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CONSTITUTIONAL COURT OF SOUTH AFRICA
Case CCT 57/03
NOKUTHULA PHYLLIS MKONTWANA Applicant
versus
MINISTER OF PROVINCIAL AFFAIRS
AND CONSTITUTIONAL DEVELOPMENT Second Respondent
Case CCT 61/03
PETER WILLIAM BISSETT Applicant
ANNA MARIA ELZA VAN DER STRAETEN Second Applicant
NEDCOR BANK LIMITED Third Applicant
versus
MINISTER FOR PROVINCIAL AND LOCAL GOVERNMENT Second Respondent
MEMBER OF THE EXECUTIVE COUNCIL FOR LOCAL
GOVERNMENT AND HOUSING Third Respondent
Case CCT 1/04
TRANSFER RIGHTS ACTION CAMPAIGN
AND OTHERS Applicants
versus
MEMBER OF THE EXECUTIVE COUNCIL
FOR LOCAL GOVERNMENT AND HOUSING
IN THE
Together with
Heard on : 10-11 March 2004
Decided on : 6 October 2004
JUDGMENT
YACOOB J:
Introduction
[1] One of the five objects of local government in our Constitution is to ensure the provision of services to communities in a sustainable way.[1] Municipalities supply water and electricity to consumers in their area subject to the payment of a consumption charge. In practice consumers of water and electricity are occupiers of property. Some own property they occupy and others do not. These three cases concern the constitutional validity of laws that in effect burden owners in relation to consumption charges for water and electricity supplied to other people who occupy their immovable property.
[2] Section 118(1) (section 118(1)) of the Local Government: Municipal Systems Act[2] (the Act) is one of these provisions.[3] It places limits on the owner’s power to transfer immovable property. The registrar of deeds may not effect transfer of any property without a certificate issued by the municipality to the effect that the consumption charges due during a period of two years before the date of issue of the certificate have been paid.[4] The section is being challenged principally on the basis that it gives rise to arbitrary deprivation of property contrary to section 25(1) of the Constitution.
[3] In September last year section 118(1) was declared to be constitutionally invalid by the South Eastern Cape Local Division of the High Court (the High Court) in two cases before it.[5] The High Court held that the section permitted arbitrary deprivation of property in conflict with section 25(1) of the Constitution and referred the declaration of invalidity for confirmation to this Court in terms of section 172(2) of the Constitution. The applicants in both these cases[6] have applied for confirmation of this order. The municipalities cited in each of the two cases[7] as well as the Minister responsible for Local Government opposed confirmation and appealed against the High Court order.[8]
[4] There is also before this Court an application for direct access which came to be made in the following circumstances. In December 2002 an application was launched in the Witwatersrand Local Division of the High Court (the WLD application). That application required a consideration of the meaning and constitutionality of national, provincial and local government legislation including section 118(1) that burdened owners in relation to payment for water and electricity supplied to consumers who occupied the property. Certain consequential relief was also sought in the application. The applicants included an association of persons and are jointly referred to as the WLD applicants.[9] Responsible government entities[10] as well as utility companies responsible for the delivery of water[11] and electricity[12] were joined as respondents in these proceedings.
[5] Legislation additional to section 118(1) in issue in the WLD application may be briefly summarised. Section 118(3) of the Act is to the effect that any consumption charge owing is a “charge upon the property in connection with which the amount is owing and enjoys preference over any mortgage bond registered against the property”. Sections 49 and 50(1)(a) of a Gauteng Local Government Ordinance (the Ordinance)[13] were also challenged. Section 49[14] in effect renders the owner and occupier of premises jointly and severally liable to a municipality for the consumption charges for water and electricity supplied to that property. The section empowers the municipality to sue the owner and occupier jointly and severally after written notice to one of them. It also confers on the owner and occupier the right to recover from the other the latter’s share of the liability discharged by the former. Section 50(1)(a)[15] of the Ordinance has the same effect as section 118(1) of the Act except that the certificate required by the Ordinance must cover debts due for three years before the date of the certificate.
[6] The by-laws in issue in the WLD application are those of the City of Johannesburg Metropolitan Municipality. They are by-law 4(2) of the water by-laws[16] and by-law 36 of the electricity by-laws.[17] The former makes owners and consumers jointly and severally liable in respect of water charges[18] while the latter does the same for electricity charges.[19]
[7] In January this year almost all the parties in the WLD application[20] applied for direct access to this Court. The aim was to have all the issues in the WLD application heard together with the application for confirmation and the appeal.[21] The issues to be decided in this appeal can be ascertained only after the fate of the application for direct access is decided. That application is considered first.
[8] Before this is done however it is convenient to mention that an attack on the constitutionality of sections 118(1) and 118(3) of the Act was considered by the KwaZulu-Natal High Court in the case of Geyser[22] (the Geyser case) and dismissed some six months before the delivery of the judgment of the High Court. It was held there that both subsections were not inconsistent with section 25(1) of the Constitution because the deprivation to which they gave rise was not arbitrary. There were therefore two conflicting judgments in relation to the constitutionality of section 118(1) by the time the direct access application was heard by this Court.
Direct Access
[9] Applications for direct access are now governed by rule 18 of the rules of this Court. In substance, the rule allows for direct access to be granted if it is in the interests of justice to do so.[23] The interests of justice is a broad concept and requires a consideration of many factors.[24]
[10] All the parties in the WLD application were agreed during argument before this Court that direct access should be granted. They submitted that it would be in the interests of justice for this Court to hear the case before it had been entertained by any other court. They relied on the saving of time and costs, the importance of the matter, and on a need to resolve the uncertainty created by competing judgments in the High Court. The application for confirmation and the appeal are concerned only with section 118(1) of the Act. We were accordingly urged not to decide the fate of this section in isolation, but to grant direct access and decide all the other legal issues in the light of the more comprehensive factual matrix presented in the WLD application.
[11] A useful point at which to start in considering an application for direct access is to recognise the importance of the principle that it is ordinarily not in the interests of justice for this Court to be a court of first and last instance.[25] The Constitution and the rules of this Court do, however, provide for this Court to be the court of first and final instance, but only in exceptional circumstances.[26] The saving of time and costs, the importance of the issue or the existence of conflicting judgments on an issue in a case do not, without more, constitute exceptional circumstances and justify this Court being a court of first and last instance. Indeed the importance and complexity of the issues raised would weigh heavily against this Court being a court of first and final instance. As a general rule, the more important and complex the issues in a case, the more compelling the need for this Court to be assisted by the views of another court. Each of the issues in respect of which direct access is sought must be considered separately.
[12] It is significant that section 118(1) is already before this Court in the application for confirmation and leave to appeal. There are conflicting judgments in relation to the constitutional validity of section 118(1). It is also true that the WLD application canvasses the factual background on a broader basis than has been done in the Mkontwana and Bissett cases. The determination of the application for confirmation and that for leave to appeal by this Court will result in a final decision as to the constitutionality of section 118(1). No delay is occasioned by hearing the applicants on section 118(1) in the light of the new evidence they present. It is therefore in the interests of justice to grant direct access to the WLD applicants, to consider the evidence placed before the High Court in the WLD application, and to decide the constitutional validity of section 118(1) by reference to all the arguments advanced. In the circumstances, direct access should be granted in relation to all the issues raised concerning the interpretation and constitutionality of section 118(1).
[13] The position in relation to section 118(3) is different. It has been submitted that this Court will not be the court of first and last instance when it comes to the determination of the constitutionality of section 118(3). It is said that this is because the High Court has already considered and dismissed challenges to the constitutional validity of section 118(3) in the Geyser judgment. However very little is said in the Geyser judgment about the meaning and effect of section 118(3). Nor in that judgment is the constitutionality of section 118(3) considered separately from the constitutionality of section 118(1). This is not surprising because section 118(3) was not really a matter of “live controversy” in that case. The municipality had not relied upon section 118(3) and therefore this section was not really in issue. The challenge to section 118(3) in the Geyser case can rightly be said to be one bordering on the abstract. Section 118(3) has not been used by the municipality in relation to any of the applicants in the WLD case either. The construction of section 118(3) is far from straight forward and the reasoned judgment of another court on how the section is to be interpreted is likely to be helpful. In the circumstances, it is not in the interests of justice for this Court to consider the constitutional validity of section 118(3) at this stage.
[14]
Section 49 of the
Ordinance as well as the by-laws of the City of
[15] It has already been pointed out that section 50(1)(a) of the Ordinance is similar to section 118(1), except that an owner wishing to sell the property would be able to pass transfer only after all amounts owing in respect of the property for a period of three years before the date of the certificate have been paid. Arguments advanced by the parties about the interpretation and constitutionality of section 50(1)(a) are virtually the same as those directed at section 118(1). There is so little difference between the two provisions that a decision on the constitutional validity of section 118(1) by this Court would directly impact on the constitutionality of section 50(1)(a). Indeed, a decision that the former is unconstitutional might lead to the conclusion that the latter is unconstitutional too. It is therefore in the interests of justice for the application for direct access to be granted in relation to section 50(1)(a).
[16] The application for direct access concerning the interpretation and constitutionality of sections 118(1) and 50(1)(a) must therefore be granted. The application must be refused in all other respects.
Parties before the Court
[17] The applicants and the respondents in the WLD application are therefore before the Court in addition to the applicants and respondents in the confirmation proceedings.[27] This Court also admitted two parties as amici curiae on their application. Both were parties in the Geyser case. The first amicus,[28] contests the constitutionality of section 118(1) of the Act and the second amicus[29] contends for its validity. There are therefore broadly two sets of parties. The applicants in the confirmation proceedings, the applicants in the WLD application and the first amicus all of whom regard the burden placed on owners of property by section 118(1) as constitutionally objectionable. Then there are municipalities supported by a provincial MEC, national minister responsible for local government and the second amicus who urge that the section is good. I will refer to the former simply as the applicants and to the latter as respondents.
The factual background
[18] All the applicants tell us of an escalation of amounts owing in respect of electricity and water charges without their knowledge. In many cases, there are disputes between the applicant and the municipality about whether the municipality acted negligently and whether the owner ought to have taken more steps to ensure that amounts were in fact paid. In most cases large amounts of money have become due. There are allegations of illegal reconnection of water and electricity in some of the factual situations in the WLD application.
(a) The High Court cases
[19]
In the Mkontwana
case, Ms Mkontwana bought a house in
[20]
In the Bissett
case, applicants, co-owners of property in
[21]
The same pattern is
evident in the dealings between the second of the applicants who also owned
property in the
(b) The WLD application
[22] Four of the five applicants in the WLD application are owners of property. The fifth is an administrator of a deceased estate which owns the property in question. In relation to the cases of the four applicants who own property, the factual background, to the extent that it needs to be recited for the purposes of this case is very similar. Owners had let the property to tenants in all cases. Large sums of money had become outstanding in relation to consumption charges. The municipalities concerned had made unsuccessful efforts to collect the money. In one case, the municipality had in fact informed the owner that a substantial sum of money had been owing by the tenant and the owner had renewed the lease with the same tenant after receipt of this information. The municipality’s efforts to secure payment by the disconnection of electricity and water, resulted, in many instances, in the unlawful reconnection of electricity. There are material disputes of fact on the papers relating in particular to whether the predicament that had ultimately eventuated was the result of inaction by the municipality or of the lack of reasonable, responsible conduct on the part of the owners.
[23] The experience of the administrator of the deceased estate raises issues similar to those in the High Court. The property had been occupied by tenants pursuant to agreements of lease they had entered into with the deceased. The property is worth R95 000.00 according to the estate account. The municipality required payment of an outstanding sum slightly in excess of R1550.00 for the issue of a section 50(1) certificate and provided a written document to this effect. Some months later however the municipality indicated that the amount required to be paid exceeded R22 000.00. Like in the other cases before the WLD, there is a dispute about the extent of the municipality’s tardiness in the execution of its debt collection responsibilities.
Repeal of section 50
[24] The whole of section 50 was repealed exactly two weeks before the WLD application was launched.[30] It was contended by some of the respondents that the application concerning the constitutionality of section 50(1)(a) of the Ordinance is accordingly moot and ought not to be entertained. The applicants answer that one of the WLD applicants has been prejudiced by the application of the section and that the Court should accordingly deal with it. There is in fact a dispute on the papers concerning the validity of the section, whether one of the applicants was obliged to pay certain consumption charges owing to obtain the certificate and, if not, whether that applicant is entitled to recover the amounts paid. A cause of action can be moot only if its resolution will have no practical effect.[31] A decision about the validity of section 50(1)(a) will have practical effect. The issue is not moot.
Issues
[25] Several matters call for our attention. The first is whether section 118(1) and section 50(1)(a) can reasonably be interpreted so that they apply only if the consumption charges are due by the owner. Secondly, if these provisions cannot be so construed, we must decide whether they are consistent with section 25 of the Constitution. Thirdly, if any of these laws is found to be unconstitutional, the appropriate remedy must be considered. Finally, if the relevant provisions are not struck down for their failure to comply with the Constitution it will be necessary to evaluate contentions made by one of the applicants in the High Court and which the High Court found unnecessary to consider. It is submitted before this Court that section 118(1) is inconsistent with sections 9(1), 26 and 34 of the Constitution.
Application: further evidence
[26] A few days before the hearing, the municipality in the Bissett case tendered evidence aimed essentially at showing the amount of consumption charges recovered by it through the section 118(1) procedure during a three year period. The explanation for this late tender of evidence was that the municipality had been alerted to the need that this additional information be placed before us by the submission of one of the parties. This information had not been placed before the High Court. This Court will receive additional evidence on appeal only if there is compelling reason to do so. There is none in this case. The amount of money actually recovered by the use of the procedure is not particularly helpful largely because it is impossible to tell whether the money recovered in consequence of the use of the procedure would not in any event have been paid. More importantly, however, the figure put up in the evidence does not relate to consumption charges incurred by non-owner occupiers. In the circumstances, the materiality of the evidence is doubtful. The application for leave to introduce further evidence must accordingly be refused.
Interpretation
[27] The WLD applicants correctly point out that we must construe a legislative provision so as to avoid its unconstitutionality if it is reasonably capable of being interpreted in that way or, to put it differently, the construction is not unduly strained.[32] I will address this contention on the assumption that all these laws will be unconstitutional if not interpreted in the way suggested by the WLD applicants. They contend that sections 118(1) of the Act and 50(1)(a) of the Ordinance are reasonably capable of being so interpreted without attributing an unduly strained meaning to the language used.
[28] The submission is that each of these provisions must be interpreted as if the words “by the owner” or “due by the owner” had been inserted at appropriate points in each of the provisions so as to render it less burdensome. Each of these sections is set out in full below. The words added by the applicants to demonstrate the reasonable meaning contended for are in bold.
(a) Section 118(1) of the Act provides
“A registrar of deeds may not register the transfer of property except on production to that registrar of deeds of a prescribed certificate—
(a) issued by the municipality or municipalities in which that property is situated; and
(b) which certifies that all amounts that became due [by the owner] in connection with that property for municipal service fees, surcharges on fees, property rates and other municipal taxes, levies and duties during the two years preceding the date of application for the certificate have been fully paid.”
(b) Section 50(1)(a) of the Ordinance reads
“(1) No transfer of any land or of any right in land as defined in section 1 of the Local Authorities Rating Ordinance, 1977, within a municipality shall be registered before any registration officer until a written statement in the form set out in the Third Schedule to this Ordinance and signed and certified by the town clerk or other officer authorised thereto by the council, shall be produced to such registration officer, and unless such statement shows—
(a) that all amounts [due by the owner] for a period of three years immediately preceding the date of such registration due in respect of such land or right in land for sanitary services or so due as basic charges for water or as other costs for water where any water closet system on the ground concerned has been installed or so due as basic charges for electricity in terms of the provisions of this Ordinance or any by-law or regulation . . . have been paid to the council . . . .”
[29] Interpreted in this way, section 118(1) of the Act and section 50(1)(a) of the Ordinance would require that consumption charges due only by the owner for the relevant period must be paid as a precondition to transfer. This preferred construction involves an assumption that the purpose of enacting the laws in question is limited. The aim is to secure only those consumption charges due by the owner. In other words the legislation does not seek to secure municipalities against non-payment of consumption charges due by occupiers other than the owner.
[30] It is highly unlikely that the purpose was so narrow. If it was, it is inconceivable that the text would not have said so expressly. Each of these provisions, on its face, is broadly worded and secures the payment of all consumption charges “in connection with” the property. The interpretation advanced by the WLD applicants is unreasonable. These laws are not reasonably capable of the suggested interpretation.
The constitutionality of section 118(1) and section 50(1)(a)
[31] It is helpful to repeat that section 118(1) of the Act and section 50(1)(a) of the Ordinance make transfer of immovable property subject to the precondition that all consumption charges due “in connection with” or “in respect of” that property by anyone have been paid. The applicants submit that these provisions are inconsistent with section 25(1) of the Constitution because they amount to an arbitrary deprivation of property. Section 25(1) provides:
“No one may be deprived of property except in terms of law of general application, and no law may permit arbitrary deprivation of property.”
[32] Almost all the parties accepted that these provisions do bring about a deprivation of property. There was one submission however that they do not, but are merely regulatory provisions. They do not prevent transfer altogether, the argument went, but are measures that merely delay transfer until a certificate has been obtained. The contention has no merit. In First National Bank[33] (the FNB case) this Court held that the taking away of property is not required for a deprivation of property to occur.[34] Whether there has been a deprivation depends on the extent of the interference with or limitation of use, enjoyment or exploitation. It is not necessary in this case to determine precisely what constitutes deprivation. No more need be said than that at the very least, substantial interference or limitation that goes beyond the normal restrictions on property use or enjoyment found in an open and democratic society would amount to deprivation.
[33] Alienation of immovable property is ordinarily completed by transfer to the new owner in the office of the registrar of deeds. The right to alienate property is an important incident of its use and enjoyment. The effect of section 118(1) and section 50(1)(a) of the Ordinance is that transfer can take place only if all outstanding consumption charges have been paid. It follows that owners cannot transfer their properties unless consumption charges due by people other than themselves and for which they are not liable have been paid. It was correctly pointed out that these laws do not literally require the owner to pay outstanding consumption charges. The reality is, however, that if the person liable for the debt does not or cannot pay, the owner who wants to effect transfer must, unless the relevant agreement provides for a party other than the owner to effect the payment, pay all outstanding consumption charges. The payment must be made regardless of whether the owner is liable to pay. The provisions are not merely procedural. They are a substantive obstacle to alienation and constitute a deprivation of property within the meaning of section 25(1). Indeed, it is distinctly possible that all consumption charges for the two or three year period might be so high as to exceed the market value and render a sale uneconomical. It follows that I agree with the High Court[35] and with the Geyser judgment[36] that section 118(1) does give rise to deprivation of property.
Is the deprivation arbitrary?
(a) The nature of the section 25(1) analysis
[34] The meaning of arbitrary in section 25 of the Constitution was determined in the FNB case. After a thorough analysis[37] Ackermann J concluded that a deprivation of property is arbitrary within the meaning of section 25 of the Constitution if the law in issue either fails to provide “sufficient reason” for the deprivation or is procedurally unfair.[38] To determine whether there is sufficient reason for a permitted deprivation, it is necessary to evaluate the relationship between the purpose of the law and the deprivation effected by that law.[39] A complexity of relationships must be considered in this assessment including that between the purpose of the provision on the one side, and the owner of the property as well as the property itself on the other.[40] If the purpose of the law bears no relation to the property and its owner, the provision is arbitrary. The customs law in issue in the FNB case fell into this category. It permitted total deprivation of property even when the customs debt bore no relationship either to the owner or to the property itself.[41]
[35] The FNB judgment also sets out the approach to be adopted if there is a connection between the purpose of the deprivation and the property or its owner.[42] In these circumstances, there must be sufficient reason for the deprivation otherwise the deprivation is arbitrary. The nature of the relationship between means and ends that must exist to satisfy the section 25(1) rationality requirement depends on the nature of the affected property and the extent of the deprivation. A mere rational connection between means and ends could be sufficient reason for a minimal deprivation. However, the greater the extent of the deprivation the more compelling the purpose and the closer the relationship between means and ends must be.
(b) The High Court judgment on arbitrariness
[36] The High Court was persuaded that there was, in this case, no connection between the consumption charge and either the property or its owner. It was held that there were four significant similarities between the deprivation permitted in the FNB case and that allowed by section 118(1).
a) Both laws permitted deprivation absent any connection between the relevant debt and the owner of the property.[43]
b) Section 118(1) permitted a deprivation of property when “there would be no connection between the owner and the property on the one hand and the municipal debt on the other” and was accordingly similar “to the position in the FNB case where there was no connection between the property and the customs debt”.[44]
c) The owner of the property had in neither case induced the creditor to act to its detriment in relation to “the incurring of the debt”.[45]
d) The deprivation brought about by section 118(1) and the customs law in issue in the FNB case could both continue indefinitely until the debt was paid.[46]
[37] The High Court concluded, on the basis of these perceived parallels, that the FNB judgment was “powerful and persuasive authority” for the conclusion that section 118(1) was far-reaching and therefore arbitrary.[47] It was in the circumstances unnecessary for the High Court to decide whether there was sufficient reason for the deprivation. The applicants supported this reasoning.
[38] The High Court saw the purpose of section 118(1) as being the protection of municipalities and the promotion of the collection of debts owed to a municipality.[48] It is however necessary to examine the purpose more closely. The purpose of section 118(1) is to furnish a form of security to municipalities for the payment of amounts due in respect of the consumption of water and electricity (consumption charges). The ultimate effect of the law is that the property in connection with which the consumption charges have been incurred provides security for the payment of that consumption charge. In this sense the law burdens the owners of property. Municipalities are obliged to provide water and electricity to the residents in their area as a matter of public duty.[49] It is therefore important that the possibility that municipal debt remains unpaid be reduced by all legitimate means. Section 118(1) is concerned amongst other things, with the question whether the municipality or the owner of property should bear the risk when non-owner occupiers who are obliged to make these payments in the first instance fail to do so. In more specific terms therefore, the purpose of the provision is to place this risk on the owner. The purpose is important, laudable and has the potential to encourage regular payments of consumption charges and thereby to contribute to the effective discharge by municipalities of their constitutionally mandated functions. It also has the potential to encourage owners of property to discharge their civic responsibility by doing what they can to ensure that money payable to a government organ for the delivery of service is timeously paid. The municipality also has responsibilities in this regard but this aspect is briefly discussed later in this judgment. It follows that the relationship between consumption charges on the one hand and the owner of property and the property itself on the other must be examined.
[39] It is convenient to first discuss the relationship between the consumption charge and the property. As I have already said, the High Court in effect found that section 118(1) permitted a deprivation of property when “there would be no connection between the owner and the property on the one hand and the municipal debt on the other” and was accordingly similar “to the position in the FNB case where there was no connection between the property and the customs debt”. In my view, however, the difference between the nature of the connection between the property and the debt in the two cases is both fundamental and decisive. In the FNB case, affected property (a motor vehicle in that case) leased by the owner to the customs debtor could have been sold in execution even if the vehicle had nothing whatever to do with the customs debt. The consequences of section 118(1) do not go that far. Section 118(1) does not permit the deprivation of property where there is no connection between it and the consumption charges. As the High Court correctly points out the debt giving rise to deprivation is required to have “become due in connection with that property”. The High Court reasoned however that electricity and water consumed by a non-owner “would, generally, benefit neither the owner nor the property”, that the service was merely being provided at the property and that the property-debt relationship was therefore similar to that in the FNB case.
[40] It cannot be accepted that electricity and water are merely consumed at the property. These amenities are supplied to the property, accessed and consumed by the occupier on the property and are enjoyed by the occupier as part and parcel of the enjoyment of the occupation of the property. What is more, the supply of electricity and water to a property ordinarily increases its value; the consumption of electricity and water enhances its use and enjoyment. Indeed, the consumption of electricity and water by the occupier is integral to the use and enjoyment of the affected property and to its inherent worth. There is therefore more than just a close relationship between the property and the consumption charge: the property and the consumption charge are closely interrelated.
[41] What of the connection between the consumption charge and the owner? The High Court concluded that there was none, on the basis that section 118(1) applies in the case of “a vast array of non-owners” including “tenants, persons exercising rights of habitatio or exercising rights of usufruct or fideicommissum, squatters or other mala fide occupiers”.[50] It is self evident that the exact character of the relationship between the owner and the consumption charge will vary depending on whether the property is occupied by the owner, a tenant, a usufructuary, a fiduciary or an unlawful occupier. However, there is a level at which the owner and the debt are usually connected or related regardless of the nature of the relationship between the owner and the occupier and of whether the property is lawfully occupied. This is because the owner is bound to the property by reason of the fact of ownership which, as I will consider in more detail later, entails certain rights and responsibilities. Both the owner and the consumption charge are closely related to the property and the property is always the link between the owner on the one hand and the consumption charge in respect of water and electricity provided by the municipality on the other.
[42] The applicants correctly point out that the deprivation occurs even when there is no contractual relationship between the owner and the municipality that obliges the latter to supply water and electricity to property that belongs to the former. However, it does not follow from the absence of a contractual relationship that there is no relationship. In many instances, the owner benefits from the increase in the value of the property and the enhanced use and enjoyment of it because electricity and water are available there. In some instances, notably in the case of the unlawful occupier who has never had the consent of the owner to occupy, it is arguable that the supply of electricity and water to the property for consumption by that occupier is of no benefit to that owner at all. It is however fallacious to require that the owner must benefit from the consumption charge before it can be said that there is a relationship between the consumption charge and the property. The mere fact that the consumer of water and electricity supplied to the property is an unlawful occupier cannot break the strong owner, property and consumption charge chain. The High Court was also incorrect in concluding that the subsection reveals no connection between the consumption charge and the owner.
[43] The High Court wrongly held that the consumption charge was connected neither to the property nor to the owner. The charge is connected to both. It becomes necessary therefore to examine whether section 118(1) is arbitrary for want of the appropriate relationship between means and ends. In other words, we must decide whether there is sufficient reason for the deprivation.
(c) Is section 118(1) arbitrary for want of an appropriate relationship between means and ends?
[44] There are three interrelated steps to this enquiry. We must determine in turn:
a) the nature of the property concerned and the extent of the deprivation;
b) the nature of the means–ends relationship that is required in the light of the nature and extent of the deprivation and
c) whether the relationship between means and ends accords with what is appropriate in the circumstances and whether it constitutes sufficient reason for the section 25(1) deprivation.
[45] We are concerned in this case with the deprivation of a single but important incident of ownership in immovable property namely the right to pass transfer of property to complete alienation. The owner can continue to occupy the property, let it or do anything else that ownership allows. The deprivation is moreover temporary. The High Court was incorrect in finding that, like the deprivation in the FNB case, the deprivation in the present case “may continue indefinitely”.[51] The deprivation lasts for two years only. It is correct that if there are substantial arrears for consumption charges and all payments over an extended period are for current consumption only and are credited to the amount first owing, the substantial sum may remain outstanding indefinitely and thereby constitute an obstacle to transfer. If, however, no further obligations are incurred to increase the existing indebtedness of the same occupier the limit on the power of the owner to transfer the property will last no more than two years. Nevertheless, an owner could in the purchase and sale agreement delay transfer for a period of two years on appropriate conditions. Moreover there is nothing to make the subsequent occupier liable for the consumption charge indebtedness of a previous occupier. This means that the owner could, if he is able successfully to eject a delinquent occupier, either occupy the property or secure a reliable tenant or other occupier for a two year period in order to terminate the deprivation.
[46] The extent of the deprivation is affected by the amount of the consumption charge owing. The larger the amount the greater the extent of the deprivation. Indeed, transfer becomes virtually impossible for two years after the date on which the consumption charges due exceed the market value of the property. It is necessary to emphasise that we are not concerned in this case with the deprivation of property consequent upon consumption charges incurred by and for the benefit of the owner. All the parties agreed that the deprivation that would result from that situation would not be arbitrary. We are concerned with the deprivation of property occasioned by electricity and water consumption on the part of non-owner occupiers only.
[47] The basic reason for the accumulation of consumption charges due in connection with any property occupied by non-owners is non-payment by those occupiers. However, it is ordinarily possible for both the municipality and the owner to guard against an unreasonable accumulation of outstanding consumption charges. The municipality has a duty to send out regular accounts, develop a culture of payment, disconnect the supply of electricity and water in appropriate circumstances, and take appropriate steps for the collection of amounts due. The owner’s ability to protect her own interest by ensuring that consumption charges are kept within reasonable limits depends to some extent on the nature of the relationship between her and the occupier. If that occupier is on the property with the knowledge and consent of the owner, the latter can, amongst other things, choose the occupier carefully and stipulate that proof of payment in relation to consumption charges be submitted monthly on pain of some sanction including ejectment. As will appear more fully later, where the occupier is a usufructuary, the owner could compel the occupier to comply with the obligation to care for the property and to ensure that all amounts due for the use and occupation of the property are paid. The position is somewhat different where the property was initially unlawfully occupied without the knowledge and consent of the owner. It has been suggested that the owner is completely innocent and utterly powerless in this situation. That is, however, not the whole truth. The owner has the responsibility to take reasonable steps to ensure that it is not unlawfully occupied and to take reasonable steps to evict the occupier as a matter of urgency if the circumstances warrant this. I return to this later.
[48] The amount of the consumption charges due in connection with any property at any time would depend on a number of factors. As the following examples show, arrear consumption charges may accumulate in circumstances where the owner or the municipality alone has failed to carry out the duties appropriate to each effectively or where both the owner and the municipality have acted reasonably and the arrear accumulation is due to some other circumstance which might or might not have been appreciated by the owner, the municipality or both. The owner might fail to take reasonable steps to ensure that the property was not unlawfully occupied, fail to take reasonable steps to ensure the eviction of the unlawful occupier and fail to inform the municipality of the fact of the unlawful occupation. In these circumstances, there would be no-one to blame but the owner.
[49] Whether and the way in which the municipality discharges its duty to take reasonable steps to secure timeous payment could have a severe impact on the amount owing. The municipality might, for example, send no statement of account, take no steps to recover amounts owing and continue to supply water and electricity for a period as long as two years without question in the case of a failure of a non-owner occupier to make payment. The municipality might have been requested by the owner to be kept informed on the status of the account in relation to consumption charges due by the occupier at reasonable intervals and might have refused to do so. The municipality might know or might have been informed by the owner that the occupier is on the property without the owner’s knowledge and consent. The municipality might know that there are pending legal proceedings for the ejectment of an applicant already considerably in arrear and might continue to supply electricity and water despite objection from the owner. The owner, on the other hand, might have taken all reasonable steps required of a responsible owner, but to no avail. The applicants emphasise that a municipality cannot sit by and allow consumption charges to escalate regardless and in the knowledge that recovery will be possible whenever the property falls to be transferred. They are right. The municipality must comply with its duties and take reasonable steps to collect amounts that are due.
[50] But this is not the only possible scenario. The municipality might do everything reasonable including the disconnection of supply. Yet the occupier might (and this is shown to have happened in the evidence before us) in effect steal electricity and water from the municipality without the knowledge either of the municipality or the owner. The evidence also reveals the possibility of successive occupiers put in by the owner who occupy for relatively short periods each and whose indebtedness cannot be laid at the door of any subsequent occupier. The owner could well be lumbered with this indebtedness again in circumstances where neither the owner nor the municipality were strictly to blame.
[51] Bearing this immediate context in mind, I now consider the relationship between means and ends that is appropriate to constitute sufficient reason for the deprivation. As I have said before, the deprivation we are concerned with here involves a single but significant element of ownership and lasts effectively for two years. It is not an insubstantial deprivation. The provision in effect requires the owner of the property to bear the risk of non-payment of consumption charges by non-owner occupiers. In my view, there would be sufficient reason for the deprivation if the government purpose was both legitimate and compelling and if it would, in the circumstances, not be unreasonable to expect the owner to take the risk of non-payment. To decide this question it is necessary to evaluate the relationship between the consumption charge and the property relative to that between the consumption charge and the owner. The closer the relationship between the consumption charge and the property, the more tenuous the link between the consumption charge and the owner can be. Conversely, the more tenuous the link between the consumption charge and the property the closer the consumption charge must be to the owner to qualify as sufficient reason.
[52] The importance of the purpose of the provision has been discussed earlier.[52] It is emphasised that municipalities are obliged to provide water and electricity and that it is therefore important for unpaid municipal debt to be reduced by all legitimate means. It bears repeating that the purpose is laudable, has the potential to encourage regular payments of consumption charges, contributes to the effective discharge by municipalities of their obligations and encourages owners of property to fulfil their civic responsibility.
[53] It is now necessary to consider the position of each category of occupiers and set of circumstances by reference to which the constitutionality of section 118(1) was called into question by the applicants and by the High Court.[53] I start with tenants. There is a close interrelatedness between the consumption charge and the property as well as that between the consumption charge and the owner. It has been pointed out that the supply of electricity and water enhance the use, enjoyment, and value of the property. It has an impact on the amount of rent payable. The benefit to the owner and the property in these circumstances cannot be gainsaid. The relationship between the owner and the consumption charge is so close as to justify a reasonable expectation that the owner would choose a responsible tenant, monitor payment by the tenant of consumption charges that are due and ensure that the agreement of tenancy is appropriately crafted. An agreement could provide, for example, that the consumption charges must be regularly paid by the tenant, that proof of payment is given to the owner and that eviction or other consequences would follow if there is non-payment. There is therefore no basis to suggest that it would be unreasonable for the owner to bear the risk. The provisions are therefore not arbitrary to the extent that they cover consumption charges due by tenants.
[54] The section 118(1) certificate must also cover the consumption charges due in connection with the property by an occupier who holds over unlawfully after the termination of a lease or some other legal relationship that rendered occupation lawful at the time it began. Here again, the relationship between the consumption charge and the property as well as the owner are sufficiently strong for the owner to bear the risk. There are allegations that tenants and those who hold over reconnect electricity and water illegally after the municipality has effected a disconnection consequent upon the failure by the occupier to pay consumption charges. The submission that it is arbitrary for the owner to bear the risk of non-payment in these circumstances must also be rejected. The relationship between the owner, the property and the consumption charge remains sufficiently close to expect the owner to take the risk. The owner would have chosen the tenant and would receive rental where the occupier concerned is a tenant or would be entitled to damages for holding over from an unlawful occupier. The connection is sufficiently strong.
[55] Fiduciaries and usufructuaries must be discussed next. It is not necessary to discuss the usufruct and fideicommissum in detail here. The usufruct is an institution in which the usufructuary has the right to possess, use and enjoy property belonging to another in such a way that the substantial character of the property is preserved and there is a duty to restore the property to the owner upon the termination of the usufruct.[54] A fideicommissum is a disposition of property to a fiduciary who is required to pass the property onto another beneficiary, the fideicommissary, on the happening of an event or on a specified date.[55] Both fiduciaries and usufructuaries cannot diminish, alienate or consume the property.[56] Both the fiduciary and the usufructuary can let the property.[57]
[56] In a usufruct, the relationship between the consumption charge and the property is as close as it is in the case of a tenant. It is true that in the case of a usufruct created by will, the owner who has been given the property would have no control over who the usufructuary would be. Nevertheless there is some connection between the usufructuary and the owner in the sense that the owner has the right to ensure that the usufructuary cares for the property, does not burden the property unduly by the use and enjoyment of it and provides security for the restoration of the property to the owner in good condition. The consumption charge is incurred in the course of the usufructuary’s use and enjoyment of the property sanctioned by the very instrument that resulted in her becoming the owner. Indeed, the owner’s right to alienate the property is limited by the rights of the usufructuary during the term of the usufruct. The owner acquires the property subject to the usufruct. It cannot therefore be said that it is unreasonable to expect the owner to carry the risk of non-payment by the usufructuary as a necessary incident of the condition attaching to that ownership.
[57] In the case of a fideicommissum, the fiduciary will be hit by the provisions of section 118(1) because she remains the owner of the property until and unless the condition that would result in the property being transferred to the fideicommissary is fulfilled. If the occupier of property is someone other than the fiduciary, the fiduciary will be obliged to pay the consumption charges incurred by that occupier before that property can be transferred to the eventual beneficiary, the fideicommissary. When the fideicommissary becomes the owner as a result of the fulfilment of the condition, section 118(1) will apply to her if and when she wishes to alienate the property. In other words, the fiduciary is in effect the owner of the property until the condition is fulfilled and the fideicommissary becomes the owner of the property after the condition is fulfilled. In the circumstances, the fact that property is subject to a fideicommissum has no impact upon the arbitrariness or otherwise of section 118(1).
[58] Finally, it is necessary to consider whether it is arbitrary for the owner to be burdened with the risk of paying consumption charges for water and electricity supplied to the property and consumed by a narrow category of unlawful occupiers: occupiers who got on to the property without the knowledge or consent of the owner and who remain on the property. To put the question in another way: Is it unreasonable to expect an owner of property to pay these charges as a prerequisite to transfer of the property if the municipality supplies water or electricity to unlawful occupiers and if these occupiers do not discharge their indebtedness to the municipality? The enquiry involves a comparison of the position of the municipality and the owner in relation to the property, the unlawfulness of the occupation and the consumption charge.
[59] This unlawful occupation benefits neither the property nor the owner and, in most cases, is prejudicial to both. It is nevertheless the duty of the owner to safeguard the property, to take reasonable steps to ensure that it is not unlawfully occupied and, if it is, to take reasonable steps to ensure the eviction of the occupier. If the owner performs these duties diligently, unlawful occupiers will not, in the ordinary course, remain on the property for a long period. It is ordinarily not the municipality but the owner who has the power to take steps to resolve a problem arising out of the unlawful occupation of her property. It is accordingly not unreasonable to expect the owner to bear the risk.
[60] The relationship between the property and the consumption charge in these circumstances is strong because the water and electricity is supplied to and consumed on the property in the course of its use and enjoyment. This relationship compensates for the somewhat attenuated connection between the owner and the consumption charge. It is true that legal proceedings may be protracted at times but this does not afford justification to transfer the risk from the owner of the property to the municipality. It may be that the municipality ought not to have supplied the unlawful occupier with electricity and water in the circumstances that prevailed. This would mean simply that the amount cannot be said to be “due” in connection with the property and any dispute in relation to this must be resolved by a court. This can be done either before transfer or, if the owner pays to obtain the certificate, after transfer. Owners of property have to bear the risk in relation to many occurrences as an integral incident of the exercise of the right of ownership. They for example bear the risk if the property is damaged or destroyed or if movables are stolen. There seems to me to be little difference in principle between the risk borne by the owner in relation to the theft of movable property and that borne by an owner of immovable property in relation to consumption charges incurred as a result of the unlawful occupation of that property. The burden placed on the owner by section 118(1) in consequence of unlawful occupation does not render section 118(1) arbitrary.
[61] The applicants emphasised that the municipality supplied the service to the occupier and that this local government body had rightly been allocated the statutory duty to ensure that all amounts due were effectively collected from the occupier. It was also stressed that the owner had never asked for the service, did not directly benefit from it and had little control over consumption. In these circumstances, the applicants strongly resisted what they regarded as a provision that in truth relieved the municipality of the obligation to collect amounts due to it and transferred them to the owner. This the applicants said rendered the provision arbitrary.
[62] Section 118(1) does not relieve the municipality of its duty. It must continue to do everything reasonable to ensure appropriate collection of its debt. That municipal debt as a whole has accumulated to devastating proportions is of considerable concern. So too is the evidence to the effect that, in relation to many of the applicants before this Court, large amounts due in relation to consumption charges have remained outstanding for a considerable period. There is disputed evidence before us concerning the degree of inefficiency of the municipalities that have been cited. No more should be said about this aspect than that if the inefficiency of the municipality degenerates to the extent where it can be proved to be negligence that occasioned damage to the owner of the property concerned, owners may have a delictual claim for damages against the municipality. It must be emphasised that it is imperative for municipalities to do everything reasonable to reduce amounts owing. Otherwise, the sustainability of the delivery of municipal services is likely to be in real jeopardy.
[63] The KwaZulu-Natal Law Society, relied on the circumstance that there was a great deal of confusion created by the requirements of the section and that this had an impact on the speed with which property was transferred. Parties to contracts did not understand the terms of the impugned provision and the completion of the certificate requirement also resulted in undue delays. The fear was that this would have a serious impact on the property market. It has been shown in these cases that some municipalities have been less than efficient in the issue of certificates, that the accounts sent by them have in many instances been unclear and that there are instances in which amounts said to be due as a precondition for the issue of a certificate have reduced considerably and inexplicably over time. In the Geyser case in which the Society was an applicant the seller was first informed by the municipality that the amount required to obtain the section 118(1) certificate was R125 934.68. By the time the matter came to be argued in court some months later however it became common cause that the sum required was R47 145.29.
[64] All these are matters of concern but they do not render the provision arbitrary. Counsel was inclined to concede that these difficulties could well be the result of the fact that this was a new provision and that these negative consequences would probably diminish as all the affected parties gained a greater understanding of the provision and its implications. It is necessary for all municipalities to ensure that they have reasonably accurate records and that they are able to provide complete, credible, comprehensible and reasonably detailed information in relation to consumption charges that are owing within a reasonable time of being requested to furnish it. Without this, the transfer process is likely to be unduly slowed down. It must be understood by all concerned that municipalities have the obligation to furnish this information to all owners intent upon selling their property. It must also be understood that they can be compelled to provide that information by court proceedings if this should turn out to be necessary.
Procedural fairness
[65] It was held in the FNB case that the law that results in a deprivation of property must, in addition to showing an appropriate relationship between means and ends, be procedurally fair.[58] Nothing was however said in that case about what procedural fairness entailed in the context of the determination of arbitrariness for purposes of section 25(1) of the Constitution. It was contended that section 118(1) was not procedurally fair principally because it did not impose any obligation on municipalities to keep property owners informed of the amounts owing by occupiers at reasonable intervals when this is requested by the property owners in writing. This meant that owners were often taken by surprise by the large amounts of consumption charges owing when certificates were sought in the process of the transfer of property. Owners were accordingly often unable to pay consumption charges due with the speed required by the exigencies of the situation. This, it was said, was unfair. This Court has held in contexts other than a section 25(1) arbitrariness investigation that procedural fairness is a flexible concept and that the requirements that must be satisfied to render an action or a law procedurally fair depends on all the circumstances.[59] This proposition applies equally to procedural fairness mandated by section 25(1).
[66] The circumstances here are that the municipality has, or ought to have, a running accurate record of the amounts that are due, a municipality would know if the amounts outstanding are unreasonably high and it would be theoretically possible for the municipality to keep the owner informed. The practical implications of a municipality assuming a responsibility of this kind are considerable. Additional resources and processes need to be put in place. The other side of this coin is that owners are, or ought to be, in a position to care for their property, keep in touch with occupiers and monitor the occupation and use of their properties. These considerations point to a conclusion that a municipality should not be required to furnish the owner of property with information on a continuous basis for the law to be procedurally fair. Owners also complain however that municipalities refuse to provide information even if they are requested to do so. There is no basis for this refusal. The owner has an interest to know how much is owing and a municipality is obliged to provide the information if requested to do so.
[67] Fairness requires a municipality to provide an owner of property with copies of all accounts if the owner requests them. The absence of this requirement would render the deprivation in this case procedurally unfair. However, it is reasonably possible to interpret the section to mean that there is a necessary implication that the municipality is indeed obliged to furnish accounts to the owner upon request where the property is not occupied by the owner. It has been pointed out that the municipalities in this case disputed the obligation to furnish the information. It is important for there to be certainty in this regard. It is accordingly appropriate to declare that every municipality is obliged to provide copies of monthly accounts in respect of amounts owing for water and electricity by occupiers of property where the owner is not the occupier on the written request of the owner.
Other arguments
[68] One of the applicants contended that section 118(1) was unconstitutional by reason of its inconsistency with sections 9(1), 26, and 34 of the Constitution. Each of these arguments must now be considered.
[69] Section 9(1) of the Constitution provides:
“Everyone is equal before the law and has the right to equal protection and benefit of the law.”