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[2023] ZAFSHC 340
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Central University of Technology, Free State and Mangaung Metropolitan Municipality and Others (A12/2020) [2023] ZAFSHC 340 (24 August 2023)
IN THE HIGH COURT
OF SOUTH AFRICA,
FREE STATE
DIVISION, BLOEMFONTEIN
Case No: A12/2020
REPORTABLE: NO
OF
INTEREST TO OTHER JUDGES: NO
CIRCULATE TO MAGISTRATES:
NO
In
the matter between:
CENTRAL
UNIVERSITY OF TECHNOLOGY,
Applicant
FREE
STATE
and
MANGAUNG
METROPOLITAN MUNICIPALITY
1
st
Respondent
THE
MUNICIPAL MANAGER:
MANGAUNG
METROPOLITAN MUNICIPALITY
2
nd
Respondent
THE
MUNICIPAL VALUER:
MANGAUNG
METROPOLITAN MUNICIPALITY
3
rd
Respondent
HEARD
ON:
22 MAY 2023
JUDGMENT
BY
:
MHLAMBI, J
CORAM:
MHLAMBI, J
et
OPPERMAN, J
DELIVERED
ON:
24 AUGUST
2023
[1]
The applicant sought declaratory relief and the review of the first
and third respondents’
decisions relating to the valuation and
levying of rates of the applicant’s immovable properties for
the 2017/2018, 2018/2019,
and 2019/2020 financial years. The
immovable property is situated in the first respondent’s
municipal area. The applicant
contended that these decisions were
subject to the doctrine of legality as they failed to comply with the
statutory requirements
envisaged in the Local Government: Municipal
Property Rates Act,
[1]
(“the
MPRA”), and were irrational.
[2]
The respondents opposed the application on various grounds based on
the Promotion of Administrative Justice
Act, (“PAJA”)
[2]
and the MPRA.
[3]
In
its amended notice of motion, the
applicant seeks relief in four parts as follows:
“
Part
1
1.
The declaration as unlawful, the
second respondent’s failure to serve a copy of the notice
contemplated in section 49(1)(a)
of the MPRA together with an extract
of the valuation roll for the financial years 1 July 2017 until 30
June 2021 in terms of section
49(1)(c) of the MPRA.
2.
Orders to review and set aside;
alternatively, to declare unlawful and set aside the decisions set
out hereunder:
2.1
The first respondent’s decision to levy rates in respect of the
applicant’s
properties in terms of the market value of the
properties and in terms of the categories of the properties, recorded
in the valuation
roll; and
2.2
The first respondent’s decision to determine the cent amount in
the rand payable as
rates (published in the Provincial Gazette in
terms of section 14(2) of the MPRA and in accordance with copies of
the relevant
notices annexed as annexures “
FA14”
,
“
FA15”
and “
FA16”
to the
founding affidavit) in respect of the applicant’s properties
with reference to the market value of the properties
and the category
of the properties as reflected in the valuation roll.
Part 2
Orders to review and
set aside: alternatively, to declare unlawful and set aside the
decisions set out hereunder:
1.1
The first respondent’s
decision to categorise the applicant’s properties reflected in
the first respondent’s valuation
roll for the financial years 1
July 2017 until 30 June 2021 as “public benefit organisation”
in terms of the first
respondent’s 2017/2018 property rates
policy;
1.2
The first respondent’s
decision to determine in its 2017/2018 property rates policy that a
business rate will apply to the
levying of rates in respect of the
applicant’s properties;
1.3
The first respondent’s failure
to determine separate and different rates, in accordance with the
provisions of section 3(3)(a),
8(1),14 and 19(1)(c) of the MPRA, in
terms of its 2017/2018, 2018/2019 and 2019/2020 property rates
policies;
1.4
The determination by the first
respondent of item 10.1(b) of its 2017/2018 property rates policy and
item 11.1(b) of its 2018/2019
and 2019/2020 property rates policies
as a criterium to be applied by the first respondent to levy
different rates for different
categories of rateable properties.
2.
The 2017/2018, 2018/2019 and 2019/2020 property rates policies be
referred to
the first respondent who is directed to consider and
apply the provisions of sections 3(3)(a), 3(3)(b)(i) and (ii),
14(2)(b)(ii)
and 19(1)(c) of the MPRA and considering such policies.
3.
An order that the first respondent
makes or causes to be made a supplementary valuation and
categorisation of the applicant’s
properties as reflected in
the valuation roll in terms of section 78 of the MPRA.
Part 3
1.1
The third respondent’s
decision to categorise the applicant’s properties (specifically
erf 26454) reflected in the valuation
roll as “business”
in accordance with the provisions of section 34 and 48(2)(b) of MPRA;
1.2
The third respondent’s
decision to determine the market value of erf 26454 in the amount of
R 340 million rands; and
1.3
The first respondent’s
decision to levy rates on the applicant’s properties in terms
of their market value and their
categorisation recorded in the
valuation roll.
2.
First respondent be ordered to make a supplementary valuation and
categorisation
of the applicant’s properties as reflected in
the valuation roll in terms of section 78 of the MPRA.
3.
The time period for the institution of reviewing proceedings of part
3 of the
notice of motion be extended in terms of PAJA.
Part 4
Conditionally, upon
the court holding that the applicant could have resorted to internal
remedies; the applicant, in the interests
of justice, is exempted
from the obligation to exhaust any internal remedy.
[4]
The applicant is a University duly established as a Higher Education
Institution in terms of the
Higher Education Act, 101 of 1997
with an
address at the main Campus, 20 President Brand Street,
Bloemfontein.
[3]
It performs a
public function and provides higher education to a section of the
public. As an organ of state,
[4]
its properties are owned by the state.
[5]
The first respondent is a metropolitan municipality duly established
in terms of the provisions
of
section 12
of the
Local Government:
Municipal Structures Act, 117 of 1998
with its address at the Bram
Fisher Building, 15 De Villiers Street, Bloemfontein. It exercises
its executive and legislative authority
by, amongst others,
developing and adopting policies, preparing, approving and
implementing its budgets
[5]
and
must follow the procedure prescribed by the applicable national or
provincial legislation when it levies, recovers or increases
property
rates.
[6]
The second respondent is the first respondent’s municipal
manager appointed in terms of
section 54A of the Local Government:
Municipal Systems Act, 32 of 2000 (“the Systems Act”).
The third respondent is
the first respondent’s municipal valuer
duly appointed in terms of the provisions of section 33 of the MPRA.
[7]
The dispute between the applicant and the first respondent has its
genesis in the 2017 valuation
roll which determined the
categorisation and market value of the applicant’s properties;
in particular, the first respondent’s
decision to levy a
business property rate on the applicant’s properties,
especially erf 26454 since 1 July 2017. On 10 June
2019, the
applicant, through its attorneys, declared a dispute in terms of
section 102(2) of the Systems Act, to the rates and
taxes payable by
the applicant on its immovable property. The applicant disputed the
amount payable on the basis that:
“
4.
We dispute that this amount is due and payable by the CUT and place
this amount in
dispute on the following basis:
4.1
The property rates are seemingly due and payable in relation to Erf
26454, although this
erf does not appear to have been registered or
even created yet;
4.2
It is our instruction that this property is known as Erf 26454 but
that this Erf still needs
to be created by consolidation of other
erven.
4.3
The municipality’s insistence to charge property rates on a
property that does not
exist at this stage is illegal for want of
compliance with the requirements of the Municipal Property Rates Act,
6 of 2004 (hereafter
the “Rates Act”);
4.4
The rates account received from the municipality indicates that rates
are charged against
the properties of the CUT at a rate of R
0.037700, which rate is termed the “Business and Commercial”;
4.5
The Free State High Court declared the charging of a business rate
against the properties
of the Free State University as illegal and
set that decision of the Mangaung Metropolitan Municipality aside on
27 May 2019;”
[6]
[8]
The applicant contended that the levying of such a rate against an
institution of higher education
was illegal and irrational and based
this contention on the court order of 27 May 2019.
[7]
The court order declared portions of the first respondent’s
2017/2018 property rates policy unlawful and set them aside.
[8]
The applicant contended that the illegalities in that policy were
retained in the subsequent rates policies of the municipality
and had
an illegal and irrational effect on the rates payable by the
applicant. The applicant held the view that the court order
was
relevant to the determination of the present dispute as the two
universities were similarly situated rate payers, rendering
the same
service and the first respondent acknowledged that it was not
entitled to charge a business rate for the properties of
the
University of the Free State. It was contended that the first
respondent would, in similar fashion, be precluded from charging
a
business rate for the applicant’s properties.
[9]
[9]
The court order of 27 May 2019 was issued by agreement between the
first respondent and the University
of the Free State after the
latter challenged the legality of the 2017/2018 property rates policy
of the first respondent. For
completeness’ sake, the said court
order provides as follows:
“
It
is ordered that:
1.
The First Respondent’s failure
to determine separate assessment rates for each of the different
property categories determined
in the Rates Policy 2017/2018 in
accordance with the provisions of sections 3(3)(a), 14(2)(b)(ii) and
(iii) and 19(1)(c) of the
Local Government: Municipal Property Rates
Act, 6 of 2000 is declared unlawful and set aside.
2.
The First Respondent’s
decision to levy a business tariff on Applicant’s properties as
provided for in paragraph 11.7
of the Rates Policy 2017/2018 is
declared unlawful and set aside.
3.
The determination by the First
Respondent of item 10.1(b) of its 2017/2018 Property Rates Policy as
a criterium to be applied by
the First Respondent to levy different
rates for different categories of rateable properties is declared
unlawful and set aside.
4.
The Rates Policy 2017/2018 is
referred back to the First Respondent and the First Respondent is
directed to consider the criterium
to be applied when levying
different rates of different categories of rateable property.
5.
The First Respondent is directed to
determine separate assessment rates for each of the different
property categories determined
in the Rates Policy 2018/2019,
14(2)(b)(ii) and 19(1)(c) of the Local Government: Municipal
Properties Act, 6 of 2000.
6.
The parties to bear their own
costs.”
[10]
The disputes between the parties remained unresolved.
[10]
The court granted an order staying proceedings between the parties
pending the institution of a review application by the applicant
which should be instituted within 30 days of that order.
[11]
[11]
According to the applicant, the grounds of review
consisted of the second respondent’s failure to
give the
requisite notice in compliance with section 49(1)(c) of the MPRA as a
result of which the required jurisdictional facts
for the valuation
and categorisation of the applicant’s properties reflected in
the 2017 valuation roll were absent. Furthermore,
the first
respondent failed to comply with sections 3(3)(a), 3(3)(b)(i) and
19(1)(c) of the MPRA as well as the third respondent’s
valuation and categorisation of the applicant’s properties did
not comply with the requirements of legality.
[12]
[12]
The respondent’s case is that the applicant became aware of
increased levies as a result of the 2017
valuation report in July or
August 2017 when the applicant’s Mrs Van Niekerk, at the
beginning of August 2017, liaised with
the first respondent’s
finance department, seeking clarification about the increased rates
levied
[13]
as a result of the
2017 valuation roll. Correspondence was exchanged and on 21 August
2017, a certain Ms Trudy Khanye, an employee
of the first respondent,
indicated that the valuation of the applicant’s Erf 26454 had
increased from R 11 130 000.00
in the previous valuation
roll for the period 01 July 2013-30 June 2017, as a result of the
current valuation roll for the period
01 July 2017-30 June 2021.
[14]
[13]
Following this complaint, the respondents allege that the applicant
and the respondents engaged in a supplementary
valuation process to
revalue the applicant’s rateable properties in terms of the
provisions of section 77(a) read with section
78(1)(f) of the
MPRA.
[15]
Over and above the
supplementary revaluation, the applicant could, as further relief,
lodge an objection “
in
accordance with section 50 of the MPRA, if unsatisfied with the
outcome of the revaluation, and a further appeal in terms of
section
54 of the MPRA, directed against the outcome of the objection, in
accordance with section 50.”
[16]
[14]
In light of the above, the respondents raised a preliminary point
that the applicant’s delay in bringing
the review application
was unreasonable and beyond the 180 days envisaged in section 7(1) of
PAJA as this application was issued
on 21 January 2020. A period of 2
years and 4 months had lapsed since 1 August 2017 when the applicant
became aware of the new
rates. The applicant had, therefore, not made
out a case for the extension of the time frame in terms of sections
9(1) and 9(2)
of PAJA.
[17]
[15]
The revaluation process, according to the respondents, came to a
standstill due to the applicant’s
non-preparedness to
participate and to furnish the necessary information for the
finalisation of the revaluation.
[18]
The first respondent’s municipal valuer, Thinus Nel, was tasked
with the revaluation of the applicant’s rateable properties
in
2018. His request for further information over the period 2 March
2018 and 7 January 2020 was hardly or partly furnished by
the
applicant.
[19]
To confirm the
2017 valuation roll, Nel needed a detailed asset register of all
buildings on the site (Erf 26454) and the extent
to which and what
they were used for. Unless the requested information was furnished,
the valuation of R 340 million for erf 26454
would stand.
[20]
Nel valued the applicant’s properties for the 2017-2021
valuation roll. Rainier Spamer later took over from Nel as the
valuer.
[21]
[16]
Spamer grew impatient with the applicant’s non-participation
and failure to furnish the information
which would shed light on the
correct extent of each building and the uses of the applicant’s
entire campus for the review
of the valuation on the correct erf
numbers.
[22]
The applicant, it
was contended, failed to give a real explanation for the delay in the
review application and was not in a hurry
to finalise it.
[23]
Besides, the applicant was busy with the internal revaluation of its
properties and, it was contended, this internal remedy had
to be
exhausted before the legal processes were proceeded with.
[17]
It behoves at this juncture to have a sneak peek at the legal
framework within which the events played themselves.
The MPRA
provides that the aim of the Act is to regulate the power of a
municipality to impose rates on property; to exclude
certain
properties from rating in the national interest; to make
provision for municipalities to implement a transparent and
fair
system of exemptions, reductions and rebates through their rating
policies; to make provision for fair and equitable
valuation
methods of properties and an objections and appeals process.
[18]
A municipality may levy a rate on property in its
area
[24]
but must exercise
this power subject to section 229 and any other applicable provisions
of the Constitution; the provisions
of this Act and the rates
policy it must adopt in terms of section 3.
[25]
It must adopt a policy consistent with the provisions of the MPRA on
the levying of rates on rateable property in its area. The
rates
policy must treat persons liable for rates equitably
[26]
and determine the criteria to be applied by it if it levies
different rates for different categories of properties determined
in
terms of section 8.
[27]
[19]
Sections 8(1) and (2) of the MPRA read as follows:
“
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, determined in subsections (2) and
(3), which must be determined
according to the-
a)
use of the property;
(b)
permitted use of the property; or
(c)
a combination of (a) and (b).
(2)
A municipality must determine the following categories of rateable
property in terms of subsection
(1): Provided such property category
exists within the municipal jurisdiction:
(a)
Residential properties;
(b)
industrial properties;
(c)
business and commercial properties;
(d)
agricultural properties;
(e)
mining properties;
(f)
properties owned by an organ of state and used for public service
purposes;
(g)
public service infrastructure properties;
(h)
properties owned by public benefit organisations and used for
specified public benefit activities;
(i)
properties used for multiple purposes, subject to section 9; or
(j)
any other category of property as may be determined by the Minister,
with the concurrence of
the Minister of Finance, by notice in the
Gazette.”
[20]
A municipal council’s resolution to levy
rates in the municipality must differentiate between categories
of
properties and reflect the cent amount in the rand rate for each
category of property.
[28]
A
municipality may not levy rates which unreasonably discriminate
between categories of non-residential properties.
[29]
All rateable properties in the municipality must be valued
during a general valuation
[30]
by a municipal valuer who shall then prepare a valuation roll, sign
and certify it for submission to the municipal manager within
a
prescribed period.
[31]
[21]
Property must be valued in accordance with generally recognised
valuation practices, methods and standards,
and the provisions of the
MPRA. Physical inspection of the property to be valued is optional
and comparative, analytical and other
systems or techniques may be
used, including aerial photography and computer assisted mass
appraisal systems or techniques, taking
into account changes in
technology and valuation systems and techniques.
[32]
The general basis of valuation is the market value of a property
which is the amount the property would have realised if
sold on the
date of valuation in the open market by a willing seller to a willing
buyer.
[33]
[22]
I deem it prudent to start first with the
evaluation of the preliminary points raised by the respondents.
The
first preliminary point is based on PAJA in that the applicant failed
to comply with the 180-day period within which to bring
a review
application. Section 1 of PAJA defines an administrative action as
any decision taken by an organ of state when exercising
a public
power or performing a public function in terms of an empowering
provision, which adversely affects the rights of any person
and which
has a direct, external legal effect, but does not include the
executive powers and legislative functions of a municipal
council.
[34]
[23]
It is a fundamental principle of the rule of law
that the exercise of public power is only legitimate where
lawful.
The rule of law expresses this principle of legality. A local
government may only act within the powers lawfully conferred
upon
it.
[35]
The exercise of public
power must therefore comply with the Constitution, which is the
supreme law, and the doctrine of legality,
which is part of that law.
The doctrine of legality, which is an incident of the rule of law, is
one of the constitutional controls
through which the exercise of
public power is regulated by the Constitution. It entails that both
the Legislature and the Executive
are constrained by the principle
that they may exercise no power and perform no function beyond that
conferred upon them by law.
In this sense, the Constitution
entrenches the principle of legality and provides the foundation for
the control of public power.
[36]
[24]
The decisions the appellants seek to impugn are
not administrative in nature and can therefore not be assailed
on the
grounds of non-compliance with PAJA. Consequently, in seeking relief,
the applicant relied solely upon the legality principle.
The matter
thus turns on whether the municipality's 2017 valuation roll was
lawfully adopted.
[37]
That
being said, it follows that the provisions of PAJA are not applicable
to this legality review and, consequently, this finding
disposes of
some of the allegations and/or defences raised by the respondents. In
particular, the insistence of the respondents
that the applicant
should have exhausted internal remedies before the court could review
the administrative action.
[38]
[25]
The respondents stated that the engagement in a supplementary
valuation by the parties was in terms of sections
77(a) and 78(1)(f)
of the MPRA. Section 77(a) provides that a municipality must
regularly, but at least once a year, update its
valuation roll by
causing a supplementary valuation roll to be prepared, if section 78
applies. Section 78(1) provides as follows:
“
78
Supplementary valuations
(1)
A municipality must, whenever necessary, cause a supplementary
valuation to be made in respect of any
rateable property-
(a)
incorrectly omitted from the valuation roll;
(b)
included in a municipality after the last general valuation;
(c)
subdivided or consolidated after the last general valuation;
(d)
of which the market value has substantially increased or decreased
for any reason after the last general
valuation;
(e)
substantially incorrectly valued during the last general valuation;
(f)
that must be revalued for any other exceptional reason;
(g)
of which the category has changed; or
(h)
the value of which was incorrectly recorded in the valuation roll as
a result of a clerical or typing
error.”
[26]
The respondents’ interpretation and
application of the sections mentioned above seem forced and give
credence to the applicant’s assertion that the jurisdictional
facts required for the undertaking of a supplementary valuation
must
exist before a municipality is entitled to do a supplementary
valuation in terms of section 78 of the MPRA.
[39]
[27]
It was also raised as a preliminary point that the applicant could
make use of the machinery in sections
50 and 54 of the MPRA for the
necessary relief. However, section 50 refers to a person or owner of
a property who inspected the
roll within the period stated in the
notice referred to in section 49(1)(a) and lodged an objection with
the municipal manager
against any matter reflected in or omitted from
the roll. This process does not, as stated by the respondents, refer
to an outcome
of a revaluation.
[28] I
am satisfied that the defences raised under the heading “
In
Limine
” are without merit and should therefore be
dismissed. I turn now to the claims contained in the notice of
motion.
Part 1: Ad prayer 1
[29]
The respondents contended that the section 149(1)(c) notices dated 7
March 2017 were posted at the main post
office in Bloemfontein on 4
April 2017 by ordinary mail in accordance with the MPRA. The
applicant requested copies of the notices
that were allegedly served
on the applicant as well as copies of the valuations prepared by the
third respondent in respect of
each immovable property of the
applicant.
[40]
The
respondent’s attorneys then made available a copy of the notice
which was attached to their letter dated 15 January 2020.
[41]
The respondents contended that the applicant’s denial of having
received the notice, was based on the evidence of Corinne
Van Niekerk
that neither described the messengers who fetched the mail from the
post office, if at all fetched, nor that the notices
were noticed in
the provincial gazette, the circulating media and the first
respondent’s website.
[30]
The applicant on the other hand, contended that the notice should, as
a matter of fact, be delivered by means
of ordinary mail to the owner
at his or her postal address. Mere despatch of the notice is not
enough because the risk on no-delivery
by ordinary mail was too great
as stated in
Sebola
and another v Standard Bank of South Africa Ltd.
[42]
[31]
The applicant stated in its affidavit that in the letter from the
respondent’s attorneys dated 15 January
2020,
[43]
it was alleged that the required notice in terms of section 49(1) of
the MPRA was properly served upon the applicant.
[44]
The bare allegation was made therein that the required notice was
served per ordinary mail
[45]
and the copy of the relevant notice that was furnished (“FA11.2”)
depicted no proof of the alleged service. It was
contended that there
was no indication that such a letter was posted to the applicant.
[32]
It was therefore apparent to the applicant, on the municipality’s
own version, that the second respondent
failed to comply with the
requirements of section 49(1)(c) of the MPRA in that the second
respondent failed to annex a copy of
the notice published in terms of
section 49(1)(a) in the provincial gazette to (“FA11.2”).
[46]
The second respondent also failed to annex a copy of an extract of
the 2017 valuation roll pertaining to the applicant’s
properties to “FA11.2”
[47]
and neither “FA11.1” nor ‘FA11.2” referred to
a copy of the relevant notice published in terms of section
49(1)(a)
in the provincial gazette or an extract of the 2017 valuation roll
pertaining to the applicant’s properties.
[48]
[33]
The letter dated 9 January 2020, marked “FA9”, addressed
to the respondents’ attorneys
stipulated in paragraph 8 as
follows:
“
(8)
Accordingly, we request as a matter of urgency copies of the
following:
a)
The notices that were served on the
CUT, invited to object to the proposed valuations of its immovable
properties during the phase
prior to the roll coming to operation on
01 July 2017; and
b)
The
valuations prepared by the municipal valour for each of the immovable
properties of the CUT.”
[49]
The
respondents’ response in paragraph 3 of their letter marked
“FA11.1”
[50]
reads
as follows:
“
Kindly
find attached a copy of the notice properly served on your client per
ordinary mail in accordance with section 49(1) of the
Municipal
Property Rates Act, 6 of 2004. No formal and complaint reaction
emanated from your client in respect of this notice.”
The applicant stated that
no further annexures were attached to the said letter save the copy
of the notice.
[34]
The applicant stated that Ms Van Niekerk never received a copy of the
relevant prescribed notice nor a copy
of the prescribed extract of
the 2017 valuation roll pertaining to the applicant’s
properties as contemplated in section
49(1)(c) from any of the
respondents.
[51]
The applicant
was therefore prejudiced by the non-compliance with the provisions of
section 49(1)(c) of the MPRA because the applicant
was deprived of
its rights in terms of section 50 of the MPRA to object to the
valuation and or the categorisation of its properties
in terms of the
2017 valuation roll, especially in circumstances where the market
value of Erf 26454 increased materially and Erf
26454, together with
the applicant’s other properties were categorised as business
as a result of which the applicant’s
properties were equated
with properties used for business purposes by commercial entities.
The applicant was a higher education
institution that used its
properties to fulfil its function to provide higher education to a
section of the public.
[52]
[35]
The applicant contended that, in as much as a notice in terms of
section 49(1)(a) of the MPRA might have
been published in the
provincial gazette, such notice did not come to the knowledge of the
applicant, and correctly pointed out
that section 49(1) of the MPRA
is a jurisdictional requirement for a valid valuation and
categorisation of the applicant’s
properties. The procedures
set out in the MPRA for the compilation of a valuation roll are a
jurisdictional pre-requisite for the
exercise of the first
respondent’s power to collect rates.
[53]
[36]
Section 49(1)(c) of the MPRA provides that the
municipal manager must serve, by ordinary mail or, if appropriate,
in
accordance with section 115 of the Municipal Systems Act, on every
owner of property listed in the valuation roll, a copy of
the notice
stating that the roll is open for public inspection together with an
extract of the valuation roll pertaining to that
owner's property.
The phrase
'serve
notice upon',
taken by themselves, signifies no more than that the notice reaches
the person concerned and effectually conveys to him the information
sought to be brought.
[54]
The
evidence of Ms Corinne van Niekerk is satisfactory and her evidence
was not rebutted. The respondents accepted that the applicant
became
aware of the increased rates levied as a result of the 2017 valuation
roll in July/August 2017 when Ms Van Niekerk liaised
with the first
respondent’s finance department at the beginning of 2017 to
enquire into the increased rates.
[55]
[37] I
come to the conclusion that with the given evidence, the second
respondent failed to comply with the provisions
of section 49 of the
MPRA, thus rendering the valuation process unlawful.
Ad Prayer 2 and 3
[38]
The failure to comply with section 49(1)(c) of MPRA renders the 2017
valuation roll unenforceable against
the applicant. The levying of
the rates, calculated in reference to the valuation and categories of
the applicant’s properties
portrayed in that valuation roll, is
unlawful and not legitimate. Consequently, the first respondent is
enjoined by the provisions
of section 78 to cause a supplementary
valuation to be made in respect of the applicant’s rateable
property.
Part 2: Ad Prayer
1.1
[39]
The respondents pointed out that the applicant’s properties
reflected in its valuation roll for 01
July 2017 to 30 June 2021 were
not categorised as “Public benefit organization” in terms
of the 17/18 public rates
policy. Applicant’s 36 properties
were depicted and described in MMM2(a)
[56]
as 22 Erven business, 6 Erven residential, 5 Erven public service
infrastructure, 1 Erf public service purpose, 1 Erf is agricultural
farms and agricultural and 1 Erf as vacant land residential. Not a
single Erf was categorised “public benefit organisation”.
In its reply,
[57]
the
applicant stated that the 2017/2018 rates policy reflected the
properties of the applicant under the heading “Public
Benefit
Organisations” and it was understood that the first respondent
regarded the applicant and the University of the Free
State as public
benefit organisations. It is indeed so that in paragraph 11.5 of the
valuation roll, the heading is described as
“Public Benefit
Organisation (PBO’s),
[58]
and in paragraph 11.7, it is stated that the University of the
Free State as well as the Central University of Technology
will be
levied on a business tariff.
Ad Prayer 1.2
[40]
The respondents stated that the business rate applicable to the
applicant’s 22 properties was categorised
in accordance with
the three criteria in section 8(1) which authorised the discretionary
determination of categories of rateable
property contained in section
8(2) and permissible in accordance with section 19(1). These 22
properties were categorised as business
and Erf 26454 was one of
them.
[59]
The properties could
as well have been categorised as "state-owned facilities”
or “state-owned properties”
with no effect upwards or
downwards on the payable rates.
[60]
[41]
The applicant accepted in its replying affidavit
[61]
that only 22 of its rateable properties were categorised as business
which included Erf 26454. The applicant pointed out, correctly
so,
that the respondents’ candid acknowledgement that the
properties of the applicant could also be categorised as “state-owned
facilities” is an admission of irrational and/ or illegal
categorisation of the applicant’s 22 properties as “business”
properties. Business properties are not state-owned properties and to
treat the owner of state-owned properties, such as the applicant,
similar to business property owners is inequitable and thus in breach
of section 3(3)(a) and 19(1)(c) of the MPRA. These sections
provide
that a rates policy must treat persons liable for rates equitably and
that a municipality may not levy the rates which
unreasonably
discriminate between categories of non-residential properties.
Ad Paragraph 1.3,
1.4 and 2
[42]
It is common cause that the first respondent determined only five
categories of assessment which recorded
the cent amount in the rand
and eighteen categories of rateable properties in its 2017/2018
property rates policy. Eight categories
of assessment rates and
nineteen categories of rateable categories for the 2018/2019 property
rates policy. Nineteen categories
of rateable property were
determined and different categories of assessment rates for the
2019/2020 property rates policy.
[62]
However, the respondents denied that its property rates policies
failed to comply with the applicable statutory provisions.
[63]
[43]
The respondents’ resistance appears to be
ensconced in their understanding of the provisions of section
8 of
the MPRA
[64]
and which, as the
applicant correctly pointed out, were outdated and did not reflect
the correct legal position.
[65]
The decisions to determine as criteria 10.1(b) and 11.1(b) of the
2017/2018 and 2018/2019, 2019/2020 property rates policies was,
according to the respondents, in accordance with and based on section
152(1) of the Constitution and its requirements.
[66]
[44]
The applicant’s response was that the application of the same
rate for state-owned facilities and business
properties in
circumstances where the owners of such properties are not similarly
situated, led to the unreasonable discrimination
between these
categories of non-residential properties and treated the owners of
state-owned properties, who render the public
service, inequitable if
compared with business owners.
[67]
The alleged criteria determined by the first respondent in paragraph
10.1 of its 2017/2018 rates policy were repeated in its ensuing
rates
policies for the 2018/2019 and 2019/2020 financial years and
these
provisions are but goals and not criteria.
[68]
I agree. Paragraphs 10.1(b) and 11.1(b) appear to be a rehash of
section 3(3)(i) of the MPRA which reads: “
allow
the municipality to promote local, social and economic development.”
[45]
In the circumstances, it is proper to refer the property rates
policies to the first respondent for consideration.
[46] I
have already dealt with the supplementary valuation in paragraph 25
above.
Ad
Part 3: Prayers 1,2 and 3
[47]
Section 48(2)
[69]
provides that the valuation roll must reflect the following
particulars in respect of each property as at the date of valuation
to the extent that such information is reasonably determinable:
(a)
The registered or other description of the property;
(b)
the category determined in terms of section 8 in which the property
falls;
(c)
the physical address of the property;
(d)
the extent of the property;
(e)
the market value of the property, if the property was valued;
(f)
the name of the owner; and
(g)
any other prescribed particulars.
[48]
In its answering affidavit, the respondents allege that the third
respondent’s valuer, Nel, determined
the value of the
applicant’s properties and categorised them in accordance with
provisions of sections 45(1), (2) and (3)
read with section 46 of the
MPRA.
[70]
Erf 26454 was valued
as the “
parent
property
”
with erven 1896/RE, 1897/RE, 1898, 1899,1945, 2923 and 2923/1 value
as “
child
properties
”
with nominal values of R 10.00 for all seven.
[71]
The value of R 340 million rand was not the market value of Erf 26454
only but represented the total market value of the said Erf
together
with the other seven.
[72]
At
the date of the valuation of the applicant’s properties, the
third respondent (Nel) was in possession of the information
that he
acquired before the valuation and which included the information
referred to in section 45(2)(b)
[73]
which constituted recognised valuation practices, methods and
standards. He confirmed that the DRC method that he used was a
recognised
valuation method used for municipal valuations.
[74]
[49]
The third respondent made use of, amongst others, aerial photography
to identify and measured rooftop digitisation
and the extent of
improvements. Street view and other comparative, analytical, and mass
valuations techniques were utilised to
determine the value of the
properties. This statutory authorised information was deemed correct
as at the date of valuation.
[75]
The said Nel had sufficient information and details required by
section 45 of the MPRA for a proper valuation of erf 26454 together
with the other 7 erven which were all valued together for purposes of
the DRC method to determine the market value of R 340 million
rand
recorded in the valuation roll. He applied his mind to the
matter.
[76]
[50]
The applicant denied that the allegations contained in the opposing
affidavit constituted proof that Nel
applied the DRC method of
valuation correctly and in a proper manner to arrive at the estimated
market value of the applicant’s
immovable properties at the
date of the valuation.
[77]
It
contended that the third respondent had insufficient facts and
information to comply with the general valuation practices, methods
and standards regarding the correct and proper application of the DRC
method to make a proper and reliable estimate of the likely
construction costs and the manner in which such construction costs
had to be depreciated in terms of the DRC to arrive at the market
value of the applicant’s immovable properties on the valuation
date.
[78]
The applicants
relied on the expert opinions of Professor Verster and Mr Margolius,
a professional valuer.
[51]
Professor Verster opined that the application of the information
which was available to the third respondent
and used by him would
have not enabled the third respondent to consider:
[79]
1.
The differences in design, shape, total floor area, vertical
positions of the floors, overall
height, storey height, extra costs
of providing usable floor areas and the effect of an extra or more
expensive specification.
2.
The influence of the specification upon construction costs
specifically regarding the nature
and standards on the inside
finishes of the buildings.
3.
The effect of floor-to-ceiling heights on construction costs.
4.
The influence of design and internal sub-divisions upon construction
costs.
5.
The costs of plumbing, mechanical and electrical installations.
[52]
The fact that the third respondent was, on his version, unable to
have access to the inside of the relevant
buildings and thus unable
to consider the issues stated above, materially affected any reliable
and proper assessment of the construction
costs to replace the
existing buildings situated upon the applicant’s immovable
properties as at the valuation date.
[53]
Mr Margolius opined that the third respondent did not value the
subject properties of the applicant in accordance
with generally
recognised valuation practices, methods, and standards as
contemplated in section 45 of the MPRA and the valuation
of the
subject properties did not represent the market value of such
properties at the valuation date.
[80]
[54]
The valuation was completed before 17 February 2017 as the valuation
roll was published in the Provincial
Gazette on that date. The lack
of information thereafter by the third respondent indicates that the
third respondent did not have
a required information in order to
draft a proper valuation roll as at that date.
[55]
The applicant correctly pointed out that the third respondent did not
have the relevant required information
to apply the DRC method
properly when he still requested addition data as at 9 May 2018 to
consider his valuation of the properties
for the 2017 valuation roll.
The correspondence between the parties during the period 2017-2019,
attests to that.
Part 4
[56] As
indicated in the above paragraphs, it was not necessary for the
applicant to resort to internal remedies.
[57]
Consequently, the following orders are made:
Order:
1.
The second respondent’s failure to
serve a copy of the notice in terms of section 49(1)(a) of the MPRA
together with an extract
of the valuation roll for the financial
years 01 July 2017 until 30 June 2021 upon the applicant is declared
unlawful and or illegal.
2.
The following decisions by the first
respondent are declared unlawful and set aside:
2.1
The first respondent’s decision to
levy rates on the applicant’s properties in terms of their
market value according
to their categories recorded in the valuation
roll; and
2.2
The first respondent’s decision to
determine the cent in the rand as rates (published in the provincial
gazette in terms of
section 14(2) of the MPRA and in accordance with
the copies of the relevant notices annexed as “FA14”,
“FA15”
and “FA16” to FA) of the applicant’s
properties with reference to their market value and category as
reflected
in the valuation roll.
3.
The first respondent is directed to make or
cause to be made a supplementary valuation and categorisation of the
applicant’s
properties reflected in the valuation roll in terms
of section 78 of the MPRA.
4.
The first respondent’s decisions set
out hereunder are declared unlawful and a set aside;
1.1
The categorisation of the applicant’s
properties in the first respondent’s municipal area and
reflected in its valuation
roll for the financial years 1 July 2017
until 30 June 2021 as “Public benefit organization” in
the first respondent’s
2017/2018 property rates policy.
1.2
The determination that a business rate will
apply to the levying of rates of the applicant’s properties in
the first respondent’s
2017/2018 property rates policy.
1.3
The failure to determine separate and
different rates in its 2017/2018, 2018/2019 and 2019/2020 property
rates policies in terms
of sections 3(3)(a), 8(1), 14 and 19(1)(c) of
the MPRA.
1.4
The determination of item 10.1(b) of its
2017/2018 property rates policy as a
criterium
to be applied to levy different rates for the different categories of
rateable properties and
1.5
The determination of item 11.1(b) of its
2018/2019 and 2019/2020 property rates policies as a
criterium
to be applied to levy different rates for different categories of
rateable properties.
5.
The 2017/2018, 2018/2019 and 2019/2020
property rates policies are referred to the first respondent who must
consider and apply
the provisions of sections 3(3)(a), 3(3)(b)(i) and
(ii), 14(2)(b)(2) and 19(1)(c) of the MPRA when considering such
policies.
6.
The decisions set out hereunder are
declared unlawful and set aside:
6.1
The third respondent’s decision to
categorise the applicant’s properties (specifically Erf 26454)
situated in the first
respondent’s municipal area and reflected
in the first respondent’s valuation roll for the financial
years 1 July 2017
until 30 June 2021 as “business” in
accordance with the provisions of sections 34 and 48(2)(b) of MPRA.
6.2
The third respondent’s decision to
determine the market value of the applicant’s property situated
in the first respondent’s
municipal area and specifically the
market value of Erf 26454 at the values recorded in the valuation
roll (R 340 000 000.00
in respect of Erf 26454).
6.3
The first respondent’s decision to
levy rates on the applicant’s properties in terms of their
market value and their
categorisation recorded in the valuation roll.
7.
The first and third respondents to pay the
costs jointly and severally, the one paying the other to be absolved.
Such costs to include
the employment of two counsel until the
completion of the drafting of the heads of argument.
MHLAMBI, J
I concur,
OPPERMAN, J
On
behalf of the applicant:
Adv.
J.S. Rautenbach
Instructed
by:
Blair
Attorneys
32
First Street
Westdene
Bloemfontein
On
behalf of the respondents:
Adv.
A.H. Burger SC
Instructed
by:
Rampai
Attorneys
48
Gen Hertzog Street
Dan
Pienaar
BLOEMFONTEIN
[1]
No. 6 of 2004.
[2]
No
3 of 2000.
[3]
Paragraph
5 of the Founding Affidavit.
[4]
Section
239 of the Constitution of Republic of South Africa.
[5]
Section
11(3) of the Systems Act.
[6]
Annexure
“FA2” on page 85 and 86 of the Indexed Papers.
[7]
Paras 25 and 26 of the FA.
[8]
Para 33 of the FA.
[9]
Para
28 of the FA.
[10]
Para 36 of the FA.
[11]
Para 37 of the FA.
[12]
Para 38 of the FA.
[13]
Para
2.2 of the AA.
[14]
Para
2.2 of the AA; annexure “FA 13.1” on page 120 of the
Index.
[15]
Para
2.6.1 of the AA.
[16]
Para
2.6.1 of the AA.
[17]
Paras
2.3-2.5 of the AA.
[18]
Para
2.8 of the AA.
[19]
Para
2.8 of the AA.
[20]
Para
2.8.3 of the AA.
[21]
Para
2.8.6 of the AA.
[22]
Para
2.8.8 of the AA.
[23]
Para
2.13 of the AA.
[24]
Section 2(1) of the MPRA.
[25]
Section 2(3)(a), (b) and (c) of the MPRA.
[26]
Section 3(3)(a) of the MPRA.
[27]
Section 3(3)(b)(i) of the MPRA.
[28]
Section
14(2)(b)(i) and (ii) of the MPRA.
[29]
Section
19(1)(c) of the MPRA.
[30]
Section
30(2) of the MPRA.
[31]
Section
34 of the MPRA.
[32]
Section
45 of the MPRA.
[33]
Section
46 of the MPRA.
[34]
Section
1(b)(cc) and (cc) of PAJA.
[35]
Fedsure
Life Assurance Ltd and Others v Greater Johannesburg Transitional
Metropolitan Council and Others 1999(1) SA 374 (CC)
para 56.
[36]
Affordable
Medicines Trust and Other v Minister of Health and Others
[2005] ZACC 3
;
2006 (3)
SA 247
CC para 40.
[37]
Kalil
No and Others v Mangaung Metropolitan Municipality and Others 2014
(5) SA 123 (SCA).
[38]
Respondents’ heads of argument: paras 1.3.10-1.3.15.
[39]
Para
25: Applicant’s replying affidavit.
[40]
Annexure
“FA9” on page 109 of the Index.
[41]
Annexure
“FA11.1” on page 114 of the Index.
[42]
2012
(5) SA 142
(CC) paras 75 and 87.
[43]
Marked
annexure “FA 11.1” on page 114 of the index.
[44]
Para
63.1 of the FA.
[45]
Para
63.2 of the FA.
[46]
Para
68.1 of the FA.
[47]
Para
68.2 of the FA
[48]
Para
68.3 of the FA.
[49]
Page
110 of the Index.
[50]
On
Page 114 of the Index.
[51]
Para
70 of the FA.
[52]
Para
72 of the FA.
[53]
City
of Tshwane Municipality v Lombardy Development (Pty) Ltd [2018] 3
All SA 605 (SCA).
[54]
Ondedaalsrus
Municipality v Odendaalsrus Gold, General Investment and Extension
Ltd 1959 (1) SA 374 (A).
[55]
Paras
76,77.1 and 77.2 of the FA and paras 2.2 and 40.4 of the AA.
[56]
Respondent’s
extract of the valuation roll on page 413 of the Index.
[57]
Para
91 of the Applicant’s Replying Affidavit.
[58]
On
page 446 of the Index.
[59]
Paras
5.1.4, 6.7 and 10.2 of the AA.
[60]
Para
6.8 of the AA.
[61]
Para
52 of the AA.
[62]
Paras
99.1-99.7 of the FA and paras 43.7.1-43.7.6 of the AA.
[63]
Para
44.9.5 of the AA.
[64]
Paras
6.3.2, 6.3.3 and 6.7 of the AA.
[65]
Paras
11.3 and 11.4 of the MPRA.
[66]
Para
8.2 of the AA.
[67]
Para
94 of the RA.
[68]
Para
77 of the RA.
[69]
Of
the MPRA.
[70]
Para
11.2 of the AA.
[71]
Para
11.5 of the AA.
[72]
Para
11.6 of the AA.
[73]
O
f
the MPRA.
[74]
Para
33.1.5.1 of the AA.
[75]
Para
33.1.12.1 of the AA.
[76]
Para
60.2 of the AA.
[77]
Para
44 of the RA.
[78]
Para
45 of the RA.
[79]
Para
28 of his affidavit on page 528 of the Index.
[80]
Para
25 of his affidavit on page 544 of the Index.