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[2012] ZASCA 34
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Rinaldo Investments (Pty) Ltd v Giant Concerts CC and Others (311/2011) [2012] ZASCA 34; [2012] 3 All SA 57 (SCA) (29 March 2012)
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THE SUPREME COURT OF APPEAL OF
SOUTH AFRICA
JUDGMENT
Case no: 311/2011
Reportable
In the matter between
RINALDO INVESTMENTS (PTY) LTD
….....................................................
Appellant
and
GIANT CONCERTS CC
…...............................................................
First
Respondent
THE
MINISTER FOR LOCAL GOVERNMENT,
HOUSING
AND TRADITIONAL AFFAIRS FOR
THE PROVINCE OF KWAZULU-NATAL
…...............................
Second
Respondent
ETHEKWINI MUNICIPALITY
….....................................................
Third
Respondent
THE MINISTER OF PUBLIC WORKS
….....................................
Fourth Respondent
THE MINISTER OF DEFENCE
…....................................................
Fifth Respondent
Neutral
citation:
Rinaldo Investments (Pty) Ltd v Giant Concerts CC
(311/2011)
[2012] ZASCA 34
(29 March 2012)
Coram:
MTHIYANE DP, CLOETE, CACHALIA, MALAN JJA and PLASKET AJA
Heard:
27 February 2012
Delivered:
29 March 2012
Summary: Local Authorities
Ordinance 25 of 1974 (KZN) – sale by municipality of land by
private bargain – standing of
objector.
________________________________________________________________
ORDER
________________________________________________________________
On appeal from:
KwaZulu-Natal
High Court, Pietermaritzburg (Mnguni J sitting as court of first
instance)
1. The appeal is upheld with costs,
including the costs of two counsel.
2. Paragraphs (a) to (d) of the order
of the court below are set aside and replaced with the following
order:
‘
(a) The
application is dismissed.
(b) The applicant is directed to pay
the third respondent’s costs, including the costs of two
counsel.’
JUDGMENT
PLASKET AJA (MTHIYANE DP, CLOETE,
CACHALIA and MALAN JJA concurring)
[1] This appeal concerns the validity
of a contract of sale of land by private bargain concluded by the
third respondent, the eThekwini
Municipality, and the appellant,
Rinaldo Investments (Pty) Ltd, with the consent of the second
respondent, the Minister (more correctly,
the MEC) for Local
Government, Housing and Traditional Affairs for the Province of
KwaZulu-Natal. The court below, the KwaZulu-Natal
High Court,
Pietermaritzburg (Mnguni J) had set aside the sale at the instance of
the present first respondent, Giant Concerts
CC. This appeal is
before us with the leave of this court, Mnguni J having refused leave
to appeal.
The facts
[2] The land with which this case is
concerned is situated on the Durban beachfront. It consists of land
upon which the headquarters
of the Natal Command of the South African
National Defence Force is situated as well as adjoining land that is
owned by the municipality.
The land upon which the Natal Command is
situated makes up the bulk of the land in issue in this matter. It
was acquired by the
municipality in 1855 but was transferred to the
central government in 1937 for military purposes, subject to a
condition that if
it was no longer required for those purposes it
would revert to the municipality. By 2003 a decision had been taken
to relocate
the military to Salisbury Island with the result that the
property would revert to the municipality. (I shall, for the sake of
convenience, refer to all of the land in issue in this appeal as ‘the
Natal Command site’.)
[3] When it became known that the
military was going to move from the beachfront and that the land it
occupied there would revert
to the municipality, Videovision
Entertainment (Pty) Ltd, a film production company, proposed to the
municipality that it purchase
the Natal Command site for the purpose
of establishing a modern film studio in Durban. Rinaldo Investments
is the property holding
entity of Videovision Entertainment and both
companies have the same shareholders and directors. The dominant
figure in both is
Mr Anant Singh, a film producer with an
international reputation.
[4] The proposal struck a chord with
the municipality because it had earlier established a film office
with a view to promoting
Durban as a destination for the production
of what it termed professional and reputable films. This plan had, in
turn, been included
into its Integrated Development Plan, which
recognised the potential of the film industry for economic
development, and it had
entered into a partnership with the
KwaZulu-Natal provincial government to promote the film industry in
Durban.
[5] The proposal was considered
internally and approved in principle by the municipality’s
executive committee. Protracted
negotiations followed and eventually
the terms of a contract of sale were agreed to. The executive
committee then took a decision
to sell the land to Rinaldo
Investments by private treaty at a price of R15 million. As the land
had been valued during the negotiations
at R71 million, if it was
rezoned for its optimal use, the purchase price was made subject to
conditions. They were that the land
had to be used for the core
activities of the development of a film studio and associated
infrastructure and if it was not, a ‘claw
back’ provision
provided that the purchase price would increase in accordance with a
prescribed formula. The effect of this
was that Rinaldo Investments
was required, in return for a reduced purchase price, to develop the
land at its own expense in accordance
with the municipality’s
vision.
[6] Because the proposed sale involved
a deviation from the usual way in which land owned by the
municipality is sold, namely by
public auction or public tender, s
234(1) of the Local Authorities Ordinance 25 of 1974 (KZN) required
the proposed sale to be
advertised prior to a final decision being
taken. The municipality advertised the sale, the parties signed the
contract and it
lay for inspection as required by s 234(3) of the
Ordinance.
[7] An objection to the proposed sale
was received by the municipality from Giant Concerts. It was signed
by Mr K M Gayadin who,
although not a member of the close
corporation, represented it throughout. The objection stated:
‘
Kindly
take notice that the abovenamed close corporation hereby places on
record its objection to the sale of the aforesaid property.
The
close corporation furnishes inter alia its reasons for such
objection, namely that it is involved in the entertainment business
and has an interest in the development of a movie studio and other
allied facilities on the site.
Further
take notice that the close corporation’s offer to purchase the
aforesaid immovable property shall be greater than
the present offer
submitted to you, which offer I am given to understand is R15
million.
We
trust you find the above in order and invite you to contact the
writer should you require any further information.’
[8] Municipal officials met with
Gayadin in order to allow him to explain and expand upon the contents
of the letter. In particular,
he was asked to outline his proposal
for the development of the site but he refused to do so on the basis
that this was confidential.
He was also unable to show that he had
any involvement in or knowledge of the film industry. Indeed, the
letterhead of Giant Concerts
indicates that its area of operation, as
its name suggests, involves the organisation of large concerts –
‘Mind Blowing
Live Concerts’ – and no mention is
made of the film industry. (Singh, with his extensive knowledge of
the film industry,
both locally and internationally, stated in his
affidavit that he had never heard of Gayadin or Giant Concerts in
film industry
circles.)
[9] A little over a month later, the
municipality approved the sale to Rinaldo Investments. It was then
referred to the MEC for
approval in terms of s 235(1) of the
Ordinance. That approval was duly given on 22 February 2005. Giant
Concerts launched an application
to review the decision a short while
thereafter, on 3 May 2005, but then matters slowed down: the
application was heard four years
later, on 11 June 2009.
[10] In the court below it was
contended on behalf of the municipality, the MEC and Rinaldo
Investments that Giant Concerts had
no standing to challenge the
validity of the sale and that because Gayadin had been convicted of
offences involving dishonesty
he was disqualified by
s 47
of the
Close Corporations Act 69 of 1984
from taking part in the management
of Giant Concerts. Both of these points failed. On behalf of Giant
Concerts, it was argued that
the decisions were invalid on a number
of grounds that went to their lawfulness, procedural fairness and
reasonableness. All of
these arguments were upheld by the court below
in a judgment that was delivered more than 15 months after the
application was argued.
This is clearly an unacceptably long delay.
The judgment set aside the decision of the municipality to sell the
Natal Command site
to Rinaldo Investments by private bargain as well
as the MEC’s approval of the sale.
[11] In my view, a single issue is
decisive of this appeal. That is the issue of Giant Concert’s
standing to review the decision
of the municipality to sell the Natal
Command site to Rinaldo Investments, and the related decision of the
MEC to approve the sale.
It is to that issue that I now turn.
Giant Concert’s standing
[12] When, as in this case, the
fundamental right to just administrative action is alleged to have
been infringed, s 38 of the Constitution
extends standing to five
classes of litigants.
1
The section provides:
‘
Anyone
listed in this section has the right to approach a competent court,
alleging that a right in the Bill of Rights has been
infringed or
threatened, and the court may grant appropriate relief, including a
declaration of rights. The persons who may approach
a court are –
(
a
)
anyone acting in their own interest;
(
b
)
anyone acting on behalf of another person who cannot act in their own
name;
(
c
)
anyone acting as a member of, or in the interest of, a group or class
of persons;
(
d
)
anyone acting in the public interest; and
(
e
)
an association acting in the interest of its members.’
[13] Giant Concerts does not claim to
act in any capacity other than in its own interest, in terms of s
38(
a
).
Furthermore, as its registered address is 468 Loop Street,
Pietermaritzburg, it does not have ‘ratepayer’ standing
in terms of the common law (saved by s 39(3) of the Constitution)
2
in respect of the eThekwini
Municipality in Durban.
3
[14] How is the question as to whether
a person has an interest in particular litigation for purposes of s
38(
a
)
to be determined? Even though s 38 has, generally speaking, widened
the scope of standing beyond the common law rules that applied
in the
pre-1994 era,
4
that does not mean that everyone who
alleges an infringement of a fundamental right has an unfettered
right of access to court.
In the words of Sir William Wade and
Christopher Forsyth,
5
(albeit in a different context) a
successful challenge to administrative action is only possible, as a
starting point, if ‘the
right remedy is sought by the right
person in the right proceedings’. (This statement was approved
by this court in
Oudekraal
Estates (Pty) Ltd v City of Cape Town & others
.
6
)
The ‘right person’ is one who has what is regarded as a
sufficient interest in the subject matter of the dispute.
7
[15] In
Ferreira
v Levin NO & others; Vryenhoek & others v Powell NO &
others
8
O’Regan J held in relation to
the interim Constitution’s equivalent of s 38 of the final
Constitution:
‘
Section
7(4) is a recognition too of the particular role played by the Courts
in a constitutional democracy. As the arm of government
which is
entrusted primarily with the interpretation and enforcement of
constitutional rights, it carries a particular democratic
responsibility to ensure that those rights are honoured in our
society. This role requires that access to the courts in
constitutional
matters should not be precluded by rules of standing
developed in a different constitutional environment in which a
different model
of adjudication predominated. In particular, it is
important that it is not only those with vested interests who should
be afforded
standing in constitutional challenges, where remedies may
have a wide impact.
However,
standing remains a factual question. In each case, applicants must
demonstrate that they have the necessary interest in
an infringement
or threatened infringement of a right. The facts necessary to
establish standing should appear from the record
before the Court . .
.’
[16] The factual basis upon which a
litigant claims standing is only part of the picture. In order to
place those facts in their
proper context, it is also necessary to
consider the statutory scheme in issue, particularly its purpose.
This is well illustrated
by
Polikor
Investments (Pty) Ltd v Chairman, Local Road Transportation Board,
Cape Town & others.
9
In determining whether a business
competitor had a sufficient interest in the grant of private road
transportation permits to its
rival, Grosskopf J, after considering
the legislation, held:
‘
In
the present case I do not consider that the applicant had a
sufficient interest to entitle it to notice of the application for
a
private road transportation permit to convey goods, or to a hearing
before the Local Board when the application was considered.
This
conclusion seems to me to follow from the procedural provisions of
the Act, the ambit of the enquiry which the Local Board
had to
conduct, and the nature of the interest of the present applicant.’
In other words, a litigant’s
interest must be assessed ‘against all the factual and legal
circumstances of the case’.
10
[17] I shall commence this enquiry by
considering first the applicable legislation and then the facts.
Sections 233, 234 and 235
of the Ordinance empower municipalities in
the province of KwaZulu-Natal to alienate their immovable property
and regulate how
such alienations are to take place. It is to these
sections that one must look in order to determine whether Giant
Concerts has
an interest that is sufficient to clothe it with
standing to challenge the municipality’s decision to sell the
Natal Command
site to Rinaldo Investments.
[18] Section 233(2) sets out the
various modes by which a municipality may alienate or otherwise deal
with its immovable property.
These include sale by public auction or
public tender, the granting, selling or letting of immovable property
without reference
to its actual value in defined circumstances, the
exchange of a piece of its immovable property for ‘other
immovable property
within the borough’, the letting of its
immovable property by public auction or public tender on defined
terms and the sale
or letting by public auction or public tender of
‘the trading rights in respect of any portion of the town lands
of the borough’.
[19] Section 233(8) allows for a
deviation from the norm of selling or letting immovable property by
public auction or public tender.
It provides:
‘
Notwithstanding
anything contained in subsection (2), the council may sell or lease
any immovable property by private bargain if
the council is satisfied
that the interests of the borough will be better served than by a
sale or lease by public auction or public
tender, or that other
circumstances connected with the proposed transaction, justify such a
course.’
[20] A decision to sell or let
immovable property in this way, or to grant it, is in terms of s
233(12) valid for a period of either
three or two years, depending on
the purpose of the alienation, ‘calculated from the date of
such decision or, where the
approval of the Administrator in terms of
section 235 is required, from the date of such approval and no such
grant, sale or letting
shall be finalised after the expiration of any
such period unless the council, after compliance with the provisions
of section
234, so resolves’.
[21] Section 234(1) requires that
prior to taking a final decision to alienate immovable property in
circumstances such as those
in this case, a municipality ‘shall
advertise its intention so to . . . sell . . . and, after
consideration of the objections,
if any, lodged in accordance with
the advertisement’ comply with the provisions of s 235(1). The
advertisement is required,
in terms of s 234(2), to: specify the
period, which may not be less than 14 days, during which objections
may be lodged; include
the lot number or similar description of the
property; state that the terms and conditions of the sale or other
alienation shall
be available for inspection ‘during office
hours at the town office’; and where the proposed alienation is
to be by
way of private bargain, the name of the purchaser and the
price are to be disclosed. In terms of s 234(3), in every case, a
copy
of the terms and conditions of the alienation, ‘in both
official languages’, must be kept ‘at the town office
and
be available for inspection by the public during office hours’.
[22] Finally, s 235(1) provides that a
municipality may not proceed with a proposed alienation where
objections have been received
‘without the prior approval of
the Administrator’. In terms of s 235(1A), an application for
approval must be accompanied
by ‘certified copies of the
relevant resolutions of the council, a certificate by the town clerk
that the relevant provisions
of this ordinance have been complied
with and a certified copy of the proposed conditions of grant, sale
or letting’ and
must ‘set forth any objections which may
have been lodged, together with the council’s comments thereon
and a statement
of the market value of the property concerned . . .’.
[23] From this statutory scheme the
following is clear: first, that alienating municipal immovable
property by means of public auction
or public tender is the usual
mode of alienation; secondly, those modes of alienation, by their
nature, have inbuilt safeguards
as to achieving a market-related
price and for openness and accountability on the part of the
municipality; and thirdly, they may
be departed from but, where this
is to occur, it is necessary to ensure that openness and
accountability on the part of the municipality
is maintained and that
the interests that are to be served by the alienation of public
immovable property are not compromised.
[24] Sections 233, 234 and 235 put in
place mechanisms to achieve these safeguards. They do so by providing
for the advertising
of any proposed sale by private bargain, by
requiring the proposed contract to lie for inspection, by allowing
for objections and
by requiring the approval of the Administrator –
now the Premier of the province – in order to ensure that the
interests
of objectors are not disregarded.
[25] In order to answer the question
as to who has standing to object, in terms of s 234(1), it is
necessary to determine the prior
issue of whose interests the
provisions of ss 233, 234 and 235 are designed to protect. The
answer, in my view, lies in s 233(8).
In order to sell its property
by private bargain, a municipality must be satisfied that ‘the
interests of the borough will
be better served than by a sale . . .
by public auction or public tender, or that other circumstances
connected with the proposed
transaction justify such a course’.
[26] The advertising requirement
envisages advertising, not for the world at large, but for members of
the local community, so that
they are informed of proposed action by
their local government that may have a detrimental impact on ‘the
interests of the
borough’ – and by necessary implication
on their interests. In other words, an advertisement in accordance
with s 234(1)
is not an invitation to the world at large to object to
a proposed sale of immovable property.
[27] The case of
Ninian
& Lester (Pty) Ltd v Crouse NO & others
11
was relied on by counsel for Rinaldo
Investments in support of an argument that even if anyone may object,
it does not follow that
every objector has standing to challenge an
adverse decision. This decision is distinguishable. Unlike in this
case, a notice to
objectors to the proposed registration, by the
Registrar of Labour Relations, of an amalgamated bargaining council
was expressly
aimed at the ‘general public’
12
and the statute expressly provided
that a more limited class of persons – ‘[a]ny person who
is aggrieved by a decision
of the registrar’ – had
standing to appeal against the registrar’s decision to the
Labour Court.
13
[28] The case relied upon by counsel
for Giant Concerts to establish that anyone had the right to object
and to challenge the municipality’s
decision is also
distinguishable.
Doctors for
Life International v Speaker of the National Assembly
14
concerned the constitutional
requirement of ‘public involvement’ in the processes of
the National Council of Provinces
(the NCOP) and the provincial
legislatures (which mandate their delegations to the NCOP) in the
enactment of national legislation
in terms of s 76 of the
Constitution.
15
The constitutional requirements of
‘public involvement’ in the making of legislation, as an
aspect of participatory
democracy, differ in scope from the notice
and comment procedure, as part of the operational decision-making of
municipalities,
envisaged by s 234 of the Ordinance. Furthermore,
being concerned with national legislation, the ‘public
involvement’
in
Doctors
for Life International
is
understandably aimed much wider than the local application of the
Ordinance. Even so, the court observed that the purpose of
the
specific provisions with which it was concerned was to give ‘the
people in the provinces the opportunity to participate
in their
respective legislative processes’.
16
This case simply illustrates, once
more, the importance of context.
[29] It follows from what I have said
above that those who have an interest in the ‘interests of the
borough’ constitute
the class of persons who may object to a
sale by private bargain. (For present purposes I exclude from
consideration representative
litigants such as organisations acting
in the public interest or on behalf of their members, as this case is
concerned with a litigant
claiming to litigate in its own interest
only.) I cannot imagine that a ratepayer in Johannesburg or a
businessman in Cape Town
has any interest in whether the eThekwini
Municipality sells the Natal Command site by private bargain: they
have no connection
to Durban, no relationship with the municipality
and no stake in the social and economic development of the city.
[30] Giant Concerts is in the same
position as the hypothetical ratepayer from Johannesburg or
businessman from Cape Town. It is
not a ratepayer in Durban or a
member of the local community, if an artificial person could be said
to be a member of a community,
and it has no interest in the
‘interests of the borough’. Furthermore, its objection
was not aimed at the ‘interests
of the borough’. It
accepted that the land should be sold by private bargain for the
purposes proposed but to it, rather
than to Rinaldo Investments. It
has no interest in
who
the municipality chooses to contract
with, once it has decided to sell immovable property by private
bargain, because by definition
one is not dealing with a public
tender.
[31] It is, by now, trite that
legislation must be interpreted consistently with the Constitution,
wherever this is possible, in
recognition of the supremacy of the
Constitution and in order to give effect to the Constitution and its
values. The Ordinance
is no exception. The conclusions that I have
reached, that the Ordinance concerns itself with local interests and
that only those
with an interest in the ‘interests of the
borough’ have standing, are strengthened by s 152(1)(
a
)
of the Constitution which states that among the objects of local
government is the duty ‘to provide democratic and accountable
government for local communities’.
[32] Giant Concerts does not have a
sufficient interest in the validity of the sale of the Natal Command
site by the municipality
to Rinaldo Investments. It accordingly lacks
standing to challenge the validity of that sale. That is not to say
that if the sale
is tainted by unlawfulness, procedural unfairness or
unreasonableness, the municipality is above the law and its wrong is
unreviewable.
All that this judgment concludes is that Giant Concerts
is not able to mount such a challenge in terms of s 38(
a
)
of the Constitution. It is not the right person in the right
proceedings.
Costs
[33] It was argued by counsel for
Giant Concerts that if the appeal was to succeed, it should not be
ordered to pay the costs of
Rinaldo Investments in either the court
below or in this court. Reliance was placed on the judgment of the
Constitutional Court
in
Biowatch
Trust v Registrar, Genetic Resources & others
,
17
to the effect that in litigation
between ‘the government and a private entity seeking to assert
a constitutional right’,
the general rule is that ‘if the
government loses, it should pay the costs of the other side, and if
the government wins,
each party should bear its own costs’.
18
[34] I cannot see the basis upon which
the
Biowatch
principle can apply in this case.
First, Rinaldo Investments is a private entity. It is entitled to its
costs in both the court
below and in this court. Secondly, even
though Giant Concerts relies on the fundamental right to just
administrative action as
the basis of its challenge to the validity
of the contract between Rinaldo Investments and the municipality, it
is in fact seeking
to further its business interests, and the
vindication of fundamental rights is secondary to those interests.
Thirdly, no governmental
bodies opposed the appeal and Giant Concerts
has a costs order in its favour against the municipality and the MEC
in the court
below. That has not been appealed against and it
consequently stands.
The order
[35] For the reasons set out above,
the following order is made.
1. The appeal is upheld with costs,
including the costs of two counsel.
2. Paragraphs (a) to (d) of the order
of the court below are set aside and replaced with the following
order:
‘
(a) The
application is dismissed with costs.
(b) The applicant is directed to pay
the costs of the third respondent, including the costs of two
counsel.’
______________________
C Plasket
Acting Judge of Appeal
APPELLANT: PJ Olsen SC and AA Gabriel
SC
Instructed by:
JH Nicolson Stiller and Geshen, Durban
Honey Attorneys Inc, Bloemfontein
RESPONDENT: GJ Marcus SC and HS Gani
Instructed by:
Vather Attorneys, Pietermaritzburg
Lovius-Block, Bloemfontein
1
Freedom
Under Law v Acting Chairperson: Judicial Service Commission &
others
2011
(3) SA 549
(SCA) paras 17-18;
SLC
Property Group (Pty) Ltd & another v Minister of Environmental
Affairs & Economic Development (Western Cape) &
another
[2008] 1 All SA
627
(C) para 19. See too Cora Hoexter
Administrative
Law in South Africa
2
ed (2012) at 494.
2
Section
39(3) provides: ‘The Bill of Rights does not deny the
existence of any other rights or freedoms that are recognised
or
conferred by common law, customary law or legislation, to the extent
that they are consistent with the Bill.’
3
Dalrymple
& others v Colonial Treasurer
1910
TS 372
at 382;
Jacobs
& ‘n ander v Waks & andere
[1991] ZASCA 152
;
1992
(1) SA 521
(A) at 536D-E; Lawrence Baxter
Administrative
Law
(1984)
at 658-659.
4
Ferreira
v Levin NO & others; Vryenhoek & others v Powell NO &
others
1996
(1) SA 984
(CC) paras 165-166 (dealing with s 7(4) of the interim
Constitution, the equivalent of s 38 of the final Constitution);
Kruger
v President of the Republic of South Africa & others
[2008] ZACC 17
;
2009 (1) SA 417
(CC) para 23.
5
Sir
William Wade and Christopher Forsyth
Administrative
Law
9 ed (2004) at 281.
6
Oudekraal
Estates (Pty) Ltd v City of Cape Town & others
2004 (6) SA 222
(SCA) para 28.
7
Baxter
(note 3) at 644, 650-658; Hoexter (note 1) at 494-499.
8
Note
4 paras 230-231. See too
Jacobs
& ‘n ander v Waks & andere
(note
3) at 534C-E.
9
Polikor
Investments (Pty) Ltd v Chairman, Local Road Transportation Board,
Cape Town & others
1981
(4) SA 782
(C) at 789A-B. See too
Rauties
Transport (Edms) Bpk v Voorsitter, Plaaslike Padvervoerraad,
Johannesburg & ‘n ander
1983
(4) SA 146
(W) at 163C-E.
10
The
Rt Hon the Lord Woolf, Jeffrey Jowell QC and Andrew Le Sueur
De
Smith’s Judicial Review
6
ed (2007) para 2-025.
11
Ninian
& Lester (Pty) Ltd v Crouse NO & others
(2009) 30 ILJ 2889
(LAC).
12
Labour
Relations Act 66 of 1995
,
s 29(3).
13
">
13
Labour
Relations Act, s
111(3).
14
Doctors
for Life International v Speaker of the National Assembly
[2006] ZACC 11
;
2006 (6) SA 416
(CC).
15
Constitution,
ss 72 and 118.
16
Para
151.
17
Biowatch
Trust v Registrar, Genetic Resources & others
2009 (6) SA 232
(CC).
18
Para
22.