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[2014] ZASCA 221
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Cowin N.O. and Others v Kyalami Estate Homeowners Association and Others (499/2013) [2014] ZASCA 221 (12 December 2014)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case
No: 499/2013
In
the matter between:
MONICA
GEZINA COWIN
NO
.........................................................................
FIRST
APPELLANT
ORIEL
RAMPOLOKENG SEKATI
NO
.......................................................
SECOND
APPELLANT
SILVER
TUNNEL INVESTMENTS 7
(PTY)
LTD
............................................................................................................
THIRD
APPELLANT
and
KYALAMI
ESTATE HOMEOWNERS
ASSOCIATION
..................................................................................................
FIRST
RESPONDENT
KYALAMI
EQUESTRIAN CENTRE
CC
.................................................
SECOND
RESPONDENT
THE MASTER OF THE
HIGH
COURT
.......................................................
THIRD
RESPONDENT
THE REGISTRAR OF
DEEDS,
PRETORIA
...................................................................................................
FOURTH
RESPONDENT
And
ASSOCIATION
OF RESIDENTIAL
COMMUNITIES
CC
..............................................................................................
First
Amicus Curiae
NATIONAL
ASSOCIATION OF
MANAGING
AGENTS
.......................................................................................
Second
Amicus Curiae
Neutral
citation:
Cowin NO v Kyalami Estate
Homeowners Association
(499/2013)
[2014] ZASCA 221
(12 December 2014)
Coram:
Maya, Theron, Saldulker JJA, Mocumie and
Gorven
AJJA
Heard:
15 September 2014
Delivered:
12 December 2014
Summary:
Land – a title condition in a
deed of transfer which prohibits the transfer of immovable property
without a clearance certificate
or the consent of a homeowner’s
association constitutes a real right – the title condition is
thus binding on successors
in title including the liquidators of the
insolvent property owner – amounts owed by insolvent owner not
‘taxes’
as envisaged in
s 89(5)
of the
Insolvency Act 24
of 1936
.
ORDER
On
appeal from:
South Gauteng High Court,
Johannesburg (Mashile AJ sitting as a court of first instance):
Save
for the amendment of the order of the court below by the deletion of
paragraph 36.1 thereof, the appeal is dismissed with costs
including
the costs of two counsel.
JUDGMENT
Maya
JA:
(Theron, Saldulker JJA, Mocumie and
Gorven AJJA concurring):
[1]
This is an appeal against the judgment of the South Gauteng High
Court, Johannesburg (Mashile AJ). The high court dismissed
an
application for an order declaring, inter alia, that a title
condition contained in a deed of transfer prohibiting the transfer
of
immovable property registered in the name of the liquidated third
appellant (the insolvent) without a clearance certificate
from the
first respondent (the association), confirming that all levies and
penalties due to the latter had been paid, binds
only the
insolvent and the association and is not enforceable against the
insolvent’s liquidators.
[2]
The first and second appellants are the insolvent’s joint
liquidators. The insolvent, a company in liquidation, is the
registered owner of Portion 2 of Erf 219, Kyalami Estates Extension
10 Township (the property) which it purchased before its liquidation.
It is situated in a residential secured estate comprising 1106
residential units which was developed in accordance with the Township
and Development Ordinance of the province. The estate is operated by
the association.
[3]
In terms of the association’s constitution (constituted by its
Memorandum and Articles of Association) its main business
is ‘to
promote, advance and protect the communal interest of the occupiers’
within the estate and in particular ‘to
ensure acceptable
aesthetic, architectural, environmental standards in the [estate], to
promote security services and systems to
ensure acceptable security
standards within the [estate] and to maintain recreational facilities
within the [estate]’.
[1]
Its members consist of registered owners of all the dwelling units
within the estate who automatically acquire such membership
upon
becoming owners.
[2]
The members
are bound to observe all rules made by the association’s
trustees from time to time at a general meeting with
regard to
various matters of communal interest. These include restrictions on a
member’s right to use his property as he
pleases, the
buildings, structures and installations which may erected on the
property, levies imposed upon members for purposes
of meeting all the
expenses incurred or reasonably expected to be incurred by the
association in the pursuit of its business, fines
imposed for
non-compliance with the Articles and interest charged on any arrear
levies.
[3]
[4]
The title deeds of each of the dwelling units, including the one in
respect of the property,
[4]
contain the following restrictive title conditions:
‘…
[B2]
Imposed by the KYALAMI EQUESTRIAN CENTRE CC [the second respondent] …
for the benefit of [the association] and which
are binding on the
Transferee [the insolvent] and its Successors in title, namely:
Every
owner of the erf or any subdivision thereof or any interest therein
or any unit thereon as defined in the Sectional Titles
Act, shall
automatically become and shall remain a Member of [the association]
and be subject to its constitution until he ceases
to be an owner as
aforesaid. Neither the erf nor any subdivision thereof nor any
interest therein nor any unit thereon shall be
transferred to any
person who has not bound himself to the satisfaction of such
Association to become a Member of [the association].
The
owner of the erf or any subdivision thereof or any interest therein
or any unit thereon as defined in the Sectional Titles Act,
shall not
be entitled to transfer the erf or any subdivision thereof or any
interest therein or any unit thereon without a clearance
certificate
from [the association] stating that the provisions of the Articles of
Association of [the association] have been complied
with.’
[5]
The relevant provisions of the articles of association referred to in
the title condition include:
(i)
clause 7.9 which provides that ‘No unit shall be capable of
being transferred without a Certificate first being obtained
from the
Association confirming that all levies and interest have been paid up
to date and including date of registration of transfer
of a unit’;
(ii)
clause 7.8 which provides that ‘[a]ny amount due by a Member by
way of fines, levy and / or interest shall be deemed
to be a debt by
him to the Association. The obligation of the Member to pay a levy
and interest shall cease upon his ceasing to
be a Member without
prejudice to the Association’s rights to recover all arrear
levies and interest. No fines, levies or
interest paid by a Member
shall under any circumstance be payable to the Association upon his
ceasing to be a Member. A Member’s
successor in title to a unit
shall be liable from the date upon which he becomes a Member pursuant
to the transfer of that unit,
to pay the levy and interest thereon
attributable to that unit’;
(iii)
clause 6 which provides that the ‘right and obligations of a
Member shall not be transferrable …’; and
(iv)
clause 8.6 in terms of which any fine imposed upon any Member shall
be deemed to be a debt due by the Member to the Association
and shall
be recoverable by ordinary civil process.
[6]
The insolvent registered three mortgage bonds over the property in
favour of Absa Bank Ltd (Absa) in terms of which it declared
‘to
bind specially … [the property] … subject to the
conditions contained [in the deed of transfer] and especially
to the
reservation of rights to minerals and to the rights of [the
association]’. After its liquidation on 8 June 2010, Absa
obtained judgment against it and the property was also declared
executable. Thereafter, the joint liquidators concluded an agreement
of sale of the property with a third party, Oxter Construction
Projects CC, for a purchase price of R2,25 million. The purchaser
fulfilled its obligations under the agreement and the municipal rates
clearance amounts were duly settled. However, the association
refused
to issue a clearance certificate to facilitate the transfer of the
property before it had been paid a sum of R887 408,94
which comprised
arrear levies.
[7]
The joint liquidators took the view that the association’s
stance
prejudiced the
concursus creditorum
,
particularly the rights of Absa as the secured creditor over the
property, and that any amounts due to the association could not
supersede those of secured creditors who hold mortgage bonds over the
immovable property. As far as they were concerned, the association
was confined to proving its claim as a concurrent creditor in the
insolvent estate. And they
did not consider
themselves at all bound by title condition B2 which they contended
merely
creates a personal relationship between parties to the
agreement (the Articles of Association), ie the owner of the property
and
the association, and does not bind third parties upon
liquidation.
It is on that basis that they
approached the high court, mainly for declaratory relief that would
allow transfer of the property
and its registration in a prospective
purchaser’s name without the association’s consent. Among
the relief sought was
an order declaring that the amounts due by the
insolvent do not constitute tax as defined in s 89(5) of the
Insolvency Act 24 of
1936 (the Act).
[8]
The association and the amici curiae, which joined
the fray as the only recognised representative bodies in the country
for homeowners
associations and managing agents, contended otherwise.
They argued that the title condition, a convenient method to enable
homeowners
associations to maintain infrastructure and provide
services to their members which does not offend public policy and
enjoys longstanding
and widespread registration and enforcement,
constitutes
a real right as it results in a subtraction from
dominium of the property against which it is registered. It binds the
owner of
the property and his successors-in-title. Thus, in
insolvency, it binds the liquidators of the insolvent estate, who in
this case
could not, in any event, extricate the insolvent from the
restrictive condition or its contract with the association in respect
of services pertaining to the property which could not be
discontinued. The amounts due fell to be dealt with either as ‘costs
of realisation’ in terms of s 89(1) of the Act read with ss 342
and 391 of the Companies Act 61 of 1973, or ‘costs
of
administration (liquidation)’in terms of s 197 of the Act read
with ss 342 and 391 of the Companies Act or, otherwise,
under the
common law. The amici curiae also submitted that the interpretation
of the title condition contended for by the joint
liquidators would
result in the arbitrary deprivation of the association’s
property in the form of the real right in breach
of s 25 of the
Constitution.
[9]
This appeal, in which the issues remain the same as in the high
court, was heard in this court together with
Willow
Waters Homeowners Association (Pty) Ltd & another v Koka NO &
others
,
[5]
which is a matter similar to this one. The reasons given for
upholding the appeal in that matter apply equally to this case. I
do
not, therefore, intend to repeat them here. Suffice it to say that I
agree with the reasoning and conclusion of the high court
except for
the declaratory relief which it granted in respect of s 89(5) of the
Act – that the moneys due to the association
by the insolvent
constitute ‘tax’ within the meaning of this section.
Apart from the fact that the issue simply did
not arise for
determination as the
association
never contended that the amounts do constitute such tax, this court
has expressly said that they do not in
Barnard
NO v Regspersoon van Aminie en ‘n ander
.
[6]
As
for title condition B2, it
does
constitute a real right that is binding on the insolvent company and
the joint liquidators who stepped into its shoes consequent
to its
liquidation. For the same reasons stated in
Willow
Waters
,
it is not necessary to engage the constitutional argument.
Accordingly, the appeal must fail with costs to follow the result.
[10]
In the result, the following order is made:
Save
for the amendment of the order of the court below by the deletion of
paragraph 36.1 thereof, the appeal is dismissed with costs
including
the costs of two counsel.
________________________
MML
MAYA
JUDGE
OF APPEAL
APPEARANCES:
For
Appellants: FH Terblanche SC (JE Smith)
Instructed
by: Tim du Toit & Co Inc.,
Johannesburg
Phatshoane
Henney Attorneys,
Bloemfontein
For
1
St
Respondent: EA Limberis SC (A De Kok)
Instructed
by: Fluxmans Inc,
Johannesburg
Lovius-Block,
Bloemfontein
For
Amicus Curiae: S Budlender
Instructed
by: Adams & Adams
Attorneys,
Pretoria
Honey
Inc, Bloemfontein
[1]
Clause
2 of the Memorandum of Association.
[2]
Article
3.4 of the Articles of Association.
[3]
Articles
6.2, 7 and 8 of the Articles of Association.
[4]
Deed
of Transfer No. T 165574/2004 dated 25 November 2004.
[5]
Willow
Waters Homeowners Association (Pty) Ltd & another v Koka NO &
others
(768/13)
[2014]
ZASCA
x (x 2014).
[6]
None
of the parties contended that it does, correctly so in light of this
court’s decision in
Barnard
NO v Regspersoon van Aminie en ‘n ander
2001
(3) SA 973
(SCA) paras 25-29.