Introduction
Over the years I have addressed the question of whether a trustee can be appointed as an employee of the body corporate on various occasions. Can, for example, a duly elected trustee be appointed as the caretaker of the scheme in terms of an employment contract?
Appointment of trustees
Trustees are duly elected to office at the first AGM and at every AGM thereafter by the members of the body corporate. Trustees are appointed in a fiduciary position of trust.
Power to appoint agents and employees
Trustees are empowered 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. In terms of section 4(a) of the Sectional Titles Schemes Management Act 8 of 2011 (“the STSM Act”), the body corporate has the power to appoint such agents and employees as it may deem fit. In terms of PMR 9(d), the trustees have the power to appoint any agent or employee in terms of section 4(a) of the STSM Act in terms of a duly signed written contract.
Restriction on trustees’ powers
This power is subject to any restriction imposed or direction given at a general meeting of the body corporate. Therefore, the body corporate could, for example, place a restriction on the trustees that the caretaker employed may not be a trustee.
Budget constraints
Another consideration is whether the approved budget makes provision for the appointment of a caretaker.
Condition
It is important to note that only trustees who are owners can be employed by the body corporate (for example as caretakers) due to the disqualification contained in PMR 6(2) that states that:
“A person who is the managing agent or an employee of the managing agent or the body corporate may not be a trustee unless that person is a member.”
Process of the appointment of an employee by the trustees
The trustees must take a resolution by majority vote to appoint the trustee/employee. The trustee will be disqualified from voting on his or her own appointment as employee by virtue of his or her interest in the contract in terms of PMR 6(3) which states that:
“A trustee who has any direct or indirect personal interest in any matter to be considered by the trustees must not be present at or play any part in the consideration or decision of the matter concerned.”
Furthermore, two trustees must sign the contract of appointment in terms of PMR 10(1) which states that:
“No document signed on behalf of the body corporate is valid and binding unless it is signed on the authority of a trustee resolution by—
(a) two trustees or the managing agent, in the case of a clearance certificate issued by the body corporate in terms of section 15B(3)(i)(aa) of the Sectional Titles Act; and
(b) two trustees or one trustee and the managing agent, in the case of any other document.”
Difficulties with owner trustee employee dynamics
- Delegation
Difficulties can arise when an owner trustee is appointed as an employee such as the caretaker. In terms of PMR 9(b) the trustees must exercise the body corporate’s powers and functions assigned and delegated to them in terms of section 7(1) of the STSM Act in accordance with resolutions taken at general meetings and at meetings of trustees. 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.
- Liability
The basis for liability that an owner/trustee/employee may incur differs in each role. As a trustee he or has a fiduciary duty toward the body corporate. As an employee he or she has contractual duties toward the body corporate.
- Remuneration
Another problematic issue that could arise is that of remuneration. Trustees are not usually paid for executing their fiduciary duties. PMR 8(2) states that unless so determined by special resolution, trustees who are members are not entitled to any reward, whether monetary or otherwise, for their services as such. In terms of PMR 8(1) the body corporate must reimburse trustees for all disbursements and expenses actually and reasonably incurred by them in carrying out their duties and exercising their powers.
An employee such as a caretaker would expect remuneration in terms of his employment contract. Where a trustee/employee is remunerated, it must be clear that the trustee is not being compensated for his or her fiduciary trustee duties. If the trustee/employee is being paid as such in terms of a special resolution taken by the body corporate in terms of PMR 8(2) then the trustee is not an employee, but is being paid for his services as a trustee. If the trustee/employee is being paid as a caretaker (the trustees would have authorised his or her remuneration) then the trustee/employee is an employee of the body corporate, regardless of the fact that he is only a part-time caretaker/employee.
- Supervision
Trustees retain a supervisory role over body corporate employees. 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 or she must (and must not) take instructions.
- Proxies
The last consideration is that PMR 20(6) states that a proxy need not be a member, but must not be the managing agent or an employee of the managing agent or the body corporate. Therefore a trustee who is also an employee of the body corporate would not be able to hold any proxies.
Conclusion
There is no legal restriction on a trustee who is also an owner from being appointed as an employee of the body corporate such as a caretaker. The body corporate need to take care and caution when doing so for all the reasons listed above. The trustees have a fiduciary duty to manage the scheme for the benefit of, and in the interest of the body corporate. Lines may be blurred between the fiduciary obligations as trustee and the employment duties unless the contract clearly establishes the separation of duties of the owner as trustee and as employee. Good governance will require that the employee be supervised adequately by the other trustees.
WRITTEN BY DR CARRYN DURHAM
