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[2021] ZAGPJHC 783
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The Body Corporate of Central Square SS 661/2917 v Beck-Paxton N.O and Others (30916/2021) [2021] ZAGPJHC 783 (2 August 2021)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
LOCAL DIVISION, JOHANNESBURG)
CASE
NO: 30916/2021
REPORTABLE:
NO
OF
INTEREST TO OTHER JUDGES:NO
REVISED.
2/08/2021
IN
THE MATTER BETWEEN :-
THE
BODY CORPORATE OF CENTRAL SQUARE
SS
661/2917
APPLICANT
And
PENELOPE
BECK-PAXTON N.O
FIRST RESPONDENT
ANDRE
ANDREAS
N.O
SECOND RESPONDENT
THE
CHIEF OMBUD OF THE COMMUNITY
SCHEMES
OMBUD SERVICE
THIRD RESPONDENT
PHILIP
IAN
TILLMAN
FOURTH RESPONDENT
DATE
OF HEARING: This matter was enrolled for hearing on 20 JULY 2021,
with appearance on Microsoft teams. DATE OF JUDGMENT: This
judgment
was hand down electronically by circulation to parties by
email/caselines. The date of hand-down is deemed to be.
JUDGMENT
Kollapen
J
Introduction
and an overview of the relief sought
[1]
These are opposed proceedings in which the main protagonists are the
applicant and
the fourth respondent and in which proceedings the
applicant seeks by way of urgency relief in the following terms:-
“
(a)
Granting leave to the applicant to move this Part A of the
application as one of urgency, dispensing, insofar
as needs be, with
the forms and service provided for in the Rules of the above
Honourable Court and disposing of this application
at such time and
place, in such manner and according to such procedure as the above
Honourable Court may deem meet in terms of
Rule 6 (12);
(b)
Ordering, in terms of section 57(3) of the Community Schemes Ombud
Services Act 9 of 2011 ("the
CSOS Act"), that the operation
of the following adjudication orders granted against the Applicant in
terms of section of the
Act ("the Adjudication Orders" be
stayed pending the outcome of the final relief sought in Part B of
this notice of motion;
(c)
the adjudication order granted by the first respondent against the
applicant on 15 June 2021 under case number
CSOS 00/301 7/GP/19 ("the
First Adjudication Order"); and
(d)
the adjudication order granted by the second respondent against the
applicant on 17 June 2021 under case
number CSOS 824/GP/20 (other
Second Adjudication Order");
(e)
Interdicting and restraining the fourth respondent, pending the
outcome of the final relief sought in
Part B of this notice of
motion;
(f)
from taking any steps whatsoever pursuant to, in reliance on or in
the enforcement of the Adjudication
Orders; and
(g) from approaching
any High Court in terms of section 56(1) of the CSOS Act and/or any
Magistrates Court in terms of section 56(2)
of that Act, to obtain
the registration of either of the Adjudication Orders as an order of
any such Court.”
[2]
In part B of the Application the applicant seeks an order setting
aside the Adjudication
Orders to which reference has been made and
further relief confirming the validity of the Management Rules of the
Scheme as well
as the determination of the value of the votes of
residential and non- residential owners in the Scheme and their
respective liability
to make contributions to the Scheme.
[3]
The applicant is the Body Corporate of a Sectional Title Scheme known
as Central Square
SS (‘the scheme’) established in terms
of the
Sectional Titles Schemes Management Act No 8 0f
2011 (“STMSA).
[4]
The fourth respondent is the owner of a unit in the Scheme and has
over time challenged
features of the scheme and the rules in place to
the extent that he says they conflict with his rights and those of
other owners
of units in the scheme.
[5]
To that end the fourth respondent was aggrieved by what he says is
the unlawful Management
Rules of the scheme including the value of
votes and the extent of the liability of owners of residential units
in the scheme to
make contributions to levies.
[6]
He submitted written complaints in terms of the Community Schemes
Ombud Services Act
9 of 2011 ("the CSOS Act") and those
complaints came before the first and the second respondents who after
considering
the content of the complaints as well as the views of the
applicant, made determinations in both complaints which are described
in these proceedings as adjudication orders.
[7]
The first adjudication order was made by the first respondent on the
15 June 2021
while the second adjudication order was made on the 17
June 2021 by the second respondent. It is these orders that the
applicant
seeks to have reviewed in Part B of the application but for
now seeks an order that would effectively suspend the implementation
of those orders pending the outcome of Part B.
The
background facts
[8]
The scheme is a mixed scheme consisting of both residential and non-
residential units
and was developed by Lushaka Investments (Pty) Ltd
("Lushaka") and at the heart of this dispute is the manner
in which
voting rights and the liability of owners to make
contributions towards the expenses of the scheme have been determined
and allocated
between residential and non-residential owners of units
in the scheme as part of the applicants levy budget.
[9]
In the complaints which came before the first
and second
respondents, the fourth respondent objected to the manner in which
voting rights are allocated to owners in the separate
components of
the Scheme and to the manner in which the expenses of the Scheme are
apportioned to the owners of units in its separate
components. He
contended that the management rules which provide for that structure
were not put in place lawfully and that they
are unfair and benefit
Lushaka as owner of the non- residential units, at the expense of the
owners of residential units.
[10]
Both adjudicators found in favour of the fourth respondent and the
effect of the orders made
are as follows:-
The
First Adjudication order
The
following relief was sought
“
an
order declaring that a scheme governance provision is invalid and
requiring the association to approve and record a new scheme
governance provision to remove the invalid provision; and (d) an
order declaring that a scheme governance provision. having regard
to
the interests of all owners and occupiers in the community scheme, is
unreasonable, and requiring the association to approve
and record a
new scheme governance provision — (i) to remove the provision;
(ii) if appropriate, to restore an earlier provision;
(iii) to amend
the provision; or (iv) to substitute a new provision."
The
adjudicator made the following finding:
77.1 the Applicant's
prior written consent was not obtained prior to the amendment to the
management rules as required by section
11(a) of the STSMA;
77.2 the Applicant is
adversely affected by the 2017 amendment to the management rules; and
77.3 The composition
of the Respondent is in contravention of section 2 of the STSMA.
The adjudicator however
found that because the complaint had been lodged out of the time
period required by the CSOS Act she could
not, despite the finding
made grant the relief sought and accordingly made an order in the
following terms:-
“
80.1
The application to declare the 2017 amendment to the management rules
invalid and unenforceable is dismissed.
80.2 The association
must within 30 days of the issuing of this order call a general
meeting of its members to deal with the specified
business of:
80.2.1 the 2017
amendment to the management rules in so far as it relates to the PQ
and voting rights; and the composition of the
Respondent.
81.3 There is no order
as to costs.”
[11]
The effect of this order is that the applicant is obliged to call a
general meeting within 30
days of the order to deal with and address
the management rules of the applicant. There is no prescription as to
how this is to
be done and it is left largely to the applicant to
deal with that in the meeting to be called.
The
Second Adjudication order
[12]
In these proceedings the relief sought was described in the following
terms:-
“
Section
39(1)(c) (1) In respect of financial issues — (c) an order
declaring that a contribution levied on owners or occupiers,
or the
way it is to be paid, is incorrectly determined or unreasonable, and
an order for the adjustment of the contribution to
a correct or
reasonable amount or an order for its payment in a different way;
and then later in the
order and the reasons it was summarised as follows by the second
respondent :-
The relief sought by
the applicant is for an order directing the respondent to abandon the
concocted budget and to apportion levies
of the scheme in accordance
with the prescribed management rules of the STSMA as amended by the
2017 amended Management Rules.
[13]
The adjudicator upheld the complaint of the fourth respondent and the
effect of the order is
to declare that the contribution levied on
owners by the applicant is unlawful and should be adjusted in
accordance with the 2017
Management Rules of the Scheme.
The
appeal / review
[14]
Section 57 of the CSOS Act provides as follows in respect of appeal
rights:-
“
1)
An applicant, the association or any affected person who is
dissatisfied by an adjudicator’s order, may appeal to the High
Court, but only on a question of law.
(2) An appeal against
an order must be lodged within 30 days after the date of delivery of
the order of the adjudicator.
(3) A person who
appeals against an order, may also apply to the High Court to stay
the operation of the order appealed against
to secure the
effectiveness of the appeal”.
[15]
In addition this Court in
Turley Manor Body Corporate v Pillay
and Others 2020 JDR 0430 (GJ)
held that such orders beyond
being appealable were also open to being challenged on review in
terms of the Promotion of Administrative
Justice Act No 3 of 2000
(PAJA).
[16]
Thus the applicant has established at least in principle the right to
appeal and/or review the
adjudication order and in addition in terms
of Section 57(3) of the CSOS Act may apply to this Court to stay the
operation of the
order to secure the effectiveness of the appeal.
[17]
The applicant has argued that the decisions of the adjudicators are
wrong in law as well as open
to being challenged on review on various
grounds set out in PAJA including that the adjudicators took into
account irrelevant information
and failed to consider relevant
information. In particular, the applicant says that the adjudicators
failed to bring a proper understanding
to the proceedings the legal
framework that is applicable to both the adoption and the amendment
of the rules of the scheme.
[18]
It appears that apart from the intention of the applicant to review
both orders, the fourth respondent
has also lodged an appeal against
the First Adjudication order even though the scope and basis of that
appeal is not before the
Court. At the very least it appears that
both the applicant as well as the fourth respondent take issue with
the First Adjudication
order. – this is matter to be considered
in the grant or otherwise of the relief sought.
[19]
The requirements for the grant of interim relief was set out in
Setlogelo v Setlogelo
1914 AD 22
1 and they are as follows :-
“
(a)
a prima facie right;
(a)
a well-grounded
apprehension of irreparable harm if the interim relief is not granted
and the ultimate relief is eventually granted;
(b)
a balance of
convenience in favour of the granting of the interim relief; and
(c)
the absence of
any other satisfactory remedy.”
The
relief in respect of the first order
[20]
Before considering the requirements for interim relief I pause to
consider the 2 orders both
in terms of what they require as well as
their relationship with each other. The first order dismisses the
relief sought but nevertheless
orders the applicant to convene a
meeting to consider the amendment to the 2017 Management Rules. There
is a finding that suggests
those rules are in need of amendment but
no order to that effect. What then is the applicant required to do?
Reconsider the rules
in the light of the findings or regard the rules
as valid as there is no order otherwise and the application to have
the 2017 rules
declared invalid was expressly dismissed? If the Rules
have not been declared invalid, then what is the basis from which the
general
meeting is to proceed? A finding which was not made an order?
This is an area of some uncertainty and may not provide clear
guidance
to the applicant as to what is required of it. It is for
this reason that the rights of the parties may require further
clarity
and the appeal/review may provide the opportunity for that to
happen. It is significant that both parties seek to challenge the
First Adjudication order, even though for different reasons I must
assume. Under those circumstances a
prima facie
right (even
one open to some doubt) would have been established.
[21]
The other requirements for the grant of interim relief would find
application in that the uncertain
nature of the order is likely to
result in harm in that the applicant and its members will find
difficulty in giving effect to
the order for the reasons I have
already given. The balance of convenience does not require that issue
to be dealt with at this
stage especially in the light of the
uncertainty of the order; there is also no other remedy available.
[22]
I am in the circumstances inclined to grant the relief in respect of
this order.
The
relief in respect of the second order
[23]
The applicant argues that it has good prospects of success in its
intended review and has established
a prima facie right. That
assertion needs to be considered against the facts and the law as
well as the adjudication order and
the reasons advanced for it.
[24]
In the First Adjudication order it was found that the 2017 Management
Rules were changed to the
extent that the Rules registered when the
sectional title register was opened and that dealt with voting rights
and participation
quotas differed from what was contained in the
purchase agreement entered into between the developer and the fourth
respondent
and to that extent that change was not permissible unless
the consent of the owner was obtained and that absent such consent
the
purported change was invalid.
[25]
The first respondent however did not make any order in this regard as
the complaint was lodged
out of time.
[26]
The Second Adjudication order relates to the period after the opening
of the Sectional Title
register in 2017 and when the scheme became a
mixed use scheme with the addition of a non-residential section.
[27]
The fourth respondent says that the prescribed management rules which
were in force were further
amended by the 2019 Amended Management
Rules, which resulted in the scheme becoming mixed-use, consisting of
a residential section
and a commercial section.
[28]
His complaint was that the applicant was not adhering to the STSMA as
well as the Management
and Conduct Rules of the scheme and alleges
that in July 2020, a new managing agent was appointed to manage the
financial affairs
of the applicant, which resulted in the finances of
the scheme being split into 2 sections, being the residential section
and the
commercial section.
[29]
It was the fourth respondent’s case that the manner in which
levies were apportioned departed
from the 2017 Amended Management
Rules with the new apportionment method overwhelmingly benefitting
the owner of the commercial
section, who is the developer.
[30]
It was on this basis that the fourth respondent sought relief that
would in effect set aside
the budget approved for 2020 /21 and an
order requiring the revision of the budget along the basis of the
2017 Rules.
[31]
The stance of the of the applicant was to place reliance on the
Sectional Titles Act (section
32(2) and 11(2) which permits a
developer to structure the participation quotas and to amend the
Rules in a manner which distinguishes
between residential and
non-residential units in respect of voting rights as well as the
liability of owners to make payment of
levies.
[32]
The applicant further submitted that a certificate was lodged on
behalf of the developer in terms
of the section 3(1)(d) when the
sectional title register in respect of the scheme was initially
opened and brought about an amendment
to the voting rights and to the
liability to make contributions to the levy fund of the owners of
units in the residential component
and the non-residential component.
[33]
The adjudicator in finding in favour of the fourth respondent found
that notwithstanding the
provisions of Section 32(2) and 11(2) what
was in issue was the amendment of the rules of the scheme and that in
this regard Section
10(2)(a) of the STSMA was applicable and
provided:-
"management
rules, as prescribed, which rules may subject to the approval of the
chief ombud, be substituted, added to, amended
or repealed 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 repealed by
unanimous resolution of the body corporate
as prescribed".
[34]
The adjudicator also relied on Section 11(2)(b) of the STSMA which
provides that –
"Where an owner
is adversely affected by such a decision of the body corporate, his
or her prior written consent must be obtained."
[35]
It was found that the purported amendment of the Rules was not
effected by a unanimous resolution
as is required in Section 10(2)(a)
of the STSMA and further that the purported amendment had an adverse
effect on the interests
of the fourth respondent and that his prior
written consent was not obtained.
[36]
It was on this basis and for these reasons that the adjudicator
upheld the complaint and granted
the relief that was sought.
[37]
While the applicant has a right of appeal and seeks to exercise that
right, my view is that the
reasoning of the second respondent and the
reliance on the applicable legal provisions as well as the applicable
case law appears
sound. In this regard the second respondent relied
in part on the decision of the Supreme Court of Appeal in
Body
Corporate of Marine Sands v Extra Dimensions 121 (Pty) Ltd
(1082/2018)
[2019] ZASCA 161
;
2020 (2) SA 61
(SCA) (28 November 2019)
,
"The high court
approached the matter on the basis that the result of the resolution
was fair, and therefore the consent of
the appellant was not
required. This approach, which ostensibly imports a further proviso
that is not expressed in the Act, is
clearly wrong. If that had been
the intention of the legislature, one imagines, that it would have
said so. Such an approach, resting
as it does on nebulous notions of
fairness, brings uncertainty into the Act. What is more, it
disregards the carefully crafted
scheme of the Act. It also ignores
the plain meaning of the expression and therefore could hardly have
been intended by the legislature.
Moreover, it assumes that it is
unfair for the participation quota not to accord with floor area
ratio, yet section 32(2) expressly
provides for this in the case of
non-residential sections. In the context of a resolution to modify an
owner's liability for levies,
it seems a simple matter of logic that
an owner whose liability for levies increases is adversely affected
thereby. It is impossible
to conceive of any other meaning of those
words. That being so, the clear intention of the legislature is that
the written consent
of such a member must be obtained, so as to
observe the audi alteram partem rule and to prevent a diminution of
property rights
being imposed on a minority by the majority. I
therefore conclude that the respondent was 'adversely affected within
the meaning
of that expression by the resolution and that its written
consent was required. It follows that the resolution is ultra vires
the
Act and void".
[38]
In
casu
there appears to have been a compelling case for the
second respondent to conclude that there was a change in the rules
that would
have warranted a unanimous resolution of the applicant
(which was not obtained) and that the interests of the fourth
respondent
was adversely affected absent his consent.
[39]
I am accordingly not satisfied that a prima facie right has been
established by the applicant.
[40]
On the other requirements for the grant of interim relief there
cannot be said to be a well-grounded
fear of irreparable harm in that
if the order of the second order is given effect to, it cannot
firstly be asserted with any certainty
that there will be a
restructured budget or that if there is such a new budget it will
redound to the applicant’s prejudice.
Those are all maters for
the AGM to apply its mind to. In any event if the applicant finds
success on appeal or review then it
cannot be said that the
implementation of a new budget cannot be reversed. There was no
suggestion of irreparable harm in that
sense but rather that there
would be confusion at the AGM. I am not in agreement with this
submission as the order is clear and
what is required of the
applicant is clear.
[41]
The balance of convenience also does not favour the applicant. For
the reasons already given
the implementation of the order will bring
an unsatisfactory situation to an end and in the event the appeal or
review succeeds
the parties can simply be restored to the position
they were in – it is a matter of a financial adjustment at
worse there
being no suggestion that this was not possible in the
event that it became necessary.
[42]
Finally, there is an alternate remedy and that is the convening of a
general meeting. That ultimately
is the forum that must make
decisions and what those decisions will ultimately be remains to be
seen. It cannot and should not
be assumed that the general meeting.
properly conducted and with full and fair participation will reach
any outcome that can be
predicted with any certainty at this stage.
[43]
It is for these reasons that the relief sought in respect of the
second order must be refused.
Costs
[44]
It may be appropriate to reserve the costs of Part A for
determination in Part B.
Order
[45]
I make the following order in Part A of the proceedings:-
1.
It is ordered in terms
of section 57(3) of the Community Schemes Ombud Services Act 9 of
2011 ("the CSOS Act"), that the
operation of the
adjudication order granted by the first respondent against the
applicant on 15 June 2021 under case number CSOS
00/301 7/GP/19 ("the
First Adjudication Order")
a)
be stayed pending the
outcome of the final relief sought in Part B of this notice of
motion; and
b)
The fourth respondent
be interdicted from approaching any High Court in terms of section
56(1) of the CSOS Act and/or any Magistrates
Court in terms of
section 56(2) of that Act, to obtain the registration of the First
Adjudication Order as an order of any such
Court;
2.
The relief sought by
the applicant in respect of the adjudication order granted by the
second respondent against the applicant on
17 June 2021 under case
number CSOS 824/GP/20 ( “the Second Adjudication Order" )
is dismissed .
3.
The costs of Part A of
this application are reserved for determination in Part B of the
application.
————————————
NJ.
KOLLAPEN
JUDGE
OF THE HIGH COURT
APPEARANCES
COUNSEL
FOR THE APPLICANTS
: Adv GF
PORTEOUS
Instructed
by
: S.
BROWN ATTORNEYS INC
COUNSEL
FOR RESPONDENT
: Adv SJ
MARTIN
Instructed
by
:
SCINDLERS ATTORNEYS
DATE
OF HEARING
: 20 JULY
2021
DATE
OF JUDGMENT
: 2
AUGUST 2021