It is often suggested to us that we should distribute the levy age analysis to all owners. By so doing, we would be putting pressure on those who haven't paid, to bring their account up to date. But are there risks in doing this? Below is the opinion of Christo Sutherland, one of South Africa's leading sectional title and property law attorneys.
Legal Opinion from Christo Sutherland Attorneys
- I have been requested to provide an opinion on whether the levy age analysis may be distributed amongst its members.
- Before providing the opinion I wish to confirm that the following is regarded as the factual matrix upon which the opinion is premised:
- The age analysis referred to in this opinion relates to outstanding amounts by various members of the Company in respect of levies and other charges owed to the Company.
- The age analysis will show all members that are in arrears with their levies and other charges and to what extent.
- The Company was registered as a Section 21 Company under the old Companies Act and is now regarded as a Non Profit Company ("NPC") under the new Companies Act.
- It is trite law that the members of a NPC have a right to certain information contained in the records of the Company.
- The new Companies Act stipulates that a member of a NPC, has a right to inspect and copy (without any charge for any such inspection or upon payment of no more than the prescribed maximum charge for any such copy), the information contained in the following records of the Company:
- The Company's Memorandum of Incorporation and any amendments to it, and any rules made by the company, as mentioned in section 24 (3) (a);
- the records in respect of the company's directors, as mentioned in section 24 (3) (b);
- the reports to annual meetings, and annual financial statements, as mentioned in section 24 (3) (c) (i) and (ii);
- the notices and minutes of annual meetings, and communications mentioned in section 24 (3) (d) and (e), but the reference in section 24 (3) (d) to shareholders meetings, and the reference in section 24 (3) (e) to communications sent to holders of a company's securities, must be regarded in the case of a non-profit company as referring to a meeting of members, or communication to members, respectively; and
- the members register of a non-profit company that has members, as mentioned in section 24 (4).
- None of the above includes the age analysis as described herein.
- So, in my opinion and according to the New Companies Act, there is neither an obligation on the Company to distribute nor a right by the Members to receive the age analysis.
- So, what would the rationale be behind such distribution? The only inference that can be drawn is a: "name and shame" type of motive. That the age analysis be distributed in the hope that those members whose levies are in arrears will feel so ashamed that they will bring their accounts up to date.
- This is a very dangerous motive and can open the Company up to various law suits.
- It is very important to bear in mind that the publication of information can be regarded as defamatory even though it is true. In our law, unlike British law, truth is not necessarily a defence to a claim for defamation of character.
- The fact that the information contained in the Age Analysis is true is accordingly no defence on its own.
- For there to be a defence to a claim for defamation of character the Company will have to prove that the information divulged in the age analysis was both true and in the public interest. That means that the persons to whom the information was parted had a direct right and interest to such information.
- I do not think that it can ever be argued that the normal members of the Company, who has no role to play in the collection process, has any interest in the names of defaulters.
- The members have insight into the financial statements, from which they can ascertain whether the directors and attorneys are properly performing their functions in the collection process and having knowledge of the names of defaulters is of no further advantage to them, especially if they did not even request same.
- To the contrary, I think that the conduct of distributing the age analysis to members, indiscriminately, can easily be regarded as malicious and with the intent to cause embarrassment to the levy defaulters. This is accordingly not advised.