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[2007] ZASCA 152
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Body Corporate of Greenacres v Greenacres Unit 17 CC and Another (521/06) [2007] ZASCA 152; [2007] SCA 152 (RSA); [2008] 1 All SA 421 (SCA); 2008 (3) SA 167 (SCA) (28 November 2007)
Links to summary
THE SUPREME
COURT OF APPEAL
OF SOUTH AFRICA
Case number : 521/06
Reportable
In the matter between :
BODY CORPORATE OF GREENACRES
................................ APPELLANT
and
GREENACRES UNIT 17 CC ................................
FIRST RESPONDENT
GREENACRES UNIT 18 CC ................................
SECOND RESPONDENT
CORAM : HARMS ADP, CLOETE, LEWIS, PONNAN
et
COMBRINCK JJA
HEARD : 13 NOVEMBER 2007
DELIVERED : 28 NOVEMBER 2007
Summary:
Sectional Titles Act 95 of 1986
:
Arbitration: Management
rule 71(1)
interpreted.
Neutral citation: This judgment may be referred to as
Body Corporate of Greenacres v
Greenacres Unit 17 CC
[2007] SCA 152
(RSA).
_________________________________________________________
JUDGMENT
CLOETE JA
/
CLOETE JA
:
[1] The appellant is the Body Corporate of Greenacres, a
body corporate as contemplated in
s 36
of the
Sectional Titles Act
1
and
to which it would be convenient to refer as ‘the
body corporate’. The first respondent is Greenacres Unit 77 CC
which,
as its name implies, is the registered owner of unit 17 in the
Greenacres sectional title scheme. It would be convenient to refer
to
the first respondent as ‘the owner’. The relief sought on
appeal does not concern the second respondent (the registered
owner
of another unit in the Greenacres sectional title scheme) and it
should not have been joined in these proceedings.
[2] The body corporate claims that it is owed levies and
electricity charges in respect of the unit by the owner. The owner’s
defence to the claim is that it undertook, at its expense, work for
the completion of parts of the common property, which the body
corporate was obliged to undertake but which it had requested the
owner to perform; and that the body corporate’s claim was
extinguished by set-off. The parties’ rival contentions were
set out in pleadings in an action instituted in the Randburg
Magistrate’s
Court. Those proceedings were withdrawn by the
body corporate and arbitration proceedings instituted. The owner
delivered a special
plea alleging that the latter proceedings were
not competent in that only a court of law could determine the body
corporate’s
claim. The arbitrator held that the dispute between
the parties was indeed arbitrable. The court
a
quo
(Snyders J), in a judgment which has been
reported as
Greenacres Unit 17 CC v Body
Corporate of Greenacres
,
2
held the contrary at the suit of the owner who was the
first applicant before that court. The body corporate (which was the
first
respondent) has appealed to this court with the leave of the
court
a quo
.
[3] The legislative framework relevant to the appeal is
the following.
Section 35(1)
of the Act provides:
‘
A scheme shall as from the
date of the establishment of the body corporate be controlled and
managed, subject to the provisions of
this Act, by means of rules.’
Section 35(2)
provides:
‘
The rules shall provide for
the control, management, administration, use and enjoyment of the
sections and the common property, and
shall comprise ─
(a) management rules, prescribed by regulation . . . .
(b) conduct rules, prescribed by regulation . . . ‘.
Regulation 30
3
anc" HREF="#sdfootnote3sym">
3
provides in subregulation (1) that
4
the management rules as contemplated in
s 35(2)(a)
shall
be the rules set out in Annexure 8, and in subregulation (5) that the
conduct rules as contemplated in
s 35(2)(b)
shall be those rules set
out in Annexure 9, to the regulations.
Regulation 39
provides:
‘
The provisions of the
Arbitration Act, 1965 (Act 42 of 1965), shall, insofar as those
provisions can be applied, apply
mutatis
mutandis
with
reference to arbitration proceedings under the Act.’
Management rule 71(1) was subsequently inserted
5
into Annexure 8. It provides:
‘
Any dispute between the body
corporate and an owner or between owners arising out of or in
connection with or related to the Act,
these rules or the conduct
rules, save where an interdict or any form of urgent or other relief
may be required or obtained from
a Court having jurisdiction, shall
be determined in terms of these rules.’
The rule goes on to provide for the procedure for
arbitration and to prescribe time limits within which steps are to be
taken.
[4] The issue in the present proceedings revolves
primarily around the correct interpretation of the third saving
provision in rule
71(1), namely:
‘
Save where . . . any form of .
. . other relief may be required or obtained from a Court having
jurisdiction.’
This provision cannot be interpreted literally as
covering any relief which a court may grant, for then it would be as
wide as the
rule itself and operate to negate it. That would plainly
be absurd.
[5] In my view the key to the interpretation of the
provision at issue is the wide
wording of the operative part of the rule. The word
‘any’, which introduces the rule, is ‘a word of
wide and unqualified
generality’.
6
Each of the phrases ‘arising out of’, ‘in
connection with’, and ‘related to’ is also of wide
import
and the combination of all three evidences an intention on the
part of the Legislature to cast the net as widely as possible. The
inclusion of the Act and the conduct rules with the management rules
is in itself an indication that the Legislature wished to regulate
by
arbitration almost every dispute which might arise between a body
corporate and an owner, and between the owners themselves. The
same
intention appears from rule 71(8)
7
which reads as follows:
‘
Notwithstanding that the
Arbitration Act, No. 42 of 1965
, makes no provision for joinder of
parties to an arbitration without their consent thereto, should a
dispute arise between the body
corporate and more than one owner or
between a number of owners arising out of the same or substantially
the same cause of action,
or where substantially the same order would
be sought against all the parties against whom the dispute has been
declared, such party
shall be automatically joined in the arbitration
by notice thereof in the original notice of dispute given in terms of
sub-rule (2).’
[6] Against this background the saving provision at
issue should in my view be interpreted narrowly as excluding only
such relief
as an arbitrator is not competent to give, whether by
virtue of the provisions of the Act or otherwise. The last part of
the rule
should accordingly be read as follows: save where an
interdict or any form of urgent relief may be required, or other
relief has
to be obtained, from a court having jurisdiction. The
purpose behind the inclusion of the provision was in my view to make
it clear
that although the operative part of the rule is to be
interpreted widely for the purpose of ascertaining what disputes have
to be
subjected to arbitration, it is not to be interpreted as
conferring jurisdiction on an arbitrator to grant all forms of relief
which
may be sought consequent upon such determination; and
accordingly, if the relief sought cannot be granted by an arbitrator,
arbitration
on a dispute which would otherwise fall within the
operative part of the rule, would nevertheless not be competent in
terms of the
rule.
[7] So far as the Act is concerned, two examples may be
given where an arbitrator will not have jurisdiction: s 46 and s 48.
Section
46 deals with the appointment of an administrator who, to the
exclusion of the body corporate, has some or all of the powers of the
body corporate. The discretion whether or not to appoint an
administrator, to determine which powers of the body corporate shall
be vested in the administrator, and to remove the administrator is
vested in the court, ie, in terms of the definition in s 1, the
provincial or local division of the High Court having jurisdiction.
Section 48 deals with the destruction of, or damage to, building(s)
comprising the scheme. It confers wide powers on a court. A court may
make an order that the building(s) shall be deemed to have
been
destroyed
8
and
‘
impose such conditions and
give such directions as it deems fit for the purpose of adjusting the
effect of the order between the body
corporate and the owners and
mutually among the owners, the holders of registered sectional
mortgage bonds and persons with registered
real rights’
9
.
A court may also
10
authorise a scheme for the rebuilding and reinstatement
in whole or in part of the building(s), and for the transfer of the
interests
of owners of sections which have been wholly or partially
destroyed, to the other owners; and in this regard the court:
‘
may make such order as it may
deem necessary or expedient to give effect to the scheme.’
A dispute in relation to any of the matters in respect
of which a discretion is vested in the court by the Act could not be
determined
by an arbitrator acting under rule 71 of the management
rules, for such an interpretation of the rule would have the
impermissible
consequence that the rule would conflict with the Act.
[8] More general examples of relief, which an arbitrator
is not competent to give and which the saving provision must also be
interpreted
as covering, would be an order for the inspection or the
preservation of property, pending the resolution of a dispute
relating to
such property. The power to make such orders is conferred
on a court
11
in terms of
s 21(1)(e)
of the
Arbitration Act read
with
regulation 39
made under the Act quoted in para 3 above. An
arbitrator acting under s 71(1) would not have this power.
[9] It was submitted on behalf of the body corporate
that because of the express wording of the saving provision at issue
(‘may
be obtained’) the meaning to be given to the saving
provision should extend also to relief that may (not only must) be
sought
from a court. That was the approach of the court
a
quo
, which reasoned:
12
‘
[T]he saving provision has to
be read to exclude interdictory relief, urgent relief and any other
relief which may be required or
obtained from a court having
jurisdiction. Other relief obtains practical content if read with
section 37(2) which empowers a body
corporate to recover levies from
an owner by way of action in a court of competent jurisdiction. The
recovery of levies is therefore
relief which may be required or
obtained from a court having jurisdiction and would fall within the
ambit of the saving provision
of rule 71(1).’
Section 37(2) provides:
‘
Any contributions levied under
any provision of subsection (1)
13
,
shall be due and payable on the passing of a resolution to that
effect by the trustees of the body corporate, and may be recovered
by
the body corporate by action in any court (including any magistrate’s
court) of competent jurisdiction from the persons
who were owners of
units at the time when such resolution was passed.’
The submission on behalf of the body corporate was that
rule 71 (which makes arbitration compulsory) cannot contradict s
37(2) (which
permits an action in a court) because a regulation which
is inconsistent with the statute under which it was made, is invalid
under
the Constitution according to the doctrine of legality.
14
But properly understood, the rule and the section deal
with two different situations. In order for the
rule to operate, there must be a dispute.
15
Absent a dispute ─ for example, where an owner
ignores a demand for payment of levies or simply refuses, without
more, to pay
them ─ there can be no arbitration, as there is
nothing for an arbitrator to determine;
16
and the body corporate is entitled to institute a court
action in terms of s 37(2) for recovery of the levies. It was
submitted on
behalf of the body corporate that this would give rise
to an anomaly as an owner might raise a dispute in the court
proceedings and
then require arbitration.
17
But such a situation frequently arises in the case of
consensual arbitrations. What happens is that the court proceedings
are stayed,
the dispute goes to arbitration and, if determined in
favour of the claimant, the consequent arbitral award can be made an
order
of court to enable the claimant to execute against the
respondent. The whole purpose of rule 71 is to provide an expeditious
and
inexpensive method of determining disputes and the operative part
of the rule is formulated in wide terms, as I have already pointed
out. I see no reason why a dispute as to the liability of an owner to
pay levies should be excluded from its operation and there
is in my
view no basis to do so.
[10] For the sake of completeness I shall deal also with
the argument advanced on behalf of the body corporate. It was that
the saving
provision should be read as being limited to an interdict,
and other relief in connection with the interdict, granted as a
matter
of urgency. This submission was influenced by what Prof Butler
has suggested in an article,
18
namely:
‘
The reference to “other
relief” should clearly not be taken literally and should be
restricted to urgent relief similar
to an interdict which is directed
at preventing serious prejudice to one party pending the arbitrator’s
award or to ensuring
that a party will still be in a position to
comply with the award.’
Cleaver J (D Potgieter AJ concurring) in his unreported
judgment in
Balmoral Heights No 39 BK v The
Trustees for the Time Being of the Balmoral Heights Body Coporate
19
was inclined to Prof Butler’s view, but did not
come to a definite conclusion. With respect, I see no reason to
confine the
saving provisions in rule 71 to urgent relief, or to
relief granted in connection with or similar to an interdict. The
phrase ‘or
other relief’ is used in contradistinction
both to an interdict and to urgent relief; ‘other’ does
not mean ‘similar’;
and the relief excluded may be
neither urgent nor dependent on an interdict being granted.
20
[11] I therefore conclude that the arbitration
provisions prescribed by rule 71 are applicable to disputes described
in sub-rule (1)
between the parties there referred to, save where an
interdict or any form of urgent relief is required, and save where an
arbitrator
is not competent to grant the relief sought. It follows
that the arbitrator was correct in determining that the dispute
between the
Body Corporate and the owner was arbitrable and the court
a quo
was incorrect in
finding the contrary.
[12] The following order is made:
(1) The appeal is allowed, with costs.
(2) The order of the court
a quo
relating to the first respondent on appeal (the first
applicant in the court
a quo
)
is set aside and the following order is substituted:
‘
The first applicant’s
application is dismissed, with costs.’
______________
T D CLOETE
JUDGE OF APPEAL
Concur: Harms ADP
Lewis JA
Ponnan JA
Combrinck JA
1
95
of 1986.
2
[2006]
4 All SA 78
(W).
3
Of
the regulations made in terms of s 55 of the Act and contained in GN
R664 published in
Government Gazette
11245 of 8 April 1988.
4
Subject
to subregulations (2) and (3), which are irrelevant for present
purposes.
5
By
GN R1422 contained in
Government
Gazette
18387 of 31 October 1997.
6
Per
Innes CJ in
R v Hugo
1926
AD 268
at 271.
7
Inserted
by GN R438 contained in
Government
Gazette
27561 published on 13 May
2005.
8
Section
48(1)(c).
9
Section
48(2).
10
Section
48(3).
11
Defined
in
s 1
of the
Arbitration Act to
mean any court of a provincial or
local division having jurisdiction.
12
Above,
n 2, at 80h-j.
13
Which
obliges a body corporate to establish for administrative purposes a
fund, and to require the owners, whenever necessary, to
make
contributions to the fund for the purposes of satisfying any claims
against the body corporate.
14
Pharmaceutical
Manufacturers Association of SA : In re ex parte President of the
Republic of South Africa
[2000] ZACC 1
;
2000 (2) SA
674
(CC) para 50.
15
Rule
71(2)
also provides for a ‘complaint’ to be referred to
arbitration. The first reference to ‘complaint’ in the
rule was inserted by GN R438 contained in
Government
Gazette
27561 published on 13 May
2005. That rule now provides:
‘
If such a dispute
or
complaint
arises,
the aggrieved party shall notify the other interested party or
parties in writing and copies of such notification shall
be served
on the trustees and the managing agents, if any and should the
dispute
or complaint
not be resolved within 14 days of such
notice, either of the parties may demand that the dispute
or
complaint
be
referred to arbitration . . .’. (Underlining supplied.)
It may be that an arbitrator is called upon to
investigate a complaint and act as a mediator; or it may be that the
complaint has
to have given rise to a dispute before the services of
an arbitrator must be engaged (which is the view of Butler,
The
Arbitration of Disputes in Sectional Schemes under Management
Rule
71
(1998) vol
9 Stellenbosch Law
Review 256
at 260). It is not necessary for the purposes of the
appeal to express any opinion in this regard.
16
Withinshaw
Properties (Pty) Ltd v Dura Construction Co (SA) (Pty) Ltd
1989
(4) SA 1073
(A) at 1079B-G;
Parekh v Shah Jehan Cinemas (Pty) Ltd
1980 (1) SA 301
(D) at 304E-G.
17
It
is not necessary to consider the position where no demand for
arbitration is made by the owner. It may be that the court action
would continue, as in the case of a consensual arbitration; or it
may be that a body corporate is obliged to proceed to arbitration
under
rule 71
because legislation requires such a dispute to be
resolved by arbitration. If the latter is the position, a court
could raise the
point
mero motu
.
18
Above,
n 15, at 264.
19
CPD
case A698/2001; 4 October 2002; para 14. In that matter an owner
claimed loss of rental income as damages from the body corporate
which, the owner alleged, had failed to maintain the common property
with the result that water penetrated the unit owned by it.
The
court correctly upheld a special plea that the dispute had to be
arbitrated under
rule 71
because it arose out of the body
corporate’s alleged failure to comply with its duties under
the Act. (The court no doubt
had in mind the duty imposed by s
37(1)(j) viz ‘properly to maintain the common property
(including elevators) and to keep
it in a state of good and
serviceable repair’).
20
For
example, an order for the inspection of property ─ see para 8
above.