EY Suart Attorneys

This newsletter is for our valued clients and is intended to inform them of recent developments in our law and of other matters of interest. This newsletter and other articles are available on our website. Kindly advise should you not wish to receive this newsletter in future and feel free to distribute it to your friends or other interested parties if you so wish. Contributions are made by our directors and professional assistants.  Please also refer to our disclaimer at the bottom of this newsletter.

 

THIS MONTH:

(1)  HOW CAN A BODY CORPORATE TERMINATE THE MANADATE OF A MANAGING AGENT?

(2)  DIGITAL SIGNATURES IN TERMS OF THE ELECTRONIC COMMUNI-CATIONS AND TRANSACTIONS ACT, 25 OF

(3)  ENTERING A RESTRAINT OF TRADE

(4)  THE COMMUNITY SCHEMES OMBUD SERVICE – AN AFFORDABLE ADJUDICATION PROCESS FOR COMMUNITY SCHEME DISPUTES?

(5)  TRAFFIC RULES MAY AGAIN BE ENFORCED WITHIN SECURITY ESTATES

(6)   ABOUT US 

1)  HOW CAN A BODY CORPORATE TERMINATE THE MANADATE OF A MANAGING AGENT?

In terms of the Sectional Titles Schemes Management Act 8 of 2011 and Prescribed Management Rules, the trustees are empowered to terminate the agreement entered into with a managing agent.

In terms of Rule 28(7) of the Prescribed Management Rules, a management agreement may not endure for a period longer than three years and may be cancelled, without liability or penalty, despite any provision of the management agreement or other agreement to the contrary –

(a) by the body corporate on two months’ notice, if the cancelation is first approved by a special resolution passed at a general meeting, or

(b) by the managing agent on two months’ notice.”

Therefore, if the trustees elect to terminate the managing agreement outside the terms of the agreement, the trustees may do so, but is required to first obtain a special resolution at a general meeting.

A special resolution is passed by at least 75 percent of all the members of a body corporate reckoned in number (by a show and count of hands) and all members reckoned in value (by calculating an owner’s participation quota) of owners present at the meeting or represented by proxy or by a representative of such member at the meeting.

The trustees can also in terms of Prescribed Management Rule 28(8), by trustee (mere majority) resolution cancel the management agreement in accordance with its terms or refuse to renew the management agreement when it expires.

If the trustees elect to terminate the management agreement in terms of Prescribed Management Rule 28(8), the trustees must ensure that the required quorum of 50% of the elected trustees were obtained for such decision. If not, such decision will be null and void and of no effect. If the trustees fall below the number necessary to form a quorum, the remaining trustees may continue to act, but only to: 

(a) appoint a replacement trustees to make up a quorum; or

(b) call a general meeting

In terms of the Prescribed Management Rules, it also makes provision for members to be able to terminate a management agreement, if they elect to do so. It will be necessary for the members to deliver a written and signed request to the trustees to arrange a special general meeting, at which meeting a motion can be tabled for the termination of the management agreement and the members can vote thereon. However, there are certain additional requirement prescribed for in the Rules where a special general meeting is requested by members.

It will be advisable for trustees and members to first seek legal advice prior to the election to terminate a management agreement if they are not certain of their right to do so.

Quintin Badenhorst - Associate

2) DIGITAL SIGNATURES IN TERMS OF THE ELECTRONIC COMMUNI-CATIONS AND TRANSACTIONS ACT, 25 OF 2002  

In July 2018, the Deeds Office officially entered the digital era when the Bloemfontein Deeds Office registered its first property transfer with a digitally-signed document, the Seller’s Power of Attorney to Pass Transfer, which was signed with an advanced electronic signature (AES), paving the way to a more efficient and streamlined conveyancing process.

The Electronic Communications and Transactions (ECT) Act creates a special type of electronic signature, known as an “advanced electronic signature” (AES), which is a particularly reliable form of signature. Where a law (such as the Deeds Registries Act) requires a signature, only an AES will be valid.

The Power of Attorney to Pass Transfer of the property was therefore electronically signed, by both the client and the conveyancer. Such signing was completed by using a digital signature platform called Lexis Sign, which is underpinned by the ECT Act, and all documents still had to be lodged manually.

According to Section 12 of the ECT Act, it specifically excludes electronically generated signatures for an agreement pertaining to the alienation of land and long-term lease agreements, but does not refer to powers of attorney, consents, antenuptial contracts, etc.

However, although the electronically signed document submitted in the Bloemfontein Deeds Office was a Power of Attorney to pass Transfer, the Registrar of Deeds has since ruled that this document, as well as the Deed of Sale, must still be hand signed in pen before being lodged together with the other documents.

We therefore bring your attention to Registrars’ Conference Resolution 50/2006, pertaining to Section 12 of Electronic Communication and Transaction Act No. 25 of 2002, to which all Registrars are bound:

Question posed by Conveyancers and Deeds Examiners: 

“May electronically generated signatures be accepted for any act of registration to be registered in a deeds registry?  The Act specifically excludes an agreement for the alienation of land and long-term lease agreements, but does not refer to powers of attorney consents, antenuptial contracts, etc.

Resolution:

Only originally signed documentation is permissible.”

Therefore, and in conclusion, one must remember that agreements concluded in terms of the Alienation of Land Act are excluded from ECT Act and must therefore still be concluded by parties appending their written signatures thereto.

            Quraisha Dawood - Conveyancer

3)  ENTERING A RESTRAINT OF TRADE

A restraint of trade is a provision in a contract which restrains and/or prevents an employee from performing certain work, disclosing certain information and using client or supplier connections to the detriment or potential detriment of the employer or company. A restraint of trade will in principle and on the face of it be enforceable, unless such restraint is shown to be unreasonable and contrary to public policy.

The purpose of subjecting a person to a restraint of trade is for an employer or company to safeguard a protectable interest belonging to the employer or company. The purpose of a restraint of trade must not merely be to eliminate and prevent competition, there must be an actual legitimate proprietary interest that deserves protection.

Trade connections (e.g. accessibility to suppliers or clients) and Trade secrets are protectable interests, which may be subjected to a restraint of trade. The ability, knowledge and skills that an employee possess are attributes of the person himself and does not constitute a protectible interest belonging to the employer or company. Restraining the attributes of a person infringes upon that person’s ability to trade and compete freely, and such a restraint is unreasonable and contrary to public policy.

For example, an IT specialist cannot be restricted to make use of his software developing or programming skills, as these are acquired skills that can only be used in a specific field. However, an IT specialist may be restrained from using software and programmes developed, designed or used by or for his former employer to the detriment of the former employer or from acquiring the former employers’ clients.

The interest which the employer or company seeks to protect must be clearly described as an interest belonging to the employer or company. The nature, scope, and extent to which the restraint imposed finds application must be clearly described and cannot be couched in terms so as to have a broad and vague interpretation.

The abovementioned interests are protected by way of contractual agreements. An employee must agree to be subjected to a restraint of trade, and this undertaking is usually included in the employment contract of the employee. Therefore, unless the employer or company has concluded a restraint of trade agreement with an employee, the employer or company cannot seek to restrain the employee in order to protect these interests at a later stage.

The interest which the employer or company seeks to protect will be weighed against the reasonableness of the restriction to which the employee is to be subjected. Factors that will be considered in determining whether a restraint is enforceable include: the duration of the restraint, the area to which the restraint finds application, the ability of the person restrained to earn a living, the ability of the person restrained to trade and compete freely, whether or not a restraint of trade payment has been made as well as the interest which the employer or company seeks to protect.

The person seeking to enforce or be released from the restraint of trade bears the onus to prove this. If an employee seeks not to be subjected or bound by a restraint of trade, he or she bears the onus to show that the restraint is unreasonable and contrary to public policy. However, if an employer seeks to enforce a restraint of trade, he will have to approach the court to show that the restraint is enforceable, and thus bears the onus to show that the restraint is reasonable and not contrary to public policy.

In conclusion, whether or not a restraint of trade is enforceable, will be determined by the facts and circumstances in each case.

  Ziegh Steenkamp - Candidate Attorney

4)  THE COMMUNITY SCHEMES OMBUD SERVICE – AN AFFORDABLE ADJUDICATION PROCESS FOR COMMUNITY SCHEME DISPUTES?

The Community Schemes Ombud Service Act, 9 of 2011, (“the Act”) came into operation on the 7th of October 2016.  The purpose of the Act was to establish the Community Schemes Ombud Service (“CSOS”) as a dispute resolution mechanism for persons related to a community scheme.

The rationale behind the establishment of the CSOS was to create a dispute resolution mechanism accessible to the public which is affordable and informal.

To make application to CSOS is in fact affordable and, in many cases the adjudication process is a whole lot quicker than approaching our Courts for relief pertaining to community schemes.  The idea behind the establishment of the CSOS is therefore a noble one.

The question, however, is whether CSOS is equipped to assist the public efficiently?

It can be an enormous relief to a person to obtain an adjudication order from CSOS which is correct in law, as the adjudication order can be easily enforced in the High Court or Magistrates’ Court and the cost to obtain the relief sought is fractional compared to court proceedings. 

There is however an enormous concern for persons who are aggrieved or dissatisfied by an order of an adjudicator of CSOS.  The Act only makes provision for an appeal to the High Court if a person is dissatisfied with an adjudication, and only on a question of law.  No other appeal process is available in terms of the Act, which, as I will indicate, undermines the purpose of the Act and, therefore, the existence of CSOS.

By way of example, a dispute which seems relatively straight forward to a member of a body corporate may be referred to CSOS by the aggrieved member (who does not have the financial means to approach a court with competent jurisdiction), only to find out that the dispute hinges on technical legislation and legal principles.  The application of the aggrieved member is dismissed by an adjudicator of CSOS (or worse, an adverse adjudication order is given against the member).  Without any other alternative, the member of the body corporate engages the services of an attorney for an opinion and finds out that the adjudication order is clearly wrong and bad in law.  This member of the body corporate will now have to apply directly to the High Court to challenge the adjudicator’s order. 

In addition to the fact that this member of the body corporate with humble financial means will have to become involved in High Court litigation, it would seem that the normal rules of the High Court are not applicable and as such, experts (attorneys and counsel) in the field of sectional title law and High Court litigation will have to be engaged.  This while the member was (most likely) unrepresented during the adjudication at CSOS, as representation is not ordinarily allowed.

In a previous newsletter, the automatic suspension of an order pending an appeal was dealt with.  In normal circumstances, any appeal and/or review proceedings against an order or decision suspends that decision or order automatically until the appeal or review is finalised.  This is not necessarily the case with an adjudication order, as the section in the Act dealing with appeals states that “a person who appeals against an order, may also apply to the High Court to stay the operation of the order appealed against to secure the effectiveness of the appeal”.   To date there exists no precedent or clarity as to whether the Act or the Superior Courts Act enjoys preference in this regard, although in my opinion it is the latter.  This means that our aggrieved member of a body corporate will have to apply to the High Court just to suspend the operation of the adjudication order against which he/she had already noted an appeal.

In recent case law, the High Court of South Africa, Western Cape Division, held that the appeal as envisaged in the Act is not a normal appeal for which the rules of the High Court make provision.  The court held that the appeal, as referred to in the Act, is a hybrid type of an appeal, with strong characteristics of a review, in that the appeal is to be brought on notice of motion (application procedure), supported by affidavits.  This was confirmed by the Johannesburg Local Division of the High Court.

All the uncertainty relating to the appeal process, as well as the fact that an appeal can only be noted in the High Court of South Africa, is severely prejudicial to an aggrieved person who wishes to appeal an order by an adjudicator of the CSOS, in that the aggrieved person will have to become involved in High Court litigation in order to set aside the adjudication order of the adjudicator of CSOS or live with the final effect it has. 

This vacuum in the Act can only be rectified by the legislature and, in my opinion, can be done by making provision for a voluntary internal appeal process and clarification of the automatic suspension of an adjudication order pending finalisation of an appeal.

Leslie Stuart - Associate

5)  TRAFFIC RULES MAY AGAIN BE ENFORCED WITHIN SECURITY ESTATES

We have previously reported on the Judgment of the Full Bench of the High Court of South Africa in the matter between N. Singh & Others  vs  Mount Edgecombe Country Club Estate Management Association II (RF) (NPC), where the Court ruled that road traffic rule-enforcement on estate roads are unlawful.

The Mount Edgecombe Country Club Estate (“the HOA” / “Association”) appealed this judgment to the Supreme Court of Appeal of South Africa and judgment was delivered on the 28th of March 2019.

The Supreme Court of Appeal has set aside the Order of the High Court, dealing with traffic rules and enforcement thereof.

Certain Conduct Rules concerning domestic workers, which were found to be unlawful by the High Court, were not set aside.

The Supreme Court of Appeal only had to consider whether or not the traffic rules were unlawful and have not considered the domestic worker-rules which were not appealed.

The full judgment can be perused on our website at:  www.eyslaw.co.za.

The crux of this judgment is:

1) Roads within a security estate are not public roads, notwithstanding the fact that members of the public may enter the estate, subject to applicable Estate Rules. 

2) The contractual nature of estate rules, as rules between an Association and its members, was again confirmed.  Therefore, the Conduct Rules are enforceable and any third party (a member of the public) only gains access to the estate with the consent of the owner/member.

3) Road traffic rules adopted by members of an Association do not have a public law content and its enforcement does not involve the usurpation of public power.

In our view, the legal position and legal principles will apply equally to similar Management- or Conduct Rules of a Body Corporate where the common property roads are not freely accessible by members of the public.

Elmo Stuart - Director

6)  ABOUT US

 

To view our previous newsletters, please visit our website on http://www.eyslaw.co.za.

Kind regards,

EY STUART INC.

 

Disclaimer: The information disclosed herein is not intended to constitute legal advice and is not guaranteed to be correct, complete, or up-to-date. You should not act or rely on any information emanating from this Newsletter without seeking the advice of an Attorney, as the facts relating to your circumstances may influence any advice or information conveyed herein. Should you require legal representation, then please do not hesitate to communicate with us for further information and our standard mandate terms.