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[2015] ZAKZDHC 93
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P.A. Pearson (Pty) Ltd v Ethekwini Municipality and Others (13270/2012) [2015] ZAKZDHC 93; 2016 (4) SA 218 (KZD) (2 December 2015)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
LOCAL DIVISION, DURBAN
CASE
NO: 13270/2012
DATE:
02 DECEMBER 2015
REPORTABLE
In
the matter between:
P.
A. PEARSON (PTY)
LTD
....................................................................................................
Applicant
And
EThekwini
MUNICIPALITY
...............................................................................................
Respondent
NATIONAL MINISTER
FOR CO-OPERATIVE
GOVERNANCE
AND TRADITIONAL
AFFAIRS
...............................................
Second
Respondent
KZN MEC FOR
CO-OPERATIVE GOVERNANCE
AND
TRADITIONAL
AFFAIRS
...............................................................................
Third
Respondent
JUDGMENT
Delivered:
02 December 2015
MARKS,
AJ
INTRODUCTION
[1]
The applicant seeks from the first respondent the payment of R1 431
442.88 and interest from 12 March 2012 in respect of a payment
made
under protest on 12 March 2012, together with an order as to
costs.
[2]
No relief is sought against the second and third respondent as the
challenge to the constitutional validity of the relevant
legislation,
which is pivotal to the proceedings and was sought in the amended
notice of motion, was withdrawn on 5 November 2015
when the matter
was argued before me on an opposed basis, and judgment was reserved.
[3]
The central dispute between the parties is the interpretation of
section 102(1)(b) of the Local Government: Municipal Systems
Act No.
32 of 2000 (“the Systems Act”) i.e. whether the
section permits the re-allocation of payments made for
electricity
and utilities supplied, from one account to another account, of the
same account holder.
[4]
A summary of the facts which are not in dispute is as follows:
1.
Andrew Mark Goodman (“Goodman”),
the deponent to the Founding Affidavit, is a Director of the
applicant (Pearson). He
was also the Managing Director of the
entity known as Microfinish Manufacturing (Pty) Ltd (“Microfinish”),
and a director
of an associate company Helio Microfinish South Africa
(Pty) Ltd (“Helio”).
2.
The applicant (Pearson) owns a property
situated at 5 Wareing Road, Pinetown. Microfinish occupied the
premises in Wareing
Road and Helio occupied the premises at Goodwood
Road which property is owned by Cherokee Rose 164 CC (“Cherokee
Rose”).
3.
Microfinish was the account holder for
both
these accounts with the respondent (“Municipality”) for
the supply of utilities and services such as electricity and
water to
both properties. Therefore, Microfinish had two different
accounts with the Municipality, for two different properties
which
were owned by two different owners (Pearson and Cherokee Rose).
4.
On 6 September 2011, Ms Happiness Gama,
(Gama) the deponent to the answering affidavit, and the Credit
control Manager of the Municipality
, advised Goodman that
Microfinish was in arrears in excess of R2, 5 Million in respect of
both accounts for the respective two
properties. She also advised
that she intended to notify the landlord Cherokee Rose.
5.
On 13 October 2011. Goodman requested Gama
to hold off on the notification to the landlord of Cherokee Rose
regarding the arrear
rental account as he was in the process of
negotiating a new tenant for the Cherokee Rose owned premises.
6.
On 14 October 2011, the total debt in
respect of both the accounts held by Microfinish was in excess of R 3
Million. Gasa informed
Goodman that the Municipality had no option
but take the necessary steps to safeguard its position.
7.
Microfinish was wound up by special
resolution dated 3 November 2011. This was registered with the
Companies and Intellectual
Properties Commission on 18 November 2011.
8.
As at 17 November 2011, Microfinish was
indebted to the Municipality in the sum of R1 700 000.00 in
respect of Pearson’s
property and R1 400 000.00 in
respect of the property owned by Cherokee Rose. Goodman was
advised by Gama, that
the Municipality intended to invoke section
102(1)(b) of the Systems Act.
9.
On 19 November 2011 the Municipality
credited the payments made by Microfinish in respect of the Pearson
property to the indebtedness
of Microfinish in respect of the
property owned by Cherokee Rose, thereby extinguishing the
indebtedness of Microfinish in respect
of electricity services on the
property owned by Cherokee Rose.
10.
The Municipality, in attributing the
payments of Microfinish from one account to another account held by
Microfinish, contends that
it acted in terms of section 102(1)(b) of
the Systems Act which authorises such re-allocation.
11.
The debt owed by Microfinish in respect of
the Account for the Pearson property was still due and owing.
However, Microfinish was
unable to make payment due to the
aforementioned liquidation. During this period, Pearson and the
Municipality were involved in
discussions regarding settlement of the
outstanding debt. Being unable to resolve the issue, the Municipality
cut off the services
and utilities at the Pearson Property.
12.
On 12 March 2012 Pearson being the owner of
the property made payment to the Municipality in the sum of
R2742191.02 which included
the amount of R1431442.88 that had been
previously transferred. It is this last mentioned amount that was
paid under protest that
Pearson is seeking payment together with
interest and costs in the present matter.
13.
Helios has since also been liquidated.
ISSUES
[5]
The crisp issue between the parties in this matter is whether section
102(1)(b) of the Systems Act empowers the Municipality
to credit
payments made by an individual account holder to any other account of
that account holder held by the Municipality.
Both
counsel for the applicant, Mr G.D. Goddard and counsel for the
respondent, Mr J.P. Broster, agree that there being no dispute
of
fact, the question of whether the Municipality is so authorised is a
matter of law and may be determined on the papers.
Moreover, it
is incumbent upon this court to interpret the provisions of section
102(1)(b) of the Systems Act. Both counsel
are in agreement
that the Systems Act is a legislative measure intended to support and
strengthen the capacity of municipalities
to manage their own
affairs, exercise their powers and perform their functions.
[6]
Mr Goddard contended that the provisions of the Systems Act cannot
properly be interpreted to authorise the Municipality to
manipulate
the accounts of a customer or account holder so that a charge on one
property becomes payable by the owner of a different
property.
It was further argued that whilst section 118(3) of the Systems Act
places a liability on the owner of the property
to pay for an account
on his property, there is no legal liability on Pearson to pay for
services provided to Microfinish at the
other property not owned by
Pearson.
He
further contended that the consequences of the Municipality’s
conduct has the result that Pearson has had to pay for utilities
supplied to a property owned by another party (Cherokee Rose) which
amounts to an arbitrary deprivation of Pearson’s property.
Further that section 25(1) of the Constitution
[1]
prohibits any law from permitting arbitrary deprivation of the
property. Further that section 39(2) of the Constitution
requires that all legislation must be interpreted to promote the
spirit, purport and objects of the Bill of Rights. Finally,
he
contended that section 102(1)(b) cannot correctly be interpreted to
authorise the Municipality to act as it has, it is unconstitutional
and should not be allowed.
[7]
Mr Broster contended that section 102(1)(b) of the Systems Act,
empowers the Municipality to credit payments of an account holder
and
re-allocate those funds to any account held by the person who is
liable to make payment to the Municipality for services rendered.
He
further contended that the Municipality’s entitlement to credit
a payment is not confined to a single transaction.
The wording
of the section is neutral as regards “re-allocation” of
monies paid and there is nothing in the language
of the section to
prevent payments being re-allocated to another account so long as the
account holder is the same. Further,
the respondent did not
rely or utilise the provisions of section 118(3) and thus section
118(3) of the Systems Act is irrelevant.
[8]
To determine the issue, it is incumbent on the court to interpret the
provision of the Systems Act. Interpretation is the process
of
attributing meaning to the words used in a document, be it
legislation, some other statutory instrument or contract.
The
present state of the law in regard to interpretation was succinctly
expressed by Wallis JA in
Natal Joint Municipal Pension Fund v
Endumeni Municipality
2012 (4) SA 593
(SCA) at para 18, where it
stated:
“
.
. . The present state of the law can be expressed as follows.
Interpretation is the process of attributing meaning to the
words
used in a document, be it legislation, some other statutory
instrument, or contract, having regard to the context provided
by
reading the particular provision or provisions in the light of the
document as a whole and the circumstances attendant upon
its coming
into existence. Whatever the nature of the document, consideration
must be given to the language used in the light of
the ordinary rules
of grammar and syntax; the context in which the provision appears;
the apparent purpose to which it is directed
and the material known
to those responsible for its production. Where more than one meaning
is possible each possibility must be
weighed in the light of all
these factors. The process is objective not subjective. A sensible
meaning is to be preferred to one
that leads to insensible or
unbusinesslike results or undermines the apparent purpose of the
document. Judges must be alert to,
and guard against, the temptation
to substitute what they regard as reasonable, sensible or
businesslike for the words actually
used. To do so in regard to a
statute or statutory instrument is to cross the divide between
interpretation and legislation. In
a contractual context it is to
make a contract for the parties other than the one they in fact made.
The ‘inevitable point
of departure is the language of the
provision itself’, read in context and having regard to the
purpose of the provision
and the background to the preparation and
production of the document.”
[9]
INTERPRETATION OF SECTION 102 OF THE MUNICIPAL SYSTEMS ACT
9.1
In respect of the interpretation of section 102(1)(b) the section
ought to be interpreted so as to have regard to the language
of the
provision itself, read in its context and having regard to the
purpose of the provisions and the background to the legislation.
Furthermore, all legislation must be interpreted to promote the
spirit, purport and objects of the Bill of Rights.
[2]
Section
102 of the Municipality Systems Act states:
"(1)
A municipality may –
(a)
consolidate any separate accounts of persons liable for payments to
the municipality;
(b)
credit a payment by such a person against any account of that person;
and
(c)
implement any of the debt collection and credit control measures
provided for in this Chapter in relation to any arrears on
any of the
accounts of such a person."
9.2
Section 102 of the Act is located in chapter 9 of the Act which deals
with credit control and debt collection. The provisions
of section
102 of the Act have been held to present no controversy. Section 102
of the Act has been considered in both the judgments
of
Rademan
v Moqhaka Local Municipality
2013 (4)
SA 225
(CC); and
Body Corporate
Croftdene Mall v Ethekwini Municipality
2012 (4) SA 169
(SCA).
Neither
of these judgments dealt with the effect of section 102(1)(b) of the
Systems Act. Moreover, in the limited time allocated
I have
been unable to find any case law or precedent dealing with section
102(1)(b) of the Systems Act and neither did counsel
refer me to any
cases
9.3
Having regard to the language of section 102 of the Act the following
is clear from a plain linguistic interpretation: Section
102(1)(a)
deals with the consolidation of any separate account of any persons
liable to pay the municipality. The effect of consolidation
is that
the various accounts of an individual are consolidated into a single
account. The account holder is then presented with
an account which
has various components such as electricity, water and rates. The
account holder is not permitted to pay part of
the account but is
required to pay the whole account subject to section 102(2) of the
Act.
In
other words, the account holder cannot choose or opt to pay part of
an account. See
Rademan v Moqhaka
Local Municipality (supra)
para 20; 30
to 33
9.4
Section 102(1)(b) entitles the municipality to credit a payment by a
person against any account of that person. The person referred
to in
this section, logically is a person who is liable to make payment to
the municipality. For the reasons set out by the Constitutional
Court
in
Rademan
,
consolidation is not necessary in order for the municipality to
utilise section 102(1)(b) because, once consolidation has occurred
the account holder receives a single account whereas section
102(1)(b) of the Act envisages a situation where a person has
multiple
accounts and the municipality takes a payment from one
account and credits that payment to another account. The process
envisaged
under section 102(1)(b) would have no application in a
consolidated account.
9.5
To my mind, the municipality’s entitlement to credit a payment
is not confined to a single transaction, and the wording
of the
section is neutral in regards to the question of “re-allocation”
of monies paid. The power to credit payments
must be construed to
persist once amounts have been paid into a particular account, at the
instance of the person making payment.
There is nothing in the
language of the section to prevent amounts being re-allocated to
another account, in fact the language
expressly gives the power to
credit amounts which must be held to mean the power to re-allocate,
with the proviso that both the
accounts must be accounts of that
one
person
or
account
holder
.
[10]
Therefore, section 102 read together with the other provisions of
Chapter 9 of the Act undoubtedly gives powers to municipalities
to
enable them to collect all monies that are due and payable to them in
the most cost-effective manner. There is a clear legislative
need for
the Municipality to efficiently collect monies due to it by means of
the powers afforded to it. This point has been repeated
in numerous
judgments.
[3]
[11]
On a plain reading of the provisions of section 102(1) of the Act the
Municipality has the power to consolidate separate accounts
as
envisaged by section 102(1)(a) of the Act and to credit a payment
made
a person
to any other account held by
that person
as envisaged by section 102(1)(b) of the Act. The section is not
ambiguous and the meaning of the words used is clear.
[12]
The Municipality is entitled to credit payments made to
any
account held by a customer to
another
account of the customer. It is common cause that that is what
occurred in respect of the accounts of Microfinish when the
Municipality
took funds paid in respect of one account and credited
those funds to another account. On a plain reading of section
102(1)(b)
the Municipality is entitled to credit payments in the
manner in which it has in this matter.
[13]
The argument that this could never have been the intention of the
legislature especially if one has regard to section 118(3)
of the
Systems Act cannot be sustained. The purpose of the provisions
of section 118(3) of the Systems Act was highlighted
in the
Constitutional Court judgment of
Mkontwana
[4]
which determined that land owners were liable for the amounts due by
tenants for services rendered to the owner’s land and
that such
an imposition of liability did not amount to an arbitrary deprivation
of property given the closeness of the relationship
of the debt and
reason for deprivation.
[5]
The
judgment did not deal with the provisions of section 102 and how that
would affect the liability of the owner of the
property.
In
BOE Bank Ltd v Tshwane Metropolitan
Municipality
2005 (4) SA 336
(SCA)
Brand JA (at para 8) observed that section 118(3) is on its own
wording an independent, self-contained provision. The
purpose
of that section is to ensure payment of the municipal claims.
In
any event, at no stage did the Municipality seek to rely on or
utilise the provisions of section 118(3). To my mind section
118(3) is irrelevant to the interpretation of section 102.
[14]
Mr Goddard argued that the power conferred upon the Municipality in
terms of section 102(1)(b) could not have been intended
that the
Municipality could change credits as it chooses. If this is
indeed so then it would amount to an unjust result which
would not
pass constitutional muster.
[15]
It is settled principle that considerations outside the wording of a
statutory provision including considerations of constitutional
validity, do not permit an interpretation which is unduly
strained.
[6]
[16]
The contention that the ordinary meaning of section 102(1)(b) does
not authorise the Municipality to “re-allocate amounts
or chop
and change credits as it chooses”, is directly contradicted by
the provisions of section 102(1)(b) of the Act. If
the Municipality
is entitled to credit payments made that would by necessity involve
the movement of a payment from one account
to another account. That
is precisely what the Municipality has done in this matter, and to my
mind is entitled to do.
[17]
The Systems Act gives the authority to the Municipality and not the
customer to decide which account to credit. To my
mind, the
Municipality needed to safeguard its position and acted within the
confines of the relevant provisions of the Systems
Act.
[18]
In conclusion, Pearson has failed to discharge the onus upon it to
prove that the Municipality had acted outside its authority
in terms
of section 102(1)(b) of the Systems Act and therefore the application
falls to be dismissed.
COSTS
[19]
The costs normally follow the result in that a successful litigant is
entitled to costs. There is no reason in law to
deviate from
this principle that costs should follow the result.
ORDER
I
accordingly make the following order:
1.
The application is dismissed with costs.
MARKS,
AJ
Date
of Hearing: 05 November 2015
Date
of Judgment: 02 December 2015
Appearances
Counsel
for the Applicant: Mr G.D. Goddard
Instructed
by: J. H. Nicholson Stiller & Geshen 2
nd
Floor,
Clifton Place
19
Hurst Grove
Musgrave
DURBAN
Ref:
T.E. Moon/P0907/1
Counsel
for the First Respondent: Mr J.P. Broster
Instructed
by: Ngidi & Company Inc
12
th
Floor, Durban Bay
333
Anton Lembede St
Durban
Ref:Mpumelelo/Dolly/E194
[1]
Constitution
of the Republic of South Africa, 1996
[2]
Section
39(2) of the Constitution of the Republic of South Africa, 1996
[3]
Rademan
v Moqhaka Municipality and Others
2012 (2) SA 387
(SCA)
Mkontwana
v Nelson Mandela Metropolitan and Others; Bissett and Others v
Buffalo City Municipality and Others; Transfer Rights
Action Group
and Others v MEC: Local Government and Housing Gauteng and Others
2005 (1) SA 530
(CC)
[4]
Mkontwana
v Nelson Mandela Metropolitan and Others
supra
[5]
Mkontwana
supra
para [40-43]
[6]
NDPP
and Another v Mohammed NO and Others
[2003] ZACC 4
;
2003 (4) SA 1
(CC);
2003 (5)
BCLR 476
at para
[35]