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[2011] ZAFSHC 219
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Bio Energy Afrika Free State (Edms) Bpk v Freedom Front Plus in re: Freedom Front Plus v Moqhaka Local Municipality and Others (2012 (2) SA 88 (FB)) [2011] ZAFSHC 219; [2011] ZAFSHC 140 (1 September 2011)
FREE
STATE HIGH COURT, BLOEMFONTEIN
REPUBLIC
OF SOUTH AFRICA
Appeal No. : 339/2010
In
the matter between:-
BIO
ENERGY AFRIKA FREE STATE (EDMS) BPK
…............
Appellant
and
FREEDOM
FRONT PLUS
….................................................
Respondent
Case No.: 1507/2010
In re:
In the matter between:
FREEDOM FRONT PLUS
….....................................................
Applicant
and
MOQHAKA LOCAL
MUNICIPALITY
…...........................
1
st
Respondent
BIO ENERGY AFRICA
FREE STATE (EDMS) BPK
…..
2
nd
Respondent
THE REGISTRAR OF
DEEDS, BLOEMFONTEIN
….....
3
rd
Respondent
_______________________________________________________
CORAM:
MUSI, JP
et
VAN ZYL, J
et
DAFFUE, AJ
_______________________________________________________
JUDGMENT BY:
MUSI, JP
_______________________________________________________
HEARD ON:
11 AUGUST 2011
_______________________________________________________
DELIVERED ON:
1 SEPTEMBER 2011
_______________________________________________________
INTRODUCTION
[1]
This is a full bench appeal against the judgment of Cillié J
wherein he confirmed, with minor amendments, a
rule nisi
that
was granted by Jordaan J on 25 March 2010. The appeal is before us
with leave of the court
a quo
.
[2]
The amendments to the
rule nisi
relate only to the issue of
costs and are not being challenged in this appeal. By the time that
the
rule nisi
was confirmed some of the prayers contained
therein had become irrelevant. For purpose of the appeal, the
critical paragraphs of
the
rule nisi
as confirmed are the
following:
“
3.1
Dat die Tweede Respondent verbied word om die eiendom wat bekend
staan as Gedeelte 225, Gedeelte 226 en Gedeelte 227 van die
plaas
“Dorpgronden” van Kroonstad, provinsie Vrystaat,
onderskeidelik groot 12.5617 (twaalf komma vyf ses nul sewe)
hektaar;
14,0370 (veertien komma nul drie sewe nul) hektaar, 2,9300 (twee
komma nege drie nul nul) hektaar oorspronklik geregistreer
en steeds
gehou kragtens titelakte T26721/2009 met diagram SG506/2009 van
toepassing daarop tesame met die roerende bates wat daarmee
saam
verkoop en/of oorgedra is aan die Tweede Respondent, te beswaar of te
vervreem.
…
3.8 Dat verklaar
word dat die oordrag en registrasie van die gemelde onroerende
eiendom, Gedeelte 225, Gedeelte 226 en Gedeelte
227 van die plaas
“Dorpgronden” van Kroonstad 460, distrik KROONSTAD,
provinsie Vrystaat, onderskeidelik groot 12,5617
(twaalf komma vyf
ses een sewe) hektaar, 14,0370 (veertien komma nul drie nul nul)
hektaar oorspronklik geregistreer en steeds
gehou kragtens titelakte
T26721/2009 met diagram SG506/2009 van toepassing daarop in die naam
van die Tweede Respondent nietig
is;
3.9 Dat die
oordrag van die onroerende eiendom vermeld in bede 3.8 hierbo tersyde
gestel word;
3.10 Dat gelas
word dat die Eerste en Tweede Respondent alle stappe neem en alle
dokumente onderteken ten einde toe te sien dat
die gemelde onroerende
eiendom teruggetransporteer word in die naam van die Eerste
Respondent.”
In
essence, the application seeks the setting aside of the transfer and
restoration of ownership to the first respondent (restoring
the
status quo ante
).
[3]
There is only one issue to be determined in this appeal. It is
whether the respondent, a political party operating in the national,
provincial and local level, had the necessary standing in law (
locus
standi
) to bring this application seeking the
orders granted herein. Such issue cannot, however, be properly
considered without the benefit
of the background against which it
arises. It becomes necessary therefore to set out the relevant
factual and legal background
whereafter the real issue will be
addressed.
FACTUAL
BACKGROUND
[4]
The factual background to the matter is either common cause or
undisputed and is set out hereunder. I shall henceforth refer
to the
parties as in the court
a quo
.
In this regard I should indicate that the first respondent, Moqhaka
Local Municipality, had filed a notice of intention to oppose
the
application but subsequently did not file any opposing papers and has
not joined issue in this appeal. It apparently will abide
the
decision of the court.
[5]
The first respondent, a local municipality established in terms of
section 12
of The
Local Government Municipal Structures Act, No 117
of 1998
, was the owner of the immovable property known as portions
225, 226 and 227 of the farm Dorpgronden, Kroonstad 406, Free State
Province, measuring respectively 12.5617 hectare, 14.0370 hectare and
2.9300 hectare registered under Title Deed T26721/2009 with
diagram
SG506/2009 applicable thereto. On this farm is located an electricity
power station together with movable assets which
also belonged to the
first respondent. The dispute centres on the immovable property which
includes the power station and I shall
henceforth simply refer to it
as the property. On 3 December 2009 the property was sold and
transferred to the second respondent
allegedly pursuant to a Deed of
Sale concluded on 23 September 2008. The purchase price thereof
inclusive of the movable assets
was R8 million. Significantly, such
purchase price was not paid to the first respondent. Instead a
mortgage bond was registered
over the property in favour of the first
respondent to secure payment of the R8 million.
[6]
The sale followed upon proposals embodied in a document entitled
“Project Lesedi Co-operation Agreement” which essentially
proposed the setting up of a Steering Committee whose mandate was to
conduct a feasibility study on the utilisation of the property,
particularly the power station which had been dysfunctional. This
document had been prepared and signed by the representatives
of the
second respondent and the first respondent’s municipal manager,
then one Mr Mokete Duma. The document was discussed
at meetings of
the council of the first respondent on 11 March 2008 and 31 March
2008 and ratified. A steering committee was then
constituted to carry
out the feasibility study and to compile a report thereon. It
included the representatives of the second respondent,
on the one
hand, and the first respondent’s municipal manager aforesaid
and its director of technical services, on the other
hand. The
document envisages transfer of the property together with the
movables thereon to the second respondent but subject to
certain
conditions precedent. Significantly, one of the conditions was
approval of the first respondent’s municipal council.
It also
stipulated that approval by the first respondent would transpire in
terms of the Municipal Finance Management Act (the
MFMA). Of further
note is that in approving or rather, ratifying, the agreement, the
meeting of the first respondent’s council
specifically declared
that
“The final asset transfer will be presented for
approval by Moqhaka Council”
.
THE
LEGAL POSITION
[7]
It is apposite to briefly set out the statutory framework applicable
to disposal of property belonging to a municipality. Section
14 of
the Municipal Finance Management Act, No 56 of 2003 (MFMA) provides
as follows:
“
[doja56y2003s14
]
(1)
A municipality may not transfer ownership as a result of a sale or
other transaction or otherwise permanently dispose of a capital
asset
needed to provide the minimum level of basic municipal services.
(2) A municipality may transfer
ownership or otherwise dispose of a capital asset other than one
contemplated in subsection (1),
but only after the municipal council,
in a meeting open to the public-
(a)
has decided on
reasonable grounds that the asset is not needed to provide the
minimum level of basic municipal services;
and
(b)
has considered the
fair market value of the asset and the economic and community value
to be received in exchange for the
asset.
(3) …
(4) A municipal council may delegate
to the accounting officer of the municipality its power to make the
determinations referred
to in subsection (2)
(a)
and
(b)
in respect of movable capital assdets below a value determined by the
council.
(5) Any transfer of ownership of a
capital asset in terms of subsection (2) or (4) must be fair,
equitable, transparent, competitive
and consistent with the supply
chain management policy which the municipality must have and maintain
in terms of section 111.”
Section
60(1)
of the
Local Government: Municipal Systems Act, No 32 of 2000
provides as follows:
“
The
following powers may within a policy framework determined by the
municipal council, be delegated to an executive committee or
executive mayor only:
(a) decisions to
expropriate immovable property or right in or to immovable property;”
[8]
It is not disputed that the above statutory precepts were not
complied with in the transfer of the property to the second
respondent.
In this regard, it is worth noting that
section 14(1)
of
the MFMA may not be applicable, given that the property was not being
used and, in particular, the power station was dysfunctional.
But
sub-section (2) applied and was not complied with. Neither was
sub-section (5) complied with. Most fundamentally, the disposal
was
not authorised by the first respondent’s municipal council. The
sale was apparently concluded by the municipal manager
who also
authorised the transfer, purportedly on behalf of the first
respondent, when he had no authority to do so. The transfer
was
clearly unlawful and invalid. See
CITY OF TSHWANE METROPOLITAN
MUNICIPALITY v RPM BRICKS (PTY) LTD
2008 (3) SA 1
(SCA) paras
[13] and [17];
LEGATOR McKENNA INC AND ANOTHER v SHEA AND
OTHERS
2010 (1) SA 35
(SCA) para [29];
MUNICIPAL
MANAGER: QUEKENI LOCAL MUNICIPALITY AND ANOTHER v FV GENERAL TRADING
CC
2010 (1) SA 356
(SCA) para [14];
EASTERN CAPE
PROVINCIAL GOVERNMENT AND OTHERS v CONTRAPROPS 25 (PTY) LTD
2001 (4) SA 142
(SCA) para [8]. And it matters not whether the
purported sale agreement pursuant to which the transfer took place
(
causa)
was valid or not (See
LEGATOR
paras
[20], [21], [22]) nor would the rule in
WILKEN v KOHLER
1913 AD 135
apply (See
LEGATOR
para [29]). Furthermore,
it makes no difference that the transferee (the second respondent)
may have been an innocent party. Compare
the remarks made in
EASTERN
CAPE PROVINCIAL GOVERNMENT AND OTHERS
supra
para [9].
The point is that the transfer was prohibited by law and is a
nullity. As was stated in
CITY OF TSHWANE
para [25] the
Court cannot breathe new life into a dead transaction.
[9]
In view of the weight of authority, counsel for the appellant was
constrained to concede right from the beginning of the hearing
of the
appeal that he could not argue that the transfer of the property was
legal. He accordingly only relied on the one ground
relating to
locus
standi
, to which I now turn.
LOCUS
STANDI
[10]
This issue was foreshadowed in the second respondent’s
answering affidavit. It was correctly characterised as a legal
point
(point
in limine
) and was canvassed in the court
a quo
.
The issue arises out of the fact that the applicant is a political
party which stated in its founding affidavit that it was not
acting
in its own interest but in the public interest and seemed to rely on
section 38 of the Constitution. The question was therefore
whether
the requirements of section 38 were met.
[11]
The court
a quo
decided the point in favour of the applicant.
Its reason for this was that section 38 of the Constitution was broad
enough to permit
the applicant to bring the application in the
interest of the residents and ratepayers in the area of the
respondent’s jurisdiction,
some of whom are also its
supporters. But the learned judge did not elaborate.
[12]
Section 38 of the Constitution provides as follows:
“
38
Enforcement of rights
Anyone listed in this section has the
right to approach a competent court, alleging that a right in the
Bill of Rights has been
infringed or threatened, and the court may
grant appropriate relief, including a declaration of rights. The
persons who may approach
a court are-
(a)
anyone
acting in their own interest;
(b)
anyone
acting on behalf of another person who cannot act in their own name;
(c)
anyone
acting as a member of, or in the interest of, a group or class of
persons;
(d)
anyone
acting in the public interest; and
(e)
an
association acting in the interest of its members.”
[13]
A literal interpretation of this section seems to me to mean that the
persons and associations enumerated therein will have
standing to
bring an action to court only if their complaint is an infringement
of or threat to, a right contained in the Bill
of Rights. And the
rights contained in the Bill of Rights are essentially human rights.
Infringement of rights other than human
rights, will thus not confer
standing. This view seems to find support in the statement made by
Traverso DJP in
FIRSTRAND BANK LTD v
CHAUCER PUBLICATIONS (PTY) LTD
2008 (2)
SA 592
(CPD) at 599D to the effect that “
an applicant in
a class action must allege that a right enshrined in the Bill of
Rights is being threatened.”
The learned judge
proceeded to rule that there could be no infringement of the right
implicated in that case and rejected the applicant’s
claim to
standing based on section 38.
[14]
On this interpretation, the applicant herein would have no standing
because it has not alleged, let alone established, any
violation of,
or threat to, any of the rights contained in the Bill of Rights.
However, the Constitutional Court has adopted a
broad approach to the
interpretation of section 38. See the judgment of Chaskalson P (as he
then was) in
FERREIRA v LEVIN NO AND
OTHERS; VRYENHOEK AND OTHERS v POWELL NO AND OTHERS
1996 (1) SA 984
(CC)
(1996 (1) BCLR 1)
in para [165],
which is quoted in full in the
FIRSTRAND
BANK LTD
-case,
supra
at 599A-C.
[15]
It seems evident that the Constitutional Court has given an extended
interpretation to Section 38 to incorporate violations
of and threats
to all the rights, obligations, values and principles contained in
the Constitution committed by public bodies or
public officials. This
would include
“
any
executive or administrative act or conduct or threatened
administrative act or conduct of any organ of the State,…
”
(
FERREIRA
at
1084C-D). Constitutional challenges to legislative measures allegedly
enacted contrary to the precepts of the Constitution are
similarly
covered. The rationale for this approach is the principle of
legality, which is enshrined in the Constitution. In terms
thereof
“
any
exercise of public power has to be carried out in terms of a valid
rule of law”, as was stated in
MENQA
AND ANOTHER v MARHOM AND OTHERS
2008
(2) SA 120
(SCA) para [19]. See
FEDSURE
LIFE ASSURANCE v GREATER JOHANNESBURG TMC
[1998] ZACC 17
;
1999
(1) SA 374
(CC) paras [55] and [56].
[16]
A typical example is the recent case involving the extension of the
term of the office of the Chief Justice of South Africa
by the
President of the Republic of South Africa. This is the case of
JUSTICE
ALLIANCE OF SOUTH AFRICA AND OTHERS v PRESIDENT OF THE REPUBLIC OF
SOUTH AFRICA AND OTHERS
[2011]
ZACC 23
, case number CCT53/2011, judgment delivered on 29 July 2011.
The standing of the applicants was not disputed but in dealing with
the issue Moseneke DCJ, writing for the unanimous court, expressed
himself in the following terms in para [17]:
“
All
the applicants claimed standing in the public interest, in the
interest of their members or in their own interest, pursuant
to the
standing provision of the Constitution.
18
They relied variously on certain constitutional or democratic
concepts, which may be summarised as follows: the protection of the
Constitution; the protection and advancement of the understanding of
and respect for the rule of law and the principle of legality;
the
protection of the administration of justice and the independence of
the judiciary; the promotion, protection and advancement
of human
rights; the strengthening of constitutional democracy; the promotion
of social justice and equality; public accountability
and open
governance.”
(The
standing provision referred to in footnote 18 is Section 38).
[17]
The applicant’s claim for standing falls squarely within the
ambit of the above passage. The applicant is challenging
the legality
of the conduct of an organ of state in transferring public property
to a private entity in complete contravention
of the applicable
statutory provisions and seeking the setting aside of the impugned
transaction. In so doing, it is acting in
the public interest as well
as the interest of its supporters who are residents and ratepayers in
the area of jurisdiction of the
first respondent’s
municipality. It has
locus standi
.
[18]
In view of this clear authority, it is unnecessary to consider the
alternative grounds advanced on behalf of the applicant
in regard to
standing. In this regard, it matters not that a private person or
entity may be adversely affected by the order undoing
the illegality.
As the authorities cited elsewhere in this judgment demonstrate, a
transaction prohibited by law in the public
interest must be visited
upon by a declaration of invalidity irrespective of the consequences
for even an innocent party involved
in it (of course the second
respondent was not an innocent party). This being so, the argument
advanced on behalf of the second
respondent to the effect that the
proper course in this case was for the applicant to have sought a
mandamus against the first
respondent is untenable. It is premised on
the wrong assumption that a party in the position of the second
respondent should not
be adversely affected by the consequences of
the other contractant’s breach of its statutory duties.
[19]
In the premises, the appeal is dismissed and appellant (second
respondent) is to pay the costs.
______________
H. M. MUSI, JP
I
concur.
_______________
C. VAN ZYL, J
I
concur.
_______________
J. P. DAFFUE, AJ
On
behalf of the appellant: Adv. S. J. Reinders
Instructed
by:
Hill,
McHardy & Herbst
BLOEMFONTEIN
On
behalf of the respondents: Adv. N. Snellenburg
Instructed
by:
Rosendorff,
Reitz Barry
BLOEMFONTEIN
/eb