The appellants, who are or represent municipal ratepayers in the Mangaung Metropolitan Municipality, launched urgent proceedings to prohibit the Municipality from adopting a resolution on 30 May 2013 approving municipal rates for the budget year 2013/2014. The proposed resolution involved increasing the rate to be applied on commercial properties to a ratio of 1:3.8 compared to residential properties (meaning commercial properties would be rated 3.8 times higher than residential properties of the same value). The appellants raised concerns about: (1) lack of proper community participation in the budget process; (2) whether the proposed ratio exceeded the permissible ratio under s 19(1)(b) of the Local Government: Municipal Property Rates Act 6 of 2004; and (3) whether the rates would prejudice national economic policies. Mhlambi AJ in the Free State Division dismissed the application with costs. The appellants were granted leave to appeal.
The appeal was dismissed save for altering the costs order in the high court. The order of the court below as to costs was set aside and replaced with an order that the Municipality pay the applicants' costs in the high court. There was no order as to costs in the Supreme Court of Appeal.
The binding legal principles established are: (1) Section 19(1)(b) of the Local Government: Municipal Property Rates Act 6 of 2004, read with the Municipal Property Rates Regulations, does not prohibit a municipality from levying rates on business or commercial properties that exceed the rates levied on residential properties. The regulations only prescribe maximum ratios for specific categories of non-residential property (agricultural property, public service infrastructure property, and public benefit organisation property) relative to residential properties, and do not prescribe a ratio for business or commercial properties. (2) Municipalities have the power under s 8 of the Rates Act to levy different rates for different categories of property, and may lawfully impose higher rates on commercial, business and industrial properties than on residential properties, subject to the limitations in Part 3 of the Rates Act. (3) Proper public participation in the municipal budget process requires effective communication to the local community of the proposed budget and related documents as required by the Systems Act, Finance Act and Rates Act. The inquiry is whether the steps taken by the municipality are effective when measured against the object of the legislature. (4) In public interest litigation concerning the legality of government action, public officials have a duty to take the court into their confidence and fully explain the facts to enable informed decision-making in the interests of the public and good governance.
The court made several important obiter observations: (1) Courts must be conscious of the vital limits on judicial authority and should not interfere in the processes of other branches of government unless mandated by the Constitution, but equally must not hesitate to declare unlawful actions illegal where public power is exercised beyond constitutional or legal constraints. (2) The reason for imposing higher rates on commercial/business/industrial properties than residential properties is self-evident: such properties generate income and can absorb additional rating burdens by passing them on in prices, while residential properties provide homes to often financially hard-pressed domestic ratepayers. This approach is consistent with constitutional rights to access to housing and the need to respond to people's needs. (3) Where a municipal budget resolution has already been implemented for a substantial period and a new budget is being considered, it may be too late for meaningful declaratory relief to be granted even if procedural irregularities occurred. (4) The court deprecated the manner in which the Municipality's officials deposed to affidavits, making unsubstantiated denials without advancing factual bases, which fell far short of what is expected from an organ of state whose actions' legality is in dispute. Confirmatory affidavits that merely confirm another affidavit without deposing to actual facts constitute a "slothful means" of placing evidence before a court.
This case is significant for clarifying that: (1) Section 19(1)(b) of the Local Government: Municipal Property Rates Act 6 of 2004 and the regulations promulgated thereunder do not prohibit municipalities from levying higher rates on business/commercial properties than on residential properties. The regulations only prescribe ratios for specific categories of non-residential property (agricultural, public service infrastructure, and public benefit organisation properties). (2) Municipalities are empowered to levy differential rates on different categories of property, and it is historically established and constitutionally appropriate that commercial properties may be rated higher than residential properties. (3) The case reaffirms the importance of meaningful public participation in municipal budgeting processes and the detailed requirements for publication under the relevant municipal legislation. (4) It emphasizes the duties of public officials in public interest litigation to take courts into their confidence and provide full and frank disclosure, particularly where the legality of government action is in question. (5) The case demonstrates the application of the legality principle to municipal decision-making and the court's supervisory jurisdiction over exercises of public power.
Explore 3 related cases • Click to navigate