At least one law firm has questioned whether a recent judgment handed down by the North Gauteng High Court now means that municipalities cannot pursue homeowners for debts incurred by previous owners of the property (see “Municipal debts: good news for homeowners” – link at the end of this article).
Meumann White Attorneys, a KwaZulu-Natal firm that specialises in property law, says the September 8 judgment in Perregrine Joseph Mitchell v City of Tshwane will bring relief only to people who bought a property in a sale in execution, but a purchaser who buys a property in a private sale can still be held liable for historical debts incurred by previous owners. (There is link to the full judgment in the Mitchell case at the end of this article.)
The firm says many commentators have failed to take into account that the facts in the Mitchell case “are distinctly different” from those in the case of City of Tshwane Metropolitan Municipality v Mathabathe and Another. (There is link to the full judgment in the Mitchell case at the end of this article.)
In Mathabathe, the Supreme Court of Appeal held that immovable property belonging to any person who took transfer of the property on the strength of a rates clearance certificate issued in terms of section 118(1) of the Local Government: Municipal Systems Act may be sold in execution by the municipality for any old municipal debts incurred by his or her predecessor in title, Meumann White says.
“In the Mitchell case, it was common cause that the property was purchased in a sale in execution, as opposed to the Mathabathe case, where the property was sold by agreement between the mortgagee and the mortgagor.
“What the court held in the Mitchell case was that the purpose of a sale in execution was to publicly convert the property in question into cash in order to satisfy the claims of creditors.
“It is not in dispute that the municipality in this matter held a statutory hypothec [lien] arising from the historical debts on the property, but the municipality, while being aware of the sale in execution, failed to exercise its right of preference over the proceeds of the sale of the property.
“The court went further to state that, by failing to exercise this right of preference, the municipality’s statutory hypothec was in effect extinguished by the sale in execution and the subsequent transfer of the property into the name of the purchaser, thus granting the purchaser a ‘clean title’.
“According to the Mitchell judgment, the principal obligation – that is, the historical debts – continued to exist after the sale in execution, but the municipality could now only proceed against the person who incurred these debts and not the new owner who purchased the property at the sale in execution,” Meumann White says.
It also said it was “strange” that the Gauteng High Court could make a finding that was contradictory to that of the Supreme Court of Appeal’s decision in the Mathabathe case.
The structure of our judiciary is such that the decisions of the Appeal Court are binding on all lower courts and, as such, the Gauteng High Court does not have the authority to deviate from precedent law handed down in the Supreme Court of Appeal, Meumann White says.