The Magistrate’s Court of Nelspruit per Magistrate Hall today granted summary judgment against the Nelspruit CID for the refund of all levies raised against an owner under the illegal CID structures. The Court held that it was bound to follow the judgment of the Supreme Court of Appeal that declared CID’s illegal and unconstitutional. All pending claims amounting to thousands of Rands will now follow the same course. It remains to be seen if the CID has the necessary funds to refund owners. Owners that carry on paying CID levies will therefore be funding the claims for refunds. If the CID fails to pay, an application for its liquidation may follow. In addition, the alternative claims against the Mbombela Municipality, based on the negligence of officials in establishing illegal alternative tax collecting structures, will also proceed. Owners who suffered losses as a result of the illegal Council scheme are therefore assured to recover all levies.
Owners affected by all CID structures must note that they are now entitled to reclaim all levies paid since the inception of the illegal scheme.
The judgment brings an end to the moneymaking scheme designed to take advantage of poor service delivery by municipalities. The CID’s allege that they provide “additional services” while in actual fact cash-strapped owners are forced to pay additional amounts for municipal services they are either already taxed for or don’t need.
The Supreme Court of Appeal in the matter of Randburg Management Districts v West Dunes Properties 2016 (2) SA 293 (SCA) held that the CID structures are illegal. (The decision related to a similar CID in Randburg, Gauteng). The SCA held in that matter that the levies raised by CID’s offend s 229 and 160 of the Constitution in that a local authority may not delegate its right to raise rates and taxes. Further, the ratio of the Court’s judgment related to the fact that the legislative framework does not permit that the CID plan may endure for a period longer than 3 years from its inception.
It is at this stage not clear how the Nelspruit CID’s are going to react or what the way is going forward. It is however clear that owners within CID areas are not obliged to pay levies. Our firm has received instructions from various owners to reclaim all levies that have been paid to the CID since its “inception”, either from the CID, alternatively from the Town Council of Mbombela. The refund of levies is based on the fact that if the establishment of the CIDs are deemed to be unconstitutional and the due processes have not been followed, the CIDs never came into lawful existence and the provisions for raising of levies consequently were void ab initio.