- Courts are increasingly setting aside trustee decisions that do not comply with the law.
- Undisclosed financial interests are exposing trustees and directors to personal liability.
- Governance failures are escalating quickly from CSOS disputes to High Court intervention.
Trustees and directors in South African community schemes are facing personal liability as courts begin overturning decisions tainted by hidden conflicts of interest, undisclosed financial arrangements, and procedural abuse.
At the centre of this scrutiny is a recurring governance pattern in which trustees or directors position themselves, or their businesses, to benefit financially from scheme decisions. Johlene Wasserman, Director of Community Schemes and Compliance at VDM Incorporated, says these arrangements are widespread and routinely justified as practical solutions.
“Across the country, trustees and directors of homeowners associations frequently wear multiple hats. The trustee who is also the scheme’s attorney, the director whose company maintains the gardens, or the accountant serving on the board who also prepares the scheme’s financial statements,” she says.
“These arrangements often start with good intentions, saving costs, using trusted expertise, or keeping work within the community. But beneath these seemingly practical decisions lies one of the most misunderstood legal risks in community governance, the conflict of interest.”
Wasserman is clear that the issue is not the arrangement itself, but the failure to manage it lawfully. “There’s a huge misconception that trustees or directors are automatically barred from doing business with their own schemes. The law doesn’t necessarily prohibit it,” she says.
“The problem lies in secrecy, inadequate disclosure, and staying involved in discussions or decisions where a personal benefit exists.” In practice, this is where hidden contracts take shape, with trustees influencing procurement, remaining present during deliberations, or steering outcomes in ways that compromise the integrity of the decision-making process.
The Cassim ruling and a governance wake-up call
The consequences of these practices were brought into sharp focus in Cassim v The Trustees of Drakensberg Body Corporate and Others, a case that has since become a stark warning to community schemes nationwide. At its heart, the matter involved Nielopahr Cassim and Shereen Cassim, who were removed as trustees during a Special General Meeting.
The High Court found that the removal process did not comply with the Sectional Titles Schemes Management Act and declared the meeting a nullity. “The court ruled that the managing agent acted ultra vires and that the original CSOS adjudication was flawed,” Wasserman says.
“The presiding officer made defamatory, unfounded conclusions against the applicants.” The judgment signals that courts are willing to interrogate how decisions are made within schemes and to reverse them where governance standards have been ignored.
The ruling also highlights the personal risk faced by trustees and directors. “This case makes clear that trustees who fail to disclose their interests, or who participate in decisions where they stand to benefit, risk personal liability,” Wasserman warns. “It also illustrates the courts’ increasing scrutiny of governance processes. The message is unambiguous. Trustees must remove themselves entirely from any decision in which they have an interest.”
Conflict of interest and why disclosure must be absolute
The legal framework governing community schemes, including the Sectional Titles Schemes Management Act and the Companies Act, permits trustees and directors to engage in external business activities. However, it imposes strict fiduciary duties requiring honesty, good faith, and full transparency at all times.
Wasserman is precise about the threshold. “A conflict of interest arises where a board member, whether directly or indirectly, stands to benefit from a contract or decision, including where a relative, partner, or linked firm may profit,” she says. Informal or partial disclosure, she stresses, is not enough. “Influence doesn’t only happen through a vote. It can happen through presence, tone, or steering the conversation, which is why full recusal is essential.”
Governance failures and the role of the courts
A consistent line of cases is reinforcing the principle that community scheme decisions must be lawful, reasonable, and procedurally fair. In Singh v The Body Corporate of St Tropez, the court affirmed that even perceived conflicts of interest can undermine otherwise reasonable decisions. “Even when a decision is substantively reasonable, procedural defects, including undisclosed interests, can undermine the validity of the outcome,” Wasserman says.
In The Trustees of the Legacy Body Corporate v Bae Estates and Escapes, the Supreme Court of Appeal confirmed that trustees must place the interests of the scheme above personal relationships or financial gain. “The court confirmed that trustees have to prioritise the scheme’s interests over personal relationships,” Wasserman says.
The escalation risk is further illustrated in Stenersen and Tulleken Administration CC v Linton Park Body Corporate, which clarified the limits of appeals within the Community Schemes Ombud Service framework. “CSOS appeals are restricted to questions of law, which means governance failures and conflict of interest issues can escalate quickly,” Wasserman says. “Once a matter reaches the High Court, the record must show that the scheme followed the law to the letter.”
The cost of power plays
“In community governance, the conflict of interest itself is often manageable,” Wasserman concludes. “The legal problem is usually the failure to disclose it properly.”
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