Court name
Constitutional Court of South Africa
Case number
CCT 7 of 2002

Uthukela District Municipality and Others v President of the Republic of South Africa and Others (CCT 7 of 2002) [2002] ZACC 11 (12 June 2002);

Law report citations
2002 (11) BCLR 1220
2003 (1) SA 678 (CC)
Media neutral citation
[2002] ZACC 11
Coram
Chaskalson CJ
Langa DCJ
Ackermann J
Goldstone J
Kriegler J
Madala J
Ngcobo J
O’Regan J
Sachs J
Skweyiya AJ
Du Plessis AJ

CONSTITUTIONAL COURT OF SOUTH AFRICA



Case CCT
7/02


UTHUKELA DISTRICT MUNICIPALITY First Applicant

ZULULAND
DISTRICT MUNICIPALITY Second Applicant

AMAJUBA DISTRICT
MUNICIPALITY Third Applicant

versus

THE PRESIDENT OF THE
REPUBLIC
OF SOUTH AFRICA First Respondent

THE MINISTER OF
FINANCE Second Respondent

THE MINISTER OF PROVINCIAL
AND LOCAL
GOVERNMENT Third Respondent

AND 64 OTHERS 4th to
67th Respondents

Heard on : 14 May 2002
Decided on : 12 June
2002




JUDGMENT






DU PLESSIS AJ:


[1] Government in the Republic
of South Africa “is constituted as national, provincial and local spheres
of government which
are distinctive, interdependent and
interrelated.”[1] Municipalities
established throughout the territory of the Republic constitute the local sphere
of government.[2]

[2] The
local sphere of government is structured as

“(a) self-standing municipalities, (b) municipalities that form part of a
comprehensive co-ordinating structure, and (c) municipalities
that perform
co-ordinating functions.”[3]


The Constitution refers to these municipalities respectively
as Category A, B and C
municipalities.[4] This case concerns
the entitlement of category C municipalities to an equitable share of revenue
raised nationally.

[3] In terms of section 214(1)(a) of the
Constitution, an Act of Parliament must provide for “the equitable
division of revenue
raised nationally among the national, provincial and local
spheres of government”. Section 227(1)(a) of the Constitution in
turn
provides that “local government and each province . . . is entitled to an
equitable share of revenue raised nationally
to enable it to provide basic
services and perform the functions allocated to it”.

[4] In order
to comply with sections 214(1)(a) and 227(1)(a) of the Constitution, Parliament
annually enacts a Division of Revenue
Act. At issue in this case is the
Division of Revenue Act 1 of 2001 (“the 2001 Act”) that dealt with
the 2001/2002 financial
year.[5]
Section 3(1) thereof provided for the division of revenue raised nationally
among the national, provincial and local spheres of
government.[6] Section
5(1)[7] in turn provided for the
allocation to individual municipalities, of their equitable share. The
subsection made no provision for
the payment to Category C municipalities of an
equitable share of revenue raised nationally.

[5] The three applicants
are Category C municipalities whose respective areas of jurisdiction fall within
the KwaZulu-Natal (KZN)
province. In three separate applications they applied
to the Natal High Court for orders declaring section 5(1) of the 2001 Act

unconstitutional “in its omission to accord Applicant’s entitlement
to an equitable share of revenue raised nationally
allocated to the local sphere
of government”.[8] The three
applications were consolidated and the High Court gave an order declaring
section 5(1) unconstitutional and “invalid
to the extent that it excludes
Category ‘C’ municipalities from sharing with Category
‘A’ and ‘B’
municipalities in the local government
allocation of revenue raised
nationally.”[9] (It is
convenient to refer to Category B municipalities as “local
municipalities” and to Category C municipalities as
“district
municipalities”.)

[6] In this Court the applicants sought an order
confirming the High Court’s
order,1[0] as well as an order
directing the national government to pay to them their respective equitable
shares. When the application was
heard in this Court, the 2001 Act had been
repealed by the Division of Revenue Act,
20021[1] (“the 2002
Act”). The 2002 Act does not expressly exclude district municipalities
from receiving an equitable share
of revenue raised nationally (“the
equitable share”).1[2]
Whether this Court should nevertheless deal with the confirmation is a question
that I deal with later.

[7] The applicants cited 67 respondents. Only
the first three respondents opposed both the High Court application and the
application
before us. They are respectively the President of the RSA, the
national Minister of Finance and the national Minister of Provincial
Government.

[8] The fourth, fifth and sixth respondents are respectively
the Premier of KZN, the Member of the Executive Council (MEC) for Finance
in KZN
and the province’s MEC for Traditional and Local Affairs. The seventh
respondent is the Municipal Demarcation
Board.1[3] The eighth respondent is
the KwaZulu-Natal Local Government Organisation (KWANALOGA), an organisation
representing the majority
of municipalities in KZN. It is recognised as such in
terms of section 2(1)(b)1[4] of the
Organised Local Government Act.1[5]
The South African Local Government Organisation (SALGA) is the national
organisation recognised in terms of section 2(1)(a) of the
same
act.1[6] SALGA was not cited as a
respondent, but the director of this Court notified it of the application for
confirmation. Neither of
these organisations appeared to oppose or support the
confirmation of the order of the High Court.

[9] The ninth to
sixty-seventh respondents are, together with the applicants, all the local and
district municipalities in KZN.
Three local municipalities filed affidavits
opposing the relief sought, but they did not enter an appearance. One district
municipality
filed an affidavit in support of the relief; another wrote a letter
to the applicants’ attorneys in support of the relief.

[10] During
the course of argument before this Court the matter stood down in order for the
parties to discuss a settlement. The
six parties concerned settled the matter
on the basis that the respondents pay to each of the applicants a specified
amount. The
parties further agreed that the applicants would furnish the
respondents with proof concerning revenue and expenditure and that the
respondents would in specified circumstances be entitled to withhold money from
the applicants’ 2002 equitable share. The
parties sought no order as to
costs. (The settlement was not made an order of Court and my summary thereof is
no more than narrative).
Mr Dickson who appeared for the applicants withdrew
the application for payment of the applicants’ 2001 equitable share.
Counsel did not make any further submissions regarding the confirmation of the
High Court’s order but the applicants did not
withdraw the application for
confirmation.

[11] In the event this Court is still seized with the
confirmation proceedings. However,

“[a]t least where the provision declared invalid by the High Court has
subsequently been repealed by an Act of Parliament,
the Court has a discretion
to decide whether or not it should deal with the matter. In this regard, the
Court should consider whether
any order it may make will have any practical
effect either on the parties or on
others.”1[7]


If
its order will have no practical effect, this Court will not deal with
confirmation
proceedings.1[8]

[12] If the
order may, despite the repeal of the legislation under consideration, have some
practical effect on the parties or on
others, the Court will in its discretion
decide whether or not to deal with the confirmation. In doing so all the
circumstances
of the case will be taken into account. Factors that must be
taken into account include the nature and extent of any practical effect
the
order may have, “the importance of the issue raised, its complexity and
the fullness of the argument on the
issue”.1[9]

[13] If
parties who may be affected by confirmation proceedings are organs of
state,2[0] a further important
factor must be taken into consideration. Organs of state have the
constitutional duty to foster co-operative
government as provided for in Chapter
3 of the Constitution.2[1] This
entails that organs of state must “avoid legal proceedings against one
another”.2[2] The essence of
Chapter 3 of the Constitution is that “disputes should where possible be
resolved at a political level rather
than through adversarial
litigation.”2[3] Courts must
ensure that the duty is duly
performed.2[4] This is apparent
from section 41(4) which provides:

“If a court is not satisfied that the requirements of subsection (3) have
been met, it may refer a dispute back to the organs
of state
involved.”


[14] In view of the important requirements
of co-operative government, a court, including this Court, will rarely decide an
intergovernmental
dispute unless the organs of state involved in the dispute
have made every reasonable effort to resolve it at a political level.
When
exercising a discretion whether to deal with confirmation proceedings, this
Court must thus bear in mind that Chapter 3 of
the Constitution contemplates
that organs of state must make every reasonable effort to resolve
intergovernmental disputes before
having recourse to the courts.

[15] I
now proceed to consider whether, in view of these considerations, this Court
should deal with the confirmation order.

The Practical Effect of an
Order.

[16] In view of the settlement and the repeal of the 2001 Act,
an order regarding the confirmation of the High Court’s order
will have no
practical effect as far as the applicants are concerned.

[17] Section 34
of the 2002 Act provides:

“(1) Subject to subsection (2), the Division of Revenue Act, 2001 (Act No.
1 of 2001), is hereby repealed with effect from
the date on which this Act takes
effect or from 1 April 2002, whichever is the later.

(2) The repeal of the Act referred to in subsection (1) does not affect any act
in terms of that Act which is necessary for the
effective implementation of this
Act or the performance of any outstanding duties or obligations under or in
terms of that Act.”


The presently relevant effect of
subsection (2) is this: If this Court finds that district municipalities, or
some of them, were constitutionally
entitled to an equitable share in terms of
the 2001 Act, the equitable share for that year must be paid to those
municipalities.2[5] An order in
this case may have a practical effect for the national government and the local
sphere of government in general. Therefore
it is necessary to decide whether in
our discretion we should deal with the confirmation.

Co-operative
government

[18] Municipalities are organs of state in the local sphere
of government.2[6] The first,
second and third respondents, are all organs of state in the national
sphere.2[7]

[19] Apart
from the general duty to avoid legal proceedings against one another, section
41(3) of the Constitution2[8] places
a two-fold obligation on organs of state involved in an intergovernmental
dispute: First, they must make every reasonable
effort to settle the dispute by
means of mechanisms and procedures provided for. Second, they must exhaust all
other remedies before
they approach a court to resolve the
dispute.

[20] There is a dispute-resolution mechanism in place in the
context of fiscal disputes between organs of state in the national and
local
spheres.2[9] Part 2 of the
Intergovernmental Fiscal Relations
Act3[0] (the Fiscal Relations Act)
establishes a Local
Government Budget Forum (the Forum). The Forum
consists3[1] of the national
minister of finance, the member of the executive council for finance of each
province, five representatives nominated
by
SALGA3[2] and one representative
nominated by each provincial organisation recognised in terms of the Organised
Local Government Act.3[3]
KWANALOGA, who represents the majority of municipalities in KZN, thus has one
representative on the Forum.

[21] Section 6 of the Fiscal Relations Act
deals with the functions of the Forum and provides:

“The Budget Forum is a body in which the national government, the
provincial governments and organised local government consult
on–

(a) any fiscal, budgetary or financial matter
affecting the local sphere of government;
(b) any proposed legislation or
policy which has a financial implication for local government;

(c) any matter concerning the financial management, or the monitoring of the
finances, of local government; or

(d) any other matter which the Minister has referred to the
Forum.”


Meetings of the Forum are convened
by the Minister of Finance, and any person may attend meetings on
invitation.3[4]

[22] That
the mechanism provided for in the Fiscal Relations Act is applicable to disputes
concerning the 2001 equitable share of
local government is evident from section
31(1) of the 2001 Act:

“An organ of state involved in an intergovernmental dispute regarding an
allocation provided for in this Act must, before approaching
a court to resolve
such dispute, make every effort to settle the dispute with the other organ of
state concerned, including making
use of the structures established in terms of
the Intergovernmental Fiscal Relations
Act.”3[5]


In
their affidavits the applicants contended that section 31(1) is not applicable
to the present dispute because it does not concern
“an allocation provided
for” in the 2001 Act, but the absence of an allocation to district
municipalities. It is unnecessary
to express a view on the merit of this
contention: Section 41(1)(h)(vi) obliges organs of state to avoid litigation
against one another
irrespective of whether special structures for that purpose
exist or not.3[6]

[23] If
municipalities are aggrieved by the omission of district municipalities from the
2001 equitable share, they can and must
make use of the dispute-resolution
procedures described above. If such municipalities are unable to resolve their
grievances, they
must approach the relevant national minister directly. The
papers before this Court do not suggest that the national organs of state
involved are not willing to address, at a political level, problems regarding
the 2001 equitable share. From an annexure to an affidavit
filed in this Court
by the first three respondents it appears that the Minister of Finance, dealing
with the present issue, said
in Parliament:

“Our intergovernmental system for dealing with financial and fiscal
matters is maturing, and flexible enough to allow us to
deal with some of the
unintended consequences of section 5(1) of the Division of Revenue Act,
2001."


[24] In the circumstances and in the interest of
co-operative government, this Court should not exercise its discretion to decide
the confirmation issue. It must first be left to the organs of state to
endeavour to resolve at a political level such issues as
there may still
be.

[25] There is a further reason why we should not exercise our
discretion to decide the confirmation issue. Due to the repeal of
the 2001 Act
and the settlement, we did not have the benefit of full argument on the
different and complex questions raised by the
confirmation issue. It is not
advisable in the circumstances to deal with it.

The
order

[26] In the result the following order is made:

1. No order is made in respect of the confirmation
application.




Chaskalson CJ, Langa DCJ,
Ackermann J, Goldstone J, Kriegler J, Madala J, Ngcobo J, O’Regan J, Sachs
J and Skweyiya AJ concur
in the judgment of Du Plessis AJ.


For the appellants: AJ Dickson SC and AA Gabriel instructed by E R Browne
Inc, Pietermaritzburg

For the respondents: T Beckerling SC and F Kathree instructed by the State
Attorney, Durban


[1] Section 40(1) of the
Constitution of the Republic of South Africa.

[2] Section 151(1) of the
Constitution.

[3]Ex Parte Chairperson of the
Constitutional Assembly: In re Certification of the Amended Text of the
Constitution of the RSA, 1996
, 1997 (2) SA 97 (CC); 1997 (1) BCLR 1 (CC)
para 77.

[4] Section 155(1).

[5] The 2001 Act has now been
repealed by the Division of Revenue Act 5 of 2002. The effect of this will be
considered later.
[6] Section 3(1)
provided as follows:

“Revenue anticipated to be raised nationally in respect of the financial
year is divided among the national, provincial and
local spheres of government
for their equitable share as set out in Column A of Schedule
1.”

[7] Section
5(1) provided as follows:

“The national accounting officer responsible for local government must
determine the allocation for each category A and B municipality
in respect of
the equitable share for the local sphere of government set out in Schedule 1 for
the financial year and such determination
must be published by the Minister in a
Gazette by 15 May
2001.”

[8] Prayer
2.2 of the First Applicant’s Notice of Motion. The Second and Third
Applicants’ prayers are identically worded.

[9] The form of the order is such
that it did not bring about the invalidity of section 5(1). It is unnecessary
to discuss that here.
See National Coalition for Gay and Lesbian Equality v
Minister of Home Affairs
2000 (2) SA 1 (CC); 2000 (1) BCLR 39 (CC) para 63
and 64.

1[0] Section 172(2)(a) of the
Constitution provides: “The Supreme Court of Appeal, a High Court or a
court of similar status may
make an order concerning the constitutional validity
of an Act of Parliament, a provincial Act or any conduct of the President, but
an order of constitutional invalidity has no force unless it is confirmed by the
Constitutional Court.”

[1]1 Act 5 of 2002.

1[2] Section 5(1) of the 2002
Act.

1[3] A juristic person
established in terms of section 2 of the Local Government: Demarcation Act, 27
of 1998.
1[4] Section 2(1)
provides:

“(1) Subject to section 6, the Minister must, by notice in the
Gazette

(a) recognise one national organisation representing the majority of the
provincial organisations contemplated in paragraph (b);
and

(b) with the concurrence of the responsible member, recognise one organisationin
each province representing the majority of municipalities
in the province in
question: Provided that all the different categories of municipalities in the
province in question are represented
in the organisation in
question.”

1[5] Act
52 of 1997.

1[6] Id.

1[7]President, Ordinary Court
Martial and Others v Freedom of Expression Institute and Others
1999 (4) SA
682 (CC); 1999 (11) BCLR 1219 (CC) para 16.

1[8]Independent Electoral
Commission v Langeberg Municipality
2001 (3) SA 925 (CC); 2001(9) BCLR 883
(CC) para 11.

1[9] Id.
2[0] Section
239 of the Constitution defines “organ of state” as:

(a) any department of state or administration in the national, provincial or
local sphere of government; or

(b) any other functionary or institution—

(i) exercising a power or performing a function in terms of the Constitution or
a provincial constitution; or

(ii exercising a public power or performing a public function in
terms of any legislation,
but does not include a court or a judicial
officer;”

2[1] Chapter
3 comprises sections 40 and 41 of the Constitution. The sections and the
requirements of co-operative government are discussed
in National Gambling
Board v Premier KwaZulu-Natal and Others
2002 `(2) SA 715 (CC; 2002 (2)BCLR
156 (CC) paras 29 to 39.

[2]2 Section 41(1)(h)(vi) of the
Constitution.

2[3]Ex Parte Chairperson of
the Constitutional Assembly: In re Certification of the Constitution of the
Republic of South Africa, 1996
1996 (4) SA 744 (CC); 1996 (10) BCLR 1253
(CC) para 291.

2[4] It does not seem as if the
parties fully addressed the issue of co-operative government in argument before
the High Court.

2[5] It is unnecessary to decide
whether, absent subsection (2), the effect would have been the same.

2[6] Para (a) of the definition
of “organ of state” above n 22. And see Independent Electoral
Commission v Langeberg Municipality
2001 (3) SA 925 (CC); 2001 (9) BCLR 883
(CC) para 19.

2[7]National Gambling Board
case above n 21 paras 19 to
21.
2[8] Section 41(3)
provides:

“An organ of state involved in an intergovernmental dispute must make
every reasonable effort to settle the dispute by means
of mechanisms and
procedures provided for that purpose, and must exhaust all other remedies before
it approaches a court to resolve
the
dispute.”

2[9] Section
41(2) of the Constitution provides:

“An Act of Parliament must –

(a) establish or provide for structures and institutions to promote and
facilitate intergovernmental relations; and

(b) provide for appropriate mechanisms and procedures to facilitate settlement
of intergovernmental disputes.”

In the National Gambling Board case, above n 22 para 33, it was said that
the Act envisaged in section 41(2) has not been enacted. Our attention was not
drawn
to the Fiscal Relations Act 97 07 1997 which was not relevant then. Part
2 of the Fiscal Relations Act deals only with specified
disputes and does not
detract from the duty of the legislature pointed out in National Gambling
Board
.

3[0] Act
97 of 1997.

3[1] Section 5 of the Fiscal
Relations Act.

3[2] Above para 8.

[3]3 Section 2(1) of the
Organised Local Government Act quoted above at n 14.

3[4] Section 7 of the Fiscal
Relations Act.
3[5] Section 31(1)
of the 2002 Act provides:

“An organ of State involved in an intergovernmental dispute regarding
any provision of this Act must, before approaching a court to resolve
such dispute, make every effort to settle the dispute with the other organ of
state in
question, including making use of the structures established in terms
of the Intergovernmental Fiscal Relations Act.” (Own
underlining)

3[6]National
Gambling Board
above n 21 para 33.