City of Cape Town v Real People Housing (Pty) Ltd (77/09) [2009] ZASCA 159; [2010] 2 All SA 305 (SCA) ; 2010 (5) SA 196 (SCA) (30 November 2009)

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[2009] ZASCA 159
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City of Cape Town v Real People Housing (Pty) Ltd (77/09) [2009] ZASCA 159; [2010] 2 All SA 305 (SCA) ; 2010 (5) SA 196 (SCA) (30 November 2009)

THE
SUPREME COURT OF APPEAL
REPUBLIC
OF SOUTH AFRICA
JUDGMENT
Case No: 77/09
THE CITY OF CAPE TOWN
Appellant
and
REAL PEOPLE HOUSING (PTY)
LTD Respondent
Neutral citation:
City
of Cape Town v Real People Housing
(77/09)
[2009] ZASCA 159
(30 November 2009)
Coram:
HARMS
DP, NUGENT, MALAN JJA, HURT and TSHIQI AJJA
Heard:
19
NOVEMBER 2009
Delivered:
30
NOVEMBER 2009
Summary:
Clearance
certificate required by
s 118(1)
of the
Local
Government Municipal Systems Act 32 of 2000
-
whether municipality entitled to withhold certificate until all debts
are paid.
ORDER
On appeal from: High Court, Cape Town (Yekiso J sitting
as court of first instance).
The appeal is dismissed with costs.
JUDGMENT
NUGENT JA (HARMS DP, MALAN, HURT and TSHIQI AJJA
concurring)
[1] Municipalities are obliged by the
Local Government
Municipal Systems Act 32 of 2000
to collect monies that become
payable to them for property rates and taxes and for the provision of
municipal services.
1
For that purpose municipalities are required to adopt, maintain and
implement a credit control and debt collection policy complying
with
various criteria,
2
and to adopt by-laws that give effect to the policy and its
implementation and enforcement.
3
[2] They are assisted to fulfil that obligation, so far
as debts relate to fixed property, in two ways. First, they are given
security
for repayment of the debt in that it is a charge upon the
property concerned.
4
And secondly, municipalities are given the capacity to block the
transfer of ownership of the property until debts have been paid
in
certain circumstances. That is the effect of the provisions of
s
118(1):
‘A registrar of deeds may not register the transfer of property
except on production to that registrar of deeds of a prescribed

certificate –
issued by the municipality or municipalities in which the property
is situated; and
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.’
[3] The City of Cape Town Metropolitan Municipality has
adopted a credit control and debt collection policy as it is required
to
do. One of the principles that it has incorporated in its policy
is the following:
‘Payment of any undisputed debt…will first be allocated to the
oldest debt…progressing to the latest debt.’
It has also adopted by-laws giving effect to its policy.
Section 15(1)(c)
of the by-laws provides that the City Manager may
‘implement any of the measures provided for in…the policy’ in
relation
to any arrears on an account of a debtor. Read together with
the policy it is plain that the City is authorised to allocate
payments
made by a debtor to the oldest undisputed debt and its
computerized accounting system has been designed to produce that
effect.
[4] But while the by-laws and policy are informative as
to how the problem arose in this case I do not think they are
material to
this appeal. The question before us is not what is
authorised by the by-laws but what is demanded by the statute. If the
statute
by implication entitles an owner to insist that moneys must
be allocated to debts incurred in the immediately preceding two years

then the authority conferred by the by-laws must necessarily give way
to that entitlement.
[5] The respondent in this appeal – Real People
Housing (Pty) Ltd – owns and has sold various properties in Cape
Town, including
Erf 23548 Khayelitsha, and it wishes to transfer
ownership of the properties to the purchasers. But the City alleges
that debts
have been incurred for the provision of municipal services
to the properties, some of which have been outstanding for more than

two years. The respondent disputes that it is liable to pay the
debts, because they were incurred by occupiers of the property
and
not by itself, but that is a matter that need not concern us. Clearly
all the debts fall within the terms of
s 118(1).
[6] Notwithstanding that it disputes liability for the
debts the respondent is willing to pay them so as to obtain the
certificates
(colloquially called ‘clearance certificates’) that
are required for transfer to take place – but only if they were
incurred
not more than two years preceding the request for the
certificate. The City refuses to issue certificates on those terms.
It insists
that any moneys that are paid by the respondent will be
allocated to the oldest debts according to its policy. The effect of
adopting
that approach is that it will not issue clearance
certificates until all debts have been paid irrespective of when or
by whom they
were incurred. The City goes so far as to refuse even to
provide the respondent with the amounts that were incurred in the
preceding
two years, and the manner in which those amounts are
arrived at, saying that the information is not relevant if all
payments fall
to be allocated to the oldest debts.
[7] That impasse came before the High Court at Cape Town
when the respondent applied for orders in the following terms:
‘1. Declaring that the respondent is obliged, upon receipt of a
request from the applicant, to furnish the applicant with full
and
itemised particulars of the amounts which became due for payment in
respect of municipal service fees, surcharges on fees,
property rates
and other municipal taxes, levies and duties (and which remain
unpaid) for a period of two years prior to the date
of the request in
respect of any property owned by the applicant;
2. `Declaring that the respondent is obliged, on receipt of payment
of such sum tendered specifically for the purpose of discharging
that
indebtedness, to issue to the applicant a certificate as contemplated
by
s 118(1)
of the
Local Government Municipal Systems Act 32 of 2000
;
Declaring, more specifically, the respondent's refusal to issue such
a certificate to the applicant in respect of Erf 23548 Khayelitsha,

to be unlawful.’
The relief was granted by Yekiso J and the City now
appeals with the leave of that court.
[8] It is useful at the outset to be reminded of the
findings of the Constitutional Court when the constitutional validity
of
s 118(1)
was unsuccessfully challenged in
Mkontwana
v Nelson Mandela Metropolitan Municipality
et
al.
5
The impetus for the challenge was that the section has the effect of
forcing owners to pay debts that were incurred not by them
but by
occupiers of their properties (as in the present case). The owners
said that the section deprived them of one of the rights
of ownership
– the right to alienate the property – and that to deprive them
of that right until debts that were incurred by
others had been
expunged was arbitrary and thus constitutionally offensive.
6
[9] Although the issue that is before us was not
pertinently considered there are two features of the decision in that
case that
are instructive. The first is the recognition by that court
(it was hardly in dispute) that the section has the effect of
depriving
owners of one of the incidents of ownership. It has for
long been a principle of our law that statutes that intrude upon
established
rights ought to be strictly construed. Innes CJ expressed
that as follows in
Dadoo Ltd v Krugersdorp
Municipal Council
,
7
and it has been repeated in many subsequent cases:
‘It is a wholesome rule of our law which requires a strict
construction to be placed upon statutory provisions which interfere

with elementary rights. And it should be applied not only in
interpreting a doubtful phrase, but in ascertaining the intent of
the
law as a whole.’
It hardly needs saying that under the present
constitutional order there is no warrant for choosing a wide
construction of a statute
that intrudes upon protected rights if the
section opens itself to a construction that intrudes upon those
rights more narrowly.
[10] The second instructive feature emerges from the
considerations that were taken into account in assessing whether the
deprivation
was arbitrary. One consideration that was taken into
account was the period for which the deprivation would endure. In
response
to a submission that the deprivation was capable of enduring
indefinitely Yacoob J, writing for the majority, observed that the

deprivation ‘lasts for two years only’ and he explained that as
follows:
8
‘It is correct that if there are substantial arrears for
consumption charges and all payments over an extended period are for

current consumption only and are credited to the amount first owing,
the substantial sum may remain outstanding indefinitely and
thereby
constitute an obstacle to transfer. If, however, no further
obligations are incurred to increase the existing indebtedness
of the
same occupier the limit on the power of the owner to transfer the
property will last no more than two years.’
9
[11] It is apparent that the section was construed by
the majority to mean that a municipality must issue a clearance
certificate
if no debts were incurred during the preceding two years,
notwithstanding that earlier debts exist, because otherwise there
would
have been no basis for finding that the deprivation is capable
of being restricted to no more than two years. If an owner is
entitled
to a clearance certificate when debts have not been incurred
for two years, albeit that earlier debts have not been paid, it must

follow that an owner is also entitled to a certificate if debts
incurred in that period have been expunged. Although the court
did
not pertinently express how it reached its conclusion on that issue I
think that was because it is self-evident from the section
itself.
[12] The case that was advanced before us for the City
was founded on the premise that the section ‘imposes no obligations
of
any kind on municipalities’ in express terms (taken from the
heads of argument). It follows that the respondent could succeed,
so
the submission went, only if the obligation that it relies upon was
to be read into the section by implication. Expressed in
those terms
the submission is unexceptionable. But the same cannot be said of the
further submission that no such obligation is
to be implied.
[13] The submission that a municipality has no implied
obligation at all to issue a clearance certificate was advanced for
only
a brief while in argument before counsel correctly accepted that
that was not so. Clearly a municipality has no discretion to grant
or
withhold a clearance certificate at will and thereby frustrate the
exercise of the ordinary rights of ownership – such a discretion

would be absurd and I have no doubt that it would not survive
constitutional challenge. Once it was accepted that a municipality

indeed has an obligation to issue a clearance certificate in
appropriate certain circumstances then all that remains is to
determine
what those circumstances are.
[14] Those circumstances, on the face of it, appear from
the express terms of the section: the obligation arises when ‘all
amounts
that became due in connection with that property…during the
two years preceding the date of application for the certificate have

been fully paid.’ Most of the remaining submissions made by counsel
for the City were directed towards persuading us to read
into the
section an implied qualification to that express provision. I do not
think it is necessary to detail the terms in which
suggested provisos
were framed. It is sufficient to say that all of them – indeed, any
proviso that would have the effect of
entitling the City to withhold
a certificate until all debts were paid – would nullify the express
language of the section and
it might just as well not be there. I do
not think it is necessary to cite authority for the trite proposition
that a term cannot
be implied in a statute if it would contradict its
express terms. Had it been intended not to limit the period to two
years then
the words would not have appeared at all.
[15] The dilemma in which the City finds itself is that
it has left debts outstanding for more than two years albeit that the
statute
contemplates prompt collection. No doubt there are
understandable reasons why that is so but the City cannot resolve its
dilemma
by subjugating the statute to a policy that would frustrate
its terms. As Yacoob J observed in
Mkontwana
:
‘The applicants emphasise that a municipality cannot sit by and
allow consumption charges to escalate regardless and in the knowledge

that recovery will be possible whenever the property falls to be
transferred. They are right. The municipality must comply with
its
duties and take reasonable steps to collect amounts that are due’.
[16] In my view the court below cannot be faulted for
granting the relief sought in prayer 2. The respondent paid to the
City an
amount that it estimated had become due in relation to Erf
23548 Khayelitsha during the period of two years preceding its
request
for a certificate and there is no evidence to suggest that
any further amounts are due. In those circumstances the court below
also cannot be faulted for granting prayer 3. There remains the
relief that was sought in prayer 1.
[17] Once more counsel for the City relied upon the
absence of an express provision in the statute to support his
submission that
the City was not obliged to supply details of the
amounts outstanding for debts incurred in the preceding two years.
But an owner
cannot be expected to tender payment if he or she has no
knowledge of what is due, particularly if all or portion of the debt
was
incurred by an occupier and not by the owner. If that obligation
is not to be implied in the section itself it seems to me that
it
finds sufficient support from s 95(e) of the Act.
10
We were told that the computerized accounts system is not designed to
provide that information. But that is because the computer
has been
programmed to allocate payments to the earliest debts. No doubt the
computer is capable of being programmed to produce
the relevant
information once the City accepts that the provisions of the statute
do not yield to practical considerations of that
kind.
[18] There is no merit in this appeal and it is
dismissed with costs.
__________________
R.W.
NUGENT
JUDGE
OF APPEAL
APPEARANCES
:
For
appellant: E Fagan SC
P
Farlam
Instructed
by:
Fairbridges
Attorneys, Cape Town
McIntyre
& Van der Post, Bloemfontein
For
respondent: D R Mitchell SC
Instructed
by:
Bowman
Gilfillan Attorneys, Cape Town
Matsepes
Inc, Bloemfontein
1
Section 96.
2
">
2
Sections 96
and
97
.
3
">
3
Section 98.
4
Section 118(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.’
5
Mkontwana v Nelson Mandela Metropolitan Muncipality; Bissett v
Buffalo City Municipality; Transfer Rights Action Campaign v MEC,

Local Government and Housing, Gauteng
2005 (1) SA 530
(CC).
6
Section 25 of the Constitution provides that ‘no one may be
deprived of property except in terms of law of general application,

and no law may permit arbitrary deprivation of property.’
7
1920 AD 530
at 552.
8
Para 45.
9
The effect of the section in that regard was considered in the
minority judgment of O’Regan J (Mokgoro J concurring) at para
96.
I do not think what was said in that paragraph lends credence to the
construction advanced by the City. The learned judge
did no more
than postulate what would occur if payments were allocated to
earlier debts without suggesting that a municipality
is entitled to
insist upon that allocation.
10
‘In relation to the levying of rates and other taxes by a
municipality and the charging of fees for municipal services, a
municipality must, within its financial and administrative capacity
... ensure that persons liable for payments, receive regular
and
accurate accounts that indicate the basis for calculating the
amounts due.’