Waterford Estate Homeowners Association NPC v Riverside Lodge Body Corporate
and others 2023 JOL 60577 GJ

The case involves several key issues, including the review of an adjudicator’s decision based
on the Promotion of Administrative Justice Act (PAJA), as well as a decision as to whether
the individual owners of the Sectional Title Scheme are members of the applicant, and the
constitutionality of certain sections of the Community Schemes Ombud Services Act (CSOS
Act). The parties involved in the case are the Waterford Estate Homeowners Association
(the applicant), the body corporate of Riverside Lodge Sectional Title Scheme (the first
respondent), individual owners of Riverside Lodge Sectional Title Scheme (the second to
102nd respondents), the adjudicator appointed under the CSOS Act (the 103rd respondent),
as well as statutory functionaries.

The dispute began in 2005 when the first respondent failed to pay outstanding
contributions to the applicant. A settlement agreement was reached; it contained a formula
for the determination of future contributions. The respondent paid the outstanding arrears.
During 2017, the first respondent fell into arrears again. The respondent refused to pay the
outstanding contributions because it was not per the formula in the Settlement Agreement
and was deemed unreasonable. The applicant referred the matter to the CSOS seeking an
order against the respondents for unpaid levies. An adjudicator was appointed to handle the
matter. The respondents counterclaimed, seeking adjustments to contributions and alleging
that contributions were unreasonable.

Adjudicator’s findings:
The adjudicator ordered the first respondent to pay a sum to the applicant, and upheld the
respondent’s counterclaim for adjustments and repayment related to contributions, and
indicated that the second to 102nd respondents were not members of the applicant. The
applicant sought to review this decision under PAJA and challenged the constitutionality of
certain sections of the CSOS Act.

Defences raised by the respondents:
The respondents raised several defences, including contentions around the applicant’s locus
standi on the basis that the adjudicator’s finding was not reviewable under PAJA, the
adjudicator’s decision was meant to be final, internal remedies were not exhausted, and
that the review application had lapsed.

Locus standi, exhausting internal remedies and finality of the decision
The first point in limine that the court considered was whether the adjudicator’s decision
amounted to administrative action as envisaged under PAJA. The court confidently ruled
that an adjudicator appointed under an Act, like CSOS, is not engaged in private adjudication
but performing a public function. Hence, the court rejected the first point raised by the
respondent and ruled that the adjudicator’s decision is reviewable under PAJA.

The court then moved on to the next major point that the respondents had raised.

The respondents had correctly stated that PAJA requires one to first exhaust all internal
remedies before having the action reviewed in court, as seen in section 7(2) of PAJA.
Respondents argued that the applicant had not exhausted all internal remedies because a
clause in their settlement agreement required that any dispute needed to be referred to
either the Chairperson of Eagle Canyon Homeowners Association or the Chairperson of the
Dainfern Homeowners Association, which the applicant had ignored. The court rejected this
argument on the basis that section 7(2) of PAJA refers to internal remedies that are
provided for in the legislation, such as adjudication in the CSOS Act.

Respondents raised a further point against this application. They contended that the
adjudicator’s decision should be final and binding. However, the court dealt with this point
swiftly – adjudication orders or rulings have at all times been taken on review in several
cases in this division and stand to be challenged on review.

The next question the court looked at was whether there were any grounds that justified a
review of the adjudicator’s decision.

Are the unit owners of the sectional title units members of Waterford?
The Court found that the adjudicator relied on Section 11(3)(b) of the Sectional Titles Act,
which states that the body corporate becomes a member of the Homeowners Association,
but it does not explicitly state that unit owners are also members. The adjudicator found
that there was no mention in the conditions of the title, sale agreements or deeds of
transfer requiring sectional title owners to become members of Waterford. The adjudicator
concluded that sectional title owners are not members of Waterford, and only the first
respondent is a member bound by Waterford’s rules.

The applicant argued that the sectional title owners are also owners of Erf 645, which is a
consolidated erf comprising Erf 380 and Erf 381. The applicant went on to state that the
Township Establishment Condition 4(9)(f) has the requirements that each and every “owner
of an Erf in the Township shall become a member of a Residents Association upon transfer
of the subdivided portion”.

The court did not agree with the applicant’s argument on two points:

Firstly, the court stated that clause 4(9)(f) is specific to erven 431 and 432 which, according
to the conditions, are zoned especiallyfor access purposes and would not refer to
consolidated erven 380 and 381.

Secondly, this clause conflicts with the conditions of titles, with specific reference to section
11(3)(b) of the Sectional Title Act.

Ultimately, the judgment affirmed the adjudicator’s findings: nowhere in the condition of
the title does it indicate that the unit owners will become members of the applicant; the
document shows that the body corporate becomes a member of the Homeowners
Association, and the only requirementis that unit owners be made aware of this.

Were there any grounds justifying that the adjudicator’s decision be reviewed?
The applicant maintained that the adjudicator’s decision was irrational and materially
influenced by errors of law within the meaning of PAJA. The court went on to state that the
rationality test was not an investigation into the merits or an investigation of whether the
decision was the best one, but rather whether the final decision was connected to the
purpose provided in the CSOS Act. The court stated that the adjudicator assessed the
relevant evidence presented, taking into account the context of the dispute, and considered
both parties’ submissions, making orders within the adjudicator’s powers. The court found
that the adjudicator’s final decision was connected to all the evidence, and that she did not
stray from her purpose.

In terms of whether the adjudicator’s decision was materially influenced by errors of law,
the court found that the applicant had failed to set out any errors of law in the finding.
However, the court still went on to investigate whether the adjudicator had done so.

The court stated that the focus was on the process and on how the adjudicator made the
decision when it came to the above inquiry. The court assessed the evidence and came to a
similar conclusion: the applicant did not follow the Settlement Agreement, the applicant
unilaterally cancelled the agreement and arbitrarily raised levies, and the argument that the
individual owners of the Sectional Title Scheme were members of the applicant was
incorrect. The court found that the adjudicator’s decision was not materially influenced by
errors of law.

Are sections 39(1)(c) and 39(1)(e) of the CSOS Act unconstitutional?
Sections 39(1)(c) and (e) of the CSOS Act set out that the adjudicator is entitled to make an
order in terms of the sections. This is an order declaring that a contribution levied on
owners or occupiers, or the way it is to be paid, is incorrectly determined or unreasonable,
and an order can be made for the adjustment of the contribution to a correct or reasonable
amount. The applicant argued that these sections afford the adjudicator an unguided and
unfettered discretion, which renders the section unconstitutional due to the vagueness of
the word ‘reasonable’. The court found the applicant’s argument to be flawed, as the word
‘reasonable’ is seen in almost all legislation around the country where an organ or state or
bodies have exercised discretion. The word ‘reasonable’ does not mean unfettered
discretion; it carries an objective test. The court dismissed the applicant’s contention.

The court ruled that the adjudicator’s decision was subject to review under PAJA as it
constituted public, not private, adjudication. It also clarified that internal remedies referred
to in PAJA are those provided for in the legislation, such as adjudication under the CSOS Act,
and not private agreements.
Regarding the membership of the applicant, the court affirmed the adjudicator’s findings,
stating that Sectional Title Owners are not members of Waterford, and that only the first
respondent was bound by Waterford’s rules.
The court found that the adjudicator’s decision was neither irrational nor influenced by
errors of law, as it was connected to the adjudicator’s purpose under the CSOS Act.
Lastly, the court dismissed the contention that certain sections of the CSOS Act were
unconstitutional, noting that the word ‘reasonable’ in those sections did not grant
unfettered discretion but required an objective test.
In summary, the court upheld the adjudicator’s decision and dismissed the challenges
brought against it, providing clarity on several important legal issues.

Author- Tristan de Chalain