Grundler NO v Rambadursing (13500/2010) [2011] ZAKZDHC 24; [2011] 3 All SA 556 (KZD) (20 May 2011)

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IN THE KWAZULU-NATAL HIGH COURT, DURBAN

REPUBLIC

OF SOUTH AFRICA

REPORTABLE

CASE NO. 13500/2010

In the matter between:

A GRUNDLER N.O. ….................................................................................APPLICANT

and

MAUREEN JULIA RAMBADURSING ….................................................RESPONDENT

JUDGMENT

Rall AJ,

[1] This judgment deals with the relationship between administrators and trustees of sectional title schemes.

[2] The applicant is the administrator of the scheme known as Bencorrum. He was appointed by this Court on 24 June 2009 in terms of s46 of the Sectional Titles Act 95 of 1986 (“the Act”). The order was made at the request of six applicants, with the body corporate as the respondent.

[3] The order reads as follows1:

“1. That Andre Grundler is appointed to act as an Administrator of the Respondent in terms of Section 46 of the Sectional Titles Act, 1986 as amended.

That the said Administrator shall exercise the powers and perform the duties contained in the said Act.

That the terms of appointment of the Administrator shall be for a period of 24 months from date of appointment provided that the

Administrator may, if necessary, apply to Court for any further directions in the event of the Administrator not being able to carry out any of the said functions for any good reason.

That the attorneys representing the Applicants and the Respondent consult and agree the nomination of a new managing agent and attorney to replace the present incumbents within 21 days from the date of this order.

That the Administrator shall convene a general meeting of the Respondent’s members within 30 days from the granting of this order to appraise them of the Respondent’s current financial position, and outline a plan of action for the 24 months period of his tenure.

At the meeting referred to in 5.1 above the Administrator is to call for the nomination of interim trustees, who shall upon their election be entitled to make recommendations to the Administrator in respect of the running of the affairs of the Respondent, within the ambit and subject to the powers granted to him by Section 46 of the Sectional Title Act.

That the Administrator shall at the meeting referred to above and in consultation with the interim trustees as elected, appoint an attorney and managing agents to replace the present incumbents, John Dua and Company and Elsie Marketing respectively.

That the Administrator shall convene a general meeting once every three months, to engage the Respondent’s members in respect of the Respondent’s financial situation and their general concerns regarding the building.

That the Administrator shall at least thirty (30) days prior to the expiration of his term of appointment, convene a meeting of all members of the Respondent for the purposes of electing and appointing a Board of Trustees and shall call upon such members to nominate trustees to be appointed to the Board of Trustees of the Respondent.

That the Administrator shall be remunerated at the rate of R500.00 per hour subject to a maximum fee of R6000.00 per month and the Respondent shall be liable for and pay the Administrator’s actual travelling expenses, the expenses if any of his assistant and the recovery of disbursements necessarily incurred in the execution of the Administrator’s duties.

That the costs of this application be borne by the Respondent.”2

[4] As can be seen from paragraph 5 of the order, the applicant was required to convene a general meeting of the members of the body corporate at which inter alia, interim trustees were to be elected. This meeting was held and the respondent was elected as one of the interim trustees.

[5] This application is for a final interdict aimed at preventing the respondent from interfering with the applicant in the execution of his duties as administrator. The applicant brings the application in his capacity as administrator. However, the respondent is cited in her personal capacity.

[6] On 9 December 2010 a rule nisi was granted and the applicant seeks confirmation of the rule. The rule reads as follows3:

“That a rule nisi do hereby issue calling upon the Respondents to show cause, if any, on 23 DECEMBER 2010 at 09h30 or so soon thereafter as the matter may be heard why an order should not be granted interdicting the Respondent from:-

issuing instructions, either directly or indirectly, or interfering, in any way, with employees and service providers appointed by the Body Corporate of Bencorrum (hereinafter referred to as “Bencorrum”), other than if requested to participate by the Administrator or the Managing Agent or on their express instruction;

becoming personally involved in the daily operational aspects of Bencorrum other than by way of submissions in writing, to the Administrator, Managing Agent or Building Agent;

requesting or demanding that employees and service providers report to her on affairs or matters that concern Bencorrum

making recommendations to the Administrator only after such recommendations have been agreed to by a properly constituted meeting of elected interim trustees.

In general not to do anything which shall interfere with or in any way obstruct the Administrator in the execution of his duties as Administrator

That the provisions of paragraph 1 shall operate immediately as an interim order pending the outcome and final determination of this application.”

[7] Before dealing with the allegations made by the applicant, it is necessary to consider the effect of the order of 24 June 2009 (“the order”), particularly paragraph 5.2 thereof. This can only be done against the background of the Act.

[8] First, some general observations. The body corporate is the juristic person created by the Act to manage sectional title schemes.4 The owners of units in the scheme are members of the body corporate4 and they elect trustees to carry out certain functions on their behalf.5 The situation is analogous to that of a company, its members and directors.

[9] The powers and duties of a body corporate are dealt with in sections 37 and 38 of the Act. The latter section lists the powers of a body corporate. It is apparent from the former what a body corporate’s duties are because it states that a body corporate shall perform the functions entrusted to it by the Act and the rules, including the eighteen functions listed in that section. It would be fair to say that a body corporate’s powers and duties “contained in the said Act” (see paragraph 2 of the order) are, to paraphrase paragraph 5.2 of the order, those needed for running the affairs of the body corporate.

[10] In terms of s39 of the Act the functions and powers of the body corporate shall, subject to the provisions of the Act, the rules and any restriction imposed or direction given at a general meeting of owners of sections (“owners”), be performed and exercised by the trustees holding office in terms of the rules. It is clear from s39, the rest of the Act and the rules that the primary responsibility for the day-to-day running of a body corporate rests on its trustees. The owners however have overall control of the body corporate. The situation is much like that of members and directors of a company.

[11] In terms of s46(3) of the Act an administrator “shall, to the exclusion of the body corporate have the powers and duties of the body corporate or such of those powers and duties as the Court may direct”. In my view this subsection is clear. Firstly, unless the court restricts the administrator’s powers and duties the administrator has all the powers and duties of the body corporate.

[12] Secondly, the administrator’s powers and duties are held to the exclusion of the body corporate. This means that for so long as the administrator holds office, whatever powers and duties he is given, are no longer possessed by the members or trustees of the body corporate.

[13] This must be so. Although the Act sheds no light on the circumstances under which an administrator should be appointed, our courts have done so. In Bouraimis v Body Corporate of the Towers 1995(4)SA 106 (D), Booysen J stated the following at 109 G-H:

“It seems to me that the Court should not, where a duly constituted board of trustees is in existence, grant an order for the appointment of an administrator unless the applicant establishes on a balance of probabilities, firstly, that there have been breaches of the duties set out in s39 read with ss 37, 38 and 40, and, secondly, that it is likely that the owners of units shall suffer substantial prejudice if an administrator were not to be appointed by the Court. Such breaches could take the form of a failure to perform duties or the improper performance of duties.”

[14] Gautschi AJ referred with apparent approval to the above test in Dempa Investments v Body Corporate, Los Angeles 2010(2)SA 69 (W) at 80 D. The learned judge then went on to lay down the principles to be applied in an application for the appointment of an administrator.

For present purposes it is not necessary to list them all. However, the court made it clear that special circumstances or good cause must be shown before an order will be granted. Without attempting to define special circumstances or good cause the learned Judge went on to state6:

“… but as a minimum there should be

[21.3.1] some neglect, wilfulness or dishonesty on the part of the trustees, or an event beyond their control; and

[21.3.2] a likelihood that the owner of units will suffer substantial prejudice if an administrator is not appointed.”

[15] It is apparent from these two cases that administrators do not get appointed to manage the affairs of well run bodies corporate. This only happens in exceptional cases, and in my view, only where the trustees and owners have proved incapable of resolving the difficulties being experienced by the body corporate. Furthermore, I consider that the purpose of the appointment of an administrator is to turn the body corporate around. It would therefore run counter to the purpose of appointing an administrator to allow the members and trustees to retain many of their powers and duties.

[16] In addition, to allow the administrator on the one hand and the members and trustees on the other, to exercise the same powers and perform the same duties simultaneously, is self evidently a recipe for disaster, irrespective of the competence of the trustees.

[17] It is apparent from the order that at the time of the applicant’s appointment Bencorrum had no trustees. Why this was so, does not appear from the papers. However, this factor is no doubt what prompted paragraph 5.2 of the order to be made. Paragraph 5.2 provides for the election of so-called interim trustees and the order then states what rights the interim trustees will have.

[18] It was argued on behalf of the respondent that the fact that this court ordered trustees to be appointed for Bencorrum meant that these trustees would have all the powers and duties of trustees in terms of the Act. I do not agree. As I have already found, in terms of s46(3), the appointment of an administrator temporarily divests the trustees of their power and duties. In my view, the fact that this court ordered the appointment of trustees makes no difference. The court was simply ensuring that a void was filled, one which could not have been filled without such an order. It could not be filled because the appointment of the applicant deprived the members of their rights, one of which is to elect trustees.

[19] As was held in the Dempa Investments case7 there is nothing in s46 which prevents a court from appointing an administrator when there are existing trustees. In other words, an appointment is not limited to situations where there are no trustees. Accordingly, the fact that the order of 24 June 2009 required trustees to be elected, does not mean that these trustees would be different from ones elected before the applicant’s appointment.

[20] Finally, there is no magic in the fact that the order refers to the trustees as interim trustees. In my view, this was merely to denote that the trustees were to hold office during the administratorship, or to be more precise until the election of the trustees referred to in paragraph 7 of the order. It would seem that it was anticipated that the administratorship would end after the initial two year period and therefore that the trustees elected in terms of paragraph 7 would then take over from the applicant. The reason for the election of trustees was probably to ensure that the members, through their representatives could have some input in the management of the body corporate, something which the Act does not expressly provide for.

[21] In this case there is no limitation on the applicant’s powers and in fact, paragraph 2 of the order expressly states that the applicant has the powers and duties “contained in the said Act”. Accordingly, subject to the qualification mentioned below, the applicant was entitled to exercise all the powers and duties of the body corporate.

[22] The applicant’s powers were limited by paragraphs 5.2 and 5.3 but, only paragraph 5.2 is relevant to this case. That paragraph gives the interim trustees the right to make recommendations to the applicant in respect of the running of the affairs of the body corporate.

[23] It is arguable that the interim trustees would have had this right even without the order. Nevertheless it is quite clear that this right is very limited and this is because the order expressly makes it subject to the powers granted to the applicant by s46. In my judgment therefore, the interim trustees are limited to making recommendations, unless authorized by the applicant to do more than that. I must stress however, that where a trustee is authorized by the applicant to perform some or other function in connection with the body corporate, that trustee performs that function not as trustee, but as the duly authorized agent or employee of the applicant in his capacity as administrator. In such a case, the interim trustees are in no different a position to trustees of any other body corporate under administratorship.

[24] It follows from what I have already said that the applicant has the right to manage the body corporate to the exclusion of the members and the interim trustees, including the respondent. It follows therefore that the applicant has established the first requirement for an interdict, namely a clear right.

[25] The applicant contends that the respondent has violated his rights by interfering in the management of Bencorrum, and that without an interdict, this unacceptable conduct is likely to continue.

[26] I turn now to consider some of the applicant’s complaints. In doing so, I am mindful of the fact that the applicant seeks final relief and so the well known Plascon Evans test8 must be applied.

[27] The following is common cause between the parties:

In an e-mail dated 13 October 2009, the respondent stated the following to the applicant:

“As trustees we have come to a decision and have appointed Rob Millar to do the following on our behalf:-

‘’1. Keys to both offices are handed to him for any emergencies that may arise within the 24hour periods in the absence of the manager or caretaker in future.

2. Rob Millar will oversee the Manager in his duties and all staff of Bencorrum including security and must ensure that Bernard Unger does not prevent Andrew from carrying out his duties as agreed by the managing agent.

At the rate of R9000+ I believe he does need to provide a service that we the owners will benefit from, however should he not be able to perform in his duties he will have to be relieved of his duties and replaced by a more competent and efficient manager.

3. All business quotes, contractors’ repairs, etc will be overseen by Rob Millar as he has made himself available and will report to the Trustees and keep us informed of the management services in the building.”

By email dated 3 September 2010 the respondent stated to the managing agent in connection with the cleaning of the building “kindly report to me by 12h00 today as this cannot continue”

In her email to the applicant on 22 September 2010, the respondent issued instructions to the applicant in peremptory terms. She stated:

“I noticed that you and Andrew met with lift consultants and Andrew also took pictures for the companies of the buildings lift shafts. I was not advised by Andrew of this meeting, kindly advise why?

…Apparently the lifts stopped working last Saturday and have still not been repaired by Express Lifts. Kindly advise why? I have read an article in the news paper two days ago that the lift situation is serious and must be attended to…

…Kindly forward me all correspondence from Express Lifts by close of business tomorrow…”

By email dated 5 October 2010 the respondent stated the following to the managing agent:

“Dear Mr Felton

I want to remind you that you have been appointed by Bencorrum Body Corporate on a ‘MASTER & SERVANTS” (sic) relationship and therefore do not go beyond your duty in terms of the Sectional Titles Act>.

In future we as trustees must be advised who the service providers are that have presented their quotes according to the spec. It will be in the best interest of the body corporate for the trustees according to the portfolio’s to liaise with the service provider.

One that is accepted it must be signed by 3 trustees and the trustee in charge of the portfolio must oversee that the work is done properly.

Once the job is done and if all the 3 trustees are satisfied with the workmanship the invoice would then be presented and again 3 trustees must sign the invoice for payment.

Please arrange with the BANKING INSTITUTIONS THAT 3 (three) trustees are signatories to all cheques as from today 05/10/2010.

We are fully aware what Managing Agents are doing and let it not go beyond this whereas (sic) it leads to FRAUD as this could be proved beyond any doubts (sic).

Let this working relationship be on a ‘MASTER & SERVANTS” in future until your tenure (sic).”

[28] In addition, there are allegations which the respondent has not dealt with properly. She simply responded to them with a bare denial. Such a response does not create a true dispute of fact, and so the applicant’s version must be accepted on these issues. Examples of these are:

The respondent ordered Bencorrum employees to move furniture; and

She interfered with an employee of Bencorrum, the building manager in the execution of his duties by telling him on 22 October 2010 that he was a servant and she (the respondent) was the master, that he should remember his place, and that she would back down for no one.

[29] It is common cause that by letter dated 8 October 2010 the applicant, through his attorneys, pointed out some respects in which the respondent had interfered with the applicant in the carrying out his duties and called upon him to undertake to comply with various demands.

[30] The respondent failed to give the undertaking. In fact, in a letter from her attorneys it was denied that the respondent had done anything wrong and the respondent refused to give any undertakings. In this letter the following was stated:

“Our client is entitled to enquire, query, question, find out and make decisions with her fellow trustees regarding service providers, employees, security personnel, managing agents and the lift service providers, after all it is the unit owners (including our Client) that pay monthly levies to the Body Corporate fund in order to pay for services provided to the building. Your Client should be more co-operative with the interim trustees as he is also being paid remuneration for his services.”

[31] Furthermore, as appears from paragraph [28] above, the applicant persisted in her attitude even after receipt of the letter of demand.

[32] On the face of it therefore, the applicant has shown both that his rights were violated and that they were likely to be violated in the future.

[33] However, it was argued that the applicant was not entitled to an interdict because he had authorized the interim trustees to perform certain functions in relation to Bencorrum. Reference was made to the trustees meeting of 22 February 2010 at which trustees were assigned various portfolios. The respondent was assigned the security and cleaning portfolios. However, this delegation was very limited, as explained in the applicant’s e-mail to trustees of 6 May 2010, in which the following was stated:

“Further to the e-mails below and operational documents attached including the minutes of a meeting where portfolios were assigned, I wish to confirm that I support trustee involvement in the rehabilitation challenges facing Bencorrum. The participation at present has been largely limited to substantial involvement of Mrs Rambadhursing. Participation by trustees however needs to take into account the operational responsibilities and accountability specific to Bencorrum, which includes final responsibility and accountability by the administrator and thereafter that of employees and the managing agent. The trustees are not accountable under the High Court Order and accordingly in my view cannot be assigned responsibilities to act in the capacity which trustees would ordinarily do in a self managed body corporate.

In summary, I support that the interim trustees are in place to represent owner interests and concerns in the rehabilitation of Bencorrrum. The participation however needs to remain advisory and inclusive, without trustees assuming the responsibilities and functions of the administrator, employees or the managing agent. It is on this basis that the operational responsibility document was tables (and agreed) at the last trustee meeting.

The operational structure as tabled in my view does not conflict with the provisions of the Court Order. In sundry matters, in the interests of containing my input and costs, the trustees would interact with the building manager in their relevant portfolio areas, which then gets directed to the managing agent, who will where appropriate involve the administrator. The building manager is obligated to involve and keep the relevant portfolio trustees informed in all relevant matters. The managing agent’s authority to act at this level is on the basis of responsibilities I have assigned in terms of the powers available to me as appointed administrator. It needs to be considered that we are holding monthly trustee meetings where key matters are jointly addressed between the administrator, trustees and the managing agent. Further, the process does not preclude any trustee from raising matters directly with me or the managing agent.

A meeting has been called for tomorrow morning 09h00 at Bencorrum, between myself, the managing agent, building manager and Mrs Rambadhursing, to finalise the position relating to participation by trustees. All trustees are welcome to attend. ”

[34] The applicant’s attitude was spelt out in equally clear terms in his letter to owners of 20 May 2010. The applicant stated the following:

“Various matters have arisen which appear to have created confusion relating to the nature of the involvement of interim trustees in the management and control of Bencorrum, which are clarified below.

The provisions of the High court Order relating to the appointment of interim trustees are as follows:

“…interim trustees, who shall upon their election be entitled to make recommendations to the Administrator in respect of the running of the affairs of the Respondent, within the ambit and subject to the powers granted to him by Section 46 of the Sectional Titles Act.”

1I have corrected typographical errors.

2The order was subsequently amended but that amendment is irrelevant to this judgment.

3Once again, typographical errors have been corrected.

4S36

5S39 and Management Rule 6

6At 82B-C

7At 79F-H

8Laid down in Plascon Evans Paints v Van Riebeeck Paints 1984(3)SA 623(A) at 634

9Management Rule 13(e)