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IN THE HIGH COURT OF SOUTH AFRICA

DURBAN AND COAST LOCAL DIVISION

                                                                                                 CASE NO. CC 1948/08

In the matter between:

YST PROPERTIES CC                                                                                                APPLICANT

and

ETHEKWINI MUNICIPALITY                                                                     1ST RESPONDENT

NINSIX SHARE BLOCK (PTY) LTD                                                           2ND RESPONDENT

(IN LIQUIDATION)

FEDBOND PARTICIPATION MORTGAGE                                               3RD RESPONDENT

BOND MANAGERS (PTY) LTD                                                                    4TH RESPONDENT

JUDGMENT

SISHI J

1.         In this urgent application, the applicant seeks the following order in terms of the Notice of Motion:

            (a)        That this application be heard as a matter of urgency, dispensing with the usual forms and service under Rule 6(12)(a);

            (b)        Ordering the 1st Respondent within 24 hours of the service of this order, to furnish the Applicant with the certificate in terms of Section 118(1) of the Local Government:  Municipal Systems Act 32 of 2000, which certifies that all the amounts that became due in connection with the remaining extent of Portion 13 of Erf 793 Dunns Grant for municipal service’s fees, surcharges on fees, property rates and other municipal taxes, levies and duties during the two years preceding the date of application for this certificate have been fully paid.

(c)        That the 1st Respondent pay the costs of this application on a scale as between Attorney and client.

2.         In terms of the order granted by this Court on the 9th February 2008, the    matter was to be heard on the Opposed Roll on the 28th February 2008 by arrangement with the Senior Judge.  The 1st Respondent is the only party opposing the application.  The 2nd, 3rd and 4th Respondents abided the decision   of the Court.

Background

3.       The following facts are either common cause between the parties or not disputed.  The immovable property which is the subject of this application is the remaining extent of Portion 13 of Erf 793 Dunns Grant.  This property is situated at 1295/1301 South Coast Road, Mobeni, Durban.  The registered owner of the property in question is the 2nd Respondent, Ninsix Shareblock (Pty) Ltd, a company in Liquidation.  The 2nd Respondent hold ownership under the title deed T37420/1997, which is annexure “D” to the Applicant’s Founding Affidavit

4.        On 1st February 2005, the liquidators of the 2nd Respondent entered into a Deed of Abandonment with Fedbond Nominees (Pty) Ltd, the 3rd Respondent herein, in terms of which Fedbond Nominees was to receive transfer of the immovable property.  The Deed of the Abandonment is annexure “E” to the Founding Affidavit.  Transfer of the property has not yet been registered in the name of Fedbond Nominees or any person.

5.        On 22nd November 2006, Fedbond and the Applicant entered into an Agreement of Sale of Letting Enterprise in terms of which Fedbond sold to the Applicant, inter alia, the property.  In doing so, Fedbond acted as the principal, in its role as the manager of the Collective Investment Scheme of Fedbond Nominees.  The Agreement of Sale of Letting Enterprise is annexure “F” to the Founding Affidavit.  The 4th Respondent (Fedbond) is the manager of the Participation Bond Scheme of Fedbond Nominees as contemplated in Section 55 of the Collective Investment Schemes Control Act 45 of 2002.  In terms of clause 5.1 of the Agreement of Sale and Letting Enterprise, the transfer of the property into the name of the purchaser shall be given by an Attorney, Hillary Shaw, “the convenyancer”.  In terms of clause 5.1.3 of the said agreement, the purchaser must have paid the transfer costs, arrear rates, and taxes (and obtained the clearance certificate), stamp duty and any costs incidental to the transfer of the property as has been requested by the seller’s conveyancer.    A further condition in terms of clause 5.1.4 is that the seller’s conveyancer is in possession of a valid and up to date rates clearance certificate from the relevant local authority.  In terms of clause 6.1 of the same agreement, all benefits, risks of ownership and loss of profit on the property shall pass to the purchaser from the date of registration of the transfer, from which date, the purchaser shall be liable for all rates and taxes, insurance premiums and any other charges levied against the property.

6.        On 17th May 2007, Fedbond, the 4th Respondent, and the Applicant entered into a Memorandum of Agreement constituting an Addendum to the Agreement of Sale.  Clause 6 of this agreement provides that clause 5 of the principal agreement is supplemented by including the following new paragraph:

“5.3   In the event that the conveyancer is not able to register the transfer of the property into the name of the purchaser within 180 days from the date of the purchaser signing this agreement, due to any act or omission that can be attributed to the purchaser, and the purchaser fails, refuses and or neglects to perform on 7 days written notice to take such action as is required to register the transfer of the property into its name, this agreement shall lapse and be of no further force and effect, in which event the purchaser shall have no further claim against the seller arising out of this or the 1st agreement …”

7.        The 180 days from 17th May 1007, expired on 13th November 2007.  The Applicant has complied with all its obligations under the agreement save that it has not been able to effect the transfer of the property because it cannot obtain the clearance certificate from the 1st Respondent in respect of the property.  It appears common cause that a dispute exist as to the amount of rates and other charges which the 1st Respondent may be entitled to collect from whoever is the owner of the property. 

8.        Under the agreement referred to above, the 3rd Respondent undertook a contractual obligation to the liquidators of the 2nd Respondent to pay whatever was owed to the 1st Respondent.  In turn, the Applicant undertook a contractual obligation to Fedbond to pay whatever was owing to the 1st Respondent and to obtain the necessary rates clearance certificate.  Fedbond was aware of the rates disputes and it agreed in writing on 11th October 2007 to allow the Applicant an extension of time until the end of November 2007 to obtain a rates clearance certificate.  The dispute on the rates and services account could not be resolved by the end of November 2007.  Fedbond verbally agreed to allow the Applicant further extension to obtain the rates clearance certificate.

9.        The conveyancers attending to the transfers on behalf of the 2nd Respondent, 3rd Respondent and the Applicant, Mr Shaw of Livingston Leandy Incorporated, applied for the rates clearance certificate in December 2007.  In response to such request, and on 17th January 2008, the 1st Respondent provided such clearance figures in its Attorney’s report of that date.  This report is annexure “K” to the Founding Affidavit, and the 1st Respondent claims the following amounts as a precondition to the issue of the clearance certificate for the property:

           Application fee                                                                        R                136,80 

           Rates                                                                                       R   400  81 958,06

            Monthly rates                                                                          R           40 250,24

            Electricity                                                                               R           67 931,00

            Water                                                                                       R           13 979,36

            TOTAL                                                                                   R  400 704 225,46

10.      A letter dated 22nd January 2008, marked “paid under protest” from Attorneys Livingston Leandy Inc, to the 1st Respondent, enclosed a cheque in favour of the 1st Respondent in the amount of R400 704 225,46 being the amount claimed by the 1st Respondent, this letter is annexure “L” to the Founding Affidavit.  This money was paid in order that the rates clearance certificate could be issued.  The cheque was also marked “paid under protest”.  The cheque and the letter were received by the 1st Respondent and the cheque in question was banked by the 1st Respondent on 22nd January 2008.  The cheque was honoured by the bank.  The cheque was drawn by Attorneys Livingston Leandy Incorporated, after that firm had been placed in funds by the Applicant in order for it to meet the obligation to obtain the rates clearance certificate under the Agreement of Sale and the Addendum thereto.

11.      On 25th January 2008, Mr Paley of the 1st Respondent telephonically advised Reshma Kassie of Livingston Leandy Incorporated that it would not allow the issue of a rates clearance certificate unless the condition of payment, namely, its being under protest, was withdrawn.  In a letter dated 28th of January 2008, Fedbond demanded that the 1st Respondent issue a rates clearance certificate, failing which proceedings will be instituted to compel same.  The demand was rejected by the 1st Respondent in a letter dated 29th January 2008. 

12.      In a final attempt to have the Rates and Services Account adjusted, the Applicant sent a letter per e-mail to the 1st Respondent on 30th November 2007 (Annexure “H” to the Founding Affidavit).  The letter summarized various disputes on the Rates and Services Account provides proof thereof, and makes a proposal for settlement of the account in an attempt to draw the on-going disputes to finality so that transfer of property could take place.  These proposals were rejected by the 1st Respondent.

13.      I may as well mention at this stage that the Applicant has indicated that it intends to issue summons against the 1st Respondent for payment of the overpaid amount.  The Applicant has indicated that it has no intention of suing the 1st Respondent for any amount other than the payment which is the difference between the amount banked by the Municipality on 22nd January 2008 and the correct amount owed to the Municipality in order to obtain the rates clearance certificate.

14.      The 1st Respondent contends that it is not obliged to issue a rates clearance certificate to the Applicant for the following reasons:

(a)        The Applicant has no locus standi to compel the issue of such certificate.

            (b)        The Application is not urgent;

(c)        The outstanding rates have not been “fully paid” because payment was made “under protest” by a company that was not liable for them in the 1st place.

            I propose to deal with each of these contentions in the order referred to above.

Locus Standi

15.      The 1st Respondent has contended that the Applicant has no locus standi to bring this application.

16.      The chain of contracts between the parties which led to the present position have been referred to in paragraphs 4, 5 and 6 of this judgment.

The following facts are common cause:  The 2nd Respondent, a company in liquidation is the registered owner of the property in question.  It abandoned the property to the 3rd Respondent.  Fedbond, the 4th Respondent, is the manager of Collective Investment Scheme in Participation Bonds of Fedbond Nominees – the 3rd Respondent.  The 4th Respondent in turn sold the property to the Applicant.

17.      In terms of the agreements, the 3rd Respondent undertook a contractual obligation to the Liquidators of the 2nd Respondent to pay whatever was owed to the 1st Respondent.  In turn, the Applicant undertook a contractual obligation to the 4th Respondent to pay whatever was owed to the 1st Respondent and to obtain the necessary rates clearance certificate.

18.      These agreements have not been challenged by the 1st Respondent, save to refer to the agreement of sale between the Applicant and the 4th Respondent as “an alleged agreement”.  These agreements remain valid until set aside by a court of law.

19.      The 1st Respondent has contended that because the applicant will, in terms of the Deed of Sale, only acquire ownership of the property at some time in future, it has no “direct and substantial interest in the matter and consequently has no locus standi to bring this application.  In support of this contention, the 1st Respondent relied in the case of Vandenhende Vs Minister of Agriculture and Tourism, Western Cape and Others 2000(4) SA 681 (at 691/692).

20.      The facts of the Vandenhende case, supra, are clearly distinguishable from the facts of the present case.  This case dealt with the locus standi of a purchaser and prospective owner of property to apply for a review of the decision of the Minister responsible for Local Government to lodge an appeal against the Local Authority’s refusal of an application for the rezoning of the property.  The property zoned for single residential use, was sold to the Applicant, in terms of a Deed of Sale that contained a suspensive condition to the effect that the agreement would lapse unless an application for rezoning of the property for commercial use was approved by the relevant authority.  Such Application was made by the selling agent and refused by the local authority and the subsequent internal appeal was dismissed.  The Applicant then initiated a review of that decision.  The Court correctly held that he had no locus standi to do so for various reasons.  One of the reasons was that Section 17(1) of the Land Use Planning Ordinance 15 of 1985 required only the owner of land to apply.  Section 2 defined an “owner” as a person in whose name that land was registered.  The Court also held that the Applicant might have acquired such interest only after his status as a purchaser.

21.      In the present case, Section 118(1) of the Local Government:  Municipal Systems Act No.32 of 2000 (MSA) does not specifically say who must apply and obtain a rates clearance certificate.  Anyone who has a direct and substantial interest in the registration of a property can apply for a rates clearance certificate, for example, sellers, purchaser and third parties.  There is no legislation which prescribe as to who should apply and obtain a rates clearance certificate.

22.      The Applicant submitted correctly in my view, that in this case, the request for a rates clearance certificate was actually made by the conveyancers involved and there is no doubt that the 1st Respondent was informed that, they were dealing with the transfer from the 2nd Respondent which is the owner of the    property.

 

23.      The Applicant further submitted that there is no dispute that the Applicant’s interest in the property is that the purchaser who has contractual obligation to pay what is owed to the 1st Respondent and to secure a rates clearance certificate and which has a contractual right to receive the registration of transfer.  It further submitted that this is sufficient interest to entitle the Applicant to compel the 1st Respondent to issue the rates clearance certificate.

24.      Section 118 of the Local Government Municipal System’s Act 32 of 2000, imposes restraint on transfer of property.  Section 118(1) of the Act provides as follows:

“The Registrar of Deeds may not register the transfer of the property except on production to that Registrar of Deeds of a prescribed certificate;

(a)        issued by a Municipality or Municipalities in which that property is situated;  and

(b)        which certifies that all amounts that became due in connection with the property for Municipal services fees, surcharges on fees, property rates and other Municipal taxes, levies and duties during the two year preceding the date of application for the certificate had been fully paid”

As indicated above, there is no provision in this Act which provides that only the owner of the property can apply for the rates clearance certificate.

25.      The 1st Respondent in paragraph 7 of the Answering Affidavit records that it is prepared to issue rates clearance certificate provided:

(i)        the payment of the sum of R400 704 224,77 is made without any qualification, namely, removal of the use of the words “under protest”

(ii)        that the Applicant concedes that it is taking over the liability of the 2nd Respondent to pay the rates and wish to extinguish the claim under Section 89 of the Insolvency Act;

(iii)       the outstanding rates for the amount of January 2008 in the sum of R40 250,24, is paid.

The Applicant submitted correctly in my view that one of the three conditions requires that the application for such certificate be made by the owner or its conveyancers.

26.      It has been submitted on behalf of the 1st Respondent that it held the view that pursuant to the provisions of Section 89(4) of the Insolvency Act, there was no need for the issue of the rates clearance certificate to effect transfer from the 2nd Respondent in Liquidation to the 4th Respondent.  In support of this contention the 1st Respondent has referred to the case of Greater Johannesburg Transitional Metro Council vs Galloway NO & Others 1997  (1) SA 348 at 360 B/C and 361 A.

27.      Section 89(4) of the Insolvency Act 24 of 1936 provides as follows:

“Notwithstanding the provisions of any law which prohibits the transfer of any immovable property unless any “tax” as defined in Section 84(5) due thereon has been paid, that law shall not debar the trustee of an insolvent estate from transferring any immovable property into that estate for the purpose of liquidating the estate, if he has paid the tax which may have been due in 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”.

Section 89(5) of the same Act provides as follows:

“For the purpose of subsections (1)and (4) tax in relation to immovable property means any amount payable periodically in respect of that property to the State or for the benefit of a provincial administration or to a body established by or under the authority of any law in discharge of a liability to make such a periodically payments, if that liability is an incident of the ownership of the property”.

Section 89(4) of the Insolvency Act entitles a liquidator to transfer property without a rates clearance certificate provided that certain tax is paid.  In terms of Section 89(5) of the same Act, such “tax” is restricted to liabilities which are, “an incident of the ownership of that property”.

28.      In the case of Greater Johannesburg Transitional metro Council, supra, referred to by both parties, it was held that charges for matters such as water and electricity are not “tax”, as contemplated by Section 89(5) of the Act (at page 358B).

29.      It was also submitted on behalf of the Applicant that it has been held that in respect of such charges like electricity and water, the local authority is entitled to embargo the transfer of property from an insolvent estate until such amounts are paid and a clearance certificate provided accordingly.  See City of Johannesburg vs Kaplan NO & Another 2006 (5) SA 10 (SCA) at page 18.  In this case Heher JA stated the following: 

“Before proceeding it may assist in providing a clearer appreciation of the conclusions at which I have thus far arrived, if I summarise the operation of Sections 118(1) and (3) in situations where the Municipal debtor is not subject to a sequestration nor a liquidation order and to compare that with the position after the making of such orders.

When such a debtor is not subject to such an order:

1.         No property may be transferred unless a clearance certificate is produced to the registrar of deeds that certifies full payment of all Municipal debts as described in Section 118(1) which have become due during a period of two years before the date of application for the certificate.

2.         Any amount due for Municipal debts (i.e. not limited by the aforesaid period of two years) that have not prescribed is secured by the property and, if not paid and an appropriate order of Court is obtained, the property may be sold in execution and the proceeds applied in the payment of debts.  In such event, the proceeds will be applied to the payment of the Municipal debt in full.  Only after satisfaction of such debts will the remainder, if any, be available for payment of the debt secured by a mortgage bond other than the property.

            Once a debtor has been sequestrated or liquidated, the position is, to the extent that the Municipal debts are “taxes” within the meaning of Section 89(5), (but not otherwise) the following:-

1.         No property may be transferred unless the clearance certificates certifies full payment of Municipal debts that have become due during a period of two years before the date of application for the certificate.

2.         The preference accorded by Section 118(3) in favour of the Municipality over that of a holder of a mortgage bond is limited to claims which fell due during the period laid down in Section 89(1) i.e. two years prior to the date of sequestration or liquidation up to the date of transfer.

3.         Interests charged on the secured claim of the Municipality are secured as if it were a part of the claim.

After sequestration or liquidation, those Municipal debts that are not “taxes” with the meaning of Section 89(5) continue to attract benefits of Section 118(3) without being affected Section 89 of the Insolvency Act”, (at paragraphs 25,26,27, and 28). 

30.      It was submitted correctly on behalf of the Applicant that it is clear from the Attorney’s report that the amount claimed by the 1st Respondent included charges for electricity and water.  Accordingly even the liquidator would still have had to obtain rates clearance certificate under Section 118 in respect of these charges because they are not “tax” as contemplated in Section 89 of the Insolvency Act.  It is also clear from the Kaplan’s case, supra, that a clearance certificate would still be required under the present circumstances.  The contention by the 1st Respondent that no such certificate is required by virtue of provisions of Section 89(4) cannot be correct.

31.      The 1st Respondent further contended that the Deed of Abandonment in respect of the said immovable property in favour of Fedbond, (the 1st bond holder) is tantamount to a disposition in settlement of its liability to Fedbond (the 1st bond holder) which equates to an undue preference of one creditor over another, namely, the 1st Respondent.  The 1st Respondent has submitted that this amounts to a contravention of the provisions of Section 30 of the Insolvency Act of 1936.  Section 30 of the Insolvency Act provides as follows:

“(1)  If a debtor made a disposition of his property at a time when his liability exceeded his assets, with the intention of preferring one of his creditors above another, and his estate is thereafter sequestrated, the Court may set aside the disposition”.

32.      The Applicant submitted correctly in my view that the section relied upon by the 1st Respondent has no bearing upon the Deed of Abandonment entered into between the liquidators and the Fedbond nominees after liquidation.  The Section specifically refers to transactions entered into prior to sequestration or liquidation.  The submissions by the 1st Respondent that the Deed of Abandonment is voidable, that it falls to be set aside and that the Sale Agreement of immovable property, is likewise struck by the provisions of Section 30 of the Insolvency Act have no merit.  Both agreements are in place and will remain in place until set aside by a Court of law. 

33.      The 1st Respondent in paragraph 7 of the Answering Affidavit records that is is prepared to issue the rates clearance certificate provided:

(i)        the payment of the sum of R400 704 224,77 is made without any qualification, namely, removal of the use of the words “under protest”

(ii)        that the Applicant concedes that it is taking over the liability of the 2nd Respondent to pay the rates and wish to extinguish the claim under Section 89 of the Insolvency Act;

(iii)       the outstanding rates for the amount of January 2008 in the sum of R40 250,24, is paid.

None of the three conditions requires that the application for such certificate be made by the owner of the property.  The issue of locus standi may well be raised by the 1st Respondent at some future date, if and when the Applicant sues for the return of the whole amount paid to the 1st Respondent. Having considered all the above, I am satisfied that the Applicant in this matter has locus standi to bring this application.

Urgency

34.      The 1st Respondent contended that the Applicant’s application is not urgent and if there is any urgency such urgency is self created.  It is common cause between the parties that the Agreement of Abandonment was entered into on 1st February 2005.  That the agreement of sale was concluded on 22nd of November 2006 and the addendum thereto on 16th May 2007.  In terms of the addendum, registration of the immovable property to the name of the purchaser was to take place not later than 13th November 2007.  It is also common cause that there had ongoing negotiations with the 1st Respondent preceding the disputes which terminated on 7th December 2007.  These negotiations were for a prolonged period.  The 1st Respondent contend that despite dates of the agreements referred to above, the Applicant only applied for rates certificate in December 2007.  The delay in applying for the rates clearance certificate is not fully explained by the Applicant.

35.      The Applicant on the other hand contends that at the end of November 2007, it secured a further extension of time to obtain the rates clearance certificate.  It contends further that there is nothing in the Applicant’s conduct to suggest an unwarranted delay and that the Applicant should not be penalized for trying to settle the matter.  The Attorney’s report was made available only on 17th January 2008 and payment under protest was made to the 1st Respondent on 22nd January 2008.  It is also common cause or either not disputed that the first occasion upon which the 1st Respondent made known that it would not issue a rates clearance certificate because the Applicant’s payment had been made under protest was on the 25th of January 2008.  It is clear from annexure “M” to the Founding Affidavit that this message was telephonically received from Mr Paley of the 1st Respondent by Reshma Kassie of Attorney’s Livingston Leandy Incorporated in Durban.  It is also not in dispute that these proceedings were preceeded by a letter of demand dated 28th January 2008, which was rejected by the Respondent on 29th January 2008. The application was thereafter launched on 13th January 2008.

36.      Considering the nature of the application and the fact that the 1st Respondent rejected the letter of demand only on 29th January 2008, and that the application was launched on 13th February 2008, it cannot be said that there was an unreasonable delay in launching the application by the Application. It is common cause that there had been prolonged negotiations with the 1st Respondent relating to the amount of rates and other services payable, which explains the delay in applying for a rates clearance certificate by the Applicant.

37.      The 1st Respondent has contended that at the time of the launching of the application, the Applicant was not placed on terms pursuant to the terms with the agreement and that it had made payment in terms of the agreement and consequently is not in breach thereof. On 7th February 2008, Fedbond advised the Applicant by telefax (Annexure “R” to Founding Affidavit) that it was to be put on terms to obtain the clearance certificate and proceed with the transfer of the property failing which Fedbond intended to cancel the agreement of sale.  The Applicant’s obligations under the agreement of sale include obtaining a clearance certificate and the clearance certificate had not yet been obtained.  It is accordingly in breach of the agreement of sale which can be cancelled at any time on 14 days notice.  Annexure “R” to the Founding Affidavit clearly indicates that the notice of breach in terms of the agreement of sale is imminent.  It is therefore not unreasonable for the Applicant to have launched this application prior to receiving the notice of breach in terms of the agreement.

38.      The 1st Respondent’s argument that at the time of launching of this application the Applicant was not placed on terms pursuant to the terms of the agreement has no merit.  The 1st Respondent’s contention that the Applicant had made payment in terms of the agreement and consequently is not in breach thereof,  is also without merit as agreement of sale required that it should also obtain a clearance certificate which had not been obtained.

39.      The urgency of the application arose due to Fedbond’s reluctance to continue waiting for the 1st Respondent to issue a clearance certificate. 

Having considered all the facts in support of the urgency of this application, I am satisfied that the application is indeed urgent.

Payment under Protest

40.      The 1st Respondent contends that the condition of payment being made “under protest” must be withdrawn before it issues a rates clearance certificate. The 1st Respondent has submitted that payment under protest is a conditional payment, and that it does not discharge the debt.

41.      The 1st Respondent has referred to the following cases in support of this contention, Venter NO vs Eastern Metro Sub-structure of the Greater Johannesburg Transitional Council 1998(3)SA1076 at 1079 and CIR vs First National Industrial Bank Limited 1990 (3) 641 at 651C.

42.      The Applicant on the other hand has contended that it is not correct that payment made under protest is conditional payment and that it does not extinguish the debt, and therefore, the 1st Respondent is entitled to refuse the issue of the rates clearance certificate. If the money paid conditionally does not discharge the debt, can the Municipality claim the debt again and if so against who?   It was then contended that the Municipality cannot recover the same because it had already been paid.  It was further contended correctly in my view that the 1st Respondent by keeping the payment clearly accepts that the debt has been discharged.  It was submitted that the 1st Respondent cannot have both ways.  If the 1st Respondent had not accepted the payment for the rates, it should have returned the money and it has not done so.  The Court was referred to the case of CIR vs First National Industrial Bank Ltd 1990(3) SA 641 (A) at 649 G-J where the following is stated.

“The addition of the words “under protest” when a payment was tendered can, so it seems, fulfill one or more of several functions:

(i)         The phrase can serve as confirmation that, in the broad sense, the payment was not a voluntary one or, in the narrow sense, that it was due to duress.  The failure so to stipulate could support an inference that the payment was voluntary or that in truth there was no duress.

(ii)        It can serve to anticipate or negate an inference of acquiescence, lest it be thought that, by paying without protest, the solvens conceded the validity or the legality of the debt, or his liability to pay it, or the correctness of the amount claimed.  The object is to reserve the right to seek to reverse the payment.  The effect is not to create a new cause of action but to preserve and to protect an existing one; - namely; that the payment was an indebitum, solutum, which is recoverable in law, e.g. by  means of the condictio indebiti.

(iii)       It could serve as the basis for an agreement between the parties on what should happen if the contested issue is tested and resolved in favour of the solvens.  Such an agreement would indeed created a new and independent cause of action”.

43.      It is accepted that there was no contract between the Applicant and the 1st Respondent, obliging the Applicant to pay the rates and services in respect of the said property, such agreement was between the Applicant and the 4th Respondent. The money was, however, accepted, banked and kept by the 1st Respondent as a discharge of the 2nd Respondent’s obligation.  The consequence of the aforegoing is that in the ordinary course of events, the 1st Respondent would have been obliged to issue the rates clearance certificate had the 2nd Respondent applied for same. In the circumstances of this case, however, that demonstrates that the 1st Respondent was aware that the application had discharged the debt pursuant to the contractual obligation with the 4th Respondent for the purposes of obtaining the necessary certificate. Accordingly, there can be no basis for the 1st Respondent refusing to issue the rates clearance certificate to the Applicant.

44.  In the case of Venter NO vs Eastern Metro Substructure of the Greater Johannesburg Traditional Council, supra, wherein the payments of rates owed to the Municipality was paid under protest to get a clearance certificate, the Court stated the following:

“ … it is evident that the Applicant was not merely recording dissatisfaction.  There was a problem.  It was made adequately clear that payment was effected only to overcome Respondent’s refusal and without at all relinquishing the view that payment is not due…” at 1080 A-B.

The Court went further to state the following:

“It seems to me that probably the whole payment was intended to be, and understood to be a step undertaken to get transfer passed on the basis that matters would be sorted out afterwards” (at 1080 I-J).

45.      On the close examination of the authorities referred to above, it is clear that payment made under protest is not conditional and constitute full payment of the debt owed.  It is up to the person paying, to establish in other proceedings that the amount paid was not actually owing and that it should be repaid.  It was submitted correctly on behalf of the Applicant that until a Court makes such a finding, in favour of the person paying, the party paid (i.e. the 1st Respondent in this case) is in exactly the same position as any other person who receives money in discharge of a debt.

46.      The Applicant made payment as there was a threat of the cancellation of the sale agreement.  It did not abandon its right to reclaim over payment.  The 1st Respondent has always been aware that, the amount paid to it in respect of the property has been in dispute, and that the dispute remained unresolved after lengthy negotiations.  The 1st Respondent therefore cannot force the Applicant to relinquish its right to claim overpaid monies by refusing to issue a clearance certificate.  The contention by the 1st Respondent that it is not obligated to issue a rates clearance certificate to the Applicant, for the reasons referred to above is without merit.

Lawfulness of the conduct of the 1st Respondent

47.      The Applicant has submitted that the 1st Respondent’s conduct in refusing to issue the rates clearance certificate under these circumstances is unlawful.  By its duress, the 1st Respondent seeks to force the Applicant to pay money which might not be owed, and to abandon any recourse.  The Court was referred to the following cases, Union Government (Minister of Finance) vs Gowar 1915 AD 426 at 434 – 435 and Venter NO vs Eastern Municipal Substructure of the Greater Johannesburg Transitional Council supra.

In the Union Government case, supra, the Court per Innes CJ, held as follows:

“Where goods have been wrongly detained and where the owner has been driven to pay money in order to obtain possession, and where he has done so not voluntarily, as by way of gift or compromise, but with an expressed reservation of his legal rights, payment so made can be recovered back, as having been exacted under duress of goods.  The onus of showing that the payment had been made involuntarily under duress and that there had been no abandonment of rights would be upon the person seeking to recover … And hence the importance of a protest or unequivocal statement of objection made at the time.  Without such protest it is difficult to see how the Plaintiff’s state of mind could be established to the satisfaction of the Court”

48.      The Applicant submitted that the 1st Respondent’s conduct is unlawful for the following reasons:

The first is that such conduct is contrary to good public policy.  No one should be allowed to put himself in the position that he is able to force payment of a debt, which may not be owed and force the party paying to give up all rights of recovery.  It would be quite synical for the 1st Respondent to suggest that the Applicant or the liquidator for that matter had a free choice in the matter.  That choice was really “take it or leave it”.  The relationship between a Local Authority and its inhabitants, is in the broad sense fiduciary and the 1st Respondent’s conduct falls short of that standard.  See Kempton Park / Thembisa Metropolitan Substructure vs Kenter 2002 (2) 980 (SCA) at 986. Plewman JA in Kempton Park case, supra, the following:

“There is in a broad sense a fiduciary relationship between a Council and its rate payers.  That the Local Government should be a representative of the inhabitants of its jurisdiction and that its actions should be open and transparent can certainly not be doubted …” (at paragraph 15).

Secondly, the applicant further submitted that what the 1st Respondent has done infringes upon the Applicant’s constitutional right to have a legal dispute settled by a Court of law.  Instead the 1st Respondent wishes to arrogate to itself the decision that, whatever claim Applicant might have to a refund, that claim will not be decided in the Court of Law.  The Respondent has contended that because the Applicant is not the registered owner of the property, and thus not legally liable to the 1st Respondent for rates anyway, any subsequent proceedings by the Applicant to recover the payment made under protest must succeed in full because the Applicant was not liable in the first place.  The Respondent further contends that the Applicant is not entitled to protest against the charges and therefore cannot make payment under protest.

49.      The Applicant has submitted correctly in my view that the Applicant’s Founding Affidavit and the correspondence annexed thereto makes it clear that whoever was making the payment such payment was made on behalf of the registered owner and for the purpose of discharging that registered owner’s indebtedness.  At all times, everyone, including the 1st Respondent knew that only the 2nd Respondent was actually legally liable to pay the 1st Respondent.  It has been pointed out earlier on in this judgment that in his Founding Affidavit, the Applicant made its position clear, namely that its right to claim a refund was limited strictly to the extent of the overpayment, that is, a difference between what the Municipality would have been paid and the amount which is actually entitled to recover from the registered owner of the property during the period in question.  The Court was referred to AJ Kerr, “The Principles of the Law of Contract”, 6th edition page 520, quoting the Commissioner for Inland Revenue vs Visser 1959(1) SA 452 A at 458 where the following is stated:

            “It is not essential to the validity of the payment that it be made by the debtor or any person authorized by him;  it may be made by any person without such authority, or even in opposition to his orders, ….”

50.      It is therefore clear that the 1st Respondent’s argument that the Applicant cannot protest on the rates charges because the Applicant is not the owner of the property and that it cannot make a payment under protest is without merit. The obligation to obtain the clearance certificate in terms of the deed of abandonment has legitimately been transferred to the Applicant.  Clauses 5.1.3 and 5.1.4 of the Agreement of Sale have not been challenged by the 1st Respondent.  There is no suggestion that the Agreement of Sale or any provision thereof is invalid.

51.      The Applicant paid the debtor on behalf of the 2nd Respondent with intention of discharging the debt.  In so far as the amount paid is properly required to be paid to obtain a rates clearance certificate.  This debt has accordingly been discharged by the Applicant.  The 1st Respondent has no legal grounds or justification to refuse the applicant the rates clearance certificate.  Its conduct in this regard is therefore unlawful.  The 1st Respondent cannot be expected to accept, retain and keep the money and not tendering its return and refuse to issue the rates clearance certificate.  The conduct of the 1st Respondent in this regard is totally unacceptable.

52.      Having considered all the above, I am satisfied that the Applicant has made out a case for the grant of the order as set out in the Notice of Motion.  The Applicant has also asked for the costs of this application on an Attorney and Clients scale.  The Court is however, of the view that the costs order at an Attorney and Client Scale is not justified in the circumstances of this case.

I accordingly make the following order:

1.        The application is sufficiently urgent to warrant dispensing with the usual forms and service under Rule 6(12)(a) of the Rules of Court.

2.        The 1st Respondent is ordered, within 24 hours of service of this order, to furnish the Applicant with the certificate in terms of Section 118(1) of the Local Government/Municipal Systems Act 32 of 2000 which certifies that all amounts that became due in connection with the remaining extent of Portion 13 of Erf 793, Dunns Grant for Municipal Services 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 of rates have been fully paid;

3.        The 1st Respondent is ordered to pay the costs of this application.

SISHI J

Date of hearing           :           28th February 2008

Delivery date              :           19th March 2008

Applicant’s Counsel  :  Advocate J King SC

Instructed by:

Moodie & Robertson

C/O Livingston Leandy Incorporated

1st Respondent’s Counsel :  Advocate M Maharaj

Instructed by:

Linda Mazibuko & Associates

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