By Chantelle Gladwin and Sean Piveteau

This article deals with instances when a municipality is entitled to disconnect and/or refuse to reconnect the supply of services to purchasers of properties burdened by a prior owner’s historical municipal debt, as well as when a municipality is entitled to execute against (attach and sell at auction) the property of a current owner to satisfy debts owed by prior owners to the municipality.

Case law

In the case of Stand 278 Strydom Park (Pty) Ltd v Ekurhuleni Metropolitan Municipality (GJ) (unreported case no 23503/2014, 27-4-2015) (Strydom AJ), the case was between the owner of a property and the Ekurhuleni Municipality. The municipality in effect threatened to terminate the supply of services to the property as a result of the unpaid historical debt attached to the property, which was incurred by prior owners of the property. Although there were several different legal principals involved in the overarching disputes between the parties, only two of the issues are relevant for the purposes of this article.

Legal issues in the Stand 287 case

• Although the court did not expressly make a finding on this issue, the court did consider whether a municipality is entitled to disconnect the supply of an owner, and/or refuse to reconnect that supply if disconnection had already taken place. It was also considered whether a municipality can refuse to reconnect the supply of a service until such time as the present owner has made payment (or conducted satisfactory payment arrangements agreeable to the municipality) of the amounts owing by prior owners.
• The second issue that the court examined and made a finding on was: At what stage could a municipality attach a purchaser’s property as a result of unpaid municipal debts incurred by prior owners?

Termination of supply for old owner’s debts

Relief sought

In the first issue, the applicant sought an urgent court order declaring (among other things) that the municipality was not entitled to disconnect its municipal supply as a result of unpaid arrears, which were incurred not by it, but by prior owners.  The municipality conceded the relief sought, meaning that its legal representatives agreed in court that the correct legal position is that a municipality is not entitled to disconnect for unpaid debts of prior owners.  This relief was made part of the court order handed down by agreement between the parties.

Importance of judgment

It is important to note that although the order contained relief regarding the termination of supply, the court did not explicitly consider the matter as it was conceded by the municipality. As a result there is no judgment (or reasons for judgment) that one can rely on to set a precedent for future cases.  The judge did, however, expressly state in the written judgment that, in his view, the municipality had correctly conceded that it was not entitled to terminate the purchaser’s services as a result of the unpaid historical municipal debt of prior owners. This comment will accordingly serve as compelling persuasive authority for future courts faced with the same decision – if indeed any municipality is of the view that this very strong and express indication by the Johannesburg High Court is insufficient to create legal certainty as to what the legal position is.

Execution against the property

Finding of the court

Although the municipality conceded the relief sought above, it required clarity on whether a municipality could attach a purchaser’s property as a result of unpaid municipal debts incurred prior owners. The court held that a municipality can only approach a court for an order to attach a property, and sell it at auction to satisfy the debts of prior owners, after obtaining judgment against the prior owners who incurred that debt on the property. In this particular case, the municipality had not yet obtained judgment against the prior owner responsible for incurring the historical municipal debt in question. The consequence of this was that the municipality was not entitled to take legal action to attach the property in the hands of the purchaser to satisfy prior owners’ historical municipal debt.

Implications for property owners

The court’s ruling in connection with the attachment of a property goes: A municipality will not be able to attach and sell a property of a purchaser for the historical municipal debt of prior owners, unless it has first obtained judgment against the prior owner or owners concerned. There are still several procedural questions that remain to be answered, such as –

• whether a purchaser will be entitled to raise any defences against the municipality in court that were not initially raised by the seller;
• how the onus of proof will work in such an instance; and
• what rights the purchaser has to obtain confidential information from the municipality relating to whatever disputes the seller may have had with the municipality in relation to the historical municipal debt.

It is likely that these questions will only be answered on a case by case basis as the need arises when test cases are brought to court.

Conclusion

With regard to the first legal issue, the termination of supply, the court did not actually decide on the issue, and hence did not set legal precedent to the extent that a municipality cannot terminate the supply of services to a property for the unpaid debts of prior owners. However, the fact that the municipality in question conceded the relief, and further that the judge in question expressly endorsed that concession as being correct in law, creates compelling (and in our view, unavoidable and concrete) persuasive authority for future litigants facing the same legal issue.

The court’s findings regarding a municipality’s right to attach and sell a property is a step in the right direction for property owners, in the sense that it clarifies the position as to when and what steps the municipality must follow before it can attach a purchaser’s property and sell it to satisfy the historical municipal debt of prior owners.

Chantelle Gladwin BA LLB (Rhodes) LLM (Unisa) is an attorney and Shaun Piveteau BA Law LLB (UP) is a candidate attorney at Schindlers Attorneys in Johannesburg.

This article was first published in De Rebus in 2016 (July) DR 25.