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[2019] ZAKZDHC 24
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Independent Schools Association of Southern Africa v Ethekwini Municipality and Others (6957/2010) [2019] ZAKZDHC 24; 2020 (2) SA 235 (KZD) (28 June 2019)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
LOCAL DIVISION: DURBAN
CASE NO: 6957/2010
In
the matter between:
Independent
Schools Association of Southern Africa
Applicant
and
Ethekwini
Municipality
First Respondent
The
National Minister for Co-operative Governance &
Traditional
Affairs
Second Respondent
The
National Minister of
Finance
Third Respondent
Stellenbosch
Municipality
Intervening Party
Judgment
Lopes
J
[1]
The dispute in this matter is whether the first respondent, Ethekwini
Municipality,
is bound by regulations promulgated by the national
government which prescribe that no municipality may levy rates on
public benefit
organisations at a rate of more than 25 per cent of
the rate charged on residential properties. The Independent Schools
Association
of Southern Africa (‘ISASA’), a public
benefit organisation, was charged property rates in excess of 25 per
cent of
the property rate applicable to residential property, and it
seeks an order preventing Ethekwini Municipality from levying such
rates. Ethekwini Municipality counter-claims for an order declaring
the regulations and the enabling legislation to be unconstitutional
amongst other relief.
[2]
The legal framework:
(a)
In terms of s 229 of the Constitution of the Republic of South
Africa, 1996 (‘the
Constitution’), municipalities are
authorised to impose rates on immovable property. That power is
subject to the provision
that a municipality may not impose rates in
a way that materially and unreasonably prejudices national economic
policies, economic
activities across municipal boundaries, or the
national mobility of goods, services, capital or labour. In
addition the power
to levy rates may be regulated by national
legislation.
(b)
Municipal powers are prescribed in the provisions of s 151(3) of the
Constitution, and provide
that ‘a municipality has the right to
govern, on its own initiative, the local government affairs of its
community, subject
to national and provincial legislation...’
Section 151(4) provides that ‘the national or a provincial
government may
not compromise or impede a municipality’s
ability or right to exercise its powers or perform its functions’.
(c)
Section 154(2) provides that prior to introducing national
legislation which affects
the powers of local government, a draft of
the legislation must be published for public comment in a manner
which allows municipalities
and others to comment thereon.
(d)
The national legislation dealing with the levying of rates is to be
found in the Local Government:
Municipal Property Rates Act, 2004
(‘the MPRA’), which presently provides in s 19(1):
‘
(1)
A municipality may not levy-
…
(b) a rate on a category of
non-residential properties that exceeds a prescribed ratio to the
rate on residential properties
determined in terms of section 11
(1)(
a
): Provided that different ratios may be set in respect
of different categories of non-residential properties.
…
(2)
The ratio referred to in
subsection 1(
b
)
may only be prescribed with the concurrence of the Minister of
Finance.’
The proviso in s 19(1)(
b
)
was introduced by the
Local Government Laws Amendment Act, 2008
.
Sub-section 19(2) was
amended in 2014.
[3]
The historical background:
(a)
On the 19
th
December 2007, the second respondent, the
Minister of Co-operative Governance and Traditional Affairs (‘the
Minister’)
published draft regulations in the Government
Gazette for comment in terms of
s 19(1)(b)
of the MPRA (‘the
2007 draft regulations’).
(b)
A rate ratio of 1:0.25 was proposed for the property of public
benefit organisations (as
defined in s 30 of the Income Tax Act,
1962, read with item 4 in the ninth schedule to that Act). This meant
that rates could only
be levied at the rate of 25 per cent of the
rate levied by any particular municipality on residential property.
(c)
Comments were invited, and were received, from nine municipalities,
including Ethekwini
Municipality, and 34 non-governmental private and
civic organisations. Ethekwini Municipality did not, in its
submissions,
object to the inclusion of public benefit organisations,
or the rates applicable to them. On the 11
th
December 2007 the Minister invited the South African Local Government
Association (‘SALGA’) to comment on the 2007
draft
regulations. SALGA did not object to the inclusion of public
benefit organisations. The intervening party, Stellenbosch
Municipality, participated in the consultation process indirectly,
via the SALGA submissions.
(d)
SALGA was then invited to participate in visits planned by the
Minister to various cities,
including Durban.
(e)
On the 11
th
February 2008 the Department of Provincial and
Local Government consulted with Ethekwini Municipality in relation to
the 2007 draft
regulations. Ethekwini Municipality was, by
then, generally opposed to regulation by the Minister and the third
respondent,
the National Minister of Finance, (‘the Ministers’)
and resisted the notion of having its rates restricted.
(f)
On the 3
rd
March 2008 the Minister wrote to SALGA
acknowledging its submissions, and inviting SALGA to attend
discussions, which did not occur.
(g)
On the 27
th
March 2009 the Minister, together with the
concurrence of the third respondent, the Minister of Finance, and
acting in terms of
s 19(1)(b) of the MPRA promulgated the 2007 draft
regulations. The regulations were to be effective from the 1
st
July 2009.
(h)
The 2009 regulations were different from the 2007 draft regulations,
in that the reference
to the property of public benefit organisations
had been omitted.
(i)
In September 2009, ISASA brought judicial review proceedings in the
North Gauteng
High Court to challenge that omission.
(j)
The respondents in that application were the Ministers, and SALGA.
SALGA
did not oppose the application. Apparently following
legal advice, the Minister decided not to duplicate the entire
consultation
process which had followed the publication of the the
2007 draft regulations. A letter was sent to SALGA on the 21
st
December 2009 in which the basis of the judicial review application
was set out. It recorded that the Minister was of the
view that
his department could not successfully challenge ISASA’s review
proceedings, and as the public benefit organisations
were not
significant contributors to rates budgets, and the Minister had
decided to include them in the regulations.
(k)
The Minister gave SALGA 30 days to comment. Having received no
comment, on the 15
th
January 2010 the Minister addressed a
letter to the Minister of Finance seeking his written concurrence.
That was considered
by Treasury officials and the concurrence was
provided.
(l)
As at the 15
th
January 2010, and having received no
response from SALGA, an email was sent to SALGA attaching the
Minister’s letter to the
Minister of Finance.
(m)
It transpired that on the 19
th
January SALGA forwarded the
letter to the Institute of Municipal Finance Officers (‘IMFO’),
an organisation with whom
the Ministers were not obliged to consult.
SALGA requested comments by the 29
th
January 2010,
notwithstanding the lapse of the period provided for by the Minister
(ending on the 15
th
January). The President of the IMFO
suggested that the ability to make regulations should be expunged
from the MPRA. That reply
was sent to SALGA, but never forwarded by
SALGA to the Minister.
(n)
SALGA only properly objected to the regulations by way of a letter on
the 28
th
April 2010, complaining that as the result of a
misunderstanding, the letter had not been posted to the ministry (an
unsigned letter
had been emailed to the Minister’s office
during February 2010. It was not accepted, because it was not
signed).
(o)
On the 15
th
March 2010 the North Gauteng High Court made
an order directing the Ministers to publish regulations in terms of s
19(1)(b) of
the MPRA, regulating an upper limit rate ratio of 1:0.25
for properties owned by public benefit organisations. The order
provided that the regulations had to be published by no later than
the 30
th
March 2010.
(p)
During this process ISASA’s attorney had addressed letters to
Ethekwini Municipality
on the 14
th
December 2009 and the
14
th
January 2010, drawing attention to the litigation in
the North Gauteng High Court.
(q)
Ethekwini Municipality refused to implement the regulations on the
basis that public benefit
organisations were not one of the defined
categories of rate payers in their rates policies. That decision
precipitated this application.
[4]
The progress of the application:
(a)
On the 18
th
of June 2010, ISASA delivered its application
seeking an order that Ethekwini Municipality may not, with effect
from the 1
st
July 2010, levy a rate in respect of the
property of members of ISASA, of more than 25 per cent of the rate
levied upon residential
property. This was because the schools that
comprise the members of ISASA are all public benefit organisations as
contemplated
in terms of s 30 of the Income Tax Act, 1962 read with
item 4 of the ninth schedule to that act.
(b)
On the 6
th
August 2010 Ethekwini Municipality delivered a
counter-application seeking the following relief:
(i)
Part A - the joinder of the Minister and the National Minister of
Finance. This
was achieved and does not form part of the dispute
before me.
(ii)
Part B - reviewing and setting aside the decision of the two
ministers to amend the
regulations. The declaration also seeks
declaratory relief that the amended regulations are invalid and do
not bind Ethekwini Municipality.
(iii)
Part C - a declaration that an inter-governmental dispute as
contemplated in s 44 of the
Local Government: Municipal Finance
Management Act, 2003 exists, and directions were sought to resolve
that dispute. This dispute
has been resolved inasmuch as Ethekwini
Municipality and the ministers agree that the dispute cannot be
resolved, and the application
must proceed. No relief in this regard
is sought.
(iv)
Part D – a declaration that s 19(1)(b) of the MPRA is
unconstitutional and invalid
to the extent that it restricts the
powers of a municipality to levy rates at ratios determined by that
municipality.
(c)
On the 15
th
November 2010, ISASA delivered a further
notice of application addressed to Ethekwini Municipality and the
Minsters that it would
apply for an order declaring Ethekwini
Municipality’s rates policy for the 2009/2010 years
unconstitutional and invalid insofar
as they included the levying of
a rate on the property of public benefit organisations which was not
in accordance with the amended
regulations. A further order was
sought directing the municipality to comply with the regulations.
The supporting affidavit
leading this application was deposed to by
one Jane Mary Hofmeyr, who had deposed to the ISASA’s founding
affidavit in the
main application. In her affidavit Ms Hofmeyr
sought to include Inanda Seminary as an additional member of ISASA.
The affidavit
also recorded that at that stage the Ministers opposed
their joinder application.
(d)
On the 25
th
February 2011, an interim order was granted by
consent by Gyanda J in this court: that pending the outcome of the
applications,
Ethekwini Municipality could not levy rates in excess
of 25 per cent of the rates levied by Ethekwini Municipality on
residential
property. Gyanda J also granted leave to Ethekwini
Municipality to join the Ministers.
(e)
On the 30
th
June 2011, and in terms of Uniform rule 28,
ISASA delivered an amended notice of motion seeking again to compel
Ethekwini Municipality
to levy rates with effect from the 1
st
July 2010, in accordance with the published regulations, and further
sought an order declaring Ethekwini Municipality’s rates
policies for 2010/11 and 2011/12 years to be unconstitutional and
invalid. Further relief was sought in respect of the
resolutions
for the 2008/9 to 20011/12 rates policies. That amendment
was again supported by a further affidavit by Ms Hofmeyr, dated the
24
th
June 2011, and described as an ‘explanatory
affidavit’.
(f)
On the 11
th
July 2011 Stellenbosch Municipality brought an
application for leave to join in the counter-application by the
Ethekwini Municipality.
(g)
On the 18
th
November 2011 Sishi J granted an order joining
Stellenbosch Municipality as the second applicant in the Ethekwini
Municipality
counter-application. On the 18
th
January 2012
Ms Hofmeyr deposed to the answering affidavit of ISASA. This
affidavit was not in opposition to the joinder of Stellenbosch
Municipality, but rather in reply to the allegations in Stellenbosch
Municipality’s founding affidavit for the relief claimed
in the
counter-application.
(h)
On the 7
th
March 2012 the two ministers served notice of
their intention to oppose Ethekwini Municipality’s application
for joinder.
(i)
On the 8
th
August 2012 Ms Hofmeyr deposed to what is
described as a supplementary affidavit on behalf of ISASA.
(j)
On the 25
th
June 2015 Ethekwini Municipality applied to
this court for an order condoning the late delivery of its
supplementary affidavit
in the counter-application. That
affidavit was deposed to on the 24
th
June 2015.
(k)
On the 27
th
October 2015 Mr Lebogang Montjane deposed to
ISASA’s answering affidavit in Ethekwini Municipality’s
counter-application.
(l)
Further affidavits and amendments, including an application to
strike-out certain
of ISASA’s affidavits were delivered up to
2018.
[5]
The arguments:
Mr
Dodson SC
, who appeared together with Mr
Sisilana
for
ISASA, submitted that the MPRA was the primary legislation
promulgated in terms of the Constitution in order to regulate the
levying of rates by municipalities. He drew my attention to the
preamble to the MPRA which provides,
inter alia,
as follows:
‘
AND WHEREAS it is essential
that municipalities exercise their power to impose rates within a
statutory framework that not only
enhances certainty, uniformity and
simplicity across the nation, but also takes into account historical
imbalances and the rates
burden on the poor;’
Mr
Dodson
referred to s 2 of the MPRA which provides:
‘
2. Power to levy rates
–
(1) A metropolitan or local
municipality may levy a rate on property in its area.
…
(3) 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.’
[6]
Section 3(1) of the MPRA provides that the council of a municipality
must adopt a
policy consistent with the Act on the levying of rates
on rateable property in the municipality. Section 3(3) provides
that
a rates policy must determine the criteria to be applied by a
municipality if it levies different rates for different categories
of
properties determined in terms of s 8. The word ‘category’
is defined in s1 of the MPRA and, in relation to property,
means ‘a
category of properties determined in terms of section 8.’
Section 3(3) was amended to refer to the categories
of properties as
determined in s 8, by way of the Local Government: Municipality
Property Rates Amendment Act, 2014.
Prior to that amendment no
reference was made in S 3(3) to s 8.
[7]
Section 8 of the MPRA provides for the provision of differential
rates, but the introduction
to s 8 (1) makes it clear that the
section is ‘subject to section 19,…’ Section 8(1)
provides that the different
categories of rateable properties may be
determined according to,
inter alia,
the use of the property.
Section 8(2) provides that municipalities must determine categories
of rateable property in terms
of subsection (1), and refers to
‘business and commercial properties’ and ‘properties
owned by public benefit
organisations and used for specified public
benefit activities.’
Section
8 was amended by s 6 of the Local Government: Municipal Property
Rates Amendment Act of 2014. Prior to that amendment, the
word ‘must’
in s 8(2) read ‘may’. In addition the number of
categories was more extensive, but referred
to both ‘business
and commercial properties’ and ‘public benefit
organisations’.
[8]
Mr
Dodson
criticised the
approach of the Ethekwini Municipality which has maintained that it
was not obliged to use the category of public
benefit organisations.
Instead it has categorised independent schools as being ‘schools
not for gain’, and included
them among ‘business and
commercial properties’. Mr
Dodson
advanced the
following reasons why Ethekwini Municipality’s approach was
incorrect:
(a)
The provisions of s 8 are subject to the provisions of s 19.
Ethekwini Municipality’s
approach reversed that proviso by
making s 19 subject to s 8. The provisions of s 19 and in particular
the introduction in subsection
1 thereof that ‘a Municipality
may not levy …’ is peremptory in form and did not allow
Ethekwini Municipality
the discretion not to follow the
categorisations reflected thereafter. He referred to a great number
of authorities for the proposition
that it is not open to an
administrator acting under a statute to determine or alter the
meaning to be attributed to that statute.
If it does so, it acts
beyond its powers. Similarly, subordinate or delegated
legislation cannot be used to interpret a statute.
He referred in
this regard to the dicta of Chaskalson P in
Executive Council,
Western Cape Legislature & others v President of the Republic of
South Africa & others
[1995] ZACC 8
;
1995 (4) SA 877
(CC), paras 50-65 and
Sebola & another v Standard Bank of South Africa Ltd
&
another
2012 (5) SA 142
(CC), para 62.
(b)
The municipality referred to categories of owners, instead of
categories of property, as
it was obliged to do. The MPRA had
defined a category of public benefit organisations, into which the
members of ISASA fall.
To avoid including them in that
particular category was to exclude them from the benefit available to
that category.
(c)
In
the
City of Johannesburg Metropolitan Municipality v The
Chairman of the valuation Appeal Board for the City of Johannesburg &
another
(282/2013)
[2014] ZASCA 5
(12 March 2014), the local
authority had valued rateable property which was zoned and used for
multiple permitted uses, as ‘commercial
and residential’.
The municipality had, in terms of s 8 of the MPRA, catered in its
rates policy for the levying of different
rates in respect of
different categories of rateable property: in clarifying the
categories of property, the rates policy determined
that where
property had multiple purposes, the properties would be rated
according to the highest applicable tariff. The
business,
commercial and industrial uses of multi-purpose property attracted a
higher rate than the residential elements, and that
higher rate was
then applied to the residential properties.
The court emphasized the
need for municipalities to enact policies which are consistent with
the MPRA. In
City of Johannesburg
it appears that the
municipality categorised the property otherwise than in accordance
with the categories listed in s 8 of the
MPRA. The court emphasized
the fact that ss 2 and 3 of the MPRA oblige municipalities to
exercise their power to levy rates subject
to the provisions of the
MPRA, and in terms of policies which are consistent with that Act.
[9]
In
Kalil
N.O. & others v Mangaung Metropolitan Municipality & others
(210/2014)
[2014] ZASCA 90
(4 June 2014) the municipality had, in its
rates policy, approved increased rates to be applied to commercial
properties in the
municipal area. The appellant argued,
inter
alia
,
that the ratio between the proposed rate for commercial properties
and that of the residential properties exceeded the permissible
ratio
prescribed under s 19(1)(b) of the MPRA. The court held that the
actual use of the property was of cardinal importance as
a reason
advanced for business and commercial properties paying more than
other categories of property.
[10]
Mr
Dodson
emphasized that it was important to note that there are no
shareholders in any of the members of ISASA. In addition they are all
schools which are not designed to make a profit. The submission was
also made that as the subsequent policies of Ethekwini Municipality
included public benefit organisations, they have no option but to
accept the regulations as promulgated by the Minister.
[11]
Mr
Dodson
emphasised that SALGA was the authorised and
recognised representative of local government in South Africa.
They chose not
to oppose the regulations promulgated in terms of the
MPRA. When the litigation in the North Gauteng High Court was
proceeding,
Ethekwini Municipality was twice informed of the
litigation, but did not intervene. In the intervening period, no
party has rescinded
or appealed the order of that court. It is trite
that court orders cannot simply be disobeyed.
[12]
Mr
Dodson
submitted that the counter-application by Ethekwini
Municipality required this court to think away the order issued by
the North
Gauteng High Court. With regard to the publication of the
order Mr
Dodson
submitted:
(a)
The rationality behind the provisions of the MPRA were that public
benefit organisations
are to be protected from the imposition of
excessive rates.
(b)
SALGA, as the legal representative of the municipalities, was
consulted.
(c)
On the 21
st
December 2009 a letter was sent by the
Minister with a time limit within which representations were to be
made.
(d)
SALGA responded on the 8
th
April 2010, well after the
taking of the consent order, and the publication of the amended
regulations.
[13]
Mr
Dodson
emphasised the holistic approach to be adopted in an
analysis of the fairness of publication. The Minister was
entitled to
change his mind, and did so. In
South African Poultry
Association v Minister of Agriculture, Forestry and Fisheries &
others
[2016] JOL 36802
(GP), para 15 Fabricius J referred to
Minister of Health & another v New Clicks South Africa (Pty)
Ltd
2006 (2) SA 311
(CC), para 630 where Sachs J stated:
‘
The forms of facilitating an
appropriate degree of participating in the law-making process are
indeed capable of infinite variation.
What matters is that at the end
of the day a reasonable opportunity is offered to members of the
public and all interested parties
to know about the issues and to
have an adequate say’.
Fabricius
J also referred to
City of Tshwane Metropolitan Municipality v
Afriforum
& another (157/15)[2016] ZACC 19 (21 July 2016)
where the following was said in para 67:
‘
Public participation should not
be elevated to co-governance or equal sharing of executive and
budgetary responsibilities’.
…
Fabricius J concluded that: ‘Not
every procedural flaw will invalidate the consultation process….
A holistic view of
the five-year consultation process leads me to the
conclusion that a fair process was followed. It would be an
impossible burden
to simply repeat the chronology of events herein,
and to comment thereon by way of reference to each individual
meeting, letter
and email. I have considered the process as a
whole and deem it to be fair’
[14]
In
Electronic Media Network Limited & others v e. tv (Pty) Ltd
& others
(CG 140/16, CG141/16, CG145/16)
[2017] ZACC 17
, para
37 the court stated:
‘
Consultation, as distinct from
negotiations geared at reaching an agreement, is not a
consensus-seeking exercise. Within the
context of national
policy development it must mean that a genuine effort is being made
to obtain views of industry or sector roleplayers
and the public.
In other words, a genuine and objectively satisfactory effort must be
made to create a platform for the solicitation
of views that would
enable a policymaker to appreciate what those being consulted think
or make of the major and incidental aspects
of the issue or policy
under consideration. People or entities must be left to express
themselves freely on as wide a range
of issues, pertinent to a policy
proposal, as possible. The standpoints of interested parties,
who want to have their views
taken into account, must thus be allowed
to reach a policymaker. But, consultation fulfils a role that
is fundamentally different
from negotiation’.
[15]
Mr
Dodson
referred to the answering affidavit deposed to on behalf of the
Ministers in the Ethekwini Municipality counter-application, where
they deal extensively with the reasons for the 2010 changes.
[16]
With regard to the constitutional challenge to s 19(1)(b) of the
MPRA, this challenge is not
grounded in the Constitution, and there
is nothing to suggest where the legislation has gone wrong.
There has been a general
compliance regarding the separation of
powers between the national government and local government. In
addition, it is not
for the courts to opine on the appropriateness of
policy enacted by the legislature pursuant to the wishes of the
executive.
[17]
Mr
Dodson
pointed out that the reactive challenge by ISASA to the Ethekwini
Municipality’s rates policies from 2010 onwards, overlaps
with
the illegality challenge. The succession of policies are
non-compliant with the regulations, and there is no scope for the
statutory recognition of a category described as ‘commercial
and business’, when categories of property were required
to be
referred to by the municipalities.
[18]
Mr
Dodson
submitted that even if one interpreted the use of the word ‘may’
in s 8 (of the pre-2014 statute) as being permissive
rather than
peremptory, the municipalities were still required to categorise
entities according to the use of the property as opposed
to
categories of persons or owners. This is a clear direction in
the MPRA.
[19]
Mr
Singh
SC, who appeared for Ethekwini Municipality together
with Mr
Gani
, submitted that the following questions need to
be answered by this court (I exclude the procedural matters referred
to below):
(1)
Does s 8 of the MPRA require municipalities to include a category of
properties in its rates
policies, if legislation requires it?
(2)
Can regulations be reviewed when a court order requires such
regulations to be promulgated?
(3)
Are the regulations which were promulgated in 2010 valid?
(4)
Is s 19 (1)(b) of the MPRA unconstitutional and invalid?
[20]
Mr
Singh
submitted that the proposed invalidity of s 8 of the MPRA turns on an
interpretation of that section together with the other sections
of
the MPRA. He submitted that two judgments support the relief
sought, namely
Kalil
and
City of
Tshwane v Marius Blom & GC Germishuizen Inc & another
2014
(1) SA 341
(SCA).
[21]
Mr
Singh
submitted that the municipalities have autonomy and the freedom of
choice to include or omit any category of rate payers they deem
fit.
This choice given to municipalities is in accordance with the
provisions of s 152(1)(a) of the Constitution, which records
that the
object of local government is to provide democratic and accountable
government for local communities. Part of that
democratic
process is where municipalities make decisions with regard to local
taxes pursuant to a participatory process instigated
by the
municipality concerned. He accepted that municipalities should strive
to achieve the objects set out in the preamble to
the MPRA. Mr
Singh
submitted that the use of the word ‘may’ in the pre-2014,
s 8 provisions of the MPRA, determines the categories which
may
include those set out in that section. This section is not
designed to be prescriptive, and the degree of autonomy afforded
to
the municipalities is very wide. Mr
Singh
submitted that
Blom
was supportive of the submission that the list of categories set out
in s 8 (2) is not intended to be exhaustive, and it is competent
for
municipalities to add a category of ‘non permitted use’
to that list. The court a quo in
Blom
was of the view that additional categories had to be of a similar
nature, or of the same genus as those listed in s 8 (2).
[22]
In
Blom
,
Zondo J found that the list of rateable properties in s 8 (2) is not
exhaustive and that it is competent for a municipality to
add
categories to that list. The court held that municipalities
were entitled to make policy choices, and that there can
be no basis
for questioning the choices it makes with regard to properties that
may be differentially rated with respect to different
categories of
property. However, he referred to properties that may be
deferentially rated with respect to different categories
of property
– not different categories of owner. In addition the challenge
in
Blom
was to a category which was deemed to be unfair. In this regard, Mr
Dodson
argued that Ethekwini Municipality’s reliance on
Blom
is misplaced, as the municipality in question added on a category.
Whilst the list of categories in s 8 (2) may not be finite,
they must
be determined according to the use or permitted use of the property
or a combination of those two.
[23]
In
Kalil
an interdict was sought prohibiting a municipality from adopting a
council resolution concerning municipal rates. The applicants
complained that the decision to increase rates on business properties
required community participation which had not occurred:
the ratio
between the proposed rate for commercial properties and that on
residential properties exceeded the permissible ratio
prescribed
under s 19(1)(b) of the MPRA.
[24]
The court held that although there had not been proper consultation,
it did not follow that the
budget resolution of the previous year
should be set aside. The principal point of the case then became the
determination of the
rates ratio between residential and commercial
properties, and whether that determination offended the principle of
legality.
Ultimately the court had to consider whether the
conclusion reached by Southwood AJA in
South
African Property Owners Association v Johannesburg Metropolitan
Municipality & others
2013
(1) SA 420
(SCA) (‘Sapo’'), meant that s 19(2) prohibits
the imposition of a rate on any category of non-residential property
higher than the rate levied on residential property. In
Sapoa
the court found that there was insufficient consultation, and in
addition that the increased rate on business properties had no
rational basis. Thus the views of Southwood AJA regarding the attack
upon the decision under s 19(1)(b) was his view alone. It
was also
not part of the ratio of his judgment. In addition the point
had not been argued because the appellant had abandoned
reliance upon
it. In
Kalil
the majority pointed out that s 19(1)(b) provides that the
municipality may not levy a rate on non-residential properties that
exceeds a prescribed ratio to the rate on residential properties. It
did not find that a rate levied on non-residential properties
may not
exceed that imposed on residential properties. The court
disagreed with the conclusion of Southwood AJA and found
that the
rate which the municipality sought to impose in respect of business
properties was in any event not shown to have offended
the principle
of legality.
[25]
Mr
Singh
submitted that a municipality was entitled to have a category of
property as ‘business and commercial’, and even though
that category may include schools, even schools operating not for
profit, is a policy choice by the municipality. That policy choice
is
part of its autonomy and the powers given to municipalities to frame
their own policies.
[26]
Mr
Singh
conceded that after the 2014 amendment, if the provisions of s 8 are
constitutionally valid, municipalities have no option but
to include
the listed items in their rates polices. He submitted that
nonetheless, the change of interpretation was a ministerial
decision
indicating a change of mind, and not an explanation or reinforcing of
the previous legislation. He submitted that
a municipality was
not obliged to include a category of rate payers in its policies if
the regulations already prescribed a rate
for it.
[27]
Mr
Singh
conceded that if the interpretation point was decided in favour of
ISASA in the main application, the rest of the application would
fall
away with regard to the pre-2014 situation. With regard to the
post-2014 situation the municipalities had a moratorium
for seven
years.
[28]
In reply to the question whether a court could review regulations
where a court order compelled
promulgation of them, he submitted that
the municipalities were not reviewing the order of the North Gauteng
High Court.
This court was required to review the regulations
and their validity in order to decide whether they could stand
alone. He
submitted that the court order cannot stop me from
setting aside the regulations.
[29]
Mr
Singh
also
submitted that the regulations were not valid because the ministers
did not publish the regulations for public comment in terms
of s
84(a) of the MPRA. This section requires that the minister must
consult organised local government on the substance
of regulations to
be promulgated and publish the draft regulations in the Government
Gazette for public comment. He submitted
that it was a
non-sequitur
to suggest that since substantial compliance took place in 2007 for
the publication of the 2008 regulations, there was also substantial
compliance with the provisions of notice for the 2010 regulations. In
this regard he submitted that the 2007 consultations were
a completed
process and a final decision was made in respect of them.
[30]
It was common cause that during 2007, SALGA was concerned that many
municipalities had not implemented
proportional policies, or
completed valuations to anticipate the effect of doing so. It
had wanted to postpone the ratio
process, and the regulations
regarding them until the municipalities had implemented the
provisions of the MPRA. In those circumstances
it was unfair to draw
the positive statement contended for by Mr
Dodson
that no one had objected to the inclusion of public benefit
organisations and the policy that the rate of such an organisation
should bear a proportion to the residential rates.
[31]
In addition Mr
Singh
submitted that even though the signed letter containing the
complaints of SALGA was only delivered in April of 2010, an unsigned
letter had been sent in February of 2010, which was an indication
that the municipalities were opposed to the inclusion of public
benefit organisations. When ISASA challenged the 2009
regulations the Minister was placed on notice prior to the
promulgation
of the regulations in 2010. He submitted that it was
common cause that no notice had been published in terms of s 84(b) of
the
MPRA and the regulations were therefore not properly
promulgated. He conceded that SALGA should have attended to
matters
more promptly, but that there had nevertheless been no
substantial compliance.
[32]
With regard to constitutionality of s 19(1)(b), Mr Singh submitted
that the section takes away
the autonomy of municipalities to
determine the various categories of property and the rates leviable
on those categories of property.
He submitted that s 229(2)(b) of the
Constitution provided that the levying of rates by municipalities may
be regulated by national
legislation. He submitted that the word
‘regulated’ is notionally different to the language used
introductory phrase
in s 229(1)(a) which is:
‘
Subject
to subsections (2),(3) and (4), a municipality may impose –
(a)
rates on property …’
In
this regard he referred to
Maccsand
(Pty) Ltd & another v City of Cape Town & others
2011 (6) SA 633
(SCA), para 12, where the court dealt with the manner
in which powers are distributed among, and in some cases reserved, to
the
different spheres of governments. The necessary corollary of this
is that one government sphere may not usurp the functions of another,
although interference by one sphere in the affairs of another is
permitted in limited circumstances.
[33]
Mr
Singh
relied upon the approach of Jafta J in the minority judgment in
Merafong City v AngloGold Ashanti Ltd
2017 (2) SA 211
(cc) paras 171
and 177. That approach provides that a minister cannot impose
upon or limit or direct municipal powers. The
majority in Merafong
decided that case upon a different point and referred the collateral
challenge back to the high court.
[34]
Mr
Singh
submitted that s 19(1)(b) of the MPRA is invalid and should be set
aside
ab
initio.
Thereafter,
Ethekwini Municipality should be allowed to recover the outstanding
rates due by ISASA schools in terms of its
original policy. It
follows in those circumstances that the regulations promulgated
pursuant to s 19(1) will be set aside and that
there will no capping
of the ratio of rates.
[35]
Mr
Singh
also addressed me on the aspect of bias which was alleged to have
been exhibited on the part of Ethekwini Municipality. In
my
view there is no proper basis for such an allegation, when there are
other explanations which may as equally justify the approach
of
Ethekwini Municipality. I accordingly do not find it necessary
to deal with those suggestions.
[36]
Mr
Mokhare
SC, who
appeared for the two ministers together with Ms
Lithole
,
submitted that Ethekwini Municipality was correct in submitting that
if the ISASA application succeeds, that is the end of the
matter.
The submission, however, that if the court finds in favour of ISASA,
it should still consider the counter-application
is incorrect.
This is because if an interpretation of the court is accepted in
favour of ISASA, it cannot be one where the
interpretation could be
made in isolation, and it is not possible to interpret s 8 without
interpreting the provisions of s 19(1)
as well.
[37]
Mr
Mokhare
referred to the North Gauteng High Court order and said it was not a
settlement agreement which was made an order of court, but
rather an
order which was given by agreement between the parties. He drew my
attention to the provisions of s 165 of the Constitution
dealing with
the judicial authority of courts, and submitted that the court order
had to be given effect to until it was set aside.
However, no
party had approached that court to appeal or in any way deal with the
order.
[38]
That order was specific, and directed only one change to the
regulations as previously published.
It provided only for an upper
limit rate-ratio for properties described as public benefit
organisations as defined. No party
has at any stage since 2010
invoked the provisions of Uniform rule 42 in order to rescind, vary
or amend the order.
[39]
Mr
Mokhare
drew attention to the fact that the court order provided at prayer 2
that the regulations be published by the 30
th
March 2010. At that stage Ethekwini Municipality would have been well
aware of its own view that the process of consultation had
to be
restarted. Accordingly it would be untenable to suggest that the
provisions of s 84 of the MPRA had been violated to the
extent that
the court order or the regulations could be set aside because of
non-compliance with that section. The North
Gauteng High Court
had given effect to the wishes of the parties, and the court order
stands until it is set aside. Mr
Mokhare
submitted that the question posed by Mr
Singh
as to
whether the regulations could be reviewed when the court order did
not require the regulations to be published, was the incorrect
question, and the correct question was whether this court can set
aside the regulations in light of the court order.
[40]
In addition, Mr
Mokhare
drew attention to the provisions of s 163 of the Constitution and
submitted that SALGA was the recognised organisation which
represented
the interests of municipalities. Mr
Singh
admitted that SALGA did not act as it should have done and there is
accordingly no basis for Ethekwini Municipality to raise a
case of no
consultation, or submit that any serious procedural shortcoming was
present. The fact that the ministers had not
taken into account
the unsigned submissions delivered in February 2010 did not assist
SALGA or Ethekwini Municipality because
the credibility of the
communication was in doubt.
[41]
The focus by Mr
Singh
on non-compliance in terms of s 84(b) of the MPRA could not succeed
in the light of the North Gauteng High Court order. Mr
Mokhare
submitted that the only two matters to be resolved by me with regard
to Ethekwini Municipality’s counter-application was
the
reviewing and setting aside of the decision of the ministers to amend
the regulations of the 1
st
March 2010, and the declaration sought by Ethekwini Municipality that
s 19(1)(b) of the MPRA is unconstitutional and invalid because
it
restricts the powers of municipalities to levy rates at ratios
determined by the municipality.
[42]
Mr
Mokhare
referred to the fact that in his heads of argument Mr
Singh
sets out in paragraphs 166 to 172 thereof, the reasons why s 19
(1)(b) should be regarded as unconstitutional. Ms
Singh
dealt with the provisions of ss 40 and 41 of the Constitution dealing
with the different spheres of government, and their separate
functions. In addition s 151 to 154 of the Constitution deals with
the restrictions on national government from impeding a
municipality’s
autonomy. He referred to judgments of the
court a quo in
Merafong
,
which was overturned.
[43]
Mr
Singh
also submitted that any restriction on the imposition of rates
results in the two ministers concerned exercising the municipality’s
power which is unlawful and at odds with the constitutional scheme.
Mr
Mokhare
referred
to chapter 7 of the Constitution and the concept of local government
autonomy. He pointed out that that does not provide
blanket autonomy,
with s 229 (1)(a) being the starting point. It is necessary, as
stated in the Constitution, for the exercise
of local authority power
to be uniform across the board. This concept is expressed in s
16 of the MPRA, which makes it clear
that the autonomy of local
governments is not seen in isolation. Similarly, s 19 must be
seen within the scheme of the MPRA
which starts with the preamble
setting out, inter alia, that the purpose of the act is to enhance
certainty, uniformity and simplicity
across the nation. It is
necessary to interpret the provisions of s 19 in the context of the
other provisions of the MPRA,
in particular sections 2,3 and 8.
[44]
Mr
Mokhare
submitted
that s 19 of the MPRA must be seen in the context of the operations
of the three spheres of government, and the first
approach of a court
should be that it should be read to be constitutional, rather than to
seek to strike it down. He further
identified his case with the
arguments of Mr
Dodson
with regard to the provisions of the MPRA. In the circumstances he
submitted that the declarations sought by ISASA should be granted,
and the counter-claim by Ethekwini Municipality and Stellenbosch
Municipality dismissed.
[45]
Mr
Potgieter
SC, who
appeared for Stellenbosch Municipality together with Mr
Papier
,
focused on the procedural challenge to the regulations which were
promulgated pursuant to the court order of the 15
th
March 2010. He submitted that it was unconstitutional if the Minister
ignored the provisions of s 84(b) of the MPRA – the
requirement
for the publication of a draft for comment in the Government Gazette.
In addition, regulations are never promulgated
pursuant to a court
order. It appears, in any event, from the documents, that they were
promulgated on the 12
th
March 2010, and that the court order was only handed down on the 15
th
March 2010. The agreement, however, was concluded between ISASA
and the ministers prior to the 21
st
December 2009. He submitted that the agreement included the
promulgation of the regulations, which was done without the strict
compliance with a court order.
[46]
Mr
Potgieter
submitted that the 2009 amendment had dealt only with agriculture and
public service infrastructure matters. Just as ministers
were
entitled to change their minds, so could other affected parties in
the process. What had been followed was a process
of
promulgation in motion, and only consultation with the Minister of
Finance and SALGA had taken place.
[47]
Mr
Potgieter
drew my attention to the fact that there was no suggestion that the
complaints raised by SALGA which were unsigned, were any different
to
those that were delivered in April, 2010. The important thing
to note was that the Minister was aware that SALGA had objected.
The
Minister must have been aware that others had an interest, and there
was no justification for him to assume that no one would
complain
because of the consultations which had taken place in 2007.
Public participation was indicated, and the provisions
of s 84 of the
MPRA are peremptory. He pointed that it is not the case of the
ministers that there was substantial compliance
with that section,
but rather they did not have to comply with it. The 2007 consultation
process did not mean that publication
was unnecessary. They
excluded those who were interested in the excluded categories, and
who had a direct and substantial
interest and should have been
consulted.
[48]
Mr
Potgieter
submitted that the court order could not operate as a shield because
it was granted after the fact, as it were. In saying that,
he
concedes the status of the court order. However, the court order was
not pursuant to a considered judgment and could be viewed
differently
from an order given after a fully reasoned judgment. Nothing in
the court papers in the North Gauteng High Court
made out a case of
exemption from complying s 84( ) of the MPRA. Although there was no
indication in that section that it should
have been complied with in
this instance, there was nothing to gain say it either.
[49]
Anything done in terms of s 83 of the MPRA must be consistent with
the Act, and compliance with
s 84 then becomes obligatory. For
the ministers to have adopted an interpretation that there was
compliance with that statutory
obligation, the order should clearly
have said so. In addition, the Minister proceeded as if he was
required to comply with
s 84(a), but only dealt with SALGA, and
failed to comply with s 84(b). Mr
Potgieter
submitted
that non-compliance with s 84(b) was the nub of the application and
that he would not argue for a retrospective order.
He recorded that
the Stellenbosch Municipality concurred with the proposed order
sought by Mr
Singh
for the Ethekwini Municipality.
[50]
My reasoning:
The
Constitution very clearly sets out that municipalities, although
authorised to impose rates on immovable property, may not do
so in a
manner which materially and unreasonably prejudices national economic
policies, economic activities across municipal boundaries,
or the
national mobility of goods, services, capital or labour. The
Constitution clearly sets out that the power to levy
rates may be
regulated by national legislation. The national legislation is to be
found in the MPRA. It is a comprehensive piece
of legislation, the
purpose of which is set out in the preamble to the Act, which enjoins
municipalities to exercise a power to
impose rates within a statutory
framework that enhances certainty, uniformity and simplicity across
the nation. It is also
required to take into account historical
imbalances and the rates burden on the poor. This application
centres around the
levying of rates on public benefit organisations.
All the members of ISASA are public benefit organisations, as that
concept is
defined in s 30 of the Income Tax Act, 1962 read with item
4 of the ninth schedule to that Act.
[51]
The category of properties against which rates may be levied by
municipalities is a political
decision. Political decisions become
ultimately translated into legal instruments, setting out the manner
in which desired policy
objectives are to be achieved. Provided that
the Acts issued pursuant to the Constitution are constitutionally
sound, it is not
for courts of law to interfere with the policy
decisions themselves. Those decisions are made by the other two
arms of government.
[52]
Promulgating national legislation in order to achieve desired policy
decisions is not the kind
of intervention by national or provincial
governments which is referred in s 151(4) of the Constitution:
compromising or impeding
a municipality’s ability or right to
exercise its powers or perform its functions. The municipal
level of government
is not given c
arte
blanche
to make any policy decision which it chooses. The guidelines are set
out in the MPRA. That is the piece of legislation which
the
legislature chose to be the directing hand behind the levying of
rates.
[53]
It is important to note that when the 2007 draft regulations were
published for comment, no municipality
cited the public benefit
organisations as a source of concern. Nor did SALGA, which is
the authorised and recognised representative
of local government
throughout the Republic of South Africa.
[54]
Accordingly, Ethekwini Municipality was not at large to make a policy
decision which is directly
at odds with the MPRA. To suggest
that it could include non-profit making schools in the category
‘business and commercial’
makes no sense where a category
had already been provided for in the MPRA. This is because, to
the knowledge of Ethekwini
Municipality, all those schools were
public benefit organisations, and the municipality was, in terms of s
19 read with s 8 of
the MPRA, obliged to categorise public benefit
organisations accordingly. It is surely incorrect to
re-categorize an organisation
such as a public benefit organisation
in contravention of the MPRA, simply because it suits the
municipality to do so. That
this was a contravention of the
MPRA was pointed out in correspondence addressed to the Ethekwini
Municipality employees at an
early stage of the dispute. Their
response was simply to ignore the truth of what the schools were, and
to continue with
the incorrect categorisation. In my view their
conduct in doing so was ill-advised.
[55]
In addition, to suggest that Ethewkini Municipality has a seven-year
moratorium to deal with
the post-2014 situation is unreasonable when
it has already taken steps to abide by the amendments.
[56]
I cannot agree with the suggestion by Mr
Singh
that a municipality which had already categorized an entity, was not
obliged to change the categorisation if the regulations already
prescribed a rate for it. This simply ignores the legislative
intent that municipalities are required to follow the spirit
and
import of the MPRA.
[57]
The suggestion that this court could review the regulations which had
been published pursuant
to the North Gauteng High Court order is
implausible. The judgment stands, and it has not been appealed
or set aside.
Notionally, perhaps, a situation may arise where
an error could have occurred in the publication of the regulations.
That
however is not the position with which I am faced, and there is
no need to consider it.
[58]
With regard to the complaints by Mr
Singh
and Mr
Potgieter
that there was insufficient consultation in terms of s 84(b) of the
MPRA, I believe that the process adopted was both sufficient
and
fair. ISASA has brought an application against the two
ministers and SALGA. SALGA had every opportunity to comment
on
the proposed amendments, which were extremely limited in scope. They
did not do so properly and timeously.
[59]
It is incorrect to suggest that the Minister ought to have accepted
the unsigned objections delivered
in February 2010. The
correspondence in this regard demonstrates the fact that the Minister
was not obliged to take notice of objections
in a document where the
provenance of that document was in doubt.
[60]
I agree generally with the submissions made by Mr
Mokhare
.
In particular I agree that the process of interpreting the provisions
of the MPRA as constitutionally valid requires a reading
of both s 19
and 8 of the MPRA. I also agree that the question to be
answered is whether I am able to set aside the 2010
regulations in
the light of the North Gauteng High Court order.
[61]
I have set out my views above on the need for publication in terms of
the s 84(b) of the MPRA.
I disagree with the submission of Mr
Potgieter
that publication was peremptory in the circumstances in which the
ministers found themselves. No one was excluded in the
publication of the regulations pursuant to the order. Indeed,
SALGA was a party to the application, and the Ethekwini Municipality
was notified on two occasions of the existence of the dispute.
[62]
In all the circumstances, and observing the caveat by Mr
Mokhare
that I should be inclined to uphold subsidiary legislation as being
constitutional unless it is clearly not so, I cannot find that
the
provision of s 19 and s 8 of the MPRA, either prior to, or after
2014, were unconstitutional. Similarly, I do not find
the 2010
regulations namely, Amended Municipal Property Rates Regulations on
the rate ratios between Residential and Non-Residential
Properties,
GN R.195,
GG
33016
¸12
March 2010 to be unconstitutional and invalid.
[63]
I should mention that most of the 1 818 pages comprising this
application are composed of
various applications which were brought
after Ethekwini Municipality had introduced its counter-application.
ISASA sought to amend
its notice of motion from time to time, using
the expedient of uniform rule 28. In order to explain the reactive
challenge contained
in the continuing amendments to its notice of
motion, ISASA used the expedient process of what it refers to as an
‘explanatory
affidavit’. This attracted a great deal of
criticism both in the application papers and in the heads of
argument. Indeed
ISASA continued to seek to have the succeeding rates
policies of Ethekwini Municipality reviewed and set aside up to the
2017/18
years.
[64]
Ethekwini Municipality takes the point that the causes of action in
relation to all the policies
after 2010 had not yet accrued when
those amendments were made, and the cause of action of ISASA was
impermissibly widened.
One of the problems is that Ethekwini
Municipality did not, as it could, and perhaps should, have done, was
to have its objections
and applications dealt with expeditiously over
the nine years during which this application has taken to reach this
stage. This
included: an application by Ethekwini Municipality to
strike out three affidavits, an application by ISASA to extend the
time period
in the
Promotion of Administrative Justice Act, 2000
, and
requests by Ethekwini Municipality for the delivery of further
affidavits. This last category could have been avoided by the
simple
expedient of pleading over – something the Ethekwini
Municipality could easily have done – but, contrary to
the
weight of authority, chose not to do.
[65]
Given the conclusion at which I have arrived at in this judgment,
there is no need for me to
enter into the debates regarding those
applications. This is because they all become irrelevant in the
circumstances. I accordingly
do not deal with them.
[66]
With regard to the question of costs, the parties are
ad idem
that I should follow the approach adopted in
Trustees,
Biotech
Trust v Registrar: Genetic Resources, & others
2005 (4) SA
111
(T). The principles set out in that case, however, were
designed to shield unsuccessful litigants in legal proceedings
against
the state, from having to pay the costs of the state in
constitutional challenges. The principle would apply as between
the
ministers and Ethekwini Municipality and Stellenbosch
Municipality. The principle is not, however, applicable to the
costs
of ISASA. In my view Ethekwini Municipality and
Stellenbosch Municipality should not have opposed the relief sought
by ISASA,
and it was unreasonable of them to have done so.
[67]
I accordingly make the following order:
(1)
It is declared that Ethekwini Municipality may not henceforth (and
was not, with effect
from the 1
st
July 2010 permitted to)
levy a rate in excess of 25 per cent of the rate levied by it on
residential property, on:
(a)
Non-residential properties owned by public benefit organisations as
contemplated in terms
of s 30 of the Income Tax Act, 1962 (‘the
Act’) and used for the specified public benefit activity of
education and
development as contemplated in item 4 of the ninth
schedule to the Act.
(b)
Property owned by the rate payers whose names are listed in the
schedule annexed hereto
marked ‘X’ and used for the
specified public benefit activity of education and development as
contemplated in item
4 of the ninth schedule to the Act, provided
that they retain their status as public benefit organisations in
terms of s 30 of
the Act.
(2)
Ethekwini Municipality is directed to levy a rate on the property of
public benefit organisations,
such rate as defined in Regulation 1,
with effect from the 1
st
July 2010 in compliance with the
Local Government: Municipal Property Rates Act, 2004
, and with
Regulation 2
of the amended regulations promulgated pursuant
thereto.
(3)
Ethekwini Municipality and Stellenbosch Municipality, the one paying,
the other to be absolved,
are directed to pay the applicant’s
costs, such costs to include those consequent upon the employment of
two counsel.
(4)
Ethekwini Municipality, Stellenbosch Municipality, the National
Minister for Cooperative
Government and Traditional Affairs, and the
National Minister of Finance shall each bear their owns costs.
Lopes
J
Date
of hearing:
5
th
June 2019.
Date
of Judgment:
28
th
June
2019
For the
Applicant: Mr
A Dodson SC and Mr L Sisilana (instructed by Shepstone & Wylie
Attorneys).
For the First Respondent:
Mr
N Singh SC and Mr H S Gani (instructed by Linda Mazibuko and
Associates).
For
the Second and Third Respondent: Mr W R Mokhare SC
and Ms C Lithole
(instructed by The State
Attorney)
Intervening Party:
Mr
D Potgieter SC and Mr Pieper (instructed by Webber Wentzel)