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[2013] ZASCA 15
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Steve Tshwete Local Municipality v Fedbond Participation Mortgage Bond Managers (Pty) Ltd and Another (409/12) [2013] ZASCA 15; 2013 (3) SA 611 (SCA) (20 March 2013)
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THE SUPREME COURT OF APPEAL OF
SOUTH AFRICA
JUDGMENT
Case No: 409/12
Reportable
In the matter between:
THE
STEVE TSHWETE LOCAL MUNICIPALITY
................................
APPELLANT
and
FEDBOND
PARTICIPATION MORTGAGE BOND
MANAGERS
(PTY) LTD
........................................................
FIRST
RESPONDENT
FEDBOND
NOMINEES (PTY) LTD
..................................
SECOND
RESPONDENT
Neutral citation:
The Steve Tshwete Local
Municipality v Fedbond
Participation Mortgage Bond Managers (Pty) Ltd
(409/12)
[2013] ZASCA 15
(20 March 2013)
Coram:
Malan and Shongwe JJA and Van der Merwe,
Saldulker
and Mbha AJJA
Heard: 26 February 2013
Delivered:
20 March 2013
Summary:
Local authority ─ municipal
charges payable by trustee or liquidator to obtain certificate in
terms of s 118(1) of
Local Government: Municipal Systems Act 32
of 2000
─ period laid down in
s 118(1)
applicable and not
period in
s 89
of
Insolvency Act 24 of 1936
─
stare
decisis
─ court bound by earlier decision.
______________________________________________________________
ORDER
______________________________________________________________
On appeal from:
North Gauteng High Court,
Pretoria (Prinsloo J sitting as
court of first instance):
The appeal is dismissed with costs.
______________________________________________________________
JUDGMENT
______________________________________________________________
VAN DER MERWE AJA (MALAN AND SHONGWE JJA AND
SALDULKER AND MBHA AJJA CONCURRING):
[1] This is an appeal against a declaratory order and
ancillary relief granted in favour of the respondents by Prinsloo J
in the
North Gauteng High Court, Pretoria. He granted leave to appeal
to this court.
[2] The appeal concerns the interrelation between the
provisions of
s 118(1)
of the
Local Government: Municipal
Systems Act 32 of 2000
and
s 89
of the
Insolvency Act 24 of
1936
. In
City of Johannesburg v Kaplan NO &
another
1
this court held that, notwithstanding the longer period
referred to in
s 89
, liability for payment of a tax as defined
in
s 89(5)
to a municipality in order to obtain a certificate in
terms of
s 118(1)
in respect of immovable property falling in an
insolvent or liquidated estate, is limited to the period mentioned in
s 118(1).
The judgment of the court a quo is essentially based
on the decision in
Kaplan
and
the real issue raised by the appellant’s challenge thereto is
whether the decision in
Kaplan
can
be departed from.
[3] The factual background is uncomplicated and common
cause. The appellant (the Municipality) is a duly established local
municipality.
The respondents, collectively referred to as Fedbond,
operate a participation bond scheme in terms of which they make loans
to
commercial companies based on funds they have received mostly from
pensioners and widows and which are secured by mortgage bonds
registered over commercial properties. A close corporation named TNT
Trading 23 CC (TNT) was the registered owner of four immovable
properties (the properties). The second respondent granted a loan to
TNT which was secured by participation mortgage bonds registered
over
the properties in favour of Fedbond.
[4] On 3 December 2008, however, TNT was placed in final
liquidation. The second respondent was the major creditor of TNT. It
proved
a claim in respect of the said loan in the amount of
R16 125 136.18. With the authorisation of creditors, the
liquidators
of TNT sold the properties at a public auction for the
total purchase price of R5,3 million. The liquidators then instructed
Fedbond’s
attorney to attend to the transfer of the properties
to the purchaser.
[5] For this purpose the attorney had to obtain a
certificate in terms of
s 118(1)
(clearance certificate) in
respect of each of the properties from the Municipality, certifying
that all the amounts mentioned in
s 118(1)
have been fully paid.
It is common cause that the amounts payable to obtain clearance
certificates in respect of the properties
related only to property
rates and interest thereon (rates). As TNT did not have sufficient
funds to obtain clearance certificates,
Fedbond accepted that
responsibility. Applications for clearance certificates were made
during December 2009.
[6] A dispute arose between the Municipality and Fedbond
in respect of the amount payable to obtain clearance certificates.
The
Municipality maintained that the amount should be calculated from
the date two years immediately preceding the date of liquidation
of
TNT, in terms of
s 89.
The contention of Fedbond was that the
amount should be calculated over the period of two years preceding
the dates of application
for clearance certificates, in terms of
s 118(1).
In the result the Municipality required payment of
rates for a period of more than a year longer than the period for
which Fedbond
was prepared to pay rates to obtain the clearance
certificates.
[7] The parties reached an agreement to the effect that
Fedbond would pay the amount claimed by the Municipality, the
Municipality
would issue clearance certificates to enable the
liquidators of TNT to transfer the properties to the purchaser and
Fedbond would
apply to the court for an order declaring that the
period in respect of which rates were payable to oblige the
Municipality to
issue clearance certificates in respect of the
properties is the period mentioned in
s 118(1)
, and for
repayment by the Municipality of the amount overpaid in the event of
the declaratory order being granted. All of this
was done, and once
agreement was reached in respect of the amounts involved, the court
below granted the order sought by Fedbond,
with costs.
[8]
Section 118(1)
, (2) and (3) provide as follows
(subsecs (3) and (4) are not applicable):
‘
(1) A
registrar of deeds may not register the transfer of property except
on production to that registrar of deeds of a prescribed
certificate─
(a) issued by the municipality
or municipalities in which that property is situated; and
(b) which certifies that all
amounts that became due in connection with that property for
municipal service fees, surcharges on
fees, property rates and other
municipal taxes, levies and duties during the two years preceding the
date of application for the
certificate have been fully paid.
(1A) A prescribed certificate
issued by a municipality in terms of subsection (1) is valid for a
period of 60 days from the date
it has been issued.
(2) In the case of the transfer
of property by a trustee of an insolvent estate, the provisions of
this section are subject to section
89 of the Insolvency Act, 1936
(Act 24 of 1936).
(3) An amount due for municipal
service fees, surcharges on fees, property rates and other municipal
taxes, levies and duties is
a charge upon the property in connection
with which the amount is owing and enjoys preference over any
mortgage bond registered
against the property.’
[9] As explained in
Kaplan
,
the principal elements of s 118 are an embargo provision with a
time limit (s 118(1)), a security provision without
a time limit
(s 118(3)), and a provision located between the two (s 118(2))
which subjects the provisions of s 118
as a whole to the terms
of s 89.
[10] Section 89 provides:
‘
(1)
The cost of maintaining, conserving and realizing any property shall
be paid out of the proceeds of that property, if sufficient
and if
insufficient and that property is subject to a special mortgage,
landlord’s legal hypothec, pledge, or right of retention,
the
deficiency shall be paid by those creditors,
pro
rata
,
who have proved their claims and who would have been entitled, in
priority to other persons, to payment of their claims out of
those
proceeds if they had been sufficient to cover the said cost and those
claims. The trustee’s remuneration in respect
of any such
property and a proportionate share of the costs incurred by the
trustee in giving security for his proper administration
of the
estate, calculated on the proceeds of the sale of the property, a
proportionate share of the Master’s fees, and if
the property
is immovable, any tax as defined in subsection (5) which is or will
become due thereon in respect of any period not
exceeding two years
immediately preceding the date of the sequestration of the estate in
question and in respect of the period
from that date to the date of
the transfer of that property by the trustee of that estate, with any
interest or penalty which may
be due on the said tax in respect of
any such period, shall form part of the costs of realization.
(2) If a secured creditor (other
than a secured creditor upon whose petition the estate in question
was sequestrated) states in
his affidavit submitted in support of his
claim against the estate that he relies for the satisfaction of his
claim solely on the
proceeds of the property which constitutes his
security, he shall not be liable for any costs of sequestration other
than the costs
specified in subsection (1), and other than costs for
which he may be liable under paragraph (
a
)
or (
b
)
of the proviso to section
one
hundred and six
.
(3) Any interest due on a
secured claim in respect of any period not exceeding two years
immediately preceding the date of sequestration
shall be likewise
secured as if it were part of the capital sum.
(4) Notwithstanding the
provisions of any law which prohibits the transfer of any immovable
property unless any tax as defined in
subsection (5) due thereon has
been paid, that law shall not debar the trustee of an insolvent
estate from transferring any immovable
property in that estate for
the purpose of liquidating the estate, if he has paid the tax which
may have been due on that property
in respect of the periods
mentioned in subsection (1) and no preference shall be accorded to
any claim for such a tax in respect
of any other period.
(5) For the purposes of
subsections (1) and (4) “
tax
”
in relation to immovable
property means any amount payable periodically in respect of that
property to the State or for the benefit
of a provincial
administration or to a body established by or under the authority of
any law in discharge of a liability to make
such periodical payments,
if that liability is an incident of the ownership of that property.’
[11] In terms of
s 66(1)
of the
Close Corporations
Act 69 of 1984
read with s 339 of the Companies Act 61 of 1973,
s 89 is applicable to the liquidation of a close corporation.
Section
118(2) applies also to the transfer of property by a
liquidator of a company or a close corporation.
2
In terms of s 229(1) of the Constitution a
municipality is empowered to impose rates on property. It is common
cause that property
rates are taxes as defined in s 89(1).
3
[12] In
BOE Bank Ltd v Tshwane
Metropolitan Municipality
4
Brand JA held that the veto (embargo) in s 118(1)
and the charge in s 118(3) are two separate entities and that
s 118(3)
is an independent, self-contained provision. He
accordingly held that the only plausible interpretation of s 118(3)
is that
it is not subject to the time limit contemplated in
s 118(1).
5
[13] In
Kaplan
,
Heher JA set out the historical context of s 89 and continued:
‘
21. In
this context, the logic of s 89(4) is plain: it was necessary to
inform creditors and trustees of the rights and obligations
attaching
to the realisation of immovable property in an estate so that there
would be no doubt as to what the trustee must pay
before being
permitted to transfer the property and what statutory restraints and
claims would attach to the proceeds after transfer.
In this way, the
limits of the costs of realisation of such property (in the context
of s 89(1)) are also determined. The
Legislature had, in
s 89(3), laid down that interest on a secured claim would be
secured as if it were part of the capital
sum for two years prior to
the date of sequestration. The Legislature, having provided in the
first part of s 89(4) for a
limitation on the effective duration
of an embargo provision, saw the section as an appropriate vehicle to
similarly limit the
duration of preferences which arose from the
quasi-liens and charges which were the vogue. Thus construed both
s 89(3) and
89(4) serve a consistent purpose in providing a
uniform duration (two years prior to the date of sequestration and
from that date
until the date of transfer) for interest on securities
and on embargoes and claims for a tax (as defined in s 89(5)).
See
also
De
Wet en Andere NNO v Stadsraad van Verwoerdburg
1978
(2) SA 86
(T) at 101D.
. . .
24. It will be noted that the
two-year period in s 89(1) differs from that appearing in
s 118(1): two years prior to the
date of sequestration as
against two years preceding the date of application for a clearance
certificate. When a trustee makes
application for a certificate, the
two-year period under s 118(1) will effectively be less than the
two-year period under
s 89(1), because the date of application
is necessarily later than the date of sequestration. The first part
of s 89(4)
means that, when an embargo period laid down in any
other law is effectively shorter than the two-year period in s 89(1),
the first-mentioned period continues to apply after sequestration.
So, the operation of s 118(1) is not affected by s 89(4).
When, however, the embargo provision in any other law is effectively
longer than that in s 89(1), then, by reason of the provisions
of s 89(4), the period in s 89(1) will override the period
in the other law.
. . .
27. Once a debtor has been
sequestrated or liquidated, the position is, to the extent that the
municipal debts are “taxes”
within the meaning of
s 89(5), (but not otherwise) the following─
1. No property may be
transferred unless the clearance certificate certifies full payment
of municipal debts that have become due
during a period of two years
before the date of application for the certificate.
2. The preference accorded by
s 118(3) in favour of the municipality over that of a holder of
a mortgage bond is limited to
claims which fell during the period
laid down in s 89(1), ie two years prior to the date of
sequestration or liquidation up
to the date of transfer.
3. Interest charged on the
secured claim of the municipality is secured as if it were part of
the claim.’
[14] In 1937 Stratford JA said the following in
Bloemfontein Town Council v Richter
:
6
‘
The
ordinary rule is that this Court is bound by its own decisions and
unless a decision has been arrived at on some manifest oversight
or
misunderstanding, that is there has been something in the nature of a
palpable mistake, a subsequently constituted Court has
no right to
prefer its own reasoning to that of its predecessors ─ such
preference, if allowed, would produce endless uncertainty
and
confusion. The maxim “
stare
decisis
”
should,
therefore, be more rigidly applied in this the highest Court in the
land, than in all others.’
And in 1989 Corbett CJ in
Catholic
Bishops Publishing Co v State President & another
7
stated:
‘
The
reluctance of this Court to depart from a previous decision of its
own is well-known. Where the decision represents part of
the
ratio
decidendi
and
is a considered one (as is the position in this case) then it should
be followed unless, at the very least, we are satisfied
that it is
clearly wrong.’
Today it is recognised that the principle that finds
application in the maxim of
stare decisis
is a manifestation of the rule of law itself, which in
turn is a founding value of the Constitution.
8
[15] This rule applies only to the
ratio
decidendi
of the previous decision. The
ratio
decidendi
means the reasons for the order
that was made,
9
excluding merely factual or incidental reasoning.
10
[16] In
Kaplan
an
order was granted on the basis that the municipality’s charge
under s 118(3) enjoyed preference over the security
attached to
the mortgage bond over the property in question. It is clear from
para 21 of the judgment that an essential part of
the line of
reasoning that led to that order was the finding that the legislature
provided in the first part of s 89(4) for
a limitation of an
embargo provision and therefore, in subsequently adding the second
part of s 89(4), intended to similarly
limit the preferences
arising from security provisions such as s 118(3). The finding
that s 89(4) provides for a limitation
of embargo provisions
therefore forms part of the
ratio decidendi
of the judgment in
Kaplan
.
From this finding it necessarily follows, as was said in para 24 (and
summarised in para 27.1) of
Kaplan
,
that when an embargo period laid down in any other law is effectively
shorter than the two year period in s 89(1), the shorter
period
continues to apply after sequestration. Because s 89(4) is
intended to limit (and not to extend) embargo provisions,
its effect
cannot be to extend the embargo period in terms of s 118(1) to a
period longer than the period of two years preceding
the date of
application for a certificate. It follows that the submission of the
Municipality that in terms of s 89(4) the
period of the embargo
is extended beyond the period mentioned in s 118(1) is not
consistent with the
ratio decidendi
in
Kaplan
.
11
[17] In the result counsel for the Municipality was
constrained to argue that the decision in
Kaplan
was clearly wrong on these points. For the reasons that
follow, I am not persuaded by this argument.
[18] The words of s 89(4), namely that a law which
prohibits transfer of immovable property unless any tax due thereon
has
been paid shall not debar a trustee from transferring the
property if the trustee has paid the tax for the period mentioned in
s 89(1), lend themselves to the interpretation that the object
of s 89 was to provide a remedy to a trustee by limiting
the
impediment created by embargo provisions. This was decided in
Greater
Johannesburg Transitional Metropolitan Council v Galloway NO &
others
.
12
In
Eastern Metropolitan
Substructure of the Greater Johannesburg Transitional Council v
Venter NO
13
this finding in
Galloway
was not criticised by this court but effectively
confirmed. In
Venter
the
court dealt with the effect of s 89 on s 50(1) of the Local
Government Ordinance 17 of 1939 (Transvaal), which also
contained an
embargo provision in respect of municipal charges. Farlam AJA made it
clear that s 89 limits the embargo provision
only where the debt
is a tax as defined therein and that it imposes no limitation at all
on the periods over which other debts
mentioned in such embargo
provisions have become due.
14
[19] The expression ‘subject to’ has no
a
priori
meaning.
15
While it is often used in a statutory context to
establish what is dominant and what is subservient, its meaning in a
statutory
context is not confined thereto and it frequently means no
more than that a qualification or limitation is introduced so that it
can be read as meaning ‘except as curtailed by’.
16
It is the last mentioned meaning that was ascribed to
the expression ‘subject to’ in s 118(2) by the
judgment in
Kaplan
.
[20] In addition, the Municipality’s argument
leads to a peculiar result. As I have pointed out, no limit is placed
on the
duration of the security of a municipality in terms of
s 118(3) except in case of sequestration or liquidation. In that
case
the security is limited, only in respect of taxes as defined, to
a period not exceeding two years before date of sequestration or
liquidation.
17
It follows that taxes due in respect of the limited
period remain a preferent charge upon the property in terms of
s 118(3).
On the Municipality’s argument, in order to
obtain a clearance certificate, a trustee or liquidator would be
obliged to pay
all debts referred to in s 118(1) and, in
addition, taxes as defined for the period from a date two years prior
to date of
sequestration or liquidation to date of application for
the clearance certificate, despite the fact that the additional
amount
is a preferent secured charge upon the property. No reason
suggests itself for this differentiation.
[21] I am therefore not convinced that the decision in
Kaplan
was clearly
wrong. On the contrary, I agree with the judgment and the reasoning
leading to its conclusion.
[22] In the result the appeal is dismissed with costs.
_____________________
C H G VAN DER MERWE
ACTING JUDGE OF APPEAL
APPEARANCES:
For Appellant: M C Erasmus SC
Instructed by:
Van Zyl Le Roux Inc, Pretoria
Honey Attorneys, Bloemfontein
For Respondent: S P Pincus
Instructed by:
Hilary Shaw Attorneys
c/o Helen Karsas Attorneys, Pretoria
Rossouws Attorneys, Bloemfontein
1
2006
(5) SA 10
(SCA).
2
See
Kaplan
supra
para 17.
3
See
Kaplan
supra
at 19F-G.
4
2005
(4) SA 336
(SCA) at 341I-342B.
5
At
343F.
6
1938
AD 195
at 232.
7
1990
(1) SA 849
(A) at 866H.
8
See
Camps Bay Ratepayers’ and
Residents’ Association & another v Harrison & another
2011 (4) SA 42
(CC) at 56A-B and
True
Motives 84 (Pty) Ltd v Mahdi & another
2009
(4) SA 153
(SCA) para 100.
9
Fellner
v Minister of the Interior
1954 (4) SA
523
(A) at 537A-F.
10
Pretoria
City Council v Levinson
1949 (3) SA 305
(A) at 317.
11
See
Pretoria City Council v Levinson
supra at 318.
12
1997
(1) SA 348
(W) at 357H and 359F.
13
[2000] ZASCA 139
;
2001
(1) SA 360
(SCA).
14
Venter
supra at 369C-D.
15
See
Pangbourne Properties Ltd v Gill &
Ramsdan (Pty) Ltd
1996 (1) SA 1182
(A)
at 1187I.
16
Premier,
Eastern Cape & another v Sekeleni
2003 (4) SA 369
(SCA) para
14. See also
Standard General Insurance Co Ltd v Verdun Estates
(Pty) Ltd & another
1988 (4) SA 779
(C) at 783I-784B.
17
See
Kaplan
supra
paras 26-28.