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[2024] ZAKZPHC 94
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Langlaagte Truck and Car CC v Ethekwini Municipality (9219/2023P) [2024] ZAKZPHC 94 (31 October 2024)
FLYNOTES:
MUNICIPALITY – Rates clearance certificate –
Historical
debt
–
Property
bought on auction – Purchaser paying under protest to
facilitate transfer – Whether liable for historic
municipal
debt that was older than two years – Wording of conditions
of sale was clear and unambiguous – Purchaser
was liable for
all debts and taxes owed in respect of property –
Municipality was entitled to demand payment for same
before
exchange of ownership –
Local Government: Municipal Systems
Act 32 of 2000
,
s 118(1).
SAFLII
Note:
Certain
personal/private details of parties or witnesses have been
redacted from this document in compliance with the law
and
SAFLII
Policy
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
DIVISION, PIETERMARITZBURG
Case
No: 9219/2023P
In
the matter between:
LANGLAAGTE
TRUCK AND CAR CC
APPLICANT
and
ETHEKWINI
MUNICIPALITY
RESPONDENT
JUDGMENT
Delivered
on: 31 October 2024
POYO
DLWATI JP
[1]
The question to be answered in this application is whether the
applicant is liable for the historic
municipal debt that was older
than two years when it bought the property at a sale in execution.
[2]
The brief background to the matter is that Langlaagte Truck and Car
CC, the applicant, successfully
bid for and accepted the conditions
of sale for a property sold in execution described as a Unit
consisting of:
(a)
Section No 48, as shown and more fully described on Sectional Plan
SS372/2011
in the scheme known as 1[...] on P[...] B[...] in respect
of the land and building or buildings situated at Umhlanga Rocks, in
the eThekwini Municipality, of which section the floor area according
to the said Sectional Plan is 302 square metres in extent;
and
(b)
An undivided share in the common property in the scheme, apportioned
to the said section in accordance
with the participation quota, as
endorsed on the said sectional plan;
Held
by Deed of Transfer No ST16660/2015 and subject to such conditions as
set out in the deed (the property).
[3]
The property was sold to the applicant on 18 July 2022 for the sum of
R2 763 950.90. This was
the reserve price set by the court when the
property was declared executable in terms of rule 46A of the Uniform
Rules. Clause
6 of the conditions of sale of the property is relevant
for the purposes of determining this application and it reads:
'6.
Further costs and charges
6.1
The purchaser shall be liable for and pay within 10 days of being
requested to do so by the appointed
conveyancer, the following:
6.1.1
All amounts due to the municipality servicing the property in terms
of s 118(1) of the Local Government Municipal
Systems Act, 2000 (Act
No.32 of 2000) for municipal service fees, surcharges on fees,
property rates and other municipal taxes,
levies and duties that may
be due to the municipality.
6.1.2
where applicable, all levies due to a body corporate in terms of the
Sectional Titles Act, 1986 (Act No.95 of
1986) or amounts due to a
homeowner or other association which renders services to the
property; and
6.1.3
The costs of transfer, including conveyancing fees, transfer duty or
Vat, Deeds Office levies and any other amount
necessary for the
passing of transfer to the purchaser.
6.2
The purchaser is hereby informed of the following charges:
6.2.1
Arrear rates and taxes, estimated at R351 093.75
6.2.1
Arrear levies: R530 498.90
6.3
The purchaser notes that the amounts indicated by the Sheriff as
owing in respect of clause 6.2 are
estimates only. Neither the
Sheriff nor the execution creditor warrants the accuracy of these
estimates. The purchaser shall not
be able to avoid his/her/its
obligations hereunder, nor will the purchaser have any claims against
the fact that the amounts actually
owing in terms of clause 6.2 are
greater than the estimated charges as stated by the Sheriff. The
actual amounts owing in respect
thereof must be paid by the purchaser
in terms of clause 6.2.'
[4]
The applicant's contention was that it complied with all the
conditions of sale. Thereafter, the
nominated conveyancers, Ramdass
and Associates (the conveyancers) applied for the rates clearance
figures on or about 5 August
2022. On 21 November 2022, the eThekwini
Municipality, the respondent, issued the rates clearance figures. The
rates clearance
figures set out an indebtedness to the respondent by
the judgment debtor (Yateen Bhupandra Natvarlal Bhagwan) in the sum
of R473
110 (the first figures). The other amount of R29 080 was for
forward projections for various charges. An amount of R240 340 was
for indebtedness of the judgment debtor to the respondent for the
period of two years preceding the date of the application for
the
rates clearance figures in compliance withs 118(1)
(b)
[1]
of the Local Government: Municipal Systems Act 32 of 2000 (the Act).
An amount of R203 690 was the judgment debtor's indebtedness
for
historical debt in terms of s 118(3) of the Act.
[2]
It was recorded that the period for which the figures would remain
valid would be from 1 December 2022 to 28 February 2023 (the
validity
period).
[5]
In a letter addressed to the conveyancers dated 21 November 2022, the
respondent advised that
'we record that the latter amount is the debt
of the property which is secured under s 1
18(3) of the Act, and we cannot allow transfer of the property to
proceed unless this amount is paid or secured by means of an
irrevocable bank guarantee made payable to the municipality on date
of registration'. The applicant sought to clarify the issue
with the
respondent and advised that it was not responsible to pay the
historic debt as this, in its view, was the judgment debtor's
responsibility and obligation. It then paid to the respondent what it
believed was the correct amount, consisting of the sums of
R240
340.00 and R29 080.22.
[6]
Despite payment, the respondent did not furnish the conveyancers with
a rates clearance certificate.
This resulted in the lapse of the
validity period of the initial figures. The applicant had to and did
apply for new figures (the
revised figures). The revised figures were
received on 20 February 2023 (the second figures) and amounted to
R230 695. The payment
made by the applicant was offset against the
historical indebtedness of the judgment debtor. According to the
applicant, it was
not obliged but forced to pay the historic debt.
This, according to the applicant, was in violation of the Act.
[7]
The applicant caused the conveyancers to advise the respondent that
it would be paying the second
figures in full under protest. The
respondent did not respond to this letter, but instead, after payment
was received, issued a
rates clearance certificate. As a result,
after registration of the property into the applicant's name, the
applicant instructed
its attorneys to address a letter of demand to
the respondent for the payment of R230 695.80, which it had paid
under protest.
This it did as it believed it was forced to pay for
the previous owner's debt and this it believed was unlawful.
[8]
The respondent opposed the application. It stated that the applicant
was obliged to pay the actual
arrears in respect of the property.
This, according to the respondent, was apparent from clause 6.3 of
the conditions of sale.
It further contended that the applicant was
obliged to pay the arrear rates and taxes due on the property, even
if they were greater
than the estimated charges contained in clause
6.2 of the conditions of sale. According to the respondent, there was
a lawful reason
for the demand and payment thereof, hence the
payment.
[9]
The respondent further stated that it had advised the conveyancers
that should a guarantee not
be provided for the payment of the
historic debt, it would have no option but to interdict the transfer
in order to secure its
rights and would hold the conveyancer
responsible for the costs. According to the respondent, once the
applicant signed the conditions
of sale, it created a binding
contractual obligation between the applicant and the respondent in
respect of the historical debt.
It was therefore, according to the
respondent, the applicant's obligation to discharge the indebtedness
of the judgment debtor
as provided for in the conditions of sale. For
these reasons, the respondent believed that the application ought to
be dismissed
with costs.
[10]
In reply, the applicant reiterated that the respondent's obligation
was derived from the Act, which required the respondent
to provide a
clearance certificate upon receipt of a payment contemplated in s
118(1)
(b)
of the Act. In terms of the replying affidavit, even
though this point was not pursued in argument, the applicant
contended that
the respondent was not a party to the conditions of
sale agreement and therefore no personal rights existed between the
respondent
and the applicant. The applicant's contention was that the
respondent ought to have interdicted the proceeds of the sale of the
property to secure any outstanding balance due by the previous owner
in title.
[11]
The issue to be determined in this application is whether the
applicant was obliged to pay the historical
debt due by the previous
owner to the respondent or whether the respondent had another
recourse available.
[12]
What one needs to bear in mind in this matter is that this was not an
ordinary sale where the respondent
could demand a guarantee by the
previous owner to pay all the historical debt due to it before it
could issue a rates clearance
certificate. The property was sold in a
sale in execution as a result of the previous owner having defaulted
in its bond obligations
to the bank. Indeed, it is so that the
respondent is obliged to issue a rates clearance certificate once
payment has been made
for any outstanding rates and taxes owing on
the property. It is also trite that a purchaser is obliged to pay for
the two years
preceding the application for clearance figures whilst
the previous owner is responsible for the historical debt.
[13]
When there is a historical debt and there is uncertainty regarding
who will pay for it, the respondent is
entitled to interdict any sale
in order to secure its rights. It threatened to do so in this matter,
but the applicant opted to
pay the amounts outstanding, albeit under
protest. However, this the applicant did at its own disadvantage as
any interdict process
would have clarified who was responsible for
the historic debt. It is not difficult in my view to determine who
pays for the historic
debt when the sale is an ordinary one, as the
previous owner would furnish an undertaking or guarantee, to the
respondent's satisfaction,
that such a debt would be paid. However,
in a sale in execution the transaction is founded on the conditions
of sale.
[14]
Whilst it is so that s 118(1)(
b
)
of the Act is concerned with property rates and other municipal
taxes, levies, and duties during the two years preceding the date
of
application for the certificate, the respondent still needs to ensure
that the historical debt is paid or secured before a change
in
ownership. It was held in
Jordaan
and others v Tshwane Metropolitan Municipality and others
[3]
that 'where there are unpaid municipal debts ... the charge enables
them to slam the legal brake on any impending transfer by obtaining
an interdict against transfer'. It is for this reason that it is
important to consider the context of the conditions of sale. As
held
in
Natal
Joint Municipal Pension Fund v Endumeni Municipality
,
[4]
one always must have 'regard
to the context provided [in a document] by reading the particular
provision or provisions in the light
of the document as a whole and
the circumstances attendant upon its coming into existence'. The
'purpose of the provision and the
background to the preparation and
production of the document' is also important.
[15]
As correctly argued by Mr Broster on behalf of the respondent, the
conditions of sale came about as a result
of the property having been
declared executable when an application was made in terms of Rule 46A
of the Uniform Rules. It is trite
that whenever an execution creditor
seeks to execute against the residential immovable property of a
judgment debtor, the court
considering the application, prior to
determining a reserved price, must ensure that a statement from a
local authority showing
the amounts owing for rates and other dues is
attached.
[5]
This must be so, so
that consideration is given to outstanding rates and other charges
due on the property, regardless of the time
frame for such a debt.
Clause 6.2 of the conditions of sale provided the estimated amount
owing as of 19 May 2022 as R351 093.75.
Clause 6.3 emphasised that
this figure is an estimate only and that the purchaser would be
liable for the actual amounts.
[16]
One must bear in mind that properties are sold in execution as a
result of an execution debtor failing to
pay whatever amount is due
on the property to that judgment creditor. When the applicant agreed
to the conditions of sale, particularly
clauses 6.1, 6.2 and 6.3,
which must be read together, it brought itself to the position of the
judgment debtor, in my view. This
was particularly so when it
accepted that the figures contained in clause 6.2.1 were estimates
only and that it would become liable
for actual figures once these
had been provided. It could not have been so that it was expected
that these figures would decrease,
as the applicant only initially
paid R240 340, way below the R351 093.75 estimate. In line with the
principle enunciated in
Endumeni,
[6]
this would be a more sensible interpretation which leads to a
sensible businesslike result in the context of the conditions of
sale.
[17]
The wording of the conditions of sale is clear and unambiguous. It
makes provision for the payment of the
amounts due in terms of s
118(1) of the Act
and
(my emphasis) all other
taxes due on the property. As made clear in clause 6.1.1, the
purchaser was liable for all amounts due to
the municipality
servicing the property in terms of s 118(1) of the Act, for municipal
service fees, surcharges on fees, property
rates, and other municipal
taxes, levies, and duties that may be due to the municipality. There
is no reason why the historic debt
in the context of the conditions
of sale should not be interpreted to fall under 'and other municipal
taxes... '. Mr Pietersen,
on behalf of the applicant, correctly
submitted that the applicant had also relied on the conditions of
sale in its argument, which
was contrary to what was stated in its
replying affidavit. If that is the case, then the applicant's
reliance on the maxim
res
inter alios acta
[7]
was ill-founded.
[18]
Much reliance was placed on
Real
People Housing (Pty) Ltd v City of Cape Town
.
[8]
There, the principle established was that '[a] clearance certificate
must be issued if the sums falling due in the two-year period
are
paid. Any sums which fell due prior to the commencement of the
two-year period need not be paid as a condition precedent to
the
issue of the required clearance certificate' .
[9]
However, Cameron J in
Jordaan
correctly pointed out
that a municipality is allowed to slam the legal brake on any
impending transfer so as to ensure payment of
any outstanding
debt.
[10]
He went on to state
that the notification to the municipalities of an impending transfer
is key:
[11]
'Doing
so is indeed indispensable and invariable. This gives the
municipality full power, and full opportunity, to enforce the charge
against the existing owner for all recoverable debt,
even beyond
the last two years
.' (My emphasis.)
What
distinguishes this matter from others is the fact that the respondent
had raised all its demands with the conveyancers without
imputing any
liability on the applicant. It required a guarantee that the historic
debt would be paid and even threatened an interdict
against the
transfer should the guarantee not be furnished. The applicant, on its
own volition, took it upon itself to pay these
amounts, prior to it
being a new owner of the property.
[19]
An argument was also raised in the heads of argument that the payment
made for the initial figures ought
to have been allocated to a
specified debt. There is, however, no merit in this argument as the
respondent made it clear how it
allocated the funds and also in the
light of the interpretation I have attributed to clauses 6.1 to 6.3
of the conditions of sale.
In my view, no case has been made out for
the relief sought. The applicant was liable for all debts and taxes
owed in respect of
the property. as provided for in the conditions of
sale. hence the respondent was entitled to demand payment for same
before the
exchange of ownership.
[20]
Accordingly, the application is dismissed with costs.
POYO
DLWATI JP
APPEARANCES
Date of Hearing:
30 July 2024
Date of Judgment:
31 October 2024
Counsel for
Applicant:
Mr Pietersen
Instructed by :
Kaveer Guiness
Attorneys
c/o Viv Greene
Attorneys Inc
Counsel for First
Respondent:
Mr Broster
Instructed by:
Dwarika, Naidoo and
Company
c/o Tomlison,
Mnguni James Attorneys
[1]
Section 118(1)
(b)
of the
Act provides as follows:
'(1)
A registrar of deeds may not register the transfer of property
except on production to that registrar of deeds of a
prescribed
certificate-
(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.'
[2]
Section 118(3) of the Act provides as follows:
'(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.'
[3]
Jordaan
and others v Tshwane Metropolitan Municipality and others
[2017) ZACC 31;
2017 (6)
SA 287
(CC);
2017 (11) BCLR 1370
(CC) para 54 ('Jordaan').
[4]
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[2012]
ZASCA 13
;
2012 (4) SA 593
(SCA);
[2012] 2 All SA 262
(SCA) para 18
(' Endumeni').
[5]
Uniform rule 46A(5).
[6]
Endumeni
para 18.
[7]
This is 'a common-law doctrine which holds that a contract cannot
adversely affect the rights of one who is not a party to the
contract' (see
Coughlan
NO v Road Accident Fund
[2015]
ZACC 9
;
2015 (4) SA 1
(CC) fn 1).
[8]
Real
People Housing (Pty) Ltd v City of Cape Town
2010
(1) SA 411 (C).
[9]
Ibid para 31.
[10]
Jordaan
para 55.
[11]
Ibid.