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[2021] ZAKZPHC 81
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Zikalala v Body Corporate of Selma Court and Another (AR255/2020) [2021] ZAKZPHC 81; 2022 (2) SA 305 (KNP) (23 September 2021)
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IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
LOCAL DIVISION, PIETERMARITZBURG
CASE
NO: AR255/2020
In
the matter between:
MDUDUZI
RICHARD
ZIKALALA APPELLANT
and
THE
BODY CORPORATE OF SELMA COURT FIRST
RESPONDENT
MAGISTRATE
GONASEELAN MUNIEN N.O. SECOND
RESPONDENT
ORDER
The
appeal is dismissed with costs.
JUDGMENT
Chetty
J
(Olsen J concurring)
[1] This
is an appeal against the dismissal of a counter-application by the
appellant, the owner of sectional title
unit No. […], Selma
Court, Berea Road, Durban. The appeal arises from an application
brought by the first respondent, being
the body corporate of a
sectional title development, which raised levies against the
individual unit owned by the appellant in
terms of section 3(1)(
f
)
of the Sectional Titles Schemes Management Act 8 of 2011 (referred to
as the ‘STSMA’). The appellant failed to pay
the levies
and contributions raised, resulting in the first respondent
instituting action and taking judgment by default in the
amount of
R24 099.09 as at 1 February 2018.
[2] In
the course of 2018 the appellant wrote to the first respondent’s
attorneys acknowledging his indebtedness
and his inability to pay the
amount due. Instead, he offered to pay off the debt by way of
instalments in the sum of R1 000 per
month, which amount would be
inclusive of the existing monthly levies. The offer was rejected by
the first respondent’s attorneys.
In an attempt to satisfy this
claim, the first respondent issued a warrant of execution which was
unsuccessful, resulting in a
nulla bona
return by the Sheriff.
[3] In
light of the first respondent not obtaining any redress in respect of
payment towards its judgment debt,
it proceeded against the appellant
in terms of section 65 of the Magistrates’ Court Act 32 of
1944, which proceedings were
set down on 29 March 2019. On 26 March
2019 the appellant made a written offer of settlement to the first
respondent’s attorneys
on the basis that he had managed to
obtain a loan from his family to secure a ‘full and final
settlement’ of the debt
in the sum of R30 000.
[4] On
29 March 2019 the appellant appeared in person at the section 65
enquiry, where the first respondent was
represented by its attorney.
He repeated his offer in full and final settlement of the claim,
including costs. The first respondent’s
attorney undertook to
take instructions regarding the offer. The matter was adjourned to 5
April 2019 on which date the first respondent’s
attorney
confirmed that the appellant’s offer was acceptable to the
trustees. Shortly thereafter on 9 April 2019 the attorneys
wrote to
the appellant advising that his offer of R30 000 in full and
final settlement was being revoked as it was erroneously
accepted.
The letter further indicated that the first respondent was
nonetheless prepared to accept R30 000 as a lump sum
payment
towards the arrears.
[5] Prior
to the appellant’s offer having been made, the first respondent
had instituted two further actions
against the appellant for levies
for the periods March to August 2018 and September 2018 to February
2019. These claims were for
the amounts of R4 027.73 and
R4 162.12 respectively, excluding interest and costs. It is
necessary to point out that
section 10 of the STSMA provides that the
affairs of a body corporate must be regulated and managed in
accordance with what is
commonly referred to as the prescribed
management rules. These rules (‘the Management Rules’),
are contained in annexure
1 of the Sectional Titles Schemes
Management Regulations, GN R1231,
GG 40335
, 7 October 2016
(‘the Regulations’).
[6] Management
rule 25 provides that once a budget has been approved, it is required
to give notice to each owner
of the contributions that will become
due and payable. Where such contributions or levies have not been
paid, the body corporate
in pursuing any claims is entitled to
receive from such owner any charges and interest due on any overdue
contributions. Provision
for this is contained in Management rule
25(2) which reads:
‘
(2) If
money owing is not paid on the dates specified in the notice referred
to in sub-rule (1), the body corporate
must send a final notice to
the member, which notice must state—
(a)
that the member has an obligation to pay the overdue contributions
and charges and any applicable interest
immediately; and
(b) if
applicable—
(i)
the interest that is payable in respect of the overdue contributions
and charges at the date of the
final notice; and
(ii)
the amount of interest that will accrue daily until the payment of
the overdue contributions and charges;
and
(c) that the
body corporate intends to take action to recover the amount due if
the overdue contributions and charges
and interest owing are not paid
within 14 days after the date the final notice is given.’
[7] To
the extent that the first respondent also included as part of its
claim the legal costs incurred in seeking
to recover the outstanding
contributions and levies from the appellant, Mr
Anderton
, who
appeared on behalf of the first respondent, submitted that the
recovery of costs is specifically catered for in Management
rule
25(4) which provides that:
‘
A member is liable
for and must pay to the body corporate all reasonable legal costs and
disbursements, as taxed or agreed by the
member, incurred by the body
corporate in the collection of arrear contributions or any other
arrear amounts due and owing by such
member to the body corporate, or
in enforcing compliance with these rules, the conduct rules or the
Act.’
[8] Accordingly,
the amount claimed from the appellant included compound interest
prior to the institution of the
litigation, the first respondent’s
legal costs prior to judgment being granted, interest on the judgment
debt after it had
been secured as well as any costs associated with
the recovery of the judgment debt. It is for this reason that the
first respondent
seeks costs on an attorney client scale in as much
as the members of the body corporate should not have to share in the
financial
burden for the recovery of outstanding contributions and
levies from an errant sectional title owner. It should be noted that
the
court a quo made the following concluding remarks in deciding to
make no order of costs when dismissing the appellant’s
counter-application:
‘
Ordinarily costs
are awarded in favour of the successful party, in this instance, the
applicant. However, the court sees no basis
to award the applicant
costs as it has to a certain extent contributed to the problem caused
by the trustees’ erroneous,
ill-considered and hasty response
to the offer. In addition, the applicant in opposing the matter did
not go far enough to address
the more pertinent and real legal issues
of novation and unfulfilled suspensive conditions.”
[9] In
response to the first respondent’s application, the appellant
opposed the application to declare his
property executable and filed
a counter-application for an order declaring that the settlement
agreement concluded on 4 April 2019
with the first respondent be held
to be valid and enforceable. In support of his application the
appellant contended that he had
not breached the terms of the
agreement and that the revocation by the first respondent was
unilateral. He stated that he had communicated
his offer of
settlement not only to the first respondent’s attorney, but
also emailed two of the trustees of the first respondent.
Both
trustees responded that the offer of settlement was acceptable.
[10] In
explaining the context in which the offer was made and received, one
of the two trustees who accepted the
offer, Ms Ramsumer, confirmed
that once the offer had been accepted, the first respondent’s
attorneys realised that it had
been done in error and immediately
sought to revoke the acceptance. Ms Ramsumer states in her answering
affidavit that as the appellant
was significantly in arrears with his
levies ‘it is not fair to all the members of the [first
respondent] to accept the appellant’s
“paltry amount to
settle the arrear levies”’. While the appellant was
liaising directly with the trustees, the
first respondent’s
attorney conveyed to the managing agents the amount of the offer and
the amount of the legal costs incurred
in pursuing all three claims
against the appellant. The total amount owing in respect of the
arrear levies and the first respondent’s
legal costs as at 1
April 2019 far outstripped the amount tendered as a settlement of the
first respondents claim. Unbeknown to
the appellant (and it appears
to the two trustees who accepted the offer) the managing agents
informed the attorneys that while
the trustees had accepted the
appellant’s offer, they ‘had not looked at the bigger
picture’ in that the total
owing to the first respondent
including legal expenses was R58 619.85. Having regard to the
offer made by the appellant, the
first respondent would still have
been left with a shortfall of R28 619.85,
[1]
which would take approximately five years to be paid off by the
appellant based on his proposals. This eventually culminated in
the
first respondent’s attorneys writing to the appellant informing
him of the decision to revoke the offer of settlement
on the basis
that acceptance of the offer would prejudice the first respondent.
[11] When
the matter came before the court a quo it considered the issue of the
offer by the appellant in light
of whether it was a conditional or an
unequivocal offer, and whether there were any suspensive conditions
attached thereto. It
concluded that the appellant was ‘testing
the waters with an offer. . . subject to his own terms which are yet
to be fulfilled’.
As no payment had been made pursuant to the
offer after almost a year, the court a quo concluded that he had not
been
bona fide
in making the offer. It further accepted the
contention on behalf of the first respondent that the offer had been
erroneously accepted
as no consideration had been given to the
prejudice that would befall the remaining sectional title owners if
the appellant were
to have avoided paying the balance of almost
R28 000 due in levies and charges. On those grounds the court a
quo dismissed
the counter-application and found that the appellant
had failed to prove the existence of a valid and binding settlement
with the
first respondent.
[12] For
the reasons set out below, little purpose is served by analysing
whether the court
a quo
was correct in its approach to the
issues before it. When the matter came before us, it was argued on a
fundamentally different
premise to that in the court
a quo
, at
least from the perspective of the first respondent. Before us,
counsel for the first respondent raised the issue as to whether
it
was competent in law for the first respondent to have accepted an
offer less than what had been claimed against the appellant;
put
differently, whether it was competent for the first respondent’s
trustees to compromise its claim for levies, costs and
interest due
and payable by the appellant in as much as the actions of the
trustees were
ultra vires
their powers in terms of the STSMA
and the Regulations.
[13] Ms
Gwele
, on behalf of the appellant, submitted that having
regard to the circumstances in which the offer was made by the
appellant, in
full and final settlement of the first respondent’s
claim, there was no uncertainty as to what the offer entailed and the
compromise which it was intended to achieve. The attorney on behalf
of the first respondent adjourned the section 65 proceedings
to
consider the offer. As such, there is no suggestion that it was
accepted without proper reflection.
[14] At
the same time, reliance was placed on Management rule 10 pertaining
to the validity of acts performed by
trustees. In this case, two
trustees of the first respondent confirmed in writing that the offer
was acceptable. As I understood
the reliance on Management rule 10
for this argument, as two trustees had consented to the offer by the
appellant, their acceptance
was binding on the first respondent. On
those grounds it was submitted that the appellant was reasonably
entitled to assume that
a valid and binding agreement had been
concluded between the parties.
[15] I
am not persuaded by this argument in as much as Management rule 10(1)
refers to a ‘document’
signed on behalf of the body
corporate being valid and binding where it is signed on ‘
the
authority of a trustee resolution
’
by two trustees, or one trustee and the managing agent. It is common
cause that both trustees agreed to accept the offer
of the appellant.
However, there is nothing in the record to point to the trustees
acting pursuant to a resolution authorising
them to accept such
offer, assuming in law they were permitted to do so. The requirement
for a resolution of owners was considered
in
Body
Corporate of Marine Sands v Extra Dimensions 121 (Pty) Ltd and
Another
2020 (2) SA 61
(SCA) where
the court was called upon to interpret the provisions of section
32(4) of the Sectional Titles Act 95 of 1986 (‘the
STA’)
which provided that the basis for the liability of owners for levy
contributions cannot be modified without the written
consent of any
owner who is adversely affected by such modification. Mr
Anderton
for the first respondent submitted that acceptance of the appellant’s
offer would necessarily have entailed the remaining
portion of the
unpaid levies being paid by the remaining members of the body
corporate, as a result of the compromise. To that
extent, those
members would be ‘adversely affected’ by a decision taken
by two trustees to the exclusion of the managing
agents and all of
the remaining owners. There is no record of such written consent or
resolution by the owners permitting the two
trustees to encumber the
body corporate with the unpaid portion of levies and contributions,
amounting to R28 619.85. I am
in agreement with Mr
Anderton
that even if the two trustees did give their consent and accepted the
appellant’s offer, such acceptance was invalid for
want of
compliance with their statutory duty under the STSMA. It appears to
me however that the only manner in which the trustees
could have been
so authorised was by way of a unanimous resolution of all the members
of the body corporate, giving their consent
to compromise the claim.
[16] In
dealing with the erroneous acceptance of the offer by the two
trustees, the court
a quo
said the following in relation to contention that the two trustees
may not have been aware of the ‘bigger picture’:
‘
4.
It is equally probable that whilst the attorneys, Lomas and Walker
and the agents, Acutts, were aware
of the factual situation regarding
the full extent of the Respondent’s indebtedness, the trustees,
A Ramsumar and K Naicker
were unaware of the true situation and acted
in haste believing the offer to be linked with the present judgment
debt of R24 000.00
plus interest and costs. The Respondent is
not in a position to dispute the situation described by the trustees
but seeks to score
a technical victory not supported by the law and
the facts.’
[17] The
conclusion by the court
a quo
appears to be entirely consistent with the contents of an email
addressed by the managing agents to the first respondent’s
attorneys, who drew to the latter’s attention that while the
trustees may have accepted the offer of the appellant, they
appeared
to be oblivious of the overall level of indebtedness of the appellant
and the potential prejudice for the remaining members
of the body
corporate if the acceptance of the appellant’s offer was
allowed to stand. On this basis the first respondent
submits that the
court
a quo
correctly found that the offer from the appellant was erroneously
accepted due to a reasonable error on the part of the two trustees.
Allowing the acceptance of the offer to stand would entail burdening
the remaining sectional title owners with a liability for
levies and
contributions which is exclusively that of the appellant.
[18] Even
if the court
a quo
was wrong in concluding that the acceptance of the appellant’s
offer could be set aside on the grounds of
justus
error
, a further issue arises
whether the conduct of the two trustees was consistent with the ambit
of their powers in terms of the STSMA.
Management rule 9(
b
)
provides that the trustees must ‘exercise the body corporate’s
powers and functions assigned and delegated to them
in terms of
section 7 (1) of the Act in accordance with resolutions taken at
general meetings and at meetings of trustees’.
[19] Section
7(1) of the STSMA likewise provides that:
‘
The
functions
and powers of the body corporate
must
,
subject to the provisions of this Act, the rules and any restriction
imposed or direction given at a general meeting of the owners
of
sections, be performed and exercised by the trustees of the body
corporate holding office in terms of the rules’. (emphasis
added.)
It
follows therefore that absent any express or implied power that is
accorded to a body corporate in the STSMA, the trustees may
not
conclude an agreement outside the ambit of the powers given in terms
of the STSMA. To the extent that an act is outside the
powers given
in the STSMA, the body corporate as a creature of statute, will be
construed to have acted
ultra vires
.
Likewise, it would not be competent for the body corporate to
sanction an act which is
ultra vires
by way of a special resolution.
[20] Management
rule 25 expressly grants to the body corporate the power to impose
levies and contributions from
owners. Where an owner fails in the
obligation to pay such amounts, the body corporate is empowered to
take action to recover such
amounts, including interest and costs. I
am unable to find any power in the Management rules or the STSMA that
permits the body
corporate to compromise on its obligation to collect
levies or contributions. To the extent that such amounts are owing,
it is
worth noting that the language employed in Management rule
21(2)(
b
)
precludes a body corporate from ‘
refund[ing]
to any member a contribution lawfully levied and paid’.
Although the rule speaks to the prohibition against excusing
any
owner from the obligation to pay levies, it may by implication be
interpreted to prohibit a compromise on any sum lawfully
due to the
body corporate in terms of levies and contributions.
[21] Malan
J in
Body Corporate of Fish Eagle v
Group Twelve Investments (Pty) Ltd
2003 (5) SA 414
(W) (‘
Fish
Eagle
’) was seized with an
application for the winding up of a respondent who was sued by the
body corporate for various amounts
stemming from levies and
electricity charges. The respondent disputed liability for payment of
the amount claimed, tendering in
settlement only what it considered
it was liable for. Pertinent to the present matter is that the body
corporate in
Fish Eagle
held a special general meeting at which a resolution was passed to
the effect that ‘the body corporate will not continue
with any
litigation and previous litigation will now be cancelled. The matter
will be settled by way of a discussion, at a meeting,
on an amicable
basis’ (
Fish Eagle
,
para 6).
[22] In
considering the resolution not to proceed with litigation, Malan J
said the following in paragraph 9 as
to the power (or rather the
absence thereof) of a body corporate to compromise on an amount due
in respect of levies:
‘
The resolution
allegedly passed at the special general meeting of the applicant held
on 26 January 2002: The respondent alleges
that a resolution was
passed at the special general meeting of the applicant held on
26 January 2002,
to the effect that the applicant would not
continue with any litigation against the respondent, and that
“previous litigation”
would be cancelled. The resolution
was that the dispute between the parties would be settled by way of
discussion, at a meeting,
on an amicable basis.
Any such resolution
is
ultra vires
the applicant.
In terms of s
37(1)
(d)
, one of the functions of the applicant body corporate
is to raise amounts by the levying of contributions on the owners in
proportion
to the quotas of their respective sections. In terms of
s
39(1)
of the
Sectional Titles Act, the
trustees of the applicant were
obliged to perform this function.
In law, a body corporate
has no power to pass a resolution to the effect that it will not
carry out one or more of the duties
imposed upon it by
s 37
read with
s 39
of the
Sectional Titles Act.
Moreover
, any such
resolution is invalid because it is said to have embodied an
agreement between the parties that a resolution of the dispute
between them would be agreed upon at a later meeting.’
(emphasis added.)
[23] It
must therefore follow that whatever the motive of the two trustees in
accepting the offer of the appellant,
whether rooted in sympathy for
his plight due to him being unemployed and the sole breadwinner in
his family, absent any express
or implied provision in the STSMA,
they were not empowered to accept a settlement offer of a lesser
amount than what was owing
to the first respondent. At a practical
level, one could understand why the trustees accepted the offer as
the alternative would
be to wait for several years before the debt of
the appellant would have been liquidated in terms of the offer made
at the
section 65
enquiry.
[24] In
Fish
Eagle
the
court took into account the duty to collect levies as contained in
sections 37(2)
and
39
(1) of the STA read together with management
rule 31(4)
of Annexure 8 to the
Sectional Titles Regulations, GN
R664,
GG
11245, 8 April 1988,
[2]
as
constituting the legislative framework against which the powers and
functions of the body corporate must be measured.
[3]
As noted in Van der Merwe
Sectional
Titles, Shareblock and Timesharing
,
section 37(1)(
d
)
of the STA (re-enacted under
section 3(1)(
f
)
of the STSMA) requires as one of the functions of the body corporate
to raise money by levying owners, in proportion to their
respective
participation quotas.
[4]
Section
39
of the STA (re-enacted in
s 7(1)
of the STSMA) requires this
function to be performed by the trustees. The following is stated in
Van der Merwe
Sectional
Titles, Shareblock and Timesharing
:
[5]
‘
In
law a body corporate has no power to pass a resolution to the effect
that it will not carry out one or more of the duties imposed
on it by
section 37
of the
Sectional Titles Act (STSMA
s 3)
read with
section
39.
In short, collection of levies is a statutory duty, which cannot
be circumvented by the making of a resolution.’
[25] It
was submitted by Mr
Anderton
that similarly to the trustees having no discretion to compromise on
the collection of levies and contributions, there is no provision
in
the STA (or the re-acted provisions of the STSMA) which permits a
body corporate not to collect interest and legal costs incurred
on
outstanding amounts due. As set out earlier, Management
rule 25(2)(
c
)
provides for the body corporate to take action to recover the amount
due if the overdue contributions and charges and interest
owing are
not paid after notice has been given. The sub-section again employs
use of the word ‘
must
’,
suggesting that the obligation imposed on the body corporate cannot
be compromised. In
Van
der Merwe
Sectional
Titles, Share Blocks And Time-sharing
it
is pointed out that:
[6]
‘
The
body corporate is a juristic person created by statute. . . . being
an artificially created legal entity, it can only have the
legal
status and powers conferred by it by the
Sectional Titles Act and
the
Sectional Titles Schemes Management Act and nothing more. It can only
operate within the legal framework of the legislation
in question. If
the legislation clearly and exhaustively deals with the matter
concerned, anything done outside the framework of
the statute is void
ab initio
and is likened to driving a coach and horses through the statute.’
The
author further states the following regarding the power of
trustees:
[7]
‘
A
person seeking to enforce a contract against the body corporate which
he contends was entered into by the trustees on its behalf,
must
first establish that the contract was within the capacity of the body
corporate itself, because an act performed by the trustees
in excess
of the capacity of the body corporate is
ultra
vires
and void. Secondly, he or she
will have to establish that the act was not one reserved by the Act
or the rules for the owners in
general meeting.’
[26] As
held in
Fish Eagle
,
a resolution that a
dispute about levies would be settled is
ultra
vires
the powers of the body corporate,
whose obligation is to raise amounts by levying contributions on
owners.
While the appellant may be feel aggrieved that his
offer of a settlement was unilaterally revoked by the first
respondent as a result
of an error on the part of its attorney and
two trustees who accepted his offer (before the opinion of the
managing agents was
obtained), the fact of the matter is that neither
the attorney nor the trustees had authority in law to compromise the
amount due.
The statutory obligation imposed on the body corporate is
to collect the full amount of levies and contributions due, together
with interest and legal costs. No latitude is afforded to trustees to
deviate from this obligation. The fact that the trustees or
their
attorney may have ‘failed to do their homework’ before
accepting the offer does not come to the assistance of
the appellant
in having his offer declared valid and enforceable. To do otherwise
would be to foist an agreement on the body corporate
in circumstances
where an errant or non-compliant owner is allowed a reduction or
compromise on the amount of his levies in circumstances
where this is
plainly not permitted or contemplated by the legislative framework
governing the affairs of sectional title developments.
It would
undermine the uniformity for the common burden that must be shared by
all sectional owners to pay their levies, based
on their
participation quota. This is an intrinsic component of communal
living envisaged in the STA and the STSMA.
[27] The
restriction against a statutory body compromising claims to it is not
unique to the STA or the STSMA.
The limited powers of the South
African Revenue Service (‘SARS’) to agree to waive or
compromise tax claims
[8]
is
arguably analogous to the limited powers of bodies corporate. In this
regard, it is a principle of taxation that it is impermissible
for
SARS to waive any payment of tax, unless it is authorised to do so.
The rationale appears to be the protection of the
fiscus
.
There is an exception, however which is where SARS would not stand to
harm the
fiscus
,
a claim for taxes may be waived. This would apply where it was
apparent that the debt was otherwise not recoverable.
[28] In
Namex (Edms) Bpk v Kommissaris Van Binnelandse Inkomste
[1993] ZASCA 181
;
1994
(2) SA 265
(A), the following summary of the court’s findings
in the headnote are noteworthy:
‘
The Court conceded
that it was not as a rule competent for a tax collector to waive,
settle or cede a claim for taxes, but referred
to the decision in
City of Cape Town v Claremont Union College
1934 AD 414
at 452
where it was held that in the event of a thorny dispute a receiver of
revenue was entitled to conclude a binding settlement
for an amount
less than that of his claim. The logical basis for this exception was
the rule that the State should not be prejudiced
by a renunciation of
its claims. There was accordingly no reason why a tax collector such
as the respondent could not, in order
to prevent harm to the
fiscus
,
waive part of his claim where it was certain that he would not
otherwise be able to recover the remaining portion thereof. The
respondent was accordingly entitled at common law to agree to a s 311
arrangement provided that he did not stand to receive less
in terms
thereof than he would have received in the event of a final
liquidation.’
[29] Referring
to the above decision, the court in
Commissioner for the South
African Revenue Service v Logikal Consulting (Pty) Ltd and others
[2019] JOL 42736
(GP), (‘
Logikal Consulting
’)
stated the following in para 16:
‘
The court [in
Namex
] held that, provided it was clear that the CIR would in
any event not receive a greater dividend in liquidation of the tax
payer,
nothing prevented a such claim being compromised to the
recoverable extent, whether by the creditor's actual consent or by
sanction
of the scheme by the court.’
[30] The
Supreme Court of Appeal in
A M Moola Group Ltd and Others v
Commissioner, South African Revenue Service, and Others
2003 (6)
SA 244
(SCA), para 18-19, considered the principle that a tax claim
may not be waived, and stated the following:
‘
[18] In
Collector
of Customs v Cape Central Railways
(1888-89) 6 SC 402
it was
argued for the respondent that when a senior government official had
allowed the importation of cement free of duty, the
appellant was
precluded from claiming the duty that should have been levied. That
proposition was termed “untenable’’
by De Villiers
CJ (at 404). Declining to apply any doctrine of estoppel (a term
“used in a very vague sense in the English
law”, said the
court, at 405), the court characterized the issue as follows at 405:
“
The question to be
determined, therefore, is not the limited one of estoppel, but the
far wider one whether the Government can legally
abandon its right to
any particular source of revenue provided by Parliament, and having
abandoned it, in any particular instance,
it is debarred from
recovering it from the person in whose favour it has been abandoned.”
[19] The court, after an
examination of both English and Roman-Dutch authorities, held that
the Government was not precluded from
claiming the duty. De Villiers
CJ was of the view that while it might be considered an injustice
that government should be permitted
to enforce a right it had
purported to abandon, “the rights of Government exist for the
public good and not for the personal
advantage or convenience of
members of the Government”. . .’
[31] A
point of similarity between the collection of revenue by SARS and the
function of a body corporate to collect
levies is that neither entity
is permitted to deviate from this duty, except in the case of a
‘thorny dispute’ where
SARS believes that it would be
better off entering into a settlement for a lesser amount,
particularly where there is no prospect
of it receiving the full
amount it claims. See
Logikal
Consulting
above. To that end, an exception is expressly catered for in the case
of SARS.
[9]
However, in the case
of a body corporate, no such latitude exists in the STA and the STSMA
or the Regulations. The fact that a
body corporate is a private body
and SARS is a public body is immaterial. The underlining rational is
that neither the
fiscus
in the context of SARS, nor the members of the body corporate, should
be prejudiced by the acceptance of a settlement. Moreover,
it would
lie in the powers of the revenue collector to raise taxes to make
good a shortfall in collection, whereas that power is
not available
to the body corporate as a result of non-collection. As an aside,
there is a further reason why the “thorny
dispute” does
not arise in relation to sectional title properties where an owner is
in arrears with the payment of levies.
Bearing in mind that sectional
title ownership is premised on the notion of a collective or
community ownership, the ultimate sanction
that the body corporate
can resort to in the collection of a debt is to obtain judgment and
pursue the attachment and sale in execution
of the unit. A
precondition for any sale in execution would be a settlement of the
outstanding levies owing to the body corporate
from the proceeds of
the sale. Failing that, transfer of the property would not take place
without a levy clearance certificate
being issued.
[32] A
further comparison can be found in the obligation of a municipality
to collect rates on property within
its area.
[10]
In
City
of Cape Town v Claremont Union College
1934
AD 414
the court considered whether the Council could exempt certain
properties from assessment and levying of rates. The Council argued
that it was
ultra
vires
to exempt the properties, and thus the exemption was a nullity and it
could accordingly claim the rates. The court disagreed and
found that
it was
intra
vires
to exempt the properties, and the rates could not be claimed. Wessels
CJ reasoned as follows at 421:
‘
We must therefore
consider the scope of the Cape Municipal Ordinance and of the
Valuation Ordinance and see whether these Ordinances
necessarily
imply a power in the Council to determine each year what properties
are to be exempted from paying the rate fixed for
the year.’
And
at 426-427:
‘
In determining
whether the Council has an implied power to exempt a property for
each financial year, the
consequences which follow from not
holding that the Council has such power
have always been
considered by the Courts as an important factor. The only argument
advanced by Mr. Davis against this view is
that the municipality is a
creature of statute and is bound by the terms of the statute. . . .
The municipality cannot forego its
statutory claim to the revenue
which the statute provides for it. In general terms this proposition
may be true, but when we take
the whole statute into consideration
and we find how difficult it is to carry on the work of the
municipality unless the Council
is given the power to determine, for
the purpose of raising its revenue for the year, into what category a
particular property
is to be placed; and if we find how far-reaching
the consequences are of not giving to the Council that power, then
the Court is
justified in coming to the conclusion that although the
power to separate property each year for revenue purposes is not
specially
given, the Legislature intended the Council to have such a
power and to exercise it.’ (emphasis added)
[33] Wessels
CJ reasoned further by distinguishing the matter before the court
from that in
Collector of Customs v Cape Central Railway
(1888-89)
6 SC 402
, on the basis that in the latter decision there was no
implied power:
‘
Decisions like
that of the
Collector of Customs v Cape Central Railway
(6 SC
402)
do not apply to a case like the present. In that case the
Government of the day agreed with the Cape Central Railway not to
exact
customs duty on certain articles which the Legislature had
declared to be liable to duty. This, the Court declared, the
Government
had no right or power to do. There was no question there
of a necessary discrimination and no room for any implied power. Here
of necessity
there must be someone who has the power to divide
the immovable property into rateable and non-rateable, for unless
this is done
a proper voters' roll which conforms with the law cannot
be framed and municipal revenue cannot be effectively raised for the
year,
even though by the erroneous exercise of that power some rates
for that year may be forfeited.’ (emphasis added)
[34] What
is of particular interest are the further comments by De Villiers JA
in the above matter (the learned
judge agreed with the judgment by
Wessels CJ) at 452-453:
‘
I take it to be an
elementary general proposition of law that when any dispute or
question of liability arises between two persons,
they are competent
to settle the matter between themselves by agreement, without being
compelled to have recourse to a court of
law, and I see no cogent
reason why a legal
persona
in the position of a municipality
should not have the power, for the purpose of carrying out its
statutory functions, of settling
disputes and questions of liability
without being compelled to have recourse to a court of law. On the
contrary, as is pointed
out by the Chief Justice in his judgment,
such a power may fairly be held to be incidental to, or consequential
upon, its statutory
power of levying municipal rates. It is
interesting to find that
Voet
lays down (Comm. 2.15.2), that
"agreements concerning doubtful things (i.e. compromises) may be
entered into by all persons
who are not prohibited. Therefore tutors,
syndics, administrators of communities (
administratores civitatum
)
and other similar persons, may enter into compromises on behalf of
their wards or on behalf of such communities, provided that
they do
not extravagantly (
ambitiose
) remit a clear right. . . For
although a
defensor
of a municipality, or of any corporate
body, is not allowed to refer a matter to the oath of the opposing
party, yet he does not
seem to be thereby impeded in his liberty of
compromising in a doubtful matter." The quotation may not be
strictly in point,
for the municipalities spoken of may have
possessed powers at common law, and may not have been mere "creatures
of statute,"
but it illustrates the general proposition of law
which I have stated. The only argument to the contrary, of any
substance, seems
to me to be the argument that a municipal council
being under our law a creature of statute, cannot possess any such
power of deciding
questions of rateability even with the consent of
the owner, in the absence of any express statutory provision
conferring such
power. Now the answer to that argument seems to me to
be (as is pointed out by the Chief Justice) that such a power may be,
and
is in the present instance, implied.
The mere fact that a body
is a creature of statute does not restrict it, in all the minutiae of
its daily functions, to the express
powers expressly conferred by the
Statute.
Something must sometimes be left to implication as
appears from the English decisions quoted in the judgment of the
Chief Justice
herein.’ (emphasis added).
[35] On
the issue of implied powers, the court in
Lekhari v Johannesburg
City Council
1956 (1) SA 552
(A) at 567A-C (‘
Lekhari’
)
commented as follows:
‘
It should be
emphasised, I think, that in order that such a power may be implied,
it is not sufficient that its existence would
be reasonably ancillary
or incidental to the exercise of any express power, in the sense that
it would be useful in giving effect
to that power. It must be
reasonably necessary for that purpose.
The test is not mere
usefulness or convenience, but necessity.
There must be a need of
sufficient cogency to rebut the presumption that the Legislature, in
conferring the power relied upon, intended
to authorise legislation
affecting the subjects of the State and not the State itself in its
judicial organs. Nor must the implied
power be extended beyond the
requirement of the occasion. What can be dispensed with without
defeating the object of the express
power or preventing its exercise
in a reasonably effective way, is not to be implied.’
(emphasis)
[36] It
was not argued by either of the counsel before us that the body
corporate or the trustees had the implied
power to compromise a claim
for levies and contributions which were outstanding. Applying the
test in
Lekhari
, I am unable to find any basis to infer the
existence of an implied power given to the body corporate to
compromise a claim for
levies due, or that such power to compromise
could be construed as ancillary to the express powers to collect
levies and contributions,
or that this exists as a reasonable
consequence of the express powers
(
see
Road Accident Appeal
Tribunal and Others v Gouws and Another
2018 (3) SA 413
(SCA),
para 27). On the contrary, the language used in section 3(1)(
c
)
of the STSMA imposes a positive obligation on the body corporate to
collect levies and contributions – the legislature sought
through the use of the word ‘
must
’ in the section,
to couch these functions in mandatory terms. Admittedly section
(4)(
i
) appears to be couched in permissive language through
the use of the word ‘may’, but a distinction between the
two
sections is that the obligation for collection of levies as a
function and not a power, only appears in section 3.
[37] In
the result, the contention of the appellant that a valid and binding
compromise was reached in respect
of the first respondent’s
claims cannot be sustained. Whatever the conduct of the attorney and
the two trustees in conveying
the impression that an agreement had
been reached, in law neither had the authority to compromise the
claim, as to do so would
be
ultra vires
the provisions of the
STSMA and the Regulations. While we reach the same conclusion as the
court a quo, we do so for reasons entirely
different. In the result,
the appeal must fail.
[38] In
so far as costs are concerned, the court a quo dismissed the
appellant’s application but made no
order as to costs. As set
our earlier, the court took into account that the first respondent’s
trustees and attorney were
partly responsible in bringing the
appellant under the impression that a valid and enforceable
settlement had been reached. The
appellant persisted in the appeal
despite the authority of
Body Corporate of Fish Eagle v Group
Twelve Investments (Pty) Ltd
2003 (5) SA 414
(W) relied on by the
first respondent that any such settlement was
ultra vires
the
STSMA. The members of the body corporate were suitably admonished by
the court
a quo
not making any order of costs against the
appellant. As a result, the costs of their litigation in the court
a
quo
would have to be borne by the members of the first
respondent, despite the litigation having as its genesis in the
failure of the
appellant to pay what is lawfully due to the first
respondent. While I see no reason to interfere with the court
a
quo’s
determination as to costs, I see no reason why the
appellant should not be liable for the costs of the appeal. The first
respondent
has been successful on a point of law. To do otherwise
would be to unduly prejudice the first respondent with legal costs
for no
reason justifiable in law. Accordingly, the general rule that
costs must follow the result should apply.
[39] In
the result, the appeal is dismissed with costs.
M
R Chetty
Appearances
For
the appellant: B.G
Gwele
Instructed
by: Garlicke
& Bousfield Inc
7
Torsvale Crescent
La
Lucia Ridge
Tel: 031 570
5415
Ref: S
Khanyile
Email: advgwelwbg@gmail.com
Tel: 031 109
2460
For
the respondent: SP
Anderton
Instructed
by: Lomas-Walker
Attorneys
2
Derby Place
Westville
Email: simonanderton@yahoo.com
Cell: 072 384
0961
Date
of hearing: 7
th
May 2021
Date
of submissions: 5
th
July 2021
Date
of reserved: 5
th
July 2021
Date
of delivery: 23th
September 2021
[1]
The first respondent’s closing written argument, paras 5-7,
records that of the three actions instituted by the first respondent
the total in respect of levies amounted to R20 240 for a period
of 44 months. Over the same period the use by the appellant
of a
parking bay would have attracted an exclusive use levy totalling
R8 580, resulting in a total amount due in respect
of levies of
R28 820. Management rule 25(1) and (2) (of the rules contained
in annexure 1 of the Sectional Titles Schemes
Management
Regulations, GN R1231,
GG
40335
,
7 October 2016) permit the first respondent to charge interest,
compounded monthly on overdue amounts together with all legal
costs
incurred in the recovery of arrears. None of the amounts claimed in
the court a quo were disputed by the appellant. Accordingly,
the
total sum claimed as at 1 April 2019 in respect of all three actions
was R68 932.14 in respect of which the appellant
offered an
amount of R30 000 in full and final settlement.
[2]
Body
Corporate of Fish Eagle v Group Twelve Investments (Pty) Ltd
2003
(5) SA 414
(W) para 7.
[3]
Section 37
and
38
of the
Sectional Titles Act have
been repealed.
The powers and functions of the body corporate referred to in those
sections are now largely encompassed in
sections 2
to
5
of the
STSMA. It is worth noting that the functions of the body corporate
under
s 3
contains the word ‘must’ suggesting that they
are mandatory whereas
s 4
contains the word ‘may’
suggesting that they are discretionary. See Van der Merwe
Sectional
Titles, Share Blocks and Timesharing
Vol 1 at 14-38, and 14-53.
[4]
Ibid at 14-65.
[5]
Ibid.
[6]
Ibid
at 14-17 –14-18
[7]
Ibid at
14-202(1)
– 14-203.
[8]
See
section 4(1)
of the
South African Revenue Service Act 34 of 1997
and
sections 143(1)
and
193
(1) and
193
(2) of the
Tax Administration
Act 28 of 2011
. See also F Moosa ‘
Tax Administration Act:
Fulfilling
human rights through efficient and effective tax
administration (2018)
De
Jure
1-16
at 14-15.
[9]
Section 193(2)
of the
Tax Administration Act 28 of 2011
.
[10]
In terms of the
Local
Government: Municipal Property Rates Act, No. 6 of 2004
.