Why the Security Right in Section 118(3) of the Local Government: Municipal Systems Act 32 of 2000 is not Enforceable Against Successors in Title – A Follow-up Occasioned by the SCA’S Mitchell Judgment
Jurisdiction | South Africa |
Citation | (2017) 28 Stell LR 47 |
Date | 27 May 2019 |
Published date | 27 May 2019 |
Author | Reghard Brits |
Pages | 47-67 |
47
WHY THE SECURITY RIGHT IN SECTION
118(3) OF THE LOCAL GOVERNMENT:
MUNICIPAL SYSTEMS ACT 32 OF 2000 IS NOT
ENFORCEABLE AGAINST SUCCESSORS IN
TITLE – A FOLLOW-UP OCCASIONED BY THE
SCA’S MITCHELL JUDGMENT*
Reghard Brits
BCom LLB LLD
Senior Lecturer, Department of Mercantile Law, University of Pretoria
1 Introduction
Section 118(3) of the Local Government: Municipal Systems Act 32 of 2000
(“LGMS Act”) provides that outstanding municipal debts form a “charge
upon the propert y” to which the debts relate. The effect is that the mun icipality
has a statutory real security right that “enjoys preference over any mortgage
bond registered again st the property”.
In City of Tshwane Metropolitan Municipality v Mathaba the (“Mathabathe”)1
the Supreme Court of Appeal (“SCA”) implied that this charge will remain
upon the land after it is t ransferred to a new owner. Shortly after, the
Gauteng Division of the High Court i n Pretoria decided in Mitchell v City
of Tshwane Metropolitan Municipal Council (“Mitchell”)2 that this r ule,
although apparently cor rect in private sales, does not apply when the propert y
is transferred subsequent to a judicial sale in execution. However, a majority
of the SCA in Mitchell recently upheld an appeal against the latte r judgment.3
Not only did the court reject the argument that the charge on the property
falls away when the property is transferred after a sale in execution, but it
also con rmed the general implication of Mathabathe, namely that the
municipality’s real security r ight passes with the land when it is t ransferred
regardless of the cause of such a tran sfer. In other words, the secur ity right is
enforceable against successor s-in-title of the original owner – the latter being
* An earl ier draft of th is article for med the basis of a pr esentation g iven at Schindlers Attorneys,
Conveyance rs & Notaries in Johanne sburg on 3 March 2016 as well as of a semina r during the annua l
alumni week of the South Af rican Resea rch Chair in P ropert y Law at Stellenbos ch University on
11 August 2016. Thank you to Er nst Marais, C hantelle Glad win and Gust av Muller for read ing and
commenti ng on earlier dr afts as well as t o the anonymou s reviewers for th eir help in improv ing this
contribut ion. All shortcom ings are my own.
1 2013 4 SA 319 (SCA) para 12. See B Clo ete “Clearan ce Certif icates: Does the Mu nicipality’s Lien Su rvive
the Transfer?” (2013 Sep) 534 De Rebu s 46.
2 2015 1 SA 82 (GP) paras 9-15.
3 2016 3 SA 231 (SCA). See T Mashi le “Municipal ities Have a Hypoth ec Over Debts for R ates” (2016
Jun) 564 De Rebus 30; C Gla dwin “The s 118(3) Monster: City of Tshwane Metr opolitan Municipality
v PJ Mitchell (38/2015) [2015] ZASCA 1 (29 January 2016)” (11-02-2016) GhostDigest w.
ghostdigest.com/articles/the-s118(3)-monster-ii/54981> (accessed 15-02-2016).
(2017) 28 Stell LR 47
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the person who actu ally incurred the relevant debt. Although the mu nicipality
can only obtain a judgment for the outstanding debt again st its actual debtor,
the apparent implication is that t his judgment can be executed against the
burdened propert y by having it attached in execution regardless of who the
owner is.
Various authors have criticised this possible implication of Mathabathe,4
but now the SCA’s Mitchell judgment has necessitated a fresh look at this
matter. This contr ibution does not discuss the details of the existing case
law, since it is assumed that the reader is fa miliar with the decisions. Instead,
the focus is on re-afrming5 the contention that a section 118(3) charge,
in its current for m, cannot remain on the property subsequent to any kind
of transfer (except perhaps when the doctrine of notice applies). Three lines
of argument are presented, which – in my view – collectively provide a
workable interpretation of section 118(3), namely (1) a contextual, historical
and logical interpret ation of the wording of the provision; (2) a theoretical
argument regard ing the effect of real security rights t hat are not supplemented
by publicity; and (3) a constitutional perspect ive. After prese nting these three
arguments, this article also briey discusses t he impact of the i nterpretation
of section 118(3) on the rights of mortgagees.
It should be noted that the Gauteng Division of the High Cou rt in Pretoria
recently held in Jordaan v Tshwane City (“Jordaan”)6 that section 118(3)
of the LGMS Act is unconstitutional to t he extent that the charge sur vives a
transfer of ownership to some one who is not a debtor of the municipalit y. T he
Constitutional Cour t must still (and probably will) conr m this declaration of
invalidity, but it is hoped that the cour t will also consider the other arguments
made in this contr ibution, such as that section 118(3) can be interpreted to
avoid constit utional invalidit y.
2 Interpr etation of section 118(3)
A strategic mista ke in Mitchell was for council not to challenge the
correctness of the Mathabathe judgment, in which it was assu med that a
section 118(3) charge survives a tra nsfer of the property. Instead of challenging
this interpretation, as certain commentators have done,7 the focus was on the
4 See eg R Brits “T he Statutor y Security Right in Sect ion 118(3) of the Local Governme nt: Municipal
Systems Act 32 of 2000 – D oes It Survive Tra nsfer of the Land? [ Discussion of Cit y of Tshwane
“The Implica tions of Section 118(3) of the Local Government: Mun icipal Systems Act 32 of 2000 for
Purchase rs of Immovable Prope rty” (2015) 78 THRHR 219; MM Ratiba “The Mun icipal Debt Collect ion
Beyond the Matha bathe Case – A Welcome Solution or Multiplic ation of Problems?” (2014) 35 Obiter
691; C Gladwin “Histor ical municipal debt” (23-01-2014) GhostDigest
articles/ historical-mu nicipal-debt/54 489> (accessed 29-08-2014); C Gladwi n & D Hepburn “The im pact
of Mitchell and Mathabathe on s 118” (08-12-2014) Johannesburg Attorneys Association
za/download /impact-mitchell-math abathe-s118/> (accessed 24 -01-2015); I Miltz & J Bitter “Hist orical
Debt” (2016) 16 Without Prejudice 45. See also JC Sonnekus “Sogen aamde Stat utêre Retens ieregte
ten gunst e van Plaaslike Owerhede v ir Agterstallige Er fbelasting en Mu nisipale Rekeninge” (2016) 79
THRHR 443.
5 The present aut hor is one of the comment ators who previously cr iticised Mathabathe. See the text to n 4
above.
7 See the text to n 4 ab ove.
48 STELL LR 2017 1
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