|
|
[Home]
[Databases]
[WorldLII]
[Search]
[Feedback]
South Africa: Supreme Court of Appeal |
[Database Search] [Name Search] [Recent Decisions] [Noteup] [Help]
Reportable
Case No: 39/2002
In the matter between:
WIMBLEDON LODGE (PTY) LTD Appellant
and
STEPHEN MALCOLM GORE N.O. 1st Respondent
TREVOR PHILIP GLAUM N.O. 2nd Respondents
HARBOUR'S EDGE BODY CORPORATE 3rd Respondent
Coram: Olivier, Schutz, Zulman, Streicher JJA and Heher AJA
Heard: 7 March 2002
Delivered: 31 March 2003
STREICHER JA/
STREICHER JA:
[1] The appellant applied in the Cape of Good Hope Provincial Division in terms of s 41 of the Sectional Titles Act 95 of 1996 (‘the Act’) for an order (a) appointing a provisional curator ad litem (‘the curator’) to the third respondent being the Harbour’s Edge Body Corporate (‘the body corporate’) and (b) directing the curator to conduct an investigation as to the grounds and desirability of the institution of proceedings on behalf of the body corporate ‘in order to claim and re-transfer certain immovable property’. In the replying affidavit filed by the appellant it is stated that the reference to the re-transfer of the property was perhaps unfortunate as ‘the claim on behalf of the body corporate essentially (boiled) down to the rectification of the sectional plans’. It is stated further that the curator would ‘naturally also investigate an alternative claim of damages’ based on a fraudulent or negligent misrepresentation. The proceedings envisaged by the appellant were therefore claims for rectification of the sectional plan and for damages. The court a quo dismissed the application. Schutz JA, with whom the other members of this court agree, is of the view that the appeal against the court a quo’s judgment should be upheld. I disagree for the following reasons.
[2] Section 41(1) of the Act provides as follows:
‘When an owner is of the opinion that he and the body corporate have suffered damages or loss or have been deprived of any benefit in respect of a matter mentioned in section 36 (6), and the body corporate has not instituted proceedings for the recovery of such damages, loss or benefit, . . . the owner may initiate proceedings on behalf of the body corporate in the manner prescribed in this section.’
I accept that the appellant is of the opinion that he and the body corporate suffered damage or loss or have been deprived of a benefit in respect of a matter mentioned in s 36(6). It is common cause that the body corporate has not instituted proceedings for the recovery of such damages, loss or benefit. It follows that I accept that the appellant could initiate proceedings in the manner prescribed in the section.
[3] Subsection (2) provides as follows:
‘(a) Any such owner shall serve a written notice on the body corporate calling on the body corporate to institute such proceedings within one month from the date of service of the notice, and stating that if the body corporate fails to do so, an application to the Court under paragraph (b) will be made.
(b) If the body corporate fails to institute such proceedings within the said period of one month, the owner may make application to the Court for an order appointing a curator ad litem to the body corporate for the purposes of instituting and conducting proceedings on behalf of the body corporate.’
Again I accept that the formalities prescribed in this section were complied with and that the appellant could in terms of the section apply for an order appointing a curator ad litem to the body corporate for the purposes of instituting and conducting proceedings on behalf of the body corporate.
[4] Subsection (3) provides as follows:
‘The court may on such application, if it is satisfied-
that the body corporate has not instituted such proceedings;
that there are prima facie grounds for such proceedings; and
that an investigation into such grounds and into the desirability of the institution of such proceedings is justified,
appoint a provisional curator ad litem and direct him to conduct such investigation and to report to the Court on the return day of the provisional order.’
It follows that the appellant had to satisfy the court a quo that there were prima facie grounds for the proceedings it required the body corporate to institute. In my view the appellant failed to make out a case which could satisfy a court that there were prima facie grounds for such proceedings.
[5] A sectional title development at Harbour’s Edge, Gordon’s Bay gave rise to these proceedings. The development comprises hotel rooms, penthouses, basement parking, recreational facilities, shops, a dining room or restaurant, kitchen and conference facilities. A Mr Scharrighuisen through Casisles Coastal Property Investments CC (‘the developer’) conducted the development. The developer is presently in liquidation and the first respondent has been appointed its liquidator. During the planning stages of the development a Mr Cuninghame, who deposed to the founding affidavit filed by the appellant, and other prospective purchasers, became interested in purchasing apartments also described as a hotel suites in the development and conducted negotiations with Scharrighuisen and his representatives. According to Cuninghame he attended a meeting with such other prospective purchasers at which an agent of the seller told them ‘that they were not only purchasing a fully-furnished hotel suite (section) but also an undivided share in the common property, which included parking, conference facilities, hotel reception and offices, hotel dining-room and kitchen, passages, squash court, swimming pool, etc’. He says, furthermore, that during the negotiations Scharrighuisen relied heavily upon the income that the hotel/conference facility would generate, and produced cash flow projections which showed that one could settle his bond in seven years from the income generated by the hotel/conference facilities after which the investment would be ‘a great pension plan’.
[6] On 18 June 1996 ‘Cuninghame or nominee’ (‘the purchaser’) as purchaser concluded a written agreement of sale (‘the deed of sale’) with the developer as seller in terms of which the developer sold to the purchaser a unit in a proposed sectional title development scheme in respect of a hotel it intended to erect on erf 4600, Gordon’s Bay. The unit consisted of a section, being apartment no B82, together with an undivided share in the common property apportioned to the section in accordance with its participation quota of 1,1893%. It was recorded in clause 8.1 of the deed of sale that it was the intention of the parties that the scheme would operate as a hotel apartment scheme and that ‘to this end the SELLER has retained various sections within the scheme in order to provide the necessary facilities for the operation of the hotel’. The parties agreed that the seller would ‘place these sections at the disposal of the Management Company so as to enable the Management Company to contract with the Operator for the operation of the scheme as a hotel apartment scheme’. The purchaser similarly undertook and agreed to place the section purchased at the disposal of the management company and to enter into a rental pool agreement, as per a draft annexed to the agreement of sale, with the management company.
[7] The rental pool agreement was to be an agreement between the developer, the purchaser and a management company which was to be appointed by the developer. It provided that the purchaser would let the relevant unit to the management company; that the management company would enter into a similar agreement with the owners of other units in order to create a rental pool; that the management company would contract with an operator to endeavour to let the units to guests; and that the management company would pay to the purchaser a monthly rental calculated according to the following formula:
A x owner’s points/total points
Where: ‘A’ represents the net accommodation revenue received from the rental pool:
‘Owner’s points’ represents those points allocated to the owner and calculated as the product of the number of nights in any one month that the unit was pooled and the income participation share allocated to the unit: and
‘Total points’ represents the sum of all points allocated to the owners participating and whose units together form the rental pool for the month in question.
[8] At the time when the agreement of sale was concluded the building had not been erected yet. Drawings were, however, annexed to the deed of sale and the purchaser acknowledged that he had read and approved the drawings and that he would be obliged to accept delivery of the unit completed substantially according to the drawings and as finally depicted and delineated on the sectional plan. The parties agreed that the buildings, being the ‘Harbour’s Edge Hotel’, would be built substantially in accordance with the drawings provided that the developer was entitled to inter alia substitute items of a similar standard and quality for any specified item referred to in the finishing schedule or the schedule of furnishings or vary the sectional plans for the building should the seller consider it reasonably necessary for technical or aesthetic reasons.
[9] According to Cuninghame the basement parking, conference facilities, utility rooms and staff canteen (‘the disputed properties’) were all defined as common property in the deed of sale. However, no such definition is to be found in the deed of sale. In terms of s 1 of the Act the land and such parts of the building as were not included in a section would have constituted common property. I have already referred to the provision in the deed of sale to the effect that the seller ‘retained various sections within the scheme in order to provide the necessary facilities for the operation of the hotel’. The appellant contends that the sections referred to must be hotel suites in that only hotel suites are mentioned in the Participation Quota List annexed to the deed of sale. The contention cannot be sustained. Firstly, hotel suites do not provide facilities for the operation of a hotel. Secondly the list, despite adding up to a participation quota of 100%, does not purport to be a list of all the sections in the development. It is quite apparent that the list only relates to residential sections or apartments. Each residential apartment is identified by its number according to the drawings annexed to the deed of sale. Cuninghame was well aware that the list was not intended to be a list of all the sections in the building. He states that during the negotiations with the seller the seller pointed out ‘that the areas designated “shop 1 – shop 5”, the “restaurant” and the “tavern” reflected on the ground floor plan were to be “commercial property”, i.e., property retained by the Seller’ and not common property. Section 32(1) provides that in the case of a scheme for residential purposes only, the participation quota of a section shall be expressed as a percentage arrived at by dividing the floor area of the section by the floor area of all the sections in the building or buildings comprised in the scheme. In the case of a scheme that is not for residential purposes only, the developer has to determine the participation quota (subsection (2)). To the extent that the scheme is residential the total of the quotas allocated by the developer to the residential sections shall be divided among them in proportion to a calculation of their quotas made in terms of subsection (1). The appellant’s contention that the reference in clause 8.1 must be a reference to hotel suites is, therefore, wrong. The retention of various sections within the scheme in order to provide facilities for the operation of the hotel together with an undertaking to ‘place these sections at the disposal of the Management Company so as to enable the Management Company to contract with the Operator for the operation of the scheme as a hotel apartment scheme’ may have obliged the developer to place these sections at the disposal of the management company (maybe at a fair rate depending on the proper interpretation of the undertaking) but not to have these sections designated common property.
[10] Cuninghame also contends that the operating budget in respect of the first year of operating the hotel indicates that the disputed sections formed part of the common property of the development. He suggests that that is so because parking revenue is listed and because no expenditure is listed for the hiring of the conference rooms. Apart from parking revenue (R142 312) the only sources of revenue listed are rooms revenue (R10 455 604), telephone revenue (R347 873) and sundry revenue. No revenue is budgeted in respect of the dining room, food and beverages or the conference facilities. That in my view is a clear indication that in terms of the deed of sale the dining room and conference facilities were not intended to be common property.
[11] Cuninghame concludes that it is ‘clear from the various provisions of the Deed of Sale and the Act quoted above, that all property outside hotel suites, penthouses and the commercial properties described above were intended to, and did, constitute common property for the benefit of all individual purchasers/owners’. In my view, for the reasons set out above, that conclusion is wrong. At best for the appellant, it appears from the provisions of the deed of sale that, of the disputed properties, only the basement parking was intended to be common property.
[12] Cuninghame nevertheless alleges that he was under the impression that all the disputed properties were common property. As proof that he was under that impression he refers to the fact that he, as a qualified land surveyor, during October 1996 submitted a quotation for the preparation of sectional plans in terms of which quotation he treated all the disputed properties as common property. He says that Scharrighuisen referred him to Mr Rick Granville, the architect, to obtain plans for the quotation and that he confirmed the common property areas with Granville. Although Granville was never consulted with regard to which portions of the building would be either common property or sections he states in a supporting affidavit that his own understanding of the matter was that the conference facilities were intended to be common property. He states, furthermore, that the fact that the kitchen was designed such that it could serve one of the conference rooms indicated that it was also intended to be common property.
[13] The initial working drawings prepared by Granville in mid-1996 were revised 15 times between 19 August 1996 and 2 September 1997. As a result the building eventually erected on erf 4600 was not built substantially in accordance with the drawings annexed to the deed of sale as was required by the deed of sale. According to these drawings the ground floor was to consist of inter alia a restaurant, a tavern, five shops, two conference rooms and a squash court. However, the layout of the ground floor was changed and eventually the tavern had to make way for a hotel dining room cum restaurant; the restaurant and the squash court disappeared and a kitchen and two more shops were added. The layout of the first floor also changed in that a hotel dining room and kitchen were replaced with five new hotel suites.
[14] Sections 4 and 7 of the Act require a developer who intends to establish a development scheme to cause a draft sectional plan to be submitted to the Surveyor-General. The scheme may relate to an existing building or to a building to be erected or being in the process of erection (s 4(2)). The draft sectional plan has to be prepared by a land surveyor or architect from an actual measurement undertaken by him or under his direction (s 6(1)). It has to include a plan to scale of each storey in the building shown thereon; define the boundaries of each section; distinguish each section by a number; show the floor area of each section and the total floor area of all the sections; and have endorsed upon or annexed to it a schedule specifying the quota of each section in accordance with section 32(1) or (2) and the total of the quotas of all sections shown thereon (s 5). After approval of the draft sectional plan by the Surveyor-General the developer may apply to the Registrar of Deeds concerned for the opening of a sectional title register in respect of the land and building and for the registration of the sectional plan (s 11(1)). Simultaneously with the opening of the sectional title register the Registrar of Deeds has to issue to the developer a certificate of registered sectional title in respect of each section and its undivided share in the common property. Thereupon the building and the land shown on the sectional plan are deemed to be divided into sections and common property as shown on the sectional plan (s 13(1)). It is only after such deemed division has taken place that ownership in a unit in the sectional title development can be transferred by means of a deed of transfer (s 15B(1)). All of these formalities were apparently complied with on or before 19 September 1997 being the date of the certificate of registered sectional title in terms of which all the disputed properties were registered in the name of the developer. Subsequently some of the disputed properties were transferred to Harbour’s Edge Commercial Property Holdings (Pty) Ltd (‘Harbour’s Edge Commercial Property Holdings’). Like the developer Harbour’s Edge Commercial Property Holdings is presently in liquidation and the second respondents have been appointed its liquidators.
[15] With effect from the date on which the first person other than the developer became the owner of a unit in the sectional title development scheme there was deemed to be established for that scheme a body corporate of which the developer and such person were members. Every person who thereafter became a member of a unit also became a member of the body corporate. (S 36(1)).
[16] Cuninghame attended the official opening ceremony of the hotel in November 1997 and then realized that the basement parking was not being treated as common property. By that time the sectional title plan had been registered and the sectional title register had been opened. The various sections and the common property in the development had, therefore, already been determined. The purchaser had, however, not yet taken transfer of a section in the sectional title development. It was only on 11 February 1998 that Cuninghame’s nominee, the appellant, took transfer of section 91. The appellant is a company of which Cuninghame is the sole director and a shareholder.
[17] On these facts the court a quo had to decide, before a curator ad litem could be appointed, whether there were prima facie grounds for proceedings for the recovery of damages, loss or benefit in respect of a matter mentioned in s 36(6). The section reads as follows:
‘(6) The body corporate shall have perpetual succession and shall be capable of suing and of being 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; and
(e) any claim against the developer in respect of the scheme if so determined by special resolution.’
[18] Counsel for the appellant submitted that ‘Scharrighuisen had clearly indicated (and indeed promoted sales on this basis) to all concerned that the areas in question would be part of the common property, and then, unbeknown to them, had prepared the sectional title plan in such a manner that this was not the case, enabling him to appropriate/sell off such sections, which, in the circumstances, constitutes fraudulent conduct on his part’. He submitted that the appellant was entitled to rectification of the registered sectional plan so that it would reflect the contract between the parties alternatively that the appellant was entitled to the rectification of both the deed of sale and the registered sectional plan so as to reflect the true intention of the parties which was that the disputed properties should be common property. In making these submissions he relied on Weinerlein v Goch Buildings Ltd 1925 AD 282 and Benjamin v Gurewitz 1973 (1) SA 418 (A) at 428. In the alternative he submitted that the body corporate is entitled to claim damages in respect of the misrepresentations.
[19] At best for the appellant, the aforesaid facts establish, prima facie, that Scharrighuisen or the developer misrepresented to Cuninghame that in terms of the deed of sale the disputed properties were going to be common property whereas in terms of the deed of sale, of the disputed properties, only the basement parking was going to be common property. Thereafter the developer proceeded to erect a building that differed substantially from the building that was to be erected in terms of the drawings annexed to the deed of sale. It also proceeded to have a sectional plan registered and a sectional title register opened in respect of a scheme substantially different from the proposed scheme according to the deed of sale. One of the differences being that the basement parking was shown as a section and not as common property. The appellant became aware of the fact that a sectional plan in respect of a substantially different scheme had been registered before transfer of section 91 was passed to it. In particular it became aware that the extent of the common property differed materially from the common property according to the proposed scheme as per the deed of sale in that the basement parking was not common property in terms of the scheme that was registered. The appellant was, therefore, aware that the seller was not able to perform in terms of the deed of sale. However, it did not resile from the deed of sale as it was entitled to do but now wants the body corporate to claim, by way of rectification of the sectional plan, a conversion of the disputed properties into common property and/or damages. The basis upon which the appellant wants the body corporate to claim rectification and/or damages is spelt out in paragraphs 2.4, 2.5 and 4.5.2 of the appellants founding affidavit. These paragraphs read as follows:
‘2.4 The application/potential claim by the body corporate as against the Respondents is based thereon that certain parts of the development, which had, in terms of the Deeds of Sale with the various purchasers of the units, and in terms of representations made by the developer, been designated as common property . . . were, contrary to the said Deeds of Sale/representations, sold/registered in the name of the Respondents, which properties the majority of bona fide purchasers of the units now wish to recover as common property.’
‘2.5 Since the body corporate is, by definition and in terms of the Act, the custodian of common property, it is appropriate that the Body Corporate seeks the retransfer of the properties concerned, and, to the extent necessary, rectification of the sectional plans, and /or damages.’
‘4.5.2 We accordingly seek the rectification of the sectional plans to the extent that the common property will constitute the portions of the building defined as common property in the Deed of Sale agreement and retransfer of the properties, alternatively, a claim for damages.’
Before us the appellant argued, inter alia, that the registration of the sectional title plan constituted a fraud. That is not the case advanced in the founding affidavit. In fact, there is no express allegation of any fraudulent conduct to be found in the founding affidavit. In the replying affidavit there is a reference to fraudulent alternatively negligent misrepresentation but it is not at all clear what representation is being referred to. In any event, the registration of the sectional title register and the transfer of some of the disputed properties to Harbour’s Edge Commercial Property Holdings could have constituted a breach of the deed of sale on the part of the developer but it is difficult to imagine how these actions by themselves could have constituted a fraud vis a vis the purchaser or the body corporate.
[20] I have already stated that in terms of the deed of sale, of the disputed properties, only the basement parking was going to be common property. However, notwithstanding the fact that no express allegation of fraud is made in the founding affidavit, I will assume in favour of the appellant that a case has been made out that a fraudulent misrepresentation as to the terms of the deed of sale was made. I furthermore assume in favour of the appellant that, because of such fraud, the purchaser became entitled to rectification of the deed of sale so as to reflect the disputed properties as common property (see Benjamin v Gurewitz supra at 424F-426H). It does, however, not follow that the purchaser, let alone the body corporate in its stead, became entitled to the rectification of the sectional plan and the Weinerlein-case, contrary to the submission by the appellant, is not authority for the proposition that it does. In the Weinerlein-case it was alleged that a deed of sale as well as the subsequent deed of transfer, as a result of a mistake, did not reflect the common intention of the parties correctly. An exception to a claim for the rectification of the deed of sale and the deed of transfer was dismissed.
[21] The ownership of immovable property is transferred from an owner to another person when transfer is given by the owner with the intention to transfer ownership and received by the other person with the intention to acquire ownership (see Commissioner of Customs and Excise v Randles, Brothers & Hudson Ltd 1941 AD 369 at 368; Trust Bank van Afrika Bpk v Western Bank Bpk en Andere NNO 1978 (4) SA 281 (A) at 301 in fine – 302A; and Cape Explosive Works Ltd and Another v Denel (Pty) Ltd and Others 2001 (3) SA 569 (SCA) at 577G). Transfer of ownership therefore takes place in terms of an real agreement between the parties (see Air-Kel (Edms) Bpk H/A Merkel Motors v Bodenstein en `n Ander 1980 (3) SA 917 (A) at 922F-G). If the deed of transfer, as a result of mistake or fraud does not carry out the real intention with which transfer is given and received the aggrieved person may in terms of the common law apply to court for a rectification thereof (see Ludolph and Others v Wegner and Others 6 SC 193 at 198; Saayman v Le Grange 1879 Buch 10). (It is not necessary to consider to what extent, if any, statutory provisions such as the provisions of the Deeds Registries Act 47 of 1937, affected the common law.) It follows that it is the real agreement between the parties as reflected in the deed of transfer which may be rectified in terms of the common law. Kotzè JA said in the Weinerlein-case at 294:
‘The written contract and transfer deed were intended to embody a previous verbal agreement between the parties, and to convey to the plaintiffs the property agreed to be sold. . . . The question is whether, under the circumstances, the written instruments can be rectified on the ground of the said mistake. . . .
. . . [T]he Court can, upon the . . . ground of fraud, rectify the mistake in the written instruments, if it is satisfied that these instruments do not in some material respect contain the actual intention of the parties.’
[22] A sectional plan is not analogous to a deed of transfer. The registration of a sectional plan constitutes the approval of a unilateral application by the developer. It is not intended to and does not purport to reflect a common intention between the developer and another party or parties. The remedy of rectification which is available in respect of agreements, that, due to a common mistake, do not reflect the intention of the parties, is therefore not applicable.
[23] As a result of the fraudulent misrepresentation the purchaser was entitled to rescind the deed of sale and claim damages, or to hold the developer to the contract and claim specific performance, in so far as it was possible for the developer to specifically perform, and damages. The question is, however, whether it has prima facie been established that the body corporate suffered damage or loss or has been deprived of any benefit in respect of a matter mentioned in s 36(6), as a result of the developer not having performed in terms of the deed of sale. Put differently has it prima facie been established that the body corporate suffered damage or loss or that it was deprived of a benefit and, if it has, does the body corporate, in terms of s 36(6), have the power to sue for such damages or loss or benefit. As s 41 is concerned with a claim in respect of which the body corporate may institute action against a third party ‘deprived of a benefit’ must in my view be interpreted to mean deprived of a benefit to which the body corporate was entitled. I shall hereinafter refer to ‘damage or loss or deprivation of a benefit’ as ‘a loss’.
[24] The appellant contends that the body corporate suffered a loss in that in terms of the deed of sale the common property should have included the disputed properties which would have generated an additional income to the body corporate. I disagree. The body corporate came into existence in respect of a scheme as reflected in the registered sectional plan. In terms of s 37(1)(r) it is obliged, in general, to control, manage and administer the common property for the benefit of all the owners. In order to do so it is empowered by s 38(j) to do all things reasonably necessary for the enforcement of the rules and for the control, management and administration of the common property. The common property referred to is the common property as per the registered sectional plan. The disputed properties and the income generated by them never formed part of the common property and the body corporate never had any entitlement to them. The fact that they do not form part of the common property, therefore, cannot constitute a loss to the body corporate.
[25] My colleague Schutz JA is of the view that the deed of sale was a pre-incorporation contract, in part for the benefit of the body corporate which was to come into existence. He is, furthermore, of the view that it is clear that the body corporate implicitly accepted the benefits and duties of the ‘pre-incorporation contract’. A contract for the benefit of a third party is not simply a contract which will benefit a third party; ‘what is required is an intention on the part of the parties to a contract that a third person can, by adopting the benefit, become a party to the contract’. (See Total South Africa (Pty) Ltd v Bekker NO 1992 (1) SA 617 (A) at 625E-G.) In Joel Melamed and Hurwitz v Cleveland Estates(Pty) Ltd; Joel Melamed and Hurwitz v Vorner Investments (Pty) Ltd 1984 (3) SA 155 (A) at 172B-D Corbett JA quoted the following passage in Crookes NO and Another v Watson and Others 1956 (1) SA 277 (A) at 291E-F with approval:
‘[T]he typical contract for the benefit of a third person is one where A and B make a contract in order that C may be enabled, by notifying A, to become a party to a contract between himself and A. What contractual rights exist between A and B pending acceptance by C and how far after such acceptance it is still possible for contractual relations between A and B to persist are matters on which differences of opinion are possible; but broadly speaking the idea of such transactions is that B drops out when C accepts and thenceforward it is A and C who are bound to each other.’
It does not appear from the deed of sale and it was never contended in the papers filed that the parties intended to contract for the benefit of a third party. It has furthermore not been suggested by anybody in the papers filed or anywhere else that if there was such a pre-incorporation contract for the benefit of the body corporate that the body corporate adopted the contract. In the circumstances there is in my view no basis for a finding that the alleged claim relates to a contract made by the body corporate. In any event a body corporate comes into existence in respect of a registered sectional plan from which it will appear which parts of the building is common property. A contract for the benefit of the body corporate in respect of such common property would not make any sense. A contract for the benefit of the body corporate that any other parts of the building, that is to say sections in terms of the registered sectional plan, would be common property would make even less sense. I therefore find it inconceivable that the parties would have intended to contract for the benefit of the body corporate as to what part of the building to be erected would constitute common property. In terms of the deed of sale the developer bound itself to deliver to the purchaser an apartment in a sectional title development as per the drawings annexed to the deed of sale. It did not bind itself to provide, at that time, a non-existent body corporate with certain common property to administer.
[26] Even if the fact that the disputed properties do not form part of the common property of the development is to be considered a loss to the body corporate, prima facie grounds for the proposed proceedings have not been shown to exist as it is not a loss in respect of a matter mentioned in s 36(6) or put differently it is not a loss in respect of which the body corporate has the power to sue in terms of the section.
[27] The alleged loss does not relate to a contract made by the body corporate; it does not relate to damage to the common property; and it did not arise out of the exercise by the body corporate of any of its powers or the performance or non-performance of any of its duties under the Act or any rule. Section 36(6)(a), (b) and (d) are therefore not applicable. Section 36(6)(c) deals with the body corporate’s capability of being sued and is, therefore, also not applicable.
[28] It remains to consider whether the alleged loss is a loss ‘in respect of the scheme’ in which event it will be a loss in respect of which the body corporate may sue in terms of the provisions of s 36(6)(e). ‘Scheme’ is defined in the Act as a development scheme and a development scheme is in turn defined as ‘a scheme in terms of which a building or buildings situated or to be erected on land within the area of jurisdiction of a local authority is or are, for the purposes of selling, letting or otherwise dealing therewith, to be divided into two or more sections . . . ’. There can only be one scheme in respect of a particular body corporate and that is the scheme that brought it into being. In respect of the body corporate we are dealing with, the scheme is the scheme reflected in the registered sectional plan and not the scheme envisaged in the deed of sale which latter scheme was not proceeded with. The body corporate did not suffer loss in respect of the scheme as reflected in the registered sectional plan. Before us the question arose what claims a body corporate could have against a developer if the section was so construed. There are various possibilities. One such possibility is a claim for the costs of correcting an incorrect sectional plan (s 14(2)). Another one is a claim in terms of s 36(7)(a)(ii) which requires a developer to convene a meeting of the members of the body corporate at which he has to furnish the members with a certificate from the local authority to the effect that all rates due by him up to the date of establishment of the body corporate have been paid. Yet another one is a claim in terms of s 36(7)(a)(iii) and s 36(7)(aA) for proof of revenue and expenditure concerning the management of the scheme from the date of the first occupation of any unit until the date of the establishment of the body corporate and for payment of any residue revealed by such proof.
[29] The appellant’s claim is a personal claim which remained the appellant’s claim when the body corporate was established. Owners other than the developer and Harbour’s Edge Commercial Holdings own fifty-three hotel suites and 2 penthouses. Forty-four of those owners supported a resolution that the sectional plans be amended and that, to the extent necessary, action be instituted against the first and second respondents to this end. Six voted against the resolution. The others were apparently not present or represented at the meeting. Cuninghame says in the founding affidavit that the circumstances giving rise to his own deed of sale generally pertained to the other individual units. I do, however, not think that he intended to suggest that misrepresentations or the same misrepresentations were made to all the purchasers or that all their contracts are identical. The fact that there may be differences illustrates how untenable it is to suggest that the body corporate acquired the rights to performance and damages of the individual owners. If only some purchasers were entitled to damages as a result of a particular section not being common property and if the body corporate were to have acquired their rights to such damages the owners who were not entitled to such damages would benefit at the expense of the owners who were so entitled.
[30] For these reasons I am of the view that the appellant failed to make out a case that there are prima facie grounds for proceedings to be instituted on behalf of the body corporate for the recovery of damages, loss or of a benefit of which it had been deprived in respect of a matter mentioned in s 36(6).
[31] It follows that in my view the appeal should be dismissed with costs.
_______________
P E STREICHER
Judge of Appeal
SAFLII:
|
Terms of Use
|
Feedback
URL: http://www.saflii.org/za/cases/ZASCA/2003/34.html
.RTF of original document