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[2013] ZAKZPHC 24
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Angelfish Investments 536 CC v Body Corporate of Orient Gardens (9362/2012) [2013] ZAKZPHC 24 (26 February 2013)
IN THE KWAZULU-NATAL
HIGH COURT, PIETERMARITZBURG
REPUBLIC OF SOUTH
AFRICA
CASE NO. 9362/2012
In the matter between:
ANGELFISH
INVESTMENTS 536 CC
.....................................
APPLICANT
and
THE BODY CORPORATE OF
ORIENT GARDENS
............................................................
RESPONDENT
JUDGMENT
Delivered
on 26 February 2013
STRETCH A J
[1] This is an
application in terms of section 46 of the Sectional Titles Act 95 of
1986 (“the Act”) for Mr Andrè
Grundler
(“Grundler”) to be appointed to act as the respondent’s
administrator.
[2] The application,
which was accompanied by a certificate of urgency, was enrolled for
hearing on 26 October 2012 with a few days’
notice to the
respondent and the occupiers of the residential units at Orient
Gardens.
[3] On that day three
representatives appeared in person for the respondent. The matter was
adjourned to 8 November 2012 and on
that day was adjourned to be
heard as an opposed motion on 23 November 2012.
[4] The crisp issues for
determination are the following:
[4.1] whether the
applicant has made out a case for urgency;
[4.2] whether there
exists a need for the appointment of an administrator and if so,
whether Grundler is a suitable appointee.
[5] The applicant (a
close corporation) is the owner of eight of 54 units which form part
of scheme 804 of Orient Gardens, being
a sectional title scheme (“the
scheme”). The applicant’s sole member is Mr Kadarnath
Maharaj (“Maharaj”).
Its chief executive officer is
Darshi Harase, who has been duly authorised to launch these
proceedings on the applicant’s
behalf. The applicant’s
member, Maharaj, is not only also a co-director of a company by the
name of New Order Investments
29 Pty Ltd (hereinafter referred to as
“the developer”) but also, it seems, was/is his own
attorney, the applicant’s
attorney, the developer’s
attorney, and at least during August 2011, also the respondent’s
attorney.
[6] The applicant seeks
for the appointment of an administrator for the scheme, averring, in
an affidavit deposed to by its chief
executive officer, that the
respondent has failed in its fiduciary duties to the owners and other
interested parties in a number
of respects which I shall deal with in
due course.
[7] The applicant
contends that, by virtue of this failure, a wall supporting a bank
collapsed onto the applicant’s units
on the weekend of 7
September 2012. The applicant says that the collapse was due to the
lack of maintenance of a burst water pipe
and the heavy rains during
that weekend. This the applicant says has in turn impacted on the
stability of the road.
[8] It is for these
reasons that the applicant says it has brought this urgent
application for the appointment of Grundler as an
administrator.
[9] On the question of
urgency itself the applicant’s representative, Darshi Harase,
says the following on oath:
‘
This
application has become urgent in that the repairs to the wall and
other damages needs urgent attention and at this stage the
applicant
is funding the repairs but the repairs need to be overseen by a
responsible person for and on behalf of the Respondent
but that is
not possible as there is no such person responsible and hence the
administrator needs to be appointed to take control
of the affairs of
the Body corporate.’
[10] The Chair of the
respondent, Ms Zibonisle Ngcobo (“Ngcobo”), who has
deposed to an affidavit on the respondent’s
behalf, argues that
the applicant has failed to make out a case for urgency. She, in
turn, says that Orient Gardens came into being
as a single phase in
1991. Ninety-eight per cent of the trustees were ‘Africans’
and they managed their affairs well.
The development and construction
of this first phase was of a high standard and there were no
complaints about drainage, sewerage,
plumbing and the like.
[11] However, in 2007 the
applicant’s member (Maharaj) began developing the second phase
and erected three units in excess
of that determined by the
regulations and the engineering specifications, resulting in the
properties being ‘squeezed’
next to each other severely
affecting the storm-water drainage, the sewerage and the plumbing. I
digress to mention that Maharaj
(wearing his developer’s hat)
and his co-developer deny that too many units were built and refer on
oath to various plans,
diagrams and certificates which would be made
available at the hearing of the application, but as it transpired,
were not.
[12] Maharaj, she
contends, sold the units with fake water meters which are still on
the property (this too is disputed). Ethekwini
Water Sanitation
(“EWS”) inspected the property at the behest of the
respondent and it was found that the developer
and the plumber had
made illegal connections and that the plumbing was sub-standard and
‘hopeless’.
[13] She avers that at
all times the trustees of the respondent have been playing an active
role in championing the cause of the
unit owners of Orient Gardens.
She seems to be of the view that the reason why the applicant has
launched this application (which
she describes as a fruitless one
which has been brought behind the respondent’s back) is because
Maharaj ‘is concerned
about the hurdles and challenges he has
to face with the municipality’s enforcement unit.’
[14] Ngcobo goes on to
describe in her affidavit that a meeting was held in 2011 with the
developer of Orient Gardens, Maharaj and
a representative of the
municipality, who presented Maharaj with a snag list to be attended
to by mid October 2012. This did not
happen which ultimately resulted
in the respondent approaching a building inspector who conducted an
inspection
in loco
and
found that sewerage pipes had not been secured and storm water
drainage had been laid incorrectly.
[15] In July 2012 the
respondent was advised by the building inspectors that they had
attempted to contact Maharaj in connection
with these problems but
that he had failed to respond, resulting in the problem being
referred to the municipality’s law
enforcement unit.
[16] In Ngcobo’s
opinion, the wall referred to by the applicant’s deponent did
not collapse due to rain and pre-existing
badly maintained plumbing
(which is apparently the version of the applicant), but because the
pipe was exposed due to a fatal construction
error on the part of the
developer. The wall (as a result of heavy rain) collapsed onto the
pipe, causing it to burst. She says
that after the wall had collapsed
a crisis committee was formed consisting of five members of the
respondent, the chief executive
officer of the municipality’s
law enforcement unit, and the building inspectors.
[17] Ngcobo avers that
the municipality’s law enforcement unit was still in the
process of investigating and attempting to
correct the
‘transgressions’ of Maharaj (
qua
developer) when these urgent application papers were
served on the respondent and the unit owners out of the blue. At no
stage,
she says, did Maharaj ever suggest the need for an
administrator, and they were taken completely by surprise. It is
prudent to
mention that the applicant’s deponent avers that ‘at
no stage did the enforcement unit intimate any investigation’
against Maharaj, and that according to this unit the buildings had
been built according to plan and their sole concern was the
rectification of the damaged wall.
[18] Ngcobo, on behalf of
the respondent, states that the applicant has launched these
proceedings with the deliberate intent to
shift the focus from
Maharaj onto the respondent. She believes that he will ultimately be
held liable for the damage to Orient
Gardens and may even be charged
for contravening building regulations. The appointment of an
administrator, she says, will result
in innocent home owners having
to pay to correct Maharaj’s errors, as has apparently already
happened with home owners having
been constrained to pay for the
installation of water meters to replace fake ones which she says had
been supplied by Maharaj.
It goes without saying that these
allegations are also denied.
[19] Ngcobo also
complains that due to short service she was unable to vent in full
the complaints which the respondent has against
Maharaj. She stresses
however, that before Maharaj became a trustee (Maharj denies having
been a trustee), the respondent thrived
at phase one of Orient
Gardens. Administration, she says, will drain the respondent of its
hard earned cash, as it is Maharaj,
and not the respondent who has
been ‘negligent and wreckless’ in the construction of the
second phase of Orient Gardens.
[20] Finally, Ngcobo
argues in her affidavit that the applicant has failed to make out a
case for urgency. She alleges, for example,
that despite the fact
that Maharaj had been invited to attend the respondent’s
meetings before the applicant launched this
application, he declined
to do so. The applicant’s deponent disputes that Maharaj (who
has deposed to a confirmatory affidavit)
was invited to attend such
meetings. On the contrary a letter written by Maharaj in his capacity
as the applicant’s attorney
it seems, suggests that on 16
August 2011 Ms Ngcobo and Ms Mkwanazi (representing the respondent)
were invited to address an issue
pertaining to the water connection
of a certain phase of Orient Gardens. In this letter the respondent
is referred to the Act and
afforded an opportunity to comply with its
provisions failing which the applicant would be constrained to launch
an application
for a curator for the scheme
or
for an order that would benefit the scheme (this scheme being the
extension of Orient Gardens to include units 27 to 54, eight
of these
units being owned by the applicant).
[21] The applicant
contends that there are no material disputes of fact in this matter
despite the papers being riddled with collateral
disputes,
ambiguities and inconsistencies, the most significant of which seems
to be the cause of the collapse of the wall. It
may well be argued
that the collapse of the wall was the proverbial last straw. On the
other hand, I have some misgivings as to
whether this court would
have been approached in the manner in which it has, if the wall was
still standing.
[22] Notwithstanding the
existence of these factual disputes and of averments made by the
applicant which are simply met with bare
denials, the material issue
for this court’s determination, putting aside for the moment as
to why the wall collapsed, is
whether the respondent’s trustees
have fulfilled their duties under sections 37 to 40 of the Act and if
not, whether this
firstly calls for the appointment of an
administrator, and secondly, whether the applicant ought to have
sought such appointment
affording the respondent the brief notice
which it did.
[23] The applicant
complains that the respondent has failed to comply with its fiduciary
duties to the owners of the 54 units in
the scheme in the following
respects:
[23.1] It has failed to
establish for administrative expenses a fund sufficient for the
repair, administration and maintenance of
the common property of
Orient Gardens, and has failed to sufficiently provide for the
payment of rates and taxes and other local
authority charges.
[23.2] It has failed to
require the owners to make contributions to such a fund for the
purpose of satisfying any claims against
it.
[23.3] It has failed not
only to determine from time to time how much money ought to be raised
for the aforesaid purposes, but has
in fact not raised any funds by
levying contributions on the owners as per their respective
participation quotas.
[23.4] It has failed to
maintain the common property and to keep it in a state of good and
serviceable repair.
[23.5] It has failed to
maintain and repair all pipes, wires, cable and ducts existing on the
property.
[23.6] It has failed to
control, manage and administer the common property for the benefit of
all the owners.
[23.7] It has not held an
annual general meeting since 2007.
[23.8] It has no books of
account or records available to be signed off by an auditor as
provided for in the management rules.
[23.9] It has not ensured
that common property is utilised and maintained in such a way so as
not to interfere with the use and
enjoyment thereof by the common
body of owners.
[23.10] It has not
properly dealt with issues such as the number of trustees and the
election of trustees, the approval of a budget,
the appointment of an
auditor or accounting officer, the preparation of annual financial
statements and the approval of a schedule
of insurance replacement
values.
[23.11] A retaining wall
and an associated bank which collapsed on 7 September 2012 have not
been repaired and this has impacted
on the stability of the roadway
which is also under threat of collapse.
[23.12] Units are in a
state of disrepair and are not being maintained adequately, resulting
in financial institutions refusing
to finance them.
[24] These are
undoubtedly serious allegations, aggravated by the fact that it is
not at all clear whether the respondent is made
up of a duly
constituted board of trustees. All Ngcobo’s affidavit says in
this regard is that she is the respondent’s
chair and that she
has been ‘duly
authorised’ to depose
to the respondent’s opposing affidavit. She does not indicate
at all whether she is a trustee,
whether there are any other trustees
and if so who they are and where she derives her authority from. She
does not annex to her
affidavit any resolution from any other
trustees and/or unit owners authorising her to speak for the
respondent and/or on behalf
of the owners.
[25] The actual content
of Ngcobo’s affidavit does not improve things. It does not even
begin to touch on the allegations
which have been levelled at the
respondent. I have gone to lengths to underscore anything at all
reflected therein, which might
suggest that there is little or no
substance in the concerns raised by the applicant, and I record the
verbatim responses. They
are:
[25.1] ‘There is no
mismanagement.’
[25.2] ‘We were
busy trying to correct the wrongs of the developer Mr Maharaj/New
Order Investments, when the application
papers were served on us.’
[25.3] ‘Before Mr
Maharaj became a trustee, the Body Corporate managed its affairs. All
our light bill, water bills, rates
and insurance were all up to date
… There were no issues regarding collapsed walls, storm water
blockages, exposed electricity,
water and sewer pipes.’
[25.4] ‘There is
much more to say however due to time constraints and the fact that we
only consulted with our attorney yesterday
… we were unable to
include all of Mr Maharaj’s transgressions.’
[26] It is clear from the
above, that although Ngcobo has raised a number of domestic disputes,
none of them touch on the material
issues which have been raised by
the applicant justifying the need for the appointment of an
administrator. In some cases it may
be proper to say that domestic
disputes between members of a body corporate should be resolved by
resorting to the domestic forum
of a general meeting rather than the
appointment of an administrator, but where there have been clear and
continuing breaches of
the kind complained of by the applicant, the
appointment of an administrator may be the only effective remedy and
one which this
court should not shrink from exercising (see
Else-Mitchell J in re
Steel and the Conveyancing (Strata Titles)
Act 1961 (1968) 88 WN (Pt 1) (NSW) 467 at 471).
In my view, the
criticisms which the applicant has levelled at the respondent with
respect to its fiduciary duties remain unchallenged.
The only
question then, is whether these complaints are sufficiently serious
so as to merit the appointment of an administrator.
[27] In the exercise of
my judicial discretion, I am of the view that they are. The averments
made by the applicant (who is not
only the owner of a number of units
in the scheme, but who has also been a developer of the scheme and
was at some stage the respondent’s
attorney), supported by
graphic images of the neglected condition of the complex, in my view
constitute special circumstances for
the appointment of an
administrator. The collapsed wall and the collapse of the embankment
supporting it, which appears to have
become the subject matter of
dispute and acrimony, also seems to have become an event beyond the
control of the respondent’s
purported trustees, whoever they
may be. Furthermore, there certainly appears on the face of it to
have been maladministration,
breaches of statutory duties,
inefficiency, managerial atrophy and a deadlock having been reached
after the collapse of the wall.
[28] It is so that this
court should endeavour to strike a balance between, on the one hand,
being slow to interfere in the management
of the scheme by the
respondent’s chosen representatives, and on the other hand, not
hesitating to come to the assistance
of owners of units who might
suffer substantial prejudice by the actions or the omissions of the
purported trustees. However, when
this court is in the dark as to who
the trustees are and what their roles have been in the scheme, this
court has no alternative
but to come not only to the applicant’s
assistance, but also to the rescue of other registered owners who
have not opposed
this application despite the papers having been
served on them (see
Dempa Investments v Body Corporate, Los
Angeles
2010 (2) SA 69
WLD at 82A-H).
[29] The scheme at Orient
Gardens is an extensive one. It comprises of 54 units, eight of which
are owned by the applicant and a
further five by the applicant’s
member. It has been submitted on the respondent’s behalf that
the 41 remaining owners
all oppose this application. However, there
is no direct or indirect evidence of this on the papers, and I
reiterate that this
is a case where not only the applicant, but the
other unit owners are owed a visible and accountable duty of care.
[30] Were it not for
these other unit owners, I would have had no hesitation in dismissing
this application for lack of urgency.
What the parties have described
is not a situation which has emerged suddenly. The parties are
ad
idem
that there have been serious problems going as far back as
2007. The applicant has for some reason elected, five years later, to
arm himself with a purported certificate of urgency (wherein counsel
for some mystical reason certifies that on 18 October 2012
the papers
disclosed circumstances making it ‘appropriate’ for the
matter to be heard on 26 October 2012) and approaches
this court in
extreme haste on two to three days’ notice to the respondent
and the other unit owners. This type of conduct
on the part of
litigants is to be discouraged and it is the duty of their attorneys
to advise them to approach the court in a sensible
fashion as
provided for in the uniform rules of this court and in the cases
traversing degrees of urgency (see
Luna Meubel Vervaardigers
(Edms) Bpk v Makin
1977 (4) SA 135
W at 137 A – F).
[31] There is one further
aspect which deserves mention. The applicant has proposed the
appointment of Grundler as the respondent’s
administrator. The
respondent has opposed the appointment of an administrator
altogether. On the papers, it has not objected to
the appointment of
Grundler should the application succeed, nor has it proposed anybody
else.
[32] During the course of
argument before me the respondent’s representative questioned
Grundler’s suitability as an
administrator but has not mooted
the appointment of anyone else in his stead, should the application
on the merits succeed. The
respondent has referred me to an
unreported judgment of this Division, where this court refused to
extend Grundler’s appointment
as an administrator for various
reasons (see
Grundler NO v Body Corporate Flamingo of Lot 2371
Flamingo Heights and Others 2012 ZAKZPHC53
(delivered on 22
August 2012)).
[33] I have read the
judgment in that matter and do not believe that it sets forth
convincing reasons, when dealing with the facts
and circumstances of
this particular case, for me to decline the application for
Grundler’s appointment. If anything, it
seems to me that the
difficulties and challenges he was constrained to face and traverse
in the management of that scheme (consisting
of some 72 units) could
only have served to add to his experience, and I expect him, in this
case, to add value to the scheme,
where the purported trustees have
not shown to have been able to do so themselves.
In the premises I make
the following order:
Andrè Grundler is
appointed to act as the administrator of the respondent in terms of
section 46 of the Sectional Titles
Act 95 of 1986 (“the Act”).
The aforesaid
appointment shall terminate after the expiry of two years from the
date of this order, or upon an earlier date should
the administrator
produce, to this court’s satisfaction, a report advising on
the completion of a rehabilitation plan;
alternatively, should good
cause be shown why the administrator’s appointment should be
set aside.
In the event of the
administrator being unable to complete or substantially comply with
a rehabilitation plan within the two year
period, he may approach
this court for an extension.
The administrator shall
perform the functions and have the powers of a body corporate
referred to in sections 37, 38 and 46 of
the Act.
The respondent is
directed (within ten days of the date of this order) to deliver to
the administrator all its books, documents
and records in terms of
the provisions of the Act, and to pay or cause to be paid into the
trust account of the administrator’s
attorney on behalf of the
respondent, any and all funds which are held for and on the
respondent’s behalf.
f) The administrator
shall, at least 30 days before the expiry of his term of appointment,
whether abridged or extended, convene
a meeting of all the members of
the respondent for the purpose of electing and appointing a board of
trustees of the respondent
and shall call upon such members to
nominate trustees to be appointed to the respondent’s board.
g) The administrator
shall act as chairman of this meeting and shall, thereat, determine
who is eligible to nominate trustees and
to vote in accordance with
the provisions of the Act and the respondent’s rules.
h) In the event of the
board of trustees not being duly and properly elected, the
administrator’s office shall be deemed to
be extended and the
administrator shall forthwith report the absence of due and proper
election to this court and seek appropriate
directions from this
court in that regard.
The remuneration of the
administrator shall be fixed in accordance with his quotation dated
18 September 2012, and shall be limited
to R850,00 per hour for
administrator functions and R350,00 per hour for assistant
functions.
Any reasonable and
necessary additional costs incurred by
the administrator are to
be funded out of the respondent’s administrative fund.
k) The respondent is
directed to pay the costs of this application.
____________
STRETCH
A J
Appearances /…
Appearances:
For the Applicant
:
Mr H.P. Jeffreys SC
Instructed by
: Sham & Co. Inc Durban C/o Schorie & Sewgoolam
Inc. Pietermaritzburg
F
or the
Respondents
: Mr A.B. Maharaj
Instructed
by
: Baba Ntoi Attorneys
Durban
Date of Hearing
:
23 November 2012
Date of Filing of
Judgment
: 26 February 2013