THE SUPREME COURT OF APPEAL OF SOUTH AFRICAJUDGMENT Reportable
CITY OF JOHANNESBURGMETROPOLITAN MUNICIPALITY APPELLANT
FIRST RESPONDENT ZIBI LINDIZWE
SECOND RESPONDENT Neutral citation:
City of Johannesburg Metropolitan Municipality v Zibi and Another (234/2020)  ZASCA 97 (09 July 2021)
Summary: Municipal law – Local Government: Municipal Property Rates Act 6 of 2004 – municipality within its powers to impose a penalty tariff in the instance of illegal or unauthorised use of property within its jurisdiction – such action not ultra vires if it is in terms of a validly adopted municipal property rates policy – appeal upheld.
On appeal from: Gauteng Division of the High Court, Johannesburg (Fourie AJ sitting as the court of first instance): 1 The appeal is upheld with costs, including the costs of two counsel where so employed. 2 The order of the high court is set aside in toto, and replaced with the following order: ‘The application is dismissed with costs.’
______________________________________________________________________ JUDGMENT______________________________________________________________________Mbha JA (Saldulker JA and Poyo-Dlwati AJA concurring)
 The central issue in this appeal is whether a municipality is entitled to levy a rate in the form of a penalty on residential property for illegal or unauthorised use, without first changing the category of the property on its valuation roll or supplementary roll, from ‘residential’ to ‘illegal or unauthorised’ use.
 The appellant, City of Johannesburg Metropolitan Municipality (the municipality), established in terms of the Local Government: Municipal Systems Act 32 of 2000 (the Systems Act) and other related legislation governing local authorities, appeals against the judgment and order of the Gauteng High Court Division, Johannesburg (per Fourie AJ) (the high court), handed down on 9 October 2019. In terms of this judgment, the municipality was ordered to apply the residential category reflected on its valuation roll, when levying property rates against erf 671 Auckland Park 1, the property of Mr and Mrs Zibi (the property) from ‘1 October 2015 to date of implementation of a replacement valuation roll pertaining to the property’. The municipality was also ordered to rectify, within thirty days, the relevant municipal account for the respondents’ property and change the rating tariff from ‘illegal or unauthorised use’ to ‘residential’, and to replace the tariff charge with a residential category rating. This appeal is with leave of the high court.
 At the core of this entire dispute, is the respondents’ complaint that since October 2015, the municipality has levied rates on the respondents’ immovable property, in accordance with the category of ‘illegal’ or ‘unauthorised’ use of the property. This, so the respondents contend, despite the fact that the zoning category of the property remained ‘Residential 1’ on the municipality’s 2013 and 2018 valuation rolls.  It bears mentioning that until October 2015, the municipality had levied a property rate of R898.01 monthly on the property, which at all relevant times has been zoned ‘Residential 1’. However, from October 2015 onwards, such rate as reflected on the municipality’s account number 552060383, has escalated to R3 592. 05. As appears from the tax invoice dated 23 October 2015, under the heading ‘Property Rates’, this penalty tariff for the higher amount of R3 592. 05 was debited, which incorporates the amount charged in respect of property rates. Thereafter, the penalty tariff was claimed monthly as per the tariff provided for in the appellant’s rates policy. This penalty tariff was calculated based on the market valuation of the property, being the amount of R1 650 000.
 The nub of the dispute, from the municipality’s point of view, is that the aforementioned levied rate of R3 592, 05 represents a penalty for the respondents’ unlawful or unauthorised use of the property. On the other hand, the respondents contend that the municipality ought to have first re-categorised the property from ‘Residential 1’ to ‘illegal or unauthorised’ use on the municipality’s valuation roll, before the municipality could impose the escalated levy.
 It is necessary to set out the relevant background facts, which are largely common cause, in order to have a better understanding of the context in which the dispute arose. The respondents took transfer of the property in their names on 24 June 2013. The property is a free-standing erf with a house consisting of 5 bedrooms, 2 bathrooms, a living room, a laundry room, a double garage, and an outside room with a toilet. In addition to residing in the property with their two minor children, the respondents aver that from January 2015 they started renting out 2 bedrooms to students and young professionals, thus using the property as a commune, a commercial concern. It is common cause that no authorisation was first sought and obtained from the municipality for such use.
 On 28 October 2016, the municipality sent a letter to the respondents through its attorneys, notifying them of their wrongful and unlawful use of the property as a student commune, in contravention of the town planning scheme and zoning thereof without the necessary authorisation. Importantly, the respondents were notified of their contraventions since 2013 based on several site inspections conducted by officials of the municipality, which resulted in a contravention notice, referred to as a TP19 Notice, which was sent to them on 4 September 2013. This notice called upon the respondents to terminate their unauthorised use of the property by no later than 4 October 2013.
 In the same correspondence it was also stated that further site inspections were conducted on the property on 3 August 2014, 16 November 2014, 31 January 2015, 20 June 2015 and 9 October 2016. These site inspections confirmed that the unauthorised use of the property by the respondents continued unabated.
 From October 2015 to date, the municipality has levied rates on the property in the form of a penalty for the illegal and unauthorised use of the property. It transpired that, on 22 September 2015, the municipality’s town planning law enforcement section instructed the property rates policy finance and compliance division to impose a penalty tariff as contemplated in the municipality’s policy.
 Aggrieved by the increased penalty tariff imposed by the municipality, on 11 December 2017, the respondents approached the City of Johannesburg Ombudsman (the Ombudsman), to investigate what according to them, was the incorrect billing on the property. On 31 January 2018, the Ombudsman responded and informed the respondents that the municipality’s records indicated that the respondents were advised that the increase in their account was a result of the implementation of a penalty tariff in terms of the municipality’s policy. The said penalty, the Ombudsman explained further, was imposed due to the fact that the property was being used in contradiction to its zoning.
 On 10 October 2018, the municipality obtained an order in the Johannesburg High Court, per Meyer J, interdicting the respondents from using the property in contravention to its residential zoning within 30 days of the date of the order. Significantly, no appeal has been made against Meyer J’s order, and it remains in force. On 26 November 2018, the respondents launched an application challenging the municipality’s penalty tariff, which forms the subject matter of this appeal.
 In finding in favour of the respondents, the high court relied on the decision in Smit v The City of Johannesburg Metropolitan Municipality and reasoned that the municipality was constrained to levy a penalty rate without first re-classifying the property as an ‘unauthorised category’. Its failure to follow this prescribed procedure, the high court held further, amounted to a contravention of its rates policy which in turn contravened s 3 of the Local Government: Municipal Property Rates Act 6 of 2004 (the MPRA).
 The high court concluded that the municipality was only authorised to levy rates on the property based on the categorisation thereof namely, in accordance with its ‘Residential 1’ zoning. If the municipality wished to charge the punitive rate, the high court reasoned, it was required to first amend the valuation roll or issue a supplementary roll, and comply with the relevant legislative requirements that are designed to ensure compliance with the audi alteram principle, in order to protect ratepayers like the respondents, against arbitrary increases before imposing any penalty rates. Accordingly, the high court held that the municipality’s failure to do so, rendered its conduct invalid.
 It is necessary to examine the legislative provisions governing the powers and ability of municipalities to impose rates and tariffs. The municipalities’ power to levy rates on properties within their jurisdiction is an original power conferred in terms of s 229 (1)(a).of the Constitution of the Republic of South Africa (the Constitution). The MPRA is the national legislation envisaged in s 229 (2)(b) of the Constitution, enacted to regulate the imposition of rates by municipalities. This legislation, read together with the Systems Act, and the Local Government: Municipal Finance Management Act 56 of 2003 (the Finance Act), form part of a suite of legislation that gives effect to the new system of local government established in terms of the Constitution.
 Section 2 of the Systems Act provides that a municipality is an organ of state with a separate legal personality, whilst s 4(1)(b) provides that ‘the council of a municipality has the right to govern on its own initiative the local government affairs of the local community’. The object of the Finance Act is to secure sound and sustainable management of the financial affairs of municipalities by establishing norms and standards for, inter alia, ensuring accountability and appropriate lines of responsibility in the financial affairs of municipalities, budgeting and financial planning processes.
 The power of a municipality to raise a surcharge over and above a rate it levies in respect of a property, is guaranteed by s 156(5) of the Constitution, which provides that ‘[a] municipality has the right to exercise any power concerning a matter reasonably necessary for, or incidental to, the effective performance of its functions’. It immediately becomes evident that the consequence of having an original power is that a municipality’s power to levy rates is not dependant on enabling national legislation as it is derived directly from the Constitution. It follows therefore that the imposition of a penalty against property owners, as has happened in this case, is necessary and incidental to the effective performance of the municipality’s functions and services.
 Nonetheless, s 75A(1)(a) of the Systems Act bestows a general power upon a municipality to ‘levy and recover fees, charges and tariffs in respect of any function or service of the municipality’. In terms of s 75A(2) the fees, charges or tariffs are levied by a municipality by a resolution passed by the municipal council, with a supporting vote of a majority of its members.
 A municipality is obliged in terms of s 74 of the Systems Act, to ‘adopt and implement a tariff policy on the levying of fees for municipal services provided by the municipality itself or by way of service delivery agreements, and which complies with the provisions of this Act . . . and any other applicable legislation.’ This provision must be read together with subsecs 3(1) and (2) of the MPRA, which obliges a municipality to adopt a rates policy on the levying of rates on rateable property which takes effect on the effective date of the first valuation roll prepared by the municipality, and which must accompany the municipality’s budget for the financial year concerned.
 In Kungwini Local Municipality v Silver Lakes Homeowners Association and Another, this Court held that the adoption of a rates policy and the levying, recovering and increasing of property rates is a legislative rather than an administrative act. The effect being that a municipality’s action in this regard can only be challenged on the principle of legality, an incidence of the rule of law.
 Based on the various legislative provisions and established principles I have referred to above, it is beyond any doubt that a municipality’s powers to levy a penalty in respect of the use of any property within its jurisdiction, is not ultra vires its powers, provided it does so as part of a validly adopted property rates policy. It is common cause that, in casu, the respondents did not impugn the validity of the relevant municipality’s property rates policy, but its application. The respondents’ attack is only directed at the validity of the impugned tariff. Neither did the high court assail the validity of the property rates policy in question in any manner whatsoever.
 In developing their case, the respondents submitted that in terms of the MPRA and the rates policy, the rating of the property is done in accordance with the category of the property as set out in the municipality’s valuation roll. It therefore followed, the respondents argued further, that before an illegal or unauthorised tariff can be levied, the municipality was obliged to first update the category of the property on its valuation roll. To the contrary, the municipality contended that the property rates policy was properly applied and there was no requirement that there should first be a re-categorisation before the application for a penalty tariff.
 The municipality in this matter validly adopted and implemented a property rates policy in accordance with the provisions of subsecs 8(1) to (3) of the MPRA. Applying that policy, the municipality then levied different rates for different properties for the relevant period of 2015-2016. Clause 5 of the policy reads as follows: ‘5. CATEGORIES OF PROPERTY FOR LEVYING OF DIFFERENTIAL RATES
 Clause 5(2) of the policy contains a list of the various categories of rateable property in respect of which different rates are levied. Twenty-three different categories are listed based on the primary permitted use of the property, unless, otherwise stated. For example (a) is for business and commercial property, (b) is for sectional title business and (i) is for farming and so forth. The last item on the list under (w) is for ‘illegal use’, with which we are concerned in this case. The municipality’s 2016/2017 property rates policy has the same number of categories, save that under item (w), it has listed ‘unauthorised use’ in contrast to ‘illegal use’ that is found in the 2015/2016 rates policy.  The municipality’s property rates policy, for 2015/2016, explains, inter alia, under Clause 6 bearing the heading ‘6 Clarification of Categories of Property’, the primary permitted use of the rateable property, the reasons for the zoning of the specific property and how each particular category of property would be rated. The clarification given in respect of the ‘Illegal use’, in Clause 6.1, is particularly important. It reads as follows: ‘6.1 Illegal use (i) This category comprises all properties that are used for a purpose (land use) not permitted by the zoning thereof in terms of any applicable Town Planning Scheme or Land Use Scheme; abandoned properties and any properties used in contravention of any of the Council’s By-laws and regulations. . . (ii) The rate applicable to this category will be determined by the City on an annual basis. The City reserves the right to increase this penalty tariff higher than any other tariffs’. (My emphasis.) It bears mentioning that the ‘unauthorised use’ category is explained in similar terms in the municipality’s 2017/2018 and 2018/2019 property rates policies. This is clearly not without significance.  The approach to the interpretation of any legal document, be it legislation, any statutory instrument or contract, is now trite and has been affirmed in various judgments of this Court and the Constitutional Court. In Natal Joint Municipal Pension Fund v Endumeni Municipality, this Court outlined the approach to the judicial interpretive exercise as the process of attributing meaning to the words used in legal documents, taking into account the context in which they were used 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.
 A simple reading of the penalty tariff in Clause 6, read together with the rest of the municipality’s property and rates policy, reveals that it is plainly not applied as a ‘category’, although it is listed under the heading ‘Categories of Property for levying of Differential Rates’. From a mere interpretation of the MRPA, read with the policy, it is clear that the penalty charges levied under ‘illegal use’ or ‘unauthorised use’ are directed against a landowner’s illegal conduct, and not the property.
 The municipality’s property rates policy states unequivocally, that the ‘illegal use’ or ‘unauthorised use’ tariff will be imposed in respect of all properties that are used for a purpose (land use) not permitted by the zoning thereof. The ‘illegal use’ or ‘unauthorised use’ category is thus clearly defined with reference to the zoning categories, and not the categories as contemplated in the valuation roll.
 The respondents’ reliance on the fact that the penalty tariff is referred under the heading of ‘Categories’ in Clauses 5, is misconceived. The penalty tariff and how it is applied forms part of the concept of the tariff and charges against the property as informed by the municipality’s validly adopted property rates policy. A reading of this policy reveals a clear distinction between the general property rate for lawful use and a charge for the penalty tariff which is founded on illegal conduct.
 I have already alluded to the various enabling legislative provisions in terms of which the municipality validly adopted and implemented a property rates policy. Clearly, the municipality validly reserved to itself the right to claim a higher charge and tariff against landowners who deliberately refuse to bind themselves to the municipality’s land use scheme, as set out in its municipal property rates policy. This is in my view, the only sensible conclusion that can be reached if the penalty provisions, tariffs and charges referred to in the policy, are interpreted in the context in which they appear therein, taken together with the purpose to which the policy is directed, and the object of the enabling suite of legislation referred to earlier.
 The respondents’ argument that the municipality must first update the valuation roll whenever it wishes to charge an ‘illegal use’ or ‘unauthorised use’ tariff is based on the fallacy that such a valuation roll or supplementary roll must always reflect actual use. This argument completely misconstrues the lawful purpose of a valuation roll, which is to determine the value of the property in a specified category. As a matter of common sense, it follows that unauthorised use or a use for a non-permitted purpose can therefore only reflect the permitted use of the property.  Section 77 of the MPRA obliges the municipality to update the valuation roll annually, either through a supplementary valuation roll under s 78, or an amendment of the valuation roll under s 79. The object of updating the valuation roll is merely to correct objective errors in the category which is indicated in the roll, for example, errors or omissions in relation to rateable property.
 Sections 77 to 79, read simply, do not deal with the changes or variation to rates. In casu, no such error or omission in respect of the value of the respondents’ property exists. It is common cause that the permitted use of their property was always residential. It accordingly follows that no amendment or supplementary valuation roll is required as the respondents suggest.
 In the light of what I have stated above, I am in agreement with the municipality that the imposition of a higher tariff regarding rates payable on residential property, which is used for a purpose other than its authorised purpose, as has happened in this case, does not require a re-categorisation. The penalty or higher tariff the municipality validly imposed in respect of the respondents’ property, only seeks to address the current situation to the extent and for the duration of the illegal land use in operation. Clearly, the high court failed to appreciate the unreasonable administrative burden that would be placed on the municipality if a supplementary valuation roll had to be published in respect of every unlawful use of a property.
 The high court however acknowledged, rightly in my view, that the respondents were acting in contravention of the appellant’s land use scheme and importantly, that they were acting in contempt of the order by Meyer J issued on 18 October 2018, interdicting them from using the property as an accommodation establishment as long as the property remained zoned as ‘Residential 1’. In my view, the respondents’ aforesaid unlawful conduct are clear jurisdictional facts for the application of the municipality’s policy of the penalty tariff. Furthermore, the application of the penalty tariff and charge to the respondents’ property is competent in terms of the policy.  As I have stated earlier, the policy was validly adopted and applied. It, together with the relevant valuation rolls, were published and subjected to a normal public participation process. It follows that the complaint of an alleged breach of the respondents’ right to the audi alteram procedure cannot be sustained. Clearly the high court erred in this respect. I must also point out that the respondents’ reliance on the Blom
 case is misconceived. That case concerned a municipality’s power to add categories of rateable property in terms of s 8 of the MPRA. Blom accordingly concerned a totally different issue.  In light of what has been stated above, I find that the high court misdirected itself in various manners already described above, and its order falls to be set aside. It has not been demonstrated why the costs order should not follow the result.  In the circumstances, I make the following order: 1 The appeal is upheld with costs, including the costs of two counsel where so employed. 2 The order of the high court is set aside in toto, and replaced with the following order: ‘The application is dismissed with costs.’ _________________ B.H MBHA JUDGE OF APPEAL
Schippers JA (Carelse AJA concurring):  I am grateful to my colleague, Mbha JA, for setting out the circumstances in which the municipality’s claim to payment of a penalty tariff or higher rates arose. Unfortunately, however, I find myself in disagreement with the majority on the outcome of the appeal. In my respectful opinion, the municipality was not empowered under s 8 of the Local Government: Municipal Property Rates Act 6 of 2004 (the Rates Act) to determine ‘illegal use’ as a category of rateable property, nor to include such category in its rates policies.
 The answering affidavit states the ‘central issue’ in the case involves the interpretation and application of s 8(1) and (2) of the Rates Act. The municipality claimed that in terms of s8 (1) it was authorised to levy different rates for different categories of rateable property according to specified criteria set out in s 8(2) of the Rates Act. Then it referred to s 156(2) of the Constitution which empowers municipalities to make and administer by-laws to give effect to the functional areas in which they are authorised to govern, and s 156(5) which grants a municipality incidental powers for the effective performance of its functions. The municipality also cited s 229(1)(a) of the Constitution, which expressly authorises a municipality to impose ‘rates on property and surcharges on fees for services provided by or on behalf of the municipality’. Next, the municipality referred to s 3 of the Rates Act which enjoins the council of a municipality to adopt a policy consistent with the Act, for the levying of rates on rateable property in the municipality; and prescribes the contents of a rates policy.
45] The relevant provisions of the Rates Policy are the following:‘5. CATEGORIES OF PROPERTY FOR LEVYING OF DIFFERENTIAL RATES
 The high court (Fourie AJ) followed Smit v City of Johannesburg, a similar case in which De Villiers AJ held that the municipality could not apply an illegal use tariff to property used in contravention of a town planning scheme. The court in Smit held that the municipality had levied the illegal use tariff in breach of its rates policy, contrary to the provisions of s 2(3) of the Rates Act. The high court concluded that the municipality was only authorised to levy rates on the property based on its categorisation, ie residential property. If it wished to levy the punitive rate, it was required to amend the valuation roll or issue a supplementary one, and comply with the relevant legislative requirements, which included the audi principle to protect ratepayers against arbitrary increases.
6.1 Illegal use
‘It is a requirement of the rule of law that the exercise of public power by the executive and other functionaries should not be arbitrary. Decisions must be rationally related to the purpose for which the power was given, otherwise they are in effect arbitrary and inconsistent with this requirement. It follows that in order to pass constitutional scrutiny the exercise of public power by the executive and other functionaries must, at least, comply with this requirement. If it does not, it falls short of the standards demanded by our Constitution for such action.’