City of Johannesburg Metropolitan Municipality v Sheriff of the High Court Randburg South West and Others (42498/2016) [2019] ZAGPPHC 104 (19 March 2019)

THE REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG DIVISION, PRETORIA

(1) REPORTABLE: NO

(2) OF INTEREST TO OTHER JUDGES: NO

(3) REVISED.

CASE NO: 42498/2016

19/3/2019

In the matter between:

THE CITY OF JOHANNESBURG

METROPOLITAN MUNICIPALITY

Applicant

and

THE SHERIFF OF THE HIGH COURT

RANDBURG SOUTH WEST

First Respondent

XPLORE AFRIKA PROPERTIES (PTY) LIMITED Second Respondent

CAPE ROCK PROPERTY TRADING (PTY) LIMITED Third Respondent

ADCLICK AFRICA (PTY) LIMITED Fourth Respondent

THE REGISTRAR OF DEEDS, PRETORIA Fifth Respondent

BUSINESS PARTNERS LIMITED Sixth Respondent

JUDGMENT

AC BASSON, J

The parties:

[1] The applicant is the City of Johannesburg Metropolitan Municipality (“the City”) and is a metropolitan municipality as defined in section 1 of the Local Government: Municipal Systems Act[1] (“Systems Act”). The City has a constitutional duty to render municipal services to all properties within its municipal boundary. The City must implement debt collection and credit control measures to provide

municipal services in a sustainable manner.

[2] The first respondent is the Sheriff of the High Court, Randburg West (“the Sheriff”) appointed as such in terms of the provisions of the Sheriffs Act.[2] The other respondents are Xplore Afrika Properties (Pty) Limited, Cape Rock Property Trading (Pty) Limited, Adclick Africa (Pty) Limited, the Registrar of Deeds, Pretoria and Business Partners Limited. Only the first respondent remained relevant in this application. The City no longer seeks any relief affecting the second to sixth respondent. Although the third respondent filed answering papers, there was no appearance on behalf of the third respondent.

[3] A Sheriff is an impartial independent officer of the Court appointed by the Minister of Justice in terms of the Sheriffs Act. The role of the Sheriff is to execute, in accordance with the Uniform Rules of the High Court, all sentences, decrees, writs, summonses, rules, orders, warrants, commands and processes directed to him or her. The Uniform Rules of Court, which constitute the procedural machinery of the Courts, are intended to support and expedite the business of the Courts.

What is before the Court?

[4] Initially the City sought an order setting aside the sale of execution held on 10 September 2015 by the Sheriff in respect of an immovable property to the third respondent (prayer 1 of the Notice of Motion). The applicant no longer persists with this relief. The City also no longer persists with seeking an order that the fifth respondent (the Registrar of Deeds) cancel the transfer and registration of the property in the name of the third respondent and retransferring and registering the property into the name of the second respondent (prayer 2 of the Notice of Motion). The applicant also no longer seeks an order in terms of prayers 3, 4, 5 and 7 of the Notice of Motion.

[5] In respect of prayer 5, the applicant sought an order which requires this Court to interpret section 118(3) of the Systems Act. More in particular, the City sought an order that the Sheriff be compelled, pursuant to any sale of property in execution, to include payment of any outstanding municipal debt due to the applicant in the distribution account and to pay to the City such amount from the proceeds of such subsequent sale in preference over any mortgage bond registered against the property as provided for in section 118(3) of the Systems Act, without the necessity of a judgment or a court order. In order to grant this order, it would be necessary for this Court to confirm that, on a proper interpretation of s 118(3) of the Systems Act, security is afforded to the applicant which arises ex lege once a debt is owed on a property and if such debt remains unpaid, such security is not conditional on the City obtaining a court order and thereafter registering this court order against the title deed of the property specifically pertaining to sales in execution. In brief, the City contends that section 118(3) of the Systems Act does not require a municipality to perfect its security before it becomes a preferent creditor and that the preference occurs by operation of law. More in particular, it is contended that where a property is sold by private treaty or a sale in execution, a municipality already enjoys the preference in terms of s 118(3) by operation of law and it may enforce its claim to the proceeds realized on the sale.

[6] Although the City no longer seeks the relief in terms of prayer 5 of the Notice of Motion, counsel on behalf of the City submitted that this Court should, nonetheless pronounce on it. I do not agree. Although it might well be necessary for another Court to revisit and interpret the purport of section 118(3) of the Systems Act, the relief sought in prayer 5 is no longer before this Court and declaratory relief merely for the sake of clarifying a difference of opinion regarding the interpretation of a section of an act, is not appropriate. There clearly is no longer a live dispute[3] between the parties in light of the abandonment of the relief sought in prayer 5 of the Notice of Motion and I am not persuaded that the present application as it now stands, warrants this Court to consider the declaratory relief sought by the City in prayer 5 of the Notice of Motion. The question has, in any event, to a large extent became academic for the reasons stated. In

JT Publishing (Pty) Ltd v Minister of Safety and Security[4], the Constitutional Court explained:

“[A] declaratory order is a discretionary remedy, in the sense that the claim lodged by an interested party for such an order does not in itself oblige the Court handling the matter to respond to the question which it poses, even when that looks like being capable of a ready answer. A corollary is the judicial policy governing the discretion thus vested in the Courts, a well-established and uniformly observed policy which directs them not to exercise it in favour of deciding points that are merely abstract, academic or hypothetical ones. I see no reason why this new Court of ours should not adhere in turn to a rule that sounds so sensible.”

Uniform Rule 46:

[7] The only remaining issue to be decided is whether, on a proper interpretation of Rule 46 of the Uniform Rules of Court, the Sheriff complied with her substantive and procedural obligations to implement and adhere to the processes and time lines as required in terms of this rule. I should emphasise that the old Uniform Rule 46 was applicable at the time. Uniform Rule 46 was amended on 17 November 2017. The relevant sale in execution took place on 10 September 2015.

[8] The parties hold different views in respect of the Sheriff’s level of compliance and also in respect of the interpretation of Rule 46(5) of the Uniform Rules and the obligations created thereunder. Uniform Rule 46(4)(b) and Uniform Rule 46 (5)(a) and (b) (of the old Rules) read as follows:

“4(b) Upon receipt of written instructions from the execution creditor to proceed with such sale, the sheriff shall ascertain and record what bonds or other encumbrances are registered against the property together with the names and addresses of the persons in whose favour such bonds and encumbrances are so registered and shall thereupon notify the execution creditor accordingly.

(5) No immovable property which is subject to any claim preferent to that of the execution creditor shall be sold in execution unless—

(a) the execution creditor has caused notice, in writing, of the intended sale to be served by registered post upon the preferent creditor, if his address is known and, if the property is rateable, upon the local authority concerned calling upon them to stipulate within ten days of a date to be stated a reasonable reserve price or to agree in writing to a sale without reserve; and has provided proof to the sheriff that the preferent creditor has so stipulated or agreed, or

(b) the sheriff is satisfied that it is impossible to notify any preferent creditor, in terms of this rule, of the proposed sale, or such creditor, having been notified, has failed or neglected to stipulate a reserve price or to agree in writing to a sale without

reserve as provided for in paragraph (a) of this subrule within the time stated in such notice.”

[9] In order to decide whether the Sheriff has complied with her obligations, it must, inter alia, be considered whether the notice sent by the execution creditor (the sixth respondent - Business Partners) to the City was required to be sent to a specific

(designated) official at the City as contended by the City.

Facts:

[10] The transaction at issue in this application is referred to as the “Ferndale” property[5] - a property that falls within the jurisdiction of this court.

[11] The Sheriff was instructed to sell the Ferndale property in execution by way of public auction. The Sheriff set the date for the sale in execution of the property for 10 September 2015.

[12] On 24 July 2015 (posted on 13 August 2015) the execution creditors’ attorneys invited the City to place a reasonable reserve price in a registered letter and called upon the City to do so by no later than ten (10) days before the sale date. The City was also informed that the Ferndale property would be sold in execution on 10 September 2015. The registered letter was addressed to “City of Johannesburg Clearance Department, P.O. Box 5000, Johannesburg, 2000”.

[13] On 9 September 2015 (a day before the sale in execution) the City addressed a letter to auctions@sheriffrsw.co.za requesting a reserve price of R340 000.00. The Sheriff states that she never received the mail as this e-mail address is incorrect. This denial is consistent with what is stated by the City. In the founding affidavit, the City in fact identifies the various e-mail addresses used by the Sheriff: auctions@sheriffrandburgsw.co.za; general@sheriffrandburgsw.co.za; complaints@sheriffrandburgsw.co.za and lephadi@sheriffrandburgsw.co.za. The e-mail addressed used by the City on 9 September 2015 pertaining to the Ferndale Property is not one of these. The Sheriff explains that even if the e-mail had been received by her office it would, at best have triggered her obligations under the Auction Regulations of the Consumer Protection Act[6] causing her to inform potential purchaser at the action of the potential charge on the property.

[14] On 10 September 2015, the Sheriff sold the Ferndale property in a sale in execution without a reserve price. The City blames the Sheriff for this state of affairs. What it says is that, because the relevant department of the City did not receive the aforesaid letter, it only became aware of the sale in execution shortly before the sale date. That is why the City only attempted to place a reserve price on the sale in execution per email addressed to the Sheriff the day before the sale in execution (9 September 2015). The Sheriff is further accused of having failed to comply with her duty to satisfy herself with the notice required for a reserve price and to ensure that the municipal debt is paid from the proceeds of the sale in execution.

[15] The City thereafter attempted to receive satisfaction for its claim from the proceeds realized at the sale in execution, without success. To this end it addressed several letters to the transferring attorneys.

[16] The City submitted that, due to the current difficulties with the registered post procedures in the country, the procedure prescribed in Uniform Rule 46(5)[7] (which requires that the local authority must be notified in writing which notice must be served by registered post) is wholly inadequate. The City states that as a result thereof, Sheriffs were formally requested by the City to notify attorneys of prospective sales in execution. This letter is, however, not attached to the founding affidavit. The City, however, correctly submits that the purpose of Uniform Rule 46(5)(a) is to ensure that a local authority within whose jurisdiction a sale in execution if taking place, is informed of a proposed sale by a judgment creditor.

[17] In its founding affidavit, the City also states that the time frames within which a notification of the sale in execution must be effected results in the Sheriff not incorporating the municipal debt and the reserve price in the sale of execution. The Sheriff would have none of this. According to her, if the City is unable to set a reserve price in accordance with Uniform Rule 46(5) due to the alleged short “window period” within which to collect the required information, then there is nothing precluding the City to send a representative to the sale in order to look after the City’s interests. According to her, it is her function “to observe the rules and not go beyond it”. The Sheriff further maintains that she has, at all times, set the reserve price where the local authorities, including the City, and preferent creditors have set such reserve in accordance with the provisions of Rule 46(5). She further states that the City has the tendency to advise Sheriffs (including herself) of the historical debt due under section 118(3) of the Systems Act, either the day before or on the day of the sale in execution of such property. She contends that this is not in accordance with the provision of Uniform Rule 46(5) and cannot be accepted as a reserve price for such property. She, however, reiterates that, in such circumstances, she complied with her obligations under the Auction Regulations of the Consumer Protection Act and informed potential purchaser of the potential charge on the property.

[18] Although conceding that there were problems with the registered post procedures in 2014, the Sheriff disputes that this was still the case when the registered letter was dispatched to the City. In turn the Sheriff blames the City for the inadequacies in the system due to the fact that the City does not have an internal system or infrastructure whereby registered notices received in terms of Uniform Rule 46(5) are processed either timeously or at all.

[19] In response to the alleged instruction given to Sheriffs (which letter is not attached to the founding affidavit), she attaches the letter received from the City to her answering affidavit. According to the Sheriff, she was requested by the City’s attorney (mandated to collect amounts owed to it) to provide them (the attorneys) with a detailed list of properties that have been attached and/or will be sold 20 days prior to the sale. She reiterates that this request is not in accordance with the Rules and that she merely regarded this letter as a “gentleman’s agreement”. She further states that there is no provision in Uniform Rule 46 requiring a Sheriff to do so and that this request is merely an attempt by the City to impose an additional obligation on Sheriffs in order to facilitate its (the City’s) collection of debts.

[20] The Sheriff acknowledges that the main purpose of Rule 46(5) is to inform the local authority and preferent creditors of the impending sale in execution and to afford them the opportunity to set a reserve price. She however, disputes that such an obligation is imposed on the Sheriff: The obligation is imposed on the execution creditor. Further, according to the Sheriff, the only obligation imposed on the Sheriff in terms of section 46(5) is to ensure that the execution creditor has dispatched the notice by registered post to the local authority and to the preferent creditor. She specifically disputes that the Rules impose an obligation on the Sheriff to ensure that it has reached the correct branch of the post office and that the post office sent the City notification of the registered post item.

Uniform Rule 46(5) as read with Rules 4 and 4A:

[21] Uniform Rule 46(7)(a) requires the Sheriff to fix a date and place for the sale in execution. Once this date has been set, the execution creditor must send the preferent creditors a notice in terms of Uniform Rule 46(5). The purpose of Uniform Rule 46(5) is, as already pointed out, to provide the preferent creditors, including the City, of notice of the forthcoming sale in execution and through this notice invite the preferent creditor to place a reasonable reserve price in order to protect its rights.

[22] Uniform Rule 4 requires service to be affected upon specific and senior office bearers of a local authority.[8] Rule 4A provides that service may be affected by registered post to the postal address provided.[9]

[23] In Erasmus’ commentary on Rule 4 the following is stated:

“Any process of the court directed to the sheriff.’ The following are processes directed to the sheriff: a summons for provisional sentence (Form 3), a writ of arrest (Form 4), a simple summons (Form 9), a combined sum ons (Form 10), a subpoena (Form 16), a writ of execution (Form 18, Form A, Form B), a writ of attachment — immovable property (Form 20), a writ of commitment for contempt of court (Form F), a writ of attachment ad fundandam jurisdictionem (Form H).

Service of all subsequent documents and notices, not falling under subrule (1)(a), in any proceedings on any other party to the litigation may be effected in any manner laid down by rule 4A.”[10]

[24] In terms of these Rules, there is only an obligation to serve on a specific municipal official when the Sheriff is called upon to serve a closed list of court process. The noticed referred to in Rule 46(5)(b) is not such a court process. It may be sent by registered post by the execution creditor to the address of the City. There is no special requirement that it needs to be served on a specific official.

[25] Even if such an obligation existed, it would be an obligation on the execution creditor and not the Sheriff. If an execution

creditor fails in meeting such an obligation, there is no rule which creates a duty on the Sheriff to rectify the situation.

[26] The Sheriff may only proceed with the sale if she is satisfied as duly required in terms of Uniform Rule 46(5)(b).

[27] The Sheriff is therefore required in terms of the Rules to satisfy herself that: (i) the letter is addressed to the correct recipient; (ii) the correct address was reflected on the letter; and (iii) the letter and the date of postage complies with the time lines set out in rule 46 as this would ensure substantive compliance with the aim of the rule (to inform the preferent creditors before drafting the notice of sale and conditions of sale).

Did the sheriff comply with her duties in terms of the uniform rules?

[28] Yes, she did. On 13 August 2015, the attorneys acting on behalf of the execution creditor (Business Partners) sent a letter by registered post to the Johannesburg Metropolitan Municipality giving notice to council of the intended sale in execution of the Ferndale property on 10 September 2015.

[29] In the notice, the City is requested to stipulate within 10 days of receipt of the notice a reasonable reserve price, or alternatively, to furnish its written consent to the proposed sale without a reserve price. As already pointed out, it is not, as contended by the applicant, necessary to address his letter to the Municipal Manager or the Executive Mayor.

[30] Uniform Rule 46(8)(a)(i) (of the old Rules which were applicable at the time) required the following:

“Rule 46(8)(a)(i) The conditions of sale shall, not less than 20[11] days prior to the date of the sale, be prepared by the execution creditor corresponding substantially with Form 21 of the First

Schedule, and the said conditions shall be submitted to the sheriff conducting the sale to settle them.

(b) Any interested party may, not less than 10 days prior to the date of the sale, upon twenty-four hours’ notice to the execution creditor and the bondholders apply to the magistrate of the district in which the property is to be sold for any modification of

the conditions of sale and the magistrate may make such order thereon, including an order as to costs, as to him may seem meet.”

[31] The City therefore had sufficient time to inform the execution creditor that it wanted a reserve price to be put in place. It failed to do so timeously or at all since it contacted the Sheriff on the incorrect email address only a day before the sale. The last day it could have asked for the reserve price would have been 27 August 2015, which was ten court days before the sale. Therefore, it would have had enough time to approach a magistrate to alter the conditions of sale. The Applicant failed to so.

[32] It is clear from the papers that the City must in fact have received the aforesaid letter. This is so because on 9 September 2015 the City addressed a letter to the Sheriff setting a reserve price.

[33] In the event, the City has not made out a case for the substantive relief it sought.

[34] Is there, in light of the aforegoing, any reason to entertain the declaratory relief sought by the City in the only remaining prayer (prayer 6)?

[35] I reiterate what I have already stated in respect of relief sought in terms of the now abandoned prayer 4 (in terms of the section 118 (3) of the Systems Act). In light of the fact that it is this Court’s finding that the Sheriff has complied with her duties in terms of the Uniform Rules, there exists, in my view, no reason why this Court should entertain a difference of opinion regarding the interpretation of a Rule that has now become “merely abstract, academic or hypothetical”.[12] The application therefore falls to be dismissed. Costs should follow the result.

Order:

[36] The application is dismissed with costs. Such costs to be taxed on an attorney and client scale.

AC BASSON

JUDGE OF THE HIGH COURT

Appearances

For the applicant: ADV LGF PUTTER SC

ADV H VARNEY

Instructed by:

MATHIPANE TSEBANE ATTORNEYS

C/O VAN ZYL LE ROUX INC

For the first respondent: ADV MARK OPPENHEIMER

Instructed by:

J TARICA ATTORNEYS

C/O FRIEDLAND HART SOLOMON & NICOLSON

[1] Act 32 of 2000.

[2] Act 90 of 1983.

[3] The absence of a live dispute does not as an inflexible rule oust a court’s discretion to entertain an application for a declaratory order. However, this is one of the factors that a Court will consider together with various other factors before deciding to exercise a discretion whether or not to grant declaratory relief. The Court in Minister of Finance v Oakbay Investments (Pty) Ltd and others 2018 (3) SA 515 (GP) explains: “[59] Herbstein & Van Winsen extrapolates from decided cases factors courts have taken into account to determine whether judicial discretion should be exercised positively or negatively in an application for declaratory relief. These include (i) the existence or absence of a dispute; (ii) the utility of the declaratory relief and whether, if granted, it will settle the question in issue between the parties; (iii) whether a tangible and justifiable advantage in relation to the applicant's position appears to flow from the grant of the order sought; (iv) considerations of public policy, justice and convenience; (v) the practical significance of the order; and (vi) the availability of other remedies. [60] The above factors are considered below in no particular order. When applying the above factors to the present application, this court is not persuaded that the circumstances of the present application warrant the granting of the declaratory relief sought.”

[3] The absence of a live dispute does not as an inflexible rule oust a court’s discretion to entertain an application for a declaratory order. However, this is one of the factors that a Court will consider together with various other factors before deciding to exercise a discretion whether or not to grant declaratory relief. The Court in Minister of Finance v Oakbay Investments (Pty) Ltd and others 2018 (3) SA 515 (GP) explains:

“[59] Herbstein & Van Winsen extrapolates from decided cases factors courts have taken into account to determine whether judicial discretion should be exercised positively or negatively in an application for declaratory relief. These include (i) the existence or absence of a dispute; (ii) the utility of the declaratory relief and whether, if granted, it will settle the question in issue between the parties; (iii) whether a tangible and justifiable advantage in relation to the applicant's position appears to flow from the grant of the order sought; (iv) considerations of public policy, justice and convenience; (v) the practical significance of the order; and (vi) the availability of other remedies.

[60] The above factors are considered below in no particular order. When applying the above factors to the present application, this court is not persuaded that the circumstances of the present application warrant the granting of the declaratory relief sought.”

[4] [1996] ZACC 23; 1997 (3) SA 514 (CC) at para [15].

[5] The so-called Windsor transaction will not be considered as it is, by the applicant’s own admission not directly related to this application.

[6] Act 68 of 2008.

[7] Quoted in para [8] supra.

[8] Rule 4(1)(a)(viii): “where a local authority or statutory body is to be served, service shall be effected by delivering a copy to the town clerk or assistant town clerk or mayor of such local authority or to the secretary or similar officer or member of the board or committee of such body, or in any manner provided by law.”

[9] Rule 4A reads: “(1) service of all subsequent documents and notices, not falling under rule 4(1)(a) in any proceedings on any other party to the litigation may be affected by one or more of the following manners to the address or addresses provided by the party under rules 6(5)(b), 6(5)(d)(i), 17(3), 19(3) or 34(8), by - (a) hand at the physical address for service provided, or (b) registers post to the postal address provided, or facsimile or electronic mail to the respective address provided.”

[9] Rule 4A reads: “(1) service of all subsequent documents and notices, not falling under rule 4(1)(a) in any proceedings on any other party to the litigation may be affected by one or more of the following manners to the address or addresses provided by the party under rules 6(5)(b), 6(5)(d)(i), 17(3), 19(3) or 34(8), by -

(a) hand at the physical address for service provided, or

(b) registers post to the postal address provided, or facsimile or electronic mail to the respective address provided.”

[10] RS 4, 2017, D1-30A.

[11] The old Rule has now been amended to extend the timelines for the preparation and setting of the conditions of sale by the execution creditor from 20 days to 35 days before the date of sale.

[12] JT Publishing (Pty) Ltd v Minister of Safety and Security above footnote 1.