The Body Corporate of San Sydney v Shivani Singh and Others
A Case Analysis: Lessons for Sectional Title Management
By Adj. Prof. Graham Paddock
The background to The Body Corporate of San Sydney v Shivani Singh and Others [2024] ZASCA was that the Body Corporate decided to formally incorporate into the scheme three additional buildings that the scheme developer had built on common property without legal permission before it was liquidated. The right was to be taken out under section 25(6) of the Sectional Titles Act 95 of 1986 (STA) and then ceded to HF Property Investments (Pty) Ltd (HFP) under section 5(1)(b) of the Sectional Titles Schemes Management Act 8 of 2011 (STSMA). The Body Corporate needed the written consent of all sectional owners and unit bondholders, who could not withhold such approval without good cause in law. Owner Shivani Singh refused to consent, citing insufficient disclosure of material facts and questioning the fairness and legality of the transaction.
The High Court decided that the Body Corporate had failed to comply with legal requirements for alienating common property. However, on appeal, the Supreme Court of Appeal (SCA) reversed this decision, clarified the legal issues and gave a more complex judgment.
Key Legal Issues
The issues the SCA considered were:
- Whether the High Court was correct that the sale and cession of the right of extension constituted an alienation of common property requiring unanimous resolution under section 5(1)(a) of the STSMA.
- Whether in the circumstances Singh’s withholding consent to the agreement for “good cause in law” was justified under section 5(1)(b) of the STSMA.
- Whether sufficient information had been provided to the respondent to allow an informed decision.
The Decision
- Alienation of Common Property: The Court held that the agreement did not constitute an alienation of common property under section 5(1)(a) of the STSMA. It held that while the scheme extension affects participation quotas, the cession of the extension right does not involve the sale of a defined portion of common property.
- Withholding Consent: Singh’s withholding of consent was found to be justified as she had not been provided with sufficient material information..
- Relief Granted: The Court partially upheld the appeal by directing the respondents to sign the necessary consents for the Body Corporate to obtain a Certificate of Real Right and exercise its right of extension. However, the SCA did not oblige the Respondents to consent to the body corporate’s cession of the extension right to HFP—which meant that not all the parties’ disputes were resolved.
Key quotes from the judgment given on 9 December 2024 are:
- on Alienation of Common Property: “…the extension of the scheme on common property does not involve an alienation of the common property.”, at par 42,
- on Good Cause for Withholding Consent: “Good cause would… include anything which objectively would be contrary to the best interest of the owner, the body corporate, or the scheme.”, at par 45, and “the respondent was entitled to be provided with information that would persuade her that it was an appropriate way for the appellant to proceed, and one to which she could not in law withhold her approval.” at par 55.
Significance of the Decision
This case has important implications for the management of sectional title schemes, particularly when dealing with a right of extension under section 25 of the STA.
- Full Disclosure and Transparency are Required: The SCA’s judgment reinforces trustees’ obligations to act transparently when seeking owner approval for significant decisions. Owners should receive not only copies of documents, but all relevant information.
- Rights of Extension Are Not Alienations of Common Property: The judgment clarifies that the sale or cession of a right of extension does not constitute the alienation of common property. This distinction is important for sectional title schemes considering further development opportunities.
- Legal and Procedural Compliance: The case underlines the need for trustees to get expert legal advice in regard to complex management issues and then strictly adhere to the STA and STSMA. Failure to do so can lead to lengthy and costly litigation and delayed projects.
Conclusion
The case is a judicial clarification of the procedural and substantive requirements that apply in process of extending a scheme and the cession of body corporate scheme extension rights. It also highlights the importance of transparency, member engagement, and legal compliance.
Article reference: Paddocks Press: Volume 20, Issue 01
This article is published under the Creative Commons Attribution license.
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