A body corporate of a sectional title scheme is a statutory body whose functions and powers are exercised by the trustees.  The trustees are in a fiduciary relationship to the body corporate and must act honestly, in good faith, in the best interest of the body corporate and without exceeding their powers.  The trustees purported to reverse a resolution adopted by the AGM.  The purported resolution was unlawful, invalid and was set aside.  The trustees were ordered in their personal capacities to pay the costs of the application and the counter-application, jointly and severally, the one paying the others to be absolved.

North Global Properties (Pty) Ltd v Body Corporate of Sunrise Beach Scheme 20.02.2012 – [2013] JOL 30400 (KZD) per Dhaya Pillay J.

North Global Properties (Pty) Ltd v Body Corporate of Sunrise Beach Scheme  (12465/2011) [2012] ZAKZDHC 47 (17 August 2012) (KZD) per Dhaya Pillay J – granted application and refused leave to appeal to body corporate.

Excerpts without footnotes

[8]  A body corporate of a sectional title scheme is a statutory body.  Trustees who perform the functions and exercise the powers of a body corporate are in a fiduciary relationship to the body corporate.  They must act honestly, in good faith, in the best interest of the body corporate and without exceeding their powers.  Importantly, trustees must avoid material conflicts of interest with the body corporate.  Trustees who breach any duty arising from the fiduciary relationship are liable for any loss they cause the body corporate.  I take this into account in the cost order below.

[9]  Trustees’ decisions must be objectively reasonable; when they are not, they are reviewable under the common law read consistently with, in my respectful opinion, the STA, Promotion of Administrative Justice Act 3 of 2000 (“PAJA”) and section 33 of the Constitution of the Republic of South Africa, 1996 (“the Constitution”).  As a statutory body performing not only commercial and regulatory functions but also administrative functions, it is implied from the STA that trustees must comply with the constitutional principle of just administrative action.  As a juristic person taking administrative action, a body corporate is also an administrator as defined in the PAJA.  What is just is determined in the context of the STA and PAJA.

[10]  A body corporate is also akin to a company.  Trustees are in a similar fiduciary position as directors of a company.

[11]  A body corporate is composed of members who are owners of units in the sectional title scheme.  Members elect trustees who may or may not be owners to represent them in the body corporate.  The trustees, including the chairman, as representatives of the members of the body corporate have to do the bidding of the members.  Trustees have no powers outside of the STA and the mandates given to them by the members.

[12]  Furthermore, the largest and most authoritative decision-making forum is a general meeting of the members.  A decision of the trustees cannot replace the decision of a general meeting of the body corporate without the concurrence or participation of the members.  This is a simple application of the principle of majoritarianism.  Inimical to this principle is the notion that a minority such as the trustees should prevail over the majority.  Therefore trustees cannot of their own accord reverse or replace decisions of a general meeting of members.