Surprising insights on transformation from the Constitutional Court

What do we mean when we talk about transformation of the judiciary and of the legal culture? Do the members of the Judicial Service Commission (JSC) and the President believe in the substantive transformation of the legal culture and legal doctrine away from its colonially-inspired formalistic roots and away from the deeply embedded assumptions about free choice and equal bargaining power, (assumptions that promote the interests of the wealthy over those who are marginalised, disempowered or poor)?

Or do they use the term rather disingenuously to try and justify the appointment of essentially anti-poor, deeply formalistic judges whose judgments will disregard the interests of the marginalised and might even champion the interests of the rich and powerful? Moreover, which judges are best placed to take on the challenges of legal transformation — within the disciplining boundaries of the separation of powers doctrine — and which judges merely cling to notions of legal formalism to the detriment of the poor and marginalised and in resistance to the transformation of the legal culture?

These questions are all raised by the fascinating Constitutional Court judgment in the case of Maphango and Others v Aengus Lifestyle Properties (Pty) Ltd, which was handed down today.

The majority judgment, written by Justice Edwin Cameron (Moseneke DCJ, Froneman J, Nkabinde J, Skweyiya J, Yacoob J and Van der Westhuizen J concurring), grapples with the transformative effects of the Constitution and the Rental Housing Act on the relationship between landlords and tenants. The judgment also attempts to empower Rental Housing Tribunals, Tribunals created by the democratic legislature to protect the rental housing market while also addressing the unequal power relations between landlords and tenants.

The minority judgment, written by acting judge Ray Zondo, who has reportedly been earmarked for appointment to the Constitutional Court (Mogoeng CJ and Jafta J concurring), displays a surprisingly formalistic and pre-constitutional attitude to the law that applies between landlords and tenants. The minority judgment, relying on what seems to me to be misguided technical arguments, would have upheld the freedom of a landlord to cancel a lease, hike rents or have tenants evicted who cannot afford the steep hikes on rentals, regardless of how unfair the landlord might have acted (all because they supposedly failed to plead their case correctly). The minority judgment also seems rather disrespectful of the principle of separation of powers, which would have required them to engage seriously with the Rental Housing Act, a piece of legislation passed by our democratic Parliament.

The narrow question in this case seemed to turn on the question of when a landlord could legally cancel a lease and evict its tenants. But behind this formal question lurked the larger question of how the constitutional protection against arbitrary eviction (enshrined in section 26(3)), as well as the protections afforded to tenants by the Rental Housing Act, limited the discretion of the landlord to evict tenants or raise rents.

The applicants are tenants in Lowliebenhof, a ten-storey block of flats in Braamfontein, in the inner city of Johannesburg. The flats are their homes, and they live there in terms of various leases. The respondent landlord bought the building, upgraded it, and then wanted to increase the rent. To do so, it cancelled the tenants’ leases, but offered them new tenancies, on identical terms, though at rents of between 100% and 150% higher than the original rents. The tenants resisted and the landlord brought eviction proceedings. The original lease only allowed an annual rent increase of between 10% and 15% and the cancellation of the leases were aimed at circumventing these clauses.

The tenants put forward several arguments about why the landlord was not permitted to cancel the leases to raise the rents, based on the Constitution, contract law and public policy as well as on the interpretation of certain provisions of the Rental Housing Act. In the end the majority argued that it was unnecessary to develop the common law of contract to deal with this case. Instead it relied on the provisions in Rental Housing Act, which state that the landlord may not engage in “unfair practices” in its dealings with tenants. The Supreme Court of Appeal (SCA) had found that this phrase did not apply to a case like the present because an unfair practice contemplated in the relevant section was “incessant and systemic conduct”, not a once off termination of a contract aimed at hiking the rents.

The majority rejected this view and said that the Rental Housing Tribunal should have decided whether there was an unfair practice in this case. It pointed out that the Act provides that an unfair practice ruling “may include a determination regarding the amount of rental payable by a tenant” or may relate to any termination of the lease in respect of rental housing property “on grounds that do not constitute an unfair practice “.

The Act states that when a Tribunal makes a determination about the rent to be charged, it “must be made in a manner that is just and equitable to both tenant and landlord”. In addition, the rent determination must take “due cognisance” of “(a) prevailing economic conditions of supply and demand; (b) the need for a realistic return on investment for investors in rental housing; and (c) incentives, mechanisms, norms and standards and other measures introduced by the Minister in terms of the policy framework on rental housing…”.

The majority thus found that the Act demands that a ground of termination must always be specified in the lease, but even where it is specified, the Act requires that the ground of termination must not constitute an unfair practice. A Tribunal can decide whether such a termination constituted an unfair practice — regardless of what the lease might have stipulated. The effect of these provisions is that contractually negotiated lease provisions are subordinate to the Tribunal’s power to deal with them as unfair practices.

It means that unfair practices are not determined by taking into account only the common law legal rights of a tenant or landlord, but by considering also their statutory interests. This makes it even clearer that the statutory scheme does not stop at contractually agreed provisions, and conduct in reliance on them. It goes beyond them. It subjects lease contracts and the exercise of contractual rights to scrutiny for unfairness in the light of both parties’ rights and interests.

Given this expansive interpretation of the Rental Housing Act (an interpretation influenced by the provisions in the Constitution that prohibits arbitrary evictions from housing and guarantees for everyone the right of access to housing), the majority held over final determination of the appeal (which was originally based on the request to have the tenants evicted) to enable the landlord and tenants, if so advised, to bring suitable proceedings before the Tribunal.

If the Tribunal should hold that the termination of the tenants’ leases was an unfair practice, and should the relief it grants include an order setting aside the termination, the eviction order granted against the applicants may have to be set aside. The parties must be granted leave to set the matter down in this Court for finalisation of the appeal on papers supplemented as they think fit.

The minority had no truck with this airy-fairy, bleeding heart, approach to the old fashioned area of contract law, which would have shown some deference to the democratically elected Parliament who passed the Rental Housing Act. Instead the minority would have preferred to rely on traditional contract law principles that would have allowed the landlord to cancel the lease, and to evict the tenants unless they agreed to a 150% hike in their rents. The minority argued that this case was never argued on the basis of the Rental Housing Act (although the SCA interpreted this Act narrowly in making a finding in favour of the landlord) and hence that the majority was wrong now to rely on this progressive piece of legislation to come to the assistance of the tenants.

The minority, seemingly channeling early twentieth Century British attitudes about the distinction between law, on the one hand, and values and morals, on the other, (as if there was an absolute distinction between these), argued that whether the landlord had engaged in unfair practices was not a legal question at all, but rather a value judgment requiring a judge to rely on moral values (not “law”). The Constitutional Court should therefore not have engaged with this issue at all, according to the minority.

Relying on the legal fiction that the parties “freely and voluntarily entered into leases with clauses that allowed either party to terminate them on notice and which did not say that the termination would not be permissible when effected for a certain purpose or when effected with a certain motive”, the minority would not have referred the matter back to the Rental Housing Tribunal (as the majority did).

Zondo AJ argued that:

the applicants may also have insisted on clauses that excluded certain reasons or motives for the termination of their leases. They did not do so and they have not put up any case to suggest that their bargaining position did not allow them to do so. The matter must then be decided upon the basis that, like the two tenants who included the unusual clauses that their leases could only be terminated at their discretion, the applicants, too, could have included a clause to the effect that their leases could not be terminated to enable the landlord to increase rents by amounts higher than those permitted by their leases. They failed to do so.

As Justice Froneman (in a concurring judgment) pointed out, this denial that it was permissible for the Constitutional Court to consider the interpretation of the Rental Housing Act (which might protect the tenants) in this case, was difficult to square with the law and the facts of this case.

Both the High Court and the Supreme Court of Appeal interpreted the Act and came to the conclusion that the respondent’s right to cancel the leases was unaffected by its provisions. The majority found “that interpretation to be wrong. That the interpretation of the Act lies at the heart of this matter, however pleaded, has never been doubted… I thus have considerable difficulty in understanding how this appeal can be determined in this Court without interpreting the Act. Whether the Act applies to leases in general is a matter of law. So is the question whether the cancellation.”

Moreover, justice Froneman also dispensed with the deeply conservative and formalistic argument about the distinction between morals and value judgments on the one hand and legal questions on the other:

It is common cause that section 26 of the Constitution is implicated. Interpretation of what constitutes an “unfair practice” under the Act in light of this is thus inevitably a constitutional issue, a matter of law. Interpretation and application of the law under the Constitution is never a mechanical application of rules; it always involves a value judgment. Our Constitution and law are infused with moral values. The days of denying the value-laden content of law are long gone.

The various judgments therefore illustrate a clear distinction between one set of judges who are engaged with the transformative project and with the transformation of legal culture and the interpretation and application of law (all done while displaying suitable respect for the elected branches of government who passed the Rental Housing Act) and another set of judges stuck in a colonial-inspired formalist mindset (with potentially adverse consequences for disempowered tenants) who rejected the notion that constitutional values and the morals underpinning them, have any role to play in the adjudicating process in this case.

For those of us studying court judgments and legal articles produced by a (still largely) conservative academia, this insight will perhaps not come as a surprise. The surprising aspect of the judgement arise from discovering which judges came out on which side of this profoundly important judicial and philosophical divide.

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