Brief Summary

Administrative Law — Review of administrative decision — Property development — DB Property Development Company sought to review the Executive Mayor's decision dismissing its appeal against development charges imposed for municipal road infrastructure — DB contended that the charges did not accurately reflect the impact of its development on municipal roads, given its location within provincial road infrastructure — The court held that the Executive Mayor had failed to properly exercise discretion in calculating development charges, warranting the remittal of the matter for reconsideration.

Comprehensive Summary

Summary of Judgment

1. Introduction

This matter concerned an application in the Western Cape Division of the High Court for the review and setting aside of an administrative decision relating to development charges imposed in connection with a land development approval. The proceedings took the form of a judicial review directed at the lawfulness of an appeal decision taken within the municipal land use planning framework.

The applicant was DB Property Development Company (Pty) Ltd (“DB”), a property development company. The respondents were the Executive Mayor: Stellenbosch Municipality (first respondent, the municipal appeal authority who determined the internal appeal), the Director: Planning and Economic Development (second respondent, the original decision-maker who approved the land use application subject to conditions), and Stellenbosch Municipality (third respondent).

DB sought, in its final amended relief, the review and setting aside of the Executive Mayor’s decision dated 24 May 2023 dismissing DB’s appeal against two conditions incorporated into condition 2.3.26 of the Director’s land use approval decision of 22 June 2021. If successful, DB sought that the appeal be referred back to the Executive Mayor for reconsideration. The parties were aligned that remittal was the appropriate remedy if the review succeeded, but differed on whether the court should direct the Executive Mayor to appoint an independent technical adviser for reconsideration. (The order ultimately granted records the impugned decision as dated 24 May 2021, whereas the body of the judgment identifies the date as 24 May 2023.)

The general subject-matter of the dispute was the imposition and calculation of development charges, specifically (i) the quantification of development charges for municipal road infrastructure where the development was located within a road network dominated by provincial roads, and (ii) the extent of a development charges credit arising from a previous approval in 2018.

2. Material Facts

DB owned or developed Portion 43 of Farm No. 65, Stellenbosch Division (“the Property”), situated in the Koelenhof area, approximately 7 km northwest of Stellenbosch Town. It was common cause that the surrounding road network in which the development was embedded comprised provincial roads (notably Bottelary Road (M23) and the R304). It was also common cause that DB’s proposed development would have impacts on municipal bulk infrastructure, and that DB was obliged to make a contribution towards such infrastructure, including water, sewerage, stormwater, solid waste, roads, and community services.

The Director approved DB’s land development application on 22 June 2021, subject to conditions that included development charges. DB appealed internally against two aspects of these conditions. On 24 May 2023, the Executive Mayor dismissed the appeal, which decision became the target of the present review.

The first impugned condition related to the amount of development charges payable for municipal road infrastructure. DB’s road engineers determined that, given the development’s location relative to the surrounding provincial road network, the development would effectively be a secondary user of the municipal (as opposed to provincial) road infrastructure. DB disputed the conclusion reached by the Director and then by the Executive Mayor that all trips generated by the development would distribute to the Stellenbosch Town (municipal) impact zone, resulting in a municipal roads development charge calculated on that basis.

The relevant policy instrument was the Municipality’s 2020/21 Development Charges Policy (“MDC Policy”), read with the Municipality’s Development Charges Tariff Tables, which together informed the approach and quantification of development charges. Although the Director had applied the 2019/20 policy at first instance, the parties were ad idem that the review concerned only the Executive Mayor’s decision and that she correctly considered the 2020/21 policy.

DB’s case, as accepted as materially relevant to the review, was that the MDC Policy and tariff tables were a policy and guideline, not a rigid framework to be applied inflexibly. DB contended that the decision-makers mechanically calculated municipal roads development charges using the tariff tables for the Stellenbosch Town impact zone (which included Koelenhof), without properly accounting for the development’s reduced utilisation of municipal roads. DB maintained that the decision-makers were required to consider whether to deviate from the policy approach and adjust the roads development charge.

The respondents initially contended in their answering papers that the MDC Policy had the status of subordinate legislation and could not be deviated from without violating legality, but this contention fell away in light of authority confirming that a policy cannot bind a decision-maker inflexibly. However, the respondents persisted that neither decision-maker had an “unfettered” discretion to circumvent the policy’s formula, and that any limited discretion in the policy was not activated on the facts.

The second impugned condition related to the development charges credit. Under a previous approval in 2018, the Municipality had granted DB a development charges credit of R25 490 015.44 (15% of the total development charges imposed pursuant to the 2018 approval). Under the later approval, the Municipality substantially reduced the credit to R1 447 158.39 (2% of total development charges of R81 708 331.11 imposed). DB contended that the previously granted credit remained valid until set aside and should have been carried into the later credit calculation, inclusive of DB’s vested position under the earlier approval. The respondents disputed that the earlier credit had to be taken into account in the subsequent approval.

On the material before the Executive Mayor, it was common cause that professional engineer reports commissioned by DB were before her when she decided the appeal, and those reports were relied upon by DB in motivating for an adjustment on the basis of actual usage differing from tariff-based assumptions.

3. Legal Issues

The court was required to determine, in substance, whether the Executive Mayor’s dismissal of the internal appeal was lawful in relation to the two challenged conditions. The central legal questions were whether, on the facts and the relevant statutory and policy framework, the Executive Mayor:

Impermissibly fettered her discretion by treating the MDC Policy (and specifically paragraph 14.1) as effectively determinative and thereby failing to engage with the discretionary adjustment mechanism contemplated in paragraph 9 (including paragraph 9.1.3) and the broader statutory discretion to depart from calculated contributions where appropriate.

Committed a reviewable error of law by materially relying on certain provisions of section 7 of SPLUMA to conclude that development charges credit could be determined only with reference to actual payments received or existing buildings already constructed, in circumstances where those SPLUMA provisions did not provide such a limitation.

The dispute was primarily concerned with the application of law to fact, including the interpretation and interaction between statutory provisions and policy provisions, and an assessment of whether the decision-maker properly exercised the discretion conferred by the framework. In relation to the development charges credit issue, the court treated the Executive Mayor’s reasoning as turning on a legal proposition drawn from SPLUMA, and thus centrally concerned a question of law (namely whether SPLUMA supported the asserted limitation).

4. Court’s Reasoning

The court set out the statutory context for development charges. It explained that development charges are once-off capital contributions paid towards the capital costs of municipal external engineering services required to meet increased demand arising from new development. SPLUMA authorises provincial legislation regulating development charges, and section 40 of the Western Cape Land Use Planning Act 3 of 2014 (LUPA) provides for conditions on approvals, including conditions requiring payment of money and proportional contributions to municipal public expenditure arising from the approval. The court emphasised that section 40 requires regard to specified considerations, including prior contributions paid in the past and contributions to be paid in the future, and that section 40(12) confers an overriding discretion permitting a municipality, if appropriate, to depart from contributions determined under sections 40(3) and 40(5).

The court noted it was common cause that there were no prescribed “norms and standards” for purposes of section 40(3). On a plain reading of section 40, the focus of development charges is municipal expenditure in relation to infrastructure and amenities needed for and arising from the approved land use, coupled with an express discretion to deviate where appropriate.

The Municipality had adopted a Land Use Planning By-Law implementing SPLUMA and LUPA. The By-Law contained provisions materially replicating section 40 of LUPA and required that development charges be set out in a policy and reviewed annually, and that charges be calculated in accordance with that policy. The Municipality adopted and annually revised the MDC Policy.

Before analysing the grounds of review, the court held it was not necessary to consider explanations in the answering affidavit that were at variance with or sought to amplify the Executive Mayor’s recorded reasons, as doing so would constitute impermissible ex post facto justification.

The roads development charges: fettering of discretion

In addressing the first challenged condition, the court analysed the Executive Mayor’s reasons, which treated paragraph 14.1 of the MDC Policy as guiding officials on developments along provincial roads and as effectively resolving DB’s argument about reduced impact on municipal roads. The Executive Mayor had relied on paragraph 14.1’s statement that development charges would be applied based on impact from increased rights or intensification leading to increased demand “irrespective of geographical location,” giving the example that traffic from a development along a provincial road would ultimately end up on the municipal road network linking to provincial roads.

The court contrasted this with the structure of the MDC Policy. It recorded that paragraph 8.3 required determination of unit costs and the application of a formula aimed at determining the impact of proposed land use on municipal infrastructure services, including calculating the amount payable by multiplying the unit cost by the estimated proportion of municipal infrastructure services that would be utilised by the development. Crucially, paragraph 9 provided that, notwithstanding paragraph 8.3, the Municipality could, on its own initiative or on request, increase or reduce the bulk services component of development charges to reflect actual cost in specified instances. One such instance (paragraph 9.1.3) applied where actual usage varied significantly from the tariff tables and where actual usage was motivated by a professional engineer and justified by recognised guidelines and/or industry norms and standards. The court highlighted that it was common cause that professional engineer reports addressing this were before the Executive Mayor.

The court reasoned that the Executive Mayor appeared to have treated paragraph 14.1 as an overriding provision that removed the discretion explicitly conferred on decision-makers, not only under binding legislative instruments (LUPA and the By-Law), but also under paragraph 9 of the MDC Policy itself. It held that paragraph 14.1 merely used a development along a provincial road as an example and assumed that traffic generated by such development would, without exception, ultimately end up on municipal roads, irrespective of geography. While that might be true in general, the court held that this approach ignored the underlying principle of proportionality, and it further ignored that the framework contemplated departure in appropriate circumstances to reflect actual cost.

A central step in the court’s reasoning was that interpreting paragraph 14.1 as the Executive Mayor did would render paragraph 9.1.3 nugatory. The court noted that paragraph 9 did not state that the discretion it conferred was subject to paragraph 14.1, and that paragraph 14’s heading (“Other Principles to be Applied”) indicated that a balancing exercise was required. The court also took into account that the Executive Mayor herself acknowledged paragraph 14.1 should be read in conjunction with paragraph 9. Applying the settled principles of interpretation referenced in the judgment, the court concluded that the Executive Mayor impermissibly fettered her discretion in reaching her decision on the municipal roads development charge.

The court accepted that the Municipality was entitled to adopt a policy aimed at consistency and administrative justice, but held that what could not be sanctioned was an impermissible fettering of discretion. It also pointed to policy principles within the MDC Policy itself, including equity and fairness (those who benefit or cause off-site impacts should pay their fair share) and spatial and economic neutrality (charges should, where possible, be calculated on a sectoral or geographic scale to approximate costs within a specific impact zone). The court stressed it was not for the court to prescribe how the Municipality should achieve these goals or how the discretion should be exercised, but it was for the court to ensure that discretion was not unlawfully constrained.

The development charges credit: material error of law

In addressing the second challenged condition, the court examined the Executive Mayor’s reasoning that (i) the 2018 credit had been based on an industrial zoning extent then in place; (ii) no payments had been made in respect of development charges; and (iii) that under SPLUMA, the Municipality only gave credit for actual payments received or approved buildings already constructed, with reference to section 7(b)(i) and (v) and section 7(c)(i) and (ii) of SPLUMA.

The court held that it was not necessary, for the purposes of the review, to determine whether the Executive Mayor was correct about how development charges were determined under the pre-SPLUMA regime, because the decisive defect lay in her reliance on SPLUMA section 7 for a proposition it did not contain. The court recorded that during argument counsel for the respondents fairly conceded that the relevant SPLUMA provisions contained no reference to a statutory limitation that development charges credit must be based only on actual payments received or existing buildings, and that attempting to derive such a limitation from the reference to “fiscal” means in section 7(b)(i) would be speculative.

On that basis, the court held that the Executive Mayor’s decision on the credit issue was materially influenced by an error of law, which was sufficient on its own to render that part of the decision reviewable and liable to be set aside. Because the Executive Mayor’s own stated reasoning did not turn on DB’s vested-rights contention about the continuing effect of the 2018 credit, the court did not decide that contention and expressly indicated that DB was at liberty to renew that argument when the matter was reconsidered on remittal.

Remedy and direction sought regarding technical advice

Having found that the Executive Mayor’s decision dismissing the appeal was to be reviewed and set aside, the court held that remittal for reconsideration had to follow. DB sought a direction that the Executive Mayor appoint an independent registered professional road engineer, not employed by the state, with at least ten years’ relevant experience, to assist in the reconsideration under section 81(10) of the By-Law. The court accepted the respondents’ submission that the appointment of a technical adviser under section 81(10) was a matter within the authority of the Executive Mayor, because the provision states that the appeal authority may appoint a technical advisor. The court indicated that DB could make application to the Executive Mayor to invoke section 81(10) in due course.

Costs

The court held that DB had been substantially successful and that costs should follow the result, subject to a specific qualification relating to wasted costs of a postponement.

5. Outcome and Relief

The court reviewed and set aside the Executive Mayor’s decision dismissing DB’s appeal, insofar as it related to two components incorporated in condition 2.3.26 of the Director’s decision of 22 June 2021, namely the determination of the extent of development charges payable for municipal road infrastructure and the determination of the extent of the development charges credit (reflected as R1 447 158.39).

The appeal was remitted to the Executive Mayor for reconsideration.

The respondents were ordered to pay DB’s costs of the application, including the costs of two counsel, except for the wasted costs of the postponement on 20 February 2023 occasioned by the registrar, in respect of which each party was ordered to bear its own costs.

Cases Cited

MEC for Agriculture, Conservation, Environment and Land Affairs v Sasol Oil (Pty) Ltd and Another 2006 (5) SA 483 (SCA).

MEC for Education, Gauteng Province and Others v Governing Body, Rivonia Primary School and Others 2013 (6) SA 582 (CC).

Akani Garden Route (Pty) Ltd v Pinnacle Point Casino (Pty) Ltd 2001 (4) SA 501 (SCA).

Nersa v PG Group 2020 (1) SA 450 (CC).

National Lotteries Board and Others v South African Education and Environment Project 2012 (4) SA 504 (SCA).

Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA).

Legislation Cited

Spatial Planning and Land Use Management Act 16 of 2013.

Western Cape Land Use Planning Act 3 of 2014.

Land Use Planning Ordinance 15 of 1985.

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The court held that the Executive Mayor’s decision dismissing DB’s internal appeal against two development-charge-related conditions was unlawful and fell to be reviewed and set aside.

In relation to the municipal roads development charge, the court held that the Executive Mayor interpreted and applied the MDC Policy in a manner that impermissibly fettered the discretion conferred by the policy and the enabling legislative framework, including by treating paragraph 14.1 as overriding and thereby undermining the discretionary adjustment mechanism in paragraph 9.1.3.

In relation to the development charges credit, the court held that the Executive Mayor’s determination was materially influenced by an error of law, because the provisions of SPLUMA relied upon (section 7(b)(i) and (v) and section 7(c)(i) and (ii)) did not impose the limitation asserted by the Executive Mayor regarding credit being confined to actual payments or existing buildings.

The matter was remitted to the Executive Mayor for reconsideration, and costs were awarded to DB with the stated exception for wasted costs of a registrar-caused postponement.

LEGAL PRINCIPLES

A policy serves as a guide to decision-making and may not bind a decision-maker inflexibly; decision-makers must remain open to exercising discretion where the framework contemplates it.

A reviewing court will not accept ex post facto justifications that are at variance with or seek to amplify the recorded reasons for an administrative decision.

Where a statutory or policy framework confers a discretion to depart from a calculated contribution in appropriate circumstances, a decision-maker acts unlawfully by fettering discretion, including by treating one provision as overriding in a manner that renders other discretionary provisions effectively nugatory.

A decision materially influenced by an error of law, including reliance on statutory provisions for a proposition they do not support, is reviewable and liable to be set aside.

Upon setting aside an administrative decision, remittal to the decision-maker for reconsideration is an appropriate remedy where the matter requires the exercise of discretion by the original authority, and a court will not ordinarily dictate how the discretion must be exercised where the enabling provision confers a permissive power (such as that an appeal authority “may” appoint a technical adviser).

DB Property Development Company (Pty) Ltd v Executive Mayor Stellenbosch Municipality and Others (15274/2021) [2023] ZAWCHC 200 (10 August 2023)