About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Supreme Court of Appeal
SAFLII
>>
Databases
>>
South Africa: Supreme Court of Appeal
>>
2013
>>
[2013] ZASCA 60
|
|
City of Tshwane Metropolitan Municipality v Mathabathe and Another (502/12) [2013] ZASCA 60; 2013 (4) SA 319 (SCA); [2013] 3 All SA 227 (SCA) (22 May 2013)
Links to summary
THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case no:502/12
In
the matter between:
CITY
OF TSHWANE METROPOLITAN MUNICIPALITY
...................
Appellant
and
THOMAS
MATHABATHE
......................................................
First
Respondent
NEDBANK
LIMITED
.........................................................
Second
Respondent
Neutral
citation:
City of Tshwane Metropolitan Municipality v
Mathabathe & another
(502/12)
[2013] ZASCA 60
(22 May 2013)
Bench:
PONNAN and MAJIEDT JJA, ERASMUS, SWAIN and ZONDI AJJA
Heard: 6 MAY 2013
Delivered: 22 MAY 2013
Summary:
Local authority – charge upon property in favour of
municipality – s 118(3) of
Local Government: Municipal Systems
Act 32 of 2000
– nature of security discussed.
___________________________________________________________________
ORDER
___________________________________________________________________
On
appeal from
:
North Gauteng High Court
(Pretoria) (Goodey AJ sitting as court of first instance):
The appeal
is dismissed with costs.
___________________________________________________________________
JUDGMENT
___________________________________________________________________
PONNAN JA (MAJIEDT JA, ERASMUS, SWAIN and ZONDI JJA concurring):
[1] The outcome of the dispute in this appeal turns on an
interpretation of s 118(3) of the Local Government: Municipal Systems
Act 32 of 2000 (the Act) read with s 118(1). To the extent here
relevant those subsections provide:
'(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.
…
(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.’
[2] The facts giving rise to the dispute are either common cause or
undisputed. During 2010 the first respondent, Mr Thomas Mathabathe,
the then owner of Erf 1080 Kosmosdal Ext 17 (the property), appointed
the second respondent, the mortgagee of the property, Nedbank
Ltd
(Nedbank), by virtue of a special power of attorney to sell the
property by public auction on his behalf. Auction Alliance
(Pty) Ltd
was appointed the auctioneer by Nedbank. On 11 December 2010 and at a
public auction conducted by it, Mr Lesley Thomas
Lawrence made an
offer to purchase the property for the sum of R1.3 million. That
offer was accepted by Mr Mathabathe on 13 December
2010.
[3] Pursuant to the conclusion of the sale agreement between Messrs
Mathabathe and Lawrence, Nedbank instructed attorney Y Viviers
of
Weavind & Weavind Incorporated to attend to the registration of
transfer of the property into the name of the latter. With
a view to
discharging her mandate, Ms Viviers applied to the appellant, the
City of Tshwane Metropolitan Municipality (the Municipality),
to
issue her with the requisite clearance certificate contemplated by s
118(1) of the Act in respect of the property. According
to the
certificate furnished by the Municipality to Ms Viviers the total
amount outstanding in respect of municipal rates and services
was
R162 722.26, which included, what has been termed ‘the
historical debt’ of R151 324.22. The historical debt was
for
charges levied by the Municipality for the provision of municipal
services to the property prior to the two years envisaged
in s
118(1)
(b)
.
[4] When Ms Viviers' various attempts at persuading the relevant
officials in the employ of the Municipality to exclude the historical
debt came to naught, Mr Mathabathe and Nedbank, as the first and
second applicants, respectively, launched an application in the
North
Gauteng High Court. The relief sought against the Municipality was:
'1. That the Respondent be
ordered to issue to the Applicants a written statement in terms of
the provisions of
Section 118(1)
of the
Local Government:
Municipal Systems Act, 32 of 2000
that is limited to amounts
that became due in connection with the Erf 1080, Kosmosdal Ext 17 for
municipal service fees, surcharges
on fees, property rates and other
municipal taxes, levies and duties during the
two years
only
preceding the date of application for the certificate applied for in
terms of the provisions of
Section 118(1)
of the
Local
Government: Municipal Systems Act, 32 of 2000
as well as a
detailed calculation of the said amount.
2. An order that the Respondent
issue to the First Applicant a certificate in terms of the provisions
of
section 118(1)
of the
Local Government: Municipal Systems
Act, 32 of 2000
upon payment of the amount to it that is owed
in respect of Erf 1080, Kosmosdal Ext 17 with regards to municipal
service fees,
surcharges on fees, property rates and other municipal
taxes, levies and duties during the
two years
only preceding
the date of application for the certificate applied for in terms of
the provisions of
Section 118(1)
of the
Local Government:
Municipal Systems Act, 32 of 2000
.
3. An order declaring that the
Respondent is strictly bound to adhere to the provisions of
Section
118(1)
of the
Local Government: Municipal Systems Act, 32 of
2000
and, more in particular, that the Respondent is obliged
to issue a certificate in terms of the provisions of
section 118(1)
of the
Local Government: Municipal Systems Act, 32 of 2000
upon payment to it of an amount equal to the outstanding debt in
respect of a property for municipal service fees, surcharges on
fees,
property rates and other municipal taxes, levies and duties during
the
two years
only preceding the date of application for the
certificate applied for in terms of the provisions of
Section 118(1)
of the
Local Government: Municipal Systems Act, 32 of 2000
.
4. Costs on the scale as between
attorney and client.'
[5] The application was opposed by the Municipality. It, moreover,
was met with a counter-application, which sought the following
relief:
'1. That the First Applicant
and/or Second Applicant be ordered to pay an amount of
R 87 440.17
(eighty seven thousand four hundred and forty four rand and seventeen
cent) upon finalization of this application to enable the
Respondent
to issue a clearance certificate for the property, Erf 1080,
Kosmosdal Ext 17 thereby enabling the First Applicant and/or
Second
Applicant to pass transfer to the purchaser as per their deed of sale
dated 13 December 2010.
2. That the transfer attorneys
of the Applicants provide the Respondent with an undertaking that the
arrear amount of
R 87 743.64
(opening balance on
Account
No.
3317602419
as at the beginning of August 2009) will be
paid to the Respondent on date of registration of the property into
the name of the
purchaser or within a reasonable time thereafter,
i.e. within 48 hours after registration was effected, as per the
proviso in
Section 118
(3) of the
Local Government: Municipal
Systems Act, 32 of 2000
; and
3. Costs on the scale as between
attorney and client.'
[6] The matter came before Goddey AJ, who granted the relief sought
by the respondents and dismissed the Municipality’s
counter-application. In each instance he ordered the costs to follow
the result. The present appeal is with the leave of the high
court.
The order of the high court granting leave to appeal to this court
suffers some confusion. Thus in its notice of appeal
filed with this
court the Municipality intimated that it ‘does not appeal
against the order granting prayers 1, 2 and 3 of
the Respondents’
notice of motion’. And in heads of argument filed on its behalf
the following explanation is to be
found:
'18.
The Appellant was initially of
the view that it can withhold the issuing of the
Section 118(1)
certificate, unless an undertaking is given that the amount covered
by
Section 118(3)
will be paid subsequent to the registration of the
transfer of the property.
19.
The Appellant had subsequent to
the judgement of the court
a quo
, conceded the Respondents'
entitlement to a
Section 118(1)
certificate on compliance of the
requirements.
20.
The Appellant therefore did not
appeal the court
a
quo's
findings,
granting prayers 1, 2 and 3 of the Respondents' notice of motion, and
conceded same when leave to appeal was sought. The
Appellant tenders
the Respondents' costs in the court
a
quo
insofar as
Respondents were successful with such relief.'
[7] That leaves the appeal against the dismissal by the high court of
the Municipality’s cross-application. In so far as
that is
concerned it was put thus in the Municipality’s heads of
argument:
'The Appellant only appeals the
dismissal of the Appellant's counterclaim with costs, and
specifically the dismissal of the counterclaim
in which the Appellant
sought an undertaking from the Respondents (prayer 2) that the arrear
amount will be paid on date of registration
or within a reasonable
time thereafter.'
From the bar in this court counsel clarified that, if successful, the
Municipality would content itself with the relief presaged
in prayer
2 of its counter-application. It is accordingly to a consideration of
that issue that I now turn.
[8] In support of that relief it was alleged on behalf of the
Municipality that:
'13.1 Ms Y Viviers, as
transferring attorney, failed to take cognizance of the provisions of
Section 118(3)
of the
Local Government: Municipal Systems Act,
32 of 2000
("
the Act
") which provides as
follows:
…
13.2 The Second Applicant as the
mortgagee over the property known as Erf 1080, Kosmosdal Ext 17 ("
the
property
") should know that the Respondent enjoys preference
over any mortgage bond registered against the property and that the
Respondent
enjoys a
lien
(
hypothec
) over
the property.
13.3 The Respondent, however as
soon as the clearance certificate is issued, without an undertaking
from the transferring attorney
that upon registration the conveyancer
will pay over the outstanding monies to the Respondent, loses its
rights under Section 118(3)
of the Act. . . .
…
15.1 It is noticeable . . . that
the legislature did not include the wording of "
two years
preceding the date of application
" in Section 118(3) of the
Act.
15.2 If there are still
remaining amounts due in excess of the two years period then the
Respondent has a
lien
in terms of section 118(3) of the
Act and the Respondent can only issue a clearance certificate upon
receiving an undertaking from
the transferring attorney that the
Respondent will receive the outstanding amounts, in excess of the two
year period, on date of
registration of the property into the name of
the purchaser or within a reasonable time thereafter, i.e. within 48
hours after
registration was effected.
15.3 I can absolutely state that
the Respondent will always issue a clearance certificate upon payment
of the amount due on the
clearance figures memo issued by its Finance
Department or when the arrear amount exceeds the two year period,
upon receiving an
undertaking from the transferring attorney that the
Respondent will receive the outstanding amounts, in excess of the two
year
period, on date of registration of the property into the name of
the purchaser.'
[9] Municipalities are obliged to collect moneys that become payable
to them for property rates and taxes and for the provision
of
municipal services (s 96). They are assisted to fulfil that
obligation in two ways: first, they are given security for repayment
of the debt, in that it is a charge upon the property concerned (s
118(3)); and, second, they are given the capacity to block the
transfer of ownership of the property until debts have been paid in
certain circumstances (s 118(1)) (per Nugent JA,
City of Cape Town
v Real People Housing (Pty) Ltd
2010 (5) SA 196
(SCA) para 2).
The principal elements of s 118 are accordingly a veto or embargo
provision with a time limit (s 118(1)) and a security
provision
without a time limit (s 118(3)) (
City of Johannesburg v Kaplan NO
& another
2006 (5) SA 10
(SCA) para 13). The two subsections
thus provide the municipality with two different remedies. Although
the purpose of both is
to ensure payment of the municipal claims that
fall within the stipulated categories, the mechanisms employed to
achieve that purpose
are different (
BOE Bank Ltd v Tshwane
Metropolitan Municipality
2005 (4) SA 336
(SCA) para 7).
[10] As Brand JA observed in
BOE Bank (
para 8) ‘s 118(3)
is on its own wording an independent, self-contained provision'. The
security provided by the subsection
amounts to a lien having the
effect of a tacit statutory hypothec (
Stadsraad van Pretoria v
Letabakop Farming Operations (Pty) Ltd
1981 (4) SA 911
(T) at
917A-H;
BOE Bank
(
supra
) at 341F-H) and no limit is
placed on its duration outside of insolvency (
Kaplan
para 20).
Its effect is to create in favour of a municipality a security for
the payment of the prescribed municipal debts so that
a municipality
enjoys preference over a registered mortgage bond on the proceeds of
the property (
Kaplan
para 16). Subsection (3), according to
Brand JA (
BOE
para 10), ‘does not refer to a category or
class of debts but to the aggregate of different debts secured by a
single charge
or hypothec. For purposes of s 118(3) it therefore does
not matter when the component parts of the secured debt became due.
The
amounts of all debts arising from the stipulated causes are added
up to become one composite amount secured by a single hypothec
which
ranks above all mortgage bonds over the property'.
[11] It bears noting that the security given to a municipality by s
118(3) is a charge upon the property.
Irwin v Davies
1937 CPD
442
at 447 put it thus: ‘Sweet,
Law Dictionary
, says
that a “charge” on property “signifies that it is
security for the payment of a debt or performance of
an obligation.
.
.
'''
.
In
Kaplan
(para G26), Heher JA explained:
‘
Any
amount due for municipal debts (ie not limited by the aforesaid
period of two years) that have not prescribed is secured by
the
property and, if not paid and an appropriate order of court is
obtained, the property may be sold in execution and the proceeds
applied in payment of the debts. In such event, the proceeds will be
applied to payment of the municipal debts in full. Only after
satisfaction of such debts will the remainder, if any, be available
for payment of the debt secured by a mortgage bond over the
property.'
[12]
Unlike subsection
(1), subsection (3) is not an embargo provision – it
self-evidently is a security provision. The Municipality
failed to
draw that distinction and thus confused the two distinct remedies
available to it. It, moreover, was plainly wrong in
its contention
that ‘upon registration [of transfer] . . . [it] loses its
rights under Section 118(3) of the Act’.
It follows that in at
least those two fundamental respects the Municipality has
misconstrued the import of s 118(3). Having misconstrued
the section,
it sought, in addition to the security that it enjoys for the
historical debt to which no limit in duration exists,
the postulated
undertaking. In that it had to fail.
[13] In the result the appeal is dismissed with costs.
_________________
V M PONNAN
JUDGE OF APPEAL
APPEARANCES:
For
Appellant: T Strydom SC
Instructed
by:
M
A Christian Attorneys
Pretoria
Honey
Attorneys
Bloemfontein
For
Respondents: P G Cilliers SC (with J L Myburgh)
Instructed
by:
Weavind
& Weavind Incorporated
Pretoria
Matsepes
Bloemfontein