South Africa: High Courts - Gauteng

In the matter between:

This judgment is concerned with the Sectional Titles Act 95 of 1986 and especially those provisions pertaining to control, management and administration of sections and common property

2.      

Applicant (“Torgos”) avers that an agreement was entered into by authorised representatives of both the applicant, a registered company, and first respondent, the body corporate of a sectional title scheme (“the Body Corporate”) The applicant seeks to enforce the agreement.

3.      

There is a dispute concerning the validity of the agreement. Two issues are central to this dispute:
a.      

The authorisation or otherwise of those who purported to enter into the agreement on behalf of the Body Corporate.
b.       The applicability or otherwise of the provisions of Section 25(6) of the Sectional Titles Act 95 of 1986 to the agreement and the impact, if any, thereon.

4.      

However, as a point in limine, the Applicant objected to the locus standi of the deponent to the Respondent’s Answering Affidavit. This objection raises issues pertaining to retrospective ratification of the actions of Trustees of the body corporate as also the implementation of Management Rule 24 annexed to the Regulations published in terms of the Sectional Title Act.

5.      

I must record my appreciation to counsel for both parties who assisted me by providing additional Heads of Argument subsequent to the hearing of this application.

LOCUS STANDI OF RESPONDENT - RATIFICATION OF OPPOSITION TO APPLICATION

6.      

At the hearing of the application the locus standi of the deponent to the Answering Affidavit was challenged. On the authority of Baeck & Co v Van Zimmeren & another 1982(3) 112 W, I allowed the Respondent opportunity to furnish the necessary authority subsequent to the hearing. A number of Trustee resolutions were filed by the Respondent with an affidavit to which the Applicant replied. Further argument was heard on the question of locus standi.

7.      

A series of documents were provided entitled “Trustees' Resolution” of which the relevant portion reads:

“It is hereby recorded that on this, the 15^th day of September 2005, the duly elected Trustees of the Body Corporate of Anchors Aweigh ratified their decision that:

Phillipus Johannes Potgieter

The duly elected Chairman of the Trustees, be authorized, in respect of all acts, already undertaken, and to be undertaken in the future on the Body Corporate’s behalf, to
1.      

sign all documentation and process, and
2.       do all things necessary;

to oppose the Application instituted by Torgos (Pty) Ltd under case number 2005/15098 in the Witwatersrand Local Division of the High Court against Anchors Aweigh Body Corporate.”

8.      

Rule 24 of the Management Rules in Annexure 8 of the Sectional Title regulations provides that “A resolution in writing signed by all the trustees for the time being present in the Republic and being not less than are sufficient to form a quorum, shall be as valid and effective as if it had been passed at a meeting of the trustees duly convened and held”.

9.      

Rule 4(1) provides that the number of trustees shall be determined from time to time by the members of the body corporate in general meeting while Rule 8 provides that “The Trustees may fill any vacancy in their number”. It is common cause that the members of the body corporate had determined in general meeting that the number of the trustees ‘shall be thirteen’. Thirteen persons were so elected and two subsequently resigned. One person sold his unit. The Respondent’s affidavit avers that one person, the deponent to the Answering Affidavit, was co-opted to the Trustees. Nine persons signed this Trustees’ Resolution with one signatory adding in manuscript that “ Hiermee vrywaar ek myself teen enige regsaksie van Torgas omrede ek nie deel was van die oorspronklike onderhandelinge tussen Torgos en Anchors Aweigh maar ek steen die voorsitter omdate he verkies was om namen die body corporate op te tree”.

10.     

The purported ‘ratification’ is disputed on a number of grounds. It seems to me that the respondent’s difficulties may be summarized as follows: those relating to the number of Trustees, those relating to the number of persons who signed the resolution and the content of that which was ratified.

11.     

Firstly, the respondent apparently calculates there to be eleven Trustees at time of signing the resolutions. This does not appear to be correct. Thirteen were elected and two, the papers say, resigned. The papers say that Mr Potgieter was co-opted but no details are given as to when or how or by whom. However, since the signed resolutions refers to him as the “duly elected Chairman of the Trustees” one could accept this to be so. That one Trustee sold his unit does not necessarily mean that he or she ceased to be a Trustee. Although one would logically expect only owners of units to be Trustees, Rule 5 permits a non owner to be a Trustee. Absent proof of resignation as a Trustee, the former owner remains a Trustee. Accordingly, at best for the respondent there were/are twelve trustees at the time of the resolution. Management Rule 24 requires all the trustees in the Republic to sign. Mr Potgieter was apparently overseas at the time. However, only nine of the eleven trustees in South Africa at the time actually signed the resolution. It is therefore unnecessary to determine whether or not nine Trustees constitute a quorum. The Rule requires all trustees in the Republic to sign. Accordingly, the requirements of Management Rule 24 were not followed. These resolutions cannot therefore constitute ratification of Potgieter’s opposition to the application.

12.     

If I am wrong on this point, I should deal with the others raised.

13.     

Secondly, the applicant has argued that the trustees do not have the right to omit to fill up the vacancies to bring their number within that prescribed by the members in general meeting. The applicant takes the point that, since the trustees failed to use their power in terms of Rule 8 to fill the vacancies, the trustees were not properly constituted in terms of the determination of the members of the body corporate. Accordingly, the decision of the remaining trustees cannot constitute a proper decision of the body corporate via the trustees. Thirdly, the applicant has argued that the trustees did not obtain the resolution of all the “trustees’ as required by Rule 24 since they had failed to fill the vacancies. I see no merit in these arguments. The trustees may be empowered to co opt further trustees but it cannot be an invariable requirement that this be done before trustees can take appropriate action when required. This present instance constitutes a good example of a situation where the trustees are not in residence, two trustees resigned and one departed from the body corporate, the trustees were required to take action and there was a quorum (notwithstanding not the full complement of trustees). There may be an interregnum. Further, I do not see that there is a positive obligation on the trustees to coopt replacement trustees. The Rule is not worded in those terms. Where the trustees do not coopt new trustees, then the general meeting can do so. That this has not been done does not render the trustees any the less empowered since they still constitute more than the minimum number of trustees (two) and are quorate.

14.     

Fourth, that which is ratified is somewhat uncertain. The resolution claims that the trustees “ratify their decision” but the affidavit submitted by the respondent certainly does not confirm the existence of any earlier decision of the trustees. The affidavit of the CEO of the Managing Agent of the respondent refers only to the fact that “one of the members of the Body Corporate alerted me to the fact that the Applicant had instituted action against he First Respondent. It was determined then and there, albeit verbally by the trustees considering that a meeting had been held two days previously, that Mr Potgieter as the Chairman of the trustees would represent the trustees and do all things necessary, including the signing of all legal process, to defend the action.”. On this affidavit, it would appear that no more than a member of the body corporate took a decision with the managing agent – certainly no decision of the trustees. The affidavit does not clearly state that there had been a meeting of trustees on the 6^th August when the trustees had gathered at their holiday homes and that, when this member alerted the CEO on the 9^th August (a public holiday), that the trustees were still present and then they congregated and made this decision. Since there is no evidence by whom or when the decision was reached the question arises whether this trustees’ resolution can be said to ratify a decision by the trustees or the actions of Phillipus Potgieter. The trustees’ resolution clearly purports to ratify a decision and identifies the decision. There can be no doubt that the trustees intend and authorise opposition to this current litigation and authorise, both retrospectively and prospectively, the actions of the deponent to the Answering Affidavit. I consider that the ambiguity or lack of clarity regarding an earlier decision does not call the Resolution into question.

15.     

However, the very paucity of information and the manner in which it is presented by the respondent is deserving of the comments made by Corbet J in Griffith & Inglis (Pty) Ltd v Southern Cape Blasters (Pty) Ltd 1972 (4) SA 251

“This affidavit is a somewhat curious document and it creates more problems than it solves….. if such a resolution were taken, then I cannot understand why this is not stated in so many words. Indeed the very fact that the deponent tends to skirt around the issue …. These are questions which, on this affidavit, remain unanswered….” (at 253E-245D)

16.     

Fifth, the applicant even went so far as to suggest that the court cannot be certain that the signatories to the Resolutions were fully aware of the nature of the litigation since it is nowhere stated that they have been furnished with all documents and information. I find no merit in this submission. It is not for the court to enquire of each and every trustee (or director of a company) whether he or she was or is compos mentis at time of signing, literate, fully informed or could quote chapter and verse of every document and each issue. That is the very reason why the written resolution referring to the litigation is accepted as sufficient.

17.     

The result is that I find that there was and is no proper authority for Phillipus Potgieter to file the opposing affidavit on behalf of the First Respondent and that such affidavit should be disregarded for the purposes of adjudication of the applicant’s application.

THE AGREEMENT

        

Signed document

18.     

Applicant avers that a document entitled “Koopooreenkoms” was signed by Torgos and by the authorised representatives of the Body Corporate on the 19^th April 2003.

19.     

The document, annexure EC2 to Applicant’s founding affidavit, purports to be entered into between Torgos, “Beheerliggaam Anchors Aweigh” and”Likwidateur van Perseel 705 Hibberdene Bk”. It is undated and signed “Namens Torgos”, “Namens Anchors Aweigh” and “Namens die Likwidateur”. There are two signatories signing “Namens Anchors Aweigh” and against one signature are written in brackets the word “Voorsitter” and against the other signature is written the word “Trustee”.

Content of Document

20.     

The details of the document are not particularly relevant to this judgment. A sectional title scheme known as “Anchors Aweigh” was registered in respect of certain ground. A bond was registered over the property. The developer of the sectional title scheme was a close corporation which went into liquidation. The rights and obligations of the developer vested in the hands of the liquidator who is the second respondent and who is not defending this application.

21.     

One of the rights so vested in the liquidator was the right, in terms of Section 25(1) of the Sectional Titles Act (“the Act”), to extend the scheme. This right was registered, endured for a period of five years and then lapsed on 23^rd December 2001.

22.     

The crux of the agreement as between Applicant and the Body Corporate is a cession from the Body Corporate into the name of Torgos of the aforesaid Section 25 (1) right to extend the scheme. Torgos was to furnish a guarantee in the amount R470 000 payable on registration of cession of the right to extend the scheme into the name of Torgos, cancellation by the liquidator of all bonds registered by one of the insolvent entities over the property and registration of all sectional title units from the insolvent to the Body Corporate. On receipt of the guarantee from Torgos the liquidator undertook to cancel all bonds registered over the property by the insolvent, to transfer buildings and sectional title units from the insolvent to the Body Corporate and to pay to the Body Corporate the sum of R300 000 in settlement of any amounts owed by the liquidator to the Body Corporate.

Circumstances giving rise to the document

23.     

Applicant sets out in considerable detail the circumstances to the signing of the agreement which caused him to rely upon these signatures as being those of the authorised representatives of the first respondent. These circumstances, as related by Torgos, are relevant to the issue as to whether or not the signatories were or could have been authorised to sign the agreement on behalf of the Respondent.

24.     

On 16 September 2002 Torgos addressed what is described in its Founding Affidavit as “Somewhat of an introductory letter to the Chairperson of the Body Corporate”. Having introduced Torgos the letter goes on to state as follows:

“Ons versoek die geleentheid om met u Bestuursliggaam en/of enige ander belanghebbende party in onderhandeling te tree ten einde die volgende te bekom –

1.       Die reg tot ontwikkeling van die onontwikkelde gedeeltes van Erf 705 Hibberdene (insluitend die toegekende karavaanpark gedeeltes),

2.       Moontlike eienaarskap van geboue

B145;B146;B147;B148;B152;B153;B154;B155;B156 en B157 soos per Deelplan SG D47/2000.”

25.     

In response thereto Torgos was invited to make a presentation to the Annual General Meeting of the Body Corporate. The AGM was held on 16 November 2002 It appears from the minutes that there were 23 owners in attendance and a proxy was received from 28 additional owners. One proxy represented 50% of the units in the sectional title scheme. The first item of the minutes stipulates that notice of the meeting had been given and that a quorum was present.. Item 12.4 is minuted as follows:

“Unanimous resolution to decide on the selling off of land – presentation by two prospective buyers (due to the urgency and nature of this business, we were unable to give thirty days notice).

Two proposals were received.

Proposal 1: received from Mr and Mrs Botha – they did not attend the meeting and this proposal was not discussed.
Proposal 2: Mr Dirk Coetzee, of Torgos Pty Ltd who are property developers in Kwa-Zulu Natal, addressed the meeting.
He made a proposal on the basis of not selling off the top section of the land but buying the development rights and then to develop. This would benefit the Body Corporate, as the levies would come down considerably. He requires an answer by no later than Tuesday, or else the liquidator can sell off the land to anyone he pleases. It was agreed that the development rights would be valid for ten years only.
A committee will be appointed by the trustees to negotiate the contract, together with the liquidator and the developer. Owners are also to send by fax or e-mail to Sue their nominations to represent this committee.
Unanimous decision was taken to accept his offer. Mr van Zyl will notify the liquidator”

26.     

Applicant then details a number of meetings held between members of the committee of the Body Corporate and representatives of Torgos. Reference is made to minutes which are not attached to the Founding Affidavit so one relies on the summary as given by the Applicant.

27.     

At the meeting on 29^th November 2002 Mr Potgieter of the Body Corporate committee advised “That a mandate had already been given to the committee to reach a decision in respect of development” and that “75% of the members at the Annual General Meeting had agreed that the committee could proceed”. The first item on the agenda was “that of the development period and it was agreed that the development period would be set at 30 years and the developer would be given 10 years to complete the development with an option to extend such period. This was accepted by all.” Item number 8 on the agenda was a request from a member of the committee of the Body Corporate for Torgos “to give the Body Corporate a percentage of the profit that.. would make on the sale of the buildings” and the response was that this “could be considered”. Described as a “penultimate consideration” was the suggestion from the Torgas representative that he would ask his attorneys to “Draw up a contract for the parties to look at and “work on”.

28.     

On 1^st March 2003 a further meeting was held. It was minuted that “The development period was agreed to be a period of 30 years”. Thereafter the “Map in respect of the proposed development was tabled and discussed and signed. Torgas informed the committee of the Body Corporate that “The ground inspection had been done and that at a cost of R27 000 the common property could be and was cleaned. This was done with the consent of H Grobler, the acting Chairman of the Body Corporate of the time.” Torgos then suggested that “The common property would not be sold and that it would be developed. This was agreed to unanimously by all parties present.”

29.     

On 19^th April 2003 a final meeting was held at which the development agreement was signed. It was minuted that the agreement would be “Perused by the attorneys acting for the Body Corporate within 14 days” and thereafter “The liquidator would sign the agreement”.

30.     

At a further meeting of the committee and Torgos on 9^th August 2003, a letter from the liquidator advised that the liquidator refused to pay certain transfer costs and Torgos undertook to refer this to its attorneys. Then there were questions as to “why was the developer’s clause changed from 10 years to 30 years.... how could this have been changed without the consent of the owners”. Torgos response was firstly to say building regulations required this and secondly to undertake to “change the clause back to 10 years”. It was then agreed that another meeting would have to be arranged for “further discussions”. Torgos informed the committee that resolution was needed and that necessary documents needed to be signed because “if not the contract vs the developer Dirk Coetzee and the Body Corporate and any other agreements will be cancelled”. The upshot was that the committee would meet and “report back to the developer”.

31.     

Thereafter the agreement was sent to the liquidator who obtained the consent of creditors and the Master of the High Court and signed the agreement.

Events subsequent to signature

32.     

The guarantee in the amount of R470 000 to be furnished by the applicant was furnished to the liquidator on the 9^th of June 2004.

33.     

There were various interchanges between the applicant and first respondent and Torgos avers that “Suddenly the first respondent sought not to be bound by the terms of the agreement and sought to rely on alleged lack of authority of the persons who signed the documentation”.

34.     

Torgos states that a number of items of correspondence were exchanged but it all reflects “the same opinion on the part of the first respondent, that being that the Body Corporate did not consent to the transaction”.

IMPORT OF THE DECISION OF THE AGM

        
Agreement in principle?

35.     

Applicant avers in it’s affidavit that it had been unanimously decided by the Body Corporate at the AGM “to accept the offer” made by Torgos and that it was “quite apparent from the Minutes that the Body Corporate resolved to appoint a committee which would finalise the terms of the agreement.” It submitted that the committee was mandated to “determine the terms and conditions of the rights and obligations of the parties in accordance with the provisions of the proposal that had been unanimously accepted in its totality”. Elsewhere in the papers, Torgos states that “it was not the function of the committee to renegotiate or determine whether the offer was acceptable or not. The Minutes quite clearly indicate that the offer… was accepted unanimously and that a committee would be appointed to “oversee the process”. Torgos further states that “There was no negotiation of the rights and obligations of the parties at any of the meetings with the committee… and all that took place at these meetings was clarification of the workings of the process and details was added to that which was discussed”.

36.     

Scrutiny of events at the AGM, as recorded in the Minutes, and at the subsequent meetings do not support this understanding on the part of Applicant.

37.     

Prior to the AGM, Torgos had done no more than request to be allowed to make a proposal to the body corporate. At the AGM, there were to be two presentations but only that of Torgos was actually received. The Minutes reflect two apparently contradictory results: on the one hand, a committee was appointed “to negotiate the contract” while on the other hand “ unanimous decision was taken to accept his offer”.

38.     

On the one hand, if the contract was still to be negotiated, then the terms and conditions of any contract were obviously not yet finalized. Until such terms and conditions were finalized there could be no agreement. At most the body corporate at the AGM would have reached a decision to accept the offer in principle. On the other hand, if the “offer” had been accepted then one has to ask what was the content of the offer so accepted and were the parties ad idem on the agreement thus reached? The answer must be in the negative. Certainly insufficient detail had been given at the AGM as the subsequent meetings bear out.

39.     

At the first meeting, the committee did no more than confirm a mandate “to reach a decision”. At that meeting the development period was discussed – ten years had been proposed at the AGM while now thirty years was agreed; there was a proposal from the committee for Torgos to pay a percentage of the profit on the sale of the buildings and Torgos undertook to consider this; matters such as electricity, water, perimeter wall, residential units, entrance and development plan were discussed. At the next meeting, three months later, the development period was agreed at 30 years; the map of the proposed development was tabled for the first time; that the common property not be sold but developed was agreed. Yet another meeting was held.

40.     

These were not issues of process. These were matters of substance pertaining to the contract. Without agreement on these issues there could be no contract. It is of some concern that I note that the Minutes of the AGM are silent as to any monies to be paid by Torgos to the body corporate and the minutes of the first meeting between the committee and Torgos are not attached. Torgos has not furnished any information as to how or when or by whom or on what terms the sums of R470 000 and R 300 000 were agreed or terms of payment thereof.

41.     

Accordingly, I find that nothing more than an agreement in principle to sell development rights to Torgos was reached at the AGM and that a committee was indeed appointed to ‘negotiate’ an agreement acceptable to the body corporate., the individual members of the committee to be appointed by the trustees.

Applicant’s counsel agreed that what was reached at the AGM was an ‘in principle agreement’ to purchase the right vesting in the body corporate. However, the first pillar of his argument was that that the general meeting had appointed this committee as it’s agent to both negotiate and conclude the final agreement. When asked how a final contract could be concluded if the terms were not known to the body corporate, counsel responded that the body corporate would have to abide the decision of it’s committee since the minutes do not record that the committee was to return to the AGM for confirmation. It was submitted there would be nothing untoward with the AGM taking the view that individual members had heard the proposal, did not want to be further involved and allowed the committee to negotiate and conclude in the best interests of the body corporate. After all, section 38(a) of the Act empowers the body corporate to “appoint such agents and employees as it may deem fit” Obviously, this power is subject to the limitation that the agent cannot be appointed to carry out functions or exercise powers which are neither allocated to nor entrusted to the body corporate itself. and the committee was the agent of the body corporate with authority to finalise and conclude the contract with Torgos.

43.     

Secondly, it was argued by Applicant’s counsel that the trustees of the body corporate act subject to the general meeting and accordingly, the trustees cannot and could not override and oppose the actions of the very committee authorized by the annual general meeting of the body corporate. This is because the trustees are bound to act in accordance with any ‘direction given at a general meeting of the owners of sections’ .

44.     

The first question is therefore whether or not the committee was authorised to enter into a binding agreement on terms and conditions unknown to the body corporate.?

45.     

The powers of the committee were derived directly from the body corporate in the general meeting. The instruction given by the body corporate was to ‘negotiate the contract’.

46.     

The ambit of the word ‘negotiate’ received attention in Lines and Others v Liberty Life Association of Africa Ltd 1990 (3) SA 268 (T) where was said:

“Several dictionary meanings of the verb ‘negotiate’ when used as it is in requirement 6 in intransitive form were quoted in argument. I think it necessary to repeat only two. The Shorter Oxford Dictionary says of ‘negotiate’ : “to confer (with another) for the purpose of arranging some matter by mutual agreement; to discuss a matter with a view to settlement or compromise;. Webster’s New 20^th Century Dictionary 2^nd ed sv ‘negotiate’: “to treat with another respecting purchase and sale; to confer with another involving a trade; as to negotiate with a man for the purchase of a farm”; and the second meaning: “to hold a conference and discussion with a view to reaching agreement on a treaty, league, contract etc, to treat with another respecting peace, commerce or any subject of common concern.”. The common element lies in the act of communicating with another for the purpose of arranging some matter by mutual agreement”. (272H-J)

47.     

Appellant submitted that, on the authority quoted above, the conclusion of the process of negotiation would therefore be the conclusion of the mutual agreement, ie. the contract.

48.     

That is not necessarily the case. The activities envisaged in the definitions given above are all, as identified by his Lordship Mr Justice Eloff, acts of communication. They are not aimless but are directed towards a certain result. The desired result may be that of reaching agreement. However, there is no guarantee that such communication will necessarily be successful and will result in agreement. Communications may not result in a meeting of minds; discussions may be fruitless; conferring may not conclude in a positive result. Negotiations, in short, may terminate without the anticipated agreement being concluded. Accordingly, the activity of negotiation, though purposeful, is not in and of itself anything more than an attempt to reach agreement. The activity envisaged within the verb ‘negotiate’ does not encompass the result for which it may be undertaken. That result is an activity with its own verbs, which are ‘agree’, ‘settle’, compromise’, purchase’ ‘trade’ and ‘arrange’ as set out in the definitions above.

49.     

This distinction is not just one of semantics. It is a distinction recognized as fundamental to daily life and to our law. Process is distinguished from result. A principal may appoint an agent to negotiate on his or her behalf but may not empower the agent to conclude the final agreement. That is frequently left to the prospective bride and groom, chief executive officers of companies, heads of state. In South Africa, the most notable distinction between process and result was the negotiating which took place at the Constitutional Assembly and the 1996 Constitution which was enacted by Parliament.

50.     

Appellant argues that the context points to a conflation of both process and conclusion of the agreement in the mandate given at the AGM. Counsel referred to the minutes of the AGN and relied upon reference to “the urgency and nature of the business” , the absence of any indication or instruction that the committee was to table the terms reached after negotiation before the body corporate for signature by the body corporate, the recordal that Torgos’ proposal had been unanimously accepted.

51.     

I do not think that these contextual pointers take the instruction of the body corporate to the committee beyond the ambit of negotiation. Whatever urgency there was, it still took some five full months from the AGM to the signing of the document. There is nothing to suggest that, during this time, matters were so urgent that neither the body corporate or the trustees were never to consider this issue. Similarly, there may not have been any mention in the minutes of a further meeting or referral back but this does not mean that the trustees or the body corporate did not or could not meet Meeting and reaching decisions where physically present and together or by round robin resolution or by video conference or otherwise as permitted by the Rules. . As already indicated, the so-called ‘acceptance’ of the Torgos proposal was without content other than an in-principle commitment to the idea.

52.     

Accordingly, I find that the committee was empowered to do no more than ‘negotiate’ and that the conclusion of any resulting agreement was not within it’s powers.

Conclusion of the Agreement

53.     

There is, of course, no indication in the minutes of the AGM that the committee to be appointed was to be comprised solely of the trustees of the body corporate. Paragraph 8 of the minutes name the trustees who had accepted nomination. Para 12 of the minutes record that “a committee will be appointed by the trustees to negotiate the contract… owners are also to send by fax or e-mail to Sue, their nominations to represent this committee”. The details of the committee are not given in the papers. One does not know exactly how many persons sat on the committee, who they were, how many were trustees of the body corporate and how many merely members of the body corporate.

54.     

However, perusal of the minutes of the AGM, the minutes of the negotiating meetings supplied by the applicant and the signed document itself all suggest that the disputed agreement both purported to be and was signed by two trustees. In addition, one of them may have been the chairperson of either the committee or the board of trustees.

55.     

I take the view that it matters little whether or not the body corporate itself ( at the AGM or at a subsequent meeting) was to conclude/confirm any agreement which might result from negotiations with Torgos or the trustees were actually delegated or authorised so to do by the body corporate (at the AGM or at a subsequent meeting) or the trustees were carrying out their duty to exercise the powers of the body corporate so to do.

56.     

The Act provides that the body corporate may “exercise the powers conferred on it by or under this Act or the rules” Section 38.. Specifically section 25 (6) of the Act vests in the body corporate the power to extend the scheme which was the subject matter of the negotiations. Furthermore, the powers of the body corporate include those set out in sections 37 and 38 of the Act which include the appointment of agents Section 38(a). Such agents appear to be additional to the trustees of the body corporate but this does not mean that the trustees cannot and do not act as the agent of the body corporate when authorized so to do.

57.     

The subordinate and representative powers of the trustees of the body corporate are set out in both section 39 of the Act as also Management Rules 25 and 26. Section 39 (1) provides that the

“Functions and powers of the body corporate shall, subject to the provisions of this Act, the rules and any restriction imposed or direction given at a general meeting of the owners of sections, be performed and exercised by the trustees of the body corporate holding office in terms of the rules.”.

Rule 25 generally provides that “the duties and powers of the body corporate shall, subject to the provisions of the Act and these rules and to any restriction imposed or direction given at a general meeting of the owners of sections, be performed or exercised by the trustees of the body corporate holding office in terms of these rules.” Rule 26 provides that “(1) Subject to any restriction imposed or direction given at a general meeting of the body corporate, the powers of the trustees shall include the following: (a) to appoint for and on behalf of the body corporate such agents …as they deem fit in connection with- (ii) the exercise and performance of any or all of the powers and duties of the body corporate; (b) to delegate to one or more of the trustees such of their powers and duties as they deem fit…….”

58.     

Accordingly, since section 25(6) vests the right to extend the scheme in the body corporate and section 39 and rules 25 and 26 empower the trustees to exercise and perform any or all of the powers of the body corporate, it follows that the trustees have the power to extend the scheme on behalf of the body corporate subject to the provisions in section 25(6) of the Act. Furthermore, since rule 26 permits one of more trustees to receive and exercise delegated powers of the body corporate, it follows that one or more trustees may extend the scheme on behalf of the body corporate (if so delegated and subject to the provisions in section 25(6) of the Act.).

59.     

Torgos was a third party in relation to the body corporate. When transacting with third parties, the trustees may act as agents Whether in terms of section 39 or rules 25 or 26. of the body corporate with the result that the body corporate is bound by all acts performed by the trustees within the scope of their actual or ostensible authority. The actual authority of the trustees of the body corporate of Anchors Aweigh is not known to this court. However, the court does know that the Anchors Aweigh trustees are actually empowered to exercise all the powers and to perform all the duties of the body corporate subject, of course, to the restrictions imposed by the Act, the Rules and (unknown to the court) any imposed by the owners in owners in general meeting.

60.     

Everything which is before this court suggests that Torgos was entitled to assume, in good faith, that the trustees had and have the necessary authority to enter into an agreement on behalf of the body corporate for the sale and cession of the right of the body corporate to extend the Anchors Aweigh scheme as provided for in terms of section 25(6) of the Act.

61.     

The Turquand rule, also referred to in applicant’s counsel’s heads of argument as the ‘rule of indoor management’, entitles the applicant to continue to seek to enforce whatever agreement it has entered into with the trustees of Anchors Aweigh should it transpire that the body corporate never gave the necessary authority to the trustees, or the general meeting of the body corporate is not prepared to ratify the action of the trustees or should it transpire that the trustees were acting beyond their delegated powers. action. The ratio for this well known rule is that Torgos cannot be expected to look beyond the public documents regulating the affairs of or empowering the trustees of Anchors Aweigh. Torgos cannot be expected to investigate the internal management arrangements made by Anchors Aweigh body.

62.     

There is no evidence that the powers of the trustees were restricted by any direction given at a general meeting of the body corporate.

63.     

Torgos was entitled to believe that the trustees signing the agreement were authorised to sign on behalf of the body corporate. The agreement was signed by two trustees in apparent compliance with Rule 27 which provides that “No instrument signed on behalf of this body corporate, shall be valid and binding unless it is signed ……….. by two trustees…..”.

64.     

The result is that the body corporate of Anchors Aweigh is bound by all acts performed by the trustees within the scope of their actual or ostensible authority. Torgos cannot be deemed to have constructive knowledge of the meetings of the body corporate or those of the trustees. The minutes of such meetings are not public documents and are not required to be registered in the Deeds Office. Accordingly, the applicant was entitled to believe that the signing trustees were indeed authorized to sign the contract on behalf of the body The body corporate would be liable on this contract even if the actual signatories had not in fact actually been authorized by the body corporate to sign the agreement since they were ostensibly authorized by virtue of that which I have set out above.

APPLICABILITY OF SECTION 25(6) OF THE SECTIONAL TITLES ACT

Section 25(6) of the Act

40.     

In the correspondence attached to it’s papers by applicant, there is, inter alia, reference to and reliance upon Section 25(6) of the Act Letter of 3^rd October 2003 from Torgos at page 75 of the pleadings. . Apparently, respondent had, inter alia, relied on the first proviso to the subsection for claiming lack of authorisation to proceed while Torgos relied upon the second proviso to the subsection for claiming that refusal to consent was not in and of itself a barrier to proceeding with the agreement.

41.     

The relevant portions of the subsection provides:

(a)“If no reservation was made by a developer in terms of subsection (1), or if such a reservation was made and for any reason has lapsed, the right to extend a scheme including land contemplated in section 26, shall vest in the body corporate which shall be entitled, subject to this section and after compliance with the necessary changes, with the requirements of paragraphs (a), (b) (c) (d) and (g) of subsection (2), to obtain a certificate of real right in the prescribed form in respect thereof: Provided that the body corporate shall only exercise or alienate or transfer such right with the written consent of all the members of the body corporate as well as with the written consent of the mortgagee of each unit in the scheme: Provided further that such a member or mortgagee shall not withhold such approval without good cause in law.” ( my highlighting)

42.     

Correspondence indicates the view taken by the body corporate is that the so-called agreement was void ab initio because the unanimous consent of all members and mortgage holders had not been obtained in terms of Section 25 (6) (a). Applicant maintains, that the full cession to Torgos will only be complete once the body corporate has carried out its obligations and procured the written consent of the owners and the mortgage bond holders and, therefore, the agreement is valid and binding on the body corporate which is obliged to proceed with the formalities provided for in section 25(6).

Application of the proviso to section 25(6) to the agreement

65.     

The subject matter of the agreement between Torgos and the body corporate is the sale and cession of the right of the body corporate to extend the scheme.

66.     

In argument, applicant’s counsel submitted that the required written consent need only be obtained before registration of transfer and not before any agreement, such as the cession, which gives rise to the transfer. Counsel argued that ‘alienate’ should be interpreted to mean the same as ‘transfer’ in that both constitute the same act of registration in the Deeds of Office. The use of two words is therefore surplusage. A mere sale agreement cannot constitute a transfer of ownership and is merely the underlying contract which gives the purchaser the personal right to claim transfer of ownership The result is that the written consent need only be obtained before registration of transfer or registration of the cession in the Deeds Office and is not needed before entering into any agreement to so transfer. The argument is amplified that the cession between Torgos and the body corporate comprises two parts: the first portion, which creates the binding obligation, does not require the consent of all members to be binding and the second portion, which is the transfer in the Deeds Office, does require such consent.

67.     

Counsel’s supplementary heads of argument went even further to suggest that it is only once the transfer of the right to extend the scheme from the body to Torgos is actually registered in the Deeds Office that it can be stated that there has been an alienation of the right to extend the scheme.

68.     

In a minority judgment in Jaga v Donges NO 1950(4) SA 653 A, Schreiner JA stated what has now become accepted as a useful analysis of approach. The learned judge also cautioned against the peculiar dangers of each approach.

“Certainly no less important than the oft repeated statement that the words and expressions used in a statute must be interpreted according to their ordinary meaning is the statement that they must be interpreted in the light of their context. But it may be useful to stress two points in relation to the application of this principle. The first is that ‘the context’, as here used, is not limited to the language of the rest of the statute regarded as throwing light of a dictionary kind on the part to be interpreted. Often of more importance is the matter of the statute, its apparent scope and purpose , and , within limits, its background. The second point is that the approach to the work of interpreting may be along either of two lines. Either one may split the inquiry into two parts and concentrate, in the first instance, on finding out whether the language to be interpreted has or appears to have one clear ordinary meaning, confining a consideration of the context of the context only to cases where the language appears to admit of more than one meaning; or one may from the beginning consider the context, and the language to be interpreted together.” (at 662 G-663A)

The import of the proviso to section 25(6)

69.     

I must decide whether that the agreement constitutes a transaction to ‘alienate’ or ‘transfer’ and whether the written consent need be obtained prior to, contemporaneously with or subsequent to such action. The applicant argues that written consent need not be obtained prior to conclusion of the agreement which constitutes neither an alienation nor transfer. The correspondence disclosed by the applicant indicates that the body corporate subscribes to the view that the agreement is of no validity without the prior written consent of the owners and mortgagees.

70.     

The first questions which arise are, what is the purpose of the proviso to section 25(6), and in whose interests was it enacted?

71.     

I have no doubt that the clear purpose of the proviso is to protect owners of units from discovering that the value of their undivided share in the common property of the sectional title scheme has been diminished or has disappeared by cession of the right, vested in the body corporate, to extend that scheme. Further, it is to protect such owners from discovering that a scheme which has had known and limited number of units and a extended expanse of common property and amenities has unexpectedly had that the number of units increased and the common property diminished by reason of a developer exercising the right to extend the scheme which formerly vested in the body corporate. In short, insofar as the members of the body corporate or the owners of the units are concerned, they are entitled to be protected against a diminution in the value of their unit – both section and share in common property – whether this value is in monetary terms or by way of enjoyment of their unit. The protection afforded is to ensure that they know of the alienation or transfer of the right to extend the scheme, are aware of the implications thereof to them, are aware of the loss to them in some terms and the gains to them in other terms.

72.     

Similarly, the mortgagees are protected from discovering (or not discovering) that the value of the security upon which they relied when making finance available to the owners of units has been depleted or diminished by similar means. A bank of finance institution assesses the value of a section and the value of an undivided share and only then determines the amount of loan finance which it is prepared to make available (secured by a mortgage bond over that very section and common property). Such mortgagee ertainly needs to be informed that it’s security may change and the extent to which and the manner in which it’s security will change, for the better or the worse, if the right to extend the scheme is alienated.

73.     

The purpose of the proviso is then clear: to protect persons and institutions who have invested money and living or work arrangements in a sectional title scheme – who are members and mortgagees. The proviso is therefore solely for the benefit of these two groups are none other.

At issue in the proper interpretation of the proviso is the stage at which the ‘written consent’ of the owners and mortgagees must be obtained. This requires understanding of what is meant by the terms ‘alienate’ or ‘transfer’ in the context of the proviso to section 25(6).

75.     

The Legislature must be presumed to mean what it said in the legislation and accordingly that it had and has a separate and distinct meaning for each of the words used. There is nothing in the definition section to provide guidance on the different meanings (if any) of ‘alienate’ and ‘transfer’.

76.     

The Oxford English Dictionary and others do not provide a clear and immediately obvious divergence in meaning. ‘Alienate’ includes “To make estranged” or “to turn away” or “to alter, change or make a thing other than it is” or “to transfer to the ownership of another” while ‘transfer’ includes “the conveyance from one person to another of property, spec of shares or stock” or “to convey or take from one place or person to another, to transport, to give or hand over” and in its legal sense is “to convey or make over title, right or property by deed or legal process”.

77.     

Of course, in having recourse to dictionary definitions one must be mindful that they do no more than “…….mark out the scope of the meanings available for a word, but the task remains of ascertaining the particular meaning and sense of the language intended in the context of the statute under consideration” Per Margo J in Transvaal Consolidated Land and Exploration Co Ltd v Johannesburg City council 1972(1) SA 88 W at 94..

78.     

I note that the Sectional Title Act does not deal with land but with “units” Defined as “A section together with its undivided share in undivided share in common property”. . Nevertheless, assistance may be sought in other legislation involving disposal of a right which also involves registration of such disposition. In the Alienation of Land Act, 68 of 1981, alienate is defined as “sell, exchange or donate” which is a meaning clearly circumscribed by the ambit of the legislation. Dealing with that legislation, Hoeksma and Another v Hoeksma 1990(2) SA 893 AD referred to the nature of sale as “a reciprocal consideration promised for the res …with the agreed co-ordinate is essentially the payment of money” (at 897C). When considering a right of pre-emption, Crous NO v Utilitas Bellville 1994(3) SA 720 C referred to Sande’s Treatise on Restraints 1.3.16 where ‘alienation’ is defined as “any course of dealing by which dominium is transferred” and concluded that ‘alienate’ had a generally accepted meaning of a voluntary and intentional transfer of ownership of a res by the owner thereof to a new owner . In Cohen and Others NNO v SAPHI (Pty) Ltd 1996(1) SA 1190 AD it was pointed out that the English version of the Insolvency Act 24 of 1936 had been amended by substituting, in section 34, the words ‘disposes of’ for ‘alienates’ which words had had a narrower meaning than the Afrikaans words ‘vervreem’ used in the signed version of the Act. ( see Cronje NO v Paul Els Investments (Pty) Ltd 1982 (2) SA 179 T at 190E-G).

79.     

The meaning of ‘transfer’ in the context of the Deeds Registries Act received careful consideration in Ex Parte Menzies et Uxor 1993(3) SA 799 C.

“The entry in Claassen’s Dictionary of Legal Words and Phrases defines ‘transfer’ as ‘the conveyance of land by means of a deed of transfer duly registered in the office of the Registrar of Deeds’. However, see Clayton NO v Metropolitcan and Suburban Railway Company and Walker (1893) 10 SC 291 at 302, cited there, in which De Villiers CJ said that registration of transfer ‘ is a judicial duty by virtue of which full ownership passes from the transferor ot the transferee’. The Shorter Oxford English Dictionary defines the legal meaning of ‘transfer’ as ‘conveyance from one person to another of property….’ And ‘transferable’ as ‘capable of being transferred or legally made over to another’. .Hiemstra and Gonin Engels-Afrikaans Regswoordeboek 2^nd ed translate ‘transfer’ as ‘oordrag, oorbrenging, oormaking, oorplasing, oorboeking; (vaste eiendom) transport’.
In Geue and Another v van der Lith and Another 2004(3) 333 SCA the owner of a farm had sold an undivided portion of his land without the consent of the Minister of Agriculture as required by the Sub-division of Agricultural Land Act, but subject to the suspensive condition of such consent being obtained. The relevant portion of Section 3(e)(i) provides that “No portion of agricultural land… shall be sold or advertised for sale…unless the Minister has consented in writing”. The Supreme Court of Appeal held that the meaning of this section read with the definition of “sale” (which stated that this included a sale subject to suspensive condition) were on first impression clear and it seemed that the agreement fell within the ambit of the prohibition.
In Words and Phrases Legally defined, all the illustrations of ‘transfer’ involve divesting one person of property or rights and vesting the same in another. The ‘ordinary meaning’ of transfer is ‘simply to hand over or part with something’: Lyle & Scott Ltd v Scott’s Trustees; Lyle & Scott Ltd v British Investment Trust Ltd [1959]2 All ER 661 (HL) at 668.
In my view, ‘transfer’ in its original meeting implies no less than the actual traditio from one person to another person of ownership or other real rights in property which the latter did not previously have. (Compare Wagenaar v Minister van Landboukrediet en Grondbesit 1972(2) SA 496 (O) at 500 D-501A regarding the meaning of ‘transfer’ in s 11(9) of Act 12 of 1912.) However, it has become extended in practice and in common use to include also the formal procedure, even where no real right is actually passed from one person to another but by which , ownership having already changed hands, the records in the deeds registry are brought into correspondence with the true ownership position. (Compare Barnhoorn NO v Duvenage and Others 1964 (2) SA 486 (A) at 494F regarding a fideicommissary’s right to ‘claim transfer’.) There seems to be no reason why an endorsement should not be included under this wider meaning. (Compare s 31 of the Act referred to above. Consider also the procedure whereby ownership acquired by prescription can be registered either with the co-operation of the former owner in the execution of a deed of transfer, or without it on the basis of an order of court. (Carey Miller (op cit at 93).)”

I am satisfied that the Legislature intended, in this Act, that a distinction be drawn between the words ‘alienate’ and ‘transfer’ and therefore between the actions and import encompassed within the chosen language of the Statute. The use of both words is not mere surplusage. To ‘alienate’ is not the same as to ‘ transfer’.

81.     

Dictionaries provide a multiplicity of understandings of and nuances to these two words. In context of the Sectional Titles Act, it appears that there are subtleties of meaning which distinguish between the words, actions, concepts and effects. ‘Alienate’ encompasses a separation between the body corporate and the right to extend the scheme and therefore a change in the relationship between the right to extend and the body corporate doing the alienation. ‘Transfer’ envisages something further than this change in relationship. ‘Transfer’ encompasses the actual relinquishment or renunciation by the body corporate, the conversion of the holder of the right from the body corporate to Torgos, the delivery or handing over to Torgos of the right and notification to all third parties of such vesting of the right. The first is achieved by way of a private document but the second can only be achieved by way of a document registered in the Sectional Title Register in the Deeds Registry. The first may be subject to conditions while the second may not. The first may come to nothing whereas the second is a completed act.

82.     

Although the Act may not have provided for separate and distinct definitions, the Act does distinguish between the words and concepts. Most noticeably, this is done in sections 17 and 15. Section 17 of the Act is concerned with circumstances where owners and holders of a right of extension direct the body corporate to alienate or let such right. (see also subsections 17(1) and (4) and (4B)). Section 15B deals with the responsibilities of the Registrar of Deeds and the requirements for transfer of ownership, registration of a notarial deed of lease, cession of lease and other real rights in a notarial deed. It would therefore appear that the Sectional Titles Act, without full explanation, anticipates and envisages different actions comprising and different purposes to the words ‘alienate’ and ‘transfer. .Different words are used in different contexts to deal with different powers and duties.

83.     

Other legislation may be of assistance in appreciating the divergence between the actions, concepts and words. Section 1 of the Alienation of Land Act 68 of 1981 defines ‘alienate’ as “sell, exchange, donate irrespective of whether such sale, exchange or donation is subject to a suspensive or resolutive condition”. There is no definition given of ‘transfer’. However, the formalities prescribed for the recordal of and registration of transfer in both the Sectional Titles Act and the Deeds Registries Act 47 of 1937 clearly indicate that ‘sale’, ‘exchange’ and ‘donate’ are not the same as ‘transfer’. For instance, a sale may be enacted by any party capable of and/or authorised so to do whereas a transfer in pursuance thereof may only be executed by a conveyancer duly qualified and registered as such. A cession may be entered into between two contracting parties but may only be executed by such a conveyancer by way of a notarial deed of cession executed by a qualified and registered notary public. Both transfers are only complete when actually registered by the Registrar of Deeds. Accordingly, alienation, in the sense of a sale, may have happened at the moment of conclusion of the agreement but transfer can only occur on the date of registration of the right of cession in the Deeds Office. This distinction was also neatly illustrated in Menzies supra, which dealt with the Deeds Registries Act, and which equated loss/acquisition by prescription with the act of alienation and distinguished this from registration which is the act of transfer.

84.     

Counsel’s suggestion that there would only be an alienation of the right of the body corporate to extend the scheme once the cession is actually registered in the Deeds Office would be an attempt to open an unopenable can of worms. The implications of such interpretation, if correct, would be that consents are required at time of transfer and again after transfer when alienation is complete. Further, if consents are not provided after this post transfer alienation, then one would have to enquire whether or not the Registrar of Deeds is required or empowered to undo or deregister the registration of transfer which has just been effected? The scenario painted is so absurd as to be beyond the contemplation of the Legislature and, in any event, is not in conformity with the literal meaning ascribed to the words, the legislative context or the purpose of the requirement.

85.     

I conclude that to ‘alienate’ includes the dispossession of the right to extend through a sale and cession while ‘transfer’ refers to the formal act required by Statute and which publicly enacts and completes such dispossession. One can do neither without the ‘written consent’ of owners and mortgagees.

86.     

It may be asked whether the Legislature really does intend that each transaction requires such written consents to be extant prior to or contemporaneously with each transaction? Such question is asked only in the context of whether or not the alienation requires the consents since if that answer is in the affirmative then the same consent can be reused for the transfer. After all, a transfer is the consequences of the alienation. If the consents had to be obtained twice – at time of the sale and cession and at time of execution and registration in the Deeds Office, it might be cumbersome and tortuous in the extreme and involve a duplication of costs and endeavour. Can the Legislature have intended that? The real question in this case is whether or not it is practicable tomembers and all mortgagees before the agreement of sale and cession can be concluded? To what would the members and mortgages be consenting if no agreement had yet been concluded? After all, circumstances or the intentions of the parties may change prior to the consents being obtained which would render the consents valueless and those consenting doubtful as to the finality of that to which they are being asked to consent.

87.     

I do not think it is the function of this court to question the practicalities of what the Legislature has provided for in the Statute. That is for the Legislature to decide. Certainly, there is other legislation which requires written consents to be obtained prior to advertisement as well as conclusion of an agreement of sale. See for instance the Sub-division of Agricultural Land Act 70 of 1970 The relevant of Section 3(e)(i) of the Act provides that “No portion of agricultural land… shall be sold or advertised for sale…unless the Minister has consented in writing See a long line of case including Smith v Tucker’s Land and Development Corp 1984(2) 157 TPD; Geue and Another v van der Lith and Another 2004(3) 333 SCA . One can also envisage standard practices to resolve such imagined difficulties or inconveniences. Documents attached to consents; memoranda of understanding and so on are not unknown.

The next question is whether , in order to be effective to comply with subsection 25(6), the consents referred to in the proviso must be given prior to the alienation concerned.

89.     

Applicant’s counsel submits that, whatever the interpretation of ‘alienate’ or ‘transfer’, the written consent is not required prior to entering into an agreement to alienate or transfer the said right. By reference to other legislation, it was argued that, if the Legislature had so intended, then the words ‘prior’ or ‘previously obtained’ would have been inserted in the proviso.

90.     

I understand this argument to mean that the agreement may be entered into/concluded and then the written consents obtained so as to be available for presentation at the time of registration of transfer. The difficulty I have with this suggestion is that the Legislature has not stipulated in section 25(6) that the body corporate shall only ‘transfer’ with the written consents. The subsection includes the word ‘alienate’ as well. The Legislature did not use the word ‘prior’ but used the word ‘with’. Provision of the consents is thus to accompany and exist contemporaneously with the ‘alienation’ as well as the ‘transfer’. In effect, the agreement which alienates and the consents become composite documents. The body corporate cannot ‘alienate’ without the written consents.

91.     

Section 18 of the Sectional Titles Act provides that the provisions of sections 56 and 57 of the Deeds Registries Act shall apply mutatis mutandis with reference to, inter alia, the cession of any mortgaged lease of a unit or undivided share in a unit. The Deeds Registries Act provides that, if land is mortgaged, it cannot be transferred without, in terms of section 56, the mortgagee consenting to the cancellation of the bond or the release of the property concerned from the bond or, in terms of section 57, the new owner and the mortgagee agreeing to the former being substituted as debtor under the bond in place of the transferor.

92.     

The import of this specific application of these sections of the Deeds Registries Act to the cession of an undivided share in a unit ( which is an identified section and an undivided share in the common property) is illustrative. Section 18 already requires consents of mortgagees prior to registration of transfer ie registration of cession of the unit. The proviso to section 25(6) would not have been necessary if the Legislature intended written consents of mortgagees only to be acquired prior to transfer but not prior to alienation. The Deeds Registries Act does not apply to acts which ‘alienate’ only to those which ‘transfer’. Accordingly, the insertion of the proviso to section 25(6) of the Sectional Titles Act suggests that the Legislature was not only concerned to require written consents in respect of alienation, in addition to those already required in respect of transfer. More importantly, the consents prior to transfer (and subsequent to alienation) were deemed insufficient by the Legislature. After all, the consent prior to transfer would have been sufficient, on the argument of applicant’s counsel, since it would be extant post alienation. Clearly the Legislature was of a different mind. The Legislature already had provision for written consents prior to transfer and it wanted consents prior to alienation. It is noted that, of course, the provisions of sections 56 and 57 do not involve “all members” of the body corporate.

93.     

Subsection 25 (6) permits the body corporate to alienate it’s right only with the necessary consents. ( my underlining). Absent such consents, the body corporate is not permitted so to do. It is not the rule that in all cases where the consent of some person is a prerequisite (whether at common law or by virtue of a statutory provision) to the validity of a transaction, it must be a prior consent. A statute may indeed so provide. Generally speaking however, consent may be given ex post facto by subsequent ratification. This would then confirm the transaction concerned with retroactive effect. However, in Neugarten and Others v Standard Bank of South Africa Ltd 1989(1) SA 797 AD, the majority of the court held that subsequent ratification would not be the equivalent of prior consent (per Kumleben JA at 807D).

94.     

In Neugarten supra, the court was concerned with section 226( 2) of the Companies Act 61 of 1973 which provides that a prohibition on a loan by a company to certain individuals or entities shall not apply “...in respect of the provision of security by a company.... with the consent of all the members of the company....”. The majority of the court found that

“When consent is required in terms of ss 226(1) , lack of consent before or at the time the loan is made or the security provided is fatal to the validity of the transaction”.

95.     

In that case there was no express declaration of nullity. The court referred to the principles and indicia usually invoked to decide this question. Kumleben JA posed the question whether on a proper interpretation of s 226 consent ex post facto is authorised. He postulated that an argument along these lines would appear to be based on one of two grounds: “that is it only the enforceability of the agreement which is prohibited or suspended until such time as all have consented; or, which amounts in essence to the same thing, that failure to obtain the necessary consent at the same time the guarantee is given does not render ab initio void – it has what one may term ‘latent validity’ which makes subsequent consent possible”. (at 809E)

96.     

The first issue to be addressed is whether the language of the proviso and the section as a whole points to anything other than that the agreement to alienate between Torgos and the body corporate is, absent consent, null and void.

97.     

Generally the consequence of such conflict is nullity of the contract, but that is not an inflexible rule Tuckers Land & Development Corp (Pty) Ltd v Wasserman 1984 (2) SA 157 T . In Gueue supra , was stated

“It is a settled principle of our law that a contract which contravenes a statutory provision is not ipso iure void, unless, of course, the statute contains an express statement to that effect. In every case the question whether the contract is void or not depends on whether such intention is to be imputed to the Legislature. As was explained by Solomon JA in Standard Bank v Estate van Rhyn 1925 AD 226 at 274 “The contention on behalf of the respondent is that when the legislature penalizes an Act it impliedly inhibits it, and that the effect of the prohibition is to render the Act null and void, even if no declaration of nullity is attached to the law. That, as a general proposition, maybe accepted, but it is not a hard and fast rule generally universally applicable. After all, what we have to get at, is the intention of the Legislature, and, if we are satisfied in any case that the Legislature did not intend to render the Act invalid, we should not be justified in holding that it was”. (at 3444J)

98.     

In Pottie v Kotze 1954(3) SA 719 AD , Fagan JA considered the object of the Ordinance and the mischief which the Legislature wished to prevent. The court took cognizance of other safeguards to achieve the legislative purpose as well as the penalties for which provision was made. The learned judge stated,

“The usual reasons for holding a prohibited act to be invalid is not the inference of an intention on the part of the Legislature to impose a deterrent penalty for which it has not expressly provided, but the fact that recognition of the act by the court will bring about, or give legal sanction to, the very situation which the legislature wishes to prevent.” .

99.     

In ascertaining the intention of the Legislature, not only the wording of the Statute and it’s objects are examined, but other indiciae. Those which may point to an intention that invalidity should result include the use of the words ‘shall’, the fact that the provision is expressed in negative terms, the provision of a penal sanction for contravention, whether or not visiting the contract with nullity will cause more inconvenience or lead to more undesirable results than if the wrongdoer is merely punished criminally See Swart v Smuts 1971 (1) SA 819 A at 829 C- 830C and the authorities cited therein .

100.    

In the present case the indiciae attest to the fact that an agreement made contrary to the provisions of subsection 25(6) is a nullity. It is difficult to envisage how the proviso could be reconciled with a construction which permits of consent of some or all of the members to be given at some stage after the agreement to alienate has been concluded.

101.    

Similar questions to those posed in Neugarten supra come to mind. If member A fails to give consent at the time of the agreement and then sells his unit to B, who become a member of the body corporate of Anchors Aweigh in his stead, then is the consent of A or B required in order to validate the agreement with Torgos? . If the former, he would be consenting to a transaction in which he no longer has any interest. If the latter, he would be furnishing consent which at the time of the signature of the agreement or the mandate to the signing Trustees would not, and could not, be sought from him. If at the time A had not consented, but B had, and B thereafter disposed of his unit to C, who became a member before A’s consent was obtained, would the consent of C be required to give the agreement with Torgos validity? Equally apposite in the present instance is this comment by Kumleben JA:

“ If shares are sold and membership changes after the guarantee but before all the members have consented, and if such subsequent consent validates the guarantee, the shareholding of those subsequent shareholders (whether they acquired the shares of a consenting or a non-consenting member) would be indirectly burdened with an obligation which did not exist at the time they became members and to which they at no stage consented. This would not conform to the intention of the Legislature , which envisaged the consent of all members who would or could be adversely affected by the giving of the security.” (at 810H-I)…

102.    

Furthermore the wording of the proviso supports the conclusion that it was not intended that the written consents could be given later. I have already referred to the implications of the application of section 18 of the Sectional Titles Act. The actual wording of the proviso supports the conclusion that it was not intended that consents could be given later. The body corporate “shall only alienate with written consents”. The wording is peremptory .

103.    

I am in agreement with the approach of the court in Neugarten supra that if a contract is ‘totally void’ by virtue of a statutory prohibition then “subsequent consent is, similarly ‘immaterial’. That there may be financial loss and inconvenience to Torgos is subsequent consent is not authorised by the proviso, is not a consideration in construing the proviso which was inserted solely for the protection and benefit of members of the body corporate and the mortgage holders as I have already discussed.

104.    

The written consents of the members and mortgagees are not a ‘mere formality’ See Wassermann supra.

105.    

Accordingly, I am of the view that the written consents required by the proviso to subsection 25(6) must be furnished prior conclusion of the agreement which is the act of alienation.

Consents provided at AGM

106.    

I should mention that the applicant, it’s founding affidavit, proffered the averments that “Reference in the agreement to obtaining consents was not reference to any suspensive nature of the agreement but was rather a reference to the need to obtain a formal written consent for lodgment in the Deeds Office and for submission to the creditors of the liquidator. It is not to be construed that the consents required by the body corporate were in fact suspensive conditions. The agreement was specifically drafted so as not to indicate that the body corporate needed to go and obtain the consents but rather that the body corporate undertook to obtain the necessary consents (paragraph 41). The applicant continues that “The reason why there was an undertaking and not a suspensive condition was because all the parties had agreed that the necessary consents had been given at inter alia the Annual General Meeting of 2002 and all that required to be done was that the formalities relating to the consents themselves were to be complied with. As was understood at the time by all of the parties, in order for the transaction to be finalized (once the agreement and all other matters had been dispensed with) it was necessary that certain documentation be lodged in the Deeds Office in order to extend the rights to develop the property, cede those rights and matters relating thereto.” (paragraph 42) The applicant concludes that “Reference in the agreement to all of the consents was reference to obtaining the formal document that was required rather than obtaining the acquiescence of the persons to the transaction.”.

107.    

There is no merit in these averments. Firstly, all members did not provide ‘written consents’ at the AGM. Indeed it was not possible for them so to do. The negotiations had not yet commenced and any ‘in principle’ agreement was not yet an agreement to ‘alienate’ with identified known terms and conditions. Whatever consent was given at the AGM was certainly not given in writing. Nor did the mortgagees provide ‘written consents’. It is not known how many mortgagees exist, who they are, which units secure the indebtedness owing to them, whether they consent to the loss of common property which forms part of their security. Certainly no such consents have ever been shown to the court. Secondly, the Statute does not provide for informal oral consents in lieu of the ‘written consents’ required in terms of subsection 25(6). There is no provision for a preliminary consent which will validate the alienation which will then be followed by compliance with the Statute.

108.    

I am in agreement with the applicant that there is no indication of any suspenisve condition set out in the agreement . Such condition would probably not have assisted the applicant in claiming an agreement to alienate validated by the subsequent provision of the written consents. In Gueue supra the owner of a farm had sold an undivided portion of his land without the consent of the Minister of Agriculture as required by the Sub-division of Agricultural Land Act, but subject to the suspensive condition of such consent being obtained . The relevant portion of Section 3(e)(i) provides that “No portion of agricultural land… shall be sold or advertised for sale…unless the Minister has consented in writing”. . The Supreme Court of Appeal held that the meaning of this section read with the definition of “sale” (which stated that this included a sale subject to a suspensive condition) were on first impression clear and it seemed that the agreement fell within the ambit of the prohibition. The court held that an agreement can never become enforceable without the Minister’s consent (at 343F). In dealing with the prohibition on advertisements for sale which precede the actual sale or alienation, the Court of Appeal found that it was not absurd to infer that the Legislature intended to prohibit sale of an undivided portion of farmland, whether conditional or not, unless and until the subdivision had actually been approved by the Minister. The court went on to find it quite plausible to infer that the Legislature did not want undivided portions of agricultural land to be sold and occupied by the purchaser for an indefinite period of time pending the consent of the Minister, which may then not even be sought. Another inference which came to mind was that the Legislature wanted to protect unwary or unsuspecting purchasers from binding themselves into onerous agreements, subject to an event of uncertainty which may remain unresolved for an extended period of time. It may therefore have been that insertion of a suspensive condition in the agreement that the sale was subject to the written consents of all members and mortgagees may not have been compliant with subsection 25(6). However, that is not decided by this court.

COSTS

109.    

There were two hearings of this application. On Friday 16^th September a substantial portion of time was expended on the point in limine concerning the locus standi of the 1^st respondent. That occupied approximately one quarter of the time expended on this matter on that day. Thereafter, the 1^st respondent was permitted to file an affidavit and resolutions to establish locus standi. To these the applicant filed an answering affidavit and the respondent replied. The question of locus standi was then argued on Wednesday 5^th October. These costs were occasioned solely by the ineptitude of the 1^st respondent and on this aspect the 1^st respondent was not successful. Since the 1^st respondent was not before the court, the 1^st respondent cannot be ordered to bear the costs of this portion of this application. Since the deponent to the Answering Affidavit is not a party to the litigation and his locus standi was at all times in dispute, I can make no order of costs against him.

110.    

Since the 1^st respondent has been found to have no locus standi the 1^st respondent cannot succeed with regard to any costs in the unsuccessful application.

ORDER
111.    

The application is dismissed .
112.     There is no order as to costs.

Johannesburg 29^th November 2005
Hearings 16^th September, 5^th October, 26^th November.


K. Satchwell

Applicant:

Adv G Kairinos instructed by Attorneys George Michaelides