Can a trustee also be appointed as a caretaker?
By Dr Carryn Melissa Durham
She is one of the most highly qualified Sectional Title lawyers in the country (BA. LLB, LLM and currently completing her Doctorate in the subject), Carryn forms part of the Paddocks Private Consulting Division
In this article I will address a topic that, on various occasions, I have dealt with in the Paddocks Club discussion forum and on Facebook as question of the day namely, whether a trustee can also be appointed as a caretaker?
It is important to note that only trustees who are owners can be appointed as caretakers due to the disqualification contained in Prescribed Management Rule (“PMR”) 5(b).
Trustees are empowered to employ a caretaker. In terms of section 38(a) of the Sectional Titles Act 95 of 1986 (“the Act”), the body corporate has the power to appoint such agents and employees as it may deem fit. In terms of PMR 26(1)(a), the trustees have the power to appoint for, and on behalf of the body corporate, such agents and employees as they deem fit in connection with the control, management and administration of the common property; and the exercise and performance of any or all of the powers and duties of the body corporate. This power is subject to any restriction imposed or direction given at a general meeting of the body corporate. Therefore, the body corporate can place a restriction on the trustees that the caretaker employed may not be a trustees. Another consideration is whether the approved budget makes provision for the appointment of a caretaker.
The trustees must take a resolution by majority vote to appoint the caretaker. I must emphasise that the trustee will be disqualified from voting on his own appointment as caretaker by virtue of his interest in the contract in terms of PMR 23. Furthermore, two trustees must sign the contract of appointment in terms of PMR 27.
Difficulties can arise when a trustee is appointed as a caretaker. In terms of PMR 26(1)(b) the trustees have the power to delegate to one or more of the trustees such of their powers and duties as they deem fit, and to revoke the delegation at any time. When a trustee is delegated the maintenance portfolio, the lines between what he is doing as a trustee and what he is doing as an employee become blurred. The duties that the trustee executes as a caretaker should therefore be set out in detail in the contract.
Furthermore the basis for liability that he may incur differs in each role. As a trustee he has a fiduciary duty toward the body corporate. As a caretaker he has contractual duties toward the body corporate.
Another problematic issue that could arise is that of remuneration. Trustees are not usually paid. PMR 10(1) states that owner trustees are not entitled to any remuneration in respect of their services as such. A caretaker would expect remuneration in terms of his employment contract. Where a trustee/caretaker is remunerated, it must be clear that the trustee is not being compensated for trustee duties. If the trustee/caretaker is being paid as such in terms of a special resolution taken by the body corporate in terms of PMR 10(1) then the trustee is not an employee, but is being paid for his services as a trustee. If the trustee/caretaker is being paid as a caretaker (the trustees would have authorised his remuneration) then the trustee/caretaker is an employee of the body corporate, regardless of the fact that he is only a part-time caretaker/employee.
Trustees retain a supervisory role over body corporate employees. One of my my main concerns is that a trustee who is also a caretaker is then placed in an untenable position where he has to supervise his own work. This creates a conflict of interest. A well-drafted employment contract would specify who the caretaker must report to and from whom he must (and must not) take instructions.
The last consideration is that PMR 67(3) states that a proxy need not be an owner, but cannot be an employee of the body corporate. Therefore a trustee who is also a caretaker would not be able to hold any proxies.
In conclusion, there is no legal restriction on a trustee who is an owner from being appointed as a caretaker. However, as I have mentioned there are various reasons why it is unwise to do so. In my view the trustees must manage the scheme for the benefit of, and in the interest of the body corporate. Good governance might be sacrificed in situations where the employment contract does not clearly set out the separation of duties of the trustee/caretaker, and where the caretaker is not supervised adequately.