Baumoral Heights no 39 bk v Trustees for the time being of the Baumoral Heights Body Corporate (A698/2001) [2002] ZAWCHC 54 (4 October 2002)

About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Western Cape High Court, Cape Town
SAFLII
>>
Databases
>>
South Africa: Western Cape High Court, Cape Town
>>
2002
>>
[2002] ZAWCHC 54
|

|

Baumoral Heights no 39 bk v Trustees for the time being of the Baumoral Heights Body Corporate (A698/2001) [2002] ZAWCHC 54 (4 October 2002)

IN THE HIGH COURT OF
SOUTH AFRICA
(CAPE OF GOOD HOPE PROVINCIAL DIVISION)
Case no.: A 698/2001
In the matter between:
BAUMORAL HEIGHTS NO 39
BK Appellant/Plaintiff
and
THE
TRUSTEES FOR THE TIME BEING OF Respondent/Defendant
THE BAUMORAL HEIGHTS BODY CORPORATE
JUDGMENT GIVEN THIS
FRIDAY, 4 OCTOBER 2002
­­­­­­­­­­
CLEAVER
J:
[1] The issue to be determined in this matter is whether or not
management rule 71 prescribed in terms of regulations published under
the Sectional Titles Act 75 of 1986 (“the Act”) provides for a
compulsory arbitration procedure. The difficulties raised by
the
wording of the rule were foreseen by academic writers, but as far as
I am aware, the issue has not yet come before the courts.
[2] The appellant, the owner of a sectional title unit of a sectional
title scheme known as Balmoral Heights in Cape Town sued the
respondent, the Trustees of the Body Corporate responsible for the
administration of the sectional title scheme, in the Cape Town
magistrate’s court for payment of the sum of R26 000. The
appellant alleged that the respondent had failed and neglected in its
legal duty to prevent water penetrating into its unit and to maintain
the common property in the scheme so as to prevent water penetrating
its unit. The amount claimed was said to represent loss of rental
income. The particulars of claim record that the appellant had
informed the respondent and its managing agent of the dispute in
terms of rule 71(2) promulgated under section 55 of the Act by means
of a written notice which had been hand delivered to the respondent.
I will deal further with this rule in due course.
[3] In addition to raising a defence on the merits, the respondent
raised a special plea and it is that which is the subject of this
appeal. The plea reads:
“
Defendant pleads that, in view of the provisions of Management
Rule 71, which Rule was published in Government Notice R1422 of 31
October 1997, and which is applicable to the relevant Sectional Title
Scheme in question, any dispute between an owner of a unit
and the
body corporate is to be determined by means of arbitration.”
The special plea was argued before the magistrate in Cape Town who
upheld the plea and dismissed the plaintiff’s claim with costs.
[4] The
appeal before us was brought on two grounds, namely:
4.1 That
rule 71 does not provide for compulsory arbitration; and
4.2 In the alternative, if it be found that the rule does provide
for compulsory arbitration, the magistrate should not have dismissed
the plaintiff’s claim, but merely stayed it.
The respondent does not oppose the appeal on the
second
ground.
[5] Rule
71(1) reads as follows:
“
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.”
[6] One of the points raised by the appellant was
that since the claim was one for consequential damages, it was not
proper to bring
the claim under and in terms of the Act and rules,
the argument being that since the claim was one in delict, the Act
and the rules
had
no
application. In the first place, the appellant specifically invoked
the provisions of rule 71(2) by giving the respondent notice
of the
dispute. Secondly, the claim is, as pointed out by the magistrate,
firmly founded on the provisions of the Act since the
claim is based
on the respondent’s alleged failure to comply with duties specified
in the Act. I agree with the magistrate that
the fact that the claim
is for damages makes no difference and that is not thereby excluded
from the rule.
[7] The
interpretation of two elements of rule 71 are of importance, namely
7.1 the
meaning of the word ‘shall’; and
7.2 the meaning of the proviso
“save
where an interdict or any form of urgent or other relief may be
required or obtained from a Court having jurisdiction”.
[8] Mrs
Le Roux
,
who appeared for the appellant, submitted that when interpreting the
rule, regard should be had to the provisions of section 39(2)
of the
constitution, which provides that
“
when interpreting any legislation, and when developing the
common law or customary law, every court, tribunal or forum must
promote
the spirit, purport and objects of the Bill of Rights”.
Thus, she argued that the common law principle
that the intention of the legislature to oust the jurisdiction of the
courts must be
expressly stated before such ouster can take place,
has application. Since section 34 of the constitution provides that
everyone
has the right to have any dispute that can be resolved by
the application of law decided in a fair public hearing before a
court
or where appropriate, another independent and impartial
tribunal or forum, she argued that the appellant’s right to enforce
his
claim in a court of law should not be taken away by requiring him
to submit to arbitration. In developing this argument she relied
on
a principle of statutory interpretation (with reference to the
meaning to be applied to the word
“shall”
in rule 71(1)) that where a provision in an enactment is couched in
positive language and no penalty for failure to comply with the
provision is provided, the provision should be interpreted as being
merely directory. She also submitted that strict compliance
with the
provision in question would lead to an injustice in that access to
the courts would be denied to the appellant, the appellant
would be
forced to submit to a more costly procedure and would be denied a
right of appeal which he would have in the courts. Finally,
the
result would also be to treat sectional titleholders differently from
holders of conventional or traditional title to immovable
property.
[9] All these arguments are dependent upon whether
or not rule 71 is a statutory enactment. The question requires one
to
go back
to the Act. Section 35 of the Act reads as follows:
“
35 Rules
(1) 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.
(2) 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, which rules may be substituted,
added to, amended or repealed by the developer when
submitting an
application for the opening of a sectional title register, to the
extent prescribed by regulation, and which rules
may be substituted,
added to, amended or repealed from time to time by unanimous
resolution of the body corporate as prescribed by
regulation;
(b) conduct rules, prescribed by regulation, which rules may be
substituted, added to, amended or repealed by the developer when
submitting
an application for the opening of a sectional title
register, and which rules may be substituted, added to, amended or
repealed from
time to time by special resolution of the body
corporate: Provided that any conduct rule substituted, added to or
amended by the
developer, or any substitution, addition to or
amendment of the conduct rules by the body corporate, may not be
irreconcilable with
any prescribed management rule contemplated in
paragraph (a).
(3) Any management or conduct rule made by a developer or a body
corporate shall be reasonable, and shall apply equally to all owners
of units put to substantially the same purpose.
(4) ….”
[10] Although the legislature determined that certain management
rules would apply to a scheme, it is clear that such determination
is
unlike a statutory provision which remains binding, for provision is
made
10.1 for other rules to be substituted, added to, amended or
withdrawn by the developer when submitting an application for the
opening
of a sectional title register; and
10.2 for
the rules to be added to, amended or repealed by unanimous resolution
of the body corporate once there are owners, other
than the
developer, of at least 50% of the units in the scheme.
[11] Although rule 71 has its origin in a statutory enactment,
persons affected by it are not in the position of persons who are
subject to normal statutory enactments who do not have the right to
choose whether the enactments will apply to them or not. In
discussing the nature of the rules, Professor C G van der Merwe in
his work ‘Sectional Titles, Share Blocks and Time-sharing’
(Vol
1, Butterworths) comes to the conclusion that
“
It is extremely difficult to come to a definite conclusion on
the nature of the rules. What follows, is merely intended as a few
observations of a preliminary nature which can serve as a point of
departure for further discussion.
In
our view, the following dogmatic foundations for the rules merit
consideration:
(i) that the rules have a contractual nature;
(ii) that the rules have their origin in the law of things;
(iii) that
the rules have the character of delegated legislation; and
(iv) that the rules flow from the legislative
power of an autonomous sectional title community.”
(p 13-16)
[12] Support for the theory that the rules are by
nature contractual is to be found in the judgment in
Wiljay
Investments (Pty) Ltd v Body Corporate Bryanston Crescent
1984 (2) SA 722
(T) at 727D. In that case,
Spoelstra
J
also
rejected the notion that the rules should be regarded as being
similar to restrictive conditions contained in the title deeds
of
urban property.
[13] As to the third and fourth theories, Prof van der Merwe points
out that there is a difference in the nature of the rules set
out in
annexure 9 which deals with restrictions on the use and enjoyment of
sections and the common property (which show a strong
resemblance to
restrictive conditions in a township development) and the rules which
relate to the management, administration and
control of a scheme set
out in annexure 8 and with which we are concerned. He concludes that
“
The
only tenable theory which can accommodate the rules of both schedules
is that the rules of a sectional title community are the
product of
the legislative power of an autonomous association.”
(p 13 – 29)
[14] I do not consider it necessary to decide
finally on the nature of the rules, save to say that whatever the
underlying nature
may be, it
is
not such as to require the rights of individuals to be protected
against interference by the State. Rule 71 plainly and clearly
provides that with the exception of matters covered by the proviso,
any dispute between the body corporate and owner or between owners
“arising out of or in connection with
or related to the act, the rules or conduct rules”
shall be determined in terms of the rules. Regulation 39 published
under the Act in turn provides
“
that
provisions of the
Arbitration Act 1965
…, shall insofar as these
provisions can be applied, apply
mutatis
mutandis
with reference to arbitration
proceedings under the act.”
[15] The dispute between the parties is a dispute
between the owner of a unit and the body corporate and arises out of
or in connection
with or related to the Act. The ambit is very wide
and as I have already remarked, there is no reason why a claim for
damages based
on an alleged failure by the body corporate to comply
with its obligations under the rules should not fall under the ambit
of rule
71. In the result, it is my view that the rule 71(1) read
with regulation
39
provides for a compulsory arbitration of the dispute.
[16] Can it be said, as it was argued by Mrs
Le
Roux
, that the appellant was entitled
to bring its case to court under the concept of
“other
relief”
referred to in the proviso?
I think not, and incline to the view set forth by Prof Butler in his
article ‘The Arbitration of Disputes
in Sectional Title Schemes
under Management Rule 71’ published in Stellenbosch Law Review 1998
(3) at 264, 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.”
Whether Prof Butler’s view is adopted or not, it
is in my view quite clear that
“other
relief”
must be given a restricted
meaning, for otherwise the provisions would be meaningless and any
dispute could then be brought before
the courts. This could never
have been the intention of the legislature. The proviso clearly
covers the situation where interim
relief is sought, since the
Arbitration Act does
not permit an
arbitrator to grant interim relief
relating to a matter under dispute.
[17]
Rule
71(2)
also needs to be considered. It provides:
“
If such dispute 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. Should the dispute or complaint not be resolved within
fourteen
days of such notice, either of the parties may demand that
the dispute or complaint be referred to arbitration.”
The use of the word ‘may’ should not in my view be interpreted so
as to give a party the right to have the dispute resolved by
a method
other than arbitration. The subsection is concerned with the
mechanism of resolving the dispute. The fourteen-day period
is
allowed so that the parties may endeavour to resolve the dispute. If
no such resolution is achieved, either party can (may) demand
that
the dispute proceed to arbitration. The party is not obliged to do
so and may decide not to take the matter further, hence
the use of
the word ‘may’.
[18] To return to the main point advanced by the
appellant, namely that the appellant will be denied its right in
terms of
section 34
of the constitution, it should be remembered that
the section speaks of a public hearing before a court, or where
appropriate,
another independent and
impartial tribunal or forum
.
Arbitration is clearly an impartial and independent forum. The
discretionary power of a court to exclude arbitration is not usually
available in the case of a statutory arbitration, but as I have
already indicated, the reference to arbitration in respect of the
rules is not a statutory one in the normal sense of the word. Also,
should the rules have a contractual or consensual basis, the
availability of such a discretionary power of the court would be
likely. Perhaps more importantly, the wording of
regulation 39
may
well support a wide application for the provisions of the
Arbitration
Act to
rule 71
, including the court’s discretionary powers under
sections 3
and
6
of the
Arbitration Act, not to
enforce the
agreement.
[19] There may of course be cases which although
ostensibly arise out of or are
in
connection with or related to the Act and the rules are not
arbitrable, (see the examples given by Prof Butler
op
cit
at 265) but the case before us is
not one of those.
[20] Finally, there is the question of whether the
respondent was entitled to raise the defence of arbitration at the
fairly late
stage of the proceedings in the manner in which it did.
As to the propriety of raising the defence in a plea, instead of
doing so
by way of a substantive application, the following passage
from
Delfante v Delta Electrical
Industries Ltd and Another
1992 (2) SA
221
(C) is instructive
“
An
arbitration agreement is no ‘automatic bar to legal proceedings in
respect of disputes covered by the agreement’ (
Conress
(Pty) Ltd and Another v Gallic Construction (Pty) Ltd
1981
(3) 73 (W) at 75H,
per
Nicholas
J). It is incumbent upon a defendant seeking to invoke such a clause
to file a special plea (
Yorigami
Maritime Construction Co Ltd v Nissho-Iwai Co Ltd
1977
(4) SA 682
(C) at 692H) or to raise it as a defence on affidavit
(
Conress (Pty) Ltd and Another v Gallic
Construction
(
supra
at 75H)). Thus, while the language used
in
s 6(1)
of the
Arbitration Act 42 of 1965
is suggestive of a
substantive application, in compliance with
Rule 6(5)(a)
, or at least
Rule 6(11)
, it would seem to me that Joubert (ed)
Law
of South Africa
vol 1 para 467 correctly
contends that
‘
(t)he procedure provided
in the (A)ct is not obligatory but permissive and does not derogate
from the practice of pleading the submission
clause either by way of
a preliminary special plea or by way of defence.’
That practice is evidenced by such cases such
as
The Rhodesian Railways Ltd v
Mackintosh
1932 AD 359
at 371 and
King
v Harris
1909 TS 292.
(See also
Piercy
v Young
(1879) 14 ChD 200
at 209 and
Russel on
Arbitration
20
th
ed (1982) at 206.)”
(226E-H)
It seems clear therefore that it is not improper to raise the
defence in a plea.
[21] The defendant having raised the matter by way of a special plea,
the magistrate was in my view not correct in dismissing the
application. The proper course would have been to grant a stay of
proceedings pending the outcome of the arbitration. The plaintiff
will on this basis enjoy only very limited success on appeal, but
such success will not be sufficient to disentitle the respondent
to
the costs of the appeal.
[22] I
accordingly make the following order:
22.1 The appeal against the magistrate’s judgment upholding the
special plea is dismissed with costs.
22.2 The
appeal against the magistrate’s judgment dismissing the plaintiff’s
claim with costs is set aside and following order
made in place
thereof:
(a) The plaintiff’s claim against the defendant is stayed, pending
the resolution of the plaintiff’s claim by arbitration as
provided
for in the rules applicable to the sectional title scheme known as
Balmoral Heights and situated at Balmoral Road, West
Beach,
Tableview.
The costs will stand over for determination at a later stage.
_________________
R B CLEAVER
POTGIETER AJ
I agree.
__________________
D POTGIETER