City of Tshwane Metropolitan Municipality v Lombardy Development (Pty) Ltd and others

The respondents were owners of vacant stands in Lombardy Estate situated in the former Kungwini Local Municipality, which was absorbed into the City of Tshwane Metropolitan Municipality (the City) with effect from 1 July 2011. Under Kungwini administration, the respondents' properties were categorised as 'residential' for rates purposes. About a year after absorption, from July 2012, the respondents received invoices from the City showing massive retrospective increases in rates (up to 700% increases), backdated to July 2011. This resulted from the City re-categorising the properties from 'residential' to 'vacant' in a 2012 supplementary valuation roll published on 4 July 2012 and taking effect from 1 September 2012, applying the vacant land rate which was approximately 4.5 times higher than the residential rate. The City failed to comply with section 49 of the Municipal Property Rates Act 6 of 2004 (MPRA), which requires mandatory notice procedures including publication in the Provincial Gazette, media advertisements, and individual service on every property owner of notice of the valuation roll and opportunity to object. None of the respondents received individual notice as required by section 49(1)(c) of the MPRA. After unsuccessful attempts to obtain reasons from the City, the respondents launched a review application in June 2013 seeking to set aside the City's decisions.

• Whether the respondents' review application was brought out of time and whether condonation should be granted for any delay
• Whether the respondents should have been permitted to amend their notice of motion to challenge subsequent valuation rolls
• Whether the City's failure to comply with the mandatory notice and publication requirements in section 49 of the MPRA rendered the 2012 supplementary valuation roll invalid
• Whether subsequent valuation rolls (2013 and later) that relied on the re-categorisation in the invalid 2012 roll were themselves invalid
• Whether the relief granted by the high court should have been confined to the respondents only or had general effect for all similarly affected properties

The appeal was dismissed with costs, including the costs of two counsel. Paragraphs 5 and 6 of the high court's order were set aside, but the remainder of the high court's order was upheld, including: (1) condonation for lateness and extension of the 180-day PAJA period; (2) declaration of invalidity of the 2012 supplementary valuation roll; (3) declaration of invalidity of the 2013 general valuation roll and subsequent rolls to the extent they categorised the affected properties as vacant; (4) declaration that imposition of the vacant land rate on the affected properties was invalid; (7) direction that the respondents pay rates at the residential rate applicable immediately prior to the 2012 supplementary roll until the rate is changed according to law; (8) remittal to the City to reconsider the categorisation of the affected properties with due regard to the MPRA; and (9) saving of other decisions and acts under the valuation rolls not directly related to the invalid re-categorisation.

The binding legal principles established by this judgment are: (1) Compliance with the mandatory notice and publication procedures in section 49 of the Municipal Property Rates Act 6 of 2004 is a jurisdictional prerequisite for the validity of a municipal valuation roll and the municipality's power to levy rates based on that roll. (2) Where a municipality fails to comply substantially with section 49 requirements, including individual service of notices on property owners (section 49(1)(c)) and publication in media (section 49(1)(a)), the resulting valuation roll is invalid. (3) A subsequent valuation roll that relies for its validity on a prior invalid valuation roll is itself invalid to the extent of such reliance (applying the principle from Seale v Van Rooyen 2008 (4) SA 43 (SCA)). (4) Where an organ of state has failed to provide adequate reasons for its decisions and the true facts only emerge through litigation, delay in launching a review application may be excused and condonation granted under section 9(2) of PAJA, particularly where continuing with the invalid conduct would perpetuate illegality. (5) Organs of state have a duty to act candidly in litigation and to take courts into their confidence by providing full explanations of facts, particularly where those facts are within the exclusive knowledge of the state organ. (6) Declaratory orders concerning the validity of state action have in rem effect and are not confined to the parties to the litigation but bind all persons affected by the subject matter.

The Court made several important obiter observations: (1) That the exercise of a municipality's power to impose rates under section 229(1) of the Constitution may arguably be characterized as either an executive or legislative function and thus potentially exempted from PAJA, though the Court did not definitively decide this issue. (2) That a litigant seeking a 'just and equitable' remedy limiting the impact of a declaration of invalidity must make out a case with facts showing deleterious consequences for the public interest, to enable the court to weigh these against the imperative to vindicate the principle of legality (citing Bengwenyama Minerals). (3) The Court observed that the City's lack of candour detracted from any perception that it was acting in good faith. (4) The Court noted that the case was 'characterized by a failure to provide a frank and comprehensive account of its conduct' by the City, and criticized the City for seeking 'to make a virtue of its silence on matters on which it owes a duty to account'. (5) The Court commented that it was unclear whether the decision not to follow MPRA procedures could 'only plausibly have been made at the highest executive or legislative levels by the City's policy-making organs or by its Council', suggesting concern about the level at which such decisions were made.

This case is significant in South African local government law for affirming that compliance with the mandatory procedural requirements of the Municipal Property Rates Act 6 of 2004 (particularly section 49) is a jurisdictional prerequisite for the valid exercise of a municipality's constitutional power to levy rates under section 229 of the Constitution. The judgment emphasizes that these procedures cannot be circumvented, even in circumstances where a municipality faces administrative challenges such as absorbing other municipalities. The case reinforces the principle of legality in administrative action and the duty of organs of state to act candidly and take courts into their confidence when challenged. It establishes that where a municipality fails to comply with mandatory notice and objection procedures, the resulting valuation roll is invalid, and subsequent rolls that rely on the invalid roll are also invalid to that extent (applying Seale v Van Rooyen). The judgment also clarifies the nature of declaratory orders against organs of state as having in rem effect beyond just the parties to the litigation, recognizing the public character of proceedings against the state. It serves as an important precedent for the protection of ratepayers' rights to notice and participation in municipal rates processes.