THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case No:   433/2012

Reportable
In the matter between:

CITY OF TSHWANE
APPELLANT

and

MARIUS BLOM & GC GERMISHUIZEN
INCORPORATED
FIRST RESPONDENT

KAWARI BELEGGINGS CC
SECOND RESPONDENT

Neutral citation: City of Tshwane v Blom 433/2012 [433/12] 88 ZASCA (31
May 2013)

Coram:
MTHIYANE DP, LEWIS, SHONGWE, PETSE JJA et
ZONDI AJA

Heard:
22 MAY 2013
Delivered:

Summary: Local authority – interpretation of sections 8(1) and 8 (2) of the Local
Government: Municipal Property Rates Act 6 of 2004 ─ criteria according to
which different categories are determined set out in s 8(2) ─list of categories of
rateable property not intended to be exhaustive ─ competent for municipality to
add a category of 'non-permitted use' to the list.

____________________________________________________________________________
ORDER

On appeal from: North Gauteng High Court, Pretoria (Hiemstra AJ sitting as
court of first instance):
The appeal is upheld with costs including the costs of two counsel.
The order of the court a quo is set aside and replaced with the following:
'The application is dismissed with costs.'

______________________________________________________________

JUDGMENT

ZONDI AJA (Mthiyane DP, Lewis, Shongwe et Petse JJA concurring)

Introduction
[1] The central issue in this matter involves the interpretation and application
of sub-sections 8(1) and (2) of the Local Government: Municipal Property Rates
Act 6 of 2004 (the Rates Act) and in particular whether it confers authority on
the appellant to add to the list of categories of rateable property by creating in
its rates policy a category called 'non-permitted use' or 'illegal use', and to levy a
rate accordingly. This issue arises because the appellant has categorised the

second respondent's property as 'non permitted use' and levied a higher rate on
the property than it levied on properties used for the purpose permitted.

[2] When the respondents received an invoice for some R171 000 for rates
they brought an application in the court a quo seeking the following relief:
'1.
A declaratory order that Act 6 of /2004, does not provide for a rating category of
"illegal use" but only the categories provided for in Section 8 of the said Act;
2.
A declaratory order that all levies levied by the Respondent against Portion 1 of Erf
91, Brooklyn, which is higher than the levies levied in respect of all other residential
properties of a similar zoning, in Brooklyn, should be repaid to the Applicant;
3.
That the Applicant be given leave to re-enrol this matter on the same papers,
supplemented by an affidavit, for an order for the debating of the account, should the
Applicant not be satisfied that the correct adjustment has been made by the Respondent
pursuant to the above;
4.
Costs.'

[3] In the court a quo the respondents contended that the appellant does not
have authority in terms of s 8 of the Rates Act to add to the list of categories of
rateable property by creating a category called 'illegal use' or 'non-permitted
use', and argued that on a proper interpretation of s 8 it was clear that the list of
categories of rateable property is exhaustive. The court a quo rejected the

respondents' contention and held that it was competent for the appellant to add
to the list of categories of rateable properties. However, it found that the
addition of 'illegal use' or 'non-permitted use' category was not competent and
proceeded to make an order in the following terms:
'1.
It is hereby declared that it is not permissible for the respondent to include a category
of "illegal use" or "non-permitted use" for the rating of properties in its Rating Policy;
2.
The respondent is ordered to rate Portion 1 of Erf 91, Brooklyn, for as long as it is
used for business purposes according to the rates applicable to business properties in
Brooklyn.
3.
The respondent is ordered to adjust the levies imposed on Portion 1 of Erf 91,
Brooklyn, to that applicable to properties for business use from the time that it imposed a rate
for "illegal use" or "non-permitted use" to the date of adjustment.
4.
The applicant is granted leave to re-enrol this matter on the same papers,
supplemented by an affidavit, for an order for the debating of the account, should the
applicant not be satisfied with the adjustment of the rates as ordered.
5.
The respondent is ordered to pay the costs of this application.'

[4] The court a quo's order was predicated on its finding that the appellant's
power to create additional categories of rateable property is not unfettered. In its
view additional categories have to be 'of a similar nature or of the same genus as
those listed' in s 8(2). It reasoned that since all the categories listed in s 8(2) are

lawful uses of the properties, the appellant may add only lawful uses. It held
that the appellant may not add a category 'illegal use' to the list as to do so
would make illegal use lawful. The court a quo concluded by holding that to
levy 'a higher rate than the normal rate' on a property because it is used for non-
permitted purposes amounts to an imposition of a penalty without due process.
The present appeal, with the leave of the court a quo, is directed against the
judgment and the findings underlying the order of the court a quo.

Background
[5] The facts in light of which the issues in this matter are to be determined
are largely common cause. The second respondent is the registered owner of
Portion 1 of erf 91, Brooklyn, also known as 835 Duncan Street, Brooklyn,
Pretoria (the property) which is the subject of these proceedings. The property is
situated within the area of jurisdiction of the appellant and is zoned for
residential purposes in terms of the appellant's applicable Town Planning
Scheme. The first respondent, a firm of attorneys, occupied the property in
terms of a lease with the second respondent and used the property for business
purposes, namely as attorneys' offices. In terms of the lease, the first respondent
was responsible for the payment of rates and taxes, which is why it took issue
with the appellant. The first respondent's use of the property, which is zoned for
use as 'residential', was contrary to the provisions of the appellant's Town

Planning Scheme. By allowing the first respondent to use the property as it did,
the second respondent was committing an offence.

[6] Section 2 of the Rates Act empowers a metropolitan or local municipality
to levy rates on properties within its area. In terms of s 8(1) it may levy different
rates for different categories of rateable property according to specified criteria.
Section 8(2) sets out the different categories of rateable property that may be
determined in terms of s 8(1). Acting in terms of s 3 of the Act, the appellant
adopted rates policies from time to time and the relevant rates policy is the one
that came into operation on 1 July 2008. In this rates policy the appellant
introduced a 'non-permitted use' category of rateable property for the purposes
of creating differential rates and categorised the property as 'non-permitted use'.
The effect of this categorisation was that not only did the second respondent
lose the benefit of a rebate, but also had to pay a higher rate.

Legal Framework
[7] Section 156(2) of the Constitution empowers municipalities to make and
administer by-laws in order to give effect to the functional areas in which they
are authorised to govern. Section 156(5) affords a municipality 'incidental
powers', that is to say, it has the right to exercise any power concerning a matter

reasonably necessary for, or incidental to the effective performance of its
functions. In particular s 229(1)(a) of the Constitution expressly authorises a
municipality to impose 'rates on property and surcharges on fees for services
provided by or on behalf of the municipality'. But the exercise of this power is
subject to the provisions of the Constitution, the Rates Act and the rates policy
which the municipality may have adopted.

[8] Section 3 of the Rates Act, which deals with the adoption and contents of
rates policies, enjoins the council of a municipality to adopt a policy for the
levying of rates on rateable property which is consistent with the Act.
Subsection (3) provides that the rates policy must inter alia determine the
criteria to be applied by the municipality if it levies different rates for different
categories of properties, and determine or provide for the criteria for the
determination of categories of properties for the purpose of levying rates and
categories of owners of properties or categories of properties.

[9] Section 8(1) of the Rates Act provides for the determination of
differential rates in respect of different categories of rateable property listed in s
8(2). To the extent here relevant those subsections provide:

'8 (1) Subject to section 19, a municipality may in terms of the criteria set out in its rates
policy levy different rates for different categories of rateable property, which may include
categories determined according to the –
(a)
use of the property;
(b)
permitted use of the property; or
(c)
geographical area in which the property is situated.
(2) Categories of rateable property that may be determined in terms of subsection (1) include
the following:
(a)
Residential properties;
(b)
industrial properties;
(c)
business and commercial properties;'
. . ."
[10] The rates policy which finds application in this matter is the one adopted
by the appellant on 1 July 2008. Clause 3.1 of the appellant's property rates
policy provides as follows:
'3.1
Different Categories and Rates of Properties
 Categories of rateable property for purposes of levying differential rates are
determined as follows:
o Residential properties
o Business and commercial properties

o Industrial properties
o Municipal property [rateable]
o Municipal property [not rateable]
o State-owned properties
o Public Service Infrastructure
o Agricultural
o Agricultural vacant
o Non-permitted use (my emphasis)
o Multiple use properties
o Vacant land
o State Trust Land'

[11] The appellant's rates policy makes it clear that the criteria for
levying different rates for different categories of rateable property are
determined according to the actual use of the property, permitted use of the
property or the geographical area in which the relevant property is located.
And as required by s 6 of the Rates Act, the appellant adopted the Property
Rates By-Law to give effect to the implementation of its rates policy.

Interpretation of section 8 of the Act

[12] Counsel for the appellant submitted in the heads of argument that s
8, properly interpreted, affords the appellant a discretion to determine
categories of rateable property. Counsel argued that although s 8(1) refers to
certain factors that may be considered in determining categories of rateable
property, it is not a numerus clausus, and does not restrict or limit the
appellant's discretion in any manner. The use of the word 'include' in
conjunction with 'may' in the section, he argued, signifies that the legislature
intended to enlarge or extend the specific guidelines and that the categories
of properties referred to in s 8(2) are merely guidelines. Counsel pointed out
that even if only the factors referred to in s 8(1) must be considered, it is
clear from the context in which the word 'include' is used that non-permitted
use was intended to be included in such categories. In advancing these
arguments reliance was placed on the following dictum in De Reuck v
Director of Public Prosecutions, Witwatersrand Local Division, & others:1
'[18]
The correct sense of "includes" in a statute must be ascertained from the
context in which it is used. Debele [1956 (4) SA 570 (A)] provides useful guidelines for
this determination. If the primary meaning of the term is well known and not in need of
definition and the items in the list introduced by "includes" go beyond that primary
meaning, the purpose of that list is then usually taken to be to add to the primary meaning
so that "includes" is non-exhaustive. If, as in this case, the primary meaning already
encompasses all the items in the list, then the purpose of the list is to make the definition

1 De Reuck v Director of Public Prosecutions, Witwatersrand Local Division, & others 2004 (1) SA 406 (CC)
para 18.

more precise. In such a case "includes" is used exhaustively. Between these two situations
there is a third, where the drafters have for convenience grouped together several things
in the definition of one term, whose primary meaning – if it is a word in ordinary, non-
legal usage – fits some of them better than others. Such a list may also be intended as
exhaustive, if only to avoid what was referred to in Debele as "'n moeras van
onsekerheid" (a quagmire of uncertainty) in the application of the term.'

[13] Counsel for the respondents correctly pointed out in his heads of
argument that s 8(1) authorises the municipality, in terms of the criteria set
out in its rates policy, to levy different rates for different categories of
rateable property listed in s 8(2), and which authority has to be exercised in
accordance with the provisions of s 229 of the Constitution and the Rates
Act. Counsel argued that s 8(1) does not, however, empower the
municipality to create further categories not listed in s 8(2) as the list of
different categories of rateable property is exhaustive. The basis for his
argument is that the terms 'property', 'category' and 'rates' contained in the
Rates Act are not infinitely elastic terms but are specifically limited by the
Act's definition. And using the 'golden rule' of interpretation,2 which, counsel
submitted, finds application in the construction of the provision of s 8 in the
instant matter, he argued that the Act's definitions make it clear that the
municipality's power to levy different rates for different categories of

2 25 LAWSA, 2 ed  para 314.

rateable property does not include the power to create a 'non-permitted use'
or 'illegal use' category. He submitted that the creation by the appellant of a
category in its rates policy of non-permitted use was contrary to the
provisions of s 8(1) and (2) of the Rates Act, and that it was unfair to levy a
punitive rate on the property.

[14] The proper approach to the interpretation of statutes was recently
repeated by this court in Natal Joint Municipal Pension Fund v Endumeni
Municipality.3 Wallis JA writing for the court explained:4
'[18]
The present state of the law can be expressed as follows: Interpretation is the
process of attributing meaning to the words used in a document, be it legislation, some
other statutory instrument, or contract, having regard to the context provided by reading
the particular provision or provisions in the light of the document as a whole and the
circumstances attendant upon its coming into existence. Whatever the nature of the
document, consideration must be given to the language used in the light of the ordinary
rules of grammar and syntax; the context in which the provision appears; the apparent
purpose to which it is directed and the material known to those responsible for its
production. Where more than one meaning is possible each possibility must be weighed
in the light of all these factors. The process is objective, not subjective. A sensible
meaning is to be preferred to one that leads to insensible or unbusinesslike results or
undermines the apparent purpose of the document. Judges must be alert to, and guard

3 Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA) paras 17-26.
4 Para 18.

against, the temptation to substitute what they regard as reasonable, sensible or
businesslike for the words actually used. To do so in regard to a statute or statutory
instrument is to cross the divide between interpretation and legislation; in a contractual
context it is to make a contract for the parties other than the one they in fact made. The
"inevitable point of departure is the language of the provision itself", read in context and
having regard to the purpose of the provision and the background to the preparation and
production of the document.'

[15] Thus the appropriate starting point in interpreting a statute is the
language of the provision itself (South African Airways (Pty) Ltd v Aviation
Union of South Africa & others;5 Bastian Financial Services (Pty) Ltd v
General Hendrik Schoeman Primary School6) read in the context and having
regard to the purpose of the provision and the background to the preparation
and enactment of the statute.

[16] Turning to the present matter, in my view the court a quo correctly
held that the list of categories of rateable property is not exhaustive and that
it is competent for the appellant to add categories to that list. The use of the
word 'include' in s 8(2) signifies that the list extends the meaning of
categories of rateable property that may be determined in terms of s 8(1).

5 South African Airways (Pty) Ltd v Aviation Union of South Africa & others 2011 (3) SA 148 (SCA) paras 25-
30.
6 Bastian Financial Services (Pty) Ltd v General Hendrik Schoeman Priamry School 2008 (5) SA 1 (SCA).

(De Reuck supra; Ndlovu v Ngcobo; Bekker & another v Jika7). This means
that other grounds of differentiation besides those mentioned in s 8(1) may
be used.

[17] In my view, when consideration is given to the words 'use of the
property' and 'permitted use of the property' appearing in s 8 in the light of
the ordinary rules of grammar and syntax, the context in which they appear
and the apparent purpose to which they are directed, it is clear that 'use' is
wide enough to include 'non-permitted use'. If this were not the case no
purpose would be served in having a separate category for 'use'. Non-
permitted use is a form of 'use' contrasted with permitted use. It is therefore
competent for the municipality to include in its rates policy a 'non-permitted
use' category for the purposes of determining applicable rates.

[18] The term 'permitted use' is defined in the Rates Act as 'the limited
purposes for which the property may be used in terms of . . . any restrictions
imposed by . . . a condition of title, a provision of a town planning or land
use scheme; or any legislation applicable to any specific property; or any
alleviation of such restrictions'. Section 8(2) lists a number of categories of

7 Ndlovu v Ngcobo; Bekker & another v Jika 2003 (1) SA 113 (SCA) para 20.

rateable property that may attract different rates. These categories are
optional.8 The municipality may adopt all of them, drop some or include new
categories depending on the nature of the objectives its rates policy seeks to
achieve. The municipality has a choice. Rates policies entail, by definition,
policy choices which lie at the core of municipal autonomy, and as long as
the rates policy treats ratepayers equitably and is consistent with the
provisions of the Constitution and the Rates Act, there can be no basis for
questioning the choices it makes with regard to properties that may be
differentially rated with respect to different categories of property. The court
a quo therefore erred in finding that the creation of a 'non-permitted use'
category was improper.

[19] I reject the respondents' contention that the appellant breached the
audi alteram partem principle when it determined that the property's use
falls under a 'non permitted use' category without any prior reference to the
respondents. There was no obligation on the appellant to do so other than
through the process described below. The municipality's power to impose
taxes is an original power which stems from the Constitution in terms of s
229(1)(a).9 It is a legislative act. As such, it is not an administrative action

8 Professor N Steytler and Dr J de Visser, Local Government Law of South Africa (2012) at 13-35.
9 City of Cape Town and another v Robertson & another 2005 (2) SA 323 (CC) para 57;  Fedsure Life
Assurance Ltd & others v Greater Johannesburg Transitional Metropolitan Council & others 1999 (1) SA 374
(CC).

subject to administrative law. That being the case, the setting of rates and
determination of categories of rateable property under s 8 of the Rates Act
cannot be challenged, as counsel for the respondent seemed to suggest in his
argument, simply on the ground that it is unfair.

[20] The court a quo also found that a punitive rate imposed on the
property as a result of its being categorised as non-permitted use amounts to
the imposition of a penalty without due process. This finding is incorrect.
The Rates Act contains built-in mechanisms in terms of which the disputes
about the propriety of rates levies can be resolved. The property owner who
is aggrieved by a rate that has been levied on his or her property is not
without a remedy.

[21] Once the determination of different categories of rateable property
in terms of s 8 is completed the valuation process begins. The valuation is
done by a municipal valuer who is designated by the municipality in terms of
s 33 of the Rates Act. The valuer must inter alia value all the properties and
prepare a valuation roll of all the properties in the municipality. After the
compilation of the valuation roll, it is open for objections by the public and
the municipality. A property owner may then object, within a stipulated

period, to the valuation or categorisation. If his or her objection is not dealt
with to his or her satisfaction he or she may then appeal to a valuation appeal
board whose decision is final and binding on the municipality.

[22] It is not suggested by the respondents that they were not aware that,
in the valuation roll, the use of the property was termed 'illegal' for the
purposes of determining the applicable rate. (It should have been termed
'non-permitted use'). It is therefore not open to the respondents to now
contend that the categorisation of the property and the resultant rate is
unreasonable on the basis that it constitutes a penalty without due process.
The respondents should have used the legal mechanisms provided for in the
Act if they wished to challenge the correctness of the property categorisation
and the rate determined. This they failed to do.

[23] To conclude, the court a quo erred in finding that it is not
competent for the appellant to add to the list of categories in s 8(2) by
creation of a category called 'non permitted use' in the rates policy and that
to levy a 'higher rate than the normal rate on a property' on the basis of such
categorisation is to impose a penalty without due process.

[24] With regard to costs counsel for the appellant submitted on
authority of City of Tshwane Metropolitan Municipality v Grobler & other 10
that, should the appeal succeed, the respondents should be ordered to pay
costs on the scale as between attorney and client on the basis that when they
brought the application they knew that their use of the property was in
contravention of the appellant's town-planning scheme. They were using it
for commercial purposes for which they had not been granted permission by
the appellant. It was presumptuous of the respondents, his argument
proceeded, to contend that the property should be rated as residential
property. He argued that the respondents' conduct was in flagrant disregard
of the provisions of the Act.

[25] In my view the punitive costs order is not appropriate in the instant
matter. While I accept that the respondents were aware that their use of the
property was in contravention of the appellant's town-planning scheme, I do
not agree that that knowledge in itself constitutes a sufficient basis for this
court to order them to pay costs on a punitive scale. The dispute between the
parties is essentially about the interpretation and application of s 8 of the
Rates Act, the provisions of which are far from clear and thus susceptible to
different interpretations. The respondents were entitled to come to court and

10 City of Tshwane Metropolitan Municipality v Grobler & others 2005 (6) SA 61 (T) para 12.

challenge the correctness of the construction of the section contended for by
the appellant. In these circumstances there can be no basis for the contention
that their conduct was vexatious such as to warrant the special order of costs.
In my view costs should be ordered on a normal scale.

[26] In the result the following order is made:
1 The appeal is upheld with costs including the costs of two counsel.
2 The order of the court a quo is set aside and replaced with the following:
'The application is dismissed with costs.'

________________

D H ZONDI

Acting Judge of Appeal

APPEARANCES

For Appellant:
T Strydom SC

J J Botha
Instructed by:

Hugo Ngwenya Attorneys

Pretoria

Claude Reid Attorneys

Bloemfontein

For Respondents:
S Güldenpfennig

H J Snyman
Instructed by:

Couzyn Hertzog & Horak Inc

Pretoria

Honey Attorneys

Bloemfontein
THE 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:
31 May 2013
Status:
Immediate

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.
City of Tshwane v Blom & Others 433/2012 [433/12] 88 ZASCA (31 May
2013)
[1] The Supreme Court of Appeal (SCA) today upheld an appeal by the City of Tshwane
(the appellant) against the judgment and orders made by the North Gauteng High Court,
Pretoria (High Court). The matter involved a dispute between a ratepayer and the appellant in
whose area the property is situated, over the latter’s inclusion in its rates policy of a category
of the rateable property called 'non permitted use'. The core issue relates to the interpretation
and application of sections 8(1) and (2) of the Local Government: Municipal Property Rates
Act 6 of 2004 (the Act), in particular whether the municipality is empowered to add to the list
of categories of rateable property by creating in its rates policy a 'non-permitted use' category
and to impose a higher rate on the property used for non-permitted purpose.
[2] The first respondent occupied the property owned by the second respondent in terms
of a lease agreement. This property is situated within the area of jurisdiction of the appellant
and is zoned for residential purposes in terms of the appellant's applicable Town Planning
Scheme. The first respondent utilised the property for business purposes, which use is thus
contrary to the provisions of the appellant’s Town Planning Scheme.

In July 2008 the appellant adopted a new rates policy pursuant to s 3 of the Act, which policy
introduced a ‘non-permitted use’ category of rateable property. In terms of that rates policy,
the appellant categorised the relevant property as a ‘non-permitted use’ property, and levied a
higher rate on the property than it levied on properties used for the purpose permitted. As a
result, the second respondent was charged a higher rate while simultaneously losing a benefit
of a rebate.
[3] The respondents brought an application in the High Court, seeking an order declaring,
inter alia, that the Act does not provide for a rating category of 'non-permitted use' or ‘illegal
use’, but only the categories provided for in section 8 of the Act and that all levies levied by
the appellant on the property which are in excess of levies payable in respect of all other
residential properties in Brooklyn should be repaid to the respondents by the appellant. The
basis for the application was that the list of categories of rateable property in the Act is
exhaustive and does not allow additions.
[4] The High Court held that the appellant was indeed authorised to add to the list of
categories of rateable properties, but nevertheless found that the addition of the ‘non-
permitted use’ or 'illegal use' category was not competent on the basis that any such additions
were required to be of a similar nature to those already included in the Act. Furthermore, the
High Court held that the levy for ‘non-permitted use’ amounted to the imposition of a penalty
without due process.The appeal is before this Court with the leave of the High Court.
[5] The SCA held that, when the provisions in the relevant section are interpreted using
the ordinary rules of grammar and syntax, the context in which they appear and the apparent
purpose to which they are directed it was clear that they are wide enough to include 'non-
permitted use'. The High Court therefore erred in holding that it was not competent for the
appellant to include in its rates policy a 'non-permitted use' category for the purposes of
determining applicable rates.
[6] This was so, the SCA concluded, because  rates policies entail, by definition, policy
choices which lie at the core of municipal autonomy, and as long as the rates policy treats
ratepayers equitably and is consistent with the provisions of the Constitution and the Act
there can be no basis for questioning the choices the municipality makes with regard to
properties that may be differentially rated with respect to different categories of property. The
appeal was therefore upheld with costs.