Ratifying community scheme resolutions — who has the power?

The full bench decision (three judges) of the Pietermaritzburg High Court, in the case of Derby Downs Management Association v Assegaai River Properties (Pty) Ltd and Another (the Derby Downs case)[1], is interesting for a quite a few reasons. One reason is that it appears to be a rare occasion when a CSOS Adjudication Order is not only appealed to one High Court judge, but then the decision of the single judge is appealed to the full bench of that High Court. Another reason that the judgment is interesting is because the adjudicator’s decision was overturned by the single judge of the High Court in the first appeal, and then the Adjudication Order was re-established by the full bench (i.e. the adjudicator was correct from the very start, and the single judge’s decision was set aside).

Primarily, however, this judgment is interesting because the shareholders (members) of the Homeowners Association (“the HOA”) were permitted to ratify, by special resolution, an earlier impugned decision made by the HOA’s Board of Directors, some 10 years earlier. That decision was to change the calculation of levies for the HOA.

Although the decision allowing the ratification by special resolution of the members was based on s 20(2) of the Companies Act 71 of 2008 (because the HOA is a registered non-profit company), it makes one question whether this kind of ratification, or other types of ratification of potentially impugned body corporate or trustee resolutions, is possible in a sectional title environment.