THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable

Case No: 1139/2019
In the matter between

CITY OF CAPE TOWN METROPOLITAN
MUNICIPALITY
APPELLANT

and

NU-WAY HOUSING DEVELOPMENTS
(PTY) LTD
RESPONDENT

Neutral citation:
City of Cape Town Metropolitan Municipality v Nu-Way
Housing Developments (Pty) Ltd (1139/2019) [2021] ZASCA 19 (12 March 2021)

Coram:       Navsa ADP, Molemela and Nicholls JJA and Ledwaba and Rogers
AJJA

Heard:
22 February 2021

Delivered:
This judgment was handed down electronically by circulation to
the parties’ legal representatives by email. It has been published on the Supreme
Court of Appeal website and released to SAFLII. The date and time for hand-down
is deemed to be 14h00 on 12 March 2021.
Summary:
Townships – Less Formal Township Establishment Act 113 of
1991 – conditions on which land designated – electricity supply – condition that
local authority shall determine ‘connection fee and conditions applicable’ to
electricity connections when application for supply made – ‘conditions applicable’
include development capital charge in force at time application made for electricity
supply.

_____________________________________________________________________

ORDER
_____________________________________________________________________

On appeal from: The High Court, Western Cape Division (Baartman J sitting as
court of first instance).
(a)  The appeal succeeds with costs, including the costs of two counsel where
engaged.
(b)  The order of the court a quo is set aside and replaced with an order in the
following terms: ‘The application is dismissed with costs.’

JUDGMENT
_____________________________________________________________________

Rogers AJA (Navsa ADP, Molemela and Nicholls JJA and Ledwaba AJA
concurring)
[1] The present respondent, Nu-Way Housing Developments (Pty) Ltd (Nu-
Way), sued the appellant, the City of Cape Town Metropolitan Municipality (the
City), in the court a quo for recovery of R2 109 009, being an electricity
development contribution which Nu-Way had paid the City, allegedly under
protest. Nu-Way based its claim on the condictio indebiti, alternatively in
contract, being the two conceptual bases for recovery in such circumstances
identified in the majority judgment in Commissioner for Inland Revenue v First
National Industrial Bank Ltd 1990 (3) SA 641 (A). The court a quo (Baartman J)
upheld the claim on both bases. The City appeals to this Court with the leave of
the court below.

[2] Nu-Way applied to the Department of Planning, Local Government and
Housing in the Western Cape Provincial Government (WCPG) to have land in
Langa designated for less formal settlement in terms of s 3(1) of the Less Formal
Township Establishment Act 113 of 1991 (the LFTEA).1 The land belonged to the
Passenger Rail Agency of South Africa (PRASA), whose agreement to the project
Nu-Way had secured. The proposal was to subdivide the land into 224 erven
zoned Single Dwelling Residential, one erf zoned Business and five erven zoned
Undetermined (Services) Use.
[3] In accordance with the LFTEA, the City was notified of the application.
The City recommended that the application be approved on certain conditions set
out in annexures E, G and G2 to its report. In November 2001 the WCPG notified
Nu-Way that the application had been approved on certain conditions, including
those recommended by the City.
[4] In relation to electricity, clause 18(1) of annexure G required Nu-Way, at
its own cost, to provide the internal electrical reticulation and street lighting
serving the subdivision. Independent connections were required for each erf. The
erf owner was to make formal application to the City’s electricity department for
the connection of supply to that erf. Clause 18.6 provided:
‘The Directorate [ie the City’s electricity department] shall determine the connection fee and
conditions applicable to the joining of the internal electrical reticulation of the proposed
subdivision to the Directorate existing electrical infrastructure, on formal application by the
Applicant.’
[5] Nu-Way completed the residential component in about 2004. The
individual residential erven were transferred to the end-users, and each erf
obtained an electricity connection. The business erf, which had become Erf 4330

1 The LFTEA was repealed nationally by the Spatial Planning and Land Use Management Act 16 of 2013 and (as
legislation the administration of which had been assigned to the Western Cape) by the Land-Use Planning Act 3 of
2014 (Western Cape).

Langa and over which Nu-Way had a 99-year lease from PRASA, remained
undeveloped for some years. In February 2014 the City approved building plans
for the construction of a shopping centre on the erf, and construction began in
June 2014. In October 2014 Nu-Way applied to the City’s electricity department
for an electricity supply to the business erf of ‘1440A three phase at 400V’,
equating to 998 kVA. On 15 October 2014 the electricity department notified Nu-
Way that a connection fee of R31 073 and a ‘Development Contribution (DC)
Cost’ of R2 109 009 were payable for the requested supply. (I shall refer to the
latter item as the DC charge.)
[6] According to the evidence of Nu-Way’s Mr Gordon Mann, Nu-Way had
not been expecting to pay a DC charge. This cost had not been factored into the
leases which Nu-Way concluded with tenants of the new shopping centre,
particularly Shoprite. Nu-Way believed that it was not legally obliged to pay the
DC charge. However, unless Nu-Way secured electricity for the shopping centre
by January 2015, it would be in breach of its obligations to the tenants. The City’s
officials suggested that in order to prevent further cost and delay for Nu-Way, the
latter should make payment as an interim measure while the City investigated the
issue. On 2 December 2014 Nu-Way paid the connection fee and DC charge by
way of an electronic funds transfer. On the same day Nu-Way wrote to the City,
attaching proof of payment and adding:
‘Payment is made subject to the condition that the amount paid in respect of electrical
development contributions will be refunded if it is determined by the City that such amount is in
fact not due and payable in respect of Erf 4330 Langa.’
This wording had been suggested to Mr Mann earlier in the day by Ms Susan
Mosdell of the City’s Legal Services Department, following a meeting between
representatives of Nu-Way and the City that morning.

[7] Although the City raised a number of other defences, it is convenient to
start with the question whether the DC charge was in law due and payable. If it
was, Nu-Way’s claim naturally could not succeed. Counsel agreed that the appeal
should be decided on that basis.
[8] The City of Cape Town in its current form came into existence in
December 2000 as an amalgamation of a previous metropolitan council and
various transitional municipal local councils. Mr Coenraad Steyn, an electrical
engineer and employee of the City, testified that before amalgamation the various
municipal administrations had different mechanisms for recovering costs when a
developer or owner applied for a new or upgraded supply of electricity. In the
case of this particular land, Mr Steyn believed that a guarantee scheme would
have applied in terms whereof the developer would have had to provide a
guarantee based on the projected monthly billing for five years. This and other
mechanisms were repealed by the City’s council in December 2003, and an
interim electricity development contribution tariff was adopted. The DC charge
was only to be applicable ‘to additional capacity applied for above the existing
capacity supplied by the developer, customer or others’. The DC tariff was to be
recalculated annually on 1 July.
[9] By way of statutory background, the Local Government: Municipal
Systems Act 32 of 2000 (Systems Act) came into force on 1 March 2001. Section
74(1) required a municipal council to adopt and implement a tariff policy on the
levying of fees for municipal services. Section 75(1) required a municipal council
to adopt by-laws to give effect to the implementation and enforcement of its tariff
policy. Section 75A, which came into force on 5 December 2002, provided in
subsection (1) that a municipality could ‘levy and recover fees, charges or tariffs
in respect of any function or service of the municipality’. In terms of s 75A(2),
such fees, charges or tariffs were to be levied by council resolution.

[10] In May 2005 the council by resolution replaced the interim tariff with a
development capital tariff which distinguished between four categories of
networks. The new tariff was applicable only ‘to additional capacity applied for
above the existing site connection supply capacity’. The council resolved that
‘formal and informal low-cost housing schemes are exempted from paying DC
tariffs’. The DC tariff was thereafter revised annually by council resolution.
[11] In April 2010 the City enacted its Electricity Supply By-Law.2 Section 5
stipulates that no person may use an electricity supply unless a written agreement
for such supply has been concluded with the service provider (usually the City
itself). In terms of s 8, an application for electricity supply must be made in
writing on the prescribed form and such application must specify the maximum
required demand in kVA. Section 16 states that copies of electricity charges and
fees may be obtained free of charge from the service provider’s office. In terms of
s 18(1), the consumer ‘shall be liable for all charges listed in the prescribed tariff
for the electricity service as approved by [the City]’.
[12] The DC tariff formed part of the City’s broader electricity tariff. The
electricity tariff policy and tariff in force when Nu-Way applied for a supply of
electricity to the business erf in October 2014 were the 2014/2015 policy and
tariff. The policy identified the nature of the charges. The development capital
tariff was described as ‘a charge to cover the costs incurred to increase the
capacity of shared networks to meet the additional demands imposed by new
developments and additional capacity requested’. The tariff itself specified the DC
charges for various types of networks at an amount in rands per kVA,
distinguishing between DC charges ‘for new developments’ and ‘for upgrades’.
The policy as read with the tariff provides for a subsidised connection fee for
residential consumers in qualifying low-cost housing schemes, backyarder

2 City of Cape Town Electricity Supply By-Law, 2010.

programmes and informal settlements. Although the policy and tariff do not
mention an exemption from DC charges, it appears from the evidence that the
exemption approved by the City in May 2005 has continued to apply.
[13] Mr Steyn explained that the DC charge does not relate to new equipment
installed as part of the new or upgraded connection but is a mechanism for
recovering the cost of shared networks from all consumers on an equitable basis.
When a consumer asks for a new or upgraded electricity supply, the additional
capacity has to be provided over shared networks all the way from the ‘Eskom
intake point’ to the erf’s individual connection. In simplified terms, the
replacement cost of the shared network is divided by the capacity of the network,
yielding an amount in rands per kVA, which is the marginal cost of supplying the
next kVA of infrastructure. This is the basis of the DC charges.
[14] In cross-examination, Mr Steyn was taken to a Development Charges
Policy for Engineering Services which the council adopted in May 2014. This
policy indicated that DC charges for engineering services were levied as a
condition for the approval of planning applications such as subdivision and
rezoning. The quantum of the charge was to be agreed with the applicant before
approval of the planning application. It was put to Mr Steyn that Nu-Way’s
planning application had been approved in 2001, that no DC charge had been
imposed as a condition of approval, and that it was impermissible for the City to
attempt to levy the DC charge in October 2014.
[15] Mr Steyn disagreed. He said that in the case of electricity services, it is
unusual for the connection fee and DC charges to be determined and paid as a
condition for the approval of a planning application. This is because the developer
would typically not know, at that early stage, precisely what the electricity
requirements will be. This is particularly so for non-residential erven. In most

cases, therefore, the connection fees and DC charges only become payable, and
are only determined, when the developer (or an owner who has taken transfer of a
subdivided erf) applies for a supply of electricity to the erf in question. The
application would specify the power supply which the client needed. In the
present case, by way of example, the residential erven had a standard residential
supply of 4 kVA. Nu-Way’s notified demand for the business erf in 2014 was 998
kVA. This was regarded by the City as a high requirement, attributable to the fact
that the operations on the site were to include a large bakery and two fast food
outlets with numerous deep fryers. One can infer that if Nu-Way had instead
decided to develop the business site as a modest office block the notified demand,
and thus the DC charge, would have been much less.
[16] With reference to the 2014 policy, Mr Steyn testified that he had attended
the first meeting at which the policy was discussed. He told the meeting that the
electricity DC charges should be excluded from the policy, because the electricity
department already had a policy which had been in place for ten years. He also
considered that electricity DC charges stood on a different footing from DC
charges for other engineering services, not least because they were not typically
determined and payable as a condition of planning approval. For this reason, he
did not attend subsequent meetings about the policy, and it was approved without
further reference to the electricity department.
[17] The 2014 policy is in alignment with Mr Steyn’s historical analysis. The
applicable provisions of the policy are clear. Although ‘engineering services’ are
defined in clause 1 as including electricity, the concluding paragraph of clause 3
states as follows:
‘This policy covers the following engineering services: roads, stormwater, water, sewerage,
electricity, public transport and solid waste. However, the specific details of the charges
applicable for electricity are the subject of a separate policy and legal framework. The separate
policy on charges for electricity is essentially compatible with the approach proposed in this

draft policy, although the charges for electricity are paid at the point of connection not as part of
the land development application.’
[18] Clause 7.3 of the 2014 policy states that a description of the components
of external engineering services for each of the engineering services is provided in
annexure A, adding: ‘The amount payable excludes the capital charge for
electricity connections as the provisions relating to this charge are described in the
Electricity Development Capital Policy’. The table in annexure A states, with
reference to electricity: ‘Refer to Electricity Development Capital Tariff Policy’.
There is a similar reference in the table in clause 10.1.
[19] I thus reject Nu-Way’s submission that the 2014 policy precluded the City
from levying an electricity DC charge other than as a quantified condition for the
approval of a planning application. The 2014/2015 policy and tariff as read with
the council resolution of May 2005 authorised the electricity department to raise a
DC charge whenever an applicant for a supply of electricity to an erf sought a new
or upgraded supply. The tariff and resolution, in turn, fell within the ambit of
ss 74 to 75A of the Systems Act and s 18 of the Electricity Supply By-Law.
[20] Nu-Way did not take issue with the calculation of the DC charge in the
event of its being found that the 2014/2015 tariff was applicable. During the trial a
question arose as to whether the exemption in the council resolution of 31 May
2005 applied. Although the court a quo did not base its judgment on this
exemption, Nu-Way in the appeal persisted with its reliance on the exemption. In
my view, such reliance is ill-founded. The resolution in question was that ‘formal
and informal low-cost housing schemes are exempted from paying DC tariffs’. Mr
Steyn testified that the City has always regarded this exemption as confined to
qualifying residential erven. The DC charge is payable by the owner of the erf,
which could be the end-user or a developer who would pass on the cost to the end-
user. The exemption was intended as relief to indigent end-users. Commercial

erven and other non-qualifying residential erven (eg GAP and market-related
housing) do not benefit from the exemption, even though those erven may have
come into existence as part of the same process in which the low-cost housing
scheme was created.
[21] Since the DC charge was levied in accordance with the City’s 2014/2015
electricity tariff and policy and was otherwise in accordance with the law, the next
question is whether there is anything in the terms of the approval of November
2001 which precluded the City from imposing the DC charge. This requires one to
interpret the terms of approval. I accept that the process of interpretation must
take into account the statute under which the approval was issued.
[22] Counsel for Nu-Way argued that the LFTEA was social legislation and
evinced an intention that developers of designated land for less formal settlement
should be spared costs which would ordinarily be payable when townships are
established. While the submission that the LFTEA is social legislation is
substantially true, counsel pressed it too far, particularly when arguing that an
exemption in respect of non-residential erven would help to make unprofitable or
marginal schemes commercially viable. The primary purpose of the LFTEA was
to shorten and streamline the planning processes (rezoning and subdivision) when
land was to be used for less formal residential settlement. The expedited
procedure would naturally be less costly for the developer. For the rest, the
LFTEA was explicit when exempting less formal townships from legislation that
would otherwise apply. Paragraphs (a) to (g) of subsection 5(3) listed various
laws that did not apply to designated land, and paragraph (h) gave the
Administrator the power by notice in the Official Gazette to add other laws to the
list. In terms of s 9(8), there was also an exemption from transfer and stamp duties
when an erf was transferred. Section 3(5) did not contain any exemption in

relation to legislation governing municipal charges in general or charges for
electricity in particular.
[23] There is thus no basis for approaching the interpretation of the terms of
approval on the assumption that in order to give effect to the LFTEA the WCPG
probably intended to provide an exemption in respect of any particular category of
municipal charges. The conditions relevant in the present case were conditions
proposed by the City itself, and we must ascertain their proper meaning.
[24] Read as a whole, the conditions formulated by the City and adopted by the
WCPG do not suggest that the City had in mind a general exemption from
ordinary municipal charges. In relation to electricity, I have already referred to the
condition (contained in clause 18.1 of annexure G) requiring the developer at its
own cost to provide the internal electrical reticulation and street lighting. Counsel
for the City also referred us to clause 2.3 of annexure E which imposed the
following condition:
‘The developer shall be responsible for all costs incurred in respect of the upgrading, extension,
deviation or removal of any existing storm water, sewerage, electricity or other services or
works, whether on the property of [the City] or any other body having authority so to require as
a result of the development of the property and for any connection costs in respect of such
services or works.’
[25] With reference to clause 18.6, counsel for Nu-Way emphasised that the
only charge specifically mentioned was a ‘connection fee’. Although the clause
envisaged that the City’s electricity department would, when the application for
supply was made, determine not only the connection fee but also the ‘conditions
applicable to the joining of the internal electrical reticulation .  .  . to [the City’s]
existing electrical infrastructure’, counsel resisted the proposition that those
conditions could include a requirement to pay a DC charge. In my view, the word
‘conditions’ in clause 18.6 is wide enough, in its ordinary meaning, to include a

condition requiring payment of a charge. After all, it was not in dispute that a
‘condition’ of approval in terms of s 3(1) of the LFTEA could include a condition
requiring payment of a valid quantified charge. One of Nu-Way’s arguments was
that if the City had wished to recover a DC charge, this should have been
quantified and specified as condition of approval in November 2001, which
presupposes that a ‘condition’ can include a condition as to payment. I see no
reason why the word should receive a narrower meaning in clause 18.6.
[26] Indeed, I did not understand counsel for Nu-Way to argue that ‘conditions’
was inapt to include a condition as to payment. His argument was that in clause
18.6 the conditions had to be conditions ‘applicable to joining’ the internal
electrical reticulation to the City’s electrical infrastructure, and that this envisaged
no more than the requirements and costs associated with the physical exercise of
making the connection. I disagree. The DC charge becomes payable whenever a
person wants a new or upgraded supply of electricity. This requires a new or
upgraded connection to the City’s infrastructure. In addition to the connection fee
(which would cover the sorts of matters counsel was referring to), the City has
since 2005 required the payment of a DC charge. Unless the DC charge is paid, a
connection to provide the new or upgraded supply will not be made. In the present
case, the DC charge falls comfortably within the ambit of conditions imposed by
the City in order to join the electrical reticulation on the business site with the
City’s infrastructure.
[27] On the basis, then, that clause 18.6 is wide enough to include a condition
for the payment of the DC charge, the final question is whether it matters that the
DC regime was not in force when the approval was issued in November 2001. It
was this feature which lay at the heart of the court a quo’s judgment. In my view,
it entails no impermissible retrospectivity to find that Nu-Way was obliged to pay
the DC charge when it applied for the supply of electricity to the business site in

2014. Clause 18 envisaged a written application for electricity supply, and the
most natural meaning of clause 18.6 is that the connection fee and other
conditions are those applicable at the time the application for supply is made.
[28] As Mr Steyn testified, no quantified electricity capacity was applied for or
allocated to the land in 2001. The supply of electricity lay in the future. The mere
fact that in 2001 the erf was zoned for business use did not without more confer
on the developer a right to any particular supply of electricity or (as counsel for
Nu-Way appeared to contend) a limitless supply. Clause 18 of annexure G
required an application to be made for a supply of electricity. The principle of
legality would require the City to determine connection fees and other conditions
of supply in accordance with the instruments governing these matters at the time
the application for supply is made.
[29] When applications were made to provide electricity connections to the
residential erven, the subsidised connection fees prevailing at that time were
apparently charged, and there was an exemption from the DC charges because the
residential erven constituted low-cost housing. When Nu-Way made an
application for a supply of electricity to the business erf in October 2014, the
prevailing connection fee and other conditions as at October 2014 were applied,
and correctly so. The connection fee was the fee determined in accordance with
the 2014/2015 tariff, not the 2000/2001 tariff. Counsel for Nu-Way accepted that
his client had correctly been charged the connection fee determined by the
2014/2015 tariff; he did not argue that this involved impermissible retrospective
action. Similarly, the DC charge, for which there was in this instance no
exemption, was determined in accordance with the 2014/2015 tariff. It would not
make commercial sense, and would be of doubtful legality, for a local authority to
give an open promise of indefinite duration to grant a supply of electricity on

terms which were fixed at the outset and which disregarded future changes in the
cost of providing and maintaining electrical infrastructure.
[30] It is irrelevant that as at November 2001 the City would not, when using
the word ‘conditions’ in clause 18.6, have had a DC charge specifically in mind.
The word ‘conditions’ was probably used without further specificity precisely
because the conditions of supply might change from time to time. The City was
referring to the conditions, whatever they might be when the time arrived. If Nu-
Way had applied for a supply of electricity to the business erf in 2002, the
‘conditions’ prevailing at the time of the application for supply would have
included the guarantee scheme. In 2014, though, the prevailing ‘conditions’ of
supply instead required the payment of the DC charge.
[31] It follows that the court a quo erred in its conclusion on the central issue. It
is unnecessary to address the City’s other defences. Although the City employed
one counsel in the court a quo, two were engaged for the appeal, which was in my
opinion justified.
[32] The following order is made:
(a)  The appeal succeeds with costs, including the costs of two counsel where
engaged.
(b)  The order of the court a quo is set aside and replaced with an order in the
following terms: ‘The application is dismissed with costs.’

______________________
O L Rogers
Acting Judge of Appeal

APPEARANCES

For Appellant:
K Pillay SC (with her R J Steyn)

Instructed by:

Cluver Markotter Inc, Stellenbosch
c/o McIntyre van der Post Inc, Bloemfontein

For Respondent:
M M Rip SC

Instructed by:

Ivan Pauw & Partners, Cape Town
c/o Phatshoane Henney Attorneys,
Bloemfontein
SUPREME COURT OF APPEAL OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE
SUPREME COURT OF APPEAL

FROM
The Registrar, Supreme Court of Appeal
DATE
12 March 2021
STATUS
Immediate

City of Cape Town Metropolitan Municipality v Nu-Way Housing
Developments (Pty) Ltd (1139/2019) [2021] ZASCA 19 (12 March
2021)

Please note that the media summary is intended for the benefit of the
media and does not form part of the judgment of the Supreme Court of
Appeal.

The Supreme Court of Appeal (the SCA) today upheld an appeal against
a judgment of the Western Cape Division of the High Court concerning
an application by a developer (the respondent in the appeal) for a supply
of electricity to a business erf located in a township established pursuant
to the now-repealed Less Formal Township Establishment Act 113 of
1991.

The less formal settlement was approved by the Western Cape Provincial
Government in November 2001. The application for a supply of
electricity to the business erf was made in November 2014. The court a
quo held that the City of Cape Town (the appellant) was not entitled to
impose, as a condition for the electricity connection, a development
capital charge as contemplated in the City’s electricity tariff for
2014/2015. This was said to be so because the terms of approval in
November 2001 had made no mention of a development capital charge
and because as at November 2001 a charge of the said kind was not in
existence.
The SCA reversed this decision, holding that in terms of the November
2001 approval the developer had to comply with the City’s ‘conditions’
for making the connection; that this referred to the conditions prevailing
by law at the time the application for supply was made; and that
‘conditions’ included any requirements as to payment applicable at that
time (ie November 2014).
~~ ends~~