Wimbledon Lodge (Pty) Ltd v Gore NO and Others

• Jurisdiction: South Africa
• Judge: Olivier JA, Schutz JA, Zulman JA, Streicher JA and Heher AJA
• Judgment Date: 31 March 2003
• Citation: 2003 (5) SA 315 (SCA)
• Docket Number: 39/2002
• Hearing Date: 07 March 2003
• Counsel: R S van Riet SC for the appellant. G W Woodland for the first and second respondents.
• Court: Supreme Court of Appeal

Schutz JA:

[1] The applicant below (now appellant) complains that a fraud was committed on him, and others, by one Scharrighuisen. The latter's B estate has been sequestrated and two of the corporations which he used for his schemes have been liquidated. The first two respondents (below and here), Messrs Gore, Walters and Glaum, are liquidators of the one or the other of these corporations. C

[2] The appellant, Wimbledon Lodge (Pty) Ltd (Wimbledon), owns a unit in a sectional title development on erf 4600 Gordon's Bay. The third respondent (here and below) is the Harbour's Edge Body Corporate, which controls the scheme. Wimbledon is owned by one Cuninghame, who deposes on its behalf. His accusation is that a large part of the common property was secretly appropriated by D Scharrighuisen for the benefit of the two corporations which he controlled. They are Casisles Coastal Property Investments CC (Casisles) (which was the 'developer' in terms of the Sectional Titles Act 95 of 1986 - 'the Act') and Harbour's Edge Commercial Property Holdings (Pty) Ltd (Harbour's Edge). E

[3] The building was not intended to be occupied by the unit-holders. It was to be used as a hotel. The rentals earned were to be placed in a pool which, after expenses had been met, was to be distributed according to individual participation quotas. According to the plan which was annexed to the deeds of sale, the common property F was to include restaurants, kitchens, a parking basement, a squash court, necessary service areas and much more. That plan showed that there would be 86 sections with a total area of 5 886 square metres. It is not Wimbledon's case that a fraudulent misrepresentation was made when the sales took place, in the sense that Scharrighuisen then already intended to cheat buyers. Wimbledon's case is that the G sectional title plan which Scharrighuisen had registered in the deeds registry subsequently, without informing buyers, provided for 120 sections with a total area of 14 420 square metres. The extra area was achieved, not by enlarging the building, but by the appropriation of a large part of the common property. Of the 34 extra sections, 10 are H registered in the name of Casisles and 12 in the name of Harbour's Edge. How the 12 sections reached Harbour's Edge (these are the valuable ones) we are not told, as, despite a challenge to disclose, there came only the statement that the sections 'were purchased' from Casisles. As the entries in the deeds registry stand those 22 sections are owned by the one or the other of the two corporations, now in I liquidation, and their area has been subtracted from the common property of the other unit-holders. It is these doings that Cuninghame describes variously as a fraud or a theft. The exact legal categorisation hardly matters. These allegations stand essentially unchallenged. J

Schutz JA

[4] Section 41 of the Sectional Titles Act 95 of 1986 provides: A

'Proceedings on behalf of bodies corporate

(1) When an owner is of the opinion that he and the body corporate have suffered damages (sic) or loss or have been deprived of any benefit in respect of a matter mentioned in s 36(6), and the body corporate has not instituted proceedings for the recovery of such damages, loss or benefit, or where the body corporate does not take B steps against an owner who does not comply with the rules, the owner may initiate proceedings on behalf of the body corporate in the manner prescribed in this section.

(2)(a) Any such owner shall serve a written notice on the body corporate calling on the body corporate to institute such proceedings within one month from the date of service of the notice, C and stating that if the body corporate fails to do so, an application to the Court under para (b) will be made.

(b) If the body corporate fails to institute such proceedings within the said period of one month, the owner may make application to the Court for an order appointing a curator ad litem for the body corporate for the purposes of instituting and conducting proceedings on behalf of the body corporate.

(3) The Court may on such application, if it is D satisfied -

(a)

that the body corporate has not instituted such proceedings;

(b)

that there are prima facie grounds for such proceedings; and

(c)

that an investigation into such grounds and into the desirability of the institution of such proceedings is justified,

appoint a provisional curator ad litem and direct him to conduct such investigation and to report to the Court on the return day of the provisional order. E

(4) The Court may on the return day discharge the provisional order referred to in ss (3), or confirm the appointment of the curator ad litem for the body corporate, and issue such directions as it may deem necessary as to the institution of proceedings in the name of the body corporate and the conduct of such proceedings on behalf of the body corporate by the curator ad litem.'

[5] The relief that Wimbledon seeks is the appointment of a curator to the body corporate, so that he may investigate F these events, and, if so advised, take action against Casisles and Harbour's Edge, aimed at somehow restoring the position. The three liquidators resist this claim on a variety of legal, not factual, grounds, mainly directed against Wimbledon's locus standi to apply for the appointment of a curator or against the body corporate's locus to bring the proceedings G contemplated. Van Reenen J, sitting in the Cape Provincial Division of the High Court, held in favour of the respondents. The body corporate, acting through its trustees, did not resist the application. H

[6] It will be observed that one of the jurisdictional facts provided for in s 41(1) is that an owner be of the opinion that he and the body corporate 'have been deprived of any benefit in respect of a matter mentioned in s 36(6)'.

[7] Section 36(6) provides: I

'The body corporate shall have perpetual succession and shall be capable of suing and of being sued in its corporate name in respect of -

(a)

any contract made by it;

(b)

any damage to the common property;

(c)

any matter in connection with the land or building for which the body corporate is liable or for which the owners are jointly liable; J

Schutz JA

(d)

any matter arising out of the exercise of any of its powers or the performance or non-performance of any of its duties under A this Act or any rule; and

(e)

any claim against the developer in respect of the scheme if so determined by special resolution.'

[8] Van Reenen J found against Wimbledon, inter alia, on the ground that no special resolution in terms of s 36(6)(e) to sue Casisles had been passed, which is indeed the case. The 'developer' was, as stated, Casisles, so that against it a special resolution was required. An ordinary resolution to allow B Harbour's Edge to be sued was also rejected. The uncontradicted evidence of Cuninghame makes it plain that if it had not been for the improprieties to be described below the ordinary resolution would have been passed. Whether, but for them, the special resolution would also have been passed is nowhere clearly stated. C

[9] Confining myself then to the ordinary resolution, in order to decide whether it was properly rejected one must have regard to how the voting went, and why it went the way it did. At the general meeting 44 unit-holders voted in favour of a resolution that the body corporate D take action against Scharrighuisen's two corporations. All the trustees, who included Cuninghame, voted in favour of the motion. But their votes were swamped by the votes that Casisles and Harbour's Edge had acquired in the way described, plus the contrary votes of six other unit-holders. Those six were all controlled by one Krecklenburg, a chartered accountant who worked for Scharrighuisen. Had the two E corporations not voted against it, the resolution would have been carried. (In terms of the definition contained in s 1 of the Act a special resolution requires a three-fourths majority both in number and in value. What the requirements for an ordinary resolution may be depends upon s 32(3) and (4) of the Act and upon the content of the F rules. We do not have the rules before us.)

[10] Can this situation be countenanced? I think not. I am content to start with the Roman law. In D50.17.134.1 Ulpian tells us 'Nemo ex suo delicto meliorem suam conditionem facere potest', rendered in Watson's translation as: 'No one is allowed to improve his own condition by his own wrongdoing.' G This fundamental principle has been applied expressly at least twice in this Court, in Principal Immigration Officer v Bhula1931 AD 323 at 330 and Parity Insurance Co Ltd v Marescia and Others1965 (3) SA 430 (A) at 433 and 435. It finds exact application to this case. Scharrighuisen, through his corporations, by means of his fraud, H obtained at least apparent ownership of the contested sections. That carried with it the apparent right to direct the votes of the owners of those sections. This vote was then used to smother an attempt to reverse the consequences of the fraud; ie his successors, the liquidators, in casting their votes were using his estate's strengthened position, obtained by fraud, to maintain the hold over those sections. I

[11] Not confining oneself to the language of delict or wrongfulness, one finds the quoted precept scattered about the law. The principle of fictional fulfilment in contract is an example. If a party is under a duty not to prevent the fulfilment of a condition, he is treated as if it has been J

Schutz JA

fulfilled, if he fails in that duty. Similarly the principle that a provision in a contract that has been A obtained by fraud may be rectified: Weinerlein v Goch Buildings Ltd1925 AD 282 at 288, 292 and...