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[2016] ZAKZDHC 39
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Assegaai River Properties (Pty) Ltd v Derby Downs Management Association (5986/2015) [2016] ZAKZDHC 39 (28 September 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
LOCAL DIVISION, DURBAN
NOT REPORTABLE
Case No: 5986/2015
In the
matter between:
ASSEGAAI
RIVER PROPERTIES (PTY) LTD
Applicant
and
DERBY DOWNS
MANAGEMENT ASSOCIATION
Respondent
Coram:
Gorven J
Heard
:
27 May, 20 September 2016
Delivered:
28 September 2016
ORDER
1.
The application is dismissed.
2.
The counter application is
dismissed.
JUDGMENT
Gorven
J:
[1]
The Derby Downs Office
Park is located near the Westville campus of the University of
KwaZulu-Natal. It comprises a number of individually
owned
properties. The owners are voting members of the respondent
Association. When the events dealt with in this application took
place, the governing legislation was the Companies Act 61 of 1973
(the Act).
[1]
The respondent functions as a company and was governed by Articles of
Association.
[2]
A finance committee must present a budget to every annual general
meeting. This is an itemised estimate of the anticipated income
and
expenditure of the respondent for the ensuing financial year. A levy
fund must be established. Each member is required to contribute
a
proportion of the levies to the fund which must be used to meet the
expenses of the respondent.
[2]
The proportion in which
levies are recovered from members is governed by article 14.7 of the
Articles. At the time of the annual
general meeting held on 12
December 2007 (the 2007 AGM), the relevant parts of this article read
as follows:
‘
14.7
The proportions in which members shall make contributions towards the
levy fund established in terms of Article
14.2 shall be determined by
the Finance Committee, who in determining such proportions shall have
regard to all circumstances prevailing
at the time and to equity and
shall be guided by the following:
14.7.1 they shall
assign those costs arising directly out of the land itself to the
member owning such land;
14.7.2 they
shall assign those costs relating to the office park generally,
including all open spaces, to an owner in the
ratio of the
permissible gross area of that owner’s land in the office park
over the total permissible gross area of land
in the office park’.
[3]
It will be seen that
the property size provided the basis for the proportion of levies
paid by each member. It was recognised that
this was not an equitable
approach because not all sites were able to utilise the full
municipal building allowance. Among other
things, a large lake
encroached on some of the properties which prevented this. A proposal
was put forward to the 2007 AGM to amend
the basis upon which the
levy proportions were calculated.
[4]
The chair of the board
motivated a new basis on which proportions would be calculated. For
illustrative purposes he appended a schedule
(the schedule) headed,
‘Present System compared with GLA System’. GLA stands for
general lettable area of each property.
The percentages for various
systems were set out in three columns. The first was headed ‘Present
Ratio’, the second
‘GLA Ratio’, and the third
‘Mixed Basis’.
[5]
At the 2007 AGM, a
special resolution was tabled and unanimously passed. This provided
that:
‘
The Articles
of Association be altered in the following manner.
1.
That Articles 14.7; 14.7.1 and 14.7.2 be
deleted.
2.
That a new Article 14.7 be included which
will read: The proportions in which members shall make contributions
towards the levy
fund established in terms of Article 14.2 has been
determined by the members in General Meeting and is set out in
Article 14.7.1
3.
That a new Article 14 be included as
Article 14.7.1. This Article shall consist of a list of Erf Numbers
and the proportion of the
levy charges they shall bear. The
proportions shall be as approved by the members in General Meeting on
the 12 December 2007 as
evidenced by signature of the Chairman.’
Immediately
after that resolution, the minutes of the 2007 AGM record:
‘
With regard to
the levy contribution apportionment, after further discussion, it was
agreed that Mr Diab would check the lettable
area of his unit as it
appeared to be in excess of the area actually built. The levies of
the above G.L.A. (Gross letting area)
system of apportionment was
unanimously approved.’
Mr Diab
was the representative of the applicant at the 2007 AGM.
[6]
The dispute in this
application arises from this part of the minutes. Both parties
treated the dispute as one hinging on the interpretation
of the
special resolution read with what is recorded thereafter. The
applicant contends that, properly construed, the resolution
was to
the effect that the levies would in future be calculated on the basis
of the accurate and actual gross lettable area of
each property. In
order to give effect to this resolution, it says, an accurate
measurement of the gross lettable areas of each
property is required.
It says that, since there are no such accurate measurements, the
resolution requires this exercise to be
undertaken by a land
surveyor.
[7]
The applicant therefore
approached this court for the following relief:
‘
(a)
The respondent shall within one (1) month of the grant of this order
or within such period
as this court deems appropriate, cause Mr
STANLEY GIBSON, alternatively a practising land surveyor appointed by
the chairman of
the South African Geomatics Institute to measure the
gross lettable areas of the buildings constructed on the site within
the office
park Derby Downs situate at Derby Place, Derby Downs
Westville, KwaZulu-Natal.
(b)
The respondent is ordered to pay the costs of the land surveyor to
measure the gross
lettable areas as referred to in para (a) above.
(c)
The respondent is ordered to pay the applicant’s costs of suit.
(d)
The respondent shall not recover from the applicant any costs of the
surveyor referred to
in para (a) above or any costs of this
application payable by it to the applicant.’
The
final prayer is because the applicant contracted Mr Gibson, a land
surveyor, to undertake that exercise on its property. The
applicant
says that there is therefore no need for a fresh measurement of its
property.
[8]
In opposing the
application, the respondent raises two points
in
limine
and deals
also with the merits of the application. It raises a counter
application which ‘is brought in the event that this
Honourable
Court does not dismiss the application as a result of the issues
raised
in limine
. . . or for any other reason not connected to the merits.’ The
counter application seeks payment of arrear levies by the
applicant.
This is framed in alternative amounts; the main claim being based on
the applicant’s proportion of the levies
which the respondent
says was agreed in the resolution and which the respondent applied
from March 2008. The alternative is based
on a proportion based on
the gross lettable area of the applicant’s property arrived at
by Mr Gibson. Both of these amounts
exceed the levy payable under the
system which obtained prior to the resolution taken at the 2007 AGM.
[9]
The first point
in
limine
is one of
non-joinder. The respondent contends that each of its members should
have been joined in the application. This because
the levies of each
member will be affected if the applicant is to succeed. The second is
that there are material factual disputes
which militate against the
matter being dealt with on the papers and require resolution by way
of oral evidence.
[10]
The applicant submits
that the test concerning non-joinder is that the party concerned has
a legal interest in the subject matter
of the litigation which may be
adversely affected by a judgment. It submits that a financial
interest is not sufficient and, in
support of the submission, calls
in aid the decision in
In Re: BOE
Trust Ltd & others NNO
.
[3]
In that matter, the application
sought to vary the terms of a trust. The Supreme Court of Appeal held
that charities which were
beneficiaries of the trust should have been
joined because they would no longer receive funds if the relief was
granted. This decision
is distinguishable in that the respondent
comprises, and represents the interests of, all the members. In my
view, therefore, it
was not necessary to join each member.
[11]
The second point
in
limine
is that
material factual disputes exist on the papers. Any such disputes
relate only to issues which are not material to the outcome
of the
application. The main factual dispute relates to when Mr Diab
reverted to the Chair of the meeting. As will become clear
later in
this judgment, I do not regard that issue as of any moment in
determining the application. I turn, therefore, to the merits
of the
application.
[12]
What is clear is that
the special resolution sought to amend the Articles. After resolving
to delete articles 14.7, 14.7.1 and 14.7.2,
it resolved to substitute
article 14.7 in the following terms:
‘
14.7
The proportions in which members shall make
contributions towards the levy fund established in terms of Article
14.2 has been determined
by the members in General Meeting and is set
out in Article 14.7.1’…
The resolution
then provided for the contents of article 14.7.1. as follows:
14.7.1. This Article shall
consist of a list of Erf Numbers and the proportion of the levy
charges they shall bear. The proportions
shall be as approved by the
members in General Meeting on the 12 December 2007 as evidenced by
signature of the Chairman.’
What was
placed before the 2007 AGM for approval was the schedule with the
three columns mentioned above. As regards that schedule,
the minute
records:
‘
The levies of
the above G.L.A. (Gross letting area) system of apportionment was
unanimously approved.’
What was
therefore approved is the list headed ‘GLA Ratio’ in the
schedule appended to the report of the Chair. This
list was converted
from percentages to ratios and the Chair signed that list (the AGM
GLA list). This then meant that the resolution
resolved to
incorporate those proportions into article 14.7.1 in the form of a
list. The issue of whether Mr Diab reverted in time
or not is not
material because the list was signed and was thus resolved to be
incorporated in that form into the articles. Whether
the applicant
would have a basis to challenge and set aside the signing of the list
is a different matter.
[13]
As I say, the parties
focused their argument on whether the resolution allowed Mr Diab to
substitute his calculation for that on
the AGM GLA list and whether
it was required that other properties should also be measured and
their actual areas included. However,
since this was a special
resolution, the provisions of the Act govern whether it has amended
the articles.
[14]
Section 200(1) provides
that, within one month of the passing of a special resolution, a copy
of the resolution, together with a
copy of the notice convening the
meeting, shall be lodged with the Registrar of Companies who shall,
upon payment of the prescribed
fee, register the resolution. Section
203(1) provides that a special resolution shall not take effect until
it has been registered
by the Registrar. Section 202 of the Act
provides that ‘[a]ny special resolution of which a copy is not
lodged with the Registrar
and registered by him within six months
from the date of the passing of that resolution shall, unless the
court otherwise directs,
lapse and be void.’
[15]
When this was raised
during argument, the parties requested an adjournment to establish
whether or not the special resolution was
lodged and registered with
the Registrar within six months from the December 2007 AGM. Written
argument would follow. It has been
established that the special
resolution was not lodged with the Registrar. No court order relating
to the resolution has been made.
As such, the special resolution
passed at the 2007 AGM has lapsed and is void. Article 14.7 remains
unamended.
[16]
The relief sought by
the applicant is premised on the special resolution coming into
effect being void. In its written argument
the applicant sought to
argue that in future the issue of the accurate measurement of the
gross lettable area is bound to arise
and that, therefore, I should
grant the relief sought. Whether or not such an order is competent,
and I express no view on that
issue, I cannot act as if a resolution
in the exact form of the special resolution passed at the 2007 AGM
will inevitably be passed
in future. Some other formula may be
settled on or the present system left intact. That is a matter for
the relevant meeting of
the respondent. It is therefore clear that
the applicant cannot succeed in its application.
[17]
In its written
argument, the respondent did not seek to submit that it would be
entitled to the relief sought since it is premised
on the special
resolution having brought about an amendment to the Articles and this
has not taken place. The trustees can only
collect levies on the
basis set out in the Articles. The respondent can therefore also not
succeed in its counter application.
[18]
It remains to consider
the question of costs. The applicant submits that, if both the
application and the counter application are
dismissed, no order
relating to costs should be made. This would have the effect that
each party would pay its own costs. The respondent
submits that the
counter application was conditional on the success of the applicant
on the merits. This is not so. It was made
conditional on the
dismissal of the points
in
limine
or a refusal
to ‘dismiss the application . . . for any other reason not
connected to the merits.’ The points
in
limine
have not
resulted in the application being dismissed, nor has it been
dismissed for a reason not connected to the merits. In the
alternative, the respondent submits that no costs order should be
made. I agree with this position as being the most appropriate
in the
circumstances.
[19]
In the result:
1.
The application is dismissed.
2.
The counter application is
dismissed.
_______________________
GORVEN
J
DATE
OF HEARING:
27
May, 20 September 2016.
DATE OF
JUDGMENT:
28 September
2016.
FOR
THE APPLICANT:
GR Thatcher
SC instructed by Sanan & Watts Inc.
FOR
THE
RESPONDENT:
MB Pitman instructed by Francois Medalie
& Co.
[1]
T
he Act was repealed by
the
Companies Act 71 of 2008
with effect from 1 May 2011.
[2]
The respondent
was
known as an Association Incorporated under
Section 21
under the
Act. Under the new Act, such companies are called non-profit
companies.
[3]
In Re: BOE Trust Ltd & others NNO
2013 (3) SA 236
(SCA) para 19.