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Hutchings v Hutchings (15633/2019) [2021] ZAWCHC 3 (18 January 2021)

80 Reportability
Arbitration Law
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Brief Summary

Arbitration — Enforcement of arbitration award — Application to make arbitration award an order of court — Respondent raising prescription as a defense — Court held that a claim to have an arbitration award made an order of court is not a 'debt' under the Prescription Act — Prescription does not commence until the debt becomes due, which requires agreement on costs or taxation of a bill of costs — Respondent's argument regarding prescription of costs rejected, as the right to apply for the award to be made an order of court is independent of the taxation process.

Comprehensive Summary

Summary of Judgment


Introduction


The proceedings concerned an application to have an arbitration award made an order of court in terms of section 31(1) of the Arbitration Act. The applicant, Hugh Hutchings, sought the conversion of an award dated 22 January 2014 into a court order. The respondent, Anna Catherina Hutchings, opposed the relief on the basis that the applicant’s entitlement to obtain the order (or alternatively the entitlement to recover costs under the award) had become extinguished by prescription.


The matter arose after an arbitration between the parties in which the respondent raised a point in limine of prescription against a claim advanced by the applicant in the arbitration. The arbitrator dismissed that point in limine and made a costs award against the respondent, including the costs of the arbitration and the arbitrator. After the award was published, the parties were unable to settle the quantification and recovery of the costs, which led to the present application so that the applicant could proceed to tax a bill of costs.


The respondent’s opposition was advanced through points of law raised by notice under rule 6(5)(d)(iii) of the Uniform Rules of Court, contending that the award did not have the status of a court judgment and that a three-year prescription period applied, with prescription allegedly completing on 22 January 2017.


The general subject-matter of the dispute was thus the interaction between (i) the statutory mechanism for enforcing arbitration awards by making them court orders and (ii) the law of prescription, particularly as it relates to whether the application (and/or the costs entitlement) had become prescribed.


Material Facts


It was common cause that an arbitration award was published on 22 January 2014. The award disposed of a preliminary prescription point raised in the arbitration by dismissing it and ordering the respondent to pay (i) the applicant’s legal costs on a party-and-party scale including counsel’s fees and (ii) the costs of the arbitration, including the arbitrator’s costs.


It was also accepted that, following publication of the award, the parties were unable to agree on the issue of costs. The applicant’s stated purpose in seeking to make the award an order of court was to enable the preparation and taxation of a bill of costs.


The respondent’s opposition depended on the asserted legal consequences of the above chronology. The respondent relied on the date of the award (22 January 2014), the contention that an arbitration award is not itself a court judgment, and the contention that a three-year prescription period applied so that the applicant’s entitlement to costs (or the entitlement to have the award made an order of court) prescribed by 22 January 2017.


To the extent that there was a dispute, it was not a dispute about what occurred in the arbitration or the contents of the award, but rather a dispute about whether, on those facts, prescription had run and completed in relation to the relief sought (and/or the costs entitlement reflected in the award).


Legal Issues


The central legal questions before the court were whether the applicant’s request to make the arbitration award an order of court was susceptible to prescription under the Prescription Act 68 of 1969, and, if so, when prescription would begin to run.


A closely related question was whether the respondent could defeat the section 31(1) application by contending that the costs awarded in the arbitration had prescribed, and specifically whether such costs could be regarded as a debt “due” (for purposes of section 12(1) of the Prescription Act) before the costs had been agreed or taxed.


The dispute was predominantly a matter of law, particularly the interpretation and application of statutory provisions and binding precedent. It also involved the application of those legal principles to essentially undisputed facts concerning the timing and nature of the award and the subsequent failure to agree or tax costs.


Court’s Reasoning


The court approached the respondent’s prescription defence by drawing a distinction between (i) the nature of an application under section 31(1) to make an arbitration award an order of court, and (ii) the enforceability and prescription of the costs that were awarded in the arbitration.


On the first aspect, the court relied on Brompton Body Corporate v Khumalo 2018 (3) SA 347 (SCA). That authority held that a claim to make an arbitration award an order of court is not a “debt” as contemplated in the Prescription Act because it does not require the respondent to perform an obligation to pay money, deliver goods, or render services; rather, it is the use of a statutory remedy. Applying Brompton, the court held that there was no basis to treat the present section 31(1) application as the enforcement of a “debt” such that prescription would begin to run from the publication date of the award.


The respondent nevertheless argued that there was no basis to make the award an order of court because the applicant’s costs claim under the award had prescribed. The court agreed with the applicant’s submission that the respondent could not, in this application, rely on the purported prescription of legal costs to show that the applicant’s case to record the award under section 31(1) had itself prescribed, and that the respondent would need to pursue such a contention through an independent application for declaratory relief.


In advancing the prescription argument, the respondent relied on a dictum from City of Cape Town v Allie 1981 (2) SA 1 (C), where it was stated that the right to apply under section 31 arises upon publication of the award and that taxation is not a condition precedent to bringing such an application. The court treated that dictum as not supporting the respondent’s broader proposition that the section 31(1) application prescribes as a “debt”. The court further noted that, in Allie, the court expressly stated that it expressed no opinion on whether a debt for costs could become due before taxation for purposes of section 12(1) of the Prescription Act.


The court then addressed the respondent’s further contention that the costs became “due” upon publication of the arbitration award, so that prescription began running immediately from January 2014. The court analysed the concept of a debt becoming “due” by reference to section 12(1) of the Prescription Act 68 of 1969, which provides that prescription commences to run as soon as the debt is due. The court referred to Western Bank v Van Vuuren 1980 (2) SA 438 (T), where “debt is due” was held to mean that the debt is immediately payable, or that the debtor is under an obligation to pay immediately.


The court also drew on Standard Bank of South Africa Ltd v Miracle Mile Investments (Pty) Ltd and Another 2017 (1) SA 185 (SCA), which emphasised that a debt must be immediately enforceable before a claim in respect of it can arise, and that prescription runs when the creditor has a complete cause of action. In that context, the judgment referred to supporting formulations in Deloitte Haskins & Sells Consultants (Pty) Ltd v Bowthorpe Hellerman Deutsch (Pty) Ltd 1991 (1) SA 525 (A), The Master v IL Back and Co Ltd 1993 (1) SA 986 (A), and Truter and Another v Deysel 2006 (4) SA 168 (SCA).


Applying these principles to costs, the court accepted that the respondent’s liability for costs followed on publication of the award, but held that the costs could only become “due” once there was either agreement on the amount payable or a taxation of a bill of costs. The court’s reasoning emphasised the distinction between the moment when an obligation arises in principle and the moment when it becomes enforceable as a quantified, immediately payable debt.


The court considered Santam Ltd v Ethwar 1992 (2) SA 244 (SCA) as the governing authority on when costs become due for prescription purposes. In Santam, the court held that a costs entitlement could not be enforced without prior agreement or taxation, and that these were not mere procedural steps within the unilateral control of the creditor because they required the participation of third parties. The court treated Santam as establishing that, absent agreement or taxation, it is not possible to recover costs and it cannot be said that costs have become due; accordingly, prescription cannot commence running until the debt becomes due within the meaning of section 12(1).


The respondent also relied on an unreported Free State decision, Botha and Others v Scholtz and Another (3424/2016) [2017] ZAFSHC 51 (9 March 2017), quoting a passage about quantifying costs while the underlying judgment has not prescribed. The court accepted the applicant’s contention that the dictum was misconstrued, and in any event held that the prevailing precedent remained as stated in Santam Ltd v Ethwar 1992 (2) SA 244 (SCA).


On this basis, the court concluded that the respondent’s contention that the applicant’s right to make the award an order of court had prescribed could not succeed. The court further held that there was no reason to depart from the general rule that costs follow the result.


Outcome and Relief


The court made the arbitration award dated 22 January 2014 an order of court in terms of section 31(1) of the Arbitration Act.


The respondent was ordered to pay the applicant’s costs of the application.


Cases Cited


Brompton Body Corporate v Khumalo 2018 (3) SA 347 (SCA); Electricity Supply Commission v Stewards and Lloyds of SA (Pty) Ltd 1981 (3) SA 340 (A); City of Cape Town v Allie 1981 (2) SA 1 (C); Western Bank v Van Vuuren 1980 (2) SA 438 (T); Standard Bank of South Africa Ltd v Miracle Mile Investments (Pty) Ltd and Another 2017 (1) SA 185 (SCA); Deloitte Haskins & Sells Consultants (Pty) Ltd v Bowthorpe Hellerman Deutsch (Pty) Ltd 1991 (1) SA 525 (A); The Master v IL Back and Co Ltd 1993 (1) SA 986 (A); Truter and Another v Deysel 2006 (4) SA 168 (SCA); Santam Ltd v Ethwar 1992 (2) SA 244 (SCA); Van Vuuren v Boshoff 1964 (1) SA 395 (T); Rogers NO en ‘n ander v Erasmus NO en andere 1975 (2) SA 59 (T); Botha and Others v Scholtz and Another (3424/2016) [2017] ZAFSHC 51 (9 March 2017).


Legislation Cited


Arbitration Act (section 31(1)); Prescription Act 68 of 1969 (sections 11(d), 12(1), 13, 14, 15).


Rules of Court Cited


Uniform Rules of Court (rule 6(5)(d)(iii)).


Held


The court held that an application to have an arbitration award made an order of court under section 31(1) is not a claim for a “debt” under the Prescription Act 68 of 1969, and thus the respondent’s contention that this right had prescribed could not be sustained on the basis advanced.


The court further held that while liability for costs under the arbitration award arose upon publication of the award, the costs were not “due” for purposes of section 12(1) of the Prescription Act until the amount of costs was determined by agreement or taxation. In the absence of agreement or taxation, prescription in respect of a claim for payment of costs could not commence running on the publication date.


The court held that the respondent’s prescription-based opposition failed and that the arbitration award should be made an order of court, with the respondent liable for the costs of the application.


LEGAL PRINCIPLES


A claim to have an arbitration award made an order of court under section 31(1) of the Arbitration Act is characterised as the invocation of a statutory remedy and not as the enforcement of a “debt” as contemplated by the Prescription Act 68 of 1969. As a result, the mere passage of time from publication of an award does not, on that basis alone, found a prescription defence to the section 31(1) remedy.


For prescription purposes, a debt becomes “due” under section 12(1) of the Prescription Act 68 of 1969 when it is immediately enforceable and the debtor is obliged to perform immediately. In the context of an entitlement to costs, the amount is not treated as due and enforceable merely because liability for costs exists; rather, enforceability depends on the costs being quantified through agreement or taxation.


Where quantification of costs requires agreement between parties or taxation (processes involving third-party participation), the creditor cannot enforce payment of costs without that prior quantification. In such circumstances, prescription in respect of the payment claim does not commence running until the costs have been agreed or taxed, because only then does the costs debt become “due” in the statutory sense.

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[2021] ZAWCHC 3
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Hutchings v Hutchings (15633/2019) [2021] ZAWCHC 3 (18 January 2021)

IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case No: 15633/2019
In
the matter between:
HUGH
HUTCHINGS
Applicant
and
ANNA
CATHERINA HUTCHINGS
Respondent
Date of hearing: 19
October 2020
Date
of Judgment:  18 January 2021
(delivered
via email to the parties’ legal representatives)
JUDGMENT
HOCKEY,
AJ
[1]
The applicant seeks an order for an arbitration award (“the
award”) which
was handed down on 22 January 2014 to be made an
order of court in terms of section 31(1) of the Arbitration Act, 1969
(“the
Arbitration Act”).
[2]
The award followed an arbitration between the parties wherein the
respondent in the
present matter raised a point
in limine
of
prescription against a claim by the applicant. The point
in limine
was dismissed by the arbitrator, with costs. The arbitrator’s
award reads:
“
The
following award is made:
a)
the
point
in
limine
regarding
prescription is dismissed.
b)
[The
respondent] to pay [the applicant’s] legal costs on party and
party scale including costs of counsel.
c)
[The
respondent] to pay the costs of the arbitration including the costs
of the arbitrator.”
[3]
Subsequent to the publication of the award, the parties were unable
to settle the
issue of costs, and the applicant now seeks to have the
award made an order of court to enable a bill of costs to be taxed.
[4]
The respondent opposes the relief claimed on the basis of a
contention that the right
to have the arbitration award made an order
of court has prescribed in terms of provisions of the Prescription
Act. The respondent
raised points of law in its opposition by way of
a notice in terms of rule 6(5)(d)(iii) of the Uniform Rules of Court
(“the
rules”) as follows:
“
1.
The arbitration award was made on 22 January 2014:
2.
The arbitration award does not have the status of a Court Judgment;
3. A three year
prescription period in terms of section 11(d) of the
4.
The applicant’s claim for costs in terms of the arbitration
award was extinguished by prescription on 22 January 2017;
5.
There is accordingly no basis for the arbitration award to be made an
order of court in terms of the relief sought.”
[5]
In
Bromton Body Corporate v Khumalo
2018 (3) SA 347
SA it was
held by Van der Merwe JA (at para 11) as follows:
“
A
claim that an arbitration award be made an order of court is not a
‘debt’ in terms of the [Prescription Act 68 of
1969].
In this regard the Constitutional Court has clearly endorsed the
decision of this in
Electricity
Supply Commission v Stewards and Lloyds of SA (Pty)
Ltd
1981 (3) SA 340
(A) at 344E-G, namely that a debt in terms of the Act
is an obligation to pay money, deliver goods or render services. …

The appellant’s claim to make the arbitration award an order of
court did not require the respondent to perform any obligation
at
all, let alone one to pay money, deliver goods or render services.
The appellant merely employed a statutory remedy available
to it.”
[6]
It follows that there is no basis to hold that the arbitration award
in this matter
created a new debt and prescription therefore did no
commence running with the publication of the award on 22 January
2014.
[7]
Mr Steyn who appeared for the respondent, persisted with an argument
that there is
no basis for the arbitration award to be made an order
of court in terms of the relief sought, as the applicant’s
claim for
costs in terms of the arbitration award has prescribed.
[8]
I agree with Mr MacKENZIE, who appeared for the applicant, that the
respondent cannot raise
the purported prescription of legal costs as
a basis for its claim that the applicant’s case to have his
arbitration award
recorded as an order of court under section 31(1)
of the Arbitration Act has prescribed, and that the respondent would
need to
institute an independent application for declaratory relief
to that effect.
[9]
In pursuit of his argument, Mr Steyn relies on a
dictum
from
City
of Cape Town v Allie
1981 (2) SA 1
(C) where the respondent attempted to recover costs
under an arbitration award some five years after the award was made.
In that
matter, the respondent contended, as do the applicant in the
present matter, that prescription could not commence to run until the

bill of costs had been taxed. In respect of this contention, the
court had this to say:
“
The
simple answer to this contention is that the right to apply to Court
in terms of
section 31
of the
Arbitration Act 42 of 1965
for the
award to be made an order of court arises upon the publication of the
award. The taxation of costs awarded is not a condition
precedent to
the accrual of such a right or the falling due of the correlative
publication to submit to it being made an order
of court. Indeed, the
costs have still not been taxed, yet respondent was plainly entitled
to bring the application which it did.
I express no opinion upon the
question whether a debt for costs can become due before taxation
within the meaning of
section 12(1)
of the
Prescription Act No. 68 of
1969
in the sense that prescription against a claim for payment of
the costs can commence running before taxation. This is not the issue

as I see it.”
[10]
As a result, so it is argued, the right to have an arbitration award
made an order of court and
enforce it prescribes in terms of
section
11(d)
of the
Prescription Act. Furthermore
, it was submitted on
behalf of the respondent that the cost award became due upon the
publication of the arbitration award in January
2014 and that
prescription commenced running from that date.
[11]
But the argument submitted on behalf of the respondent is wrong. As
already stated, it was made
clear in
Bromton
that a claim that
an arbitration award be made an order of court is not a ‘debt’
in terms of the
Prescription Act. As
for the argument that the costs
award became ‘due’ with the publication of the
arbitration award, regard must be had
to
section 12(1)
of the
Prescription Act which
provides:
“
(1)
Subject to the provisions of subsections (2), (3), and (4),
prescription shall commence to run as soon as the debt is due…”
[12]
In
Western
Bank v Van Vuuren
1980 (2) SA 438
(T), it was held that “
debt
is due”
meant
that the debt is immediately payable, or that the debtor was under an
obligation to pay the debt immediately.
[13]
In
Standard
Bank of South Africa Ltd v Miracle Mile Investments (Pty) Ltd and
Another
2017 (1) SA 185
(SCA), it was held (at para 24):
“
In
terms of the current Act, a debt must be immediately enforceable
before a claim in respect of it can arise. In the normal course
of
events, a debt is due when it is claimable by the creditor, and as
the corollary the thereof, is payable by the debtor. Thus
in
Deloitte
Haskins & Sells Consultants (Pty) Ltd v Bowthorpe Hellerman
Deutch (Pty) Ltd
[1990]
ZACSA 136
[1990] ZASCA 136
; ;
1991 (1) SA 525
(A) at 532 G-H, the court held that for
prescription to commence running,
‘
The
has to be a debt immediately claimable by the creditor or, stated in
another way, there has to be a debt in respect of which
the debtor is
under an obligation to perform immediately’.
(See
also
The
Master v IL Back and Co Ltd
1993
(1) SA 986
(A) at 1004 F – H.) In
Truter
& another v Deysel
[2006]
ZACSA 16
[2006] ZASCA 16
; ;
2006 (4) SA 168
SCA para 16, Van Heerden JA said that a
debt is due when the creditor acquires a complete cause of action for
the recovery of the
debt, ie when the entire set of facts which the
creditor must prove in order to succeed with his or her claim against
the debtor
is in place or, in other words, when everything has
happened which would entitle the creditor to institute action and to
pursue
his or her claim.”
[14]
I agree with Mr MacKENZIE that in terms of the arbitration award, the
respondent became liable
for costs on publication of the award, but
the actual costs can only become due once there is agreement on the
amount of costs
payable, or once a bill of costs had been taxed. What
is of relevance is not when a debt arose, but when it becomes due.
[15]
In
Santam v Ethwar
1992 (2) SA 244
(SCA), the court considered
whether a claim for costs in favour of the respondent (Ethwar), which
arose out of a settlement agreement,
has become prescribed. The court
framed the issue for determination thus (at 252 B-D):
“…
the
issue is whether the respondent's ‘claim for costs’ has
become prescribed. This depends on whether the debt became
‘due’
- within the meaning of the word in section 12(1) of the Act - on the
day of the settlement when the appellant’s
debt to pay the
respondent’s costs arose. If the answer is in the affirmative,
as contended for by the appellant, prescription
would have commenced
running from that date, and respondent’s right become
prescribed before the notice of taxation was served.
If not,
prescription could, of course, not have started running then. It is
common cause that nothing delayed completion of prescription
in terms
of section 13, or that anything interrupted its running under
sections 14 or 15 of the Act.  It is further common
cause that
if prescription did not begin to run on the day of the settlement the
appeal has to fail.”
Further
(at 253 B-G), the court held:
“
Whether
the respondent could have enforced compliance with clause (c) [of the
settlement agreement] in the absence of an agreement
or taxation
depends on whether, on the one hand, agreement or taxation simply
formed the formal method of liquidating and quantifying
the amount of
the indebtedness or whether, on the other, it was an agreed condition
for payment or that payment was contingent
thereon. Put differently,
was agreement or taxation a simple procedural step to or was it of
the essence of liability? It seems
to me that the answer, perforce,
has to be that the parties could not have intended that the
respondent could recover her costs
without a prior agreement or
taxation. Any summons claiming payment of costs not agreed upon or
not taxed would have been made
by a successful exception.  From
a different angle: in
Van
Vuuren v Boshoff
1964
(1) SA 395
(T) at 400E, Colman J held that a simple procedural step
which the creditor,
without
extraneous aid
,
can take anytime, cannot delay the commencement of prescription.
Agreement or taxation may, conceivably, be termed simple procedural

steps, but both require extraneous aid of third parties over whom the
respondent had no control. One can compare the case with
one where a
person undertakes to pay the amount fixed by an architect's
certificate or by a referee or an arbitrator. Payment,
no doubt, can
only be ‘due’ once the amount has been so fixed (see also
Rogers
NO en ‘n ander v Erasmus NO en andere
1975
(2) SA 59
(T) 71 – 72.
To
test this conclusion. If the parties had settled the quantum of costs
or if taxation occurred shortly before September 1995,
can it be said
that the claim would still have become prescribed on that date? I
think not.”
[16]
It is clear, therefore, that unless there is agreement as to costs or
a bill of costs had been
taxed, it is impossible to recover costs and
it cannot be said that costs has become “due”.
Prescription cannot commence
running until such time that the debt
becomes due in terms of
section 12(1)
of the
Prescription Act.
[17
]
Mr Steyn also relies on a dictum from the unreported judgement in
Botha and Others v Scholtz and Another
, (3424/2016) ZAFSHC 51
(9 March 2017), where it was held:
“
In
my view the first respondent does not enjoy an unlimited right to
enforce his claim for costs insofar as he can only quantify
his costs
and present a bill for taxation as long as the judgment from which is
right derives has not prescribed.”
Mr
MacKENZIE argues that the dictum is misconstrued. I agree. I read it
to mean that a judgment creditor is not limited to present
his bill
of costs for taxation only whilst the judgment wherein the cost order
was made had not prescribed. Even if I am wrong
in this
interpretation, the prevailing precedent is still as set out in
Santam
v Ethwar,
namely
that costs become due only once there is agreement on the amount of
costs payable or once taxation has taken place.
[18]
The respondent’s contention that the applicant’s right to
make the award an order
of court has prescribed, must fail. There is
no reason why costs should not follow the result.
[19]
In the result, I make the following order:
a)
The
arbitration award dated 22 January 2014, attached to the founding
affidavit as “HH2”, is made an order of this court
in
terms of section 31(1) of the Arbitration Act, 1969.
b)
The
respondent is ordered to pay the applicant’s costs of this
application.
______________________________
S.
HOCKEY
ACTING
JUDGE OF THE HIGH COURT
For
applicant:
Adv P MacKenzie
Instructed
by:
Pincus Matz Attorneys
For
Respondents:        Adv R Steyn
Instructed
by:
Cluver Markotter Attorneys

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