|
|
[Home]
[Databases]
[WorldLII]
[Search]
[Feedback]
South Africa: Supreme Court of Appeal |
[Database Search] [Name Search] [Recent Decisions] [Noteup] [Help]
Last Updated: 7 December 2004
IN THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
REPORTABLE
CASE NO 334/03
In the matter between
MA MPAKATHI
Appellant
and
KGOTSO DEVELOPMENT
CC First Respondent
SDP DU
TOIT Second Respondent
HC DU
TOIT Third Respondent
SEDIBENG DISTRICT
MUNICIPALITY Fourth Respondent
MIDVAAL LOCAL
MUNICIPALITY Fifth Respondent
REGISTRAR OF
DEEDS, PRETORIA Sixth
Respondent
________________________________________________________________________
CORAM: HARMS, STREICHER JJA, ERASMUS, JAFTA et PONNAN AJJA
________________________________________________________________________
Date Heard: 3 September 2004
Delivered: 20 September 2004
Local authority – Councillors – Purchase of property at a sale in execution where municipality the judgment creditor – According to agreed facts, magistrate acquired certain ‘rights’ in terms of conditions of sale – Such ‘rights’ all to benefit of municipality – Such ‘rights’ entail rights already vesting in municipality in terms of statute or part of functions of sheriff under Magistrates’ Courts rule 43 – Sale not null and void under s 40 of Gauteng Local Government Ordinance 17 of 1939
________________________________________________________________________
J U D G M E N T
________________________________________________________________________
ERASMUS AJA
ERASMUS AJA
[1] At issue in this appeal
is the validity of an agreement of sale of immovable property concluded at a
sale in execution held on
a magistrate’s judgment obtained by a local
authority against the registered owner of the property. Transfer was effected.
The previous owner thereafter instituted action in the court a quo for an
order declaring the purchase to be null and void. She cited: as first defendant,
the close corporation that had purchased
the property; as second and third
defendants, the two members of the close corporation; as fourth and fifth
defendants, two municipalities
(to whom I refer collectively as either
‘the municipality’, ‘the judgment creditor’ or
‘the execution
creditor’ depending upon what is appropriate to the
context); and, as sixth defendant, the registrar of deeds.
[2] It was
plaintiff’s case that the sale fell foul of s 40 of the Gauteng Local
Government Ordinance 17 of 1939 (T) (‘the
ordinance’) which is
current in Gauteng and which provides, in ss (1) thereof, that a municipal
councillor shall not (except
in certain specified circumstances not relevant
here) ‘enter into a contract with the council in which he or she has a
pecuniary
interest’. Subsection (3) declares that such a contract
‘shall be null and void’. At the time of the sale in execution,
the
second defendant was a councillor in the municipality. His member’s
interest in the close corporation was sufficient to
bring the contract of sale
within the purview of s 40.
[3] The court dismissed the action on the
basis of the stated case presented to it for adjudication in terms of rule 33 of
the Uniform
Rules. The judgment is reported as Mpakathi v Kghotso Development
CC and others 2003 (3) SA 429 (W). Cloete J therein set out fully the
relevant facts and dealt extensively with a number of questions of law arising
in the matter. The learned judge granted the unsuccessful plaintiff leave to
appeal.
[4] The agreement that comes into being at a judicial sale is one
between the purchaser and the sheriff acting as the executive of
the law. This
proposition was accepted as correct by appellant’s counsel, who therefore
did not contend that the execution
creditor automatically becomes party to that
contract. He contended instead that in the present matter a contractual
relationship
was established between the municipality and the purchaser by
virtue of certain provisions contained in the conditions of sale; which
conditions, upon the fall of the hammer, became terms of the contract of sale.
The relevant conditions are identified in the statement
of agreed
facts:
‘26. The Conditions of sale vested various rights in the Eastern
Gauteng Services Council, inter alia, the following:
26.1 Clause 5 obliged the purchaser, at the instance of the attorney of the Eastern Gauteng Services Council, to pay all the costs relating to the transfer of the property and the sale in execution.(a)
26.2 In terms of clause 6, the purchaser assumed liability for all outstanding debts owed to the Eastern Gauteng Services Council in respect of taxes, levies and service fees relating to the property.(b)
26.3 In terms of clause 7, the purchaser had to furnish a guarantee approved by the attorney of the Eastern Gauteng Services Council for payment of the balance of the purchase price.(c)
26.4 In terms of clause 9, the Eastern Gauteng Services Council appointed the conveyancer to effect the transfer of the property.(d)
26.5 In terms of clause 10, the Eastern Gauteng Services Council was exempted from liability for any latent defects in the property.’(e)
I comment as follows on the cross-references inserted in the
above paragraph. (a)Section 3 of the Transfer Duty Act 40 of 1949
declares that the duty shall be payable by the person who has acquired the
property.
(b)Section 50 of the ordinance provides that no transfer of
land shall be registered unless all amounts for a period of three years in
regard to municipal rates and services have been
paid.[1] (c)Rule 43(13) of
the Magistrates’ Courts rules provides that the sheriff shall give
transfer to the purchaser against payment
of the purchase money and upon
performance of the conditions of sale and may for that purpose do anything
necessary to effect registration
of transfer. (d)Rule 43(8) provides
that the creditor may appoint the conveyancer for the purposes of transfer.
(e)Clause 10 purports to exempt the municipality from a liability
which, for it, does not exist.
[5] It seems therefore that the conditions of
sale upon which appellant would rely, entail rights already vested in the
municipality
in terms of statutory provisions or the rules; or prescribe how the
sheriff shall perform his executive functions in giving effect
to the terms of
the agreement of sale in a process which is mandatory for the sheriff and
therefore beyond the control of the execution
creditor.
[6] Counsel for the
appellant submitted that clauses 5 to 9 of the conditions of sale involve the
municipality in a tripartite agreement,
as in the case of Sedibe and another
v United Building Society and another 1993 (3) SA 671(T). This aspect was
the subject of the judgment of the court a quo. However, in view of the
developments described hereinafter, it has become unnecessary for us to come to
a finding on the issue.
[7] Appellant’s counsel advanced the further
submission that the validity and status of the so-called tripartite agreement is
not open to challenge by the respondents, in virtue of the fact that in the
stated case it is expressly and therefore incontrovertibly
agreed that clauses 5
to 9 of the conditions of sale vested various ‘rights’ in the
council.[2] He contended that the
court is not entitled to go behind the admission. I shall accordingly for
purposes of this judgment accept
(without deciding) that on the agreed facts, we
have here a contract of the kind that was found to exist in Sedibe 678
A-C, viz a special type of situation where the execution creditor, the
sheriff and the purchaser are all parties to what is in effect a tripartite
agreement in terms of which the municipal council acquired a contractual bond
with the purchaser, and therefore indirectly with a
councillor.
[8] That contract is impugnable under s 40(1) of the ordinance only if a councillor thereunder acquires ‘any direct or indirect pecuniary interest’. That concept was received from England[3] into our legislation regulating relationships between local authorities and the members of their governing councils[4]. It is employed in three areas: councillors attending and voting at meetings concerning matters in which they have a direct or indirect pecuniary interest; the disqualification from office of councillors who enter into contracts with the council in which they have such interest, and the ineligibility of candidates for office who have such contracts with the council; and, as in the present case, the invalidity of contracts in which a councillor has such interest.
[9] The words ‘direct or indirect pecuniary interest’ are capable of bearing a wide meaning. However, inasmuch as s 40 restricts the right of freedom of contract, limitation of that extensive meaning through contextual interpretation, seems called for. Dönges and Van Winsen, Municipal Law 2ed 128 state that ‘(t)hese words are nowhere defined and the courts have been called upon to treat each set of facts on its merits. In order to do this the courts have looked to the object which the Legislature desired to attain.’ Apart from avoiding conflict of interest[5], s 40 obviously has the purpose of protecting municipal councils from fraud and corruption by councillors; the prevention of misuse of insider knowledge of municipal business by councillors; and their abuse of their position in dealing with municipal employees and administrators in the performance of contracts with the municipality.
[10] In R v Garb 1934 CPD 66, 69, Gardiner JP remarked that ‘(w)here the councillor’s interest is simply one which is common to every ratepayer in the municipality, then he is not regarded as coming within the section’. In the present matter the contract was entered into at a public auction open to all ratepayers and other interested parties. The municipality had no part in or control over the auction in that the sheriff is obliged to sell the property to the highest bidder (Magistrates’ Courts rule 43(10)). These circumstances greatly reduce the risk of impropriety on the part of the councillor in the purchasing of the property.
[11] The risk of chicanery is further reduced by the fact that the benefits which redound to the municipality in terms of clauses 5 to 9 involve statutory rights which it already possesses, or to executive actions by the sheriff prescribed by the rules of court.[6]
[12] Importantly, the contractual provisions upon which the appellant would
rely are all to the benefit of the municipality. In Burger v Dummer and
another 1913 CPD 765, 770, Gardiner AJ declared that ‘wherever
“contract” is mentioned in the (municipal) Ordinance, a
contract ...
whereby the Council is to do or give something in return for something done or
given by the other party, is contemplated’.
The court held that the
undertaking by a candidate councillor to donate an amount of money towards
defraying the costs of an appeal
instituted by the council, did not constitute a
pecuniary interest disqualifying him from office. This decision might not give
rise
to a general rule that a donation or a promise without return, made by a
councillor to the council, can never constitute a pecuniary
interest; it does
however reflect the common sense view that the words ‘pecuniary
interest’ generally connote a right
or claim vesting in the councillor as
against the council.
[13] The purpose of execution is the enforcement of the
court’s judgment; to which end the proceedings are driven throughout
by
the judgment creditor for its exclusive benefit (subject to the rights of
preferent creditors), through the sheriff acting in
his or her executive
capacity. The execution creditor has the right to prepare the conditions of sale
(Magistrates’ Courts
rule 43 (7)(a)) and may include therein provisions to
its benefit. The municipality, in its capacity of execution creditor, stipulated
the benefits which it required out of the sale. The purchaser, in accepting the
conditions of sale, was instrumental in the municipality
obtaining its
objectives. What is more, the purchaser’s bid, being the highest bid,
constituted for the municipality the best
bargain possible at the particular
sale in execution. The purchaser’s obligation to fulfil that bargain can
hardly afford scope
for corruption, fraud or insider trading.
[14] In short,
for the above reasons, I find that the beneficial statutory ‘rights’
of the kind ‘acquired’
by the municipality at the public judicial
sale did not constitute a pecuniary interest, direct or indirect, as
contemplated
in Local Government Ordinance 17 of 1939 (T).
[15] I should
mention perhaps that in the appellant’s heads of argument reliance is
placed also on s 10H(3) of the Local Government
Transition Act 209 of 1993, but
that aspect was not pursued at the appeal. I need not burden this judgment with
my reasons for regarding
counsel’s decision to be correct and
proper.
[16] In the result, I would dismiss the appeal with costs.
_______________________
AR ERASMUS
ACTING JUDGE OF
APPEAL
CONCUR:
Harms JA
Streicher JA
Jafta AJA
Ponnan AJA
[1] The section is fully set out
in footnote 8 p 437 of the reported judgment of the court a quo above
para [3].
[2] See para
[4].
[3] See
Halsbury’s Laws of England 4th ed. Vol 29(1) under
para 170 ‘Pecuniary
interest.’
[4]
See, for example : s 46 and s 103 Ordinance 10 of 1912 (Cape); s 30
Municipal Ordinance 20 of 1974 (Cape); s 50 Local Government Ordinance
8 of 1962
(Free State).
[5] See
McIllwraith v Fowler 1920 EDL 215 at 222; Stellenbosch Farmers’
Winery v Distillers Corporation (SA) Ltd and another 1962 (1) SA 458 (A)
470B.
[6] See para
[4].
SAFLII:
|
Terms of Use
|
Feedback
URL: http://www.saflii.org/za/cases/ZASCA/2004/81.html
.RTF of original document