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Presentation on theme: "THE LAW, POLICY,& JUDGMENTS IN CREDIT CONTROL"— Presentation transcript:




. Rules of the game

Give effect to National Legislation Credit Control Policy Credit Control Bylaw Judgments and Common Law Implementation Policies

Use All Legislation to disposal MSA MFMA MPRA NCA Magistrates Court Act Sectional titles Act Review Policy Annually Ensure By-laws give Effect to Policy Proper Procedure Manuals Proper set of delegated authority Keep abreast of judgments impacting on Credit Control 21

Chapter 9 of Systems Act S95 Customer Care S97 Credit Control and Debt Collection Policy S98 By-Law S101 Right to access a premises S102 Consolidation of Accounts S118 Restraint on transfer of property

Other Legislation S58 Magistrate Courts Act S’s 28 & 29 MPRA Deceased Estates Management Act Insolvency Act S’s 46 & 47 Sectional Titles Act S64 MFMA Prescription Act

9 LEGISLATION Prescription Act 1969 (NO 68 OF 1969)
S59 System of Delegations Internal Policies and Procedures from By-Law Standard Operating Procedures (SOP)

Water Services Act 1997 (No 108 of 1997): Section 2 (a) right to access to basic supply, Section 4 (3) procedure regarding limited- and discontinued services & pre paid Mazibuko versus Johannesburg judgment. Wait Strumpher versus Cape Town judgment Electricity Regulations Act 2006 (No 4 of 2006): Section 23 entry and inspection of property & tampering Promotion of Access to Information Act 200 (No 2 of 2000) (PAIA): Section 11 provide right to customers of public bodies to access records related to their accounts Promotion of Administrative Justice Act 2000 (No 3 of 2000) (PAJA): Procedurally fair administrative action where person’s rights are materially affected & adequate notice Interpretation Act 2005 (No 23 of 2005) : Higher court decisions, level of legislation & constitutional court decisions

National Credit Act 2005 (No 34 of 2005): Raising of interest on electricity – 30 days (Nobumba versus Nelson Mandela Judgment) & no applicability Consumer Protection Act 2008 (No 68 of 2000): Section 22 relating to understandable language Companies Act 2008 (No 71 of 2008): Section 133(1) financially distressed companies and close corporations (6 months) however careful of section 132 Close Corporation Act (No 69 of 1984): Ownership Deeds Registry Act 1937 (No 47 of 1937): Section 118 of Systems Act link directly Electronic Communication and Transactions Act 2002 (No 25 of 2002): Legality of communication mediums schedule 1 (section 4(3)) and schedule 2 (section 4(4)) ( & SMS..) Income Tax Act No 58 of 1962)

12 COMMON LAW….. Referee of the game

13 DEFINITION “Common law, also known as case law or precedent, is law developed by judges through decisions of courts and similar tribunals rather than through legislative statutes or executive branch action. A "common law system" is a legal system that gives great precedential weight to common law, on the principle that it is unfair to treat similar facts differently on different occasions. The body of precedent is called "common law" and it binds future decisions. In cases where the parties disagree on what the law is, an idealized common law court looks to past precedential decisions of relevant courts. If a similar dispute has been resolved in the past, the court is bound to follow the reasoning used in the prior decision (this principle is known as stare decisis). If, however, the court finds that the current dispute is fundamentally distinct from all previous cases (called a "matter of first impression"), judges have the authority and duty to make law by creating precedent. Thereafter, the new decision becomes precedent, and will bind future courts.” Wikipedia

14 JUDGMENTS ……………

15 JUDGEMENTS Gundwana V Steko Development Cc And Others
Jaftha v Schoeman & Others 2004 JDR 0601 (CCT 74/03) Mkhize v Umvoti Municipality Nobumba N.O. vs Nelson Mandela Bay Municipality Hartzenberg and 8 others vs. Nelson Mandela Metropolitan Municipality B G Beck & Others v Kopanong local Municipality Joseph v City of Johannesburg and others CCT 43/09 Mkontwana v Nelson Mandela Metropolitan Municipality CCT 57/03 Various Others dealing with s118

GUNDWANA V STEKO DEVELOPMENT CC AND OTHERS [CC 44/2010 : (2011) ] Summary: The Gundwana case was a challenge to the constitutionality of the High Court Rules and practice, which allowed a High Court Registrar to grant default judgment, without judicial oversight, declaring immovable property executable.

17 Facts: In 1995, Mrs G bought a property in Thembalethu, outside George, in the Western Cape, using a mortgage bond from a Bank. Mrs G used this property as her home, from which she ran the only black-owned Bed & Breakfast in the area. In 2003, she fell into arrears with her bond repayments. The Court, at the banks formal application, granted default judgment against her and declared the property executable for the debt. Mrs G continued to make payments on the bond over the next 4 years, without the bank letting her know that they were unacceptable. In 2007, the bank carried out the execution and the property was sold. When the new property owner sought to evict Mrs G, she opposed the eviction but failed to respond effectively to the affidavit seeking the eviction. Both the High Court and the Supreme Court dismissed her case.

18 Issues and decision of the Constitutional Court
The Constitutional Court stated that ‘[t]o agree to a mortgage bond does not… entail agreeing to forfeit one’s protection [from arbitrary eviction]. It held that due regard should be taken of the impact that the sale in execution might have on judgment debtors who were poor and at risk of losing their home. At the time of execution, Mrs G’s arrears were R It was possible that other mechanisms could have been used to have recovered the debt. Each case must therefore be considered on its own merits. As a result of the Judgment, Rule 31(5)(a) of the Uniform Rules of the High Court allowing a Registrar to grant and enter a default judgment was declared unconstitutional for lack of judicial oversight. Now, only a Judge may grant execution orders.

Summary: These 2 cases preceded the Gundwana Judgment and were concerned with the constitutional validity of s66 & 67 of the Magistrates Court Act which dealt with the sale in execution of property in order to satisfy a debt.

20 Facts: In 1997, Maggie Jaftha applied for and was granted a state housing subsidy to acquire a property where she lived with her 2 children. She suffered from high blood pressure and only had a standard 2 education. Therefore could not find work. In 1998, she borrowed R250 from a Mrs S which was to be repaid in instalments. Although Ms Jaftha made some payments, she failed to repay the debt on due date. Markotter Attorneys, the only legal firm in Prince Albert, in the Eastern Cape, were then instructed to recover the balance outstanding. By the time they took judgment, the amount owing had escalated to over R600 including interest and costs. Ms Jaftha continued to make a few payments but then was hospitalized. In 2001, she went to the attorneys and was told that she would have to pay R7000 to prevent the sale of her home. This amount was impossible to find so in August 2001, her property was sold in execution for R and she was forced to vacate her house. The facts of the van Rooyen case are fairly similar and this is why the 2 cases were heard by the Constitutional Court at the same time.

21 Decision of the Constitutional Court
The Constitutional Court declared s66(1) of the Magistrates Court invalid on the basis that it breached s26(1) of the Constitution to the extent that it allowed execution against the homes of indigent debtors, resulting in them losing their security of tenure and having no suitable alternative accommodation. It is now necessary to apply to the Magisrates Court to declare an immovable property executable. This is to ensure that the sale in execution of the homes of people, who may lack knowledge of the legal process, and/or are ill-equipped to make use of the remedies available to them, is justifiable.

Where a defendant is indebted to another party and owns immovable residential property, the Summons and Particulars of Claim must include a clause drawing the defendant’s attention to s26 of the Constitution which accords everyone the right to have adequate housing. Such clause should state further that should the defendant claim that the order for execution will infringe that right, it is incumbent on the defendant to place that information before the court;

23 In considering whether or not to order execution, the court will look at ‘Relevant circumstances’ on a case-by-case analysis - - The circumstances in which the debt was incurred; - Any attempts made by the debtor to pay off the debt; - The financial situation of the parties; - The amount of the debt; - Whether the debtor is employed or has a source of income to pay off the debt; and - Any other factor relevant to the particular facts of the case before the court The cases show how important it is to profile debtors and their circumstance so that when it comes to making application to court to declare a property executable, persuasive information can be placed before it. If information is poor and the debtor appears to fall into the category where careful oversight by the court is required, prospects of obtaining an order to sell property in execution may be slim.

24 The above Constitutional Court judgments do not alter the historical position with regard to the sale in execution of properties that do not engage s26 of the Constitution eg commercial, agricultural or even residential properties that have been purchased for investment purposes or not used as primary residences [Mkhize v uMvoti Municipality]

Rationale Provided for in s97(1) of the Municipal Systems Act where payments are in arrears; Constitutes an alternative debt collection measure; Can give rise to a positive response from a debtor; Court processes are expensive and protracted;

26 The court emphasized that the municipal service account should be seen, treated and settled as a single account of various services provided. The court upheld the withholding of sales of the pre-paid electricity coupons until the consolidated debt was paid. Through the test cases, our courts have recognised that consolidation of accounts, cash allocation and disconnection of services is a much more effective form of credit control. However, the Municipality must have its Credit Control & Debt Collection Policy properly approved and Bylaws properly promulgated.

27 What do the Courts have to say?
2003 HARTZENBERG & OTHERS v NELSON MANDELA METROPOLITAN MUNICIPALITY Summary: The case concerned the right of the municipality to cut the pre-paid electricity supply of household because of their failure to pay their water accounts.

28 Facts: The applicant unlawfully invaded houses owned by a bank and ran up substantial arrears on their water accounts. The municipality responded by terminating the electricity supply to the houses and relied on its Credit Control Policy to do so. Issues and ruling: The court considered the legislation that supported the municipality’s Credit Control Policy and ruled that s98 of the Systems Act required a municipality to adopt a bylaw so as to give effect to its credit control and debt collection policies. The municipality could not provide such a bylaw. Therefore, the municipality was not entitled to discontinue the electricity on account of the applicants being in arrears on their water accounts.

Summary: Here, the court also had to decide whether it was legally permissible for the municipality to withhold the provision of one service to a resident in order to enforce payment of arrears owing in respect of another service.

30 Facts: The applicants purchased electricity from a community vendor acting as a cash coupon distribution outlet. They were thus not indebted to the municipality in respect of their electricity consumption. However, they were indebted to the municipality for their water accounts, which they had decided not to pay until the municipality did something to improve the quality of its service delivery to the community. In response, the municipality blocked the cash sale of electricity coupons by the community vendor. The municipality’s Credit Control Policy provided that: “…electricity supply will be disconnected if any of the services delivered by the council or rates & taxes due to council are in arrears. In cases where pre-paid electricity meters have been installed, the purchase of electricity coupons will be blocked.”

31 Issues and rulings: The court looked at s97(1) of the Systems Act which deals with the content of a municipality’s credit control and debt collection policy and interpreted the section to mean that a municipality should put an end to the provision of any service (of whatever nature) when the municipal service account, due and payable by the consumer in favour of that municipality, is unpaid. It further held that the municipality is constitutionally compelled to take action in terms of the Municipal Systems Act against consumers indebted to it in respect of the municipal service rendered. The court also emphasized that a municipal service account should be treated and settled as a ‘composite but single account for various services rendered’.

Recognition of the effectiveness of the consolidation of accounts under s102 of the Municipal Systems Act in credit control; Recognition of the need for Bylaws to give validity to credit control and debt collection policies; Recognition of the reciprocal relationship between a municipality and a resident ie the right of a consumer to demand a municipal service entails a reciprocal obligation to pay.

33 2009 LEON JOSEPH & OTHERS V CITY OF JOHANNESBURG AND CITY POWER [CCT 43/2009] (Langa CJ, Moseneke DCJ, Cameron J, Mokgoro J, Ngcobo J, Nkabinde J, O’Regan J, Sachs J and Van der Westhuizen J) Summary: The crux of this case was whether any legal relationship exists between tenants in a building and a municipality’s external electricity service provider, entitling them to procedural fairness before their household electricity supply is terminated.

34 Facts: The applicants were tenants in a building who paid their electricity bills directly to their landlord. In 2008, the landlord fell into arrears with his electricity payments and the municipality disconnected the electricity supply. No prior notice was given to the tenants. At the time of disconnection, most of the applicants who were billed for electricity by their landlord, were up to date. Approximately 30 families were living in the building, including 38 children and 4 apartments were occupied by elderly people.

35 Facts: The average monthly income of the households was R3000-R4000, although some households had no income at all. A number of shops and businesses also operated from the building. On the eve of disconnection, the landlord’s son delivered a note to each apartment, which stated that owing to ‘unforeseen circumstances’ the electricity supply would be disconnected for a few days. The arrears amounted to R A committee of the tenants visited the municipality and were referred to SA Human Rights Commission which in turn referred them to the Rental Housing Tribunal. When they received no joy, the University of the Witwatersrand advised them to launch proceedings in the High Court. They did so and also challenged the constitutionality of the City’s By-laws. The High Court dismissed the application.

36 Decision of Constitutional Court
In a unanimous judgment, the court held that the City was obliged to afford the tenants procedural fairness in accordance with the Promotion of Administrative Justice Act 3 of 2000, before taking a decision that would materially and adversely affect them. This meant affording the tenants pre-termination notice. It said that- “Procedural fairness….is concerned with giving people an opportunity to participate in the decisions that will affect them, and – crucially – a chance of influencing the outcome of those decisions. Such participation is a safeguard that not only signals respect for dignity and worth of the participants, but is also likely to improve the quality and rationality of administrative decision making and to enhance its legitimacy.”

37 For any pre-termination notice to be ‘adequate’, it must contain the following:
All relevant information, including date and time of the proposed disconnection; Reason for the proposed disconnection; The place at which the affected parties can challenge the basis of the proposed disconnection; Afford sufficient time to the affected parties to make any necessary enquiries and investigations, to seek legal advice and to organize themselves collectively if they so wish. In the court’s view, a minimum period of 14 days pre-termination notice would be fair.

Persons who are not ‘customers’ as defined in any Bylaws or Credit Control Policy are entitled to procedural fairness where their rights are materially and adversely affected’ A municipality’s By-laws and Credit Control and Debt Collection Policy must make provision for notice to both consumers and other parties whose interests may be materially affected, before termination failing which the Policy and/or By-law will be constitutionally invalid;

39 Rademan v Moqhaka Local Municipality and Others [CCT 41/2012 (2013)]
(Zondo J (Mogoeng CJ, Moseneke DCJ, Jafta J, Mhlantla AJ, Nkabinde J, Skweyiya J and Van der Westhuizen J concurring) Summary: The appellant claimed that a municipality should first obtain a court order authorizing the termination of her electricity supply and the failure to do so, rendered the disconnection unlawful.

40 Facts: Mrs Rademan (and other members of the community) decided not to pay rates on her property because she was unhappy about perceived poor or inefficient service delivery by the municipality. She nevertheless continued to pay for her electricity and other services. Her account was consolidated in terms of s102 of the Systems Act. The municipality gave notice that it would cut off the electricity supply to her property in the light of her failure to pay part of her account. She did not change her mind and so the municipality then effected the disconnection.

41 Issues and ruling of the Constitutional Court
The court supported both the High Court and the Supreme Court of Appeal and held that a court order was not necessary before cutting off a resident’s electricity supply. It also supported previous decisions allowing for an electricity supply to be terminated where only a component and not the entire account had paid. CAN A PROPERTY OWNER TERMINATE THE ELECTRICITY SUPPLY TO PREMISES THAT ARE TENANTED? YES BUT ONLY WITH A COURT ORDER [Anva Properties CC v End Street Entertainment Enterprises CC /2014 (2015) ZAWCHC]

42 DISPUTES Relevant cases:
Leon Joseph v City of Johannesburg and City Power Pty Ltd [CCT 43/2009] Body Corporate Croftdene Mall v eThekwini Municipality [603/2010 (2011) SCA] City of Cape Town v Marcel Mouzakis Strumpher [104/2011 (2012) SCA] Lessons to be learned: Where a grievance is valid, rendering a proposed disconnection untenable, disconnection should not be effected. (Leon) A mere claim that something is or ought to have been the position does not amount to a dispute. Subsec 102(2) of the Systems Act requires that the dispute must relate to a ‘specific amount’ claimed by the municipality. (Croftdene)

MKONTWANA V NELSON MANDELA METROPOLITAN MUNICIPALITY [CCT 57/2003 (2004) ] Summary: This case concerned the constitutional validity of s118(1) of the Systems Act that in effect burden owners in relation to consumption charges for water and electricity supplied to other people who occupy their immovable property

44 Facts: Mrs Mkontwana bought a house in Port Elizabeth for R The agreement of purchase and sale provided that she must pay the outstanding consumption charges for the s118(1) rates clearance certificate. She was not well off and had relied on a state housing subsidy to acquire the property. When she applied for the RCC, she was informed that previous occupiers had run up a large debt. The owner had never asked for the service, nor did he directly benefit from it and had little control over consumption.

45 Decision of the Constitutional Court
The court held that s118(1) of the Systems Act is not inconsistent with s25(1) of the Constitution as it does not give rise to a deprivation of property. It held further that the purpose of s118(1) is to afford a form of security to municipalities for the payment of amounts due in respect of water and electricity. It also held that there is an inherent link between an owner, consumption charges and the property. An argument that an owner must first benefit from the consumption charge, was fallacious. The court stated it was not unreasonable for an owner to bear the risk even where an occupier holds over unlawfully after the termination of a lease of some other legal relationship. It is the duty of the owner to safeguard his property and it is the owner, not the municipality, who has the power to take the necessary steps to evict.

The expression in s118(1)(b) of ‘all amounts that became due in connection with that property’ extends to all debt even where electricity and water is supplied to a person other than the owner (eg a tenant); All debt remains on the property and the owner bears the risk; The RCC must certify that all amounts that become due during the last 2 years preceding the date of application, have been paid; A municipality must be able to provide complete, credible, comprehensible and reasonably detailed information in relation to consumption charges that are owing within a reasonable time of being requested to furnish it. Otherwise a municipality can be compelled to provide the information. Five years after the Mkontwana decision, the Supreme Court of Appeal in the City of Cape Town v Real People Housing [77/2009] stated very clearly that it was unlawful to withhold a RCC if the debts falling due in the 2 year period, are paid. As a result, a municipality cannot allocate payments to the oldest debt first so as to ensure that all debt is paid prior to the issue of a RCC.

CITY OF TSHWANE METROPOLITAN MUNICIPALITY V MATHABATHE [501/ (2013) ZASC ] Summary: In this case, the Supreme Court of Appeal was required to consider the nature of security provided in terms of s118(3) of the Systems Act.

48 FACTS: In 2010, Nedbank Limited on behalf of the owner of the property, Thomas Mathabathe sold his property by public auction. The transferring attorneys applied for a RCC in terms of s118(1) of the Systems Act. In response, the municipality furnished a certificate not only for the 2 years envisaged in s118(1)(b) but also for historical debt. It did so on the basis that it enjoyed a lien (hypothec) over the property. The bank then launched an application to Court to compel the municipality to issue the RCC.

49 Issues and ruling of the Supreme Court of Appeal
The court came to the following conclusions: - s118(1) and s118(3) provide a municipality with 2 different remedies- - s118(1) is an embargo provision with a time limit; - s118(3) is a security provision without a time limit. The security provided by s118(3) amounts to a lien having the effect of a tacit statutory hypothec so that a municipality enjoys preference over a registered mortgage bond on the proceeds of the property. Since the security given to a municipality by s118(3) is a charge upon the property, a municipality cannot withhold the issue of a RCC on account of historical debt.

Debt remaining on a property must not be written off since- it remains a charge on the property; In terms of s96 of the Systems Act, a municipality MUST collect all money that is due and payable to it; The municipality owes a duty to inform the Conveyancer who acts for both the seller and the purchaser that there is an outstanding balance owing on the property; The municipality can endorse the outstanding balance on the RCC.

[23503/2014 Gauteng High Court] Summary: In this case, the court considered the meaning of ‘a charge upon the property’ and declined to grant an order declaring a property executable should the municipality, in the future, obtain a monetary judgment against the property which remained unpaid. It also ruled that the municipality was not entitled to terminate the supply of services to the current registered owner on the ground that previous owners of the property were indebted to it.

Before a court can declare property executable, the principle debt must be established and a judgment obtained (liquidation proceedings excluded). The Stand 278 Strydom Park case reinforces the need for the municipality to collect debt and places a question mark on the ability of the municipality to look to successors in title. Hence, collection of historical debt prior to transfer of a property is critical. A municipality may have to consider interdicting the transfer if there is outstanding debt.

[50816/2014 Gauteng Division] Summary: This case concerned an application for a declaratory order that ‘the lien (hypothec) over a certain immovable property held in terms of s118(3) of the Systems Act, did not pass upon transfer to the purchaser at a sale in execution or his successor in title nor was he liable for the historical municipal debts of previous owners. Although the municipality was aware of the sale prior to transfer as it was requested to issue a RCC, it did not exercise its right of preference over the proceeds of the property in terms of its statutory hypothec

54 Decision of the Gauteng High Court
The municipality’s hypothec was extinguished with the sale in execution and subsequent transfer of the property. In the absence of an agreement, the new owner or his successors in title did not become a co- debtor with regard to the principal debt and was not liable for the payment of historical debts incurred by previous owners or occupiers. In the absence of anything in the By-laws or municipality’s Credit Control Policy, the municipality was not entitled to refuse the supply of municipal services only because of debts older than 2 years on the property sold in execution.

The municipality will be protected against the effect of the Perregrine Judgment if it amends its By-laws and/or Credit Control Policy to ensure that the definition of ‘owner’ also includes successors in title. The municipality must ensure that it provides figures to the Judgment Creditor’s attorney timeously so that its right of preference over a property is safeguarded at sales in execution; When issuing a RCC for a property sold in execution, it is prudent to also refer to the outstanding principal debt (historical debt older than 2 years); In the absence of a wider definition of ‘owner’, the new owner or his successors in title, will not be liable for the outstanding principal debt. The municipality will be obliged to recover it from the predecessor in title.

NELSON MANDELA BAY METROPOLITAN MUNICIPALITY v MR NOBUMBA NO & OTHERS [2009 Easter Cape High Court] Summary: The National Credit Act does not apply to a claim for rates as a rate is a tax and the obligation to pay rates does not arise from a credit agreement, but from s2(1) of the Rates Act. As the entitlement of a municipality to claim interest on due but unpaid rates also arises from legislation, the NCA does not apply to such claim. With respect to unpaid service charges, the NCA may have application depending upon how a municipality’s Credit Policy is worded.

This case if the judgment is implement carefully will ensure that the municipality does not have to comply with the NCA which are: Legal Interest rate Raised after 30 days Does not constitute incidental credit under the Act

BARCLAYS NATIONAL BANK LTD v TRAUB [1981 (4) SA 291 (W)] A debt due to a creditor of a company or CC that has been deregistered is not extinguished but it is rendered unenforceable against the corporation; Any summons served on a company or CC that has been deregistered, cannot be enforced. MILLER & OTHERS v NAFCOC INVESTMENT HOLDINGS (PTY) LTD [2010 (6) SA 390 SCA] Upon deregistration of a corporation, all its property automatically (ie without any necessity for delivery or an order of court) into the ownership of the State as bona vacantia.

If a CC is deregistered while having outstanding liabilities, the persons who are members of such CC at the time of deregistration are jointly and severally liable for such liabilities. However, this will not be of assistance to the municipality if the deregistered CC owned immovable property against which the municipality wishes to execute; Where a company or CC is dissolved as a result of an administrative deregistration eg by the CIPC, on account of failing to file returns, an application can be made by a creditor to the Commissioner for it re-registration but this is an expensive process and the CIPC has placed insurmountable obstacles in the path of the creditor in respect of the type of information that has to be produced. It is possible for a company that has been deregistered for failing to file statutory returns, to continue trading. Accordingly, it is important for credit control checks to be undertaken to confirm the status of a company prior to hand over for debt collection.

60 IN DUPLUM RULE PAULSEN and ANOTHER v SLIP KNOT INVESTMENTS 777 (PTY) LTD [ZAWCHC (2013) ] Summary: This case considered the application of the ‘in duplum’ rule and whether interest accumulates pendent lite ie while proceedings are pending before the court or is suspended. Judgment Commercial Bank of Zimbabwe Ltd versus MM Builders & Suppliers (Pty) Ltd (ZH) and Standard Bank of SA Ltd versus Oneanate Investments (Pty) Ltd (in liquidation (SCA)

The case is helpful as it reiterated the common law. In duplum means ‘double the amount.’ In terms of the common law: Where the total amount of arrear and unpaid interest has accrued to an amount equal to the outstanding Capital Sum, interest ceases to run, but any payment made by the debtor thereafter will lead to the amount of interest decreasing after which interest again starts to accrue to an amount equal to the outstanding Capital Amount. A Creditor is not entitled to claim unpaid interest in excess of the capital outstanding. The in duplum rule is not limited to money transactions but applies to all contracts arising from a capital sum owed. The in duplum rule has the effect of encouraging plaintiffs to issue summons and claim payment of the debt speedily; The operation of the in duplum rule is suspended by the institution of proceedings but not where a surety is sued and not the principal debtor; The in duplum rule cannot be waived by the debtor or excluded by agreement.

CITY OF JOHANNESBURG METROPOLITAN MUNICIPALITY v BLUE MOONLIGHT PROPERTIES 39 (PTY) LTD & ANOTHER [CCT 37/11 (2011)] Summary: This case deals with the rights of the owner of the property, Blue Moonlight Properties and with the obligation of the City of Johannesburg Metropolitan Municipality to provide housing for the Occupiers if they were evicted. The Constitutional Court had to decide whether the eviction of the Occupiers was just and lawful. The Judgment has important implications for poor occupiers who face homelessness upon their eviction from private property.

63 Facts: Blue Moonlight concerns a community of 86 desperately poor people living in a disused industrial property at 7 Saratoga Avenue, Berea, Johannesburg inner city. In 2004, the site was bought by Blue Moonlight. Shortly thereafter, the company posted a notice to the occupiers to vacate the property. When they occupiers did not do so, Blue Moonlight launched an application to court for their eviction.

64 The Centre of Applied Legal Studies argued that the occupiers could not be evicted unless and until the City discharged its constitutional obligation to provide them with temporary housing. The City had an emergency housing policy but it did not cover occupiers on private properties who were evicted. The Constitutional Court granted Blue Moonlight its eviction order on the basis that PIE allowed for eviction of unlawful occupiers when it was just and equitable. The court found that on the facts, this requirement was satisfied.

65 It also ruled that: The City must provide temporary accommodation; The City’s housing policy was unconstitutional as it excluded people evicted by a private landowner from its temporary housing programme, whilst accommodating those relocated by the City. Once an emergency of looming homelessness is created, it mattered little to the evicted who the evictor was. In the case of the occupiers, affected individuals included children, elderly people, and child headed households for whom homelessness, would have disastrous consequences.

66 The City has an important constitutional role to play in the provision of housing and the fact that housing is a constitutional competence of national and provincial government, did not absolve the City; The City had a duty to plan and budget proactively for situations like that of the occupiers. Although the City’s assertion that it lacked resources, deserved consideration, the facts showed that the City had 3 years prior knowledge of the occupiers circumstances. This led the court to find that the City was, to a large extent itself to blame for its unpreparedness to deal with the occupier’s plight.

Summary: This case concerned the cancellation of a public rental housing lease agreement and the right to have adequate housing.

68 Facts: Mrs Malan was a 74 year old widow who received a social grant and lived in public rental housing, paying a nominal rental. The City of Cape Town cancelled the lease on the grounds of breach and obtained an order for her eviction and whoever else was in occupation. At the time she was in arrears with her rental payments in the amount of R It was alleged that illegal activity, in the form of drug trafficking and possession of illegal ammunition, took place on the premises. Such activities were allegedly carried out by the son and daughter as well as 3rd parties.

69 Issues and ruling of the Constitutional Court:
The court held that at common law, a clause in a lease giving the lessor the power to cancel the agreement for non-payment of rent, is enforceable strictly according to its terms. Once the breach is committed, its seriousness – even objectively judged, is irrelevant. However, a clause that states that a lessee must vacate the premises forthwith, may in certain circumstances, be unfair and contrary to public policy if invoked on account of a failure or delay to pay rental eg where the lessee is a public rental housing lessee, and the lessee is not afforded an opportunity to rectify the breach. The Court acknowledged that the City, as an organ of state, had an obligation to take reasonable measures within its available resources, progressively to realize the right everyone has to adequate housing. At the time, the City had rental stock of some housing units but a waiting list for state housing of households.

70 In terms of the City’s housing policy, termination of leases was a last resort. But given, the huge demand for state housing, the City had adopted a zero-tolerance approach to drug dealing being conducted at any of its rental housing units. This stemmed from the need to fulfil its constitutional obligation to provide adequate habitable crime-free housing to its citizens. Clause 2 of the lease agreement provided that either party may terminate the lease on one month’s notice. (No further reasons were required). The City relied on this clause in terminating the agreement. BUT it conceded that it could not properly terminate on the basis of the power in clause 2 alone. : Further justification was required for the cancellation to pass constitutional muster.

71 The court said the following
“For a public authority to cancel a lease agreement with a poor tenant on mere notice, for no further reason, is unreasonable and against public policy. This is because it would be an abuse of contractual power. Apart from infringing the tenant’s security of tenure, it would create the possibility of arbitrariness and abuse. Tenants in public housing thus may not be evicted merely on notice. There must be something more.”

72 The City’s records showed that at the time when the City launched the eviction proceedings- Mrs Malan: Mrs Malan was in arrears on her own version; She had been afforded an opportunity to remedy the default, but had failed to do so; The City had given due and proper notice of cancellation based, among other things, on these arrears; and Mrs Malan had not taken any steps to settle her arrears in the period of just over 2 months between the date of cancellation and the cancellation itself. The court stated that a public authority may cancel a lease on the ground of arrear rental alone.

73 ‘The contrary conclusion would be untenable
‘The contrary conclusion would be untenable. It would mean that a poor tenant, once she took occupation of public housing, could decline to pay any rent, assured in the knowledge that no amount of arrear rentals would provide a reason for eviction. This cannot be. The City is the custodian of exceptionally scarce resources and is surely entitled to ration it according to just principles of payment. In the case, the City was also able to enumerate extensive instances of illegal activity on the property. The letter delivered to her giving notice of cancellation of the lease, enabled her, if she was so minded, to protest the allegation of the illegal activities, and if such activities were admitted, to take steps to bring such activities to an end. She did neither. On the basis of all the facts, the court ruled that it was just and equitable that she be evicted.

The municipality has a concurrent constitutional obligation to give effect to s26 of the Constitution and the right to adequate housing and must budget accordingly; Housing policies need to be re-examined as well as the content of lease agreements and procedures; Lessees of municipal rental stock can only be evicted when it is just and equitable to do so. Careful attention must be paid to breach notices and administrative processes to ensure that actions are not considered to be unreasonable and contrary to public policy.

75 BATHO PELE CANTON TRADING 95 (PTY) LTD & OTHERS v BUFFALO CITY METROPOLITAN MUNICIPALITY [2727/2013 (2014) Eastern Cape High Court] Summary: This case concerned an application to compel the municipality to amend its records relating to the sale of a property and to furnish an account of the calculation of the amount paid for the issue of a rates clearance certificate. The municipality furnished the account and provided an undertaking that its records would be amended but continued to send demands to the applicant for payment in respect of the erf it had sold. The court granted the application and ordered the municipality to pay punitive costs on an attorney and client scale.

76 Facts: Canton Trading continued to receive statements of account and letters of demand long after it had disposed of its property. It first requested and then demanded that the municipality’s records be amended. It also requested that the municipality explain how it arrived at the figures it had said were due.

77 Issues and ruling of the court:
The court said the following: One would have imagined that requests of so innocuous, simple and routine a nature would have been complied with by return of post; Public administration is governed by ‘… principles enshrined in the Constitution and these include: the promotion and maintenance of a ‘high standard of professional ethics; the efficient, economic and effective use of resources; the provision of impartial, fair, equitable and unbiased services; responsiveness to people’s needs; accountability; and the fostering of transparency by ‘providing the public with timely accessible and accurate information.’ These principles are incorporated by reference in the Systems Act (s6).

78 The court also referred to the 2000 case of President of the Republic of South Africa & Others v South African Rugby Football Union & Others where the Constitutional Court stated in the clearest terms that the Constitution ‘is committed to establishing and maintaining an efficient and ethical public administration which respects fundamental rights and is accountable to the broader public.’ In the Canton Trading matter, the court found that it was clear from an official’s affidavit that a mistake was made in the calculation of the rates that were owed – “yet there was not a word of apology but a brazen attempt to lay the blame – on an erroneous factual basis.” It also said ‘One wonders why, when the mistake was discovered, the municipality did not immediately contact Canton Trading and explain the problem to it.’

79 And further stated: Members of the local community have a right, in terms of s5(1)(b) [of the Systems Act] to ‘prompt response to their written or oral communications, including complaints directed to the municipality’; It is apparent from [s27 of the Municipal Property Rates Act] that a municipality is obliged to account properly to ratepayers for both rates and service charges; As a statutory obligation to account….rests on a municipality, a person may demand an account in respect of either service charges or rates. The right does not arise from the Promotion of Access to Information Act but from the Systems Act.

Municipal service standards are under close scrutiny by the public and there is a need to adhere to Batho Pele principles at all times.

ALLOCATION OF RECEIPTS P A Pearson (Pty) Ltd v eThekwini Municipality [Supreme Court of Appeal 241/2016 (Judgment )] The Systems Act Subsection 102(1)(b) gives the municipality the authority to decide which account to credit; The municipality is entitled to credit payments made to any account held by a customer to another account of the customer. DISPUTES Body Corporate of Croftdene Mall v eThekwini Municipality [Supreme Court of Appeal 603/ (Judgment 2011)] A mere claim that something is or ought to have been the position does not amount to a dispute. Subsection 102(2) of the Systems Act requires that the dispute must relate to a ‘specific amount’ claimed by the municipality.

These two judgments open up for a municipality to consolidate payments to any account of the account holder. Some implication here is to now allocate payments on application of RCC to unpaid accounts of a customer, prior to the issuing of a Revenue Clearance Assessment (RCA)

83 POLICY & BYLAWS ……………

84 ROLE OF COUNCILLORS Section 99 of the Local Government Municipal Systems Act Supervisory Authority and must Oversee and monitor the implementation and enforcement of credit control policy and by-laws Oversee and monitor performance of administration in the implementation of credit control policy and by-laws Evaluate and review credit control policy and by-laws to improve the efficiency of the credit control mechanisms Receive regular reports on the implementation from the administration To politically back the collection processes, which was done exceptionally by Council and Councillors



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