About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Eastern Cape High Court, Port Elizabeth
SAFLII
>>
Databases
>>
South Africa: Eastern Cape High Court, Port Elizabeth
>>
2010
>>
[2010] ZAECPEHC 36
|
|
Eedendrop (Pty) Ltd v Kouga Municipality (1774/2009) [2010] ZAECPEHC 36 (22 June 2010)
IN THE HIGH COURT OF SOUTH AFRICA
EASTERN CAPE, PORT ELIZABETH
CASE
NO.: 1774/2009
DATE HEARD:
25/02/2010
DATE
DELIVERED: 22/06/2010
In the matter between:
EEDENPROP (PTY) LTD
APPLICANT
a
nd
KOUGA MUNICIPAL
ITY
RESPONDENT
JUDGMENT
SA
NGONI
J:
[1]
The
applicant is Eedenprop (Pty) Ltd a company with limited liability
duly registered and incorporated as such according to the
laws of the
Republic of South Africa with its principal place of business at
Jeffreys Bay in the province of the Eastern Cape.
[2]
The
respondent is Kouga Municipality, a municipality established in terms
of the Local Government : Municipal Systems Act, Act 32
of 2000 read
with the Local Government: Municipal Structures Act, Act 117 of 1998.
The respondent is the successor in title to
the Transitional Local
Council of Jeffreys Bay (TLC) then established in terms of 30
September 1994.
[3]
The
applicant company, acting both in its capacity as Developer and
registered owner of a certain portion 13 (a portion of portion
8) of
the farm Kabeljouws river no. 328 (the property), in the district of
Humansdorp in the Eastern Cape Province, entered into
a written
agreement (Agreement) in October 2000 with the then TLC, and the said
Agreement relates to the development of the said
property.
[4]
It
is common cause that the applicant company and the respondent’s
successor in title agreed that the applicant would develop,
in
phases, a portion of the said property into a retirement village
(the village) which would be incorporated into the area of
jurisdiction of the TLC.
[5]
The
details of the obligations created in terms of the contract will be
set out hereunder. Upon completion of the construction
referred to
in paragraph 4 above, in around October 2006, the respondent
municipality was requested to comply with its contractual
obligations, in particular, to pay the applicant company the amounts
due in terms of the formula set out in the Agreement. This
was
done. Payments were made by the respondent as they became due. On
24 March 2009 Attorneys McWilliams and Elliott, acting
on behalf of
the respondent, addressed a letter to the applicant company, alleging
the Agreement was of no force and effect for
the reasons given and
that no further payments would be made in pursuant thereto. Indeed
no payments were made thereafter.
[6]
The
relief that is sought by the applicant in these proceedings is an
order in the following terms:
“
1. It is ordered that the Agreement
concluded between the Applicant Company and the Jeffreys Bay
Transitional Local Council, in
October 2000, is of full force and
effect.
The Respondent Municipality is ordered to comply fully with its
obligations arising from the said Agreement including the
obligations
imposed upon it by virtue of the provisions of clause VI
of such Agreement.
The Respondent Municipality is ordered to pay to the Applicant
Company all amounts due to the Applicant Company arising from
the
said Agreement, including interest at the legal rate from the date
upon which such amounts are due and payable, to the date
of payment
thereof.
The Respondent Municipality is ordered to pay the
costs occasioned by this application, including interest on such
costs
at the legal rate calculated as
from the date fourteen (14) days after the date of taxation to the
date of payment.”
[7] In terms of the grand scheme
prepared by the applicant and agreed upon by the TLC the applicant’s
fundamental obligations
were to:
7.1 attend to the rezoning and
subdivision
of the
property in terms of the Land Use Planning Ordinance (LUPO) No. 15 of
1985 and to apply for the proposed retirement development;
7.2 develop the retirement village in accordance with
the subdivision and development plan;
7.3 provide at its own expense for a bulk water supply
and bulk electricity supply and connect that infrastructure to the
infrastructure
of the Transitional Local Council.
7.4 establish a Home Owners’
Association as envisaged by the provisions of section 29 of the Land
Use Planning Ordinance No.
15 of 1985 with a constitution consistent
with the scheme;
7.5 to design and construct at its
own expense the
internal reticulation services for the benefit of consumers within
the development products.
[8] The contractual obligations of
the TLC are recorded in the Agreement as follows:
“
In view of the fact that the Developer
personally carry the burden of all the development costs and interest
thereon in order to provide the internal services and the connector
services (external), the Council undertakes to annually pay
as from
completion of the development as envisaged in par. VIII to the
Developer 60% of the assessment rate income levied in respect
of the
development area as well as all the availability charges levied,
provided that the payments thus to be made to the Developer
shall in
any one year not exceed 12,5% of the total cost of the scheme, which
payments will in any event terminate 15 years from
the date of
completion of the construction work pertaining to the services
envisaged herein or as soon as the cost of the services
has been
fully paid whichever is the earlier.”
POINTS RAISED BY THE RESPONDENT
[9
] It
is not challenged by the respondent that the applicant complied with
its contractual obligations. A number of points were
raised in
defence but at the hearing many were abandoned. Mr Beyleveld SC,
representing the respondent together with Ms Laher,
advised the Court
that the respondent relied upon only four defences which relate to:
▪
c
onditions
of subdivision and rezoning and the existence or otherwise of waiver
in terms of section 42 of the Land Use Planning Ordinance;
▪
whether the payment to the
applicant in the formula agreed on does or does not constitute a
sharing of rates, which is inimical
to the concept of good
governance;
▪
non-compliance with sections
146, 172 and 173 of the Cape Ordinance;
▪
the authorisation of payments
in the budgets.
C
ONDITIONS
OF SUBDIVISION AND REZONING
[10]
In
the preamble of the Agreement it has been acknowledged that rezoning
and sub divisional applications by the Developer in terms
of the Land
Use Planning Ordinance 15 of 1985 had been approved by the Western
District Council within whose jurisdiction the property
then fell.
In its letter of approval the Western District Council referred to
conditions applicable, one of them being that “services
such as
water reticulation, electricity, sewerage reticulation refuse
removal, storm water disposal and any accesses to private
thoroughfares from public roads shall be provided by the developer at
his cost”. As regards this specific condition, it
is recorded
that proof of compliance with the said condition has to be furnished
to the Local Authority, before clearing the subdivided
portion for
registration. It is the respondent’s contention that such
requirement was not given effect to as in effect the
cost to do all
that was not the Developer’s. The respondent argues that the
formula for payment to the applicant in effect
demonstrates that the
cost is not entirely that of the Developer.
[11]
This
is based on the fact that though the infrastructure was provided by
the Developer, the payments due to the Developer, in terms
of the
Agreement, are devised on a formula (referred to in paragraph 8
above) which has the effect that it is not the Developer
responsible
for such services at the end of the day, in that, as contended by the
respondent, the Developer is able to recoup the
payment he has made
for the construction and installation of the services referred to.
[12] I record hereunder the relevant part of the
conditions referred to, for purposes of a clearer insight:
“
CONDITIONS OF SUBDIVISION
NB : The Transfer
or
shall in terms of section 31 of Ordinance No 15 of 1985 furnish proof
to the Local Authority that the undermentioned conditions,
where
applicable
, have been complied with
before the Local Authority will clear such subdivided portion for
registration. Such proof is best furnished
by the conveyancer
simultaneously with the submission of diagrams and powers of attorney
for endorsement in terms of the said section
31.
The following further conditions shall be applicable:
(a) services such as water reticulation,
electricity, sewerage reticulation refuse removal, storm water
disposal and any accesses
to private thoroughfares from public roads
shall be provided by the developer at
his cost
”; (my underlining).
[1
3] The
response of the applicant is to the effect that the condition
referred to is just a standard condition. The parties to a
contract
have an option to do away with that condition. It may thus not apply
to what has been agreed upon by the parties. The
words ‘where
applicable’ in the context are there to indicate that option.
The use of the words in the context suggested
does not appear to be
the correct one. The words appear to qualify the furnishing of proof
of compliance to the local authority.
That refers to where it is
possible that proof of compliance may be complied with prior to
written authority in terms of section
31 of the Ordinance.
[14]
It
is further contended by Mr Buchanan SC, on behalf of the applicant,
that the condition would in any event be a condition in
favour of the
Western District Council which was at the time the agreement was
reached out of the picture. That submission that
the condition is no
longer relevant and applicable to the Agreement reached in the
instant case appears at a glance to have merit.
It however, loses
sight of the fact that in the Agreement there is a clause recorded as
follows:
“The
Developer shall be obliged and undertakes to give effect to all the
conditions upon which the subdivisional and rezoning
applications
have been approved such as conditions laid down in terms of section
42 of Ordinance 15 of 1985”.
[15]
The
rezoning and subdivision of the property were approved by the Western
District Council before the Agreement was concluded.
They did not
come about as a consequence of the Agreement. It may perhaps be
accurate to say they came about in anticipation of
the Agreement.
The legal entity that approved is a separate entity from the parties
involved in the current case. Yet, in view
of the clause I have just
referred to, the applicant has a contractual obligation “to
give effect to all the conditions”,
such as those laid down in
section 42 of Ordinance 15 of 1985.
WAIVER IN TERMS OF SECTION 42
[16]
I
proceed to consider whether the requirements of waiver in terms of
section 42 of the Land Use Planning Ordinance (LUPO) were
complied
with. The Agreement records that “in view of the fact that the
Developer personally carry the burden of all the
development costs
and interest thereon in order to provide the internal services and
the connector services (external)”,
the Council undertakes to
annually pay a portion of the assessment rate income levied. It is
therefore clear that the parties
took an informed decision at the
time. The respondent was aware on what the charges were based on and
how they were determinable.
I find nothing in the papers to support
the view that the respondent was not aware of the facts. For that
reason it is reasonable
to infer that the parties consciously opted
for what the Agreement records.
[17]
Section
42(3) provides that waiver or amendment of any condition by the
Administrator or a council, as the case may be, will come
after a
consideration of objections received in consequence of an
advertisement in terms of section 4 and after consultation with
the
owner of the land concerned or administration in the case of a local
authority. Section 42(4) envisages advertisement of the
proposed
waiver in cases where the director or the town clerk or secretary, as
the case may be, is of the opinion that the waiver
adversely affects
the interest that any person has in land. No such opinion has been
canvassed herein. Instead, in annexure VE14
the Town Planner writes
to say “the application was advertised and no objections were
received”.
[18]
Subsection
4, however, stipulates that the relevant advertisement should be
about the proposed waiver. It appears the advertisements
to which
there were no objections received relate to advertisements in terms
of the prescribed procedures for rezoning and subdivision.
It follows
that technically no waiver could be valid without the said
advertisement. It was argued on behalf of the applicant that
because
the parties carried on with the agreement without the conditions
having been complied with and of course with the subdivision
and
rezoning having been concluded that the parties intended to waive
compliance with the conditions. I endorse the view that waiver
has to
comply with the provisions of section 42(3) of LUPO in order to be
valid.
SHARING OF RATES
[1
9] The
parties agreed that payment to the Developer should be worked out on
the basis of “the assessment rate income levied
in respect of
the development area as well as all the availability charges levied”.
The percentage agreed on was 60% with
the proviso that payments made
to the Developer “shall in any one year not exceed 12.5% of the
total cost of the scheme”.
The payments would in any event
“terminate 15 years from the date of the construction work…
or as soon as the cost
of the services has been fully paid whichever
is the earliest”.
[20
] The
defence, as regards the sharing of rates, has been raised, as Mr
Beyleveld so confirmed, in the context that the allocation
of a
portion of rates payments by inhabitants is unlawful,
unconstitutional and against public policy. The respondent contends
that this amounts to utilising funds emanating from taxation to
advance a commercial development to the detriment of other members
of
the community.
[21] On the reading of the
applicant’s response to the allegation of sharing of rates, I
observe no serious dispute as far
as the facts are concerned. The
applicant however disagrees that the agreed formula for the repayment
to the applicant of a portion
of rates is unlawful. The applicant
contends that the infrastructure he brought about generated a
substantial rate and other income
for the respondent. That
infrastructure or development that the applicant paid for is now
owned by the respondent or the Home
Owners Association. The question
then seems to be what is unlawful in them repaying, be it via rates,
for what they have benefited
from, more especially the respondent who
continues to derive substantial income from the said infrastructure.
[22] There does not seem to be any
issue with the principle that the sharing of rates is prohibited.
The applicant further argues
that the applicant is permitted to
recover the balance of its costs of infrastructure in accordance with
the agreed formula. There
is no doubt that the formula, as it
stands, entitles the applicant to a certain portion of rates levied
in respect of the development
area albeit restricted to a certain
period. That is not compatible with the provisions of section
229(1)(a) of the Constitution
which read “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”.
[23
] One
of the defences taken by the respondent is that the applicant or both
parties to the Agreement failed to comply with the requirements
set
out in sections 146, 172 and 173 of the Municipal Ordinance No. 20 of
1974 (Ordinance). Frankly, neither party would have
been required to
comply with the provisions of section 146. It has been referred to
in these proceedings purely to illustrate
circumstances where the
council may assist the owner of immovable property.
[24
] Section
172(1) reads:
“(1) A council shall, by notice published in the press, invite
tenders before entering into any contract which is for –
(a) the execution of any work for or the supply or sale of any goods
or materials to the council and which involves or is likely
to
involve an amount exceeding such amount as the Administrator may from
time to time either generally or specially determine in
respect of
contracts entered into by such council, and
(b) the sale of any goods or materials by the
council.
Section 173(4) reads:
“(4) No contract contemplated by subsection (1) or (2) and no
amendment to any such contract shall come into force until
–
(a) the council has by publication in the press given notice of its
intention to enter into such contract or to make such amendment,
and
(b) the Administrator has approved such contract
or amendment”.
[25
] In
the context of this case, that would mean the attack is that there
has been no publication in terms of those sections, inviting
tenders
and or publishing a notice in the press of intention to enter into
the Agreement. The response by the applicant is that
it would not be
possible in the circumstances of this case to comply with the
relevant requirements. In the first instance, the
piece of land in,
question was owned by the applicant and was at the time the Agreement
was reached falling outside the jurisdiction
of the respondent.
Secondly, the nature of the agreement concluded was not for the
“execution of any work or the supply
of any goods or material”.
Thirdly, the respondent contends that the publications it made
comply with what would be required
in terms of section 173 (4).
[26
] As
regards the first two points there is merit in the contention that
the provisions of section 139 of the Ordinance apply. Section
139
provides that “a council may, within or outside its municipal
area provide, establish and maintain municipal services”.
The
issue of the piece of land falling outside the jurisdiction of the
respondent is thus not relevant.
[27] As regards the alleged
non-compliance with section 173, the facts are as follows. The
publication which came out in the press
during the week ending on 18
February 2000. It is headed “Proposed incorporation of a
portion of portion 13 (a portion of
portion 8) of the farm
Kabeljouwsriver no 328”. Another publication was almost
similar. It appeared in the provincial gazette
on 21 February 2000.
The subject matter highlighted in that publication is rezoning and
subdivision. The applicant contends that
those who had an interest
in the matter, could have come to the office of the Town Planner to
get ‘further particulars’
and consequently lodged
objections if they saw fit. Both publications indeed had nothing to
do with the Agreement entered into
on 24 October 2000. They relate
to incorporation of the land in question within the jurisdiction of
the applicant, rezoning and
subdivision and not the proposal referred
to in the Agreement which would be capable of inspection.
[28
] The
Agreement was signed by the parties on 24 October 2000. It is
expressly stated therein that the Agreement is subject to the
incorporation of the land within the boundaries of the Jeffrey’s
Bay Municipality, to establish and confirm the jurisdiction
of the
TLC.
[29
] In
my view the provisions of both section 172 and 173 have been
violated. What remains for consideration is whether such
non-compliance
renders the Agreement unlawful and of no force and
effect. In my previous decision in
Casalinga
Investments CC
1
,
after having considered the dicta in case law
2
,
I stated that “the transgression of the Constitutional
imperatives, the violations of statutory provisions and supply chain
management policies and manuals, are material. At the end of it all
it cannot be said the processes complied with section 217
(1) of the
Constitution”. In that case I had found that there were
violations of statutory provisions relating to procurement
of
services which undermine the values set out in section 217 of the
Constitution. Section 173 of the Ordinance expressly provides
that
“no contract … shall come into force until…”
there has been the prescribed publication.
[30
] Section
217 (1) of the Constitution provides that “When an organ of
state in the national, provincial or local sphere of
government, or
any other institution identified in national legislation, contracts
for goods or services, it must do so in accordance
with a system
which is fair, equitable, transparent, competitive and
cost-effective”. In a long list of cases
3
it has been held that non-compliance with the provisions prescribed
by the Legislature for the validity of the transaction must
render
the transaction invalid.
AUTHORISATION IN THE BUDGETS
[31] A provision in the now repealed
Local Government Transitional Act 209 of 1993, which was in operation
at the time the Agreement
was concluded, prescribed that there
had
to be an approval budget for operating an income and capital
expenditure. Under this heading the attack by the respondent was
that there was no such provision in the budget for the scheme agreed
on. Whether there was or not would need oral evidence. In
view of
my findings in the previous paragraphs it is not necessary to pursue
this challenge.
[32] For the reasons given above I come to the
conclusion that the agreement signed by the parties on 24 October
2006 is invalid
and of no force and effect.
In the result the application is dismissed with costs.
C T SANGONI
JUDGE OF THE HIGH COURT
Counsel for the applicant : Adv R G
Buchana SC
Attorneys for the applicant : Pagdens Attorneys
Port Elizabeth
Counsel for the respondent : Adv A
Beyleveld SC
Attorneys for the respondent : McWilliams & Elliott
Inc
Port Elizabeth
Eedenprop
(Pty) Ltd and The Kouga Municipality
Case
no 1774/09
1
Casalinga Investments CC t/a Waste Rite v
Buffalo City Municipality case no ECD 2359/08 (unreported
).
2
City of Tshwane Metropolitan Municipality v
RPM Bricks (Pty) Ltd 2008 (3) 1 (SCA) : Nelson Mandela Bay
Municipality v Afrisec
Strategic Solutions (Pty) Ltd & Others,
not reported yet, registered under case no. 865/07 in SACLO
.
3
Qaukeni Local Municipality & Another v F V
General Trading CC (324/08)
[2009] ZASCA 66
(29 May 2009): Premier,
Free State and Others v Firechem Free State (Pty) Ltd
2000 (4) SA
413
(SCA): Eastern Cape Provincial Government v Contractprops 25
(Pty) Ltd
2001 (4) SA 142
(SCA)
.