Eskom v Bonjanala Platinum District Municipality and Another

Supreme Court of Appeal -560/03 Hearing date: 15 November 2004
  Judgment date: 30 November 2004
Prescription – Regional Service Council levies paid without liability – claim for refund – s 11(a)(iii) of Act 68 of 1969 – 30 years in respect of taxation – operates in favour of taxgatherer only - prescriptive period applicable to refund claim 3 years in terms of s11(d)

Media Summary of Judgment

From: The Registrar, Supreme Court of Appeal

Please note that the media summary is intended for the benefit of the media and does not form part of the judgment of the Supreme Court of Appeal


1. The Supreme Court of Appeal today dismissed Eskom’s appeal for the refund of regional service council levies it paid to the respondent councils from 1991 to 1998. The SCA held that Eskom’s claim for repayment had prescribed after three years. It held that the 30-year prescription period for amounts owing in respect of taxation did not apply to moneys mistakenly paid as taxes.

2. During 1995 Eskom was alerted to the possibility that in terms of s 24 of it own enabling statute, Act 40 of 1987, it might not be liable for RSC levies at all. On the strength of an opinion of senior counsel, an objection was lodged which was upheld by Southwood J in the Special Income Tax Court on 9 July 1997. That decision was confirmed by the SCA on 30 November 1999 in Greater Johannesburg Transitional Metropolitan Council v Eskom 2000 (1) SA 866 (SCA).

3. From 1995 Eskom continued without protest to pay RSC levies while its appeal to the Income Tax Court was pending. From July 1997 onwards Eskom continued to pay RSC levies, in some instances under protest. Summonses claiming refunds were issued and served in December 2001 and January 2002.

4. The trial court held that prior to December 1995 the levies had been paid in the bona fide and reasonable, but mistaken belief that they were due. It held further that from December 1995, alternatively from July 1997, payment by Eskom of RSC levies had not been made in error. The trial judge also held that with the exception of the payments made under protest, Eskom’s claims had prescribed in terms of s 11(d) of the Prescription Act 68 of 1969, which lays down a prescriptive period of three years.

5. On appeal Eskom contended that the applicable period of prescription was not three years, but thirty years in terms of s 11(a)(iii): ‘any debt in respect of any taxation imposed or levied by or under any law’.

6. The SCA rejected this contention. It assumed that RSC levies, properly assessed, constituted taxation. It did not follow, however, that levies improperly assessed (and paid), for which there was no liability, also constituted taxation. In truth such payments were not taxes but something else.

7. The SCA held that the clear intention of the legislature in s 11(a)-(c) was to prefer certain classes of creditor according to the nature of the debt. The State was intended to be a preferred creditor, for prescription purposes, for certain specified types of debt, including taxation. There was not sufficient reason to broaden the meaning of ‘taxation’ so as to include a claim for a refund of tax paid but not owed.