Structurally defective units: Cause of action?

Note: Footnotes omitted, emphasis added and certain personal details redacted to comply with law.

INTRODUCTION

[1] The defendant has filed an exception to the plaintiff’s most recently amended particulars of claim premised on the contention that same lack the averments necessary to sustain the cause of action. The present exception is one of a few the defendant has had to file and each has resulted in the plaintiff amending its particulars of claim.

FACTUAL MATRIX

[2] It is important to describe the relationship or connectivity between the two plaintiffs, amongst themselves, and that between each of them with the defendant. This is to enable an understanding of the nature of dispute(s) and the merits or demerits of the exceptions, with particular focus on the most recently amended particulars of claim pursuant to a notice to amend dated 14 May 2021.

[3] The first plaintiff is the body corporate charged with the administration maintenance and management of the sectional title scheme situated at 5341 6th Road, Montana, Pretoria, commonly known as La Mon Villa. The units at the core of these proceedings form part of this sectional title scheme.

[4] The second plaintiff is a company with limited liability registered in terms of the company laws of the Republic of South Africa. The second plaintiff is the owner of 21 units in Block M and another 21 units in Block N within the sectional title scheme. These units were initially owned and rented out by a property rental business enterprise owned by the defendant.

[5] The defendant, also a registered company with limited liability registered as such in terms of the company laws of the Republic of South Africa. The defendant was the developer of the entire sectional title scheme.

[6] Upon completion of the development of the scheme, the defendant established a property rental business for the purpose of renting out the units it owned within the scheme. On or about 11 September 2014 the second plaintiff purchased the property rental business of the defendant, including the units rented out by it, as a going concern. Two sale agreements were concluded between the second plaintiff and the defendant, each agreement contained a ‘voetstoots’ clause in relation to the subject units sold.

[7] It is necessary to state that the second plaintiff is alleged to have been cited in the present proceedings as an interested party, ostensibly by virtue of its ownership of the units it had bought from the defendant. Notably also is the fact that, according to the plaintiff, the second plaintiff is the funder of the first plaintiff in these proceedings.

THE DISPUTE

[8] At paras 10 to 19 of its amended particulars of claim as per notice to amend dated 14 May 2021, the first plaintiff alleges:

‘’ [10] Pursuant to the conclusion of the Agreements, the plaintiffs requested a condition survey report to be conducted by Curasure Building Maintenance Solutions (‘’the Curasure report’’).

[11] The Curasure report’ is dated 12 March 2015 and attached hereto marked as annexure ‘’POC3’’.

[12] The Curasure report evidenced that the units developed and purchased in terms of the Agreements were not developed in a professional and workmanlike manner in a number of respects by the defendant, and as a result thereof, remedial work is required to rectify such defects and to prevent any further damage.

[13] A structural engineer report was also prepared at the instance of the plaintiffs and a copy of which is annexed hereto marked as annexure ‘POC4’’, which confirms the defects in the development of the premises by the defendant and further confirms that the defendant failed to fully comply with the development of the units on the premises in a professional and workmanlike manner.

DELICTUAL CLAIM FOR DAMAGES

[14] The defects evidenced by the Curasure report and structural engineer report reveal that the common property in and to the scheme was not constructed in a professional and workmanlike manner.

[15] As a result of the defendant’s intentional, alternatively negligent construction of the scheme as a whole, and the units individually, repairs ought to be effected to the following aspects of the common property: –

15.1. Flatroof, waterproofing & washing lines – at a cost of R1,923,795.00;
15.2 Roads (including replacement roads markings and paving) – at a cost of R158,460.00;

[16] Copies of the quotations evidencing the expenses as set out above is annexed hereto and marked annexure ‘’POC5.’’

[17] The repairs necessary to the common property were caused by the defendant’s intentional, alternatively negligent act in constructing the scheme in a defective manner as set out above.

17A The defendant’s conduct was wrongful in that the defendant’s positive act (in constructing the scheme in a defective manner) caused physical damage to the common property, and was thus wrongful.
17.B Alternatively to paragraph 17A above: –
17B.1 The defendant owed a legal duty to the public as a whole, and
specifically, to the First Plaintiff (whom would ultimately become responsible for the care and maintenance of the common property) to construct the Scheme in a professional and workmanlike manner, and ensure that the Scheme was free of defects;
17B.2 The defendant breached this legal duty by failing to construct the Scheme in a professional and workmanlike manner, resulting in the Scheme suffering from structural defects;
17B.3 The defendant’s breach of its legal duty rendered the defendant’s intentional, alternatively negligent act (in constructing the scheme in a defective manner) wrongful.

[18] As such, and due to the defendant’s intentional, alternatively negligent conduct, the First Plaintiff has suffered damages in the amount of R2,082,255.00 (two million and eighty-two thousand two hundred and fifty-five rand).

[19] In the circumstances the defendant is indebted to the First Plaintiff in the amount of R2,082,255.00 which amount is due and owing and payable by the defendant to the First Plaintiff’’.

EXCEPTIONS AND ANALYSIS

[9] There are two plaintiffs in this matter. The second plaintiff is alleged to have been cited merely as a party having an interest in the outcome of this case. This is, in my view and from what is discernible from the particulars of claim, plainly misleading.

There is far more than just the alleged interest of the second plaintiff in this case. This is apparent from the second plaintiff’s funding of the first plaintiff in this litigation which is intrinsically connected to the purchase of the impugned units forming part of the claim.

Furthermore, the first plaintiff’s reliance on the sale agreement between the second plaintiff and the defendant in the claim for damages and the joint participation of both plaintiffs in seeking reports on the quality of the buildings and common property are indicative of the actual nature of the participation and interest of the second plaintiff in this case, being to use the first plaintiff to claim purported damages the second plaintiff is precluded by the voetstoots clauses in the sale agreements from claiming from the defendant.

[10] The first plaintiff clearly seeks to fight the second plaintiff’s battle, if there was any. The rebuilding of structurally defective units, amongst other things, falls outside the scope of the duties and obligations of the first plaintiff.

The first plaintiff has no locus standi to institute these proceedings and indirectly seek to claim on behalf of the second plaintiff. The costs of the reports obtained would constitute wasteful expenditure if paid by the first plaintiff who is by law subject to the provisions of the Public Finance Management Act 1 of 1999.

[11] It is noted that the first plaintiff does not rely on a building contract for the claim, yet seeks payment of damages for defective construction of the units and the common property. This is impermissible and the first plaintiff again has no cause of action against the defendant. The fixing of structural defects and defects to common property and responsibilities of the owners of the units. The first plaintiff obligations are limited in this regard to the care and maintenance of the units and the common property.

[12] The first plaintiff’s allegation that the defendant owed a duty of care to the public as a whole and to it, in particular, lacks a foundational basis and merit. Firstly, the agreements between the second plaintiff and the defendant was not founded on a building contract. The units were already in existence and rented out when bought voetstoots by the second plaintiff. The alleged duty of care in the construction of the units consequently lacks legal grounding. The same applies in respect of the common property.

[13] Where a duty of care is alleged and relied upon in a claim, the detailed facts and circumstances giving rise to such duty ought to be fully set out in the pleadings for a determination to be made of the existence and the nature of the alleged duty of care.

This is so as such a determination is a value judgment (see Knop v Johannesburg City Council (669/92) [1994] ZASCA 159; 1995 (2) SA 1 (AD); [1995] 1 All SA 673 (A) (18 November 1994).

The first plaintiff in the present matter has failed to plead the detailed facts and circumstances purportedly to give rise to the defendant’s alleged duty of care. Absent the relevant disclosure of the facts and circumstances in the pleadings, the plaintiffs’ claim for delictual damages premised on the defendant’s failure to exercise the duty of care, the plaintiffs’ claim cannot succeed.

[14] It is inconceivable that the first plaintiff to [sic] could allege or assert ownership of the common property. Common property is belonging equally by the owners of the units. The first plaintiff has no title to a claim for damages premised on damages to the common property.

[15] The defendant’s sale of the units to the second plaintiff voetstoots could in no way or legal grounding imposed a duty of care on the defendant entitling the plaintiffs to damages. On the contrary, the terms of the agreements imposed the responsibility on the second plaintiff to inspect and satisfy itself of the soundness of its purchase/ investment prior to the conclusion of the sale agreements. The conclusion of the sale agreements was indicative of the second plaintiff’s satisfaction and willingness to be legally bound to the terms and conditions of the agreements.

CONCLUSION

[16] It is apparent from the findings in this judgment that the plaintiffs’ particulars of claim have not, from inception and despite all the amendments, set out a cause of action entitling either plaintiffs to the relief sought. More concerning is the plaintiffs’ persistence and continuation of this litigation despite the reasonably foreseeable absence of any foundational legal grounding to do so.

The second plaintiff’s financing of the first plaintiff in this litigation is clearly opportunistic and motivated by the benefit it would derive in the event that the first plaintiff is successful. In the entire process of exchanging pleadings, the first plaintiff has failed to establish its locus standi and to set out a cause of action against the defendant. The defendant’s exceptions must consequently be upheld and the plaintiff’s particulars of claim set aside.

COSTS

[17] The defendant has prayed for a punitive costs order against plaintiffs. I can find no reason why this prayer should not be granted on the facts of this case.

ORDER

[18] Resulting from the findings in this judgment, the following order is made:

1. The exception raised by the defendant to the plaintiffs’ particulars of claim is upheld.
2. The plaintiffs’ particulars of claim are set aside.
3. The plaintiffs are ordered to pay the costs on the opposed scale.

Application for leave to appeal

INTRODUCTION

[1] This is an application for leave to appeal to the Full Bench of this division or alternatively, the Supreme Court of Appeal against the whole of the judgment and order of this court that was handed down on 18 July 2022. In the said judgment the court upheld an exception raised by the respondent/defendant to the applicants’/plaintiff’s particulars of claim; the basis for the exception being that the particulars of claim lacked the necessary averments to sustain a cause of action against the respondent/defendant.

SUMMARY OF THE FACTS

[2] It is important to describe the relationship or connectivity between the two plaintiffs, amongst themselves, and that between each of them with the defendant. This is to enable an understanding of the nature of dispute(s), the merits or demerits of the exceptions and amendments of the particulars of claim, with particular focus on the most recently amended particulars of claim pursuant to a notice to amend dated 14 May 2021.

[3] The first plaintiff is the body corporate charged with the administration and management of the sectional title scheme situated at 5341 6th Road, Montana, Pretoria, commonly known as La Mon Villa. The units at the core of these proceedings form part of this sectional title scheme.

[4] The second plaintiff is a company with limited liability registered in terms of the company laws of the Republic of South Africa. The second plaintiff is the owner of 21 units in Block M and another 21 units in Block N within the sectional title scheme. These units were initially owned and rented out by a property rental business enterprise belonging to the defendant.

[5] The defendant is also a registered company with limited liability registered as such in terms of the company laws of the Republic of South Africa. The defendant was the developer of the entire sectional title scheme.

[6] Upon completion of the development of the scheme, the defendant established a property rental business for the purpose of renting out the units it owned within the scheme. On or about 11 September 2014 the second plaintiff purchased the property rental business of the defendant, including the units rented out by it, as a going concern. Each sale agreement (‘’the Agreements’’) between the second plaintiff and the defendant contained a ‘voetstoots’ clause in relation to the subject units sold.

[7] It is necessary to state that the second plaintiff is alleged to have been cited in the present proceedings as an interested party, ostensibly by virtue of its ownership of the units it had bought from the defendant. Notably also is the fact, according to the plaintiff, that the second plaintiff is the funder of the first plaintiff in these proceedings

THE RELIEF SOUGHT AND BASIS THEREOF

[8] The appellants sought payment of delictual damages against the respondent arising from its alleged failure of the duty of care owed to the applicants and the community at large by its alleged intentional construction of defective units and the development common area within the sectional title scheme which is administered, managed and maintained by the first applicant. The respondent was alleged to have failed to render a proper and workmanlike performance in the construction and development of certain units in the sectional title scheme.

[9] The first applicant attached two sale agreements that were concluded by the second applicant and the respondent in the purchase of the units concerned. Further attached to the papers are two reports jointly obtained by the applicants and which point out structural defects in the units and in the development of communal area, an amount in the order of R2,082,255-00 is claimed by the applicants as the expense the first applicant is to incur to cure the defects and effect the repairs necessary to bring normality to the conditions. The first applicant alleged that it is its responsibility to administer, maintain and effect repairs in the scheme – hence the claim.

DEFENDANT’S EXCEPTIONS

[10] Throughout the exchange of pleadings between the parties the respondent had filed no less than three exceptions to the applicants’ particulars of claim, and each had occasioned an amendment of the applicants’ averments in the particulars of claim, being the notices of exceptions dated 22 May 2018, 31 October 2018 and 01 March 2021.

COURT FINDINGS AND THE JUDGMENT

[11] The prominent issues raised in the respondent’s/defendant’s exceptions and which the court found had not been demonstrated by the plaintiffs/applicants were, firstly, that neither the plaintiffs nor the first plaintiff had locus standi to institute the claim for damages against the respondent/defendant and, secondly, that the plaintiffs or first plaintiff has not disclosed a cause of action against the defendant/respondent.

[12] For the plaintiffs to successfully rely on the defendant’s alleged defective performance, the applicants had to produce the written building construction agreement and refer therein to the relevant specifications of the building work undertaken by the defendant and to demonstrate any deviation or unauthorised deviation therefrom by the defendant and it was detrimental and resulted in the defective structure (positive defective performance).

This would have been followed by an allegation and demonstration that the defendant had failed to exercise the duty of care and, by so doing, had caused damages to the plaintiff in the amount claimed.

[13] There was factually no building contract between the applicants or first applicant and the respondent relating to the construction of the units concerned. Nor was there a contract for the building and development of the common property between the plaintiffs and the defendant.

In fact, the defendant had built the units as an enterprise of his own to renting them out through a company he had established. The second applicant had been conducting the rental business through his company which was bought from him as a going concern by the second plaintiff.

Each of the relevant sale agreements of the sale of the business, including the units in particular, contained a voetstoots clause which deprived the second plaintiff of any right to claim damages on the basis of any construction defect in the units.

Thus neither of the plaintiffs, least of all the first plaintiff had the locus standi nor the legal ground to institute the action against the defendant. The plaintiff’s claim stood to be dismissed or the defendant’s exceptions had to be upheld.

[14] There are no provisions in the Sectional Titles Schemes Management Act 8 of 2011 entitling the applicants to claim delictual damages against the respondent nor does the common law lend any such right to the applicants particularly on the facts of this case.

[15] The applicant’s criticism of the court’s findings per se does not entitle them to the grant of leave to appeal. In fact, it is in exceptional circumstances that a court hearing an appeal would interfere with the findings of the court of first instance (see R v Dhlumayo and Another 1948 (2) SA 677 (A).

The applicable principle was reiterated by the court in the following terms:

“In truth the matter was approached as if an appeal lies against the reasons for judgment. It does not. Rather, an appeal lies against the substantive order made by the court. Western Johannesburg Rent Board and Another v Ursula Mansions (Pty) Ltd 1948 (3) SA 353 (A) at 355.”

PRINCIPLES REGULATING THE GRANTING OF LEAVE TO APPEAL

[16] The criteria for granting leave to appeal are contained in the provisions of sections 17(1) and 16(2)(a)(i) of the Superior Courts Act 10 of 2013, (‘the Act’).

In terms of section 17(1) the court may only grant leave to appeal where it is convinced that:

(a) the appeal would have a reasonable prospect of success; or

(b) there is some other compelling reason why the appeal should be heard, including the existence of conflicting decision on the matter under consideration; or

(c) the decision on appeal will still have practical effect (section 16(2)(a)(i), and

(d) where the decision appealed against does not dispose of all the issues in the case, and the appeal would lead to a just and prompt resolution of all the issues between the parties.

[17] In Zuma v Democratic Alliance [2021] ZASCA 39 (13 April 2021) the court [per Ponnan JA] held that the success of an application for leave to appeal depends on the prospect [sic] of the eventual success of the appeal itself.

In The Mont Chevaux Trust v Tina Goosen and Others 2014 JDR 2325 LCC the court [per E Bertelsmann J] held that section 17(1)(a)(i) requires that there be a measure of certainty that another court will differ from the court whose judgment is sought to be appealed against before leave to appeal is granted.

“An applicant for leave to appeal must convince the court on proper grounds that there is a reasonable prospect or realistic chance of success on appeal. A mere possibility of success, an arguable case or one that is not hopeless, is not enough. There must be sound, rational basis to conclude that there is a reasonable prospect of success on appeal.’’ (See: MEC For Health, Eastern Cape v Mkhitha and Another [2016] ZASCA 176 (25 November 2016) [per Schippers AJA].

[Note: Goosen and Others v Mont Chevaux Trust (148/2015) [2017] ZASCA 89 (6 June 2017) per CHG van der Merwe JA].

CONCLUSION

[18] The merits in the plaintiff’s case and grounds of appeal fall outside the circumstances defined in section 17 of the Superior Courts Act and there is nothing exceptional in the case requiring a consideration and a pronouncement by the Supreme Court of Appeal.

The application for leave to appeal consequently stand [sic] to be dismissed.

COSTS

[19] The respondent has succeeded in its opposition of the application for leave to appeal and is therefore entitled to an order for costs.

ORDER

[20] Following the conclusion in this judgment, the court makes an order that:

1, The application for leave to appeal is dismissed.

2. The applicants are to pay the costs of the application.

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