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[2020] ZASCA 107
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Central Developments Tshwane (Pty) Ltd and Another v Body Corporate, Twee Riviere Aftree Oord (635/2019) [2020] ZASCA 107 (21 September 2020)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
no: 635/2019
In
the matter between:
CENTRAL
DEVELOPMENTS TSHWANE
(PTY)
LTD t/a CENTRAL DEVELOPMENTS
PROPERTY
GROUP
FIRST
APPELLANT
WILCOPROP
202 (PTY) LTD SECOND
APPELLANT
and
THE
BODY CORPORATE OF TWEE
RIVIERE
AFTREE OORD
(SECTIONAL
TITLE SCHEME SS0052110 RESPONDENT
Neutral
citation:
Central Developments
Tshwane (Pty) Ltd and Another v Body Corporate, Twee Riviere Aftree
Oord
(635/2019)
[2020] ZASCA 107
(21
September 2020)
Coram:
WALLIS, MOLEMELA and PLASKET JJA and
LEDWABA and UNTERHALTER AJJA
Heard
:
In terms of s 19(a) of the Superior Courts Act determined
without an oral hearing.
Delivered
:
This judgment was handed down electronically by circulation to the
parties’ representatives by email, publication on the
Supreme
Court of Appeal website and release to SAFLII. The date and time for
hand-down is deemed to be 09h45 on 21 September 2020.
Summary:
Action against developer of sectional
title development arising from defects in the design and construction
of foundations for structures
situated on common property –
power of body corporate to pursue such a claim – Sectional
Title Schemes Management Act
8 of 2011 – body corporate's power
to pursue such a claim conferred by s 2(7)(
b)
of Act – no need for a special
resolution in terms of s 2(7)(
e
)
of Act.
ORDER
On
appeal from:
Gauteng Division of High
Court, Pretoria (Tolmay J sitting as court of first instance):
1 The appeal is
dismissed.
2 The order of the
High Court is set aside and replaced by the following order:
'1
The special plea is dismissed.
2 Each party is to
pay its own costs relating to the preparation and argument of the
special plea.'
3 Each party is to
pay its own costs of this appeal.
JUDGMENT
Wallis
JA and Ledwaba AJA (Molemela and Plasket JJA and Unterhalter AJA
concurring)
[1]
One or other of the appellants was the
developer of the Twee Riviere Aftree Oord, a retirement village
consisting of 448 sectional
title units. There is no reason to
distinguish them for present purposes so we will refer simply to the
developer, encompassing
both of them. The respondent, the Body
Corporate of the sectional title development, alleges that the design
and construction of
portions of the common property, more
specifically the foundations of the courtyard and patio walls, in the
retirement village
undertaken by the developer was defective as a
result of the developer's negligence. It instituted two actions in
the Gauteng Division
of the High Court, Pretoria, seeking to recover
damages calculated by reference to the cost of remedying the alleged
defects. In
both its cause of action was primarily couched in delict
on the grounds of the developer's negligence, with alternative claims
for the same damages based on the existence of latent defects or
misrepresentations to purchasers of units in the retirement village.
For the purposes of this appeal the parties agreed that the one
before us be treated as a test case.
[2]
Shortly
before the commencement of the trial an amended special plea was
delivered, contending that the Body Corporate was precluded
from
suing, because they had not secured a special resolution of their
members as required by s 2(7)(
e
)
of the Sectional Title Schemes Management Act 8 of 2011 (the
Management Act) before commencing action.
[1]
The Body Corporate's response was to contend that the failure to
obtain a special resolution was capable of subsequent ratification.
Sensibly, the parties agreed a stated case to address that issue. The
special plea was dismissed in a judgment by Tolmay J. She
refused
leave to appeal, but on petition to this court such leave was
granted.
[3]
It is unnecessary to set out the terms of
the special case. It was agreed that the Body Corporate had not
obtained a special resolution
of residents, either before commencing
the proceedings or at all. The developer contended that this was
fatal to the Body Corporate's
action. The Body Corporate contended
that this deficiency could be remedied by ratification by the
sectional title unit holders.
When dismissing the special plea, the
judge granted the following additional orders:
'42.2 It is declared
that the failure to obtain a special resolution, as envisaged in
section 2(7)(
e
) of the Sectional Title Scheme Management Act 8
of 2011, before the institution of the actions by the Plaintiff is
capable of being
ratified.
42.3
The Plaintiff is afforded an opportunity to procure a special
resolution ratifying the institution of the actions under case
number
89152/2014 and under case number 72462/2016
[2]
within a period of 6 months of date of this order, provided that it
will be open to the Defendants to challenge the procedural
validity
of such ratification.
42.4
The Defendants are ordered to pay all the costs relating to the
special plea, the one paying the other to be absolved.'
[4]
In preparation for the appeal it became
apparent that there was an antecedent question that the parties had
not addressed in their
heads of argument, namely whether s 2(7)(
e)
was in truth the source of the Body
Corporate's authority to pursue the claim advanced against the
developer. Certain questions
were then posed to the parties through
the registrar of this court. They were invited to deliver
supplementary written argument
dealing with this question and both
parties did so.
The
Act
[5]
Sectional title schemes were introduced in
South Africa by the
Sectional Titles Act 66
of 1971 (the
1971 Act) and are now an
established part of the legal landscape. The original legislation was
replaced in 1986 by the Sectional
Titles Act 95 of 1986
(the 1986 Act). Sections 28(6) of the 1971 Act and 36(6) of
the 1986 Act empowered a body corporate
to sue or be sued in its
corporate name in respect of:
'(
a
)
any contract made by it;
(
b
)
any damage to the common property
;
(
c
)
any matter in connection with the land or building for which the body
corporate is liable or for which the owners are jointly
liable;
(
d
)
any matter arising out of the exercise of any of its powers or the
performance or non-performance of any of its duties under this
Act or
any rule.' (Our emphasis.)
In
1992 section 36(6) was amended
[3]
by the addition of the following sub-paragraph:
(
e
)
any claim against the developer in respect of the scheme if so
determined by special resolution.”
[6]
When portions of the 1986 Act were repealed
and replaced in 2011 by the Management Act, the section, as so
amended, was re-enacted
as s 2(7) reading as follows:
'The body corporate
has perpetual succession and is capable of suing and being sued in
its corporate name in respect of─
(
a
) any
contract entered into by the body corporate;
(
b
) any
damage to the common property;
(
c
) any
matter in connection with the land or building for which the body
corporate is liable or for which the owners are jointly
liable;
(
d
) any
matter arising out of the exercise of any of its powers or the
performance or non-performance of any of its duties under this
Act or
any rules; and
(
e
)
any claim against the developer in respect of the scheme if so
determined by special resolution.'
[7]
The basis for the special plea was that,
because the claim lay against the developer, a special resolution was
required before the
Body Corporate was entitled to commence legal
proceedings against the developer. Such a resolution was a
pre-requisite to the commencement
of proceedings, or, using language
from another area of law, a jurisdictional fact, the absence of which
meant that the Body Corporate
lacked the power or authority to pursue
the action against the developer.
[8]
The antecedent question was whether the
assumption that the source of the Body Corporate's power to sue the
developer lay in s 2(7)(
e
)
of the Management Act was correct. That assumption overlooked
s 2(7)(
b
),
which empowered the Body Corporate to sue in respect of any damage to
the common property. The court sought and obtained submissions
on
whether s 2(7)(
b
)
empowered the Body Corporate to bring this action against the
developer, without the need to obtain a special resolution by the
unit owners.
Discussion
[9]
The
effect of the provisions of s 36(6) of the 1986 Act was
considered by this court in
Oribel
Properties
.
[4]
After quoting the section, Malan JA said:
‘
A
body corporate is constituted by law, and it is charged with
responsibility for the enforcement of the rules and the control,
administration and management of the common property for the benefit
of all members. A body corporate has perpetual succession
and is
capable of suing or being sued in its own corporate name in respect
of the five matters referred to.
Some
of the powers, such as the one in paragraph (a) are only declaratory,
but the power granted in paragraph (b) – and in
some
circumstances paragraph (c) as well – gives it an entitlement
it would otherwise not have had under normal circumstances,
only the
owners of the common property, ie the owners of the sections, would
have been able to do so jointly as the common property
is owned by
them jointly.
Section 36(6)(
e
)
also bestows a power it would not otherwise have had on the body
corporate: there is no contractual arrangement between the developer
and the body corporate and, while there may be cases where a
developer is contractually bound to a sectional owner to give effect
to the scheme, the body corporate is in no such relationship with the
developer. . . . The body corporate is empowered by section
36(6)(
e
)
to institute proceedings against the developer ‘in respect of
the scheme; if so determined by special resolution’.
This
general power of the body corporate, however, does not detract from
this specific right given to the individual or owner under
section
25(13).’ (Emphasis added.)
[10]
The
common property in a sectional title development is owned jointly by
the section owners in undivided shares.
[5]
In the present case, that would ordinarily mean that any damage
unlawfully caused to the common property could only be recovered
in
proceedings brought by the owners of the 448 units in the retirement
village acting jointly. Such an arrangement would be practically
difficult, and possibly unworkable, in most sectional title schemes.
Accordingly, s 28(6)(b) of the 1971 Act, s 36(6)(
b
)
of the 1986 Act, and s 2(7)(
b
)
of the Management Act all empowered bodies corporate of sectional
title developments to sue in their own name to recover damages
arising from damage caused to any part of the common property.
[11]
There is an underlying logic to this
provision. Under s 3(1)(
a
)(i)
of the Management Act the body corporate is obliged to establish and
maintain an administrative fund which is reasonably sufficient,
among
other matters, to repair and maintain the common property. Under
s 3(1)(
i
)
the body corporate is obliged to insure the buildings forming part of
the development, which would include structures forming
part of the
common property. Where such structures are damaged by third parties
it is appropriate that the body corporate should
be entitled to
recover those damages. Indeed, if it did not have that power, it
might be debatable whether it had an insurable
interest in the
buildings it was obliged to insure. Be that as it may the power to
sue in their own name is vested in all bodies
corporate in relation
to claims for damage to the common property. It is unnecessary for
present purposes to decide whether this
is a form of representative
action on behalf of owners of sections, or to consider what
obligations a successful action may impose
upon bodies corporate
vis-à-vis the section owners. Those are questions for another
day and a very different dispute.
[12]
Malan JA correctly said
in
Oribel Properties
that s 36(6)(
b
)
of the 1986 Act conferred a power to sue for damage to the common
property that bodies corporate would not otherwise have enjoyed.
He
did not refer to its predecessor in the 1971 Act, but the same would
have been true of that provision as well. The same power
is now
derived from s 2(7)(
b
)
of the Management Act.
[13]
Neither the language nor the context of
s 2(7)(
b
)
suggests that the power to sue to recover damages arising from damage
to the common property is confined to damage caused by parties
other
than the developer of the sectional title development. Where the
damage is occasioned by defects in the original design and
construction of the structures on the common property, such as the
foundations that are the
casus belli
in
the present case, the developer is an obvious target for any claim.
Others who may be liable are the architect, the engineer
and the
builder. There is no question that they can be sued by the body
corporate in its own name without the need to obtain a
special
resolution.
[14]
To
that extent the decision in
Body
Corporate of Greenwood Scheme
[6]
was correct, but only coincidentally. The argument on exception in
that case was that the architect and a director of the development
could not be sued because the developer could not be sued without a
special resolution in terms of s 36(6)(
e
).
The fallacy in the argument was that s 36(6)(
e
)
was irrelevant to the action, whether against the developer or
against the architect and the director. The power to sue arose
in
terms of s 36(6)(
b
).
The endeavour by the court to distinguish s 36(6)(
e
)
by saying that its requirements were procedural and did not vest the
body corporate with powers to sue the developer was incorrect.
[15]
It is helpful to consider the issue by
looking back at the position before the s 36(6) of the 1986 Act
was amended to introduce
sub-section (e). The section clearly
provided, as its predecessor did and its successor still does, that
the body corporate
was empowered to sue in its own name in respect of
any damage to the common property. The section contained no
limitation on the
power of the body corporate to sue the developer
where the damage to the common property was caused by fault on its
part. There
is no reason, and none was suggested in the heads of
argument, why any limitation should be read into the section to
restrict the
power to sue contained therein, or to preclude it from
being used against the developer.
[16]
It follows that the developer's argument in
the present case depended upon the proposition that, when s 36(6)(
e
)
was introduced in 1992, it had the effect of removing the power that
bodies corporate had previously enjoyed to sue developers
for damages
arising from damage to the common property. The suggestion must be
that it removed that power from s 36(6)(
b
)
without any amendment to that section and reinstated it in
s 36(6)(
e
),
subject to the qualification that it could only be exercised if a
special resolution had been obtained from the owners of all
the
sections in the development.
[17]
There is nothing to suggest that this was
the purpose of the amendment. On its wording it was directed at
affording bodies corporate
a power to sue developers where the claim
was one 'in respect of the scheme'. An obvious example would be a
claim to compel performance
of an obligation resting on the developer
under the scheme. Another would be an application for an interdict to
prevent the developer
from acting in a manner inconsistent with the
terms of the scheme. Nothing in the long title of the amending
statute suggests that
the purpose of including sub-section (
e
)
in s 36(6) was anything other than to vest bodies corporate with
powers that they did not otherwise have. It aimed at conferring
additional powers, not removing and restricting existing powers by
making their exercise more onerous.
[18]
In the judgment of the high court it was
said that:
'The 1992 amendment
therefore entailed a stricter requirement before a body corporate may
sue a developer namely a special resolution
…'
That
led to the conclusion that:
'… a claim by
the body corporate can only be instituted if a special resolution to
do so is obtained.'
This
reasoning was largely based on that in
Body Corporate of Greenwood
Scheme
, which is dealt with above, and fell into the same error.
The judge recognised the antecedent question but, with respect,
answered
it incorrectly, no doubt because the arguments to the
contrary were not addressed to the court. But a correct answer
rendered the
further question of the ratification of a failure to
secure a special resolution academic.
Result
[19]
The inevitable outcome of this analysis is
that the Body Corporate in this case did not require the authority of
a special resolution
in order to pursue the claims advanced by it.
The special plea was accordingly bad in law as it proceeded from a
misconception
as to the Body Corporate's powers. It was correctly
dismissed, but not for the reasons given by the learned judge, who
was confronted
with very different arguments. The appeal must
therefore be dismissed but the separate orders quoted in para 3
must be set
aside as unnecessary given the terms of this judgment.
[20]
The
issue on which the case was decided in the high court did not,
properly speaking, arise. The conclusion that the absence of
a
special resolution in the case of an action by a body corporate
against a developer in respect of a scheme could be cured by
subsequent ratification was based on what was termed a 'purposeful
interpretation' of section 2(7)(
e
).
However, little consideration was addressed to the background to the
introduction of this section or the purpose it served. Nor
was
reference made to the differing approaches to a problem of this type
in the majority and minority judgments in
Neugarten
.
[7]
When and if a case arises where the ratification of the failure by a
body corporate to obtain a special resolution before instituting
action against the developer pertinently arises these considerations
will no doubt be borne in mind.
[21]
That leaves only the issue of costs. While
ordinarily these would be borne by the unsuccessful party, the
position is that responsibility
for the stated case and the arguments
before the high court and initially before this court must be shared
by the parties. The
point was ill-conceived by the appellants, but
the respondent raised the issue of ratification, instead of pointing
out that the
power to pursue the claim lay in s 2(7)(
b
).
In the circumstances the appropriate order is that each party should
bear its own costs, both in this court and in the
high court.
[22]
The following order is made:
1 The appeal is
dismissed.
2 The order of the
High Court is set aside and replaced by the following order:
'1
The special plea is dismissed.
2 Each party is to
pay its own costs relating to the preparation and argument of the
special plea.'
3 Each party is to
pay its own costs of this appeal.
______________________
M J D WALLIS
JUDGE OF APPEAL
_______________________
for
A LEDWABA
ACTING JUDGE OF
APPEAL
Appearances
For
appellant: F N Erasmus SC (with him C van Eetveldt)
Instructed
by: JDB Incorporated Attorneys, Pretoria;
Peyper
Incorporated Attorneys, Bloemfontein
For
respondent: D K Nigrini
Instructed
by: Erasmus Incorporated Attorneys, Pretoria;
Phatshoane
Henney, Bloemfontein.
[1]
As the
development and sales of units in the development spanned the
operation of that Act and its predecessor, the
Sectional Titles Act
95 of 1986
, reliance was also placed on
s 36(6)(
e
)
of its predecessor the
Sectional Titles Act 95 of 1986
. As the
provisions are in identical terms it is unnecessary to differentiate
between them.
[2]
The
present action.
[3]
By
s 9(b) of the Sectional Titles Amendment Act 7 of 1992.
[4]
Oribel
Properties 13 (Pty) Ltd v Blue Dot Properties 271 (Pty) Ltd
[2010]
ZASCA 78
;
[2010] 4 All SA 282
(SCA) para 24.
[5]
Section
16(1) of the 1986 Act.
[6]
Body
Corporate of Greenwood Scheme v 75/2 Sandown (Pty) Ltd and others
1999
(3) SA 480
(W) at 485B-E.
[7]
Neugarten
and Others v Standard Bank of South Africa Ltd
1989
(1) SA 792
(A).