Body Corporate of Empire Gardens v Sithole and Another

• Jurisdiction: South Africa
• Court: Supreme Court of Appeal
• Judge: Tshiqi JA, Wallis JA, Petse JA, Mbha JA and Nicholls AJA
• Judgment Date: 27 March 2017
• Citation: 2017 (4) SA 161 (SCA)
• Hearing Date: 06 March 2017
• Docket Number: 240/2016 [2017] ZASCA 28
• Counsel: J Vorster (with WJ Botha) for the appellant.K Nhlapo for the amicus curiae.

Tshiqi JA (Wallis JA, Petse JA, Mbha JA and Nicholls AJA concurring):

[1] D The issue in this appeal is whether in an application for compulsory sequestration, a body corporate of a sectional title development is required to prove that the order of sequestration sought will be to the advantage of the whole body of creditors as contemplated in s 10(c) of the Insolvency Act 24 of 1936 (Insolvency Act). [1]

[2] E The appellant, the body corporate of Empire Gardens (the EG Body Corporate), was established in accordance with s 36 of the Sectional Titles Act 95 of 1986 (the Sectional Titles Act). The first respondent, Ms Nobuhle Sithole, is the joint registered owner of unit 12 of the sectional title scheme of the EG Body Corporate and is accordingly, in F terms of s 36(1) of the Sectional Titles Act, one of the members of the EG Body Corporate. The other registered owner of the unit is the first respondent's sister, Ms Cynthia Sithole, but she was not cited as a party in these proceedings. Any reference to Ms Sithole in this judgment will thus be a reference to Ms Nobuhle Sithole.

[3] Section 37(1)(a) of the Sectional Titles Act provides that a body G corporate is obliged to —

'establish for administrative expenses a fund sufficient in the opinion of the body corporate for the repair, upkeep, control, management and administration of the common property (including reasonable provision for future maintenance and repairs), for the payment of rates and H taxes and other local authority charges for the supply of electric current, gas, water, fuel and sanitary and other services to the building or buildings and land, and any premiums of insurance, and for the

Tshiqi JA

discharge of any duty or fulfilment of any other obligation of the body A corporate; . . . '.

In terms of s 37(1)(b) it must require the owners of the units, who, in terms of s 36(1), are also members of the body corporate, to make contributions, where necessary, to the fund established in terms of s 37(1)(a), for the purposes of satisfying any claims against the body B corporate. It must determine from time to time amounts to be raised from each member and must raise the amounts by levying contributions on the owners in proportion to the quotas of their respective sections (s 37(1)(c) and (d)).

[4] The Sithole sisters, as joint owners of the unit, were obliged to pay C their proportionate share of the levies but they defaulted and two default judgments in the amounts of R13 385,70 and R99 298,80 were granted against them respectively. In order to satisfy the judgments, their movable assets were attached and sold at an auction but it only realised an amount of R3237. The sheriff first appropriated the money towards the payment of his fees and costs and declared a shortfall of R147,23 in D respect of his fees and costs. The consequence was that the EG Body Corporate received nothing from the proceeds.

[5] In a further attempt to satisfy the judgments, the EG Body Corporate obtained a warrant of execution against their immovable property and E the unit was attached and sold at an auction, but the sale had to be abandoned because the second respondent (Nedbank), which had a mortgage bond registered in its favour in respect of the unit, did not accept the selling price of R170 000. The EG Body Corporate then launched an application for Ms Sithole's sequestration. It alleged that Ms Sithole appeared to be factually...