Community Scheme Ombud Services Bill [B21-2010]: Further Deliberations

Meeting report

Community Scheme Ombud Services Bill [B21-2010]
The Chairperson noted that this meeting would continue discussions about the Community Scheme Ombud Services Bill [B21-2010] (the Bill) and it was proposed that this be addressed as part of the agenda.

Mr Kwhezi Ngwenya, Director: Framework Legislation, Department of Human Settlements, then spoke to the remaining clauses of the Bill. The Chairperson asked that the Parliamentary Legal Unit should also comment where necessary.

Clause 14
Mr Ngwenya read out Clause 14 of the Bill.

Ms M Borman (ANC) said that there may be a need to be looking at stipulating a minimum qualification instead of saying “suitable qualification” in Clause 14(4)(a) and asked if there was any reason for the current wording.

Mr Ngwenya responded that the Department wished to be prudent. It was considered preferable for the Board to establish, within its own discretion, the minimum qualifications and duties needed for the position when it was advertised.

The Chairperson asked if the wording could not be changed to “suitable qualifications, in line with requirements”, so it would be clear that somebody would take responsibility to advertise the requirements.

Ms Borman asked if it was normal to leave it to boards to stipulate qualifications.

Mr Ngwenya responded that the drafters would rephrase it.

Clause 15
Mr Ngwenya read out Clause 15.

Ms Berenice Paulse, Parliamentary Researcher, noted that there was a question in respect of 15(2), and asked why the positions involved a term of five years, with the possibility of being reappointed for another term of five years. She asked if there was any discretion to appoint still beyond that term.

Ms Borman said this was a good suggestion, as she did not believe in ending terms of office after a stipulated period, although it could sometimes be useful if it proved difficult to get rid of appointees.

The Chairperson said that in regard to Clause 15(3)(b), the conditions set up by the board should not be in contravention of labour relations or any other regulations. This should be refined, and the point needed to be captured.

Clause 16
Mr M Mdakane (ANC) noted that suspensions, in Clause 16(1)(c) should be without pay.

The Chairperson noted the suspension should be stated specifically in terms of the time frame, and said there was a need to fast track disputes.

A Member suggested that the Minister should determine the period of suspension as there may be different circumstances according to the nature of the misconduct. This could be on a case by case basis, but prescribing the time periods in legislation may limit the discretion of the board. There was a further suggestion that this could be fleshed out under Clause 29.

The Chairperson agreed, but said there needed to be a minimum and maximum period. Suspending a person without taking disciplinary measures and /or setting up a hearing was not good. She agreed that they could say 'as determined in the regulations'. In the past, people had been suspended for up to five years. It was important to learn from experience, and they had experience of people being suspended for indeterminate amounts of time. They could work it out in the regulations.

Mr Ngwenya noted that Clause 16(3) would be reworded, and a time period would be fixed.

Ms Borman asked if it would not be appropriate to add in the reference to “in accordance with the labour legislation” somewhere in this clause.

The Chairperson said that the labour laws did not allow suspension without pay. This was why it was important to expedite disciplinary measures.

Mr Mukesh Vassen, Parliamentary Legal Advisor, commented that often these cases were postponed because people raised issues of due process. This was where time frames may create problems, from a  labour law point of view.

The Chairperson noted that this could be dealt with in regulations.

Mr Ngwenya said that this issue was clear to the Department, and the drafters would look again at the points raised.

Clause 17
Ms D Dlakuda (ANC) said that there was a need to have time frames in regard to employees being in “acting” positions.

Ms Borman agreed.

Mr M Kwela, State Law Advisor, thought that the clause 17(1)(a) should be clarified by the wording “and a new chief ombud or” should be added in before “a new chief executive officer”.

The Chairperson said that there was a need to be consistent in terminology.
 
Clause 18
The Chairperson asked if there was a deputy ombud, or simply a chief ombud and Chief Financial Officer and Chief Executive Officer.

Mr Ngwenya replied that there was no deputy, but an “acting” appointment could be made.

Mr K Sithole (IFP) asked where it was said that chief ombud was the head.

Ms N Njobe (COPE) asked if Clause 18(2)(c) implied the appointment, and not just recruitment, of staff.

Mr Ngwenya said that it did. It was included under the clauses dealing with the staff of the Ombud Services.

Mr Vassen said that this subclause had significant financial consequences. Because of this, the Parliamentary legal advisers suggested including the words “to a structure” after the word “employees”, and also adding in a reference to “on the conditions approved by the board”. The Committee may also want to include a reference to “in consultation with the Minister”, as well as consider whether there was a role for the Minister of Finance in this matter.

Professor Graham Paddock, Consultant to Department of Human Settlements, said that this might hamstring the ombud. The Ombud Services would be running an organisation employing a reasonable number of people. If, each time it was necessary to appoint someone, the Ombud had to go to many Ministers then it would not be able to do things quickly. The Department wanted the entity to be lean and efficient, and he thought that having to get consent of Ministers before being able to employ would be too difficult.

Mr Mdakane said that the Ombud was accountable to the board and by extension to the Ministry, so it should be allowed enough space to fulfil its mandate. If it failed to perform the contracts of staff would not be renewed. He recommended that no changes be made.

Ms Borman thought that this was already covered in Clause 2, which stipulated that the Ombud should be working “subject to directives by the board”, which meant that the Ombud was not working completely on his or her own.

Adv Jan Tladi, Chief Director: Legal Services, Department of Human Settlements, clarified that before the ombud could be established, it was a requirement, in terms of the Public Finance Management Act (PFMA) that a  business plan had to be developed, which included an organisational structure approved by the National Treasury and the board. Therefore the Chief Ombud would not be hiring people that were outside the organisational structure.

The Chairperson agreed that there would be a pre approved structure or framework.

Mr Sithole agreed that the board was accountable to the Minister and the Department, and that there was a board and structure. Once an organogram was approved, people would be brought in, under those agreed criteria.

Clause 19
There were no comments on this clause.

Clause 20
Ms Njobe raised concerns about the chief Ombud and Chief Financial Officer (CFO) being able to delegate “any of their powers and assign any of their duties” in terms of Clause 20(1). She asked if this would then also involve the delegation of the function of appointing employees.

Prof Paddock said that it was important to cater for the situation where the chief ombud might be absent. In such an organisation there needed to be such a facility to delegate responsibilities. There was a financial plan, directors, and a yearly plan, so he said that the delegation would not be in isolation, and he did not see a danger there.

The Chairperson added that it was not possible to delegate unless set out in writing. Final approval should be done by the ombud. If he/she was not there, the board appointed some other person to fulfil responsibilities.

Mr Ngwenya added that Clause 22 gave power to the board to set conditions, and reiterated that it would therefore have a say over what was to be done.

Ms Njobe said she was only concerned with the one function of appointing employees, which could be delegated to other employees, saying that there was no mention of “senior” employees.

The Chairperson said that there were some duties that could be delegated to some people and if the board had appointed a specific person to whom the delegation could be made, that must stand.

Prof Paddock reiterated that it was necessary to cater for the situation where the Chief Ombud might be absent or ill, or not available for some other reason. The appointment of employees would always be in the context of a board approved plan. In an organisation such as this it was important to have the ability to delegate these types of responsibilities. He did not think that there was a danger of someone employing many people. He reiterated that the office would be working in terms of a financial plan, an approved yearly, and under board directives. He did not see that there was a particular danger.

The Chairperson said again that the delegation would be in accordance with the written delegation of functions, and the Chief Ombud may not appoint everyone, but the final decision lay with him/her.
 
Mr Tladi said there would not be an irresponsible delegation of the function. He again referred to Clause 22, and added that any delegation contemplated would be scrutinised by the board.

Ms Njobe reiterated that her concern was about employees. In an earlier version there was a reference to a “senior” employee, but this now appeared as “employee” only.

The Chairperson said there might be a need to rephrase this, as it was possible that people might take chances, but reiterated that certain duties could not be delegated.

Prof Paddock asked if the Committee would be happy if another subclause were to be added.

Mr Tladi said that delegations would be developed, and the ombud would be able to appoint up to a certain level. The board would have to approve these appointments. The ombud would give out duties to the managers, and would be assisted by other senior managers. He thought it would not be possible to “over-delegate”.

The Chairperson asked why subclause (3) was necessary, as she thought it had already been covered in subclause (2)(d).

Prof Paddock explained that (3) was referring to the fact that, even though a power may be delegated at a particular time by the Chief Ombud or CFO, they were still able to exercise the power, so it was not removed from them.

The Chairperson reiterated that surely this was covered in subclause (2)(d).

Prof Paddock conceded that she had a point.

The Chairperson suggested, and the drafters agreed, to delete either (3) or (2)(d).

Clause 21
Ms Paulse noted that this clause had attracted some public comment. She summarised the concerns that Clause 18(2)(c) provided that each Ombud should manage and appoint employees, but Clause 21(2) provided that the Chief Ombud must appoint employees. However, Clause 21(3)(a) and (b) provided that the board must appoints a regional Ombud as well as a deputy ombud, and full time and part time adjudicators. She said that there was a concern that the regional Ombud, Deputy Ombud and adjudicators were therefore perhaps not regarded as employees of the Service. There were also questions whether the full time adjudicators were not to be subject to the code of conduct provided for earlier, and whether they were entitled to the benefits provided under subclauses 21(6) and (7).

The Chairperson also asked why it was necessary to have full time adjudicators.

Prof Paddock referred to the business plan, and said that the scheme needed both full time and part time adjudicators to keep the system as lean as possible. There was a need to train full time adjudicators. However, because of the changing demands for disputes, the office would make substantial use of part time adjudicators. It might put a substantial burden on the system if there were no full time adjudicators. The part timer adjudicators would have other work. The business plan involved four full-time adjudicators in Gauteng and two in Kwazulu-Natal. It was a load-balancing mechanism.

The Chairperson said the Committee would have to check this. The Service must act on the local level, and it should be possible to hold evening meetings (after work). She did not necessarily agree with the reasoning.

Ms Dlakude thought that four full time adjudicators in Gauteng was too many, especially if there were no disputes to resolve at a particular time, and suggested that this should be revised to one full-time and allow for part-timers to come in where necessary.

Mr Mdakane said that the Board had been given responsibility to create its own structure. He said there would be more demand in Cape Town than in the Karoo. He wanted to make it easy for the board to function, but was also in favour of part time adjudicators, as long as it did not limit the board. It needed to be accessible. There was a need to discuss demand and supply.

Clause 22
Ms Paulse noted four issues raised by the community in respect of this Clause. An explanation was required as to how the Bill would be self funding if Parliament had to contribute. In respect of the levies collected by community schemes, it was argued that this would be another expense to be levied on properties, with the result that either the purchase price of properties would have to be raised to meet this obligation, or, if the developer would have to fund the bill, then the levies to the body corporate may have to be increased. Sometimes owners would not use the service but would have to pay for it. This was seen in the context of an already challenging property market, whereby owners were expected to lower their selling price to accommodate the fact that limited funds were being provided by the banking institutions.

In respect of Clause 22(1) (f), the public comment suggested that proper checks and balances should be in place in order to ensure transparency, and to avoid undue influence and possible corruption in respect of donations and contributions to the Service.

Ms Borman asked, in respect of the levies paid, whether it was the occupier or the owner who paid the levies. She also enquired what happened when a property had been repossessed, and who must pay those levies.

Ms Paulse continued by noting questions from the banking institutions. They had submitted that the Bill was unclear as to whether the owner or occupier was liable for the payment of this levy. Where a property had been repossessed, so that the bank held the property through a customer defaulting on home loans, there was a question whether the mortgagor (the bank) was required to pay the levy. There was also a question whether the Service would hold a preferent right over mortgages, and what were the respective rights of a body corporate to collect levies, of municipalities to collect rates and taxes or utilities charges, linked to the above question of the preferential right of the Ombud. If the Ombud was to hold this right, then the banks questioned whether the fact that levies were in arrears would impact upon the transferability of such properties. It followed that mortgagees holding any interest in the scheme must be advised on any actions to be taken by the Ombud Service, and that the Service must request the consent of all mortgagees, holding any interest in the scheme, prior to action being taken.

Prof Paddock responded as to why money would have to be appropriated by Parliament. He noted that the business plan set out the position relative to initial funds needed from Parliament. This depended on how the Service managed to recover costs and self-service itself. There was also the need to address top up funding. There was a multi faceted funding model, which would include payment of monies by Parliament initially. However, there was some debate whether there should be a top-up by the Department, or whether the number of services rendered should be reduced, or whether a levy should be imposed on community schemes. The provisions in the Bill thus far had nothing to do with owners and occupiers, but only related to community schemes. Clause 59 dealt with that. There was no provision in respect of whether any claim would be a preferential claim or a preferred claim in liquidation.

The Chairperson said that it would be necessary for the Committee to address these issues.

Clause 23
No comments were noted on this Clause.

Clause 24
Ms Borman asked about Clause 24(a), which required the Minister to table the annual report within 14 days, if Parliament was in session, and, if not, then within 14 days after commencement of the next Parliamentary session. She wondered if there did not need to be a more exact time frame.

The Chairperson said that this was normal practice in all legislation, and the Committee should concur with it.

Clauses 25 and 26
Members noted these clauses but did not comment on them.

Clause 27
Ms Borman noted that there was an error in the layout in Clause 27(1)(b).

The Chairperson agreed, and said that the drafters should note this.

Mr Kweta said that this was the correct way of drafting used in other legislation.

The Chairperson said that wording of “on a directive of the Minister, must comply”, rather than “if requested by the Minister” should be used in Clause 27(4).

Clause 28
Mr Vassen said that the term “reasonable period” seemed vague, and suggested that perhaps the term “not exceeding six months” should be used instead, in Clause 28(2)(c).

Ms Dlakude asked if the administrator had a time frame.

The Chairperson said that experience was the best teacher, and asked if the drafters could look at the timeframes.

The Department’s representatives confirmed that they would look at subclause 28(5) to see if that satisfied similar requirements in other legislation.

The Chairperson said that a specific time should be set by when the Minister was to review the administrator's appointment.

Clause 29
The Chairperson asked why this clause did not require the Minister, instead of “consultation with the Service” to hold “consultation with the Board”. She noted that this referred to delegated functions of the Board, approved by the Minister, and that consultation should therefore be between those parties.

Mr Mdakane asked if there was a difference between the “board” and the “service”.

Mr Kweta said there were material differences. In Clause 29(1), he said that the Service was a legal entity, but acted through its board. It was for this reason that the Minister would consult with the “Service” – the legal entity – in the making of regulations. The words were being used correctly and there were no legal anomalies in that clause.

Ms Njobe said that perhaps the Members needed to look again at the definitions. Clause 3 dealt with the establishment of the juristic entity that was the Service. Clause 6 dealt with the board, to be known as the board of the Service. The board was essentially responsible for the management of the Service.

Prof Paddock responded that the board was the executive of the Service.

Mr Mdakane said that he believed that these differences needed to be noted, and he asked that assistance be given to the Committee on this point, otherwise the Bill would be very disjointed. He reiterated that surely the Minister would be consulting with the board. He asked for the drafters to assist in clarifying this in the Bill.

Ms Paulse asked who qualified for waivers or discounts. She noted a suggestion from the banking and financial services that guidelines needed to be in place, which would need to be drafted in advance.

The Chairperson said that she thought this was covered in Clause 29(1).

Ms Borman referred to Clause 29(1)(a)(x), and asked to which meetings did the reference to “minutes” relate, and whether these were the minutes of board meetings, or annual general meetings, or any meetings.

Prof Paddock said this referred to board meetings and related issues, but not to any other meetings.

Ms Paulse asked if it was likely that the Service would sue anyone.

Prof Paddock responded that levies were payable by schemes, not owners.

The Chairperson said that the explanation was not clear in the clauses to deal with regulations.

Ms Paulse mentioned that the banking and financial services had also raised issues around the interest in respect of this clause. This was relevant to Clause 29(1)(f), which dealt with rates of interest payable on overdue levies and fees. She asked what the effects of this would be on such levies, where the owner had a mortgage bond, and whether legal action taken to recover outstanding monies was likely to result in the attachment of movable or immovable property.

Prof Paddock said levies were not payable by owners or occupiers. The Service would not sue owners at all, because the levies were payable by community schemes. None of the questions asked by the banking council were applicable to this Bill, although certainly those questions would have been relevant if the money was payable by owners. He reiterated that this money was, however, payable only by schemes. He noted that Clause 59 made it clear that the levies were payable by community schemes.

The Chairperson said that this needed to be made far clearer. Subclause (1)(f) stood on its own.

Mr Ngwenya noted that this whole clause was dealing with matters which the Minister may regulate. The Minister may make regulations regarding levies and fees. These matters would thus be clarified in the regulations.

Ms Borman said she was getting confused. She set out that schemes charged levies, but owners paid these levies. Ultimately, therefore the scheme’s money came from the owner's pocket. She asked how then Prof Paddock was saying that it was not the owner or occupier who paid. Individuals would have to pay into the scheme. She thought that the distinction was not clear.

The Chairperson said that the banking sector had raised a concern, and wanted to make sure that disputes would not arise from these clauses, so there was a need for them to be quite clear.

Mr Mdakane said that his earlier understanding was that occupiers or owners paid levies to the scheme, which then paid a third person. If the community scheme as a whole did not pay, then the scheme (which was a juristic person) would be taken to court. Eventually the scheme could be held liable. He asked for this to be expressed more simply, noting that the necessary distinctions needed to be made.

Prof Paddock said that the issue raised by the banking council related to was how it affected their security. The banking council had been concerned with whether the Service could attach the units owned by the owners. The answer to this was that they would not. Any claim by the Service would not lie directly against the individual owners, but against the scheme. Ultimately, it was true that any cost would filter through to the owners, but there was no question of attaching any unit to found security for the claim. He agreed, however, that the drafters could try to simplify this issue.

The Chairperson said that this legislation must be able to be understood by everyone.

Clause 30: Judicial management and liquidation
Mr Mdakane noted that this clause provided that the Service could not be placed under judicial management or liquidation, other than under an Act of Parliament. He questioned why this was so. There could be clashes among individual members within the scheme, and he thought that all should be subject to the normal kinds of court rulings. He was not sure that the Service should be above the jurisdiction of the Court and had to be managed by Parliament.

Prof Paddock responded that it was his understanding that this was quite a normal clause for this type of entity. This was because the entity was being set up to perform a public function. The idea that it should not be subject to disruption by somebody that owed money to the Scheme seemed to be quite logical.

The Chairperson agreed that this was normal practice in all legislation of this type, and that there was nothing sinister about it, and urged the Committee not to tamper with this clause.

 It would not have an impact. She said they should agree on this one.

Ms Njobe asked what 'executive' meant, and whether this in practice had any impact on whether the Service could be placed under judicial management or liquidation.

Prof Paddock said that Clause 28 set out the powers of the Minister, and noted that if matters were not working properly, then the Minister had certain tools that he or she could apply to correct any administrate dysfunction.

The Chairperson agreed that the Minister would be the person to come before Parliament if an Act was needed.

Clause 31
There were no comments on this clause.

Clause 32
Ms Borman asked if it was too onerous to require the Service to provide the Minister with copies of all pleadings in its possession relating to legal proceedings brought by or against the Service. Attorneys did keep documents. If the Minister required certain documents, he / she could call for them.

Prof Paddock suggested that the words “on request” could be added, so that the information to be provided would be limited to what the Minister had requested.

Clause 33
The Chairperson asked for the legal unit to make input on the limitation of liability clauses.

Mr Vassen thought that this clause should also make reference to the failure to exercise a power or perform a duty under this Act or the Public Finance Management Act.

Mr Tladi said he would not be happy with singling out one particular piece of legislation, because there was a host of legislations applicable.

The Chairperson asked why “a contravention of PFMA” could not be included.

Mr Mdakane said that Adv Tladi was correct, and citing only one piece of legislation may create the impression that the others were not considered important or applicable. He agreed with the current wording, even if it was possible to change the phrasing slightly.

Mr Vassen said the PFMA had additional arenas that were not captured under this subsection.

Clause 34
Members did not comment on the clause listing the offences and penalties.

Clause 36
Members did not comment on the clause relating to the practice directives.

Clause 37, Clause 38
There were no issues raised in relation to these clauses.

Clause 39
The Chairperson noted that this clause set out what applications in terms of Clause 38 should contain. She asked about applications in respect of occupiers.

Prof Paddock said that in a shared block situation, there could be someone who held rights as an occupier, as well as an owner. Because of the different ways in which people held rights, it was necessary to say that both owners and occupiers had a right to come to the Service.

Ms Borman said that where someone “owned” a unit or shares in a scheme, that share translated into something concrete. She thought that this related to queries raised before. She wondered if the “share” concept was being treated differently in respect of this clause.

Prof Paddock responded that it was possible, in community scheme, for occupiers or owners to be liable for particular financial obligations. This gave them the right to say when something was not fair.

Ms Borman wanted to follow up on animal nuisance and noise of animals or people. She thought this could also be included in the behaviour clauses. It created huge problems in community living if people did not adhere to respect for peace and quiet at certain times.

Prof Paddock said that these aspects were intended to be included under Clause 39(2)(a)’s reference to “nuisance”. This would also include such things as loud parties. The basis for this clause was that people who lived close together should have respect for each other, and he noted that “nuisance” was a common law term and involved any action or failure to act which disrupted another person's peace.

The Chairperson said that perhaps the term “nuisance” should be described or defined.

Mr Vassen said that this was not possible. The wide category of things that were included in “nuisance” was well understood in the law, and a specific definition would change those common law meanings.

Ms Borman accepted that explanation, although she was concerned that different definitions of “nuisance” could well be proposed in court.

Mr Kweta agreed with his colleagues that “nuisance” was established in South African jurisprudence, and he said that there should not be any danger of misunderstanding.

The Chairperson agreed.

Prof Paddock said that, while he was working on the Sectional Title Schemes Management Bill, the Committee had asked for a change to the clauses dealing with collection of levies. The Committee had noted that this was not only collection in terms of a court order, but could also be a collection in terms of the Ombud Service. He noted that this be noted in Clause 39(1) as well.

The drafters and Committee agreed.

The meeting was adjourned.