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[2017] ZAECPEHC 56
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Charlewood N.O. and Others v Valuation Appeal Board for the Nelson Mandela Bay Metropolitan Municipality and Others, Lovemore N.O. and Others v Valuation Appeal Board for the Nelson Mandela Bay Metropolitan Municipality and Others (2669/2016, 2861/2016) [2017] ZAECPEHC 56 (12 December 2017)
IN
THE HIGH COURT OF SOUTH AFRICA
EASTERN
CAPE LOCAL DIVISION – PORT ELIZABETH
In
the matters between:
Case
No.: 2669/2016
In
re: The Grassroof, Erf 663, Theescombe, Port Elizabeth
MICHAEL
GODFREY MORETON CHARLEWOOD N.O.
First
Applicant
CHARLES
GODFREY CHARLEWOOD N.O.
Second
Applicant
ROBERT
BERNARD SPANJAARD N.O.
Third
Applicant
and
THE VALUATION APPEAL BOARD FOR
THE
NELSON MANDELA BAY
METROPOLITAN MUNICIPALITY
First
Respondent
THE CHAIRMAN OF THE VALUATION
APPEAL BOARD, NELSON MANDELA BAY
METROPOLITAN MUNICIPALITY
Second
Respondent
THE NELSON MANDELA BAY
METROPOLITAN MUNICIPALITY
Third
Respondent
MUNICIPAL MANAGER OF THE
NELSON MANDELA BAY METROPOLITAN MUNICIPALITY
Fourth
Respondent
AND
Case
No.: 2861/2016
In re: Pink Fig, Erf
422, Theescombe, Port Elizabeth
CHRISTOPHER
BAILLIE LOVEMORE N.O.
First
Applicant
ROBERT
BAILLIE LOVEMORE N.O.
Second
Applicant
ELLEN
LOVEMORE N.O.
Third
Applicant
and
THE VALUATION APPEAL BOARD FOR
THE
NELSON MANDELA BAY
METROPOLITAN MUNICIPALITY
First
Respondent
THE CHAIRMAN OF THE VALUATION
APPEAL BOARD, NELSON MANDELA BAY
METROPOLITAN MUNICIPALITY
Second
Respondent
THE NELSON MANDELA BAY
METROPOLITAN MUNICIPALITY
Third
Respondent
MUNICIPAL MANAGER OF THE
NELSON MANDELA BAY METROPOLITAN MUNICIPALITY
Fourth
Respondent
JUDGMENT
REVELAS
J
:
[1]
This
judgment is in respect of two separate applications wherein the
applicants seek to review and set aside two decisions of the
first
respondent which categorized two respective properties as
“
multi-purpose
other”
for purposes of levying rates upon the property in terms of the
Property Rates Act.
[1]
The applications are brought in terms of section 6 of the Promotion
of Administrative Justice Act
[2]
The applicants also seek to substitute the decisions of the first
respondent with ones categorizing both properties in their entirety
as for “
agricultural
purposes only”.
[2]
In
the first application, under case number 2669/16, the applicants are
the three trustees of the Charlewood Property Trust, the
owner of Erf
663, Theescombe, Port Elizabeth on which there is a restaurant called
“
The
Grassroof”
(“the
Grassroof property”).
The
second application under case number 2861/16, the three applicants
are the trustees of the Lovemore Children Primary Trust which
the
owner of Erf 422, Theescombe, Port Elizabeth, on which there is also
a restaurant called “
The
Pink Fig” (“the Pink Fig property”).
[3]
In
both applications, the applicants have brought their review
applications in their capacities as trustees of the trusts that own
the properties (the Grassroof property and the Pink Fig property)
affected by the first respondent’s categorization.
Their complaint is the same. In respect of both
applications the applicants maintain that the core and most
substantial
operations conducted on the properties are farming
operations. In the case of the Grassroof property its
applicants say it
is vegetable farming, and the trust supplies
various retail stores in Port Elizabeth with a variety of
vegetables. The trust
who owns the Pink Fig property say it is
utilized extensively for cattle farming which includes the breeding
and sustaining of
a herd of Boran Stud cattle (75 calves are sold
annually to commercial farmers) and the growing of mushrooms that are
also sold
commercially.
[4]
The
total extent of the Grassroof property is 155 650 square meters, and
the trust says a restaurant, nursery and farm stall takes
up 0,26% of
the property. The remainder of the property is utilized
for the vegetable growing referred to. On
the Pink Fig
property, an even smaller portion of the property is let out as the
restaurant and a payground. In both applications
the applicants
maintain that not less than 99% of each property is utilized for
farming operations.
[5]
During
2013, each of the owners of the two properties concerned, received a
notice from the third respondent (‘
the
Municipality’),
informing
them that the categorization of their properties had been changed
“
from
agricultural to business and commercial”.
The
most direct and relevant consequence of the new categorization was
that the owners of the properties would be liable to pay
much higher
rates, approximately ten times more than they were liable to pay
under their “
agriculture”
categories
.
Both
owners lodged objections in terms of section 50(1)(c) of the MPRA and
requested that the properties be categorized as “
for
agricultural purposes”
on the basis that it was in accordance with the dominant use of the
properties in both cases.
[6]
In
respect of both cases the outcome of the objection was that the
categorization in respect of both properties was changed from
“
business
and commercial”
to
“
multi-purpose
property: other”
.
This change brought the two trusts in question cold comfort in that
the increased property rates associated with the
first change of
categorization remained the same under the latest categorization.
[7]
The
trusts then lodged appeals against the aforesaid categorization.
The first respondent convened in May 2015 to consider
the two
appeals. In June 2015 the two owners of the properties,
i.e. the two trusts, were notified that the first respondent
had
decided that the categorization in respect of both properties would
remain as “
multi-purpose:
other”
.
[8]
The
two applications for review of the decisions were brought on 2 August
2016 and 17 August 2016 respectively, more than 180 days
[3]
after the decisions sought to be reviewed were taken. Consequently
the question of extending the 180-day period in terms of section
9 of
PAJA (condonation) also requires determination in both
applications. The third and fourth respondents have also
filed counter-applications, in addition to their opposition to the
applications for review.
[9]
The
basis of both review applications is that the decisions taken by the
first respondent i.e. the categorization of the properties,
are
contrary to the provisions of section 9(1)(b) of the MPRA and part 6:
clause 21 of the (then) applicable Municipal Rates Policy
of the
Municipality. The latter makes provision for the categorization of a
property according to its
dominant
use
which
in both cases is agriculture. The applicants also seek substitution
orders to the aforesaid effect.
[10]
The
opposition to the two review applications is premised on the
proposition that the provisions of Part 6: Clause 21 of the previous
2014/2015 Municipal Rates Policy of the municipality, upon which the
respondent rely, are contrary to the provisions of sections
9(1) and
9(2) of the MPRA and accordingly, in their counter-application, the
third and fourth respondents seek declaratory orders
to the effect
that those provisions are null and void.
[11]
The
third and fourth respondents also oppose the granting of the
extension sought by the applicants in terms of section 9 of the
PAJA
on account of what they allege is an unexplained, inordinate delay
(more than year after the impugned decisions were taken
and more than
double the 180 period prescribed in the PAJA) and the lack of merit
in the application.
Extension
in terms of section 9 of the PAJA
[12]
Section
9 of the PAJA empowers the courts to condone an applicant’s
non-compliance with the provisions of section 7(1) of
the PAJA “
where
the interests of justice so require”.
[13]
The
applicants blame the lack of expertise on the part of former
attorneys and the consequent necessity for a change in legal teams
for the delay. However, the applicants took a further few months to
consult with their present attorneys of record, to prepare
documents
and bring the present applications. The latter delay ought to have
been explained and was not.
[14]
In
the light of my approach to the merits of both applications, and
given the dearth of proper reasons for the delay, I do not deem
it to
be in the interests of justice to grant the extension sought.
The
Reviews and Counter-Applications
[15]
The
relevant part of section 9 of the MPRA which deals with multi purpose
properties reads as follows:
“
9
Properties used for multiple purposes
(1) A property used for
multiple purposes must, for rates purposes, be assigned to a category
determined by the municipality for
properties used for-
(a)
a
purpose corresponding with the permitted use of the property;
(b)
a
purpose corresponding with the
dominant
use of the propert
y;
or
(c)
multiple
purposes in terms of section 8 (2)
(r)
.
(2)
A
rate levied on a property assigned in terms of subsection (1)
(c)
to a category of properties used for multiple purposes must be
determined by-
(a)
apportioning
the market value of the property, in a manner as may be prescribed,
to the different purposes for which the property
is used; and
(b)
applying
the rates applicable to the categories determined by the municipality
for properties used for those purposes to the different
market value
apportionments.”
[4]
(emphasis
added)
[16]
Part
6, clause 21 of the municipality’s 2014/15 Property Rates
Policy reads:
“
PART
6: CRITERIA FOR RATING MULTIPLE PURPOSE PROPERTY
[21]
The NMBM will categorize and rate properties used for multiple
purposes in terms of section 9(1)(b) of the MPRA,
i.e. such
properties will be assigned to a category corresponding to the
dominant
use
of the property as determined by the municipality”
(emphasis
added)
[17]
The
applicant relies on the aforesaid provisions in support of their
argument that the properties have to be assigned to
agriculture
.
Clause 21 was however, amended, and in its present form, in the new
2016/2017 Property Rates Policy, it reads:
“
PART
6: CRITERIA FOR
CATEGORISING AND RATING ‘PROPERTY USED FOR MULTIPLE PURPOSES’
[21]
With regards to the categorizing and rating of ‘property used
for multiple purposes’ the NMBMM
will:
(i)
categorize
such properties in terms of section 9(1)(c) of the MPRA, i.e. “as
multiple purposes in terms of section 8(2)(r)”
[5]
;
and
(ii)
determine
a rate in terms of section 9(2) of the MPRA, i.e. “(a)
apportioning the market value of the property, in a manner
as may be
prescribed, to the different purposes for which the property is used;
and (b) applying the rates applicable to the categories
determined by
the municipality for properties used for those purposes to the
different market value apportionments.””
[18]
In
terms of section 2(3) of the MPRA, a municipality must exercise its
power to levy a rate on property subject to section 229 of
of the
Constitution of the Republic of South Africa, the provisions of the
MPRA, and the rates policy it must adopt in terms of
section 3 of the
MPRA.
Section
3 of the MPRA requires a municipality to adopt a rates policy
determining the criteria to be applied by the municipality
if it
levies different rates for different categories of properties,
[6]
and it must determine how the municipality’s powers in terms of
MPRA section 9(1) must be exercised in relation to properties
used
for multiple purposes.
[7]
The amendment to the policy in the 2016/2017 has the effect of
bringing the policy in line with section 9. The previous
policy only
makes provision for the categorisation of a property according to its
dominant use, whereas the later policy echoes
the multi purpose
categorization as set out in section 9(1)(a).
[19]
A
municipality may, in terms of the criteria set out in its rates
policy, levy different rates for different categories of rateable
property
[8]
.
The following different categories are set out in section 8(1) of the
MPRA (and echoed in Part 5: clause 17 of the Municipality’s
2014/2015 Property Rates Policy):
“
8
Differential rates
(1)
Subject
to section 19, a municipality may in terms of the criteria set out,
in its rates policy, levy different rates for different
categories of
rateable property, which may include categories determined according
to the–
(a)
use
of the property;
(b)
permitted
use of the property; or
(c)
geographical
area in which the property is situated.
(2)
Categories
of rateable property that may be determined in terms of subsection
(1) include the following:
(a)
Residential
properties;
(b)
industrial
properties;
(c)
business
and commercial properties;
(d)
farm
properties used for–
(i)
agricultural
purposes;
(ii)
other
business and commercial purposes;
(iii)
residential
purposes; or
(iv)
purposes
other than those specified in subparagraphs (i) to (iii);
(e)
farm
properties not used for any purpose;
(f)
smallholdings
used for–
(i)
agricultural
purposes;
(ii)
residential
purposes;
(iii)
industrial
purposes;
(iv)
business
and commercial purposes; or
(v)
purposes
other than those specified in subparagraphs (i) to (iv);
(g)
state-owned
properties;
(h)
municipal
properties;
(i)
public
service infrastructure;
(j)
privately
owned towns serviced by the owner;
(k)
formal
and informal settlements;
(l)
communal
land as defined in section 1 of the Communal Land Rights Act, 2004;
(m)
state
trust land;
(n)
properties–
(i)
acquired
through the Provision of Land and Assistance Act, 1993 (Act 126 of
1993), or the Restitution of Land Rights Act, 1994 (Act
22 of 1994);
or
(ii)
which
is subject to the Communal Property Associations Act, 1996 (Act 28 of
1996);
(o)
protected
areas;
(p)
properties
on which national monuments are proclaimed;
(q)
properties
owned by public benefits organisations and used for any specific
public benefit activities listed in Part 1 of the Ninth
Schedule to
the Income Tax Act; or
(r)
properties
used for multiple purposes, subject to section 9.”
[9]
[20]
The
applicants submit that the clear meaning of section 9(1)(b) of the
MPRA, especially if consideration is given to a municipality’s
autonomy in electing which rates categories to create, is that the
municipality may elect to utilize one of the options stated
in
section 9(1), in determining how to categorize a property which has
more than one use.
[21]
The
applicants’ main argument is however that, if a property is
used for multiple purposes, it must thus be assigned a category
corresponding to the
dominant
use
of the property, which in their case is agriculture.
[22]
Section
3 (1) of the MPRA prescribes that a municipality “must
adopt
a policy which is consistent with [the MPRA] on the levying of
rates”.
[23]
The
provision in the rates policy relied on by the applicants is clearly
in conflict with sections 9 (1) and 9 (2) of the MPRA,
because it
only envisages one method of categorization being the dominant use of
a particular property at the exclusion of methods
such as
“permissible use” specifically provided for in section 9
(1) and 9 (2). The earlier policy is also in
conflict with
rationale of part 5 of the policy, which echoes section 8 of the MPRA
cited above, and which categorizes property
rates according to their
actual use.
[24]
Since
this contradiction may affect other categorizations, I believe that
it would be in the public interest to grant the declaratory
relief
sought by the third and fourth respondents in their counter
application.
[25]
Also,
a municipality “is bound to follow the prescripts of section 9
(2) in cases of multiple use” even where its rates
policy is
based on a different categorization method.
[10]
In
other words, section 9 of MPRA takes preference over rates policies.
In the present case the policy relied upon by the
applicants does
away with “multi-purpose” categorization.
[26]
The
applicant has not demonstrated that they rely on any of the grounds
for a successful review envisaged in the PAJA. They
simply
challenge the outcome of the appeal decisions because they seek a
categorization that attracts lesser rates. There
is also no
basis upon which it can be found that the decisions sought to be
reviewed are incorrect, if one applies legal principles.
As
shown above, the two decisions are correct as far as the applicable
laws are concerned.
[27]
The
construction the applicants seek to place on section 9 of the MPRA is
that section (9)(1)(b) thereof is prescriptive. It is
not. It
provides more than one method to categorise a property according to
its use.
[28]
The
fact that the non-farming activities or operations on the properties,
(the farm stall, nursery, restaurant on the Grassroof
property and
the restaurant and playground on the Pink Fig property) are conducted
from small areas, less than one percent of the
actual farms, cannot
mean that the income generated from these areas are necessarily as
negligible as their two physical footprints
in relation to the income
derived from the remainder of the farms in question. These
aspects were never pertinently investigated
in accounting terms
during the appeals. Both businesses do generate income, however.
Since the businesses commenced in on
the farms, the farms were no
longer run as purely agricultural entities, but as properties from
where more than one income generating
business are run.
[29]
In
terms of sections 9 (1) and 9 (2) of the MPRA the two properties
simply ought to be categorized as multi-purpose properties because
according to their actual and permitted use that is what they are.
They are no longer purely agricultural use properties for purposes
of
according them a rates character.
[30]
For
the considerations set out above I conclude that both applications
for review fall to be dismissed and that the declaratory
relief
sought by the respondents ought to be granted.
Costs
In
so far as the review applications are concerned, costs must follow
the result. In respect of the counter applications I am of
the view
that the municipality is responsible for the confusion arising from
its own 2014/2015 rates policy. It sought the declaratory
order in
this regard to avert future litigation. The applicants should not be
out be mulcted in costs for this reason. Accordingly
I decline to
award a costs order in its favour of the respondents in this regard.
Order
1.
The
application for review under case number: 2669/2016 is
dismissed with costs.
2.
The
application for review under case number: 2861/2016 is also
dismissed with costs.
3.
The
phrase “
i.e
such properties will be assigned to a category corresponding to the
dominant use of the property as determined by the municipality
”
in Part 6, Clause 21 of the third respondent’s Municipal Rates
Policy for 2014/15 is declared to be inconsistent with
section of the
Local Government Municipal Property Rates Act, no. 6 of 2004
.
____________________
E
REVELAS
Judge
of the High Court
Appearances
:
Case
No.: 2669/2016
For
the applicants: Adv Moorhouse, instructed by : RJM
Attorneys, 145 Main Road, Walmer, Port Elizabeth
For
the respondents: Adv Euijen SC, instructed by: Goldberg &
De Villiers, 13 Bird Street, Central, Port Elizabeth
Case
No.: 2861/2016
For
the applicants: Adv Moorhouse, instructed by: RJM
Attorneys, 145 Main Road, Walmer, Port Elizabeth
For
the respondents: Adv Euijen SC, instructed by: Gray
Moodliar Attorneys, 19 Raleigh Street, Central, Port Elizabeth
Date
heard: 30 March 2017
Date
delivered: 12 December 2017
[1]
The
Municipal Property Rates Act, 6 of 2004 or the MPRA.
[2]
Act
3 of 2000 or “
the
PAJA”
[3]
The
period envisaged in section 7 of the PAJA within which to lodge an
application for review of decisions such as those presently
considered.
[4]
Sections
8 and 9(c) of the Property Rates Act have been substituted by
sections 6 and 7 of the Local Government Property Rates
Amendment
Act 29 of 2014.
[5]
“
properties
used for multiple purposes, subject to section 9
”
[6]
MPRA
section 3(3)(b)(i) & 3(3)(c)(i)
[7]
MPRA
section 3(3)(d)
[8]
MPRA
section 8(1)
[9]
This
reference is referred in the amended policy
[10]
City
of Johannesburg v Chairman, Valuation Appeal Board and Another
2014(4) SA 10 (SCA)
,
para [33]