Paul Hoffman, SC, expresses his opinion with regard to the legal opinion expressed by SP Rosenberg. W Landman also contributes an essay regarding the ethics of withholding rates.
Letter from Paul Hoffman:
I have seen the opinion and respect the credentials of its author. I do not share his conclusion on the illegality of rates being withheld. The legal problem is best illustrated by way of what lawyers call a “reductio ad absurdam” which entails arguing by way of a notionally absurd example.
Rosenberg SC seems to opine, on my reading of his opinion, that once rates are fairly fixed they are payable come hell or high water. He concedes however that if, for example, you are being charged in Sannieshof for refuse removal and no refuse is being removed, you could under s 102(2) withhold payment of refuse removal charges until the dispute over delivery of services is determined or resolved. He does not however explore the “collapse” scenario being experienced on the ground in small municipalities such as yours around the country.
So, by way of reductio ad absurdam, what happens if the rates are fairly determined and accounts are sent out annually or monthly by a municipality that to all intents and purposes has ceased to function because all its income is spent on fast cars, big receptions, parties and overseas study tours for corrupt councillors? Must the hapless ratepayers simply swallow this and keep paying so that the party never ends? I think not, the law is not such an ass. You must however be prepared to show in any litigation that the absurd is the reality if you want to legally justify the withholding of rates. There is no great risk involved if the withheld rates are, as is usually the case, paid into trust and properly accounted for by organisations involved in withholding them. The worst the court can do is order that the withheld amounts (less such sums as have been spent legitimately as negotiorum gestor) be paid over to the municipality, it is unlikely to order costs against withholders as the litigation would be of a public interest nature. This means that unless the withholding is proved to be vexatious or mala fide (in bad faith), no adverse costs award would be made against withholders. I suspect the government has been told this by its legal advisors, which is why there is no major litigation over withheld amounts despite years of withholding rates and taxes from municipalities. And, who knows, the court may be persuaded that paying rates and getting nothing tangible in return is not on in law, and order that withholding can continue until the dispute over liability to pay is sorted out between the municipality and the disgruntled ratepayers. The best way for withholders to demonstrate their bona fides (good faith) in withholding, is to engage with the authorities over the disputes with a view to rectifying the situation on the ground to the reasonable satisfaction of those who withhold payment. As I understand Jaap’s NTU circulars, this is being done right up to Ministerial level.
Your decision to withhold is not without risk as Rosenberg explains in detail, but it is also not without legal justification, especially as the wording of the section has, to my and Rosenberg’s knowledge, not been judicially considered in the context of withholding rates. The fact that the withholding was initially justified by raising the inapplicable contractual exception, the “exceptio non adimpleti contractus” will count against the NTU, but is not necessarily fatal to its argument that the collapse of municipal infrastructure and services in general gives rise to a specific dispute which makes it legally impossible for the municipality to sue for amounts so withheld while the dispute is bona fide in existence. This is what participatory democracy is all about, how refreshingly different to the old order to be able to legally hold municipalities that misbehave to account in a way that gets them to sit up and pay attention, if they have any ambitions to be accountable. The real problem is that corruption, cadre deployment and lack of “capacity” have conspired to kill off accountability at municipal level in all too many ANC led and even some other municipalities. Visit www.ifaisa.org and read its accountability page for more on this aspect. See also the submissions to the service delivery parliamentary committee on the same site.
Groetnis,
Paul Hoffman SC
Opinion of W Landman:
The town of Sannieshof has become synonymous with rate payers’ fight against poor or non-existent municipal service delivery.
Some 280 towns are in various stages of declaring disputes with municipalities.
Of these towns, 30 are withholding municipal property rates and certain service fees in order to get municipalities so far as to respect residents’ constitutional rights.
Withheld payments are paid into trust accounts for safe keeping. Sannieshof ratepayers use a portion of the funds in their trust account to finance essential services and purchases themselves.
Is this ethical?
One can argue that we all have an unconditional or absolute ethical duty within a democracy to pay our taxes and service fees. This duty is not abrogated by poor or non-existent service delivery.
A mere appeal to ethical absolutes, however, is tantamount to intellectual sloth. Complex ethical issues require thorough analysis. Even the ethical prohibition on the taking of a human life is not absolute, because it may be justified under certain circumstances.
It does not at all follow that ethical right and wrong may be taken lightly. For that matter, a heavy burden of proof to justify such action rests on anyone transgressing an ethical principle.
Thus, the Sannieshoffers have a duty to show that their action meets at least three requirements and, therefore, can be justified ethically.
Firstly, there must be convincing grounds for withholding payment, such as a state of emergency.
They can indeed argue that they had to intervene urgently to resolve a state of emergency, or had to act in self-defence to protect themselves against a threat to their health.
Sannieshof’s sewage system, for example, has disintegrated to such an extent that sewage is bubbling from septic tanks everywhere, and even flowing from toilets. Borehole water, drinking water, marshlands and rivers are being contaminated in the process.
Secondly, the municipality’s dereliction of duty must have caused the state of emergency – rather than, for example, a natural disaster, or other circumstances beyond the municipality’s control.
As has been the case repeatedly in the past, Sannieshof has again been without sewage services for the past seven weeks. Extractors and suction dredgers are in a state of neglect and decay. When this is brought to the municipality’s attention, merely empty promises are made.
Thirdly, withholding of payment must be the last resort.
Over the years, all channels have been tested – meetings; letters, which remain unanswered; and warnings that dispute declaration or withholding of payment will be used as a last resort.
Would the residents of Bloemfontein, Pretoria or Cape Town tolerate sewage in their streets or contaminated drinking water? Like the Sannieshoffers, they would probably, and with ethical justification, take the same action.
Whether the Sannieshoffers also have the law on their side is another question.
But if the Tswaing municipality were to summons them, they would probably be able to appeal to legal grounds for justification, similar to the ethical grounds – such as a state of emergency or self-defence.
They would be able to argue that their basic human rights are being disregarded, with serious consequences for all residents and the environment.
A counterargument of the municipality is that withholding of payment is tantamount to civil disobedience against a democratically elected government.
Civil disobedience is usually exercised against an illegal government or unjust laws. Withholding of payment as a result of dereliction of duty could certainly also be tantamount to a form of civil disobedience.
But merely calling non-payment civil disobedience does not make non-payment wrong. The residents’ reasons deserve consideration.
The municipality, furthermore, argues that it cannot remove sewage without precisely the monies that the residents are withholding. This is untrue. Not only does the residents’ withholding represent a miniscule 0.25 per cent of a budget of R159 million, but the municipality actually did not manage the sewage properly before payment was withheld.
With its unsavoury arguments about insufficient money, the municipality is moving onto moral quicksand.
The auditor-general’s qualified audit report on the Tswaing municipality is damning. Just one of many alarming examples from the report is that unauthorised expenditure of R37 million was made in the 2008 tax year.
Furthermore, there are several allegations – by a whistle blower within the municipality – of large-scale corruption, which has not really made news yet.
Thus, the problem is not a financial one, but one of dereliction of duty, incompetence, poor work ethic, irregularities, lack of political will, disregard of human rights and deployment of political cadres.
We are living in times in which lawlessness has become such a part of our culture that combating it is becoming almost impossible. This includes not only criminal violence, corruption, illegal and violent strikes, but also payment boycotts and violence against poor municipal service delivery.
The question thus is: Is the action of the Sannieshoffers not dangerous precisely for that reason and thus unethical?
Does it not feed on – and feed – general lawlessness?
This is most unlikely, because there is a radical difference, which anyone can appreciate.
Criminality is driven by own interest, parasitic greed or lack of respect for the person or property of others. It is destructive.
Disciplined withholding of payment on the other hand is motivated by an intention to preserve infrastructure. It is constructive. It is evidence of a sense of civic duty.
If ordinary citizens become indifferent in this regard, we’ll be in even greater trouble.
WA Landman
CEO
EthicSA
16 July 2009
Tags: is withholding rates legal?, legal opinion of rates action, rates action, Withholding rates