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[2012] ZAKZDHC 47
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North Global Properties (Pty) Ltd v Body Corporate of the Sunrise Beach Scheme (12465/2011) [2012] ZAKZDHC 47 (17 August 2012)
IN THE
HIGH COURT OF SOUTH AFRICA, DURBAN
REPUBLIC
OF SOUTH AFRICA
Case no.: 12465/2011
In the matter between
NORTH GLOBAL PROPERTIES (PTY) LTD
…..........................................................
Applicant
and
BODY CORPORATE OF THE SUNRISE BEACH SCHEME,
SCHEME NO. SS278/2006
…...........................................................................
Respondent
JUDGMENT
Heard: 15 August 2012
Handed down: 17 August 2012
D. PILLAY J
[1] Northglobal Properties (Pty) Ltd (Northglobal) applies in terms
of rule 30(1) of the Uniform Rules of Court to set aside the
application for leave to appeal on the preliminary basis that the
Body Corporate of the Sunrise Beach Scheme, Scheme number SS278/2006
(the Body Corporate) and the Trustees of the Body Corporate (the
Trustees) (the applicants for leave to appeal, collectively referred
to as the applicants) took an irregular step by failing to deliver
proper powers of attorney. Northglobal brought a notice in terms
of
rule 7(1) to dispute the authority of the attorneys acting for the
applicants. It called on the applicants to deliver a power
of
attorney supported by a valid resolution of the Body Corporate and
the Administrator of the Body Corporate I appointed in my
judgment
which is the subject of this appeal.
[2] The respondents purported to comply with the rule 7(1) notice by
delivering a power of attorney on behalf of the Body Corporate
and
the Trustees supported by a resolution of the Trustees.
[3] Mr Harpur for Northglobal contended that the resolution has to by
all 17 members of the Body Corporate and not merely the four
Trustees
because in terms of the rules of the Body Corporate, Trustees cannot
incur expenses in excess of R50 000.00 without the
members’
prior approval. As the costs of this application and any ensuing
appeal would exceed R50 000.00 the resolutions
and powers of
attorneys filed were inadequate.
[4] Mr H. P. Jefferys for the applicants contended firstly that no
power of attorney is required in terms of rule 7(1) until after
this
application for leave to appeal is granted. Secondly, the resolution
by the applicants is sufficient as they represent the
members.
Furthermore, Northglobal has not proved that the costs of the
application for leave to appeal would exceed R50 000.00.
It is only
the costs of this application and not the appeal itself that is
relevant. So he submitted.
[5] Turning to the applicant’s opposition to
the Rule 30 application, rule 7(1) is the procedure a party may
follow if it
disputes the authority of anyone to act on behalf of a
party. In the event of such a challenge the person may no longer act
unless
he satisfies the court that he is authorised to act. Case law
confirms that rule 7 is the prescribed procedure for challenging the
authority of a party to act.
1
In the unanimous decision of this division in
ANC
Umvoti Council
the full bench observed
‘
that the legislature intended
the authority of “anyone” who claimed to be acting on
behalf of another in initiating
proceedings, and not only attorneys,
to be dealt with under rule 7(1) . . .’
[6] I agree with the full bench that rule 7(1)
requires a broad interpretation having regard to the purpose of the
rule. The purpose
of the rule is, on the one hand, to avoid
cluttering the pleadings unnecessarily with resolutions and powers of
attorneys. On the
other hand, it provides a safeguard to prevent a
person who is cited from repudiating the process and denying his or
her authority
for issuing the process.
2
Rule 7 can be invoked anytime before judgment. It
is a practical rule which mostly turns out to be compliance with a
procedural
formality. In this case it is not merely a procedural
formality. It impacts substantively on the pockets of all the members
of
the Body Corporate, including the opposition Northglobal.
[7] Mr Jeffreys is correct that rule 7(3) requires a power of
attorney to be filed when an application for a date for hearing of
an
appeal is set down. Similarly, rule 7(3) requires a power of attorney
from other parties to an appeal before the hearing. However,
sub-rules 2 and 3 are additional to sub-rule 1 and do not derogate
from it.
[8] Rule 7(1) requires
the court
to be satisfied that the
party whose authority is disputed is authorised to act. In this case
Northglobal has disputed the competence
of two Trustees namely, Mr
and Mrs Ashworth, to represent the Body Corporate. I appointed an
Administrator for the Governing Body
because I found that the
Trustees, in particular the Ashworths, were unsuitable to represent
the Body Corporate. Consequently,
I need to be satisfied that the
attorneys are properly authorised to act on behalf of the applicants
and that the latter are properly
mandated to represent and bind the
members to the consequences of this application. Therefore properly
mandated powers of attorney
are required in this application for
leave to appeal.
[9] Any party to legal proceedings bears the onus of proving that its
legal representative is properly authorised and that it has
the
authority to instruct its legal representatives. In this case meeting
this onus is not accomplished by simply filing powers
of attorney and
resolutions on behalf of the applicants. The applicants have to
comply with a substantive requirement of the Body
Corporate Rules
namely, that in instructing legal representatives, they will not
exceed their mandate by incurring costs in excess
of R50 000.00.
[10] Contrary to Mr Jefferys’ submission, it is not only the
costs of the application for leave to appeal that counts but
also the
costs of the appeal if leave is granted. This must be so if the
applicants are serious about the appeal. They are serious
about the
appeal because the special powers of attorney filed are not only to
apply for leave to appeal but also to petition and
to prosecute the
appeal. This application is but the first step towards the appeal. If
they were not serious about the appeal,
or if the members decline to
grant a power of attorney to prosecute the appeal, this application
will be entirely academic. I therefore
reject Mr Jefferys’
submission that only the costs of this application for leave to
appeal counts.
[11] The costs of the appeal to the Supreme Court of Appeal will
certainly exceed R50 000.00. Northglobal’s attorney estimated
those costs to be as follows:
preparing heads of argument to be R30 000.00 plus VAT,
perusing heads of argument, replying and appearing R60 000.00 plus
VAT; and
preparing the appeal record R50 000.00 plus VAT according to an
estimate from Appeal Document Services.
This total of R140 000.00 excludes the attorneys fees on both sides.
[12] However, assuming in favour of the applicants that only the
costs of this application is relevant to determining whether they
are
authorised to instruct legal representatives then they have not
discharged their onus of proving that the costs of the application
for leave to appeal will not exceed R50 000.00. In fact, Mr Jefferys
was unable to say what his own attorneys costs might be and
whether
the applicants’ legal costs could be pegged to not more than
R50 000.00. Expenses for the Body Corporate include
potentially the
costs of both parties. The applicants cannot guarantee what
Northglobal’s costs will be.
[13] If this application fails, then the applicants risk incurring
expenses in excess of R50 000.00. In that event they would have
acted
ultra vires
in applying for leave to appeal and these
proceedings would be not only a nullity but a waste of court time and
expense. Furthermore,
even if I were to accept the applicants’
submissions that the power of attorney by the members is due only
after leave to
appeal is granted this application for leave to appeal
will be entirely academic if the members decline to continue with the
appeal.
[14] At the commencement of the hearing I indicated to the parties
that as regards the grounds of appeal my
prima facie
view was
that important issues arise in relation to the functioning of a body
corporate, meeting procedures, voting and mandates.
Consequently, I
was inclined to grant leave to appeal. However, the difficulty I had
is with the authority of the applicants to
bind the members without
their express mandate to incur expenses. Even if costs were limited
to the application for leave to appeal
they could exceed the
applicants’ mandated limit of R50 000.00. I invited him
therefore to indicate whether the applicants
were prepared to
undertake to accept personal liability for any costs in excess of R50
000.00. He was unable to give me such an
undertaking. Consequently, I
was unable to assist the applicants to overcome what could have been
treated as a procedural hurdle
in order to deal with the substantive
merits of the appeal.
[15] In response to my enquiry as to whether there
was any likelihood of the members refusing to authorise legal
representatives
to prosecute the appeal, Mr Jefferys pointed out that
Northglobal would refuse to authorise the appeal. He referred me to
Wimbledon Lodge (Pty) Ltd v Gore NO and
Others
2003 (5) SA 315
(SCA) which, he
submitted, was authority for his proposition that the authority of a
developer who acts fraudulently could be bypassed
in litigation. Mr
Jefferys did not discuss how
Wimbledon
Lodge
assisted the applicants beyond
saying that the similarity was that in both cases the developer acted
fraudulently. A significant
difference between the two cases is that
the allegation of fraud or theft in
Wimbledon
Lodge
was ‘essentially
unchallenged’.
3
Whether Northglobal acted fraudulently is highly
contested in the main action for damages. Furthermore, in as much as
the applicants
seek to exclude Northglobal from voting on the
resolution to authorise the applicants’ legal representatives,
Northglobal
itself contests the competence of the Ashworths to vote
on such a resolution as Trustees.
[15] As to the remedy, rule 7 challenge would usually result in the
hearing of an application being postponed. However, Northglobal
gave
the applicants notice to prove their authority by way of delivering a
power of attorney supported by a resolution by the members.
Rule 30
prescribes that an application to set aside an irregular step may be
made only if an applicant has by written notice afforded
its opponent
an opportunity to remove the cause of complaint within 10 days and
thereafter delivers an application after the expiry
of those 10 days.
The notice in terms of rule 7(1) was delivered about 9 March 2012 and
the application in terms of rule 30(2)(b)
was filed on 12 March 2012.
The application in terms of rule 30(2)(c) was filed on 19 April 2012.
It is not the applicants’
case that they did not have an
opportunity to the remove the cause of complaint. It is simply that
there is no basis for a complaint.
[16] In the circumstances I grant an order in terms of paragraph (a)
and (b) of the notice of motion in the Application in terms
of Rule
30(2)(c).
___________
D.PILLAY J
Date of Application: 15 August 2012
Date of Judgment: 17 August 2012
Counsel for the Applicant Mr G. D. Harpur SC
Instructed by: Halstead Paola
Unit 5B, 7 Holwood Park
La Lucia Ridge Office
Estate
Counsel for the Defendant: Mr H. P. Jefferys SC
Instructed by: Tiefenthaler Attorneys
c/o Carl v d Merwe & Ass
3
rd
Floor, 6 Durban Club
Place
1
Eskom
v Soweto City Council
1992 (2) SA 703
(WLD) at 705 E-706 C ;
Ganes and
Another v Telecom Namibia Ltd
2004 (3)
SA 615
(SCA) at 624 ;
ANC Umvoti
Council Caucus v Umvoti Municipality
2010
(3) SA 31
(KZP) para 13-29
2
Erasmus
Superior Court Practice
Rule
7(b)(1) - 59
3
Wimbledon
at para 3?