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2015
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[2015] ZAKZDHC 51
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Body Corporate of Redberry Park v Sikude NO (9874/2014) [2015] ZAKZDHC 51 (25 June 2015)
In
the High Court of South Africa
KwaZulu-Natal
Local Division, Durban
Case
No : 9874/2014
In
the matter between:
Body
Corporate of Redberry
Park
Applicant
and
Nkosingiphile
Welcome Sukude
NO
Respondent
Judgment
Lopes
J
[1]
The applicant in this matter is the body corporate of Redberry Park,
established in terms of
s 36
of the
Sectional Titles Act, 1986
.
The body corporate seeks a provisional order sequestrating the estate
of the late Sokesibone Alfred Sukude. The respondent
in the
application is the executor of the estate of the late Sokesibone
Alfred Sukude.
[2]
The facts giving rise to this application may be summarised as
follows:
(a)
the deceased in this matter Sokesibone Alfred Sukude died on the 13
th
April 2014;
(b)
the respondent, Nkosingiphile Welcome Sukude was appointed as
executor to his estate on
the 24
th
July 2014;
(c)
the deceased was the owner of the sectional title property described
as
Section 180
, Door No 49, Redberry Park on the 21
st
August 2014;
(d)
summons was issued against the estate for outstanding levies and
other charges due by the
estate to the body corporate;
(e)
default judgment in the sum of R112 621,87 was granted together
with interest thereon
calculated at the rate of two per cent per
month compounded monthly and calculated from the date of service of
the summons to date
of final payment. Costs of suit on an
attorney and client basis was awarded;
(f)
a warrant of execution was issued on the 29
th
October
2014;
(g)
the Sheriff attempted to execute service on the 19
th
November 2014, was unable to locate any disposable property against
which execution could be levied, and rendered a
nulla
bona
return.
[3]
The founding affidavit in the application is deposed to by one Andre
Grundler who is the administrator of the sectional title
scheme,
having been appointed as such by this court on the 12
th
March 2009 under case number 2020/09. That appointment was
extended on the 25
th
February 2013 under case number 1531/12. I called for the files
in those matters in order to obtain more background information
to
the matter. It appears from the files that the original
application for the appointment of an administrator was sought
by the
eThekwini Municipality under case number 2020/09. This followed
the lapsing of the appointment of a previous administrator.
The
lack of proper management of the sectional title scheme had created a
crisis which required intervention. At that stage
the sectional
title scheme was indebted to eThekwini Municipality in an amount of
approximately R1,5M in respect of rates, taxes
and other municipal
services. Outstanding levies due to the body corporate
represented an average of R33 000 per unit
for each of the 297
units of the sectional title development. The case was made out
that even if the levies were to be recovered
in their entirety, they
would not have been sufficient to cover all the expenses of the
sectional title development.
[4]
The principal motivation for the appointment of an administrator was
the fact that very few of the sectional title unit owners
were up to
date with their levy payments. It seems clear from the
correspondence that the sectional title development falls
within what
may be described as lower income housing.
[5]
The application papers record that as at the 11
th
February 2015 the judgment debt had escalated to an amount of
R136 705,65. An examination of the statement rendered
by
the body corporate to the insolvent estate reveals that the majority
of the amount for which default judgment was granted constituted
interest charges or ‘finance charges’ as they are
reflected on the statement, together with legal fees.
[6]
In the application for default judgment the body corporate put up a
resolution of the administrator dated the 21
st
April 2009 resolving that interest would be charged on unpaid levies
at the rate of two per cent per month compounded monthly.
In
addition interest would be charged at two per cent per month for the
full month where levies remain unpaid after due date.
[7]
A concern which emerges from the papers is that although
s 46(3)
of
the
Sectional Titles Act, 1986
bestows upon an administrator the
powers and duties of the body corporate,
s 35(3)
records that
any management or conduct rule made by a body corporate shall be
reasonable. Given that the current interest
rates are
relatively low (as evidenced by the legal interest rate which is 9,5
per cent per annum) the levying of an interest rate
on arrear or
outstanding levies in excess of 24 per cent per annum does not
seem reasonable. This is more particularly
so when one takes
into account the economic level of the sectional title holders in the
development. However, as the judgment
was granted on the 10
th
October 2014 there is nothing to be done in the present matter.
[8]
The reasons why the body corporate seeks a sequestration order
against the estate are recorded in the founding affidavit as
follows
:
(a)
non-payment of levies impacts upon, and prejudices other members of
the sectional title
scheme, because the errant unit constitutes a
monthly drain on the resources of the body corporate;
(b)
the body corporate will be able to derive an income from the unit
after its sale in execution,
or by private treaty by the executor;
(c)
there will no longer be prejudice to the other sectional title
holders;
(d)
the unit in question will become less valuable as levies accumulate
against it;
(e)
an order for sequestration would avoid any problems with possible
defences under the Prevention
of Eviction from and Unlawful
Occupation of Land Act, 1998 which would lead to delays and further
prejudice;
(f)
the mortgage bond holder (Nedbank Ltd), who has been advised of the
application, will
have its preferential claim against the sectional
title unit ranked after the body corporate by virtue of the
provisions of
s 15
of the
Sectional Titles Act, 1986
.
[9]
Mr
van
der Westhuizen
who appeared for the applicant submitted that the applicant must
abandon the suggestion that it would be advantageous to pursue
a
sequestration, because that would obviate problems caused by the
defences raised in terms of the Prevention of Illegal Eviction
from
and Unlawful Occupation of Land Act, 1998. I agree with
that submission, but remain unpersuaded that I should
exercise my
discretion in terms of
s 10
of the
Insolvency Act, 1936
permitting
the sequestration the deceased estate.
[10]
In my view the administrator has not made out a proper case
establishing that it would be to the advantage of creditors to
sequestrate the estate. The presence of a mortgage bond
held over the property by Nedbank Ltd is not a factor in favour
of
sequestration, because although, as suggested by the administrator,
the body corporate may gain a ranking preference to Nedbank
Ltd, that
is not an advantage to the general body of creditors, which includes
Nedbank Ltd.
[11]
It is not clear to me why it is necessary for the administrator to be
granted an order for the sequestration of the insolvent
estate of the
erstwhile sectional title holder, when there is no apparent reason
why the property cannot be sold in execution.
Although Mr
van
der Westhuizen
eschewed any reliance on the avoidance of the consequences of the
eviction of persons from the unit as a basis for justifying
sequestration proceedings, there is no doubt that that was in the
mind of the administrator when the papers were drawn. In
addition one of the main reasons the administrator wishes to proceed
with a sequestration process, is to secure an advantage over
the bond
holder. In my view neither of those are legitimate reasons for
seeking to issue sequestration proceedings as opposed
to simply
following the normal execution process against immovable property.
In
Gardee v Dhanmanta Holdings and Others
1978 (1) SA 1066
(N) at
1070 C, Didcott J stated :
‘
The
notion of advantage to creditors is a relative and not an absolute
one. Sequestration cannot be said to be to the creditors’
advantage unless it suits them better than any feasible and
reasonably available alternative course. It follows that the
enquiry necessarily postulates a comparison. HATHORN J.P. made
the point very clearly in
O’Flaherty
& Co. v. Meiklejohn,
1940 NPD 371
, by saying (at p 371) :
“
It
is obvious that, in order to form an opinion upon the question
whether or not
prima
facie
there is reason to believe that it will be to the advantage of
creditors if the estate is sequestrated, the Court must compare
the
position of the creditors if there is no sequestration with their
position if there is a sequestration.”’
[12]
There is no information disclosed by the administrator as to the
relative costs of recovering the debt via a sequestration
process, as
opposed to levying execution against the sectional unit in the normal
course. There is no indication whatsoever
as to the costs of
sequestration. Had these aspects been fully dealt with by the
administrator, it would have been of some
assistance in arriving at
the proper exercise of my discretion.
[13]
Mr
van
der Westhuizen
raised the problem that in terms of
s 30
of the
Administration of
Estates Act, 1965
, no person charged with the execution of a writ
shall, before the expiry of the period referred to in the notice
referred to in
s 29 of the Act, levy execution against any property
which has been attached. After the expiry of the notice period,
in the
case of property with a value exceeding R5 000, consent
of the court is required. In my view, ensuring the publication
of a s 29 notice is not an onerous task, and there is no reason why
the administrator cannot procure compliance with the provisions
of ss
29 and 30 for the sale of property, albeit after invoking the
assistance of the Master, if necessary.
[15]
In all the circumstances the application is dismissed.
Date
of hearing :27
th
May 2015
Date
of judgment : 25
th
June 2015
Counsel
for the Applicant : Mr van der Westhuizen (instructed by Erasmus van
Heerden Attorneys)