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[2014] ZAWCHC 70
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Dennegeur Estate Huiseienaarsvereniging v Zonnekus Mansion (EDMS) BPK (2024/2011) [2014] ZAWCHC 70 (8 May 2014)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE, CAPE TOWN DIVISION)
Case
No: 2024/2011
DATE:
08 MAY 2014
In
the matter between:
DENNEGEUR
ESTATE HUISEIENAARSVERENIGING
.............................
Applicant
A
nd
ZONNEKUS
MANSION (EDMS)
BPK
.......................................................
Respondent
JUDGMENT: 8 MAY 2014
PILLAY AJ:
INTRODUCTION
1.
This
is an application for the Respondent’s provisional liquidation.
2.
The
matter has a long history with proceedings having been instituted in
February 2011.
THE PAPERS FILED OF RECORD
3.
The
application was instituted on the basis that the Respondent (which
owns certain property at Dennegeur Estate) is indebted to
the
Applicant (which is the Dennegeur Estate Homeowner’s
Association) in an amount of R 103 708.90.
[1]
The debt was initially alleged to include an amount for arrear
levies, penalty levies and legal fees, which indebtedness
was alleged
to be due, owing and payable.
4.
In
its answering affidavit, the Respondent avers inter alia as follows:
“
6.
The actual monthly levy in respect of which Applicant purports to
hold Respondent liable
was R 456.00 from March 2008 and R 513.00 per
month from September 2008 to the present. The monthly levy was
paid by Respondent
up to and including October 2008.
7.
In September 2008 a charge of R 6 928.35 for rubble removal was
raised against
Respondent. Respondent was not prepared to pay
this amount.
8.
In June 2009 Applicant introduced a penalty levy of R 2 565.00.
Interest,
administration fees and other costs were also levied
against Respondent. Respondent was not prepared to pay these
amount
(sic) and disputes its liability to do so.
9.
In March 2009, Applicant, as Plaintiff, purported to cause summons to
be issued
out of the Somerset West Magistrates’ Court against
Respondent, as Defendant, in respect of the selfsame cause of action
on which it relies for its alleged claim against Respondent in this
application (the amount of the claim was then less). ...
10.
Respondent, as Defendant, instructed attorneys to defend the
aforesaid action (“the
action”) and a plea was served and
filed in June 2009 in which Respondent set out its defence. ...
11.
As appears from the Plea, Respondent does not accept that Applicant
exists and requires
Applicant to
prove all technical and
procedural aspects relating to the charges levied against Respondent
.
12.
Without admitting liability for the standard normal levy, Respondent
was prepared on numerous
occasions to pay same in settlement of the
action and Applicant’s alleged claim. Respondent has
however always disputed
the liability of all the charges levied.
13.
Applicant has not withdrawn the other action.
14.
I deny that Applicant is
entitled to levy the charges
which
have been levied by it, especially those over and above the standard
levy. There are various factors in this regard:
14.1
Respondent disputes Applicant’s existence.
14.2
Respondent never agreed to any Homeowner’s Association
Constitution or Development Control Parameters
(as all homeowners
were requested to do in writing).
14.3
Respondent disputes Applicant’s authority to impose any of the
charges sought to be imposed by it.
14.4
Respondent disputes any resolution in respect of the charges made
against it
.
14.5
Respondent disputes the amount of the penalty levy
. This
would have to be determined. The amount is therefore not
liquidated.
15.
Even were it to be entitled to levy further charges over and above
the standard levy, these
further charges would be a penalty which is
not a liquidated amount and would have been subject to dispute by
Respondent.
16.
Applicant’s alleged claim was being dealt with in the action.
I am advised that
a trial is the proper forum for the determination
thereof and that liquidation applications are not the correct forum
for the resolution
of the dispute which exists between the parties
herein. This will be dealt with further in legal argument to
the extent necessary.”
(Own
Emphasis)
5.
In
addition, the Respondent provided some indication of the value of its
immovable property, asserted that its movable assets are
readily
realisable “in an amount way in excess of Applicant’s
claim” and referred to the
quantum
of its long term liabilities.
6.
In
its Replying Affidavit, the Applicant stated inter alia as follows:
“
8.
In June 2009 word ‘n sogenaamde “penalty levy”
gehef van R 2 565.00.
Hierdie heffing is ingestel weens
die feit that die Respondent weens wanbetaling en ander problem wat
dit skep, a groot administratiewe
las op die Applikant plaas.
In terme van die Applicant se konstitutsie is dit geregtig om hierdie
heffing in te stel.
Weereens is die enigste verweer wat die
Respondent hierteen opwerp dat dit nie bereid was om die bedrag te
betaal nie.
9.
Die primere verweer wat die Respondent opwerp, word vervat in
paragrawe 11 tot
14 me Cameron se verklaring. Die grondslag van
hierdie verweer is dat die Respondent nie aanwaar dat die Applikant
bestaan
nie. Geen feitelike en/of regsbasis word verskaf vir
hierdie bewering nie end sky dit bloot ‘n gefingeerde en uit
die
lug gegrypte bewering te wees.”
7.
The
replying affidavit was filed on 19 May 2011. On 2 December
2011, the Respondent filed a further affidavit. According
to
the further affidavit, the Respondent paid “under protest”
the normal levy and the rubble removal portions of the
Applicant’s
claim “in order to remove them from the arena of dispute”;
this notwithstanding, it persists in disputing
its liability to pay
these amounts. The further affidavit also states that the
Respondent has made available cash funds in
an amount of R 79 000.00,
which is the
quantum
of the balance of the claim.
8.
On 3
February 2014 (two Court days before the hearing of this matter), the
Applicant filed a supplementary affidavit. The
following
aspects of that affidavit warrant reference:
8.1.
A
printout of the Applicant’s detailed ledger for the period 1
March 2013 to 28 February 2014 was attached which reflected
the
Respondent’s indebtedness to the Applicant in respect of
various levies, penalty charges and fees levied against it by
the
Applicant in the performance of its responsibilities in terms of
section 2 of its Constitution in an amount of R 416 406.83.
8.2.
A
copy of the Applicant’s Constitution was attached in
confirmation of its existence and locus standi.
8.3.
It
was contended that the institution of these proceedings was
authorised by the Applicant’s Executive Committee and had the
support of its members. Certain minutes of the Applicant’s
annual general meetings were attached in this regard.
8.4.
A
copy of the Respondent’s title deed to Erf 13421 Somerset West
was attached.
9.
When
this matter came before me on 6 February 2014, I granted an Order in
terms whereof the Respondent was afforded an opportunity
to answer to
the Applicant’s further affidavit. Both parties were also
afforded the opportunity to file supplementary
heads of argument.
10.
Pursuant
to my Order of 6 February 2014, the Respondent filed a further
affidavit on 24 February 2014. In its further affidavit,
the
Respondent contended as follows:
10.1.
The
print out of the Applicant’s detailed ledger constitutes
hearsay evidence in that it was prepared by an entity styled
Micsam
Management and is presented in the absence of a confirmatory
affidavit by the person responsible for its preparation.
To
this extent, the Respondent seeks to have the print out (as well as
the supporting averment in the affidavit) struck out.
10.2.
In
the alternative, it is alleged that the print out is any event
“nonsensical and ultimately of no use to this Honourable
Court
as a basis for establishing the Respondent’s alleged
indebtedness” towards the Applicant. In this regard
it is
averred that the print out commences with an opening balance as at 1
March 2013 in an amount of R 312 604.666 without
any indication
of the manner in which this balance had been arrived at.
Furthermore, it is contended that the legal fees
reflected in the
print out are not chargeable to the Respondent’s account.
10.3.
The
print out does not indicate on which basis the interest component of
the amount claimed from the Respondent has been calculated,
specifically in respect of the base amount and the interest rate
employed.
10.4.
The
Applicant’s “true case” on its version is
that the Respondent’s alleged indebtedness in respect
of
“ordinary monthly levies payable” over the book year in
question, in the sum of R 6 600.00, which is slightly
more than
1.5% of the total amount of R 416 406.83. In this regard
the Respondent contends that it is eminently able
to make payment of
these levies and in fact did pay these levies in full. In
amplification, it is further contended that
the Respondent made
payments totalling R 6 550.00 over the period in question which
is just R 50 short of the “normal
levies” claimed from
the Respondent in that period. These payments were discontinued
by the Respondent since September
2013.
10.5.
Despite
clause 10 of the Constitution, the Applicant has failed to present
any documentary or other evidence as proof that the correct
procedure
was employed in the imposition of levies.
THE ISSUES IN DISPUTE
11.
In
the course of the affidavits that have been filed by both parties the
issues have narrowed substantially in that:
11.1.
The
Respondent no longer disputes Applicant’s existence.
11.2.
The
Respondent no longer contends that it had never agreed to any
Homeowner’s Association Constitution or Development Control
Parameters (as all homeowners were requested to do in writing).
It accepts that it is bound by the following condition in
the title
deed: “Subject further to the following condition contained in
the Constitution of the Dennegeur Home Owner’s
Association,
imposed in Deed of Transfer T 102878/2002 by the Helderberg
Municipality in terms of section 29 of Ordinance 15 of
1985 upon
approval of the subdivision of Erf 13351 Somerset West, namely –
‘The within property may not be sold or
transferred without the
prior written consent of the DENNEGEUR HOME OWNER’S
ASSOCIATION, of which the Transferee shall become
a member, which
consent shall not be unreasonably withheld.” Furthermore,
a document entitled “Requirements for
Consent to Transfer”
signed on behalf of the Respondent on 9 February 2007 states as
follows: “That a copy of
the house rules/constitution has
been received from the previous owner. By signing this document
the purchaser and his spouse
acknowledges that they read the conduct
rules / constitution, understands it and agrees to become a member of
the body corporate
/ association and abide by the conduct rules and
the Sectional Title Act or the constitution of the association and
any regulation
and rules made by the trustees / committee.”
11.3.
The
Respondent no longer disputes Applicant’s authority to impose
any of the charges sought to be imposed by it. As
is apparent
from the provisions of the constitution quoted elsewhere in this
judgment, the Applicant is indeed authorised to impose
charges in
respect of ordinary levies as well as penalty levies.
12.
The
remaining issues in dispute are accordingly whether the alleged debt
is genuinely disputed on reasonable grounds on the basis
of the
Respondent’s contentions:
12.1.
That
it disputes any resolution in respect of the charges made against it.
12.2.
That
the Applicant has not proved all technical and procedural aspects
relating to the charges levied against Respondent.
13.
In
addition, I am called upon to determine the outcome of the
application to strike out.
THE APPLICATION TO STRIKE OUT
14.
As
stated in its application to strike out, the Respondent seeks to
strike out:
14.1.
Paragraph
4 of the Applicant’s further affidavit (on the basis that it is
alleged to constitute inadmissible hearsay evidence)
which states as
follows:
“
4.
As regards the extent of the Respondent’s current indebtedness
to the Applicant,
I hereto annex a printout of the Applicant’s
detailed ledger for the period 1 March 2013 to 28 February 2014,
marked annexure
“AL1”. As can be seen from Annexure
“AL1”, the Respondent’s indebtedness to the
Applicant in
respect of various levies, penalties, charges and fees
levied against it by the Applicant in the performance of its
responsibilities
in terms of Section 2 of its Constitution, currently
amounts to R 416 406.83. I respectfully confirm that the
aforesaid
amount is due and payable by the Respondent to the
Applicant. I further respectfully point out that the component
of this
aggregate sum of R 416 406.83 which relates to the
ordinary monthly levies payable (as opposed to penalties and the
like)
amounts to R 14 300.”
14.2.
Annexure
AL 1 which is the detailed ledger allegedly reflects the Respondent’s
indebtedness to the Applicant also on the basis
that it is alleged to
constitute inadmissible hearsay evidence.
14.3.
Paragraphs
10 and 11 of the supplementary affidavit and AL5 on the ground that
it constitutes matter of a privileged nature.
15.
Subsequent
to the application to strike out having been brought, a further
supplementary affidavit was filed on behalf of the Applicant.
The Deponent to that affidavit is one Ms Jackson who identifies
herself as a businesswoman and director of the company Micsam
Management, the managing agent of the Applicant. She further
states as follows: “I have read the supplementary
affidavit by Andre Loedolff and confirm the correctness thereof
together with the correctness of the annexures prepared by Micsam,
which was prepared by me and/or under my supervision.”
The Respondent took issue with the formulation of this averment
and
contended that it did not adequately address the question of
hearsay.
16.
Notwithstanding
the supplementary affidavit having been filed at a late stage of the
proceedings, I am of the view that it is in
the interests of justice
that it be admitted. Indeed, the Respondent could not point to
any prejudice that it would suffer
as a result thereof.
17.
I am
of the view that the supplementary affidavit of Ms Jackson does
indeed address the complaint of hearsay evidence in relation
to AL1
and paragraph 4 of the further affidavit. I am guided by the
following in this regard:
17.1.
First,
the fact that the documents in question were prepared by the Deponent
and/or under her supervision is, in my view sufficient
to respond to
the allegation of hearsay.
17.2.
Second
and in any event, it is clear from the papers filed of record that
the statements of account for the Homeowner’s Association
have
consistently been prepared by Micsam Management.
17.3.
Third,
the Circular to all Owners on the Estate regarding the Construction
Levy was authored by Ms Jackson in her capacity as managing
agent.
17.4.
Fourth,
the AGM minutes of 20 October 2011 which referred to outstanding
levies as well as the liquidation application of the Respondent,
reflect that Ms Jackson was in attendance. The minutes of a
Committee meeting held on 20 October 2011 also reflect Ms Jackson
as
having been in attendance as do the minutes of the AGM of 7 December
2006 at which a resolution was adopted regarding the amendment
of
clause 2.7 of the Constitution. Ms Jackson was also in
attendance at a committee meeting and an AGM on 26 July 2011.
18.
Indeed,
Ms Jackson appears to have been intimately involved in the matters
concerning the Association. I accordingly do not
have a
difficulty in respect of the formulation of what she confirms in her
supplementary affidavit and conclude for reasons aforestated
that the
application to strike out paragraph 4 of the supplementary affidavit
and AL1 must fail.
19.
As
regards the striking out of the privileged matter, it has long been
recognised that statements expressly or impliedly made without
prejudice in the course of bona fide negotiations for the settlement
of a dispute cannot be disclosed in evidence without the consent
of
both parties. Such exclusion is based upon the tacit consent of the
parties and the public policy of allowing people to try
to settle
their disputes without the fear that what they have said will be held
against them if the negotiations should break down.
[2]
I am of the view that paragraphs 10 and 11 of the supplementary
affidavit (as well as AL5) do indeed constitute privileged
matter.
The application to strike out in this regard must therefore succeed.
THE LAW
20.
Section
344 of the Companies Act No. 61 of 1973 regulates the circumstances
in which a company may be wound up by Court. One
such instance
is if the company is unable to pay its debts as described in section
345.
[3]
21.
Section
345 provides as follows:
“
345
When company deemed unable to pay its debts
(1)
A company or body corporate shall be
deemed to be unable to pay its debts if-
(a)
a creditor, by cession or otherwise, to whom the company is indebted
in a sum not less than
one hundred rand then due-
(i)
has served on the company, by leaving the same at its registered
office, a demand requiring
the company to pay the sum so due; or
(ii)
in the case of any body corporate not incorporated under this Act,
has served such demand
by leaving it at its main office or delivering
it to the secretary or some director, manager or principal officer of
such body
corporate or in such other manner as the Court may direct,
and the company or body corporate has for three weeks thereafter
neglected
to pay the sum, or to secure or compound for it to the
reasonable satisfaction of the creditor; or
(b)
any process issued on a judgment, decree or order of any court in
favour of a creditor of
the company is returned by the sheriff or the
messenger with an endorsement that he has not found sufficient
disposable property
to satisfy the judgment, decree or order or that
any disposable property found did not upon sale satisfy such process;
or
(c)
it is proved to the satisfaction of the Court that the company is
unable to pay its
debts.
(2)
In determining for the purpose of
subsection (1) whether a company is unable to pay its debts,
the
Court shall also take into account the contingent and prospective
liabilities of the company.”
22.
I am
of the view that in terms of Schedule 5 (9) of the
Companies Act No.
71 of 2008
, the previous
Companies Act will
continue to apply in
respect of the present application. In this regard in
Scania
Finance Southern Africa (Pty) Ltd v Thomi-Gee Road Carriers CC and
Another Case
2013 (2) SA 439
(FB) the Court held:
“
[21]
I therefore hold that an applicant may, in terms of
s 9
of sch 5 of
the 2008 Act, approach the court for the liquidation of a respondent
company (or close corporation) on the ground of
its inability to pay
its debts in terms of s 344(f), and that s 345 (and s 69 of the Close
Corporations Act) is still a deeming
provision. Such an applicant
need not prove that the respondent company is insolvent in order to
rely on ch XIV of the previous
Act.”
23.
The
applicable legal principles in respect of applications of this nature
are well established:
23.1.
In
Van
Zyl NO v Look Good Clothing CC
1996 (3) SA 523
(SE) at 530B-E it was held:
“
In
order to obtain a provisional order of liquidation an applicant is
required to establish a prima facie case.
Where,
as in the present matter, the application is opposed, the necessary
prima facie case is established only when the applicant
is able to
show that on a consideration of all the affidavits placed before the
Court a case for liquidation has been established
on a balance of
probabilities
.
Kalil v Decotex (Pty) Ltd and Another
1988 (1) SA 943
(A) at 978D-E,
979B-C and E-F.
Where,
however, the respondent shows on a balance of probabilities that its
indebtedness to the applicant is disputed on bona fide
and reasonable
grounds, the application will be refused. In Kalil's case supra at
980C-D Corbett JA, as he then was, has the following
to say in this
regard:
'Consequently,
where the respondent shows on a balance of probability that its
indebtedness to the applicant is disputed on bona
fide and reasonable
grounds, the Court will refuse a winding-up order. The onus on the
respondent is not to show that it is not
indebted to the applicant:
it is merely to show that the indebtedness is disputed on bona fide
and reasonable grounds.'”
(Own emphasis)
23.2.
In
Helderberg
Laboratories CC v Sola Technologies (Pty) Ltd
2008 (2) SA 627 (C)
[4]
this Court held:
“
[20]
Before turning to the relevant facts in this regard, it is necessary
to consider the principles applicable in deciding, on
the return day
of a provisional winding-up order, whether the provisional order
should be confirmed or discharged. In particular,
it is necessary to
consider the relevant principles in circumstances where a respondent
disputes the existence of the
alleged debt upon which an
applicant relies.
In
an application for the grant of a provisional winding-up order, a
mere prima facie case has to be established by the applicant,
while a
final order will only be granted if the applicant satisfies the court
on a balance of probabilities that the provisional
order should be
confirmed
.
Where an applicant, as in the instant case, relies on
s 346(1)(b)
of
the
Companies Act, it
has to satisfy the court that it is a creditor
within the meaning of the said subsection. It follows that, on the
return day of
a provisional winding-up order, the onus is on the
applicant to prove on a balance of probabilities that it has the
necessary locus
standi as a creditor. See Henochsberg on the
Companies Act vol
1 at 728 - 30 and the authorities there cited.
[21]
If, however, a respondent opposes an application for its
liquidation on the basis of a dispute as to the existence of the
alleged
debt, a difference in approach is called for. If the alleged
debt is genuinely disputed on reasonable grounds, the attitude of our
courts is that it would be wrong to allow such dispute to be resolved
by utilising the machinery designed for winding-up proceedings,
rather than ordinary litigation. In this event the court ought to
refuse the granting of a winding-up order, whether it be a
provisional
or final order which is sought by the applicant
. See
Kalil v Decotex (Pty) Ltd and Another I
1988 (1) SA
943
(A); Wolhuter Steel (Welkom) (Pty) Ltd v Jatu Construction (Pty)
Ltd (In Provisional Liquidation)
1983 (3) SA 815
(O); H\)lse-Reutter
and Another v Heg Consulting Enterprises (Pty) Ltd (Lane and Fey NNO
Intervening)
1998 (2) SA 208
(C); and Payslip Investment Holdings CC
v Y2K Tec Ltd
2001 (4) SA 781
(C).
[22]
In the event of a respondent disputing its alleged indebtedness in
liquidation proceedings, it is often said that the respondent
has the
'onus' of satisfying the court that the alleged debt is disputed on
bona fide and reasonable grounds. In my view the use
of the word
'onus', in these circumstances may lead to confusion, as the overall
onus, to prove on a balance of probabilities that
it is a creditor of
the respondent within the meaning of
s 346(1)(b)
of the
Companies
Act, remains
on the applicant. In Commonwealth Shippers Ltd v Mayland
Properties (Pty) Ltd (United Dress Fabrics (Pty) Ltd and Another
Intervening)
1978 (1) SA 70
(D) at 72D - E, Milne J said the
following:
Perhaps
it may be said that if there is prima facie a valid claim by the
applicant so as to make it a creditor within the meaning
of
sec.
346(1)(b)
, then it is for the respondent to disturb that prima facie
situation by showing a dispute on bona fide and reasonable grounds.
Overall, however, it seems to me that the position must be that, in
order to establish that the applicant has locus standi to bring
the
application, it must show, on a balance of probabilities, that it is
a creditor (where of course that is the ground relied
upon to
establish its locus standi).
[23]
I am in respectful agreement with the aforesaid dictum of Milne J,
which has been approved by the Appellate Division in Kalil
v Decotex
(Pty) Ltd and Another (supra) at 980E.
It therefore appears to me
that it would be preferable to refer to this duty, of a respondent to
show that the alleged debt is disputed
on bona fide and reasonable
grounds, as an evidential burden and not an onus. Be that as it may,
it should be borne in mind, as
explained by Thring J in the
H\)lse-Reutter case (supra) at 219F - G, that a respondent merely has
to satisfy the court that the
grounds which are advanced for its
disputing the debt are not unreasonable. The learned judge further
emphasised that it is not
necessary for the respondent to adduce on
affidavit, or otherwise, the actual evidence on which it would rely
at a trial. It is
sufficient if the respondent bona fide alleges
facts which, if proved at a trial, would constitute a good defence to
the claim
made against it
.”
(Own emphasis)
23.3.
The
approach in dealing with factual disputes in winding-up applications
differs from applications in general. In
Payslip
Investment Holdings CC v Y2K Tec Ltd
2001 (4) SA 781
(C) at 783G – I, it was held:
“
Guidelines
as to how factual disputes should be approached in an application
such as the present were laid down by the Appellate
Division in Kalil
v Decotex (Pty) Ltd and Another
1988 (1) SA 943
(A). According to
these guidelines a distinction is to be drawn between disputes
regarding the respondent's liability to the applicant
and other
disputes. Regarding the latter, the test is whether the balance of
probabilities favours the applicant's version on the
papers. If so, a
provisional order will usually be granted. If not, the application
will either be refused or the dispute referred
for oral evidence,
depending on, inter alia, the strength of the respondent's case and
the prospects of viva voce evidence tipping
the scales in favour of
the applicant. With reference to disputes regarding the respondent's
indebtedness, the test is whether
it appeared on the papers that the
applicant's claim is disputed by respondent on reasonable and bona
fide grounds. In this event
it is not sufficient that applicant has
made out a case on the probabilities. The stated exception regarding
disputes about an
applicant's claim thus cuts across the approach to
factual disputes in general.”
THE BASIS ON WHICH THE APPLICANT
ENTITLED TO LEVY CHARGES
24.
The
Applicant is a homeowner’s association established in terms of
section 29 of the Land Use Planning Ordinance No. 15 of
1985
(“LUPO”). Section 29(1) and (2) provides as
follows:
“
29
Home owners' association
(1)
Either the Administrator or the
council concerned, as the case may be, may impose conditions
under
section 42 as to the granting of an application for subdivision in
terms of section 25(1), in relation to the compulsory
establishment
by the applicant for subdivision of a home owners' association.
(2)
A home owners' association coming into
being by virtue of the provisions of subsection (1)-
(a)
shall be a body corporate;
(b)
shall have a constitution which-
(i)
has as its object the control over and the maintenance of buildings,
services
and amenities arising from the subdivision concerned;
(ii)
provides for the implementation of the provisions of paragraph (c),
and
(iii)
has been approved by the council concerned in order to ensure that
the provisions of subparagraphs
(i) and (ii) are being complied with,
and
(c)
shall have as its members the owners of land units arising from the
subdivision concerned,
who shall be jointly liable for expenditure
incurred in connection with the association.”
25.
It is
common cause that the Applicant has adopted a Constitution pursuant
to section 29 of LUPO. The following provisions
of the
Applicant’s Constitution warrant reference:
“
4.
OBJECTS OF THE ASSOCIATION
The
objects of the Association:
....
4.3
That the Association, through its said Committee, shall have the
power to do such acts as
are necessary and reasonably required to
give effect to the provisions of the Constitution.
5.
MEMBERS
5.1
The Association shall be organised without capital and membership
thereof shall be evidenced
by registered ownership in the Deeds
Registry in Cape Town of one or more erven in the Private Area.
Upon registration of
ownership, membership of the Association shall
be automatic and members shall be obliged to comply with the
provisions of this
Constitution. No person shall be entitled to
cease to be a member of the Association while remaining the
registered owner
of an erf in the Private Area.
....
5.3.
Membership shall be transferred by the registration of a Deed of
Transfer in the Deed’s
Registry at Cape Town, passing transfer
of one or more erven in the Private Area to the new member.
5.4.
Every member shall pay an annual levy/subscription to the
Association, the amount of which shall
be determined by EXCOM in
terms of Clause 10 hereof. The subscription so determined shall
apply equally to erven and shall
be payable in respect of each erf
owned by a member.
....
6.
COMMITTEE
6.1.
The powers of the Association other than those to be exercised by the
members in General Meeting,
shall be exercised by the Executive
Committee (EXCOM).
...
7.4.
MEETINGS AND PROCEDURES THEREAT
7.4.1
EXCOM members may give notice convening
meetings, meeting together
for the dispatch of business, adjourn or otherwise regulate their
meetings as they think fit.
It shall not be necessary to give
notice of a meeting of any EXCOM member currently absent from the
Republic of South Africa.
7.4.2
An EXCOM member may at any time convene
a meeting of EXCOM by giving
to the other EXCOM members no less than TEN (10) days written notice
of a meeting proposed by him,
which notice shall specify the reason
for calling such a meeting, provided that in case of urgency shorter
notice may be given
within reason and according to circumstances.
7.4.3
THREE (3) EXCOM members shall form a quorum
where EXCOM consists of
either FIVE (5) or EIGHT (8) members. If at any meeting a
quorum is not present within THIRTY (30)
minutes of the
appointed time of the meeting, such meetings shall stand adjourned to
the next business day at the same time.
7.4.4
If the number of EXCOM members falls below
the number necessary to
form a quorum, the remaining members may constitute a quorum, but
only for the purpose of convening a General
Meeting of members.
7.4.6
All matters at any meeting of EXCOM shall
be determined by a majority
or (sic) those present and voting.
7.4.7
EXCOM members may from to time appoint
a person to be Secretary of
the Association, to fulfil the normal functions of a Secretary and,
inter alia, to attend all meetings
and keep Minutes thereof.
7.5.
POWERS OF EXCOM
The
Management and administration of the Association shall vest in EXCOM
which may exercise all such powers of the Association and
also on
behalf of the Association, all such acts as may be exercised by the
Association itself and which are not, by its Constitution,
required
to be exercised or executed by the Association in a General Meeting.
Without in any way limiting the generality
of the aforegoing, such
powers shall include but not be limited to the following:
7.5.1
The determination of what constitutes an
appropriate standard for
community living and the maintenance of properties in the Private
Area and ensuring house rules if need
be;
7.5.2
The performance of such acts as are necessary
to accomplish the
objects expressed or implied herein;
7.5.3
The investment and re-investment of monies
of the association which
are not immediately required, in such a manner as may be determined
from time to time;
....
7.5.7
To institute proceedings in the name of
the Association, to defend
actions in the name of the Association and to appoint legal
representatives for this purpose; in particular
and without
derogating from the generality of the aforegoing, the power to sue
shall include the right to sue members for the payment
of
subscriptions in arrears an(sic)/or for the carrying out of their
obligations in terms of the Constitution;
7.5.8
The levying of a subscription payable by
the members are provided in
Clause 5 and 10 hereof and subject to the said Clauses, the
determination from time to time and as
frequently as they may, at
their sole and absolute discretion, consider necessary or expedient,
of the amount of the subscription
to be paid to the Association by
its members.
....
8.
MEETINGS
8.1
Annual General Meetings shall be held once every year at such time
and place as may be determined
by EXCOM, but so that no more than
FIFTEEN (15) months shall be allowed to elapse between any TWO (2)
such successive meetings.
The business to be done at the Annual
General Meeting shall include:
8.1.1
the receipt of a report on the affairs of the Association;
8.1.2
the election of members to EXCOM;
8.1.3
the adoption of the Balance Sheet account;
8.1.4
the consideration of any Resolutions concerning the affairs of the
Association of which due notice has been given;
8.1.5
any other business.
....
10.
ANNUAL SUBSCRIPTIONS
10.1
The Association, through EXCOM, shall be entitled to levy an annual
subscription to, defray and provide for
all the costs for which the
Association may become responsible in order to give effect to its
objects in terms of this constitution.
Such subscriptions may
be fixed and collected annual in advance.
....
14.
RULES AND REGULATIONS AND AMENDMENTS TO THE CONSTITUTION
14.1
Any amendment or addition to the Constitution, with the exception of
“Annexure C”, may be effected
by a Resolution passed by a
50 PERCENT majority at a General Meeting, after written notice
thereof setting out such amendment or
addition in full, has been
given in the notice calling the meeting. Any amendment to
“Annexure C” may only be
effected through the above
stipulation as well as the consent of the Municipality.”
26.
Annexure
C, which forms part of the Applicant’s Constitution provides as
follows in clause 2.7:
“
2.7
Construction of all dwellings must be completed by 31
st
December 2008. Failure to complete construction within such
period will result in a penalty being imposed which will be payable
over and above the normal levy.”
27.
Based
on the above mentioned provisions, I am of the view that the
Applicant is indeed entitled to impose both an ordinary levy
and a
penalty levy. It derives the power to do so from its
Constitution.
28.
As
regards notification of the penalty levy in a Circular dated 20
February 2007, the following is stated:
“
We
have been instructed by the Committee to advise that at the Special
General Meeting held on 7
th
December 2006 the Resolution pertaining to the Building Deadline
being 31
st
December 2008 was passed without amendment.
The
Constitution has been amended to reflect the above and therefore the
existing Clause 2.7 of the Development Control Parameters,
which
forms part of the Constitution, falls away. Due to this clause
falling away no further monthly construction penalties
have been
charged with effect from 1
st
January 2007. Any
penalties imposed upon owners prior to this date are still applicable
and must be paid in full.
Should
dwellings not be completed by 1
st
January 2009, a
construction penalty levy will be imposed which will be payable over
and above the normal levy, the amount of this
penalty is still to be
determined.
It
is incumbent on present owners to advise potential buyers of erven of
this clause.”
IS THE CLAIM DISPUTED ON BONA FIDE
AND REASONABLE GROUNDS?
29.
The
Respondent submits that the Applicant has failed to place evidence
before this Court to show that the prescribed formalities
and
internal procedures were followed in the imposition of levies charged
by the Applicant against the Respondent. Reliance
is placed on
the following specific averments in this regard:
29.1.
In
its Plea to the Magistrates’ Court proceedings (attached to its
answering affidavit), the Respondent specifically pleaded
(albeit in
the context of a special plea dealing with jurisdiction):
“
(a)
In order for Plaintiff to succeed with this
action they are required to prove the valid constitution
and
registration of the homeowners association in question, which would
not have taken place wholly within the jurisdiction of
this
Honourable Court.
(b)
In order for the Plaintiff to succeed with this action they are
required to prove that all decisions
pertaining to constitution of
the management committee; ordinary and special levies etc. were taken
after the necessary democratic
process was followed, which, of
necessity, includes proof that Defendant and other effected (sic)
home owners were duly notified
in each instance. This would not
have happened wholly within the jurisdiction of this Honourable
Court.”
29.2.
Furthermore,
in its answering affidavit (as already referred to) the Respondent
has averred:
“
As
appears from the Plea, Respondent does not accept that Applicant
exists and requires Applicant to prove all technical and procedural
aspects relating to the charges levied against Respondent.
.....
Respondent
disputes any resolution in respect of the charges made against it.”
30.
The
Respondent’s defence with regard to compliance with prescribed
formalities and internal procedures has not been clearly
expressed.
One would have expected the defence to have been formulated with
reference to specific instances in which procedural
requirements have
not been complied with and furthermore the precise basis on which
resolutions have been disputed. Unfortunately,
this has not
been the case and, is in my view partly attributable to the manner in
which this matter has evolved and more particularly
that the
Association’s Constitution was attached to the papers only
after
the replying affidavit had been filed.
31.
Despite
the fact that the Respondent’s defence with regard to
compliance with prescribed formalities and internal procedures
has
not been clearly expressed, the Applicant appears to have understood
the complaint regarding non compliance with prescribed
formalities
and internal procedures in that in its supplementary affidavit it
averred:
“
7.
For the sake of completeness I also hereto annex the minutes of the
Applicant’s
Annual General Meetings for 2006 and 2012 years
marked annexures “AL3c” and “AL3d”
respectively.
Even
a cursory perusal of the attached minutes reveals that all of the
levies, penalties and related costs and imposts which the
Applicant
claims to be owed by the Respondent have been duly authorised by its
members and raised by the Applicant
.”
(Own
Emphasis)
32.
Despite
the fact that the Respondent’s defence regarding non compliance
with formalities and internal procedures has not been
articulated
with absolute clarity, it is, in my view, apparent that it entails a
dispute as to: (a) whether there was a resolution
in respect of the
penalty charges levied; and (b) if so, whether the procedural
requirements for a valid resolution were complied
with. The
supplementary affidavit filed by the Applicant (referred to above)
contents itself with a statement that is ultimately
not borne out by
the source documents relied upon.
33.
As is
apparent from the case-law referred to above the threshold that the
Respondent has to satisfy in matters such as these is
a relatively
low one. In my view, the Respondent’s reliance on the
prescribed formalities and internal procedures satisfies
the
threshold that it “merely has to satisfy the court that the
grounds which are advanced for its disputing the debt are
not
unreasonable.... [and] that it is not necessary for the respondent to
adduce on affidavit, or otherwise, the actual evidence
on which it
would rely at a trial. It is sufficient if the respondent bona fide
alleges facts which, if proved at a trial, would
constitute a good
defence to the claim made against it.” In other words,
should this matter proceed to trial the Respondent
may contend that
the debt is not due, owing and payable because the procedural
requirements of the Homeowner’s Association
have not been
complied with. By way of example (and as amplified in
argument), the Respondent may contend that: (a) there
was no quorum
when the decision to impose the charges was taken; and/or (b) no
resolutions were adopted by the EXCOM and therefore
no valid
decisions were taken. This, in my view, constitutes a genuine
dispute on reasonable grounds, particularly given
that the “attached
minutes” referred to by the Applicant do
not
show that all of the levies, penalties and related costs (in the
amounts charged) have been duly authorised by the Applicant’s
members. Indeed, the AGM minutes of 7 December 2006 merely
refers to the constitutional amendment in respect of clause 2.7.
34.
Furthermore,
the minutes of the Association’s AGM dated 19 September 2013
state inter alia as follows:
“
4.
ADOPTION OF THE AUDITED ANNUAL FINANCIAL STATEMENTS
A
question was raised as to whether there will be a shortfall due to
the penalties being ceased for a year
.
The Chairman said that, as per his report, in order to assist owners
who currently are struggling to sell their plots because
of the
penalty levies imposed on them; and taking the economic climate into
consideration, it was through to cease the penalties
for a year.
It will give those owner (only 4 plots are left) the opportunity to
sell their plots.
The idea
is not to penalise the owners but to get the Estate completed; the
raising of penalty levies was successful to date and
this assisted in
achieving good finances, but now the last few plots are struggling to
sell and with the ceasing of the penalty
levies it could help to get
these 4 plots sold and build (sic) on hopefully as soon as possible.
Owners will be given a 12
month period to draw up plans and complete
the building – this will assist prospective buyers. The
Chairman advised
that at the next annual general meeting the owners
can decide to re-instate the penalty levies. ....”
(Own
Emphasis)
35.
It is
apparent from the documentation that even if the charges were validly
and competently imposed in terms of the Constitution,
due to a
constitutional amendment penalty levies were not charged from 1
st
January 2007 until 1
st
January 2009. Furthermore, it appears from the minutes of the
Association’s AGM dated 19 September 2013 that at some
stage
penalty levies had been ceased for a year. These issues, in my
view, have a bearing on the calculation of the charges
that the
Applicant has imposed on the Respondent which falls to be properly
ventilated at a trial, particularly given that in these
proceedings
the Respondent has disputed the amount of the penalty levy.
36.
Finally,
I was asked in argument on behalf of the Applicant to identify the
“debt” in question as being the building
of the house in
light of the obligation in the constitution that the construction of
all dwellings must have been stipulated by
a specific date. It was
further contended that it was this debt that the Respondent was
unable to pay. Whatever the merits
of such an argument may be,
these proceedings were instituted on the basis that the Applicant was
the creditor of the Respondent
in respect of a particular sum of
money as identified in a statement of account attached to the
founding affidavit. In light
thereof, I am of the view that it
is not competent at this stage for the Applicant to seek to identify
the debt as being the construction
of the house.
CONCLUSION
37.
In
the result, I make the following Order:
“
The
application is dismissed with costs.”
K
PILLAY
Acting
Judge of the High Court
[1]
At the time that
this matter was heard, the quantum of the claim had increased to R
416 406.83.
[2]
Waste-Tech (Pty)
Ltd v Van Zyl & Glanville NNO
2000 (2) SA 400
(SE)
At
406. See too: Naidoo v Marine and Trade Insurance
Company Ltd
1978 (3) SA 666
(A) at 677B-C; Milward v Glaser 1950(3)
SA 547 (W) at 554.
[3]
Section 344(f)
of
the
Companies Act.
>
[4]
See too:
Desert
Star Trading 145 (Pty) Ltd and Another v No 11 Flamboyant Edleen CC
and Another
2011 (2) SA 266
(SCA) para 16; Hülse-Reutter v HEG
Consulting Enterprises (Pty) Ltd (Lane & Fey NNO Intervening)
1998 (2) SA 208
(C) at 219E.