Genuine Motors CC v F & J Familie Trust and Others (6381/2017) [2018] ZAFSHC 139 (20 September 2018)

80 Reportability
Municipal Law
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Brief Summary

Municipal Law — Clearance Certificate — Application for clearance certificate pertaining to proposed subdivision of property — Dispute over rates and taxes owed — Interpretation of section 118 of the Municipal Systems Act 32 of 2000 — Court held that a clearance certificate can only be issued for the property intended for transfer, not the entire property from which it is subdivided — Applicant failed to establish a clear right for the interdict sought — Counter application dismissed with costs.

Comprehensive Summary

Summary of Judgment


1. Introduction


The proceedings were an application and counter-application arising from a stalled property transfer. Although the matter originated as an application in which Geniune Motors CC was the applicant and F & J Familie Trust the first respondent, the judgment concerned only the counter-application (referred to in the judgment as “reconvention”), which was the application adjudicated by the court.


The principal parties to the counter-application were F & J Familie Trust (as the applicant in reconvention) and Geniune Motors CC (as the respondent in reconvention). Additional cited parties in the main heading of the case were Mr Doepie Benade, Messrs Bezuidenhouts (the transferring attorneys), and the President of the Law Society of the Free State, though the judgment’s dispositive reasoning was directed at the dispute between the Trust and Geniune Motors.


The dispute arose after the parties concluded a written sale agreement for a portion of immovable property. Transfer did not proceed because the transferring attorneys could not obtain the municipal rates clearance certificate, apparently due to incorrect municipal and service-provider information. Various disputes between the parties culminated in the counter-application.


The general subject-matter concerned the interaction between (i) the parties’ sale agreement and responsibility for municipal charges, and (ii) the statutory requirements for issuing a clearance certificate under section 118(1) of the Local Government: Municipal Systems Act 32 of 2000, particularly in the context of a proposed subdivision and the scope of debts to be paid before transfer can be registered.


2. Material Facts


On 4 September 2013, the parties concluded a written agreement for the sale of Portion 1 of Erf 1652, Bloemfontein, measuring 182 m², for R420 000.00. It was a term of the agreement that, upon payment of R200 000.00, the purchaser would take control and occupation of the property. The purchaser took control and occupation on 17 September 2013.


It was expressly recorded in the sale agreement that, after occupation, the purchaser would be liable for payment of all rates and taxes and levies to the local authority for any period after taking occupation. The court treated this contractual allocation of responsibility as part of the background to the ensuing dispute.


Transfer could not proceed because the transferring attorneys were unable to obtain a rates clearance certificate. The judgment recorded that the inability to obtain the certificate appeared to be linked to incorrect information held by entities including Centlec and the Mangaung Metropolitan Municipality (MMM).


A further factual feature (material to the court’s refusal of final interdictory relief) was that the respondent in reconvention disputed the municipal charges said to be owing. The judgment recorded that there were allegations of an inaccurate billing system, including wrong meter numbers allocated or registered to incorrect properties, and incorrect valuation. The respondent’s position, as captured by the court, was that it did not wish to pay amounts that were not owed and that were disputed.


3. Legal Issues


The central legal questions the court was required to determine were framed around the statutory meaning and application of section 118(1) of the Municipal Systems Act 32 of 2000 in the circumstances of a proposed subdivision, and the nature of the relief sought in the counter-application.


In particular, the court identified the key interpretive question as whether transfer of the proposed subdivision could proceed on payment of municipal charges limited to the two-year period contemplated in section 118, calculated only in respect of the proposed subdivision, or whether payment was required (within the same two-year window) in respect of the whole of the remainder from which the proposed subdivision was to be carved.


In addition, the court had to determine whether the counter-application effectively sought final interdictory relief, and if so, whether the applicant in reconvention had satisfied the requirements for a final interdict, including the existence of a clear right and the absence of an adequate alternative remedy.


The issues were therefore a combination of legal interpretation (construction of “the property” and “in connection with that property” in section 118), and the application of law to the facts (whether, given the billing dispute and available administrative steps, the interdictory relief could be granted).


4. Court’s Reasoning


The court approached the matter by locating the clearance-certificate regime within the Municipal Systems Act 32 of 2000, focusing on section 118(1), which restrains transfer unless a prescribed certificate is produced confirming that all amounts that became due “in connection with that property” for municipal charges during the two years preceding the application have been fully paid.


The court accepted, with reference to City of Cape Town v Real People Housing, that a municipality has an obligation to issue a clearance certificate once the statutory requirements are met, namely once the qualifying two-year amounts due “in connection with that property” have been paid.


On the central interpretive issue, the court relied materially on Tshwane City v Uniqon Wonings (Pty) Ltd, where the Supreme Court of Appeal construed “in connection with that property” as referring to the property that is to be transferred, and not the remaining extent that is not being transferred. The court adopted that construction, stating that it was self-evident that the phrase refers to the property to be transferred and cannot refer to the remainder not being transferred. The court emphasised that, on this approach, it is necessary to determine the outstanding charges due in connection with the particular erf to be transferred, and those amounts must be paid before the clearance certificate can be issued.


Although the court acknowledged that the facts before it were distinguishable from those in Tshwane City v Uniqon Wonings (Pty) Ltd, it held that the same principles applied. It concluded that the relevant property had an independent existence for purposes of obtaining a clearance certificate, and that a clearance certificate pertaining to it could be obtained “leaving aside” the remainder of Erf 1652.


Turning to the nature of the remedy sought, the court accepted the respondent in reconvention’s characterisation that the counter-application sought an interdict, and it assessed whether the requirements for a final interdict were met. The court held that those requirements were not satisfied. A key consideration in this evaluative conclusion was that the debt said to be owing had been disputed “from time immemorial,” and the court found it would not be just and equitable to compel the respondent to pay a disputed debt through the mechanism sought in the counter-application.


The court further reasoned that the transferring attorneys should shoulder responsibility for directing proper applications to Centlec and MMM and following proper procedures so that the authorities could comply with their obligations, namely issuing a clearance certificate on receipt of correct information. This reasoning reflected the court’s view that the applicant in reconvention had not shown that coercive relief against the respondent in reconvention was the appropriate mechanism, particularly in light of the dispute over the correctness of the municipal accounts and the availability of administrative steps to obtain proper figures.


On costs, the court applied the general principle that costs follow the result and held that there was no basis to depart from that principle. The successful party was therefore entitled to costs.


5. Outcome and Relief


The court dismissed the counter-application in its entirety.


The court ordered that the counter-application was dismissed with costs, awarding costs against the applicant in reconvention in favour of the successful party.


Cases Cited


Morar NO v Akoo 2011 (6) SA 311 (SCA)


Tshwane City v Uniqon Wonings (Pty) Ltd 2016 (2) SA 247 (SCA)


City of Cape Town v Real People Housing 2010 (5) SA 196 (SCA)


Legislation Cited


Local Government: Municipal Systems Act 32 of 2000 (section 118)


Local Government: Municipal Property Rates Act 6 of 2004 (section 24)


Rules of Court Cited


No rules of court were cited in the judgment.


Held


The court held that the statutory phrase “in connection with that property” in section 118(1) of the Municipal Systems Act 32 of 2000 refers to the property to be transferred, and not to the remaining extent that is not being transferred. It held further that, despite factual distinctions from the Supreme Court of Appeal authority relied upon, the same interpretive principles applied and the relevant property had an independent existence for clearance-certificate purposes.


The court held that the counter-application, treated as seeking final interdictory relief, failed because the requirements for a final interdict were not met, particularly given the longstanding dispute over the municipal charges and the availability of appropriate procedural steps to obtain correct clearance information from the relevant authorities.


The counter-application was dismissed with costs.


LEGAL PRINCIPLES


The statutory restraint on transfer in section 118(1) of the Local Government: Municipal Systems Act 32 of 2000 requires production of a prescribed clearance certificate certifying payment of qualifying municipal charges that became due during the two years preceding the application for the certificate, where such amounts are due in connection with the property to be transferred.


The phrase “in connection with that property” is construed as referring to the specific property being transferred, not to other land (such as a remaining extent) that is not the subject of the transfer, and the relevant inquiry is the state of municipal charges due in connection with the property to be transferred.


Where relief is sought in the form of a final interdict, the applicant must satisfy the requirements for such relief, including establishing a clear right and showing that interdictory relief is appropriate in the circumstances. A court may refuse to compel payment through such proceedings where the alleged debt is materially disputed and where appropriate procedural or administrative remedies exist to obtain correct municipal figures and compliance by the relevant authorities.


The ordinary principle that costs follow the result applies absent a proper basis to depart from it.

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[2018] ZAFSHC 139
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Genuine Motors CC v F & J Familie Trust and Others (6381/2017) [2018] ZAFSHC 139 (20 September 2018)

IN
THE HIGH COURT OF SOUTH AFRICA,
FREE
STATE DIVISION, BLOEMFONTEIN
Reportable:

YES/NO
Of
Interest to other Judges:   YES/NO
Circulate
to Magistrates:
YES/NO
Case
number:
6381/2017
In
the matter between:
GENIUNE
MOTORS CC
Applicant
and
F & J FAMILIE
TRUST
1
st
Respondent
MR DOEPIE
BENADE
2
nd
Respondent
MESSERS
BEZUIDENHOUTS
3
rd
Respondent
THE PRESIDENT OF THE
LAW SOCIETY OF
THE FREE
STATE
4
th
Respondent
HEARD
ON:
07
JUNE
2018
JUDGMENT
BY:
MATHEBULA, J
DELIVERED ON:
20
SEPTEMBER
2018
[1]
The applicant (in reconvention) and the respondent (in reconvention)
concluded a written sales agreement
on 4 September 2013 pertaining to
the sale of Portion 1 of Erf 1652 Bloemfontein measuring 182 m²
for the sum of R420 000.00.
As provided in the agreement, on
payment of the sum of R200 000.00, the applicant took control and
occupation of the property on
17 September 2013.  It was
expressly provided in the agreement that the applicant was liable for
payment of all rates and
taxes as well as levies to the local
authority for any period after taking occupation of the property.
It appears that the
transferring attorneys have been unable to obtain
the Rates Clearance Certificate because of incorrect information kept
by inter
alia Centlec and Mangaung Metropolitan Municipality(MMM).
Various disputes arose between the parties leading to this

application and counter application.  It is the latter
application that is before me for adjudication.  Mr Gilliland

appeared for F & J Familie Trust (applicant in reconvention) and
Mr Groenewald for Geniune Motors CC( respondent in reconvention).
[2]
The applicant seek an order compelling the respondent to provide the
applicant with a clearance
certificate.  The respondent is
opposing the application and seek an order that it should be
dismissed with costs.
[3]
The question to be answered is whether the proposed sub-division can
be transferred to the
applicant against payment of rates, taxes and
levies limited to the two (2) year period provided for in section 118
of the Municipal
System Act 32 of 2000 in respect of that proposed
sub-division only as opposed to whether they are payable limited to
the same
period in respect of the whole of the remainder from which
the proposed subdivision has to be cut off.
[4]
Mr. Gilliland makes a point in his submission that the question to be
considered are inter alia when
does a prime piece of land become a
property for the purposes of rates and taxes, what is the intention
of the Legislature in the
provisions of section 118 of the Municipal
System Act 32 of 2000, and whether the proposed subdivision can be
transferred for payment
of that subdivision as opposed to the whole.
He makes the point that it was not the case of the applicant seeking
the court
to extend its authority in this matter.  He submitted
that sales agreement does not specify as to how the rates and taxes
must be paid and subsequently issued.  However, it was always
implied or tacit intention of the parties at all times and
contemplated
by them that the obligation to pay was on the
owner/seller of the property.
[5]
Therefore, it could not be argued that the applicant was requesting
the court to go beyond
the contractual obligations of the parties.
In addition, this matter was distinguishable in that the proposed
subdivision
was not yet a property and a clearance certificate cannot
be issued in respect of it.  This is the position simply because

it is not a property on the property register held and maintained by
the Registrar of Deeds.  The result is that without it
being
declared a property, no transfer can take place.
[6]
H
e
contended that there is plenty of scope allowing the court to
exercise the necessary authority.  Apart from the implied or

tacit terms of the Sales Agreement, Section 24 of the Municipal Rates
Act 6 of 2004 placed the obligation on the owner to pay the
rates,
taxes and levies.  In this matter, the respondent was the main
reason why that has not been settled.  He referred
to the
document marked “AA61” that will show in detail what is
due and payable.  In the event that there is a
dispute, this
could be resolved easily by applying the provisions of the relevant
Acts, regulations and by-laws.  There was
a small chance that
the respondent will be overcharged because the rates and taxes have
been owing since 2005.
[7]
Mr Groenewald approached his oral submissions by stating that there
are three (3) issues to be
considered in this matter.  First,
the authority of the court to grant the relief sought by the
applicant.  Secondly
the proper interpretation of section 118 of
the Municipal Systems Act 32 of 2000.  Thirdly, whether the
applicant has complied
with all the requirements of an interdict.
[8]
He relied on and quoted the judgment of the Supreme Court of Appeal
in
Morar
NO v Akoo
[1]
.
In the judgement Wallis JA emphasized that “the court is merely
enforcing the contractual obligations of the partners

themselves”.
[2]
On
that occasion the court reiterated that once the court it is asked to
go beyond that, it must identify a source of its
power to do so.
He argued that the applicant was seeking an order for its attorneys
viz  Bezuidenhouts to calculate
the appropriate amount of rates,
taxes and levies.  They are not authorized to do that in terms
all the Municipal Systems
Act.  He questioned the basis upon
which this court can order that Bezuidenhouts calculate the amount
due and payable based
on wrong figures.
[9]
The second point he raised related to the interpretation of the words
“the property”
as contained in section 118 (1) of the
Municipal Systems Act.  He found support for his submission from
the decided matter
of
Tshwane
City v Uniqon Wonings (Pty) Ltd
by the Supreme Court of Appeal.
[3]
There the court held that the correct construction of section 118 (1)
of the aforementioned Act is that a clearance certificate
must be
applied for in connection with the property the owner wished to
transfer.  This means that the owner is under no obligation
to
pay all the amounts due in respect of an entire township when
applying for a clearance certificate in respect of an erf sold
and to
be transferred.  He submitted that although this matter is
factually distinguishable from the matter on hand, the same

principles are applicable.
[10]
Lastly he submitted that the applicant was seeking an interdict.
This was admitted that much by the
counsel for the applicant.
He argued that the applicant has not satisfied one of the
requirements of an interdict namely
a clear right.  The
respondent has over period disputed the charges levied for rates and
taxes relating to the property. Wrong
meter members were allocated
and registered to the wrong properties.  The valuation was
equally incorrect.  In clear
simple terms, the billing system
was inaccurate. Attempts to remedy the situation did not yield any
positive results.  The
conclusion is that the respondent does
not want to pay that which is not owed.  As a result the
respondent cannot be compelled
to pay that which is disputed.
[11]
He pointed out that there is an alternative remedy available to the
applicant.  The transferring
attorneys simply has to direct an
application for clearance figures to Centlec and MMM.  He stated
that the amount alleged
to be owed included interest of which its
calculation is unknown.  This in essence is an unliquidated
amount and cannot be
enforced in the proceedings of this nature.
He emphasised that the transferring attorneys were not (and no
suggestion was
made in the papers) experts in the calculation of the
rates and taxes.  In conclusion, he submitted that the
application must
be dismissed with costs.
[12]
The competency of the collection of rates and taxes relating to
property is governed by the Municipal
Systems Act 32 of 2000.
Pertinently section 118 (1) provides as follows:-
“
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) 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)
……
..
(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.
(4)
……..
(5)
……..”
[13]    In
City of
Cape Town v Real People Housing
the court held that a municipality has as an obligation to issue
clearance certificate for a property when all amounts that became
due
in connection with that property during the two(2) years preceding
the date of the application for the certificate have been
fully
paid.
[4]
[14]
The correct interpretation of the phrase “
in
connection with that property
”
was considered in
Tshwane
City v Uniqon Wonings
matter.
[5]
The court held that it is self-evident that it refers to the property
that is to be transferred.  Undoubtedly it cannot
refer to the
remaining extent which is not to be transferred.  In an eloquent
manner Lewis JA writing for the court said that
“
this
means that it is
necessary
to determine the state of outstanding rates and other charges due in
connection with the erf to be transferred, and that
must be paid
before a clearance certificate can be issued
.”
[15]
The court went on to state that the issue is not whether an erf has
been separated out.  What
is important is whether it has an
independent existence for the purpose of obtaining a clearance
certificate.  In this matter,
the property concerned has that
independent existence and a clearance certificate pertaining to it
can be obtained leaving aside
the remainder of Erf 1652.
[16]
It is so that the facts
in casu
are distinguishable from those
in the Tshwane City matter.  However, the principles are the
same and I see no reason why they
are not applicable.  I agree
with counsel for the respondent on this point.
[17]
The last aspect is whether the applicant has met the requirements of
a final interdict.  I beg
to differ that those have been met.
The transferring attorneys must shoulder the responsibility to
forward the proper applications
to Centlec and MMM. It will not be
just and equitable to compel the respondent to pay the debt which has
been disputed from time
immemorial.  It is the function of the
attorneys to follow the proper procedures to ensure that the
authorities comply with
the obligations.  That is to issue the
clearance certificate on receiving the correct information.  In
conclusion this
counter application ought to fail.
[18]
It is a legal principle in our law that costs follow the result and a
successful party is entitled
to costs.  This issue was argued by
counsel on both sides that a costs order must follow the event.
I do not intend
to depart from the principle and in the exercise of
my discretion it will be proper to award costs to the successful
party.
[19]
For all of these reasons, the following order is therefore made:-
19.1.
The counter application is dismissed with costs.
­­_____________
MATHEBULA,
J
On
behalf of Plaintiff:

Adv. J. Gilliland
Instructed
by:

Bezuidenhouts Inc.
Bloemfontein
On
behalf of
Defendant
:

Adv. W. Groenewald
Instructed
by:

Symington & De Kok
Bloemfontein
[1]
2011 (6) SA 311 (SCA)
[2]
See footnote 1 par 19
[3]
2016 (2) SA 247
(SCA) at 255 para 21-23
[4]
2010 (5) SA 196
(SCA) paras 13 - 14
[5]
See footnote 2 para 21

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