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[2011] ZAKZPHC 21
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KwaZulu-Natal Agricultural Union v Minister of Co-operative Governance and Traditional Affairs and Others (2943/09) [2011] ZAKZPHC 21; 2011 (4) SA 266 (KZP) (16 May 2011)
IN
THE KWAZULU-NATAL HIGH COURT, PIETERMARITZBURG
REPUBLIC
OF SOUTH AFRICA
CASE NO: 2943/09
In the matter between:
KWAZULU-NATAL AGRICULTURAL
UNION
….....................
Applicant
and
THE MINISTER OF CO-OPERATIVE
GOVERNANCE
AND TRADITIONAL AFFAIRS
….......................
First
Respondent
And 27 other Respondents
___________________________________________________________
JUDGMENT
___________________________________________________________
PLOOS VAN AMSTEL J
[1] This application concerns the
levying of rates on agricultural property in KwaZulu-Natal. The
applicant, who claims to represent
the agricultural sector in the
province, seeks to review a refusal by the Minister of Provincial and
Local Government Affairs to
limit the rates imposed by municipalities
on agricultural properties in the province, in accordance with the
powers given to him
in s 16(2) of the Local Government: Municipal
Property Rates Act, No 6 of 2004 (the MPRA). His portfolio has since
been renamed
and with the consent of the parties his citation was
amended to “
The Minister of Co-operative Governance and
Traditional Affairs”.
[2] S 16(2) (a) of the MPRA
provides that if a rate on a specific category of properties, or a
rate on a specific category of properties
above a specific amount in
the Rand, is materially and unreasonably prejudicing any of the
matters listed in ss (1), the Minister
must, by notice in the
Gazette, give notice to the relevant municipality or municipalities
that the rate must be limited to an
amount in the Rand specified in
the notice.
[3] S 16(1) refers to a
constitutional limitation on the power of a municipality to levy
rates. It records that in terms of s 229(2)(a)
of the Constitution
1
a municipality may not exercise
its power to levy rates on property in a way that would materially
and unreasonably prejudice national
economic policies, economic
activities across its boundaries or the national mobility of goods,
services, capital or labour.
[4] S 16(3) provides that if the
Minister is convinced by evidence evaluated by him at the request of
any sector of the community,
through its organised structures, that a
rate on any specific category of properties, or a rate on any
specific category of properties
above a specific amount in the Rand,
is materially and unreasonably prejudicing any of the matters listed
in ss (1), he must act
in terms of ss (2).
[5] On 14 April 2008 the
applicant’s attorney wrote to the Minister
2
and requested him in terms of s
16(3)(a) to evaluate the evidence which accompanied the letter, which
was said to be to the effect
that the rate on the agricultural sector
was materially and unreasonably prejudicing the matters listed in s
16(1). The Minister
was requested in the letter to publish a notice
in the Government Gazette limiting the amount in the Rand for the
eight municipalities
who had implemented the MPRA from the 1
st
July 2007, and further that he
should make a determination limiting the rate on the Rand to a
maximum of 0.5 cent in the Rand on
properties used for agricultural
purposes.
[6] Counsel for the applicant
submitted that the request in the letter related to all the
municipalities in the province and not
only to the specified eight.
This was also the approach which the applicant adopted in the papers.
Counsel made it clear that the
relief sought in paragraphs 1 and 4
3
of the amended notice of motion
relates to all the municipalities in the province and not only to
some of them. The same stance
was taken in the applicant’s
supplementary founding affidavit and in its replying affidavit, where
the deponent said in paragraph
9:
4
“
Applicant’s
case is based upon the universality of the principle it seeks to
establish. It does not seek the Minister to take
action against any
particular municipality. The position of any particular
municipality is merely illustrative.”
[7] This is not how the Minister
understood the request. His decision was conveyed to the applicants’
attorney in a letter
dated 23 March 2009
5
.
In the first paragraph he said the following:
“
Pursuant
to the application made by the KwaZulu-Natal Agricultural Union …
I hereby inform you that I have taken a decision
not to limit the
rate imposed by any of the eight municipalities cited in your
submission.”
[8] The applicant’s letter
did not expressly state that the request related to all
municipalities in the province. It is perfectly
clear from the
Minister’s letter that he understood the request to relate to
the specific eight municipalities and that his
decision likewise
related to them only. He did not consider a request which related to
every municipality in the province. I do
not consider that the
Minister’s interpretation of the letter was unreasonable or
that he misdirected himself in this
regard. The evidence which
the Minister was asked to evaluate related to specific case studies
and a number of specific municipalities,
but did not deal with every
municipality in the province. If the applicant wanted the Minister to
consider the position relating
to the whole of the province it should
have said so in clear and unequivocal terms.
[9] The Minister’s decision
related to the eight municipalities referred to in the applicant’s
request. That is however
not the decision which the applicant seeks
to review. It seeks to review a decision relating to the whole of the
province but,
as I endeavoured to demonstrate, no such decision was
asked for or taken.
[10] In case I am wrong, I
proceed to consider whether it would have been competent for the
Minister, pursuant to the applicant’s
letter of 14 April 2008,
to impose a limit as contemplated in s 16(2)(a) on every municipality
in the province. His powers in this
regard must be considered in the
context of the applicable legislation.
[11] The MPRA came into effect on
the 2
nd
July 2005 and repealed the whole
or part of the Ordinances in terms of which rates were previously
levied, subject to the transitional
provisions in the Act. The power
of municipalities to levy rates is now derived from section 229 of
the Constitution. Ss 229(1)
and (2) read as follows:
6
“
(1)
Subject to sub-sections (2), (3) and (4), a municipality may impose –
rates on property and
surcharges on fees for services provided by or on behalf of the
municipality; and
if authorised by national
legislation, other taxes, levies and duties appropriate to local
government or to the category of
local government into which that
municipality falls, but no municipality may impose income tax,
value-added tax, general
sales tax or customs duty.
The power of a municipality
to impose rates on property, surcharges on fees for services
provided by or on behalf of the municipality,
or other taxes,
levies or duties –
may not be exercised in a way
that materially and unreasonably prejudices national economic
policies, economic activities across
municipal boundaries, or the
national mobility of goods, services, capital or labour; and
may be regulated by national
legislation.”
[12] The MPRA is the national
legislation contemplated in s 229(2)(b). S 2 thereof provides for the
levying of a rate by a municipality
on property in its area. S 2(3)
provides that a municipality must exercise its power to levy a rate
on property subject to s 229
and any other applicable provisions of
the Constitution, the provisions of the MPRA and the rates policy
which such municipality
must adopt in terms of s 3.
[13] S 11(1) provides that a rate
levied by a municipality on property must be an amount in the Rand on
the market value of the
property, subject to the adjustments referred
to in ss (1) (b) and (c).
[14] S 15 provides for exemptions
and rebates in accordance with criteria set out in the
municipality’s rates policy.
Specific reference is made in
ss (2) (f) to owners of agricultural properties who are
bona fide
farmers.
[15] It is instructive to have
regard to the legislative framework which determines the role of the
different spheres of government
with regard to the levying of rates
on property. Chapter 3 of the Constitution deals with
“
Co-operative
governance”
. S
40(1) constitutes government in the Republic as national, provincial
and local spheres of government which are distinctive,
interdependent
and interrelated. S 40(2) requires all spheres of government to
observe and adhere to the principles in chapter
3 and to conduct
their activities within the parameters that the chapter provides. The
principles of co-operative government and
intergovernmental relations
are set out in s 41, which requires all spheres of government and all
organs of State within each sphere,
inter
alia,
to respect the
constitutional status, institutions, powers and functions of
government in the other sphere, not to assume any power
or function
except those conferred on them in terms of the Constitution, and to
exercise their powers and perform their functions
in a manner that
does not encroach on the geographical, functional or institutional
integrity of government in another sphere.
The Constitution
7
establishes municipalities as the
local sphere of government. S 229 confers the power to levy rates on
municipalities. S 151(4)
provides that the national or a provincial
government may not compromise or impede a municipality’s
ability or right to exercise
its powers or perform its functions. S
139 provides for provincial intervention in local government in the
following circumstances:
“
(1)
When a municipality cannot or does not fulfil an executive obligation
in terms of the Constitution or legislation …
(2) ….
…
.
If a municipality cannot or
does not fulfil an obligation in terms of the Constitution or
legislation to approve a budget or any
revenue- raising measures
necessary to give effect to the budget …
If a municipality, as a
result of a crisis in its financial affairs, is in serious or
persistent material breach of its obligations
to provide basic
services or to meet its financial commitments, or admits that it is
unable to meet its obligations or financial
commitments …”.
[16] It follows from the
aforegoing that the Minister’s power to interfere in the
levying of rates by municipalities is limited.
He cannot prescribe
what rates they should levy, and if he is of the view that the rates
which they have levied are too high he
cannot interfere. The extent
to which he can interfere (ignoring for the moment section 139 of the
Constitution) is the imposition
of a limit on the rates in accordance
with s 16 of the MPRA. He can only do so if he is convinced by the
evidence that
“
a
rate on any specific category of properties … is materially
and unreasonably prejudicing any of the matters listed in sub-section
(1) …”
8
[17] It is in this context that
one should consider the submission that the Minister, on an
evaluation of the evidence presented
to him, should have given notice
in the Gazette stipulating the maximum rate in the Rand applicable to
all properties used for
agricultural purposes in the province.
9
[18] The order sought does not
seem to me to be in accordance with s 16(3)(b). The jurisdictional
facts which are required for the
Minister’s power and
obligation to act in terms of ss (2) pursuant to an approach by a
sector of the economy in terms of
ss (3) (a) are the following. He
must be convinced by the evidence referred to in ss(3)(a) that a rate
on any specific category
of properties, or a rate on any specific
category of properties above a specific amount in the Rand, is
materially and unreasonably
prejudicing any of the matters listed in
ss(1). To paraphrase, there must be a rate which is causing the
specified prejudice. That
is, an existing rate which “is”
(present tense) causing prejudice. Further, s16(4) provides that a
notice issued in
terms of ss(2) must give the reasons why such a rate
“is materially and unreasonably prejudicing” a matter
listed in
ss(1).
[19] It seems to me to follow
that the Minister does not have the power to issue a notice in terms
of ss (2) (a) in respect of a
particular municipality unless he is
convinced that a current rate in that municipality is causing the
prejudice referred to in
s16. In other words, he cannot impose a
blanket limitation on every municipality in the province, as the
applicant wants him to
do, including municipalities which have not
yet implemented the MPRA and municipalities which have levied rates
on agricultural
properties which are not causing the prejudice
referred to. It also does not make sense to subject every
municipality to the same
limitation without having regard to the
specific circumstances and policy considerations pertaining to each
of them. Why should
the same limitation apply to a municipality which
consists mainly of agricultural property and another which has some
agricultural
property but consists mainly of residential, commercial
and industrial property?
[20] It was submitted on behalf
of the applicant that such an interpretation will render the
mechanism in s16 illusory because it
will not be possible to get the
Minister to impose the limit timeously. This is not necessarily so. A
body which wishes to approach
the Minister with evidence such as is
referred to in ss (3) (a) should do so as soon as possible. In this
case the applicant wrote
to the Minister some 10 weeks before the end
of the financial year. This is not meant as a criticism as there may
have been valid
reasons for doing so. Further, ss2 (b) provides that
a municipality affected by a notice referred to in ss (2) (a) must
give effect
to the notice and, if necessary, adjust its budget for
the next financial year accordingly. The word “accordingly”
suggests an adjustment to give effect to the notice. In other words,
if the Minister imposes a limit in accordance with ss (2) (a)
that
limit will not fall away at the end of the financial year. It will
continue to apply, presumably until the notice is withdrawn.
[21] I conclude that the Minister
does not have the power to do what the applicant contends he should
have done.
[22] The position therefore is
that the decision which the applicant wants to review is one which
the Minister was not asked to
make, did not make and could not have
made.
[23] I would like to add a
comment about the role of the courts as far as the levying of
municipal rates is concerned.
[24] In Fedsure Life Assurance
Ltd & Others v Greater Johannesburg Transitional Metropolitan
Council & Others
10
the Constitutional Court held
that when a legislature, whether national, provincial or local,
exercises the power to raise taxes
or rates, it is exercising a power
that under our constitution is a power peculiar to elected
legislative bodies. It is a power
that is exercised by democratically
elected representatives after due deliberation. The Court held that
the imposition of rates
and levies did not constitute
“
administrative
action”
under
section 24 of the interim Constitution and was therefore as such no
longer subject to judicial review (paragraph 45). It can
however be
challenged if it offends against the principle of legality (paragraph
53 to 59).
[25] In Nokeng Tsa Taemane Local
Municipality v Dinokeng Property Owners Association & Others
11
Bosielo JA said the following in
paragraphs 8 to 10:
“
The
obligation of a municipality not materially and unreasonably to
prejudice national economic policies by its rates is juridically
of
the same kind as two other provisions on which the association
relied, namely section 152(1) (c) and section 195(1) (d). The
first
provides that an object of local government is to promote social and
economic development and the second deals with the basic
value of
public administration which requires that the efficient, economic and
effective use of resources must be promoted. These
provisions are, as
submitted by the municipality, not justiciable by Courts … The
same view was expressed by this Court
(per Cameron JA) who echoed the
misgivings of Froneman J (in CDA Boerdery (Edms) Beperk v Nelson
Mandela Metropolitan Municipality
[2007] ZASCA 1
;
2007 (4) SA 276
SCA, paragraphs 45
to 46). The provisions concern political and inter-governmental
issues, evidently specialist areas involving
policy issues and a
consideration of a host of other issues in respect whereof the Court
does not have the necessary expertise.
It would be wrong for the
Courts to usurp the powers of municipalities and determine rates and
taxes for them. The best course
for a Court is to show judicial
deference to the decisions taken by democratically elected municipal
councils … In Doctors
for Life International v Speaker of the
National Assembly & Others
[2006] ZACC 11
;
2006 (6) SA 416
CC Ngcobo J stated in
this regard (at paragraph 37): ‘Courts must be conscious of the
vital limits on judicial authority
and the Constitution’s
design to leave certain matters to other branches of government. They
too must observe the constitutional
limits of their authority. This
means that the judiciary should not interfere in the other branches
of government unless to do
so is mandated by the Constitution.’
In view of this conclusion it will be unnecessary to revert to the
contention on behalf
of the association that the new tariffs offended
section 229(2)(a) of the Constitution in that they unreasonably
prejudiced
national economic policies.”
[26] The provisions of section 16
of the MPRA were not considered in the Nokeng Tsa Taemane Local
Municipality case because it related
to decisions taken by the
municipality before the MPRA came into effect.
[27] The reservations expressed
by Froneman J to which Bosielo JA referred were expressed by him as
follows in CDA Boerdery (Edms)
Bpk & Another v Nelson Mandela
Metropolitaanse
Munisipaliteit & Others
12
:
“
Die
tweede rede vir versigtigheid is dat die Howe in die algemeen nie
goed toegerus is om die aangeleenthede vermeld in artikel
229(2)(a)
van die Grondwet, naamlik die wesenlike en onredelike benadeling van
nasionale ekonomiese doelwitte, behoorlik te beoordeel
nie. Net soos
daar in gewone administratiefregtelike gedinge aangeleenthede is waar
die Howe nie ‘n oordeel oor die meriete
van administratiewe
beslissings behoort te vel nie, uit hoofde van die grondwetlike
skeiding van magte, so ook is die beoordeling
van die aangeleenthede
vermeld in artikel 229(2)(a) ook nie die soort vraag waarmee die Howe
hul behoort in te meng nie. Geen skending
van regte is direk ter
sprake by hierdie soort beoordeling nie. Onwyse beoordelings van wat
ekonomies goed vir die land is mag
weliswaar nadelige gevolge vir die
burgery inhou, maar ter regstelling daarvan is die ander middele tot
beskikking in ons demokrasie,
naamlik dié vervat in hoofstuk 3
van die Grondwet self, en demokratiese verkiesings op die
verskillende regeringsvlakke,
moontlik eerder toepaslik.”
[28] The position may well be
that the Minister’s decision pursuant to s16 (3) (b) is not
justiciable by the Courts either,
for the reasons referred to by
Froneman J. This aspect of the matter was not argued before me and
the parties approached the matter
on the basis that the Minister’s
decision was reviewable under section 6 of the Promotion of
Administrative Justice Act,
53 of 2002.
[29] In the light of the
conclusion to which I have come it is unnecessary to deal with the
grounds of review. Suffice it to say
that I do not believe that the
Minister’s approach to the question of the prejudice allegedly
caused by the rates was irrational
in that he considered the effect
of the rates in the light of the rebates allowed in terms of the
MPRA. The applicant contended
(and this was the main ground for the
review) that this approach is wrong in law because it is the rate as
such which should be
under scrutiny. I do not think this is correct.
It is the prejudice referred to in s16 (1) which is under scrutiny. A
rate which
in itself is excessive in this context may not cause the
kind of prejudice referred to in s16 (1) if it does not have to be
paid
in full because of rebates. It is the effect of the rate which
is relevant. It will be artificial to ignore the rebates. Counsel
for
the applicant protested that the rebates are temporary and should
therefore be ignored. I think the simple answer to this is
that a
rate which is inoffensive in the light of a rebate may become
offensive when the rebate is scrapped and then the mechanism
in s16
may be invoked.
[30] I conclude, for the reasons
which I have mentioned, that the application cannot succeed.
[31] Counsel for the applicant
submitted that if I find against the applicant I should not award
costs against it, on the approach
adopted in Biowatch Trust v
Registrar, Genetic Resources
13
to costs in constitutional
litigation. In Affordable Medicines Trust v Minister of Health
14
Ngcobo J (as he then was)
referred
15
to the general rule in
constitutional litigation that an unsuccessful litigant ought not to
be ordered to pay costs. He said the
rationale for this rule is that
an award of costs might have a chilling effect on the litigants who
might wish to vindicate their
constitutional rights. But this is not
an inflexible rule. There may be circumstances that justify departure
from this rule such
as where the litigation is frivolous or
vexatious. There may be conduct on the part of the litigant that
deserves censure by the
court which may influence the court to order
an unsuccessful litigant to pay costs. The ultimate goal is to do
that which is just
having regard to the facts and circumstances of
the case.
[32] In the Biowatch-case
16
the court said that merely
labelling the litigation as constitutional and dragging in specious
references to sections of the constitution
would, of course, not be
enough in itself to invoke the general rule referred to in the
Affordable Medicines case. The issues must
be genuine and
substantive, and truly raise constitutional considerations relevant
to the adjudication.
[33] The dispute in this matter
related primarily to the proper interpretation of s16 of the MPRA,
which gives effect to the constitutional
injunction relating to
municipal rates in s 229(2) of the Constitution. The purpose of the
application was to protect the constitutional
rights of farmers in
the context of s229. Although s229(2) refers to the national
interests it stands to reason that municipal
rates which offend
against those interests also offend against the constitutional rights
of those who have to pay them and whose
livelihood may be at stake.
In the circumstances I believe that the required constitutional
context is present and that I should
follow the approach to which I
have referred.
[34] The applicant asked for a
costs order in its favour relating to the postponement of the matter
after the delivery of an affidavit
by the Minister one day before the
previous hearing. The matter was postponed so as to enable the
applicant to respond to the Minister’s
affidavit. It seems fair
that the Minister should pay the wasted costs occasioned by that
postponement. That will include the wasted
costs incurred by the
seventh and nineteenth respondents.
[35] In the result the
application is dismissed. There will be no order as to costs, save
that the first respondent is ordered to
pay the wasted costs incurred
by the applicant and the seventh and nineteenth respondents pursuant
to the postponement of the matter
on 3 December 2010.
………………………………………………………………………
Application heard on: 15 April
2011
Counsel for the applicant: Mr AJ
Dickson SC
with Ms A Gabriel SC
Instructed by: J Leslie Smith &
Co
Counsel for the 1
st
respondent: Mr R Bedhesi SC with
Ms S Yacoob
Instructed by: S Naidoo
Deputy State Attorney)
Counsel for the 7
th
respondent: Mr KJ Kemp SC
Instructed by: Venn Nemeth &
Hart Inc
Counsel for the 19
th
respondent: Mr A Rall SC
Instructed by: Steenkamp Weakly
Ngwane
Judgment handed down on: 16 May
2011
1
The
Constitution of the Republic of South Africa, 1996
2
P
250
3
I
was told in argument that the applicant no longer pursued the relief
in paragraphs 2 and 3.
4
P644
5
P434
6
The
other subsections are not relevant for current purposes.
7
section
151(1)
8
Section
16(3)(b)
9
Para
4 of the amended notice of motion
10
[1998] ZACC 17
;
1999
(1) SA 374
CC
11
(518/09)
[2010] ZASCA 128
12
2006(4)
AllSA 56 at 63b-d
13
2009(6)
SA 232 CC
14
2006(3)
SA 247 CC
15
at
297A
16
Supra,
at
247C