Harbour Terrace Body Corporate v Minister of Public Works (2556/2016) [2016] ZAWCHC 87; [2016] 3 All SA 766 (WCC) (8 July 2016)

The high court declined to grant an order in terms of s 48 of the Sectional Titles Act  (STA) to the effect that a section, including exclusive use areas, are deemed to have been destroyed.  This meant the scheme could not be reconstituted by excluding that section and use areas from it.

Excerpts without footnotes

[29]     Notwithstanding the wording of the heading, from a reading of the body of the sub-section it is apparent that damage alone will not suffice, and what is required for the section to be applicable is destruction. In this regard it covers both actual as well as notional ‘deemed’ destruction, which may be effected either by the members of a scheme acting unanimously, or by a court on application to it.

. . . . .

[31]     Be that as it may, it is evident that apart from the situation where a building or buildings in a scheme is/are physically destroyed, the section also envisages that notional or hypothetical destruction may occur when either the owners by unanimous resolution so determine[1] (subject to certain conditions in this regard)[2] or when a court is satisfied that, having regard to all the circumstances, it is just and equitable that the building or buildings in a scheme shall be deemed to have been destroyed, and it makes an order to that effect.

. . . . .

[36]     It is to be noted that the primary sub-section of s 48 (ie sub-section (1)) which contains the “destructive” deeming provision,[1] makes reference to a “building” or “buildings”, and not to a “Section” within a building or scheme.  This is an important distinction and indicator, of what the legislature intended.  In like vein, subsection (3)(a)(i) speaks of the “rebuilding and reinstatement” of buildings which have been destroyed, and not of Sections

[37]     A “building” is defined in the Act to mean “a structure of a permanent nature erected or to be erected and which is shown on a sectional plan as part of a scheme”.[2] A “Section” means a portion of the scheme as partitioned or divided on a sectional plan, which constitutes a defined portion of a building or buildings within a scheme.[3]

[38]     On the face of it therefore, the provisions of s 48(1) are not capable of being utilised either by the owners in a sectional title scheme or by a court, to declare a Section therein to be deemed to be destroyed, and it is only a building or buildings within a scheme that is/are capable of so being declared.  That such an interpretation is what was intended, is fortified by the reference in the later sub-section[4] to the “rebuilding and reinstatement” in whole or in part, of the “building” or “buildings”.

. . . . .

[40]     As I read subsection 48(3), it provides consequential mechanisms for the rebuilding and reinstatement of buildings in a scheme where such building work and reinstatement is required, and for the transfer of the interests of owners in certain Sections if necessary; so that the scheme as a whole and the arrangement of sectional ownership therein, may be reconstituted. In my view, the provisions of subsection (3)(a)(ii) were thus also not intended to be used as a selfstanding mechanism to effect the ‘deemed’ destruction of a Section within a building which is part of a scheme, thereby bypassing the provisions of subsection (1).

To interpret these provisions in a manner as to allow owners to declare a Section to be deemed to be destroyed, as opposed to the building(s) in which such Section is contained, would expose individual owners who fall out of favour, to the tyranny of the majority. 

. . . . .

[45]     In contrast to the reference to the destruction of buildings in ss 48 and 49, s 50 refers to the destruction of an unencumbered Section in a scheme. It provides that where the State or a local authority is the owner of a Section in a building, which Section has been “destroyed” to give effect to a project or scheme for the benefit of the public, the State or local authority may apply to the Registrar for the cancellation of the sectional title deed pertaining thereto, whereupon the undivided share in the common property that was held under that sectional title deed shall vest in the owners of the remaining Sections proportionate to their respective participation quotas.[1]

Once again, the way I read this section in the context of the Act as a whole, and ss 48 and 49 in particular, is that it was not intended to constitute a means for owners to resolve, or for a Court to declare, a Section to be deemed to have been destroyed.  As in the case of the sub-sections in s 48 that were previously referred to,[2] in my view these provisions only find application consequent upon an earlier actual destruction or a resolution or declaration of notional deemed destruction of the building(s) in the scheme, in terms of s 48(1).[3]

[46]     In the circumstances, given the provisions of s 48 read as a whole, and in context, they cannot in my view be construed as affording a body corporate a right to resolve (whether by unanimous resolution or otherwise) or a Court a power, to declare a Section within a building to be deemed to be destroyed.

. . . . .

[49]     In CA Fours CC[1] Cachalia JA pointed out[2] that the use of the word “deemed” is often

“not a very happy one, because that term may be employed to denote merely that the person or things to which it relates are to be considered to be what really they are not”.

[50]     In Mouton v Boland Bank Ltd,[3] the Supreme Court of Appeal cautioned[4] that

“the intention of a deeming provision in laying down a hypothesis, is that the hypothesis shall be carried as far as (is) necessary to achieve the legislative purpose but no further”, and there is “no need to extend the bounds of an imaginary state of affairs” further than is necessary in order to give effect to a statute’s legislative purpose.[5]

. . . . .

Deregistration, expropriation and re-registration

[54]     In my view, the deeming provisions of s 48(1) should similarly not be interpreted in such a manner as to ignore the passage of time and the legal consequences which ensued on the deregistration of SD.

[55]     In this regard it is trite that as a matter of law, as soon as a corporation or company is deregistered and thereby ceases to exist, any moveable or immovable property which it owns becomes bona vacantia and vests in the State.[1] The transfer and vesting of such ownership occurs automatically and without any need for delivery, or any order of court.[2]

[56]     In the circumstances, and even though Section 57 and the rights of exclusive use over certain areas (to wit storerooms 1 – 3 and open basement and shade net parking areas OB2 and SP12) of the Harbour Terrace sectional title scheme are still registered in the name of SD as far as third respondent’s records are concerned, as a matter of law they became the property of the State with effect from 4 January 2008 ie the date of the deregistration of SD.

[57]    At the time when 44 owners of units within the scheme thus purported to vote (at the special general meeting which was held on 14 October 2015) in favour of a resolution deeming Section 57 and the exclusive use areas to have been destroyed in terms of s 48(1)(b) of the Act, they sought to ignore the passage of time and the transfer of ownership to the State.  What such owners purported to do in terms of the resolution which they passed, and for which they now seek the Court’s imprimatur, was to deprive the State of its rights of ownership in the aforesaid Section and the exclusive use rights it held within the scheme.  In effect, this amounts to nothing more than an attempted

[58]     The provisions of s 48(1), properly interpreted, are not, in my view, capable of being utilised to expropriate an owner from his/her rights of ownership of a Section within a sectional title scheme by utilising the hypothesis of notional destruction, under the guise of the deeming provision concerned.  In my view, to give effect to the resolution which the aforesaid owners took on 14 October 2015 in terms of the Order which is sought herein, would effectively constitute an expropriation contrary to the provisions of s 25 of the Constitution, and would be impermissible and unlawful.

[59]     Even if I am wrong in finding that a declaration of deemed destruction by the Court in terms of s 48(1)(c) would offend the provisions of s 25 of the Constitution, the provisions of s 48(1)(b) read together with the definition of “unanimous resolution”, [3] cannot, in my view, be relied upon by the applicant.   I say this for the following reasons.

. . . . .

[61]     Secondly, whereas the definition of a “unanimous resolution”[1] only requires that 80% of the members of a body corporate (reckoned in both value and number) need to vote (by proxy or by a representative) in favour of a resolution at a properly constituted general meeting of a body corporate in order for it to be considered as being “unanimous”, and whereas any member present at such a meeting (through a proxy or a representative) who abstains from voting on the resolution in question shall be regarded as having voted in favour thereof, the Act expressly provides that, nonetheless, where the resolution in question adversely affects the “proprietary rights or powers” of any member qua owner, it shall not be regarded as having been passed unless such member expressly consented thereto in writing.[2] No such written consent was ever obtained from the State.

[62]     Although the Act provides[3] that if a body corporate is unable to obtain a “unanimous resolution” as so defined, it may approach a Court for appropriate “relief”[4] in my view this cannot be used to sanction a resolution which has been passed not only without the requisite 80% majority but also without the written consent of the owner whose proprietary rights were adversely affected thereby, to the point of depriving or expropriating him/her of his rights of ownership contrary to the provisions of s 25 of the Constitution.

. . . . .

[68]     The process of disclaiming title to property which falls to the State on de-registration of a corporate entity, in terms of UK law, provides an expedient and effective remedy for persons in regard to reclaiming property which vested in such entity at the time of its deregistration, without the selfsame perils and difficulties associated with the remedy available in South African law pursuant to deregistration ie an application for the restoration of the company or corporation to the register.

. . . . .

[71]     In the result, although the restoration of SD to the register will restore its rights of ownership and exclusive use in regard to Section 57 and the areas referred to, it could also cause severe prejudice to third parties.[1] Perhaps it is because of these dangers that SD’s erstwhile director was not prepared to make application for its restoration to the register.