Transparency in body corporate finances

The question of whether the Promotion of Access to Information Act[1] (“PAIA”) applies to a unit owner’s request for financial information from a body corporate has been a contentious issue in the industry for a few years now, marked by conflicting interpretations and considerable debate. Unit owners, seeking transparency in the management of their shared property, often face bureaucratic hurdles when attempting to access information essential to evaluating the financial health of their body corporate where they have invested serious money. This confusion has sparked uncertainty for all parties, leading to disputes and unnecessary delays.

Fortunately, recent clarifications suggest that this matter can finally be put to rest. It is now evident, and entirely reasonable, that a unit owner should have the right to inspect the financials of their body corporate without resorting to overly complex procedural frameworks such as PAIA. With the law clearly on the side of transparency and accountability within sectional title schemes, one can only hope that further litigation on this issue will be unnecessary. Instead, stakeholders can focus on fostering trust and cooperation, ensuring effective management of sectional title schemes for the benefit of all involved.

The case of Montrose Mews Body Corporate v Mokoka[2] (“Montrose Mews”) serves as a pivotal juncture in clarifying the interplay between PAIA and statutory obligations under the Sectional Titles Schemes Management Act[3] (“the STSMA”), and the Sectional Titles Schemes Management Regulations[4] (“the STSM Regulations”). Central to the dispute is whether a member of a body corporate is required to follow PAIA procedures to access financial documents, or if their right of access stems directly from statutory Prescribed Management Rule (“PMR”) 26 of Annexure 1 to the STSM Regulations.

Montrose Mews (“the Body Corporate”) filed an application under the Promotion of Administrative Justice Act[5] (“PAJA”) to review an adjudication order issued by a Community Schemes Ombud Service (“CSOS”) adjudicator.[6] The adjudication order required the Body Corporate to furnish financial records to its member, the unit owner, who argued that her right of access arose under PMR 26 without needing to resort to PAIA mechanisms.[7] The Body Corporate contended that PAIA exclusively regulated such access.[8]

PMR 26(2) mandates that bodies corporate make “books of account and records available for inspection and copying” upon application by a member.[9] The broader legislative landscape includes PAIA, which provides a general framework for requesting information from public and private bodies.[10] However, PAIA’s applicability is contingent on the absence of specific statutory or contractual rights establishing access to the requested information​​.[11]

The Johannesburg High Court held that PAIA does not apply where a pre-existing legal relationship already creates a duty of disclosure.[12] It highlighted that PMR 26(2), which serves to ensure transparency and informed participation in the management of a sectional title scheme, provides a statutory framework for members to access financial records​​.[13]

The court stated:

“If that were not enough to rule out the application of PAIA (it is), the manifest purpose of PAIA is not to displace other statutes which provide for defined rights of access to information to individuals who are embedded in specific legal relationships.”[14]

PAIA’s Supplementary Role

The Johannesburg High Court clarified that PAIA is intended as a supplementary mechanism, applicable primarily where no statutory or contractual obligations exist to disclose information.[15] For instance, shareholders’ rights under the Companies Act[16] coexist with PAIA, but statutory rights take precedence.[17] To require members to navigate PAIA for information governed by PMR 26(2) would impose unnecessary administrative burdens, undermining the efficiency of statutory disclosure​​.[18]

Scope of Access under PMR 26

The purpose of PMR 26(1)(a)(iv) is to empower members to assess the financial health of their body corporate.[19] However, access is not absolute. The Johannesburg High Court emphasised the body corporate’s right to redact confidential or irrelevant information, ensuring the disclosure is limited to what is necessary for financial assessment​.[20]

Nature of “Application” in PMR 26(2)

The term “application” in PMR 26(2) was interpreted to permit a structured request process, allowing the body corporate to evaluate the necessity of disclosure.[21] This approach balances the member’s right to access with the body corporate’s duty to protect sensitive information​.

The ruling carries significant practical implications for various stakeholders. For members, it simplifies access to financial information by allowing reliance on the prescribed rules for sectional title schemes rather than the more complex mechanisms of PAIA. Bodies corporate, while obliged to provide access, retain the right to redact confidential details where appropriate, with such decisions subject to oversight by CSOS and, if necessary, judicial review. From a governance perspective, the decision reinforces the autonomy of sectional title legislation in managing these very specific relationships, thereby reducing unnecessary dependence on the broader access-to-information legislative landscape.

Therefore, this case reaffirms the primacy of specialised legislative frameworks like the STSMA in resolving internal governance disputes within sectional title schemes. By delineating the boundaries of PAIA and PMR 26, the Johannesburg High Court provided much-needed clarity, promoting transparency while safeguarding confidentiality. This balance is essential for the equitable management of sectional title schemes, ensuring that members have meaningful access to information without overburdening the administrative capacities of bodies corporate.

This resolution reflects the spirit of sectional title arrangements, which demand mutual trust and transparency for their effective governance. With the legal position clarified, stakeholders can now move forward with a clearer understanding of their respective rights and obligations.

Let this serve as a reminder that simplicity and good governance are not at odds but rather complementary principles that enhance community living. Here’s hoping this marks the end of litigation over this issue so that we can focus on their primary purpose: harmonious and efficient management of shared property.

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FOOTNOTES:

[1] Act 2 of 2000.

[2] 2024 (5) SA 291 (GJ). Accessible at https://www.saflii.org/za/cases/ZAGPJHC/2024/198.html.

[3] Act 8 of 2011.

[4] 2016.

[5] Act 3 of 2000.

[6] Montrose Mews para 1.

[7] Para 2.

[8] Para 2.

[9] Para 4.

[10] Paras 4 and 20.

[11] Paras 20 and 21.

[12] Para 5.

[13] Paras 4, 14 and 16.

[14] Para 20.

[15] Para 5.

[16] Act 71 of 2008.

[17] Para 21.

[18] Para 5.

[19] Paras 4 and 14.

[20] Paras 4, 24 and 25.

[21] Paras 14, 15, 17 and 24.