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[2011] ZASCA 190
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Municipality of Stellenbosch v Shelf-Line 104 (Pty) Ltd (SCA) [2011] ZASCA 190; 2012 (1) SA 599 (SCA); [2012] 1 All SA 441 (SCA) (3 November 2011)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case No: 615/10
In the matter between:
THE MUNICIPALITY OF
STELLENBOSCH
…............................................
APPELLANT
and
SHELF-LINE 104 (PTY)
LTD
…................................................................
RESPONDENT
Neutral citation
:
Municipality of Stellenbosch v Shelf-Line 104
(615/10)
[2011]
ZASCA 190
(8 November 2011)
Coram:
HEHER,
SNYDERS, SHONGWE, MAJIEDT JJA and PLASKET AJA
Heard:
13
September 2011
Delivered:
8
November 2011
Updated:
Summary:
Township
– conditions of approval – rezoning and subdivision under
secs 16 and 25 of the Land Use Planning Ordinance
15 of 1985 –
whether municipality may unilaterally amend such conditions after
acceptance by developer.
____________________________________________________________________________________
ORDER
On appeal from:
Western Cape High Court (Cape Town)
(Goliath J sitting as court of first instance):
The appeal is dismissed
with costs including the costs of two counsel.
_______________________________________________________________________
JUDGMENT
_____________________________________________________________________
HEHER JA (SNYDERS,
SHONGWE, MAJIEDT JJA AND PLASKET AJA concurring):
[1] The appellant is a
local authority. Within its jurisdiction falls certain immovable
property presently owned by the respondent
that was formerly
described as the Remainder of Portion 3 of the Farm Groenfontein,
Annex no 716, Klapmuts and is now known as
erven 1340 and 1950,
Klapmuts.
[2] The respondent is a
property developer. In 1999 its predecessors in title, Guillaume
Johannes and Magdalena Elbertie du Toit,
applied to the appellant to
rezone and subdivide the property in order to develop what was, in
effect, a residential township on
it.
[3] On 23 February 1999
the council of the appellant resolved to approve the rezoning in
terms of s 16(1) of the Land Use Planning
Ordinance, 15 of 1985
(hereinafter referred to as ‘LUPO’) and the subdivision
in terms of s 25(1) thereof, subject
to specified conditions. An
unsuccessful appeal was lodged by certain objectors to the proposed
development and in July 2000 the
competent authority dismissed the
appeal and approved the application in terms which accorded with
those initially laid down by
the appellant, including a condition
(2.17) that
‘
The
standard conditions of Stellenbosch Municipality for rezoning and
subdivision shall be complied with.’
[4] It is common cause
that such standard conditions included liability to make payment of
bulk infrastructure development contribution
levies (‘BICLs’)
in accordance with a tariff set out in the appellant’s
‘Guidelines for Engineering Services
with regard to
Subdivisions including Township Establishment, Smaller Subdivisions
and Rezonings’. It is also not in dispute
that the formulae for
the calculation of the contributions which are contained in the
tariff remained unchanged from 1999 until
the implementation of the
council resolution of 29 May 2007 which is the subject of the present
dispute and which I shall consider
in some detail below.
[5] For reasons that are
unexplained in the court papers the Du Toits allowed their rezoning
and subdivision approvals to lapse.
Presumably they or their
successor applied for reinstatement, since in February 2006 the
approvals were extended for a period of
one year in terms of ss
16(2)(ii) and 27 of LUPO. On 26 March 2006 the respondent’s
planners were notified that the Executive
Director: Economic
Facilitation Services of the appellant had resolved that in terms of
s 42 of LUPO certain conditions be imposed
that included the
following:
‘
5.1.2
All conditions as determined by the Provincial Administration in
their letter dated 20/07/2000 be adhered to;
5.1.3
That the development take place in two phases as proposed by the
applicant.’
[6] It must be pointed
out that the earlier conditions had contained an express condition
which required the applicant to notify
its acceptance of the
conditions in writing. Because of the terms of 5.1.2 (as quoted) that
requirement was implicitly repeated
on reinstatement. Although the
respondent made no positive assertion in the court below that it had
accepted the conditions that
is the most probable inference having
regard to the subsequent history. The appellant has never placed its
acceptance in question.
[7] On 28 March 2006 a
subdivisional plan in respect of Phase One of the development was
approved by the appellant. On 5 June 2007
a similar approval was
obtained for Phase Two.
[8] After approval of the
plan for Phase One the respondent carried out its planning on the
basis of the estimated costs of development
of the whole property
including its liability for BICLs, calculated according to the tariff
structure in the Guidelines.
[9] In March 2007 the
respondent became aware that the appellant was considering a possible
increase in its tariff structure for
BICLs. Accordingly the deponent
to the founding affidavit, Guillaume Johannes du Toit Jnr, and his
father (referred to in para
[2] above) met with a Mr Hartzenberg, an
employee of the Municipality, to try to obtain finality in respect of
the respondent’s
liability for the levies. According to the
deponent, Hartzenberg assured them that the existing tariff applied
to their development.
On the strength of that assurance they
calculated the sale prices of the subdivided erven according to their
previous estimate
of the liability viz R825 000, and proceeded with
the marketing on that basis.
[10] Sales of erven were
concluded on the understanding that the existing tariff would
regulate the amount of the liability, the
costs of the levies being
factored into the prices.
[11] On 29 May 2007 the
council of the appellant considered its draft annual budget for the
year commencing 1 July 2007. It resolved:
‘
(a)
that the current approved formulae for the application of Bulk
Infrastructure Contribution Levy
(Dev.
Levies)
,
be escalated by a factor of 3,5 in order to align Stellenbosch’s
levies with other municipal levies with immediate effect;
(b)
that this increase be included as basis for BICL in the 2007/2008
budget and tariffs;
(c)
that developers be permitted to provide bulk services in lieu of BICL
with the approval of the Director: Civil Engineering Services
and in
terms of a service agreement; and
(d)
that Council approve the schedule of rate for bulk infrastructure
contribution levies (detail attached as
APPENDIX
1
) and that same be
implemented with immediate effect’.
[12] Thereafter confusion
arose among officials and developers as to the meaning of the
resolution and, in particular, whether the
council’s intention
had been to apply the new tariff to all developments in esse or only
to developments initiated after
30 June 2007. This uncertainty gave
rise to a further council resolution on 20 November 2007 and a
‘clarifying resolution’
of the Mayoral Committee on 27
November 2007, both of which merely added legal uncertainty to the
process (and generated a great
deal of additional argument before and
during the subsequent litigation).
[13] On 4 December 2007
twenty-three erven in Phase One were simultaneously transferred to
purchasers. Three further erven were
transferred on 15 February 2008
and, the last five erven in that phase, on 8 July 2008. In all cases
the transfers were preceded
by the issue of clearance certificates
certifying that amounts owing by the seller to the municipality in
respect of the land had
been paid. Those payments were all calculated
according to the old tariff.
[14] On 11 July 2008 and
1 August 2008 the respondent requested the appellant to issue
thirty-six clearance certificates relating
to erven in Phase Two. The
respondent tendered payment of BICLs in accordance with the old
tariff but the appellant refused to
comply unless payment accorded
with the new tariff.
[15] After further
exchanges between the parties proved futile, the respondent launched
an urgent application in February 2009 in
which it claimed an interim
order directing the appellant to issue clearance certificates in
respect of the thirty-six Phase Two
erven against payment of R590
294-96 and the furnishing of a guarantee for payment of a further R3
060 178-00 in the event of the
court finding that the respondent was
liable for BICLs on the basis of the appellant’s increased
tariff.
[16] On 25 February 2009
the Cape High Court made an interim order in terms of which the
application was postponed for hearing in
June of that year and the
appellant undertook, pending judgment in the matter, to furnish
clearance certificates for Phase Two
erven against payment of the
aforesaid amount and the furnishing of an irrevocable undertaking by
the respondent to pay according
to the increased tariff in the event
of the municipality obtaining a favourable judgment.
[17] On 31 May 2010
Goliath J made the following order in the main application in favour
of the developer:
‘
1.
The respondent is directed to issue clearance certificates to the
applicant in respect of 36 erven situated in phase 2 of the
development known as Rozenmeer, Klapmuts, within 24 hours of receipt
of an application for the required certificates and provided
that the
applicant has paid to the respondent an amount of R590 294,96 in
respect thereof.
2.
The applicant is released of its obligation in terms of paragraph 6.2
of the Court Order dated 25 February 2009.
3.
Respondent is ordered to pay the costs of this application, inclusive
of the costs of 25 February 2009, including the costs consequent
upon
the employment of two counsel.’
With leave of the learned
judge the municipality appeals to this Court.
[18] The appeal turns on
the meaning and, consequently, the scope and application, of the
council’s resolution of 27 May 2007.
According to appellant’s
heads of argument:
‘
46.1
Before 29 May 2007 the position was, and had been since 1999, that
the rate of BICLs was calculated in accordance with a particular
formulae (sic) that Council adopted in 1999.
46.2
On that date, Council authorised the continuation of the use of that
formulae but with an escalation by a factor of 3.5, such
escalation
was to take place with immediate effect.
46.3
Council also resolved that this increase be included as the basis for
the applicable BICLs in the 2007/2008 budget and tariffs.
47.
Accordingly, there is no question as to which tariff is applicable,
whether in respect of developments approved before or after
1 July
2007, or in respect of those where development agreements had been
signed or not, or where quotes had been furnished or
not. The fact of
the matter is that, with effect from 1 July 2007, (the earliest date
when Council’s decision could lawfully
take effect) there was
only a
single
tariff for BICLs, same to be
determined in accordance with the formulae that was before Council on
29 May 2007, but escalated by
a factor of 3.5. There was no other
tariff that could be applied after 1 July 2007. Accordingly, much of
the debate that ensued
after 29 May 2007 is misdirected because from
1 July 2007 the increased tariff had to be uniformly applied to all
payments of BICLs,
irrespective of when the payment of those BICLs
became due.
’
[19] The validity of that
argument depends on the underlying principles of township development
and the source of the power in the
council to impose conditions when
granting its approval for such development. The appellant’s
position is that BICLs are
a tax on the development of land paid by
successful applicants for township, rezoning and subdivisional
rights. The council is
entitled to amend its BICL tariffs, and,
therefore, vary the amount of the tax every year, if necessary. As a
tax, it is operative
from the effective date of its imposition,
usually the beginning of the council’s financial year. Counsel
submits that it
is in this light that the resolution of 29 May 2007
must be understood, interpreted and applied. As I shall demonstrate,
however,
that submission is contrary to principle and the established
law relating to such developments, at odds with the council’s
own policy, and, ultimately, in conflict with the statutory
foundation for the imposition and amendment of BICLs.
Practical
considerations
[20]
Township development is an economic speculation that holds serious
implications for both the developer and the public authority.
The
developer, for example, must balance the costs involved in the
acquisition of the land, with legal, planning, marketing and
infrastructural development expenses against a prediction of future
market conditions, the potential of the land, competing developments
and so on. The best interest of the local authority lies in the
success of the development. It too has infrastructural costs
recoverable
in the medium to long term. A failed development
represents a blot on its management and may involve it in the costs
of salvaging
the development. In these circumstances prudence
requires that both parties exclude by their consensus as much
uncertainty as they
can at the outset. The development process is, of
course, also designed to protect the persons who will be acquiring
property in
the development and will become its residents and users
of its amenities:
Estate Breet v Peri-Urban
Areas Health Board
1955 (3) SA 523
(A), at
531F;
Palm Fifteen (Pty) Ltd v Cotton Tail
Homes (Pty) Ltd
1978 (2) SA 872
(A) at
888F-889B.
[21] There
is nothing original in the relationship as I have described it. As
Schreiner JA said in
Estate Breet
at
531C-D:
‘
.
. . there is authority and reason for holding that the steps by which
a township is established and proceedings can be brought
to recover
endowment moneys, involve mutual consent between the administrator
and the applicant as to the township conditions,
and the
administrator may be regarded, not inappropriately, as making an
offer to the applicant which the latter must accept if
a township is
to be brought into existence’.
1
See also
Permanent Estate and Finance Co v Johannesburg
City Council
1952 (4) SA
249
(W) at
257;
Administrator (Cape Province) v
Ruyteplaas Estates (Pty) Ltd
1952 (1) SA 541
(A) at 551.
[22] Although those cases
related to township development simpliciter while the application
presently under consideration covered
the lesser field of rezoning
and subdivision, this is a distinction without a difference given the
extent of the respondent’s
proposed development.
The appellant’s
own practice
[23] The
conditions for approval imposed in the present instance reflect the
principles to which I have referred. Both in relation
to the original
and revived applications for rezoning and subdivision the applicant
(the present respondent) was notified that
its acceptance of the
conditions in writing was required before the approval would become
effective. The applicant was thus offered
the opportunity of
considering the financial implications involved in fulfilling the
conditions with the alternative of abandoning
the application if it
considered them too onerous or such as to detract materially from the
viability of the project. This opportunity
was particularly relevant
in relation to clause 2.17 of the conditions.
The
standard conditions incorporated the formulae for developers’
contributions to bulk infrastructure costs, an important
factor in
the costing of the development and, hence, the prices at which the
applicant would offer the subdivisions to the public.
[24] The Guidelines for
Engineering Services also provided protection for the municipality,
as it was proper they should. In relation
to BICLs they contained an
express provision that:
‘
The
capital contribution is due when the new rights are approved or at a
time mutually agreed upon by the parties.’
There
was, in this instance, no mutually agreed time. So the municipality
need not have been prejudiced by any delay on the part
of the
developer in pursuing its development: it had only to invoke the
remedy.
2
[25] In its supplementary
submissions the appellant contended that BICLs did not become due and
payable unless and until a development
contract was signed between
the municipality and the developer. As it was common cause between
the parties that no such contract
had been entered into the council
remained at liberty to amend the conditions and impose them on the
respondents. Counsel referred
to clauses 5 and 6 of the Standard
Conditions of Rezoning and Subdivision:
‘
5
a development contract must be entered into between the Municipality
and the developer before any contractor may go on site and
before any
services design plans or building plans will be approved.
6
With the signing of the above-mentioned development contract, the
developer must pay the Municipality pro rata contributions to
the
main services (as calculated by the Town Engineer and the
Electrotechnical Town Engineer) or, alternatively if approved by
the
said departmental heads and the Town Treasurer, provide the
Municipality with an acceptable bank guarantee for the total amount
of the said pro rata contributions.
’
[26] No doubt those
represent the general terms of approval in default of express
conditions applied to particular situations. The
appellant’s
deponent Mr Kenned, its Municipal Manager, had, in the answering
affidavit, identified the specific policy, comprising
‘a set of
guidelines and formulae to be applied by [the council] in determining
a developer’s pro-rata contribution
towards BICLs’ (the
Guidelines to which I have earlier referred). The terms of that
policy, being directed to a specific
end, clearly superseded the
general terms in para 6 with regard to the due date for payment.
Counsel submitted that the respondent
had been unaware of the terms
of the policy at the time of approval of its application. Even if
that was so (and I do not find
that to be clear on the affidavits)
the respondent committed itself to the council’s standard
conditions when it elected
to proceed with the approved development.
Those conditions included the policy on BICLs and the formulae
contained in that policy.
[27] It will be obvious
from the aforegoing discussion of the relationship between the
parties that the municipality’s attempt
to rely on an
interpretation of the resolution of 29 May 2007 as the exercise of a
unilateral right to vary the standard terms
and conditions accepted
by the applicant for the development in 2000 and again in 2006, flies
in the face of the underlying principle
of consensus. Of course the
municipality possessed the right and the power to amend those terms
and conditions and, in so far as
it did so, the range and effect of
such conditions when accepted in future by an applicant would be
according to their amended
form. But clearly, in such circumstances,
for both legal and practical reasons the resolution could not affect
terms and conditions
already the subject of acceptance by an
developer.
Are bulk
infrastructure construction levies a tax?
[28] Counsel for the
municipality submitted that the resolution of 29 May 2007 imposed a
tax on developers. I do not agree. It did
no more than define the
obligation of a developer for the purposes of a conditional approval
of an application for rezoning and
subdivision under LUPO. The
obligation required payment to the municipality of defined parts of
the latter’s infrastructural
costs, in return for which the
developer could expect to receive a properly serviced development and
higher prices for the properties
sold by it. The payment would meet
what was in effect an endowment obligation. The nature of such a debt
was closely examined by
Ramsbottom J in the
Permanent Estate &
Finance Co
case, supra, at 258A-F:
‘
The
reason for requiring endowment money is clear. When the owner of land
obtains permission to establish a township and to sell
lots, he
acquires a right, but in exercising that right he imposes upon the
local authority, if the township is within the area
of jurisdiction
of a local authority, a financial burden. A centre of population is
brought into being, and the inhabitants require
streets to be made,
sanitary services to be provided, water and light to be made
available and so on. The Legislature has said
to applicants for leave
to establish a township: “We empower the Administrator to grant
your application, but we also empower
him, in doing so, to impose as
a condition that you will contribute towards the cost of providing
the amenities which persons to
whom you sell lots will require; the
amenities which purchasers know they will get will enhance the price
at which you will be
able to sell lots in the township and part of
that price must be handed to the local authority to enable it to
provide those amenities.”
The contribution may be made in one
or more of the prescribed ways. The township owner may be required to
do work himself in the
construction of streets. In addition, or in
the alternative, he may be required to pay to the local authority
money, in a lump
sum. Or he may have to transfer erven to the local
authority, from the sale of which the local authority may recoup
itself. Or
he may have to make his contribution, by instalments, as
and when he sells his erven.’
The learned judge
continued (at 258H-259C):
‘
When
the Provincial Council enacted that the conditions upon which an
owner of land could be offered permission to establish a township
might include a condition which, if accepted, would oblige him to
contribute towards the cost of the financial burden which would
be
imposed on the local authority, it clearly did not impose a tax upon
him. I do not propose to attempt to give a definition of
the word
tax. Though difficult to define, I think that a tax can be recognised
with reasonable ease. To require any person who
carries on a business
or who owns a dog or a motor-car to pay a prescribed fee is, I think,
to impose a tax. The money paid is
taken into general revenue and is
used for general purposes; the person who pays receives no specific
service in return for his
payment. Endowment money paid by a township
owner is quite a different thing; it is an agreed payment for
services which are to
be performed for the improvement of the
township and from which the township owner will derive financial
benefit. To require the
township owner himself as a condition for the
grant of permission to establish a township to make the township
habitable by an
urban community would not be to impose a tax upon
him, and where that work is to be performed by a local authority, to
require
him to pay for, or to contribute towards the cost of, the
work is likewise not to impose a tax.’
[29] This dictum, uttered
in relation to a provision in Ord 11 of 1931 (Transvaal), is of equal
validity in relation to s 42 of
LUPO which provides:
‘
(1)
When the Adminstrator or a council grants authorisation, exemption or
an application or adjudicates upon an appeal under this
Ordinance, he
may do so subject to such conditions as he may think fit.
(2)
Such conditions may, having regard to-
(a)
the community needs and public expenditure which in his or its
opinion may arise from the authorisation, exemption, application
or
appeal concerned and the public expenditure incurred in the past
which in his or its opinion facilitates the said authorisation,
exemption, application or appeal, and
(b)
the various rates and levies paid in the past or to be paid in the
future by the owner of the land concerned,
include
conditions in relation to the cession of land or the payment of money
which is directly related to requirements resulting
from the said
authorisation, exemption, application or appeal in respect of the
provision of necessary services or amenities to
the land concerned.’
Therein
lies the authority for the inclusion of the provision that a
contribution be made to the costs of bulk infrastructure as
a
condition of the approval of a township or a subdivision and rezoning
application. (The foundation of the original power to impose
such a
condition is also identified in the
Permanent
Estate & Finance Co
case,
at 259C-G. Counsel for the appellant submitted that the authority of
LUPO, as pre-constitutional legislation, had been superseded
by s 229
of the Constitution, but this is untenable; para 2 of Schedule 6
maintains the force of ‘old order legislation’
and s 42
of LUPO has neither been amended nor repealed and is not inconsistent
with the Constitution.)
The express
provisions of the existing law
[30] But section 42
proceeds to create a power to amend such conditions:
‘
(3)
Subject to the provisions of the Removal of Restrictions Act, 1967
(Act 84 of 1967), either the Administrator or a council,
as the case
may be, may, in relation to a condition imposed under subsection (1),
after consideration of objections received in
consequence of an
advertisement in terms of subsection (4)
3
and
after consultation with the owner of the land concerned and, in the
case of the Administrator, with the local authority concerned-
(a)
waive or amend any condition, and
(b)
impose additional conditions of the kind contemplated in subsection
(1), which additional conditions shall be deemed to have
been imposed
in terms of that subsection.’
[31] Inasmuch as s 42(3)
requires consultation with the owner of the land before the council
may lawfully exercise its power to
amend conditions originating in s
42(1), it affirms the consensual substratum of the original process.
It compels the local authority
to consider and, where appropriate,
take account of the practical effects of the proposed amendment on
the development process.
[32] In the context of s
42(3) the unilateral imposition of an amended condition upon a
developer conflicts with the express terms
of LUPO. There was, in the
present instance, no consultation with the owner of the land, and the
council gave no consideration
to the effect of the amendment on the
viability of the process. On the contrary, the interpretation which
the municipality seeks
to place on the resolution of 29 May 2007
would have the legal consequence that when the municipality amends
its BICL tariffs unilaterally,
as it is entitled to do, it also
amends the terms under which it has previously granted approvals to
developers under s 42(1).
Such an interpretation cannot live with s
42(3) which plainly requires consultation with each individual owner
(and the consequent
consideration of factors affecting the
development of each body of land upon which each original condition
was imposed).
[33] It follows that the
interpretation espoused by the council has no foundation. The
resolution of 29 May 2007 operated as an
amendment of the
municipality’s BICL tariffs but did not render the changes
binding on the respondent.
[34] In the result the
appeal is dismissed with costs including the costs of two counsel.
_________________
J A HEHER
JUDGE OF APPEAL
APPEARANCES
APPELLANT: I Jamie SC
(with him S K Witten)
Webber Wentzel, Cape Town
Matsepes Inc,
Bloemfontein
RESPONDENT: N J
Treurnicht SC (with him A Bester-Treurnicht)
Van Dyk & Kie, Parow
Naudés,
Bloemfontein
1
Contrary
to the submission of appellant’s counsel in supplementary
written submissions made after judgment was reserved,
the consensus
does not result in a contract, as is shown by the judgments in
Breet’s
case.
2
In
their supplementary heads counsel for the appellant submitted that
payment can, at the earliest, be due ‘when such service
[ie
the provision of infrastructure] is actually provided, or its
provision is imminent’. That interpretation conflicts
with the
express words of the standard terms and the Guidelines.
3
Subsection
(4) is not of relevance to the present case.