Port Alfred Riverhouse Property (Pty) Limited v Ndlambe Municipality and Another (1223/2007) [2008] ZAECHC 126 (18 July 2008)

IN THE HIGH COURT OF SOUTH AFRICA

(EASTERN CAPE DIVISION) CASE NO. 1223/2007

In the matter between:

PORT ALFRED RIVERHOUSE PROPERTY (PTY) LIMITED Applicant

and

NDLAMBE MUNICIPALITY First Respondent

KERYN VAN DER WALT Second Respondent

Application for review of lease agreement. Restrictive condition in title deed pertaining to public open space as well as publication in terms of section 124(2) of the Municipal Ordinance 20 of 1974 (as amended) discussed.

______________________________________________________________

JUDGMENT

Crouse, AJ:

Introduction:

The Applicant, Port Alfred Riverhouse Property (PTY) LTD., brings this application for the review of a lease agreement entered into between the First Respondent, Ndlambe Municipality (hereinafter refer to as “the Municipality”) and the Second Respondent, Keryn van der Walt, (hereinafter referred to as “Van der Walt”).

The Applicant sought the following relief:

Reviewing and setting aside the decision of the Municipality taken on 15 November 2006, by which the Municipality resolved to lease portions of erven 336 and 460, Port Alfred, (hereinafter referred to as “Kiddies Beach”) to Van der Walt subject to various conditions;

Reviewing and setting aside the granting of the lease of Kiddies Beach by the Municipality to Van der Walt, such lease being concluded on 20 December 2006, and further declaring that such purported lease is of no force and effect;

Directing the Municipality to evict Van der Walt from Kiddies Beach, alternatively evicting Van der Walt from Kiddies Beach;

Directing the Municipality to require Van der Walt to remove the temporary structures erected on Kiddies Beach alternatively directing Van der Walt to remove the temporary structures erected on Kiddies Beach;

Costs of suit, such costs only to be paid by Van der Walt in the event of Van der Walt opposing the relief sought;

Only the Municipality opposed the relief sought.

The Applicant owns the land situate directly across the Kowie River from Kiddies Beach. The Applicant alleges that it has locus standi to bring this application, because of the proximity of the Applicant’s land to Kiddies Beach and because it is a ratepayer of the Municipality, it has a direct interest in the lawfulness of any lease entered into by the Municipality. The Municipality does not dispute that the Applicant has locus standi to bring this application.

The Applicant initially raised five grounds for review in the Founding Affidavit, but at the time that this application was argued, relied on two grounds only, namely:

That the lease contravenes a restrictive condition in the title deed of one of the erven of which a portion is leased by Van Der Walt; and

That the lease was not advertised as is required by section 124 (2) of the Municipal Ordinance 20 of 1974.

I was informed that the Applicant will only rely on the two grounds of review as set out above and that there are no factual disputes that I have to decide. It is accepted by the parties that the acts complained of are administrative acts as envisaged by the Promotion of Administrative Justice Act 3 of 2000 (PAJA) and that the application must be dealt with under PAJA.

Mr Paterson and Mr De la Harpe argued the application for the Applicant and the Municipality respectively. I thank them for their helpful and well prepared arguments.

The Background To The Lease Agreement:

Kiddies Beach consists of portions of erven 336 and 460 and is situated on the western bank of the Kowie River. It must be appreciated that the area of erven 336 and 460 is larger than only the Kiddies Beach area, but the lease does not include the total area of these erven.

In previous years, Kiddies Beach was well utilised by the public, but prior to entering the lease circumstances changed. The general public avoided the area as it had become unsafe. Bad elements and vagrants used the surrounding bush as overnight accommodation and/or as a base camp to commit crime in the surrounding neighbourhood. Abalone poachers used Kiddies Beach as a drop-off point for divers and their implements and for hiding the illegally obtained abalone. Unattended parked vehicles were vandalised and/or broken into. Illegal dumping caused a health risk. Broken glass bottles on the beach caused injury to swimmers. The environment was not adequately protected and/or managed. The ablution facility was vandalised and not clean. Additional showers were needed. Children bathed in unsafe areas not far from commercial fishing boats as the swimming areas were not properly demarcated.

The Municipality did not and still does not have the manpower or finances to manage the area properly, nor to put corrective measures in place. Therefore a public-private partnership (hereinafter referred to as PPP) was proposed, whereby Van der Walt would move her business, known as Keryn’s Dive School, to Kiddies Beach.

In terms of the PPP proposal Van der Walt would:

Clear the undergrowth and remove all alien invasive trees and shrubs without destroying the natural boundary line. Apart for the environmental impact, this will expose the vagrants and bad elements, limit the number of access paths into Kiddies Beach and rehabilitate the affected areas. This would again have a positive effect on the environment and also limit the illegal use of the area by vagrants and criminals;

Prepare a network of smaller pathways (touch paths) between the indigenous vegetation for young children;

Put up informative signage in the area highlighting information about fish, general legislation and the importance of the estuary;

Take over and upgrade the ablution facilities and maintain same;

Van der Walt’s office will be placed centrally at the entrance to the beach area between the ablution facilities and the parking area;

Increase and upgrade braai facilities, with litter bins to be placed strategically;

Increase environmental awareness by working closely with the Rhodes University’s Laboratory station next to Kiddies Beach, as well as with the municipality’s full time environmental education officer;

Place a row of buoys or markers demarcating a safe swimming area for children;

Painting and maintaining the Sister Peter bridge.

It was envisaged that with increased activity and Van der Walt’s business running seven days a week, this area will become safe again. The intended PPP was published in July 2006. The Municipality resolved on 15 November 2006 to enter into this PPP by using the vehicle of a lease agreement. The lease agreement was entered into on 20 December 2006, with the lease commencing on 1 January 2007.

Van der Walt erected a container from where she conducts her business. This container is situated partly on both erven. The Applicant lodged this application for review on 25 June 2007.

First Ground of review: Restrictive Condition:

Erf 460 Port Alfred (part of which forms part of Kiddies Beach which is leased by Van der Walt) is held by the Municipality in terms of a Deed of Grant from the State. The title deed contains the following condition:

“Die eiendom sal slegs as openbare oopruimte aangewend word en indien dit nie langer vir die doel gebruik of benodig word nie, dit op koste van die Munisipaliteit aan die Staat terug getransporteer sal word en dat die Munisipaliteit in sodanige omstandighede vergoed sal word vir daardie verbeterings deur hulle op die eiendom tot stand gebring en wat vir die Staat tot niet kan strek”

Mr Patterson for the Applicant argued that the lease of part of erf 460 to Van der Walt to conduct a business thereon is a direct contravention of this condition in the title deed and therefore the lease should be reviewed and set aside.

For the Municipality Mr De la Harpe agrees that the erf’s usage is subject to the said restrictive condition, which is operative against the world at large. He however contends that Van der Walt’s business of offering recreational activities to the public is not a contravention of the said condition. He argued that one must look at the predominant feature of the contract between the Municipality and Van der Walt. The effect of the lease contract was that Van Der Walt erected a temporary structure as office on the boundary of erf 460. In terms of the lease, Van der Walt must keep the beach surrounding the lagoon clean and must refurbish and maintain the ablution facilities. Van der Walt’s use of the premises includes environmental education and general recreation, a safe and maintained swimming area, safe parking, prevention of littering, dumping or squatting. She also upgraded braai facilities and conducts outdoor activities and adventure tourism. She presents training in first aid, navigation and diving. In return for these obligations, Van der Walt is entitled to conduct her business which has to do with recreation and recreational tourism, all of which is compatible with the general purpose to which the property let is to be put.

Mr De la Harpe submitted that it must be a material and predominant feature of “public open space” that the public have access thereto for recreational purpose without restriction. Mr De la Harpe argued thus that the simultaneous use of a portion by Van der Walt for the conduct of a recreational business does not offend the limitation of use and this is particularly so in circumstances where Van der Walt’s use is attached to the obligations to maintain the erf to facilitate the public use which would otherwise be inhibited. The character of the area is not affected by this use of Van der Walt, which can also be seen as a part of or incidental to the permitted use.

Mr Paterson on the other hand submitted that this argument must fail because there is no mention in the title deed of recreational activities and the fact that Van der Walt is conducting a business is contrary to the purpose of the restrictive condition. He also argues that Van der Walt’s business cannot be seen as incidental usage. He conceded that should the Municipality had conducted a recreational business on the premises this would not have been a contravention of the restriction, but Van der Walt is not allowed to conduct the business that she does. Mr Patterson is of the opinion that the Municipality would have even been allowed to limit public access by an entrance fee. Van der Walt does not limit public access in any way.

In Coin Operated Systems (Pty) Ltd and Another v Johannesburg City Council 1973 (3) SA 856 (W), Howard J in S v Pine Smythe (Pty) Ltd 1982 (2) SA 32 (N) at 36H-37A found that it may sometimes be a matter of degree whether a particular activity constitutes a legitimate part of the business or other use permitted by the scheme.

Each case must however be decided on its own facts. The use of erf 460 to which the Applicant objects, in real terms means that half of a container is put on the one boundary of a very large erf and that the general public will visit this from time to time. The applicant would have had no qualm if the container was placed there merely to act as an office to facilitate the managing of Kiddies Beach, but now it also offers diving courses, sea and river skipper courses, and acts as a central reservation office for skydiving, horse riding, overnight river cruises, overnight canoe trails and fishing charters as well as leadership training and team building for school groups.

Within the meaning and intent of the town planning scheme, “public open space” is land to which the general public has access. Objectively viewed, the business conducted by Van der Walt holds no prejudice for the general public’s access to erf 460, if anything the agreement between the Municipality and Van der Walt enhances this use by the general public.

In the circumstances, this ground of review is dismissed.

Second Ground of review : Publication

The Applicant’s second ground for review is that the lease was not advertised as required by section 124(2) of the Municipal Ordinance 20 of 1974 (as amended).

Mr Paterson submitted:

That the publication of the PPP makes neither reference to a lease or to section 124(2) of the said Ordinance. Therefore no publication as envisaged in the said Ordinance took place.

That there is nothing in the advertisement which could alert the public to the fact that a lease was envisaged and that a person intent on objecting to a lease cannot be required to examine every set of papers lying for inspection to satisfy himself that no lease is envisaged.

Consequently the lease should be set aside on review for want of compliance in terms of Section 6(2)(a)1 and section 6(2)(f)(i)2 of PAJA.

In argument, Mr De la Harpe for the Municipality, agreed that, should I find that no advertisement took place, this ground of review is proper and the lease must be set aside. He submitted however that:

A PPP was advertised and the lease was the means (or the vehicle) of performing that partnership;

The advertisement took place in terms of sections 120 and 33 of the Local Government: Municipal Finance Management Act 56 of 2003 and the proposed lease lay for inspection;

There was material and substantive compliance with Section 124 of the Municipal Ordinance;

Although the deponent for the Municipality contended in the opposing papers that there had been an implied repeal of section 124, this argument was not persisted in before me.

Thus the question to be decided is whether the failure to mention that the intended contract is one of lease in the advertisement renders this contract susceptible to review.

Section 124 of Municipal Ordinance 20 of 1974 (as amended) reads as follows:

124 Alienation and letting of municipal property

“(1) Subject to the provisions of subsection (2) and such directions as the Administrator may from time to time determine, a council may -

(a) alienate, let or permit to be built upon, occupied, enclosed or cultivated any immovable property owned by the municipality …..

b) ….

“(2) No council shall act in terms of subsection (1) unless it has-

(a) advertised its intention so to act, and

(b) considered the objections (if any) lodged in accordance with the advertisement contemplated by paragraph (a) ; provided ….”

The Municipality caused the following advertisement to be published prior to entering into the lease agreement:

“ NDLAMBE MUNICIPALITY PROPOSED PUBLIC PRIVATE PARTNERSHIP:

KIDDIES BEACH, PORT ALFRED

An application has been received from Keryn’s Dive School to enter into a public private partnership agreement with Ndlambe Municipality for the maintenance and management of the area known as Kiddies Beach, Port Alfred in terms of Section 120 of the Municipal Finance Management Act, 2003 (Act No 56 of 2003).

Details of the proposal can be viewed at the Municipal Offices, Causeway, Port Alfred during office hours. Alternatively, details can be obtained from Ms Keryn van der Walt of Keryn’s Dive School, Small Boat Harbour, Port Alfred. Written comments / objections, if any, should be (1) e-mailed to portalfred@ndlambe.co.za , (2) or handed in at the Registry Office, Causeway, Port Alfred or (3) posted to P O Box 13, Port Alfred, 6170, to reach the undersigned by not later than Friday, 18 August 2006.”

In reaching a decision on the above question, I will firstly decide whether the Municipality could enter into a lease in terms of the Municipal Finance Management Act 56 of 2003.

Section 120 of the Municipal Finance Management Act 56 of 2003, as amended, reads as follows:

120 Conditions and process for public-private partnerships

(1) A municipality may enter into a public-private partnership agreement, but only if the municipality can demonstrate that the agreement will-

(a) provide value for money to the municipality;

(b) be affordable for the municipality; and

(c) transfer appropriate technical, operational and financial risk to the private party.

(2) A public-private partnership agreement must comply with any prescribed regulatory framework for public-private partnerships.

(3)…. (7)

Regulations under section 168 of the Municipal Finance Management Act 56 of 2003 were made and published under GN R309 in Government Gazette 27431 of 1 April 2005. In these regulations a PPP is defined as:

'public-private partnership' means a commercial transaction between a municipality and a private party in terms of which the private party-

(a) performs a municipal function for or on behalf of a municipality, or acquires the management or use of municipal property for its own commercial purposes, or both performs a municipal function for or on behalf of a municipality and acquires the management or use of municipal property for its own commercial purposes; and

(b) assumes substantial financial, technical and operational risks in connection with-

(i) the performance of the municipal function;

(ii) the management or use of the municipal property; or

(iii) both; and

(c) receives a benefit from performing the municipal function or from utilising the municipal property or from both, by way of-

(i) consideration to be paid or given by the municipality or a municipal entity under the sole or shared control of the municipality;

(ii) charges or fees to be collected by the private party from users or customers of a service provided to them; or

a combination of the benefits referred to in subparagraphs (i) and (ii);”

In her replying affidavit the Applicant avers that there was no compliance with section 120(2) of the Municipal Finance Management Act 56 of 2003, nor with regulations 2, 4 and 5 made therein under. This argument was however not pursued before me, but Mr Paterson, on my prompting on whether he agreed with the argument of Mr De la Harpe that a PPP was entered through the vehicle of a lease agreement, submitted that because the lease does not claim to be a PPP, the lease cannot be a PPP. In the circumstances I will accept, bar for this argument, that there is no further dispute between the parties concerning the formalities of establishing a PPP. I also accept that other than the two arguments advanced before me that the parties are in agreement that the Municipality could have entered into a PPP or a lease agreement with Van der Walt.

I have no difficulty in finding that the agreement between the Municipality and Van der Walt was in fact intended as a PPP, although it is termed a lease. I have also no difficulty in finding that the agreement between Van der Walt and the Municipality was entered in good faith and for public benefit. I also find that the Municipality was entitled to choose either a PPP or a lease as a vehicle to contract with Van der Walt. The Municipality could have termed the contract a lease or a PPP.

The question however remains whether the publication of the PPP is sufficient compliance with the provisions of section 124(2) of the Municipal Ordinance 20 of 1974 to enter into a lease agreement with Van der Walt.

The ratio of publication was set out as follows by Plasket J in Civil and General Contractors CC v Lukhanji Municipality and others3 at paragraph [16]:

“ It is clear from a number of cases spanning nearly 100 years that provisions such as section 124 of the Cape Municipal Ordinance are not unusual and are based on the idea that some form of oversight of the way in which municipalities deal with their immovable property is necessary to protect ratepayers from the consequences of ill-considered or even corrupt dissipation of municipal assets. As this is the purpose of provisions such as section 124, the courts have taken the view consistently that compliance with such conditions is necessary for a valid decision by a municipality to alienate, lease or acquire immovable property.”

Section 124(2) of the Municipal Ordinance 20 of 1974 only requires publication. This section does not determine what information must be published. However "publish in the press" is defined in the said Ordinance as:

“ to publish ... a notice setting forth the substance of the matter authorised or required to be so published and specifying the place where and the hours during which particulars thereof will be available for inspection...”

In Latib v Administrator, Transvaal 1969 (3) SA 186 (T) (190H-191A) Galgut J held: “It seems clear, therefore, that, where there is no direction in the statute requiring that the section in terms of which a proclamation is made should be mentioned, then, even though it is desirable, nevertheless there is no need to mention the section and, further, that, provided that the enabling statute grants the power to make the proclamation, the fact that it is said to be made under the wrong section will not invalidate the notice. The Administrator here had the power in terms of sub-sec. (3) of sec. 5 A to do what he did in Administrator's Notice 616; he acted in terms of the enabling section. The fact that he inadvertently omitted to mention para. (c) of sub-sec. (3) does not invalidate the Notice.” This dictum was relied on by the Supreme Court of Appeal in Howick District Landowners’ Association v Umngeni Municipality and others 2007 (1) SA 206 SCA paragraphs [19] & [20]: “Under the doctrine in Latib 's case, where an empowering statute does not require that the provision in terms of which a power is exercised be expressly specified, the decision-maker need not mention it. Provided moreover that the enabling statute grants the power sought to be exercised, the fact that the decision-maker mentions the wrong provision does not invalidate the legislative or administrative act” and “Latib does not license unauthorised legislative or administrative acts. It licenses acts when authority for them exists, and when the failure expressly or accurately to invoke their source is immaterial to their due exercise. As Baxter (in Lawrence Baxter Administrative Law14) puts it: 'If the authority is stated incorrectly, the action is not thereby invalidated so long as authority for the action does exist and the conditions for its exercise have been observed.”

In Pinnacle Point Casino (Pty) Ltd v Auret NO 1999 (4) SA 763 (C) at 769H-I, Blignaut J referring inter alia to Latib v Administrator, Transvaal (supra), supported the proposition that the existence of a valid enabling provision will validate action incorrectly stated to have been taken under some other provision. He held that the situation is different, however, where the functionary deliberately acted in terms of a particular enabling provision. If that provision is found to be invalid then the validity of the action cannot be saved by the existence of a valid enabling provision elsewhere.

The learned author Cora Hoexter on p 231 in her book Administrative Law in South Africa states that the challenge in these situations is to steer a course between faulting administrators for purely technical (or administrative) errors and paying due regard to the right to lawfulness and of course to the public interest in certainty.

These cases are not directly on par with the situation at hand. In the advertisement the Municipality did not presume to act under the wrong enabling legislation. The Municipality referred to parallel enabling legislation in the publication.

Fairness dictates that the information published must be such that it places the ratepayer who might want to object in a position to do so. In its founding papers the applicant referred to the said advertisement and also the proposals to which the advertisement refers. The Applicant acknowledges correctly that the proposal refers to a lease agreement. As there are no allegations to the contrary, I can thus safely assume the applicant had knowledge of the intended PPP through the advertisement and of the intended lease agreement through perusal of the proposal. The Applicant does not allege any prejudice she had suffered in relation to the advertisement not stating that the vehicle of the PPP was a lease.

As already stated, each case must be decided on its own facts. In the circumstances of this case, I cannot find any prejudice to the Applicant. I therefore dismiss the second ground of review.

Costs

Mr Paterson argued that should the Applicant succeed in the Application, cost should follow the event. However, should I find that the Applicant is non-suited; I should order each party to pay their own costs. His argument was that there were some technical requirements that were only corrected after the Applicant brought the Application and therefore the Applicant was justified in bringing the Application. Mr De la Harpe disagreed with this argument. He argued that the Applicant chose to continue with the Application even though the Applicant was already aware that the Municipality had complied with the said technical requirements before the filing of the replying affidavit. He argued that the Applicant had chosen to argue this Application to the end and that costs should follow the event.

I can find no reason why the Applicant should not pay the Municipality’s costs.

Order:

Therefore, the Applicant’s application is dismissed with costs.

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E CROUSE

ACTING JUDGE OF THE HIGH COURT

1 6(2)(a)(i) A court or tribunal has the power to judicially review an administrative action if the administrator who took it was not authorised to do so by the empowering provision;

2 6(2)(f)(i) A court or tribunal has the power to judicially review an administrative if the action itself contravenes a law or is not authorised by the empowering provision.

3Unreported ECD judgment dated 9 November 2006 (case number 1502/05)