IN THE HIGH COURT OF SOUTH AFRICA
(NATAL PROVINCIAL DIVISION)
								 
  CASE NO: 3361/05
In the matter between:

CARIBBEAN ESTATES (PTY) LTD			Applicant

And

SEETHAL, GREGORY LARRY N.O.		First Respondent
THE VALUATION APPEAL BOARD,
HIBISCUS COAST MUNICIPALITY		Second Respondent

THE MUNICIPAL MANAGER,
HIBISCUS COAST MUNICIPALITY		Third Respondent

THE HIBISCUS COAST MUNICIPALITY	Fourth Respondent

JUDGMENT

KONDILE J:
[1] This is an application to review and set aside the administrative action of the Fourth Respondent (“the Municipality”), an internal appeal to the Second Respondent (“the Appeal Board”) having failed.  The matter concerns the levying of rates on property, by the Municipality, in terms of the Local Authorities Ordinance 25 of 1974 (“the Ordinance”).

[2] There is very little dispute between the parties, on the facts.  The Applicant (“Caribbean Estates”) was at all material times the owner of property zoned SZ4 which is situated within the area of jurisdiction of the Municipality.  The property first comprised only the Remaining Extent of Portion 2 of Erf 1015 Port Edward.  It was 9, 3728 Hectares in extent. 

[3] In 1990 the said property was subdivided and split into three properties.  These were Portion 28, Portion 36 and what now remained of the Remaining Extent of Portion 2.  Certificates of Registered Title in respect of Portion 28 and Portion 36 were taken out in the office of the Registrar of Deeds at Pietermaritzburg on 29th June 1990.  After the subdivision the Remaining Extent, (“Parent Lot”), reduced in size to 4, 2769 Hectares.

[4] The Valuation Roll, upon which the Municipality relies, for levying rates, valued the Parent Lot at R 552 000 as at the date of the subdivision.  After the subdivision the valuation roll continued to reflect the Parent Lot as still containing Portions 28 and 36 and in doing so incorrectly reflected it as being 9, 3728 Hectares in extent and having a land value of R 552 000.  The Valuation Roll was not amended until the year 2005.

[5] The zoning of the property remained identical on subdivision.  The subdivision therefore did not entail any difference in zoning between the Parent Lot and Portions 28 and 36 or between any of them and the original Parent Lot.

[6] In the year 2004 Caribbean Estates made application to subdivide Portions 28 and 36.  The applications were approved.  It sold off the various subdivisions of Portions 28 and 36.  It then applied for Rates Clearance Certificates from the Municipality in terms of section 118 of the Local Government: Municipal Systems Act 32 of 2000 (“the Act”) in order to give transfer pursuant to such sales.

[7] The officials of the Municipality advised that they were unaware of Portion 28.  A Rates Clearance Certificate was however issued in respect of the Parent Lot as follows:
“HIBISCUS COAST MUNICIPALITY
		                       NO. 4122
	This certificate is valid until 	21-3-2005
	Date of issue	23-11-2004
RATES CERTIFICATE
	This certifies that all amounts due to the council have been paid in accordance with section 118 of Local Government municipal Systems Act 32/2000 for 2004/200
on Lot	1015/2/Rem Port Edward
Registration Division ET situated in the Hibiscus Coast municipality Area and in the Ug District municipality Area, Province of KwaZulu-Natal,

in extent	93728
Transforec 	Caribbean Estates Pty Ltd
		Pvt Bag x 02
		Northlands 2116
For the Hibiscus Coast municipality
Receipt No.	325245/9/50		Chief Financial Officer”

[8] The issue by the Municipality of a Rates Clearance Certificate, in terms of section 118 (1) of the Act, for the Parent Lot, so as to include Portions 28 and 36 and reflecting 9,3728 Hectares in Extent, obviously serves as proof that all charges in respect of the 3 properties were up to date at the time of issue.

[9] It became evident that, although certificates of Registered Title were taken out in respect of Portion 28 and 36, the Valuation Roll did not reflect the subdivided nature of the property.  Thereupon Caribbean Estates suggested, to the Municipality, the amendment of the Valuation Roll to reflect Portions 28 and 36 as separate erven, so that the Rates Clearance Certificates could be issued in respect thereof.

[10] The Municipality, in response, advised Caribbean Estates that the rates for Portions 28 and 36 would be levied in terms of section 159 (1) (a), (d) and (f) of the Ordinance.  Section 159 (1) of the Ordinance provides:
“The council may at any time after valuation roll or amended valuation roll for any financial year has been completed in terms of sections 155 (1) (f) or 158 but not for more than three financial years in retrospect – 
(a)	cause any property which has been omitted, to be valued, and where necessary levy and collect rates in respect thereof;
. . .
(d)	cause a fresh valuation to be made of any property which is subdivided or consolidated and where necessary levy and collect rates in respect of each subdivision, including any remainder, or in respect of the consolidated property, as the case may be, accordingly;
(e)	cause a fresh valuation to made of any property which has materially increased or decreased in value for any reason and where necessary levy and collect rates accordingly;
(f)	cause any error in the valuation roll to be corrected by a valuer and where necessary levy and collect rates in accordance with the corrected statements of facts;
(g)	cause the classification or identification of any property to be altered or corrected by the valuer and where necessary levy and collect rates in respect thereof in accordance with such altered or corrected classification or identification.”

[11] The Municipality then sought to impose additional general rates on Portions 28 and 36 for the financial years 2001 – 2002; 2002 – 2003; 2003 – 2004 and 2004 – 2005 in the total amounts of R 93 553.25 in respect of Portion 28 and R 478 999.64 in respect of Portion 36.  The Municipality thereafter refused to issue Rates Clearance Certificates in respect of Portions 28 and 36 unless and until these amounts, which it indicated were estimated rates only, were paid.  

[12] The Caribbean Estates objected to the competence of this retrospective levying of rates.  It submitted that the Municipality is not empowered to raise extra rates, in respect of property, merely because it has been subdivided.  It pointed out that even though the Municipality had omitted to value the properties concerned separately and to reflect them as separate items on the Valuation Roll the Portions in question had already been fully rated and paid for as part of the Parent Lot.

[13] Furthermore it asserted that had Portions 28 and 36 formed separate entities on the Municipality’s Valuation Roll at the time of the last valuation, these properties would also have been valued at R 5.89 per square metre.  As rates calculations are based on nothing other than land value, if a physical piece of property was rated and rates paid for a certain area of land it can never be “necessary” to levy rates because the land ought to have been rated as subdivided portions where no element in the subdivision alters the value per square metre of the area of land in question.  In addition Caribbean Estates contends that the zoning of all the properties concerned is identical and there would be no reason for placing any greater value per square metre on Portion 28 and/or Portion 36 merely by virtue of the fact that the Certificate or Registered Title had been taken in respect thereof.  

[14] The Municipality’s response to the contention in paragraph [13] is that:
“(i)t is accepted in this instance that the value of the land of the three subdivided properties is greater than the value of that same land when it was part of the parent lot but this is coincidental.  The reason for amending the valuation roll is that three properties came into existence upon subdivision and not that the value of the three subdivided properties was greater than the single consolidated property.”

[15]  The Municipality’s response is, in my view, illogical.  In fact the choice of the word “coincidental” constitutes an implied concession by the Municipality that there is no apparent rational connection between the administrative action of levying rates retrospectively herein and the information before the Municipality or the reasons given for it by the Municipality.    

[16] Caribbean Estates nevertheless paid the amounts demanded under protest, in order to obtain the clearance certificates.  It however reserved its right to appeal in terms of section 160 (1) (d) of the Ordinance.

[17] The Municipality ultimately furnished Notices in terms of section 159 (3) of the Ordinance (“the Notices”), on 1st February 2005.  Section 159 (3) says:
“Notice shall be given by the town clerk or town treasurer or other authorised officer of the council, to every person who becomes liable to pay new or increased rates by reason of anything done under the authority of this section.  Such notice shall contain particulars in regard to the property affected and the new or increased rates payable and shall mention the right of appeal hereinafter provided for and the time allowed for appealing.”

[18] It is apparent from the said Notices that the Municipality in revaluing Portions 28 and 36 and levying rates retrospectively thereon acted in terms of section 159 (1) (d) of the Ordinance.  The Notices contain the following: “Reason for revaluation: SUBDIVISION”. 

[19]  Thereafter Caribbean Estates appealed to the Appeal Board against the Municipality in terms of section 160 (1) (d) of the Ordinance and in compliance with the provisions of section 7 (2) (a) of the Promotion of Administrative Justice Act 3 of 2000 (“PAJA”).
Section 160 (1) (d) of the Ordinance provides:
“Any owner or occupier who in terms of any law is legally liable for the payment of rates in respect of the property in question who is aggrieved by reason of anything done in terms of section 159, may appeal against the same . . .”

Section 7 (2) (a) of PAJA reads:
“Subject to paragraph (c) no court or tribunal shall review an administrative action in terms of this Act unless any internal remedy provided for in any other law has first been exhausted.”

[20] The appeal specifically challenged the validity of the retrospective levying of the rates.  Caribbean Estates contended that section 159 (1) does not give the Municipality the power to do so in the manner it seeks to do.  Notwithstanding that, no one was called upon to address the Appeal Board on the question of levying rates retrospectively.  The appeal was dismissed by the Appeal Board.  The basis for dismissing the appeal was that the Appeal Board did not consider itself able to entertain submissions on the interpretation of the powers of the Municipality to levy rates the way it did.  The Appeal Board also concluded it was not empowered to order the municipality to repay the money that had been demanded and been paid under protest.

[21] Only the Municipality opposes this application.  The First Respondent, who represented the Municipality as its attorney from time to time, and who also acted as the Chairperson of the Appeal Board in this matter, deposed to the answering affidavit of the Municipality.  He stated that the Third Respondent is the authorised representative of the Municipality.  

[22] The Municipality opposes the application on a number of grounds.  Firstly it contends that the relief sought has not been timeously sought.  It argues that in terms of section 7 of PAJA the judicial review proceedings must be instituted without unreasonable delay and not later than 180 days after the date on which the Applicant may reasonably have become aware of the action and reasons.  It contends that the period of 180 had elapsed between November 2004 when the Applicant became aware of the decision and 8th June 2005, when these review proceedings were instituted.  

[23] The Municipality adds that even if Caribbean Estates placed reliance on the date of the Notices, as the date upon which it became aware of the Municipality’s decision, such Notices were furnished on 1st February 2005 and that is the date Caribbean Estates became aware it was liable to pay new or increased rates by reason of anything done under the authority of section 159; that therefore the 180 days elapsed before the 8th June 2005 when the review proceedings were instituted.

[24] The submission in paragraph 22 above ignores section 7 (1) (a) of PAJA which provides:
“Any proceedings for judicial review in terms of section 6 (1) must be instituted without unreasonable delay and not later than 180 days after the date . . . on which any proceedings instituted in terms of internal remedies . . . were concluded.”  
There was an appeal to the Appeal Board to exhaust the internal remedy.  This was concluded on the 31st August 2005 when the reasons were furnished.  These review proceedings were instituted on 8th June 2005.  In addition and even if the internal remedy process is ignored, 8th June 2005 is before 180 days after 1st February 2005.  

[25] Secondly the Municipality contends that the Appeal Board correctly held that it had no jurisdiction to grant the relief sought from it, that the municipality should repay the amounts paid to it under protest before they were levied unlawfully.  The purpose of the Appeal Board, according to the Municipality, is to consider appeals against valuations and Caribbean Estate does not contest the amount of the valuations placed on the properties.

[26] This contention cannot be sustained.  It is clear from the aforegoing that the Municipality considers the Caribbean Estates legally liable for the payment of rates, by reason of what was done in terms of section 159 of the Ordinance.  Caribbean Estates is aggrieved by that.  Therefore Caribbean Estates was entitled to appeal in terms of section 160 (1) (d) and the Appeal Board was obliged to properly determine the appeal.  

[27] It seems the Appeal Board has misunderstood the whole nature of the internal appeal and its duties in connection with it.  The Appeal Board had a duty to afford the parties a rehearing.  It was obliged to reconsider and re-evaluate properly the evidence and determine the correctness or validity of the administrative action of the Municipality.  If the administrative action was found to be unlawful or unreasonable the appeal succeeded and the Appeal Board could, among other things, have made a declaratory order.  

[28] The Municipality has also taken the point that the deponent to the affidavits of the Caribbean Estates lacked authority to institute review proceedings inasmuch as the resolution of the directors of Caribbean Estates annexed to the founding affidavit authorises him to apply only for the review of the decision of the Appeal Board and not for the review of the decision of the Municipality.  Caribbean Estates response is that the authority to set aside a decision refusing an appeal against another decision would, by definition, include authority to seek to have the original decision set aside.  It is unnecessary for me to express an opinion

on these contentions as there has been retrospective validation or ratification of the “missing” authority.

[29] I turn now to consider the main issue in this review.  It is apparent from the provisions of section 159 (1) (d) that the discretionary power conferred on the Municipality, by the Ordinance, is not a “free” discretion.  It is circumscribed.  The circumstance in which the discretion has to be exercised is clearly defined in the Ordinance.  The Municipality can levy and collect rates in respect of each subdivision “where necessary”.  If the circumstance does not exist, the Municipality has no choice, the discretion may not be exercised.

[30] The reason specified in the Notices, for levying rates and the submissions by the Municipality for levying rates on Portions 28 and 36 retrospectively made to the Appeal Board disclose no basis for a finding that the retrospective levying of rates was “necessary” as required by section 159 (1) (d) of the Ordinance.  Therefore the Municipality had no authority in law for its decision.  An unlawful decision is invalid.

[31] Caribbean Estates has contended that had the Municipality caused Portion 28 and Portion 36 to be valued separately and reflected these properties on its Valuation Roll the land value of the Parent Lot would also have been reduced at least proportionately to R 251 882-98.  This has been admitted by the Municipality.  The Municipality in fact confirmed that Portions 28 and 36 were rated as part of the Parent Lot until the Valuation Roll was amended.

[32] Therefore the contention by for Caribbean Estates that the sum total of the values of the three properties immediately upon subdivision was the same as the value of the property immediately before subdivision and that, the subdivision did not cause any value difference in the properties in question, has merit. 

[33] The Municipality also admits that rates and taxes in respect of the Parent Lot have at all times been paid by Caribbean Estates in accordance with the amounts levied by the Municipality with the result that the Municipality has in fact also received rates and taxes in respect of Portion 28 and Portion 36.  Therefore the contention by Caribbean Estates that the Municipality could never be entitled to receive double rates in respect of Portion 28 and 36, once as part of the Parent Lot and then again as separately valued properties on the Valuation Roll must be sustained.  It cannot be “necessary” to levy and collect rates where they have already been paid.

[34] Clearly the circumstance or the condition precedent specified in section 159 (1) (d) of the Ordinance, that the Municipality may levy and collect rates in respect of its subdivision, where “necessary” has not been fulfilled.  In the absence of such circumstance the levying and the collection of the rates in retrospect were unlawful.

[35] Furthermore I agree with Caribbean Estates that section 159 (1) (d) envisages a situation where property is subdivided, the Parent Lot reduces drastically in size, and the “children lots” are not included on the Valuation Roll and rated, although the Parent Lot continues to be included on the Valuation Roll and rated, but now as a much smaller property, in which event the subdivided erven go unrated until the error is discovered.  In such a circumstance it is “necessary” to levy and collect rates. 

[36] I further agree that one could also have a situation where the subdivision causes a different zoning or classification with different value consequences, in which case section 159 (1) (e) and (g) would be more appropriate subsections to invoke rather than section 159 (1) (d).  Section 159 (2) which deals with additional rates that may be due because of increases in terms of section 159 (1) (e) and (g) of the Ordinances does make it clear beyond doubt that these occasions are limited to occasions where an event causes an increase in value on a given date.  

[37] Both parties relied on Juddor which dealt with section 159 (1) (a) and (f) of the Ordinance.  In that case, Applicant’s property had been valued and rated as consolidated property and the Applicant had paid these rates.  Section 155 (10) (c) of the Ordinance was amended in 1980 to provide that all subdivided erven shall be valued separately and deemed to have come into operation on 9th January 1976.  The Municipality relying on section 159 (2) of the Ordinance purported to levy rates on the subdivided portions for three years in retrospect on the basis of section 159 (1) (a) and section 159 (1) (f).  The Court held that the Municipality in that case was not entitled to levy retrospectively on properties if the liability for rates had been discharged on the basis of the Valuation Roll as it stood at the time.

[38] The Caribbean Estates, in this matter, also discharged its liabilities for rates on the basis of the Valuation Roll as it stood at the time.  I share the view expressed in Juddor above.  Subdivision, in itself, does not, in terms of section 159 (1) (d) also, justify the raising of extra rates in respect of Portions 28 and 36, since these had already been paid as part of the Parent Lot.  I accordingly find that the Municipality has failed to establish that it was “necessary” to levy rates retrospectively on Portions 28 and 36, properties owned by Caribbean Estates.

[39] Caribbean Estates does not persist with many of the points and grounds raised in the papers and in the appeal.  In view of the decision that I have come to, it is also not necessary for me to deal with the other remaining issues it raised. 

[40] The application succeeds and there will be an order in terms of paragraphs 1, 2, 3 and 4 of the Notice of Motion.  Fourth respondent is ordered to pay the applicant’s costs.

					………………………………

Review heard on :				23 May 2007 
Counsel for the applicant	:		Mr F. Snyckers
Instructed by :				Tonkin Clacey Inc.
Counsel for the fourth respondent :	Mr G.D. Goddard
Instructed by :				Mason Inc.
Judgment handed down :			27 September 2007