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[2012] ZAKZPHC 82
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PGP Body Corp Administration CC v The Trustees of the body Corporate Club Kerkira (AR 403/11) [2012] ZAKZPHC 82 (26 October 2012)
9
IN
THE KWAZULU-NATAL HIGH COURT, PIETERMARITZBURG
REPUBLIC
OF SOUTH AFRICA
CASE
NO. AR 403/11
In
the matter between:
PGP
BODY CORP ADMINISTRATION CC
...............................
APPELLANT
and
THE TRUSTEES OF THE
BODY CORPORATE
CLUB KERKIRA
.....................................................................
RESPONDENT
JUDGMENT
Delivered
on 26 October 2012
________________________________________________________
SWAIN
J
[1] I have had the
benefit of reading the Judgment prepared by Patel
J P and respectfully
agree with the conclusion that the resolution purportedly passed by
the respondent on 30 January 2009, was
invalid for the reasons set
out in the Judgment. I also respectfully agree with the conclusion
that this invalid resolution was
capable of ratification by the
resolution which was taken by the respondent on 14 March 2009.
[2] I however
respectfully disagree with the conclusion that Sishi J was correct in
concluding that the respondent was entitled
to be awarded costs, for
the reasons set out below.
[3] The invalid
resolution was validly ratified by the respondent in terms of the
resolution taken on 14 March 2009. This was two
days before the date
that the application was set down for hearing on 16 March 2009.
However, the resolution ratifying the prior
invalid resolution, was
taken after the appellant’s notice of opposition dated 13 March
2009 was served upon the correspondents
of the respondent’s
attorneys on 13 March 2009.
Record pg 62
The notice of opposition
sets out the basis upon which the application is opposed in detail
and expressly challenges the validity
of the defective resolution
relied upon by the respondent. It also alleges that the deponent to
the respondent’s founding
affidavit relies upon the resolution
not only for his authority,
“
but also as
the basis for allegedly terminating the first respondent’s
mandate to act”.
In addition, the
appellant’s opposing affidavit was deposed to and signed on 13
March 2009, albeit that the respondent states
in reply, that this
affidavit was only handed to the respondent at the hearing on 16
March 2009.
[4] In the appellant’s
answering affidavit the deponentEwaldiniPorteous states the
following:
“
3.
The First Respondent has
no interest in the Applicant’s monies and is prepared to hand
the said monies together with a complete
accounting in respect of
same over to any person in trust.
4.
The reason for such
tender being directed to a person in trust is as a consequence of
what I set out hereunder namely that the purported
resolutions by the
Applicant and the trustees appear to me to be invalid and in this
regard it will be for the person to whom I
hand this money in trust
to verify that the correct resolutions have indeed been passed.
5.
I make this submission
not as a result of being managing agent but rather as a consequence
of being a registered estate agent with
the Estate Agencies Affair
Board and have fiduciary duties not only to the trustees of the Body
Corporate but also to all other
members of the Body Corporate.
6.
Should the Court direct
me to pay monies into any other bank account, such will only
be done in the instance
of a Court Order to protect the First Respondent from any possibility
of it ever being suggested that it
did not carry out its fiduciary
duties towards any of the other members of the Body Corporate.
7.
I have been advised that
prior to the hearing of this matter, my attorneys of record will file
various notices in which the authority
of the Applicant’s
attorneys is challenged, as well as the issue is raised on a point of
law that the resolutions relied
upon by the Applicant are invalid”.
[5] In a letter dated 04
March 2009 written by the appellant’s attorneys to the
respondent’s attorneys, the following
was however stated:
“
4.
Our client records
further that it has requested a copy of the Minutes of the said
Trustees meeting to determine the legality of
the meeting and whether
indeed, the aforesaid decision was properly taken. Our client records
further that notwithstanding the
Practice Management Rule 49 (2)
which provides that our client is entitled to a copy of these
Minutes, our client has not been
furnished with same.
5.
Our client further has
some concern in simply adhering to your demand that the money be
handed over for the following reasons:
The Chairman of the Body
Corporate, Mr. R. Gueffry has requested that the monies be
transferred to a Plus Plan Savings Account
with Standard Bank. We
are instructed that Section 32 (3) of the Estate Agent’s Act
1976 (No. 112 of 1976) and Practice
Management Rule 42 of the
Sectional Titles Act, specifically provide that the Body Corporate
monies must be held in a Trust Account
and that the Manager
therefore must be an Estate Agent as defined in the Estate Agents
Act.
Quite clearly,
the
Plus Plan Savings Account
is not an account as contemplated
within the aforesaid statute of the said Act. Indeed, it is not even
a Current Account which
is essential if the management of the Body
Corporate is to be conducted properly.
...........................
In light of the
aforegoing, there is a legal obligation on our client to discharge
its fiduciary duty in ensuring, that the funds
are properly
maintained and legally transferred into an account, which complies
with the requisite legislation and to ensure,
that there is proper
and effective control by the Trustees of the said funds.
6.
……………
.
7.
Our client wishes to
record that it has no objection to the termination of its services
and for the transfer of the funds under
its control provided such
termination and bank account created by the Body Corporate comply
with the aforesaid legislation”.
Record pgs 46 - 48
[6] I respectfully agree
with the conclusion of Patel J P that the appellant’s
insistence upon the monies being paid into
a trust account, as set
out in this letter, was erroneous.
[7] However, the fact
that one of the grounds upon which the appellant relied for refusing
to hand over the funds, i.e. that they
had to be paid into a trust
account, was erroneous, does not affect the validity of the
additional ground relied upon by the appellant,
namely that the
resolution terminating its mandate was not a valid one. As regards
the willingness of the appellant to hand over
the books of account
but not the money, Porteous says the following:
“
56.
“
It is indeed
correct that at that meeting the documents which had been requested
by Gueffroy were duly handed over. Whilst I have
serious doubts as to
the validity of the termination of the First Respondent’s
mandate, the First Respondent does not wish
to be involved in the
management of a body corporate where there is a clear dissatisfaction
or dispute between the trustee and
the managing agents. For this
reason, the First Respondent was happy to hand over the books. There
was no suggestion of us accepting
the termination. It was simply an
instance of being requested by the trustees. In any event, the
trustees are the persons responsible
for the maintenance of all the
documents referred to in the document “
DPB”
and there was no reason for the First Respondent to refuse to hand
over same.
57.
What I did object to was
the handing over of trust monies as Gueffroy had failed to furnish me
with copies of the notice or minutes
relating to such meeting”.
[8] It seems to me that
the conduct of the appellant in being prepared to hand over the books
of account, but not money which was
held in trust, in the absence of
the production of a valid resolution terminating their mandate, was
reasonable and justifiable.
The appellant’s attitude is
encapsulated in the following statement of Porteous:
“
68.
Arising from the
aforegoing, it will be noted that I have no problem in paying out the
money,
but the First Respondent will not do so
based on the resolution
,
annexure
“
B”
.
Should this Honourable Court exercise its discretion
independent of that or alternative arrangements be made, I will have
no problem
paying out the monies but in light of what I have set out
hereinabove,
it would seem to me that the
resolution which founds this entire application is invalid”
.(
Emphasis
mine).
[9] In the light of the
fact that the resolution relied upon by the respondent was invalid,
how can the appellant’s opposition
to paying over the money be
faulted? This is of particular significance when regard is had to the
fact that the resolution ratifying
the prior invalid resolution was
taken on 14 March 2009, i.e. the day after the appellant had served
its notice of opposition upon
the correspondents of the respondent’s
attorneys, being 13 March 2009, in which the validity of the initial
resolution was
expressly challenged. The appellant thereafter and on
the day of the hearing, being 16 March 2009, after the resolution
ratifying
the original invalid resolution had been taken on 14 March
2009, tendered payment into the trust account of the respondent’s
attorney.I accordingly respectfully disagree with the conclusion of
Sishi J where he states the following:
“
[30] What is
evident in this case is that the Applicant was compelled to bring an
urgent application when the First Respondent unreasonably
refused to
transfer the money into a designated account. The applicant was
successful in that it obtained the payment of the monies
requested
from the First Respondent”.
[10] In my view, Sishi J
based his order directing the appellant to pay the costs of the
application, upon an erroneous conclusion
that the appellant had
unreasonably refused to transfer the money into a designated account.
Consequently, having misdirected himself
on the facts, this Court is
entitled to interfere with the costs order made.
[11] In my view, the
correct approach to the issue of costs on the facts of this case,is
as set out in
Baeck& Company
v van Zummeren& Another
1982 (2) SA 112
(WLD) at 122 G
which dealt with
retrospective ratification of an unauthorized act on the part of the
applicant in reply, where Goldstone J had
the following to say:
“
As far as the
costs are concerned, I am of the view that having regard to the
deficiencies in the founding affidavit the applicant
has perforce
sought an indulgence from the Court. For the reasons I have given, I
am of the view that the indulgence should be
granted. I am of the
view that the first respondent’s opposition has been
reasonable. In these circumstances the applicant
should be ordered to
pay the costs of the opposition and I propose to make such an order”.
In my view, the following
order should be granted:
The appeal succeeds and
the order of the Court
a quo
is
set aside and substituted
by the following order:
“
The applicant is
ordered to pay the first respondent’s costs”
The respondent is
ordered to pay the costs of all of the appeal proceedings”.
_____________________
SWAIN J
Appearances /..
Appearances:
For the Appellant :
Mr. G. M. Harrison
Instructed by :
V
Chetty Incorporated
Durban
C/o Kishore Ramkaran&
Co. Pietermaritzburg
For
the Respondent
:
Mr. E.Crots
Instructed by
:
Louis Hansmeyer Attorneys
C/o Johan Oberholzer&
Co.
Durban
Date of Hearing
:
30 March 2012
Date
of Judgment
: 26 October 2012