THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

JUDGMENT

Reportable

Case No: 20634/2014
In the matter between:

BLAIR ATHOLL HOMEOWNERS ASSOCIATION                     FIRST APPELLANT
WRAYPEX (PTY) LIMITED                                                     SECOND APPELLANT
ROBERT SEAN WRAY                                                               THIRD APPELLANT

and

THE CITY OF TSHWANE METROPOLITAN MUNICIPALITY            RESPONDENT

Neutral Citation:
Blair Atholl Homeowners Association v The City of Tshwane
Metropolitan Municipality (20634/2014) [2015] ZASCA 195 (1 December 2015)
Coram:
Lewis, Cachalia, Tshiqi, Pillay and Dambuza JJA
Heard:
13 November 2015
Delivered:
1 December 2015

Summary:
Review – Section 3(3)(a) of Local Government: Municipal Property
Rates Act 6 of 2004 – council resolution not to exempt ratepayers, who
provide their own services, from paying rates – whether equitable.

___________________________________________________________________
ORDER
___________________________________________________________________

On appeal from: Gauteng Division of the High Court, Pretoria (Murphy J sitting as
court of first instance):

The appeal is dismissed with costs, including the costs of two counsel.

___________________________________________________________________
JUDGMENT
___________________________________________________________________

Cachalia JA (Lewis, Tshiqi, Pillay and Dambuza JJA concurring)

[1] This is an appeal against a judgment of the Gauteng Division of the High
Court (Murphy J) dismissing an application to review and set aside a rates policy of
the City of Tshwane Municipality (the City) for a private residential complex known as
the Blair Atholl Estate. The policy was adopted by way of a council resolution on
4 May 2011.

[2] The three applicants in the high court were the Blair Atholl Homeowners
Association, of which all the individual property owners are members, Wraypex (Pty)
Ltd, the developer and ‘township owner’ of the estate as well as a member of the
Homeowners Association, and Mr Robert Wray, who was a member of the
Homeowners Association (but no longer is) and is a director of the developer. They
were granted leave to appeal to this court against the dismissal of their application.
On the day before the appeal was heard, the Homeowners Association delivered a
notice withdrawing its appeal. Senior and junior counsel, who had been briefed in the
matter and had prepared written submissions, had to withdraw.

[3] Mr Theron and Ms Freese were then instructed to argue the appeal. They
were placed in an invidious position having had virtually no time to prepare, but
adopted their predecessors’ main submission and soldiered on for the two remaining
appellants. When the hearing commenced Mr Theron explained that Mr Wray, the
third appellant, was no longer a member of the Homeowners Association and did not
own any property on the Estate. He thus had no standing to continue with the appeal
in his personal capacity. The developer, however, persists in the appeal as the sole
remaining appellant. As it is no longer a member of the Homeowners Association,
the only basis upon which it now claims to have standing is as the township owner,
an issue to which I shall later return. It is convenient to refer to the appellants
collectively.

[4] The appellants’ complaint is that the City’s rates policy is inequitable, and thus
unlawful, because it imposes the same liability for rates on property owners of the
estate as for other differently situated ratepayers. They believe that they are entitled
to be treated differently from other property owners in the City’s jurisdiction because
they provide and maintain their own services and thus qualify for an exemption, a
reduction, or a rebate in rates. Section 3(3) of the Local Government: Municipal
Property Rates Act 6 of 2004 (the Rates Act), which calls for rates policies to be
equitable, and envisages a rates differentiation for different categories of properties
(determined under s 8), is the focus of this dispute.

[5] The facts, which were fully set out in the judgment of the high court, are briefly
these: The Blair Atholl Estate is an upmarket residential development with a golf
course, located 50 kilometres west of Pretoria. It is some 600 hectares in size and
has 329 stands. The estate’s recreational facilities include a restaurant, swimming
pool, tennis courts and a wellness centre.

[6] The development was approved as a township, subject to specific conditions,
under the Town-Planning and Townships Ordinance 15 of 1986. This was because
the relevant area fell outside the City’s priority areas for the establishment of new

townships, and had no water and sewerage services. So, approval was given on
condition that the developer installed these services.

[7] To this end, in 2006, the developer and the City concluded an ‘Engineering
Services Agreement’ (ESA), so styled because the developer undertook to install all
engineering services for which municipalities are usually responsible. The services
included water, electricity, sewerage networks, storm water drainage systems, and
road infrastructure. The Homeowners Association, whose establishment was one of
the conditions in the ESA, became responsible for the maintenance of the services
inside the estate. The residents, who are obliged to be members of the association,
pay a monthly levy to it to cover these costs. The City maintains the services outside
the estate, including the supply of water, for which the residents pay, but it does not
raise sewerage charges.

[8] It is of some significance that the ESA specifically provided for rates to be
levied according to the City’s policies once the township was proclaimed. It made no
provision for, nor did it expressly envisage, the township to be treated as a different
category of rateable property. In fact on any fair reading of the relevant clauses of
the ESA, the contrary was envisaged – rates would be levied as usual, as with other
residential property. I shall return to this question.

[9] In April 2011 the City published a draft rates policy inviting the public to
comment on it. The appellants made written representations in response to the City’s
invitation running into some thirty pages. In summary, they made the following
argument:
(a)
The rates policy recognises only one category of residential property and one
category of vacant land. In regard to residential property this means that all
properties in this category attract the same rates. But, this does not take into account
Blair Atholl’s unique position of being located a distance from the urban area and not
having to rely on the City for its internal services. Its property owners pay levies to

the Homeowners Association for the maintenance of essential services. So, the
additional rates the City demands for the same services are inequitable because the
property owners pay, but do not benefit from, these rates in the same way that other
property owners located close to the City’s amenities do. The rates therefore
constitute an improperly imposed double tax.
(b)
In regard to vacant land inside the estate, ie land the developer has not yet
transferred to a first time recipient, there should also be a separate category for
which the developer is exempt from paying rates, and first time recipients should
likewise not have to pay rates for the first two years, while they are developing it.
This is to give recognition to the important role of developers in township
development.
(c)
Section 3 of the Rates Act compels a municipality to adopt a rates policy that
is equitable, meaning that geographic locality and the provision of engineering
services must be taken into account. The City is obliged to create a specific category
for ‘privately owned towns serviced by the owner’ such as Blair Atholl as provided for
in s 8(2)(j) of the Rates Act.1 It should have a capped property tax of R570.50 per
erf, escalated annually at the municipal cost index.

[10] On 4 May 2011 the City’s Council, an elected body, met to approve the draft
rates policy and draft by-laws, and after considering the appellants’ oral and written
submissions resolved to reject the appellants’ demand for a separate category of
rateable property in its rates policy. The city’s documentation, placed before council,
noted that the Rates Act did not define the category of ‘privately owned towns
serviced by the owner’. It stated, however, that the conventional understanding of
this concept is a township with a single owner that provides all developmental,
social, functional and infrastructural services, including approving building plans. It
also attends to its own town-planning as mining residential townships do.
Importantly, it has full jurisdictional powers over the township as an ‘own-
municipality’. The basis of how Blair Atholl came to be developed, underpinned by

1 In 2011, s 8(2)(j) of the Rates Act provided for a category of ‘privately owned towns serviced by the
owner’. Section 8 was repealed and substituted by s 6 of Act 29 of 2014. The section no longer
provides specifically for this category of rateable property.

the ESA, which explicitly recognised that the City would levy assessment rates in
accordance with its policies, therefore precluded this estate from being understood
as falling within this concept.

[11] As to the appellants’ main complaint, that it was inequitable to have to pay the
same rates as other property owners who rely on the municipality for services, the
documents before council explained the policy rationale for rejecting the linkage
between rates and services: rates, it stated, are a property tax. They are imposed on
all rateable property in a municipality and are not linked to services, such as water,
waste removal and electricity that property owners pay in respect of the property.
Unlike the costs for services, there are no measurable benefits from the payment of
property taxes. There may be indirect benefits such as the use of parks, libraries,
public health and law enforcement services, which may be referred to as collective
goods and services. For these services everyone pays, whether or not they are
used. Rates policy is also based on affordability and the principle of a progressive
sliding scale; the higher the value of the property the more the owner pays.

[12] The resolution concluded thus:
‘[P]roperty tax is not payable upon receiving basic services. The taxpayers do not receive
direct or measurable benefits from the payment of property tax and the value of the benefit,
which an individual derives, cannot be quantified. It is the responsibility of an individual
property owner to pay property tax irrespective of receiving a direct benefit from making use
of collective services. The lesser the number of properties, subject to property rates, the
smaller becomes the tax base of the municipality. The more exceptions and rebates granted,
the greater the tax burden becomes to the property owners whose properties remain subject
to non-discounted rates. Exceptions also create precedents and expectations that could not
be afforded by the remaining tax payers . . . [T]he Blair Atholl Development is not entitled to
any reduction on rates and taxes or any preferential treatment.’

[13] Aggrieved by this outcome the appellants instituted review proceedings
against the City in the court below to set aside the resolution. They asserted that the

decision was  reviewable under s 6 of Promotion of Administrative Justice Act 3 of
2000 (PAJA) as an administrative action because the council did not follow the
proper procedure prescribed by the Rates Act and that: it failed to properly consider
their representations; the decision not to create a separate category of rateable
property was irrational because it failed to take into account the link between
property rates and services; and it was inequitable because it levied the same rates
against Blair Atholl’s property owners as it did against other property owners, who
also live in high income areas, despite the fact they do not provide their own
services.

[14] The learned judge, however, correctly pointed out that a council resolution on
rates policy was a legislative decision taken by an elected body. It was therefore
reviewable, not as an administrative action under PAJA, but only under the principle
of legality on the grounds of irrationality. He therefore approached the review
application on this basis. And he also considered the appellants’ new contention –
not properly or clearly advanced on the papers – that the rates policy was inequitable
and contravened s 3(3)(a) of the Rates Act. The procedural challenges, which failed
before the court below, have now been abandoned and need not be further
considered.

[15] The appellants also abandoned the specific relief they sought compelling the
City to create a category of rateable property for ‘privately owned towns serviced by
the owner’ and a category of ‘vacant land’ owned by developers that would be
exempt from rates. In this regard they accepted that a municipality may determine a
category of rateable property from the list of categories identified in s 8(2) of the
Rates Act for the purposes of determining differential rates and the amount it wishes
to levy.2 And also, that in making this determination the council has a wide
discretion. Put simply, it exercises a policy choice, which a court will be slow to
second-guess.

2 City of Tshwane v Marius Blom & G C Germishuizen Inc & another [2013] ZASCA 88; 2014 (1) SA
341 (SCA) paras 16-18.

[16] So, while the appellants accept that courts may not impose their own
preferences on a municipality regarding the choice of category of rateable property,
its case now is that the rates policy adopted on 4 May 2011 did not meet the
threshold requirement of equitability in s 3(3)(a) of the Rates Act. This is because it
imposed a rates burden on the property owners of Blair Atholl that other differently
situated ratepayers do not bear. The policy, they contend, therefore falls to be set
aside on this basis.

[17] Furthermore, it is contended that the imposition of this additional burden is
irrational because it is not rationally connected to the objectives of the Rates Act.
The appellants’ papers confusingly attempt to draw a distinction between their
inequitably and irrationality challenges; they are effectively one and the same. And I
shall deal with them as such.

[18] The power of municipalities to levy rates on property is an original power
derived from s 229(1)(a) of the Constitution. Rates are levied on the value of
property to cover the running costs of a municipality, and to achieve its objects.3 The
statute regulating the exercise of this power is the Rates Act.

[19] Section 3 regulates the adoption and content of rates policy. Section 3(1)
imposes a duty on the council of a municipality to adopt a rates policy, and s 3(3)(a),
which is at the centre of this dispute, requires the policy to be equitable; fair, in other
words. The principle underlying an equitable rates policy is that similarly situated
ratepayers are liable for the same rates; and, where a policy differentiates between
ratepayers, it must do so fairly.

3 Section 152(1) of the Constitution says that the objects of local government are:
‘(a)
to provide democratic and accountable government for local communities;
(b)
to ensure the provision of services to communities in a sustainable manner;
(c)
to promote social and economic development;
(d)
to promote a safe and healthy environment; and
(e)
to encourage the involvement of communities and community organisations in the matters of
local government.’

[20] To this end a rates policy must determine criteria if the council levies
differential rates for categories of properties; exempts, reduces or grants a rebate to
any category; or increases or decreases rates.4 It must also provide criteria for
determining categories of properties liable for different rates.5 Fairness also entails
any exemptions, rebates or reductions to be justified by reasons.6 The importance of
stated criteria and the obligation to provide reasons is that they are open to legal
challenge – albeit on narrow grounds, because they involve policy questions. It must
also be borne in mind that municipalities are not obliged to levy differential rates for
different categories of rateable property or create different categories for this
purpose.

[21] Another aspect of the equitability principle is that rates policy must take into
account its effects: on the poor and include measures to alleviate them;7 on
organisations that conduct public benefit activities that are exempted from income
tax;8 and on public service infrastructure.9 The policy must also allow the municipality
to promote local social and economic development.10 This necessarily implies that
some ratepayers – those who have the means to own more valuable properties –
must perforce shoulder a heavier burden for these taxes.

[22] Another injunction in the Rates Act is that a rates policy providing for
exemptions, rebates or reductions must comply with a national framework as may be
prescribed after consultation with organised local government.11 This is to avoid the
knock-on effect that a policy, which allows exemptions, reductions or rebates in one
municipality, may have on other municipalities.

4 Section 3(b).
5 Section 3(c).
6 Section 3(e).
7 Section 3(f).
8 Section 3(g).
9 Section 3(h).
10 Section 3(i).
11 Section 3(5).

[23] The adoption of a rates policy is therefore quintessentially a political decision
that involves balancing the interests of various parties. It is underpinned by the
principle of equitability in s 3(3)(a). And even though the adoption of a rates policy is
subject to legal challenge for failure to adhere to this principle, the judicial branch of
government will be circumspect before it interferes with a council’s assessment of
what is equitable.12

[24] I turn to consider the appellant’s equitably complaint. As I have mentioned
earlier, this case was not made out pertinently on the papers. The appellants’
representations to the City were aimed at securing the creation of two categories of
rateable property that would qualify for a rates reduction and exemption: a privately
owned town serviced by the owner and vacant land. The impugned resolution
rejected the submission for the reasons mentioned. That was the case they brought
to court; hence the orders sought were to compel the City to establish a different
category of rateable property for Blair Atholl. That relief has now been abandoned
and what remains is only the prayer for the resolution to be set aside.

[25] The case now made out, as I understand it, is that Blair Atholl’s property
owners were treated inequitably since: their particular circumstances and peculiar
context were not factored into the rates imposed; their geographic location was
ignored; and their interests were not appropriately balanced with those of differently
situated communities, who pay equivalent rates and enjoy access to municipal
services that Blair Atholl residents do not.

[26] Stripped of the verbiage the essential complaint is that property owners in
Blair Atholl should not be made to pay equivalent rates to other differently situated
communities as they provide and pay for their own basic services, while not having
access to other communal services because of its geographic location.

12 See generally N Steytler & J de Visser Local Government in South Africa (Issue 8, October 2014)
Chapter 13, para 2.1.3.

[27] But this challenge fails at its first hurdle, for it assumes there is, or ought to
be, a fair relationship between the services a municipality provides its ratepayers and
the rates they are liable to pay. In this regard the court a quo observed correctly that
s 229(1)(a)13 of the Constitution distinguishes between rates and surcharges: the
latter may be imposed for services the municipality provides, while the former bears
no such constraint. In addition we were referred to no provision in the Rates Act that
supports the appellants’ contention. In fact, the contrary is true. Ratepayers who
have the means are required to bear an additional burden to subsidise those who
cannot afford to pay for their services. Rates also support local social and economic
development, unrelated to the provision of services.

[28] The City’s policy document, to which I have referred earlier, explicitly eschews
any link between rates and services. That policy was not challenged. What is
contested is the application of the policy to Blair Atholl. In this regard the reasons
given in the council resolution for refusing to create a policy exception for Blair Atholl
are persuasive.14 It follows that the appellant’s attempt to link services with rates
must founder.

[29] In regard to the specific complaint that the resolution does not factor in the
peculiar context and geographic location of the Blair Atholl development, the short
answer is that it does. The court below – again correctly – observed that the City and
the developer entered into the EAS on the premise that the development would
provide its own services as it fell beyond the reach of municipal services. The City
agreed to supply water at the normal rate, and not to levy a sewerage charge, but
made no similar concessions for property rates. On the contrary, the agreement
explicitly provided for rates to be levied from the date of the proclamation of the
township.

13 Section 229(1)(a) of the Constitution provides as follows:
‘(1) Subject to subsections (2), (3) and (4), a municipality may impose –
(a)
rates on property and surcharges on fees for services provided by or on behalf of the
municipality; . . . .’
14 See para 12 above.

[30] Murphy J was thus correct in concluding that:
‘There is accordingly no basis for any supposition on the part of the applicants supporting an
equitable claim to exemption from (or reduction of) rates in exchange for the provision of
services by them. The municipality approved the township on the understanding that it would
not be burdened by an increased demand for services while retaining its right to levy rates
on the residents of the estate.’

[31] The appellants also sought to interdict the City from claiming property rates
from property owners of Blair Atholl for the period before 1 July 2008, a matter
entirely unrelated to the present dispute. The court below refused this relief on the
grounds that neither the requirements for an interdict, nor their standing to claim this
relief, had been established. Counsel for the appellants did not press this issue, for
good reason.

[32] I mentioned at the outset that the sole basis upon which the developer
asserted a legal interest in the relief claimed was as township owner. But this case is
about an equitable claim by the property owners of Blair Atholl, who as ratepayers
belong to the Homeowners Association, to be treated differently as a group. This is
because they are required to pay the association for services for which they are
liable and rates to the City in accordance with the City’s rates policy. The developer,
on the other hand, is no longer a member of the association, and has no claim as
owner of the remaining extent of the township to be treated differently. It will be
recalled that its claim for an exemption from rates as the owner of ‘vacant land’,
made in the representations to the City, was not part of relief sought in this case.

[33] In regard to the claim that the property owners were entitled to a prohibitory
interdict against the City regarding the rates for the period preceding July 2008, there
is no case made out that the developer, as owner only of the remaining extent of the
township, was entitled to claim this relief. So, in regard to both the main and
additional relief the developer alone seeks, it does not appear to have any legal

interest. However, in view of the conclusion to which I have come on the merits of
the dispute, it is not necessary to decide this issue.

[34] The Homeowners Association withdrew its appeal belatedly, on the day
before the hearing. It cannot avoid liability for the costs of the appeal. In the result
the following order is made:
‘The appeal is dismissed with costs, including the costs of two counsel.’

_______________
A Cachalia
Judge of Appeal

APPEARANCES

For Second and Third Appellant: E L Theron SC (with S Freese) (heads of
argument prepared by LGF Putter SC and
H Varney)

Instructed by:

Schwartz-North Incorporated c/o A L Maree
Incorporated, Pretoria

Martins Attorneys, Bloemfontein

For Respondent:

T Strydom SC (with T Mkhwanazi)

Instructed by:

Hugo & Ngwenya Attorneys, Pretoria

Phatshoane Henney Attorneys, Bloemfontein
THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From:
The Registrar, Supreme Court of Appeal
Date:
1 December 2015
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.

BLAIR ATHOLL HOMEOWNERS ASSOCIATION

v

THE CITY OF TSHWANE METROPOLITAN MUNICIPALITY

The Supreme Court of Appeal (SCA) today dismissed an appeal by Wraypex (Pty)
Ltd, the developer of the Blair Atholl Estate, against a judgment of the Gauteng
High Court, with costs. The high court had dismissed its application to review and
set aside a resolution of the City of Tshwane Metropolitan Municipality not to give
preferential treatment to the property owners of the Blair Atholl Estate in its rates
policy. The SCA rejected a contention on appeal that the policy was ‘inequitable’.

In the high court the Blair Atholl Home Owners Association represented the
property owners. But a day before the appeal was heard it withdrew its appeal,
leaving the developer as the sole appellant.

The Blair Atholl Estate is an upmarket residential development 50 km from

Pretoria. It is some 600 hectares in size and has 329 stands. What is unique about
this development is that it provides for and maintains most of its own services at its
own cost; it does not rely on the municipality as other ratepayers do. However, the
property owners pay equivalent rates to other high value properties in the
municipality’s area.

The property owners complain that they should not have to pay equivalent rates to
differently situated property owners because they maintain their own services and
that it is therefore inequitable that they are made to pay these rates. They therefore
made representations to the municipality in 2011 to give them preferential
treatment in the assessment of their rates. For this purpose they relied on s 3(3) of
the Local Government Municipal Property Act 6 of 2004 (the Rates Act), which
says that a rates policy must be equitable.

The SCA ruled that neither the Constitution which gives municipalities the power to
levy rates on property, not the Rates Act links services with rates. Rates are levied
on property and have no bearing on the services for which ratepayers are liable. It
was therefore not inequitable, the SCA ruled, for the property owners to pay
equivalent rates to differently situated ratepayers.

The SCA also said that the municipality approved the development some years
ago on the assumption that that the usual rates, as determined by its rates policy,
would apply. These assumptions were included in an agreement. The property
owners could therefore not now complain that the policy was inequitable.