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[2001] ZASCA 99
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Lid Van Die Uitvoerende Raad Vir Plaaslike Bestuur: Mpumalanga, Padayachee NO v Independent Municipal and Allied Trade Union ("Imatu") and Others (86/2000) [2001] ZASCA 99; 2002 (1) SA 76 (SCA) (25 September 2001)
REPORTABLE
Case No: 86/2000
In the matter between:
DIE LID VAN DIE UITVOERENDE RAAD VIR
PLAASLIKE
BESTUUR: MPUMALANGA, CNM PADAYACHEE NO
Appellant
and
INDEPENDENT MUNICIPAL AND
ALLIED
TRADE UNION (“IMATU”) and OTHERS
Respondents
Coram: HEFER ACJ, HARMS, SCOTT & MTHIYANE JJA, and CONRADIE AJA
Heard: 13 SEPTEMBER 2001
Delivered: 25 SEPTEMBER 2001
Subject: A provincial
government has no constitutional duty towards a local authority to provide it
with funds to enable the local
authority to pay its
debts.
JUDGMENT
HARMS JA/
HARMS JA:
[1] Moses in his wisdom ordained that “thou shalt not oppress a hired
servant” and “at his day thou shalt give
him his hire, neither
shall the sun go down upon it; for he is poor, and setteth his heart upon
it”(Deuteronomy 24:14-15).
The Transitional Local Council of Leandra, a
town in the province Mpumalanga, did not heed this command, pleading the lack of
funds.
The question in this appeal is whether a provincial government has a
constitutional duty towards a local authority and its employees
to provide it
with funds to enable the local authority to fulfil its financial obligations
towards those employees.
[2] It is common knowledge that a number of local authorities have grave
financial difficulties and, as explained in the papers,
this is in part due to
an inability or an unwillingness of many of their inhabitants to pay for basic
municipal services. As a result,
these local authorities are unable to fulfil
their financial obligations. Leandra, for instance, had outstanding debts in
excess
of R 16 million on 30 June 1999. On a monthly basis current expenses
exceeded current income. In order to manage the crisis, the
Council decided to
take from its employees to pay the proverbial Paul.
[3] Each employee received monthly his or her net salary, accompanied by a pay
slip indicating its computation with reference to
the gross salary and the
necessary statutory and other agreed deductions. The deductions did not find
their way to their respective
destinations and instead remained in the
Council’s pocket. Deductions for income tax were not paid to the South
African Revenue
Service as required by the Income Tax Act 58 of 1962; pension
contributions, in contravention of the
Pension Funds Act 24 of 1956
, were not
paid to the relevant pension fund; medical scheme contributions were retained
contrary to the provisions of the
Medical Schemes Act 131 of 1998
; unemployment
contributions were not transmitted to the Fund in breach of the Unemployment
Insurance Act 30 of 1966. Bond payments,
for example, were withheld from both
the employee and the bondholder. And so the list continues.
[4] The Revenue Service had recourse to a simple expedient: it took over the
Council’s bank account and managed it until what
was due had been paid.
The other entities involved do not have similar powers and it was left to the
present respondents (a trade
union – who has no role to play in the
proceedings – and some of its members, herein referred to as “the
employees”)
to apply to the Transvaal Provincial Division for relief.
They firstly sought an order directing the Council to pay the amounts
in
question on their behalf. In spite of the Council’s faint opposition, the
court
a quo
made an order against it substantially as requested. There
is understandably no appeal by the Council but, given its precarious
financial
position, it is unlikely that the order will be complied with, at least within
the foreseeable future.
[5] In addition, the employees sought an order against the Mpumalanga Provincial
Government, represented by the appellant. They
asked primarily for payment by
the Province of these amounts, jointly with the Council or in the alternative.
Their second prayer,
in substance although not in form an alternative, was for a
mandamus ordering the Province to pay the sums, either under s 139 of
the
Constitution as part of its obligation to take appropriate steps to ensure the
fulfilment of the Council’s obligations,
or under s 154 by supporting or
strengthening the capacity of the Council. The court below (De Vos AJ),
conscious of the fact that
the Province could not in law be ordered to pay the
Council’s debts, nevertheless granted an order against the Province,
purportedly
under s 154, in the following terms:
“Die Tweede Respondent word gelas om die Eerste Respondent te steun en te
versterk soos bedoel in artikel 154 van die Grondwet
van die Republiek van
Suid-Afrika, Nr 108 van 1996 met inbegrip van maatreëls wat sal lei tot die
betaling van bogemelde bedrae
aan bogemelde instellings . . ..”
The appeal is with the leave of the court below.
[6] The Council was a local authority in the interim phase of the local
government transition. That stage has come to an end but
the case must still be
decided against the backdrop of the Local Government Transition Act 209 of 1993
(read with par 26 of Sch 6
to the Constitution). As explained in
Fedsure
Life Assurance Ltd and Others v Greater Johannesburg Transitional Metropolitan
Council and Others
[1998] ZACC 17
;
1999 (1) SA 374
(CC) par 4, the Act contemplated that the
transformation of local government would take place in three distinct stages.
During the
“pre-interim” phase, negotiating forums were established
and charged with appointing temporary councils to discharge
local government
responsibilities. This period extended from the commencement of the Act, on 2
February 1994, until the first democratic
local government elections. The
“interim” phase commenced on the date of these elections and
introduced a series of transitional
local government structures. The third phase
was to be initiated and regulated by new legislation, since enacted as the
Local
Government: Municipal Structures Act 117 of 1998
with commencement date 1
February 1999.
[7] Government in the Republic is constituted on three levels, namely as
national, provincial and local spheres of government. They
are distinctive,
interdependent and interrelated (Constitution
s 40(1)).
All spheres are obliged
to respect the constitutional status, institutions, powers and functions of
government in the other spheres
(s 41(1)(e))
and to exercise their powers and
perform their functions in a manner that does not encroach on their functional
or institutional
integrity
(s 41(1)(g)).
Each has its own budget
(s 215(1))
and
the division and allocation of revenue between the different levels is a matter
for national legislation
(s 214(1)
, presently the Division of Revenue Act 28 of
1998. Financial matters relating to municipalities were, at the relevant time,
regulated
by
s 10G
of the
Local Government Transition Act.
[8
] Section 139(1) of the Constitution reads:
“When a municipality cannot or does not fulfil an executive obligation in
terms of legislation, the relevant provincial executive
may intervene by taking
any appropriate steps to ensure fulfilment of that obligation, including-
(a) issuing a directive to the Municipal Council, describing the extent of the
failure to fulfil its obligations and stating any
steps required to meet its
obligations; and
(b) assuming responsibility for the relevant obligation in that municipality to
the extent necessary-
to maintain essential national standards or meet established minimum standards
for the rendering of a service;
to prevent that Municipal Council from taking unreasonable action that is
prejudicial to the interests of another municipality or
to the province as a
whole; or
to maintain economic unity.”
[9] The court below held that this sub-section gave a provincial government the
discretion, without imposing an obligation, to intervene
in the affairs of a
local authority. For this reason it refused to grant the relief sought in its
terms. There is another reason
why the employees could not rely upon the
provision: it is concerned with a failure to fulfil “an executive
obligation in terms
of legislation”. The obligation resting upon all
employers to pay, for example, an employee’s deducted tax to the Revenue
Services is statutory but it is not “executive” in any sense of the
word. The contractual obligation to pay bond instalments
and the like is
neither “executive” nor “in terms of legislation”.
[10] Section 154(1) of the Constitution forms the cornerstone of De Vos
AJ’s order and it provides as follows:
“The national government and provincial governments, by legislative and
other measures, must support and strengthen the capacity
of municipalities to
manage their own affairs, to exercise their powers and to perform their
functions.”
To the extent that the duty resting on the higher levels of government is to
introduce legislation to support and strengthen the
capacity of municipalities,
courts are not empowered to order any legislature to pass legislation. That is
a matter falling within
the sole domain of the different legislatures. This
leaves for consideration the “other measures”.
[11] In answering the application for payment by the Province, the deponent
pointed out that the Province has a limited budget for
local government
purposes; money had not been budgeted for paying the debts of local authorities;
the Province had, insofar as its
resources permitted, assisted the Council by
making various amounts available to it; and that the Province, well aware of the
financial
difficulties of the Council, had taken various steps under s
10G(2)(m)
[1]
of the
Local Government
Transition Act. Creditors
of municipalities do not have a right to be paid by
other spheres of government
(s
10G(12)).
[2]
I am aware that the court
below held that the employees are not “creditors” but I cannot
subscribe to that finding.
The employees were creditors for their full
salaries. Payment to another party had to be done because that party had been
appointed
as a
solutionis causa adjectus
(De Wet & Van Wyk
Kontraktereg & Handelsreg
5 ed vol 1 p261-262) or by reason of a
mandate. This did not destroy the creditor-debtor relationship between the
parties.
[12] Assuming that a court is entitled to order a provincial government to
support or strengthen a municipality, it is doubtful whether
that can be done at
the behest of a creditor of the municipality. The extended standing afforded to
persons and associations under
s 38 of the Constitution relates to
infringements, real or threatened, of rights entrenched in the Bill of Rights
and not to everything
else in the Constitution. Further, at first sight it
seems that s 154(1) has no vertical operation (i. e., between government and
citizen) but that it regulates the relationship between different spheres of
government. In any event, if a court does make an order
under s 154(1), it
cannot do so by simply restating the wording of the section. The Province was
entitled to know what it had to
do. On the papers it was called upon to pay and
it responded to that case as made out in the founding affidavit; the Province
was
not called upon to defend its administrative decisions (or lack thereof) in
dealing with the crisis. De Vos AJ suggested that the
Province could assist the
Council in collecting its debts of about R 12 million; how or why she did not
say and counsel quite properly
did not attempt to justify that idea. Another
suggestion she made was that the Province could advance a loan to the Council.
One
can immediately ask: for what amount (having regard to the fact that funds
were not available) and for which creditors? Are the
employees some or other
class of creditors with special rights? Once again, counsel was not prepared to
support the proposal.
[13] Unable to suggest any order that would be capable of
enforcement, counsel sought refuge in s 41(3) and (4) of the Constitution
and
requested that the Province and the Council be ordered to settle the dispute.
They read:
“(3) An organ of state involved in an intergovernmental dispute must make
every reasonable effort to settle the dispute by
means of mechanisms and
procedures provided for that purpose, and must exhaust all other remedies before
it approaches a court to
resolve the dispute.
(4) If a court is not satisfied that the requirements of subsection (3) have
been met, it may refer a dispute back to the organs
of state
involved.”
These provisions provide no comfort for the employees because they are concerned
with “intergovernmental disputes”; the
dispute before us concerns
the Province and the employees.
[14] During argument the Court raised the question whether this would not be a
proper case for the grant of a declaratory order.
Cf
Mohamed and Another v
President of the Republic of South Africa and Others (Society for the Abolition
of the Death Penalty in South
Africa and Another intervening)
[2001] ZACC 18
;
2001 (3) SA
893
(CC) par 69-70. Counsel had no considered response available. The reason
the issue was mentioned is that the Province disputed,
for reasons that are
difficult to fathom, the application of ss 139(1) and 154(1) of the Constitution
to the interim phase of local
government. But since that phase has passed and
because there is no dispute about its present applicability, it will have no
practical
value to issue a declarator at this stage of our constitutional
development; simply to recite a provision of the Constitution in
a court order
would be to state the obvious and is unnecessary.
[15] That leaves the question of costs. Counsel informed us that the
application in the court below had been postponed twice, each
time at the behest
of the Province. Costs were reserved for no apparent reason. Courts should not
reserve costs of postponements
and the like unless there are special
circumstances because courts that deal with the merits later, especially courts
of appeal,
are not really in a position to decide the costs of interlocutory
matters. In the absence of further information it has to be assumed
that the
Province is liable for those costs. As far as the other costs between the
present parties are concerned, it seems to me
that they are covered by the
approach generally adopted in connection with constitutional claims, namely that
if the claim is genuine
and of broad concern and is not vexatious or spurious
the unsuccessful party should not be mulcted in costs. (E g
African National
Congress and Another v Minister of Local Government and Housing, Kwazulu-Natal,
and Others
1998 (3) SA 1
(CC) par 34 and cases there cited.) The financial
viability of local authorities is a matter of grave public concern. If one leg
of our democracy sinks away in a quagmire of debt, the whole is endangered.
This is the level where the ordinary citizen interacts
primarily with government
and receives basic services. For this, municipalities require employees who are
paid, not by way of an
entry on a pay slip but in money. To have raised by way
of a constitutional challenge this genuine issue was proper and the fact
that
the court below upheld the claim indicates that it was not vexatious or
spurious.
[16] In the result the following order is made:
The appeal is upheld.
Par 2 of the order of the court below is replaced with an order: “Die
aansoek teen die tweede respondent word van die hand
gewys.”
Par 3 of that order is replaced with an order:
“Die tweede respondent word gelas on die applikante se koste ten aansien
van die twee uitstelle te betaal.
Die eerste respondent word gelas om die applikante se orige koste van die
aansoek te betaal.”
_____________________
L T C HARMS
JUDGE OF APPEAL
AGREE:
HEFER ACJ
SCOTT JA
MTHIYANE JA
CONRADIE
AJA
[1]
It read: “(m) (i) The MEC
may after consultation with the MEC responsible for Finance, whenever he or she
is of the opinion
that the finances of a municipality are or may become unsound,
instruct the council concerned to take such steps as he or she may
specify in
writing.
(ii) For the purposes of subparagraph (i), the term 'unsound' includes
any failure to claim or to collect income or to control expenditure
or to
compile and approve an operating budget, or to comply with subsections (1), (2),
(3), (4), (6) and (7).
(iii) In the event of a council failing to carry
out and implement an instruction referred to in subparagraph (i), the MEC may
take
such steps or cause such steps to be taken as he or she may deem necessary
in order to restore the finances of a council to a sound
footing.”
[2]
It read: “(12) No claim
of any creditor of any municipality may attach to or be paid out of the national
revenue fund, or attach
to or be paid by the national or any provincial
government, unless specifically and duly authorised by such
government.”