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[2013] ZAFSHC 163
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Badenhorst NO and Others v Moqhaka Municipality (744/2013) [2013] ZAFSHC 163 (13 September 2013)
FREE STATE HIGH
COURT, BLOEMFONTEIN
REPUBLIC OF SOUTH
AFRCIA
Case No: 744/2013
In the matter between:
REON ESIAS
BADENHORST N.O.
.........................................
1
st
Applicant
(In his capacity as
trustee of the Renhof
Badenhorst Family Trust,
IT1765/2000)
FLORINA NICOLENE
BADEHORST N.O.
(In her capacity as
trustee of the Renhof
Badenhorst Family Trust,
IT1765/2000)
EBEN PIETERSE N.O.
(In his capacity as
trustee of the Renhof
Badenhorst Family Trust,
IT1765/2000)
SELLBORNE HOTEL
(PTY) LTD
............................................
2
nd
Applicant
ZAFIRHA ENVESTMENTS
CC
................................................
3
rd
Applicant
and
MOQHAKA
MUNICIPALITY
.....................................................
Respondent
CORAM
:
MURRAY, AJ
HEARD ON
:
11 JUNE 2013
JUDGMENT BY
:
MURRAY, AJ
DELIVERED ON
:
13 SEPTEMBER 2013
[1] The Applicants
approached the Court to declare all siding taxes, levies and/or
tariffs as well as all taxes, levies and/or tariffs
other than the
normal taxes and tariffs imposed on the Applicants’ property in
Kroonstad (“the property”)
ultra vires
and to order
the Moqhaka Municipality (“theMunicipality”) to repay all
siding tariff payments made by the Applicants
with interest; to
reverse with interest all amounts debited against the Applicants’
accounts as siding tariffs and to credit
the Applicants’
accounts accordingly.
[2] In issue between the
parties are, firstly, whether the Municipality after 28 November 2000
was entitled to rely on a council
decision to levy the siding tariffs
which it has levied from the Applicants since then, and,secondly,
whether the Applicants would
be entitled to be so refunded or
credited or repaid in the circumstances of this case.
[3] The Applicants are
the owners of five immovable industrial properties, some vacant,
others with improvements, in the district
of Kroonstad, Free State
Province. The payment of their municipal accounts for normal rates
and taxes has always been up to date.
However, the Municipality has
also served on them tax invoices for tariffs coded, for instance,
“
SU”, “Siding erf”, “Users levy”
and “
Rental”
(“the siding tariffs”).
Since the Municipality has been unable to provide them with any legal
grounds entitling it to
levy such tariffs, on their attorneys’
advice they ignored the siding tariff invoices.
[4] However, in March
2012 when the First Applicant attempted to sell two of its three
properties, erven 1545 and 1546,it was confronted
with section 118 of
the Local Government: Municipal Systems Act, Act 32 of 2000 (“the
Systems Act”), which prevents
the transfer of immovable
properties without a clearance certificate which certifies that there
are no outstanding municipal taxes,
rates, and/or tariffs regarding
that property for the 2 yearsprior to the clearance certificate. The
original clearance certificates
issued by the Municipalityfor the two
propertiesin question indicated outstanding amounts of R24 925.40
and R20 773.47,
respectively. These were subsequently replaced,
however, with new clearance certificates indicating outstanding
amounts of R10 883.16
and R10 712.37, respectively.
[5] First Applicant avers
that it has never had any use of, access to or benefit from the
sidings for which he was taxed since they
were removed before he
became the owner of the relevant properties. Its attorney therefore
attempted to “determine the basis
on which he could be held
liable for such tariffs”. The Municipality originally provided
him with and relied on a recommendation
by the Executive Committee
(annexure “RB10(2)” to the founding affidavit) for its
cause of action, insisting that it
constituted the Council decision
to institute siding tariffs which authorised the Municipality to levy
the siding tariffs.
[6] The
Municipalityfailed to provide the Applicants’ attorney with any
decisions or its policy regarding the siding tariffs
for 2010, 2011
and 2012, any decisions in terms of section 75A of the Systems Act,
any by-laws promulgated with reference to siding
tariffs or any proof
of publication of the tariffs in a newspaper in terms of section
75A(3)(b) of the Systems Act. Its officialspersisted
in relying on
annexure “RB10(2)”for the Municipality’s right to
levy siding tariffs even when the Applicants
pointed out that the
said annexure contained only proposals and made no reference to any
decisions taken by the Municipality.
[7] When the Applicants
approached the Court on annexure “RB10(2)”,however,the
Municipality in its opposing papers sought
to rely on,
inter alia,
a contractual arrangement, a possible enrichment claim, the
Municipality’s original power to make decisions regarding
municipal
affairs and a Council resolution (annexure “O6”to
the opposing affidavit).Its reliance on annexure “O6”
instead of on annexure “RB10(2)” as well as the
abovementioned defencesled to the filing of a rejoinder, a
supplementary
rejoinder and a surrejoinder, with numerous new
averments in and further annexures to the rejoinder and supplementary
rejoinder.
[8] The Respondent also
raised two
points-in-limine
, namely an averment that
Applicants’ founding affidavit was not properly sworn to and an
averment that the resolution that
authorised First Applicant to
depose to the affidavit was undated and therefore invalid. Both were
dismissed after theCourt had
listened to the arguments and considered
the further affidavits filed in that regard and was satisfied that
there had been substantial
compliance with the requirements for
validity in both instances.
The alleged
contract
cum
servitude and the Enrichment Claim:
[9] In argument Counsel
for the Municipality explicitly abandoned the contractual defence. He
did not take the enrichment claim
any further, either. Therefore
neither of these will be addressed in the judgment.
The Municipality’s
original power
:
[10] The Applicants aver
that the Municipality did not have a legal right to levy siding
tariffs from the Applicants and therefore
acted
ultra vires
when
it did so. They claim that the Municipality never took a valid
decision to levy siding tariffs and, if it were to be found
that it
did, that it failed to comply with the statutory requirements for
such a decision to be lawfully implemented. They allege,
furthermore,
that if a lawful decision was indeed taken on 28 November2000 as
averred, it could only have been valid until 30June
2003.
[11] The Respondent, on
the other hand, maintained that the Municipality’s power to
impose taxes, rates and fees is now an
original constitutional power
bestowed on it by section 229(1)(a) of the Constitution, that all
that was needed for a lawful decision
to impose taxes was a majority
decision and that, consequently, the Applicants’ reliance on
the
ultra vires
doctrine was fatally flawed.
[12] The
Respondentclaims, furthermore, that in terms of the original and
constitutionally entrenched powers to charge fees, the
Municipal
Council on 28 November 2000 in terms of section 10G(7)(a)(ii) of the
Local Government Transition Act, Act 209 of 1993
(the Transition
Act), lawfully decided by way of a resolution to charge the tariffs
for railway sidings as set out in annexure
“06”.
[13] The Municipality
maintains that the 28 November 2000resolution recorded in annexure
“O6” is the only decision regarding
the implementation of
siding tariffs that it ever took until the financial year of
2012/2013. It avers that it only then made a
further decision
regarding siding tariffs under section 11.1 of “
Public
service infrastructure (e.g. Servitudes)”
in the 2012/2013
budget and that it was the first time it had acted in terms of the
Systems Actwhich came into effect on 1 March
2001. The Municipality
insiststhat the November 2000 decision was never amended or
reconsidered until then. It admitsthat its Councilresolved
to phase
in fees up to 31 [
sic
] June 2003 and maintains that, as from 1
July 2003, the same 30 June 2003 fee has been budgeted for and taken
into considerationwithout
increase in the projected income and
expenditure for all subsequent financial years up to the 2012/2013
financial year.
[14] The Municipality
maintains, furthermore, that the November 2000 resolution entitled it
to collect a “
users levy”
of R2 941.84 p/a
and a “
rental”
of R13 839.31 p/a (or a
total
of R16 781.15) until a new decision regarding the 2012/2013
financial year changed the amounts to R3 000.00 and R16 700.00,
respectively. It avers, also, that the inclusion of the unchanged
2003 fees in the budget was done in accordance with section 74
and
section75 of the Systems Act, that the said tariffs were applicable
to the Applicants’ properties and that the Applicants
were all
charged the said tariffs in accordance with the 28 November 2000
decision until 2012/2013.
[15] In order to
determine whether the resolution in annexure “O6” indeed
constituted a valid decision to impose railway
siding tariffs, the
Court needs, first of all, to examine in chronological order the
events leading up to the Council meeting of
28 November 2000 as
depicted in the relevant annexures.
[16] The Municipality
reportedly in 1997 started to consider an adjustment to the railway
siding tariffs allegedly levied from owners
of industrial properties
close to railway sidings since 1951. At an Executive Committee
meeting on 20 May 1997 it was reported
that industrialists in the
Kroonstad Industrial areas had been paying an annual fee ranging from
R100 to R300 for railway sidings,
though
“
it
is not clear how the amounts were determined…”.
An averment that the amounts “
were
determined and registered to the Deeds of Sale when the erven were
sold”,
was disproved by an audit report
which stated that
“
the full maintenance
costs of the municipal railway sidings are reclaimable from the
industrialists.”
[17] The Executive
Committee at the 20 May 1997 meeting resolved to request an official
to obtain the tariff structures of railway
sidings from other towns
and to convene meetings with the owners of the relevant industrial
properties to discuss the possible
adjustment of tariffs.
[18] The first such
meetingon 3 July 1997 was reportedly attended by only four owners who
did not use the sidings and who agreed
to pay R100 per month towards
maintenance of the sidings. The Applicants aver that they know
nothing about any meetings.The First
Applicant in any event only
acquired his properties in 2005. Although the Municipality annexed
copies of the notices regarding
the meetings, it did not disclose how
such notices were brought to the attention of the industrialists.
[19] On 30 September
1997the Executive Committee report was submitted to the Council who
resolved that all the owners of industrial
sites with railway sidings
available to them were to be invited to a follow-up meeting and to be
informed beforehand that the Council
would consider the imposition of
one of two formulas for determining siding tariffs, namely:
“
Either
the formula set out in the agenda or a formula according to which the
56 owners whose erven can physically be linked to the
railway sidings
shall be liable, on an equal basis, for the annual interest and
redemption in respect of the provision of siding
facilities; and
The 17 owners who
presently make use of the railway sidings shall be liable, on an
equal basis, for the annual maintenance cost
of the sidings,
(c) that the persons
referred to in (b) above, also be informed that they are entitled to
submittheir comments.
Formula
5
A fifth option is to take
the yearly interest and redemption and to divide that between all the
users of the siding facilities and
the balance, viz the maintenance
cost, between the users who actually make use of the facilities.
Example:
Interest and redemption
for the 1997/98 financial year = R164743 ÷56 = R2941.84 per
year.
Maintenance cost for the
1997/98 financial year = R185 257 ÷17 = R10 897.46
per year.”
[21] The next Council
resolution annexed to the Municipality’s papers is the one of
26 May 1998 taken during a meeting at
which it was reported that at
the 10 November 1997 meeting with the industrialists it was decided
to approach Spoornet for assistance
and that the industrialists had
indicated that the Municipality should wait for Spoornet’s
policy before determining a tariff.
The agenda for the Council
meeting and the minutes of the Council resolution is annexed to the
rejoinderas annexure “S22”.
[22] Significantly, the
agenda for the 26 May 1998 Council meeting stated that the purpose of
the meeting was
“
to take a resolution
regarding the
short term
(myemphasis
)
increase of tariffs payable by users and non-users of sidings”
.
[23] On 26 May 1998 the
Council resolved:
“
(a)
thatbased on the previous year’s budget, formula 5 … be
implemented, subject thereto that the implementation thereof
be
phased in as follows:
(i) 1998/1999 –
financial year – 50%;
(ii) 1999/2000 –
financial year – 25%; and
(iii) 2001/2002 –
financial year – 25%; and
(b) that all the
stakeholders be informed accordingly.”
[24] Significantly, no
amounts were determined, specified or approved. The amounts appearing
in Formula 5 are clearly labelled
“
Example”
,
i.e. merely an illustration of the result of the application of
Formula 5 to, for example, the budget of 1997/1998. Only the
percentages as set out above were approved, with no explanation as to
their meaning. It is therefore impossible to determine whether
they
referred to a percentage of the tariff otherwise applicable in terms
of each particular year’s budget (as meant, for
instance, in
section 21 of the Local Government: Municipal Property Rates Act, Act
6 of 2004 (the Rates Act) regarding the phasing
in of certain
property rates) or to various percentages of only the “maximum
tariff”pertaining to the 1997/1998 budget
(as in the Formula 5
example).
[25] The wording of
Formula 5, namely
“
to take the
yearly
(my
emphasis)
interest and to divide that between
… and the balance, viz. the maintenance cost, between …”
in
my view makes it clear thatFormula 5 was intended to be applied,
after the end of the phasing in period, to each successive year’s
budget in order to calculate and determine the appropriate siding
tariffs for that year. The
“
short term
increases”
can in that context be taken
to refer to the three incremental percentage increases in the tariffs
proposed for the 1998/1999, 1999/2000
and 2000/2001 financial years,
whereafter the full tariffs in accordance with each year’s
budget resulting from the application
of Formula 5 were to start to
apply.
[26] This interpretation
is supported, in my view, by the NOTE after the second table in
annexure “RB10(2)” in which
it is pertinently stated
that:
“
the
increased tariffs can be phased in over the next two financial years,
whereafter the charges will be based on the interest and
redemption
plus maintenance costs”
[27] Inannexure
“RB10(2)”,
dated 28 November 2000,
the Executive Committee reportedthat for all owners the maximum
amount had erroneously been debited for
the full period
“
instead
of in three phases
at the approved
charges in respect of each of the three years
”
(my
emphasis).But as stated above, the Municipality did not provide any
document in which such charges had indeed been approved
“
in
respect of each of the three years”
.
And
on the Respondent’s own version there was no such resolution
before November 2000.
[28] Annexure “RB10(2)”
is the document which the Municipality initially called the Council
decision which makes the
levying of siding tariffs legal. From its
contents it is clear, however, that it is not a Council decision. It
is merely the agenda
for the Council meeting on 28 November 2000at
which the Executive Committee reported the non-compliance with the
previous ‘decision’
to phase in the tariff increases over
a three-year period from the 1998 to the 2001 financial years as set
out in annexure “S22”,
and proposed that the charges
applicable to the financial year 1998/1999 rather be debited annually
for the full period of those
three years,and the increased charges be
phased in in 2002 and 2003 instead.
[29] The agenda in
“RB10(2)”contains two tables which detail the
“
user
levy”
amounts which according to the
Respondent’s papers were intended to be imposed as a
“
service
fee”
on industrial properties which
could potentially obtain access to railway sidingsand the much higher
“
rentals”
to
be imposed, together with
“
user levies”,
on properties into which a railway siding actually runs.
In terms of Formula 5, the calculation of the user levies would be
based
on the annual interest and redemption charges and the
calculation of the rentals on the annual maintenance costs. No
explanation
is provided regarding the ‘redemption charges’
or the ‘interest’, what they pertain to or how they are
calculated.
[30] Presumably the user
levies and rentals set out in the first table in “RB10(2)”are
the
“
approved charges”
(
referred
to in the “NOTE” after the second table)with which the
different owners were supposed to have been debited
on 1 July 1998, 1
July 1999 and 1 July 2000, respectively, but regarding which no
resolution is annexed. The said first table reads
as follows:
“
An
investigation revealed that the owners concerned were all debited
with the maximum amount for the full period, instead of at
the
following levies and rental in respect of each of the three financial
years:-
“
DATE
USERS
LEVY
RENTAL
TOTAL
1/7/1998 R 1 470.92
pa +R 6 919.66 pa R 8 390.58 pa + VAT
1/7/1999 R 2 206.38
pa +R 10 379.48 pa R 12 585.86 pa + VAT
1/7/2000 R 2 941.84
pa +R 13 839.31 pa R 16 781.15 pa + VAT
In 50 cases owners are
responsible for payment of the users levy only and in their cases
their accounts will be credited by an amount
of R 32 561.13
each.”
[31] Annexure “RB10(2)”
also contains a second table with the EC’s recommendation for
the implementation of the
increased tariffs:
“
Recommendation:
The Executive
Committee recommends:
that an investigation be
done regarding the impact on the budget, should the
followingproposal be acceptedthat the new tariffs
for railway
sidings be phased in as follows:
DATE
USERS
LEVY
RENTAL
TOTAL
1/7/1998-30/6/2001
R 1 470.92 pa+
R6 919.66pa
R8 390.58pa+VAT
1/7/2001-30/6/2002
R 2 206.38 pa+
R10 379.48pa
R12 585.86pa+ VAT
1/7/2002-31/6/2003
R 2 941.84 pa+
R 13 839.31pa
R16 781.15 pa + VAT
1/7/2003
–
the tariffs as per Council’s policy
That the report in (a)
above be submitted at the meeting of the Council.
NOTE:
An
amount of R 2 140 634.55 was erroneously debited in respect
of railway siding facilities as the maximum levy was charged
in all
cases for the period 1 July 1998 to 30 June 2001 instead of in three
phases at the
approved charges
(my emphasis)
in respect
of each of the three years.
Should the charges
applicable to the financial year 1998/1999 be debited for the full
period of three years, the total debit will
amount to R550 515.80
in which case the increased tariffs can be phased in over the next
two financial years,
whereafter the charges will be based on the
interest and redemption plus maintenance costs.
(my emphasis)
An amount of R 227 300.00
has been provided in the budget for the 2000/2001 financial year.”
[32] The minutes of the
resolution of 28 November 2000in terms of which the Council accepted
the Executive Committee recommendation
regarding the phasing in of
the recommended tariffs are annexed to the opposing affidavit as
annexure “O6”which reads
as follows:
“
459(TLC-Minutes:28.11.2000)
ACCOUNTS IN RESPECT OF
RAILWAY SIDING FACILITIES
(Director Finance)
(7/2/3/1/9)
RESOLVED
that the
new tariffs for railway sidings be phased in as follows:
DATE
USERS
LEVYRENTAL
TOTAL
1/7/1998-30/6/2001
R1 470.92 pa+R6 919.66pa R8 390.58pa + VAT
1/7/2001-30/6/2002R2 206.38pa+R10 379.48pa
R12 585.86 pa + VAT
1/7/2002-31/6/2003R2 941.84
pa+ R13 839.31paR16 781.15 pa + VAT
1/7/2003 – the
tariffs as per Council’s policy”
(my emphasis)
[33] Annexure “O6”
therefore documents the Council’s acceptance,by way of
resolution on 28 November 2000, of the
Executive Committee’s
recommendation in “RB10(2)”to phase in over a period of
five years (instead of three),
from the 1998/1999 to the 2002/2003
financial years, the tariffs originally proposed to be approvedon 26
May 1998 as “short
term increases” to be implemented on 1
July 1998, 1 July 1999 and 1 July 2000, respectively.It is clear from
the last row
in the table that the Council resolved that the listed
tariffs beimposed only up to 30 June 2003, whereafter they were to be
determined
and imposed in accordance with the “
Council’s
policy
”.No such policy has, however, been provided.
[34] Significantly the
Council only passed the resolution on 28 November 2000, whilst the
majority of the tariffs they so decided
were applicable to previous
financial years, namely 1998/1999, 1999/2000 and 2000/2001.I have to
agree with the Applicants that
the practical effect of that
resolution would be that siding tariffs were to be levied with
retrospective effect. And in par [36]
of
Kungwini Local
Municipality v Silver Lakes Home Owners Association
2008(6) SA
187 (SCA), Streicher JA held that retrospective levying indubitably
was not authorised by the legislation. I respectfully
agree. Section
10G(7)(b)(ii) of the Transition Act indeed does not provide for the
retrospective levying of siding tariffs. The
resolution of 28
November 2000 is therefore
ultra vires.
[35] The
Respondent’sargument that municipalities are no longer
creatures of statute and that therefore their power to levy
fees is
now accepted as a constitutionally entrenched original power, the
exercise of which needs no enabling legislation, whether
national or
provincial and that all that was required for a valid Council
decision was a resolution supported by the majority of
the members of
the Council, is, of course, not as simple as that. It does not take
into consideration the fact that such original
power is not
unfettered.
[36] The principle of
legality requires that a Council’s decision to impose tariffs
or levies has to be taken in accordance
with the law, failing which
it is invalid to the extent that it is inconsistent with the law. In
Afordable Medicines Trust and Others v Minister of Health and
Others
2006(3) 247 (CC) the Constitutional Court summarised
the legal position as follows:
“
Our
constitutional democracy is founded on … the supremacy of the
Constitution and the rule of law. .
.
the Constitution is the supreme law of the Republic; law or conduct
inconsistent with it is invalid … this means that the
exercise
of all public power is subject to constitutional control. The
exercise of public power must therefore comply with the
Constitution,
which is the supreme law, and the doctrine of legality, which is part
of that law. The doctrine of legality, which
is an incident of the
rule of law, is one of the constitutional controls through which the
exercise of public power is regulated
by the Constitution. It entails
that both the legislature and the executive are constrained by the
principle that they may exercise
no power and perform no function
beyond that conferred upon them by law. In this sense the
Constitution entrenches the principle
of legality and provides the
foundation for the control of public power.”
(Seealso:
Gerber
and Others v Member of the Executive Council for Development Planning
and Local Government, Gauteng, and Another
2003(2)
SA 244 (SCA) at para [35].)
[37] Section 229 of the
Constitution provides
“
that a
municipality may impose … if authorised by national
legislation … other taxes, levies and duties appropriate
to
local government… and … the power of the municipality
to impose rates…, fees… or other taxes, levies
or
duties … may be regulated by national legislation.”
The
Local Government: Municipal Systems Act, Act 32 of 2000 (the Systems
Act) and the Local Government: Municipal Finance Management
Act, Act
56 of 2003 (the Finance Act) is the applicable national legislation
for purposes of this case.
[38] In
Fedsure
Life Assurance Ltd v Greater Johannesburg Transitional Metropolitan
Council and Other
1999(1) SA 374 (CC) in
paras [56] and [58] the principle of legality was held to imply that
a body exercising public power,
“
such as
a municipality making original legislation in the form of budgetary
resolutions”,
had to act within the
powers lawfully conferred on it. In
Kungwini
in par [14] at 194F – 195A the Supreme Court of
Appeal held that a municipality exercising its power to impose a rate
on property
was exercising a legislative power, not executing an
administrative act. The same principle applies to the other taxes,
levies
or duties, as part of the budgetary process. (See also:
South
African Property Owners Association v Johannesburg Metropolitan
Municipality and Others
2013(1) SA 420
(SCA) paras [6] and [8]).
[39] It was held in
Kungwini
, furthermore,
that the principle of legality dictated that in levying, recovering
or increasing property rates, a municipality
is obliged to follow the
procedure prescribed by the applicable national or provincial
legislation. In
SA Property Owners
par [8] at 426 the Supreme Court of Appeal determined,
moreover, that the national legislation authorising municipalities to
impose
other taxes, levies and duties appropriate to local government
in accordance with section 229 of the Constitution, the Systems Act,
the Finance Act,and the Rates Act
“…
must
be read together as they form part of the suite of legislation that
gives effect to the new system of local government”
.
(See also:
Liebenberg NO v
Berg River Municipality
2012 JDR 1834
(SCA) par [8].) The Rates Act is of course only relevant where
property rates are concerned.
[40]
It
is common cause that section 10G(7) of the Local Government
Transition Act 209 of 1993 (the Transition Act) applied to the
November
2000 resolution and that the procedures prescribed in s
10G(7) for the publication and notification of the community
therefore
had to be followed regarding the November 2000 resolution.
[41] The Supreme Court of
Appeal in paras [8] and [9] of
SA Property
Owners
made it clear
“
that
a fundamental aspect of the new local-government system is the active
engagement of communities in the affairs of municipalities”
and
that
“
members of the local community
have the right ‘through mechanisms and in accordance with
processes and procedures provided
for in terms of the Systems Act or
other applicable legislation’ to contribute to the
decision-making processes of the municipality
… It is
significant that the Act pertinently makes provision for the local
community to participate in the preparation of
the budget …
and the levying of rates”.
Chapter 4 of
the Systems Act provides in detail for such community participation
and emphasises the necessity for the community
to be apprised
effectively of all matters requiring its participation. Chapter 4 of
the Finance Act also provides for the specific
procedure to be
followed in a budgetary process in order to inform and involve the
community.
[42] In
Liebenberg
NO v Bergrivier Municipality
2012 JDR
1834 (SCA) in par [20] Lewis JA determined that the power to levy
rates was to be found in section 10G(7) until 2011, but
that the
procedure or
“
manner of doing so”
was regulated by Chapter 4 of the Finance Act once the
latter came into operation on 1 July 2004.After 1 July 2004, in other
words,
the procedures to be followed in the municipal budgetary
process were determined by the Finance Act.
[43] The Supreme Court of
Appeal in
Kungwini
in
par [30] at 199F/G – 200A held that section 10G(7)(c)(iv) of
the Transition Act required that a notice of a council resolution
whereby rates or service charges were determined or amended was to
provide for a period of 14 days within which any objections
to such
determination or amendment had to be lodged. Section 10G(7)(c)
provided that:
“
after
a resolution as contemplated in paragraph (a) has been passed, the
chief executive officer of the municipality
shall
(my emphasis) forthwith cause to be conspicuously displayed at a
place installed for this purpose at the offices of the municipality
as well as such other places within the jurisdiction of the
municipality as may be determined by the chief executive officer, a
notice stating:
(i) the general
purport of the resolution;
(ii) the date on which
the determination or amendment shall come into
operation;
(iii) the date on
which the notice is first displayed; and
(iv) that any person
who desires to object to such determination or amendment shall do so
in writing within 14 days after the date
on which the notice is first
displayed.”
[44] As is clear, section
10G(7)(c)(ii) required the notice to,
inter alia,
stipulate
the date on which the determination or amendment would come into
operation. The purpose of such requirement, according
to Van Heerden
JA in
Kungwini,
was to afford the public the opportunity to
raise objections which the Municipality then had to consider and make
fresh or amended
determinations and a new implementation date if such
objections had merit. Section 10G(7)(e), furthermore, provided that:
“
The
chief executive officer
shall
(my
emphasis)
forthwith
send a copy of the notice referred to in paragraph (c) to the MEC and
cause a copy thereof to be published in the manner
determined by the
Council.”
[45] The Respondent did
not annex any document that could have served as such a section
10G(7)(c) notice or as a section 10G(7)(e)
copy thereof regarding the
November 2000 decision or any earlier decision on the amounts listed
in the tables in annexures “RB10(2)”
or “O6”,
whether in relation to an original determination of tariffs or to an
amendment to existing tariffs. The language
regarding the notice in
both section 10G(7)(c) and section 10G(7)(e) is peremptory. In the
absence of such a notice, which absence
the Municipality in argument
admitted, the implementation of the resolution would have been
unlawful and the Applicants would simply
have been confronted with a
fait accompli
once the
new or amended tariffs were imposed.
[46] In
Gerber
in
par [36] at 357 D/E and E/F the Supreme Court of Appeal held that the
rates in that case had not been imposed in the manner required
by
law, but in conflict with the statutory prescripts for publication
and community participation and therefore had to be set aside.
In
that case the municipality did publish a notice, but failed to follow
the prescribed format and contents. In the present case,
the
Municipality did not offer any explanation or provide any evidence of
having published any notices at all, despite having had
the
opportunity to do so in its extended papers. It merely made a bare
averment that all the statutory requirements of section
10G(7) of the
Transition Act had been complied with.
[47] In
Kungwini
,
supra
, in par [31] at
200 B – F the Supreme Court of Appeal held that the object of
the provisions requiring clear and timeous
notice of new or amended
tariffs was to ensure that residents in the municipal area concerned
were ‘properly and optimally
informed’ of what their
financial obligations would be, should the published amendments take
effect, and precisely when such
obligations would become enforceable.
The Court held that for that reason a procedure whereby residents
were, in effect, presented
with a
fait
accompli
in that the rate increases were
implemented and enforced prior to the expiry of the period allowed
for the lodging of objections
to such increases, failed to
‘
encourage
the involvement of communities and community organisations in matters
of local government’
as required by
section 152(1)(e) of the Constitution and failed to constitute
‘
democratic and accountable government
for local communities’
, which is one of
the objects of local government in terms of section 152(1)(a).
[48] The Municipality
argued that there had at least been substantial compliance with the
said section. But, contrary to the
Kungwini
and
Nokeng
cases,
in this instance the notice was not deficient. There was simply no
notice at all from 2000 to 2012 when the Council adopted
a resolution
to impose specific tariffs and for the first time published a list of
tariffs which included those for railway sidings,
as well as a notice
in the newspaper in terms of S75A of the Systems Act.
[49] In
Berg River
in
par [28] it was held that material non-compliance with the provisions
of the subsection regarding publication renders the rate
imposed
legally ineffective. I agree with the Applicants’ argument that
there is no evidence of either material or even substantial
compliance with the publication requirement in the present case.
Chapter 4 in both the Systems Act and the Finance Act has the
same
purpose: namely to afford the relevant owners the opportunity to
raise objections to tariffs so that the Municipality can
consider the
objections and determine other tariffs if the objections were valid.
On the papers before me the Municipality
in casu
did not offer
the Applicants such an opportunity.
[50] In my view the
meetings that the Municipality held with some of the owners in 1997
regarding the various potential formulas
with which to determine
siding tariffs did not relieve it of its statutory duty to inform the
owners of any decisions actually
taken in that regard, especially
since it is clear from the relevant documents that the Municipality
did not follow the owners’
proposals, e.g. to wait for
Spoornet’s input before determining the tariffs.
[51] The Systems Act
commenced on 1 March 2001. Thereafter the Municipality was supposed
to apply its provisions. In terms of section
74 and section 75 of the
Systems Act the Municipality was supposed to adopt and implement by
way of resolution a siding tariff
policy. There is no evidence that
it did so. It also had to levy and collect tariffs in accordance with
its tariff and credit control
policy. There is no evidence that it
did that, either. And if the phrase“
Council’s policy”
was meant to refer to the application of Formula 5, there is no
evidence that that was applied after the November 2000 resolution
either.
[52] The Respondent’s
argument that the tariffs were lawfully imposed because they have
been part of the budget since 2000
is not persuasive. Being part of
the budget does not make them lawful
per se,
unless the
prescribed budgetary process was followed and the necessary
resolutions promulgated. The Municipality did not provide
any
evidence, however, of the promulgation of any such resolution, a
policy in terms of which siding tariffs could have been imposed,
a
list of such tariffs, any applicable by-law or evidence of the
tariffs having been made known to the public in the prescribed
manner.
[53] In par [15] of
SA
Property Owners
it was stressed that the levying of rates is an
integral part of a municipality’s annual budget process and
that the levying
of rates has to be considered together with the
budget. There is no reason why the same would not apply to the
levying of tariffs.
A Council levies rates by passing a resolution
imposing the rates, which resolution must be promulgated and made
known to the public
in the prescribed manner.
[54] In
Lienbenberg
Lewis JA in par [27] found with reference to
Gerber
and to
Nokeng Tsa Taemane Local Municipality v Dinokeng Property
Owners Association
[2011] 2 All SA 46
(SCA)that it would be
sufficient for a notice in terms of section10G(7) to state that the
details of a rates resolution could be
scrutinised elsewhere e.g.
that the resolution was available for inspection at the town council
offices during normal office hours,
in order to meet the requirement
of section 10G(7)(c) that the general purport of the resolution be
displayed. There is no evidence
that that indeed happened
in casu.
[55] In order to lawfully
impose siding tariffs in terms of the budget as from 1 July 2005 the
Municipality would have had to determine
appropriate siding tariffs
to meet the Municipality’s obligations regarding the
maintenance of the sidings in terms of the
procedures prescribed in
the Finance Act. In compliance with section 17 of the said Act it
would have had to have made the draft
budget and siding tariff
resolutions available for inspection and would have had to call for
objections.
[56] Section 17(3)(a) of
the Finance Act determines that when an annual budget is tabled, it
has to be accompanied by draft resolutions
(i) approving the budget
and (ii) … setting any municipal tariffs as may be required
for the budget year. Section 22(a)(i)
determines that the
Municipality must, in accordance with Chapter 4 of the Systems Act,
immediately after the tabling of the annual
budget, make public the
annual budget and the draft resolutions referred to in section 17(3)
and (ii) invite the community to submit
representations in connection
with the budget.
[57] Although the
Municipality argued that it was done, no evidence to that effect was
provided with reference to the siding tariffs.
Part of the purpose of
a budget is to regularly determine that the tariffs imposed for
certain services are still relevant and
appropriate and if they are
not, to debate and determine new tariffs. From the documents provided
by Respondent itself it is clear
that the 2003 tariffs were never
intended to be imposed unchanged
ad infinitum.
Yet on its own
version it did not determine new tariffs until 2012/2013.
[58] In
Berg River
Municipality v Liebenberg and Others
(26078/2010)
[2011]
ZAWCHC 371
(25 August 2011) in par [23] Binns-Ward J made it clear
that in order for a levy to qualify as one imposed in terms of
section
10G(7)(a)(ii) of the Transition Act, as averred by the
Applicants regarding the siding tariffs, its imposition would have to
be
connected with an identified function or service of the
Municipality; it would need to be recognisable by its express
provisions
as a charge for the execution of such function or the
provision of such service, with the criterion of a liability to pay
it being
established by being a benefactor or user of the function or
service.
[59] In
Pretoria
City Council v Walker
1998(2) SA 363 (CC) the Constitutional
Court in para [85] at 397H – 398B stated, in respect of a local
authority’s power
to levy a tariff for services rendered based
on a uniform structure for its area:
“
In
my view, this requirement compels local governments to have a clear
set of tariffs applicable to users within their areas
.
The
tariffs may vary from user to user, depending on the type of user and
the quality of service provided. As long as there is a
clear
structure established, and differentiation within that structure is
rationally related to the quality of the service and
type or
circumstances of the user…”
[60] It was stated in
SA
Property Owners
, furthermore, that
“
logic
dictated that the approval of the budget had to go hand in hand with
the determination of rates, as the revenue from rates
was essential
to fund the budgeted expenditures”
.
In casu,
however, in my view it is clear that
no annual determination of the tariffs took place with the approval
of the budget. The two
tenders annexed to the Municipality’s
papers clearly show an annual escalation of the siding maintenance
costs over a period
of six years from 2000 to 2006. On its own
version the industrial owners were to be held liable for the full
maintenance costs.
Clearly, then, if a policy or even Formula 5 had
indeed been applied to determine tariffs in accordance with the
annual budget,
it is not possible for the annual siding tariffs to
have remained static until 2012/2013 as, on the Municipality’s
own papers
they did.
[61] Furthermore, from
the relevant portions of the budgets annexed to the rejoinder, there
appears to be no rational connection
between the continued levying of
the unchanged 2003 amounts and the amounts budgeted for siding
maintenance and interest and redemption.
The budgeted amounts for
interest and redemption between 2004/2005 and 2007/2008, for
instance, decreasedfrom R151 500.00
to R105 000.00 to R
65 000.00. Yet there was no corresponding decrease in the ‘user
levies’ claimed from
the Applicants. It can therefore not be
found that the Council even applied its mind to the imposition of
siding tariffs until
2012.
[62] In my view it is a
municipality’s obligation as part of its budgetary process to
ensure that the tariffs it imposes for
various services are relevant
and appropriate. It cannot simply sit back and say that just because
tariffs were historically levied
for certain services, they may be so
levied
ad infinitum.
The tariffs must at least demonstrate
that the Municipality has applied its mind to the determination
thereof. That is not the
case in the instant matter.
[63] While the
Municipality averred, for instance, that it has outsourced the siding
maintenance and therefore had certain expenditures
regarding the
sidings, it only annexed two tenders dated 2001 and 2004, each one
for a period of 3 years. There is no evidence,
therefore, that the
sidings are still maintained, either by an outside company or by the
Municipality itself. On the contrary,
the Applicants maintain that
they have never had any use or benefit of the sidings and that it
would for all practical purposes
be impossible or extremely expensive
to gain such access. When First Applicant bought the property in
2005, the relevant siding
had been removed already. The Applicants
maintain, furthermore, that the Municipality is not maintaining the
sidings and that they
have had to report the lack of maintenance
because of a fire hazard. Yet the Municipality argues that the
Applicants are liable
for the “user levies’ which on its
own version have not been determined or adjusted since 2003, until
the 2012/2013
financial year.
[64] In view of the
decreasing amounts budgeted for interest and redemption, as appears
from the extracts from the budgetsannexed
for 2005 to 2007, for
instance, the non-user owners would certainly have had an interest in
objecting to the continued levying
of the same user levies, which
opportunity they would only have had if the tariffs had been
published as required.
[65]
Lewis,
JA, in
Liebenberg
with
reference to section 27(4) of the Finance Act did hold that mere
non-compliance with a provision of Chapter 4 of that Act relating
to
the budget process did not make the annual budget invalid.But the
Municipality’s failure to comply with especially the
community
involvement requirements in the present case was not simply an
administrative omission of the kind that she found in
par [40]
“
should not undermine the entire rates
basis on which the budget rests”
because
“
that could not have been the intention
of the legislature”
.
On
the papers, there was no substantial compliance at all with the
provisions of the applicable legislation.
[66] On its own version
the Municipality took only two resolutions to determine and impose
siding tariffs: the 28 November 2000
one which, if valid, could not
have yielded valid tariffs after 2003 in the absence of a tariff
policy or a new resolution for
budgetary purposes, and the 2012/2013
resolution validly taken and implemented in accordance with the
provisions of the Systems
Act and the Finance Act.
[67] If one were to find,
then, that the 2000 resolution and the tariffs imposed in consequence
thereof, were not validly imposed,
the unavoidable result would be
that the tariffs allegedly included unaltered in the budget from 2005
until 2012 when a specific
resolution to determine the tariffs was
passed, were also unlawful and invalid.But even if I am wrong about
the unlawfulness of
the November 2000 resolution, it is clear that
the amounts therein were decided to apply only until 2003 and
thereafter needed
to be imposed by way of a policy. The Respondent
provided none and relies on that resolution as the only one until
2012/2013. On
their own papers then the tariffs imposed after 2003
until 2012 are invalid.
[68] The Respondent
relied on
Rademan v Maqhaka Municipalityand
Others
[2012] JOL 28591
(SCA) case where
in par [9] it was held that for a municipality to be able to properly
and efficiently execute its constitutional
and statutory obligations
to deliver municipal services to its residents, it requires
sufficient resources and revenue and that,
in order to put the
municipality in a position to render the required municipal services,
the ratepayers must make regular payments
of taxes and levies and
consumption charges. It was held that it was part of the ratepayers’
civic and contractual responsibilities
to make corresponding payment
for municipal services in accordance with subsections 5(1)(g) and
5(2)(b) of the Systems Act.
[69] The circumstances
in
casu
differ vastly from those in
Rademan
where
in par [19] the Supreme Court of Appeal found that the ratepayers’
refusal to pay
“
for services which they
enjoy”
could not be condoned
.
Regarding the Applicants
in
casu
there is no evidence that they
“
enjoy”
any of the services they are being charged
for.
[70] The Respondent’s
averment that allowing the Applicants’ siding tariffs to be
reversed and their payments repaid
would deprive other residents of
essential services such as water and electricity if their charges for
siding tariffs were to be
reversed, is not persuasive. On the
Municipality’s own papers they were to be fully responsible for
the siding maintenance.
On the Respondent’s own version the
industrial owners pay higher property rates than owners of private
property anyway and
in that respect the Applicants’ accounts
were fully paid up. In my view the effect of the relief prayed for
would be limited,
especially if the retrospective effect thereof were
to be appropriately restricted.
[71] In
Rademan
in paras [10] and [11] Bosielo JA stated that municipalities are
obliged to levy and collect rates and taxes from their residents
as
authorised by s 229 of the Constitution and for this purpose is
required by law to have a credit control and debt collection
policy
in accordance with s 96 of the Systems Act and which is consistent
with its rates and tariffs policies.
[73] Municipalities,
therefore, have three statutory obligations regarding taxes and
tariffs: to determine, to levy and to collect.
In the present case
there is no evidence that the Municipality did anything to actually
collect the siding tariffs other than to
send invoices either. There
is no evidence that it ever demanded payment from the Applicants when
they stopped paying, until March
2012 when First Applicant wanted to
alienate its property and was confronted with the section 118
certificate. (See in this regard
Mkontwana v Nelson Mandela
Metropolitan Municipality and Another; Bisset and Others v Buffalo
City Municipality and Others; Transfer
Rights Action Campaign and
Others v MEC, Local Government and Hoausing, Gauteng, and Others
(Kwazulu-Natal Law Society and Msunduzi
Municipality as
amici
curiae)
2005(1) SA 530 (CC) in which Yacoob J in par [49]
agreed with the Applicants that a municipality cannot sit by and
allow charges
to escalate regardless and in the knowledge that
recovery will be possible whenever the property falls to be
transferred. He found
that the municipality must comply with its
duties and take reasonable steps to collect amounts that are due,
andheld in paras [62]
and [67] at 557B, C – D that the
provisions of section 118(1) did not relieve the municipality of its
duty to do everything
reasonable to ensure appropriate debt
collection.)
[74] The Municipality
relied on
Rademan
to argue that the Applicants would deprive
other residents of the provision of basic services if their payments
for the siding tariffs
were to be credited to their accounts.
Furthermore, that, because the siding tariffs have been part of the
budget, crediting the
Applicants’ accounts would have a
‘domino-effect’ or “knock-on effect” such as
described in par [71]
in the
SA Ratepayers
case.
[75] But, the important
difference between the present case and the
SA Ratepayers
case
is that in the latter case the property rates sought to be impugned
formed the principal component of the budget the appellants
sought to
have set aside.
In casu
the siding tariffs are a very small,
restricted and relatively insignificant subset of the budget,
contributed by and applicable
to a very small subset of owners. On
the Municipality’s own version the tariffs payable by the
industrial owners remained
unaltered since 2003. They did not allege
that there are more industrial owners now than when the November 2000
resolution was
passed – namely around 50 ‘user levy’
payers and 17 ‘rental payers’. Unquestionably that is a
very
small proportion of the total municipal ratepayers and in my
view it would not have a prohibitively negative effect on the budget
if the railway siding tariffs unlawfully levied were to be credited
to their accounts, especially if restricted to appropriate
period.
[76] The Municipality
in
casu
has provided no details of the effect on
the Municipality if it were indeed to be ordered to reverse the
tariffs charged and to
credit the Applicants’ accounts or to
repay the tariffs unlawfully claimed, other than to make a general
averment that
“
the matter deals with a
possible loss of approximately R8 million”
.
No explanation is provided for the calculation of the
said amount. It is not averred that it would not be possible to
credit the
accounts or even to pay back what has been paid, either.
[77] I agree with the
Applicants that it is clear on the papers that the Municipality did
not implement the siding tariffs in accordance
with the law. The
tariffs so imposed are therefore unlawful and should be set aside.In
my view, therefore,
the Municipality was not
entitled to claim the siding tariffs and the Applicants are entitled
to have the charges reversed. The
Municipality’s averment, with
reference to
SA Ratepayers,
that
it should not be done because the Supreme Court of Appeal refused to
‘unscramble the egg’ is in my view not applicable
in the
instant case. The refusal to ‘unscramble the egg’ in that
case pertained to a situation where the Court was
asked to set aside
or declare null and void Johannesburg city’s whole budget for
2009/2010. Obviously the ramifications of
such an order is vastly
different from setting aside the tariffs unlawfully claimed in a very
small subset of a budget as in the
present case.
[78] I respectfully agree
with Navsa JA in par [37] in
Gerber
that
it is regrettable that revenue will be lost because of the Council’s
failure to exercise its powers and functions within
the law, but that
one should not lose sight of the principles underlying our democracy
and that
“
All, especially institutions
of State, must respect the principles of legality”.
[79] On the papers before
me the process followed by the Council was fundamentally flawed and
it acted outside its powers and functions.
It was not merely an
administrative error such as to publish a defective notice. It was a
fundamental failure to adopt the prescribed
policies to determine
tariffs and collect the tariffs it levied.
[80]
The
Applicants
in casu
did
not ask for the entire budget to be set aside as in the
SA
Property Owners
case. Neither is the levying
of siding tariffs the principal component of the budget in this case.
Other than a bare averment that
it might involve R8 million, the
parties did not engage, on affidavit, on affordability or terms of
repayment or the possible future
impact on all ratepayers.
[81]
I
am of the view, therefore, that if I restrict the order for writing
back and crediting the Applicants’ accounts accordingly,
and
for the repayment of amounts paid, to the three years preceding this
order, the effect on the budget and the other residents
in the
Municipal jurisdiction would indeed be minimal and therefore
equitable.
[81] The Applicants have
been substantially successful in their application and I see no
reason for the cost order not to follow
success.
ORDER
[82] WHEREFORE the
following order is made:
The siding tariffs/fees
and/or charges imposed on the Applicants by the Respondent with
regard to Erf 1545, Kroonstad (extension
110, Erf 1546 Kroonstad
(extenion) 11), Portion of Erf 6922, Kroonstad, Erf 1508 Kroonstad
and Erf 1087 Kroonstad have been unlawfully
imposed and are set
aside.
The Respondent is to
reverse the siding tariffs/fees and/or charges debited to the
Applicants’ accounts in the financial
years 2009/2010,
2010/2011 and 2011/2012 and to credit their accounts accordingly.
The Respondent is to
repay with interest the siding tariffs, fees and/or charges paid by
the Applicants in the financial years
2009/2010, 2010/2011 and
2011/2012.
The Respondent is to pay
the costs of the application, which costs are to include those
occasioned by the removal from the roll
on 30 May 2013.
______________
H. MURRAY, AJ
On behalf of the
Applicants: Adv. B. Knoetze S.C.
Instructed by:
Symington & de Kok
Attorneys
BLOEMFONTEIN
On behalf of the
Respondents: Adv. J. Y. Claasen S.C.
Instructed by:
Rampai Attorneys
BLOEMFONTEIN