- High Court allows homeowner to defend levy debt claim after disputes over charges.
- Judge warns that some body corporate debt collection models may abuse the court process.
- Legal fees in the case may far exceed the original R17,000 debt.
The High Court in Johannesburg has sounded the alarm over the way some body corporates pursue levy arrears through costly litigation.
In Centenario Body Corporate v Thandeka Mlotya, Judge D Fisher warned that taking relatively small debts to the High Court could amount to an abuse of the court’s process. The case involved a claim of R17,981.86, where the court refused to grant summary judgment against the homeowner.
Judge Fisher granted Thandeka Mlotya permission to defend the claim, finding that she had raised genuine disputes that needed proper examination at trial. In explaining the decision, Judge Fisher also scrutinised the debt collection practices of the body corporate and its attorneys.
Levy dispute and acknowledgement of debt
Centenario Body Corporate approached the High Court seeking summary judgment against Mlotya, relying on an acknowledgement of debt she had signed for arrear levies.
The body corporate argued that the signed acknowledgement confirmed the outstanding amount, so summary judgment should be granted without a trial. Mlotya did not dispute signing the acknowledgement, but argued that her payments had been misallocated, and that several charges on her account, including attorney fees and water charges, were illegitimate and had no lawful basis.
Judge Fisher found that these allegations could not simply be dismissed at the summary judgment stage. “This, to my mind, raises a triable issue,” said Judge Fisher, referring to the allegedly illegitimate charges.
The judgment also raised broader questions about whether a body corporate can impose unlawful or questionable charges through debt management agreements linked to acknowledgements of debt.
Attorney-driven collection model under scrutiny
Judge Fisher expressed particular concern about the role of attorneys in managing debt collection for body corporates. The judgment noted that, once the debt is handed over, communication with homeowners seems to occur mainly through attorneys rather than the body corporate’s trustees.
“It seems that from the moment of handover of the debt, the communications are with the attorneys rather than the trustees of the plaintiff,” said Judge Fisher.
The court also pointed out that the use of acknowledgements of debt appeared to be part of a standardised process managed by the attorneys, with the body corporate’s official address listed as the attorneys’ offices even before litigation begins. This, according to Judge Fisher, raises questions about whether the management of levy arrears has been effectively delegated to attorneys instead of remaining under the body corporate’s control.
“It may be that the default in relation to payment of levies is administered by the attorneys and not directly by the plaintiff,” said Judge Fisher.
High court litigation over small debts questioned
Judge Fisher also questioned the wisdom of pursuing a relatively modest debt in the High Court, given the substantial legal costs involved. Although the claim was for just under R18,000, the legal fees were likely to far exceed that amount.
“Prima facie, I accept that the claiming of an amount of little more than R17,000 in the High Court is uneconomical when reference is had to costs,” said Judge Fisher.
In this case, attorney fees appeared to be at least five times the value of the claim. “In this case, these attorneys’ costs eclipse the claim of R17,981.86 by at least fivefold, probably more,” Judge Fisher observed.
Judge Fisher warned that homeowners who do not oppose summary judgment applications could be caught in a spiral of escalating legal costs, especially when already under financial pressure.
Warning on abuse of court process
Judge Fisher described the debt collection model as heavily reliant on the summary judgment process, which allows creditors to obtain quick judgments where there is allegedly no bona fide defence. The concern, explained Judge Fisher, is that once a debt is reduced to an acknowledgement of debt, the underlying charges may never be properly examined.
“There is a reasonable expectation that, given that the indebtedness is reduced to an acknowledgement of debt, there will be no examination of the underlying charges,” said Judge Fisher.
Although the court stopped short of making a final ruling on the issue, Judge Fisher warned that using the High Court in this way for relatively small claims raises serious concerns. “Arguably, the approach taken is an abuse of the High Court process,” Judge Fisher said.
Since Mlotya had raised genuine issues requiring a full hearing, Judge Fisher granted her leave to defend the matter, with costs reserved for trial.
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