- A former trustee must return a sectional title property she purchased from the body corporate in 2015 without the required approvals.
- The conveyancer was found to have improperly facilitated the transfer and falsely certified that the full purchase price had been paid.
- The appeal court increased the refund payable to the former trustee to R1,000,656.20 and upheld the referral of the conveyancer to the Legal Practice Council.
A former trustee of a Johannesburg sectional title body corporate must return a property she bought from the scheme while serving in that position, after the High Court found that the transaction was unauthorised and did not comply with the applicable legal requirements.
The High Court in Johannesburg dismissed most of an appeal brought by the former trustee and the conveyancer who handled the transfer. The court found that the property had been sold without the necessary approvals and in breach of the trustee’s fiduciary duties.
The disputed property sale
The matter concerned a property in a sectional title scheme in Johannesburg, which was sold to Jeanling Lee, a trustee of the body corporate at the time.
Lee purchased the property in terms of a written agreement dated 26 October 2015 for R1 million. Transfer was registered in her name on 15 December 2015. The property included a flat, an undivided share in the common property, and exclusive-use rights to parking bay P81 and two rooms.
Lee maintained that the sale had been agreed to and approved by the body’s then chairman, Brian Lavelle, and that she had relied on the conveyancer to ensure that all legal requirements were met.
However, questions about the transaction emerged in 2021 when a member of the body corporate, Mohamed Cassim, demanded access to the sale documents. After failing to obtain them, Cassim approached the High Court to prevent the body corporate from ratifying the transaction at a special general meeting.
On 1 December 2021, Judge S Mia interdicted the body corporate and its managing agent from considering the ratification of the sale, finding that it did not comply with the Sectional Titles Schemes Management Act and was void from the outset. That order was never appealed, varied or set aside.
No proper authorisation for the transaction
In the subsequent proceedings, the body corporate sought the return of the property, arguing that the sale had been unauthorised and that the required statutory procedures had not been followed.
Lee did not oppose the property’s return but insisted that she be refunded the purchase price. The body corporate, however, questioned whether she had paid the full amount and initially argued that it should recover the property without repaying her because of concerns about the source of the purchase funds.
The appeal judgment, delivered by Judge A Maier-Frawley with Acting Judge S Van Aswegen and Acting Judge T Mphahlane concurring, found that the central issue was not whether the property should be returned but how restitution should take place.
Judge Maier-Frawley found that Lee had acquired the property while occupying a fiduciary position within the body corporate, creating a conflict between her personal interests and her responsibilities to the scheme.
The judgment found that there was no evidence of a valid trustees’ resolution authorising the sale, nor proof that the required approval of members had been obtained.
The court also found that the only trustee who signed the relevant documents on behalf of the body corporate was not sufficient to authorise the transaction. The applicable management rules required documents signed on behalf of the body corporate to be signed by a trustee and the managing agent or by two trustees. They also disqualified a trustee from voting on a matter in which that trustee had a personal interest.
Judge Maier-Frawley said, “The transaction was unauthorised. No resolution of members was procured. No valid decision of the trustees was shown to exist.”
The judge further found that Lee had breached her fiduciary duties by standing on both sides of the transaction and benefiting economically from the property through rental income.
The court also noted that the transfer included exclusive-use rights to common property, which required separate notarial documentation and the necessary approval of members. No such documentation or approval was produced.
Conveyancer’s conduct criticised
The second appellant, De Wet Van Der Watt Incorporated, was the conveyancer who handled the original transfer.
The court found that the conveyancer had certified to the Registrar of Deeds that all money due to the body corporate had been paid by the date of registration. However, the documents showed that the full purchase price had not been paid at that stage. Judge Maier-Frawley described the certification as untrue and found that the conveyancer had been dishonest.
The judge also rejected the argument that the conveyancer and Lee could not be held responsible for non-compliance with the Sectional Titles Schemes Management Act because it only came into operation on 7 October 2016, after the 2015 transaction.
The judge clarified that the Sectional Titles Act 95 of 1986 and its applicable management rules governed the transaction when it took place. Although the court below had referred to the successor legislation, this did not change the outcome because the original transaction was already invalid under the law applicable in 2015.
The appeal court consequently upheld the referral of the conveyancer to the Legal Practice Council for investigation. It also maintained the punitive costs orders imposed by the court below, finding that the conduct of both appellants justified them.
Refund increased on appeal
While the appeal largely failed, the judges found that the court below had incorrectly calculated the amount Lee was entitled to receive for returning the property.
The original order directed the body corporate to pay her R868,565.20. However, the appeal court found that the documents established payments totalling R1,000,656.20. The body corporate had also conceded that it received R998,956.20, while the records reflected an additional R1,700 paid directly to it by Lee.
The court therefore increased the refund to R1,000,656.20, rejecting Lee’s claim for R1,001,700. The judges also corrected the description of the parking bay in the original order, confirming that the correct parking bay was P81 rather than P66.
The appeal was upheld only to the extent of correcting the refund amount and the parking bay description. The remaining grounds were dismissed. The appellants were ordered to pay the body corporate’s appeal costs jointly and severally, including counsel’s costs on Scale C.
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