IN THE HIGH COURT OF SOUTH AFRICA
[EASTERN CAPE DIVISION, MAKHANDA]
CASE NO.: 1323/2008
In the matter between:
ROGER RODNEY HATTON SMITH Applicant
and
BUFFALO CITY MUNICIPALITY 1st Respondent
CITY MANAGER FOR THE BUFFALO CITY
METROPOLITAN MUNICIPALITY 2nd Respondent
THE REGISTRAR OF DEEDS (KWT) 3rd Respondent
GPR PROPERTIES (PTY) LTD 4th Respondent
(In her representative capacity as the
Executrix in the estate late GJ van Niekerk)
PETER ST MELIER WARREN 6th Respondent
RONNIE COETZEE 7th Respondent
___________________________________________________________________
JUDGMENT
___________________________________________________________________
JOLWANA J
[1] On 8 May 2025 I delivered a judgment in which I made an order that the
settlement agreement concluded by and between the Mr Smith (the applicant) and
the first respondent (t he municipality) settled a related court case that had not
reached finality between the parties as appeal processes were still pending. And I
made the said settlement agreement an order of court. I also granted an order of
costs against the municipality. The municipality now seeks leave to appeal against
the whole judgment and the orders made therein.
[2] The granting of an application for leave to appeal is specifically provided for in
section 17(1)(a) of the Superior Courts Act 10 of 2013 which reads:
“Leave to appeal may only be given where the judge or judges concerned are of the
opinion that –
(a) (i) the appeal would have a reasonable prospect of success; or
(ii) there is some other compelling reason why the appeal should be heard,
including conflicting judgments on the matter;”
[3] In essence, the municipality’s basis for the application for leave to appeal is that
the property concerned is a capital asset and the settlement agreement reached by
the parties implicated a transfer of a capital asset thus necessitating compliance with
section 14(2)(b) of the Local Government: Municipality Finance Management Act 56
of 2003 (the Act). I had found section 14 of the Act not to be applicable. The
municipality contends that in doing so, I erred.
[4] In the main application, the municipality specifically relied on section 14(2)(b) and
section 14(5) of the Act. For context I consider it necessary to also include section
14(1). These three subsections read thus:
“(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 that asset.
(3) …
(4) …
(5) Any transfer of ownership of a capital asset in terms of subsection (2) or (4) must be
fair, equitable, transparent, competi tive and consistent with the supply chain
management policy which the municipality must have and maintain in terms of section
111.”
[5] While section 14(5) of the Act was also relied on in the main application, it was
made clear during submissions on the a pplication for leave to appeal that only
section 14(2)(b) was relied upon and that section 14(5) was not. In other words, the
municipality’s main gripe with the order making its own settlement agreement with
the applicant an order of court is that its council did not consider the fair market value
of the asset when it took a resolution authorising the settlement agreement at the
recommendation of its Spatial Management Committee. This appears to be based
on the fact that no specific reference is made to the fair market value of the property
in the recommendation. This is notwithstanding a direct reference to and section 14
being fully set out in the recommendation and thus bringing it to the attention of
council.
[6] It needs to be emphasized that it was not and it is still not the municipality’s case
that the settlement agreement was tainted with allegations of corruption or that the
terms of the settlement agreement resulted in the municipality getting back an
amount that is far less than that which it coul d have been offered had a fair market
value of the property been considered. It was and is still not the municipality’s case
that the municipality, for whatever reason acted irrationally.
[7] The exclusive reliance on section 14(2)(b) seems to overlook t he fact that
subsection (5) makes specific reference to subsection (2). This makes the
municipality’s interpretation of section 14(2)(b) to the specific exclusion of subsection
(5) very difficult to understand, if not downright insensible. Section 14 in g eneral and
subsection (2) in particular is concerned with the disposal of a capital asset that has
been identified as not being needed for the provision of at least a minimum level of
basic services to its community, essentially, a capital asset that is no t needed for
anything. That property so identified can only have its ownership transferred to a
private sector party subject to a competitive bidding process in accordance with a
municipality’s supply chain management policy so as to achieve a fair market value.
By definition, a fair market value is the value at which a knowledgeable willing buyer
would buy, and a knowledgeable willing seller would sell the capital asset in an arm’s
length transaction1.
[8] This is the very nub of the point I made in my judgment that section 14 of the
MFMA is simply not implicated in this matter. This is so because section 14 of the
MFMA is concerned with the ordinary transfer or disposal of a capital asset and has
nothing to do with a wrongly expropriated property and a decision by the municipality
that a related litigation be settled by restitution or restoration. The parties in this
matter were concerned with the restitution or the restoration of ownership of the
property to the applicant to settle a long -standing litigation that concerned with the
manner in which the applicant lost his ownership of the property. They agreed to
achieve this objective by cancelling the relevant sale agreement and resuscitating
his original tittle deed in terms of section 6 of the Deeds R egistries Act No. 47 of
1See definition in GNR.878 of 22 August 2008: Regulation 1 of the Municipal Asset Transfer Regulations
published in Government Gazette No. 31346.
1937. In other words, the parties were concerned with the restoration of the status
quo ante and not a disposal of a capital asset.
[9] The test for the granting of an application for leave to appeal was authoritatively
restated by the Supreme Court of Appeal in Ramakatsa2 by Dlodlo JA as follows:
“… [L]eave to appeal may only be granted where the judges concerned are of the
opinion that the appeal would have a reasonable prospect of success or there are
compelling reasons which exist why the appeal should be heard such as the interests
of justice. This Court in Caratco concerning the provisions of s17(1)(a)(ii) of the SC
Act pointed out that if the court is unpersuaded that there are prospects of success, it
must still enquire into whether there is a compelling reason to entertain the appeal.
Compelling reason would of course include an important question of law or a discreet
issue of public importance that will have an effect on future disputes. However, this
Court correctly added that ‘but here too the merits remain vitally important and are
often decisive.’ I am mindful of the decisions at high court level debating whether the
use of the word ‘would’ as opposed to ‘could’ possibly means that the threshold for
granting the appeal has been raised. If a reasonable prospect of success is
established, leave to appeal should be granted. Similarly, if there are some other
compelling reasons why the appeal should be heard, leave to appeal should be
granted. The test of reasonable prospects of success postulates a dispassionate
decision based on the facts a nd the law that a court of appeal could reasonably
arrive at a conclusion different to that of the trial court. In other words, the appellants
in this matter need to convince this Court on proper grounds that they have prospects
of success on appeal. Those prospects of success must not be remote, but there
must exist a reasonable chance of succeeding. A rational basis for the conclusion
must exist a reasonable chance of succeeding. A rational basis for the conclusion
that there are prospects of success must be shown to exist.”
[10] In all the circumstances, I am not convinced that the mu nicipality has
established that the appeal would have a reasonable prospect of success. I can find
no compelling reason why an appeal should, nevertheless, be heard. It follows that
the application for leave to appeal must fail.
2 Ramakatsa and Other v African National Congress and Another (724/2029) [2021] ZASCA 31 (31 March
2021) at para 10.
[11] In the result the following order is issued:
1. The application for leave to appeal is dismissed.
2. The municipality is ordered to pay costs of the application for leave to appeal on
scale C.
__________________________
M.S. JOLWANA
JUDGE OF THE HIGH COURT
Appearances
Counsel for the applicant : G. Solik
Instructed by : Nolte Smit Attorneys
Makhanda
Counsel for the respondent : O.H. Ronaasen SC
Instructed by : Le Roux Inc c/o Whitesides Attorneys
Makhanda
Date heard : 12 September 2025
Date delivered : 23 September 2025