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[2018] ZAGPJHC 523
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Pareto Limited v City of Johannesburg Metropolitan Municipality (39314/2015) [2018] ZAGPJHC 523 (13 September 2018)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NUMBER: 39314/2015
In
the matter of:
PARETO
LIMITED
Plaintiff
CITY
OF JOHANNESBURG METROPOLITAN
MUNICIPALITY
Defendant
Coram:
WEPENER J
Heard:
3 September 2018
Delivered:
13 September 2018
Summary:
The effect of declaring that, when taking a decision,
the party who took the decision failed to comply with the prescribed
statutory
requirements. Such decision contravenes the principle of
legality. Such a declaration does not automatically result in
invalidity.
It remains extant unless set aside by a court.
JUDGMENT
WEPENER
J:
[1]
The plaintiff is Pareto Limited, a public company duly registered as
such in terms of the company laws of South Africa, being
legally
obliged to pay rates to the defendant as determined by the defendant,
in respect of immovable properties owned by the plaintiff
within the
defendant’s area of rating. Such rates were to be determined as
falling into the business, commercial and industrial
category.
[2]
The defendant is the City of Johannesburg Metropolitan Municipality
established in accordance with the laws of the Republic
of South
Africa.
[3]
The parties presented a stated case of agreed facts and required a
decision based thereon. The only issue that eventually remained
for
consideration is the following: Whether the judgment of the Supreme
Court of Appeal
[1]
entitles the
plaintiff to claim the amount of R6,462,503, set out in its summons
together with interest and costs. This amount
represents the
difference between the amount paid by the plainitff in terms of an
impugned decision taken by the defendant and
the amount it would have
paid had the decision not been taken.
[4]
Before me was the narrow issue of whether the crucial finding therein
entitled the plaintiff to make a claim, ie, the finding
that the
defendant
‘
failed to comply with the
prescribed statutory requirements and procedures in arriving at its
decision on 21 May 2009 to impose
a rate of R0.0154 in the Rand on
the value of business, commercial and industrial properties. . . .’
and
the declaration
‘
that the first, second and
third respondents failed to comply with the prescribed statutory
requirements and procedures in arriving
at the decision. . . .’
The
declaration came about as a result of the defendant, when materially
amending its budget, was required, but failed to follow
all statutory
procedures it was obliged to follow when it proceeded to adopt a
budget.
[2]
The question that
arises is the legal consequences of this declaration by the Supreme
Court of Appeal and in particular the plaintiff’s
right to
recover amounts overpaid. The plaintiff’s entitlement to rely
on any possible benefit of the order of the Supreme
Court of Appeal
was also not in dispute.
[3]
The
stated case sets the matter out thus:
‘
9. On 16 March 2009 the
Defendant passed a resolution as contemplated in section 17(3) of the
Finance Act and / or Section 14 of
the Rates Act in terms of which it
approved a property rate of 0.0132c in the Rand based on the market
value of immovable properties
that we categorised as “business,
commercial and industrial” for the period 1 July 2009 to 30
June 2010.
10. On 21 May 2009 the Defendant
adopted a resolution as contemplated in section 17(3) of the Finance
Act and / or Section 14 of
the Rates Act to increase the property
rate referred to in paragraph 9 above to a property rate of 0.0145c
in the Rand on the market
value of immovable properties categorised
as “business, commercial and industrial” for the period 1
July 2009 to 30
June 2010.
11. Pursuant to the above, the
Defendant levied upon the Properties the property rates as referred
to in paragraph 10, based on
the market value thereof, and rendered
monthly accounts to the Plaintiff in respect thereof in terms of
section 27 of the Rates
Act.
12. During the period 1 July 2009
until 30 June 2010 the Plaintiff paid to the Defendant its
proportionate share of the amounts
claimed by the Defendant as being
due and payable by the Plaintiff in respect of property rates payable
in respect of the Properties
as per the statement rendered by the
Defendant to the Plaintiff, in the aggregate the amount of
R60,570,666,00.
13. On or about 8 November 2012 and in
the matter between South African Property Owners Association (SAPOA)
and the Council of the
City of Johannesburg Metropolitan Municipality
and others under case number 648/2011, the Supreme Court of Appeal of
South Africa
declared that the first, second and thirds respondents
in that matter (consisting of the Council of the defendant in the
present
matter; the executive mayor of the defendant and the
defendant) failed to comply with the prescribed statutory
requirements and
procedures in arriving at the decision of the 21
May 2009 to impose a rate of R0,0154c in the Rand on the value
of properties
that were categorised “business, commercial and
industrial” properties and found that:
13.1 the Defendant failed to comply
with the provisions of the Systems Act, the Rates Act and the Finance
Act.
13.2 the Defendant, by imposing an
additional increase of 18% in the rates payable in respect of
properties categorises as “business,
commercial or industrial”,
acted unlawfully; and
13.3 the rates levied on properties
categorised as “business, commercial or industrial” in
the 2009 / 2010 budget
year, had been imposed unlawfully, and
contrary to the provisions of Section 19(1)(b) of the Rates Act.’
[5]
The plaintiff’s counsel submitted, correctly in my view, that
Sapoa
did not seek a
review of the defendant’s decision, which in turn, would have
had specific consequences but rather that
Sapoa
attacked the decision based on the principle of legality
‘
.
. . in terms of which the Council’s decision had to be taken in
accordance with the law failing which it was invalid to
the extent
that it was inconsistent with the law.
[4]
It
was submitted that once the declaration was issued by the Supreme
Court of Appeal, and in the absence of exercising any power
under s
172(1)(b) of the Constitution,
[5]
the declaration has the effect of a declaration of invalidity. It
took effect immediately from the date on which the impugned decision
was taken,
[6]
resulting in it
being void ab initio. Upon a declaration of invalidity due to the
failure by the defendant to comply with prescribed
statutory
prescripts, a court is empowered to ameliorate the finding by
utilising the provisions of s 172(a)
[7]
of the Constitution. The Supreme Court of Appeal, however, did not
utilise this power and thus, it was argued, left no room for
a
partial implementation of the impugned decision and did not validate
it in any respect. I will return to the argument that the
declaration
of non-compliance leads to invalidity.
[6]
Against this, the defendant’s counsel submitted that the
Supreme Court of Appeal did not set aside the impugned decision
and
therefore there is no basis on which the plaintiff can base its
action. The argument is that, because the Supreme Court of
Appeal did
not declare the decision invalid and set it aside, it resulted in the
principle expounded in
Oudekraal
Estates (Pty) Ltd v The City of Cape Town and Others,
[8]
being applicable.
The principle is that an executive or administrative decision, once
taken, continues to have legal effect until
it has been reviewed and
set aside by a court. There is no dispute between the parties that
the
Oudekraal
principle is also applicable in matters even when the decision at
issue did not amount to administrative or executive action
[9]
.
Counsel for the defendant submitted that, having regard to the
aforementioned, the defendant’s decision was valid and
effectual
and that payments made pursuant thereto were properly made.
[7]
It is, in my view, not contentious that the Supreme Court of Appeal
did not review the decision under PAJA
[10]
.
This was clearly so because it was not called upon to review the
decision on that basis. This much is clear from the
Sapoa
judgment:
[11]
‘
As the imposition of rates is
not administrative action, Sapoa did not seek to review and set aside
the Council’s budget or
the decision to levy an additional 18%
rate on business properties in terms of the
Promotion of
Administrative Justice Act 3 of 2000
. It case is based on the
principle of legality in terms of which the Council’s decision
has to be taken in accordance with
law, failing which it was invalid
to extent that it was inconsistent with the law.’
The
action of the decision maker was in any event not reviewable
[12]
:
‘
It follows that the imposition
of the rates and the levies and the payment of the subsidies did not
constitute “administrative
action” under
section 24
of
the interim Constitution.’
The
defendant’s case is squarely based on the absence of a setting
aside of the decision and consequently that, according
to its
argument, the decision remains extant.
[8]
The decision was attacked on the basis of legality, ie, that the
decision was not taken in accordance with the law failing which
it is
invalid and thus unconstitutional. That is also the basis upon which
the Supreme Court of Appeal issued the declaratory order.
The Supreme
Court of Appeal did not declare the decision invalid nor did it set
it aside, as it could have done. I am of the view
that the Supreme
Court of Appeal carefully weighed up
[13]
the matter and did not intend to and did not invoke its powers to
declare the decision invalid or invoke any powers pursuant to
s 172
of the Constitution. It did not do so because of the view, as Navsa
JA said
[14]
:
‘
My colleague is, with respect,
correct when he states that it was recognised on behalf of SAPOA in
so far as the setting aside of
the budget is concerned, that the egg
could not be unscrambled. And as he pointed out also, s 172 of the
Constitution requires
that although the court must declare conduct
that is inconsistent with the Constitution invalid to the extent of
its inconsistency,
it may make any order that is just and equitable.
In my view it is fair and equitable now, for the reasons I have set
out and follow,
not to order the repayment of rates that were not
validly imposed.’
[15]
[9]
When a court pronounces on the validity of a matter that is
inconsistent with the Constitution, s 172 of the Constitution allows
for the court to ameliorate the consequences if it so decides by
imposing an order that is just and equitable including –
‘
(i) an order limiting the
retrospective effect of the declaration of invalidity; and
(ii) an order suspending the
declaration of invalidity of any period and on any condition, to
allow the competent authority to correct
the defect.’
It is clear why no order
pursuant to the provision of s 172 of the Constitution was issued.
The Court recognised the effect if it
set the decision aside. It
held
[16]
‘
Although counsel on
behalf of SAPOA persisted in having the rate improperly imposed set
aside, he advisedly recognized the difficulties
of a court even
attempting to set aside the 2009/2010 budget, two budgetary periods
thereafter. Successive budgets are based on
surpluses or deficits
from prior periods. One is built on the outcome of the other. This,
in modern language, is called a knock-on
effect. The legality of the
budgets for the successive periods has not been challenged.
Considering the knock-on effect it must
be so that any subsequent
increase in rates would have owed its genesis to and been premised on
the rate presently sought to be
impugned.’
[10]
The Supreme Court of Appeal went further and expressly declined to
set aside the decision
[17]
:
‘
If, as the parties and my
colleagues accept, the effluxion of time and the practical realities
referred to above dictate that the
budget for the 2009/ 2010 year
cannot be set aside, the corollary must be that, the rate in
question, which was its principal component,
also cannot be set
aside.’
[11]
A further indication that the Supreme Court of appeal did not intend
to undo the decision but only to regulate future conduct
is found
where Navsa JA held that
[18]
:
‘
For all these reasons I would
refrain from ordering the undoing of any constituent part of the
2009/2010 budget and adding any additional
orders other than the
limited ones I propose. Does this mean the Council can continue
flagrantly flouting the law with impunity?
The short answer based on
the principle of legality is no. If it becomes clear that the Council
has not rectified or is not willing
to deal with the shortcomings in
the valuation roll, an application to court for a mandatory interdict
would be warranted in advance
of the budgetary process.’
[12]
The Supreme Court of Appeal refrained from granting an order of
invalidity and to set the decision aside. The failure of the
defendant to comply with the relevant statutory provisions does not
necessarily lead to the decision under scrutiny being rendered
invalid.
[19]
Where a
court deliberately refrains from doing so, as it is entitled to
do,
[20]
the decision remains
extant. Although the remarks in
Sapela
were made in relation to review proceedings, there is no reason why
it should not apply when the principle of legality is considered.
The
result is that the decision was to be regarded as factually in
existence at the time when payments were made. The payment of
rates
were therefore not made ‘sine causa’.
[13]
Relying on the matter of
Danster
[21]
the plaintiff submitted that the decision of the defendant was void
ab initio.
Danster
,
however was expressly overruled in
De
Kock v Van Rooyen
[22]
and dealt with the effect of an order declaring a law to be invalid.
In this matter the Supreme Court of Appeal deliberately refrained
from making a declaration of invalidity.
[14]
In the circumstances, the plaintiff’s claim is dismissed with
costs.
__________
Wepener
J
Counsel
for Plaintiff: J.J. Reyneke SC
Attorneys
for Applicant: Blake Bester De Wet & Jordaan Inc.
Counsel
for Defendant: K. Pillay SC with T. Makgate and K. Motshadi
Attorneys
for Defendant: Mogaswa Inc.
[1]
Sapoa v Council of the City
of Johannesburg Metropolitan Municipality
[2013] 1 AllSA 1451 (SCA).
[2]
Sapoa
para 67.
[3]
Kouga Municipality v
Bellingan and Others
2012
(2) SA 95
(SCA) para 21.
[4]
Sapoa
para 5.
[5]
‘172. (1) When deciding a constitutional matter within its
power, a court—
(a) . . .
(b) may make any order that is just
and equitable, including—
(i) an order limiting the
retrospective effect of the declaration of invalidity; and
(ii) an order suspending the
declaration of invalidity for any period and on any conditions, to
allow the competent authority
to correct the defect.’
[6]
Danster v S; Nquido v S
[2002] JOL 9475
(C) at p6.
[7]
‘(1) When deciding a constitutional matter within its power, a
court—
(a)
must declare that any law or conduct that is inconsistent with the
Constitution is invalid to the extent of its inconsistency;’
[8]
2004 (6) SA 222 (SCA).
[9]
See
MEC for Health, Eastern
Cape and Another v Kirland Investments (Pty) Ltd t/a Eye and Laser
Institute
2014 (3) SA 481
(CC);
Gundwana v Steko
Development CC and Others
2011
(3) SA 608
(CC) para 58;
Economic
Freedom Fighters v Speaker, National Assembly and Others
2016 (3) SA 580 (CC).
[10]
Promotion of Administrative Justice Act 3 of 2000
.
[11]
At para 5.
[12]
Fedsure Life Assurance Ltd
and Others v Greater Johannesburg Transitional Metropolitan Council
and Others
199 (1) SA 374
(CC) para 45.
[13]
Millennium Waste Management
(Pty) Ltd v Chairperson, Tender Board: Limpopo Province & Others
2008 (2) SA 481
(SCA) para 23.
[14]
Sapoa
para 70.
[15]
Sapoa
para 70.
[16]
At para 71.
[17]
Sapoa
para 75.
[18]
Sapoa
para 79.
[19]
Liebenberg NO and Others v
Bergrivier Municipality
2013 (5) SA 246
(CC) para 26.
[20]
Chairperson, Standing
Tender Committee and others v J JFE Sapela Electronics (Pty) Ltd and
Others
2008 (2) SA 638
(SCA) para 28.
[21]
Note 6, supra.
[22]
2005 (1) SA 1
(SCA).