THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

JUDGMENT

Case No:       639/2010

In the matter between:

THABO MOFUTSANYANA DISTRICT
MUNICIPALITY                                                                       APPELLANT

and

STEYN-ENSLIN & VENNOTE                               FIRST RESPONDENT

RUDNAT (PTY) LTD                                          SECOND RESPONDENT

AFGRI (PTY) LTD                                                  THIRD RESPONDENT

Neutral citation: Thabo Mofutsanyana District Municipality v Steyn-Enslin
(639/2010) [2011] ZASCA 168 (29 September 2011)

Coram:
Mthiyane, Heher, Maya, Bosielo and Majiedt JJA

Heard:
12 September 2011
Delivered:
29 September 2011

Summary: Regional Services Levy in terms of Act 109 of 1985 ─
Whether municipality entitled to demand a statement of account,
debatement or other substantiating documents from a defaulting levy
payer ─ if not, whether common law should be developed under s 39(2) of
the Constitution to vest it with such right.

______________________________________________________________________

ORDER
____________________________________________________________

On appeal from: Free State High Court, (Bloemfontein) (Mocumie J
sitting as court of first instance):

The appeal is dismissed with costs, save that the appellant may, if so
advised, within 30 days hereof give notice of intention to amend its
particulars of claim.
____________________________________________________________

JUDGMENT

MTHIYANE JA (HEHER, MAYA, BOSIELO and MAJIEDT JJA
CONCURRING):

[1] This appeal is against the decision of the Free State High Court
(Mocumie J) upholding an exception by the first, second and third
respondents (the respondents) to the appellant’s particulars of claim, in
which the appellant sought against the respondents, who were registered
regional services levypayers, an order requiring them to submit to it a true
and proper statement of account; the debatement thereof and other
substantiating documents. The issue raised on exception is a narrow one,
namely whether the appellant’s demand for the submission of such
accounts and the debatement thereof has any basis in law. The attack upon
the appellant’s cause of action, as pleaded, is that the appellant as a
municipal council is not vested with powers to estimate levies or demand

debatement of accounts from levypayers, who are in default. That power
resides with the Commissioner of the South African Revenue Service.1

[2] In its particulars of claim the appellant claimed the following relief:
‘1.
That the defendant be ordered to render to the plaintiff within sixty (60) days
from the date of the order, a true and proper statement of account together with
substantiating documents reflecting the correct;
(a)
total amount of all remuneration paid or which became payable by the defendant
to any employee;
(b)
total amount of all drawings taken by defendant;
(c)
total sum of all income or amounts received by or accrued to the defendant in
relation to any leviable transaction or consideration as defined2 including but not
limited to the sale and/or letting of goods or fixed property, the rendering of any service
and/or the gross amounts received from a financial enterprise during any and every
month, effective from 1 March 2000, any remuneration was so paid or so became
payable, any drawings was so taken or any income was so received or so accrued as
contemplated in paragraph 9(1)(a) and (b) of R340/1987.
2.
That the defendant be ordered to debate the said account with the plaintiff within
sixty (60) days from the time such account was rendered in terms of prayer 1 above.
3.
Payment to the plaintiff of whatever amount appears to be due to the plaintiff
upon debatement of the account.
4.
Payment of the amount of R 33 104,46 (Rudnat CC) / R184 081,29 (Steyn
Enslin et al) / R184 081,29 (Afgri Pty Ltd), in the event of the defendant’s non-
compliance with prayers 1, 2 and 3 above;
5.
Payment of interest on the aforesaid amount in prayer 3 or 4 above at a rate of:
(i)
10.5% per annum from 1 July 2006 till 31 October 2006;
(ii)
11% per annum from 1 November 2006 till 28 February 2007;
(iii)
12% per annum from 1 March 2007 till 29 February 2008;
(iv)
14% per annum from 1 March 2008 till date of payment.’

1 See s 12(1A)(dA)(iii) and (iv) of the Regional Services Council Act 109 of 1985.
2 See paragraph 1 of the regulations promulgated under R340/1957.

[3] The respondents excepted to the particulars of claim on the basis that
the facts pleaded did not sustain a valid cause of action. They contend that
the legislature has not vested the appellant with powers to estimate levies
or demand an account or debatement of it from levypayers who are in
default.

[4] The appellant’s response was that if the appellant as a municipal
council had no such powers, the common law ought to be developed in
terms of s 39(2) of the Constitution to vest them with such powers.

[5] The high court accepted the respondents’ contention that no cause of
action had been disclosed in the appellant’s particulars of claim and upheld
the exception. The appellant was granted leave to appeal to this court, but
confined to the question of whether it was necessary for the common law to
be developed in terms of s 39(2) of the Constitution to vest a municipal
council with powers enabling it to demand delivery of a statement of
account from levy payers and defendants in litigation and the debatement
thereof as an extension of the procedural remedy in litigation. This would
essentially amount to an extension of the statutory obligation of a
levypayer to provide a declaration of its business and to provide monthly
returns in respect of the calculation of its liability.

[6] The issue on appeal, as set out in the heads of argument, was
whether the appellant’s claim that the respondents should account, debate
and pay the levies due to the Regional Council Service, had any basis in
law. During argument the appellant changed tack and confined itself to the
right to press for a return rendered by the respondents who, it argued, were

obliged to submit it in terms of regulation 9(4).3 Counsel for the appellant
further argued as follows: The right to claim levies includes the right to
have the return rendered by a levypayer in terms of regulation 9(4). The
appellant requires the return in order to determine the amount of levies
owing to it by the respondents. The scheme of the regulations is such that if
a levypayer failed to submit a return, the council is entitled to make an
assessment of what is owed to it. If regulation 13(1), (discussed below),
forbids the submission and production of the taxpayer’s books, records,
accounts or other documents, at the instance of the council, the court
should use its common law power to order the payer, to furnish the return.
If the common law is deficient, it should be developed in terms of s 39(2)
of the Constitution, to vest the court with the power to order a reluctant
levypayer to submit such a return.

[7] It was never the appellant’s case, on the pleadings, that it required
the submission of a return by the respondents. The appellant’s claim, as
indicated in particulars of claim to which exception was taken, was for a
statement of account, debatement of it and other documents reflecting the
amounts owing to the appellant. What hindered the appellant in its demand
for the production of the required documents was regulation 13(1) which
reads as follows:
‘13
Powers of council and Commissioner
(1)
A council shall be responsible for the administration of the provisions of this
Schedule, but shall not be empowered to require any person to produce any books,
records, accounts or other documents in relation to any regional services levy and
regional establishment levy or to require any levypayer to substantiate any return
submitted by him in connection with any such levy.’

3 Calculation and payment of Regional Services Levy and Regional Establishment Levy GN R340, 17
February 1987.

[8] On the case as pleaded, especially having regard to the fact that the
matter came before the high court on exception,4 the appeal cannot succeed
in light of the provision of regulation 13(1).

[9] Upon realising the difficulties posed by regulation 13(1), the
appellant resorted to demanding, not a statement of accounts and
debatement but a ‘return’. In this regard regulation 9 is relevant. It
provides:
‘(3)
Every payment of regional services levy or regional establishment levy shall be
accompanied by a return in such form as the council may determine.
(4)
Every person who is registered as a levypayer under the provisions of paragraph
10, shall within the period allowed by subparagraph (1) or (2) furnish the council with
the return referred to in subparagraph (3) in respect of every month or other period, as
the case may be, whether or not any relevant levy is payable in respect of such month or
period.’

[10] The respondents do not dispute that the appellant was entitled to the
return in terms of regulation 9(4) but submit that this was not the
appellant’s pleaded case. Their contention is borne out by the pleadings.
Had it been otherwise the matter might have ended without the present
appeal. There is nothing preventing the appellant from seeking a
mandamus in respect of the return. The respondents conceded as much in
argument.

[11] However, during argument it also became clear that the appellant is
not sure what amount, if any, is owing to it by the respondents. The
dilemma in which the appellant found itself was that it no longer has the
power to estimate the amount of levy owing to it. The regulation which
empowered it to do so, (regulation 11(1)) was struck down by this court in

4 Burger v Rand Water Board & another 2007 (1) SA 30 (SCA) para 4.

City of Tshwane Metropolitan Municipality v Cable City (Pty) Ltd 2010 (3)
SA 589 (SCA) as being invalid for inconsistency with the empowering
provisions. Regulation 11(1) read as follows:
‘Where any registered levypayer has failed to furnish any return referred to in paragraph
9(4) within the relevant period allowed, the council concerned may estimate the amount
of any levy which, in its opinion, is probably payable in respect of the relevant month or
period, and may make an assessment of the amount of the unpaid levy.’

[12] The mere submission of a return would consequently not prove a
certain solution to the appellant’s difficulties. In the circumstances the
statute provides the remedy viz an assessment by the Commissioner in
terms of regulation 13.

[13] The argument in favour of the development of the common law in
terms of s 39(2) of the Constitution, though not abandoned, was not
pressed by counsel for the appellant. I think Mocumie J, in her short pithy
judgment, handled the question of whether the common law should be
developed in a sound and judicious way. I cannot fault this aspect of her
judgment. The law on the subject is perfectly clear. A municipal council is
not empowered to assess levies owed to it. If it wishes to have them
assessed it has to request the Commissioner to conduct an assessment as
required by regulation 13. There is no valid reason for this court to develop
the common law when the wording of the legislation on the subject is clear
and sufficient. To do so would be to embark on overzealous judicial reform
against which the Constitutional Court has warned (Carmichele v Minister
of Safety and Security 2001 (4) SA 938 (CC) para 55).

[14] It follows that there is no merit in the appeal and, in my view, the
exception was correctly upheld by the high court.

[15] In the result the following order is made:
The appeal is dismissed with costs, save that the appellant may, if so
advised, within 30 days hereof give notice of intention to amend its
particulars of claim.

___________________

K K MTHIYANE

JUDGE OF APPEAL

APPEARANCES

For Appellant:
KJ Kemp SC (with him C Ploos van
Amstel SC)
Instructed by:
Podbielski Mhlambi Inc, Welkom
Honey Attorneys, Bloemfontein

For 1st, 2nd and 3rd Respondents:
FWA Danzfuss SC
Lovius Block, Bloemfontein
THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE
SUPREME COURT OF APPEAL
MEDIA SUMMARY – JUDGMENT DELIVERED IN COURT OF
APPEAL
29 September 2011

STATUS: Immediate

THABO MOFUTSANYANA DISTRICT MUNICIPALITY V STEYN-
ENSLIN (639/2010) [2011] ZASCA 168 (29 SEPTEMBER 2011)

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 dismissed the appeal with costs,
save that the appellant may, if so advised, within 30 days hereof give notice of
intention to amend its particulars of claim.

The appeal was against the decision of the Free State High Court, Bloemfontein
(Mocumie J) upholding an exception by the respondents to the appellant’s
particulars of claim, in which the appellant sought against the respondents, who
were registered regional service levypayers, an order requiring them to submit to it a
true and proper statement of account; the debatement thereof and other
substantiating documents.

The issue raised on appeal was a narrow one, namely whether the appellant’s
demand for the submission of such accounts and the debatement thereof had any
basis in law.  The respondents excepted to the particulars of claim on the basis that
the facts pleaded did not sustain a valid cause of action. They contended that the
legislature has not vested the appellant with powers to estimate levies or demand an
account or debatement of it from levypayers who are in default. The appellant’s
response was that if the appellant as a municipal council had no such powers, the
common law ought to be developed in terms of s 39(2) of the Constitution of the
Republic of South Africa, 1996, to vest them with such powers.

The SCA reiterated that the issue on appeal, on the pleadings, was whether the
appellant’s claim had any basis in law but that during argument the appellant
changed tack and confined itself to the right to press for a return rendered by the

respondents. The SCA stated that it was never the appellant’s case, on the
pleadings, that it required the submission of a return by the respondents. The SCA
averred that what hindered the appellant in its demand for the production of the
required documents was regulation 13 which forbids the submission and production
of the taxpayer’s books, records, accounts or other documents, at the instance of the
council. The SCA held that the appeal cannot succeed in the light of the provision of
the latter regulation. The respondents did not dispute that the appellant was entitled
to the return but submitted that this was not the appellant’s pleaded case. Their
contention was borne out by the pleadings. The SCA stated that there was nothing
preventing the appellant from seeking a mandamus in respect of the return, which
the respondents conceded in argument. However, during argument it also became
apparent that the appellant was not sure of the amount, if any owing to it by the
respondents. The dilemma in which the appellant found itself was that it no longer
had the power to estimate the amount of the levy owing to it. As the regulation which
empowered it to do so was struck down by the SCA in City of Tshwane Metropolitan
Municipality v Cable City (Pty) Ltd 2010 (3) SA 589 (SCA) as being invalid for
inconsistency with the empowering provisions. The SCA stated that the mere
submission of a return would consequently not prove a certain solution to the
appellant’s difficulties. The SCA held that in the circumstances the statute provides
the remedy viz an assessment by the Commissioner in terms of regulation 13. As to
the development of the common law in terms of s 39(2) of the Constitution the SCA
held that there was no valid reason for it to develop the common law when the
wording of the legislation on the subject is clear and sufficient. To do so, it held,
would be to embark on overzealous judicial reform against which the Constitutional
Court has warned. Accordingly the SCA held that there was no merit in the appeal
and the exception was correctly upheld by the high court.