About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Western Cape High Court, Cape Town
SAFLII
>>
Databases
>>
South Africa: Western Cape High Court, Cape Town
>>
2016
>>
[2016] ZAWCHC 87
|
|
Harbour Terrace Body Corporate v Minister of Public Works and Others (2556/2016) [2016] ZAWCHC 87; [2016] 3 All SA 766 (WCC); 2025 (1) SA 191 (WCC) (8 July 2016)
IN THE HIGH COURT
OF SOUTH AFRICA
(WESTERN CAPE
DIVISION, CAPE TOWN)
CASE NO: 2556/2016
DATE: 08 JULY 2016
REPORTABLE
In the ex parte application of:
HARBOUR TERRACE BODY CORPORATE
(SS401/1998)
..............................................................................................................................
Applicant
And
THE MINISTER OF PUBLIC
WORKS
....................................................................
First
Respondent
THE MINISTER OF
FINANCE
.............................................................................
Second
Respondent
THE REGISTRAR OF DEEDS, CAPE
TOWN
......................................................
Third
Respondent
Heard on: 19 February, 15 March
and 25 April 2016
Delivered on: 8 July 2016
JUDGMENT
SHER, AJ:
1.
This matter came before me in Motion Court
on the return day of a
rule nisi
.
When it was called I indicated to counsel for the applicant that
although the matter was not opposed by the respondents, who abide
the
decision of the Court, I had a number of difficulties with the
application and misgivings with the relief which was sought
therein,
and requested that written submissions should be made in regard
thereto.
2.
The central issue which arises for
determination is whether this Court is entitled in terms of the
provisions of s 48 of the
Sectional Titles Act
[1]
(“
the Act”
),
to make an order to the effect that a section and certain exclusive
use areas within a sectional title scheme, are deemed to
have been
destroyed, and that the scheme may be reconstituted by excluding such
section and use areas from it. In order to distinguish
a section in
the Act from a sectional unit in terms of the Act, the latter is
referred to herein as a “
Section
”.
The background
circumstances
3.
The applicant is the body corporate of the
Harbour Terrace sectional title scheme (a sectional title scheme with
registration number
SS401/1998, hereinafter “
the
scheme
”), which was duly
established in terms of s 36 of the Act. The scheme comprises certain
buildings, and the land on which
such buildings are situated, within
Green Point in Cape Town.
4.
The applicant launched an application for
an Order:
4.1.
declaring in terms of s1(3A) of the Act
that its members are deemed to have passed a unanimous resolution:
4.1.1.
confirming the ‘deemed’
destruction of Section 57 of the aforesaid scheme, alternatively
confirming the ‘deemed’
destruction of the buildings
comprising the scheme itself, in terms of s 48(1)(b) of the Act;
and
4.1.2.
for the reinstatement of the buildings
comprising the scheme “
excluding
the building currently comprising Section 57”
thereof; or in the alternative an Order
4.2 declaring that in
terms of ss 48(1)(c) and 48(2) of the Act, Section 57 of the
aforesaid scheme, alternatively the buildings
comprising the scheme
itself, are ‘deemed’ destroyed on the grounds that it is
just and equitable to do so, and to
the extent necessary, the
buildings comprising the scheme “
excluding the building
currently comprising Section 57”
(sic) thereof are declared
reinstated; and
4.3
declaring that Section 57 shall constitute
an undivided share in the common property as defined in terms of the
Act.
5.
The scheme was established in 1998 by the
developer, SD Developments Western Cape (Pty) Ltd (“
SD”
).
According to the sectional plan which it originally registered there
were to be 59 Sections within the scheme. Section
57 was created
together with certain exclusive use areas
(including a number of parking bays and storerooms) in terms of an
amended sectional plan
which extended the scheme. SD was reflected on
the records held by the Registrar of Deeds (being the third
respondent herein) as
the owner of Section 57 and certain exclusive
use areas to wit storerooms 1 – 3, an open basement parking
(marked “
OB2
”
on the plan) and a shade-net parking (“
SP12
”
).
6.
According to the sectional plan, Section 57
comprises 29 sqm in area, and is located within a building in the
scheme. Until
approximately two years ago it was utilised as a
laundry (by an outside business), which served the body corporate.
7.
It was the intention of the developers that
once the scheme had been completed, Section 57 and the
store-rooms would be transferred
to the body corporate for use as
part of the common property. As far as the parking bays (“OB2”
and “SP12”)
are concerned, it was intended that the
developer would cede its rights to exclusive use thereof, to the
owners of certain units
within the scheme; which cession, in terms of
the Act, was to be effected by the registration of notarial deeds of
cession.
[2]
However, on 4 January 2008 and before Section 57 had been
transferred to the body corporate and the rights of exclusive
use
over the aforesaid parking areas had been ceded, SD was de-registered
by the Commission for Intellectual Property and Companies
(“
CIPRO
”).
8.
Notwithstanding the absence of notarial
deeds of cession, and prior to SD’s deregistration, exclusive
rights of use of the
aforesaid parking areas were on-sold by SD to
the owners of certain units in the scheme, who in turn purported to
on-sell such
rights to other persons. It is further apparent
that although the developers were liable to pay levies to the body
corporate
in respect of Section 57 and the parking areas, they did
not do so. As at 19 November 2015 there was an amount of
R103 968.14
owing in lieu of arrear levies.
9.
Early in 2012, the applicant engaged the
services of attorneys Tertius Maree Associates (“
TMA”
)
with a view to ‘regularising’ the Section and the
exclusive use areas. On carrying out a search at the offices
of
CIPRO, TMA established that SD had been deregistered. A further
search which was conducted at the offices of the third
respondent
revealed that notwithstanding such deregistration the aforesaid
Section and exclusive use areas were still registered
in the name of
SD, together with certain other immovable property in Cape Town.
It also appeared from the records that there
was a sectional mortgage
bond registered over Section 57, in favour of FirstRand Bank Ltd in
an amount of R660 000.00.
10.
With the assistance of SD’s previous
auditors, TMA eventually made contact with an erstwhile director of
the company, one
Van Niekerk. During September 2012 Van Niekerk
indicated that the company had been part of a group of companies
which had
been taken over by FNB.
11.
In December 2012, TMA wrote to Van Niekerk
informing him that FNB had no records of any outstanding mortgage
bond in respect of
Section 57, or any records indicating that it had
taken over the company. Inasmuch as the company had not been wound up
by way
of liquidation proceedings, TMA enquired whether Van Niekerk
as an ex-director would consider making application for its
restoration
to the register of companies, in order that the applicant
could obtain transfer of Section 57. There was no response to
this
request and the matter became dormant.
12.
During March 2014 the applicant instructed
a new firm of attorneys, Smith Tabata Buchanan Boyes. They too
addressed a letter,
in similar terms, to Van Niekerk requesting him
to indicate whether he was prepared to assist in the formal
re-registration of
SD to the register in order that Section 57 could
thereafter be transferred into the name of the applicant, and the
exclusive use
areas ‘transferred’ to those current owners
of units within the scheme who asserted a right to ownership
thereof.
In return, the applicant offered to write off its
outstanding claim in respect of the arrear levies. Once again,
no reply
was forthcoming.
13.
On 3 August 2015 the managing agents of the
applicant gave notice to all owners of units within the scheme that
the annual general
meeting of the applicant would be held on 2
September 2015. Item 17 of the agenda reflected that at
the meeting the
applicant would move for a “
unanimous
resolution for the deemed destruction of section 57, Harbour Terrace
Body Corporate”
and the
authorisation of “
a court
application in terms of s 48(1)(c) and/or 1(3A) of the Sectional
Titles Act in order to give effect to the aforementioned
resolution”
.
14.
From the minutes of the meeting it appears
that a
quorum
of
only 29 owners of units in the scheme, represented either in person
or by proxy, was attained and as such, the resolution could
not be
voted upon as the requisite majority stipulated in terms of the Act
for a resolution to be considered unanimous ie a minimum
of 80% of
the owners in value and number, was not present.
15.
As a result, a further special general
meeting was called for 14 October 2015. On this occasion
some 44 owners were present,
in person or proxy, all of whom voted in
favour of the proposed resolution. However, the vote was still
short inasmuch as
it required the support of 48 of the 59 owners to
meet the requisite 80% majority.
16.
As a result the applicant resolved to
approach the Court in terms of the provisions of ss 48(1)(c) and
1(3A) of the Act.
The
Sectional Titles
Act 95 of 1986
17.
In terms of common law (and following
Roman-Dutch authority in this regard) the owner of any land is also
the owner of any building
which is erected thereon or which accedes
thereto, and sectional ownership of part of any such building was not
possible until
the advent of the Act.
18.
The stated purpose of the Act
[3]
is to provide for the division of buildings and the land on which
they are situated into so-called “
sections
”
and “
common property
”
within a ‘sectional title scheme’, in order to enable the
acquisition of separate ownership in such Sections
coupled with
pro
rata
joint ownership in the common
property, in the form of “
sectional
title units
”, and to provide for
the regulation and control of the legal incidents which follow upon
such sectional and joint ownership
(ie the transfer of sectional
ownership rights and the registration of real rights and sectional
mortgage bonds), and the establishment
of bodies corporate to control
and administer the common property.
19.
The Act consequently provides that
notwithstanding anything to the contrary in any law or the common
law, a building or buildings
may be erected as part of a sectional
title scheme and such building(s) and the land on which it/they are
situated may be divided
into Sections (as depicted on a sectional
plan) and common property, for the purposes of selling, letting or
otherwise dealing
therewith.
[4]
20.
To give effect to this a sectional plan
must be prepared (by a land surveyor or an architect) which must
delineate the boundaries
of the land and the location of the relevant
building(s) thereon,
[5]
together with a scale plan of each storey in the proposed
building(s)
[6]
and the boundaries of each Section in the building(s),
[7]
which must show the floor area to the median line of the boundary
walls of each Section correct to the nearest square metre, and
the
total combined floor area of all the Sections.
[8]
21.
The total area of all the Sections in the
buildings which comprise the scheme forms the basis for
determining the so-called
“
participation
quota”
of a Section in relation
to the whole, on the basis of a percentage which must be expressed to
4 decimal places.
[9]
22.
This quota determines the percentage value
of the vote of the owner of a sectional unit in the scheme
[10]
and his/her undivided share of the common property,
[11]
and the owner is liable to make levy contributions for the upkeep of
the scheme in such percentage,
[12]
and shall also be liable for the payment of any judgment debt which
may be taken against the body corporate, in such percentage.
[13]
23.
From the date on which any person other
than the developer becomes an owner of a Section in the scheme, there
shall be deemed to
be established for such scheme a body corporate of
which the developer and such owners are members, and every person who
thereafter
becomes an owner of a Section shall be a member of the
body corporate,
ex lege
.
[14]
24.
The body corporate is a juristic person
with perpetual succession capable of suing and of being sued in its
corporate name in respect
of any matter in connection with the land
or building(s) for which the owners therein are jointly liable, any
matter arising out
of the exercise of any of its powers or the
performance of any of its duties under the Act, any contract made by
it and any damage
to the common property.
[15]
The body corporate is required to control, manage and administer the
common property for the benefit of all owners
[16]
and to properly maintain the common property in a state of good and
serviceable repair.
[17]
To carry out its duties in this regard it may require the owners to
pay levies to a fund sufficient for the repair, upkeep, control,
management and administration of the common property, and for the
payment of rates and taxes and any other local authority charges
for
the supply of utilities and services to the building(s) or land, as
well as any insurance premiums which are applicable thereto.
[18]
The provisions of
section 48 of the Act
25.
Before setting out the provisions of s 48,
which are relevant to a determination of this matter, it is useful to
remind oneself
of the approach that must be adopted in interpreting
legislation.
26.
In
CA Fours CC
v Village Freezer t/a Ashmal Spar
,
[19]
the Supreme Court of Appeal pointed out that statutory interpretation
“
is an objective process by which
the words of the statute are given a meaning by having regard to
their language, the context in
which they are used and the purpose
for which they are directed. The subjective circumstances of
the parties, their state
of minds, or the facts of the particular
case have no bearing on this analysis”
.
[20]
27.
In the general layout of the various
sections in the Act, s 48 must be read together with ss 49 and
50 which, in their headings,
all make reference to “
destruction”
.
S 48 refers to “
destruction
of or damage to buildings”
within
a sectional title scheme. On a purely literal interpretation
thereof ie having regard for the ordinary grammatical
meaning of the
words used “
destruction”
means “
the action or process of
causing so much damage to something that it no longer exists or
cannot be repaired”.
[21]
The word is derived from the old French word “
destruire,”
which is the opposite of “
struere”,
which means “
to build”
.
[22]
To “
destroy”
thus means to put “
an end to the
existence of something by damaging or attacking it”
[23]
and “
damage”
in turn means “
physical harm
impairing the value, usefulness or normal function of something”
.
[24]
28.
With that introduction as a background, it
is apposite to set out the provisions of sub-section (1), on which
the applicant seeks
to rely:
“
48.
Destruction of or damage to buildings
1.
The building or buildings comprised
in a scheme shall, for the purposes of this Act, be deemed to be
destroyed –
(a)
upon the physical destruction of the
building or buildings;
(b)
when the owners by unanimous
resolution so determine and all holders of registered sectional
mortgage bonds and the persons with
registered real rights concerned,
agree thereto in writing; or
(c)
when the court is satisfied that,
having regard to all the circumstances, it is just and equitable that
the building or buildings
shall be deemed to have been destroyed, and
makes an order to that effect”
.
29.
Notwithstanding the wording of the heading,
from a reading of the body of the sub-section it is apparent that
damage alone will
not suffice, and what is required for the section
to be applicable is destruction. In this regard it covers both actual
as well
as notional ‘deemed’ destruction, which may be
effected either by the members of a scheme acting unanimously, or by
a court on application to it.
30.
Insofar as s 48(1) provides that a building
or buildings within a scheme, which are physically (and thus
actually) destroyed, shall
also be “
deemed”
to be destroyed, the wording appears to be tautologous.
31.
Be that as it may, it is evident that apart
from the situation where a building or buildings in a scheme is/are
physically destroyed,
the section also envisages that notional or
hypothetical destruction may occur when either the owners by
unanimous resolution so
determine
[25]
(subject to certain conditions in this regard)
[26]
or when a court is satisfied that, having regard to all the
circumstances, it is just and equitable that the building or
buildings
in a scheme shall be deemed to have been destroyed, and it
makes an order to that effect.
32.
Prof CG Van der Merwe, in his work
Sectional Titles, Shareblocks and
Timesharing
,
[27]
aptly comments that it is difficult to summarise the provisions of
ss 48 and 49, as they are “
very
confusing”
. In his view,
the provisions are intended to apply both to the actual destruction
of the buildings in a scheme (whether partial
or total) as well as to
the notional destruction thereof due to obsolescence ie where a
building in a scheme becomes unsuitable
for its original purpose “
not
only through the physical deterioration of the structure but also
because of functional obsolescence, namely the loss of its
competitive positions vis-à-vis other projects in view of
technological advances and evolving concepts in building design
and
materials”
,
[28]
or for “
any other sound economic
reason, for example where the cost of major replacements and
renovations would be excessive, where the
land is not fully or
suitably developed, where the value of the land has become
disproportionately large in relation to the value
of the buildings
thereon, or where it would be more viable economically to replace a
residential project in the particular area
with commercial or
industrial buildings or offices or to permit the extensive
modernisation of a commercial project”
.
[29]
33.
In seeking to give meaning to the
provisions in question it is important not to consider the
sub-section in isolation, but in the
context of the section as a
whole, as well as in the context of the related sections (ie ss 49
and 50), and the Act as a whole,
including the definitions set out
therein.
[30]
34.
S 48(3)(a) provides that where a building
or buildings are “
damaged”
or “
destroyed
within the meaning of sub-section (1)”
ie either by actual physical destruction or notional destruction (by
way of unanimous resolution of the owners or by order of court),
the
owners
[31]
or the court may authorise the “
rebuilding
and reinstatement in whole or in part”
of the
building or buildings,
[32]
and the (subsequent) transfer of the interests of
owners of Sections which have been “
wholly
or partially destroyed”
, to other
owners.
[33]
35.
In exercising their powers the owners and
the Court may further pass such resolution or make such Order as they
may deem necessary
or expedient to give effect to the scheme,
including a resolution or Order pertaining to the application of
insurance monies received
by the body corporate in respect of damage
or destruction to the building(s),
[34]
the payment of money by or to the body corporate or the owner(s),
[35]
an amendment of the sectional plan so as to include in the common
property any addition thereto or subtraction therefrom
,
[36]
and a variation of the participation quota of any Section.
[37]
36.
It is to be noted that the primary
sub-section of s 48 (ie sub-section (1)) which contains the
“
destructive”
deeming provision,
[38]
makes reference to a “
building”
or “
buildings”,
and not to a “
Section”
within a building or scheme. This is an important distinction
and indicator, of what the legislature intended. In like vein,
subsection (3)(a)(i) speaks of the “
rebuilding
and
reinstatement”
of buildings which have been destroyed, and not of
Sections
therein.
37.
A “
building”
is defined in the Act to mean “
a
structure of a permanent nature erected or to be erected and which is
shown on a sectional plan as part of a scheme”.
[39]
A “
Section”
means a portion of the scheme as partitioned or divided on a
sectional plan, which constitutes a defined portion of a building
or
buildings within a scheme.
[40]
38.
On the face of it therefore, the provisions
of s 48(1) are not capable of being utilised either by the
owners in a sectional
title scheme or by a court, to declare a
Section therein to be deemed to be destroyed, and it is only a
building
or
buildings
within a scheme that is/are capable of so being declared. That
such an interpretation is what was intended, is fortified
by the
reference in the later sub-section
[41]
to the “
rebuilding and
reinstatement”
in whole or in
part, of the “
building”
or
“
buildings”
.
39.
Although sub-section (3) does provide
[42]
for the transfer of the interests of owners of Sections which have
been ‘wholly or partially destroyed’, to other owners,
this was intended to follow by way of a
consequential
resolution by the owners or Order of Court, authorising such
transfer, subsequent to the initial (actual) destruction of the
buildings,
or an initial owners’ resolution or declaration by a
court of a notional (deemed) destruction of such buildings. In my
view,
it could never have been intended that these provisions could
be used by owners in a scheme or by a Court, to declare a Section
to
be notionally destroyed. The reference to Sections “
which
have been wholly or partially destroyed
” must be read to
refer to Sections which have suffered destruction as a
consequence
of the actual or the notional deemed destruction of the
building(s)
in the scheme, by owners’ resolution or a Court acting in terms
of s 48(1), and the sub-section does not constitute an enabling
provision which can be used by owners, or by a Court, to declare
Sections to be deemed ‘destroyed’.
40.
As I read subsection 48(3), it provides consequential
mechanisms for the rebuilding and reinstatement of buildings in a
scheme where
such building work and reinstatement is required, and
for the transfer of the interests of owners in certain Sections if
necessary;
so that the scheme as a whole and the arrangement of
sectional ownership therein, may be reconstituted. In my view, the
provisions
of subsection (3)(a)(ii) were thus also not intended to be
used as a selfstanding mechanism to effect the ‘deemed’
destruction of a Section within a building which is part of a scheme,
thereby bypassing the provisions of subsection (1).
To
interpret these provisions in a manner as to allow owners to declare
a Section to be deemed to be destroyed, as opposed to the
building(s)
in which such Section is contained, would expose individual owners
who fall out of favour, to the tyranny of the majority.
41.
S 49, which is headed “
Disposal on destruction
of buildings
”, similarly provides that when the “
building”
or “
buildings”
in a scheme “
is or are
deemed to be destroyed in terms of s 48”
(ie when such
building(s) are either actually or notionally destroyed by owners’
resolution or order of court), and the owners
have by unanimous
resolution resolved not to “
rebuild”
such
building(s), the body corporate shall lodge with the Registrar of
Deeds a notification to such effect, whereupon the Registrar
shall
endorse the relevant sectional title register to reflect that the
land on which such building(s) is/are situate, shall revert
to the
land register
[43]
and the owners shall cease to be separate owners of Sections in the
scheme, and shall become co-owners of the land in undivided
shares
proportionate to the quotas of the respective Sections previously
owned by them.
[44]
Once again, there is a clear indication from the language of these
provisions that they were intended to deal with the destruction
of
buildings
(within a scheme), and not with individual
Sections
within such buildings.
42.
S 48(6)(a) contains a provision that the Court may, on the
application of the body corporate or any member thereof (or any
holder
of a registered real right in the scheme as well as any
judgment creditor), make an Order for the winding-up of the affairs
of
the body corporate. The appearance of such a provision in
the section must similarly be read and understood in the context
of
the destruction (actual or notional) of the
building(s)
in the
scheme itself (and not of Sections therein), and a concomitant
failure by the sectional owners to resolve to authorise the
“
rebuilding and reinstatement”
of the building(s)
comprising the scheme.
[45]
43.
In my view, read as a whole, s 48 thus exists in order to deal
with the situation where the underyling substratum of a sectional
title scheme can no longer be sustained in its current form, either
because of actual physical damage so serious that it amounts
to a
destruction of the buildings, or because the buildings can no longer
serve the interests of the owners and the purpose for
which the
scheme was brought into being because of changed circumstances, as a
result of which the buildings (actual or virtual
as per the sectional
plan) have become obsolete (eg they can no longer be occupied on a
residential basis because the area has
become an industrial hub, or a
slum, or they are located next door to a nuclear power station which
is to be built, or must give
way pursuant to a rezoning of the area
for different purposes).
44.
In essence therefore, what s 48 seeks to do is to provide a
mechanism whereby the majority of sectional owners faced with a
situation
where the scheme to which they belong can no longer
continue in its current form, may in certain circumstances
reconstitute the
scheme (either by agreement or by order of court),
and where such a reconstitution is not possible, for whatever reason,
the body
corporate may be wound up and the scheme thereby dissolved.
45.
In contrast to the reference to the destruction of buildings
in ss 48 and 49, s 50 refers to the destruction of an
unencumbered
Section
in a scheme. It provides that where the
State or a local authority is the owner of a Section in a building,
which Section has been
“
destroyed”
to give effect
to a project or scheme for the benefit of the public, the State or
local authority may apply to the Registrar for
the cancellation of
the sectional title deed pertaining thereto, whereupon the undivided
share in the common property that was
held under that sectional title
deed shall vest in the owners of the remaining Sections proportionate
to their respective participation
quotas.
[46]
Once again, the way I read this section in the context of the Act as
a whole, and ss 48 and 49 in particular, is that it
was not intended
to constitute a means for owners to resolve, or for a Court to
declare, a
Section
to be deemed to have been destroyed. As in
the case of the sub-sections in s 48 that were previously referred
to,
[47]
in my view these provisions only find application consequent upon an
earlier actual destruction or a resolution or declaration
of notional
deemed destruction of the building(s) in the scheme, in terms of s
48(1).
[48]
46.
In the circumstances, given the provisions of s 48 read as a
whole, and in context, they cannot in my view be construed as
affording
a body corporate a right to resolve (whether by unanimous
resolution or otherwise) or a Court a power, to declare a Section
within
a building to be deemed to be destroyed.
47.
However, even if I am wrong in this regard and the provisions
of s 48 can be construed as being of application not only in
respect of the deemed destruction of building(s) comprising a scheme,
but Sections within such building(s), in my view the applicant
body
corporate still cannot, in the circumstances of this matter, avail
itself thereof in order to circumvent the difficulties
it faces in
respect of Section 57 and the exclusive use areas in question.
48.
In this regard, in the absence of actual physical destruction
of the aforesaid Section and the relevant exclusive use areas, the
body corporate seeks to rely on a notional destruction either in
terms of s 48(1)(b) ie by unanimous resolution of the owners,
alternatively in terms of s 48(1)(c) by Order of this Court.
In either case, provided the other requirements of the
sub-sections
concerned and which I have not yet touched upon, were met, Section 57
and the relevant exclusive use areas within
the scheme, can be
“
deemed”
to have been destroyed.
49.
In
CA Fours CC
[49]
Cachalia
JA pointed out
[50]
that the use of the word “
deemed”
is often “
not
a very happy one, because that term may be employed to denote merely
that the person or things to which it relates are to be
considered to
be what really they are not”
.
50.
In
Mouton v
Boland Bank Ltd
,
[51]
the Supreme Court of Appeal cautioned
[52]
that “
the intention of a deeming
provision in laying down a hypothesis, is that the hypothesis shall
be carried as far as
(is)
necessary
to achieve the legislative purpose but no further”
,
and there is “
no need to extend
the bounds of an imaginary state of affairs”
further than is necessary in order to give effect to a statute’s
legislative purpose.
[53]
51.
In
Mouton
,
the Court was required to interpret certain sections of the Close
Corporations Act,
[54]
in respect of a close corporation which had been de-registered at a
time when it owed money on overdraft to Boland Bank.
Subsequent
to such deregistration, the bank instituted action against the member
of the corporation (one Mouton) personally.
To this end, it
relied on the provisions of s 26(5) of the Act which provided
that if a corporation was deregistered while
having outstanding
liabilities, the member(s) at the time of such deregistration would
be liable, jointly and severally, therefor.
While the action
against him was still pending, and with a view to circumventing s
26(5) Mouton applied to the Registrar
of Close Corporations for
the re-registration of the CC, which was duly granted.
Thereafter, he proceeded to amend his plea,
by alleging therein that
he was discharged from liability in terms of s 26(7) of the Act,
which provides that from the date
the Registrar has given notice of
the restoration of the registration of a corporation in the
Gazette
,
the corporation shall continue to exist, and be “
deemed”
to have continued in existence as from the date of its
deregistration, as if it had not been deregistered.
52.
The Court
a
quo
was of the view that these deeming
provisions did not serve to extinguish the liability which had been
imposed on Mouton, as erstwhile
member of the CC, under s 26(5),
during the period when the corporation was deregistered, and it
consequently held that Mouton’s
liability as former member was
not extinguished on the CC’s re-registration.
53.
The Supreme Court of Appeal upheld this
finding and further held that although the provisions of s 26(7)
created a “
statutory fiction”
that the CC had never ceased to exist when in fact it did, when
interpreting its provisions the Court was not to “
attribute
to the legislature a belief that it can actually recall time
passed”,
[55]
particularly as there was no indication
of any legislative intent in terms of such provisions, to relieve the
sole member of the
CC from liability in circumstances where he had
been “
responsible for presenting
creditors with a vacuum in place of a corporation”
by
deregistering it.
[56]
Deregistration,
expropriation and re-registration
54.
In my view, the deeming provisions of
s 48(1) should similarly not be interpreted in such a manner as
to ignore the passage
of time and the legal consequences which ensued
on the deregistration of SD.
55.
In this regard it is trite that as a matter
of law, as soon as a corporation or company is deregistered and
thereby ceases to exist,
any moveable or immovable property which it
owns becomes
bona vacantia
and vests in the State.
[57]
The transfer and vesting of such ownership occurs automatically and
without any need for delivery, or any order of court.
[58]
56.
In the circumstances, and even though
Section 57 and the rights of exclusive use over certain areas (to wit
storerooms 1 –
3 and open basement and shade net parking areas
OB2 and SP12) of the Harbour Terrace sectional title scheme are still
registered
in the name of SD as far as third respondent’s
records are concerned, as a matter of law they became the property of
the
State with effect from 4 January 2008 ie the date of the
deregistration of SD.
57.
At the time when 44 owners of units within
the scheme thus purported to vote (at the special general meeting
which was held on 14
October 2015) in favour of a resolution deeming
Section 57 and the exclusive use areas to have been destroyed in
terms of s 48(1)(b)
of the Act, they sought to ignore the
passage of time and the transfer of ownership to the State.
What such owners purported
to do in terms of the resolution which
they passed, and for which they now seek the Court’s
imprimatur
,
was to deprive the State of its rights of ownership in the aforesaid
Section and the exclusive use rights it held within the scheme.
In
effect, this amounts to nothing more than an attempted
expropriation.
58.
The provisions of s 48(1), properly
interpreted, are not, in my view, capable of being utilised to
expropriate an owner from
his/her rights of ownership of a Section
within a sectional title scheme by utilising the hypothesis of
notional destruction, under
the guise of the deeming provision
concerned. In my view, to give effect to the resolution which
the aforesaid owners took
on 14 October 2015 in terms of the Order
which is sought herein, would effectively constitute an expropriation
contrary to the
provisions of s 25 of the Constitution, and
would be impermissible and unlawful.
59.
Even if I am wrong in finding that a
declaration of deemed destruction by the Court in terms of s 48(1)(c)
would offend the provisions
of s 25 of the Constitution, the
provisions of s 48(1)(b) read together with the definition of
“
unanimous resolution”
,
[59]
cannot, in my view, be relied upon by the applicant. I
say this for the following reasons.
60.
Firstly, in terms of s 36(1), every
person who becomes an owner of a unit in a sectional title scheme (ie
the owner of a Section
in such scheme and its undivided share of the
common property proportionate thereto), becomes
ex
lege
, a member of the body corporate.
As such, the State was a member of the scheme with effect from
January 2008, and it had
a right to be given notice of the general
meetings which were called in order to give effect to the purported
resolution which
was to be taken in terms of s 48(1), and to
vote thereon. It is common cause that no such notice was ever
given to it
and it was not represented at any of the aforesaid
general meetings and did not vote on the resolutions in question by
proxy, or
by a representative, or otherwise.
61.
Secondly, whereas the definition of a
“
unanimous resolution”
[60]
only requires that 80% of the members of a body corporate (reckoned
in both value and number) need to vote (by proxy or by a
representative)
in favour of a resolution at a properly constituted
general meeting of a body corporate in order for it to be considered
as being
“
unanimous”
,
and whereas any member present at such a meeting (through a proxy or
a representative) who abstains from voting on the resolution
in
question shall be regarded as having voted in favour thereof, the Act
expressly provides that, nonetheless, where the resolution
in
question adversely affects the “
proprietary
rights
or
powers
” of any member
qua
owner, it shall not be regarded as having been passed unless such
member expressly consented thereto in writing.
[61]
No such written consent was ever obtained from the State.
62.
Although the Act provides
[62]
that if a body corporate is unable to obtain a “
unanimous
resolution”
as so defined, it may
approach a Court for appropriate “
relief
”
[63]
in my view this cannot be used to sanction a resolution which has
been passed not only without the requisite 80% majority but also
without the written consent of the owner whose proprietary rights
were adversely affected thereby, to the point of depriving or
expropriating him/her of his rights of ownership contrary to the
provisions of s 25 of the Constitution.
63.
But even if the provisions of s 1(3A) read
together with the definition of “
unanimous
resolution”
[64]
were to have been met, this in itself would still not be sufficient
for the purposes of a notional deemed destruction by the owners
in
terms of the provisions of s 48(1)(b). In this regard the
sub-section requires not only a “
unanimous
resolution”
as defined, by the
owners, but also written agreement to such deemed destruction by all
holders of registered sectional mortgage
bonds and persons with
registered real rights, in the scheme. There is no evidence on
the papers before me that any attempt
was made to comply with this
condition, and there is in fact no indication whatsoever of who the
holders of sectional mortgage
bonds and persons with registered real
rights in the scheme might be, or that any attempt was made to obtain
their consent for
the resolution, or the application for deemed
destruction.
64.
In the circumstances, although it was
submitted that it would not be necessary for the Court to make a
declaration of deemed destruction
(in terms of s 48(1)(c)) and
that it would suffice if the Court simply were to declare that the
resolution passed by those
owners who were present at the general
meeting which was held on 14 October 2015 constituted a
“
unanimous resolution”
within the meaning of the sub-section in question, and all that the
Court consequently needed to do was to authorise a reconstitution
and
reinstatement of the scheme, and the transfer of the interests of the
owner of Section 57 to the other owners,
[65]
given the applicant’s failure to comply in numerous respects
with the provisions of s 48(1)(b) and the requirements
set out
therein, in my view, such a declaration and Order by the Court is
similarly not permissible, and would not be just and
equitable.
[66]
65.
In the United Kingdom, the Companies Act
2006 also provides that when a company is dissolved, all property and
rights which vested
in, or were held on trust for it, at the time of
its dissolution,
[67]
are deemed to be
bona vacantia
and
accordingly fall to the Crown.
[68]
66.
However, unlike our Companies Act, there is
a further provision therein whereby the Crown may disclaim title to
any such property,
by formal notice given within three (3) years
after the date on which the property so vested in it.
[69]
67.
Where any such notice of disclaimer is
executed in respect of any such property, it is deemed not to have
vested in the Crown
[70]
,
and notice of such disclaimer will terminate, with effect from the
date thereof, any rights, interests and/or liabilities of the
company
in respect of the property disclaimed,
[71]
but will not affect the rights or liabilities of any other
person.
[72]
In addition the UK Companies Act provides that a Court may (on
application by any person who claims an interest in any disclaimed
property or who is ‘under a liability’ in respect thereof
which will not be discharged by the disclaimer), make an
Order that
the disclaimed property should vest in or be delivered to any other
person who may be entitled to it, or to his/her
trustee.
[73]
68.
The process of disclaiming title to
property which falls to the State on de-registration of a corporate
entity, in terms of UK law,
provides an expedient and effective
remedy for persons in regard to reclaiming property which vested in
such entity at the time
of its deregistration, without the selfsame
perils and difficulties associated with the remedy available in South
African law pursuant
to deregistration ie an application for the
restoration of the company or corporation to the register.
69.
In
R Miller v
Nafcoc Investment Holdings Co Ltd
,
[74]
the Supreme Court of Appeal pointed out that inasmuch as
deregistration puts an end to the existence of a company, its
corporate
personality “
ends in the
same way that a natural person ceases to exist on death”
.
[75]
Fortunately, however, unlike natural persons a corporate person is
“
amenable to resurrection”
.
[76]
Ordinarily, the effect of the restoration of a company to the
register in our law, is that it is deemed not to have
been
deregistered at all, at least insofar as its previous assets are
concerned. This means that all parties who by deregistration,
or thereafter, acquired assets which the company owned as at the date
of its deregistration, will lose their rights thereto, as
the assets
revert to the company. This will include assets that became
bona vacantia
and
accrued to the State.
[77]
However any liabilities of the company are not extinguished by its
deregistration and merely become unenforceable whilst
the
deregistration subsists.
[78]
70.
In
Ex Parte
Sengol
,
[79]
it was pointed out that debtors and creditors of the company at the
time of its deregistration, may thus find that on its restoration
their obligations or rights are resuscitated, and as such the
restoration of a company to the register has a “
wide-ranging
”
effect,
[80]
and should not be entertained lightly.
71.
In the result, although the restoration of
SD to the register will restore its rights of ownership and exclusive
use in regard to
Section 57 and the areas referred to, it could
also cause severe prejudice to third parties.
[81]
Perhaps it is because of these dangers that SD’s erstwhile
director was not prepared to make application for its restoration
to
the register.
72.
In the United Kingdom the Registrar can
only restore a company to the register if it was carrying on business
or was operational
at the time of its removal,
[82]
and, in addition, where any property or rights accrued to the Crown
as
bona vacantia
,
the Crown must provide written consent to such restoration.
[83]
There are no such limitations to the restoration process, in our
law. In addition, in terms of the UK Companies Act the
applicant must deliver to the Registrar all such documents relating
to the company’s affairs as may be necessary to bring
the
records of the Registrar up to date, and must pay any penalties that
may be due for the company’s failure to deliver
any financial
statements that were outstanding at the time of its dissolution or
striking off.
[84]
73.
In the circumstances, in the absence of any
sale or donation of Section 57 and the exclusive use rights to the
applicant, and the
concomitant re-transfer of such rights into the
applicant’s name by third respondent, the only other avenue
open to the applicant
would appear be to make application for the
restoration of SD to the register of companies, and provided such
application were
to be successful, to thereafter negotiate the
transfer of Section 57 and the exclusive use rights to it.
74.
Recently, this Court held in
ABSA
Bank Ltd v CIPRO
,
[85]
that an application for restoration to the register of any close
corporation or company incorporated and deregistered under the
old
Close Corporations Act
[86]
or the previous Companies Act,
[87]
must be made in terms of the new Companies Act.
[88]
In this regard, the new Act provides that any interested person may
apply in the prescribed manner and form to CIPRO, for
the
reinstatement of the registration of any company,
[89]
or alternatively any person who has an interest may apply to a Court
for an Order that is just and equitable in respect of any
company
that has been dissolved or removed from the register.
[90]
Conclusion
75.
In the circumstances, and for the reasons
set out above, the application must fail. In the result, I make
the following Order:
(1)
The
rule nisi
and provisional Order granted on 15
March 2016 is discharged, and the application is dismissed.
(2)
There shall be no Order as to costs.
SHER, AJ
Appearances:
For Applicant: Adv AD
Brown
Instructed by:
Smith Tabata Buchanan Boyes (M Bey)
For Respondents:
None
[1]
Act 95 of 1986.
[2]
S 27(1)(b).
[3]
See the p
reamble to the Act.
[4]
S 2(a) rtw the definition of “
scheme”
,
“
development scheme”
and “
section”
in s 1.
[5]
S 5(3)(a).
[6]
S 5(3)(c).
[7]
S 5(3)(d).
[8]
S 5(3)(e).
[9]
S 32(1) rtw s 5(3)(e).
[10]
S 32(3)(a).
[11]
S 32(3)(b).
[12]
S 32(3)(c) rtw s 37(1)(a).
[13]
Id.
[14]
S 36(1).
[15]
S 36(6)(a)-(d).
[16]
S 37(1)(r).
[17]
S 37(1)(j), (o) and (p).
[18]
S 37(1)(a) and (b).
[19]
2013 (6) SA 549 (SCA).
[20]
Per Cachalia JA at para [18], referring to
Natal
Joint Municipality Pension Fund v Endumeni Municipality
2012
(4) SA 593 (SCA).
[21]
Concise Oxford Dictionary
(10
th
ed).
[22]
Id.
[23]
Id
.
[24]
Id.
[25]
S 48(1)(b).
[26]
Namely, that all holders of registered sectional
mortgage bonds and persons with registered real rights agree thereto
in writing.
[27]
Vol 1
Sectional
Titles
at 16-5.
[28]
Id
at 16-7.
[29]
Id
at 16-8.
[30]
In s 1.
[31]
By “
unanimous
resolution
”.
[32]
S 48(3)(a)(i).
[33]
S 48(3)(a)(ii).
[34]
S 48(3)b)(i).
[35]
S 48(3)(b)(ii).
[36]
S 48(3)(b)(iii).
[37]
S 48(3)(b)(iv).
[38]
S 48(1).
[39]
S
1.
[40]
See the definition of “
section”
and “
sectional plan”
in s 1 rtw ss 5(3)(d) and 5(4).
[41]
S 48(3)(a)(i).
[42]
In s 48(3)(a)(ii).
[43]
S 49(3)(c).
[44]
S 49(3)(a). The owners are then required to
surrender the sectional title deeds of such units to the Registrar
for cancellation
– s 49(3)(d) and in place thereof, the
Registrar of Deeds shall issue to each of the owners, a certificate
of registered
title for his/her undivided share in the land (s
49(4)(b).
[45]
In terms of s 48(3)(a)(i).
[46]
S 50(1) rtw 50(3).
[47]
S
s 48(3)(a)(i) and (ii).
[48]
In terms of s 48(1).
[49]
Note
19 at para [9].
[50]
Citing Innes J in
Chatobhai
v Union Government (Minister of Justice) and Registrar of Asiatics
1911 (AD) 13 at 33.
[51]
2001 (3) SA 877 (SCA).
[52]
At para [13], 882I quoting from Bennion
Statutory
Interpretation
(3
rd
ed).
[53]
At para [14].
[54]
69 of 1984.
[55]
Para [12], 882G.
[56]
P
ara [14], 883B.
[57]
Ex parte Sprawson: In re: Hebron Diamond
Mining Syndicate Ltd
1914 (TPD) 458 at
461;
Ex parte The Government
1914
(TPD) 596;
Sanlam v Rainbow Diamonds
(Edms) Bpk
1982 (4) SA 633
(C) as
confirmed on appeal
Rainbow Diamonds
(Edms) Bpk v Sanlam
1984 (3) SA 1
(A);
Newlands Surgical Clinic (Pty) Ltd v
Peninsula Eye Clinic (Pty) Ltd
2015
(4) SA 34
(SCA) at para [15] 42H-I.
[58]
Rainbow Diamonds
n
57
; Newlands Surgical Clinic
n 57.
[59]
In terms of s 1 rtw with s 1(3) of the Act.
[60]
In terms of s 1(a).
[61]
S 1(3)(c).
[62]
In s 1(3A).
[63]
Id
.
[64]
In terms of s 1 and s 1(3).
[65]
In terms of s 48(3)(a)(i) and (11).
[66]
In terms of s 48(1)(c).
[67]
Including leasehold property.
[68]
Or to the Duchy of Lancaster or the Duke of
Cornwall, s 1012(1).
[69]
S 1013(1) and 1013(3).
[70]
S 1014(1).
[71]
S 1015(1).
[72]
S 1015(2).
[73]
S 1017(1) and (2).
[74]
[2010] 4 All SA 44
(SCA).
[75]
At para [11]
.
[76]
Per Binns-Ward J in
Peninsula
Eye Clinic v Newlands Surgical Clinic
2012
(4) SA 484
(WCC) at paras [5] and [26].
[77]
Ex parte Sengol Investments
1982
(3) SA 474
(T) 477C-F.
[78]
Barclays National Bank Ltd v Kalk
1981
(4) SA 291
(W) 295;
Kalk v Barclays
National Bank Ltd
1983 (3) SA 691
(A)
633-634.
[79]
Note
76.
[80]
At 477F.
[81]
Insamcor (Pty) Ltd v Dorbyl Light and General
Engineering (Pty) Ltd
2007 (4) SA 467
(SCA) 475E-H.
[82]
S 1025(2).
[83]
Ss 1025(3)-(4) .
[84]
S 1025(5).
[85]
2013 (4) SA 194
(WCC).
[86]
69 of 1984.
[87]
61 of 1973.
[88]
Act 71 of 2008.
[89]
In terms of s 82(4).
[90]
S 83(4),
ABSA Bank
Ltd v CIPRO
n85.