August 7, 2024 Community Schemes Ombud Service, Dispute Resolution Management

By Auren Freitas dos Santos

The Heathrow Property Holdings No 3 CC v Manhattan Place Body Corporate judgment handed down on  1 June 2021 by Judge Sher has significantly influenced how our courts handle disputes within community schemes.

According to Judge Sher, disputes falling squarely within the jurisdiction of the Community Schemes Ombud Service Act (CSOSA) should be referred to the ombud first, and the High Court should only hear such matters under exceptional circumstances. Judge Sher did not elaborate on what these exceptional circumstances might be, and held that this will need to be determined on a case-by-case basis. This judgment aims to clarify the CSOSA’s role but has several critical flaws that make it problematic.

Overview of the Heathrow Judgment

In the Heathrow judgment, Judge Sher argued that:

1. Disputes within the CSOSA’s scope should first be referred to the ombud.
2. The High Court should decline to hear such matters, considering the CSOSA’s processes as “internal remedies” that must be exhausted first.
3. The judgment emphasised the importance of the CSOSA in providing a cheaper and more accessible dispute resolution mechanism.

Despite its intentions, the Heathrow judgment has several flaws in my opinion:

Misinterpretation of Legislative Intent:

1. The CSOSA was designed to provide an additional dispute resolution mechanism, not an exclusive one. It was meant to coexist with the traditional court system, offering litigants flexibility in choosing their forum.
2. The Sectional Titles Schemes Management Act (STSMA) explicitly allows for litigation involving sectional-title bodies corporate, indicating that the Courts retain jurisdiction, albeit concurrently.

Contradiction with Established Legal Principles:

1. The oft quoted Standard Credit Corporation v Bester case and subsequent rulings, including the Supreme Court of Appeal judgment in Agri Wire (Pty) Ltd v Commissioner of the Competition Commission established that courts must hear matters within their jurisdiction, regardless of the availability of specialised dispute resolution mechanisms.
2. South African law does not recognise the doctrine of forum non conveniens, meaning courts cannot decline cases on the basis that another forum is more appropriate.

Undermining Access to Justice:

1. Restricting access to the High Court undermines litigants’ rights to seek justice in their chosen forum. The High Court often has broader remedial powers and can address complex legal issues beyond the ombud’s scope or competence.

Inconsistent Judicial Approach:

1. The reliance on the Heathrow judgment has led to inconsistencies in handling community scheme disputes, creating uncertainty for litigants.

Judicial Rejection of the Heathrow Judgment

Several judgments have rejected the Heathrow reasoning.

1. The judgment of the Supreme Court of Appeal in Standard Bank of SA Ltd v Mpongo handed down 24 days after the judgment in Heathrow, reaffirmed that courts should hear matters within their jurisdiction, even if specialised dispute resolution mechanisms are available. The Court held that where a statute offers alternative fora, it is a matter of sheer practicality that the initiating party may choose one or the other.
2. The Constitutional Court judgment in South African Human Rights Commission v Standard Bank of South Africa Ltd and Others handed down on 9 December 2022 upheld views of the Supreme Court of Appeal in Mpongo and agreed that the position in Agri Wire that “our courts are not entitled to decline to hear cases properly brought before them in the exercise of their jurisdiction” remains good law.
3. In Coral Island Body Corporate v Hoge handed down on 23 May 2019, Judge Binns-Ward correctly held that courts may not refuse to hear community scheme issues, but should use their discretion regarding costs to discourage inappropriate use of the courts for matters better suited for the ombud.
4. Similarly, in Sorrento Sectional Title Scheme Body Corporate v Koordom handed down on 26 May 2022, Acting Judge Carter reiterated that courts have no power to refuse cases that could be handled by a magistrate’s court, and this principle applies to the ombud’s jurisdiction as well.
5. The most recent example can be found in the South Gauteng High Court judgment in Bogatsu and Another v 108 on 8th Street Homeowners Association handed down on 28 June 2024 where Judge Mdalana-Mayisela (Judge Strydom concurring) provided the following detailed critique:

Interpretation of Section 38(1) of the CSOSA:

The court noted that section 38(1) of the CSOSA provides that any person may make an application if such person is a party to or affected, materially by a dispute.  The court correctly held that when the word “may” is read in the context of section 38(1), it affords any person who is a party to or affected, materially by a dispute, an election to make an application to CSOS. The wording of this section is not peremptory. It does not expressly state that the exhaustion of CSOS remedies is an indispensable condition precedent to launching an application to court.

Concurrent Jurisdiction:

The judgment emphasised that the CSOS Act does not exclude the jurisdiction of the Magistrate’s Court or the High Court. It provides an alternative dispute resolution mechanism, allowing parties to choose their forum.

The principle of concurrent jurisdiction was reinforced, indicating that specialised courts and ordinary courts have overlapping authority.

The court referenced the Supreme Court of Appeal in Makhanya v University of Zululand, which explained that statutes could confer concurrent jurisdiction on specialised courts and ordinary courts without excluding the latter’s authority.

Conclusion

The Heathrow judgment’s interpretation of the CSOSA’s jurisdiction is fundamentally flawed in my opinion. While the CSOSA provides an important mechanism for resolving community scheme disputes, it was never intended to replace the High Court’s jurisdiction. Litigants retain the right to choose their forum, and the High Court must hear cases within its jurisdiction.

Courts may use cost orders to discourage inappropriate use of court resources, but cannot decline to hear matters solely because they could be addressed by the ombud. The reliance on the Heathrow judgment has created unnecessary confusion and must be corrected to ensure consistent and fair access to justice.  This is especially true in light of the deficiencies and shortcomings of the ombud as highlighted in our recent series of articles titled “A Call for Change: Addressing the Shortcomings of CSOS.”

We encourage those involved in community scheme disputes to consider approaching the courts in appropriate circumstances to ensure their cases are heard appropriately. By utilising our litigation services, you can navigate these complex legal landscapes effectively. Our expertise can help you achieve the best possible outcome, ensuring your rights are protected and justice is served.

Courtesy: The Advisory - Community Schemes Specialists

Specialist Community Scheme Attorney (BA, LLB), Ané de Klerk, is a Director of The Advisory, a boutique consultancy specialising exclusively in community schemes law. Her focus is legal education, which includes presenting seminars and running online and in-person training programs and courses. You can reach out to her via email at [email protected] to request an obligation-free quotation for assistance with better understanding sectional title finances.

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