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[2021] ZASCA 97
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City of Johannesburg Metropolitan Municipality v Zibi and Another (234/2020) [2021] ZASCA 97; [2021] 3 All SA 667 (SCA); 2021 (6) SA 100 (SCA) (9 July 2021)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case No: 234/2020
In
the matter between:
CITY
OF JOHANNESBURG
METROPOLITAN
MUNICIPALITY
APPELLANT
and
ZIBI
YANGA
FIRST RESPONDENT
ZIBI
LINDIZWE
SECOND RESPONDENT
Neutral
citation:
City of
Johannesburg Metropolitan Municipality v Zibi and Another
(234/2020)
[2021] ZASCA 97
(09 July 2021)
Coram:
SALDULKER, MBHA, and
SCHIPPERS JJA and CARELSE and POYO- DLWATI AJJA
Heard:
05 May 2021
Delivered:
This judgment was
handed down electronically by circulation to the parties’ legal
representatives by email, publication on
the Supreme Court of Appeal
website and release to SAFLII. The date and time for hand-down is
deemed to be have been at 10h00 on
09 July 2021.
Summary
:
Municipal law –
Local Government: Municipal Property Rates Act
6 of 2004
– municipality within its powers to impose a penalty
tariff in the instance of illegal or unauthorised use of property
within
its jurisdiction – such action not
ultra
vires
if it is in
terms of a validly adopted municipal property rates policy –
appeal upheld.
ORDER
On
appeal from:
Gauteng
Division of the High Court, Johannesburg (Fourie AJ sitting as
the court of
first instance
):
1
The appeal is upheld with costs, including the costs of two counsel
where so employed.
2
The order of the high court is set aside in
toto
, and replaced
with the following order:
‘
The
application is dismissed with costs.’
JUDGMENT
Mbha
JA (Saldulker JA and Poyo-Dlwati AJA concurring)
[1]
The central issue in this appeal is whether a municipality is
entitled to levy a rate in the form of
a penalty on residential
property for illegal or unauthorised use, without first changing the
category of the property on its valuation
roll or supplementary roll,
from ‘residential’ to ‘illegal or unauthorised’
use.
[2]
The appellant, City of Johannesburg Metropolitan Municipality (the
municipality), established in terms
of the Local Government:
Municipal Systems Act 32 of 2000 (the Systems Act) and other related
legislation governing local authorities,
appeals against the judgment
and order of the Gauteng High Court Division, Johannesburg (per
Fourie AJ) (the high court), handed
down on 9 October 2019. In terms
of this judgment, the municipality was ordered to apply the
residential category reflected on
its valuation roll, when levying
property rates against erf 671 Auckland Park 1, the property of Mr
and Mrs Zibi (the property)
from ‘1 October 2015 to date of
implementation of a replacement valuation roll pertaining to the
property’. The municipality
was also ordered to rectify, within
thirty days, the relevant municipal account for the respondents’
property and change
the rating tariff from ‘illegal or
unauthorised use’ to ‘residential’, and to replace
the tariff charge
with a residential category rating. This appeal is
with leave of the high court.
[3]
At the core of this entire dispute, is the respondents’
complaint that since October 2015, the
municipality has levied rates
on the respondents’ immovable property, in accordance with the
category of ‘illegal’
or ‘unauthorised’ use
of the property. This, so the respondents contend, despite the fact
that the zoning category
of the property remained ‘Residential
1’ on the municipality’s 2013 and 2018 valuation rolls.
[4]
It bears mentioning that until October 2015, the municipality had
levied a property rate of R898.01
monthly on the property, which at
all relevant times has been zoned ‘Residential 1’.
However, from October 2015 onwards,
such rate as reflected on the
municipality’s account number 552060383, has escalated to
R3 592. 05. As appears
from the tax invoice dated 23
October 2015, under the heading ‘Property Rates’, this
penalty tariff for the higher
amount of R3 592. 05 was
debited, which incorporates the amount charged in respect of property
rates. Thereafter, the
penalty tariff was claimed monthly as per the
tariff provided for in the appellant’s rates policy. This
penalty tariff was
calculated based on the market valuation of the
property, being the amount of R1 650 000.
[5]
The nub of the dispute, from the municipality’s point of view,
is that the aforementioned levied
rate of R3 592, 05
represents a penalty for the respondents’ unlawful or
unauthorised use of the property. On the
other hand, the respondents
contend that the municipality ought to have first re-categorised the
property from ‘Residential
1’ to ‘illegal or
unauthorised’ use on the municipality’s valuation roll,
before the municipality could
impose the escalated levy.
[6]
It is necessary to set out the relevant background facts, which are
largely common cause, in order to
have a better understanding of the
context in which the dispute arose. The respondents took transfer of
the property in their names
on 24 June 2013. The property is a
free-standing erf with a house consisting of 5 bedrooms, 2 bathrooms,
a living room, a laundry
room, a double garage, and an outside room
with a toilet. In addition to residing in the property with their two
minor children,
the respondents aver that from January 2015 they
started renting out 2 bedrooms to students and young professionals,
thus using
the property as a commune, a commercial concern. It is
common cause that no authorisation was first sought and obtained from
the
municipality for such use.
[7]
On 28 October 2016, the municipality sent a letter to the
respondents through its attorneys,
notifying them of their wrongful
and unlawful use of the property as a student commune, in
contravention of the town planning scheme
and zoning thereof without
the necessary authorisation. Importantly, the respondents were
notified of their contraventions since
2013 based on several site
inspections conducted by officials of the municipality, which
resulted in a contravention notice, referred
to as a TP19 Notice,
which was sent to them on 4 September 2013. This notice called upon
the respondents to terminate their unauthorised
use of the property
by no later than 4 October 2013.
[8]
In the same correspondence it was also stated that further site
inspections were conducted on the property
on 3 August 2014, 16
November 2014, 31 January 2015, 20 June 2015 and 9 October 2016.
These site inspections confirmed that the
unauthorised use of the
property by the respondents continued unabated.
[9]
From October 2015 to date, the municipality has levied rates on the
property in the form of a penalty
for the illegal and unauthorised
use of the property. It transpired that, on 22 September 2015, the
municipality’s town planning
law enforcement section instructed
the property rates policy finance and compliance division to impose a
penalty tariff as contemplated
in the municipality’s policy.
[10]
Aggrieved by the increased penalty tariff imposed by the
municipality, on 11 December 2017, the respondents approached
the
City of Johannesburg Ombudsman (the Ombudsman), to investigate what
according to them, was the incorrect billing on the property.
On
31 January 2018, the Ombudsman responded and informed the
respondents that the municipality’s records indicated
that the
respondents were advised that the increase in their account was a
result of the implementation of a penalty tariff in
terms of the
municipality’s policy. The said penalty, the Ombudsman
explained further, was imposed due to the fact that the
property was
being used in contradiction to its zoning.
[11]
On 10 October 2018, the municipality obtained an order in
the Johannesburg High Court, per Meyer J, interdicting
the
respondents from using the property in contravention to its
residential zoning within 30 days of the date of the order.
Significantly, no appeal has been made against Meyer J’s order,
and it remains in force. On 26 November 2018, the
respondents launched an application challenging the municipality’s
penalty tariff, which forms the subject matter of this
appeal.
[12]
In finding in favour of the respondents, the high court relied on the
decision in
Smit
v The City of Johannesburg Metropolitan Municipality
[1]
and reasoned
that the municipality was constrained to levy a penalty rate without
first re-classifying the property as an ‘unauthorised
category’. Its failure to follow this prescribed procedure, the
high court held further, amounted to a contravention of its
rates
policy which in turn contravened s 3 of the Local Government:
Municipal Property Rates Act 6 of 2004 (the MPRA).
[13]
The high court concluded that the municipality was only authorised to
levy rates on the property based on the categorisation
thereof
namely, in accordance with its ‘Residential 1’ zoning. If
the municipality wished to charge the punitive rate,
the high court
reasoned, it was required to first amend the valuation roll or issue
a supplementary roll, and comply with the relevant
legislative
requirements that are designed to ensure compliance with the
audi
alteram
principle, in
order to protect ratepayers like the respondents, against arbitrary
increases before imposing any penalty rates.
Accordingly, the high
court held that the municipality’s failure to do so, rendered
its conduct invalid.
[14]
It is necessary to examine the legislative provisions governing the
powers and ability of municipalities to impose
rates and tariffs. The
municipalities’ power to levy rates on properties within their
jurisdiction is an original power conferred
in terms of
s 229 (1)
(a).
of
the Constitution of the Republic of South Africa (the
Constitution).
[2]
The MPRA
[3]
is the
national legislation envisaged in s 229 (2)(
b
)
[4]
of the
Constitution, enacted to regulate the imposition of rates by
municipalities. This legislation, read together with the Systems
Act,
and the Local Government: Municipal Finance Management Act 56 of 2003
(the Finance Act), form part of a suite of legislation
that gives
effect to the new system of local government established in terms of
the Constitution.
[15]
Section 2 of the Systems Act provides that a municipality is an organ
of state with a separate legal personality,
whilst s 4(1)
(b)
provides that ‘the council of a municipality has the right to
govern on its own initiative the local government affairs of
the
local community’. The object of the Finance Act is to secure
sound and sustainable management of the financial affairs
of
municipalities by establishing norms and standards for,
inter
alia
, ensuring accountability and appropriate lines of
responsibility in the financial affairs of municipalities, budgeting
and financial
planning processes.
[16]
The power of a municipality to raise a surcharge over and above a
rate it levies in respect of a property, is guaranteed
by s 156(5)
of the Constitution, which provides that ‘[a] municipality has
the right to exercise any power concerning
a matter reasonably
necessary for, or incidental to, the effective performance of its
functions’. It immediately becomes
evident that the consequence
of having an original power is that a municipality’s power to
levy rates is not dependant on
enabling national legislation as it is
derived directly from the Constitution.
[5]
It follows
therefore that the imposition of a penalty against property owners,
as has happened in this case, is necessary and incidental
to the
effective performance of the municipality’s functions and
services.
[17]
Nonetheless, s 75A(1)
(a)
of the Systems Act bestows a general power upon a municipality to
‘levy and recover fees, charges and tariffs in respect
of any
function or service of the municipality’. In terms of s 75A(2)
the fees, charges or tariffs are levied by a municipality
by a
resolution passed by the municipal council, with a supporting vote of
a majority of its members.
[18]
A municipality is obliged in terms of s 74 of the Systems Act,
to ‘adopt and implement a tariff policy
on the levying of fees
for municipal services provided by the municipality itself or by way
of service delivery agreements, and
which complies with the
provisions of this Act . . . and any other applicable legislation.’
This provision must be read together
with subsecs 3(1) and (2)
of the MPRA, which obliges a municipality to adopt a rates policy on
the levying of rates on rateable
property which takes effect on the
effective date of the first valuation roll prepared by the
municipality, and which must accompany
the municipality’s
budget for the financial year concerned.
[19]
In
Kungwini
Local Municipality v Silver Lakes Homeowners Association and
Another,
[6]
this Court
held that the adoption of a rates policy and the levying, recovering
and increasing of property rates is a legislative
rather than an
administrative act. The effect being that a municipality’s
action in this regard can only be challenged on
the principle of
legality, an incidence of the rule of law.
[20]
Based on the various legislative provisions and established
principles I have referred to above, it is beyond any
doubt that a
municipality’s powers to levy a penalty in respect of the use
of any property within its jurisdiction, is not
ultra
vires
its powers,
provided it does so as part of a validly adopted property rates
policy. It is common cause that, in
casu
,
the respondents did not impugn the validity of the relevant
municipality’s property rates policy, but its application. The
respondents’ attack is only directed at the validity of the
impugned tariff. Neither did the high court assail the validity
of
the property rates policy in question in any manner whatsoever.
[21]
In developing their case, the respondents submitted that in terms of
the MPRA and the rates policy, the rating
of the property is done in
accordance with the category of the property as set out in the
municipality’s valuation roll.
It therefore followed, the
respondents argued further, that before an illegal or unauthorised
tariff can be levied, the municipality
was obliged to first update
the category of the property on its valuation roll. To the contrary,
the municipality contended that
the property rates policy was
properly applied and there was no requirement that there should first
be a re-categorisation before
the application for a penalty tariff.
[22]
The municipality in this matter validly adopted and implemented a
property rates policy in accordance with the
provisions of subsecs
8(1) to (3) of the MPRA. Applying that policy, the municipality then
levied different rates for different
properties for the relevant
period of 2015-2016. Clause 5 of the policy reads as follows:
‘
5.
CATEGORIES OF PROPERTY FOR LEVYING OF DIFFERENTIAL RATES
(1)
The Council levies
different rates for different categories of rateable property in
terms of section 8 of the Act. All rateable
property will be
classified in a category and will be rated based on the category of
the property from the valuation roll which
is based on the primary
permitted use of the property, unless otherwise stated. For purposes
of levying differential rates in terms
of section 8, the following
categories of property are determined, in terms of sections 3(3)
(b)
and 3(3)
(c)
of the Act. . . .’
The
above clause is repeated in the municipality’s 2016/2017,
2017/2018 and 2018/2019 property rates policies.
[23]
Clause 5(2) of the policy contains a list of the various categories
of rateable property in respect of which different
rates are levied.
Twenty-three different categories are listed based on the primary
permitted use of the property, unless, otherwise
stated. For example
(a)
is
for business and commercial property,
(b)
is for sectional title
business and
(i)
is for farming and so forth. The last item on the list under
(w)
is for ‘illegal
use’, with which we are concerned in this case. The
municipality’s 2016/2017 property rates policy
has the same
number of categories, save that under item
(w)
,
it has listed ‘unauthorised use’ in contrast to ‘illegal
use’ that is found in the 2015/2016 rates policy.
[24]
The municipality’s property rates policy, for 2015/2016,
explains,
inter alia,
under Clause 6 bearing the heading ‘6
Clarification of Categories of Property’, the primary permitted
use of the rateable
property, the reasons for the zoning of the
specific property and how each particular category of property would
be rated. The
clarification given in respect of the ‘Illegal
use’, in Clause 6.1, is particularly important. It reads as
follows:
‘
6.1
Illegal use
(i)
This category comprises all properties that are used for a purpose
(land use) not permitted by the zoning thereof in terms of
any
applicable Town Planning Scheme or Land Use Scheme; abandoned
properties and any properties used in contravention of any of
the
Council’s By-laws and regulations. . .
(ii)
The rate applicable to this category will be determined by the City
on an annual basis. The City reserves the right to increase
this
penalty tariff higher than any other tariffs’
.
(My emphasis.)
It
bears mentioning that the ‘unauthorised use’ category is
explained in similar terms in the municipality’s 2017/2018
and
2018/2019 property rates policies. This is clearly not without
significance.
[25]
The approach to the interpretation of any legal document, be it
legislation, any statutory instrument or contract,
is now trite and
has been affirmed in various judgments of this Court and the
Constitutional Court. In
Natal
Joint Municipal Pension Fund v Endumeni Municipality,
[7]
this Court
outlined the approach to the judicial interpretive exercise as the
process of attributing meaning to the words used in
legal documents,
taking into account the context in which they were used by reading
the particular provision or provisions in the
light of the document
as a whole and the circumstances attendant upon its coming into
existence.
[8]
[26]
A simple reading of the penalty tariff in Clause 6, read together
with the rest of the municipality’s property
and rates policy,
reveals that it is plainly not applied as a ‘category’,
although it is listed under the heading ‘Categories
of Property
for levying of Differential Rates’. From a mere interpretation
of the MRPA, read with the policy, it is clear
that the penalty
charges levied under ‘illegal use’ or ‘unauthorised
use’ are directed against a landowner’s
illegal conduct,
and not the property.
[27]
The municipality’s property rates policy states unequivocally,
that the ‘illegal use’ or ‘unauthorised
use’
tariff will be imposed in respect of all properties that are used for
a purpose (land use) not permitted by the zoning
thereof. The
‘illegal use’ or ‘unauthorised use’ category
is thus clearly defined with reference to the
zoning categories, and
not the categories as contemplated in the valuation roll.
[28]
The respondents’ reliance on the fact that the penalty tariff
is referred under the heading of ‘Categories’
in Clauses
5, is misconceived. The penalty tariff and how it is applied forms
part of the concept of the tariff and charges against
the property as
informed by the municipality’s validly adopted property rates
policy. A reading of this policy reveals a
clear distinction between
the general property rate for lawful use and a charge for the penalty
tariff which is founded on illegal
conduct.
[29]
I have already alluded to the various enabling legislative provisions
in terms of which the municipality validly
adopted and implemented a
property rates policy. Clearly, the municipality validly reserved to
itself the right to claim a higher
charge and tariff against
landowners who deliberately refuse to bind themselves to the
municipality’s land use scheme, as
set out in its municipal
property rates policy. This is in my view, the only sensible
conclusion that can be reached if the penalty
provisions, tariffs and
charges referred to in the policy, are interpreted in the context in
which they appear therein, taken together
with the purpose to which
the policy is directed, and the object of the enabling suite of
legislation referred to earlier.
[30]
The respondents’ argument that the municipality must first
update the valuation roll whenever it wishes to
charge an ‘illegal
use’ or ‘unauthorised use’ tariff is based on the
fallacy that such a valuation roll
or supplementary roll must always
reflect actual use. This argument completely misconstrues the lawful
purpose of a valuation roll,
which is to determine the value of the
property in a specified category. As a matter of common sense, it
follows that unauthorised
use or a use for a non-permitted purpose
can therefore only reflect the permitted use of the property.
[31]
Section 77 of the MPRA obliges the municipality to update the
valuation roll annually, either through a supplementary
valuation
roll under s 78, or an amendment of the valuation roll under
s 79. The object of updating the valuation roll
is merely to
correct objective errors in the category which is indicated in the
roll, for example, errors or omissions in relation
to rateable
property.
[32]
Sections 77 to 79, read simply, do not deal with the changes or
variation to rates. In
casu
,
no such error or omission in respect of the value of the respondents’
property exists. It is common cause that the permitted
use of their
property was always residential. It accordingly follows that no
amendment or supplementary valuation roll is required
as the
respondents suggest.
[33] In
the light of what I have stated above, I am in agreement with the
municipality that the imposition of a higher
tariff regarding rates
payable on residential property, which is used for a purpose other
than its authorised purpose, as has happened
in this case, does not
require a re-categorisation. The penalty or higher tariff the
municipality validly imposed in respect of
the respondents’
property, only seeks to address the current situation to the extent
and for the duration of the illegal
land use in operation. Clearly,
the high court failed to appreciate the unreasonable administrative
burden that would be placed
on the municipality if a supplementary
valuation roll had to be published in respect of every unlawful use
of a property.
[34]
The high court however acknowledged, rightly in my view, that the
respondents were acting in contravention of the
appellant’s
land use scheme and importantly, that they were acting in contempt of
the order by Meyer J issued on 18 October
2018, interdicting them
from using the property as an accommodation establishment as long as
the property remained zoned as ‘Residential
1’. In my
view, the respondents’ aforesaid unlawful conduct are clear
jurisdictional facts for the application of the
municipality’s
policy of the penalty tariff. Furthermore, the application of the
penalty tariff and charge to the respondents’
property is
competent in terms of the policy.
[35]
As I have stated earlier, the policy was validly adopted and applied.
It, together with the relevant valuation
rolls, were published and
subjected to a normal public participation process. It follows that
the complaint of an alleged breach
of the respondents’ right to
the
audi
alteram
procedure
cannot be sustained. Clearly the high court erred in this respect. I
must also point out that the respondents’ reliance
on the
Blom
[9]
case is
misconceived. That case concerned a municipality’s power to add
categories of rateable property in terms of s 8
of the MPRA.
Blom
accordingly
concerned a totally different issue.
[36]
In light of what has been stated above, I find that the high court
misdirected itself in various manners already
described above, and
its order falls to be set aside. It has not been demonstrated why the
costs order should not follow the result.
[37]
In the circumstances, I make the following order:
1
The appeal is upheld with costs, including the costs of two counsel
where so employed.
2
The order of the high court is set aside in
toto
, and replaced
with the following order:
‘
The
application is dismissed with costs.’
_________________
B.H
MBHA
JUDGE
OF APPEAL
Schippers
JA (Carelse AJA concurring):
[38]
I am grateful to my colleague, Mbha JA, for setting out the
circumstances in which the municipality’s claim
to payment of a
penalty tariff or higher rates arose. Unfortunately, however, I find
myself in disagreement with the majority on
the outcome of the
appeal. In my respectful opinion, the municipality was not empowered
under s 8 of the Local Government: Municipal
Property Rates Act 6
of 2004 (the Rates Act) to determine ‘illegal use’
as a category of rateable property, nor
to include such category in
its rates policies.
[39]
The respondents’ use of their property for an illegal or
unauthorised purpose is beyond question, hence the
order issued by
Meyer J in the Gauteng Division of the High Court, Johannesburg (high
court) on 10 October 2018. In terms of that
order the respondents
were directed to cease using the property or permitting it to be used
as an accommodation establishment,
or for any purpose other than a
dwelling house in conformity with the ‘Residential 1’
zoning of the property in terms
of the Johannesburg Town Planning
Scheme, 1979. However, the sanction for the respondents’
illegal use of their property
must be sought elsewhere: it cannot be
sourced in the Rates Act.
[40] It
is common ground that for the purpose of levying rates, the property
has been categorised as a residential property
in terms of s 8(2)
of the Rates Act and valued at R 1 650 000. Based
on this value the rates levied on
the property for the 2015/2016 year
was R898 per month. For the same period the municipality imposed a
penalty tariff founded on
an ‘illegal use’ category of
rateable property, contained in the City of Johannesburg Property
Rates Policy 2015/2016
(the Rates Policy). This category
includes the use of property contrary to its zoning as defined in the
relevant town
planning scheme. The rate levied for the illegal use of
the property was R3592 – four times higher than the monthly
rates
(the penalty tariff). Both tariffs used in the
calculation of residential rates and the penalty were incorporated in
the Rates Policy, following a public participation process before the
Policy was adopted.
[41]
In 2018 the appellants applied to the high court for an order that
the municipality: (1) apply the residential
category reflected on its
valuation roll in levying property rates on the property from 1
October 2015 to date of implementation
of a replacement valuation
roll; and (2) that it rectify the relevant municipal account within
30 days of the order to reflect
that the rates levied on the
property, based on an illegal or unauthorised use category since
October 2015, have been replaced
by property rates based on the
residential category.
[42]
The
grounds for the relief sought were these. The municipality had levied
penalty tariffs for the illegal use of the property despite
the fact
that it remained categorised as a residential property on the
municipality’s 2013 and 2018 valuation rolls. The
municipality
failed to comply with the Rates Act in that it ‘did not
cause a supplementary valuation roll to be issued
in relation to the
property before it commenced levying illegal/unauthorised use rates
tariffs on the property’, and did
not change the category of
the property when it published its 2018 valuation roll.
[43]
The answering affidavit states the ‘central issue’ in the
case involves the interpretation and application
of s 8(1) and
(2) of the Rates Act. The municipality claimed that in terms of
s8 (1) it was authorised to levy different
rates for different
categories of rateable property according to specified criteria set
out in s 8(2) of the Rates Act.
Then it referred to
s 156(2) of the Constitution which empowers municipalities to
make and administer by-laws to give effect
to the functional areas in
which they are authorised to govern, and s 156(5) which grants a
municipality incidental powers
for the effective performance of its
functions.
[10]
The
municipality also cited s 229(1)
(a)
of the Constitution, which expressly authorises a municipality to
impose ‘rates on property and surcharges on fees for services
provided by or on behalf of the municipality’. Next, the
municipality referred to s 3 of the Rates Act which enjoins
the council of a municipality to adopt a policy consistent with the
Act, for the levying of rates on rateable property in the
municipality; and prescribes the contents of a rates policy.
[44]
Ultimately
the municipality contended that its rates policies contained an
express provision for an unauthorised, alternatively,
illegal use
category of rateable property. This category, so it was
contended, comprised all properties used for a purpose
(land use) not
permitted by their zoning in terms of the applicable town planning
scheme. The rate applicable to this category
was determined by the
municipality on an annual basis. Thus, the empowering provisions upon
which the municipality relied for the
imposition of the
penalty tariff were s 8(1) and (2) of the Rates Act
and the Rates Policy.
[45] The
relevant provisions of the Rates Policy are the following:
‘
5.
CATEGORIES OF PROPERTY FOR LEVYING OF DIFFERENTIAL RATES
(1)
The
Council levies different rates for different categories of rateable
property in terms of section 8 of the Act. All rateable
property will
be classified in a category and will be rated based on the category
of the property from the valuation roll which
is based on the primary
permitted use of the property, unless otherwise stated. For purposes
of levying differential rates in terms
of section 8, the following
categories of property are determined in terms of sections 3(3)(b)
and 3(3)(c) of the Act:
(2)
The
categories are as follows:
. . .
(e)
Residential Property
. . .
(w)
Illegal use
. . .
6.1
Illegal use
(i)
This category comprises all properties that are used for a purpose
(land use)
not permitted by the zoning thereof in terms of any
applicable Town Planning Scheme or Land Use Scheme, abandoned
properties and
properties used in contravention of the Council’s
By-laws and regulations, which include the National Building
Regulations
and Building Standards Rates Act, 103 of 1977, and any
Regulations made in terms thereof.
(ii)
The rate applicable to this category will be determined by the City
on an annual
basis. The city reserves the right to increase this
penalty tariff higher than other tariffs.’
[46]
The
high court (Fourie AJ) followed
Smit
v City of Johannesburg
,
[11]
a
similar case in which De Villiers AJ held that the municipality could
not apply an illegal use tariff to property used in contravention
of
a town planning scheme. The court in
Smit
held that the municipality had levied the illegal use tariff in
breach of its rates policy, contrary to the provisions of
s 2(3)
of the Rates Act.
[12]
The
high court concluded that the municipality was only authorised
to levy rates on the property based on its categorisation,
ie
residential property. If it wished to levy the punitive rate, it
was required to amend the valuation roll or issue a supplementary
one, and comply with the relevant legislative requirements, which
included the
audi
principle
to protect ratepayers against arbitrary increases.
[47]
Consequently,
the high court made an order directing the municipality to apply the
residential category reflected on its valuation
roll for the
applicable period in levying property rates on the property, for the
period 1 October 2015 to the date of
implementation of the
replacement valuation roll relating to the property. The municipality
was also ordered to rectify the relevant
municipal account
within 30 days of the date of the order, to reflect that the rates
levied on the property under the illegal
or unauthorised use category
since October 2015, had been replaced with rates levied based on
the residential category.
The parties were ordered to pay their
own costs. Although the penalty tariffs were imposed for the period
2015 to 2019, the high
court’s order dealt only with the
2015/2016 Rates Policy and the October 2015 account in respect of the
property.
[48]
Before
us the argument by counsel for the municipality, in summary, was
this. The municipality was entitled to impose the penalty
tariff in
terms of the Rates Policy, which had been included in the Policy in
order to deter landowners from contravening the municipality’s
land use scheme. The penalty tariff is also authorised under
ss 156(2), 156(5) and 229(1)
(a)
of the Constitution. Further, in terms of the
s 75A
of the
Local
Government: Municipal Systems Act 32 o
f 2000 (the Systems Act)
the municipality is given a general power ‘to levy and recover
fees, charges or tariffs in respect
of any function or service of the
municipality’.
[49]
An
analysis of these constitutional and statutory provisions however
reveals that the argument does not bear scrutiny. At the outset
it
should be noted that s 75A of the Systems Act is inapplicable
for the simple reason that the municipality did not act under
that
provision when it determined the illegal use category and imposed the
penalty tariff. Instead, and as is clear from the provisions
of the
Rates Policy quoted above, the municipality purported to act in
terms of ss 3 and 8 of the Rates Act. A decision
deliberately and consciously taken under the wrong statutory
provision cannot be validated by the existence of another statutory
provision authorising that action.
[13]
[50] The
starting point therefore, is whether the municipality was authorised
to determine ‘illegal use’
as a category of rateable
property in terms of s 8(1) of the Rates Act, as it
purported to do. Sections 8(1) to 8(3)
read:
‘
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
.
(3)
In
addition to the categories of rateable property determined in terms
of subsection (2), a municipality may determine additional
categories
of rateable property, including vacant land: Provided that, with the
exception of vacant land, the determination of
such property
categories does not circumvent the categories of rateable property
that must be determined in terms of subsection
(2).’
[51]
Section 8(1) requires rates to be determined according to the ‘use
of the property’ ie the actual use,
‘the permitted use of
the property’ (the limited purposes for which the property may
be used)
[14]
or
a combination of actual and permitted use. A category of ‘vacant
land’ is acceptable because it is based on actual
use and the
value determined is the undeveloped land value given the uses to
which it could be put if developed. Mixed uses are
the same.
[52]
In my opinion, the Rates Act does not permit ‘illegal use’
as a category of rateable property, for
a number of reasons. First,
‘illegal use’, is not a use as such. This so-called
category is not determined according
to the
use
of the property. Instead, the category is determined, and the penalty
tariff imposed, on the basis of the
conduct
of property owners who use their properties contrary to town planning
or land use schemes, or contravene by-laws and regulations.
Even
owners who abandon their properties, or erect a building or structure
in contravention of the National Building Regulations
and Building
Standards Act 103 of 1977 (the Building Standards Act), are
subject to the penalty tariff. Indeed, it was submitted
on behalf of
the municipality that ‘the charge for the penalty is founded on
illegal conduct.’ It is the use itself,
not the lawfulness of
the use that determines the category of rateable property in s 8(1)
of the Rates Act.
[53]
Second, the uses of property in s 8(1) plainly constitute lawful
uses. This is buttressed by the immediate
context – all the
categories of rateable property listed in s 8(2) are lawful uses
of property. Illegal, unauthorised
or non-permitted uses of property
cannot be categorised for the purpose of levying rates in terms of
the Rates Act. In my
view, a municipality cannot grant its
imprimatur to the illegal use of property by levying a rate on such
property. This, when
in terms of the Rates Act, rates levied by
a municipality on a property must be paid by the owner of that
property.
[15]
It
seems to me that an interpretation that the Rates Act permits
the determination of ‘illegal use’ as a category
of
rateable property, produces a manifest absurdity.
[16]
[54]
Third, it is impossible to determine a value for illegal use. The
procedure set out in the Rates Act for the
preparation of a
valuation roll is a jurisdictional prerequisite for the exercise by a
municipality of its power to collect rates.
[17]
One
cannot, for example, value a property or part of a property built in
contravention of the Building Standards Act, in order to
levy a rate
on it. Neither can a property be valued on the basis of an owner’s
non-compliance with a by-law or town planning scheme.
It
was rightly conceded by counsel for the municipality that ‘a
property cannot be categorised on the basis of a non-permitted
or
illegal use’, and that a valuer could therefore not create such
a category. Thus, the failure to prepare a valuation roll
as required
by the Rates Act, ‘without first reclassifying the
property as unauthorised use’, as the high court
found, does
not even arise.
[55]
Fourth, the penalty tariff is not a ‘rate’. The Rates Act
defines ‘rate’ as follows: ‘a
municipal rate on
property envisaged in s 229(1)
(a)
of the Constitution’. The latter provision authorises a
municipality to impose
rates
on property. In
Gerber
,
[18]
Navsa
JA said that the ordinary meaning of ‘rate’ is well
established and referred to the Concise Oxford Dictionary
meaning of
the term which includes, an ‘assessment levied by local
authorities for local purposes at so much per pound of
assessed value
of buildings and land owned’. Navsa JA went on to say that
this meaning ‘accords with the tried
and trusted practice of
calculating property rates in relation to size or value of
properties’, and that ‘there is
nothing to suggest that
the power given by s 229(1)
(a)
of the Constitution to local authorities to impose property rates was
a power to depart from this established meaning’.
[19]
[56]
In this case the municipality determined the category of the property
as ‘Residential’ as contemplated
in s 8(2)
(a)
of the Rates Act, and calculated the municipal rate according to the
value of the property. In terms of the Rates Policy,
the tariff
for 2015/2016 for the residential category was 0.006531 cents in the
Rand and the penalty tariff for illegal use, 0.026124
cents in the
Rand. And as is evident from the Rates Policy, the
penalty tariff is four times higher than the amount levied
for
rates. However, the penalty tariff is neither a ‘rate’ as
defined in the Rates Act nor does it conform to
the established
meaning of that term.
[57]
The penalty tariff is not a municipal charge but a sanction directed
solely at the conduct of property owners.
It is trite that the words
of a statute ‘should be read in the light of the subject-matter
with which they are concerned
. . . and it is only when
that is done that one can arrive at the true intention of the
legislature’.
[20]
There
is nothing in the Rates Act which authorises a municipality to
levy a rate to deter landowners from contravening a statute,
by-law,
or land use scheme; or to impose a penalty tariff ‘for as long
as the property does not conform with the town planning
scheme’,
as stated in the answering affidavit. This is a case of using a power
– the power to levy rates – as
a means of punishment of
those who use their properties unlawfully. It is impermissible.
[21]
And
it is directly at odds with the purpose in the long title of the
Rates Act – to regulate the power of a municipality
to
impose rates on property, and ‘its power to levy a rate on
property’ in s 2(3) thereof.
[22]
[58]
Fifth, the illegal use category cannot be applied equitably.
Section 3(3)
(a)
of the Rates Act provides that a rates policy ‘must treat
persons liable for rates equitably’. In this case the
property
is not being rated on the same basis as other properties used for the
same purpose ie ‘accommodation establishments’.
If it
were and it was rated on that basis, there could be no complaint
because the respondents would be treated the same as all
other
operators of such establishments. The municipality recognised the
inequity. It submitted that the ‘category remains
Residential
for all purposes except in circumstances where a penalty tariff is
imposed, as in this instance’.
[59]
Finally, in determining the illegal use category and imposing the
penalty tariff, the municipality acted contrary
to the
prohibition in s 19(1) of the Rates Act, to which s 8(1) is
expressly rendered subject. Section 19(1) reads:
‘
Impermissible
differentiation
(1)
a
municipality may not levy-
(a)
different
rates on residential properties, except as provided for in sections
11 (2), 21 and 89A: Provided that this paragraph does
not apply to
residential property which is vacant;
. . .
(d)
additional rates except as provided for in section 22.’
[60]
Sections 11(2), 21 and 89A do not apply in this case.
[23]
As
already stated, in respect of the residential category the
municipality levied rates of 0.006531 cents in the Rand on the
property,
as well as 0.026124 cents in the Rand as a penalty tariff
in the illegal use category, calculated on the basis of four times
the
amount of the rates levied in the residential category. The
penalty tariff is inextricably linked to the rates levied in the
residential
category. For this reason, the submission on behalf of
the municipality that it ‘did not rely on a category of
“unauthorised
use” or “illegal” use for its
imposition of a penalty tariff’ and that the ‘penalty
tariff is independent
of the general property rate for lawful uses’,
is wrong. On the plain wording of s 19(1) of the Rates Act, the
levying
of residential rates by the municipality, together with the
penalty tariff founded on the illegal use category, is prohibited.
[61]
The penalty tariff further does not constitute an additional rate
within the meaning of s 19(1)
(d)
read with s 22(1) of the Rates Act, for two reasons. It is
firstly, not an additional rate on property levied for the
purpose of
raising funds for improving or upgrading an area determined as a
special rating area.
[24]
Secondly,
the municipality did not act in terms of s 22(1) of the Rates Act.
[62]
In
Fedsure
,
[25]
the
Constitutional Court stated that the principle of legality, an aspect
of the rule of law, requires that a body exercising a
public power
(in that case a municipality exercising original legislative power in
the form of budgetary resolutions) must act
within the powers
lawfully conferred on it. In
Pharmaceutical
Manufacturers Association
,
[26]
the
principle required that the exercise of public power should not be
arbitrary or irrational. Chaskalson P said:
‘
It
is a requirement of the rule of law that the exercise of public power
by the executive and other functionaries should not be
arbitrary.
Decisions must be rationally related to the purpose for which the
power was given, otherwise they are in effect arbitrary
and
inconsistent with this requirement. It follows that in order to pass
constitutional scrutiny the exercise of public power by
the executive
and other functionaries must, at least, comply with this requirement.
If it does not, it falls short of the standards
demanded by our
Constitution for such action.’
[63]
In my view, the action by the municipality in determining an illegal
use category of rateable property and imposing
the penalty tariff,
ostensibly in terms of ss 3 and 8 of the Rates Act, violates the
principle of legality in both respects.
The action is beyond the
powers conferred on the municipality. It is also arbitrary because it
is not rationally related to the
purpose for which the power to levy
rates was given.
[64]
Finally, I should point out that the decision of this Court in
Blom
,
[27]
is
to the contrary. The issue in that case was whether, in terms of the
Rates Act, the relevant municipality could determine ‘illegal
use’ or ‘non-permitted use’ as a category of
rateable property under the Rates Act, in order to levy a higher
rate on property than it levied on properties used for the purpose
permitted. The property had been zoned for use as ‘residential’
and was being used as attorneys’ offices, contrary to the
appellant’s town planning scheme.
[28]
The
high court decided that the power to create additional categories of
rateable property was not unfettered; that it was confined
to lawful
categories since all the categories listed in s 8(2) of the
Rates Act are lawful; and that the levying of a
higher rate than
the normal rate on a property because it was being used for
non-permitted purposes amounted to the imposition
of a penalty
without due process.
[29]
[65]
The decision was reversed on appeal. It was held that when the words
‘use of the property’ and
‘permitted use of
property’ in s 8(1) of the Rates Act were considered
in the light of the ordinary rules
of grammar and syntax, the context
in which they appear and the apparent purpose to which they are
directed, the word ‘use’
was ‘wide enough to
include “non-permitted use”’. The Court concluded
that it was ‘competent for
the municipality to include in its
rates policy a ‘non-permitted use category for the purposes of
determining applicable
rates’
[30]
and
that ‘once the determination of different categories of
rateable property in terms of s 8 is completed the valuation
process begins’.
[31]
In
my respectful opinion, the correctness of these findings is doubtful,
for the reasons advanced above.
[66]
I would dismiss the appeal with costs.
__________________
A
SCHIPPERS
JUDGE
OF APPEAL
Appearances:
For
appellant:
L G F Putter SC with C Makgato and S Ogunronbi
Instructed
by:
Prince Mudau & Associates, Midrand
Webbers Attorneys,
Bloemfontein
For
respondent:
C N Engelbrecht
Instructed
by:
Neels Engelbrecht Attorneys, Johannesburg
McIntyre van der
Post, Bloemfontein.
[1]
Smit
v The City of Johannesburg Metropolitan Municipality
[2017]
ZAGPJHC 386.
[2]
The
Constitution of the Republic of South Africa, 1996. Section
229(1)
(a)
of
the Constitution provides:
‘
(1)
Subject to sections (2), (3) and (4), a municipality may impose –
(a).
rates on property and
surcharges on fees for services provided by or on behalf of the
municipality.’
[3]
Sections 2
and 3 of the MPRA read in relevant parts as follows:
‘
2
Power to levy rates
(1) A metropolitan
local municipality may levy a rate on a property in its area.
3 Adoption and
contents of rates policy
(1) The council of
a municipality must adopt a policy consistent with this Act on the
levying of rates on rateable property in
the municipality.
(2) A rates policy
adopted in terms of subsection (1) takes effect on the effective
date of the first valuation roll prepared
by the municipality in
terms of this Act, and must accompany the municipality’s
budget for the financial year concerned
when the budget is tabled in
the municipal council in terms of section 16(2) of the Municipal
Finance Management Act.
(3) A rates policy
must -
(a)
treat persons
liable for rates equitably;
(b)
determine the
criteria to be applied by the municipality if it –
(i) levies
different rates for different categories of properties determined in
terms of section 8;
(ii) exempt a
specific category of owners of properties, or the owners of a
specific category of properties, from payment of a
rate on their
properties;
(iii) grant to a
specific category of owners of properties, or to the owners of a
specific category of properties, a rebate on
or a reduction in the
rate payable in respect of their properties; or
(iv) increases or
decreases rates;
(c)
determine, or
provide criteria for the determination of
(i) categories of
properties for the purpose of levying different rates as
contemplated in paragraph (b) (i); and
(ii) . . . .’
[4]
Section
229(2)
(b)
of
the Constitution provides:
‘
(2)
The power of a municipality to impose rates on property, surcharges
on fees for services provided by or on behalf of the municipality,
or other taxes, levies or duties –
(a)
.
. .
(b)
may
be regulated by national legislation.’
[5]
City of
Cape Town and Another v Robertson
and
Another
[2004] ZACC 21
;
2005
(3) BCLR 199
(CC);
2005 (2) SA 323
(CC) para 60.
[6]
Kungwini
Local Municipality v Silver Lakes Home Owners Association
[2008]
ZASCA 83
;
[2008] 4 All SA 314
(SCA);
2008 (6) SA 187
(SCA) para 14.
[7]
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[2012]
ZASCA 13
;
[2012] 2 All SA 262
(SCA);
2012
(4) SA 593
(SCA) para 18.
[8]
Bothma-Batho
Transport (edms) Bpk v S Bothma & Seun Transport
[2013] ZASCA
176
,
[2014] 1 All SA 517
(SCA); 2014 (2) 494 (SCA) para 12;
Airports
Company South Africa v Big Five Duty Free (Pty) Ltd and Others
[2018]
ZACC 33
;
2019 (2) BCLR 165
(CC);
2019 (5) SA 1
(CC) para 29.
[9]
City of
Tshwane v Marius Blom & GC Germishuizen Inc. and Another
[2013] ZASCA 88; 2014 (1) SA 341 (SCA); [2013] 3 All SA 481 (SCA).
[10]
Section
156(5) of the Constitution provides:
‘
Powers
and functions of municipalities
.
. .
(5)
A municipality has the right to exercise any power concerning a
matter reasonably necessary for, or incidental to, the effective
performance of its functions.’
[11]
Smit v
City of Johannesburg Metropolitan Municipality
[2017] ZAGPJHC 386.
[12]
Smit fn 11
paras 11-14.
[13]
Minister
of Education v Harris
[2001]
ZACC 25
;
2001 (4) SA 1297
(CC) paras 16-18;
Howick
District Landowners’ Association v Umgeni Municipality
and
Others
[2006] ZASCA 153
;
2007 (1) SA 206
(SCA) paras 21-22.
[14]
The
Local
Government: Municipal Property Rates Act 6 Of 2004
(Rates Act) defines ‘permitted use’ as follows:
‘
“
permitted
use
”
in relation to a property, means the limited purposes for which the
property may be used in terms of–
(a)
any
restrictions imposed by–
(i)
a
condition of title;
(ii)
provision
of a town planning or land use scheme; or
(iii)
any
legislation applicable to any specific property or properties; or
(b)
any
alleviation of any such restrictions.’
[15]
Section
24(1) of the Rates Act.
[16]
Shenker v
The Master and Another
1936 AD 136
at 142-143.
[17]
City of
Tshwane Metropolitan Municipality v Lombardy Development
(Pty)
Ltd and Others
[2018] ZASCA 77
;
[2018] 3 All SA 605
(SCA) para 21.
[18]
Gerber
and Others v Member of the Executive Council for Development
Planning and Local Government, Gauteng, and Another
[2002] ZASCA 128
;
2003 (2) SA 344
(SCA) para 23.
[19]
Gerber
fn 18 para 24.
[20]
University
of Cape Town v Cape Bar Council and Another
1986 (4) SA 903
(A) at 914D-E, affirmed in
Bato
Star Fishing (Pty) Ltd v Minister of Environmental Affairs and
Tourism and Others
[2004] ZACC 15
;
2004 (4) SA 490
(CC) para 90 and
Democratic
Alliance v Speaker, National Assembly and Others
[2016] ZACC 8
;
2016 (3) SA 487
(CC) para 28.
[21]
Van
Eck, N O, and Van Rensburg, N O v Etna Stores
1947
(2) SA 984
(A) at 997.
[22]
Section 2(3)
of the Rates Act reads:
‘
A
municipality must exercise its power to levy a rate on property
subject to–
(a)
section
229 and any other applicable provisions of the Constitution;
(b)
the
provisions of this Act; and
(c)
the
rates policy it must adopt in terms of section 3.’
[23]
In terms of
s 11(2), a ‘rate levied by a municipality on residential
properties with a market value below a prescribed valuation
level
may, instead of a rate determined in terms of subsection (1), be a
uniform fixed amount per property’. Section 21
deals with the
compulsory phasing-in of certain rates in relation to newly rateable
property. Section 89A concerns transitional
arrangements relating to
the redetermination of municipal boundaries.
[24]
Section
22(1) of the Rates Act provides:
‘
Special
rating areas
(1)
a municipality may by
resolution of its council–
(a)
determine an area
within that municipality as a special rating area;
(b)
levy an additional
rate on property in that area for the purpose of raising funds for
improving or upgrading that area; and
(c)
differentiate between
categories of properties when levying an additional rate referred to
in paragraph
(b)
.’
[25]
Fedsure
Life Assurance Ltd v Greater Johannesburg Transitional Metropolitan
Council
and
Others
[1998] ZACC 17
;
1999
(1) SA 374
(CC) paras 56 and 58.
[26]
Pharmaceutical
Manufacturers Association of South Africa and Another: In re Ex
parte President of the Republic of South Africa
and Others
[2000] ZACC 1
;
2000 (2) SA 674
(CC) para 85.
[27]
City of
Tshwane v Marius Blom & GC Germishuizen Inc and Another
[2013] ZASCA 88
;
2014 (1) SA 341
(SCA);
[2013] 3 All SA 481
(SCA)
para 17.
[28]
Blom
fn
27 paras 1 and 5.
[29]
Blom
fn 27 para 4.
[30]
Blom
fn 27 para
17.
[31]
Blom
fn 27 para
21.