About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Supreme Court of Appeal
SAFLII
>>
Databases
>>
South Africa: Supreme Court of Appeal
>>
2017
>>
[2017] ZASCA 36
|
|
Nelson Mandela Bay Municipality v Amber Mountain Investments 3 (Pty) Ltd (576/2016) [2017] ZASCA 36; 2017 (4) SA 272 (SCA) (29 March 2017)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 576/2016
In
the matter between:
NELSON
MANDELA BAY MUNICIPALITY
APPELLANT
and
AMBER MOUNTAIN
INVESTMENTS 3 (PTY) LTD RESPONDENT
Neutral
citation:
Nelson
Mandela Bay Municipality v Amber Mountain Investments
(576/2016)
[2017] ZASCA 36
(29 March 2017)
Coram:
Cachalia,
Theron, Dambuza and Mocumie JJA and Molemela AJA
Heard:
7
March 2017
Delivered:
29
March 2017
Summary
:
Local authority : Rates : Property rates levied for a financial year
: levying of rates an integral part of budget process.
Interpretation
: Acts to be read together as they form part of current system of
local government : Local Government: Municipal
Property Rates Act 32
of 2000 : s 13(1) : words and phrases : ‘as from’ :
interpreted to mean that the rate is payable
within the period of the
financial year : s 13(1) read with ss 12, 26, 27 and 28 : obligation
to pay property rates arises at the
start of the financial year :
obligation to make payment arises once the municipality has
determined the date of payment
and amount due :
Local Government:
Municipal Finance Management Act 56 of 2003
:
ss 15
to
19
:
municipality’s duties to approve annual budget for each
financial year, budget including projected revenue for current
year
based on collection levels to date : budget to be finalised before
start of financial year : Local Government: Municipal Systems
Act 32
of 2000 (the Systems Act) : certificate is issued in terms of s
118(1) in respect of municipal debts which have become due,
not
future debts : municipality’s rates policy to the contrary is
ultra vires
the Act and invalid.
ORDER
On
appeal from:
Eastern
Cape Local Division of the High Court, Port Elizabeth (Tshiki J
sitting as court of first instance):
1
The
appeal is dismissed with costs.
JUDGMENT
Theron
JA (Cachalia, Dambuza and Mocumie JJA and Molemela concurring):
[1]
This court is called upon to determine whether, following upon the
sale of immovable property, the property owner
is liable
to pay the total rates on the property determined for the financial
year or only the rates calculated until the property
is transferred.
The outcome of this appeal turns on the interpretation of various
provisions of the Local Government: Municipal
Property Rates Act 6 of
2004 (the Rates Act), the Local Government: Municipal Systems Act 32
of 2000 (the Systems Act) and the
Local Government: Municipal Finance
Management Act 56 of 2003 (the Finance Act). These Acts must be read
together as they form
the basis for the current system of local
government.
[1]
[2]
The facts giving rise to the dispute between the parties are largely
common cause. The respondent, Amber Mountain Investments
3 (Pty) Ltd,
was the previous owner of immovable property described as remainder
of Erf 8757, Walmer, Port Elizabeth (the property).
The respondent
sold the property to Joburg Skyscraper (Pty) Limited. Before transfer
of the property, the respondent required a
rates clearance
certificate, in terms of s 118 of the Systems Act, from the
appellant, the Nelson Mandela Bay Municipality, (the
municipality).
The municipality’s financial year commences on 1 July in a year
and ends on 30 June the following year. The
municipality required
payment of rates until the end of its financial year, being 30 June
2010, as a condition for furnishing the
certificate. The municipality
presented the respondent with an account for the sum of
R2 281 014,68. The respondent paid
the amount, under
protest, in order to obtain the certificate. At the time of payment,
the respondent’s actual indebtedness
to the municipality was
for the sum of R1 214 482,68. The respondent says that this
constituted an overpayment of its
obligations to the municipality of
R1 066 532, for which it was entitled to be reimbursed.
[3]
The respondent instituted action against the municipality in the
Eastern Cape Division of the High Court, Port Elizabeth. The
matter
proceeded on the basis of the agreed facts set out in para [2] above.
At the request of the parties, the court directed
that the issues be
separated and that the sole issue for determination was:
‘
whether
the [appellant] is obliged to refund a portion of the rates in
respect of the remainder erf 8757, Walmer, for the period
from the
date of transfer of the property to Joburg Skyscraper (Pty) Ltd on 25
February 2010 until the end of the [appellant’s]
financial year
terminating on 30 June 2010. . . due regard being had to the manner
in which this issue has been pleaded by the
parties, and in
particular the validity of the second sentence in Clause 31 of the
[appellant’s] Property Rates Policy for
the 2009/2010 financial
year’.
[4]
In the court a quo, as in this court, the municipality contended that
in light of the relevant provisions in Chapters 2 and
3 of the Rates
Act, the respondent was obliged, when it sought a rates clearance
certificate, to pay the full property rate on
the property for the
financial year commencing 1 July 2009. The court a quo found that the
respondent was only obliged to pay rates
on the property until the
date of transfer of the property to Joburg Skyscraper, ie 25 February
2010. It found that ‘it would
be unjust for the [appellant] to
claim rates from the [respondent] when it was no longer the owner of
the property. The [respondent]
can only be obliged to pay rates for
property that is registered in its own name’. The court ordered
that the municipality
repay the amount of R1 066 532,
including interest, to the respondent. It is against this judgment
that the appellant
appeals, with the leave of the court a quo.
[5]
Municipalities are vested with original constitutional power to levy
rates on property.
[2]
In
terms of s 229(1)
(a)
of
the Constitution a municipality has authority to impose ‘rates
on property and surcharges on fees for services provided
by or on
behalf of the municipality’. The original power to levy rates
is regulated by national legislation in the form of
the Rates Act.
[3]
[6]
Section 2(1) of the Rates Act empowers a metropolitan or local
municipality to ‘levy a rate on property in its area’.
Section 24(1) of the Rates Act provides that a ‘rate levied by
a municipality on a property must be paid by the owner of
the
property’. Section 2(1) of the Rates Act, read with s 24(1)
expressly empowers a municipality to levy and determine rates
on
property.
[7]
Of particular relevance to this dispute are ss 12 and 13(1) of the
Rates Act. Section 12 reads:
‘
12(1)
When levying rates, a municipality must levy the rate for a financial
year. A rate lapses at the end of the financial year
for which it was
levied.
(2)
The levying of rates must form part of a municipality's annual budget
process as set out in Chapter 4 of the Municipal Finance
Management
Act. A municipality must annually at the time of its budget process
review the amount in the Rand of its current rates
in line with its
annual budget for the next financial year.
Section
13(1) reads:
‘
(1)
A rate becomes payable-
(a)
as from the start of a financial year; or
(b)
if the municipality's annual budget is not approved by the start of
the financial year, as from such later date when the municipality's
annual budget, including a resolution levying rates, is approved by
the provincial executive in terms of s 26 of the Municipal
Finance
Management Act’.
[8]
It was argued on behalf of the municipality that ss 12 and 13 make
plain that an owner’s obligation was to pay one annual
property
rate and that such liability arose, and was fixed, on the first day
of the municipality’s financial year, namely
1 July. The use of
the singular noun, ‘a rate’, so the argument went, in
these sections and other sections of the Rates
Act, is indicative
that a single rate, for the entire financial year, is payable at the
start of such financial year. Accordingly,
when the respondent sought
a rates clearance certificate on 25 February 2010, its liability to
pay a single rate for the entire
financial year had already, by
operation of law, been fixed as at 1 June 2009 and the municipality
was entitled to require payment
of the property rate for the entire
financial year, before issuing a rates clearance certificate.
[9]
The nub of the municipality’s case is this. Once its financial
year commenced, the respondent became liable to pay the
rates fixed
for that financial year and it was entitled to withhold the rates
clearance certificate until it had received payment
of rates for that
financial year. There are pertinent questions which arise in the
determination of the municipality’s contentions.
Why does the
legislation stipulate that a municipality must levy the property rate
for a financial year (s 12(1))? Why does the
levying of rates form
part of a municipality’s annual budget process (s12(2))? The
answer to these questions will assist
in determining whether the
municipality’s contentions should be upheld.
[10]
As mentioned, the outcome of this appeal turns on the interpretation
of various provisions of the Rates Act, the Systems Act
and the
Finance Act. In relation to the Finance Act, ss 15 to 19 are
relevant. In terms of s 15, a municipality may incur expenditure
only
in terms of an approved budget. The council of a municipality must
approve an annual budget for the municipality for each
financial
year, before the start of that financial year (s16(1)). The mayor of
the municipality must table the annual budget at
a council meeting at
least 90 days before the start of the budget year (s16(2)). The
annual budget must realistically set out the
anticipated revenue for
the budget year from each revenue source (s17(1)
(a)
). Section
17(3) of the Finance Act details various documents that are to be
tabled with the annual budget, including draft resolutions
approving
the budget and imposing any municipal tax, and a projection of cash
flow for the budget year by revenue source. An annual
budget may only
be funded from realistically anticipated revenues to be collected,
cash-backed accumulated funds from previous
years’ surpluses
not committed for other purposes and borrowed funds (s18(1)). Revenue
projections in the budget must be
realistic, taking into account
projected revenue for the current year, based on collection levels to
date and actual revenue collected
in previous financial years
(s18(2)). A municipality may only spend money on a capital project if
the money for the project has
been appropriated in the capital budget
(s19(1)
(a)
).
It
is clear from these provisions, that the collection of rates forms
part of a municipality’s budget – which must be
determined before the financial year commences.
[11]
In regard to the Rates Act, its main objective is to regulate the
power of a municipality to impose rates on property. The
preamble of
the Rates Act recognises that ‘there is a need to provide local
government with access to a sufficient and buoyant
source of revenue
necessary to fulfil its developmental responsibilities’. It
also recognises that income derived from property
rates is a critical
source of revenue for municipalities to achieve their constitutional
objectives.
[4]
This
was confirmed in
Kalil
NO & others v Mangaung Metropolitan Municipality & others
,
[5]
where
Leach JA explained:
‘
Sections
152(1)
(b)
and
(2) of the Constitution oblige municipalities to provide services to
their communities in a sustainable manner. In order to
do so, a
municipality is empowered by s 229 of the Constitution to raise funds
by imposing rates on property in a process regulated
by national
legislation — the applicable legislation being the Systems Act,
the Finance Act and the Rates Act’.
[6]
[12]
Two conclusions follow: First, it is clear from the relevant
provisions of the Rates Act and the Finance Act that the levying
of
rates is an integral part of a municipality’s annual budgetary
process.
[7]
Second,
the approval of the budget must go hand in hand with the
determination of rates, as the revenue from rates is essential
to
fund the budgeted expenditure.
[8]
It
is for this reason that the property rate is determined for each
financial year. It is only once the rate is determined that
a
municipality can estimate its income for the financial year and
prepare its budget in accordance with that projected income.
[13]
To return to the main issue in this case, when is the property rate
payable? In terms of s 13(1)
(a)
of
the Rates Act, a rate becomes payable ‘
as
from
the start of a financial year’. (Emphasis added.) In my view,
the use of the phrase ‘as from’ as opposed to the
word
‘on’ is significant. The phrase ‘as from’
denotes the commencement of a period while the word ‘on’
specifies a particular date. If the word ‘on’ had been
used by the legislature, the rate would have been payable on
1 July,
the start of the municipality’s financial year. Support for
this view can be found in
Kleynhans
v Yorkshire Insurance Co Ltd
[9]
where
Schreiner ACJ said:
‘
It
seems to me that the important words are those that fix the
commencement of the period, which here are ‘as from’
(‘vanaf’) the date on which the claim arose. Those words
are the typical words of commencement that bring the ordinary
civil
method of computation into operation’.
[10]
[14]
In attributing a meaning to the phrase ‘as from’, regard
must be had to the ordinary meaning of the words, which
must be
determined in the context of the statute, read as a whole, with
reference to the scope and purpose of the statute.
[11]
The
Rates Act defines a ‘financial year’ as the period
starting from 1 July in a year to 30 June the next year. Section
13
falls under Chapter 2 of the Act which is titled ‘rating’
and is preceded by s 12(1), which provides that a municipality
must
levy the rate for a financial year and that a rate lapses at the end
of the financial year for which it was levied.
[15]
There are other provisions in this chapter of the Rates Act that
provide assistance in the enquiry as to when a property rate
is
payable. Sections 26, 27 and 28 deal with the method and time of
payment of rates, the furnishing of accounts and the recovery
of
arrear rates from tenants and occupiers. These sections read, in
relevant part:
‘
26(1)
A municipality may recover a rate-
(a)
on a monthly
basis or less often as may be prescribed in terms of the Municipal
Finance Management Act; or
(b)
annually, as
may be agreed to with the owner of the property.
(2)
(a)
If a rate is payable in a single amount annually it must be paid
on or before a date determined by the municipality.
(b)
If a rate is
payable in instalments it must be paid on or before a date in each
period determined by the municipality
.
. . .
27(1)
A municipality must furnish each person liable for the payment of a
rate with a written account specifying-
(a)
the amount due
for rates payable;
(b)
the date on or
before which the amount is payable;
.
. . .
28(1)
If an amount due for rates levied in respect of a property is unpaid
by the owner of the property after the date determined
in terms of
section 26 (2), the municipality may recover the amount in whole or
in part from a tenant or occupier of the property’.
[16]
The import of these sections is that the rate may be recovered on a
monthly basis or annually, subject to an election by the
owner. In
respect of both payment options, it is the municipality that
determines the date by which payment must be made. It is
the
responsibility of the municipality to produce a statement reflecting
the amount
due
in respect of rates and the date on which the
amount is payable. Section 28(1) is of particular significance. Once
the municipality
has determined the amount due and the date on which
such amount is payable, and the owner fails to make payment on the
due date,
the municipality may recover the ‘amount due’
from the tenant or occupier of the property. Section 28(1) does not
entitle
a municipality to recover the rate levied for the financial
year from the tenant or occupier.
[17]
Importantly the Act distinguishes between what is ‘due’
and what is ‘due and payable’. In terms of
s 13, the rate
becomes payable (in the sense of the obligation to pay arising at
that stage) ‘as from the start of a financial
year’.
Section 26 empowers a municipality to determine when the rate is due.
If a rate is payable in instalments then the
municipality is
required, by way of written accounts, to advise the payee of the date
on which the rate is due.
[18]
In the context of prescription and the distinction between what may
be claimed and what is payable this Court said the following
in
Union
Share Agency & Investment Ltd v Spain
:
[12]
‘
The
distinction between the indebtedness being subject to the happening
of an event and the payment being so subject is a vital
one, and
should not be overlooked.’
This
passage was quoted with approval in
Trinity
Asset Management (Pty) Ltd v Grindstone Investments (Pty) Ltd
[13]
by
Willis JA who went on to say:
‘
The
very phrase “due and payable”, ie both “claimable”
and “payable” as at a point in time,
indicates that “due”
and “payable” are not coextensive with one another’.
[14]
This
court has held that the phrase ‘prescription shall commence to
run as soon as the debt is due’ as used in
s 12(1)
of the
Prescription Act 68 of 1969
, means that:
‘
[T]here
has to be a debt immediately claimable by the creditor or, stated in
another way, that there has to be a debt in respect
of which the
debtor is under an obligation to perform immediately.
[15]
[19]
In terms of s 27 of the Rates Act, payment of the rate is subject to
the happening of an event, namely, the municipality’s
determination of the amount to be paid and the date by which payment
must be made. A property owner’s obligation in respect
of
property rates arises at the start of the financial year when the
municipality determines the rate. If the rate is payable in
instalments, an owner’s obligation to make payment arises once
the municipality has determined the date of payment and amount
due.
Put differently, a portion of the debt in respect of rates becomes
due from time to time. For these reasons, the argument
advanced on
behalf of the municipality, that the determination of an annual
property rate is indicative of an intention that a
single rate for
the entire year is payable at the start of each financial year cannot
be sustained.
[20]
Adopting the tools of interpretation already referred to, and having
regard to the definition of ‘financial year’
and the
provisions of ss 12(1), 26, 27 and 28, the words ‘payable as
from’ in s 13(1)
(a)
’, must be interpreted to mean
that the rate is payable within the period of the financial year and
not on 1 July as contended
by the municipality. Counsel for the
municipality conceded that the legislature could have inserted the
words ‘due and’
payable in s 13(1)
(a)
, without
offending the scheme of the Act if it was the intention that the
rates should be due and payable on 1 July of each year.
[21]
It is rule of statutory construction that provisions which interfere
with protected rights should be narrowly interpreted.
It is clear
that the municipality’s requirement for rates to be paid for a
full year, as a condition for the issue of a clearance
certificate
in terms of s 118 of the Systems Act, adversely affects the
rights of property holders to alienate their
property. In my view s
13 (1)
(a)
of the Rates Act should therefore be interpreted narrowly to mean
that the word ‘payable’ only fixes the rate for the
financial year, but does not mean that rate is also due at the same
time.
[16]
[22]
The final question to determine is whether a municipality can, prior
to issuing a rates clearance certificate, insist on payment
of all
rates, fees and charges in respect of the property for the current
financial year, even if this period extends beyond the
date of the
certificate.
Section
118 of the Systems Act reads:
‘
(1)
A registrar of deeds may not register the transfer of property except
on production to that registrar of deeds of a prescribed
certificate-
(a)
issued by the
municipality or municipalities in which that property is situated;
and
(b)
which
certifies that all amounts that became due in connection with that
property for municipal service fees, surcharges on fees,
property
rates and other municipal taxes, levies and duties
during
the two years preceding the date of application for the certificate
have been fully paid.’ (Emphasis added.)
[23]
In my view the section is clear and unambiguous. The certificate is
issued in respect of municipal debts which have become
due in the two
years
preceding
the date of application for the certificate and does not apply to
future municipal debts. In
City
of Johannesburg v Kaplan NO & another
,
[17]
this
court said:
‘
No
property may be transferred unless a clearance certificate is
produced to the registrar of deeds that certifies full payment
of all
municipal debts as described in s 118(1)
which
have become due during a period of two years before the date of
application for the certificate
’.
[18]
(Emphasis
added.)
[24]
Clause 31 of the municipality’s rates policy provides:
‘
In
the case of an application for a certificate in terms of s 118 of
[the Systems Act], the full amount which remains unpaid, inclusive
of
all instalments, for the remaining financial year shall be payable’.
This
could include debts incurred after the date of application for a
clearance certificate. Section 3 of the Rates Act empowers
a
municipality to make policy not inconsistent with the Act. In any
event, policy cannot override, amend or be in conflict with
laws and
legislative instruments, otherwise the separation between legislature
and executive will disappear.
[19]
[25]
This court in
City
of Cape Town v Real People Housing (Pty) Ltd
[20]
was
faced with a policy in terms of which the municipality sought to
ensure payment of debts for more than two years preceding the
date of
application for clearance certificate. Nugent JA said that:
[21]
‘…
any
proviso that would have the effect of entitling the City to withhold
a certificate until all debts were paid – would nullify
the
express language of the section and it might just as well not be
there. I do not think it is necessary to cite authority for
the trite
proposition that a term cannot be implied in a statute if it would
contradict its express terms. Had it been intended
not to limit the
period to two years then the words would not have appeared at all.
The
dilemma in which the City finds itself is that it has left debts
outstanding for more than two years albeit that the statute
contemplates prompt collection. No doubt there are understandable
reasons why that is so but the City cannot resolve its dilemma
by
subjugating the statute to a policy that would frustrate its terms’.
[26]
The clear intention of the legislature was to limit the period in s
118(1) to two years preceding the date of application for
the
certificate. The municipality’s policy contradicts the express
terms of the statute and ‘would frustrate its terms’.
To
the extent that the municipality’s policy is inconsistent with
s 118(1), it is
ultra vires
and void.
[27]
To sum up: the relevant provisions of the Rates Act, the Finance Act
and the Systems Act read together, buttress the contention
of the
respondent that the municipality was not entitled to withhold the
property rates clearance certificate until it had received
payment of
the property rates for the entire financial year. Such property rates
became payable (but not due)
from
the start of the financial
year. Further, s 118(1) clearly applies to municipal debts which have
become due in the two years
preceding
the date of application
for the certificate and does not apply to future municipal debts. The
question posed in para [3] above
must therefore be answered in favour
of the respondent.
[28]
The appeal is dismissed with costs.
_________________
LV Theron
Judge of Appeal
APPEARANCES:
For
the Appellant: SC Rorke SC
Instructed
by: Doreen Mgoduka Attorneys, Port Elizabeth
Webbers,
Bloemfontein
For
the Respondent: LA Schubart SC
Instructed
by: Greyvensteins Incorporated, Port Elizabeth
Kramer
Weihmann & Joubert Attorneys, Bloemfontein
[1]
The preamble
of the Systems Act reads: ‘Whereas this Act is an integral part
of a suite of legislation that gives effect to
the new system of
local government’.
South
African Property Owners Association v Johannesburg Metropolitan
Municipality & others
[2012] ZASCA 157
;
2013 (1) SA 420
(SCA) para 8.
[2]
Fedsure
Life Assurance & others
v
Greater
Johannesburg Transitional Metropolitan Council & others
[1998] ZACC 17
;
1999 (1) SA 374
(CC) paras 44 and 45;
Gerber
& others
v
Member
of the Executive Council for Development Planning and Local
Government, Gauteng & another
2003
(2) SA 344
(SCA) para 23.
[3]
Body
Corporate Croftdene Mall v
Ethekwini
Municipality
[2011]
ZASCA 188
;
[2012] 1 All SA 1
(SCA) para 14.
[4]
A report
issued by STATS SA (last updated September 2016) entitled, the
‘Quarterly financial statistics of municipalities
September
2016’, sets out the income of municipalities. The total
income of South Africa’s municipalities for
the quarter ending
September 2016 was about R54 million, of which the income from
property rates was over R15 million. See
http://www.statssa.gov.za/publications/P9110/P9110September2016.pdf
accessed on 15 March 2017.
[5]
Kalil NO &
others
v
Mangaung
Metropolitan Municipality & others
[2014] ZASCA 90; 2014 (5) SA 123 (SCA).
[6]
Ibid, para 6.
[7]
South
African Property Owners Association
fn 6 above, para 32.
[8]
Ibid.
[9]
Kleynhans
v
Yorkshire
Insurance Co Ltd
1957 (3) SA 544 (A).
[10]
Ibid, at
550F-H.
[11]
Consolidated
Mines of South West Africa Ltd
v
Administrator,
SWA & another
1958 (4) SA 572
(A) at 599A-C;
South
African Property Owners Association
v
Johannesburg Metropolitan Municipality & others
[2012]
ZASCA 157
;
2013 (1) SA 420
(SCA) para 55;
Liebenberg
NO & others v Bergrivier Municipality
[2013] ZACC 16
;
2013 (5) SA 246
(CC);
2013 (8) BCLR 863
(CC) para
39.
[12]
Union
Share Agency & Investment Ltd v Spain
1928 AD 74
at 80-81.
[13]
Trinity
Asset Management (Pty) Ltd
v
Grindstone
Investments (Pty) Ltd
(1040/15)
[2016] ZASCA 135
(29 September 2016).
[14]
Ibid, para
14.
[15]
Deloitte
Haskins & Sells Consultants (Pty) Ltd. v Bowthorpe Hellerman
Deutsch (Pty) Ltd
[1990] ZASCA 136
;
1991
(1) SA 525
(A) at 532H-I.
[16]
City of
Cape Town v Real People Housing (Pty) Ltd
2010
(5) SA 196
(SCA) para 9.
[17]
City of
Johannesburg
v
Kaplan
NO & another
2006 (5) SA 10 (SCA).
[18]
Ibid, para
26.
[19]
Akani
Garden Route (Pty) Ltd v Pinnacle Point Casino (Pty) Ltd
2001 (4) SA 501
(SCA) para 7. See also
Clinch
v Lieb
1939 TPD 118
at 125.
[20]
City of
Cape Town
v
Real
People Housing (Pty) Ltd
[2009] ZASCA 159; 2010 (5) SA 196 (SCA).
[21]
Paras 14 and 15.