Greater Johannesburg Transitional Metropolitan Council v Eskom

• Jurisdiction: South Africa
• Judge: Mahomed CJ, Vivier JA, Scott JA, Melunsky AJA, Farlam AJA
• Judgment Date: 30 November 1999
• Citation: 2000 (1) SA 866 (SCA)
• Docket Number: 536/99
• Hearing Date: 11 November 1999
• Counsel: PJ Van R Henning for the appellant WH Trengove for the respondent
• Court: Supreme Court of Appeal

Melunsky AJA:

[1] The question for decision in this appeal is whether the respondent, Eskom, is exempted from paying the regional establishment levies provided for in s 12(1)(a)(ii) of the Regional Services Councils Act 109 of 1985 (the RSC Act) for the period 1 November 1987 to 30 November 1995. G

The background to the appeal is the following. With the approval of the Receiver of Revenue, Johannesburg, the appellant assessed the respondent to pay such levies for the period 1 August 1987 to 30 November 1995. The respondent's objection to H the assessment was disallowed and it appealed to the Income Tax Special Court. For the purposes of the appeal a period of three months - from 1 August to 31 October 1987 - was left out of the reckoning. The Special Court (Southwood J) found in the respondent's favour and with the leave of the Judge a quo the appellant appeals directly to this Court against that decision. I

[2] Section 12(1) of the RSC Act authorises a regional services council to levy and claim regional service levies and regional establishment levies. The section reads:

'12(1)(a) Subject to the provisions of s 4(1), a council shall levy and claim from -

(i)

every employer who employs or is deemed to employ employees within its J

Melunsky AJA

region, and each person carrying on or deemed to be carrying A on an enterprise within its region as referred to in para (b) of the definition of "regional services levy", a regional services levy;

(ii)

every person carrying on or deemed to be carrying on an enterprise within its region, a regional establishment levy.

(b) The Minister of Finance may from time to B time, after consultation with the Council for the Co-ordination of Local Government Affairs established by s 2 of the Promotion of Local Government Affairs Act 91 of 1983, and by notice in the Gazette, determine the manner in which the regional services levy and the regional establishment levy shall be calculated and paid.'

[3] The Central Witwatersrand Regional Services Council (the CWRSC) was established pursuant to s 3 of the RSC Act. The appellant, C the Greater Johannesburg Transitional Metropolitan Council, succeeded to the rights and obligations of the CWRSC on 3 December 1994 in terms of Proc 24 (Premier's) of 1994, which was issued under s 10 of the Local Government Transition Act 209 of 1993 (the LGT Act). The right to claim the levies, therefore, vested in the CWRSC until 2 December 1994 and thereafter in the appellant. D

[4] The respondent is a juristic person. It was established pursuant to the Electricity Act 42 of 1922 under the name of the Electricity Supply Commission and remained in existence in terms of the Electricity Act 40 of 1958, which replaced the 1922 Act. The Eskom Act 40 of 1987 (the Eskom Act), which superseded Act 40 of 1958, provides E for its continued existence under the name of Eskom. It is not disputed that the respondent carries on an enterprise in terms of the RSC Act and that, had it not been for s 24 of the Eskom Act, it would have been liable to pay the levies for which it was assessed, although in the Special Court it reserved the right to raise certain other defences F which are not relevant in this appeal. Section 24 of the Eskom Act at the relevant time read as follows:

'Eskom is hereby exempted from the payment of any income tax, stamp duty, levies or fees which would otherwise have been payable by Eskom to the State in terms of any law (excluding a law regarding customs and excise or sales tax).' G

[5] The Judge a quo concluded that the levies payable in terms of s 12(1) of the RSC Act were payable to 'the State' within the meaning of s 24 of the Eskom Act and that the respondent was therefore exempted from paying such levies. On the appellant's behalf it was submitted both in the Special Court and in H this Court that the exempting provision has no application to this matter as neither the appellant nor its predecessor should be regarded as part of 'the State' for the purposes of the section. The issue that arises in this appeal is whether the expression 'the State' in s 24 of the Eskom Act included the CWRSC and the appellant. Southwood J was of the view that the Minister of Finance enjoys such powers of I control over the activities of regional services councils, particularly in relation to the manner in which the levies are to be calculated and paid, that the councils are 'a manifestation of the State and that the levies payable to regional services councils are levies payable to the State'. As the Minister also has the power in terms of s 12(1)(b) of the RSC Act to determine the manner in which the levy due J

Melunsky AJA

to the appellant is to be calculated and A paid, the State, so it was held by the Special Court, also controls the appellant insofar as its right to claim levies is concerned.

[6] Before considering the meaning to be ascribed to the expression 'the State' in s 24 of the Eskom Act, two other matters need to be dealt with. The first concerns the status and functions of B regional service councils and local transitional metropolitan councils, and the second is whether the test of control, which was adopted by Southwood J, is the correct yardstick to apply in the instant case.

[7] The system of government in South Africa from 1910 is C described as follows in an article by Robert Cameron 'Regional Service Councils in South Africa - Past, Present and Future' 71 Public Administration at 417 - 18):

'South Africa became a Union in 1910 as a result of the South Africa Act of 1909 which created a three-tier unitary system of government. Firstly, there was a Parliament based on the British D Westminster system in terms of structure, procedure and practice. The second tier consisted of four provinces, whereby power was shared between a centrally appointed Administrator and the elected provincial council. The third tier of government was local government. Local authorities were created by provincial authorities which defined the scope of their local jurisdiction. Local authorities were single-tier, multi-purpose authorities with both legislative and executive powers. E No metropolitan form of local government existed. This led to fragmentation of urban areas, which caused disparities in the standards of service provision and expenditure, particularly on racial lines (as will be shown). Major functions of local authorities included the construction and maintenance of roads, the supply of water and electricity, provision of housing, traffic control, refuse collection, health services, public library services, museums, fire-fighting F services, motor vehicle and business licencing, sewerage, cemeteries and crematoria, ambulance services and stormwater drainage. Public protection (except for traffic control), education and welfare, were not however local government functions.'

[8] The position did not change materially when South Africa became a Republic in 1961, save that the State President became the G Head of the State. When the Eskom Act came into operation, a new Constitution, introduced by the Republic of South Africa Constitution Act 110 of 1983, was in force. In terms of this Constitution the State President remained the head of the Republic...