About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Supreme Court of Appeal
SAFLII
>>
Databases
>>
South Africa: Supreme Court of Appeal
>>
2017
>>
[2017] ZASCA 63
|
|
P A Pearson (Proprietary) Limited v eThekwini Municipality and Others (241/2016) [2017] ZASCA 63; 2017 (6) SA 82 (SCA) (29 May 2017)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case No: 241/2016
In
the matter between:
P
A PEARSON (PROPRIETARY)
LIMITED
APPELLANT
and
eTHEKWINI
MUNICIPALITY
FIRST
RESPONDENT
NATIONAL
MINISTER FOR COOPERATIVE
GOVERNANCE
AND TRADITIONAL AFFAIRS
SECOND
RESPONDENT
KZN
MEC FOR COOPERATIVE GOVERNANCE
AND
TRADITIONAL
AFFAIRS THIRD
RESPONDENT
Neutral
citation
:
Pearson
v eThekwini Municipality
(241/2016)
[2017] ZASCA 63
(29 May
2017)
Coram
:
Lewis, Petse, Swain, Mbha JJA and Molemela AJA
Heard
:
16 May 2017
Delivered:
29 May 2017
Summary:
Municipal Systems Act
32 of 2000: Sections 102(1)
(b)
and 118(3): right of municipality to transfer credits between
accounts: single account holder: properties with different owners:
amounts outstanding on both properties by account holder for services
supplied by municipality: transfer of credits by municipality
from
first account to second account: resultant liability of owner of
first property increased and that of owner of second property
decreased: municipality entitled to claim from owner of first
property increased balance owed.
ORDER
On
appeal from:
KwaZulu-Natal
Local Division, Durban
(Marks
AJ sitting as court of first instance).
The
appeal is dismissed with costs.
JUDGMENT
Swain JA (Lewis, Petse
and Mbha JJA and Molemela AJA concurring):
[1]
This appeal examines whether
the exercise by a municipality of two of its statutory powers in
terms of the Municipal Systems Act
32 of 2000 results not only in
unfair, but also unlawful treatment of a ratepayer. The first
statutory power is the right of a
municipality, in terms of s
102(1)
(b)
of the Act, to transfer credits between accounts held by a single
account holder in respect of two properties, regardless of the
fact
that the properties have different owners. The second statutory power
is the right of a municipality in terms of s 118(3)
of the Act to
claim from the owner of a property any outstanding amounts not paid
by the account holder, based upon its right to
hold the property as
security for charges levied against it.
[2]
The inevitable consequence of
the exercise by the municipality of its right to transfer credits
between two accounts held by a single
account holder in respect of
two properties, where the properties have different owners, is that
the contingent liability of the
first owner is increased, whereas
that of the second owner is decreased. A subsequent claim for
payment by the municipality
against the owners for payment of the
amount outstanding on each of the respective accounts is unfair to
the first owner, whose
liability was increased by the conduct of the
municipality, whereas the liability of the second owner is decreased.
The possible
unfairness to the first owner is exacerbated where the
liability of the second owner is extinguished, as in the present
case. Whether
the conduct of the municipality is not only unfair, but
also unlawful, is the issue to be decided in this appeal.
[3]
The appellant, P A Pearson
(Pty) Ltd, is the owner of an immovable property situated at Wareing
Road, Pinetown, KwaZulu-Natal (the
Pearson property), within the
jurisdiction of the first respondent, the eThekwini Municipality. The
National Minister for Cooperative
Governance and Traditional Affairs
is the second respondent and the KZN MEC for Cooperative Governance
and Traditional Affairs
is the third respondent. Alleging that the
exercise by the first respondent of these statutory powers in the
manner described was
unlawful, the appellant launched an application
before the KwaZulu-Natal Local Division, Durban, in which payment of
the amount
of R1 431 442.88, was claimed from the first respondent. A
claim by the appellant that the provisions of s 102(1)
(b)
of the Act were inconsistent with the Constitution and therefore
invalid was withdrawn, with the result that the second and third
respondents were no longer required to participate in the
proceedings. The court a quo (Marks AJ) dismissed the application
with
costs, finding that the appellant had failed to discharge the
onus of proving that the first respondent had acted outside its
authority
in terms of s 102(1)
(b)
of the Act. The present appeal is with the leave of the court a quo.
[4]
The facts which gave rise to
the dispute are as follows:
(a) Microfinish
Manufacturing (Pty) Ltd (Microfinish) was at all relevant times the
occupier of the Pearson property.
(b) Cherokee Rose 164 CC
was the owner of an immovable property situated at Goodwood Road (the
Cherokee Rose property) within the
jurisdiction of the first
respondent. Helio Microfinish South Africa (Pty) Ltd (Helio), an
associate company of Microfinish, was
at all relevant times the
occupier of the Cherokee Rose property.
(c) Microfinish opened
accounts with the first respondent for the supply of utilities and
municipal services, such as electricity
and water to Microfinish at
the Pearson property (the Pearson property account), as well as the
Cherokee Rose property (the Cherokee
Rose property account). Although
Microfinish as the account holder was liable to make payment to the
first respondent for the supply
of services at both properties, it
was unable to do so as it was placed in voluntary liquidation on 18
November 2011.
(d) Prior to its
liquidation, Microfinish made a number of payments into its Pearson
property account for the supply of services
at this property in terms
of ss 75A and 76 of the Act. However, as at the date when it was
placed in liquidation approximately
R1.7 million was still owed on
this account. In addition, approximately R1.4 million was owed by
Microfinish in respect of its
Cherokee Rose property account, for the
supply of services at this property.
(e) On 19 November 2011,
and acting in terms of s 102(1)
(b)
of the Act, the first
respondent credited payments made by Microfinish into its Pearson
property account, to the Cherokee Rose
property account. The result
was that the amount owed by Microfinish in respect of the Cherokee
Rose property account for services
supplied by the first respondent
to Microfinish at that property, was fully paid. However, the
outstanding amount owed by Microfinish
in respect of the Pearson
property account, for services supplied by the first respondent to
Microfinish at that property, was
increased to approximately R3.1
million. This sum represented the total amount owed on the Pearson
property account by Microfinish,
for services supplied by the first
respondent to it at this property.
(f) The appellant, as the
owner of the Pearson property, failed to discharge its obligation to
pay the outstanding amount owed by
Microfinish on the Pearson
property account. The first respondent therefore terminated the
supply of services and utilities to
this property. As the appellant
urgently required their restoration, it paid amounts totalling R2
742 191.02 to the first
respondent on 12 March 2012, without any
admission of liability and under protest. Included in this payment
was the amount claimed
of R1 431 442.88, which the appellant contends
was previously unlawfully credited by the first respondent from the
Pearson property
account to the Cherokee Rose property account.
[5]
The relevant provisions of the
Act are ss 102(1)
(b)
and 118(3). Section 102 provides that:
‘
102 Accounts –
(1) A municipality may –
(a)
consolidate any separate accounts of
persons liable for payments to the municipality;
(b)
credit
a payment by such a person against any account of that person; and
(c)
implement any of the debt collection
and credit control measures provided for in this Chapter in relation
to any arrears on any
of the accounts of such a person.
(2) Subsection (1) does
not apply where there is a dispute between the municipality and a
person referred to in that subsection
concerning any specific amount
claimed by the municipality from that person.
(3) A municipality must
provide an owner of a property in its jurisdiction with copies of
accounts sent to the occupier of the property
for municipal services
supplied to such a property if the owner requests such accounts in
writing from the municipality concerned.’
[6]
Section 118 of the Act provides
that:
‘
118 Restraint on
transfer of property
(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) . . .
(2) . . .
(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.’
[7]
The first respondent submits
that because it is common cause that the amount of R1 431 442.88
claimed by the appellant was
the amount owed in respect of services
and utilities supplied by the first respondent to Microfinish at the
Cherokee Rose property,
and because it is also common cause that the
amount owed on the Pearson property account after the crediting of
payments to the
Cherokee Rose property account, was the amount owed
in respect of municipal services supplied to the Pearson property,
the transfer
of credits did not result in the amount owed in respect
of municipal services supplied to the Pearson property, being
increased.
All that was increased was the balance owing on the
Pearson property account for services supplied by the first
respondent to Microfinish
at the Pearson property, which had not been
paid. The appellant, however, submits that although this indebtedness
was reflected
as the indebtedness of Microfinish in the Pearson
property account, this did not entitle the first respondent to
require the appellant,
as owner of the Pearson property, to discharge
that portion of the liability of Microfinish which arose in
connection with the
Cherokee Rose property.
[8]
Whether the first respondent
acted lawfully requires a consideration of the provisions of s
102(1)
(b)
and s 118(3) of the Act. The court a quo concluded that the
provisions of s 118(3) were irrelevant to an interpretation of s
102(1)
(b)
,
and that the first respondent had acted within its authority in terms
s 102(1)
(b)
of the Act. It reached this conclusion on the following basis:
‘
In
BOE
Bank Ltd v Tshwane Metropolitan Municipality
2005 (4) SA 336
(SCA) Brand JA (at para 8) observed that section
118(3) is on its own wording an independent, self-contained
provision. The purpose
of that section is to ensure payment of the
municipal claims. In any event, at no stage did the Municipality seek
to rely on or
utilise the provisions of section 118(3). To my mind
section 118(3) is irrelevant to the interpretation of section 102.’
[9]
The first respondent submits
that the court a quo was correct in dismissing the appellant's
reliance on s 118(3) to interpret s
102 of the Act. The reason,
according to the first respondent, is that s 118(3) of the Act is a
self-contained security provision,
which affords the first respondent
a statutory legal hypothec over the property of the owner for debts
incurred on the property
in respect of municipal services. In other
words, the provisions of s 118(3) have an entirely different
objective to that of s
102 of the Act.
[10]
Although I agree with the
conclusion of the court a quo that the provisions of s 118(3) of the
Act are irrelevant to an interpretation
of the provisions of s 102 of
the Act, I disagree with its reasons for the conclusion. The finding
by Brand JA in
BOE Bank Ltd
,
that s 118(3) on its own wording was an independent and
self-contained provision, was only directed at the status of this
subsection
within the context of s 118 and not the Act as a
whole. In that case what had to be determined was whether the time
limit
stipulated in s 118(1) should be read into s 118(3). By
virtue of the fact that subsection 118(3) was an independent and
self-contained
provision, it did not require the incorporation of the
time limit in s 118(1) to make it comprehensible or workable.
Furthermore,
the first respondent, in demanding payment by the
appellant, quite clearly relied upon its right in terms of s 118(3)
of the Act
to hold the Pearson property as security for payment of
the amount owed on the Pearson property account.
[11]
The appellant, however, submits
that the conclusion of the court a quo that s 118(3) of the Act
was irrelevant to the interpretation
of s 102, demonstrates a
misunderstanding of the crucial question that had to be determined.
The appellant accepts that the first
respondent was entitled, in
terms of s 102 of the Act, to credit payments made by Microfinish
into the Pearson property account,
to the Cherokee Rose property
account. According to the appellant, the first respondent was not
entitled thereafter, in terms of
s 118(3) of the Act or on any other
basis, to require the appellant as owner of the Pearson property to
discharge that portion
of the liability which arose in connection
with the Cherokee Rose property, albeit that such indebtedness was
reflected as the
indebtedness of Microfinish in the Pearson property
account.
[12]
In my view, the proper enquiry
is whether the conduct of the first respondent, in seeking payment
from the appellant of the outstanding
balance on the Pearson property
account was rendered unlawful by the prior exercise by the first
respondent of its right in terms
of s 102(1)
(b)
of the Act, to transfer credits between the Pearson property account
and the Cherokee Rose property account. In other words, whether
the
conduct of the first respondent which resulted in an increase in the
balance owed on the Pearson property account, which increased
balance
nevertheless represented the correct amount owed by Microfinish for
services supplied by the first respondent to the Pearson
property,
with a concomitant increase in the liability of the appellant,
renders a subsequent claim by the first respondent against
the
appellant for payment of the outstanding balance on the Pearson
property account, unlawful.
[13]
Section 229 of the Constitution
vests a local authority with the authority to impose ‘rates on
property and surcharges on
fees for services provided by or on behalf
of the municipality’. This power is regulated by national
legislation in the form
of the Act. Chapter 9 provides for municipal
credit control and debt collection. Section 96 of the Act deals with
the ‘debt
collection responsibility of municipalities’
and enjoins a municipality to collect all money that is due and
payable to it,
subject to the Act and any other applicable
legislation. For that purpose it has to adopt, maintain and implement
a credit control
and debt collection policy, which is consistent with
its rates and tariff policies and complies with the provisions of the
Act.
Section 97 of the Act requires the credit control debt
collection policy to provide, inter alia, for credit control debt
collection
procedures and mechanisms. (
Body
Corporate Croftdene Mall v Ethekwini Municipality
[2011] ZASCA 188
;
2012 (4) SA 169
(SCA) paras 14-15).
[14]
The first respondent has
adopted a credit control and debt collection policy as required by
the Act, which provides under the heading
‘Responsibility for
Amounts Due’, that:
‘
7.1 In terms of
Section 118(3) of the Act an amount due for municipal service fees,
surcharge 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.
7.1.1 Accordingly, all
such Municipal debts shall be payable by the owner of such property
without prejudice to any claim which
the Municipality may have
against any other person.
7.1.2 The Municipality
reserves the right to cancel a contract with the customer in default
and register the owner only for services
on the property.
7.1.3 . . .
7.2 . . .
7.3 Except for property
rates, owners shall be held jointly and severally liable, the one
paying the other to be absolved, with
their tenants who are
registered as customers, for debts on their property.’
[15]
Under the heading ‘Cash
Allocation’ the credit control and debt collection policy of
the first respondent provides that:
‘
10.1 For
consolidated accounts the Municipality may in accordance with section
102 of the Act credit any payment by a customer against
any account
of that customer.
10.2 . . .
10.3 . . .
10.4 The Municipality’s
allocation of payment is not negotiable and the customer may not
choose which services to pay.’
[16]
In terms of the credit control
and debt collection policy of the first respondent, which is in
accordance with the Act, the first
respondent is entitled to credit a
payment made by a person who is liable to make payment to the first
respondent, to any account
of that person. In addition the liability
of an owner for ‘all such Municipal debts’ is restricted
to debts on ‘the
property in connection with which the amount
is owing’. The conduct of the first respondent was in
accordance with these
provisions for the following reasons. When the
first respondent credited the amounts previously paid by Microfinish
into the Pearson
property account to the Cherokee Rose property
account, it simply credited those payments to the amount owed by
Microfinish on
the Cherokee Rose property account. When the appellant
made payment of the balance outstanding on the Pearson property
account
for services supplied by the first respondent to the Pearson
property, it made payment of the amount owing on the property of
which
it was the owner. The fact that the amount owed on the Pearson
property account would have been reduced by the amount claimed of
R1 431 442.88, if the first respondent had not transferred
payments made by Microfinish into the Pearson property account
to the
Cherokee Rose property account, can have no bearing upon the
lawfulness of the first respondent's conduct in seeking payment
of
the increased balance owing on the Pearson property account from the
appellant. The conduct of the first respondent was authorised
in
terms of s 102(1)
(b)
of the Act and can have no bearing upon the lawfulness of the
first respondent’s subsequent exercise of its rights
against
the appellant.
[17]
The unfair result caused by the
first respondent's conduct is, however, tempered by two important
aspects of the evidence. First,
the money transferred by the first
respondent from the Pearson property account to the Cherokee Rose
property account was the money
of Microfinish and not that of the
appellant. The first respondent therefore did not use the appellant's
money to pay the balance
outstanding on the Cherokee Rose property
account. Second, the amount paid by the appellant into the Pearson
property account represented
the amount owed by Microfinish in
respect of services supplied by the first respondent to Microfinish
at the Pearson property owned
by the appellant.
[18]
The appeal accordingly fails
and the following order is made:
The
appeal is dismissed with costs.
K
G B Swain
Judge
of Appeal
Appearances:
For
the Appellant:
V I Gajoo SC
Instructed
by:
NSG
Attorneys (JH Nicolson Stiller & Geshen), Durban
Honey Attorneys,
Bloemfontein
For
the Respondent:
J P Broster
Instructed by:
Ngidi & Company
Incorporated, Durban
Strauss Daly Attorneys,
Bloemfontein