The Steve Tshwete Local Municipality v Fedbond Participation Mortgage Bond Managers (Pty) Ltd and Others

A close corporation, TNT Trading 23 CC, owned four immovable properties subject to mortgage bonds held under a participation bond scheme operated by Fedbond. TNT was placed in final liquidation in December 2008. The liquidators sold the properties and required municipal clearance certificates under s 118(1) of the Local Government: Municipal Systems Act 32 of 2000 to effect transfer. TNT lacked funds to pay outstanding municipal rates, so Fedbond paid them. A dispute arose as to the applicable period for which municipal rates had to be paid to obtain clearance certificates: the Municipality contended that, read with s 89 of the Insolvency Act 24 of 1936, rates were payable from two years prior to liquidation, whereas Fedbond contended that only rates for the two years preceding the application for clearance certificates were payable. The High Court granted a declaratory order in favour of Fedbond, relying on earlier Supreme Court of Appeal authority.

The appeal was dismissed with costs, confirming the declaratory order granted by the High Court in favour of Fedbond.

The case reaffirms the authority of City of Johannesburg v Kaplan NO and clarifies the interaction between municipal clearance certificate requirements and insolvency law. It underscores the distinction between the embargo in s 118(1) and the municipal charge in s 118(3), and confirms that municipalities may not demand payment beyond the two-year period preceding the application for a clearance certificate in liquidation contexts. The judgment also reinforces the constitutional importance of stare decisis in South African law.