Sectional title corner – Can I sue the trustees for gross negligence?
Hi, I am the owner of a sectional title unit in Potchefstroom. In September a massive storm blew off a part of the complex’s roof. My unit is on the top floor, and sustained substantial damage, including damage to the floor tiles.
My unit is one of four units that sustained damage to the tiles due to flooding while the roof was off. The body corporate submitted a claim for the tiles with the insurer, however, this claim was rejected.
The insurer’s explanation:
“According to the information presented to us, the amount claimed is for damages sustained to various units following a severe storm.
After further investigation by an independent Structural Engineer, it was ascertained that no expansion joints were fitted when the floor tiles were initially laid.
It was further confirmed that the floor tiles were not laid in accordance with the tile adhesive manufacturer’s specifications, which prescribes expansion joints be placed in both directions at a maximum of 3 meter centers for suspended floors, nor according to the SANS code of Practice which prescribes expansion joints at 4 meter centers in both directions.
The loss is ongoing and gradual, as not all floor tiles are cracking simultaneously, but rather cracking progressively over a period of time.
In this regard, we refer you to Specific Exclusion 1 b) and h) on page 21, as well as 3 a) on page 22 of the Community Living Insurance Policy wording, which reads as follows:
Directors: DM Haig, VJ Hayter, PJ Carragher
Underwriting Managers for Compass Insurance Company Limited, Registration No. 1994/003010/06, FSP No. 12148
“We will not pay for any loss or damage directly or indirectly caused by, or arising from, or aggravated by, or resulting from inherent vice, latent defect, defective design, defective workmanship, structural defects, defective construction or defective material or lack of maintenance and the cost of maintenance of the insured property, or any other failure to keep the insured property in a good state of repair.”
“We will not pay for any loss or damage directly or indirectly caused by, or arising from, or aggravated by, or resulting from gradual deterioration and gradually operating causes occurring over a period of time, including decay and wear and tear.”
“We will not pay for the lifting or cracking of tiles and floor coverings, caused by changes in temperature or the incorrect application of tile cement; inadequate tile cement; incorrect expansion gaps or poor building practices.”
In view of the above, we unfortunately have no other alternative but to reject your claim in respect of the floor tiles.
This is the second time that the roof of the complex has come off. On the previous occasion, I had to replace the ceiling of my unit at own cost because the insurer at that time also rejected the claim.
The body corporate then changed insurance companies and assured us that the insurance has been updated and that something like that won’t happen in future.
However, now I am once again expected to pay for damages caused by the roof being blown off.
My question is if I can sue the trustees of the body corporate for gross negligence by not ensuring that the building is properly insured for a second time? – Ilanca
Hi Ilanca , from the outset I wish to provide you with the relevant law in addressing your question at hand. Please be advised that I provide only the relevant sections which I choose to address to assist your understanding.
SECTIONAL TITLE SCHEMES MANAGEMENT ACT NO 8 OF 2011
Section 3- Functions of bodies corporate
3.(1) A body corporate must perform the functions entrusted to it by or under this Act or the rules, and such functions include—
(h) to insure the building or buildings and keep it or them insured to the replacement value thereof against ﬁre and such other risks as may be prescribed;
(i) to insure against such other risks as the owners may by special resolution determine;
(j) subject to section 17 and to the rights of the holder of any sectional mortgage bond, forthwith to apply any insurance money received by it in respect of damage to the building, in rebuilding and reinstating the building or buildings in so far as this may be effected;
(k) to pay the premiums on any insurance policy effected by it;
(s) on the written request of any owner or registered mortgagee of a section, to produce to such owner or mortgagee, or any person authorised in writing by such owner or mortgagee, the insurance policy effected by the body corporate and the receipt for the last premium in respect thereof; and
(t) in general, to control, manage and administer the common property for the beneﬁt of all owners.
(6) The body corporate is, for the purposes of effecting any insurance under subsection (1)(h), considered to have an insurable interest for the replacement value of the building and must, for the purposes of effecting any other insurance under that subsection, be considered to have an insurable interest in the subject matter of such insurance.
- (1) Each trustee of a body corporate must stand in a ﬁduciary relationship to the body corporate.
(2) Without derogating from the generality of the expression “ﬁduciary relationship”, the provision of subsection (1) implies that a trustee—
(a) must in relation to the body corporate act honestly and in good faith, and in particular—
(i) exercise his or her powers in terms of this Act in the interest and for the beneﬁt of the body corporate; and
(ii) not act without or exceed those powers; and
(4) Except as regards the duty referred to in subsection (2)(a)(i), any particular conduct of a trustee does not constitute a breach of a duty arising from his or her ﬁduciary relationship to the body corporate if such conduct was preceded or followed by the written approval of all the members of the body corporate where such members were or are cognisant of all the material facts.
Proceedings on behalf of bodies corporate
- (1) An owner may initiate proceedings on behalf of the body corporate in the manner prescribed in this section—
(a) when such owner is of the opinion that he or she and the body corporate have suffered damages or loss or have been deprived of any beneﬁt in respect of a matter mentioned in section 2(7), and the body corporate has not instituted proceedings for the recovery of such damages, loss or beneﬁt;
Section 2(7) being:
- (7) The body corporate has perpetual succession and is capable of suing and of being sued in its corporate name in respect of—
(a) any contract entered into by the body corporate;
(b) any damage to the common property;
(c) any matter in connection with the land or building for which the body corporate is liable or for which the owners are jointly liable;
(d) any matter arising out of the exercise of any of its powers or the performance or non-performance of any of its duties under this Act or any rule; and
(e) any claim against the developer in respect of the scheme if so determined by special resolution.
Insurance by owners
14.(1) Notwithstanding the existence of a valid insurance policy effected by the body corporate pursuant to the provisions of section 3(1)(h), an owner may obtain an insurance policy in respect of any damage to his or her section arising from risks not covered by the policy effected by the body corporate. (2) This section does not limit the rights of an owner to insure against risks other than damage to his or her section.
SECTIONAL TITLES SCHEMES MANAGEMENT ACT, 2011 (Act No 8 of 2011) SECTIONAL TITLES SCHEMES MANAGEMENT REGULATIONS
Other risks to be insured against
- Other risks against which a body corporate may insure, in terms of section 3 (1)(h) of the Act, are—
(a) lightning, explosion and smoke;
(b) riot, civil commotion, strikes, lock-outs, labour disturbances or malicious persons acting on behalf of or in connection with any political organisation;
(c) storm, tempest, windstorm, hail and flood;
(d) earthquake and subsidence;
(e) water escape, including bursting or overflowing of water tanks, apparatus or
(f) impact by aircraft and vehicles; and
(g) housebreaking or any attempt thereat.
ANNEXURE 1 MANAGEMENT RULES
PART 1 INTRODUCTORY
- (1) The insurance policies of the body corporate in terms of sections 3(1)(h) and (i) of the Act —
(a) must provide cover against —
(i) risks referred to in regulation 3;
(ii) risks that members resolve must be covered by insurance; and
(iii) risks that holders of registered first mortgage bonds over not less
than 25 per cent in number of the primary sections by written notice
to the body corporate may require to be covered by insurance;
(b) must specify a replacement value for each unit and exclusive use area,
excluding the member’s interest in the land included in the scheme; provided
that any member may at any time by written notice to the body corporate require that the replacement value specified for that member’s unit or
exclusive use area be increased;
(c) must restrict the application of any “average” clause to individual units and
exclusive use areas, so that no such clause applies to the buildings as a
(d) must include a clause in terms of which the policy is valid and enforceable by
any holder of a registered mortgage bond over a section or exclusive use
area against the insurer notwithstanding any circumstances whatsoever
which would otherwise entitle the insurer to refuse to make payment of the
amount insured, unless and until the insurer terminates the insurance on at
least 30 days’ notice to the bondholder; and
(e) may include provision for “excess” amounts.
(2) A member is responsible —
(a) for payment of any additional premium payable on account of an increase in
the replacement value referred to in sub-rule (1)(b);
(b) for any excess amount that relates to damage to any part of the buildings
that member is obliged to repair and maintain in terms of the Act or these
and must furnish the body corporate with written proof from the insurer of payment
of that amount within seven days of written request.
(3) A body corporate must obtain a replacement valuation of all
buildings and improvements that it must insure at least every three years and
present such replacement valuation to the annual general meeting.
(4) A body corporate must prepare for each annual general
meeting schedules showing estimates of —
(a) the replacement value of the buildings and all improvements to the common
(b) the replacement value of each unit, excluding the member’s interest in the
land included in the scheme, the total of such values of all units being equal
to the value referred to in sub-rule 4(a).
(5) On written request by any registered bondholder and the
furnishing of satisfactory proof, the body corporate must record the cession to that
bondholder of that member’s interest in any of the proceeds of the insurance policies
of the body corporate.
(6) A body corporate must take out public liability insurance to
cover the risk of any liability it may incur to pay compensation in respect of—
(a) any bodily injury to or death or illness of a person on or in connection with
the common property; and
(b) any damage to or loss of property that is sustained as a result of an
occurrence or happening in connection with the common property,
for an amount determined by members in general meeting, but not less than 10
million rand or any such higher amount as may be prescribed by the Minister in any
one claim and in total for any one period of insurance.
(7) A body corporate must take out insurance for an amount
determined by members in general meeting to cover the risk of loss of funds
belonging to the body corporate or for which it is responsible, sustained as a result of
any act of fraud or dishonesty committed by a trustee, managing agent, employee or
other agent of the body corporate.
(8) A body corporate, authorised by a special resolution of
members, may insure any additional insurable interest the body corporate has —
(a) in the land and buildings included in the scheme; and
(b) relating to the performance of its functions,
for an amount determined in that resolution.
Now, to address your question:
Each body corporate is insured individually, according to their own process followed, and this is done primarily by the decision of the trustees. The trustees are required to prove that they have elected the insurance chosen in the best interests of the body corporate. This insurance selection would then have been dealt with in the annual general meeting under the order of business. The insurance elected could then be considered by those present at the meeting. Should this insurance then have been agreed to, it can hardly be said that the trustees themselves were grossly negligent.
So long as the trustees are able to prove that they obtained the assistance of a professional in obtaining the best possible insurance for the body corporate, they cannot be deemed negligent. Please be advised that an owner has the right to request proof of the insurance which their body corporate has taken out.
Although your body corporate would have taken out all risk cover, there is no doubt that an insurance company would have numerous terms and conditions to adhere to. One could not have reasonably foreseen that the tiles were not laid properly, should they have been laid by the developer. Should this be the case, the trustees cannot be seen as responsible. Should the trustees have elected the company to lay the tiles, if they are able to show reports that they were informed that the tiles were laid properly, once again they cannot be said to be responsible. Having the history of the unit is important too, as it could be a possibility that the previous owner retiled the unit at their own leisure.
In progress of answering your questions, there are many considerations to deliberate before a straight forward answer could be given. The Act and the Regulations prescribe various necessities regarding insurance, had your body corporate complied by those prescriptions, it cannot be said that your trustees were negligent.
It is a possibility for you to appoint your own investigator or assessor to determine whether the findings regarding your tiles are correct. Poor workmanship is a very broad subject when it comes to insurance liability, and I for one am no insurance specialist, however, I would not write off the possibility of the cover by the body corporate in one fowl swoop. It is important to consider the possibility of whether your tiles would have been damaged, should no storm have occurred. Although the insurance has deemed your damage to be an ongoing and gradual loss, it seems difficult for this to be proved and I believe a separate, independent opinion would be a great idea.
I therefore cannot answer your question precisely in one go, in order to do so one would need to consider the insurance policy taken out by your body corporate in totality, and whether the policy conforms to the prescriptions in terms of the act. One would then need to consider the history of the building, and the foreseeability or possibility of the position you find yourself in had the storm not occurred. One needs to consider your body corporate’s individual management rules, and the processes which has been followed by the trustees.
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Answered by Kimrie Ritchie, candidate attorney at SSLR Inc