IN THE HIGH COURT OF SOUTH AFRICA 
(WESTERN CAPE HIGH COURT, CAPE TOWN)

Case No 14190/2010

In the matter between:

and

JUDGMENT

CLOETE AJ:
INTRODUCTION

[2] The applicants initially approached court on an urgent basis but such urgency was mitigated when the parties made interim arrangements in respect of the further conduct of the matter.

BACKGROUND

[3] The applicants are companies that have been involved in a number of so-called seaside property developments within the area of jurisdiction of the respondent over many years.

[5] The developments in respect of which the applicants have taken issue are all located in St Helena Bay and involve applications for the rezoning and subdivision of land which were approved by the respondent's council (and its predecessor in title) subject to certain conditions which were imposed. These conditions included conditions imposed in terms of s 42 of LUPO

[6]   Sections 42(1) and (2) of LUPO provide as follows:

(2) Such conditions may, having regard to -
(a) the community needs and public expenditure which in his or its opinion may arise from the authorization, exemption, application or appeal concerned and the public expenditure incurred in the past which in his or its opinion facilitates the said authorization, exemption, application or appeal; and

[7] '"Capital contributions" is a commonly used description for the sum or sums of money payable under conditions imposed in terms of s 42(2) of LUPO. which sum or sums are determined to cater for the requirements resulting from the approval of development applications in respect of the provision of necessary services or amenities to the land concerned. The contributions are levied in terms of a tariff calculated and adopted by a local authority and are payable upon the grant of rates clearance applications made in respect of the individual erven comprising the relevant township development.

[13] The policy attempted to set out a basis for a fair apportionment of the cost of these services between ratepayers and developers In doing so, it relied upon a complex formula which pro-rated the impact that a proposed development would have on service infrastructure for each of the bulk services referred to against the cost of the provision of such infrastructure. The formula took account of a number of variables, including the past and future cost of services which were to be rendered as also past public expenditure and future revenue that were to be derived from ratepayers in connection therewith in accordance with the provisions of s 42(2) of LUPO.

[17] The purpose of providing for annual escalation in accordance with the Index was to try and maintain a proper ratio between actual costs in the light of inflation and capital contributions levied upon developments.

[18] The applicants' dispute with the respondent relates to two "categories" of development application approvals, namely those approved prior to 1 July 2007 and those approved after 1 July 2007 (but including applications which had been submitted prior to 1 July 2007).

[19] The category of approvals granted prior to 1 July 2007 each contained a condition that the capital contributions per erf in each development were to be levied in accordance with the method set out in R55, subject to an annual escalation in accordance with the Index.

[20] The category of approvals granted after 1 July 2007 each contained a condition that the capital contributions per erf in each development were to be levied in accordance with the method set out in R35 of 26 June 2007, subject to an annual escalation in accordance with the Index. R35 is dealt with hereinbelow.

[25] The applicants took issue with the new tariff right away and made various submissions to the respondent about it.

[26] During August 2007 Victor reported to the respondent's council that he had received a request from a developer (not one of the applicants) that the old tariff incorporated in R55 remain applicable to its development which had been completed in April 2007 i.e. prior to the adoption of R35. This request led Victor to form the view that the wording adopted in R35 as to the effective date of the new tariff was ambiguous and liable to cause confusion. In his opinion, this wording was capable of being understood either to mean that the new tariff was applicable to applications across the board (i.e. even those approved prior to R35) or only to new applications submitted and approved after R35 was adopted. He recommended that respondents council should make the new tariff applicable to all applications, i.e. both those approved or submitted before 1 July 2007 as well as all new applications submitted and approved thereafter.

[30] Resolution R43 reads as follows:

(iv) that the capital contributions, contained in Annexure "B" and "C to the report, with the inclusion of solid waste, as calculated and submitted to Council per item R35/6-07 dated 26 June 2007 be reconfirmed to be applicable on all developments approved as from 1 July 2007;

(v) that, if Council is of the opinion that developers must also be responsible for a social contribution, this requirement be dealt with as an additional contribution to be made after a legal opinion for the enforcement of such a contribution has been obtained;

(vi) that a discount of 25% on the tariffs contained in Annexure "B" and "C" to the report, rounded off to the nearest R10, be made applicable on all developments approved prior to 1 July 2007, which discount will be terminated as from 1 July 2008;

[32] On 12 December 2007 the respondent notified all developers within its area of jurisdiction, including the applicants, of the contents of R43.

It must thus be accepted that any challenge to the application instituted by the applicants on the basis of unreasonable delay on their part was not considered by the respondent to have been worthy of being proffered at that stage. It must also be accepted that the attack by the applicants on the tariff contained in R43 was considered by the respondent to have merit which was sufficient to result in the respondent rescinding R43 (albeit some seven months later) on 2 February 2010.

[36] On 4 February 2010 the applicants' attorney wrote to the respondent's attorney pointing out that the rescission of R43 had particular consequences and that the applicants urgently required the respondent to indicate how such consequences were to be dealt with The applicants' attorney also referred to a previous letter of 13 January 2010 which he had written to the respondent's attorney setting out proposals to resolve the dispute, predicated on the basis that the new tariff was unlawful and that there would have to be an accounting in respect of all contributions paid by the applicants on the basis of the new tariff. It was also proposed that all contributions paid by the applicants to date be calculated on the basis of the old tariff as adjusted by the Index. The proposals contained in the letter of 13 January 2010 pre-dated the rescission of R43 by the respondent. The respondent's attorney was requested to obtain instructions as to the proposals made by the applicants in the letter of 13 January 2010.

[38] Accordingly on 18 February 2010 the first applicant wrote to the respondent's municipal manager, calling for a meeting to discuss how the question of capital contributions was to be dealt with in the period pending a valid determination thereof and the process for determining what the correct capital contributions should have been, including arrangements for repayment of any over-payments. It is clear from this letter that the applicants were proceeding on the basis that the respondent had accepted the merits of their attack on the new tariff, and that the new tariff had fallen away as a result of the rescission of R43.

[39] There was no response to this letter. On 22 February 2010 the applicants' attorney wrote to the respondent's municipal manager calling for discussion on the procedure to be instituted by the respondent for the calculation of correct capital contributions with retrospective effect from September 2007. and the management and payment of contributions pending the calculation of correct capital contributions.

[41] On 26 February 2010 the applicants' attorney attempted to arrange a meeting with the respondent's representatives on 2 March 2010. On 1 March 2010 the respondents attorney advised that the earliest date that the meeting could take place would be 5 March 2010, alternatively 10 March 2010. The parties met on 5 March 2010.

(i)   that the report be noted.

(it) that Council adopts the interim policy on development contributions attached hereto as Annexure A;

DC = A/B(C-D)
Where DC = Development Contributions A = Impact of Proposed Development B = Impact of existing Development
C = Replacement value of existing Bulk Services Infrastructure D = Outstanding loans on existing Bulk Services Infrastructure;

105/2-10/

AND WHEREAS the basis for the calculation of the capital contributions which the Municipality has until recently used has fallen away as a result of Resolution R43/12-07 having being revoked by the Council of the Municipality;

[47] On 6 April 2010 the respondent's attorney wrote to the applicants' attorney advising that he would be taking instructions from the respondent and would report back as soon as possible thereafter

[48] On 9 April 2010 the applicants attorney again wrote to the respondent's attorney, repeating the complaint that capital contributions were still being levied in accordance with the rescinded R43 and advising that in all the circumstances the applicants felt that they had no option but to approach court for relief.
[49] The present application was launched on 2 July 2010.

ISSUES FOR DETERMINATION

[51] The crux of the dispute between the parties is the applicants' allegation that despite rescinding R43, the respondent has continued to levy contributions in accordance with the tariff set out therein, both in respect of approvals granted and applications submitted before 1 July 2007 and approvals granted thereafter The applicants thus contend that the respondent has unlawfully extracted payment in accordance with the new tariff from them.

[52] The applicants do not seek an order declaring that R43 is of no force and effect; they seek an order declaring that the tariff for the calculation of contributions underlying that resolution, read with R35. is of no force and effect.

[53] The applicants argue that the tariff set out in R35 was effectively implemented only by R43 which has subsequently been revoked Accordingly the respondent is not entitled to demand or extract payment of contributions in accordance with that tariff. The applicants contend that it is evident from the events leading up to R43 that the new (2007) tariffs only right of existence flowed from R43 itself. The new tariff was only implemented pursuant to R43 While R35 purported to implement the tariff on 1 July 2007, its very essence was contradicted by follow-up resolutions in October 2007 (i.e. R50) and November 2007 (i.e. R37). The applicants argue that R43 did not refer to R35 itself but to the tariff set out in the item submitted to the council under the reference number R35. The applicants accordingly contend that the revocation of R43 meant that the tariff implemented in accordance with that resolution was revoked.
[54] The applicants' main relief is thus sought on the basis that R105 which was adopted by the respondent's council in the wake of the withdrawal of the respondent's opposition to the first review application in July 2009 also rescinded the previous resolutions which adopted or considered the new tariff. The new tariff is thus no longer of any force and effect as a basis for the imposition of capital contributions.

[55) It is for this reason that the applicants also seek an order that the respondent must account to them for the sums overpaid in respect of capital contributions levied by the respondent in accordance with R43.

[56] The alternative relief claimed by the applicants for the review and setting aside of R35. alternatively that the tariff for the calculation of capital contributions as set out in R43 as read with R35, alternatively as set out in R35 is of no force and effect, only needs to be considered in the event that the applicants do not succeed in the main relief. It is in respect of the alternative relief claimed that considerations of valid administrative action, condonation for any delay in pursuing the relief sought and any challenge to the legality of R35 are applicable.

[57] The respondent argues that the main relief sought by the applicants is misconceived since the applicants seek to attack R35 without attacking the conditions imposed in development approvals as a result of the adoption and implementation of R35. The respondent contends that the failure to attack the conditions imposed in development approvals for capital contributions under the new tariff adopted in R35 is fatal to the applicants' case not only in respect of unreasonable delay on the applicants part in pursuing their remedies but also in respect of valid administrative action and any challenge to the legality of R35 itself The respondent denies that the revocation of R43 implied the rescission or revocation of either R35 or the tariff adopted by it

[59] The respondent also argues that the applicants have failed to establish a claim for the rendering and/or debatement of an account in that there is no fiduciary relationship between the parties, the applicants have no contractual entitlement to an account, and the respondent has no statutory obligation to provide an account.

[64] It is clear that the applicants took issue with the implementation of the new tariff which culminated in the launching of the first review application on 20 July 2009 and which was directed at an attack on the tariff itself.

[69] Since I have found that the new tariff is of no force and effect it is not necessary to consider the alternative relief claimed by the applicants.

ACCOUNTING TO THE APPLICANTS

[71] The applicants have set out the evidence upon which they rely, including a spreadsheet reflecting the sums paid to the respondent by all of them for capital contributions Attached to the spreadsheet are supporting invoices from the respondent The spreadsheet also reflects what should have been paid to the respondent in terms of the old (1997) tariff duly escalated in accordance with the Index as per the respondents own calculations. From the spreadsheet it is evident that on the basis of the comparisons set out therein the applicants calculate that as at 17 September 2010 (i.e. the date upon which the schedule was prepared) they had overpaid R8 768 723.00 to the respondent.

[72] The applicants contend that given the respondent's position as a local authority responsible for the determination of capital contributions and the enforcement thereof there is a fiduciary relationship between the respondent and the applicants as ratepayers. They are thus entitled to a proper account from the respondent based upon a lawful tariff in respect of what they should have paid and what is owing to them as a result of any overpayment.

[73] As to the respondent's contention that on its calculations the applicants in fact contributed far less than they should have and the nett result is to all intents and purposes insignificant, the applicants argue (correctly in my view) that this does not justify a refusal to account in circumstances in which the respondent has unlawfully extracted payment of capital contributions from the applicants.

CONCLUSION

[83) I accordingly make the following order;
(1) The tariff for the calculation of capital contributions as set out in the respondent's resolution R43/12/07 dated 4 December 2007, read with the respondent's resolution R35/6/07 dated 26 June 2007 is declared to be of no force and effect.

(3)      The respondent shall effect payment of the costs of this application including the costs of two counsel.