribution contemplated in the
first-mentioned subsection in instalments over a period not
exceeding
3 years;
(
b
)
in any case, allow payment of the contribution contemplated in the
first-mentioned subsection to be postponed for a period not
exceeding 3 years where security for the payment is given to its
satisfaction;
(
c
)
in exercising the power conferred by paragraph (
a
) or (
b
),
impose any condition, including a condition for the payment of
interest.’
Section
63: ‘
Contribution in respect of engineering services, open
spaces or parks.
—(1) Where an amendment scheme which is an
approved scheme came into operation in terms of section 58 (1), the
authorised
local authority may, within a period of 30 days from the
date of the commencement of the scheme, by registered letter direct
the owner of land to which the scheme relates to pay a contribution
to it in respect of the provision of—
(
a
)
the engineering services contemplated in Chapter V where it will be
necessary to enhance or improve such services as a result
of the
commencement of the amendment scheme;
(
b
)
open spaces or parks where the commencement of the amendment scheme
will bring about a higher residential density.
and
it shall state in that letter—
(i)
the amount of the contribution;
(ii)
particulars of the manner in which the amount of the contribution
was determined; and
(iii)
the purpose for which the contribution is required:
Provided
that—
(
aa
)
the amount of the contribution required in respect of open spaces or
parks, where applicable, shall be determined by the local
authority
in the manner prescribed;
(
bb
)
in calculating the contribution an amount paid, payable or becoming
payable in terms of section 20 (2) (
c
)
shall be taken into account.
(2)
An owner who—
(
a
)
wishes to avoid the payment of a contribution contemplated in
subsection (1) may request the local authority contemplated in
that
subsection to repeal the amendment scheme concerned;
(
b
)
wishes to avoid payment of or wishes to reduce the amount of a
contribution contemplated in subsection (1) may, in terms of
section 56 (1), apply for the further amendment of the
town-planning scheme concerned,
within a period
60 days from the date of the letter contemplated in that subsection
or, where he has appealed in terms of section
124 or 139, from the
date on which he was notified of the decision of the Services
Appeal Board or the Board.
(3)
. . .
(4)
. . .
(5)
. . .
(6)
The provisions of section 48 (6), (7) and (8) shall apply
mutatis
mutandis
to the payment of a
contribution contemplated in subsection (1).’
[6]
Sections
63(1)
(a)
and
63(1)
(b)
.
[7]
Sections
63(1)
(b)
(i),(ii)
and (iii).
[8]
Section
63(2).
[9]
This
question was not decided in
Stands
5/1 Wierda Valley (Pty) Ltd & another v Sandton Town Council
[1993] ZASCA 141
;
1994
(1) SA 333
(A) at 346G-347B.