About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: North Gauteng High Court, Pretoria
SAFLII
>>
Databases
>>
South Africa: North Gauteng High Court, Pretoria
>>
2016
>>
[2016] ZAGPPHC 633
|
|
Shames No and Others v Body Corporate of Victoria and Edward Court (3920/2012) [2016] ZAGPPHC 633 (29 July 2016)
HIGH COURT OF SOUTH AFRICA (GAUTENG DIVISION,
PRETORIA)
NOT REPORTABLE
NOT OF INTEREST TO OTHER JUDGES
REVISED
DATE: 29 JULY 2016
Case no.
3920/2012
In the matter
between:
K.D. SHAMES NO
First Plaintiff G.M. MARC
NO
SecondPlaintiff
UCOSISELELO (PTY)LTD
Third Plaintiff
LEMASA INVESTMENTS
(PTY)LTD Fourth Plaintiff
WAVERLEY CENTENARY
(PTY)LTD Fifth Plaintiff
and
BODY CORPORATE OF
VICTORIA AND
EDWARD COURT
Defendant
JUDGMENT
RABIE,
J
1.
The first and second
plaintiffs, as trustees of the BC Specialised Opportunities Fund
Trust, claimed the amount of R 7 586 960,
92 from the defendant
pursuant to a written loan
agreement concluded between the fifth plaintiff and
the defendant on 14 September
2005.
2.
As security for its
obligations in
terms
of the loan agreement the defendant ceded and assigned to fifth
plaintiff all the defendant's rights, title and interest
in and to
all unpaid contributions due by members of the defendant to it as
well as all future contributions to be levied upon
the defendant's
members. On 3 December
2009
the fifth plaintiff ceded its right title and interest in and to all
amounts due
and
owing by the defendant to it, to the fourth plaintiff. On 1 June
2011 the fourth plaintiff ceded its right title and interest
in and
to its claim against the defendant to the third plaintiff. On 29
June 2011 the third plaintiff ceded its right title
and interest
to
its claim against
the
defendant
to the first
and second
plaintiffs. The plaintiffs
claimed the aforesaid amount from the defendant as alternative
plaintiffs. For the sake of brevity
I shall refer to the plaintiffs
merely as "the plaintiff'
unless there is reason to refer
to them
specifically.
3.
Apart from denying
liability for the claim against it the defendant
pleaded specifically that the
claim against it had become prescribed and also that the
in dulum
rule
applies insofar as the plaintiff seeks to recover more in respect
of interest than the amount of
the capital
debt.
4.
Before proceeding to
the dispute between the parties it is necessary to
refer briefly to certain
background factors. The defendant is a sectional title scheme
comprising 72 units situated in Rosettenville,
Johannesburg. The
scheme
is
governed by the Sectional Titles Act, 1986 ("the Act"). A
body corporate
was
formed
for
the scheme of which
all
the
owners
were
members.
On 5 July 2005 the scheme was
placed under administration by the Gauteng Division of the High
Court and Mr J. van den Bos was
appointed as Administrator of the
scheme
in
terms
of
section 46
of the Act.
The Administrator
was
granted
the
powers
and duties provided for in
section 37 and 38 of the Act which effectively
suspended the body corporate
and removed its rights, powers and duties in favour of
the Administrator.
5.
Shortly
after his appointment the Administrator, on 14 September 2005,
signed the aforesaid loan
agreement with the fifth plaintiff and thus bound the body corporate
to the terms of the loan
agreement.
6.
Mr J. Mason, who
testified on behalf of the plaintiff, explained the background
to the conclusion of the loan
agreement. He testified that during or about 2004
he, together with some of the
major banks,
established
a training programme with the aim of providing training to sectional
title unit owners and bodies corporate to make
them aware of their
rights and obligations
in terms of the Act.
It emerged during the course
of the training programme that one of the major
challenges facing bodies
corporate was that the owners were not making their required
contributions (levies). This resulted in
the bodies corporate not
having sufficient available funds to discharge their obligations,
inter alia,
to
maintain the
common
property. This state of affairs also prejudiced the owners who were
paying their levies and also resulted in the body corporate
having
to take legal action
against
the non-paying
owners.
7.
In
order
to
address
the
aforesaid
problem
a
loan
structure
was
developed
to address these very
financial challenges facing bodies corporate. The lending model
which was developed had as its main purpose
the advancement of a
loan which would enable the
body corporate to perform its functions and
duties required in terms of
the Act. At the inception of the loan transaction an
amount equal to the arear
levies owing at that point would be made available to the body
corporate.
A
facility
was
also
made available
to finance the shortfall,
if any,
in monthly levy collections.
No
fixed monthly instalments were
payable
and
the loan debt would be
repayable by levies collected. The advantage of this type of
loan agreement would be the
protection of the paying owners as well as allowing
the body corporate to
rehabilitate their finances without prejudicing other
owners' rights.
8.
In
casu
the Administrator
concluded the written loan agreement with the
fifth respondent on 14
September 2005. According to paragraph 2 of the
agreement the loan consisted
of two portions. The first, in
terms of paragraph 2.1, was a
loan in the amount of R 1 240 913, 18 which amount reflected the
arrear or
unpaid
levies at date of signature of the agreement. This portion of the
loan was referred to
as
the "initial
payment".
The
second
portion,
in terms
of
paragraph
2.2 was described as follows:
"thereafter on a monthly basis, during the currency of
this Agreement; sufficient
monies to enable the Body Corporate to meet its
monthly financial commitments,
subject to the terms and conditions set out in
this Agreement (monthly
amount)."
9.
Both
the aforesaid amounts were subject to the following proviso stated in
paragraph 2 as follows:
"provided that the
total amount in respect of the initial payment and the
monthly amount,
including
interest to accrue thereon,
shall
never exceed the sum of all unpaid levies (including interest,
administration charges, collection fees and legal fees) throughout
the duration of this Agreement and provided further that all
advances in respect of the monthly amount and accrued interest on
the loan shall be
made by
the Company in its
sole
discretion."
10.
Under the heading
"Payment of Interest and Repayment of Capital" paragraph
7 of the agreement provided as
follows:
"7.1 The interest
and the capital owed by
the
Body Corporate to the Company from time to time shall be repayable
from time to time on the earlier of:
7.1.1
the date of receipt of
monthly levies from time to time, limited to the amount of such a
receipt
7.1.2
the date of receipt of
collected earlier
levies
7.1.3
the
termination/cancellation of this
agreement.
7.2.
In the reduction of its
indebtedness (capital and accrued interest) to
the Company, the Body
Corporate shall, on a monthly basis, pay the interest in terms of
paragraph 4 and repay the capital owed
to the Company by way of
paying
to
the Company all the monthly levies and interest thereon collected
by or on behalf of the Body Corporate. The Body Corporate
shall
instruct the Managing Agent to effect payment of all monthly
levies (including interest, administration
charges, collection commission
and legal costs) collected, to the Company, on a
monthly basis, by paying same
in the Company's bank account, within 7 (seven)
days from receipt thereof,
but not later than the 5th day from the Managing Agent's monthly
close-off date, failing which an
administration fee of R 1000, 00
per month shall apply for the duration of such failure and/or
breach and
which
amount shall be capitalised to the loan without notice to the Body
Corporate.
7.3
All payments made by
the Body Corporate in
the
reduction of its indebtedness shall be apportioned:
7.3.1
FIRSTLY towards
administration charges, collection commission and
legal costs; and
7.3.2
THEREAFTER
towards interest not yet capitalised;
and
7.3.3
THEREAFTER in the
reduction of the capital
outstanding."
11.
In
terms of paragraph 8 the
"Company", which was the fifth plaintiff for purposes of
the agreement, was appointed by
the body corporate as the
collection agent to collect all current unpaid, future unpaid and
future monthly levies due to the body
corporate by the owners of the
sections in the scheme. However, in terms of
the same paragraph the fifth
plaintiff granted the body corporate the power to collect unpaid
levies.
12.
In terms of paragraph 4
interest was due to the fifth plaintiff on
outstanding amounts due.
Paragraph 4 provided as
follows:
"The outstanding
balance due to the Body Corporate from time to time in
respect of amounts lent and advanced by the
Company to the Body Corporate in terms
of
this Agreement shall bear interest at the Interest Rate and such
interest
payable by the Body
Corporate shall be calculated on a daily basis on the
outstanding balance and charged
monthly
in
arrears
on the
last day of each
month
when
it shall immediately be
due and payable in terms of clause 7. Any interest which
is unpaid on the due date, will be capitalised to
the Body Corporate's loan on that date."
According to paragraph
1.1.8 the "interest rate" meant interest on the loaned
amount at the rate of 10% above the prime
lending rate of the
Standard Bank of South Africa Limited per annum calculated on a
daily basis on the
outstanding
balance
and charged
monthly in arrears on the
last day of each
month
when
it becomes
due
and
payable.
13.
Paragraph 9 of the
agreement contained a "security session". According to this
provision the Body Corporate ceded and
assigned to the fifth
plaintiff, as
security
for the indebtedness of the Body Corporate to the fifth plaintiff,
all the Body Corporate's right, title and interest
in and to all
unpaid contributions due
by
members and all and any rights of action, which the Body Corporate
may
have,
including, but not limited to, rights of action against the
defaulting owners of units in the scheme;
and all future
levies,
including special
levies due and to become due to
the Body Corporate, including such charges and costs payable in
terms of the
Act.
14.
The agreement also
contained a breach and an acceleration clause should
the defendant fail to comply
with its obligations under the
agreement.
15.
It is appropriate to
deal with the defendant's plea of prescription first. In terms
of
section 12
(1) of the
Prescription Act, 68 of 1969
, prescription commences to
run from the date upon which
the debt became due. A date of this nature
becomes prescribed
after three
years.
It was
submitted
on
behalf
of the
plaintiff that
the earliest that the debt
could have become due was the date of termination of
the agreement. Notice of
termination was given in the summons that was served on 26 January
2012.
16.
Before referring to the
agreement itself, something needs to be said about
the nature and extent of the
amount claimed. Despite the evidence of Mr Mason
and Mr Shames, who testified
on behalf of the plaintiff, I find it difficult to form a
clear picture of what amounts
had actually been paid to the defendant and
what amounts had actually been
repaid to the plaintiff or had been collected as levies and/or
alleged unpaid levies. Despite what
was mentioned in
paragraph 2.1 of the agreement
and the initial evidence that the amount of R1
240 913,13
was paid as the initial
payment in respect of unpaid levies, it appeared later that only the
amount of R
1
107
689,57
had actually been paid to or on behalf of the defendant. Firstly, it
appears that this amount comprise different payments
not to the
defendant but rather to creditors of the defendant. Secondly,
although it was submitted on behalf of the plaintiff
that the
aforesaid amount constituted the
initial payment which was
supposed to reflect unpaid levies at the date of signature
of the agreement, there was
simply not sufficient reliable evidence to prove this fact. There is
no reason why the aforesaid payments
to creditors could not equally
be taken as payments in terms
of paragraph 2.2 of the agreement relating to monies which would
enable
the
defendant to meet its
monthly
financial commitments.
17.
Furthermore, the amount
originally claimed from the defendant was the amount of R 3 549 395,
23. During the trial this amount was
amended to the amount of R 7 586
960, 92. There was no evidence as to exactly how any of these
amounts were made up and
calculated. During final argument it
was submitted on behalf of the
plaintiff that there was no amount due or that there had been no
evidence
to
support a claim for monies due in respect of paragraph 2.2 of the
agreement which relates to
monies paid to enable the defendant to meet its monthly financial
commitments. It was submitted that
all the amounts paid on behalf of
the defendant was done in terms of paragraph 2.1 of the agreement
which related
to
so-called unpaid levies at the time of signature of the agreement.
It
was
submitted on behalf of the defendant that this argument was not
supported by the
evidence
and was simply put forward in order to avoid the plea of
prescription. In this regard it was further submitted that the
plaintiff endeavoured to place an interpretation on paragraph 2.1 of
the agreement which would have the effect that there was
no due date
for the repayment of the initial payment and that this could only be
brought about by the cancellation of the
agreement.
18.
In order to establish
if and when any amount became due by the defendant to the plaintiff
it is necessary to refer to the agreement.
It has been mentioned
above that paragraph 2 of the
agreement identifies two components of the loan. The
one being an initial payment
and the other monthly payments to the
defendant. Paragraph 7 of the
agreement does not, however, draw any distinction in
respect of the repayment of
the loan. Paragraph 7.1 clearly provides that the interest and the
capital owed by the defendant shall
be repayable on the earlier of
the date of receipt of monthly levies, the date of receipt of
collected arrear levies or the termination
of the agreement,
whichever occurs first. More importantly, paragraph 7.2 provides
that the reduction of the indebtedness of
the
defendant shall occur by way of
payment of all the monthly levies and interest thereon collected
from the owners. The word "capital"
is defined in the
agreement as meaning "the initial payment and monthly amounts
advanced by the company
to
the
body
corporate
from
time
to
time".
It thus
refers
to
both
components
of the loan. Payment by way of
the levies is similarly clear. Paragraph 1.1.10 defines "the
levies" as meaning "the
levies contemplated in Section 37
(1) (b) of the Act and special levies in terms of Management Rule 31
(4) ...". No distinction
is made in the source of the money to
pay back the debt namely, for example, from money received for
levies which were in arrears
or which were not. The
defendant's obligation was to
pay all levies received to the fifth plaintiff in reduction of the
debt which constitutes, inter
alia, the capital, which, in turn, is made up from the initial
payment as well as the monthly amounts
advanced. Paragraph 7.1 and
7.2 of the agreement consequently apply to the first component
namely the
initial
payment as well as the second component being the monthly amounts.
19.
I
agree with the submission on
behalf of the defendant that the only reason for the reference to
the "unpaid levies" in
paragraph 2 of the agreement was
probably
to
define it for purposes of security as set out in section 38 (f) of
the Act and to bring the loan under the auspices of that
section.
The fifth plaintiff secured the loan
by taking
a security
cession
of all unpaid contributions
and all future
levies due and becoming due to
the
defendant.
20.
The debt to the fifth
plaintiff consequently became due every time a levy was
paid to the defendant.
21.
There is an alternative way of
approaching this issue. In terms of paragraph 4
of the agreement the
outstanding balance due by the defendant from time to time
in respect of amounts lent and
advanced in terms of the agreement, shall bear interest at the rate
of 10% above prime per annum.
Any interest which is unpaid on the due
date, will be capitalised to the defendant's
loan.
22.
According to paragraph 7.2 of
the agreement the defendant was obliged to pay
to the fifth applicants all
the monthly levies and interest thereon which
were collected, in the
reduction of its indebtedness in respect of capital and
accrued interest. This had to
be paid on a monthly basis in the fifth plaintiffs bank account
within 7 days from receipt thereof
but not later than the fifth day
from
the
Managing Agent's monthly close-off
date.
23.
According to the evidence the
defendant collected R925
594,00
in levies for the
financial
year
ending
December
2006.
However, during the same
period the
defendant
only paid over to the fifth plaintiff the amount of R196 814,96.
This
shortfall
of R728 779,04 was clearly due and payable to the fifth plaintiff at
the
relevant times during
2006.
It
is not relevant whether the
amount paid
to
the
fifth
plaintiff
related to unpaid levies
or
to monthly amounts in
terms of
paragraph 2.2
of
the agreement. At the very least, and on plaintiffs version, the
interest
which
had
accrued on
the outstanding amount was
payable by
the
defendant from the levies received and not solely from unpaid levies
which had been collected. Even if all the unpaid levies
referred to
in paragraph 2.1 of the agreement had
been collected, it would not
have been enough to pay the interest in respect thereof
to the fifth plaintiff. In any
event, all interest not paid promptly in terms of paragraph 4 was
capitalised and became payable
as such in terms of paragraph 7.2
from the monthly levies. In
terms of paragraph 7.1 of the agreement the interest and the capital
were repayable from the date
of receipt of the monthly levies from
time to time, limited to the amount of such a
receipt.
24.
The defendant consequently
became indebted to the fifth plaintiff during
the course of the first year
of the loan agreement. During the course of that year but at least
at the
beginning
of 2007 the fifth
plaintiff
knew or could have established
with reasonable care what the capital amount of the loan was, that
the
financial
statements of the defendant for the year ending 2006 would have
reflected that the defendant had collected a large amount
of levies
and that the defendant
had
not paid all the
levies
collected
to
the fifth
plaintiff.
The same can
be said of the following year.
It was common cause that the last payment made by
the
defendant was on 16 February
2008.
25.
For the
above
reasons
the
plaintiff's
claim
had
become
prescribed.
It does
not matter what the exact
outstanding amount was
or
how it was computed.
Both
the capital and the interest became due to the extent of the monthly
levies as and when
they
were
received.
Since the
last
payment to the
plaintiff
had been made on 16 February
2008, the plaintiff's claim would have prescribed three years
later which is a date prior to
the institution of the action.
26.
Even if the payment on 16
February 2008 could be regarded as
an acknowledgement by the
defendant of its indebtedness towards the fifth plaintiff, in
respect of which I make no finding, prescription
would have
commenced running on 19 February 2008. The fifth plaintiff's claim
would consequently
have
prescribed on 19 February 2011 which is also prior to the date of
the institution
of
the action.
27.
The argument on behalf of the
plaintiff that the debt fell due on cancellation of the agreement
which occurred in the summons,
must consequently be rejected. This
was even accepted according to the letter of the plaintiff's
attorneys who wrote on 14 December
2011 that they were instructed
that "the current balance due,
owing and payable" to
their client amounts to R3 472 041,52.
28.
It was
not in dispute
that
the
plaintiff was
at all times
in a position
to establish
all aspects relating to the
finances of the defendant. It was consequently at all
times in a position to
establish the facts from which the debt arose. A creditor is not
allowed to postpone the running of prescription
by his failure to
take
the necessary steps. See
Gunase v Anirudh 2012(2) SA 398 (SCA); Macleod v Kweyiya 2013(6) SA 1
(SCA).
29.
As far as costs are concerned
there
is no reason why
costs should not follow the
event save that such costs should be awarded against the first and
second plaintiffs who was
mainly responsible for the institution of the
action.
30.
In the result the following
order is
made:
1.
The plaintiffs' claim
is
dismissed.
2.
The
first
and
second
plaintiffs
are
ordered
to
pay
the
defendant's
costs
of suit jointly and
severally.
C.P.
RABIE
JUDGE OF THE HIGH
COURT