UNCLE OSWALD’S Q&A FORUM – JUNE 2024

THE MATTER OF SWAMBO’S HALF-SHARE

 

Dear Uncle Oswald,

As you know, attractive ladies and matters of law are drawn to me like moths to a candle.  I will not bother you with my lady-issues, but you and your esteemed readers might be interested in my latest brush with the law because, although extinctive prescription of a debt is not directly relevant to alternative dispute resolution, it very often forms part of adjudication and arbitration proceedings.

The issue is this. 

SWAMBO (She Who Always Must Be Obeyed) and I were married in community of property.  The only valuable asset in our joint estate was a residential unit (the Unit) in a sectional title scheme (the Scheme).  When we were divorced in 2011, we concluded a settlement agreement in which I indemnified her against all claims against the joint estate, and I purchased her half-share in the Unit.  SWAMBO then moved out of the Unit.  Years later, by 2023, I eventually managed to pay SWAMBO in full for her half-share in the Unit.  My conveyancing attorneys then commenced to transfer the Unit into my name.  Of course, I needed a levy clearance certificate (the Certificate) from the body corporate (the BC) of the Scheme for the Unit to be transferred into my name.

When I applied for the Certificate in January 2024, the BC refused to issue it on the basis that I failed to pay any levies for the unit from 2011 to 2016 (the Levy Debt). 

I told the BC to buzz off, or words to that effect.  On my limited understanding of the law, the Levy Debt had already prescribed at the latest during 2019, three years after the last unpaid monthly levy became due.  The BC never issued summons against me to collect the Debt.

Ever-so-clever Trevor, the chairperson of the board of trustees (the Board) of the BC, responded by relying on section 13(1)(e) of the Prescription Act 68 of 1969 (the Prescription Act).  On the basis of section 13(1)(e) of the Prescription Act, the Board’s reasoning is that completion of prescription in this case is delayed.  It contends that this is so because the Scheme, as the creditor, is a juristic person and I, as the debtor and owner of the Unit, am a member of the governing body of the Scheme.  Therefore, the Board concludes that in terms of section 13(1)(e)(i) of the Prescription Act, the three-year prescription period applicable to the Debt could not (indeed was not) completed before a year had elapsed from the day on which the impediment (the alleged fact that I, as owner of the Unit, am a member of the governing body of the Scheme) had ceased to exist. 

I must add that I have only ever been a Unit Owner, not a Trustee of the Board of the Scheme.

Uncle Oswald, what do you think?  Is there merit in the Board’s interpretation of section 13(1)(e) of the Prescription Act?

Yours in trouble, 

Fearless Frikkie

__________________________________________________________________________________

Dear Frikkie,

I am, as always, delighted to hear from you.  I would love to hear all about your lady-issues when we sip a Klippies and Coke around a cozy campfire during our next hunting weekend in July.

Prescription is indeed something that often arises in arbitration and adjudication proceedings.  Your issue with the BC reminded me of a very recent judgment by Cloete J in the matter of LA and Another v Body Corporate of London Place and Others (11463/2023) [2024] ZAWCHC (27 March 2024).[1]  The facts and legal issues in the London Place judgment are a bit more complex than yours, but as far as the essence of your prescription issue is concerned, there is a remarkable similarity.

Before we proceed, it is necessary to have a look at section 13(1) of the Prescription Act.  It provides in relevant part as follows:

‘13. Completion of prescription delayed in certain circumstances. –

(1)
If –


(e)
the creditor is a juristic person and the debtor is a member of the governing body of such juristic person; or


(i)
the relevant period of prescription would, but for the provisions of this subsection, be completed before or on, or within one year after, the day on which the relevant impediment referred to in paragraph … (e), … has ceased to exist,

the period of prescription shall not be completed before a year has elapsed after the day referred to in paragraph (i).

(Own emphasis) 

In the London Place judgment, the essential question for determination was whether a levy debt owed by the owners of a unit in a sectional title scheme prescribed after three years from the date on which it became due in terms of section 10 read with section 11(d) of the Prescription Act, or whether prescription was delayed as provided in section 13(1)(e) of the Prescription Act.  The unit owners sought a declaration by the court that the levy debt had prescribed.  The body corporate on the other hand contended that prescription of the levy debt had been delayed as provided in section 13(1)(e) of the Prescription Act.

The essential issue for determination in the London Place judgment was whether a unit owner in a sectional title scheme is, merely by virtue of such ownership, also a member of the governing body of the scheme for purposes of section 13(1)(e) of the Prescription Act. 

Like you, the unit owners in the London Place judgment were merely unit owners, not trustees of the Board. 

The body corporate’s argument in London Place was in essence the following.  In terms of section 2(1) of the Sectional Titles Schemes Management Act 8 of 2011 (the STSMA), ownership of a unit in a sectional title scheme renders such an owner a member of the body corporate.  Section 2(5) of the STSMA provides that the body corporate is responsible for the governing of the sectional title scheme.  Because a body corporate is a juristic person, an owner of a unit in a sectional title scheme is therefore a member of its governing body for purposes of section 13(1)(e) of the Prescription Act.  Therefore, prescription of the levy debt remains delayed as long as the debtor remains a unit owner, plus one year. 

Cloete J analysed the judgment in Harbour Terrace Body Corporate v Minister of Public Works and Others [2016] 3 All SA 766 (WCC) at paragraph [24], the opinions expressed by Prof C G van der Merwe in Sectional Titles, Share Blocks and Time Sharing at pages 14-129 and 130, as well as sections 3(1), 7(1) and 8(1) of the STSMA.  The learned judge regarded section 7(1) as an important interpretational guideline in this context.  Section 7(1) provides that: 

(t)he functions and powers of the body corporate must … be performed and exercised by the trustees of the body corporate holding office in terms of the rules.’ 

Cloete J then posed the essential question: What then is the governing body of a scheme for purposes of section 13(1)(e) of the Prescription Act?

Paragraph [15] of the London Place judgment provides the answer to this question: 

When regard is had to the legislative scheme of the STSMA described above, it *[the governing body of a body corporate] must be the trustees.

(Own *insertion). 

This was followed in paragraph [16] of the London Place judgment by the conclusions that: 

‘… the unavoidable fact remains that it is the trustees of the body corporate upon whom the STSMA confers the exercise of the powers and the functions of the body corporate.’,

and, further, that:

… a member of a body corporate is not (automatically) a member of its governing body, …

The learned judge’s reasoning in London Place is further reflected in the following articulation:[2]

Applying the established principles of interpretation, if it was the body corporate comprising of every member who had to exercise those powers and functions, then s 7 of the STSMA would be rendered nugatory.  It also makes sense that in a sectional title scheme, potentially consisting of hundreds of unit owners, the only feasible way for the body corporate to function effectively is through its elected body, i.e. the trustees.’

(Own emphasis).

Paragraph [20] of the London Place judgment provides the effect of all of this, namely that:  

‘… the failure of the trustees of the BC to take timeous steps against the applicants for the historic arrear levies … has resulted in that claim against the applicants having prescribed, and the BC is precluded from relying on s 15B(3)(a)(i)(aa)[9] of the Sectional Titles Act in refusing to issue the levy clearance certificate ….

(Own emphasis).

So, Frikkie, to conclude.  There is well reasoned authority in the form of the London Place judgment for you to stand firm in your views that: (i) the BC’s claim for the Levy Debt against you has prescribed; (ii) the BC is not entitled to invoke section 13(1)(e) of the Prescription Act to support a delay of prescription; and (iii) the BC is precluded from refusing to issue your levy clearance certificate. 

Gee hulle gas, neef!

Kind regards,

Uncle Oswald.


[1]   Now reported sub nom Ashu and another v Body Corporate of London Place and others 2024 JDR 1322 (WCC).
[2]  London Place at para [16].