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[2011] ZASCA 23
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Premier of the Western Cape and Others v Overberg District Municipality and Others (801/201) [2011] ZASCA 23; 2011 (4) SA 441 (SCA); [2011] 3 All SA 385 (SCA) (18 March 2011)
THE SUPREME COURT OF
APPEAL OF SOUTH AFRICA
JUDGMENT
Case No: 801/2010
In
the matter between:
THE
PREMIER OF THE WESTERN CAPE
.................................................
FIRST
APPELLANT
THE
MINISTER FOR LOCAL GOVERNMENT,
ENVIRONMENTAL
AFFAIRS AND DEVELOPMENT
PLANNING,
WESTERN CAPE
...............................................................
SECOND
APPELLANT
THE
CABINET OF THE WESTERN CAPE
PROVINCE
..................................................................................................
THIRD
APPELLANT
and
OVERBERG
DISTRICT MUNICIPALITY
.................................................
FIRST
RESPONDENT
EVE
CATHERINE MARTHINUS
..........................................................
SECOND
RESPONDENT
ISAK
STEVENS
.......................................................................................
THIRD
RESPONDENT
JAN
CORNELIUS GELDERBLOEM
...................................................
FOURTH
RESPONDENT
FUNEKA
CAROLINE KHOHLAKALA
.....................................................
FIFTH
RESPONDENT
CHRISTINE
VUYELWA MAZEMBE
.........................................................
SIXTH
RESPONDENT
PATRICK
THAMSANQA PONI
..........................................................
SEVENTH
RESPONDENT
DEANNA
CLAUDINE RUITERS
...........................................................
EIGHTH
RESPONDENT
JOANA
JANUARIE
.................................................................................
NINTH
RESPONDENT
DAVID
JOHANNES ABRAHAMS
..........................................................
TENTH
RESPONDENT
JOHN
CHARLES OCTOBER
..........................................................
ELEVENTH
RESPONDENT
ELLEN
ROSALINE JANSEN
............................................................
TWELFTH
RESPONDENT
Neutral citation:
The Premier of the Western Cape v Overberg District Municipality
(801/2010)
[2011] ZASCA 23
(18 March 2011).
Coram:
Harms DP,
Streicher, Brand, Shongwe and Theron JJA
Heard:
1 March
2011
Delivered: 18 March
2011
Summary:
Council
of first respondent dissolved by provincial executive in terms of
s 139(4) of the Constitution of the Republic of South
Africa,
1996 – decision based on erroneous interpretation of section –
exercise of executive power reviewable for illegality.
________________________________________________________________
ORDER
________________________________________________________________
On appeal from:
Western Cape High Court (Cape Town) (Bozalek J sitting as court of
first instance):
The appeal is dismissed
with costs, including the costs of two counsel.
________________________________________________________________
JUDGMENT
________________________________________________________________
BRAND
JA
(Harms
DP, Shongwe and Theron JJA concurring):
[1]
This matter turns on the provisions of s 139(4) of the
Constitution.
1
By the nature of
things, I shall presently return to a discussion of these provisions
in some detail. Broadly stated for present
purposes, however, s 139
of the Constitution permits and requires provincial governments to
supervise the affairs of local
governments and to intervene when
things go awry. More particularly, s 139(4) deals with the
situation where a local government
fails to approve an annual budget
or revenue raising measures necessary to give effect to the budget.
In that event, so the subsection
provides, the provincial executive
must intervene by taking appropriate steps, including dissolving the
municipal council, to ensure
that the budget or the revenue raising
measures are approved.
[2]
Relying on these provisions, the provincial executive of the Western
Cape – or the provincial cabinet as it is known in
that
province
2
(the cabinet) –
decided on 14 July 2010 to dissolve the council of the Overberg
District Municipality (the council) in the
light of its failure to
approve an annual budget for the municipal financial year which
started on 1 July 2010. The cabinet further
decided to approve a
temporary budget for the municipality and to appoint an administrator
until the election of a new council.
[3] This gave rise to an
application by the Overberg District Municipality itself and eleven
former members of the council to the
Western Cape High Court, Cape
Town, for the setting aside of these decisions by the cabinet. In the
event, the application proved
to be successful in that Bozalek J
granted the order, essentially in the terms that it was sought. In
subsequent proceedings he
afforded the appellants leave to appeal to
this court, but ordered implementation of his original order in terms
of rule 49(11)
of the Uniform Rules, pending the outcome of the
appeal.
[4]
The underlying reasoning of the court a quo as well as the opposing
contentions by the parties on appeal will be best understood
against
the background that follows. The three appellants are the Premier of
the Western Cape; the Member of the Executive Council
– known
in the Western Cape
3
as the Provincial
Minister – for Local Government, Environmental Affairs and
Development Planning; and the cabinet itself.
The 12 respondents, who
were the applicants in the court a quo, are the Overberg District
Municipality and the 11 members of the
council (the individual
respondents) who have since been reinstated as council members by the
interim order of the court a quo.
[5] The 11 individual
respondents were not the only members of the council. In fact, the
council consisted of 20 members representing
four political parties.
Nine of them belonged to the African National Congress (the ANC), two
to the National Peoples’ Party
(the NPP), eight to the
Democratic Alliance (the DA) and one to the Independent Democrats
(the ID). The governing majority consisted
of a coalition between the
nine members of the ANC and the two representing the NPP. They are
the 11 individual respondents.
[6]
What gave rise to the impugned decision by the cabinet was the
failure of the council to approve an annual budget for the
municipality
before the start of the financial year on 1 July 2010.
Municipal budgets are governed by chapter 4 of the Local Government:
Municipal
Finance Management Act (the MFMA).
4
Chapter 4 consists
of ss 15 to 33. In terms of s 15 the municipality may incur no
expense except in accordance with an approved
budget. Section 16(1)
provides that ‘[t]he council of a municipality must for each
financial year approve an annual
budget for the municipality before
the start of that financial year’. Read with the definition of
‘financial year’
in s 1, it means before 1 July.
[7]
Coupled with the provisions of s 16(1), is the requirement in
s 16(2) that the proposed budget must be tabled at a
council
meeting at least 90 days before the start of the budget year. In this
case the proposed budget was tabled at a council
meeting which was
held on 13 April 2010. Though this was less than 90 days before 1
July 2010, this flaw in the procedure turned
out to be of no
consequence in these proceedings. What did turn out to be of
consequence was that at the same meeting the speaker
of the council
resigned. Moreover, for reasons unexplained on the papers, the
council resolved to elect a speaker for that meeting
only. After the
meeting the council was therefore without a speaker. This is in
conflict with s 36 of the Local Government:
Municipal Structures
Act (the Municipal Structures Act)
5
which anticipates
that ‘[e]ach municipal council must have a chairperson who will
be called the speaker’.
[8] At the meeting of 13
April 2010 the proposed budget was approved for purposes of
publication and comment. Thereafter it was
duly made public and
submitted to both the National Treasury and the treasury of the
province as required by s 22 of the MFMA.
The only outstanding
prerequisite to render the budget effective was approval by the
council. That approval could only be obtained
at a council meeting.
At the heart of the problem in the case lies the fact that there was
no meeting of the council before 1 July
2010. The reason why the
meeting did not take place has to do with s 29 of the Municipal
Structures Act. The relevant part
of this section provides:
‘
Meetings
of municipal councils
(1)
The speaker of a municipal council decides when and where the council
meets . . . but if a majority of the councillors
requests the speaker in writing to convene a council meeting, the
speaker must convene a meeting at a time set out in the request.
(2)
The municipal manager of a municipality . . . must call the first
meeting of the council of that municipality within 14 days
after the
council has been declared elected . . . ’
[9] Because the council
resolved on 13 April 2010 to elect a speaker for purposes of that
meeting only, there was no speaker after
the meeting to convene the
next meeting. The individual respondents, constituting the majority
of the council, then requested the
municipal manager in writing to
convene a meeting of the council, amongst other things, to elect a
new speaker and to approve the
annual budget. They did so on numerous
occasions during May and June 2010.
[10]
These requests led the municipal manager to seek advice from a member
of the Cape Bar as to how he should proceed. The advice
he thus
obtained was, in essence, that his authority to convene meetings of
the council was limited, by the provisions of s 29(2)
of the
Municipal Structures Act, to the first meeting after the election of
the council. In the light of this advice the municipal
manager
steadfastly refused to convene a council meeting, despite the
numerous requests by the individual respondents to do so.
Counsel for
the appellants since conceded, both in this court and in the court a
quo, that the advice was wrong and that, in the
circumstances, the
municipal manager was indeed able to convene a council meeting.
6
But this
concession, of course, did not avoid the deadlock that arose at the
time. The deadlock situation persisted until after
the commencement
of the new financial year on 1 July 2010.
[11] Eventually, the
individual respondents obtained legal advice of their own. Acting on
this advice, they again approached the
municipal manager on 9 July
2010 with a written request to convene a council meeting for 15h00 on
the same day. This time they
added a rider that if the municipal
manager should refuse to cooperate, the meeting would nonetheless
proceed. Since the municipal
manager remained resolute, the
individual respondents resorted to the fall-back position reserved in
their letter. Consequently,
a meeting was held at 15h00 on 9 July
2010. It was attended by the 11 individual respondents only, because,
so it appears, no other
council member had been notified. At the
meeting the individual respondents summarily elected one of their
number as the new speaker
and unanimously approved the proposed
budget for the 2010/2011 financial year.
[12] In the meantime the
municipal manager had informed the Provincial Minister for Finance in
the Western Cape the previous day
(ie 8 July 2010) that the
municipality had failed to approve a budget for the financial year.
In this light the second appellant,
as the Provincial Minister
responsible for Local Government, sought advice from legal experts in
the field as to the options available
to him.
[13] The advice he
received was that in terms of s 139(4) of the Constitution read
with s 26(1) of the MFMA, he had no
alternative but to request
the provincial cabinet to dissolve the council. The second appellant
in turn conveyed this advice in
a submission to the cabinet at its
meeting of 14 July 2010. In relevant part the submission read as
follows:
‘●
where
a municipality has not approved an annual budget by the commencement
of the new financial year, there is . . . no statutory
basis for the
municipality to approve a budget;
●
as
the approval of a budget is a constitutionally entrenched legislative
power of municipalities, the Provincial Executive may only
consider
and approve a temporary budget;
●
where
an annual budget has not been approved by the due date, the
applicable legislation indicates that the dissolution of council
is
compulsory and only after a new council has been elected, it regains
its authority to approve a budget for the municipality.’
[14] The submission by
the second appellant also informed the cabinet that a budget had been
approved by the council members from
the ruling coalition, on 9 July
2010. It conveyed the opinion, however, that the approval was invalid
for two reasons. First, because
the meeting did not qualify as a
properly constituted council meeting. Secondly, because in terms of
the MFMA, the council had
no authority to approve a budget after the
first day of the financial year.
[15] In the light of the
submission by the second appellant, the cabinet took the impugned
decision, essentially by reason of its
belief that it had no option
to do otherwise. In short, the appellants’ argument in defence
of the decision, both in this
court and in the High Court, rested on
the narrow basis that the belief on which the cabinet’s
decision was founded is borne
out by a proper interpretation of
s 139(4) of the Constitution and s 26(1) of the MFMA.
Because s 26(1) of the MFMA
does no more than to echo the
provisions of s 139(4) of the Constitution in identical terms,
brevity dictates that I deal
with the latter section only.
[16] Section 139(4)
provides:
‘
If
a municipality cannot or does not fulfil its obligation in terms of
the Constitution or legislation to approve a budget or any
revenue-raising measures necessary to give effect to the budget, the
relevant provincial executive must intervene by taking any
appropriate steps to ensure that the budget or those revenue-raising
measures are approved, including dissolving the Municipal
Council and
-
(a)
appointing an administrator until a newly elected Municipal Council
has been declared elected; and
(b)
approving a temporary budget or revenue-raising measures to provide
for the continued functioning of the municipality.’
[17] What the section
means, so the appellants contended, is that in the circumstances
contemplated, the provincial executive is
obliged to dissolve the
council and to take the steps referred to in (a) and (b). The
argument in support of the contention relied
on the supposition that
‘including’ is the equivalent of ‘incorporating’.
Accordingly, the ‘appropriate
steps’ must incorporate the
three steps specifically mentioned in the section. In addition, the
argument relied on the term
‘must’ which is ordinarily
understood as an imperative.
[18] Any other
interpretation, so the appellants’ argument went, would render
the specific reference to the three steps redundant.
If the
legislature intended to say that the provincial executive can do
whatever steps it finds appropriate, so the appellants
rhetorically
asked, why would the three steps be mentioned at all? These steps
would in any event be included in the open-ended
category of ‘any
appropriate steps’.
[19] Let me start by
saying that I do not agree with the appellants’ interpretation
of the section. To me the meaning of the
section is quite plain. It
provides that in the circumstances contemplated, the provincial
executive must intervene. That is the
imperative. Not that it must
dissolve the council. Accordingly the executive is obliged to take
some steps. It cannot do nothing.
But the actual steps to be taken
are left to the discretion of the executive. The only limitation
imposed on that discretion is
twofold. First, the steps must be
‘appropriate’, that is, the steps must be suitable.
Secondly, these steps must be
suitable for a particular purpose, that
is, to ensure the approval of the annual budget.
[20]
The reason why dissolving the council is specifically mentioned, as I
see it, is that it is the most drastic step the provincial
executive
can take, while the two steps referred to in (a) and (b) are
concomitant to the most drastic step. It must be borne in
mind that
s 139(4) was introduced through a constitutional amendment
7
together with other
additions to s 139
8
which, for the
first time, made reference to dissolution of the municipal council as
a measure available to the provincial executive.
Prior to 2003 there
was uncertainty as to whether the provincial executive was empowered
to take that drastic step.
9
The specific
reference to dissolution of the council was therefore aimed at
removing the uncertainty that formerly prevailed.
[21] The interpretation
contended for by the appellants raises the difficulty that it renders
the reference to ‘appropriate
steps’ in s 139(4)
superfluous. If the provincial executive is compelled to dissolve the
council what other appropriate
steps could there be? The appellants’
answer was that ‘appropriate steps’ must be understood to
refer to the
preparatory steps that the provincial executive may
regard as appropriate to properly approve a temporary budget. But if
this was
the intention, the wording of the section would, in my view,
have been quite different. It would have indicated that the executive
council must take appropriate steps to dissolve the council and to
achieve the results specifically mentioned in (a) and (b).
[22] The appellants’
further contention was that there are compelling policy and strategic
reasons why, in the circumstances
contemplated, dissolving the
council should be peremptory. Any other approach, so the argument
went, would mean that a council
can degenerate to a level where it
can ignore statutorily imposed instructions to adopt a budget on time
with impunity. Conversely,
the appellants argued, the dismissal of a
recalcitrant council which cannot even timeously adopt the most basic
of instruments
needed for delivery of services, would convey the
message that there are definite limits to local politicking at the
expense of
residents.
[23] I believe there are
two answers to this argument. The first is that the mere prospect of
its dissolution by the provincial
executive should be enough to spur
the recalcitrant or incompetent council into action. But the second
answer is, in my view, even
more pertinent in the present context. It
is this. The appellants’ argument pre-supposes that the
council’s failure
to approve a budget is invariably
attributable to incompetence or recalcitrance. The invalidity of the
assumption is demonstrated
by the very facts of this case. In this
case the council was both willing and able to approve the budget
timeously but it was prevented
from doing so by factors beyond its
control.
[24] In these
circumstances it seems not only inappropriate but downright absurd
not to allow the council to approve the budget,
which has already
passed through all the preliminary procedures, but to dissolve the
council instead. Of course, one can think
of examples of even more
glaring absurdity, for instance where the budget was in fact
approved, but one day late. What the argument
amounts to is that,
though the extreme measure of dissolution may be nonsensical in a
particular case, it is dictated by the necessity
to set an example
for others who are indeed recalcitrant and incompetent. My short
answer is that I cannot ascribe that intention
to our Constitution.
[25] For their final
contention the appellants sought to rely on those provisions of the
MFMA which provide, in seemingly prescriptive
terms, that municipal
councils are to approve their annual budgets before the start of the
financial year. Pertinent amongst these
is the stipulation in s 16(1)
that:
‘
The
council of a municipality must for each financial year approve an
annual budget for the municipality before the start of that
financial
year.’
10
[26] In addition the
appellants refer to s 27(2) of the MFMA. The import of the
section is that the MEC for Finance in a province
may, on application
and on good cause shown by a municipality, extend any deadline or
time limit pertaining to the tabling or approval
of annual budgets
stipulated in the MFMA or in any other legislation. But the section
pertinently renders the MEC’s authority
subject to two
provisos. First, that he cannot extend the deadline in s 16(1)
and, second, that any extension he affords may
not compromise
compliance with s 16(1).
[27]
In the light of these provisions, the appellants’ argument
proceeded along the following lines. After the commencement
of the
financial year there is no legal basis for the municipal council to
adopt a budget and a provincial executive has no power
to authorise
something which the MFMA does not allow. Since the Constitution
itself reserves the approval of an annual budget for
the municipal
council,
11
the provincial
executive has no power to do so – even on a temporary basis –
while the council exists. The provincial
executive therefore has no
choice. It is bound to dissolve the council so that it can approve a
temporary budget itself in terms
of s 139(4)(b), otherwise the
municipality will be without any budget and therefore unable to
operate. Consequently these
provisions of the MFMA support the
interpretation of s 139(4) of the Constitution that the
appropriate steps available to
the provincial executive are confined
to those expressly mentioned in the section. These are to dissolve
the council in order to
restore democratic government and, in the
meantime, to appoint an administrator and to approve a temporary
budget. For this line
of argument the appellants found direct support
in the writings of learned authors in the field.
12
[28] Despite this direct
support, I cannot agree with this argument. As a point of departure
it must be accepted, in my view, that
the MFMA can only inform the
provisions of s 139(4) of the Constitution. Any contradiction
of, or departure from those provisions
by the MFMA will inevitably be
unconstitutional and thus invalid. On my interpretation of s 139(4),
it does not limit ‘appropriate
steps’ to dissolution of
the council. Any limitation to that effect imposed by the MFMA must
therefore be invalid for unconstitutionality.
But I do not understand
the MFMA to impose a limitation of that kind on the discretion
bestowed upon the provincial executive in
terms of s 139(4).
[29]
For the sake of argument, I accept that the council has no authority
to approve an annual budget after the start of the financial
year.
Moreover, a council that has failed to approve its budget by 1 July
cannot approach the MEC for finance in the province.
He or she has no
authority to extend the deadline in terms of s 16(1). A council
that finds itself in that situation has no
option but to approach the
provincial executive for guidance.
13
In terms of
s 139(4) of the Constitution and s 26(1) of the MFMA the
matter is then in the hands of the provincial executive.
That body
must then take any steps it regards as appropriate to ensure approval
of the budget.
[30] The real question is
thus whether there is anything in the MFMA which excludes a directive
by the provincial executive that
compels approval of the budget by
the council after 1 July, from the wide ambit of ‘any
appropriate steps’. The answer
to this question, I believe, is
that the MFMA imposes no such limitation on the powers of the
provincial executive. At the risk
of repetition, I point out that, as
I see it, ‘any appropriate steps’ in s 139(4)
clearly include a directive
by the provincial executive that enables
the council to approve the annual budget. Any exclusion of that power
in the MFMA would
therefore impose a limitation on the powers
bestowed upon the provincial executive by the Constitution itself.
Since the MFMA contains
no express limitation to that effect, it
would have to be implied. Needless to say, in my view, that one could
hardly imply a limitation
into legislation that would be unwarranted
by the Constitution.
[31] The fact that in
terms of s 27(2) the MEC cannot extend the deadline imposed by
s 16(1) does not mean that the provincial
executive cannot do so
under s 139(4) of the Constitution. In short, s 27(2)
imposes a limitation on the powers of the
MEC which has nothing to do
with the powers of the provincial executive under s 139(4) of
the Constitution and s 26(1)
of the MFMA.
[32]
In a situation where the budget is ready and awaiting approval after
1 July a directive to approve the budget within a stipulated
time
would clearly be the appropriate step. In other situations a
directive of this kind may not be appropriate. It is because
situations that may potentially arise after 1 July are so varied and
different, that the Constitution left it to the discretion
of the
provincial executive to take any steps it regards as appropriate in
the circumstances to ensure approval of the budget.
Should the
council be directed to approve a budget within a stipulated period,
s 26(4) and (5) of the MFMA completes the picture
by providing
how municipal expenses can be met, pending approval of the budget in
terms of s 139(4) of the Constitution and
26(1) of the MFMA.
14
[33] The reasons why I
not have to come to any firm conclusion as to whether the MFMA
prevents a municipal council from approving
a budget after 1 July,
are twofold. The first is the one I have already given, namely, that
the provincial executive is in any
event empowered in s 139(4)
of the Constitution, to direct the council to do so. The second
reason is that the situation where
the council has approved a budget
after 1 July does not arise in this case. That situation would have
arisen if the council validly
approved a budget at the meeting
arranged by the individual respondents on 9 July. But it is common
cause that the meeting was
not validly constituted because the other
members of the council were not properly notified.
[34] Section 139(4) of
the Constitution does not seem to contemplate the situation where the
provincial executive is confronted
with a budget which had been
approved by the municipal council after 1 July. As to what would be
the position in that hypothetical
situation, there appears to be two
possible answers. The first is that ‘any appropriate steps’
confers the power on
the provincial executive to bestow validity on a
belated approval by the council that would otherwise be invalid. The
second possible
answer is that the MFMA does not render the belated
approval of the budget by a council after 1 July invalid. If that
were so,
there would be no appropriate steps that the provincial
executive can take to achieve a purpose which had already been
achieved.
But as I have said, I do not believe that we are called
upon to resolve a hypothetical question that does not arise in this
case.
[35]
The court a quo arrived at the same interpretation of s 139(4)
of the Constitution as I did, albeit along a somewhat different
route. It essentially assumed that the meaning of the section is
ambiguous. Departing from that premise it proceeded to the context
of
the Constitution as a whole. It then came to the conclusion that the
context favours a wide discretion on the part of the provincial
executive rather than a narrow one which is limited to dissolution of
the council. The context of the Constitution the court referred
to
related in the main to those provisions which recognise local
authorities as a separate sphere of government, independent of
superior legislatures.
15
In this context, so
the court a quo concluded, one should avoid an interpretation of
s 139(4) which limits the authority of
the provincial executive
to the most drastic interference into the affairs of the local
authority. Though I do not differ from
the approach adopted by the
court a quo, I find it unnecessary to follow that route, because I
find the interpretation of s 139(4)
contended for by the
appellants simply untenable.
[36] The conclusion I
arrive at is therefore that in this matter the cabinet had been
wrongly advised and consequently erred when
it acted on the
assumption that it had no other option but to dissolve the council.
The effect of the mistake was, of course, that
the cabinet had failed
to exercise the discretion bestowed upon it by s 139(4)
properly, if at all.
[37]
The long and the short of all this is the finding that, because of
the error in its interpretation of s 139(4), the cabinet
failed
to consider less drastic means, other than to dissolve the council,
to meet the desired end of an approved budget. Counsel
for the
appellants conceded that the impugned decision cannot survive this
finding. I believe the concession was rightly made.
It is true that
the decision constituted executive action, as opposed to
administrative action. In consequence it is not judicially
reviewable
under the provisions of the Promotion of Administrative Justice Act
(PAJA).
16
Yet, this does not
shield the decision from a challenge on the basis of illegality.
[38]
This is so because it has by now become settled law that the
constitutional principle of legality governs the exercise of all
public power, rather than the narrower realm of administrative action
as defined in PAJA.
17
And in
President
of the Republic of South Africa v South African Rugby Football Union
18
the Constitutional
Court pertinently held that the principle of legality requires the
holder of executive power not to misconstrue
that power. As I see it,
it follows that in the circumstances the impugned decision of the
cabinet offended the principle of legality,
because it directly
resulted from the cabinet misconstruing its powers under s 139(4)
of the Constitution. Stated slightly
differently: by deciding to
dissolve the council without considering a more appropriate remedy,
the cabinet, in my view, offended
the provisions of s 41(1) of
the Constitution which requires all spheres of Government to respect
the constitutional status,
powers and functions of Government in
other spheres
19
and ‘not [to]
assume any power or function except those conferred on them in terms
of the Constitution’.
20
It follows that in
my view the High Court was right in setting the impugned decision
aside on the basis of illegality.
[39] For these reasons
the appeal is dismissed with costs, including the costs of two
counsel.
……………………
.
F D J BRAND
JUDGE OF APPEAL
STREICHER JA
:
[40] I agree with my
colleague Brand JA that the appeal should be dismissed with costs
including the costs of two counsel.
[41] The Overberg
District Municipality failed to approve an annual budget before the
start of the budget year whereupon the provincial
executive of the
Western Cape on 14 July 2010 decided to dissolve the council. The
provincial executive took the decision to dissolve
the council on the
basis that it was in terms of s 139(4) of the Constitution obliged to
do so. The court below held that the provincial
executive
misinterpreted the section in assuming that the council did not have
the power to approve the budget after the start
of the budget year.
It is common cause between the parties that if that was the position
the appeal should fail.
[42]
Section 26(1)
of the
Local Government: Municipal Finance Management Act 56 of 2003
follows
the wording in
s 139(4)
and reads:
‘
If
by the start of the budget year a municipal council has not approved
an annual budget or any revenue-raising measures necessary
to give
effect to the budget, the provincial executive of the relevant
province must intervene in the municipality in terms of
section 139
(4) of the Constitution by taking any appropriate steps to ensure
that the budget or those revenue-raising measures
are approved,
including dissolving the council and-
appointing
an administrator until a newly elected council has been declared
elected; and
approving
a temporary budget or revenue-raising measures to provide for the
continued functioning of the municipality.’
[43] Like s 26(1),
s 139(4) of the Constitution provides that if by the start of
the budget year a municipal council has
not approved an annual budget
or any revenue-raising measures necessary to give effect to the
budget the ‘provincial executive
must intervene by taking any
appropriate steps to ensure that the budget or those revenue-raising
measures are approved, including
dissolving the Municipal Council
and- (a) appointing an administrator until a newly elected Municipal
Council has been declared
elected; and (b) approving a temporary
budget or revenue-raising measures to provide for the continued
functioning of the municipality.’
[44] In my view there is
no basis on which s 139(4) can be interpreted to mean, as was
submitted by the appellant, that every
appropriate step that may be
taken must include the dissolution of the municipal council.
Appropriate steps to ensure the approval
of a budget include the
dissolution of the municipal council ie dissolution of the council is
but one of the steps that can be
taken to ensure the approval of a
budget. I agree with my colleague and with the court below that the
reason why dissolving the
council is specifically mentioned is that
it is the most drastic step of others that may possibly be
appropriate.
[45] Relying on s 16
and s 24 of the Act the appellant submitted that a municipal
council has no authority to approve
an annual budget after the start
of the relevant financial year and that an appropriate step to ensure
that a budget is approved
can only be a step that includes the
dissolution of the council, the appointment of an administrator until
a newly elected council
has been declared elected and the approval of
a temporary budget or revenue-raising measures to provide for the
continued functioning
of the municipality. I do not agree. For the
reasons that follow I agree with the court below that a local
authority does have
authority to approve an annual budget after the
start of the relevant financial year.
[46]
The approval of a budget is a non-delegable function conferred on a
municipal council by the Constitution.
21
Section 16(1) of
the Act provides that the council of a municipality must for each
financial year approve an annual budget for the
municipality before
the start of that financial year. Section 24 requires that the
municipal council must at least 30 days before
the start of the
budget year consider approval of the annual budget and then repeats
that the budget must be approved before the
start of the budget year.
[47]
Appropriate intervention in terms of s 139 of the Constitution
includes the dissolution of the council by the provincial executive.
It follows that a municipal council which fails to approve an annual
budget by the start of the budget year runs the risk of being
dissolved. It does however not necessarily follow that having failed
to do so the municipal council no longer has the authority
to approve
a budget for the relevant financial year or that a budget approved by
the municipal council after the start of the financial
year would be
invalid. That will only be the case if it was the intention of the
legislature that it should be invalid.
22
In
Nkisimane
and others v Santam Insurance Co Ltd
1978
(2) SA 430
(A) at 433H-434B Trollip JA referred to the traditional
categorization of statutory requirements as ‘peremptory’
and
‘directory’ and stated that care must be exercised
not to infer merely from the use of such labels what degree of
compliance
is necessary and what the consequences are of non- or
defective compliance. He added:
‘
These
must ultimately depend upon the proper construction of the statutory
provision in question, or, in other words, upon the intention
of the
lawgiver as ascertained from the language, scope and purpose of the
enactment as a whole and the statutory requirement in
particular (see
the remarks of VAN DEN HEEVER J in
Lion
Match Co Ltd v Wessels
1946
OPD 376
at 380).’
In
regard to the use of the word ‘shall’ he said that
‘
such
seemingly imperative language is not necessarily decisive in favour
of peremptoriness’. The same would apply to the use
of the word
‘must’.
23
[48] It could in my view
not have been the intention of the legislature that upon failure of a
municipal council to approve a budget
before the start of the
financial year the council would no longer have authority to do so.
One can think of many circumstances
which would make such an
interpretation quite untenable. My colleague mentions some of those
circumstances. However, in his view
they indicate that ‘appropriate
circumstances’ in the Constitution include extension by the
provincial executive of
the time within which a budget may be
approved. In my view they indicate that it could not have been the
legislature’s intention
that failure of a municipal council to
approve a budget before the start of a financial year would
invalidate the approval of a
budget after the start of the financial
year. The object of s 26(1) is to ensure that a budget is
approved by a municipal
council. If that object is achieved before
dissolution of a council it would in my view make no sense to
invalidate the approval.
[49] Section 26(1)
repeats the wording of s 139(4) of the Constitution. The
legislature therefore probably intended the phrase
‘appropriate
steps including dissolving the council and . . . .’ to
have the same meaning as in s 139(4).
If that is the case the
legislature could not have intended a municipal council not to have
authority to approve a budget after
the start of the budget year. If
the council can no longer approve a budget there will be no steps
that can be taken by the provincial
executive to ensure that a budget
is approved other than dissolving the council and appointing an
administrator until a newly elected
council has been declared elected
and approving a temporary budget or revenue-raising measures to
provide for the continued functioning
of the municipality.
[50] The Act contains
many seemingly imperative provisions relating to the budget process.
In terms of s 21 the mayor ‘must’
do various things. He
‘must’ for example table in the municipal council a time
schedule outlining key deadlines for
various steps that have to be
taken. Section 22 prescribes the steps that ‘must’ be
taken after an annual budget has
been tabled in a municipal council.
The views of the local community, the National Treasury, the relevant
provincial treasury and
any provincial or national organs of state or
municipalities which made submissions on the budget ‘must’
in terms of
s 23(1) be considered by the municipal council. After
having considered all budget submissions the council ‘must’
give
the mayor an opportunity to respond and if necessary revise the
budget (s 23(2)). The municipal council ‘must’
at
least 30 days before the start of the budget year consider approval
of the annual budget (s 24(1)). The annual budget ‘must’
be approved before the start of the budget year (s 24(2)(a)) and
‘must’ be approved together with the adoption
of
necessary resolutions, amongst others, imposing any municipal tax for
the budget year and setting any municipal tariffs for
the budget year
(s 24(2)(c)). The accounting officer of the municipality ‘must’
submit the approved annual budget
to the National Treasury and the
relevant provincial treasury (s 24(3)).
[51] Section 27(4)
provides:
‘
Non-compliance
by a municipality with a provision of this Chapter relating to the
budget process or a provision in any legislation
relating to the
approval of a budget-related policy, does not affect the validity of
an annual or adjustments budget.’
It could hardly have been
the intention of the legislature to exclude the failure to submit the
approved budget to the National
Treasury and the relevant provincial
treasury, being the last step in the process referred to above. The
legislature must therefore
have intended the budget process to
include all the steps referred to above, ie all the steps up to the
submission of the approved
budget to the National Treasury and the
relevant provincial treasury. It follows that the legislature
specifically provided that
the approval of an annual budget after the
start of the budget year does not affect the validity of the annual
budget.
[52] The appellant placed
reliance on the provisions of s 27(1) and (2) of the Act. They
are to the effect that the MEC for
finance may, on application by the
mayor of a municipality extend any time limit or deadline contained
in the Act except the deadline
contained in s 16(1) and provided that
no such extension may compromise compliance with s 16(1). An
extension of the time for the
approval of a budget will of course
relieve the pressure on a municipal council to approve the budget or
run the risk of being
dissolved. There is in my view no reason to
believe that the legislature by prohibiting the extension of the time
limit imposed
for the approval of a budget intended more than to
maintain the pressure on a municipal council to approve the budget
before the
start of the budget year.
[53] In summary I am of
the view that upon a proper interpretation of the Act a municipal
council must approve a budget before the
start of the budget year,
should it fail to do so –
It should reconsider the
budget within 7 days and repeat the process until a budget is
approved.
The mayor must report
the matter to the MEC of local government in the province and may
recommend an appropriate provincial intervention
in terms of s 139
of the Constitution.
The provincial executive
must intervene in terms of s 139(4) of the Constitution by taking
any appropriate steps to ensure that
the budget is approved.
The provincial executive
is under no obligation to dissolve the council and may ensure the
approval of the budget by any legitimate
means such as for example
persuading the council under threat of being dissolved to approve a
budget.
For as long as the
council fails to approve a budget it may be an appropriate step in
terms of s 139(4) to ensure the approval
of a budget to
dissolve the council and to (a) appoint an administrator until a
newly elected council has been declared elected;
and (b) to approve
a temporary budget.
[54] For these reasons I
agree that the appeal should fail.
_____________________
P E STREICHER
JUDGE OF APPEAL
Counsel
for Appellants: J C Heunis SC
G
A Oliver
Instructed
by: State Attorney
CAPE
TOWN
Correspondents:
State Attorney
BLOEMFONTEIN
Counsel
for First Respondent: D Potgieter SC
G
Potgieter
Instructed
by: Webber Wentzel Attorneys
CAPE
TOWN
Correspondents:
Lovius Block Attorneys
BLOEMFONTEIN
1
Constitution
of the Republic of South Africa, 1996.
2
By
virtue of s 35 of the Constitution of the Western Cape, 1 of
1998.
3
Again
by virtue of s 35 of the Western Cape Constitution.
4
Act
56 of
2003.
5
Act
117
of 1998.
6
As
authority for their concession they relied on the provisions of ss
51(3) and (4)(c) of the Western Cape Municipal Ordinance
20 of 1974
read with schedule 6 of the Constitution.
7
In
terms of s 4 of the Constitution Eleventh Amendment Act of
2003.
8
In
s 139(1)(c) and 139(5)(b).
9
See
eg Yonina Hoffman-Wanderer and Christina Murray ‘Suspension
and Dissolution of Municipal Councils under Section 139
of the
Constitution
2007
TSAR
141-142.
10
See
also s 24(2) to the same effect.
11
See
s 160(2) of the Constitution.
12
N
Steytler & J De Visser
Local
Government Law of South Africa
at
15-40; N Steytler & J De Visser in S Woolman
Constitutional
Law of South Africa
Vol 2 2 ed at
22-125.
13
In
terms of s 55 of the MFMA.
14
Section
26(4) and (5) read as follows:
‘
(4)
Until a budget for the municipality is approved in terms of
subsection (1), funds for the requirements of the municipality
may,
with the approval of the MEC for finance in the province, be
withdrawn from the municipality’s bank accounts in accordance
with subsection (5).
(5)
Funds withdrawn from a municipality’s bank account in terms of
subsection (4) -
(a) may be used only to
defray current and capital expenditure in connection with votes for
which funds were appropriated in the
approved budget for the
previous financial year; and
(b) may not –
(i) during any month,
exceed eight per cent of the total amount appropriated in that
approved budget for current expenditure,
which percentage must be
scaled down proportionately if revenue flows are not at least at the
same level as the previous financial
year; and
(ii)
exceed the amount actually available.’
15
See
ss 40 and 41 of the Constitution. See also
Fedsure Life Assurance
Ltd v Greater Johannesburg Transitional Metropolitan Council
[1998] ZACC 17
;
1999
(1) SA 374
(CC) para 26.
16
Act
3 of 2000. In terms of s 6 of PAJA judicial review is reserved
for ‘administrative action’ as defined, while
the
executive powers of a provincial executive under s 139 of the
Constitution are expressly excluded from the ambit of
the definition
of ‘administrative action’ by s 1(bb) of PAJA.
17
See
eg
Fedsure Life Assurance Ltd
para 59;
Pharmaceutical
Manufacturers Association of SA: In re Ex parte the President of the
Republic of South Africa
[2000] ZACC 1
;
2000 (2) SA 674
(CC) para 85.
18
2000
(1) SA 1
(CC) para 148.
19
Section
41(1)(e).
20
See
s 41(1)(f).
21
Section
160(2)(b) of the Constitution.
22
Standard
Bank v Estate Van Rhyn
1925 AD 266
at
274.
23
At
435B.