THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Not Reportable
Case no: 525/2023

In the matter between:

CHAPMAN’S BAY ESTATE HOME
OWNERS’ ASSOCIATION APPELLANT

and

WILLEM ADRIAAN LÖTTER FIRST RESPONDENT
COMMUNITY SCHEMES OMBUDS SECOND RESPONDENT
SERVICES
MNINAWA BANGILIZWE THIRD RESPONDENT
Neutral citation: Chapman’s Bay Estate Home Owners’ Association v Lötter and
Others (525/2023) [2024] ZASCA 153 (12 November 2024)
Coram: MOKGOHLOA, WEINER and KGOELE JJA and DOLAMO and
DIPPENAAR AJJA
Heard: 03 September 2024
Delivered: 12 November 2024

2
Summary: Constitution of a Home Owners Association (HOA) – interpretation of
clause 9.10 – whether subsequent owner who received a transfer from the first owner
and not a developer obliged to pay penalty levies – language of the clause clear –
subsequent owners do not acquire transfer directly from a developer – reading-in not
legitimate.

3


ORDER


On appeal from: Western Cape Division of the High Court, Cape Town (Van Zyl
AJ and Sher J, sitting as court of first instance):
The appeal is dismissed.


JUDGMENT


Kgoele JA (Mokgohloa, Weiner JJA and Dolamo and Dippenaar AJJA
concurring)

[1] The appellant, Chapman’s Bay Estate Home Owners’ Association (HOA), is
a home owners’ association established for the Chapman’s Bay Estate development,
a residential development situated in Noordhoek, Cape Town (the Estate). The first
respondent, Mr Adriaan Willem Lötter (Mr Lötter), owns erf 4456 (the erf) in the
Estate. The appeal stems from an application brought by Mr L ötter to the second
respondent, the Community Schemes Ombud Services (the CSOS), in terms of s 38
of the Community Scheme Ombud Service Act 9 of 2011 (the CSOS Act). Mr Lötter
sought an order prohibiting the HOA from imposing penalty levies on him, as a
subsequent owner in terms of clause 9.10 of the HOA’s constitution. The t hird
respondent, Mr Mnimawa (the adjudicator ), was appointed by the CSOS to
determine Mr Lötter’s application.

4
[2] The appeal concerns the proper interpretation of clause 9.10 of the HOA’s
constitution. The impugned clause reads as follows:
‘Penalty levies as determined by the Trustees Committee are payable to the Association if a
dwelling on the property is not completed within 3 (three) years from date of transfer of the
property from the Developer on the basis that construction of the dwelling should commence
within 2 (two) years from the date of transfer of the property into the name of Purchaser, and
completed within 1 (one) year from date of commencement of such construction process, which
shall be undertaken on a continuous basis, unless an extended time period is approved by the
Design Review Committee due to the complexity of the dwelling.’

[3] On 5 May 2022, the adjudicator ruled in favour of Mr Lötter. The HOA
appealed the adjudicator’s ruling as provided for in s 57 of the CSOS Act, and in the
alternative, made an application to have part of the adjudication order reviewed and
set aside. The appeal, alternatively review application, served before the Western
Cape Division of the High Court, Cape Town (the high court). The high court ruled
in favour of Mr Lötter, albeit for different reasons from those of the adjudicator. This
appeal is with the leave of the high court against its decision. Mr Lötter, the CSOS,
and the adjudicator filed notices to abide by the decision of this Court.

[4] The background facts that are common cause can be summarised as follows:
The erf acquired by Mr Lötter, was transferred by the developer on 17 August 2016
to Mr. Michael David Gould (the previous owner). Mr Lötter subsequently took
transfer of the erf more than four years later, on 29 January 2021. Upon becoming
the owner of the erf, Mr Lötter also became a member of the HOA . As a member,
the constitution of the HOA binds him . At the time Mr Lötter received the transfer
of the erf, the previous owner had not yet built a house thereon.

5
[5] The HOA brought clause 9.10 to Mr Lötter's attention before he purchased the
erf. The HOA also explained to him that the interpretation of the clause is that a
subsequent owner of an erf will be liable for penalty levies if , at the time an erf is
acquired, the three years stipulated in clause 9.10 has already expired , and the
construction of a dwelling has not commenced or been completed on the property.
Mr Lötter confirmed these averments in his papers.

[6] Immediately after receiving transfer of the erf, Mr Lötter started building the
house and completed it without delay. Despite this, the HOA continued to impose
penalty levies on him in terms of this clause from the d ate he received the transfer,
even though the previous owner had duly paid the levies imposed on him in full .
Mr Lötter refused to pay the penalty levies and only paid the regular levies charged.
The aggregate sum of the outstanding penalty levies was R58 905.

[7] Approximately 14 months after Mr Lötter took transfer of his erf, he made an
application to the CSOS for, amongst other relief, that the HOA ‘ be stopped from
enforcing penalty levies on new owners who made every effort to develo p their
property expeditiously’. He complained that imposing penalty levies on owners who
are not to blame for not completing a dwelling within the three-year period stipulated
in clause 9.10 is unfair. In the alternative, Mr Lötter contended that the interpretation
of the clause should not be that it imposes penalty levies on owners such as h im,
who completed their dwellings within three years of acquiring the property. He also
urged the adjudicator to interpret the clause to the effect that the three-year period
should commence afresh upon each transfer of an erf in the Estate.

[8] It is common cause that the interpretation of the clause by Mr Lötter is at odds
with that of the HOA. The HOA maintain ed that the clause provides for a single

6
three-year moratorium period for each erf, during which the HOA will not impose
penalty levies against the owner of an undeveloped erf. According to the HOA, that
period commences on the date of transfer from the developer and expires on the third
anniversary of that date. The effect is that, the submission continued, the HOA can
impose penalty levies on subsequent owners who acquire an erf in the Estate, if the
three-year moratorium period has already expired in circumstances where a dwelling
has n ot yet been built or completed. As explained by the HOA, this is because
penalty levies will start when the subsequent owner takes transfer and continue until
he or she completes a dwelling on the erf.

[9] The HOA further submitted that clause 9.10 is attached to the property in
question and not to persons or owners, which is why subsequent owners are held
liable for paying the penalty levies. The purpose, as contended by the HOA, is to
motivate owners, irrespective of the fact that they took the transfer of an erf from the
developer or a subsequent owner, to construct and complete construction work on
the relevant erf as soon as possible.

[10] As already indicated, the adjudicator found in favour of Mr Lötter. On appeal,
the high court rejected both the interpretations proffered by the HOA and by Mr
Lötter. However, the high court found in favour of Mr Lötter on different grounds.
In rejecting the HOA’s argument that the penalty levies attach to the property and
not to a person , the high court reasoned that ‘[o]n a proper interpretation of clause
9.10, it is the responsibility of the member who takes transfer from the developer to
construct a dwelling within three years after transfer . It is a personal obligation
undertaken on the basis of the contractual nature of the constitution. It does not attach

7
to the property , but to the contracting member . For that reason, such obligation
cannot be transferred to new members, as is acknowledged by clause 7.5.’1

[11] After analysing the purpose of the provisions of clause 9.10, the high court
found that:
‘[43] The provisions of clause 9.10 would have no business efficacy if the applicant’s contentions
were upheld. . .This is because, if the purpose is (on the plain wording of the clause) to encourage
owners to build within three years of taking transfer from the developer, that purpose can never be
served by imposing penalties on subsequent owners where the three -year period has expired. In
such circumstances, it is impossible for subsequent owners to comply with the clause. Imposing
penalties in perpetuity from year 4 onwards does not give effect to the purpose of the clause. It
simply provides an additional, and probably substantial, source of income for the applicant – one
that is not necessarily authori sed by the provisions in the constitution setting out the Trustee
Committee’s rights and duties in relation to the levying of rates. . .
[44] The power to impose levies is primarily focused on meeting the reasonably incurred expenses
of the applicant. The automatic (and indiscriminate) imposition of penalty levies on subsequent
owners by reason of a first owner not having fulfilled its obligation under clause 9.10 to the
applicant, falls outside of the powers of the trustees in circumstances where clause 9.10 itself does
not provide such an entitlement.’

[12] The high court concluded by finding that the express words contained i n
clause 9.10 do not authorise the HOA to impose penalty levies on subsequent
owners, but only upon owners who purchased the properties directly from the
developer. For the clause to state what the HOA contends, redrafting is required. It
issued the following order:

1 Clause 7.5 provides that:
‘7.5 The rights and obligations of a Member shall not be transferable and every Member shall:

7.5.1 to the best of his ability further the objects and interests of the Association;
7.5.2 observe all by-laws, rules and regulations made by the Association or the Trustee Committee. ’

8
‘The [HOA] is ordered, with immediate effect, to desist from imposing penalty levies in terms of
clause 9.10 of its constitution upon any owners in the Estate other than those who took transfer of
their properties from the developer.’

[13] Before this Court, the HOA argued that the high court's ruling was in correct
in that it misdirected itself by not applying the principles applicable to contractual
interpretation. The HOA repeated all the submissions it made before the high court
to persuade this Court that the order of the high court undermines the purpose of this
clause. According to the HOA, its interpretation is consistent with the text, the
context for which the clause is being used, and the purpose it seeks to achieve. It
emphasised that in terms of the clause, the period within which the construction of
a dwelling is to commence and be completed starts from the date of the first transfer
of the property from the developer. It does not begin when a subsequent owner, such
as Mr Lötter, takes transfer.

[14] In addition, the HOA submitted that, on the interpretation pronounced by the
high court, the purpose of the clause is rendered nugatory . The HOA is thus left
powerless to encourage subsequent owners to develop their property in the Estate as
quickly as possible. On such interpretation, the argument continued , a cynical
speculator may, for instance, avoid clause 9.10 by simply transferring the erf from
one of his corporate entities under his control to another . According to the HOA,
such an interpretation is not sensible or business-like. It was the contention of the
HOA that other HOA members endorsed this interpretation and are complying.

[15] The crisp issue before this Court is whether the high court was correct in
interpreting the clause as not being applicable to Mr Lötter. In other words, whether
the clause authorises the HOA to impose penalty levies on subsequent owners who

9
did not acquire a transfer from the developer but from a previous owner.

[16] In South African Airways (Pty) Ltd v Aviation Union of South Africa and
Others (South African Airways) ,2 this Court referred to several outcomes that
circumscribed the limits of judicial interpretation. This Court said:
‘Harms DP in Minister of Safety and Security v Sekhoto most recently summarized these principles,
in so far as relevant here, as follows:
. . . There is a distinction between interpreting legislation in a way which “promote [s] the spirit,
purport and objects of the Bill of Right s” and the process of reading words into or severing them
from a statutory provision under s 172(1)( b), following upon a declaration of constitutional
invalidity under s 172(1)(a).
. . . The first process, being an interpretative one, is limited to what the text is reasonably capable
of meaning. The second can only take place after the statutory provision, notwithstanding the
application of all legitimate interpretative aids, is found to be constitutionally invalid.
And of course in S v Zuma the Constitutional Court cautioned against using the Constitution to
interpret the language of legislation to mean whatever a court wants to mean. It would appear that
in Cosawu and this case the court s considered that a particular outcome promoted the objects of
the Act and the section in particular, and disregarded the intention of the legislature as manifested
in the clear language of the section.
There was no challenge to the constitutionality of s 197 in this matter. A collateral challenge in the
guise of reading a word to mean something different is simply not legitimate. See in this regard
The Law Society of the Northern Provinces v Mahon. It would be tantamount to usurping the role
of the legislature.
In Standard Bank Investment Corporation Ltd v Competition Commission & others ; Liberty Life
Association of Africa Ltd v Competition Commission & others this court dealt with the

Association of Africa Ltd v Competition Commission & others this court dealt with the
interpretation of the Competition Act 89 of 1998, the issue in the appeal being whether the
Competition Commission is one of the regulatory authorities whose approv al of a bank merger
and an insurance merger is required. Various arguments against a literal interpretation of the

2 South African Airways (Pty) Ltd v Aviation Union of South Africa and Others [2011] ZASCA 1; [2011] 2 BLLR
112 (SCA); 2011 (3) SA 148 (SCA); (2011) 32 ILJ 87 (SCA); [2011] 3 ALL SA 72 (SCA) paras 26 -29. (Citations
omitted from quote.)

10
section were raised in favour of a purposive construction . Whilst recognizing the need to give
effect to the object or purpose of legislation, the court stressed that it is not the function of a court
to do violence to the language of a statute and impose its view of what the policy or object of a
measure should be.’ [Emphasis added.]

[17] In Lötter N O and Others v Minister of Water and Sanitation and Other s
(Lötter),3 this Court said:
‘The correct approach to the interpretation of written documents, be they statutes or contracts, was
set out authoritatively by this C ourt in Natal Joint Municipal Pension Fund v Endumeni
Municipality. Essentially, what is required is an objective, unitary exercise that takes into account
the language used, the context in which it is used and the purpose of the document concerned.
Unterhalter AJA, in Capitec Bank Holdings Limited and Another v Coral Lagoon Investments 194
(Pty) Ltd and Others, added the following:
“I would only add that the triad of text, context and purpose should not be used in a mechanical
fashion. It is the relationship between the words used, the concepts expressed by those words and
the place of the contested provision within the scheme of the agreement (or instrument) as a whole
that constitutes the enterprise by recourse to which a coherent and salient interpretation is
determined. As Endumeni emphasized, citing well -known cases, “[t]he inevitable point of
departure is the language of the provision itself”.’ [Emphasis added.]

[18] At the onset, it is essential to point out that Mr Lötter was not required to pay
any penalty levies ‘inherited’ from the previous owner. As indicated, the previous
owner paid the penalty levies imposed on him. The penalty levies imposed on Mr
Lötter were additional, based on the HOA’s interpretation of the provisions of the
clause, irrespective of the fact that Mr Lötter completed building his property shortly
after the transfer.

after the transfer.


3 Lötter N O and Others v Minister of Water and Sanitation and Others [2021] ZASCA 159; [2022] 1 All SA 98
(SCA); 2022 (1) SA 392 (SCA) para 43. (Citations omitted from quote.)

11
[19] I disagree with the interpretation proffered by the HOA . Applying the trite
principles of interpretation as espoused above, this Court is enjoined to start with the
ordinary language in the provision itself, in other words, what the text is reasonably
capable of meaning. First, there is no indication in the text that once the three-year
period has lapsed before a building is completed, the subsequent owner will pay
penalty levies. The clause is silent on this issu e. The words in the clause are clear
and specific; they expressly refer to two persons, the ‘owner who received transfer’
and the ‘developer’. The clause also refers to the non-completion of the building
within three years from the ‘date of transfer from the developer .’ There is no
ambiguity in this text. What is apparent from a plain reading of the clause is that the
three-year period within which the dwelling is to be developed is expressly linked
to the date of transfer from the developer.

[20] Subsequent owners, such as Mr Lötter, do not take transfer from the developer
but from the owner. The high court was correct in finding that there is thus nothing
in the clause that authorises the HOA to continue to impose penalty levies on them.
The subsequent owners are, in any event, incapable of ever complying with the
obligation placed on the first owner, namely, to start and complete the development
of the property within three years of the date of transfer from the developer, if they
only took transfer of the property more than three year s after its transfer from the
developer.

[21] Second, the high court w as further correct to conclude that the obligation to
pay penalty levies does not, as the appellant argued, attach to the property, but rather
attaches to the members of the HOA as contracting parties to the constitution. Clause
9.10, seen in the context of the scheme created by the constitution as a whole ,

12
regulates the rights and obligations of the HOA and its members inter se. The fact
that such rights and obligations pertain to a specific property, does not change this.

[22] Third, the clause is silent on when the obligation to pay penalty levies
terminates under clause 9.10. The termination period also cannot be found anywhere
else in the HOA’s constitution. It is important to state that the HOA’s constitution
clearly differentiates between regular and penalty levies. Unlike penalty levies,
regular levies are self-evidently payable for as long as any individual or ent ity is a
member of the HOA. Both the onset and the termination of liability for the member’s
successor in title in respect of the regular levies are provided by clause 9.7.4

[23] The termination of the liability for penalty interest was also not addressed in
the HOA’s papers. This issue is not expressly addressed in clause 9.10 of the
constitution. When this Court engaged the HOA’s counsel on this issue, he submitted
that it could be tacitly or implicitly inferred from the clause that it terminates once a
property owner builds on the property. There are several reasons why this
submission cannot extricate the case of the HOA. The first reason is that, given that
the relationship between the HOA and its members is regulated by contract, being
the constitution, it need s to be considered whether the term is implied or tacit as
contended. The problem with this contention is that the HOA never relied on such
tacit or implied term, and it does not appear in the pleadings. It is trite law that if a
party wants to rely on a tacit or implied term, the term and the facts on which reliance

4 Clause 9.7 provides that:
‘Any amount due by a Member by way of a levy shall be a debt due by him to the Association, the obligation of a
Member to pay a levy shall cease upon his ceasing to be Member of the Association, without prejudice to the

Association’s right to recover arrear levies. No levies paid by a Member shall under any circumstances be repayable
by the Association upon his ceasing to be a Member. A Member’s successor in title to a Residential Erf shall be liable
as from the date upon which he becomes a Member pursuant to the transfer of that erf, to pay the levy attributable to
that erf. No Member shall transfer his Residential Erf until the Association has certified that the Member has at the
date of transfer fulfilled all his financial obligations to the Association.’ (Emphasis added.)

13
is placed should be specifically pleaded. Therefore, no such case was made out on
the papers.

[24] The second reason is that, even if the purpose of levying the penalties is
obvious, I am not persuaded that , on this basis alone, it can simply be implied that
the penalty levies will cease once the building is completed. If we interpret the clause
as the HOA contends, it will lead to an absurdity. In my view, apart from the fact
that subsequent owners will not be able to comply with the clause as the high court
found, it will , in practical term s, mean that subsequent owners, to avoid being
mulcted with penalty levies, should build and complete their houses withi n a day
after they obtained transfer of the property from the first owner, which is impossible.

[25] The other difficulty is that there is no indication in the text of the clause
whether, if the erf is still vacant when it is transferred to a subsequent owner after
the expiration of the three years, the penalty levies will continue in perpetuity,
notwithstanding that the owner who received a transfer from the developer paid the
penalty levies imposed on him, as is the case in this matter. The HOA appears to be
acutely aware of the implications of omitting these crucial averments in the clause.
If this were not the case, it would not have been necessary for the HOA to explain
the meaning and consequences of the clause to every prospective subsequent owner.
The relevant penalty levies, in fact, according to the constitution, increase after year
4 from the date of transfer of the property from the developer.5


5 Annexure E to constitution (Transgressions and Penalties table) provides under clause 1.5 thereof, that a penalty levy
of 1x the Ruling Levy in year 4 after transfer of the property from the developer and 2 x the Ruling Levy, be imposed
in year 5.

14
[26] The fact that the first owner who obtained a transfer from the developer paid
the levies imposed on him in this matter exacerbates the difficulty the HOA is facing
with their interpretation. The reason is that the continuous imposition of the penalty
levies on Mr Lötter results in a double payment being charged from the same erf as
the penalty levies were paid in full. As indicated earlier and with the risk of
repetition, it is impossible for subsequent owners like Mr Lötter, who started
building the house on the erf shortly after transfer, to complete the building in one
day, let alone a month after transfer. Unsurprisingly, the high court regarded the
additional penalty levies as a ‘money-making scheme’.

[27] In addition, it also does not appear from the version of the HOA that Mr Lötter
was made aware that the previous owner paid the penalti es. The only thing that
emerged clearly from the HOA’s papers was that ‘he was informed that the previous
owner had incurred penalty levies. . . and that he would inherit these penalty levies’
in terms of clause 9.10. Be that as it may, I am constrained by the conclusion I reach
below from making any finding on the unfairness of the clause; suffice it to state that
the fairness of this clause is questionable despite the good intention of the purpose
of the clause as alleged by the HOA.

[28] In summary, t he wording of the clause does not bear out the expansive
interpretation given to it by the HOA in support of the purpose for which it has been
included in its constitution. There is no room for such interpretation , given that the
interpretation process is limited to what the text is reasonably capable of meaning .
The purpose of the clause cannot override the reasonable meaning of the text
employed, seen in the context of the constitution as a whole. It is also impermissible
for this Co urt to make a contract for the parties as enunciated in Natal Jo int

15
Municipal Pension Fund v Endumeni Municipalit y (Endumeni)6 and Capitec Bank
Holdings Limited and Another v Coral Lagoon Investments 194 (Pty) Ltd and
Others.7 This Court also emphasised in Endumeni that the inevi table point of
departure is the language of the provision itself.8

[29] What the HOA is effectively seeking is the ‘reading-in’ of words in the clause
to make provision for the imposition of penalty levies on subsequent owners for as
long as the property remains undeveloped, ie, to serve the purpose that the HOA had
in mind in including clause 9.10 in the constitution. Following the principles
espoused in South African Airw ays,9 ‘reading-in,’ as the HOA suggests , will be
doing violence to th e express words in the clause . On a proper interpretation of
clause 9.10, as it stands, the HOA is entitled to impose penalty levies only upon
owners who purchased properties in the Estate directly from the developer. The high
court was correct in stating that redrafting is required.

[30] In conclusion, I am of the view that the ordinary grammatical expression of
the words in the clause is sufficient to dispose of the matter. Therefore, the need to
analyse the reasons pertaining to the other aspects the high court identified and took
into consideration falls away. The high court was correct to conclude that whether
the clause is unfair, unreasonable, or harsh does not affect the debate. Similarly, this
Court was required to interpret the clause and not to make a declaration on it.



6 Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] ZASCA 13; [2012] 2 All SA 262 (SCA); 2012
(4) SA 593 (SCA) para 18.
7 Capitec Bank Holdings Limited and Another v Coral Lagoon Investments 194 (Pty) Ltd and Others [2021] ZASCA
99; [2021] 3 All SA 647 (SCA); 2022 (1) SA 100 (SCA) para 26.
8 Op cit fn 7 para 18.
9 Op cit fn 2 para 29.

16
[31] In the circumstances, the appeal is dismissed.



_______________________
A M KGOELE
JUDGE OF APPEAL

17

Appearances

For appellant: J Dickerson SC (with J Engelbrecht)
Instructed by: Bernadt Vukic Potash & Getz Attorneys, Cape Town
Honey Attorneys, Bloemfontein.