THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

JUDGMENT

Case No: 9/08

CITY OF JOHANNESBURG
Appellant

and

EVEN GRAND 6 CC
Respondent

Neutral citation:
City of Johannesburg v Even Grand (9/08) [2008] ZASCA 146
(27 November 2008)
Coram:
STREICHER,
BRAND,
LEWIS,
MAYA
JJA
and
BORUCHOWITZ AJA
Heard:
18 NOVEMBER 2008
Delivered:
27 NOVEMBER 2008
Summary:
Properties sold in terms of s 34(2) of Administration of Estates
Act 66 of 1965 – s 118(2) of Local Government: Municipal
Systems Act 32 of 2000 not applicable – interpreting s 118(1)
according to plain meaning does not lead to result not intended
by legislature.
_______________________________________________________________________

ORDER
_______________________________________________________________________

On appeal from: High Court, Johannesburg (Khampepe J sitting as court
of first instance)

The appeal is upheld with costs and the order of the court a quo is set
aside and replaced with the following order:
‘The application is dismissed with costs.’

_______________________________________________________________________

JUDGMENT
_______________________________________________________________________

STREICHER JA (BRAND, LEWIS, MAYA JJA and BORUCHOWITZ
AJA concurring)

[1] The issue to be decided in this appeal is whether a municipality is
obliged, against payment by an insolvent of the proceeds of the sale of its
immovable property, to issue a certificate that the property rates and other
fees payable to it in connection with the property have been paid despite
the proceeds being less than the amount owed to the municipality.

[2] Mr Manfred Hamburger, acting on behalf of a close corporation to
be formed (the respondent being that close corporation) purchased four
immovable properties (Erven 2394 and 2537, Jeppestown, Erf 64,
Malvern and Erf 152, Jeppestown South, Johannesburg) at a public
auction for a purchase price of R17 000. The auction was held at the
instance of the executor in the Estate Late M E Ramos, acting in terms of
s 34 of the Administration of Estates Act 66 of 1965. The amount owed
to the appellant in respect of the four properties was some R80 000.

[3] In terms of s 34(1) of the Administration of Estates Act the
executor of a deceased estate shall on the expiry of the period allowed for
the lodging of claims against the estate, satisfy himself as to the solvency
of the estate and if he finds the estate to be insolvent, he shall report the
position of the estate to the creditors, informing them that unless the
majority in number and value of all the creditors instruct him to surrender

the estate under the Insolvency Act 24 of 1936, he will proceed to realise
the assets in the estate in accordance with the provisions of s 34(2).
Section 34(2) provides that if the executor has not been directed to
surrender the estate, he shall sell the assets in the estate.

[4] Having sold the assets in the estate, the executor has to submit to
the master an account of the liquidation and distribution of the estate (see
s 34(7)(a)). In terms of s 34(7)(b) such account ‘shall provide for the
distribution of the proceeds in the order of preference prescribed under
the Insolvency Act, 1936, in the case of a sequestrated estate’. Section
34(13) stipulates that the provisions of the section shall not prevent the
sequestration of any estate in terms of the Insolvency Act.

[5] In terms of s 118(1) of the Local Government: Municipal Systems
Act 32 of 2000 (‘the Systems Act’), the registrar of deeds may not
register the transfer of a property except on production of a prescribed
certificate (‘a clearance certificate’) that the municipal service fees,
surcharges on fees, property rates and other municipal taxes, levies and
duties (‘municipal debts’) that became due in connection with the
property during the two years preceding the date of application for the
certificate, have been fully paid. However, the respondent contended that,
in terms of s 89 of the Insolvency Act, the appellant was obliged, against
payment of the proceeds of the sale of the properties, to issue a certificate
that all municipal debts in respect of the properties had been paid. As the
municipal debts that had become due during the two years preceding the
date of application for the certificate were substantially more than
R17 000 (some R80 000, as indicated above) the appellant refused to
issue a clearance certificate. The respondent thereupon applied for,
amongst others, an order:

‘1.1
That the respondent (the appellant in the appeal) issue and provide to the
applicant (the respondent in the appeal) clearance certificates, as envisaged in
Section 92(1) of the Deeds Registries Act No. 47 of 1937, valid for a period of
no less than two months in respect of the following erven: 64 Malvern
Township, 152 Jeppestown South Township, 2394 and 2537 Jeppestown
Township, against payment of R17 000,00.’

[6] Section 92(1) of the Deeds Registries Act referred to in the order
relates to certificates in respect of the payment of taxes and other amounts
to the Government and provincial administrations and not to the payment
of amounts due to local authorities. By the time of the hearing of the
matter in the court a quo the respondent had come to realise that s 118(1)
of the Systems Act was the applicable section and not s 92(1) of the
Deeds Registries Act. The matter was then argued on the basis that, in
terms of s 118(1) and (2) of the Systems Act, read with s 89 of the
Insolvency Act, the appellant was obliged, against payment of the
proceeds of the sale of the properties, to issue certificates that all
municipal debts had been paid.

[7] Section 118(2) of the Systems Act provides that, in the case of the
transfer of property by a trustee of an insolvent estate, the provisions of
s 118 are subject to s 89 of the Insolvency Act. In terms of s 89(1) of the
Insolvency Act any tax as defined in s 89(5) in relation to immovable
property ‘which is or will become due thereon in respect of any period
not exceeding two years immediately preceding the date of sequestration
of the estate in question and in respect of the period from that date to the
date of the transfer of that property by the trustee of that estate, . . . shall
form part of the costs of realization’ of that property. It provides further
that such costs ‘shall be paid out of the proceeds of that property, if
sufficient and if insufficient and that property is subject to a special

mortgage, landlord’s legal hypothec, pledge, or right of retention the
deficiency shall be paid by those creditors, pro rata, who have proved
their claims and who would have been entitled, in priority to other
persons, to payment of their claims out of those proceeds if they had been
sufficient to cover the said cost and those claims’.

[8] Relying on the provisions of s 118(2) of the Systems Act the court
a quo held that s 118 was subject to the provisions of s 89 of the
Insolvency Act when applied to the transfer of the properties. Proceeding
from this premise the court a quo reasoned as follows: In terms of s 89(1)
the amount claimed by the appellant constituted costs of realizing the
properties, which had to be paid out of the proceeds of the properties if
sufficient, and, if not sufficient, by creditors who had proved their claims
and who would have been entitled, in priority to other persons, to
payment of their claims out of those proceeds if they had been sufficient
to cover the cost of realizing the properties and these claims. There were
no such creditors with the result that the cost of realizing the properties
could only be paid out of the proceeds of the properties. If the legislature
intended that, in these circumstances, the purchaser of property should
make payment of the balance required in order to procure a certificate in
terms of s 118 it would have expressed itself in no uncertain terms.
Stating that ‘it is a truism that you cannot bleed a stone’ the court a quo
concluded that ‘upon a proper construction of the relevant provisions of
the Systems Act read with s 89 of the Insolvency Act, the respondent (the
appellant in the appeal) is obliged to accept in fulfilment of all its claims
against the insolvent estate, the proceeds of the properties in the sum of
R17 000,00.’

[9] The court a quo nevertheless made an order in the terms prayed for,
ie it ordered the appellant to issue clearance certificates ‘as envisaged in
Section 92(1) of the Deeds Registries Act’, but granted the appellant
leave to appeal to this court. In the light of the argument presented in the
court a quo, and also the court a quo’s reasoning, it probably intended to
order that clearance certificates be issued in terms of s 118(1) of the
Systems Act to the effect that the municipal debts that had become due in
respect of the properties have been paid in full. The appeal was argued on
this basis.

[10] The premise on which the court a quo based its reasoning is wrong.
Section 118(2) of the Systems Act provides that in the case of the transfer
of property by a trustee of an insolvent estate the provisions of s 118 are
subject to s 89 of the Insolvency Act. In the present case we are not
concerned with the transfer of property by a trustee of an insolvent estate,
we are concerned with the transfer of property by an executor of an estate
that is insolvent. Moreover, ‘insolvent estate’ is defined in s 2 of the
Insolvency Act as an estate that is under sequestration and s 89 of the
Insolvency Act deals with such estates. The estate late Ramos has not
been sequestrated. As stated above the creditors did not instruct the
executor to surrender the estate. As a result the properties were sold in
terms of s 34(2) of the Administration of Estates Act. It follows that
transfer of the properties in question is not, in terms of s 118(2), subject
to the provisions of s 89.

[11] In a letter written after the hearing of the appeal the respondent’s
attorney objected to the matter being decided on this basis, on the ground
that it was not contended in the court a quo, in the application for leave to
appeal, in the notice of appeal or in the appellant’s heads of argument in

this court, that the transfer of the properties is not subject to the
provisions of s 89. There is no merit in this objection. The relevant facts
are known and are common cause. It is specifically stated in the
respondent’s founding affidavit, and admitted in the appellant’s
answering affidavit, that sections 34(1) and (2) of the Insolvency Act had
been complied with, that the creditors in the estate did not require the
estate to be surrendered under the Insolvency Act and that the properties
were sold in terms of s 34(2). The reference to sections 34(1) and (2) of
the Insolvency Act was clearly erroneous and intended to be a reference
to sections 34(1) and (2) of the Administration of Estates Act. Sections
34(1) and (2) of the Insolvency Act deal with the disposal of a business
by a trader. Moreover, powers of attorney by the executor annexed to the
founding affidavit bear a stamp by the Master to the effect that the estate
is being administered in terms of s 34 of the Administration of Estates
Act. In the circumstances it is of no consequence that the appellant did
not, until the matter was argued in this court, advance the submission that
the case does not concern the transfer of property by a trustee from an
insolvent estate and that s 118(2) of the Systems Act is for that reason not
applicable. Unrestricted leave to appeal was granted to the appellant and
the appellant was free to advance any legal argument based on these
common cause facts.1 Had the argument not been advanced by the
appellant the members of the bench would in any event have questioned
the applicability of s 118(2).

[12] Before us the respondent, relying on the provisions of the
Insolvency Act read with s 34(7)(b) of the Administration of Estates Act,
submitted that unless the amount payable in terms of s 118(1) in order to

1 Van Rensburg v Van Rensburg and others 1963 (1) SA 505 (A) at 510A; and Cabinet for the
Territory of South West Africa v Chikane and another 1989 (1) SA 349 (A) at 360F-G.

obtain the required certificate, is limited to the proceeds of the sale of the
particular property, the municipality is in effect given a preference over
other assets of the insolvent estate and that to do so was impermissible.

[13] As stated above s 34(7)(b) provides that the distribution account
which the executor has to submit to the Master has to provide for the
distribution of the proceeds of the sale of the properties ‘in the order of
preference prescribed under the Insolvency Act, 36 of 1936, in the case of
a sequestrated estate’. In terms of s 118(3) of the Systems Act an amount
due in respect of municipal debts 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. Section 89(4) of the
Insolvency
Act
qualifies
these
provisions
by
providing
that
‘notwithstanding the provisions of any law which prohibits the transfer of
any immovable property unless any tax as defined subsection (5) due
thereon has been paid, that law shall not debar the trustee of an insolvent
estate from transferring any immovable property in that estate for the
purpose of liquidating the estate, if he has paid the tax which may have
been due on that property in respect of the periods mentioned in
subsection (1) and no preference shall be accorded to any claim for such a
tax in respect of any other period’.

[14] Section 118(1) of the Systems Act gives the appellant the right to
veto the transfer of property until such time as the rates and other
amounts due in respect of the period of two years preceding the date of
application for the certificate have been fully paid. In the result the
appellant’s claim is indeed, in effect, given a preference over other
creditors. However, the section does not create any preference in favour
of a municipality when it comes to the distribution of the assets or the

proceeds of the assets in the estate.2 It provides a municipality with a
different remedy to the one provided by s 118(3).3 Section 118(1) is
therefore not affected by the provisions of s 34(7)(a), which deals with
the order of preference applicable upon the distribution of an estate being
administered in terms of s 34(2). It follows that, in so far as the claim of
the appellant is given preferential treatment in terms of s 118(1), neither
s 118(2) nor s 34(7)(a) contains any indication that, in the case of an
insolvent estate being administered in terms of s 34(2), the legislature had
a different intention.

[15] The only other argument advanced for interpreting s 118(1) so as to
oblige a municipality to issue a clearance certificate in respect of an
immovable property against payment of the proceeds of the sale of that
property is that it would be absurd to interpret the section otherwise,
because such an interpretation may result in it being impossible to
dispose of a property where the municipal debts due in terms of the
section, during the two years preceding the date of application for the
certificate, exceed the amount for which the property can be disposed of.

[16] In Venter v Rex4 Innes CJ said that when to give the plain words of
a statute their ordinary meaning would lead to absurdity so glaring that it
could never have been contemplated by the legislature, or where it would
lead to a result contrary to the intention of the legislature, as shown by the
context or by such other considerations as the Court is justified in taking
into account, the Court may depart from the ordinary effect of the words
to the extent necessary to remove the absurdity and to give effect to the

2 See Rabie NO v Rand Townships Registrar 1926 TPD 286; South African Permanent Building Society
v Messenger of the Court, Pretoria, and others 1996 (1) SA 401 (T); and Nel NO v Body Corporate of
the Seaways Building and another 1996 (1) SA 131 (A) at 134B-135D.
3 BOE Bank Ltd v Tshwane Metropolitan Municipality 2005 (4) SA 336 (SCA) para 7.
4 1907 TS 910 at 914-915.

true intention of the legislature. However, ‘the absurdity must be utterly
glaring and the intention of the legislature must be clear, and not a mere
matter of surmise or probability.’5

[17] In order to be of assistance to the respondent one would have to
interpret the section so as to contain a proviso that, in the event of the
proceeds of the sale of the property to be transferred being less than the
municipal debts due in respect of  the property in respect of the two years
preceding the date of application for the certificate, and in the event of the
transferor not having any funds to pay such municipal debts, a certificate
should be issued by the municipality, against payment of the proceeds of
the purchase price, certifying that such municipal debts have been fully
paid.

[18] In my view there is no basis on which it can be held that the
legislature intended s 118(1) to be read subject to the aforesaid proviso.
Although, upon payment of the municipal debts due in connection with a
property, a municipality is obliged to issue a clearance certificate to that
effect, the section deals with a function of the registrar of deeds and not
with the discharge of the obligation to pay such municipal debts. Put
differently, although a registrar of deeds may not register the transfer of
property except on production of a clearance certificate for the required
period the section does not purport to prescribe to a municipality what
amounts it may or may not accept in settlement of the municipal debts
due to it. This is a matter dealt with elsewhere in the Systems Act. In
terms of s 109(2) of the Act a municipality may compromise or
compound any claim. It follows that a municipality may agree to accept
the purchase price of property or a lesser amount in payment of the

5 Shenker v The Master and another 1936 AD 136 at 143.

municipal debts payable in respect of a property. If such purchase price is
indeed the best price that can be achieved for the property, if no more can
be recovered from the property owner, and if there is no prospect that the
municipality may in the future be able to recover such municipal debts
from the property owner, a local authority will probably be prepared to
accept a lesser sum in payment thereof. By doing so it would enable the
property to be transferred to a new owner who would upon transfer
become liable to pay the rates and other municipal fees and charges
payable in respect of the property. For these reasons I am not persuaded
that to interpret s 118 according to the plain meaning of the section would
lead to a result that could not have been intended by the legislature.

[19] In the result the appeal is upheld with costs and the order of the
court a quo is set aside and replaced with the following order:
‘The application is dismissed with costs.’

_____________________
P E STREICHER
JUDGE OF APPEAL

APPEARANCES:

For appellant:
R A Solomon SC

K N Tsatsawane

Instructed by:

Kunene Ramapala Botha, Johannesburg

Claude Reid Inc, Bloemfontein

For respondent:
D W Phillips

Of Nathanson Bowman & Nathan, Johannesburg

Matsepes, Bloemfontein
THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From:
The Registrar, Supreme Court of Appeal
Date:
27 November 2008
Status:
Immediate

CITY OF JOHANNESBURG v EVEN GRAND 6 CC

The Supreme Court of Appeal today upheld an appeal against a judgment in the
Johannesburg High Court in terms of which the appellant was ordered to issue a
clearance certificate in respect of four properties against payment of the
purchase price fetched by those properties at a public auction. The seller of the
properties was the executor in a deceased insolvent estate. In terms of s 118 of
the Local Government: Municipal Systems Act the registrar of deeds may not
register the transfer of a property except on production of a prescribed
certificate that the municipal service fees, property rates and certain other
amounts that became due in connection with the property during the two years
preceding the date of application for the certificate, have been fully paid. The
SCA held that the appellant was not obliged to accept the purchase price
payable in respect of the properties in settlement of the aforesaid amounts
payable to the appellant.