About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Supreme Court of Appeal
SAFLII
>>
Databases
>>
South Africa: Supreme Court of Appeal
>>
2014
>>
[2014] ZASCA 211
|
|
MEC Local Government and Traditional Affairs, Kwazulu-Natal v Botha N.O. and Others (887/13) [2014] ZASCA 211; [2015] 1 All SA 649 (SCA); 2015 (2) SA 405 (SCA) (1 December 2014)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case
No:
887/13
Reportable
In
the matter between:
MEC
LOCAL GOVERNMENT AND TRADITIONAL AFFAIRS,
KWAZULU-NATAL
..........................................................................................................
APPELLANT
and
JOACHIM
HENDRIK BOTHA
NO
................................................................
FIRST
RESPONDENT
PHILLIP
DAVID BERMAN
NO
.................................................................
SECOND
RESPONDENT
OLIVIER
MICHAEL POWELL
NO
............................................................
THIRD RESPONDENT
MUNICIPALITY
OF
ETHEKWINI
...........................................................
FOURTH
RESPONDENT
Neutral
citation:
MEC
Local Government and Traditional Affairs v Botha NO
(887/13)
[2014] ZASCA 211
(1 December 2014)
Coram:
Navsa ADP, Shongwe, Theron and Swain
JJA and Fourie AJA
Heard:
18 November 2014
Delivered:
1 December 2014
Summary:
Valuation of immovable property by municipality for purpose of
levying rates in terms of
Local Government: Municipal Property Rates
Act 6 of 2004
─ variation to valuation roll occurs in terms of
s 55
as a result of objections lodged or by means of a supplementary
valuation in terms of
s 78
─ In present circumstances
s 80
of
the Act in terms of which MEC may grant condonation and extension of
time periods, inapplicable.
ORDER
On
appeal from: KwaZulu-Natal High Court, Pietermaritzburg (Tonjeni AJ
sitting as court of first instance)
1
The appeal is upheld with costs.
2
The cross-appeal is dismissed with costs.
3
The order in the court below is set aside and substituted as follows:
‘
The
application is dismissed.’
JUDGMENT
Fourie
AJA (
Navsa ADP,
Shongwe, Theron and Swain JJA
concurring):
[1]
This appeal concerns the valuation of immovable property situated
within the jurisdictional area of a municipality, for the
purpose of
levying rates on such property in terms of the provisions of the
Local Government: Municipal Property Rates Act 6 of
2004 (the MPRA).
In particular, it deals with the question whether in the prevailing
circumstances a late objection to a valuation
roll may be lodged by
invoking s 80 of the MPRA.
[2]
Erf 324, Suburb Assagay (the property) is situated within the
jurisdictional area of the fourth respondent, the municipality
of
Ethekwini (the municipality). In 2008 the property was entered in the
municipality’s valuation roll maintained in terms
of s 23 of
the MPRA, reflecting its municipal valuation as R23 million.
[3]
The property was owned by Universal Retail Portfolio (Pty) Limited
(URP). On 31 March 2010 URP was finally wound up by an order
of the
North Gauteng High Court, Pretoria, and on 18 June 2010 the first to
third respondents were duly appointed by the Master
of the high court
as the liquidators of URP (the liquidators). On 8 September 2011
and in the execution of their duty to liquidate
the assets of URP,
the liquidators sold the property to a third party for a purchase
consideration of R4,35 million. Pursuant
to the sale, the
liquidators requested a clearance certificate reflecting the amount
payable to the municipality in respect of
rates to enable transfer of
the property to be registered in the name of the purchaser.
[4]
The municipality provided the liquidators with a clearance
certificate indicating that an amount of R2 708 900 was
owed to the municipality by URP as at 12 October 2011. This
included assessed and arrear rates of R2 707 200 levied
in
respect of the property, calculated on the 2008 municipal valuation
of R23 million.
[5]
The liquidators took the view that the 2008 municipal valuation of
the property was substantially incorrect and sought to persuade
the
municipality that the fair market value of the property as at 24
March 2011, did not exceed R4,5 million. In this regard the
liquidators relied on the valuation of a professional valuer.
However, the municipality refused to reconsider its 2008 valuation
of
the property. In fact, it took the view that the 2008 valuation of
R23 million was not subject to change as no objection had
been lodged
against it and ‘no value adjustments can be done going back in
time’.
[6]
To fully appreciate the background to the litigation that followed,
it is necessary to have regard to the legislative framework
within
which rates are imposed on immovable property situated in the
jurisdictional area of a municipality. The starting point
is s 229 of
the Constitution which provides that a municipality may impose rates
on property and that such power may be regulated
by national
legislation. The MPRA is the national legislation envisaged by s 229
of the Constitution.
[7]
Section 30 of the MPRA provides that a municipality intending to levy
rates on properties within its jurisdictional area, has
to value such
properties and prepare a valuation roll reflecting the valuations. In
terms of s 31 a valuation must reflect the
market value of the
relevant property, while s 32 provides that a valuation roll remains
valid for the financial year in which
it takes effect, but may be
extended by the municipality for a maximum period of four financial
years. A financial year is defined
in s 1 to mean the period from 1
July in a year to 30 June the next year.
[8]
Section 50 of the MPRA, read with s 49(1)
(a)
,
provides for the inspection of, and objections to, valuation rolls.
In terms thereof any person may lodge an objection with the
municipal
manager against any matter reflected in, or omitted from, the
valuation roll. An objection has to be lodged within 30
days from the
date of the publication of a notice by the municipality inviting the
public to inspect the valuation roll and to
lodge objections thereto.
Sections 51 to 53 prescribe the procedure to be followed in the event
of objections being lodged, while
s 54 provides for an internal right
of appeal to an appeal board by a person who has lodged an objection
and who is not satisfied
with the decision of the municipal valuer in
regard thereto. Section 55 deals with adjustments or additions to
valuation rolls
necessitated by successful objections raised against
the valuation of specific individual properties. Section 78 provides
for the
publication of supplementary valuation rolls in cases where
properties were, inter alia, substantially incorrectly valued during
the last general valuation.
[9]
Section 80 of the MPRA reads as follows:
‘
Condonation
of non-compliance with time periods
(1) The MEC for local government
in a province may, on good cause shown, and on such conditions as the
MEC may impose, condone any
non-compliance with a provision of this
Act requiring any act to be done within a specified period or
permitting any act to be
done only within a specified period.
(2) Non-compliance with section
21, 31, or 32 may not be condoned in terms of subsection (1).
(3) The powers
conferred in terms of this section on an MEC for local government may
only be exercised within a framework as may
be prescribed.’
[10]
It is common cause that no objection had been lodged against the 2008
valuation of the property or during any subsequent fiscal
period
until the appointment of the liquidators. When the liquidators sold
the property during September 2011, the 2008 valuation
was still in
force. However, the liquidators had no knowledge thereof and it was
only when registration of transfer had to take
place that they were
made aware of the 2008 valuation of R23 million and the amount of
some R2,7 million payable to the municipality
in respect of assessed
and arrear rates, calculated on the 2008 valuation of the property.
[11]
Absent an objection against the 2008 valuation of the property, the
internal appeal procedure
provided for in s 54 of the MPRA, was not
available to the liquidators. For the same reason the liquidators
were unable to seek
an adjustment in terms of s 55 of the MPRA, while
the passage of time precluded them from obtaining any meaningful
relief in terms
of s 78. It will be recalled, as set out in para 8
above, that s 78 provides for the publication of supplementary
valuation rolls.
In the event, the liquidators resorted to s 80 of
the MPRA by lodging an application with the appellant (the MEC) for
condonation
and leave to lodge a late objection against the 2008
valuation of the property. The MEC was allowed seven days to respond
thereto,
but when no response was received, the liquidators
approached the court a quo, citing the municipality and the MEC as
respondents,
for, inter alia, the following relief:
(a) An order setting
aside the 2008 municipal valuation of the property.
(b) Alternatively,
an order granting the liquidators condonation for the late filing of
an objection against the 2008 municipal
valuation of the property,
which condonation is to be deemed to be granted in terms of s 80 of
the MPRA.
(c)
Further alternatively, an order directing that the MEC consider the
liquidators’ application for condonation in terms
of s 80 of
the MPRA within a period of 14 days from the date of the court’s
order.
[12]
The municipality and the MEC opposed the application and filed
opposing papers. The matter was heard by Tonjeni AJ, who made
an
order whereby:
(a) The application
for the setting aside of the 2008 municipal valuation of the property
was dismissed.
(b) The liquidators’
application for condonation in terms of s 80(1) of the MPRA was
referred back to the MEC for her consideration
and decision within 30
days of the date of the court order; and
(c)
The parties are to bear their own costs.
[13]
The MEC appeals, with the leave of the court a quo, only against the
order referring the application for condonation back for
her
consideration and decision. The MEC contends that this order be
varied to read:
‘
In all
other respects the application is dismissed.’
[14]
The liquidators have, also with the leave of the court a quo, filed a
cross-appeal against the same order, which they contend
should be
substituted with an order in the following terms:
‘
That
condonation be granted to the applicants [the liquidators] in terms
of s 80(1) of Act 6 of 2004 and that the applicants be
permitted to
file with the first respondent [the MEC] an objection against the
2008 municipal valuation of the immovable property
in terms of
s 50(1)
(c)
of Act 6 of 2004 within a period of 30 days from the date of the
order.’
I
should add that the municipality abides the decision of this court.
[15]
With regard to the invocation of s 80 of the MPRA by the liquidators,
the MEC submitted that it finds no application as the
framework of
the MPRA reveals a design that has the effect of completing all
disputes about valuation within the strict time limits
laid down by
the MPRA. She further submitted that the ambit of s 80 does not
extend to applications made by affected parties other
than
municipalities. The liquidators, on the other hand, submitted that,
upon a proper interpretation of s 80 of the MPRA, it does
extend to
applications for condonation made by other affected parties, such as
themselves.
[16]
Before considering whether or not the condonation and extension of
time provisions in s 80 of the MPRA find application, I
first turn to
the mystery surrounding the 2008 valuation of the property in an
amount of R23 million. By all accounts this valuation
is 500 per cent
more than the true market value of the property. It appears from the
liquidators’ papers filed that URP purchased
the property on 17
August 2006 at a purchase price recorded as R24 million. This
purchase consideration no doubt played a major
role in the
municipality arriving at a valuation of R23 million in 2008.
Reflecting on this purchase price of R24 million, the
deponent to the
founding affidavit of the liquidators said the following at para
11.6:
‘
The
only conclusion I can make is that the previous purchase price was
inflated by the members of [URP].’
[17]
In this regard the deponent referred to a letter of the liquidators’
attorneys and conveyancers, dated 6 February 2012,
in which the
following is said:
‘
As you
may know, the property in question (Erf 324 Assegay) was purchased
for the amount of R24 million in 2006. The purchase price
is
extremely excessive and we have little doubt that this purchase price
was stipulated as R24 million in order to claim VAT from
the Receiver
of Revenue. The value of the property is and was never R24 million.’
[18]
It is abundantly clear that the actual purchase price paid by URP in
2006, would not have been R24 million. The overwhelming
probability
is that this was a simulated purchase price which enabled URP to
fraudulently claim an inflated amount as VAT from
the Receiver of
Revenue. I should add that it also appears from the papers that, at
the time of the purchase of the property by
URP in 2006, a mortgage
bond in the sum of R24 million was registered over the property in
favour of a financial institution. The
simulated purchase price would
no doubt have served as justification for the financial institution
to grant a loan of R24 million.
[19]
URP not only misrepresented the 2006 purchase price of the property,
but subsequently failed to take any steps to prevent the
misrepresentation from materially influencing the 2008 municipal
valuation of the property. URP lodged no objection against the
valuation of R23 million; in fact, it acquiesced and allowed this
hugely inflated valuation of the property to be reflected in
the
valuation roll for several fiscal periods thereafter. It is clear
that URP did not take any steps during the subsequent years
to cause
a supplementary valuation to be made of the property in terms of s 78
of the MPRA, to rectify this substantially incorrect
valuation. In
these circumstances URP would not only be prevented from benefiting
from its own fraudulent conduct, but also be
precluded from having
such conduct condoned by allowing it to lodge a late objection to the
2008 valuation. In any event, URP would
certainly not be able to show
‘good cause’, entitling it to relief in terms of s 80 of
the MPRA.
[20]
The question then arises whether the liquidators, who have stepped
into the shoes of URP, are entitled to enforce any rights
under s 80
of the MPRA, to enable them to lodge a belated objection against the
2008 valuation of the property. To my way of thinking,
the
liquidators are in no better position than URP. As explained by the
authors M S Blackman, R D Jooste, G K Everingham, J L Yeats,
F H I
Cassim and R de la Harpe
Commentary
on the Companies Act
vol
1 at 14-29, the general rule is that a liquidator must take the
company’s rights and obligations as he or she finds them.
See
also
Thomas
Construction (Pty) Ltd v Grafton Furniture Manufacturers (Pty) Ltd
1988 (2) SA 546
(A)
at 568B. From this it follows that a liquidator’s ability to
enforce a company’s rights is subject to any defence
that was
available against the company before its liquidation. See Blackman et
al
Commentary on the
Companies Act
at
14-289.
[21]
In
Langham NO & another v Milne NO
1962 (4) SA 574
(N)
Caney J dealt with the situation where the trustees of an insolvent
sought to enforce an illegal agreement concluded by the
insolvent.
The learned judge opined as follows at 580B-E:
‘
The
answer to the problem lies in the fact that in a trustee are vested
the assets, including rights of action, of the insolvent.
The trustee
can enforce such rights of action as the insolvent could enforce;
there is a cession or assignment of them to him by
force of law, but
like any other cessionary he takes them subject to defences available
against the insolvent in whose shoes he
stands in so far as concerns
enforcement of rights of action . . . Illegality is one such defence;
if by reason of this the insolvent
has no right of action, none
passes to his trustee. . . . The trustee cannot enforce an illegal
contract made by the insolvent.’
I
agree with the reasoning of the learned judge and with his conclusion
that the illegality of the agreement in question debarred
the
trustees from enforcing the illegal agreement for the benefit of the
creditors of the insolvent estate.
[22]
With regard to the application under s 80 of the MPRA, the
liquidators have stepped into the shoes of URP, the registered owner
of the property at the time of the 2008 valuation. As URP would, for
the reasons mentioned, have no rights to enforce under s 80
of the
MPRA, the liquidators similarly would have no rights. They can have
no greater rights than URP could have had. I should
add that the
liquidators have not attempted to show that they have acquired any
independent rights, which would afford them a separate
ground upon
which to attack the 2008 valuation of the property. Nor should this
court speculate as to what other rights, if any,
may be available to
the liquidators.
[23]
In terms of the MPRA, a variation of a municipality’s valuation
roll occurs in terms of s 55 as a result of objections
lodged, or by
means of a supplementary valuation in terms of s 78. There is no
room, particularly in the present circumstances,
for a variation of
the 2008 valuation of the property by means of an application for
condonation and late lodging of an objection
in terms of s 80 of the
MPRA.
[24]
In terms of s 55 of the MPRA, an adjustment or addition to the
valuation roll may be made in the following circumstances:
(a) after the
lodging of a successful objection within the time limit specified in
s 49 of the MPRA.
(b) upon the
compulsory review of decisions of the municipal valuer where he or
she has, as a consequence of the lodging of a valid
objection,
adjusted the valuation of a property by more than 10 per cent upwards
or downwards;
(c)
upon a successful appeal to an appeal board against a decision of the
municipal valuer subsequent to the lodging of a valid
objection.
[25]
Section 55(1) of the MPRA provides that any such adjustment or
addition takes effect on the effective date of a valuation roll.
In
terms of s1 of the MPRA the effective date in relation to a valuation
roll, means the date on which the valuation roll takes
effect, ie
from the start of the financial year upon which the valuation roll
first takes effect. As mentioned earlier, the liquidators
were not
able to seek any relief under s 55 of the MPRA, as no objection had
been lodged by URP against the 2008 valuation roll
within the time
period specified.
[26]
Section 78 of the MPRA provides for the making of supplementary
valuations, inter alia, where it appears that a property had
been
substantially incorrectly valued during the last general valuation.
However, in terms of s 78(4)
(a)
the rates based on the valuation of a property in a supplementary
valuation roll, only become payable with effect from the effective
date of the supplementary roll. As I have also mentioned previously,
no steps have to date been taken to cause a supplementary
valuation
to be made in respect of the property.
[27]
It follows from the above that there is no remedy available to the
liquidators under the MPRA which would entitle them to lodge
an
objection to the 2008 valuation at this stage. In particular, they
have no remedy under s 80 of the MPRA. It is accordingly
not
necessary to decide whether or not the condonation and extension of
time provisions of s 80 of the MPRA, extend to applications
made by
affected parties other than municipalities. However, as this has been
the topic of much debate, I will deal with it succinctly
and without
elaboration.
[28]
There is, in my view, no merit in the contention of the MEC that s 80
only extends to applications made by municipalities.
In terms of s
80(1) the powers of the MEC to grant condonation are of wide import,
authorising her to condone
any
non-compliance with a provision of the MPRA requiring
any
act to be done within a specified period or permitting
any
act to be done only within a specified period. (My emphasis.) There
is no indication in the wording of the section of an intention
on the
part of the legislature to limit the MEC’s power to grant
condonation to a municipality only. Section 80(2) of the
MPRA
provides that non-compliance with ss 21, 31 or 32 (which do not apply
in the instant case) may not be condoned in terms of
subsection (1).
Had the legislature intended to exclude affected parties other than
municipalities, it could easily have been done
in the same manner, by
expressly excluding such other parties from the provisions of s
80(1).
[29]
It also appears from the prescribed framework within which the MEC is
to exercise her powers in terms of s 80, that she may
condone
non-compliance with a provision of the MPRA requiring
any
act to be done within a specified period or permitting
any
act to be done only within a specified period. (My emphasis.) Once
again the wide import of the words is indicative of an intention
to
include all affected parties. I therefore have no hesitation in
concluding that s 80 of the MPRA enures to the benefit of all
affected parties and not to municipalities only. I may suggest that
the correctness of this view is underscored by the fact (as
we were
informed from the Bar) that the MEC is in the process of seeking an
amendment to s 80 of the MPRA to limit its application
to
municipalities only.
[30]
In view of my conclusion that the liquidators are unable to rely on
the provisions of s 80 of the MPRA in order to lodge an
objection to
the 2008 valuation at this late stage, it follows that the court a
quo erred in referring the liquidators’ application
in terms of
s 80 to the MEC for her consideration and decision. In the result the
appeal should succeed, while the liquidators’
cross-appeal
falls to be dismissed.
[31]
The following order is made:
1
The appeal is upheld with costs.
2
The cross-appeal is dismissed with costs.
3
The order in the court below is set aside and substituted as follows:
‘
The
application is dismissed.’
___________________
P B Fourie
Acting
Judge of Appeal
APPEARANCES:
For
the appellant: A J Dickson SC
Instructed
by:
PKX
Attorneys, Pietermaritzburg
McIntyre
& Van Der Post, Bloemfontein
For
the first to third respondent: M Hugo
Instructed
by:
Rorich
Wolmarans & Luderitz Inc, Pretoria
Symington
& De Kok, Bloemfontein
For
the fourth respondent: Berkowitz Cohen Wartski, Durban
McIntyre
& Van Der Post, Bloemfontein