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CRL 202 - Administrative Law Summary
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ADMINISTRATIVE LAW CASES1. FEDSURE LIFE ASSURANCE LTD AND OTHERS v GREATER
JOHANNESBURG TRANSITIONAL METROPOLITAN COUNCIL AND
OTHERS
The appellants, ten corporate ratepayers in the Eastern Metropolitan Substructure (EMS),
objected to a substantial increase in their property rates. They challenged the lawfulness of
certain resolutions (adopted by the Greater Johannesburg Transitional Metropolitan Council
(TMC) and the EMS in relation to their 1996/97 budgets) which had given rise to this
increase.
The budgets had been drawn up in accordance with a policy negotiated and agreed to by the
TMC and its four substructures. At the heart of this policy lay two principles: (1) that a
uniform rate should be imposed on land and rights in land across the greater Johannesburg
region and (2) that the combined budgets of the individual bodies should balance.
Calculations revealed that if a general rate of 6,45 cents in the Rand was charged on land and
rights in land within the greater Johannesburg area, total income would meet total
expenditure. Specifically, deficits in the TMC, the Western Metropolitan Substructure
(WMS) and the Southern Metropolitan Substructure (SMS) would equal surpluses in the
EMS and the Northern Metropolitan Substructure (NMS).
Therefore, by means of the challenged resolutions, surpluses generated in the EMS and NMS
were paid as levies to the TMC. The TMC retained funds sufficient to balance its own budget
and paid the remainder to the WMS and SMS in the form of subsidies. The effect of this
policy was that some ratepayers faced an increase in their existing property rates whilst others
enjoyed a decrease. Still others were required to pay property rates for the first time.
The appellants applied initially to the Witwatersrand High Court to have the rates, levies and
subsidies set aside. Goldstein J found the resolutions to be lawful and dismissed the
application.
The appellants appealed against this decision. The Supreme Court of Appeal (SCA) found,
however, that it was not able to entertain the appeal since the attacks raised constitutional
issues. Accordingly it referred two questions to the Constitutional Court: (a) whether the
resolutions were consistent with the interim Constitution and (b) if they were, whether the
SCA had any residual power to decide the various challenges.
(a) Challenges to the Resolutions:
The appellants challenged the resolutions on a series of grounds. At the hearing in the SCA,
the parties were agreed that the resolutions relating to the rates, levies and subsidies were
“administrative actions” as contemplated in section 24 of the interim Constitution. In this
Court, however, the respondents argued that they were legislative and not administrative
actions.
,The Court accepted this argument. Nonetheless the justices were agreed that all legislation
must comply with the Constitution. An important principle of our Constitution is the rule of
law, which means at very least that any exercise of power by an organ of state must fall
within the limits of the power conferred on that body. Courts, including the Constitutional
Court, may thus review and set aside legislative action which does not comply with this
principle of “legality”.
First Challenge:
The appellants argued that the resolution increasing property rates within the EMS was
unlawful since these additional funds were necessary, not for the EMS’s own purposes, but
rather for the payment of a levy to the TMC. This challenge was unanimously rejected by the
Court.
The justices noted that the process of drawing up a budget involves making considered
estimates as to items of expenditure which are likely to be incurred during the relevant
financial year. In the ordinary course of events, certain contingent liabilities will not
materialise, or will place a lesser or greater drain on resources than originally anticipated.
Such outcomes cannot be said to entitle ratepayers to challenge the validity of the budget
itself.
In the present case, the EMS had drafted and approved its budget on the basis that it would be
required to pay a levy to the TMC in that financial year. There was no suggestion that this
assumption was made unreasonably or in bad faith. Therefore, even if the TMC levy was
unlawful, the fact that the EMS provided in its budget for such expenditure did not undermine
the validity of the property rates imposed by the EMS.
Second Challenge:
The appellants contended that the resolution of the TMC imposing a levy on the EMS and
NMS was unlawful because the levy was not equitable and was not based on the gross or
rates income of the substructures. The Court was evenly divided on this question.
In a joint judgment of President Chaskalson and Justices Goldstone and O’Regan (concurred
in by Justices Ackermann and Madala), it was held that the levy was not sufficiently closely
linked to either gross or rates income for it to have been “based on” such income. Indeed the
evidence indicated that the levy was based on the surpluses generated in the EMS and NMS.
Hence they concluded that the TMC levy was unlawful. This finding rendered it unnecessary
for these justices to express any opinion on the appellants’ third challenge.
In a separate judgment concurred in by Deputy President Langa and Justices Mokgoro, Sachs
and Yacoob, Justice Kriegler found that it was not necessary that the levy be based
exclusively on gross income. It was sufficient that the levy be related to gross income.
Justice Kriegler held that the levy was directly related to the EMS’s gross income and thus
that this challenge should fail.
Third Challenge:
The appellants contended that the levy was unlawful on the basis that it was not necessary for
the TMC to exercise its powers and perform its functions and that it was not based on a
, uniform structure for the TMC’s area of jurisdiction. As already indicated, only Justice
Kriegler’s finding in relation to the second challenge rendered it necessary to consider this
third attack.
In Justice Kriegler’s view, the interdependence of the TMC and its substructures, and the
TMC’s constitutional duty to provide for the well-being of all persons within its area of
jurisdiction, entailed that it had the power to impose a levy on one substructure for the
purpose, not only of balancing its own budget, but also of making a grant to subsidise another
substructure’s deficit.
Furthermore, given the co-operation between the TMC and its substructures in financing each
body’s expenditure, and in particular the decisions to standardise property rates and service
tariffs across the greater Johannesburg region, the levy was based on a uniform structure for
the TMC’s area of jurisdiction. Hence, in Justice Kriegler’s view, the TMC levy was lawful.
Fourth Challenge:
Finally, the appellants claimed that there were certain procedural irregularities in the manner
in which the TMC and EMS budgets were prepared and approved. The Court found that the
required procedures had in fact been followed and unanimously dismissed this challenge.
(b) Jurisdiction of the Supreme Court of Appeal:
In relation to the second of the questions referred by the SCA, the justices were agreed that
the SCA did not have jurisdiction under the interim Constitution to decide any matter which
the Constitutional Court was empowered to decide.
In the opinion of the Constitutional Court, this scheme was undesirable. It introduced
uncertainty as to which court should hear particular cases and deprived the Court of the views
of the SCA on constitutional issues. The 1996 Constitution removed this jurisdictional bar by
allowing the SCA to hear constitutional cases. In future cases falling under the interim
Constitution, therefore, it would be in the interests of justice for the SCA to exercise the
jurisdiction conferred on it by the 1996 Constitution. It should however decide the case in
terms of the law in force at the time that the relevant cause of action arose.
Conclusion:
☐ The justices were unanimously agreed:
∙ that the SCA did not have power under the interim Constitution to hear
constitutional matters but that, in future matters brought in terms of the interim
Constitution, the SCA should exercise its jurisdiction under the 1996
Constitution;
∙ that the resolutions of the TMC and EMS did not amount to “administrative
actions” for purposes of section 24 of the interim Constitution but had,
nonetheless, to comply with the constitutional principle of “legality”;
∙ that the property rates imposed by the EMS on its ratepayers were lawful; and
∙ that the procedural requirements relating to the presentation and approval of
the TMC and EMS budgets had been fulfilled.
☐ The justices were evenly divided, however, on the lawfulness of the TMC levy
imposed on the EMS. Since there was no clear majority in favour of reversing Goldstein J’s
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