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[2014] ZAGPPHC 85
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Anglogold Ashanti Ltd v Merafong City Local Municipality and Others (23558/2011) [2014] ZAGPPHC 85 (26 February 2014)
REPUBLIC OF SOUTH
AFRICA
IN THE HIGH COURT
OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
CASE
NO: 23558/2011
REPORTABLE
OF INTEREST TO
OTHER JUDGES
DATE: 26 FEBRUARY
2014
In
the matter between:
ANGLOGOLD
ASHANTI LTD APPLICANT
and
MERAFONG
CITY LOCAL MUNICIPALITY FIRST RESPONDENT
RAND
WATER SECOND RESPONDENT
MINISTER
OF WATER AFFAIRS AND FORESTRY THIRD RESPONDENT
J U D G M E N T
KUBUSHI,
J
INTRODUCTION
[1]
The responsibility for ensuring access to water lies in terms of the
Water Services Act No 108 of 1997 (the WSA) with what
the WSA refers
to as the water services authorities. Water services authorities are
defined in the WSA as, any municipality, including
a district or
rural council as defined in the Local Government Transition Act, 1993
(Act No. 209 of 1993), responsible for ensuring
access to water.
Section 11 (1) of the WSA provides that every water services
authority has a duty to all consumers or potential
consumers in its
area of jurisdiction to progressively ensure efficient, affordable,
economical and sustainable access to water
services. A municipality
established as a water services authority in terms of the WSA thus
has a responsibility to ensure access
to water in respect of water
services, water for commercial and for industrial use, within its
respective municipal area of jurisdiction.
[2]
The WSA authorises a water services authority to supply the consumers
or potential consumers within its area of jurisdiction
with access to
water services and/or water for industrial use. The term “water
services” is defined in the WSA as
water supply services and
sanitation; “water supply services” is described as the
abstraction, conveyance, treatment
and distribution of potable water,
water intended to be converted to potable water or water for
commercial use but not water for
industrial use. “Industrial
use” according to the WSA is the use of water for mining,
manufacturing, generating electricity,
land-based transport,
construction or any related purpose. I shall for purposes of this
judgment refer to water services as domestic
water or water for
domestic use.
[3] Where a water
services authority is unable to provide water to the consumers within
its area of jurisdiction it may nominate
another person or entity as
a water services provider in its stead. A water services provider is
in terms of the WSA any person
who provides water services to
consumers or to another water services institution. Therefore in
terms of the WSA a water services
authority may undertake to provide
communities within its area of jurisdiction with access to water
and/or contract an external
water services provider to undertake
these services on its behalf in terms of a service delivery
agreement.
[4] The Minister of
Water Affairs and Forestry (the minister) is responsible for the WSA.
In terms of the WSA the minister has established
what is called Water
Boards whose primary activity is to provide water services to other
water services institutions within its
service area. Water services
authorities are also designated as water services institutions. A
Water Board is thus a water services
provider for purposes of the
WSA. A Water Board may with the approval and on behalf of the water
services authority having jurisdiction
in the area supply water
directly to consumers for industrial use and act as a direct supplier
of domestic water to consumers (section
30 (1) (d) of the Act).
[5]The consumers who
want to obtain water directly from a water services provider may do
so with the approval of the water services
authority in that area.
For example, a water consumer who wants to use domestic water from a
source other than a water services
provider nominated by a water
services authority may in terms of section 6 of the WSA apply for
approval for such use from the
water services authority having
jurisdiction in the area in question. And a consumer may, in
accordance with section 7 of the WSA,
apply to the water services
authority for approval to obtain water for industrial use from a
source other than the distribution
system of a water services
provider nominated by the water services authority having
jurisdiction in the area in question.
[6] A person who
applied in terms of section 6 or 7 of the WSA may appeal any
decision, including any condition imposed, by that
water services
authority in respect of that application to the Minister. (Section
8 (4) of the WSA).
[7] The applicant in
this instance is AngloGold, a mining house which is the owner of
certain mines known as Tautona, Mponeng and
Suvuka Mines situated in
the jurisdictional area of the first respondent. AngloGold is a
water consumer and uses water for two
primary purposes. Firstly, for
industrial purposes such as dust allaying during drilling and rock
handling, as a cooling medium,
as transport medium and as a solvent
in the metallurgical process; and secondly for domestic purposes, the
water is used by AngloGold’s
employees housed on the mines
premises.
[8] The first
respondent (the municipality) is a category B municipality as
provided for in section 2 of the Systems Act, and was
established
pursuant to the provisions of section 12 (1), 14 (2) and 90 (2) of
the Structures Act read together with Government
Gazette Notice 6769
of 2000. The first respondent has in terms of the WSA been
established as a water services authority.
[9] The second
respondent (Rand Water formerly Rand Water Board), was established
under the previous provincial legislation and
is now established as a
water board in terms of the WSA.
[10] The third
respondent is the Minister of Water Affairs and Forestry (the
minister).
BACKGROUND
[11] Before dealing
with the issues in this application, I propose to set out the salient
facts upon which this application is based.
At all times before the
WSA came into operation and before the municipality was established
as a water services authority, AngloGold,
together with the other
mining houses in the municipality’s area of jurisdiction, were
in terms of a series of agreements
supplied water by Rand Water on an
agreed tariff.
[12] The WSA came
into operation on 19 December 1997 but the actual responsibility of
the water services authorities was only passed
to the respective
municipalities in July 2003. The municipality in this instance was
also established as a water services authority
at that time. The
municipality was however, unable to provide water services and water
for industrial use to the consumer or potential
consumers in its area
of jurisdiction, and thus appointed Rand Water as its water services
provider.
[13] By a letter
dated 11 February 2004, the municipality sent notices to all mining
houses within its area of jurisdiction, including
AngloGold,
notifying the said mining houses that with effect from 1 July 2003 it
(the municipality) has been accorded the powers
and functions of a
water services authority for the area within its jurisdiction. The
mining houses were invited in that letter
to apply, in terms of
section 7 of the WSA, for approval from the municipality for the
supply of water for industrial use. In
a meeting convened by the
municipality on 24 March 2004, the mining houses were advised about
the implications of the WSA, the
role of the water services authority
as well as the proposed tariffs that the municipality intended to
levy with effect from the
beginning of the next financial year.
[14] On 8 April
2004, AngloGold applied to the municipality for approval to continue
to be provided water directly by Rand Water
for its mining operations
and associated domestic applications at the tariff set, and under the
conditions imposed by Rand Water.
[15] In a letter
dated 31 May 2004 the mining houses, including AngloGold were
notified that, the municipality as a water services
authority, was
taking over the responsibility for the direct supply of water to the
mines in its area of jurisdiction. The effect
of such notice was
that the municipality would with effect from 1 July 2004 set the
tariffs for water to be supplied to the mines.
The letter further
notified the mining houses that in order to ensure that the mining
operations are not adversely affected by
the new arrangements, the
municipality appointed Rand Water to supply the mines with water as
an agent and water services provider
to the municipality. In terms
of such appointment Rand Water was to directly supply the mines as an
agent of the municipality
with water, bill and collect water sales
revenue and assume responsibility for water quality and other
technical aspects of water
supply to the mines. The mining houses
were also notified about the tariff charges for the supply of water
to the mines in respect
of domestic and operations use, as approved
by the municipality. The mining houses were also notified that in
terms of section
7 of the Water Services Act the abovementioned were
the conditions under which the municipality is approving their supply
of water
with effect from 1 July 2004. They were notified of their
right to appeal the municipality’s decision to the Minister of
Water Affairs and Forestry within 21 days by lodging a written notice
of appeal with the minister and the municipality.
[16] The tariffs set
by the municipality are the same tariffs which Rand Water would have
charged AngloGold should the municipality
have agreed that AngloGold
be supplied water directly by Rand Water. However, over and above the
set tariffs the municipality also
imposed a surcharge for such
services.
[17] In response to
the decision taken by the municipality, AngloGold lodged an appeal
with the minister in terms of section 8 (4)
of the WSA. The appeal
was against the tariffs, in particular the surcharge imposed by the
municipality. The Minister acting
in terms of section 8 (9) of the
WSA, upheld the appeal. She varied the municipality’s decision
and ruled that the municipality
may not impose a surcharge on water
for industrial use; and directed the municipality, AngloGold and Rand
Water to negotiate a
reasonable tariff on the portion of water that
the mines are using for domestic purposes.
[18] Following the
minister’s ruling there were attempted negotiations by the
parties which fell through. The municipality,
on the strength of a
legal opinion which advised it that the minister’s ruling was
invalid, ignored that ruling. It adopted
an attitude that the
minister’s ruling is invalid and unlawful and has refused
and/or failed to enforce it. In the meanwhile
it proceeded to levy
the surcharge, increasing over time, on water used by AngloGold for
both domestic and industrial purposes.
At a later date the
municipality introduced a flat rate tariff for both the industrial
use and domestic water.
[19] AngloGold’s
approach is that the minister’s ruling is valid and binding on
the municipality, and as such the municipality’s
subsequent
failure to give effect to the ruling is unlawful. It continues to
pay the surcharge imposed on it by the municipality
under protest in
the face of a threat by the municipality to cut off its water supply.
But it is no longer willing to continue
doing so. According to
AngloGold it is this random conduct of the municipality which
prompted it to launch this application.
[20] AngloGold
approached this court in terms of a notice of motion which was later
amended for an order:
‘
1. declaring
that the municipality may not levy surcharge on water for industrial
and domestic use;
2. for the
municipality to comply with the minister’s ruling of 18 July
2005, the municipality may not levy surcharge on water
for industrial
use;
3. interdicting the
municipality from charging water for industrial use at a price
greater than the unit cost of water charged by
Rand Water.
4. interdicting and
restraining the municipality from charging more than the unit cost of
water charged by Rand Water pending an
agreement being reached as a
reasonable tariff for domestic use.
5. for the
municipality to commence negotiations with AngloGold within 21 days
of the order;
6. granting leave to
AngloGold to approach the court on these papers duly supplemented in
the event of no agreement being reached
on domestic water, within 90
days from the date of the order for further direction.
7. alternatively
reviewing and setting aside in terms of PAJA and/or principle of
legality the decisions of the municipality made
on 31 May 2004
together with the resolution to amend the tariff of charges.
8. the municipality
to pay costs.’
[21] In essence what
is sought by AngloGold in these papers is the enforcement of the
findings and directives of the minister which
was made in 2005 and
never implemented by the municipality.
[22] Rand Water
initially filed a notice of opposition but filed no papers. By
notice served on 15 May 2013 Rand Water withdrew
its opposition and
indicated that it would abide the decision of the court. The
minister was joined as a party to the proceedings
but no specific
relief was sought against her. The minister did not file any papers.
[23]
The municipality is resisting the application and in its answering
affidavit raised several defences which included points
in
limine
.
It in addition launched a conditional counter-application. However,
at the hearing of the application counsel for the municipality
condensed the defences, the points
in
limine
and the counter-application into one main defence. I shall therefore
address myself to this main defence in this judgment.
[24] The
municipality’s main challenge to AngloGold’s application
is that the municipality has the exclusive executive
authority and
right to set and impose tariffs and surcharges on fees in relation to
the use of water for both industrial and domestic
use by AngloGold.
The minister is thus not entitled to interfere with this right in
terms of the provisions of section 8 (9) or
section 10 of the WSA as
alleged by AngloGold.
[25] Both parties in
their respective submissions relied on numerous provisions of the
following legislations: the Constitution
of the Republic of South
Africa, No. 108 of 1996 (the Constitution); the
Water Services Act
(above
); the Local Government: Municipal Structures Act, No. 117 of
1998 (the Structures Act); the Local Government: Municipal Systems
Act, No. 32 of 2000 (the Systems Act); and the Municipal Fiscal
Powers and Functions Act, No. 12 of 2000 (the Fiscal Powers Act).
The parties’ counsel also referred me to a number of judgments
in support of their respective arguments.
[26] At the hearing
of the application counsel for the municipality raised a preliminary
issue which I want to deal with first before
tackling the main issue.
It is the contention by counsel for the municipality that the
determination of this issue may settle
the matter once and for all.
The preliminary issue is that the application for approval in terms
of sections 6 and 7 of the WSA
and consequently the appeal in terms
of section 8 (4) of the WSA by AngloGold were ill conceived.
Was Anglogold’s
Application in terms of Section 7 or both Sections 6 and 7?
[27]
Before I deal with the preliminary issue raised by the municipality,
I want to deal with a contentious issue that arose during
argument.
The issue is whether the application for approval by AngloGold to the
municipality was in terms of section 7 only, or
whether it was in
terms of section 6 and 7 of the WSA. My view is that the application
was in terms of both sections. To my mind,
when the municipality
invited the mining houses to apply for approval, it misdirected
itself by referring only to section 7 in
its invitation. As a water
services authority, a municipality is responsible to provide water
for both domestic and industrial
use to its customers. The
application for approval in respect of domestic water is in terms of
section 6 and for industrial use
is in terms of section 7 of the WSA.
It was therefore a misnomer for the municipality to invite the mines
to apply only in terms
of section 7 of the WSA. The anomaly was
rightly corrected by AngloGold when in its application it referred to
both water for
its mining operations (section 7) and associated
domestic applications (section 6). AngloGold’s application
refers to ‘
continue
obtaining water from Rand Water for its mining operations and
associated domestic applications
’.
My ruling on this point therefore is that AngloGold’s
application was in terms of both section 6 and 7 of the WSA.
THE PRELIMINARY
ISSUE
[28] The
municipality’s counsel submits that the application for
approval by AngloGold was ill-conceived. Counsel’s
argument is
that prior to the minister’s decision AngloGold obtained water
from Rand Water. This situation continued even
after 2004 when the
municipality took over. The supply of water by Rand Water was never
discontinued. There was thus no need
for an application. When the
municipal manager invited AngloGold and other mining houses to apply
for approval, he misdirected
himself. AngloGold also misconstrued
the invite and applied. Consequently, the minister misdirected
herself as well by considering
the appeal. According to counsel for
the municipality, the application in terms of section 6 of the WSA
can only be lodged if
the applicant wants to be supplied water
services from a source other than a water services provider nominated
by the municipality;
and the application in terms of section 7 of the
Act can only be lodged if the applicant wants to obtain water for
industrial use
from the source other than the distribution system of
a water services provider nominated by the municipality. There was
no need
for AngloGold to apply either in terms of section 6 or 7 of
the WSA because the same water services provider was involved. If
there was no need to apply, whether invited or not, then the ruling
of the minister cannot be lawful because the ruling which she
considered did not by implication originate from sections 6 and 7 of
the Act. The application was brought under a misnomer and
was thus
unlawful because the approval was unnecessary and unjustified.
Consequently there could be no ruling from the minister,
so he
argued.
[29] AngloGold’s
contention on this point is that it was entitled to apply for
approval because at the time of the application
the municipality had
not as yet appointed a water services provider. Its further
contention is that even if it can be found that
the application for
approval was misconceived however, the ruling of the minister still
stands unless set aside by a competent
court of law.
[30] The relevant
sections of the WSA read:
Section
6.
Access
to water services through nominated water services provider:-
(1) Subject
to
subsection
(2)
,
no person may use water services from a source other than a water
services provider nominated by the water services authority
having
jurisdiction in the area in question, without the approval of the
water services authority.
and
Section
7.
Industrial
use of water:-
(1)
Subject to
subsection
(3)
,
no person may obtain water for industrial use from a source other
than the distribution system of a water services provider nominated
by the water services authority having jurisdiction in the area in
question, without the approval of that water services authority.
[31] My view is that
the application for approval and consequently the appeal to the
minister by AngloGold was not ill-conceived
as suggested by counsel
for the municipality.
[32] It is indeed so
that at all times before the municipality took over as the water
services authority in respect of its area
of jurisdiction all the
mines in that area including AngloGold were supplied water for both
industrial use and water services (domestic)
directly by Rand Water.
It is also not in dispute that once the municipality took over the
responsibility it, in a letter dated
11 February 2004, invited
AngloGold, together with other mining houses, to apply for approval
for the supply of water for industrial
use in terms of section 7 of
the WSA. AngloGold, as one of the mining houses, applied to the
municipality to continue obtaining
water from Rand Water for its
mining operations (in terms of section 7) and associated domestic
applications (in terms of section
6) at the tariff set, and under the
conditions imposed by Rand Water.
[33] It is my view
that once the municipality took over the responsibility it became
apparent that the municipality would then be
the direct supplier of
water to the consumers within its area of jurisdiction. The mining
houses were however, entitled in terms
of the WSA to decide whether
they would want to be supplied water by the municipality or by a
different water supply institution.
The WSA allows consumers to be
supplied water directly by a different water services institution
other than the water services
authority in the area. However, in
order to be so supplied the consumers must get approval from the
water services authority.
Sections 6 (2) and 7 (3) of WSA permits a
consumer who at the commencement of the WSA obtained domestic water
or industrial use
of water from another source other than the water
services provider nominated by the water services authority to
continue to do
so subject to application for approval and subsequent
approval by the water services authority. Therefore the
municipality
acted correctly, in my opinion, to inform the mining
houses to apply for approval in terms of section 7 even though I am
of the
view that they should also have done so in respect of section
6. AngloGold wanted Rand Water to continue supplying it with water.
Consequently, it was correct for AngloGold to have applied for
approval as invited to by the municipality. It even went further
and
applied in terms of section 6 as well.
[34]
In terms of section 19 of the WSA a water services authority, in this
instance the municipality, may perform the functions
of a water
services provider itself and may to the extent that it is unable to
perform such services appoint a water services provider
to perform
those duties. The municipality in this instance was unable to
supply the required water and as such appointed Rand
Water as its
water services provider.
The result being that the water supply for industrial purposes to the
mining houses and domestic water for its employees were to
be
obtained from the distribution system of a water services provider
nominated by the municipality, namely Rand Water.
[35] It is common
cause that all the mining houses, including AngloGold were notified
about this appointment as early as 31 May
2004. The municipality
notified AngloGold and other mining houses that it was now taking
over the responsibility for the direct
supply of water to the mines
in its area of jurisdiction and that it has appointed Rand Water as a
water services provider with
the responsibility to directly supply
the mines with water as an agent of the municipality. The
municipality also notified the
mining houses of the tariffs and
service charges it has approved and which it intended to levy.
[36] It is thus
apparent from this evidence that at the time AngloGold applied for
approval the municipality had not yet appointed
Rand Water as a water
services provider or at the least AngloGold was not aware of such
appointment if ever it had already been
made. My view, therefore, is
that, at that time Rand Water was a source other than the service
provider nominated by the municipality.
AngloGold is therefore
correct to say that it was at that time entitled to apply for the
approval.
[37] The parties
seem to suggest that AngloGold’s application to the
municipality was approved (para 16.3 of founding affidavit
and para
5.16 of the municipality’s heads of argument). I disagree. The
notice of 31 May 2004 by the municipality is in
contra-distinction to
what AngloGold applied for. AngloGold in its letter to the
municipality applied for approval to be supplied
water directly by
Rand Water under the conditions set by and the tariffs imposed by
Rand Water. To my mind, by this notice of
31 May 2004, the
municipality refused to allow AngloGold to be supplied water directly
by Rand Water in that it informed AngloGold
that water will be
supplied to it by Rand Water ‘as an agent and water services
provider of the municipality’. The
municipality also refused
to accept the conditions and the tariffs agreed to between AngloGold
and Rand Water and set its own conditions
and imposed its own tariffs
and by implication, it means therefore that the municipality refused
AngloGold’s application.
[38] AngloGold was
aggrieved by the municipality’s decision and in a letter dated
11 June 2004 it lodged an appeal
in terms of section 8 (4) of
the WSA against the decision of the municipality, to the Minister.
It specifically appealed against
the conditions set by the
municipality, in particular, the municipality’s decision to
impose a surcharge on the set tariffs.
The only inference to be made
from this conduct of AngloGold is that it accepted the ruling of the
municipality to be provided
water by Rand Water as an agent and
service provider of the municipality, and only wanted the minister to
intervene in respect
of the conditions the municipality imposed for
such services. This is so because AngloGold did not appeal the
municipality’s
decision to be supplied water by Rand Water as
an agent and water services provider to the municipality. AngloGold
in its notice
of appeal contained in a letter to the minister dated
11 June 2004 confirms that it does not dispute the statutory rights
of the
municipality in respect of water supply in its area of
jurisdiction.
[39] Section 8 (4)
of the WSA reads
8. Approvals
and appeal:-
(4) A person who has made an application in terms of
section
6
or
7
may appeal to the Minister against any decision, including any
condition imposed, by that water services authority in respect of
the
application.
[40] In terms of
this provision the minister may only consider an appeal where the
person in question initially applied in terms
of either section 6 or
7 of the WSA. I have already made a finding that AngloGold applied
for approval in terms of sections 6
and 7 of WSA. Therefore, in my
opinion, the minister is correct to have considered the appeal.
THE EXECUTIVE POWER
OF THE MUNICIPALITY TO IMPOSE SURCHARGES
[41] It is common
cause that AngloGold in its notice of motion seeks the enforcement of
the minister’s ruling made in terms
of section 8 (9) of the
WSA.
[42] The
municipality’s main challenge to the application is that it has
the exclusive executive authority and right to set
and impose tariffs
and surcharges on fees in relation to the use of water for both
industrial and domestic use by AngloGold. Accordingly,
the minister
is not entitled to interfere with this right in terms of the
provisions of section 8 (9) or section 10 of the WSA
as alleged by
AngloGold. It contends that such interference is not valid in law.
[43] Although
counsel for both parties argued broadly on the powers and functions
of the local government/municipality, I shall
however for purposes
of this judgment confine myself to the narrow issue of a
municipality’s powers to impose surcharges
on fees for services
provided by or on behalf of the municipality. It is my view that
this is the crisp issue that requires determination.
AngloGold’s
appeal was specifically about the imposed surcharges and the
minister’s findings pertain to the surcharges
as well.
[44] When
considering the appeal the minister made the following findings:
‘
2.1 …
Where a Water Services Authority adds no value to the services
provided to a person or institution from another source
it would be
unreasonable to impose a fee, charge surcharge or levy on the
services provided.
2.2 Since water for
industrial use is not defined as a municipal service in terms of
section 1
(xxv) of the
Water Services Act, 1997
no surcharge can
therefore be levied on water for industrial use. Surcharges may only
be levied on the portion of water that the
mines are using for
domestic purposes.
2.3 The Merafong
City Local Municipality is of the view that it appropriately
consulted with the mines and also considered the mines
economic
assessment presented by the Chamber of Mines on behalf of the mines.
Based on the appeal submitted to me, it is debatable
whether the
mines support the view that appropriate consultation has taken place.
When considering the merits of the appeals,
I am not convinced that
the Municipality has provided a reasonable opportunity for the mines
to present themselves.’
[45] Consequently in
terms of the power vested in her by
section 8
(9) of the
Water
Services Act, 1997
, the minister overturned the decision of the
Merafong City Local Municipality to levy surcharges on water for
industrial use and
ruled that the Municipality, the Mines and Rand
Water should negotiate a reasonable tariff on the portion of water
that the mines
are using for domestic purposes.
[46] I am aware that
at the time of the minister’s ruling, the Fiscal Powers Act was
not yet in operation. The definition
section of that Act succinctly
sets out the meaning of ‘base tariff’ and ‘surcharge’.
Section 1 of thereof
provides that:
a. ‘municipal
base tariff’ means the fees necessary to cover the actual cost
associated with rendering a municipal service.
b. ‘municipal
surcharge’ means a charge in excess of the municipal base
tariff that a municipality may impose on fees
for a municipal service
provided by or on behalf of a municipality.
Tariffs would in my
view therefore be the total sum of both the base tariff and the
surcharge. It is common cause that the tariff
set by the
municipality in this instance is inclusive of a surcharge.
[47] The
Constitution provides for services which a municipality may provide
to a community within its area of jurisdiction. The
services are
enunciated in section 156 (1) (a) of the Constitution. In terms of
this subsection, a municipality has executive
authority in respect
of, and has the right to administer the local government matters
listed in Part B of Schedule 4 and Part B
of Schedule 5. Matters
relevant for purposes of this judgment are listed in Part B of
Schedule 4 as “water and sanitation
services limited to potable
water supply systems and domestic waste-water and sewage disposal
systems”.
[48] The
municipality also has a Constitutional authority to impose surcharges
on fees for the provision of domestic water by and
on behalf of the
municipality. The authority in this respect is derived from section
229 (1) (a) read with section 229 (2) (b)
of the Constitution.
Does The Term
‘Water’ Include Both Water For Industrial And Domestic
Use?
[49] Before
proceeding further with this judgment I want to pause at this stage
and consider the controversial issue of whether
the term ‘water’
in Part B of Schedule 4 of the Constitution incorporates water for
domestic and industrial use.
This issue arose in the papers and was
argued by both counsel before me.
[50] The
municipality’s contention, based on its argument that the
minster is not entitled to interfere with the municipality’s
powers to impose surcharges, is that a municipality’s authority
and right to set and impose tariffs and surcharges on fees
for water
is in relation to the use of water for both industrial and domestic
use. In its answering affidavit the municipality
states that the
term ‘water’ in Part B of Schedule 4 of the Constitution
refers to all the water, namely, water for
domestic, commercial and
industrial use. This was also confirmed by the municipality’s
counsel in his argument that the
term ‘water’ refers to
both water for domestic and industrial use. In trying to explain
the difference between water
for industrial and domestic use the
municipality’s counsel differentiated between two categories of
water, namely, water
that is provided, that is, going to the party
using it; and water removed from the user of water. According to
him, the word potable
does not describe “water” as
contained in the schedule but it only describes sanitation services
of potable water.
The only distinction made between industrial and
domestic water, according to counsel, is in respect of sections 6 and
7 of the
WSA.
[51] AngloGold’s
argument is that the municipality’s powers to levy surcharges
do not relate to services provided for
water for industrial use. The
powers are only in respect of potable water (water for domestic use).
This was further argued
by AngloGold’s counsel in his
submission that the term ‘water’ in Part B of Schedule 4
of the Constitution refers
only to potable water which is water for
domestic use.
[52] I seem to be in
agreement with AngloGold’s argument that the term “water”
in part B of schedule 4 of the
Constitution refers to water for
domestic use (potable water) and does not include industrial water.
The proper reading in my
opinion should be ‘water services’
which is more in line with the definition in the WSA. I have already
set out the
definition of water services in paragraph [2] of this
judgment. Industrial use water is specifically excluded in that
definition.
The definition of industrial use is also in paragraph
[2] of this judgment. The submission by the municipality’s
counsel
about the two categories of water is completely wrong. The
definition he gives to the word ‘potable’ means ‘water
borne’. The term ‘potable’ as it is known means
water safe for human consumption. Water and sanitation services
are
services required for domestic use and when read together do indicate
that it was not intended to include industrial water
therein. Even
if read in its every day ordinary meaning, the word would not make
sense in the context in which it is used therein
because water for
industrial use cannot be limited to potable water supply. It is
also evident from the WSA, the two services
have been provided for
separately. Examples of the said provisions is in respect of
sections 6 and 7 and sub-sections 21 (1) and
21 (3). I shall
therefore in this judgment deal separately with the two services,
that is, domestic water and industrial use
water.
Is The
Municipality’s Power To Impose Tariffs Exclusive?
[53]
Counsel for AngloGold submits that the powers of a municipality to
impose surcharges are not absolute but are constrained by
the
Constitution which provides that the right of a municipality to
govern local government affairs of its community is subject
to
national legislation. In this respect AngloGold’s counsel
referred me to the judgments in
Ex
Parte President of the RSA: Constitutionality of the Liquor Bill
[1999] ZACC 15
;
2000 (1) SA 732
(CC) and
City
of Cape Town v Robertson
[2004] ZACC 21
;
2005 (2) SA 323
(CC) para [61].
[54]
Referring to the same judgment in
Robertson
above, counsel for the municipality contends that the original powers
of a municipality can only be constrained by law to the extent
the
Constitution permits. However, the municipality’s contention
is that national legislation does not allow the minister
to deprive
the municipality of its executive power to levy surcharges.
According to the municipality’s counsel, the municipality
has
the executive and original power in respect of water and such power
cannot be legally interfered with.
[55]
My view is that the municipality’s powers to impose surcharges
on fees for the supply of both water for domestic and
industrial use
is not absolute and that the minister has the power to interfere with
such authority. See
Ex
Parte President of the RSA: Constitutionality of the Liquor Bill
[1999] ZACC 15
;
2000 (1) SA 732
(CC) at para
[61]
and
Robertson
above at paras [54] to [62].
[56] Unlike water
for domestic use, industrial water is not a right given to a
municipality by the Constitution. In my conclusion
in paragraph [52]
of this judgment I excluded water for industrial use from the term
‘water’. It means therefore that
water for industrial
use falls under national government as the custodian of the nation’s
water resources. National government
has, however, in terms of the
WSA entrusted some municipalities with the responsibility to provide
communities within their respective
areas of jurisdiction with water
for industrial use. The municipality in this instance is one of the
municipalities entrusted
with that responsibility. A municipality
that supplies water for industrial use to its community is empowered
by the WSA to impose
tariffs on the supply of water for industrial
use. Section 21 (3) of the WSA which deals with industrial use
water, empowers
a water services authority which provides water for
industrial use to make by-laws providing for, amongst others, at
least the
determination and structure of tariffs. In terms of
section 4 of the Systems Act, the council of a municipality has the
right
to exercise the municipality’s executive and legislative
authority, and to do so without improper interference and to finance
the affairs of the municipality by charging fees for services and
imposing surcharges on fees. It is thus clear that a municipality
has the executive right to make decisions without improper
interference to levy surcharges and can also promulgate by-laws for
the determination and structure of tariffs in respect of water for
industrial use. It is therefore my view that where a municipality
would set a tariff that does not comply with the determination and
structure of tariffs as set out in its by-laws and where it
is proper
to do so, the minister would be entitled to intervene.
[57] It is also my
view that in the circumstances of this matter the minister was
entitled to interfere on the basis that the imposed
tariffs were
unreasonable. It is common cause that AngloGold was not satisfied
with the tariffs set by the municipality in that
they were inclusive
of surcharges. Therefore, when considering the appeal the minister
made a finding that where a water services
authority, the
municipality, adds no value to the services provided to a person or
institution from another source it would be
unreasonable to impose a
fee, charge surcharge or levy on the services provided. Therefore
based on the unreasonable tariff charged
by the municipality and the
fact that water for industrial use is not defined as a municipal
service in terms of section 1 (xxv)
of the WSA she overturned the
municipality’s decision to charge surcharges on water for
industrial use and made a ruling
that no surcharge should be levied
on such water. To my mind, an unreasonable tariff entitles the
minister to intervene and it
was proper for her to do so.
[58]
With regard to water for domestic use, the authority of a
municipality to impose surcharges on fees for the supply of water
for
domestic use provided by or on behalf of a municipality emanates from
the Constitution itself. This, as already stated, is
provided for in
section 229 (1) (a) read with section 229 (2) of the Constitution.
The parties are agreed that in terms of the
Constitution a
municipality has the original legislative and executive powers to
impose tariffs and surcharges on fees for services
provided by or on
behalf of the municipality in respect of the supply of domestic water
to members of the community within its
area of jurisdiction. See
Fedsure
Life Assurance v Greater Johannesburg
TMC
[1998] ZACC 17
;
1999 (1) SA 374
(CC) para [39].
[59] In this
instance, it is common cause that the municipality imposed tariffs
and surcharges in respect of water supplied for
domestic use to
AngloGold. It is also common cause that AngloGold was not satisfied
with the municipality’s decision to
impose the surcharges on
these services and appealed to the minister in respect thereof. When
considering the appeal the minister
made a finding that where a water
services authority adds no value to the services provided to a person
or institution from another
source it would be unreasonable to impose
a fee, charge surcharge or levy on the services provided. Based on
the appeal submitted
to her, the minister was not convinced that the
municipality provided a reasonable opportunity for the mines
(including AngloGold)
to present themselves. This in my view
resulted in an unreasonable tariff being set by the municipality.
And as a result the
minister ruled that the municipality the Mines
and Rand Water should negotiate a reasonable tariff on the portion of
water that
the mines are using for domestic purposes.
[60] As already
stated the power to impose the surcharges on fees for the supply of
water for domestic use is subject to national
legislation. The WSA
is the regulatory framework by which the minister assumes
responsibility to regulate the exercise of the
executive municipal
power for water for domestic use.
[61] AngloGold in
its founding affidavit sets out three mechanisms which it alleges are
in the Constitution and by which national
government can regulate or
constrain the authority of the municipality. The first mechanism is
in terms of section 10 (1) of the
WSA in which the minister
prescribes norms and standard that a municipality must comply with
when setting tariffs in respect of
the supply of water services. The
two other mechanisms can be conflated into one because in my view,
they both find expression
in section 8 (1) and (4) to (10) of the
WSA. The said subsections provide for the appeal procedure to the
minister against a decision
or condition imposed by a water services
authority/municipality.
Norms and
Standards:
[62] According to
AngloGold’s counsel the Constitutional Court in the First
Certification judgment recognised the autonomy
of local government
and the requirement that higher levels of government should monitor
local government functioning and intervene
where such functioning is
deficient or defective and to provide a regulatory framework for the
exercise of local government powers.
It is in accordance with that
regulatory framework that section 10 of the WSA permits the minister
to prescribe norms and standards
in respect of tariffs for water
services. The norms and standards promulgated in terms of that
section requires a municipality
when setting tariffs for water
services to differentiate, where applicable between the water supply
to households and industrial
use of water. According to AngloGold it
is apparent that the flat rate imposed by the municipality in July
2007, although it increases
annually, it does however not
differentiate between water users. Therefore the municipality does
not comply with this statutory
requirement for differentiation and
the minister should intervene, so the argument went.
[63] It is indeed so
that section 10 (1) of the WSA authorises the minister, with the
concurrence of the Minister of Finance, to
prescribe norms and
standards in respect of tariffs for water services. And that no
water services institution may use a tariff
which is substantially
different from any prescribed norms and standards. The minister
should monitor the performance of every
water services authority to
ensure compliance with the prescribed norms and standards. My view
therefore is that where a municipality
uses a tariff which is
substantially different from any prescribed norms and standards the
WSA entitles the minister to intervene.
[64] However, in
this instance, AngloGold chose a wrong example to indicate that
section 10 (1) is a mechanism which the minister
may use to
intervene. The minister promulgated the Norms and Standards in
respect of Tariffs for Water Services in Terms of Section
10 (1) of
the WSA under Government Notice No. R652 of 20 July 2001 (the Norms
and Standards). In accordance with the said Norms
and Standards the
minister has set out categories of water services which a water
services institution must, when setting tariffs
for water services
supplied to consumers and other users within its area of
jurisdiction, differentiate between. Amongst the categories
that
must be differentiated is at least, water supply services to
households and industrial use of water supplied through a water
services work.
[65]
The challenge is that clause 4 (1) of the prescribed Norms and
Standard provides differently from its empowering statute, that
is,
section 10 (2) of the WSA. The clause stipulates that a water
services institution
must
,
when setting tariffs for water services provided to consumers and
other users within its area of jurisdiction differentiate, where
applicable, between categories of water and services supplied. On
the contrary, section 10 (2) of the WSA stipulates that the
norms and
standards
may
differentiate on an equitable basis between different users of water
services. In terms of section 156 (3) of the Constitution
a by-law
that conflicts with national legislation is invalid. As such clause
4 (1) of the Norms and Standards is invalid as it
is in conflict with
section 10 (2) of the WSA. AngloGold is therefore wrong to rely on
this clause as a mechanism for the minister’s
intervention.
Even if the clause was correct in that the word ‘may’
instead of ‘must’ was used, AngloGold
could still not
rely on either section 10 (2) of the WSA or clause 4 (1) of the Norms
and Standard as a mechanism for the minister’s
intervention
because the provisions thereof are not imperative but merely
directory in nature. The municipality is thus not compelled
to
differentiate between different users of water services. Without
having to consider the issue raised by the municipality that
tariffs
are not included in the conditions imposed in terms of section 8 (4)
of the WSA, I am of the view that for that reason,
only, I agree with
the municipality that section 10 of the WSA did not entitle the
minister to intervene. It is indeed so that
the minister cannot
compel parties or place obligatory duties on them if not empowered to
do so by section 10 of the WSA.
The
Appeal Process as a Mechanism for the Minister’s Intervention:
[66] The
municipality’s contention is that section 8 of the WSA does not
deal with tariffs and that the function of the minister
in terms of
section 10 is merely to prescribe the norms and standards in respect
of tariffs for water services and not to set tariffs.
As such the
minister has no power to prescribe a specific tariff or to interfere
with the municipality’s function to set
tariffs. According to
the municipality’s counsel the minister’s interference in
terms of section 8 (9) of the WSA
cannot allow the minister the right
to deprive the municipality its right to exercise its executive
powers. Therefore, the argument
is that the minister acted
unlawfully by interfering in the municipality’s decision to
impose surcharges.
[67] The appeal
process in terms of section 8 of the WSA is a mechanism set in place
by national government to monitor the performance
of the municipality
and by so doing regulate the exercise of the municipality’s
powers to impose surcharges. The starting
point is section 4 (1) of
the WSA which provides that water services must be provided in terms
of conditions set by a water services
provider. The said conditions
must in terms of section 4 (2) (c) (ii) provide for the determination
and structure of tariffs.
[68] The appeal
procedure to the minister of a department is commonly used as a
regulatory framework to enable the minister to intervene.
In this
instance, the WSA is a regulatory framework that is in place to
enable the minister to intervene. For example, in terms
of section 8
(1) thereof, the minister is entitled to intervene where a
municipality imposes unreasonable conditions, as is the
case in this
instance, or where the municipality has unreasonably withheld its
approval. Section 8 (4) of the WSA provides the
procedure which a
dissatisfied water consumer may follow in order to get the minister
to intervene. It is therefore my opinion
that this section entitles
the minister to intervene where a consumer who applied in terms of
section 6 or 7 of the WSA and has
lodged an appeal and the minister
finds that the municipality withheld its approval unreasonably or
imposed unreasonable conditions.
In terms of section 8 (9) of the
WSA having made such adverse findings the minister may on appeal
confirm, vary or overturn such
decision. The minister was in this
instance therefore entitled to intervene with the conditions imposed
by the municipality because
they were unreasonable.
THE DECISION OF THE
MINISTER IS BINDING
[69] Even if my
findings as stated above are wrong, my view is that the decision of
the minister is still valid until set aside
by a competent court of
law.
[70]
It is trite that an unlawful decision exists in fact and it has legal
consequences that cannot be overlooked until it is set
aside by a
court in proceedings for judicial review. Our law has always
recognised that even an unlawful administrative act is
capable of
producing legally valid consequences for as long as the unlawful act
is not set aside. See
Oudekraal
Estates v City of Cape Town
2004 (6) SA 222
(SCA) para [26] and the unreported judgment of
Phatudi J in
Blyvooruitzicht
Gold Mining Company Ltd & Another v Merafong City Local
Municipality & Another
Case no 47282/2007 delivered on 20 May 2011, the findings of which
are apposite in this instance.
[71]
However, the contention by the municipality’s counsel is that
the
Oudekraal
principle which AngloGold relies on for the validity of the
minister’s decision should be qualified. His submission is
that a public action that is unlawful can be set aside by review or
when challenged by reason of its validity. The public authority
is
entitled to raise a defence that the act is unlawful. In this
respect he referred me to the judgment in
City
of Cape Town v Helderberg Park Development (Pty) Ltd
2008 (6) SA 12
(SCA) paras [49] to [50] and
City
of Tshwane Metropolitan v Cable City (Pty) Ltd
2010 (3) SA 589
(SCA) at para [15].
[72]
I am in agreement with the submission of AngloGold’s counsel on
this point. A collateral challenge is not available
to a public
authority. The defence is meant to be raised where a party is
threatened by a public authority with coercive action.
The defence is
meant to prevent the power of a state to bear on a citizen and as
such a public authority like a municipality cannot
use this defence.
See
City
of Tshwane Metropolitan v Cable City (Pty) Ltd
above.
[73]
The municipality has not in its papers sought to review or overturn
the minister’s decision and thus based on the
Oudekraal
principle the minister’s decision stands until set aside by a
court of law. The decision is therefore binding and enforceable
and
the municipality should abide by it.
THE MUNICIPALITY’S
COUNTER APPLICATION
[74] The
municipality applied in its conditional counter application for
declaratory orders, first, relating to its exclusive authority
to set
the tariffs relating to the provision of water; and, secondly, that
section 8(9) of the WSA does not confer authority on
the minister to
interfere with the tariff set by the municipality. In the
alternative to the above prayers (if it is found that
the minister is
given the power to overturn a decision of the municipality relating
to the setting of tariffs for water services
and the municipality is
directed to negotiate an agreement with AngloGold) that it be
declared that the provisions of sections
8 (9) of the WSA are to that
extent unconstitutional and invalid.
[75] Counsel for the
municipality submitted in argument that if the main application is
dismissed with costs it would not be necessary
to deal with the
counter application. However, if the application is granted I should
make a finding in respect of the orders
prayed for in terms of the
counter application.
[76] On the same
basis of my finding that the powers of the municipality to impose
tariffs and surcharges is not constrained because
it is subject to
national legislation, I can therefore not declare that the provisions
of section 8 (9) of the WSA are unconstitutional
and invalid. In
order to make a finding of unconstitutionality I should have found
that the section was in conflict with the Constitution.
To the
contrary I concluded that the minister was acting in terms of
national legislation as directed by the Constitution itself.
[77] Consequently,
the municipality’s counter claim ought to be dismissed.
ANGLOGOLDS NOTICE OF
MOTION
[78] My
understanding of the application before me is that AngloGold seeks to
enforce the minister’s ruling of 18 July 2005.
However, the
notice of motion incorporates other relief which is not part of the
minister’s ruling, for example, prayer
1 and 3 of the notice of
motion. It is my view that it would not be competent for this court
to grant these prayers based on the
following: in respect of prayer
1: firstly, because the minister has already made a finding that the
municipality should not levy
surcharges on industrial water; secondly
on the basis that in terms of section 229 (1) of the Constitution
read with Part B of
Schedule 4 of the Constitution a municipality has
the original and executive power to impose surcharges on water
services it supplies
to its community.
[79] As regards
prayer 3, the minister made a finding that where a water services
authority adds no value to the services provided
to a person or
institution from another service, it would be unreasonable to impose
a fee, charge surcharges or levy on the services
provided. This
finding to me means that the municipality can set a tariff for
services provided even if that tariff is more than
the unit cost of
water charged by Rand Water. The ruling is only against the
imposition of a surcharge in such circumstances because
it is
unreasonable.
[80] It should be
noted that this judgment does not seek to delve into the correctness
or otherwise of the minister’s decision.
I also avoided dealing
with issues raised in the papers which goes to the root of the
minister’s decision as that would appropriately
be the work of
the review court. I only gave specific attention to the issue of
whether the minister is entitled to intervene
with the decision of
the municipality to impose surcharges on the supply of water for
domestic use and/or industrial use and other
ancillary issues
relating thereto. Since I concluded that the minister was entitled
to do so, it was thus not necessary to consider
the other issues
raised.
COSTS
[81] AngloGold is
the successful party in the main application and is therefore
entitled to its costs of litigation. An order for
costs of two
counsel sought by AngloGold’s counsel is also justified in the
circumstances of this matter and should be granted.
[82] Similarly in
the counter application AngloGold is the successful party and is
entitled to its costs as well. The order for
the costs of two
counsel in similarly justified and should be granted.
ORDER
[83] In the premises
are make the following order that:
a. the first
respondent must comply with the minister’s ruling of 18 July
2005, in that:
the first
respondent may not levy surcharge on water for industrial use;
(ii) the first
respondent may not levy surcharge on water for domestic use pending
an agreement being reached by the first respondent,
the applicant and
the second respondent for a reasonable tariff; and
(iii) the first
respondent must commence negotiations with the applicant and the
second respondent within 21 days of the order.
b. The applicant is
granted leave to approach the court on these papers duly supplemented
in the event of no agreement being reached
on domestic water, within
90 days from the date of the order for further direction.
c. The first
respondent must pay costs of litigation in the main application
including costs of two counsel.
d. the first
respondent’s conditional counter application is dismissed with
costs which costs shall include costs of two counsel.
EM KUBUSHI
JUDGE OF THE HIGH
COURT
APPEARANCES:
HEARD ON
THE :22 AUGUST 2013
DATE OF
JUDGMENT : 26 FEBRUARY 2014
APPLICANTS
COUNSEL : ADV A. GRAVES SC
ADV I.
CURRIE
APPLICANTS
ATTORNEYS : KNOWLES HUSAIN LINDSAY INC
FIRST
RESPONDENT’S COUNSEL : ADV E. VAN GRAAM SC
ADV P.
KIRSTEN
FIRST
RESPONDENT’S ATTORNEY : DE SWARDT VOGEL MYAMBO