THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

JUDGMENT

Reportable

Case No: 490/13

In the matter between:

ILLOVO OPPORTUNITIES PARTNERSHIP #61                                    APPELLANT

and

ILLOVO JUNCTION PROPERTIES (PTY) LTD                       FIRST RESPONDENT
CITY OF JOHANNESBURG METROPOLITAN                  SECOND RESPONDENT
MUNICIPALITY

Neutral citation:
Illovo Opportunities Partnership #61 v Illovo Junction Properties
(490/13) [2014] ZASCA 119 (19 September 2014)
Coram:
Maya, Cachalia, and Zondi JJA and Schoeman and Dambuza AJJA
Heard:
2 September 2014
Delivered:
19 September 2014

Summary:
Application for declaratory order under s 19(1)(a)(iii) of the
Supreme Court Act 59 of 1959 – Whether direct and substantial
interest established – Proper construction given to ss 48 and 63
of the Town Planning and Townships Ordinance 15 of 1986.

___________________________________________________________________

ORDER
___________________________________________________________________

On appeal from: Gauteng Local Division, Johannesburg (Potgieter AJ sitting as
court of first instance):

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

___________________________________________________________________
JUDGMENT
___________________________________________________________________

Cachalia JA (Maya and Zondi JJA and Schoeman and Dambuza AJJA
concurring)

[1] This is an appeal from the Gauteng Local Division, Johannesburg, of the high
court (Potgieter AJ), dismissing an application for declaratory relief.

[2] The appellant, Illovo Opportunities Partnership #61 sought a declaration that
the first respondent, Illovo Junction Properties (Pty) Ltd, was liable for the payment
of approximately R8.8 million to the second respondent, City of Johannesburg
Metropolitan Municipality (the City). The City had levied the amount as a contribution
after the first respondent‘s property was rezoned to permit further development. The
contribution was meant to fund the cost of engineering services, parks and open
spaces for the property. The appellant purchased the property from the first
respondent (the seller), before the contribution was levied, but took transfer
thereafter.

[3] The appellant‘s case is that the seller is liable for the payment because the
contribution was levied against the owner of the property, ie, the seller, before the
appellant took transfer of the property. The seller denies liability. It contends that the
liability to pay the contribution will rest on the owner – the appellant in this case –
once it chooses to develop the property in line with the rezoning. The high court did
not consider the merits of the dispute because it dismissed the application on the
ground that the appellant lacked standing. It held that the appellant had no legal
interest in the relief claimed because it concerned the rights and obligations between
third parties (the City and the seller); it did not concern the appellant‘s own rights. It
is therefore necessary first to determine the issue of the appellant‘s standing to seek
the declaration, and if necessary to then deal with the merits of the dispute. The City
has not taken any steps to obtain payment from either party.

[4] It will be helpful to set out some of the background facts to better understand
the dispute between the parties. The appellant concluded a sale agreement with the
seller during September 2009 to purchase a property situated in Illovo,
Johannesburg, for approximately R35,5 million. The seller had earlier that year
applied to the City for the property to be rezoned so that its primary development
rights would include offices, residential buildings and shops. In March 2009 the seller
informed the appellant that the City had approved the application. However, at the
time when the agreement was concluded, the City had not yet published a notice to
this effect.

[5] In October 2009, a month after the agreement was concluded, the seller
obtained a clearance certificate from the City indicating that its outstanding levies on
the property had been settled. The seller maintains that it had thus discharged all its
debts to the City. It then began to give effect to the agreement by taking steps to
transfer the property to the appellant.

[6] On 4 November 2009 the City published a notice in the provincial gazette for
the property to be rezoned in terms of an amendment scheme (the scheme), which

became effective on 30 December 2009. This meant that the property could now be
developed in a manner consistent with its new use rights.

[7] On 5 January 2010, before the property was transferred to the appellant, the
City informed the seller, which was still the owner, that an amount of R 8 749 758.04
was due for a ‗bulk services contribution‘ in terms of s 63(1) of the Town- Planning
and Townships Ordinance 15 of 1986 (the Ordinance).1 On 19 January 2010, the
appellant became the owner of the property on registration of transfer. The appellant
now wishes to sell the property to a developer or develop the property itself, and
needs clarity in regard to where liability to pay the contribution lies.

[8] In July 2011 the appellant instituted proceedings in the high court to resolve
the dispute. The main relief sought was an order declaring the seller liable to pay the
contribution. Prayer 2 was for consequential relief for the seller to pay the City in the
event of the main relief being granted. The appellant added an alternative prayer for
relief against the City, but later abandoned it, as it did the consequential relief it
sought against the seller. In the high court the only relief sought, as it seeks in this
appeal, is an order declaring the seller liable to pay this amount to the City. The City
has been joined in these proceedings but is content to adopt a non-committal stance.
It abides the decision of this court.

[9] In its founding affidavit, and in the high court, the appellant relied on the sale
agreement read with s 63(1) of the Ordinance to establish its cause of action.
Clause 5.2 upon which particular reliance was placed, reads:
‗5.2
From the date of possession –
5.2.1 . . .
5.2.2 . . .

1 See fn 4 below.

5.2.3 The purchaser shall be liable for all rates, taxes and other imposts levied against the
property by any authority. Should the seller have prepaid any such rates and taxes beyond
the date of possession, the purchaser shall refund to the seller all amounts paid beyond the
said date on demand. For the purpose of this clause the words ―Assessment rates‖ includes
the electricity levy charged with respect to property not consuming electricity.‘ (my emphasis)
Accordingly, the appellant contended that until it obtained possession, which is when
transfer was effected, the seller was liable to pay rates, taxes and other imposts for
the property.

[10] The founding affidavit asserts that it was ‗an express, alternatively tacit,
further alternatively implied term‘ of the contract that the seller would pay the
contribution to the City. This is because the parties assumed that once the scheme
came into operation, and the City had directed the seller to pay the contribution, the
seller would pay. And further, that the City‘s direction to the seller under s 63(1) of
the Ordinance to pay the contribution amounted to the levying of an impost against
the property within the meaning of clause 5.2.3 of the agreement. The seller is
therefore liable for the payment to the City. The appellant thus contended, for the
purpose of establishing its standing, that it has a direct and substantial interest in
ensuring that the seller discharges its obligation to the City.

[11] The high court found that the appellant‘s founding papers had not established
the contractual term for which it contended. And it followed that the declaration
sought – that the seller is liable to pay the contribution to the City – did not concern
the appellant‘s own rights under the contract but rather related to a ‗concomitant
right‘ that the City may have against the seller, which the City has not asserted.
Consequently the appellant had established no more than a ‗derivative interest‘ –
that it would be compelled to pay the City if it wished to develop the property – and
not a direct and substantial interest in the grant of the declaratory order. The learned
judge thus dismissed the application but granted leave to this court.

[12] In its heads of argument prepared for the appeal the appellant persisted with
its submission that under the sale agreement the seller was and remains liable for
the payment of the contribution. But, before us, counsel abandoned any reliance on
the agreement as there was no express term providing for the payment and simply
no basis for reading a tacit or implied term to this effect into it.

[13] Instead he submitted that if the appellant is compelled to pay the contribution,
the seller would still incur liability on the basis of unjust enrichment or negotiorum
gestio. Simply put, the appellant says that the seller is liable for the payment under
the Ordinance, and if the appellant is obliged to discharge the seller‘s debt, the latter
would be unjustly enriched at its expense. This submission was not advanced in the
court a quo but now forms the basis for the legal interest the appellant contends it
has in the relief claimed. It is to this issue that I now turn.

[14] Section 19(1)(a)(iii) of the Supreme Court Act 59 of 1959,2 empowers a high
court to grant declaratory relief,
‗. . . in its discretion, and at the instance of any interested person, to enquire into and
determine any existing, future or contingent right or obligation, notwithstanding that such
person cannot claim any relief consequential upon the determination.‘
The existence of a dispute between the parties is not a prerequisite for the court to
exercise its power under this sub-section. The court must, however be satisfied that
the applicant seeking the relief has a legal interest – a direct and substantial interest
– in the order sought and also that the order would be binding upon interested
parties. It is insufficient for the applicant to have an indirect interest such as a
financial or commercial interest in the outcome of the litigation. It is also inadequate
for the interest to be derivative in the sense that it depends upon the validity and
existence of some other right.3

2 Section 19(1)(a)(iii) has now been replaced by s 21(1)(c) of the Superior Courts Act 10 of 2013.
3 United Watch & Diamond Co (Pty) Ltd v Disa Hotels Ltd 1972 (4) SA 409 (C) at 417B-C.

[15] On behalf of the seller it was submitted that the appellant‘s interest in whether
the first respondent is liable under the Ordinance to pay the contribution to the City is
not direct and substantial because it concerns the rights and obligations of third
parties – the City and the seller – and not its own rights. It is thus a typical example
of an indirect interest, which disentitles it to the relief claimed and means that it lacks
standing to claim the relief. Before I consider this submission it is necessary to
examine the nature of the relief claimed.

[16] It is common ground that a court must approach the question of standing on
the assumption that the allegations of fact in the founding affidavit are correct. The
appellant has abandoned reliance on the sale agreement. What remains are two
material allegations that now form the basis of the claimed relief: first, that the seller
is liable for the payment of the contribution to the City, and secondly, that if the seller
does not pay the City, the appellant shall be compelled to make the payment to
enable it to transfer the property to a prospective buyer or to apply for building plans
to exercise its zoning rights under the Ordinance.

[17] In effect the appellant asserts that it has a legal interest in both the existing
right of the City to demand payment from the seller and also in the seller‘s
corresponding obligation to pay the City. It also has a contingent right to demand
payment from the seller in the event of the seller failing to meet its payment
obligations to the City. For, it will then have to step into the seller‘s shoes and pay
the City so that it can exercise the zoning rights, and thereafter reclaim the money
from the seller, which would have been unjustly enriched at the appellant‘s expense.

[18] Notwithstanding the fact that the appellant‘s application for declaratory relief is
outwardly aimed at establishing the rights and obligations of third parties, the court‘s
decision has a material bearing on its ability to exploit the development rights in the
property, and if necessary its own right to claim a repayment from the seller in the
event it is compelled for practical reasons to pay the contribution. Furthermore,
properly understood, the order sought carries with it the necessary implication that, if

granted, the appellant shall have the right to resist an application by the City to
enforce a claim for the contribution against it, if it chooses to exercise its rights under
the scheme. Finally, whether or not the appellant succeeds in its application, the
outcome of this court‘s judgment on the merits, ie, on the proper construction to be
given to the Ordinance, will be res judicata between the parties, determining the
legal rights inter se of all three parties. That is an important factor in deciding the
standing issue.4

[19] In my view the appellant has, therefore, established a legal interest in the
relief sought. It follows that the seller‘s objection to the appellant‘s standing was not
well taken.

[20] I turn to consider whether or not the City‘s notice delivered to the seller on
5 January 2010 had the effect of imposing an obligation on the seller to pay the
contribution as the appellant contends it did. If this question is answered in the
affirmative, it means that appellant may exercise the new use rights under the
scheme, without incurring any liability to the City. The answer resides in the
construction that is given to the relevant provisions of the Ordinance, namely ss 48
and 63.5

4 Ex Parte Nell 1963 (1) SA 754 (A) at 760C.
5 Section 48: ‗Contribution in respect of engineering services, open spaces or parks.—
(1)
. . .
(2)
. . .
(3)
. . .
(4)
. . .
(5)
. . .
(6)
Subject to the provisions of subsections (7) and (8), a contribution contemplated in

subsection (1) payable in respect of any particular land shall be paid to the local authority

before—
(a)
a written statement contemplated in section 50 (1) of the Local Government
Ordinance, 1939, is furnished in respect of the land;
(b)
a building plan is approved in respect of—

(i)
the proposed alteration of or addition to an existing building on the land;

(ii)
the erection of a new building on the land,
where that building plan, were it not for the commencement of the amendment scheme
contemplated in subsection (1), would have been in conflict with the town-planning scheme in
operation;

(c)
the land is used in a manner or for a purpose which, were it not for the
commencement of the amendment scheme contemplated in subsection (1), would
have been in conflict with the town-planning scheme in operation.
(7)
Where an amendment scheme which gave rise to a contribution contemplated in subsection

(1) has been prepared by a local authority and a prospective transferee of the land in respect

of which the contribution is payable furnishes an undertaking to the local authority, which is to

the satisfaction of the local authority, to pay the contribution should he exercise any new right

conferred in respect of the land by the scheme—
(a)
the statement contemplated in subsection (6) (a) shall, where such land is acquired by
the transferee as a beneficiary in a deceased estate;
(b)
the statement contemplated in subsection (6) (a) may, in any other case,

be furnished before the contribution is paid.
(8)
A local authority contemplated in subsection (1) may—
(a)
in the circumstances contemplated in subsection (6) (b) or (c), allow payment of the
contribution contemplated in the first-mentioned subsection in instalments over a
period not exceeding 3 years;
(b)
in any case, allow payment of the contribution contemplated in the first-mentioned
subsection to be postponed for a period not exceeding 3 years where security for the
payment is given to its satisfaction;
(c)
in exercising the power conferred by paragraph (a) or (b), impose any condition,
including a condition for the payment of interest.‘

Section 63: ‗Contribution in respect of engineering services, open spaces or parks.—(1) Where
an amendment scheme which is an approved scheme came into operation in terms of section 58 (1),
the authorised local authority may, within a period of 30 days from the date of the commencement of
the scheme, by registered letter direct the owner of land to which the scheme relates to pay a
contribution to it in respect of the provision of—
(a)
the engineering services contemplated in Chapter V where it will be necessary to enhance or

improve such services as a result of the commencement of the amendment scheme;
(b)
open spaces or parks where the commencement of the amendment scheme will bring about a

higher residential density.

and it shall state in that letter—

(i)
the amount of the contribution;

(ii)
particulars of the manner in which the amount of the contribution was determined;

and

(iii)
the purpose for which the contribution is required:

Provided that—

(aa)
the amount of the contribution required in respect of open spaces or parks,

where applicable, shall be determined by the local authority in the manner

prescribed;

(bb)
in calculating the contribution an amount paid, payable or becoming payable

in terms of section 20 (2) (c) shall be taken into account.
(2)
An owner who—
(a)
wishes to avoid the payment of a contribution contemplated in subsection (1) may
request the local authority contemplated in that subsection to repeal the amendment
scheme concerned;
(b)
wishes to avoid payment of or wishes to reduce the amount of a contribution
contemplated in subsection (1) may, in terms of section 56 (1), apply for the further
amendment of the town-planning scheme concerned,

within a period 60 days from the date of the letter contemplated in that subsection or,

where he has appealed in terms of section 124 or 139, from the date on which he

was notified of the decision of the Services Appeal Board or the Board.
(3)
. . .
(4)
. . .

(5)
. . .
(6)
The provisions of section 48 (6), (7) and (8) shall apply mutatis mutandis to the payment of a

contribution contemplated in subsection (1).‘

[21] The liability to pay a contribution rests with the owner of the land. Thus s 63(1)
permits the local authority, by registered letter, to direct the owner within a period of
30 days of the commencement of the scheme to pay the contribution. The local
authority may claim the contribution only if it is necessary to enhance or improve the
engineering services or to provide for open spaces and parks following the
commencement of a scheme.6 The owner must be informed of the amount of the
contribution, how it was determined and the purpose for which it is required.7

[22] Notwithstanding the exhortation in s 63(1) for the owner to ‗pay a contribution‘,
it is not a payment demand. Its purpose is to fix the amount of payment when the
scheme commences. Thus an owner, who receives the ‗direction‘ to pay from the
local authority and wishes to avoid paying the contribution, may within 60 days of
having received the notice request the local authority to repeal or amend the scheme
to reduce the contribution payable.8 The owner, who receives the direction to pay the
contribution, may take the steps contemplated in s 63(2) to avoid paying or reduce
the amount of the contribution.

[23] It follows that an owner who has received the direction and fails to take any
steps contemplated in s 63(2) to avoid or reduce the amount of the contribution will
have his liability fixed, and he will have to pay the amount. The purpose of the
section is therefore evidently to ensure that the owner pays the fixed contribution that
is necessary to fund the engineering services, open spaces or parks envisaged in
the scheme. The question that arises is when, exactly, is the payment due and
payable?9

[24] The seller relies heavily on ss 48(6)(b) and (c) to support its submission that
the obligation to pay arises only when the rezoning is implemented, because these

6 Sections 63(1)(a) and 63(1)(b).
7 Sections 63(1)(b)(i),(ii) and (iii).
8 Section 63(2).
9 This question was not decided in Stands 5/1 Wierda Valley (Pty) Ltd & another v Sandton Town
Council 1994 (1) SA 333 (A) at 346G-347B.

sections say that the contribution must be paid before a building plan is approved or
the land is used in accordance with the scheme. This implies that the contribution
does not have to be paid if the rezoning is not implemented.

[25] The seller submits that s 48(7) also supports this construction. It provides for
a prospective buyer to furnish an acceptable undertaking to pay the contribution
when he exercises the new rights in accordance with the scheme. The import of this,
so it is submitted, is that after transfer, the local authority may no longer insist on
payment from the previous owner; it can only do so from the new owner, and then
only if the latter chooses to exercise its new use rights. It follows, so the submission
goes, that where the land is transferred after a direction is issued in terms of s 63(1),
as occurred here, the obligation to pay rests with the new owner when it elects to
exercise the new use rights.

[26] In summary, when these sections are read together this is what they
contemplate. The local authority fixes an amount of the contribution and directs the
owner of the land, within 30 days of the scheme coming into operation, to pay. If the
owner takes no steps to avoid payment or to reduce the amount of the contribution
the full amount is payable. But it only becomes due when the owner elects to
implement the scheme by applying for building plans to be approved or uses the land
in a manner contemplated in the scheme, not before this.

[27] Where the land is sold before the contribution is paid or the new use rights
have been implemented the prospective buyer must furnish an undertaking to the
satisfaction of the local authority to the effect that the contribution shall be paid
should he exercise any new right envisaged in the scheme. This can only mean that
the contribution need not be paid if the new rights are not exercised.

[28] This brings me to s 48(8), which says that when the payment is due in the
circumstances mentioned in ss 48(6)(b) and (c) the local authority may allow the

contribution to be paid in instalments over a period not exceeding three years, or
postpone the payment for this period where security for the payment is given to its
satisfaction. If the local authority allows this it may impose any condition, including a
condition for the payment of interest. It therefore follows that if neither the owner nor
the prospective buyer choose to implement the scheme s 48(8) does not apply.

[29] It seems odd that ss 48(6), (7) and (8), when applied mutatis mutandis to the
payment of the contribution in s 63(1), appear to allow an owner or prospective buyer
to postpone implementing the scheme – and thus liability for payment of the
contribution indefinitely – without any financial penalty. Counsel for the appellant
thus submits, with some force, that this could never have been what the Ordinance
contemplated. He thus contends that s 48(6) does not affect the date on which the
owner of the land becomes liable for the payment of the contribution, which is when
he has been directed to do so.

[30] There are, however, several pointers that weigh against the appellant‘s
submission. First, s 63 does not in terms specify a date when the contribution must
be paid; it cannot be on the day when the owner is directed to pay because he has
60 days after that to avoid or reduce it. Secondly, no time period is stipulated for the
implementation of the scheme. If there was, one would have expected the Ordinance
to say so clearly. Thirdly, it is not unreasonable for the Ordinance to require the
contribution to be payable only if the new use rights are exercised because the City
incurs these costs only as a consequence of the implementation of the scheme.
Finally, s 48(8) provides for the payment of instalments or the furnishing of security
and interest payments in the circumstances contemplated in s 48(6)(b) and (c). It
would be incongruous for the Ordinance to permit this indulgence to an owner or
prospective buyer only when the new use rights are exercised and not immediately
after the direction to pay was issued, which would be the consequence if the
appellant‘s contention were correct. This suggests strongly that the owner need not
pay the contribution immediately upon receipt of the directive. This, I think, is the
proper construction to be given to ss 48 and 63.

[31] It follows that the appellant‘s contention that the seller became liable for the
payment of the contribution when it received the directive on 5 January 2010 must
fail and consequently its application for declaratory relief cannot be upheld.

[32] The following order is made:

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

__________________
A CACHALIA
JUDGE OF APPEAL

APPEARANCES

For Appellant:
H F Oosthuizen

Instructed by:

Hooyberg Attorneys, Johannesburg

Webbers, Bloemfontein

For First Respondent:
J Suttner SC (with him A Lamplough)

Instructed by:

Edward Nathan Sonnenbergs, Johannesburg

McIntyre & Van der Post, Bloemfontein

For Second Respondent: No attendance

Instructed by:

Lennon Moleele & Partners, Johannesburg
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:
19 September 2014
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.

ILLOVO OPPORTUNITIES PARTNERSHIP #61

v

ILLOVO JUNCTION PROPERTIES (PTY) LTD & ANOTHER

The Supreme Court of Appeal (SCA) today held that an owner or prospective
buyer of land that is rezoned under a scheme for development for which the City of
Johannesburg Metropolitan Municipality has levied a ‘bulk services contribution’, is
only required to pay the amount of the contribution when it exercises the new use
rights envisaged in the rezoning scheme, and not at the time the City notifies it that
the contribution is payable.

The ruling follows a dispute between two parties Illovo Opportunities
Partnership#61 and Illovo Junction Properties (Pty) Ltd over which of the two
entities was responsible for the payment of the contribution. Illovo Junction (the

seller) had sold a property with rezoned rights in Illovo, Johannesburg, to Illovo
Opportunities (Pty) Ltd (the buyer) in 2009 for R35,5 million. The rezoning, which
now permits offices, residential buildings and shops to be developed on the
property came into effect after the sale. The City levied a contribution of
R8 749 758.04 to fund the cost of engineering services, parks and open spaces for
the property and notified the seller of the cost on 5 January 2010 that the amount
was payable. On 19 January 2010 the property was transferred to the buyer, which
now wants to develop the property.

The City has not demanded payment from either party yet. The dispute between
the parties is over whether the seller is liable for the payment of the contribution
because it received the notice from the City claiming the payment or whether the
buyer will become liable when it elects to develop the property.

The SCA held that on a proper interpretation of ss 48 and 63 of the Town-Planning
and Townships Ordinance 15 of 1986 the owner or prospective buyer is only liable
to pay the contribution when it exercises its right to develop the property. The seller
was therefore not liable for the payment merely by virtue of having received the
notice levying the contribution from the City and the buyer shall become liable
when it chooses to develop the property.