5 February 2020 by Dispute Resolution Alert

Community Schemes Ombud: Who can they help?

The landscape for owners on the one hand, and body corporates on the other hand, of sectional title schemes in exercising their respective rights and obligations changed significantly on 7 October 2016, when two pieces of legislation came into force - being the Sectional Titles Schemes Management Act No 8 of 2011 and the Community Schemes Ombud Service Act No 9 of 2011 (the CSOS).

Prior to the commencement of these two pieces of legislation, owners in particular, were limited to approaching the courts should they become embroiled in any dispute with either one of the other owners and members of the body corporate or the body corporate themselves.

The CSOS creates what is intended to be a more inexpensive and speedy process and method to have these types of disputes adjudicated.

Section 38(1) of the CSOS provides that “(a)ny person may make an application [for adjudication of a dispute] if such person is a party to or affected materially by a dispute”.

The seemingly wide meaning of “(a)ny person” in section 38 has opened the flood gates for disputes being referred to the Community Schemes Ombud (Ombud), often by parties not having the necessary standing to do so.

The recent judgment of Durdoc Centre Body Corporate v Singh 2019 (6) SA 45 (KZP) provides some clarity of exactly who is entitled to make use of the dispute resolution process created in section 38 of the CSOS.

In this matter, the respondent (Singh) was the manager of the company Ashdin Holdings (Pty) Ltd (the company), which owns a number of units at Durdoc Centre. The appellant (Durdoc Centre Body Corporate) manages the centre on behalf of the various owners, and the trustees serving on the body corporate are responsible for raising the levies, which include the amounts charged for the consumption of electricity. It was common cause that the units owned by the company were not supplied with electricity.

In the period of the complaint, Singh (and not the company, duly represented by Singh) lodged an application for dispute resolution with the Ombud on behalf of the company in which he claimed reimbursements for “the electricity portion of my levy as I have not received electricity”.

The dispute was opposed by the appellant and the dispute was referred for adjudication in terms of section 38 of the CSOS.

The dispute was adjudicated, and the adjudicator delivered her order and found that the appellant had been enriched by the respondent’s contribution towards the electricity consumed by the units. The adjudicator directed the appellant to reimburse the respondent.

It is against this adjudication order that the appellant approached the court. One of the grounds of appeal raised by the appellant was that the adjudicator erred in finding that the defendant before the tribunal (Singh) had the necessary locus standi to bring the dispute.

In essence the court was called upon to determine whether the adjudicator erred in allowing Singh to lodge the dispute with the Ombud. i.e. did Singh have sufficient standing to lodge a dispute?

The appellant argued that Singh was not the owner of the units nor was he an affected party or a party who could lodge a dispute, as the company was the registered owner of the units in question.

The adjudicator when the matter was heard was of the view that it was merely the applicant’s authority to act for the company which owns the units that were challenged and she was satisfied that Singh was duly authorised by resolution to act on behalf of the company.

The difficulty with this finding is found in the error by the adjudicator by equating authority with legal capacity to litigate, as the application to the Ombud was lodged by Singh in his own name and personal capacity.

The court in deciding this issue emphasised the difference by confirming that the standing of a person to commence litigation does not depend on authority to act, it depends on whether the litigant is regarded by the court as having a sufficiently close interest in the litigation and its outcome.

Considering that Singh was only a manager of the company, although authorised by the company to act on its behalf, the court held that the right to lodge a dispute was prescribed by legislation as a right that accrued to owners of units who were materially affected by a community scheme related matter. The applicant before the tribunal, Singh, was neither the owner of these units nor did he have a material interest in the existing scheme. He therefore lacked the necessary standing to institute the dispute, and it was accordingly decided that the appeal by the appellant be upheld.

The court confirmed that a party’s right of appeal against a decision by the Ombud is limited to questions of law only. Section 57(1) of the CSOS provides:

“An applicant, the association or any affected person who is dissatisfied by an adjudicator’s order, may appeal to the High Court, but only on a question of law”.

Although the purpose and intent of CSOS is to provide a more cost effective and expedient manner in which disputes in regard to community schemes can be resolved, it is important to ensure that the correct party, with the necessary standing, approaches the Ombud as applicant in any CSOS adjudication proceedings.

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