THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

JUDGMENT

Case No: 77/09

THE CITY OF CAPE TOWN
Appellant

and

REAL PEOPLE HOUSING (PTY) LTD
Respondent

Neutral citation:
City of Cape Town v Real People Housing (77/09) [2009]
ZASCA 159 (30 November 2009)

Coram:
HARMS DP, NUGENT, MALAN JJA, HURT and TSHIQI
AJJA

Heard:
19 NOVEMBER 2009

Delivered:
30 NOVEMBER 2009

Summary:
Clearance certificate required by s 118(1) of the Local
Government Municipal Systems Act 32 of 2000 - whether
municipality entitled to withhold certificate until all debts are
paid.

ORDER

On appeal from: High Court, Cape Town (Yekiso J sitting as court of first
instance).

The appeal is dismissed with costs.

JUDGMENT

NUGENT JA (HARMS DP, MALAN, HURT and TSHIQI AJJA concurring)

[1] Municipalities are obliged by the Local Government Municipal
Systems Act 32 of 2000 to collect monies that become payable to them for
property rates and taxes and for the provision of municipal services.1 For
that purpose municipalities are required to adopt, maintain and implement a
credit control and debt collection policy complying with various criteria,2
and to adopt by-laws that give effect to the policy and its implementation
and enforcement.3

[2] They are assisted to fulfil that obligation, so far as debts relate to fixed
property, in two ways. First, they are given security for repayment of the

1 Section 96.
2 Sections 96 and 97.
3 Section 98.

debt in that it is a charge upon the property concerned.4 And secondly,
municipalities are given the capacity to block the transfer of ownership of
the property until debts have been paid in certain circumstances. That is the
effect of the provisions of s 118(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 the 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.’

[3] The City of Cape Town Metropolitan Municipality has adopted a
credit control and debt collection policy as it is required to do. One of the
principles that it has incorporated in its policy is the following:
‘Payment of any undisputed debt…will first be allocated to the oldest debt…progressing
to the latest debt.’
It has also adopted by-laws giving effect to its policy. Section 15(1)(c) of the
by-laws provides that the City Manager may ‘implement any of the
measures provided for in…the policy’ in relation to any arrears on an
account of a debtor. Read together with the policy it is plain that the City is
authorised to allocate payments made by a debtor to the oldest undisputed
debt and its computerized accounting system has been designed to produce
that effect.

4 Section 118(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] But while the by-laws and policy are informative as to how the
problem arose in this case I do not think they are material to this appeal. The
question before us is not what is authorised by the by-laws but what is
demanded by the statute. If the statute by implication entitles an owner to
insist that moneys must be allocated to debts incurred in the immediately
preceding two years then the authority conferred by the by-laws must
necessarily give way to that entitlement.

[5] The respondent in this appeal – Real People Housing (Pty) Ltd – owns
and has sold various properties in Cape Town, including Erf 23548
Khayelitsha, and it wishes to transfer ownership of the properties to the
purchasers. But the City alleges that debts have been incurred for the
provision of municipal services to the properties, some of which have been
outstanding for more than two years. The respondent disputes that it is liable
to pay the debts, because they were incurred by occupiers of the property
and not by itself, but that is a matter that need not concern us. Clearly all the
debts fall within the terms of s 118(1).

[6] Notwithstanding that it disputes liability for the debts the respondent
is willing to pay them so as to obtain the certificates (colloquially called
‘clearance certificates’) that are required for transfer to take place – but only
if they were incurred not more than two years preceding the request for the
certificate. The City refuses to issue certificates on those terms. It insists that
any moneys that are paid by the respondent will be allocated to the oldest
debts according to its policy. The effect of adopting that approach is that it
will not issue clearance certificates until all debts have been paid irrespective
of when or by whom they were incurred. The City goes so far as to refuse

even to provide the respondent with the amounts that were incurred in the
preceding two years, and the manner in which those amounts are arrived at,
saying that the information is not relevant if all payments fall to be allocated
to the oldest debts.

[7] That impasse came before the High Court at Cape Town when the
respondent applied for orders in the following terms:
‘1.
Declaring that the respondent is obliged, upon receipt of a request from the
applicant, to furnish the applicant with full and itemised particulars of the amounts which
became due for payment in respect of municipal service fees, surcharges on fees,
property rates and other municipal taxes, levies and duties (and which remain unpaid) for
a period of two years prior to the date of the request in respect of any property owned by
the applicant;
2.
`Declaring that the respondent is obliged, on receipt of payment of such sum
tendered specifically for the purpose of discharging that indebtedness, to issue to the
applicant a certificate as contemplated by s 118(1) of the Local Government Municipal
Systems Act 32 of 2000;
3.
Declaring, more specifically, the respondent's refusal to issue such a certificate to
the applicant in respect of Erf 23548 Khayelitsha, to be unlawful.’
The relief was granted by Yekiso J and the City now appeals with the leave
of that court.

[8] It is useful at the outset to be reminded of the findings of the
Constitutional Court when the constitutional validity of s 118(1) was
unsuccessfully challenged in Mkontwana v Nelson Mandela Metropolitan
Municipality et al.5 The impetus for the challenge was that the section has
the effect of forcing owners to pay debts that were incurred not by them but

5 Mkontwana v Nelson Mandela Metropolitan Muncipality; Bissett v Buffalo City Municipality; Transfer
Rights Action Campaign v MEC, Local Government and Housing, Gauteng 2005 (1) SA 530 (CC).

by occupiers of their properties (as in the present case). The owners said that
the section deprived them of one of the rights of ownership – the right to
alienate the property – and that to deprive them of that right until debts that
were incurred by others had been expunged was arbitrary and thus
constitutionally offensive.6

[9] Although the issue that is before us was not pertinently considered
there are two features of the decision in that case that are instructive. The
first is the recognition by that court (it was hardly in dispute) that the section
has the effect of depriving owners of one of the incidents of ownership. It
has for long been a principle of our law that statutes that intrude upon
established rights ought to be strictly construed. Innes CJ expressed that as
follows in Dadoo Ltd v Krugersdorp Municipal Council,7 and it has been
repeated in many subsequent cases:
‘It is a wholesome rule of our law which requires a strict construction to be placed upon
statutory provisions which interfere with elementary rights. And it should be applied not
only in interpreting a doubtful phrase, but in ascertaining the intent of the law as a
whole.’
It hardly needs saying that under the present constitutional order there is no
warrant for choosing a wide construction of a statute that intrudes upon
protected rights if the section opens itself to a construction that intrudes
upon those rights more narrowly.

[10] The second instructive feature emerges from the considerations that
were taken into account in assessing whether the deprivation was arbitrary.

6 Section 25 of the Constitution provides that ‘no one may be deprived of property except in terms of law of
general application, and no law may permit arbitrary deprivation of property.’
7 1920 AD 530 at 552.

One consideration that was taken into account was the period for which the
deprivation would endure. In response to a submission that the deprivation
was capable of enduring indefinitely Yacoob J, writing for the majority,
observed that the deprivation ‘lasts for two years only’ and he explained that
as follows:8
‘It is correct that if there are substantial arrears for consumption charges and all payments
over an extended period are for current consumption only and are credited to the amount
first owing, the substantial sum may remain outstanding indefinitely and thereby
constitute an obstacle to transfer. If, however, no further obligations are incurred to
increase the existing indebtedness of the same occupier the limit on the power of the
owner to transfer the property will last no more than two years.’9

[11] It is apparent that the section was construed by the majority to mean
that a municipality must issue a clearance certificate if no debts were
incurred during the preceding two years, notwithstanding that earlier debts
exist, because otherwise there would have been no basis for finding that the
deprivation is capable of being restricted to no more than two years. If an
owner is entitled to a clearance certificate when debts have not been incurred
for two years, albeit that earlier debts have not been paid, it must follow that
an owner is also entitled to a certificate if debts incurred in that period have
been expunged. Although the court did not pertinently express how it
reached its conclusion on that issue I think that was because it is self-evident
from the section itself.

8 Para 45.
9 The effect of the section in that regard was considered in the minority judgment of O’Regan J (Mokgoro J
concurring) at para 96. I do not think what was said in that paragraph lends credence to the construction
advanced by the City.  The learned judge did no more than postulate what would occur if payments were
allocated to earlier debts without suggesting that a municipality is entitled to insist upon that allocation.

[12] The case that was advanced before us for the City was founded on the
premise that the section ‘imposes no obligations of any kind on
municipalities’ in express terms (taken from the heads of argument). It
follows that the respondent could succeed, so the submission went, only if
the obligation that it relies upon was to be read into the section by
implication. Expressed in those terms the submission is unexceptionable.
But the same cannot be said of the further submission that no such obligation
is to be implied.

[13] The submission that a municipality has no implied obligation at all to
issue a clearance certificate was advanced for only a brief while in argument
before counsel correctly accepted that that was not so. Clearly a municipality
has no discretion to grant or withhold a clearance certificate at will and
thereby frustrate the exercise of the ordinary rights of ownership – such a
discretion would be absurd and I have no doubt that it would not survive
constitutional challenge. Once it was accepted that a municipality indeed has
an obligation to issue a clearance certificate in appropriate certain
circumstances then all that remains is to determine what those circumstances
are.

[14] Those circumstances, on the face of it, appear from the express terms
of the section: the obligation arises when ‘all amounts that became due in
connection with that property…during the two years preceding the date of
application for the certificate have been fully paid.’ Most of the remaining
submissions made by counsel for the City were directed towards persuading
us to read into the section an implied qualification to that express provision.
I do not think it is necessary to detail the terms in which suggested provisos

were framed. It is sufficient to say that all of them – indeed, any proviso that
would have the effect of entitling the City to withhold a certificate until all
debts were paid – would nullify the express language of the section and it
might just as well not be there. I do not think it is necessary to cite authority
for the trite proposition that a term cannot be implied in a statute if it would
contradict its express terms. Had it been intended not to limit the period to
two years then the words would not have appeared at all.

[15] The dilemma in which the City finds itself is that it has left debts
outstanding for more than two years albeit that the statute contemplates
prompt collection. No doubt there are understandable reasons why that is so
but the City cannot resolve its dilemma by subjugating the statute to a policy
that would frustrate its terms. As Yacoob J observed in Mkontwana:
‘The applicants emphasise that a municipality cannot sit by and allow consumption
charges to escalate regardless and in the knowledge that recovery will be possible
whenever the property falls to be transferred. They are right. The municipality must
comply with its duties and take reasonable steps to collect amounts that are due’.

[16] In my view the court below cannot be faulted for granting the relief
sought in prayer 2. The respondent paid to the City an amount that it
estimated had become due in relation to Erf 23548 Khayelitsha during the
period of two years preceding its request for a certificate and there is no
evidence to suggest that any further amounts are due. In those circumstances
the court below also cannot be faulted for granting prayer 3. There remains
the relief that was sought in prayer 1.

[17] Once more counsel for the City relied upon the absence of an express
provision in the statute to support his submission that the City was not
obliged to supply details of the amounts outstanding for debts incurred in the
preceding two years. But an owner cannot be expected to tender payment if
he or she has no knowledge of what is due, particularly if all or portion of
the debt was incurred by an occupier and not by the owner. If that obligation
is not to be implied in the section itself it seems to me that it finds sufficient
support from s 95(e) of the Act.10 We were told that the computerized
accounts system is not designed to provide that information. But that is
because the computer has been programmed to allocate payments to the
earliest debts. No doubt the computer is capable of being programmed to
produce the relevant information once the City accepts that the provisions of
the statute do not yield to practical considerations of that kind.

[18] There is no merit in this appeal and it is dismissed with costs.

__________________
R.W. NUGENT
JUDGE OF APPEAL

10 ‘In relation to the levying of rates and other taxes by a municipality and the charging of fees for
municipal services, a municipality must, within its financial and administrative capacity ... ensure that
persons liable for payments, receive regular and accurate accounts that indicate the basis for calculating the
amounts due.’

APPEARANCES:

For appellant:
E Fagan SC

P Farlam

Instructed by:

Fairbridges Attorneys, Cape Town

McIntyre & Van der Post, Bloemfontein

For respondent:
D R Mitchell SC

Instructed by:

Bowman Gilfillan Attorneys, Cape Town

Matsepes Inc, Bloemfontein