Brief Summary

Community Schemes — Ombud Service — Costs — Application for variation of costs order — Applicant sought to rescind portion of order imposing costs against it — Court considered whether the Ombud Service could be held liable for costs in light of statutory provisions — Holding that the Ombud Service is immune from costs orders under the Community Schemes Ombud Service Act, as no allegations of unlawful, grossly negligent, or bad faith conduct were made against its adjudicator, thus the costs order was erroneously granted.

Comprehensive Summary

Summary of Judgment

1. Introduction

The matter concerned an opposed application for variation/rescission of part of a prior High Court order, brought under uniform rule 42(1)(a). The applicant was the Community Schemes Ombud Service (“the Service”), a statutory body established under the Community Schemes Ombud Service Act 9 of 2011. The respondent was Stonehurst Mountain Estate Owners Association (“the Association”), a community scheme within the ambit of that statute.

The procedural history originated in a dispute between the Association and certain of its members. One member referred the dispute to the Service, which appointed an adjudicator, Mr Ralawe, who delivered an adjudication order on 22 October 2020. The Association then instituted proceedings in the High Court under case number 17266/2020 (launched on 19 November 2020) to obtain urgent interim relief (Part A) and final relief (Part B), effectively challenging the adjudicator’s ruling by way of an appeal on a question of law, together with declaratory relief. The Service and the adjudicator did not oppose those proceedings and later delivered notices to abide.

Part A was heard by Bozalek J on 9 December 2020, who granted interim relief staying operation of the ruling pending Part B, postponed Part B, and ordered that the costs of Part A stand over for determination with Part B. Part B was later heard by Samela J on 3 March 2021, who granted the substantive relief sought (save for review relief advanced in the alternative) and made a costs order against the Service, including costs relating to Part A (“the Samela order”).

The present proceedings (case number 12399/2021) concerned whether the Samela order was erroneously granted to the limited extent that it imposed costs against the Service, and whether the Service was precluded from rule 42 relief because it had filed a notice to abide in the earlier matter. The general subject-matter was thus the lawfulness and correctness of a costs order made against a statutory dispute-resolution body in litigation arising from an adjudicator’s decision under the Act.

2. Material Facts

A community scheme dispute arose between the Association and some of its members. A member referred the dispute to the Service, which appointed Mr Ralawe to adjudicate it. Mr Ralawe issued an adjudication order (the ruling) on 22 October 2020.

The Association, aggrieved by the ruling, approached the High Court under case number 17266/2020. The Service was cited as first respondent and Mr Ralawe (in his official capacity) as second respondent. The Association sought, in Part A, a stay of the ruling pending Part B, and sought costs against the Service and any opposing respondents. The Service and the adjudicator did not oppose Part A.

On 9 December 2020 Bozalek J granted the stay, postponed Part B, and ordered that costs of Part A stand over. On 14 December 2020 the Service and the adjudicator served notices to abide. Part B was set down and heard on 3 March 2021 before Samela J, who granted substantive relief and ordered that the Service bear the Association’s costs, including the costs of Part A.

In the proceedings leading to the Samela order, the Association’s complaints focused on alleged jurisdictional and procedural defects in the ombud/adjudication process and on the merits, including contentions that the complaint should have been dismissed as frivolous or without substance. The judgment in the present matter recorded that, despite the length of the Association’s papers, no allegation was made that the adjudicator acted unlawfully, grossly negligently, or in bad faith as contemplated by section 33 of the Act, and no allegation was made that the adjudicator caused the Association damage or loss. The judgment further recorded that sections 33 and 37 of the Act were not drawn to Samela J’s attention, either in argument or in the heads of argument.

The court in the present proceedings accepted that the earlier court likely made the costs order without being aware of those statutory provisions. It was also accepted that no reasons were given for the Samela order, and the parties were recorded as being aligned that no appeal lay against the Samela order in light of section 16(2)(a)(ii) of the Superior Courts Act 10 of 2013.

As to what was disputed, the present judgment reflected a dispute about the consequences of the Service’s decision to file a notice to abide in the earlier litigation: the Association contended that the Service should at least have filed an explanatory affidavit when it abided, whereas the Service contended that it was not obliged to do so and that the relevant statutory framework should have been brought to the earlier court’s attention by the party seeking costs against it.

3. Legal Issues

The central legal questions were whether the portion of the Samela order making a costs order against the Service had been erroneously sought or erroneously granted for purposes of uniform rule 42(1)(a), and, if so, whether the Service was nevertheless barred from invoking rule 42 because it had filed a notice to abide in the earlier proceedings.

The dispute required determination primarily of law and the application of legal principles to the procedural facts, including statutory interpretation (particularly of sections 33 and 37 of the Act), and the proper scope and requirements of rescission/variation under rule 42(1)(a). It also involved a discretionary component in relation to the costs of the rule 42 application itself, once the merits of the variation were resolved.

4. Court’s Reasoning

The court located the Service within its statutory and constitutional setting. It recorded that the Service is established as a juristic person under section 3(1) of the Community Schemes Ombud Service Act, operates as a national public entity, and performs a dispute-resolution function. In practice, when a dispute is referred to the Service, it is adjudicated by an appointed adjudicator under the statutory framework.

The court then considered the statutory protections relevant to liability and immunity. It highlighted section 33, which limits liability of the Service and its employees for damage or loss caused by the exercise or non-exercise of powers or duties under the Act, unless the conduct was unlawful, grossly negligent, or in bad faith. It also highlighted section 37(1), which provides that, in performing their functions under the Act, the chief ombud, an ombud, a deputy ombud and an adjudicator enjoy the same privileges and immunities from liability as a High Court judge.

In approaching section 37(1), the court applied principles of statutory interpretation as restated in Cool Ideas 1186 CC v Hubbard and Another 2014 (4) SA 474 (CC), namely that statutory language should be given its ordinary grammatical meaning unless that would produce absurdity, that provisions should be interpreted purposively and contextually, and consistently with the Constitution where reasonably possible.

Against that interpretive framework, the court reasoned that it would be an absurd result if the statute immunised the Service’s functionaries (including adjudicators) from costs exposure while leaving the Service itself exposed to costs orders for performing its statutory duties in good faith. The court regarded it as inconsistent with the statutory design to interpret section 37(1) as deliberately excluding the Service from the practical protection afforded to its adjudicative functionaries, particularly in light of the Service’s role in facilitating an independent tribunal and the fact that it had no legal interest in the outcome of the underlying dispute between the Association and its members.

The court also connected the statutory purpose to section 34 of the Constitution, emphasising that the Service exists to provide a dispute resolution mechanism and that the legislature anticipated errors by adjudicators, providing an automatic right of appeal to the High Court on a question of law in section 57(1) of the Act. On that basis, the court considered that the costs issue against the Service should not have arisen in relation to the appeal, and that the Service (and adjudicator) had no interest in the declaratory relief sought regarding interpretation of the Association’s constitution.

As to the Association’s criticism that the Service should have filed an explanatory affidavit when it filed its notice to abide, the court held that the Service was not obliged to do so. The court placed responsibility on the Association, as the party seeking costs against the Service, to have drawn the relevant statutory provisions to Samela J’s attention. It stated that, had Samela J been aware of the provisions, the costs order against the Service would not have been granted.

On the procedural mechanism of rule 42(1)(a), the court considered the impact of a notice to abide and addressed arguments based on Zuma v Secretary of the Judicial Commission of Inquiry into Allegations of State Capture, Corruption and Fraud in the Public Sector Including Organs of State and Others 2021 (11) BCLR 1263 (CC). Without formulating a general rule, the court held that, in the particular circumstances, it would elevate form over substance to debar the Service from rule 42 relief where the costs order reflected an error of law, particularly given the constitutional centrality of the rule of law and the principle that an order stands until set aside.

The court then applied the established approach to rescission/variation under rule 42(1)(a) as articulated in Rossiter v Nedbank Ltd (96/2014) [2015] ZASCA 196 (1 December 2015). It noted that where an order was erroneously sought or erroneously granted, rescission or variation should follow “without more”, and it is not necessary to show good cause under the subrule. The court treated the costs portion of the Samela order as falling within the rule 42(1)(a) standard.

Finally, the court dealt with costs in the present application. Although the Service sought costs due to the Association’s opposition, the court exercised its discretion and concluded that such a costs order was not warranted on the particular facts. It therefore directed that each party pay its own costs in the rule 42 proceedings.

5. Outcome and Relief

The court varied the order granted on 3 March 2021 under case number 17266/2020 to the extent that it concerned costs. It set aside paragraph 6 of that order and substituted it with an order that there be no order as to costs in the earlier matter.

In the present proceedings, the court ordered that each party pay its own costs.

Cases Cited

Cool Ideas 1186 CC v Hubbard and Another 2014 (4) SA 474 (CC).

John Walker Pools v Consolidated Aone Trade & Invest 6 (Pty) Ltd (in liquidation) and Another 2018 (4) SA 433 (SCA).

Kingshaven Homeowners Association v Botha and Others (6220/2019) [2020] ZAWCHC 92 (4 September 2020).

Merafong City v Anglogold Ashanti Ltd 2017 (2) SA 211 (CC).

Rossiter v Nedbank Ltd (96/2014) [2015] ZASCA 196 (1 December 2015).

Turley Manor Body Corporate v Pillay and Others (10662/2018) [2020] ZAGPJHC 190 (6 March 2020).

Zuma v Secretary of the Judicial Commission of Inquiry into Allegations of State Capture, Corruption and Fraud in the Public Sector Including Organs of State and Others 2021 (11) BCLR 1263 (CC).

Legislation Cited

Community Schemes Ombud Service Act 9 of 2011.

Public Finance Management Act 1 of 1999.

Superior Courts Act 10 of 2013.

Constitution of the Republic of South Africa, 1996 (section 34).

Rules of Court Cited

Uniform Rules of Court, rule 42(1)(a).

Held

The court held that the portion of the order of 3 March 2021 directing the Service to pay the Association’s costs was erroneously granted for purposes of uniform rule 42(1)(a), in circumstances where the statutory provisions limiting liability and conferring immunities within the Community Schemes Ombud Service Act were not brought to the attention of the court that granted the costs order.

The court further held that, on the particular facts, the Service was not precluded from seeking rule 42 relief merely because it had previously filed a notice to abide, and that it would be inappropriate to prioritise form over substance where an error of law was implicated.

The earlier costs order against the Service was set aside and replaced with an order of no order as to costs, and in the present proceedings each party was ordered to pay its own costs.

LEGAL PRINCIPLES

A court may vary or rescind an order under uniform rule 42(1)(a) where the order was erroneously sought or erroneously granted. Where that requirement is met, rescission or variation follows without the applicant having to establish “good cause” under the subrule, consistent with the approach reflected in Rossiter v Nedbank Ltd (96/2014) [2015] ZASCA 196 (1 December 2015).

Statutory provisions are interpreted by applying ordinary meaning subject to avoidance of absurdity, and by adopting a purposive and contextual approach consistent with constitutional norms, as restated in Cool Ideas 1186 CC v Hubbard and Another 2014 (4) SA 474 (CC). In applying those principles to an institutional dispute-resolution framework, the court treated it as inconsistent with the statutory purpose to expose the statutory body facilitating adjudication to adverse costs consequences where its functionaries are protected and where it has no direct interest in the dispute outcome.

In the particular context of rule 42 proceedings, the filing of a notice to abide did not, on the facts, bar a party from later asserting that an order was erroneously granted, especially where an asserted error of law would otherwise remain operative until set aside, a consideration linked by the court to the constitutional value of the rule of law.

Community Schemes Ombud Service v Stonehurst Mountain Estate Owners Association (12399/2021) [2022] ZAWCHC 126 (17 June 2022)