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[2023] ZAKZPHC 160
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Naidoo v Hawaan Forest Estate Homeowners Association (AR214/2021) [2023] ZAKZPHC 160 (23 June 2023)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
LOCAL DIVISION: PIETERMARITZBURG
CASE NO: AR214/2021
In
the matter between:
S
Naidoo
Appellant
And
Hawaan
Forest Estate Homeowners’
Association
Respondent
Judgment
Lopes
J (ZP Nkosi J concurring):
[1] The appellant seeks
to set aside the judgment of the learned magistrate handed down on
the 16
th
March 2021 in the Verulam Magistrates’
Court. That judgment was granted against him in favour of the
plaintiff, Hawaan Forest
Estate Homeowners’ Association, for
the sum of R85 709.82, interest thereon at the plaintiff’s
bank’s prime rate,
and that the defendant was to pay 60% of the
plaintiff’s costs of the action.
[2] It is common cause
that:
(a) the Hawaan Forest
Estate is a residential estate in KwaZulu-Natal;
(b) on the 8
th
February 2005, the appellant purchased a plot of land from the
developer, Hawaan Investments (Pty) Ltd, a company incorporated
in
2001 (‘the 2001 company’). During 2008, the appellant
commenced construction of his home, and a ‘Certificate
of
Occupancy’ was finally issued to him by the eThekwini
Municipality on the 30
th
March 2015;
(c) in the contract to
purchase the property, the appellant accepted that he was bound by
the rules, as amended from time-to-time,
of the Home Owners’
Association, including the monthly payment of levies;
(d) the appellant stopped
paying levies due by him from the beginning of 2015 until September
2016 – a year and nine months’;
(e) the respondent then
issued summons for payment of the arrear levies. The appellant
delivered a plea, basically consisting of
a bare denial. In the
appellant’s summary judgment opposing affidavit however, he
raised,
inter alia,
the following defences:
(i)
the respondent was, in
fact, indebted to him in the sum of R90 982.00;
(ii)
the levies claimed were
imposed upon him because he had chosen a ‘non-white building
contractor’, and consequently he
had been ‘targeted with
fines and imposed harsh rules’ (sic);
(iii)
other complaints of his
having been bullied and harassed by the respondent;
(iv)
the respondent failed
to pass credits due to him which arose because he had previously
overpaid levies which were imposed during
the construction of his
home, when the delay was the fault of the respondent; and
(v) the amount sued for
by the respondent had been levied by an illegal entity, and included
a special levy of R25 000, for which
members of the respondent were
not liable.
[3] The appellant appeals
against the judgment granted against him, because the following
issues were not established by the respondent:
(a)
the identity of the
respondent, and its standing to recover the outstanding levies;
(b)
the lack of proof of
the respondent’s Articles of Association; and
(c) the failure of the
respondent to prove its quantum.
Standing:
[4] Three witnesses
testified for the respondent. They were:
(a)
Louise Cowling, the
Estate Manager since 2018;
(b)
Krishni Naidoo, the
Estate Manager until 30
th
June 2018, having initially worked for the respondent in
administration, reception, and accounts, from the 1
st
August 2008; and
(c) Asheel Gokul, who was
employed by Ballito Estates (‘Ballito’) as an accountant.
Ballito, as managing agent of the
respondent, issued monthly accounts
to home owners, including levies and fines, etc, recovered those
levies, and accounted for
them to the respondent. Ballito had taken
over the Pascal accounting system (started in 2013) from the
respondent.
[5] The appellant
testified in his defence, and he called one witness, Ms Brijamul, who
was employed by him as his assistant. She
compiled the table of
payments relied upon by the appellant, and annexed to his plea.
[6] From the evidence of
the witnesses, the issue of standing was explained as follows:
(a)
during or about 2005,
whilst the estate was being established, the land was registered in
the name of the 2001 company;
(b)
as plots were sold by
the developer, and houses were constructed, the need arose for the
formal establishment of a body corporate
to collect levies, levy
fines and arrange for the maintenance and upkeep of the estate, etc.
These functions had hitherto been
carried out by the 2001 company,
run by the developers;
(c)
to that end, a company
was registered at the end of March 2004, Hawaan Home Owners’
Association (‘the 2004 company’),
with its own conduct
rules. The 2001 company handed over the administration of the estate
to the 2004 company;
(d)
however, as the
developer had accumulated tax and other liabilities during its
management of the estate, and which potentially exposed
home owners
to liabilities, the then members of the board decided to incorporate
another company (‘the 2006 company’),
to manage the
estate;
(e)
the 2006 company was
Hawaan Forest Estate Home Owners Association, with its own
Constitution – part of the purpose of which
was to recover
unpaid levies raised on 47 vacant plots which were still owned by the
developer. On the 1
st
January 2009, the developers, who had factually managed the
administration of the estate between 2005 and 2008, handed over the
administration of the estate to the 2006 company. Pat Naicker and
Tony O’Neil, who were the controlling forces behind the
developer, also administered the estate up until 2008 under the guise
of the 2004 company, of which they were the only directors;
(f) during, or
approximately 2009/2010 a problem arose because the Registrar of
Deeds would not accept the registration of properties
newly sold by
the 2006 company, because the consent of the 2004 company was
required;
(g) in addition, the 2006
company had been unsuccessful in compelling the developer to pay
levies, and a stalemate had been reached;
(h) by the time of the
2012 Annual General Meeting (‘the AGM’), the 2006 company
was in financial difficulties, and
a resolution was passed that the
developers would pay 25% of the outstanding levies, on the condition
that the administration of
the estate reverted to the 2004 company;
(i)
two further resolutions
were taken and unanimously passed, with the appellant being present.
They were that the 2006 company’s
assets would be transferred
to the 2004 company, and that the 2006 company would be liquidated.
However, the two companies eventually
merged, and from 2012, the
estate was administered under the control of the 2004 company.;
(j) although different
companies purportedly administered the estate at different times,
apropos the home owners, the administration
of the estate was
controlled by the Home Owners’ Association, which had continued
unabated, and levies were always paid into
the same current account.
In addition, whichever of the legal entities was administering the
affairs of the estate, the home owners
all viewed their participation
in that administration as seamlessly continuing under the Home
Owners’ Association;
(k) when the appellant
purchased his property in 2005, he received a ‘sale pack’,
including the sale agreement, the
conduct rules, the certificate of
incorporation of the 2004 company and a layout plan of the estate;
(l) from then until 2015,
he paid levies to both companies under the guise of the Home Owners’
Association. His complaint
is that, notwithstanding that the funds
went into the same current account as all the levies paid by other
home owners, the 2006
company was not entitled to recover levies, and
he was entitled to set off the amounts paid to it, against the claim
of the respondent;
(m) in 2008 the levies
were increased from R500 to R2 000. The levies were invoiced in the
name of the 2004 company from the 1
st
January 2009 until
May 2012. At the time of the merger of the two companies in 2012,
levies were raised from R5 000 to R 12 000
per month. The 2006
company had no authority to raise levies, and had not done so; and
(n) the appellant alleges
that in the circumstances, the respondent has not established its
standing to sue for any levies outstanding
by him.
[7] The appellant
accepted in his evidence that he was bound, as were all other home
owners, to pay the applicable levies from time-to-time.
He accepted
that he had known of the increased levies at the time of the AGM, but
had only begun to withhold levies in 2015 –
allegedly because
by then he read the evidence of a court case where a document
evidencing the identity of the 2006 company surfaced.
The period when
he began setting-off what he considered to be the illegal levies,
coincided with the fact that he had run out of
money because his
building project was completed. He qualified this by saying he had no
money to pay excess levies. This defence
of set-off was not reflected
in the appellant’s summary judgment opposing affidavit, and
neither in his plea nor his examination-in-chief,
and it was not put
to the respondent’s witnesses.
[8] The matter of the
correct citation of the respondent had been raised in argument in the
court
a quo
, and Mr
Ploos van Amstel
, who appeared for
the respondent, as he does in this court, moved an amendment to the
respondent’s particulars of claim to
reflect the name of the
respondent as ‘Hawaan Owners’ Association’. The
amendment was opposed by Ms
Bodasing
, who appeared for the
appellant, as she does in this court. Curiously, in his order, the
learned magistrate did not deal with that
application.
[9] That he did not do so
is of no consequence, because we have the power to amend the citation
of the respondent on appeal. This
is because the evidence led during
the trial demonstrated the correct citation of the respondent. Ms
Bodasing
conceded, correctly in our view, that we had the
power to do so. There is accordingly no merit in the appellant’s
submission
that the identity of the respondent was not established.
[10] The standing of the
respondent to recover outstanding levies is also established on the
evidence. The complaint of the appellant
concerns only levies
allegedly imposed by the 2006 company. The evidence established that
it did not raise levies. Whichever company
may have raised levies at
different times, the following was also established in the evidence:
(a) from the outset of
the establishment of the estate, owners were liable for levies,
albeit that the amount of the levies may
have differed depending on
whether the construction of a particular home had been completed;
(c)
the appellant was
unquestionably aware of this, and agreed to pay levies when he
purchased the plot;
(d)
the Home Owners’
Association, under whichever guise it operated, continued as an
uninterrupted entity from approximately 2005;
(e)
the appellant agreed to
the passing of the two resolutions in 2012 – which was clearly
an attempt by the home owners to regulate
their affairs, and place
them on a firm footing under the 2004 company – the respondent.
The appellant was one of the unanimous
voters in favour of passing
the resolutions;
(f)
it was more than
co-incidental that the appellant stopped paying levies during the
2015-2016 years’, when, on his own admission,
he had run out of
money – his qualification that he never had money for excess
levies does not have the ring of truth; and
(f) the learned
magistrate correctly, in my view, found that the appellant had failed
to plead or establish his defence of set-off,
raised for the first
time in the evidence of the appellant.
[11] It became common
cause during the appeal hearing that the 2006 company did not, in
fact, impose any levies. Ms
Bodasing
conceded in argument
that:
(a)
the appellant’s
action was based upon his belief that the 2006 company had unlawfully
imposed the levies he allegedly sought
to set-off;
(b)
that defence was not
raised in the appellant’s summary judgment opposing affidavit,
nor in his plea. Ms
Bodasing
submitted that this was because the appellant believed the respondent
to be the 2006 company which acted illegally, and accordingly
he had
pleaded a bare denial;
(c)
the board resolution of
2008 to increase levies from R500 to R2 000 was taken by the Home
Owners’ Association as part of the
2004 company; and
(d) the defence of
set-off was not put to the respondent’s witnesses.
[12] Significantly, in an
email of the 9
th
December 2014, the appellant claimed that
he had over-paid his levies in error since the respondent
deregistered for VAT, and that
those amounts would equate to the
excess portions of payments ‘for the future monthly levies’.
This was not mentioned
in the appellant’s plea, and not pursued
by the appellant. In his summary judgment opposing affidavit he
alleged that he
had overpaid levies imposed during the construction
of his home, the finalization of which was delayed because of the
wrongful
conduct of the respondent. No claim-in-reconvention was
brought by the appellant for this, or any other debt allegedly owed
by
the respondent to him.
The Articles of
Association:
[13] It is not clear to
us that the Articles of Association of the 2004 company were a
necessary element for the respondent to have
proved in establishing
its claim for outstanding levies. As a matter of routine, companies
daily sue in our courts for outstanding
debts, without ever
disclosing, or referring to their articles of association (or
memorandum of incorporation). It is not normally
required to
establish a cause of action for the payment of a money debt, and the
pleading of it falls in the category of a
plus petitio
. In any
event the 2004 companies’ Articles of Association and the
conduct rules issued by the 2004 company were in the papers.
Interest:
[14] Regarding the
respondent’s claim for the payment of interest, prayer 2 in its
particulars of claim seeks:
‘
interest
on the said amount at prime +5% compounded monthly from date of
service of the Summons to date of final payment;’
In his submissions before
the court
a quo
, Mr
Ploos van Amstel
stated that the
word ‘prime’ could be equated to the respondent’s
prime bank rate. He conceded that it would
have been better had the
respondent identified its bank, because different banks may have
different prime rates. The learned magistrate,
correctly in my view,
queried the wisdom of claiming interest in the manner that the
respondent had done. He also reflected that
corporate bodies should
be advised not to use the term ‘prime’, because that
raises the need to establish the ‘prime’
rate. The
learned magistrate then simply granted ‘
interest at the
plaintiff’s bank prime rate (sic) . . . from the date of
service of the summons’
.
[15] The difficulty with
the grant of that order is:
(a)
the submission of Mr
Ploos van Amstel
that the court could simply assume that what the respondent intended
to claim, was interest at a rate calculated according to its
own
banker’s prime rate;
(b)
accepting that that was
what the respondent intended to do, no evidence was led to
demonstrate what that rate was (and, historically
after service of
the summons, how it may have varied); and
(c)
the learned magistrate
did not require such evidence prior to granting the order for
interest.
How then, was the order
capable of execution? It is not incumbent upon the Sheriff to
determine the prime rate/s. The order must
be certain and capable of
execution upon a plain reading of it, which, in this matter, it is
not. Before us, Mr
Ploos van Amstel
referred to a Notice of
Payment document (dated in 2013) in the record, demonstrating that
the respondent’s bankers were
ABSA Bank. He then referred us to
Standard Bank of South Africa Ltd v Oneanate Investments (Pty) Ltd
(in liquidation)
[1997] ZASCA 94
;
1998 (1) SA 811
(SCA). Here, at page 836C, the
court granted an order awarding interest ‘
at the agreed rate
of 2 per cent per annum above the plaintiff’s ruling prime rate
of interest from time to time.’
[16] A distinction
between the order in
Oneanate
and the proposed order in this
action, is that in
Oneanate
, the plaintiff itself was the bank
charging the prime rate. In discussing the order sought, Zulman
JA stated at 835I:
‘
The
parties were also agreed as to what the plaintiff’s prime rate
of interest was from time to time.’
In this action it is the
prime rate of the respondent’s banker, presumably ABSA, and
there was no agreement as to the respondent’s
banker’s
prime rate of interest. However, because the date of payment was
unknown, the prime rates in
Oneanate
for the future were not
agreed, because they were not yet in existence.
[17] Absent the necessary
evidence as to the prime rate of interest, what could or should have
been done? The date of the service
of the summons appears to have
been the 20
th
September 2016. The rate of interest
applicable at that date, in terms of the regulations pursuant to the
Prescribed Rate
of Interest Act, 1975 (‘the Act’), was
10.5% per annum. Mr
Ploos van Amstel
referred us to clause
11.11 of the Memorandum of Incorporation of the 2004 company, which
provides for the payment of interest on
overdue levies, but describes
the rate as ‘
5% above the prime overdraft rate of interest
levied by the major banks from time to time’
.
[18] Notionally, as the
interest rate was contractually agreed, the provisions of the
Prescribed Rate of Interest Act, 1975
are not applicable (s 1(1) of
the Act). No evidence was led as to the prime rates of interest
levied by major banks at any time.
In addition, it is entirely
unclear which of the many banking institutions would or could
describe themselves as ‘major’.
And then, how many
‘major’ banks are to be considered, and are their rates
to be averaged?
[19] In
Mutual and
Federal Ltd v Rumdel Construction (Pty) Ltd
2005 (2) SA 179
(SCA), para 17, the court recorded that:
‘
We,
however, are at large to order interest to run on the amount awarded,
although the issue of interest was not dealt with in the
Court a quo,
if we are of the view that the contractor is entitled to it.’
In my view, the
respondent is entitled to interest, but the rate was not proved, and
the calculation of such rate as may have been
agreed, was so vague as
to be unenforceable without evidence. The rate of interest is,
accordingly not ‘
governed by any other law or by an
agreement or a trade custom or in any other manner,’
in
which case, ‘
such interest shall be calculated at the rate
contemplated in subsection 2(a) as at the time when such interest
begins to run .
. .’
. Interest is therefore payable at the
rate of 10.5%
per annum
from the 20
th
September
2016 to date of payment.
Costs:
[20] The learned
magistrate awarded the respondent 60% of its costs because the
appellant reduced its claim at trial from R142 522.50
to R85 709.82.
There was no cross-appeal on the award of costs, and there is no
basis for this Court to interfere with the exercise
by the learned
magistrate, of his discretion in awarding costs.
[21] There are two
matters of procedure to which we need to refer. The first is that
after the respondent had delivered its heads
of argument, the
appellant caused to be delivered what was described as ‘Appellant’s
response to respondent’s
heads of argument’. This is a
new trend which has been followed by some legal practitioners. There
is no provision for the
delivery of such a document in terms of the
Uniform Rules of Court, nor in terms of the Practice Directives, nor
in the practice
of this court. It is a trend to be deprecated,
because it is unnecessary, and can only lead to an increase in the
work-load of
judges, and of costs to litigants. It also opens-up the
prospect of the respondent wanting to deliver a further reply, etc.
The
rules provide for finality in the documents to be produced on
appeal or in applications, and to expand upon them without a proper
substantive application to do so, is an abuse. Any such application,
in any event, is not contemplated in our practice. In my view
the
costs of those replying heads of argument fall to be disallowed.
[22] The second matter is
the inordinate size of the record. It comprises some 1310 pages over
14 volumes, excluding the heads of
argument. In the appellant’s
practice note, it recorded that it was necessary for the court to
read ‘The whole of the
record and a cursory reading of the
hearing transcripts’. The respondent’s practice note set
out the pages which it
was necessary for the court to read in the
cited bundles, and those included 37 pages in Volume 1, seven pages
in Volume 2, seven
pages in Volume 3, two pages in Volume 4, one page
in Volume 5, none in Volumes 6,7,8 and 9, 100 pages in Volume 10, all
of Volumes
11,12 and 14, and 26 pages in Volume 13. We agree with the
respondent’s legal representatives’ assessment of what
was
necessary for the Court to read. Clearly the appellant’s
legal representatives were simply not bothered to ensure compliance
with the practice directives of this Court.
[23] In the
circumstances, we make the following order:
(a)
the name of the
respondent is amended to read ‘Hawaan Home Owners’
Association’;
(b)
the appeal is upheld to
the extent that the order in the
court
a quo
is amended to
read that interest, calculated at the rate of 10.5 per cent
per
annum
, is to run on
the sum of R85 709. 82 from the 20
th
September 2016 to date of payment;
(c)
the appeal is otherwise
dismissed with costs;
(d)
the appellant’s
legal representatives may not recover any fees from their client:
(i)
for the preparation and
filing of the document entitled ‘Appellant’s response to
the Respondent’s Heads of Argument’,
and the annexed
‘Appellant’s Heads of Argument in Reply’;
(ii)
for the preparation and
filing of the appellant’s Practice Note; and
(iii) for the costs of
the copying and preparation of the appeal bundle, save for 180 pages
and Volumes 11,12 and 14.
Lopes J
ZP Nkosi J
Date of
hearing:
26
th
May 2023.
Date of
judgment:
23
rd
June 2023.
For the appellant:
Ms I Bodasing (instructed by Roshika Maharaj Law Offices).
For the respondent: Mr JA
Ploos van Amstel (instructed by Livingston Leandy
Inc).