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[2021] ZAKZPHC 28
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Royal Palm Body Corporate v Vahlati Investments (Pty) Ltd and Another (7214/2020P) [2021] ZAKZPHC 28; 2021 (5) SA 632 (KZP) (1 June 2021)
IN THE HIGH
COURT OF SOUTH AFRICA
KWAZULU-NATAL
DIVISION, PIETERMARITZBURG
Case No: 7214/2020P
In the matter
between:
THE ROYAL
PALM BODY CORPORATE
APPLICANT
and
VAHLATI
INVESTMENTS (PTY) LTD
FIRST RESPONDENT
R T REDDY
N.O.
SECOND RESPONDENT
ORDER
I make the
following order:
1. The applicant’s
appeal in terms of section 57 of the Community Schemes Ombud Service
Act
9 of 2011, is upheld with costs.
2. The orders of the
second respondent under case numbers CSOS 03401/KZN/19 and CSOS
03625/KZN/19
are set aside and replaced with the following orders in
each case;
2.1
‘The applicant’s claim is dismissed’.
JUDGMENT
Mathenjwa AJ
Introduction
[1]
This is an appeal in terms of section 57 of the Community Schemes
Ombud Services Act 9 of 2011 (the
CSOS Act), against the orders of
the adjudicator, the second respondent.
[2]
The applicant is the Royal Palm Body Corporate, a sectional title
scheme incorporated in accordance
with the laws of the Republic of
South Africa.
[3]
The respondent, Vahlati Investments (Pty) Ltd, a private company
incorporated in accordance with the
laws of the Republic of South
Africa, referred a dispute for resolution to the Community Schemes
Ombud Service in terms of section
43 of the CSOS Act.
[4]
The second respondent made orders against the applicant and the
applicant appeals against these orders.
The first respondent opposes
the application and raises points
in limine
. I first deal with
the points
in limine
before proceeding to the merits of the
complaint.
Points
in
limine
[5]
The respondent, firstly relying on the case of
Sternesen and
Tulleken Administration CC v Linton Park Body Corporate and another
2020 (1) SA 651
(GJ), contends that the applicant failed to cite the
correct respondents because it failed to cite both the adjudicator
who made
the determination and the Community Scheme Ombud Services
(the ombud) as respondents.
[6]
Secondly, it is contended that in terms of section 57 of the CSOS Act
and the Practice Directive 26.4
on dispute resolution no 1 of 2019,
the application was not served on the applicant’s registered
address, but it was served
on Unit 410 which is a hotel room in Royal
Palm Hotel.
[7]
Thirdly, it is contended that the applicant brought the notice of
appeal on 30 June 2020, which notice
omitted to relay the court case
number. The applicant argued that it subsequently elected on 21
October 2020 to appeal the adjudicator’s
order. Therefore, its
contended, the thirty days allowed for delivery of the notice of
appeal after the delivery of the adjudicator’s
order dated 22
June 2000 had elapsed.
[8]
Fourthly, it is contended that the applicant in the first instance
elected to proceed with the incorrect
procedure in their notice of
appeal on 30 July 2020 and in the second instance further elected to
proceed with their appeal on
notice of motion on 21 October 2020.
Therefore, it is argued there are two separate pending applications
seeking the same relief
against the same parties.
[9]
Finally, it is contended that in terms of regulation 14(4) of the
Sectional Titles Schemes Management
Regulations of 7 October 2016
(the 2016 Regulations), trustees are required to take decisions by
resolutions adopted by majority
vote. It is argued that it appears
that there are six trustees on the resolution; only four of, the six
trustees apparently signed
the resolution. It is unlikely that a
trustees meeting occurred as purported on 12 August 2020, since South
Africa was in lockdown,
it is argued.
[10]
Briefly, the applicant responded to the respondent’s point
in
limine
as follows:
‘Firstly, the
CSOS [the ombud] was served with notice of appeal timeously and they
acknowledged receipt thereof; the
adjudicator was cited in the
proceedings and served with papers: the application was served at the
domicilium citandi et executandi
of the respondent. The
appeal, was served timeously, and pursuant to the direction of the
Honourable Judge President a case number
was not allocated as it was
directed that the appeal be heard as an application; the issue of lis
pendens
does not hold water, because there is only one appeal
with a case number proceeding before the Court, and finally it is
contended
that the meeting was permissible notwithstanding the level
of the national lockdown. Consequently, the trustees met and took the
resolution on 12 August 2020.’
[11]
Having considered both the respondent and applicant’s versions
on the point
in limine
, I agree with the applicant that the
issue of non-joinder is neither here nor there in that the applicant
served the papers to
the ombud, the adjudicator and further cited the
adjudicator as the second respondent. Both the ombud and the
adjudicator elected
not to participate in the proceedings. As pointed
out by the applicant in paragraph 15 of its replying affidavit, the
respondent
was served at its
domicilium citandi et executandi
in accordance with the requirements of rule 3(2) of the applicant’s
management rules and rule 4(5) of the 2016 Regulations.
Therefore,
the issue of non-service does not stand. It is further evident from
the resolution of the trustees annexed as ‘FA1’
that the
resolution was signed by five trustees.
[12]
The version of the applicant that the application was launched within
the thirty days’ period allowed for
appeal, but not accorded a
case number pursuant to the direction of the Honourable Judge
President and subsequently proceeded with
the appeal on notice of
motion on the same papers on 21 October 2021, is not disputed by any
evidence to the contrary.
[13]
It follows that all the points
in limine
raised by the
respondent should fail. I now turn to the merits of the case before
this Court.
Merits
[14]
Briefly the applicant’s grounds of appeal are that:
‘1.
The learned adjudicator erred in declaring that the annual general
meeting of
the appellant of 25 June 2019 was void and invalid.
2.
The learned adjudicator erred in declaring that the appellant’s
management rule
57(2)(c) was invalid and of no force and effect
because it did not comply with the provisions of the Sectional Titles
Schemes Management
Act 8 of 2011 and the 2016 Regulations promulgated
under the Act.
3.
The learned adjudicator erred in ignoring that the appellant was
incorporated
in terms of the
Sectional Titles Act 95 of 1986
and the
Regulations promulgated thereunder contemplated a set of management
rules that could be amended or varied by a developer
or the body
corporate itself;
4.
The learned adjudicator should have found that the management rules
were registered
in terms of the 1986 Act and Regulations and
therefore erred in ignoring the principle that where a law repeals
any other law,
the repeal shall not affect any right or privilege
which was acquired or which accrued under the repeated law:
5.
Finally, the learned adjudicator erred in applying the declarations
of invalidity
of the appellant’s management rules
retrospectively to an Annual General Meeting that occurred one year
prior to this award.’
[15]
I now turn to the relevant provisions of the law that regulates the
dispute before court.
The law
[16]
The applicant was incorporated in terms of the Sectional Titles Act
95 of 1986 (the old Act of 1986). Section 35(2)
of the old Act of
1986 made provision for the creation of Management Rules of the body
corporate (the 1988 Management Rules), which
may be added to, amended
or repealed from time to time by the body corporate. The applicant
adopted the 1988 management rules in
terms of the Act. Rule 57(1) of
the 1988 Management Rules provides that ‘no business shall be
transacted at any general meeting
unless a quorum of persons is
present. . . at the time when the meeting proceeds to business’,
and rule 57(2)
(c)
provides that a quorum at a general meeting
shall be the number of owners holding at least 20 percent of the
votes by representatives
recognised by law and entitled to vote.
[17]
In 2011, Parliament adopted the Sectional Titles Schemes Management
Act 8 of 2011 (the new Act of 2011) which commenced
on 7 October
2016. Section 20 of the new Act of 2011 amended certain provisions of
the old Act of 1986.
[18]
Section 10(1) of the new Act of 2011 provides that:
‘A scheme must as
from the date of the establishment of the body corporate be regulated
and
managed, subject to the
provisions of this Act, by means of rules.’
Thus, like
the old Act of 1986, the new Act of 2011 requires the schemes to be
managed by means of management rules.
[19]
Section 10(12) of the new Act of 2011 provides that any rules made
under the
Sectional Titles Act are
deemed to have been made under
this Act. Section 19(a) of the Act provides that:
‘The Minister may
after consultation with parliament make regulations regarding –
(a)
any matter required or permitted to be prescribed by regulation under
this Act…’
[20]
Pursuant to the provision of section 19 of the Sectional Titles
Schemes Management Act, the Minister prescribed
the 2016 Regulations.
Regulation 6(1) of the 2016 Regulations provides that:
‘Rules, as
prescribed and as amended by a body corporate in accordance with
section 10 of the
Act, must be considered to
be and interpreted as laws made by and for the body corporate of that
scheme.’
It is pointed
out at paragraph 18 supra that section 10 of the new Act of 2011
preserves the management rules adopted under the
1986 Act, as
management rules under the new Act of 2011. Rule 6(2) of the 2016
Regulations under the new Act of 2011 creates management
rules for
all schemes.
[21]
Rule 19(1) of the Management Rules under the 2016 Regulations,
provides that:
‘Business must not
be transacted at any general meeting unless a quorum is present or
represented.’
Rule 19(2)
(b)
provides that
‘A quorum for a
general meeting is constituted
(a)
. . .
(b)
by members entitled to vote and holding one third of the total
votes of members in value,
provided that in
calculating the value of votes required to constitute a quorum, the
value of votes of the developer must not be
taken into account’.
[22]
Section 1 of the new Act of 2011 defines a developer as:
‘person who is the
registered owner of land, situated within the area of jurisdiction of
a local municipality, on which is
situated or to be erected a
building or buildings which he or she has divided or proposes to
divide into two or more sections in
terms of a scheme, or his or her
successor in title and includes, for the purposes of rebuilding any
building that is deemed to
have been destroyed as contemplated in
section 17, the body corporate concerned’.
Analysis
of the law
[23]
It is apparent from the reading of section 10(2) of the new Act of
2011, that the management rules adopted under
the old Act of 1986
were not repealed, but preserved and incorporated as the rules under
the new Act of 2011. These rules continued
to be valid unless they
are substituted, added to, amended or repealed by resolution of the
body corporate in terms of section
10(2)
(a)
of the new Act of
2011.
[24]
As stated supra the 2016 Regulations created the management rules for
body corporates, without repealing the management
rules created under
the old Act of 1986, and preserved by section 10 of the new Act of
2011. Consequently, there are two separate
sets of management rules
existing parallel to each other. Further, it is evident that the
provisions of the two management rules
conflict with regard to a
quorum that should be present at a general meeting and the categories
of members who are entitled to
vote at the meeting.
[25]
In terms of rule 57(2)
(c)
of old Act of 1986, the quorum at a
general meeting is constituted by 20 percent of the votes by
representatives who are entitled
to vote, and developers who are also
members of the body corporate are not excluded from voting at a
general meeting. On the other
hand, in terms of rule 19(2)
(b)
of the management rules under the 2016 Regulations under the new Act
of 2011, the quorum at a general meeting is constituted by
one third
of the votes by representatives who are entitled to vote but the
developer is not allowed to vote at the general meeting.
[26]
Before considering the fundamental tenants on the interpretation of
statues, I first consider the effect of the
conflicting rules on the
decision of the adjudicator.
[27]
I now turn to the order of the adjudicator.
Order of
the adjudicator
[28]
It is common cause that at the impugned general meeting of 25 June
2019, 44.74 percent of the persons holding voting
rights were
present. This number exceeded the threshold of 20 percent in terms of
the management rules prescribed under the old
Act of 1986 and
exceeded one third prescribed by the management rules under the 2016
Regulators of the new Act of 2011. It is further
common cause that
the vote of Gateway Royal Palm (Pty) Ltd constituted 36 percent, that
made up the 44.74 percent votes counted
at the meeting. Further it is
not disputed that Gateway Royal Palm had developed the applicant, and
that it is no longer the owner
of the land, but one of the owners of
the applicant.
[29]
Faced with the conflicting provisions of the legislation, the
adjudicator ruled that rule 57(2)(c) of the old 1988
Management Rules
was declared invalid and of no force and effect as it does not comply
with the new Act of 2011 and the 2016 Regulations
thereof; the
management rules were to be brought in line with the new legislation
and the implementation of any resolutions passed
at the general
meeting of 25 June 2019 was suspended.
[30]
In determining the legality of the order of the adjudicator, I now
turn to the principle of interpretation of statutes
and apply such
interpretation to the facts.
Interpretation
of the law
[31]
First and foremost the interpretation of statutes is regulated by the
Interpretation Act 33 of 1957. The fundamental
tenant of statutory
interpretation is further developed by case law.
[32]
Section 12(1) of the Interpretation Act provides that:
‘Where a law repeals
and re-enacts with or without modifications, any provision of a
former law, references in any other law
to the provision so repealed
shall, unless the contrary intention appears, be construed as
references to the provision so re-enacted’.
[33]
This provision of the Interpretation Act does not squarely resolve
the conflict in the current case, because although
the new Act of
2011 repealed the old Act of 1986, section 10 of the new Act of 2011
preserves the management rules of the old Act
of 1986 and renders
them to operate parallel with the management rules under the new Act
of 2011.
[34]
When resolving inconsistency between two existing statutes the
Supreme Court of Appeal in
Khumalo v Director-General of
Co-operative and Development and others
[1990] ZASCA 118
;
1991 (1) SA 158
(A) at
163C, held that:
‘where a later
statute is irreconcilable with an earlier one, the latter must be
regarded as having been impliedly repealed’.
[35]
There is however an exception to this principle. This principle does
not apply if the later statue is general and
the earlier one special
in its ambit. (See
Khumalo
supra at 163C-D).
[36]
This general principle of statutory interpretation supports the order
of the adjudicator that the old management
rules adopted under the
old Act of 1986 are repealed by the new management rules adopted
under the 2016 Regulations of the new
Act of 2011. It should be
recognised that the old management rules apply only to the applicant
whereas the new management rules
apply countrywide to all body
corporates. Further, it cannot be said that rule 57(2)
(c)
of
the old 1988 Management Rules is a special provision that applies
only in respect of certain situations or kind of body corporates
distinguishable from the situation addressed by the new management
rules. Both provisions, of Rule 57(2)
(c)
of the old rules and
rule 19(2)
(b)
of the new management rules relate to the same
issue of the quorum for a general meeting of the body corporates of
same kinds.
Therefore, in my view the adjudicator was correct in
finding that rule 57(2)
(c)
of the old management rules was
repealed by the provisions of the new management rules created by the
2016 Regulations under the
2011 Act.
[37]
The next issue for determination is whether the adjudicator was
correct in excluding the vote of the Gateway Royal
Palm (Pty) Ltd at
the annual general meeting.
[38]
Once again, I turn to the provisions of the Interpretation Act and
determine whether Gateway Royal Palm (Pty) Ltd
was entitled to vote
at the meeting.
[39]
I have dealt with the definition of a developer in paragraph 21
supra. More important in that the definition is
that a developer is a
person who is the registered owner of land.
[40]
The golden rule in the interpretation of statutes is: ‘the
words in a statute must be given their ordinary
grammatical meaning,
unless to do so would result in an absurdity’ (See
Cool
Ideas 1186 CC v Hubbard and another
2004 (4) SA 474
(CC) para
28). This principle is qualified by another rider that the relevant
statutory provisions must be properly contextualised
and interpreted
properly.
[41]
The definition of the developer in the new Act of 2011 is clear, that
for someone to be a developer he or she must
be an owner of the land
on which is situated buildings, which he has divided into sections in
terms of a scheme. This provision
is coached in the present tense,
not in the past tense.
[42]
It is common course that Gateway Royal Palm (Pty) Ltd was the
developer of the applicant some years ago. It is
further not in
dispute that it no longer owns the land, but owns 36 percent of the
scheme. A question arises then as to when
does someone who
owned the land, developed and sold the scheme to the owners ceased to
be a developer?
[43]
In my view, once a person ceased to be the owner of the land that
person is no longer a developer in terms of the
new Act of 2011. The
definition of a developer is coached in the present tense. This leads
to the conclusion that Gateway Royal
Palm (Pty) Ltd, was no longer a
developer, but, the owner and therefore entitled to vote at the
annual general meeting. In my view,
the adjudicator erred in
excluding the 36 percent votes by the Gateway Royal Palm (Pty) Ltd.
This error was based on his failure
to determine the definition of a
developer in section 1 of the new Act of 2011. This lead to the
conclusion that the general meeting
of the applicant of 25 June 2019,
was quorate.
[44]
Mr Shapiro, for the applicant argued in address, that the adjudicator
acted ultra vires his powers in declaring
rule 57(2)
(c)
of the
old 1988 Management Rules invalid. It was further contended that
since the respondent’s counsel was not opposing that
preposition it should stand. I disagree with this proposition in that
even if the passiveness of the respondent counsel on this
issue could
constitute a concession, it would be concession of law. It is settled
law that courts are not bound by wrong concession
of law. In this
regard, Ngcobo J in
Matatiele Municipality v President of the
Republic of South Africa
2006 (5) SA 47
CC para 67 held that:
‘Here we are
concerned with a legal concession. It is trite law that this Court is
not bound by a legal concession if it considerers
the concession to
be wrong in law …’
[45]
Therefore, regardless of the concession made, where there is doubt
that the adjudicator acted ultra vires his power,
this court should
interprete the empowering legislation and make a finding.
[46]
The adjudicator, a statutory functionary, source its authority from
section 54 of the CSOS Act. Section 54(1)
(a)
empowers the
adjudicator to make an order granting or refusing each part of the
relief sought by the applicant. Section 54(3) provides
that the order
may contain such ancillary and ensuring provisions as the adjudicator
considers necessary or appropriate.
[47]
Consequently, after finding that the provisions of rule 57(2)
(c)
,
of the old 1988 Management Rules were inconsistent with the new rules
in terms of the 2016 Regulations, it was within his powers
to declare
that rule 57(2)
(c)
is invalid, to the extent that it conflicts
with the new rules. The declaration of invalidity is ancillary to the
order.
[48]
It was further contended, that the declaration of invalidity of the
appellant’s management rules, should
not have been applied
retrospectively to an annual general meeting that occurred one year
prior to the award. In my view, there
is no merit in this contention.
As it was stated by Kentridge AJ in
S v Mhlungu
[1995] ZACC 4
;
1995 (3) SA
867
(CC) para 65 by ‘retroactive legislation is meant
legislation . . . which affects transactions completed before the new
statute
came into operation…’
[49]
It is common cause that at the time when the impugned meeting took
place the new rules were operative. It is further
common cause that
the award relates to the validity of the impugned meeting. The
declaration of invalidity of the rules is relevant
for the
determination of whether that meeting was quorate and legally valid
or not.
[50]
In summary I have found that:
(1)
Rule 57(2)
(c)
of the old management rules was impliedly
repealed by Rule 19(2)
(b)
of the new management rules under
the 2016 Regulations of the new Act of 2011.
(2)
The Gateway Royal Palm (Pty) Ltd is not a developer and it attended
the applicant’s general meeting
on 25 June 2019, as the owner.
(3)
The general meeting of the applicant on 25 June 2019 was quorate.
Order
[51]
It follows that the general meeting of the applicant on 25 June 2019,
was validly convened and the resolution passed
at that meeting was
valid. As pointed out in
Iscor Pension Fund v Murphy NO and
another
2002 (2) SA 742
(T) at 749A-C, that, if the court finds
that determination of the adjudicator was not correct in law, it will
substitute its own
decision.
[52]
Consequently, I make the following order:
1. The
applicant’s appeal in terms of section 57 of the Community
Schemes Ombud Service Act 9 of 2011, is upheld with costs.
2. The orders
of the second respondent under case numbers CSOS 03401/KZN/19 and
CSOS 03625/KZN/19 are set aside and replaced with
the following
orders in each case;
2.1
‘The applicant’s claim is dismissed’.
MATHENJWA AJ
DATE OF
HEARING :
5 May 2021
DATE OF
JUDGMENT : 1 June
2021
FOR THE APPLICANT :
Adv W N Shapiro
Instructed by Cox Yeats Attorneys
Locally represented by
Stowell & Co
FOR THE
RESPONDENT: Adv D Moodley
First respondent’s attorney instructed by Gishen-
Gilochrist Inc
Locally represented by
Anand Pillay Attorneys Inc.