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[2012] ZASCA 105
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Body Corporate of the Pinewood Park Scheme No 202 v Dellis (Pty) Ltd (SCA) [2012] ZASCA 105; [2012] 4 All SA 377 (SCA); 2013 (1) SA 296 (SCA) (1 June 2012)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case No: 498/2011
In the matter between:
Reportable
BODY CORPORATE OF THE
PINEWOOD PARK
SCHEME NO. 202
…...........................................................................................
Appellant
and
DELLIS (PTY) LIMITED
….............................................................................
Respondent
Neutral citation:
Body Corporate of the Pinewood Park scheme no 202 v Dellis (Pty)
Ltd
(498/11)
[2012] ZASCA 105
(1 June 2012)
Coram:
MPATI P,
BRAND, MHLANTLA and TSHIQI JJA and BORUCHOWITZ AJA
Heard:
09 May 2012
Delivered:
1 June
2012
Summary: Sectional
Title – Status and nature of rules governing control and
management of body corporate – management
rules –
resolution of dispute as to payment of levies – whether
provisions of s 6 of
Arbitration Act 42 of 1965
excluded by
arbitration procedure provided for in
rule 71.
_______________________________________________________________________
ORDER
_____________________________________________________________________
On appeal
from:
KwaZulu-Natal High Court, Pietermaritzburg
(Kruger, D Pillay JJ and Nkosi AJ, sitting as court of appeal).
1 The application for
special leave to appeal is granted.
2 The appeal is upheld
with costs.
3 The order of the Full
Court is set aside and replaced with the following:
‘
(a) The appeal is
upheld with costs.
(b) The order of the
court below is set aside and replaced with the following:
“
The defendant’s
point
in
limine
is
dismissed with costs.”’
_______________________________________________________________________
JUDGMENT
_____________________________________________________________________
MPATI P (BRAND,
MHLANTLA, and TSHIQI JJA, and BORUCHOWITZ AJA CONCURRING):
[1] This is an
application for special leave to appeal against the order of the Full
Court of the Pietermaritzburg High Court (Kruger
J, D Pillay J and
Nkosi AJ concurring) dismissing an appeal to it by the applicant
against an order of Seegobin AJ in terms of
which the applicant’s
claim against the respondent for payment of certain moneys was
dismissed with costs. The two judges
of this court who considered the
application referred it for oral argument in terms of s 21(3)
(c)
(ii)
of the Supreme Court Act 59 of 1959.
[2] The respondent is the
registered owner of Sectional Title Unit 7 (the property) in the
Sectional Title Development Scheme known
as Pinewood Park No 202 (the
scheme), situated in Pinetown, KwaZulu-Natal. As owner of the
property the respondent is obliged,
in terms of s 44(1)(b) of the
Sectional Titles Act 95 of 1986 (the Act), to pay levies in respect
of the property to the applicant,
the body corporate, which manages
the scheme. For convenience I shall refer to the applicant as ‘the
body corporate’
and to the respondent as ‘the owner’.
[3] On 2 November 2006
the body corporate issued summons against the owner for payment of
arrear levies in the sum of R123 101.00,
which the owner had
allegedly failed to pay ‘despite same being due, owing and
payable’ to the body corporate. The
body corporate also sought
orders for payment of interest on the amount claimed at a rate of two
percent (2%) calculated from 1
August 2006 and for costs of suit on
the scale as between attorney and client.
[4] The owner admitted in
its plea that it was obliged to pay levies ‘imposed in
accordance with the Act, as read with the
rules governing the
Scheme’, but denied that it was obliged to pay the amount
claimed. It pleaded further that any entitlement
to claim the levies
‘would have arisen more than three years prior to the
institution of this action, and have prescribed’;
1
that the body corporate had from time
to time appropriated payments
received from it ‘towards
debits which were unauthorised and to which the body corporate was
not entitled’ and that
it is entitled to be credited on its
account with the payments which were previously appropriated towards
unauthorised debits.
[5] At a pretrial
conference held on 23 February 2010 the owner’s legal
representatives contended that the jurisdiction of
the high court to
determine the claim was ousted by virtue of the judgment of this
court in the matter of
Body
Corporate of Greenacres v Greenacres Unit 17 CC & another
2008
(3) SA 167
(SCA), which, in the owner’s view, ‘compels
the resolution of the [body corporate’s] claim by means of
arbitration’.
The parties subsequently agreed to have the issue
argued before the trial court as a point
in
limine.
The trial court
answered the point in favour of the owner, holding that the latter’s
denial of liability ‘constituted
an arbitrable dispute which
should in light of the
Greenacres
judgment be determined by
arbitration’. It dismissed the claim, but granted the body
corporate leave to appeal to the Full
Court, which in turn dismissed
the appeal.
[6] It is perhaps
convenient to refer, at this stage, to the relevant legislative
framework relating to the management and control
of sectional title
schemes. Section 35(1) of the Act provides that a scheme shall be
controlled and managed by means of rules as
from the date of
establishment of the body corporate, subject to the provisions of the
Act. Section 35(2) reads:
‘
The
rules shall provide for the control, management, administration, use
and enjoyment of the sections and the common property,
and shall
comprise –
management
rules, prescribed by regulation, which rules may be substituted,
added to, amended or repeated by the developer when
submitting an
application for the opening of a sectional title register, to the
extent prescribed by regulation, and which rules
may be substituted,
added to, amended or repeated from time to time by unanimous
resolution of the body corporate as prescribed
by regulation;
…’
Regulation 30(1) of the
regulations made in terms of s 55 of the Act
2
provides as follows:
‘
Subject
to subregulations (2) and (3), the management rules as contemplated
in section 35 (2)(
a
)
of the Act, shall be those rules as set out in Annexure 8 of the
Regulations, for which . . . other rules may be substituted,
added
to, amended or withdrawn by the developer when submitting an
application for the opening of a sectional title register.’
It is common cause in
this matter that no substitution, amendment, addition to, or
withdrawal from, the rules (management rules)
as contained in
Annexure 8 to the regulations was effected by the developer at any
stage.
[7] Management rule 71
deals with the determination of disputes by arbitration and subrules
(1) and (2) read:
‘
(1)
Any dispute between the body corporate and an owner or between owners
arising out of or in connection with or related to the
Act, these
rules or the conduct rules, save where an interdict or any form of
urgent or other relief may be required or obtained
from a Court
having jurisdiction, shall be determined in terms of these rules.
(2)
If such a dispute or complaint arises, the aggrieved party shall
notify the other affected party or parties in writing and copies
of
such notification shall be served on the trustees and the managing
agents, if any, and should the dispute or complaint not be
resolved
within 14 days of such notice, either of the parties may demand that
the dispute or complaint be referred to arbitration:
. . ..’
In
Greenacres
this court held that in order for the
rule (rule 71) to operate, there must be a dispute. The court held
further that ‘[a]bsent
a dispute – for example, where an
owner ignores a demand for payment of levies or simply refuses
without more, to pay them
– there can be no arbitration, as
there is nothing for an arbitrator to determine . . .’.
3
[8] And in
Telecall
(Pty) Ltd v Logan
4
this court (per Plewman JA) said that
before there can be a reference to arbitration a dispute, which is
capable of proper formulation
at the time when an arbitrator is to be
appointed, must exist and there cannot be an arbitration and
therefore no appointment of
an arbitrator can be made in the absence
of such a dispute. Thus, if the word ‘dispute’ is used in
a context which
indicates that what is intended ‘is merely an
expression of dissatisfaction not founded upon competing contentions
no arbitration
can be entered into’.
5
[9] During the course of
its judgment the court a quo mentioned – and this was the
factual basis upon which it reached its
conclusion – that
counsel for the body corporate ‘ultimately conceded that [a]
dispute existed and was known to the
[body corporate] prior to the
institution of the action’. Counsel had argued, however, that
no proper dispute, capable of
being taken, or referred, to
arbitration existed. But the court, drawing support from the decision
of Cleaver J in
Baumoral
Heights No 39 Bk v The Trustees for the Time
Being
of the Baumoral Heights Body Corporate
CPD
(A698/2001)
[2002] ZAWCHC 54
(4 October 2002)
6
,
expressed the opinion that ‘arbitration is compulsory in all
matters where a dispute exists, unless the relief claimed is
not
competent through arbitration’.
7
It held that ‘[a]s arbitration
is compulsory, the [body corporate] ought to have referred the
dispute to arbitration
and ought not to have proceeded by way of action in the High Court’.
It accordingly upheld the order
of the court of first instance
dismissing the claim with costs.
[10] In this court
counsel for the body corporate repeated the argument that there had
been no proper dispute between the parties
which was capable of being
referred to arbitration and explained that the dispute put up by the
owner in correspondence exchanged
between the parties prior to the
institution of the action was completely different to the one
ultimately pleaded. What was important,
counsel contended, was the
dispute raised in the plea, that is, whether that dispute was capable
of being referred to arbitration.
He submitted that the court of
first instance should not have dismissed the claim, but should have
dismissed the point
in
limine
, and, in the
exercise of its discretion,
either dealt with the
claim to finality or referred the dispute to arbitration and stayed
the action pending the determination of
the arbitration proceedings.
Consequently, so the argument continued, the court a quo erred in
dismissing the body corporate’s
appeal. Counsel’s further
argument was that the owner, in any event, never demanded
arbitration, which it could have done
in terms of rule 71(2), and
that the proper procedure it should
have adopted was to apply
for a stay of the proceedings in terms of
s 6
of the
Arbitration Act
42 of 1965
,
8
or raised a special plea (dilatory
plea) praying for a stay of proceedings pending the final
determination of the dispute. In this
regard counsel relied on the
decision of this court in
PCL
Consulting (Pty) Ltd t/a Phillips Consulting SA v Tresso Trading
119 (Pty) Ltd
2009 (4) SA 68
(SCA)
para 7.
[11] On the other hand,
counsel for the owner disavowed any support for the finding of the
court of first instance that its jurisdiction
was ousted by the
Greenacres
judgment, which finding appears to
have been accepted by the court a quo. Counsel submitted, instead,
that management
rule 71
provides for compulsory arbitration where a
dispute exists between the parties to a sectional title scheme. This
is clear, he said,
from the use of the word ‘shall’ in
sub-rule (1). Because of the stance taken by him that
rule 71
provides for compulsory arbitration, counsel had to contend that even
though
regulation 39
stipulates that the provisions of the
Arbitration Act ‘shall
, in so far as those provisions can be
applied, apply
mutatis
mutandis
with reference to
arbitration proceedings under the Act’,
s 6
of the
Arbitration
Act does
not apply in this case, since provision is made in the rules
for compulsory arbitration. In those circumstances, so it was
contended,
the court has no discretion.
[12] For these
submissions counsel sought support from the decision of Van Dijkhorst
J in
Independent Municipal and Allied Trade Unions v Northern
Pretoria Metropolitan Substructure & others
1999 (2) SA 234
(T) (
IMATU
judgment). In that case an order was sought by the
applicant (IMATU) declaring the first respondent (the employer) to be
bound to
comply with the terms and conditions of a collective
agreement between it (employer) and three unions of which IMATU was
one. Among
several points
in limine
raised by the employer,
one was that the court had no jurisdiction to decide the matter
because the
Labour Relations Act 66 of 1995
contained clear
provisions about dispute resolution regarding collective agreements.
Section 24(1)
of that Act provides that ‘[e]very collective
agreement . . . must provide for a procedure to resolve any dispute
about the
interpretation or application of the collective agreement’.
The provision stipulated that the procedure ‘must first
require
the parties to attempt to resolve the dispute through conciliation
and, if the dispute remains unresolved, to resolve it
through
arbitration’. Van Dijkhorst J held that wherever the Act with
which he was concerned provided for dispute resolution
by
arbitration, ‘that concept in the context of the Act excludes
resort to the ordinary courts of law for dispute resolution’.
I
can find no fault with this statement of the law, at least in so far
as it does not purport to suggest that resort to the ordinary
courts
is excluded even when the statute concerned does not prescribe that
the decision of the arbitrator shall be final, where
one of the
parties wishes to challenge the decision of the arbitrator.
[13] But the learned
judge gave, inter alia, the following reasons for his statement:
‘
It
was the clear intention of the Legislature that a specialised set of
fora should deal with labour-related matters. To this end
it
established an interlinked structure of inter alia trade unions,
employers’ organisations, a variety of councils, the
Commission
for Conciliation, Mediation and Arbitration (CCMA) and the Labour and
Labour Appeal courts. The Act also creates procedures
designed to
accomplish the object of simple inexpensive and accessible resolution
of labour disputes. In this the role of the CCMA
and the exclusive
jurisdiction of the Labour Courts are important features. Generally
the scheme of the Act is that the Labour
Court does not itself hear
disputes as a court of first instance but neither does the Act confer
exclusive jurisdiction on the
CCMA vis a vis the Labour Court in all
matters pertaining to labour disputes.’
9
He accordingly held that
the court had no jurisdiction to adjudicate upon a dispute about the
interpretation or application of a
collective agreement as referred
to in the
Labour Relations Act.
[14
] As to the present
matter the Act and the regulations made under it do not prescribe a
procedure for dispute resolution. Section
35(1) of the Act simply
provides that the sectional title scheme shall be controlled and
managed by means of rules (which may or
may not provide for the
resolution of disputes). Section 35(2) directs that the rules shall
provide for the control, management
and enjoyment of common property
and that they may be substituted, added to, amended or repealed by
the developer. Although s 35(2)
(a)
directs that the rules shall comprise
management rules prescribed by regulation, regulation 30(1) only
tells us where to find the
rules and which parts thereof may not be
substituted, added to, amended or withdrawn by the developer when
submitting an application
for the opening of a sectional title
registrar.
10
The fact that the rules may be
jettisoned in part by a developer and in toto, and others substituted
for them, by unanimous resolution
of a body corporate indicates
clearly, in my view, that the Legislature intended the rules to be of
a contractual nature.
[15] In
Wiljay
Investments (Pty) Ltd v Body Corporate, Bryanston Crescent &
another
1984 (2) SA 722
(T), Spoelstra J had occasion to consider the status and nature of
rules governing body corporates under the Act’s predecessor.
11
Section 27(2)
(a)
(ii)
of that Act stipulated that the rules ‘shall provide for the
control, management, administration, use and enjoyment of
sections
and the common property, and shall include. . . the rules contained
in Schedule 2 which may be added to, amended or repealed
by special
resolution of the members of the body corporate’. Spoelstra J
said the following:
‘
These
rules are clearly not intended to define or limit the ownership of
individual owners of sections, units or common property.
The rules,
read with the provisions of the Act, contain a constitution or the
domestic statutes of the body corporate. In this
sense it could
properly be construed as containing the terms of an agreement between
owners
inter
se
and
between owners on the one hand and the body corporate on the other
hand.’
12
I agree with these dicta,
which are equally valid in respect of the management rules made in
terms of the regulations, read with
the provisions of s 35 of the
Act. It is a matter of pure logic that when a purchaser purchases a
unit in a sectional title scheme
after a sectional title register had
been opened he or she would be deemed to have consented, or agreed,
to be bound by the existing
rules relating to that scheme and to
future changes to them introduced by unanimous resolution of that
scheme’s body corporate.
It seems to me, therefore, that the
arbitration procedure provided for in management rule 71 is
consensual.
13
Unlike the
Labour Relations Act which
provides in
s 24
that every collective agreement must provide for a
specific procedure to resolve disputes, which meant that such
procedure was
compulsory (see
IMATU
judgment), the provisions
of the Act and the regulations do not prescribe an arbitration
procedure for inclusion in the rules.
[16] In
Baumoral
the issue on appeal was
whether or not management rule 71 provides for a compulsory
arbitration procedure. The appellant, the owner
of a sectional title
unit in the Balmoral Heights sectional title scheme, had sued the
trustees of the body corporate (respondent)
in the Cape Town
magistrate’s court for payment of R26 000 alleged to represent
loss of rental income. The appellant had
alleged that the respondent
had failed in, and neglected, its legal duty to prevent water from
penetrating into its unit. The respondent
pleaded on the merits and,
in addition raised a special plea to the effect that in view of the
provisions of management rule 71,
which were applicable to the
scheme, any dispute between the parties was to be determined by means
of arbitration. The appellant’s
main ground of appeal was that
rule 71 does not provide for compulsory arbitration. An alternative
ground of appeal, which was
not opposed by the respondent, was that
in the event of it being found that the rule does provide for
compulsory arbitration, the
magistrate should not have dismissed the
appellant’s claim, but merely stayed it pending the
finalisation of arbitration
proceedings.
[17] The court (Cleaver
J, Potgieter AJ concurring) held that rule 71(1), read with
regulation 39, provides for a compulsory arbitration
of the dispute.
14
But the court went further and said:
‘
The
discretionary power of the court to exclude arbitration is not
usually available in the case of a statutory arbitration, but
as I
have already indicated, the reference to arbitration in respect of
the rules is not a statutory one in the normal sense of
the word.
Also, should the rules have a contractual or consensual basis, the
availability of such a discretionary power of the
court would be
likely. Perhaps more importantly, the wording of regulation 39 may
well support a wide application for the provisions
of the
Arbitration
Act to
rule 71
, including the court’s discretionary powers
under
sections 3
and
6
of the
Arbitration Act, not to
enforce the
agreement.’
15
The court found, however,
that since the respondent had raised the issue by way of a special
plea, the magistrate was not correct
in dismissing the application,
but should have granted a stay of proceedings pending the outcome of
the arbitration. It set aside
the magistrate’s order dismissing
the appellant’s claim and ordered a stay of the proceedings
‘pending resolution
of the plaintiff’s claim by
arbitration’ as provided for in the rules applicable to the
scheme.
[18] As I have mentioned
above, in the present matter the issue of the compulsory nature of
management
rule 71
was not raised in a special plea, but as a point
in limine
during a pre-trial conference. I have also mentioned
that the only basis for the contention, on behalf of the owner, that
s 6
of the
Arbitration Act is
of no application in this matter is
that management
rule 71
provides for compulsory arbitration. Counsel
conceded, however, that if it were to be found that arbitration is
not compulsory
under the rules then the appeal must succeed.
[19] The question whether
arbitration is compulsory under management
rule 71
was left open in
Greenacres.
The issue in that case was whether a dispute as to
the liability of an owner to pay levies is excluded from the
operation of the
rule. This court held that it is not excluded and
that it is arbitrable.
[20]
Section 40
of the
Arbitration Act reads
:
‘
This
Act shall apply to every arbitration under any law passed before or
after the commencement of this Act, as if the arbitration
were
pursuant to an arbitration agreement and as if that other law were an
arbitration agreement: Provided that if that other law
is an Act of
Parliament this Act shall not apply to any such arbitration in so far
as this Act is excluded by or is inconsistent
with that other law or
is inconsistent with the regulations or procedure authorised or
recognized by that other law.’
The provisions of the
Arbitration Act are
made applicable,
mutatis mutandis
‘with
reference to arbitration proceedings under the Act’ (regulation
39). The management rules are not an Act of Parliament
and none of
the provisions of the
Arbitration Act has
been excluded by the Act,
nor has it been suggested that anyone of its provisions is
inconsistent with the Act or the regulations.
I have already held
that the management rules are consensual or contractual in nature and
that the arbitration procedure provided
for in rule 71 is not
prescribed by the Act or the regulations as is the case with the
Labour Relations Act. It
follows that I disagree with the view
expressed in
Baumoral
that management
rule 71
provides for
compulsory arbitration, if by that is meant that the provisions of
the
Arbitration Act thus
do not apply. I agree though, with the view
that the magistrate in that case should not have dismissed the
plaintiff’s claim
but should have stayed the proceedings
pending the finalisation of arbitration proceedings to be initiated.
This would be in accordance
with the provisions of
s 6
of the
Arbitration Act, which
are, in my view, applicable to an arbitration
process under management
rule 71.
[21] Similarly, in the
present matter the court of first instance should not have dismissed
the body corporate’s claim. Whether
it should have stayed the
proceedings pending the finalisation of arbitration proceedings in
terms of
s 6
of the
Arbitration Act or
exercised its discretion and
continued with the action would depend on the question of the
existence or otherwise of a dispute
between the parties and any other
relevant factor that may present itself.
[22] This being an
application for special leave to appeal, I proceed to consider the
requisites for the grant of special leave.
In
Westinghouse Brake v
Equipment (Pty) Ltd v Bilger Engineering
1986 (2) SA 555
(A)
Corbett JA considered it undesirable for this court to endeavour to
indicate with precision what these requirements are. The
learned
judge, however, laid down the general principle that an applicant for
special leave to appeal must show, in addition to
the ordinary
requirement of reasonable prospects of success, that there are
special circumstances which merit a further appeal
to this court (at
564G-J). One of the special circumstances he cited (at 564I-565E) is
that where, in the opinion of this court,
the appeal raises a
substantial point of law special leave should be granted. In my view,
not only has it been shown in this matter
that there are reasonable
prospects of success on appeal, but the appeal indeed raises a
substantial point of law, which is of
great importance not only to
the parties, but also to the sectional title industry as a whole. I
consider that special leave should
be granted.
[23] In the result the
following order is made:
1 The application for
special leave to appeal is granted.
2 The appeal is upheld
with costs.
3 The order of the Full
Court is set aside and replaced with the following:
‘
(a) The appeal is
upheld with costs.
(b) The order of the
court below is set aside and replaced with the following:
“
The defendant’s
point
in
limine
is
dismissed with costs.”’
___________________
L Mpati
President
APPEARANCES
For the Appellant: M E
Stewart
Instructed by: Biccari
Bollo Mariano Inc, Durban
E G Cooper Majiedt,
Bloemfontein
For the Respondents: I
Pillay
Instructed by: Jodi
Halkier & Associates, Durban
Honey Attorneys,
Bloemfontein
1
The
body corporate annexed to its summons a schedule reflecting the
manner in which the amount claimed was computed. The schedule
shows
debits and receipts as from September 2001.
2
Contained
in GN R664 published in
Government Gazette
11245 of 8 April
1988.
3
At
para 9.
4
Telecall
(Pty) Ltd v Logan
[2000] ZASCA 97
;
2000 (2) SA 782
(SCA).
5
At
para 12.
6
In
the body of the judgment the property concerned is referred to as
‘Balmoral Heights’.
7
At
para 8 of the judgment of the court a quo.
8
Section
6
reads: ‘(1) If any party to an arbitration agreement
commences any legal proceedings in any court (including any inferior
court) against any other party to the agreement in respect of any
matter agreed to be referred to arbitration, any party to such
legal
proceedings may at any time after entering appearance but before
delivering any pleadings or taking any other steps in
the
proceedings, apply to that court for a stay of such proceedings.
(2) If on any such
application the court is satisfied that there is no sufficient
reason why the dispute should not be referred
to arbitration in
accordance with the agreement, the court may make an order staying
such proceedings subject to such terms and
conditions as it may
consider just.’
9
At
239.
10
Sub-regulation
(4) provides that the management rules may be added to, amended or
repeated by unanimous resolution of the body
corporate, but that may
occur only when there are owners, other than the developer, of at
least 32 percent of the units in the
scheme. Thus the entire set of
rules may be substituted by unanimous resolution of the body
corporate.
11
Sectional
Titles Act 66 of 1971.
12
At
727D-E.
13
Although
the court of first instance stated that the
Baumoral
decision
‘correctly . . . held that [management rule] 71(1) read with
regulation 39 makes provision for a compulsory arbitration’,
it earlier, in the same paragraph (para 14) expressed the view that
s 35 ‘does provide for
consensual
arbitration. . .’
Section 35(4) provides, inter alia, that the rules ‘shall bind
the body corporate and the owners
of the sections and any person
occupying a section’.
14
At
para 15.
15
At
para 18.