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[2016] ZAKZDHC 1
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Extra Dimensions 121 (Pty) Ltd v Body Corporate of Marine (9015/2014) [2016] ZAKZDHC 1 (5 February 2016)
OFFICE
OF THE CHIEF JUSTICE
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
LOCAL DIVISION, DURBAN
CASE
NO: 9015/2014
DATE:
05 FEBRUARY 2016
IN
THE MATTER BETWEEN:
EXTRA
DIMENSIONS 121 (PTY)
LTD
..........................................................................
APPLICANT
And
BODY
CORPORATE OF MARINE
SANDS
..................................................
FIRST
RESPONDENT
REGISTRAR
OF DEEDS, PIETERMARITZBURG
...............................
SECOND
RESPONDENT
JUDGMENT
MASIPA
AJ
INTRODUCTION
[1]
The applicant seeks an order declaring invalid and to
be of no force and effect, Rule 26 in and Annexure “B” of
the
first respondent’s amended conduct rules. By virtue of its
position, the first respondent has as part of its functions the
authority to pass resolutions regulating the management of its
operations and to have such resolutions registered with the second
respondent.
[2]
The order sought by the applicant follows a special
resolution of the first respondent adopted on 23 August 2012 wherein
the first
respondent resolved to modify contributions by owners. The
provisions of the special resolution were as follows:
l
ln
terms of Section 32(4) of the Act, the liability of owners to make
contributions and the vaiue attached to votes is hereby modified
according to percentages set out in the attached Annexure “B
!
”.
[3]
Annexure “B” also deals with modification
to contributions and reflects section numbers, floor area (Square
metres)
and modification participation quota percentages. It then
sets out the participation quota in respect of each unit.
THE
FACTS
[4]
The Applicant is the owner of six units in the Marine
Sands Sectional Scheme which he acquired in 2002. The scheme is
partly residential
and partly non-residential (commercial). The
applicant’s units are designated non-residential. The
participation quota for
ail the non-residential properties was
determined by the developer of the scheme in terms of section 32 (2)
of the Sectional Titles
Act, 1986 (‘the Act’) when he
applied for the opening of a sectional title register. At that time,
the participation
quota for the non-residential component was
determined to be 6% of the whole.
[5]
While the developer was entitled to make provision for
a different value to be attached to the vote and for the modification
of
the liability of the units in respect of levy contributions, this
was not done. In 1992, the participation quota for each unit in
the
non-residential component of the scheme was determined by dividing
the 6% allocated to the non-residential units between each
non-residential section in proportion to their respective floor
areas. The Surveyor General approved this determination on 21 May
1993. This meant that the registered participation quota of all units
belonging to the applicant was 5.4979%.
[6]
An extension to the non-residential section in 1997
necessitated an amendment to the sectional plan and an adjustment to
the participation
quota percentage allocated to each non-residential
owner. The participation quota for the non-residential component of
the scheme
remained at 6% as had been determined by the developer but
the division of that percentage between the non-residential owners
was
adjusted. The revised participation quota for the non-residential
sections amending the sectional plan was registered with the Deeds
office. After the extension, the applicant’s revised scheme
participation quota was 4.8409%. In 2002, when the applicant
acquired
the units, his the participation quota remained at 4.8409%.
[7]
During 2011, it became apparent that the first
Respondent’s managing agent, Wakefields Property Management
(Pty) Limited were
incorrectly charging the non- residential owners
levies which were above that determined by the participation quota.
The effect
of this was that the applicant’s levies were higher
than they should be. The issue was raised by the owners since there
had
never been modification to their participation quota in respect
of their liability to levies as envisaged in section 35 of the
Act
Subsequent to this and in June 2012, the applicant’s monthly
levy was reduced from R16201.36 to R9 134.15.
[8]
Effective January 2013, the applicant’s levy
increased from R9 134.15 to R19 878.17, an increase from 4.8409% to
10.5349%
more than double the monthly levy. This was following the
special resolution passed at the annual general meeting of 23 August
2012 to substitute the conduct rules of the scheme and modify levy
contributions. At this meeting, Warren John Charlton held proxy
for
the Applicant and objected to the passing of the resolution. It was
nevertheless passed. The substituting conduct rules were
adopted and
the second respondent being the Registrar of Deeds, Pietermaritzburg
was notified of the amendments. The modification
of the levy
contributions to each member is charged according to the ratio which
the floor area of his section bears to the total
floor area of all
sections of the scheme, residential and non-residential alike. This
in effect means that the Applicant’s
levies amount to 10.5349%
of the total levies for the scheme while its participation quota is
4.8409%.
THE
ISSUE TO BE DETERMINED
[9]
The issue to be decided as agreed to by the parties is
the meaning/interpretation of the words ‘adversely affected’
as referred to in section 32(4) of the Act. The question is whether
the applicant is adversely affected by the special resolution
passed
by the first Respondent and whether it is envisaged from the Act that
his written consent be obtained prior to the passing
of such
resolution. If the Applicant was adversely affected, then the
resolution is contrary to the legal provisions and falls
to be set
aside.
APPLICABLE
LAW
[10]
The relevant part of Section 32(4) of the Act provides
as follows:
'Subject
to the provisions of section 37(1 (b), the developer may, when
submitting an application for the opening of a sectional
title
register, or the members of the body corporate may by special
resolution, make rules under section 35 by which a different
value is
attached to the vote of the owner of any section, or the liability of
the owner of any section to make contributions for
the purposes of
section 37(1 )(a) or 47(1) is modified: Provided that where an owner
is adversely affected by such a decision of
the body corporate, his
written consent must be obtained
[11]
In
Natal Joint Municipal Pension Fund v Endumeni Municipality
[1]
Wallis JA dealt with the approach in interpreting written agreements.
He stated at para 8 that:
Interpretation
is the process of attributing meaning to the words used in a
document, be it legislation, some other statutory instrument,
or
contract, having regard to the context provided by reading the
particular provision or provisions in the light of the document
as a
whole and the circumstances attendant upon its coming into existence.
Whatever the nature of the document, consideration must
be given to
the language used in the light of the ordinary rules of grammar and
syntax; the context in which the provision appears;
the apparent
purpose to which it is directed and the material known to those
responsible for its production
...
A
sensible meaning is to be preferred to one that leads to insensible
or un-business like results or undermines the apparent purpose
of the
document...”
[12]
Wallis JA held further at para 26 that:
“
In
resolving the problem the apparent purpose of the provision and the
context in which it occurs will be important guides to the
correct
interpretation. An interpretation will not be given that leads to
impractical, un-business like or oppressive consequences
or that will
stultify the broader operation of the legislation or contract under
consideration.”
[13]
In
Algar v Body Corporate of Thistledown & Others
[2]
the court considered the meaning of the words adversely affected by
first looking at the 1971 act
[3]
.
In terms of section 24(3) of that act, a unanimous resolution of
members of the body corporate was required the variation of member’s
voting rights and liability of contributions to the levy. The court
was of the view that due to the wording of the section, a member
of
the body corporate could act capriciously and without reason in
blocking a change in the basis upon which levies were calculated
by
not participating in a meeting where such unanimous resolution was to
be adopted.
[14]
Theron J found that section 32(4) of the Act reduced
the requirement to that of a special resolution which required a 75%
majority
and the consent of an owner who was adversely affected by
the resolution. The court rejected the argument by the applicant that
the fact that he had to pay an increased monthly levy, it meant that
he was ‘adversely affected’. It held that if that
was the
interpretation to be placed on the words adversely affected, it would
have been difficult to envisage any special levy
changing the basis
upon which levies were calculated. The result would be that the
situation would be the same as that which existed
under the 1971 act.
The court found that the result would ‘render the provisions of
section 32(4) nugatory’ which could
not have been the intention
of the legislature.
[15]
The court’s view was that the philosophy
underlying the Act is for owners of the units to be treated fairly
and that this
is reflected in the scheme of the Act as legislature in
section 32(4) recognised that when it comes to determination of
levies,
each scheme may be different. Since there was no authority
dealing with the meaning of the terms, the court after considering
cases
where the courts made reference to it. At page 5, the court
concluded that in order to arrive at the meaning of the terms
‘adversely
affected’ within the meaning of section 32(4)
of the Act, all facts and circumstances must be taken into account
and not
only the fact that a member has to pay more levies.
[16]
The court found it necessary in that case to consider
the scheme and found that unlike most sectional schemes, it which
comprised
of units to which exclusive garden areas are allocated, the
vast garden areas at Thistledown are common property open for equal
enjoyment by all unit owners. In addition to this, there were outside
buildings forming part of the common property and all unit
members
derived benefit. The effect of the levies as they stood meant other
members of the body corporate subsidised the applicant
when he
enjoyed equal access and enjoyment of the common areas. The special
resolution was intended to redress this inequitable
situation. When
considering all the circumstances, the court found that the applicant
was not adversely affected.
[17]
In
Silberberg and Schoeman
[4]
where the provisions of section 32(4) were considered, the authors
interpreted the phrase adversely affected to mean of detriment
to. It
was stated that the effect of the rigid interpretation of the phrase
would retain the requirement for unanimous resolution.
THE
CONTENTIONS BY THE PARTIES
[18]
Ms Mills for the applicant submitted that the context
of the provision appeared firstly in section 32(3) of the Act which
provides
that levies imposed on owners be in line with their
registered participation quotas and section 32(4) which allows the
body corporate
to pass a special resolution which alters this. She
submitted that the purpose of the proviso in section 32(4) is to
guard against
the majority imposing its will on the minority to its
detriment. She contended that there was a distinction between the
1971 act
and the current Act.
[19]
She submitted that in the context of the Act as a
whole, a purchaser who buys a unit would have constructive knowledge
of the participation
quota of that unit and of any conduct rules
providing for the computation of levies on a different basis to the
participation quota.
This knowledge would influence the purchaser in
his decision whether to purchase the unit or not and the purchase
price to offer.
It would be inequitable for the value of the levy to
be hanged by a majority of owners to the detriment of the new owner
without
his consent. Ms Mills argued that the legislature had this
consideration in mind when it enacted section 32(4). in terms of the
section, the developer is required to disclose any intention to
impose a different levy structure to potential purchasers in
instances
where the sectional title register is not yet opened.
[20]
She
submitted that the ordinary, grammatical meaning of the words
‘adversely affected’ is clear and unambiguous and
ought
to be applied. With reference to Thistledown, she submitted that the
court was not constrained to follow that decision for
various reasons
including the fact that the facts are distinguishable. She submitted
that in Thistledown, the scheme was purely
residential and the only
body corporate expense was the maintenance of the common property
which was enjoyed equally by members
regardless of the sizes of their
units. Ms Mills contended that the Thistledown judgment was wrong and
was not binging on me.
[5]
She submitted that Theron J had based her decision on equitable
principles rather than applying the letter of the law. A further
ground upon which she based her argument against Thistledown was that
the applicant continued to obtain the same benefits from
the common
property before and after the resolution.
[21]
Ms Mills contended that the first respondent’s
case was that the levy regime imposed by the developer was unfair
because the
participation quota allocated to the non-residential
component of the scheme was less than the floor they occupied. There
was nothing
placed before the court in respect of the developer’s
reasons as to why he had determine the scheme the way he did. She
further
contended that the purchasers of the units would have
considered the participation quota and associated financial
implication on
them which would have influenced the purchase price
they offered.
[22]
She submitted that the special resolution ‘adversely
affected’ the applicant and was passed without the Applicant’s
consent as required by section 32(4) and that the resolution was
ultra vires the first respondent’s powers and void.
Consequently,
the conduct rules were also void.
[23]
Mr Boulle for the first Respondent submitted that in
order for the court to find in favour of the applicant it would have
to make
the following findings:
1.
That Theron J was clearly wrong;
2.
That van der Merwe in ‘Sectional Titles, Share
Blocks and Time Sharing’, Volume 1: 4-10(3) is wrong as he
supports the
decision of Theron J;
3.
That Silberberg is wrong as he also supports Theron J
4.
That LAWSA was also wrong ;
5.
That 1986 amendments to the sectional titles act was
useless.
[24]
The court would be required to interpret the act in an
unfair and inequitable, adopt an interpretation of the act that
permits absurdity
and overlook a presumption that legislature knows
the law and how it is interpreted.
[25]
It was submitted that in Terblanche VS A. Eagle
Insurance 1983 (2) 501 (N) at 504, the court held that court must
find legislature
knows how the law was interpreted previously when
considering amendments to an existing legislation. Mr Boulle argued
that all
authorities concurred with the approach followed by the in
Thistledown.
[26]
Mr Boulle submitted that this court was called upon to
decide whether to give the phrase a wide or narrow interpretation. A
wide
meaning includes all relevant factors including purpose of the
Act while a narrow meaning is that which the Applicant relies on
being to look at the words in isolation to the circumstances. He
contended that in determining the issue, consideration must be
given
to the test set out in Natal Joint Municipal Pension Fund and
Bothma-Batho Transport (Edms) Bpk v S Bothnia & Seun Transport
(Edms) Bpk
2014 (2) SA 494
(SCA) at para 12. He submitted that the
court should have regard to the Act as a whole including its purpose,
previous legislation
dealing with the same issue and the unique facts
of the matter.
[27]
In
respect of the Act, Mr Boulle contended that it in respect of the
financial obligations, the intention of the legislature was
to ensure
a fair and equitable dispensation is created between various owners,
in this regard he relied on a reference to Thistledown
in Sectional
Titles, Share Blocks and Time-Sharing
[6]
He submitted that it could not be contended that the purpose of the
Act was create an unfair and inequitable distribution of expenses.
He
submitted further that section 32(1) and 32(2) of the Act expressly
distinguished between the calculation of the residential
and
non-residential schemes.
[28]
While
participation quotas for residential sections are determined
according to floor area, with non-residential sections, the developer
must determine the participation quota. It is expected that the
developer’s calculation should be based on section size as
well
as other relevant features including exterior design, designated use,
location, proximity to facilities, interior decorations
and fittings
and available parking space in allocating participation quotas in
non-residential and mixed schemes. He relied on
Silberberg to support
this contention
[7]
[29]
Mr Boulle submitted that the developer’s
determination did not take requisite considerations into account when
it determined
the participation quotas for Marine Sands and
disregarded the fact that non-residential sections represented 11.68%
of the aggregate
floor space while they paid 6% of the levies. He
contended that in response to the first respondent’s
proposition that the
developer’s determination discriminated
unfairly against residential owners, the applicant only advanced bare
denials.
[30]
In respect of the 1971 act, Mr Boulle contended that
the purpose of the Act was because legislature wanted to relax
stringent requirements
of amongst others the need to obtain unanimous
resolution to change levy calculations. He relied on Thistledown and
a finding by
the court that a stringent interpretation to the words
‘adversely affected’ would have the same effect as the
1971
act and render the provisions of section 32(4) nugatory which
could not have been the intention of legislature.
[31]
On the facts of this matter, Mr Boulie submitted that
the applicant did not dispute that previous levy calculations
operated harshly
on residential owners. As an example, he indicated
that while a non-residential owner would pay 0.3109% for 56 square
metres, residential
owners would have to pay 0.7103 which is more
than double. Since the applicant conceded that insurance was
calculated based on
square metres, it would not be unfair that owners
pay per area which was not the case until after the special
resolution was adopted.
While the applicant accepts that all members
must contribute equally to levies regardless of the extent of the
benefit, it contends
that it did not use security services or lifts
which constitute a large portion of expenses. On the other hand, the
applicant stated
that an enquiry as to who benefits from a service
lift would cause havoc and that it did no contend that it should not
pay for
the lift and the like.
[32]
Mr Boulle argued that the applicant makes a bare
allegation that the impugned resolution has achieved an equitable
position where
all owners are treated fairly with no undue burden on
any unit. While the previous system was inequitable, the latter
achieves
an even spread of the costs. As the applicant accepted that
costs could not be spread based on use, it could hardly be said that
the applicant is adversely affected by the change which Mr Boulle
argued was reasonable and achieved the purpose of the Act. He
submitted that the applicant enjoys its fair share of all services in
respect of the common property.
[33]
In interpreting relevant legislation, Mr Boulle
submitted that the court must avoid absurdity and achieve a sensible
result. The
applicant’s interpretation could lead to absurdity
since would result the situation which existed prior to the enactment
of section 32(4) where an owner can prevent a change in levy
payments. He submitted that the court was alive to this in
Thistledown.
Also, an opportune developer could allocate nominal
participation quota to a non-residential section and retain ownership
and then
prevent the body corporate from ever increasing the payment
by withholding written consent.
[34]
Mr Boulle submitted that the challenged resolution did
nothing but to seek to address the imbalance created by the seemingly
arbitrary
allocation by the developer and to ensure that unit owners
share expenses in a fair and equitable manner. He submitted further
that there was no dispute on the papers that the proposed levy
calculation method will achieve that purpose. In view of this, he
submitted that Thistledown was not clearly wrong and that the first
respondent’s interpretation be preferred.
[35]
In reply to the contentions by Mr Boulle, Ms Mills
argued firstly that what academics say is not binding precedent. She
submitted
that it was apparent from the authors that they neither
supported nor criticized Thistledown. Van der Merwe appeared to try
and
explain the judgment. Ms Mills argued that in any event, this
court was not bound to follow it. She submitted that the provisions
of section 32(4) were not unfair since the Act requires that all
facts are brought to the knowledge of the purchaser. She contended
further that the Applicant’s interpretation did not create
absurdity but created certainty to the would be purchasers/owners.
In
interpreting the Act, the court should not introduce uncertainty. She
disputed that legislature believed that the courts were
aware of
Thistledown decision and that it was not correct. She argued that it
was court’s function to correct wrong judgments.
Theron J read
in to the Act that which is simply not there and introduce fairness.
[36]
In respect of the meaning of adversely affected, she
argued that the Respondent sought to place proper interpretation. The
words
permit for only one meaning in the context of the provision it
can only mean that an owner’s levy went up. The resolution
changes the manner in which the levies can change. The court says
participation quota. The change is that the other owners pay
more.
EVALUATION
[37]
Although the decision in Thistledown was taken prior to
the Natal Joint Pension Fund matter, the Court’s interpretation
fails
within the principles set out by Wallis JA. In Thistledown, the
Court took into account the ordinary grammar syntax of the word
adversely affected and considered several cases where the word was
used.
[38]
However, as submitted by Mr Boulle no person can give
consent to reasonable paying more money. The result of this
interpretation
would be that there can never be a levy increase. In
Thistledown the court took into account the fact that when the
legislature
drafted the provisions of $32(4), it had at its disposal
the provisions of $24(3) of the 1971 Act where the resolution could
only
be passed by unanimous vote of members. This provision made it
difficult if not impossible for body corporates to change the basis
upon which levies could be increased.
[39]
Having considered the earlier provision and the
challenges it had introduced to body corporates legislature, it could
not have intended
for a similar context in the subsequent provision.
[40]
Another factor is that legislature being aware of the
earlier provision, could not have intended for absurdity in the
subsequent
Act. It would be absurd to suggest that legislature
intended that there be no change in levies unless an owner consents.
This would
mean that certain owners would benefit from the proper use
of common property at the expense of other owners. In any event, the
applicant accepted in his affidavits that all members must contribute
equally to levies. If this is the case, then he cannot be
complaining
about the increase of his levies.
[41]
Although the result of the impugned resolution is that
the applicant pays more money on a consideration of all relevant
facts, it
cannot be said that he is adversely affected since he now
gets to pay for what he uses or benefits from. As submitted by Mr
Boulle,
the applicant conceded that all members had to contribute
equally to levies regardless of the extent of benefit. To achieve
this,
the Body Corporate had to increase his levies. Although
suggested otherwise by Ms Mills, it is improbable that the Applicant
would
have given his consent to pay more. He evidence this through
his objection even prior to the meeting. A consideration of fairness
which Ms Mills argued was wrong in Thistledown becomes relevant since
it is unfair that one owner benefits from the use and enjoyment
of
the common property at the expense of others.
[42]
It
could not
have been the purpose of the Act and the intention of legislature
that one owner benefits from the use and enjoyment
of the common
property at the expense of others. This would lead to an insensible
and un-business like result. Further, legislature
could not have
enacted legislation allowing for the value attached to a vote of each
one to be amended by special resolution on
the one hand while on the
other it restricts this by requiring consent by an adversely affected
owner to the detriment of all other
owners. The context within which
the phrase was used can only give effect to the intention of
legislature when interpreted in line
with the Natal Joint Municipal
Pension decision.
[43]
In order to arrive at a sensible and business like
meaning taking into consideration the context of the phrase, it
cannot be said
that the applicant is adversely affected by the
resolution.
[44]
In the result, the following order is made:
1.
The application is dismissed with costs.
MASIPA
AJ
APPEARANCES:
For
the plaintiff: Ms L Mills
Instructed
by: Richard Evans & Associates
For
the interested party: Mr A J Boulle
Instructed
by: B E S Agar and Associates.
Matter
heard on: 11 November 2015
Judgment
delivered on: 05 February 2016
[1]
2012 (4) SA 593
{SCA)
[2]
[2010] JOL 26140 (N)
[3]
Sectional Titles Act 66 of 1971
[4]
Silberberg and Schoeman's 'The Law of Property', 5
th
Ed, Bardehorst, Pienaar & Mostert: para 19.5.1(c)
[5]
At para 12{b) of the Applicant's Heads of Argument; LAWSA second
edition Vol 5 (2) at para 170; Harris & others v Minister
of the
Interior and Another
1952 (2) SA 428
at 452Cto 454B; R Phillips
Dairy (Pty) Ltd
1955 (4) SA 120
(T) 122 A to E
[6]
Van der Merwe Sectional Titles, Shareblock and Time-Sharing Vol 1
Sectional Titles at 4-10(3)
[7]
Badenhorst, Pienaar & Mostert Silberberg and Schoeman: The Law
of Property 5
th
edition at 1.9.5.1: (b)