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[2009] ZAGPJHC 28
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Vosal Investments (Pty) Limited v City of Johannesburg and Others (A5023/08) [2009] ZAGPJHC 28; 2010 (1) SA 595 (GSJ) (17 June 2009)
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IN THE SOUTHERN
GAUTENG HIGH COURT, JOHANNESBURG
(REPUBLIC
OF SOUTH AFRICA)
APPEAL
COURT CASE NUMBER: A5023/08
In
the matter between:
VOSAL
INVESTMENTS (Pty) Limited Appellant
and
CITY
OF JOHANNESBURG
First
Respondent
SHERIFF
OF THE HIGH COURT
Second Respondent
REGISTRAR
OF DEEDS. -JOHANNESBURG
Third Respondent
SECOND
CAPRILEO CC
Fourth Respondent
MEDEL
GOLDMAN Fifth Respondent
The
Court
1.
The appellant is a property-owning company and it owned a building
in the centre of Johannesburg known as the Diamond Exchange.
In July
2003 the local municipality ("the council") took a default
judgment against the appellant for some R348 000.00
which was
allegedly then owed for outstanding assessment rates. It also took
an order declaring the property executable. A writ
of attachment was
issued in August 2003. More than three years later, in March 2007,
the property was sold in execution.
According
to the appellant it only became aware of the sale on 11 April 2007
when it learnt of this from its tenants. About a
week later it found
out about the default judgment from the council's attorneys.
On
18 May 2007 the appellant launched an application to rescind the
judgment and set aside the sale in execution. The application
came
before the Court a quo which dismissed it. Leave to appeal was
refused, but was later granted by the Supreme Court of Appeal
following a petition to that Court.
2.
In
the rescission application the appellant cited the council as first
respondent; the Sheriff and Registrar of Deeds as the second
and
third respondents; the close corporation, which was the buyer at the
sale in execution as the fourth respondent while the
fifth
respondent was cited as the controlling member of the close
corporation.
The
Sheriff and the Registrar of Deeds took no further part in the
ensuing proceedings.
3. The
appellant initially sought relief by way of urgency. This included
an interdict to prevent transfer of the property to
the fourth
respondent pending the outcome of the application. A preliminary
skirmish between the appellant and the fourth respondent
resulted in
the striking from the roll of the urgent part of the relief sought
in the application. Further affidavits were then
exchanged between
the parties on the merits of the application and the matter
ultimately came before the Court a quo where it
was dismissed. The
basis for the dismissal was that the appellant had not shown that it
had a bona defence to the council's claim;
nor had it shown an
absence of wilful default on its part.
4. When
leave to appeal was sought from the Supreme Court of Appeal, the
appellant raised for the first time, in amended grounds
of appeal, a
new point. This concerned whether the Registrar had the authority,
when granting default judgment, also to grant
an order declaring the
property to be executable. It was not disputed at the appeal hearing
that it was open to the appellant
to take such a law point (if
indeed it was one) at the appeal stage.
See:
Greathead
v Commercial Catering and Allied Workers Union
[2000] ZASCA 142
;
2001 (3) SA 464
SCA at 470A-G
5.
In order to understand the issues raised in the appeal it is
necessary to go back to the beginning and have regard to the
summons
which the council issued and which resulted in the default judgment,
it was not a simple summons in the usual fashion;
rather, it was
accompanied by a so-called "Annexure to Simple Summons"
which reads more like the particulars of claim
found in the usual
combined summons. Be that as it may, the following allegations were
made:
"
1
The
parties are reflected on the face of the Summons.
2.
At
all material times hereto -
a.
The
Defendant was the registered owner of certain immovable property
situated within the municipal area of the Plaintiff being
4873
JOHANNESBURG (hereinafter referred to as "the property"),
b.
The
property was rateable property as referred to in the LOCAL
AUTHORITIES RATING ORDINANCE 11 OF 1977) (TRANSVAAL) (hereinafter
referred to as "the Rating Ordinance").
c.
Assessment
rates, duly levied by the Plaintiff on the property pursuant to and
in accordance with the provisions of the Rating
Ordinance were due
and payable by the Defendant to the Plaintiff on a date stipulated
by the Plaintiff.
3.
I
n
respect of assessment rates together with interest on arrear
assessment rates at the property for the period up to and including
the 21 MAY 2003 the total amount owing, due and payable by the
Defendant to the Plaintiff amounted to R348,213.36,
4. By
virtue of a resolution of the Plaintiff in accordance with
section
10G(7)(b)(iii)
of the
Local Government Transition Act, 209 of 1993
and section 229(1) of the Constitution of the Republic of South
Africa Act, 108 of 1996, the Defendant is liable to pay to the
Plaintiff interest on any arrear monies due to the Plaintiff at the
rate of 17% per annum.
5. Despite
demand the Defendant has failed to pay the Plaintiff the aforesaid
sum.
Wherefore
Plaintiff prays for judgement against the Defendant for:
A.
Payment
of the sum ofR348 213.36;
B.
Interest
on the aforesaid sum at the rate of 17% per annum
from the date
of service of summons to date of payment;
C.
An
order declaring Stand 4873 JOHANNESBURG executable;
D.
Costs
of suit."
6.
Since it assumes importance in the appeal it is necessary to
observe that the council's claim was based four-square on the
entitlement to levy rates under the Rating Ordinance cited in the
summons.
Chapter
V of that Ordinance provides that "...
a
local authority may levy a rate or rates (to be known as a general
rate) on rateable property recorded in the valuation roll
for a
financial year to which
such
roil is applicable... " (See: s.21(1))
This
section goes on to provide a formula according to which the rates
are calculated.
As
will appear later the council's standpoint throughout this case has
been that the subject matter of its claim was the recovery
of
"rates" and nothing else.
Such
rates are to be distinguished from other charges which a local
authority is entitled to levy for services such as the supply
of
water and electricity, refuse removal and sewerage. The right to
levy those charges emanate from other empowering provisions
in other
Ordinances; they are not catered for in the Rating Ordinance.
7.
In
order to succeed in its application for rescission the appellant had
to establish that it had a bona fide defence to the council's
claim.
Failure to cross this hurdle would be fatal, irrespective of however
reasonable or otherwise the explanation for the default
might be.
See:
Chettv
v Law Society. Transvaal
1985 (2) SA 756
(AD) at 765A-D
8.
In
its founding affidavit the appellant referred to various other
litigation which took place between it and the council at about
the
same time i.e. 2003. The purpose was twofold. Firstly, the appellant
sought to show that it had been engaged in ongoing disputes
with the
council about monies allegedly owing to the council and that these
disputes had not yet been resolved. Thus, argued
the appellant, it
had a bona fide defence to the
council's present claim since
there was general uncertainty and dispute as to how precisely the
council's claim was made up.
Secondly,
in those various legal proceedings the council had served all legal
processes on the appellant at its principal place
of business,
rather than at its registered office. (The present summons had been
served at the registered office in consequence
whereof, according to
the appellant, it had not come to its attention. The reason was that
when appellant acquired the building
some time in 1998, it had
omitted to change the old registered office to a new office. This
evidence was adduced by the appellant
to negate the inference that
it had been in wilful default of defending the action).
9.
In
its answering affidavit the council took up the stance that the
other legal
proceedings involved claims for electricity and water
charges and had nothing to do with the present action. The
rescission application
was concerned with a claim for rates and in
respect of that claim the appellant had not shown that it had any
bona fide defence.
Accordingly, the rescission application was
doomed to failure on this ground.
In
the context of the above the deponent to the council's answering
affidavit stated the following:
"The
applicant also deals with other entities and other accounts it has
with the first respondent, but nowhere does it set
out a defence to
the claim of the first respondent in respect of assessment rates,
which are the amounts in respect of which
the judgment was taken."
Record
p. 383
"At
the centre of this matter is the issue of the non-payment by the
applicant of its assessment rates account with the respondent.
Like
any property in Johannesburg, the first respondent provides various
services to the property and property owner including
the providing
of water and electricity, refuse removal, sewerage charges and the
billing for assessment rates."
Record
p. 384
10.
The
deponent then went on to annex copies of the assessment rate
accounts in support of its case. In this regard the deponent
stated
the following:
"...
I file simultaneously herewith a full set of accounts for the
assessment rates in respect of the applicant for the property
commencing in 1998. ... / attach only the assessment rates accounts
as it was in respect of these amounts that judgment was taken.
I do
not attach any other utility accounts as these are irrelevant to the
present matter."
It
is necessary and apposite to have regard to these accounts since
they constitute the evidence relied upon by the council in
support
of its case.
See:
Mutebwa
v
Mutebwa
2001 (2) SA 193
(Tk) at 201A-E
11.
From these monthly accounts a number of anomalies emerged. In the
first five months of 1998 only rates were levied. At the
time these
amounted to some R2 150.00 per month although later in the same year
they appear to have been reduced to some R1 860.00.
As at the date
of the summons in May 2003 the rates were R1 772.00 per month.
However,
after June 1998 the council levied, in addition to these rates,
separate charges for sewerage and refuse removal. Thus,
the
statement rendered as at 12 June 1998 shows the following:-
Bill
date
Current Arrears
1998/06/12
R8 878.17 -R 109.85
1998/06/12 Rates
Assessment R2 150.00
Refuse
Removal R4 512.00
Sewer R1
389.00
VAT R
194.59
VAT R
631.68
(TOTAL R8
878.17)
The
above format of account is then repeated over much of the remaining
period. Although the amounts claimed for sewerage and
refuse charges
fluctuated from month to month, they always comprised the major
portion of the total monthly charges. On average
it seems that the
charges for rates represented only about one quarter to one fifth of
the total charges.
Thus,
according to the April 2000 statements the rates amounted to R1
862.00 while refuse was some R3 000.00 (including VAT) and
sewerage
was some R8 000.00 (including VAT).
Confusingly,
from about the end of 2001 the refuse and sewer charges decreased
substantially and only nominal amounts were charged.
The reason for
this was never explained.
12. These
and other anomalies were raised in the appellant's replying
affidavit. It pointed out that the total amount due for
rates over
the entire period covered by the accounts - on the assumption that
the rates averaged out at some R20 000.00 per annum
- could never
have amounted to the sum of R348 000.00 as claimed by the council in
the summons. In short, it argued that the
amount claimed in the
summons included refuse and sewer charges which had not properly
been sued for.
13. The
council did not seek to file a further affidavit to deal with the
issues raised. It adhered to its stance that its claim
was in
respect of assessment rates only. Mr Both S.C., who appeared for the
council at the appeal hearing, submitted as follows
in his written
heads of argument -
"Debits
in respect of sewerage and refuse removal are included with
assessment rates on one account because they are charges
against the
land, payable by the owner of the property."
The
above was a reference to the provisions of s.118(3) of the Municipal
Systems Act, no. 32 of 2000 which provides
"...a
security provision without a time limit..."
in
favour of a local authority.
See:
City
of Johannesburg v Kaplan MO. and Another
2006 (5) SA10 (SCA) at 15A
However,
this does not mean that a local authority can lump together the
various charges in a single cause of action.
In
the
Kaplan
case (supra) Heher JA went on to state the following at P.18J-19A:
"[29]
The question which now requires to be addressed is the subject
matter of the municipalities claim. The appellant's
counsel
submitted that the effect of s. 118(3) is to bring about an
innominate lump sum preference under which the separate elements
are
subsumed and no part can be identified by its original elements. I
do not agree. The charge upon the property giving rise
to a
preference is merely a description of the right arising from one or
more of the particular causes of indebtedness mentioned
in s.118(3).
The existence of the right to security depends upon the existence of
those elements, which do not forego their identity
by reason of
their being labelled "a charge on the property""
14.
It follows from the above that the indebtedness sued for by the
council in its summons of June 2003 comprised three separate
and
independent causes of action. The first was a claim for rates; The
second was for refuse removal; The third was for sewerage
charges.
None of the three claims were quantified; they were all subsumed
under the label of "assessment rates". No
doubt, if the
problem had been raised at the time the council could have sought an
appropriate amendment. However, at no stage
during the present
proceedings was any possible amendment sought. The consequence of
this is that the judgment sought by the
council was erroneous both
as regards to the amount of the debt and the causes of action upon
which it was founded.
Mr
Both S.C. relied on an acknowledgement of debt signed by a director
of the appeliant company in August 2002. In that document
the
director acknowledged being indebted to the council for an amount of
some R312 000.00 in respect of "outstanding
rates/refuse/sewer/water/
electricity, VAT and interest". This
document does not assist the council. The amount owing under each
separate claim is
not identified and it does not solve the problem
which the council created in its own summons, in any event, the
appellant acknowledged
throughout that it was indebted to the
council for assessment rates but queried the council's
quantification thereof. On receipt
of a proper determination the
appellant tendered to pay what it owed.
15. Since
the judgment granted in favour of the council was erroneously sought
it follows that the appellant has demonstrated
that it has a good
defence to the claim. As for showing absence of wilful default on
its part, the appellant's director explained
that when he purchased
the company some years earlier he had intended to change the old
registered address to a new one. Unfortunately,
this had not
happened. The court a
quo
held
that this omission constituted an offence under the Companies Act
and was therefore proof of wilful default. There was no
basis for
this finding. The appellant in fact had a registered address and the
council served the summons at that address. It
was never contended
that such service was bad. In the circumstances, the appellant has
made out a proper case for the rescission
of the judgment.
16. The
next issue which arises is whether it is competent for this court to
set aside the sale in execution which followed upon
the judgment. At
the time when the rescission application was launched the sale in
execution to the fourth respondent had already
taken place but
transfer had not yet been effected. As noted earlier, the appellant
sought an interdict, by way of urgency, to
stop such transfer. The
fourth respondent (but not the council) opposed such urgent relief.
The fourth respondent was thus aware
of the attack on the judgment
and consequent sale in execution and that some risk, at least, might
attach to its rights as buyer
of the property.
A
similar problem was addressed by Alexander J in
Jubb
v Sheriff
,
Magistrate's Court, Inanda District
1999 (4) SA 596
(D) where the
learned judge stated the following at 605F-G:
"If
Joosub may be regarded as the high-watermark impugning a sale in
execution even after transfer has taken place, it must
apply a
fortiori in my opinion to a case where a sale of property not
followed by transfer is rendered a nullity by reason of
the
rescission of the judgment which alone gave it validity"
(The
earlier case referred to by Alexander J is
Joosub
v JI Case SA (Pty)
Ltd
1992 (2) SA 665
(NPD))
Counsel
for the fourth respondent conceded the legal consequences of the
above conclusion in his written heads. As he put it "...
unfortunately
for the fourth respondent, transfer of ownership of the property in
issue which was sold at a public auction in
execution, had not been
transferred into the name of the fourth respondent... "
(i.e.
at the time when the rescission application was brought).
It
was not clear at the appeal whether transfer of the property had
already taken place during the intervening period. If transfer
has
not yet been effected then the ensuing order will simply entail the
fourth respondent restoring possession thereof to the
appellant. If,
on the other hand, transfer has already taken place, then
re-transfer will have to be undertaken by the fourth
respondent.
17.
In view of the above conclusions it is unnecessary to deal in
detail with the so-called law point raised by Mr Novick (who
appeared for the appellant). He argued that, even if the judgment
was not set aside nevertheless the council was not entitled
to seek
the order which it did declaring the property to be executable. He
argued that such relief is derived solely from the
provisions of the
Municipal Systems Act, 2000. S.118(3) of that Act provides that
municipal service fees, surcharges on fees,
property rates and other
municipal taxes, levies and duties constitute a charge upon the
property in favour of a local authority
and confers a preference
over any mortgage bond registered against the property. The security
provided for under s. 118(3) amounts
to a lien which has the effect
of a tacit statutory hypothec; this lien or hypothec entitles the
holder to execute against the
property secured thereunder.
See:
Kaplan
's
case (supra) at page 16J, quoting with approval the judgment of
Ackerman J (as he then was) in
Stadsraad
van Pretoria v Letabakop Farming Operations (Ptv) Ltd
1981 (4) SA 911
(T) (the latter case dealt with s.50 of the Local
Government Ordinance 1939, the forerunner of the present s.118).
18.
Mr Novick argued that the summons issued in the present case
contained no reference to the provisions of s.118 and it was
therefore excipiable for want of such an allegation. In this regard
he referred to the well-known case of
Yannako
v Apollo Club
1974 (1) 614 (AD). In that judgment Trollip JA said the following at
623G-H:
"Hence,
If he relies on a particular section of a statute, he must either
state the number of the section and the statute
he is relying on or
formulate his defence sufficiently clearly so as to indicate that he
is relying on it... and if his defence
is illegality, which does not
appear ex facie the transaction sued on but arises from its
surrounding circumstances, such illegality
and the circumstances
founding it must be pleaded"
In
Fundstrust
(Ptv) Ltd (in liquidation) v Van Deventer
1997 (1) SA 710
(AD), Hefer JA quoted with approval the following
(at 725H):
"It
is not necessary in a pleading, even where the pleader relies on a
particular statute or section of a statute, for him
to refer in
terms to it provided that he formulates his case clearly... or, put
differently, it is sufficient if the facts are
pleaded from which
the conclusion can be drawn that the provisions of the statute
apply... "
19.
In
the
Stadsraad,
Pretoria
case (supra) the local authority sued for rates and taxes. It
alleged in its summons that the defendant was the registered owner
of the property and that it was located within its jurisdiction. No
specific reference was made to any Ordinance. Ackerman J
held that
in the absence of any evidence to the contrary, it could be accepted
that the claims for rates were based on the 1979
Rating Ordinance or
any other relevant Ordinance. Since the local authority was itself a
creation of the Ordinance it was difficult
to see how it could claim
rates and taxes other than by powers conferred under an empowering
Ordinance. (At 68A-D). He then went
on to deal with s.50 of the
Local Government Ordinance 1939 - the forerunner of the present
s.118(3) of the Municipal Systems
Act. The learned judge appears to
have held that sufficient facts had been
pleaded to indicate that
the relevant Ordinances were relied upon.
The
present summons is somewhat different in that the council, in suing
for rates as it did, made specific reference to the Rating
Ordinance
which gave it the power to levy rates. It also pleaded the Ordinance
which entitled it to a special rate of interest.
There appears to be
no good reason why it should not also have pleaded s.118 of the
Municipal Systems Act. However, the failure
to do so cannot be said
to render the summons excipiabfe. Sufficient facts were before the
Court to warrant reliance on the statute.
For
these reasons the so-called law point is without foundation.
20.
The
subject matter of obtaining orders to execute against immovable
property has, in recent years, received the attention of the
Courts
on a number of occasions. In this division new rules of practice
have been introduced to alert the Registrar and assist
him or her in
determining possible abuses of the execution procedure.
See:
Nedbank
Ltd v Mortinson
[2005] ZAGPHC 85
;
2005 (6) SA 462
(WLD) at 473B
The
following new rules of practice were introduced.
"In
all applications for default judgment where the creditor seeks an
order declaring specially hypothecated immovable property
executable, the creditor shall aver in an affidavit filed
simultaneously with the application for default judgment:
The
amount of the arrears outstanding as at the date of the application
for default judgment.
Whether
the immovable property which it is sought to have declared
executable was acquired by means of or with the assistance
of a
State subsidy.
Whether,
to the knowledge of the creditor the immovable property is occupied
or not.
Whether
the immovable property is uiiiised for residential purposes or
commercial purposes.
Whether
the debt which is sought to be enforced was incurred in order to
acquire the immovable property sought to be declared
executable or
not.
All
applications for default judgment where the creditor seeks an order
declaring specially hypothecated immovable property executable,
where the amount claim falls within the jurisdiction of the
magistrate's court, shall be referred by the Registrar for
consideration
by the Court in terms of Rule 31(5)(b)(vi).
A
further rule of practice is laid down that a warrant of execution
which is presented to the Registrar for issue, pursuant to
an order
made by the Registrar declaring immovable property executable, shall
contain a note advising the debtor of the provisions
of Rule
31(5)(d)."
it may be that the above rules are only intended to apply to cases
whether the debtor specifically hypothecated the immovable
property
to secure a loan to finance the purchase thereof. However, there
would appear to be no good reason why a local authority
should not
similarly comply with the practice rules and file the required
affidavit with appropriate amendments.
Accordingly,
local authorities will in future adhere to the abovementioned
practice.
21.
As for costs the main issues in the appeal arose as between the
appellant and the council. The latter must therefore pay the
costs
of the application for rescission together with the costs on appeal.
As far as the fourth respondent is concerned it elected
to resist
the appellant's case both in the Court a
quo
and
on appeal. However, it was the innocent buyer at a sale in execution
and would be appropriate if no order for costs were to
be made
against it. It will have to bear its own costs. This is subject to
the proviso that if costs of re-transferring the property
to the
appellant arise, such costs must be borne by the fourth respondent
at no cost to the appellant. In the result the following
order is
made:
21.1
the
appeal succeeds and the judgment by default granted on 22
July
2003 is hereby set aside;
2 the
order declaring Erf 4873 executable is hereby set aside;
21.3 the
sale in execution of Erf 4873 which took place in March 2007 whereby
the fourth respondent purchased same, is hereby
set aside;
21.4 the
fourth respondent is ordered to restore possession of Erf 4873 to
the appellant within one month of the date of this
order;
alternatively
-
21.5
if
transfer of Erf 4873 has already been effected into the name of the
fourth respondent then the latter is hereby ordered to
take all
necessary steps to re-transfer the said Erf into the name of the
appellant, at the sole cost of the fourth respondent.
22.
The first respondent is ordered to pay the costs.
SCHINDLERS
ATTORNEYS
Appellant's
Attorneys
2
nd
Floor, 3 Melrose Boulevard
Melrose
Arch
Johannesburg
Appellant's
Counsel: M Novick
MOODiE
& ROBERTSON First Respondent's Attorneys 9
th
Floor, UCS Building 209Smit Street Braamfontein, Johannesburg
First
Respondent's Counsel: J Both S.C.
MERVYN
JOEL SMITH Fourth Respondent's Attorneys 14 Nugget Street City &
Suburban Johannesburg
Fourth
Respondent's Counsel: R Cohen