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[2012] ZAGPJHC 272
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Lechinzo v Bridgetown Body Corporate (29934/12) [2012] ZAGPJHC 272 (12 October 2012)
REPUBLIC OF SOUTH
AFRICA
SOUTH GAUTENG HIGH
COURT
(JOHANNESBURG)
CASE NO
: 29934/12
DATE
: 2012-10-12
In
the matter between
DAVID
LECHIZIO
Plaintiff
and
BRIDGETOWN
BODY CORPORATE
Defendant
JUDGMENT
DODSON
AJ
:
[1]
I give judgment as follows. This is an application for the
appointment of an administrator in terms of section 46 of the
Sectional Titles Act No. 95 of 1986 (“the Act”).
The Bridgetown sectional title scheme is a substantial scheme
involving some 524 units.
[2]
Unfortunately the scheme has a chequered and litigious history.
There have been two prior administration orders granted
by this
court. A further dispute culminated in a settlement agreement.
[3]
I was informed from the bar that the settlement agreement had been
made an order of court on 22 November 2011. There was no
disagreement
between the parties that the settlement agreement regulated matters
between them and regulated the basis upon which
the affairs of the
body corporate were to be conducted.
[4]
That settlement agreement which is dated 18 November 2011 reads as
follows:
“
Whereas the
parties hereto have settled all disputes between them on the terms
and conditions set forth in the settlement agreement
and agree that
the settlement agreement shall be made an order of this Honourable
Court on 22 November 2011, when this matter is
called for hearing
.
Now therefore it is
hereby agreed that:
1)
The
applicant will co-opt an additional four trustees onto its board of
trustees with immediate effect, which additional trustees
shall be
a.
Lebo
Segole.
b.
Lungo
Madlala.
c.
Pumeze
Mqeni.
d.
Marcel
Kalemba.
2)
No
special general meeting of the applicant will be called for the
reconstituted board of trustees (the trustees) before the Annual
General Meeting of the applicant is held in April 2012 to deal with
the composition of the board of trustees.
3)
The
trustees will not entertain or re-visit historic issues such as the
dismissal of security guards, Mr Zondo and the like.
4)
Trustee meetings shall not be disjointed with any block of
trustees caucusing among themselves or caucusing with any
constituency
before decisions are made during trustee meetings.
5)
The
trustees shall make decisions in the best interests of the Sectional
Title Scheme and all of its owners, having due regard to
their
fiduciary responsibilities to all such owners. Decisions will
be made by majority vote of trustees and robust but peaceful
debate
is to be welcomed.
6)
Any
extra-ordinary meeting of trustees called by any trustee or the
chairperson must be called for a date and time that is convenient
to
all trustees, notwithstanding any urgency involved. All trustees
shall at all times be bona fide and act in the utmost good
faith in
this regard.
7)
The
agenda for any extra-ordinary trustees’ meeting shall be given
together with a notice for such meeting to all trustees
and such
agenda shall not be deviated from at such meeting.
8)
Notwithstanding anything to the contrary in the management
rules, a quorum for any meeting of trustees shall be seven trustees.
If a quorum is not present after two consecutive meetings have been
properly called then those trustees present at the third consecutive
meeting called shall then constitute a quorum if at least two
trustees are present.
9)
The
terms of this agreement shall not be interpreted as preventing any
owners within the Sectional Scheme or who are not party hereto
from
requesting a Special General Meeting to be held under Management Rule
53.
10)
All
parties to the pending court proceedings shall pay their own legal
costs.”
[5]
As will appear from the terms of the agreement it provided for the
addition of four co-opted trustees to the originally appointed
trustees. There was now a quorum requirement of seven trustees
and there were specific and particular notice requirements
in
relation to the calling of meetings of trustees.
[6]
The agreement also sought to bring an end to conflict which already
existed at that time. Subsequent to the settlement
agreement
having been concluded the envisaged peaceful resolution has
unfortunately not come to fruition. Conflict has persisted
and
there have since been three resignations among the trustees,
including its former chairman. The number of trustees is
now
down to eight trustees.
[7]
The present application is based on the averment that the management
of the scheme has essentially become dysfunctional as a
result of the
actions of a particular grouping amongst the owners who were the
respondents in the legal proceedings which resulted
in the
settlement. They go by the name of “the Bridgetown concerned
home owners”.
[8]
Mr Voyi, who purported to appear on behalf of the respondent body
corporate, raised certain points
in limine
. The first point
in
limine
related to the alleged hearsay content of the founding
affidavit. This was on account of the fact that the applicant,
Mr
Lechizio, had not attended any of the meetings that were the
subject matter of these proceedings, nor is he a trustee of the body
corporate.
[9]
Taken on its own, the founding affidavit certainly does constitute
hearsay evidence. However the replying affidavits filed
on
behalf of the applicant included an affidavit of one Hendrik Strampe
who, it is common cause, is indeed a trustee of the respondent.
He says the following at paragraph 1.4 of his affidavit -
“
I have read the
founding affidavit and confirm the correctness thereof. I have
particular knowledge of the allegations therein
and confirm it is
correct. I have attended the trustee meetings, annual general
meetings and special general meetings.
I have been present
during assaults by owners, I have been intimidated and threatened
myself and can collaborate [presumably meaning
corroborate] what is
stated in the founding papers”
.
[10]
Subject to the further objection which was raised by Mr Voyi and
which is discussed below, I am satisfied on the basis
of
section
3(1)(b)
of the
Law of Evidence Amendment Act No. 45 of 1988
, that the
hearsay nature of the evidence contained in the founding affidavit
was cured by the leading of the evidence of a person
who was able to
give direct evidence of the facts deposed to.
[11]
Mr Voyi objected to the admissibility of Mr Strampe’s affidavit
on the basis that it was a supplementary affidavit
which was
unilaterally filed and which raised new matter. I do not
consider this objection to be well-founded. Firstly,
there was
no application to strike out Mr Strampe’s affidavit or any part
of it out. Secondly, the respondent specifically
elected to
challenge the evidence on the grounds of hearsay, rather than to
apply for leave to file a further affidavit or to seek
a postponement
in order to do so and must bear the consequences of that election.
Thirdly, Mr Strampe’s affidavit was
filed together with the
applicant’s replying affidavit and therefore cannot be
considered to constitute the unilateral filing
of a supplementary
affidavit. Fourthly, in the main the affidavit responds to
issues raised in the answering affidavit and
accordingly represents a
legitimate reply to those issues. Fifthly, there is no rule
that only those witnesses who deposed
to founding and supporting
affidavits may depose to and file replying affidavits.
[12]
The next point
in limine
raised by Mr Voyi was that it ought
to have been anticipated at the outset that there would be disputes
of fact and on this basis
that application proceedings should not
have been launched. However section 46 of the Act expressly
provides for application
proceedings as the mechanism for seeking the
appointment of an administrator. In those circumstances it is
always open to
a party to bring the proceedings on the basis of an
application and indeed that is statutorily required.
[13]
The applicant raised a point
in limine
that those purporting
to represent the respondent lacked authority to oppose the
application. Where an artificial person
is a party to
proceedings it must be able to show firstly that that party has duly
resolved to institute or defend the proceedings
and secondly that the
attorney representing that party is duly authorised to do so.
Mall
Cape (Pty) Ltd v Merino Ko-operasie Bpk
1957 (2) SA 347
(C).
[14]
On 30 August 2012, three days after receiving notice of intention to
oppose, the applicant issued a notice in terms of
rule 7(1) requiring
the filing of a power of attorney. On 11 September 2012 a power
of attorney was duly filed. It
reads in relevant part as
follows:
“
I Lebo Segole
acting herein in my capacity as the
chairperson of the
trustees of the Body Corporate of Bridgetown and as duly authorised
and mandated at the meeting of the trustees
held on the 24
th
August 2012 do hereby appoint Ndumiso Pedro Voyi of Ndumiso Voyi
Incorporated, with the power of substitution, to be the Body
Corporate of Bridgetown’s lawful attorney and agent in its
name, place and stead to vehemently resist and oppose the application
launched by the Applicant with this Honourable Court under the
aforesaid case number”
.
[15]
In response to this, the applicant alleged in a supplementary
affidavit of attorney Elisha Elizabeth Austin filed before
the filing
of the answering affidavit, that no quorum could have existed because
the applicant’s attorneys were in possession
of letters from
four of the trustees which supported the application for the
appointment of an administrator.
[16]
In dealing with this aspect in her answering affidavit, Lebo Segole,
said the following:
102.3)
After
receipt of the Applicant’s application, an urgent meeting was
called to take a decision on the position to be adopted
by the
Respondent concerning the relief applied for.
102.4)
The
alleged four (4) trustees referred to in the supplementary affidavit
boycotted the meeting on its first day of sitting.
They simply
did not turn up.
102.5)
On
the second day, they still did not attend. On the third
consecutive meeting called and which was on 24 August 2012 a quorum
was present.
102.6)
On
the aforesaid third consecutive meeting a resolution was taken to
oppose the present application. Present at such meeting
were
inter alia myself, Pumeze Nqeni, Lungo Madlala.
102.7)
The
letters by the said trustees are completely irrelevant to the
question of a quorum.
102.8)
These
trustees were not even present at the meeting of 24 August 2012. They
can accordingly be in no position to state whether or
not a quorum
was reached at the meeting of 24 August 2012.
[17]
Significantly no documents are put up in support of the averments
contained in this portion of the answering affidavit.
No
notices of the alleged meetings are attached nor are copies of any
forms of notice attached to indicate how the successive meetings
were
called. Given the importance of the matter, this is certainly
something which one would have expected, particularly
bearing in mind
the reliance sought to be placed on the mechanism in the settlement
agreement for a reduced quorum.
[18]
In reply, these averments are dealt with in the affidavit of Mr
Strampe, who describes what took place from his perspective
as
follows:
4.5)
…
I
received an email on 20 August at 11h45am informing other trustees
and I that a trustees meeting will be held on 21 August 2011
at
18h30.
4.6)
My
response hereto (which I emailed to Segole) was that I already had
another meeting to attend at that time and requested a postponement
of this meeting until Wednesday or Thursday. I attach a copy of
the email hereto as Annexure HS1.
4.7)
No
communication in this regard was received by myself. Nor was I
informed otherwise.
4.8)
If
one has regard to the agenda on the email it is with respect a
meaningless statement, no one would have understood what this
extremely urgent meeting had regard to.
4.9)
The
next correspondence I received was an email by the same Segole
stating on the 23
rd
, that last night’s
meeting, which could only have referred to the 22
nd
,
was adjourned till tonight at 19h30pm or the time can be extended.
4.10)
I
wish to place emphasis on the time this email was sent 17h47.
4.11)
The
response sent to me (and all other trustees) by Greg Barends
particularly states that the notice is unacceptable and illegal.
It further states that this does not give reasonable time for
trustees to arrange for a meeting. I attach a copy of the email
hereto as Annexure HS2.
4.12)
I
deny that any decision taken by the persons being present Segole,
Pumeza Nqeni and Lungo Madlala, could present a
quorum having
regard to what is stated hereinabove.
4.13)
…
4.14)
…
4.15)
One
would have expected clear communication pertaining to the meeting,
the relevance thereof and the issues to be decided and an
attempt to
obtain consensus between all relevant parties to convene the meeting,
this was not done.
4.16)
I
would like to reiterate that the only notice and information I
received was the two emails referred hereinabove. There was
no
reply to my request for obvious reasons. I respectfully submit
that no decision has been taken and the opposition of this
application is done by Segole on a frolic of her own”
.
[19]
If regard is then had to the relevant email correspondence attached
to the affidavit, this bears out the assertions made
by Mr Strampe.
The first email was sent on Monday 20 August 2012 at 11h45. It simply
says,
“
Good day all.
You are all invited to an urgent trustees meeting to be held as
follows…”
and below that
“
Agenda: notice
of intent to serve to the body corporate today
Regards
Lebo Segole”
.
[20]
In response to this, an email is sent by Mr Strampe to Lebo on 20
August at 12h40 and says -
“
Lebo
I already have another
AGM on the 21
st
that I need to attend to. Can you
please postpone the trustee meeting until Wednesday or Thursday.
Thanks
Hendrik
Strampe”
.
[21]
The next email which is then sent is addressed by Lebo Segole to the
trustees on 23 August 2012 at 17h47. The subject
is “
urgent
trustees meeting”
. The email reads:
“
Hi please note
that last nights adjourned meeting has been adjourned to tonight and
we can extend waiting time until 19h30 to accommodate
everyone as
this is a very urgent matter. Regards”
.
[22]
It will be observed that the effect of that email was to give
approximately an hour and a half notice of the meeting
which was due
to take place. Appearing immediately above the email is then a
reply email sent by another trustee Greg Barends
which reads -
“
This late
notice is unacceptable and illegal. This does not give reasonable
time for trustees to arrange for a meeting”
.
[23]
Those are the communications which were received on the part of Mr
Strampe and there is no reference to any notice having
been given of
a meeting on the 24
th
when a decision was allegedly taken
on the basis of the reduced quorum.
[24]
In those circumstances there was, in the purported convening of the
meetings, a clear breach of both clauses 6 and 8
of the settlement
agreement of 18 November 2011. Clause 6 specifically provides
that an extraordinary meeting of trustees
called by any trustee or
the chairperson must be called for a date and time that is convenient
to all trustees, notwithstanding
any urgency involved. It also
requires that all trustees shall at all times be
bona fide
and
act in the utmost good faith in this regard. In clause 8
dealing with the reduced quorum requirement at a third consecutive
meeting, there is a specific reference to the requirement that the
meetings must be properly called.
[25]
Having regard to those clauses of the settlement agreement, I am
satisfied that the resolution which was taken on 24
August 2012 was
not taken at a meeting which was properly convened and accordingly
there is no valid resolution which has been
taken to oppose the
present proceedings.
[26]
The second difficulty which I have with the power of attorney which
is relied upon is that it purports to confer authority
on the
attorneys referred to, not only on the basis of the mandate
purportedly received at the meeting, but also on the basis that
Lebo
Segole acts in her capacity as chairperson of the trustees of the
body corporate.
[27]
The basis upon which she alleges that she is the chairperson of the
trustees of the body corporate is set out in her
answering affidavit
as follows:
30 “Out of the
trustees elected in April 2011, three (3) have since resigned and/or
relinquished their positions. I
attach here two letters of
resignation and mark them as annexures D and E. With the
co-opted trustees, this resulted in the
respondent consisting of
eight (8) trustees. One of the trustees that resigned was Johan
Buys who was the chairperson.
I was Johan Buys’s deputy
and upon his resignation I took over the position of the
chairperson”
.
[28]
Hendrik Strampe in his affidavit strongly disputes that the said Mrs
Segole was ever appointed either as vice chairperson
or as
chairperson and refers to the fact that if regard is had to the
relevant provisions in the model rules laid down by the
Sectional
Titles Act, no provision
is in fact made for the existence of a
position of vice chairperson.
[29]
In this regard the model rules read as follows:
Chairman
18. At the
commencement of the first meeting of trustees after an annual general
meeting, at which trustees have been elected, the
trustees shall
elect a chairman from among their number who shall hold office as
such until the end of the next annual general
meeting of the members
of the body corporate and who shall have a casting as well as a
deliberative vote, save where there are
only two trustees.
19. The trustees at a
trustees' meeting or the body corporate at a special meeting, in
respect of either of which notice of the
intended removal from office
of the chairperson has been given, may remove the chairperson from
his or her office.
20. If any chairman
elected in terms of
rule 18
vacates his office as chairman or no
longer continues in office by virtue of the provisions of
rule 19
,
the trustees shall elect another chairman who shall hold office as
such for the remainder of the period of office of the first-mentioned
chairman, and who shall have the same rights of voting.
21. If any chairman
vacates the chair during the course of a meeting or is not present or
is for any other reason unable to preside
at any meeting, the
trustees present at such meeting shall choose another chairman for
such meeting who shall have the same rights
of voting as the
chairman.”
[30]
Accordingly it is clear from the model rules that there is indeed no
provision for the said Mrs Segole to have been appointed
as either
vice-chairman or chairman in the manner for which she contends. Nor
was any evidence put up of the rules having been
amended so as to
depart from the model rules. Accordingly it was not possible
for her in her capacity as chairperson to have
appointed the said
attorneys.
[31]
The third difficulty with the resolution underlying the power of
attorney is the following: prior to the purported resolution
advice
was received from an attorney who considered himself the duly
appointed attorney of the body corporate. That advice
took the
form of email correspondence dated 23 August 2012 addressed to one of
the trustees, Grace Maphanga, and reads as follows:
“
I confirm Grace
having given me a copy of the High Court application that has been
brought against the Body Corporate for the appointment
of Mr Adrian
Sydow to be appointed as administrator of Bridgetown. Grace
requested that I peruse such application and advise
the trustees
accordingly. It is of course prudent for the trustees to obtain
legal advice on such an application before allowing
same to be
granted unopposed if it is to be the case.
I understand that all
the trustees have seen the application, but
in the event that
anyone has not had sight of such application, please advise. I
understand that a copy of such application
has been emailed to all
trustees and certain other individuals. I am unaware as to
whether the concerned home owners, as
some sort of entity on its own
is dealing with this matter separately or intends to oppose the
application.
I cannot see any basis
on which to oppose the application and all the allegations made
therein by Mr David Lechizio (the applicant),
in support of the
application appear to be correct. Indeed the applicant has not
even made mention of the debacle going on
in the CCMA and the
deadlock that appears to be present therein”
.
[32]
He then refers to the debacle at the CCMA and goes on to say -
“
I am unaware as
to where such matter currently rests, and that will be one of the
issues for the administrator to deal with once
appointed. The
administrator will no doubt appoint a legal representative to deal
with the matter. I am of course available
to be consulted by
the trustees should the trustees wish to obtain any further advice
herein, or to give me further instructions
as to how this matter
should be attended to.
I confirm that I am
taking no further steps in regard to the application for the
appointment of the administrator, which application
is set out down
to be heard on 28 August 2012. If I am to be instructed
otherwise, kindly advise.
Regards
Kevin Schaafsma”
.
[33]
This email was then met with certain responses. The response
from the purported chairperson, Lebo Segole, read
as follows:
“
Dear Kevin
... [she quotes one
part of the letter under reply and goes on to say …]
Unfortunately
Bridgetown does not belong to Grace and she certainly does not make
decisions on behalf of everyone. So please continue
excluding
everyone from your arrangements with her.”
[34] In the second
paragraph of her response, she again quotes from the letter from the
said attorney and then responds,
“
Why is it
suddenly of your concern that the rest of the trustees have received
this because you and your client Grace never even
bothered to bring
this to the attention of the owners let alone the rest of the
trustees and you have furthermore even gone forward
making a decision
that we need an administrator, could it be that this reaction of
yours was triggered by the fact that I made
sure that owners know
about your precious little secret plan with Grace.
Is that the reason why
you and her have advised your associates GMA to put password on the
computers belonging to the body corporate
so that yourself, Grace and
your counterparts can restrict transparency in the running of
Bridgetown affairs”
.
[35]
In the third paragraph she again quotes from the attorney’s
letter and responds:
“
Kevin, it is
certainly not up to you to make such a decision. Surely you are only
in this to milk money out of Bridgetown, would
you not perhaps like
to know from the people whose money is abused how they feel or are
you having too much fun getting rich?”
.
[36]
In the fourth paragraph she again quotes from the attorney’s
letter and responds:
“
Is this now
your official proposal for an official appointment?”
.
[37]
In the fifth paragraph she again quotes from his letter and says -
“
Advice
is that you ask Grace”
.
[38]
Her letter then proceeds as follows:
“
Just so that
both of you and whoever that is on your kickback’s list know I
am going to make sure that the owners know about
everything that
concerns them. I mean even if you bring in your associate as an
administrator or put a million passwords
to mediums of communication
in Bridgetown, YOU ARE NOT GOING TO BULLY ME OUT OF THAT ONE, TRUST
ME. Until such time you and
Grace start to realise that
Bridgetown is not about the two of you I am not interested in your
dealings with her and either. Regards
Lebo Segole”
.
[39]
A similar discourteous letter was addressed to that attorney by the
trustee Pumeza Nqeni.
[40]
In my view it is implicit in the
Sectional Titles Act that
trustees
are required to act rationally. Apart from the fact that Lebo
Segole exposed the body corporate to potential proceedings
for
defamation in her letter, ignoring the advice that was given in
taking the resolution was irrational. Both letters reflect
manifest irrationality, apart from a serious lack of courtesy and
professionalism. They certainly lend credence to the complaints
advanced by the applicant.
[41]
Having regard to all of the above circumstances I uphold the point
in
limine
taken by the applicant and accordingly hold that –
[41.1] no valid
resolution was passed to oppose the proceedings; and
[41.2] no mandate was
validly given to Lebo Segole to appoint Ndumiso Voyi of Ndumiso Voyi
Incorporated to oppose the proceedings
on behalf of the respondent.
[42]
The respondent has accordingly not opposed the proceedings and the
matter stands to be dealt with on an unopposed basis.
The
defences advanced in resisting the application stand to be dismissed.
Having regard to the papers filed on behalf of the applicant,
a
prima
facie
case is made out for the appointment of an administrator.
The applicant is entitled to the relief it seeks. I will deal
with the question of costs below.
[43]
Even if a resolution had validly been taken by the respondent to
oppose the application I would have come to the same
conclusion as
that set out above. I wish to give my reasons as briefly as
possible as to why I say that. I do so because
the matter was
fully argued before me yesterday and I also do so in the hope that
this will give some greater measure of acceptance
of and support for
the relief by those who have sought to oppose it. I do so taking into
account all of the affidavits that were
filed.
[44]
The following aspects in my view warrant the appointment of an
administrator.
[45]
The trustees and the owners are at loggerheads. There is
internal strife. On both parties’ versions,
the original
and the co-opted trustees are at loggerheads. The deadlock
which exists is apparent from these very proceedings
and from the
circumstances surrounding them.
[46]
The deadlock is also apparent from the lengthy letter which was sent
by the former chairperson, Mr Johan Buys, in explaining
the
circumstances giving rise to his resignation. It certainly
gives a full account of the internal strife which characterises
the
proceedings of this particular body corporate. Although this
was put up in reply and there has not been an opportunity
to respond
to it, the allegations of internal strife and of inappropriate
behaviour on behalf of the so called concerned home owners
group is
corroborated by the two letters to which I have made reference from
Miss Segole and Miss Nqeni.
[47]
It is also corroborated by the euphemistic statements in the
answering affidavits, suggesting that the conduct on the
part of the
said home owners amounted merely to “
robust action and
straightforwardness”
. The existence of the internal
strife and the intimidation which has been taking place is also borne
out by the fact that
three of the original trustees have resigned in
the last three months.
[48]
The impasse referred to is also apparent from the failure of the
settlement agreement concluded on 18 November 2011.
[49]
The next area of concern which in my view warrants the appointment of
the administrator is the question of abortive meetings.
The
applicant complains that the major problem facing the body corporate
is that, because the trustees are at loggerheads, they
cannot obtain
a quorum to obtain any decisions to take forward the management of
the complex.
[50]
Mr Voyi suggested that the mechanism in the settlement agreement is
there to resolve this problem, but the events surrounding
the single
decision around opposition to these proceedings illustrates that it
is not a viable solution.
[51]
The detailed account by the applicant of an assault on one of the
original trustees and unruly behaviour at a meeting
on 16 April 2012
is simply answered by a bare denial and that too lends credence to
the assertions in the founding affidavit of
internal discord.
[52]
It was argued that the appropriate relief in relation to the impasse
was not the appointment of the administrator but
rather the convening
of an annual general meeting. However on both parties’
versions, the convening of a general meeting
is at this stage
virtually impossible. This is demonstrated by the following.
[53]
After the appointment of managing agents, there was an attempt to
convene a special general meeting on 30 July 2011.
The
applicant says that after three hours the meeting could not be called
to order and had to be called off. The opposing
group say that
the reason was that the only list brought to the meeting was a list
of those ineligible to vote on account of non-payment
of levies. At
the meeting, the opposing group demanded a full list of owners to see
that there were no non-members in attendance
who might rig the vote.
On both parties’ versions it was not possible to convene a
meeting successfully.
[54]
A further meeting was scheduled for 10 September 2011. The
applicant says that a quorum was present and there was
also an
attorney in attendance. However the meeting had to be called
off because of disruptions and chaos. The opposing
group says
that there were two attorneys present and that there was insufficient
proof of the proxies allegedly held by Mr Johan
Buys. On both
parties’ versions the meeting had to be called off.
[55]
A further meeting was scheduled for 1 October 2011. The
applicant says it was called off due to concerns over violence
and
threats. The respondents say it was called off due to the lack
of a venue. On both parties’ versions, the
meeting could
not be convened. This apparently was followed by the legal
proceedings which culminated in the settlement agreement
and, as I
have indicated, that too failed.
[56]
Accordingly I am not satisfied that merely directing the convening of
an annual general meeting provides any solution.
[57]
Another area of concern warranting the appointment of an
administrator is the financial management of the body corporate.
The body corporate has reserve funds of some R1.2 million. The
original trustees say this is needed to provide for undercharging
for
electricity which has taken place, with the risk the body corporate
is going to be hit in the future with a massive and crippling
electricity bill when the matter is corrected.
[58]
The undercharging arises from a faulty electricity meter and it is
common cause that this electricity meter is indeed
faulty and has
been so for years. The co-opted trustees dispute that there has
been any undercharging of electricity, but
fail to provide any basis
for their denial. Whoever may turn out ultimately to be right
or wrong about the undercharging,
the fact that it is common cause
that the electricity meter is faulty suggests that it is prudent for
reserves to be kept for such
an eventuality.
[59]
On their own version the co-opted trustees are battling for control
over these funds held in reserve. The fact
that they on their
own version wish to take control over these funds and apparently deal
with them in a manner other than maintaining
a reserve is a matter of
serious concern. This lends credence to the charge by the
applicant that the co-opted trustees wish
to redistribute this
reserve.
[60]
A further aspect is that arrear levies have increased to a very high
amount. The applicant says that in 2005 the
arrears stood at
R1,105,854.38. At the time of launching the application, the
applicant says that the amount was R2,941,747.96.
By the time
of the filing of the replying affidavit, the amount was
R3,286,343.61. The applicant puts up spread-sheets setting
out
the arrears on an individualised basis.
[61]
The spread-sheet suggests that, of the arrears, R1,939,249.63 have
been outstanding for longer than 120 days. The
opposing group
suggests that the concern about the outstanding arrear levies is
simply alarmism. They contest the figures
put up but fail to
put up any alternative version. They simply say that the
figures cannot be relied upon because of the
faulty electricity
meter.
[62]
They do not however seem to dispute that there are substantial
arrears and simply say that they have “ways and
means” of
recovering them. No further details of such “ways and
means” are given.
[63]
The applicant alleges that more than 80 percent of banks refuse to
grant bonds on units at Bridgetown due to the financial
situation and
the deterioration of the building and the complex as a whole.
This is met with a bare denial.
[64]
The applicant says that the original trustees have obtained three
insurance quotes that will reduce the monthly insurance
bill by
R10 000. This was in November 2011. No decision on
these quotes has been taken since that time.
The opposing
group’s attitude in the answering the affidavit is that there
is insurance already in place and nothing needs
to be done.
This does not amount to responsible financial management.
[65]
The next area of concern is the inability to reach consensus.
There are a range of issues on which there are disputes
of fact
around particular aspects of the management of the body corporate.
An example is the issue of whether the complex
should appoint its own
security guards directly or employ an outside firm.
[66]
It was suggested that these disputes required a referral to oral
evidence. On the contrary, in my view they simply
serve to
illustrate the need for the intervention of an outside neutral
administrator.
[67]
The test for the granting of an order appointing an administrator is
set out in LAWSA, 2
nd
Edition, Volume 24 at paragraph 460
as follows:
“
A court will
only exercise its jurisdiction to appoint an administrator in
exceptional circumstances such as serious financial
difficulties
encountered by the body corporate and flagrant maladministration
through managerial atrophy or deadlock, dishonesty
or inefficiency”
.
[68]
In
Dempa Investments CC v Body Corporate of Los Angeles
[2008]
JOL 21735
(W) at para 21, the court provided the following useful
guidelines for the appointment of an administrator:
(a) The court must
exercise its discretion judicially in the light of the circumstances
of the case before it.
(b) Special circumstances
or a good cause in the form of: (i) neglect, wilfulness or dishonesty
on the part of the trustees, or
an event beyond their control; and
(ii) a likelihood of substantial prejudice to owners if an
administrator is not appointed, must
be shown.
(c) A non-exhaustive list
of qualifying acts or omissions include maladministration, breaches
of statutory duties, dishonesty, inefficiency
and managerial atrophy
or deadlock.
(d) The administrator
must be able to add value where the trustees could not. Mere
inexperience of the trustees could be solved
by the appointment of an
experienced managing agent and serious financial difficulties may
just as efficiently be ironed out by
the trustees and the managing
agent. In cases where inexperience is coupled with pig-headedness and
financial difficulties have
been caused by maladministration and
dishonesty, an administrator could be expected to achieve better
results than the body corporate
or the trustees.
(e) A balance should be
struck between caution to interfere in the management of the scheme
by the chosen representatives and swift
assistance to owners who may
suffer substantial prejudice if an administrator is not appointed
swiftly.
(f) The onus rests on the
applicant to persuade the court that it is a suitable case for the
exercise of its discretion to appoint
an administrator.
[69]
It is clear that taking into account both sides’ versions,
there is deadlock, there are breaches of statutory duties,
there is
maladministration, there is neglect, there is financial mismanagement
and there is a likelihood of substantial prejudice
to owners if an
administrator is not appointed. Accordingly the appointment of
an administrator is appropriate even if the
answering affidavit is
taken into account.
[70]
In relation to costs, the applicant asked that an order of costs be
made against those trustees who sought to oppose
the grant of the
relief sought. Mr Voyi argues that these trustees are not
before court and he does not represent them and
that it would in
those circumstances not be fair to make a costs order against them.
[71]
The trustees concerned were warned in the original notice of motion
that costs would be sought against any party who
opposed the
proceedings and it was clear from that notice that this was a
reference to parties other than the respondent.
They were again
warned in the replying affidavit that a costs order would be sought
against them personally.
[72]
Given that the respondent has never properly resolved to oppose the
proceedings, it is in effect the three trustees who
purported to take
the resolution on 24 August 2012 who have done so. There is no
reason why the respondent should be saddled
with the costs of dealing
with the application on an opposed basis. Moreover the conduct
of the three trustees concerned
has been such as to warrant the grant
of a punitive costs order.
[73]
Finally in relation to the order, I have also provided in the order
(and this departs from the draft order which was
handed up by the
applicant) for steps to be taken towards conflict resolution between
the opposing groupings. Because this
was not canvassed with the
parties beforehand the applicant or the respondent, properly
authorised, or the administrator may approach
the court for a
variation of that part of the order on the same papers duly
supplemented.
[74]
An order is made -
1
Appointing ADRlAAN SYDOW (I.D. 721224 505 7082) as Administrator of
the BRIDGETOWN SECTIONAL TITLE SCHEME (Scheme Number
SS1142/1995
,
SS
1143
/1995, SS
1144
/1005 and SS
177
/1996, in terms of the provisions
of Section 46 of the Sectional Titles Act 96 of 1986 ("the
Act");
2
That the term of appointment of the Administrator shall be for a
period of 24 (TWENTY FOUR) months from date of appointment, provided
that in the sole discretion of the Administrator and if in his
opinion, it would be advisable to have the period shortened or
extended, he may apply to this Court, at the expense of the
Respondent, for leave to do so and in which event the proposed
election
for appointment of Trustees referred to hereunder, shall be
held earlier or later, as the case may be;
3
That the Administrator shall have, to the exclusion of the members
and Trustees of the Respondent, the powers, duties and obligations
set forth in Sections 37 to 40 of the Act and the Management Rules
published in terms of Section 35(2)(a) thereof;
4
That the Administrator shall, at least 30 (THIRTY) days prior to
expiration of his term of appointment, convene a Special General
Meeting of all members of the Respondent, for the purpose of electing
and appointing Trustees for the Respondent;
5
That the Administrator shall, for purposes of the meeting referred to
in the aforesaid paragraph, in his sole discretion, determine
who is
eligible to nominate Trustees and to vote for their appointment;
6
That, for the performance of his duties, the remuneration of the
Administrator shall be:
6.1
Remunerated at the rate of R500,00 (FIVE HUNDRED RAND) per hour plus
VAT (if applicable), provided that his fees shall not exceed
R5,000.00 (FIVE THOUSAND RAND) plus VAT (if applicable), in any one
month;
6.2
Reimbursed in respect of all necessary expenses incurred (stationery,
telephonic disbursements, etc.);
6.3
Reimbursed in respect of travelling expenses at R2,50 (TWO RAND FIFTY
CENTS) per kilometre.
7
That the Respondent, through its trustees, shall within 7 (SEVEN)
days from date of this Order, deliver or cause to be delivered
to the
Administrator:
7.1
All documents relating to the administration, management and control
of Respondent, including documents and correspondence
pertaining to:
7.1.1
insurance affairs;
7.1.2
creditors of Respondent;
7.1.3
members of Respondent;
7.1.4
legal proceedings instituted by or against Respondent;
7.1.5
any Management Agreement entered into in terms of the provisions of
Management Rule 46;
7.1.6
all Service Agreements;
7.1.7
all Employment Contracts with employees of the Body Corporate,
including all the original UIF blue cards of the employees
of
Respondent, as well as all source documents and correspondence
relating to UIF for the employees of Respondent;
7.1.8
copies of levy clearance certificates issued and details of all
transfer of Units in progress at Respondent, in Respondent's
possession;
7.1.9
all Minutes, Minuted Books, Resolutions, Management Rules and Conduct
Rules of Respondent and in Respondent's possession;
7.1.10
all financial and accounting records, including books, documents,
copies of all bank statements, deposit books and deposit
slips,
members ledger accounts, cash books, copies of tax returns and tax
assessments and any other documents pertaining to Respondent's
financial affairs and/or administration in Respondent's possession or
under its control;
7.1.11
all cheque books, documents and statements pertaining to any cheque
accounts, savings account and/or investment account,
including any
petty cash on hand;
7.2
That the Respondent shall, within 30 (THIRTY) days from date on which
this Order is granted, render to the Administrator a full
account of
the monies received and disbursed for and on behalf of Respondent,
together with supporting vouchers.
8 SPECIFIC
RESTRICTIONS/DIRECTIONS
8.1 That the
Administrator shall, at his election and upon delivery to him of the
documents referred to in paragraph 7 and
after accounting to him,
have either an investigative, or a forensic audit executed pertaining
to the correctness of the members'
ledger accounts and the financial
records of Respondent, as maintained by Respondent or its Managing
Agent.
8.2
That the Administrator shall in his sole discretion determine a
procedure to verify members' ledger accounts and/or adjudicate
any
disputes concerning outstanding arrears by members of Respondent and
failing any resolution or settlement with regard to such
dispute or
verification, shall immediately proceed with legal action for the
recovery of all arrear amounts;
8.3
The Administrator shall not be entitled to incur any expenses
relating to luxurious or non-luxurious improvements (other
than
necessary and required maintenance) to the buildings of Respondent,
without having received the approval of the members of
Respondent, in
accordance with the provisions of the Regulations, alternatively,
without the approval of this Honourable Court;
8.4
That, to the extent that the resources of the respondent permit, the
Administrator shall engage the services of a reputable
conflict
resolution organisation to implement measures aimed at resolving the
on-going conflicts which beset the administration
of the affairs of
the Respondent, provided that either party may on 24 hours notice to
the other set the matter down on the same
papers for the sole purpose
of seeking the variation of this paragraph 8.4.
9
That the costs of this Application shall be paid by –
9.1
the Respondent on an attorney and client basis to the extent that the
costs would in any event have been incurred if the
application had
been moved on an unopposed basis;
9.2
Lebo Segole, Lunga Madlala and Pumeza Mqeni on an attorney and client
basis in respect of the balance of the costs incurred
by the
applicant as a result of their opposition to the relief sought,
jointly and severally, the one paying, the other to be absolved.
10
That the Administrator gives notice of this Order to each owner of
Respondent at the owner's chosen domicilium citandi et executandi
as
reflected in the records of the Body Corporate, by prepaid post,
within 14 (FOURTEEN) days from date of this Order and to cause
delivery by hand of a copy thereof at each Unit in Respondent's
Scheme.
AC DODSON AJ