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[2012] ZAKZPHC 53
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Grundler NO v Body Corporate Flamingo of Lot 2371 Flamingo Heights and Others (9408/2011) [2012] ZAKZPHC 53 (22 August 2012)
IN THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL, PIETERMARITZBURG
CASE No.: 9408/2011
In the application of:
ANDRE GRUNDLER N.O.
…...............................................................
Applicant
and
BODY CORPORATE OF LOT 2371
FLAMINGO HEIGHTS (SS210/1998)
….................................
First
Respondent
K.K.GOVENDER (Door No.1)
….......................................
Second
Respondent
N. SAMYASI (Door No.19)
….................................................
Third
Respondent
P. GOVENDER (Door No.11)
…...........................................
Fourth
Respondent
P. NAIDOO (Door No.20)
…....................................................
Fifth
Respondent
G. RAMRUTHIA (Door No.4)
….............................................
Sixth
Respondent
V. GOVENDER (Door No.6)
…...........................................
Seventh
Respondent
S. M. CASSIM (Door No.3)
…..............................................
Eighth
Respondent
D. M. NARAINSAMY (Door No.35)
…....................................
Ninth
Respondent
S. CHETTY (Door No.27)
…..................................................
Tenth
Respondent
G. SHEIK (Door No.12)
…................................................
Eleventh
Respondent
JUDGMENT
VAN ZÿL, J
.
:
The applicant was appointed as an Administrator in terms of the
provisions of section 46 of the Sectional Titles Act 95 of 1986
(the
Act) by order of this Court granted under case number 11364/2008 on
22 October 2008. The intended duration of his appointment
was for a
maximum period of thirty six (36) months. However, the terms of the
order provided for the earlier termination of the
applicant’s
office, should the rehabilitation plan contemplated in annexure “A”
to the order be substantially
implemented before the expiration of
the period referred to above. Provision was also made therein for
the extension of the applicant’s
period of appointment, should
it not be possible to complete, or substantially complete the
rehabilitation plan involved.
The subject of the rehabilitation plan was, what was originally the
respondent, but which then became the first respondent, after
the
second to the eleventh respondents were joined as parties in these
proceedings by order of this Court dated 22 November 2011
under case
number 9408/2011. It appears that the present proceedings commenced
when the applicant applied on 20 October 2011,
by way of an urgent
application, for the extension of his term of office and a rule nisi
returnable on 22 November 2011 and containing
interim relief, was
granted. On the latter date the individuals, who had travelled to
Pietermaritzburg to attend the court proceedings
and intended
seeking a postponement to enable them to formally oppose the
confirmation of the rule, were then by consent joined
as parties,
the rule was extended until confirmed or discharged and the matter
adjourned sine die.
Before embarking upon a consideration of the issues presently in
dispute, it is necessary to recap the events which eventually
gave
rise to the present impasse. I do not propose to dwell at any length
upon the motivation for the original application giving
rise to the
appointment of the applicant as Administrator. The first respondent
has at all material times been a sectional title
development
comprising some seventy two (72) units, ownership of which are
registered in the names of the various individual
owners.
The application under case number 11364/2008 (the original
application) was launched by the eThekwini Municipality (the
municipality)
as applicant and citing the first respondent. The
municipality relied for its locus standi to bring the application
upon the
provisions of s46(1) of the Act, it being the relevant
local authority within whose area of jurisdiction the property
comprising
the business of the first respondent is situated. From
the application papers it appears that at the time the municipality
had
a claim for arrear rates as against the first respondent and was
unable to collect. Demands for payment, or even information and
documentation in terms of the provisions of the Act, went unheeded
and it could not even establish whether the first respondent
was
controlled by a functional body corporate, as required by the Act.
In the result it brought the application for the appointment
of an
Administrator and the applicant was appointed, as indicated above.
It is quite apparent from the application papers before me that,
broadly speaking, the relationship between the occupiers of
the
units in the first respondent and the applicant was unhappy from the
outset. The papers are fraught with conflicting views
and in the
absence of a referral for the hearing of evidence, which is not
justified in the present circumstances, I have to
make the best of
the papers as they are. For present purposes I am prepared to accept
that, at the time of the granting of the
original order appointing
the applicant as administrator, the first respondent had become
dysfunctional, that the appointment
was justified and that the first
respondent was in need of rehabilitation. But that was then and now
is now.
Since the original appointment of the applicant the municipality,
its executive committee having approved a rates rebate policy
during
June 2010, implemented such policy with effect from November 2010.
This resulted in a write-off of the arrear rates which
motivated the
original application and although detailed particulars of the
current rates position is not before the court, it
would appear that
the municipality now considers the first respondent as sub-economic
housing which receives corresponding rates
relief from the
municipality. It therefore appears unlikely that another debt to the
municipality is likely to accumulate in
the foreseeable future.
What also emerges with some clarity from the papers is that a
significant number of the unit owners are in dire financial
straights.
Many amongst their number are apparently old age
pensioners whose sole, or major sources of income are represented by
such pensions.
The applicant makes the point that an enduring
difficulty throughout his administration has been an inability to
resolve the
issue of long outstanding unpaid levies owed to the
first respondent by its unit owners. In paragraph 27 of his founding
affidavit
he calculates the unpaid levies as at 30 September 2011in
the sum of R485 381-00. He suggests that about one half of the
unit owners are either fully paid up or are nominally in arrear,
whilst the other half are effectively responsible for the
outstanding
amount. He expresses the view that the reason for the
accumulated debt is their unwillingness or inability to settle their
obligations.
In motivating his continued administration and extension of his
appointment the applicant expresses the view that the owners
of the
units, effectively the occupants of the first respondent’s
development, do not have the resources, experience, ability
and
tenacity to administer the affairs of the first respondent in a
proper manner and he is openly sceptical that they would
be able to
overcome the enduring problem of chronically unpaid levies. In his
view the only solution to the intractable problems
besetting the
first respondent is to extend the administration of the first
respondent so that, when the administration finally
terminates the
first respondent “..
should be left with a clean slate
before it can revert to owner management under duly appointed
trustees
.”. (as per para 40 of the applicant’s
founding affidavit).
We know from the original application papers that the municipality
at the time claimed arrear rates of some R172 625-16
as at 1
July 2008 to have been owing by the first respondent. From annexure
AG.12 in the present application papers it appears
that the
municipality, as part of its rates rebate policy wrote off
outstanding rates of R158 436-52. That no doubt brought
about a
marked improvement in the financial position of the first
respondent.
However, in expanding upon the case for continued administration the
applicant points out that there are various other debts
still owing
by the first respondent. Details of these appear in paragraph 34 of
the applicant’s founding affidavit. Although
it is not my
intention to embark upon any detailed analysis of the somewhat
lengthy papers before me, it is nevertheless necessary
to refer to
some of these debts in order to place the position of the parties in
perspective.
The applicant states that the first respondent is still indebted to
attorneys appointed by the applicant in the sum of R7 948-00
in
respect of an interdict application he brought against certain
owners or occupiers of the units of the first respondent. This
application was brought in the Durban High Court and the file has
not been available to me. The applicant alleges that he was
compelled to bring the application because certain of the
owner/occupiers of the complex interfered with service providers
appointed by the applicant and who entered the premises of the
complex. Whatever the merits of the application, it is a sad
reflection
upon the state of mistrust which appears to have existed
between the unit owners/occupiers and the applicant.
During the course of his administration the applicant appointed
so-called managing agents to attend to the general administrative,
secretarial and accounting duties of the first respondent. Initially
Connecta Realty (Connecta) was appointed for the period
12 November
2008 until 31 January 2011 and then Tricor Property Administration
(Tricor) with effect from 1 February 2011. According
to the
applicant the first respondent still owes Connecta R9 033-00
and Tricor R39 270-84. The applicant also instructed
attorneys
on behalf of first respondent to collect arrear levies from the
first respondent’s unit owners. Initially he
instructed
Shepstone & Wylie from the beginning of 2009. This firm however
withdrew its services and the applicant states
that because its
outstanding fees (in an unspecified sum) could not be settled, they
retained the files in terms of their lien.
Thereafter the applicant
appointed his present attorneys of record Messrs Erasmus van Heerden
Attorneys to attend to the collections.
The applicant states that
the first respondent was indebted to them in this regard in the sum
of R63 163-55 as at 30 September
2011 and to himself for fees
and disbursements as at 31 August 2011 in the sum of 73 807-22
with the most recent payment
to him being on 6 January 2010.
Unfortunately the papers do not contain a set of financial
statements in format which would permit an accurate understanding
of
the first respondent’s debtors and creditors, its assets and
liabilities, both actual and contingent, or its income
and
expenditures. On the face of it, however, the first respondent‘s
debts referred to above an incurred under the administration
of the
applicant, total some R193 221-00.
Prima facie the first respondent, after more than three years
administration, is financially worse off than before the appointment
of the applicant, and that despite the municipality writing off
rates of some R158 436-00. I am also concerned about the
lack
of detail and/or explanation in the papers which would assist in
evaluating the benefits of administration to the first
respondent.
For instance, it is unclear why it was necessary for the applicant
to appoint managing agents in the first place,
how duties are
divided as between the applicant and the managing agent and why it
was that the managing agent was replaced.
Likewise it remains unclear why attorneys Shepstone & Wylie
withdrew from the collection matters handed over to them, thus
necessitating the appointment of Erasmus van Heerden Attorneys. For
that matter, the wisdom of embarking upon an expensive legal
collection exercise in respect of debtors who are potentially
impecunious and may be unable to pay the capital debt, let alone
the
legal costs incurred, remains unclear. The papers are silent on how
successful the debt collections exercise may have been
but since
both firms of attorneys, the latter in particular, are owed monies
it is fair to assume that the exercise was unrewarding.
The applicant claims to be litigating for the benefit of those unit
owners who are paid up or only nominally in arrears and whose
number
he estimates at about one half of the units. However, these unit
owners are notable in their absence from these proceedings
and have
refrained from openly lending their support to the applicant for the
extension of his administration.
Finally, an not to belabour the point, it is unclear on the
applicant’s case why, if he has only made limited progress
in
the rehabilitation of the first respondent during the initial term
of his appointment, he is likely to be more successful
during the
extended term of twenty four (24) months. Prima facie, as indicated
above, the financial position of the first respondent
has arguably
deteriorated during the applicant’s initial term of
administration and if extended, may deteriorate further.
The opposition to the extension of the applicant’s appointment
has been vigorous and passionate. The second to eleventh
respondents
purport to represent the owners of the units contained in the first
respondent’s housing complex generally,
but especially those
opposed to the applicant’s administration. Various allegations
are made against the applicant and
there are insinuations of
dereliction of duty, promotion of self-interest, poor judgement and
poor administration laid at his
door. These are disputed by the
applicant and I refrain from seeking to draw any firm conclusions in
this regard from the conflicting
averments contained in the papers.
It is for that reason that I largely confined myself to the
applicant’s founding papers
in summarising the position above.
In essence, however, the second to the eleventh respondents (for
convenience here called “the respondents”) allege
that
the unit owners in the complex have embarked upon a course of self
rehabilitation, they have revived their community spirit,
they have
held formal meetings, elected office bearer/representatives,
collected monies, opened a banking account, retained the
services of
attorneys and feel themselves confident that they would be able,
once the authority of the applicant has been removed
and they are
again masters of their own house, to be able to administer the
affairs of the first respondent, both adequately
and much more
economically than the administrative costs incurred by the
applicant. They postulate, should the administration
of the
applicant not be terminated, that he would effectively become a
permanent feature of their existence because the position
where the
administration of the first respondent could be returned to the unit
owners with a “clean slate” (see paragraph
8 above)
could never be achieved.
The applicant on the other hand is pessimistic regarding the
abilities, perseverance, resources and ability of the unit owners
to
take charge of their own destiny and successfully to administer the
affairs of the first respondent. But, as already indicated,
it
remains unclear what tangible benefits, on balance, the first
respondent received or enjoyed as a result of the applicant’s
initial term as administrator.
Clearly the inter personal relationships between the applicant and
the general body of unit owners would appear to be very poor
state.
It is therefore no wonder that the applicant does not appear to have
made any serious attempt at providing the training
regime to the
unit owners, as envisaged in paragraph 14 of Annexure “A”
to the order of court of 22 October 2008
in case number 11364/2008
when he was initially appointed.
There are in addition potentially conflicting interests to be
considered. These arise in particular with regard to the claims
of
the creditors of the first respondent who became creditors in the
course of the applicant’s administration. The applicant
suggests that continued administration would mean that these
creditors would, in the fullness of time be paid, whilst if his
term
were not extended such creditors, himself included, may then be
compelled again to bring an application for an administrator
to be
appointed in respect of the first respondent. This view is premised
upon the validity of the claims and that the unit owners
would be
unable to successfully manage the affairs of the first respondent.
The respondents on the other hand appear convinced
that they would
be able to manage the first respondent successfully, are
disbelieving regarding the claims and/or quantum of
the claims of
these creditors and suggest that, in the absence of consensus, the
affected creditors should pursue their claims
against the first
respondent in a court of law where such claims can be properly
tested. They appear suspicious that the applicant,
if he remains as
administrator, would unfairly agree these claims to the prejudice of
the first respondent.
In the final analysis the question to be answered in these
proceedings is whether it has been shown that the interests of the
first respondent, and through it the interests of its unit owners
generally, would best be served by the extension of the applicant’s
administration, or by a reversion of control over its affairs to the
unit owners of the first respondent.
In principle the Act is designed to encourage and promote self
governance by unit owners. Section 46 of the Act, however, provides
for the situation where, for whatever reasons, the self
administration fails. It does so by way of making it possible for
members
of a select group of interested parties to move the Court
for the appointment, replacement or removal of an administrator,
where
the circumstances justify it. Although the Court is empowered
to render the appointment indefinite, this would clearly occur only
in the most extreme circumstances. The Court is given a wide
discretion by the section but, in my respectful view, where
possible,
such discretion should be exercised in a manner which
would favour self administration, whenever possible.
Weighing all the relevant and material considerations and the
entreaties advanced on behalf of both the applicant as well as
the
respondents, I am not persuaded that the interests of the unit
owners of the first respondent’s complex, nor its creditors,
present, contingent and future, would necessarily best be served by
the extension of the appointment of the applicant as administrator.
It may be that the unit owners are not successful and that in due
course the administration of the first respondent fails again
and
that another order placing it under administration is called for.
But to say that the unit owners can only be restored with
control
over their own destiny once there is a guarantee of success goes too
far in my view. The same consideration applies to
the approach by
the applicant that control over the first respondent can only be
returned to the unit owners when there is a
“clean slate”.
In other words all levies are fully paid up. If there is a not
insignificant prospect of the unit
owners succeeding in running
their own affairs and absent weighty considerations to the contrary
then, in my view, the court
should, in keeping with the tenor of the
Act favour the principle of self determination.
In the view I take of the present matter the onus rests upon the
applicant, as the proponent for the extension of his administration,
to demonstrate that such an extension would be justified and more
likely to be generally beneficial to all concerned. I am not
satisfied that the applicant has discharged this onus. It follows
that the application must fail and the rule be discharged.
There remains the issue of costs. In principle, costs should
normally follow the result. Here the applicant prima facie brought
and pursued the application, in the face of furious opposition from
at least a significant and vocal group of unit owners in
the first
respondent opposed to his further involvement, to advance his own
personal financial interests. Such interests related
both to
recovery of outstanding fees to which he lays claim, as well as
further fees to be earned during the course of his extended
administration.
But the situation is by no means so simple when it comes to the
formulation and effects of a costs order adverse to the applicant.
The applicant acts nomine officio and an adverse costs order would
rebound on the respondents because the costs awarded against
the
applicant would be payable out of the assets of and by the first
respondent. Since the interests in the first respondent
are
ultimately held by the unit owners, including the respondents, a
costs order against the applicant would in practice become
a costs
order against the respondents and the other unit owners. Much the
same situation would prevail if I were to make no order
as to costs
because the applicant would still be entitled to recover his own
costs from the first respondent.
The only way in which to ensure that the applicant is not unfairly
benefitted by an adverse costs order would be to direct that
the
applicant’s costs are to be personal to him and not
recoverable as an administration expense from the first respondent.
That, of course, would leave the respondents high and dry. But then
counsel for the respondents, in his heads of argument, seeks
discharge of the rule and dismissal of the application, but is
silent on the issue of costs.
In the result I make an order, as follows:-
a. The application is dismissed and the rule nisi, as granted on 20
October 2011 and indefinitely extended on 22 November 2011,
is
discharged.
b. The applicant in his personal capacity shall bear his own costs of
the application and shall not be entitled to indemnification
for such
costs by, or be entitled to recover such costs, or any portion
thereof, from the first respondent.
c. Save for the order as to costs contained in paragraph (b) hereof,
there shall be no order as to costs.
d. By reason of the fact that the costs orders contained in
paragraphs (b) and/or (c) hereof were not considered during the
course
of the argument of the opposed matter, should any one of the
parties feel aggrieved by the terms of such costs orders, such party
shall be entitled to call for reconsideration of these costs orders;
and
i. to that end shall be entitled within TEN(10) days from date of
delivery of this judgment to deliver notice in writing to the
court
and to all the other interested parties specifying the cause of
complaint and the grounds therefore, together with such written
argument as such objecting party may wish to submit in support of the
objection.
ii. Any party receiving such objection and wishing to oppose or
participate may do so by way of written argument delivered within
SEVEN(7) days from date of receipt of the objection.
iii. The Court shall consider the objection(s) and may call for oral
argument, or consider the objection(s) in the light of the
documentation submitted and may either recall the earlier costs order
and make a costs order afresh, or it may reaffirm the order
as herein
contained.
____________________
VAN ZÿL, J.
APPEARANCES:
For the Applicant : Adv P. Jorgensen
Instructed by Erasmus van Heerden Attorneys, Durban c/o Browne,
Brodie & Fourie, Pietermaritzburg.
For the Respondent : Adv A. R. Brink, Instructed by Premrajh &
Associates, Pietermaritzburg.
Judgment reserved on : 7 August 2012
Judgment delivered on : 22 August
2012
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