The Trustees for the Time Being of the Legacy Body Corporate v Bae Estates and Escapes (Pty) Limited and Another

Bae Estates (an estate agency) was engaged by a property owner in the Legacy Body Corporate sectional title scheme in Green Point, Cape Town in May 2018 to procure a tenant for a long-term rental. A lease was concluded in July 2018 which permitted the tenant to sub-let on short-term holiday leases. The tenant later sub-let without reference to Bae Estates. There were complaints by some property owners about sub-tenants' conduct (excessive noise, unruly behaviour). The trustees accused Bae Estates of failing to properly vet the sub-tenants. Bae Estates denied it had procured the sub-tenants. On 21 May 2019, the trustees voted by email round-robin to prohibit Bae Estates from operating within the scheme in terms of rule 37.3 of the body corporate conduct rules. Bae Estates objected, asserting it had nothing to do with the short-term letting. The trustees declined to reverse their decision. Bae Estates launched urgent application to review and set aside the decision.

• Whether the trustees' decision to prohibit an estate agency from operating within a sectional title scheme constituted administrative action for purposes of PAJA
• Whether the decision was of an administrative nature
• Whether the trustees exercised a public power or performed a public function
• Whether the trustees acted in terms of any legislation or empowering provision
• If PAJA did not apply, whether the decision was subject to judicial review in terms of the common law
• Whether Bae Estates had locus standi to challenge the decision at common law

The appeal was dismissed with costs, including the costs of two counsel. The high court's decision to set aside the trustees' decision was upheld.

A decision by trustees of a body corporate to prohibit an estate agency from operating within a sectional title scheme does not constitute administrative action under PAJA where: (1) the decision is managerial or commercial in nature rather than administrative; (2) it does not involve exercise of a public power or performance of a public function (no governmental control, regulation, or public interest); and (3) there is no empowering provision authorizing such a decision. However, such decisions are reviewable at common law where: (1) the affected party has been consensually permitted to operate and has developed a legitimate expectation of continuation; (2) the decision is procedurally unfair, unreasonable, irrational, or in breach of natural justice principles; (3) the affected party was not afforded a hearing before being prohibited; and (4) the decision is unjust in the circumstances. A person affected by such a decision has locus standi at common law and under s 38 of the Constitution to challenge it, even absent membership or contractual relationship with the decision-maker.

The Court noted (obiter) that under the constitutional order, private entities are not enclaves of power immune from the obligation to act fairly, lawfully and reasonably. The Court observed that the hands of justice can never be tied under the constitutional order, referencing Barkhuizen v Napier. The Court distinguished the English case of Breen v Amalgamated Engineering Union where judicial review was denied for a private body decision despite acknowledged bad faith, noting that such constraints have no place in South African law. Makgoka JA commented that courts must endeavor to do simple justice between parties and prevent injustices in demonstrably deserving cases. The Court also noted that alternative remedies (interdict, damages for unlawful interference with contractual obligations, or competition law remedies) would not adequately redress the effect of a permanent prohibition. The Court observed that issues of locus standi should be dealt with in a flexible and pragmatic manner rather than a formalistic or technical one.

This case is significant for clarifying the scope of PAJA in relation to decisions by bodies corporate in sectional title schemes. It establishes that not all decisions by statutory bodies constitute administrative action - the decision must be of an administrative (not merely managerial or commercial) nature, involve exercise of public power or performance of a public function, and be taken in terms of an empowering provision. Importantly, the case affirms that decisions by private bodies (including bodies corporate) are subject to common law review where they affect rights and legitimate expectations, even where PAJA does not apply. The judgment reinforces that private entities are not immune from obligations to act fairly, lawfully and reasonably under the constitutional order. It extends common law natural justice principles to situations where a party has been consensually permitted to engage in activity and develops a legitimate expectation of continuation, even absent a contractual relationship or membership status.