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Not reportable

Delivered: 28 June 2007

IN THE HIGH COURT OF SOUTH AFRICA

(TRANSVAAL PROVINCIAL DIVISION)

CASE NO: 7813/07

In the matter between:

RADIUS PROJECTS (PTY) LTD Applicant

and

CITY OF TSHWANE METROPOLITAN First Respondent

THE MEC FOR THE DEPARTMENT OF LOCAL Second Respondent

GOVERNMENT, GAUTENG PROVINCIAL

GOVERNMENT

________________________________________________________________

JUDGMENT

________________________________________________________________

MURPHY J

1. The applicant seeks an order compelling the first respondent, the City of Tshwane Metropolitan Municipality, to repay to it an amount of R63 756 within 7 days.

2. The applicant conducts business as a property developer. In early 2004 it was involved in developing a sectional title complex consisting of 54 units south of Pretoria at Pierre van Ryneveld X26.

3. Prior to commencing the development the applicant was required to procure the necessary development rights from the first respondent to enable it to erect 54 sectional title units on the subject property, together with the approval of the first respondent of its building plans for all buildings to be erected as part of the development with a view to eventually selling them and transferring them to prospective purchasers.

4. The application for approval, in terms of section 4 of the National Building Regulations and Building Standards Act 103 of 1977 (“the Building Act”), would have required it to submit an application in writing on the relevant form made available for that purpose by the respondent and such would have to have been accompanied by plans, specifications, documents and information as required by the legislation. The papers filed in this matter are somewhat ambiguous as to when this was done. However, it appears that it must have been done before 14 November 2003. On that date, pending final procurement of the development rights applied for, the applicant applied to the first respondent for authorisation in terms of section 7(6) of the Act to enable the applicant to commence with construction activities on the subject property.

5. Section 7(6) provides the local authority with the power to grant, at the written request of an applicant, provisional authorisation to an applicant to commence or proceed with the erection of a building to which such application relates. From the reading of the section as a whole such provisional authority should normally only be granted after an application for approval to erect any buildings had been submitted to it in terms of section 4.

6. While its application for provisional authorisation under section 7(6) was pending, the applicant went ahead and commenced with certain ground preparation and earthwork activities. On 17 February 2004, the first respondent’s Building Control Department served a notice on the applicants in terms of section 4 of the Act directing the applicant to cease building without approval, failing which legal proceedings would be instituted against it. Section 4(4) provides that any person erecting any building in contravention of the provisions of sub-section (1) shall be guilty of an offence and liable on conviction to a fine not exceeding R100 for each day on which it was engaged in so erecting such building.

7. In response to the notice of cessation issued by the respondent the applicant immediately ceased building and construction activities and commenced again only once it received the approval under section 7(6) on 30 March 2004.

8. The applicant avers that after receiving the notice of cessation it was informed that its plans would not be approved by the respondent until it paid an amount of R63 756, which the first respondent communicated was payable as a fine. The exact nature of the payment is in dispute between the parties. However, shortly before the payment of it and the grant of the section 7(6) authorisation, the first respondent addressed a letter to the applicant in which the following was stated:

“The site development plans, aesthetical plans as well as the building plans are now approvable. The only outstanding item on the building plans is the penalty fee because a notice for illegal building work has been issued prior to the submission of building plans.”

9. This letter, together with a letter dated 14 November 2003, addressed by the applicant’s project manager to the first respondent indicates that the building plans had not been submitted prior to the issuing of the notice to cease work. The relevance of this will become apparent in due course.

9. From the correspondence between the parties it appears that the respondent was only prepared to grant the approval and the provisional authorisation if the applicant paid the penalty fee. It has later denied informing the applicant that such amount constituted a fine but claims it was an administrative charge reasonably associated with the rendering of a service by the respondent to the applicant. The amount in question reflects an amount of twice the prescribed charge for the approval of the building plans. This, the respondent states, is the reasonable cost or charge associated with the function performed or service rendered by the first respondent in issuing the section 4 notice owing to the applicant having proceeded early with the unauthorised work.

11. On 23 March 2004 the project manager of the applicant paid the amount under cover of a letter which was headed:

“Pierre van Ryneveld X26: Boete vir Bouwerk Sonder Goedgekeurde Bouplanne

Hiermee verklaar ek, Mnr Jaco Pienaar, gevolmagtigde van Radius Projekte, dat betaling word hiermee getender onder protes en sonder benadeling en met volle voorbehoud van regte, sou dit later blyk dat die betaling, of ‘n gedeelte daarvan onverskuldig blyk te wees.”

12. It is the applicant’s case that the amount levied is a fine disguised as an administrative charge and that the imposition and collection of the fine falls foul of the provisions of the National Building Regulations and Building Standards Act 103 of 1977(“the Building Act”); the respondent’s Building By-Law; the Local Government Ordinance 17 of 1939; the Municipal Systems Act 32 of 2000; and the Criminal Procedure Act 51 of 1977, all of which permit the imposition of fines but only on conviction of an offence pursuant to a judicial process.

13. The first respondent does not deny that the jurisdiction to impose fines arises under the mentioned legislation and is exercised at the instance of the judiciary after conviction of an offence. Both parties seem to accept that any person erecting a building without prior approval commits an offence and is liable in terms of section 4 of the Building Act on conviction to a fine not exceeding a R100 for each day on which he was engaged in erecting such building. Likewise, other legislation allows for the imposition of fines after conviction of transgressions of municipal by-laws.

14. The respondent accordingly advances only one argument in defence, namely that the amount levied and collected constituted an administrative charge authorised by the provisions of section 75A of the Municipal Systems Act.

15. Section 75A provides that a municipality may levy and recover fees, charges or tariffs in respect of any function or service of the municipality. In terms of section 75A(2) the fees, charges or tariffs are levied by a municipality by resolution passed by the municipal council with a supporting vote of a majority of its members. Section 74 of the Act provides that a municipal council must adopt and implement a tariff policy on the levying of fees for municipal services which reflect certain principles, included among them the principle that tariffs must reflect the costs reasonably associated with rendering the service.

16. The first respondent at the time of levying the amount justified it as a charge and claimed to be entitled to impose it under its tariff policy.

17. The respondent’s resolution setting charges, fees and tariffs and adopting a tariff policy was approved on 2 October 2003. Part A of the Schedule to it deals with the charges payable to the municipality for the examination and approval of building plans. Part B deals with charges payable other than those for the examination and approval of building plans. Item 1(d) of part B provides for an administrative charge for submission of building plan applications regarding unauthorised work after a notice has been served in terms of the National Building Regulations and Building Standards Act 103 of 1977. It sets the charge at two times the plan fee additional to the building plan fee. Under part A the tariff for the examination and approval of building plans for all buildings is R7.00 per square metre.

18. The authority of a municipality to impose and collect fines is strictly regulated by legislation. Section 105(1) of the Local Government Ordinance empowers the local authority to make provision for the imposition of a fine in its by-laws should its by-laws be breached, but limits that fine to an amount of R2000. Section 106 of the Ordinance regulates the position where no penalties are provided in a specific by-law, in which event breach of the by-law will invite a penalty of R300. Section 107 requires such fines to be recovered before a court with competent jurisdiction. In terms of the respondent’s Building By-Law, supplementary to the Building Act, fines are provided for in terms of the Ordinance, the terms of which are specifically incorporated into the by-law by reference.

19. Section 113 of the Municipal Systems Act provides that fines and estreated bails recovered in respect of offences or alleged offences referred to in item 2 of schedule 4 to the Public Finance Management Act 1 of 1999 must be paid into the Revenue Fund of the municipality. The fines referred to are those in respect of offences in terms of by-laws enacted by municipalities or national or provincial legislation, the administration of which is assigned to municipalities. Counsel for the applicant, correctly in my view, submitted that section 113 of the Municipal Systems Act then is a clear indication that the legislature intended to distinguish between the authority of a municipality to levy fees, charges and tariffs in terms of section 75A and the authority to recover fines for transgressions under other legislation.

20. The Building Act, as I have already mentioned, provides its own penal provision for a transgression of section 4. That is, R100.00 for each day engaged in the unauthorised building activity. Moreover, and importantly, a conviction in a court is stated to be a pre-requisite for the imposition of such a fine.

21. In the light of the legislative framework, it is clear that parliament in the enactment of the Municipal Systems Act, maintains a clear distinction between the nature and purposes of fines and charges. A fine is a sum of money paid as punishment for breaking a law. A charge, on the other hand, is the price demanded for a thing or service. Section 1 of the Municipal Systems Act defines a municipal service as “a service that a municipality in terms of its powers and functions provides or may provide to or for the benefit of the local community”. A charge for a service, accordingly, contemplates the payment of money in exchange for a service such as refuse removal and the like.

22. The power bestowed upon a municipality in terms of section 75A, the provision under which the first respondent claims to be acting, is a general power to levy and recover charges in respect of any municipal function or service.

23. As I indicated earlier, the evidence regarding the submission of the building plans is somewhat uncertain. While the correspondence seems to suggest that the plans had not been submitted before the application in terms of section 7(6), it seems that no such application could be entertained without consideration of the building plans submitted under section 4.

24. On the assumption that the plans were submitted sometime during the previous year, one assumes they were lodged together with the fee payable under part A of the tariff policy. In such an event one would have to ask what other function or service the respondent performed or provided justifying the charge in dispute in the present matter. A service involves the provision of a benefit; whereas a function is an activity involving the performance of a duty or a role. Clearly the respondent did not provide the applicant a service when it issued the notice of cessation. The service of approving its building plans was a separate service and I doubt whether it was the subject of the charge that is presently in issue. The respondent contended in argument however that the charge indeed covered the charge for perusal and consideration of the building plans under Part A of the Schedule. Yet, it has made no positive averment to that effect in its answering affidavit. Moreover, item 1(g) of part B indicates that the charge so levied, being double the fee for the approval of building plans, is levied in addition to the fee charged for considering the building plans.

25. Accordingly, I accept then the submission of the applicant that it did not receive anything in exchange for the hefty administrative charge it paid. Nevertheless, it is correct, the first respondent did perform a function, rather than render a service. It issued a notice under the Building Act and possibly reconsidered the plans. Section 75A(1)(a), as already explained, specifically permits a municipality to levy a charge for a function.

26. Section 74 of the Municipal Systems Act, requiring the adoption of a tariff policy, relates only to the levying of fees for municipal services and requires inter alia that the tariff must reflect the costs reasonably associated with rendering the service (see section 74(2)(d)). There is no similar express limitation upon a municipality’s authority to levy and recover charges in respect of any function of the municipality under section 75A(1)(a). All that is required is that such charges must be set by and adopted in terms of a resolution passed by the council.

27. The respondent therefore makes the point that the legislative framework regulating the imposition of municipal fines does not derogate from the power to impose administrative charges for the performance by the municipality of any function under legislation. Despite the applicant’s submissions to the contrary, the respondent in its answer has consistently denied that it imposed a fine but claims rather to have imposed a charge for carrying out its function to ensure the cessation of unauthorised construction activities.

28. The respondent further asserts that the amount of the charge payable is entirely within the discretion of the first respondent. In my view that is something of an over-statement. Being subordinate legislation the policy must comply with the standards of reasonableness. Although the applicant has hoisted its flag to the mast that the charge is a disguised fine that may not imposed under the Municipal Systems Act, at the same time it makes the case that there is no rational connection between the amount charged and the extent of the function performed under item 1(g) of part B. A charge of R63 756 for the issuing of a single notice to desist and to review plans already submitted is excessive in the circumstances and hence most likely unreasonable.

29. But it is unnecessary to determine whether or not the amount recovered by the respondent from the applicant was unreasonable, because I am satisfied that the applicant is correct that the amount was in fact levied by the respondent as a fine. Thus, in the correspondence the charge was referred to as a penalty fee and the receipt issued in respect of it, annexed to the founding affidavit as annexure A10, records the receipt of a cash payment as a “boete”. Moreover, the disproportionate extent and effect of the payment in relation to the function performed is strongly indicative of the fact that it is a fine rather than the recovery of a payment for a function. And furthermore, given that the charge was levied in terms of the provision of part B (as opposed to part A) of the Schedule to the tariff policy, dealing with amounts other than fees for building plans, and is stated to be a payment in addition to the fee for the scrutiny and approval of building plans, it is clearly not for the service of considering and approving the building plans as stated by the respondent. It is quite evidently a fine imposed because the applicant had engaged in unauthorised work. The fact that section 4(4) provides for the payment of fines for commencing building in contravention of the Building Act, and the fact that section 75A of the Municipal Systems Act speaks only of a power to levy and recover fees, charges and tariffs, leaves me in no doubt that an attempt to impose a fine under section 75A, going beyond that provided for in the Buildings Act, is ultra vires and hence null and void.

30. The respondent having recovered the fine without any legal authority to do so, the question arises whether the applicant may recover it under the law of unjustified enrichment. I am of the opinion that when the applicant made payment under protest it was in effect reserving the right to rely on an unjustified enrichment action by stating that it was not simply paying and abandoning its legal entitlements. Be that as it may, the respondent asserts that the applicant fails to meet the requirements for the fulfillment of the condictio indebiti, in that such condictio entitles the plaintiff to recover money or property only if there was an error, that is, if he or she thought that the money or property was owed to the other person, whereas actually it was not. The transfer was not given under a mistaken belief or impression that performance was not due since the applicant always took the view that performance was not owing.

31. Technically, there may be some merit in the point on the specific facts of this case. However, I am of the opinion that the money was transferred under protest, contrary to public policy, sine causa. A local authority is not entitled to recover money that it has no power in law to recover. Consequently, any payment made by agreement in that regard would be illegal. In which event, in my view, the condictio ob turpem vel iniustam causam may be of application to do simple justice between man and man. Moreover, the undue influence brought to bear upon the applicant by the respondent, in the form of it refusing to approve the building and development plans until the money was paid, is a form of sine causa that would justify recovery under the condictio sine causa.

32. Interest in an enrichment claim is now regulated by section 2A(2)(a) of the Prescribed Rate of Interest Act of 1975 which provides as a general rule that interest will run from the date of demand or summons, whichever is earlier. In my opinion the payment under protest constituted a demand for immediate repayment. When payment was made under protest the respondent ought to have realised that a claim for the refund of the amount was being pressed immediately and that there existed the possibility of the applicant proving an entitlement to recover the money and hence it was in mora from the date of payment, being 23 March 2004.

33. In the result the following orders are issued:

1. The first respondent is ordered to repay the applicant R63 756 within 7 days of this order together with interest at a rate of 15.5% per annum from 23 March 2004 until the date of payment.

2. The first respondent is ordered to pay the costs of this application.

JR MURPHY

JUDGE OF THE HIGH COURT

Date Heard:8 June 2007

For the Applicant:Adv A Liversage, Pretoria

Instructed By:Classen & Gerdener Attorneys, Pretoria

For the Respondent:Adv AT Ncongwane, Pretoria

Instructed By:Hugo &Ngwenya Inc c/o Meintjes & Petser, Pretoria

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