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[2014] ZACC 16
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Cool Ideas 1186 CC v Hubbard and Another (CCT 99/13) [2014] ZACC 16; 2014 (4) SA 474 (CC); 2014 (8) BCLR 869 (CC) (5 June 2014)
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CONSTITUTIONAL
COURT OF SOUTH AFRICA
Case
CCT 99/13
In the matter between:
COOL
IDEAS 1186
CC
............................................................................................................
Applicant
and
ANNE
CHRISTINE
HUBBARD
..................................................................................
First
Respondent
MINISTER OF JUSTICE AND
CONSTITUTIONAL
DEVELOPMENT
.................................................................
Second
Respondent
Neutral
citation:
Cool Ideas 1186 CC v
Hubbard and Another
[2014] ZACC 16
Coram:
Moseneke ACJ, Skweyiya ADCJ, Cameron J, Dambuza
AJ, Froneman J, Jafta J, Khampepe J, Madlanga J, Majiedt AJ,
Van der Westhuizen
J and Zondo J
Heard
on:
5 February 2014
Decided
on:
5 June 2014
Summary:
Housing Consumers Protection Measures
Act 95 of 1998
–
section 10(1)
– requires registration
of home builder to receive consideration for work done – no
infringement of unregistered
home builder’s rights to property
and to access to courts
Application
to have arbitration award made an order of court – statutory
prohibition precluding court from making arbitral
award an order of
court – would amount to a court sanctioning an illegality
ORDER
On appeal from the Supreme
Court of Appeal (hearing an appeal from the South Gauteng High Court,
Johannesburg):
1.
The applications for condonation are granted.
2.
The application for leave to appeal is granted.
3.
The appeal is dismissed with costs, including the costs of two
counsel.
JUDGMENT
MAJIEDT AJ (Moseneke ACJ,
Skweyiya ADCJ, Khampepe J and Madlanga J concurring):
Introduction
[1]
In
most instances a home is the most valuable asset in a person’s
estate. The Legislature sought to protect housing
consumers by
enacting the Housing Consumers Protection Measures Act
[1]
(Housing
Protection Act). This matter concerns the interpretation of
section 10(1)(b) of the Act. Related thereto, it
questions
whether that provision infringes Cool Ideas’ right not to be
arbitrarily deprived of property in terms of section
25 of the
Constitution and its right to have access to courts in terms of
section 34 of the Constitution. I must at the outset
record
that no relief was sought either in the courts below or in this Court
to have the section struck down as constitutionally
invalid.
[2]
The
applicant, Cool Ideas 1186 CC (Cool Ideas), a duly registered close
corporation primarily engaged in property development, seeks
leave to
appeal against a judgment of the Supreme Court of Appeal. The
majority in that Court upheld an appeal against a
judgment of the
South Gauteng High Court, Johannesburg (High Court) which
granted Cool Ideas’ application to have an
arbitration award in
its favour against the first respondent, Ms Anne Christine Hubbard, a
home owner, made an order of court in
terms of section 31 of the
Arbitration Act.
[2]
The
second respondent is the Minister of Justice and Constitutional
Development (Minister), cited because the relief sought might
implicate the constitutionality of legislation. The Minister
took no part in the proceedings in the High Court, the Supreme
Court
of Appeal or in this Court.
Condonation
[3]
Cool Ideas applies for condonation of the
late filing of its application for leave to appeal in this Court as
well as for the late
lodging of its summary of substantial facts.
There was opposition only to the first application, but this was
abandoned at
the hearing.
[4]
The explanation proffered for the failure
to comply with the time limits is satisfactory and no prejudice has
ensued. It is
consequently in the interests of justice to grant
both applications.
Background
[5]
On
13 February 2006 Cool Ideas and Ms Hubbard entered into a building
contract. Cool Ideas undertook to construct a residence
for Ms
Hubbard for consideration of R2 695 600.
[3]
Cool
Ideas enlisted the services of Velvori Construction CC (Velvori) to
execute the building project. At the time that it
entered into
the building contract, Cool Ideas was not registered as a home
builder in terms of section 10 of the Housing Protection
Act.
However, Velvori was duly registered as a home builder with the
capacity to undertake the construction of a home. The
building
project was also enrolled by Velvori as required by section 14
[4]
of
the Housing Protection Act.
[6]
The project commenced, payments were made
and received and the building works achieved practical completion in
October 2008.
Ms Hubbard then raised certain issues regarding
the quality of elements of the building works, refused to make the
final payment
due on the building project and claimed payment of
R1 200 000 as the cost of remedial work. Ms Hubbard
invoked the arbitration
clause contained in the building contract and
initiated arbitration proceedings to seek payment for contractual
damages from Cool
Ideas.
[7]
On 12 February 2010 the parties agreed to
the appointment of an arbitrator, Mr Charles Cook, an architect,
to determine the
dispute. Ms Hubbard claimed compensation on
the basis of defective workmanship, relocation costs, penalties and
certain compliance-type
certificates. Cool Ideas counterclaimed
for the portion of the contract sum which remained outstanding,
namely an amount
of approximately R550 000. The
arbitration agreement, among other things, recorded that:
“
The
arbitration will be held in terms of the
Arbitration Act 42 of 1965
.
The arbitrator’s award shall be final and binding. There
shall be no appeal against the arbitrator’s award”.
[8]
The
arbitration proceedings culminated on 15 April 2010 in an award in
favour of Cool Ideas. The relevant part of the award
reads that
“[Ms Hubbard] is to pay the Respondent [Cool Ideas] the sum of
R550 211 inclusive of VAT”.
[5]
[9]
Ms Hubbard failed to satisfy the
arbitration award. On 16 November 2010 she wrote to Cool Ideas
contending that it was not
entitled to claim remuneration under the
building contract because it was not registered as a home builder in
terms of the Housing
Protection Act. She contended that Cool
Ideas was not entitled to apply to have the award of the arbitrator
made an order
of court, since it would receive remuneration in direct
conflict with the provisions of the Housing Protection Act.
[10]
Cool Ideas was of the view that it was not
necessary to register as a home builder in terms of the Housing
Protection Act because
that Act required both the enrolment of a
building project that was subject to its provisions and the
registration of a home builder.
Cool Ideas contended that, in
doing so, it distinguishes between two categories of home builders.
The first is where
the home builder has the capacity to
undertake the physical construction of the home, as did Velvori. The
second is where
the home builder does not have this capacity and has
to appoint a subcontractor. Cool Ideas argued that it
falls into
this latter category. It also averred that, upon
enquiry to the National Home Builders’ Registration Council
(NHBRC),
Cool Ideas was informed that it was not necessary for
it to register as a home builder before commencing construction.
[11]
Subsequently,
Cool Ideas applied to the High Court to make the arbitral award an
order of court in terms of section 31
[6]
of
the
Arbitration Act.
>
High Court
[12]
Ms Hubbard opposed the application and
averred that, in terms of section 10(1) of the Housing Protection
Act, Cool Ideas was not
entitled to carry on the business of a home
builder or to receive any consideration in terms of any agreement
with a person defined
as a housing consumer. Section 10(1)
reads as follows:
“
No
person shall––
(a)
carry on the business of a home builder; or
(b)
receive any consideration in terms of any
agreement with a housing consumer in respect of the sale or
construction of a home,
unless
that person is a registered home builder.”
[13]
Between
the delivery of the answering affidavit and the replying affidavit
during the High Court proceedings, Cool Ideas applied
for and was
registered as a home builder in terms of section 10(6)(b)
[7]
of
the Housing Protection Act.
[14]
During the High Court proceedings, Ms
Hubbard submitted that the arbitral award was incapable of
enforcement and that it was void
from the outset. She made
neither a case for a remittal of the dispute to the arbitrator in
terms of
section 32(2)
of the
Arbitration Act, nor for
setting
aside of the arbitrator’s decision in terms of
section 33.
The High Court was of the view that Ms Hubbard raised her
defence in a manner which had the effect of an appeal in that the
arbitrator erred on a point of law.
[15]
Cool
Ideas submitted that Ms Hubbard was precluded from raising new issues
for the first time. In this regard counsel placed
reliance on
York
Timbers
[8]
and
Lufuno Mphaphuli.
[9]
The
High Court upheld this submission and stated that, had the issue been
raised as an exception at the arbitration stage, Cool
Ideas would
have been afforded the opportunity to deal with the point and the
arbitrator may well have allowed an amendment.
The question of
non-registration could then have been traversed during the
arbitration.
[16]
The High Court held that there is no
authority for the proposition that
section 31(1)
of the
Arbitration Act confers
a discretion on the court to refuse the
application if it finds the award to be incorrect.
[17]
The High Court held further that a
significant feature of this case was that by the time Cool Ideas
wished to make the arbitral
award an order of court, it had
registered as a home builder in terms of the Housing Protection Act.
In this regard the High
Court cited section 14A(1) which is
headed “Late enrolment and non-declared late enrolment”.
It reads:
“
Where
a home builder—
(a)
in contravention of section 14 submits an
application for the enrolment of a home to the Council after
construction has started;
or
(b)
does not declare the fact that construction
has commenced at the time of enrolment and the Council becomes aware
of that fact,
the
Council shall require the home builder to satisfy the Council that
the construction undertaken at the time is in accordance
with the
NHBRC Technical Requirements and shall take prudent measures,
contemplated in section 16(1), to manage the risks pertaining
to the
fund.”
[18]
The High Court held that the Housing
Protection Act envisions a situation where late registration is
permissible after the building
has commenced and therefore the
peremptory provisions of section 10 are to be read with those in
section 14A.
[19]
The High Court further held that the work
was done by Velvori, a registered home builder as required by the
Housing Protection Act.
To preclude Cool Ideas from its claim
at that stage would be giving effect to form over substance. The
substance of
its claim at that stage was that it was a registered
home builder and that at the time it executed the building work it
did so
in cooperation with the subcontractor, Velvori.
[20]
The High Court made the arbitral award an
order of court in accordance with
section 31
of the
Arbitration
Act. Ms
Hubbard appealed to the Supreme Court of Appeal.
Supreme Court of Appeal
[21]
The
majority in the Supreme Court of Appeal held that the purpose of
section 10
was to protect consumers.
[10]
It
held that
section 10(7)
required that both Cool Ideas and the
subcontractor had to be registered as home builders in terms of the
Housing Protection
Act. That section reads as follows:
“
A
home builder registered in terms of subsection (6)(b) shall be
obliged, for the purposes of the physical construction of homes,
to
appoint a home builder registered in terms of subsection (6)(a)”.
[22]
While
section 10 did not nullify the contract between Ms Hubbard and
Cool Ideas, it nevertheless disentitled unregistered home
builders from receiving consideration. Importantly, section
21
[11]
creates
an offence for non-compliance with section 10(1) and (2) of the
Housing Protection Act. Enforcing the arbitral award,
in the
majority’s view, would be to give effect to an unlawful
situation and provide legal sanction to the mischief the Housing
Protection Act seeks to prevent. The majority rejected the High
Court’s finding that the Housing Protection Act envisioned
a
situation where late registration is permissible after the building
has commenced in terms of section 14A. In respect of
the
arbitration award, the majority rejected the proposition on behalf of
Cool Ideas that due deference should be shown to arbitration
awards
by our courts. In doing so, the majority emphasised that it was
not seized with the question whether an arbitration
award should be
set aside, but rather with the enquiry whether it is legally tenable
to make an arbitration award an order of court
where to do so would
amount to sanctioning the breach of a clear statutory prohibition.
The appeal was upheld with costs.
Willis JA, dissenting, took
the contrary view that a refusal to make the arbitral award an order
of court would lead to an
unjust result.
Issues for determination
[23]
The issues for determination in this Court
are:
(a)
the interpretation of section 10(1)(b) of
the Housing Protection Act;
(b)
whether Cool Ideas has been arbitrarily
deprived of its property;
(c)
whether the building contract remains
valid;
(d)
whether equity considerations are
applicable; and
(e)
whether a refusal to make the arbitral
award an order of court constitutes a denial of the right of access
to courts.
In this Court
Jurisdiction
and leave to appeal
[24]
Cool
Ideas predicated its application initially on this Court’s
jurisdiction as it existed prior to the Constitution Seventeenth
Amendment Act
[12]
(Amendment
Act), which commenced on 23 August 2013. Later it changed tack
and amended its notice of motion to seek a determination
of a
non-constitutional issue in terms of the extended general
jurisdiction brought about by section 167(3)(b)(ii)
[13]
of
the Amendment Act. The primary issue for determination is the
correct interpretation of section 10(1)(b) of the Housing
Protection
Act. However, two constitutional issues were raised in the
original application to deal with this issue, namely:
(a) that
section 10(1)(b) of the Housing Protection Act amounts to an
arbitrary deprivation of property as envisaged in section
25(1) of
the Constitution;
[14]
and
(b) that the Supreme Court of Appeal’s refusal to make the
arbitration award an order of court infringed Cool Ideas’
right
of access to courts in terms of section 34 of the Constitution.
[15]
[25]
Apart
from the fact that the original application for leave to appeal had
been filed in this Court on 30 July 2013, almost one month
prior to
the commencement of the amended section 167(3)(b)(ii), there is no
need for this Court to exercise its extended general
jurisdiction
(assuming it could do so), since constitutional issues plainly arise
here. It is therefore not necessary to
decide whether this
Court has extended jurisdiction in terms of the amended section.
[16]
[26]
It is furthermore in the interests of
justice to decide these constitutional issues, since they arise as a
consequence of the Supreme
Court of Appeal’s majority judgment.
This matter requires us to interpret section 10(1)(b) of the
Housing Protection
Act and to subject it to scrutiny through the
lens of the rights contained in sections 25(1) and 34 of the
Constitution.
These issues were not directly raised in the
Supreme Court of Appeal. There are reasonable prospects of
success and leave
to appeal should consequently be granted.
The
merits
[27]
The interpretation of section 10(1)(b) of
the Housing Protection Act requires a careful consideration
of the scheme of
the Act and its objects measured against the rights
embodied in sections 25 and 34 of the Constitution. The nub of
the dispute
concerns the question whether section 10(1)(b) should be
interpreted, as Cool Ideas contends, to mean that an
unregistered
home builder can receive payment for work done as long
as registration has been effected by the time that payment is
sought.
Put differently, Cool Ideas contends that registration
is not a prerequisite for a home builder to commence (and complete)
construction,
as long as registration has been effected by the time
the home builder seeks payment.
Proper
meaning of section 10(1)(b) of the Housing Protection Act
[17]
[28]
A
fundamental tenet of statutory interpretation is that the words in a
statute must be given their ordinary grammatical meaning,
unless to
do so would result in an absurdity.
[18]
There
are three important interrelated riders to this general principle,
namely:
(a)
that
statutory provisions should always be interpreted purposively;
[19]
(b)
the
relevant statutory provision must be properly contextualised;
[20]
and
(c)
all
statutes must be construed consistently with the Constitution, that
is, where reasonably possible, legislative provisions ought
to be
interpreted to preserve their constitutional validity. This
proviso to the general principle is closely related to
the purposive
approach referred to in (a).
[21]
I turn to an analysis of the
legislative scheme of the Housing Protection Act, against the
backdrop of these principles.
The scheme of the statute
[29]
The
purpose of the Housing Protection Act is to protect housing
consumers. This appears from the name and preamble of the
statute.
[22]
Unsurprisingly,
this aspect was not in issue before us. The entire legislative
scheme is predicated upon a building contract
between a registered
home builder and a housing consumer being concluded. The
statute is not capable of being construed as
permitting
after-the-fact registration of a home builder when construction has
already commenced (or may even have been completed)
when it seeks
payment from the housing consumer. It is necessary to discuss
in some detail the various provisions of the
Housing Protection Act
which support this conclusion.
[30]
Section
3 sets out the objects of the NHBRC. The ultimate objective is
the regulation of the building industry
[23]
through,
amongst other things, the protection of the housing consumer and
maintaining minimum standards for home builders.
The protection
is optimally achieved in requiring the registration of home builders
upfront and not during the course of or at
the end of construction.
The impugned provision must therefore be interpreted thus. To
hold otherwise would be to defeat
the primary objective of the
statute. The contrary argument would in effect leave a housing
consumer who is faced with defective
workmanship on his or her house
unprotected in respect of a civil remedy in terms of the Housing
Protection Act until such time
as the home builder registers with a
view to recovering payment for its services rendered, should such a
home builder ever choose
to do so.
[31]
Section
5 sets out the wide-ranging powers of the NHBRC. Section 13
contains important safeguards in favour of the housing
consumer.
Unless there has been compliance with certain provisions,
[24]
a
home builder is prohibited from demanding or receiving from a housing
consumer a deposit for the construction of a home.
[25]
I
deal with these sections in more detail below.
[32]
Chapter V deals with legal enforcement and,
in a similar vein, affords housing consumers extensive protection
through the imposition
of the requirement on home builders to
register with the NHBRC. Lastly, section 21 creates statutory
offences for contravention
of section 10(1) and (2). It
provides for sentences of a fine not exceeding R25 000 or
imprisonment for a period not
exceeding one year, on each charge.
[33]
These
provisions lead one to the ineluctable conclusion that the statute
envisions registration of a home builder before construction
commences. Moreover, the relevant section itself says so in
plain language.
[26]
These
prohibitions are stark and explicit. Equally clear is the
purpose of these provisions (as is the case with the statute
as a
whole), namely to protect housing consumers.
[34]
The possibility of belated registration,
advanced by Cool Ideas, would be inimical to the clear objective of
the legislation.
It would also violate the clear language and
meaning of section 10(1)(b). Much emphasis was laid on behalf
of Cool Ideas
on the use of the word “receive” in
section 10(1)(b) in support of this converse proposition. That
emphasis is
misplaced. Section 10(1)(a) and (b) and 10(2) must
be read together and, as stated, contextually and purposively with
regard
to the statute as a whole. This section requires the
registration of persons or entities that carry on the business of a
home builder, and those that have entered into an agreement with a
housing consumer in respect of the sale or construction of a
house.
In this instance, it is not permissible to extract one word from the
section and then to rely upon it as support for
the interpretation
which Cool Ideas contends for in circumstances where it plainly
controverts not only the plain, unambiguous
text of section 10(1) and
(2), but also the clear purpose of that section and of the statute as
a whole.
[35]
The
further submission that Cool Ideas’ non-registration was
in any event cured by the fact that Velvori – which
did the
actual construction work – had been duly registered as a home
builder, is devoid of merit. This is so given
the plain and
unequivocal requirement in section 10(7).
[27]
[36]
It is of some significance that while, as
the majority in the Supreme Court of Appeal correctly observed,
section 14A allows for
the late enrolment of a home after
construction has commenced, there is no corresponding relaxation of
the registration requirement
to be found in section 10(1)(b).
This too evinces a clear intention by the Legislature that
registration should occur prior
to and not during or at the end of
construction.
[37]
Accordingly, the interpretation given by
the Supreme Court of Appeal to section 10(1)(b) of the Housing
Protection Act, namely that
registration is a prerequisite for
building works to be undertaken by a home builder, must be upheld.
Failure to register
would result in the home builder being ineligible
to seek consideration for work done in terms of a building
agreement. It
is convenient to discuss whether this
interpretation amounts to an arbitrary deprivation of Cool Ideas’
property.
I think not.
Arbitrary deprivation of
property
[38]
The
starting point of this enquiry must be whether there has been a
deprivation of Cool Ideas’ property.
[28]
It is common cause that there has been deprivation – Cool Ideas
would not be able to enforce a claim based on
unjustified enrichment,
for the reasons mentioned below.
[29]
The outstanding balance of R550 000 would thus remain unpaid.
This Court held in
Opperman
that
the right to restitution of money paid based on unjustified
enrichment constitutes property for purposes of section 25(1) of
the
Constitution.
[30]
[39]
The next question is whether the
deprivation of Cool Ideas’ right to sue on unjustified
enrichment is arbitrary. The
answer to this question is
inextricably linked to the discussion of the purpose of the Housing
Protection Act, the legislative
scheme as a whole and the
interpretation of section 10(1)(b), set out above.
[40]
In
FNB
v CSARS
,
[31]
this Court set out the test for arbitrariness. It held that
there will be an arbitrary deprivation of property if the law
referred to in section 25(1) lacks adequate reason for the
deprivation in question or is procedurally unfair.
[32]
Ackermann J then laid down guidelines for determining the requirement
of sufficient reason for the deprivation.
[33]
In essence they entail an analysis of the means employed and
the ends sought to be achieved as well as a consideration of
the
nature of the property and the extent of the deprivation.
[41]
This
approach was referred to with approval in
Opperman
.
[34]
As was the case in
Opperman
,
the deprivation in this matter is not merely partial in nature.
It deprives the unregistered home builder, Cool Ideas, of
its right
to payment and there must consequently be compelling reasons for it.
Proportionality between the means and the
end would therefore have to
feature prominently in this enquiry.
[35]
But, unlike
Opperman
’s
factual matrix and ultimate findings, here the means justify the end,
that is, there is a rational connection between the
depriving
statutory provision and its purpose. The purpose of the
legislation has been set out above and is not in issue.
[42]
There can be no doubt that the protection
of housing consumers is a necessary and legitimate legislative
objective. The means
of protection is through the establishment
of a fund to compensate housing consumers for defective work by home
builders.
Registration is a prerequisite for the construction
of a home. Registration, quite apart from its protection
objective, is
also aimed at bringing home builders into the statutory
fold of the NHBRC with all its wide-ranging powers and, secondly, to
contribute
towards the funding of the NHBRC through registration
fees.
[43]
The crisp issue is whether the penalisation
for failure to register, namely the deprivation of consideration for
services rendered
by the home builder, is proportionate to the
purpose of protecting housing consumers, that is, do the means of
deprivation justify
the ends of protection? I think they do.
The purpose for deprivation is compelling. Moreover, it is a
simple
process of registration which is required. There is
nothing overly complicated or onerous. The important
consequences
brought about by registration have been dealt with
above. It is not necessary to regurgitate them. It would
suffice
to reiterate their importance by demonstrating the invidious
position a housing consumer who has unwittingly contracted with an
unregistered home builder would find herself in. There would be
no safeguards under section 13, which places certain important
obligations on the home builder and which also provides evidentiary
aid to the housing consumer by way of the deeming provisions
in
section 13(2)(a). Most importantly, the housing consumer would
have no recourse to the NHBRC Fund and no claim for restitution
against the unregistered home builder. The deprivation effected
by section 10(1)(b) is aimed at a limited target, namely
those home
builders who fail to register.
[44]
I am satisfied that section 10(1)(b) is
aimed at achieving a legitimate and important statutory purpose and
that there is a rational,
proportional connection between the
statutory prohibition and its purpose. There is accordingly no
arbitrariness in the deprivation
and thus no violation of section 25
of the Constitution. I turn next to a discussion of whether the
underlying building contract
remains valid.
The continued validity of
the building contract
[45]
By
invoking the arbitration clause in terms of the building contract,
the parties entered into a separate arbitration agreement
on
3 April 2009
[36]
(it
will be recalled that the building contract had been concluded on 13
February 2006). This fell outside of the ambit of
the building
contract. My Colleague Jafta J does not draw this distinction.
The arbitrator derives his powers not from
the building contract (as
Jafta J appears to suggest), but from the arbitration agreement. The
arbitrator himself acknowledged
this fact.
[37]
It is noteworthy that at the time of the commencement of the
arbitration agreement on 12 February 2010, Cool Ideas
was
still not registered as a home builder for the purposes of section 10
of the Housing Protection Act.
[38]
[46]
Although
I find below that the building contract remained valid, a distinction
needs to be drawn between the building contract and
the arbitration
agreement.
[39]
It is the contents of the arbitration agreement that are before
this Court. The arbitration agreement required the
arbitrator
to arbitrate on alleged defective work by Cool Ideas which
occurred whilst Cool Ideas was engaged in the construction
of a home
for Ms Hubbard. Both the arbitration agreement and the
building contract are subject to the legislative framework
of the
Housing Protection Act.
[47]
The Supreme Court of Appeal correctly found
that the underlying building contract remains valid, notwithstanding
its finding that
Cool Ideas was not entitled to payment due to its
failure to register as required by section 10(1)(b). It
reasoned, correctly
so, that the prohibitions in section 10(1) and
(2) are not directed at the validity of construction contracts, but
at the unregistered
home builder who is barred from receiving any
consideration for work done absent any prior registration as a home
builder.
There is nothing in the legislative scheme which
suggests that the building contract is invalidated by these statutory
prohibitions.
[48]
I
have already set out the main provisions of the Housing Protection
Act. The legislative scheme rests upon a written building
contract between a registered home builder and a housing
consumer.
[40]
Section
13(1) places a statutory obligation upon the home builder to ensure
that a written agreement is concluded and that
the formalities in
that regard are met.
[41]
Section 13(2)(a) lends further assistance to the housing consumer as
against the home builder by importing deeming provisions
into the
written agreement against the latter, enforceable in a court.
[42]
And, of some significance is the fact that these provisions in
section 13 may not be waived.
[43]
It is difficult to conceive how, given this importance of the written
building contract in the legislative scheme, the entire
agreement
must be invalidated by the conclusion that an unregistered home
builder is not entitled to seek payment for work done
in terms of
section 10(1)(b). It would be tantamount to a futile exercise
if the Legislature were to enact a statutory prohibition
against the
remuneration of an unregistered home builder when the entire
legislative scheme renders the building contract between
the housing
consumer and the home builder void from the outset. For this
reason I find myself in respectful disagreement
with Jafta J where he
states that there is “nothing in the text of section 10(1), or
other sections of the Act, which indicates
that the underlying
contract should remain unaffected.”
[44]
It is inconceivable that the Legislature would specifically
enact a provision such as section 13 to protect consumers but
then
render their contract invalid – a provision which stipulates
various protective measures for the benefit of housing
consumers.
These include enforceable warranties by way of the deeming
provision in section 13(2). These may not be
waived. The
Legislature is not likely to have provided for their inclusion in a
building contract if the very same enactment
renders the building
contract invalid.
[49]
The Housing Protection Act is, for good
reasons, nuanced in its purpose and scheme. The underlying
building contract must
remain extant in order to render protection to
the housing consumer in respect of what has already been erected and
to the home
builder for what has already been received. The
parties are therefore entitled to retain what has been done or given,
as
the case may be. No restitution is legally tenable in these
circumstances, as would have been the case with an invalid
agreement.
Thus, Cool Ideas would not be entitled to file suit
against Ms Hubbard for unjustified enrichment, since the material
element of
performance without legal basis (
sine
causa
) is lacking – the building
agreement remains a valid
causa
.
[50]
It
is of considerable importance to note that both parties approached
the matter in this Court and in the courts below on the basis
that
the underlying building contract remained valid. The
statements
[45]
by Jafta J that
Ms Hubbard had challenged the arbitral award on the basis that it is
invalid because the building contract itself
is invalid are, with
respect, not borne out by the extract quoted by Jafta J in his
judgment,
[46]
or by any other
part of the record. On the contrary, in response to the
averment by Cool Ideas in its founding affidavit
in this Court that
the Supreme Court of Appeal correctly found that the building
contract remains valid, Ms Hubbard stated as follows
in her opposing
affidavit:
“
I
do not dispute that the failure on the part of Cool Ideas to have
registered as a home builder in terms of the Housing [Protection]
Act
did not in itself render our building agreement void.”
Counsel for both parties
argued the matter before us on this basis, and correctly so.
[51]
In summary: the underlying building
contract remains valid and extant. This is so even though Cool
Ideas is in law precluded
from seeking consideration for the work
done, due to its failure to register as a home builder prior to the
commencement of the
building works.
Equity considerations
[52]
Cool Ideas contended that it would be
inequitable for Ms Hubbard to be absolved from complying with the
arbitrator’s award
and from paying the outstanding
approximately R550 000 due to Cool Ideas. I am of the view
that equity considerations
do not apply. But even if they do,
as my Colleague Froneman J suggests, the law cannot countenance a
situation where, on
a case by case basis, equity and fairness
considerations are invoked to circumvent and subvert the plain
meaning of a statutory
provision which is rationally connected to the
legitimate purpose it seeks to achieve, as is the case here. To
do so would
be to undermine one of the essential fundamentals of the
rule of law, namely the principle of legality. The following
dictum
by Kentridge AJ in
S v Zuma
is apposite:
“
[I]f
the language used by the lawgiver is ignored in favour of a general
resort to ‘values’ the result is not interpretation
but
divination.”
[47]
It is for this reason that I
am in respectful disagreement with Froneman J in his interpretation
of section 10(1)(b) and the reasoning
behind it. The plain
import of section 10(1)(b) is that regardless of how much work has
been done by the unregistered home
builder, no consideration is
payable by the housing consumer.
Does the refusal to make
the arbitral award an order of court infringe Cool Ideas’ right
of access to courts
?
[53]
The
majority in the Supreme Court of Appeal refused to make the arbitral
award an order of court on the basis that to do so would
amount to
sanctioning an illegality and would subvert the legitimate purpose of
the section by lending the court’s imprimatur
to the very
mischief which the statute seeks to prevent. Our law has long
recognised that any act performed contrary to the
direct and express
prohibition of the law is void and of no force and effect.
[48]
Making the arbitral award an order of court would undoubtedly amount
to the court sanctioning the illegality which section
10(1)(b)
imposes.
[54]
Moreover,
section 21 of the Housing Protection Act provides that non compliance
with the particular section constitutes a criminal
offence. It
is imperative to take cognisance of the fact that we are not
concerned here with the setting aside of the arbitrator’s
award
on one of the three grounds listed in
section 33
of the
Arbitration
Act, namely
: misconduct by the arbitrator, gross irregularity in the
proceedings, or where an arbitral award has been improperly
obtained.
Nor are we concerned with a remittal to the
arbitrator in terms of
section 32.
This matter concerns the
provisions of
section 31
of the
Arbitration Act in
terms whereof an
arbitral award may be made an order of court.
[49]
[55]
What we are seized with here is therefore
not the correctness or otherwise of the arbitral award, but with the
question whether
the award ought to be made an order of court if the
court order would be contrary to a plain statutory prohibition.
What
is more, as stated at the outset, there is no challenge to the
section’s constitutional validity. It cannot be expected
of a court of law in such circumstances to disregard a clear
statutory prohibition – that would be inimical to the principle
of legality and the rule of law. To do so would amount to
undermining the purpose of the legislation.
[56]
That
is not to say that a court can never enforce an arbitral award that
is at odds with a statutory prohibition. The reason
is that
constitutional values require courts to “be careful not to
undermine the achievement of the goals of private arbitration
by
enlarging their powers of scrutiny imprudently.”
[50]
Courts should respect the parties’ choice to have their dispute
resolved expeditiously in proceedings outside formal
court
structures. If a court refuses too freely to enforce an
arbitration award, thereby rendering it largely ineffectual,
because
of a defence that was raised only after the arbitrator gave judgment,
that self-evidently erodes the utility of arbitration
as an
expeditious, out-of-court means of finally resolving the dispute.
[57]
So
it will often be contrary to public policy for a court to enforce an
arbitral award that is at odds with a statutory prohibition.
But it will not always be so. The force of the prohibition must
be weighed against the important goals of private arbitration
that
this Court has recognised.
[51]
[58]
Against
this backdrop I turn to consider whether this particular arbitral
award is contrary to public policy. In my view it
is.
Courts are themselves subject to the fundamental principle of
legality as they are bound to uphold the Constitution
[52]
and, as stated, to make the arbitral award an order of court in the
present instance would undermine that very principle.
Cool
Ideas has placed extensive reliance on
Lufuno Mphaphuli
[53]
and the principle of party autonomy in voluntary arbitrations.
[54]
While these are important considerations, I fail to see how they
assist Cool Ideas here. Generally speaking, party
autonomy in
voluntary arbitrations will not trump the principle of legality where
the enforcement of the arbitral award would constitute
a criminal
offence, as is the case here. I turn next to a brief discussion
of
Lufuno
Mphaphuli
to
demonstrate why – although its reasoning is not irrelevant here
– it is distinguishable from the present case.
[59]
Lufuno Mphaphuli
concerned
a private arbitration between Lufuno Mphaphuli & Associates (Pty)
Ltd (Mphaphuli), an electrical infrastructure contractor
company, and
Bopanang Construction CC (Bopanang), a close corporation engaged in
similar business. Differences arose between
the parties in
respect of performance in terms of a written agreement in terms
whereof Mphaphuli had engaged the services of Bopanang
as a
subcontractor to undertake certain work on its behalf for Eskom in
rural Limpopo. The dispute was referred to arbitration
before
Mr Andrews, the respondent, a quantity surveyor and project manager.
The arbitrator found for Bopanang, who sought
to have the award made
an order of court in terms of
section 31(1)
of the
Arbitration
Act. Mphaphuli
opposed this application and launched a separate
application in terms of
section 32(2)
of the
Arbitration Act for
the
review and setting aside of the award and for remittal to the
arbitrator. Bopanang succeeded in the High Court, but Mphaphuli
did not; its applications for condonation failing for, inter alia,
lack of merits in the main action. Mphaphuli met with
the same
fate in the Supreme Court of Appeal. In this Court the central
issues were the interaction between the
section 34
right of access to
courts and private arbitrations as well as the question whether, and
to what extent, parties who enter into
an arbitration agreement are
to be taken to have waived their constitutional right to a fair and
impartial hearing and, lastly,
the role of courts in confirming or
setting aside arbitration awards. The statements in
Lufuno
Mphaphuli
must be seen in their proper
perspective. This is so because
Lufuno
Mphaphuli
concerned the setting aside
of an arbitration award in terms of
section 33(2)
of the
Arbitration
Act. As
the majority in the Supreme Court of Appeal correctly
held, it is important to remind oneself that this is not the case
before
us. We are concerned with whether making an arbitration
award an order of court is permissible in circumstances where to do
so would be to sanction a clear statutory prohibition. Some of
the same considerations apply in this context. A court’s
refusal to enforce an arbitration award will also erode, to some
extent, the utility of the arbitration process. But where
a
court is called upon actively to facilitate an illegality there is a
need for greater caution.
[60]
The refusal to make the arbitral award an
order of court for the strongly persuasive reasons advanced by the
majority in the Supreme
Court of Appeal is required by public policy
in this case. The court would otherwise be contravening a clear
statutory criminal
prohibition enacted for a particularly laudable
and important purpose: the protection of housing consumers.
[61]
At
common law an arbitral award should not be executed if the particular
matter is repugnant to arbitration.
[55]
Furthermore, Cool Ideas sought to draw an analogy with the
Recognition and Enforcement of Foreign Arbitral Awards Act
[56]
and the UNCITRAL Model Law on International Commercial
Arbitration.
[57]
But, to
the extent that those instruments have any applicability here, they
tell against Cool Ideas. Both empower a
court to refuse to
enforce an arbitral award if to do so “would be contrary to
public policy” in South Africa. For
the reasons I have
given, enforcing this arbitral award in violation of a statutory
prohibition backed by a criminal sanction would
be contrary to public
policy. This is also the approach adopted by academic writers.
Thus, for instance, Butler and
Finsen argue that if an arbitral award
is “illegal or contrary to public policy” a court may not
enforce it.
[58]
[62]
In the premises, Cool Ideas’ reliance
on the infringement of its section-34 right is misconceived.
Its access to courts
was not denied by the Supreme Court of Appeal
majority but, in truth and in fact, the principle of legality, so
fundamental to
our constitutional project, was correctly upheld.
Cool Ideas has been afforded a full and proper opportunity to
have all
the issues ventilated in the High Court and in the Supreme
Court of Appeal. The section-34 challenge must consequently
fail.
Costs
[63]
In this instance I see no reason to deviate
from the standard rule that costs should follow the result.
Accordingly, Ms Hubbard
is entitled to the costs of this
application, including the costs consequent upon the employment of
two counsel.
Order
[64]
The following order is made:
1.
The applications for condonation are granted.
2.
The application for leave to appeal is granted.
3.
The appeal is dismissed with costs, including the costs of two
counsel.
JAFTA J (Zondo J concurring):
[65]
I have read the judgment of my Colleague
Majiedt AJ (main judgment). While I agree with the order
proposed and some of the
reasons underpinning it, I am unable to
agree with some of the findings made. I do not agree that on 3
April 2009, Cool Ideas
and Ms Hubbard concluded a separate
arbitration agreement.
[66]
I also disagree with the finding that the
contract between the parties remains valid. In my view,
properly construed, the
prohibitions in section 10(1)(a) and (b) read
with section 21(1)(b), nullify the contract even though no specific
reference is
made to it in those provisions. Flowing from this
finding, my approach to the matter differs from the main judgment.
Background
[67]
The primary question is whether the
arbitration award should have been made an order of court for
purposes of enforcement.
The award arose from a building
contract concluded by the parties in February 2006. In terms of
that contract, Cool Ideas
undertook to build a residential house
for Ms Hubbard, who undertook to pay R2 695 600 for the
construction. Furthermore,
the parties agreed that any dispute
arising from the contract would be submitted to arbitration.
Clause 14 of the contract
provided:
“
Arbitration
14.1
Any dispute arising between the parties out of and during the
currency of the contract or upon termination thereof may be referred
to arbitration.
14.2
The arbitrator shall be appointed at the request of either party by
the president for the time being of the Master Builders
Association
having jurisdiction in the area or by the president of the Building
Industries Federation (SA), whose decision will
be final and binding
on both parties”.
[68]
Cool Ideas did not carry out the
construction itself, but subcontracted Velvori Construction CC to
build the house. At the
relevant time, Velvori Construction was
registered in terms of the Housing Protection Act but Cool Ideas was
not.
[69]
As is usual in contracts of this kind,
disputes arose that led to claims being made by each party against
the other. Ms Hubbard
claimed the sum of R1 231 300.50 which
she said was the cost of remedial work as she complained that there
were defects in the
building. Cool Ideas counterclaimed the
balance of the contract price which was in the amount of R550 211,
plus VAT and interest
at an agreed rate.
[70]
Mr Charles Cook, an architect and valuer,
was appointed as the arbitrator. The disputes were submitted to
the arbitrator for
determination. In October 2010, the
arbitrator issued an award in favour of Cool Ideas. In terms of
the award, Ms Hubbard
was ordered to pay the amount claimed by Cool
Ideas. She was also directed to pay the costs occasioned by the
arbitration.
[71]
But
Ms Hubbard failed to pay. In order to enforce the award, Cool
Ideas approached the High Court requesting that the award
be made an
order of court.
[59]
In
opposing the application, Ms Hubbard contended that enforcing the
award would effectively be enforcing a criminal act
because, when she
and Cool Ideas concluded the building contract, Cool Ideas was
prohibited from carrying on the business of a
home builder or
receiving any consideration in terms of an agreement with a housing
consumer like her.
[72]
Ms Hubbard’s defence was pleaded in
these terms:
“
[I]t
was discovered . . . that [Cool Ideas], whom I contracted to
construct my home, was not registered as a home builder in terms
of
the [Housing Protection Act].
The
effect of the above
, so I am advised,
is that [Cool Ideas] is not entitled to
carry on the business of a home builder, or to receive any
consideration in terms of any
agreement with a person, defined as a
housing consumer
in terms of the
[Housing Protection Act], in respect of the sale or construction of a
home.
.
. .
The
result of the above is, so I am advised, that [Cool Ideas] was not
entitled to claim any payment from me, let alone an amount
totalling
R1 228 522.09 (one million two hundred and twenty eight thousand five
hundred and twenty two rand and nine cents) which
consists of an
amount of R1 064 746 (one million and sixty four thousand seven
hundred and forty six rand) for ‘work done’
and the
remainder consisting of interest charged upon such an amount.
.
. .
I
confirm, as I have alluded to hereinbefore, that the award of the
arbitrator effectively seeks to order the performance of a prohibited
or criminal act, in that it purports to order me to make payment to
an entity who carries on the business of a home builder, as
defined
in the [Housing Protection Act], in relation to an agreement in
respect of the construction/sale of a home, while such
an entity is
not registered in terms of the [Housing Protection Act] as required
by such an Act.” (Emphasis added.)
[73]
It is apparent from Ms Hubbard’s plea
that she challenged the validity of the award on the basis that the
building contract
she had entered into with Cool Ideas was, itself,
invalid because Cool Ideas carried on the business of a home builder
and demanded
to be paid consideration under the contract whilst it
was not registered in terms of the Housing Protection Act. Thus
the
building contract was impugned on the ground that two
prohibitions in section 10(1) of the Housing Protection Act were
violated.
[74]
The High Court rejected the defence raised
by Ms Hubbard and made the arbitration award an order of court.
However, the Supreme
Court of Appeal overturned the High Court’s
order and replaced it with an order dismissing the application with
costs.
Order of court
[75]
As mentioned, the main issue here is
whether the arbitration award should be made an order of court.
Making it an order of
court is a prelude to enforcing it in the
manner that a judgment of a civil court is enforced.
Section 31
of the
Arbitration Act regulates
the process of making an arbitration
award an order of court. It provides:
“
(1)
An award may, on application to a court of competent jurisdiction by
any party to the reference after due notice to the other
party or
parties, be made an order of court.
(2)
The court to which application is so made, may, before making the
award an order of court, correct in the award any clerical
mistake or
any patent error arising from any accidental slip or omission.
(3)
An award which has been made an order of court may be enforced in the
same manner as any judgment or order to the same effect.”
[76]
But converting an award into a court order
does not follow as a matter of course. A court is entitled to
refuse to make an
award an order of court if the award is defective.
Section 33
of the
Arbitration Act sets
out the defects which would
justify the refusal.
Section 33(1)
provides:
“
Where—
(a)
any member of an arbitration tribunal has misconducted himself in
relation to his duties as arbitrator or umpire; or
(b)
an arbitration tribunal has committed any gross irregularity in the
conduct of the arbitration proceedings or has exceeded its
powers; or
(c)
an award has been improperly obtained,
the
court may, on the application of any party to the reference after due
notice to the other party or parties, make an order setting
the award
aside.”
[77]
It is apparent from
section 33(1)
that an
award which has been improperly obtained cannot be made an order of
court. Impropriety may arise from a number of
circumstances,
including illegality. If an award is tainted by illegality, it
may not be made an order of court and may not
be enforced in our
courts. It is a basic principle of our law that a court can
never lend its aid to the enforcement of an
illegal act. An act
that has been performed in violation of a statutory prohibition may,
generally, have no legal consequences.
In
Schierhout
,
Innes CJ observed:
“
It
is a fundamental principle of our law that a thing done contrary to
the direct prohibition of the law is void and of no effect.”
[60]
[78]
Here, Ms Hubbard resisted the request to
make the award an order of court on the basis that it was tainted by
illegality.
She contended that the building contract, in terms
of which the arbitrator was appointed and the arbitration process was
undertaken,
was itself void because, at the time of its conclusion,
Cool Ideas was not registered. It is common cause that Cool
Ideas
was not registered at the time that the building contract was
concluded.
[79]
In her plea, Ms Hubbard submitted that two
prohibitions in section 10(1) of the Housing Protection Act were
breached when the building
contract was concluded. The first
prohibition is to the effect that no person shall carry on the
business of a home builder.
The second is to the effect that no
person shall receive consideration in terms of any agreement with a
housing consumer in respect
of the sale or construction of a home.
Issues
[80]
Owing to the defence advanced by Ms
Hubbard, the following issues arise:
(a)
whether in concluding the building
agreement with her, Cool Ideas violated section 10(1) of the Housing
Protection Act;
(b)
if so, whether the breach nullified the
agreement;
(c)
if the contract remained valid, whether,
despite the breach, Cool Ideas was entitled to payment for the work
done on Ms Hubbard’s
house; and
(d)
if it was entitled to payment, whether the
arbitration award ought to be made an order of court.
Illegality
[81]
The
illegality which is the bedrock of Ms Hubbard’s defence depends
mainly on the interpretation of section 10(1) of the Housing
Protection Act. I agree with the main judgment that the purpose
of the Housing Protection Act, including section 10, is to
protect
housing consumers like Ms Hubbard. It achieves this purpose
through a scheme that requires every home builder, such
as Cool
Ideas, to be registered in terms of the Act before it can carry on
the business of a home builder. In addition, prior
registration
is necessary for a home builder before receipt of any consideration
in terms of a building contract. And a home
builder who
subcontracts another home builder to carry out the construction of a
home must be registered before the subcontract
is concluded.
[61]
[82]
Section 10(1) provides:
“
No
person shall—
(a)
carry on the business of a home builder; or
(b)
receive any consideration in terms of any
agreement with a housing consumer in respect of the sale or
construction of a home,
unless
that person is a registered home builder.”
[83]
A careful reading of the subsection reveals
that it stipulates two prohibitions. First, it forbids any
person from carrying
on the business of a home builder unless that
person is a registered home builder. The use of the word
“unless”
in the context of the section makes plain that
registration as a home builder must precede carrying on the business
and receipt
of consideration. The phrase “carry on the
business of a home builder” requires a little more
elaboration.
It is not in dispute that Cool Ideas is a home
builder envisaged in the Housing Protection Act. Nor can it be
gainsaid that
Ms Hubbard is a housing consumer in terms of the
same Act.
[84]
The Housing Protection Act defines
“business of a home builder” as—
(a)
constructing or undertaking to construct a
home or causing a home to be constructed for any person;
(b)
constructing a home for the purposes of
sale, leasing, renting out or otherwise disposing of such home;
(c)
selling or otherwise disposing of a home
contemplated in paragraph (a) or (b) as a principal; or
(d)
conducting
any other activity that may be prescribed by the Minister for the
purposes of this definition.
[62]
[85]
It is clear from this wide definition that,
when Cool Ideas entered into a building contract and undertook to
construct a house
for Ms Hubbard, Cool Ideas carried on the business
of a home builder. Even when it later subcontracted Velvori
Construction
to build the home, Cool Ideas was still carrying on the
business of a home builder.
[86]
The facts of the case also show that Cool
Ideas received payment for the construction of Ms Hubbard’s
house and what it claimed
at the arbitration was the balance of the
contract price. At the time Cool Ideas received part of the
payment, it was not
registered. It was registered after the
arbitration award was issued.
[87]
Therefore, both prohibitions on which Ms
Hubbard relied for her defence were violated. The first
violation occurred when the
building contract was concluded.
The second violation of the first prohibition happened at the time
when Cool Ideas subcontracted
Velvori Construction. The
infringement of the second prohibition arose when Cool Ideas received
payment for work done on
Ms Hubbard’s home. However, in
respect of the balance that is the subject matter of the arbitration
award, receipt
of the money has not occurred and Cool Ideas has now
been registered.
[88]
In
terms of section 21 of the Housing Protection Act, these breaches
constitute criminal offences.
[63]
Each contravention carries a penalty of a fine not exceeding R25 000
or imprisonment for a period not more than one
year.
[89]
The answer to the question whether the
arbitration award should be made an order of court depends on
whether, despite non-compliance
with section 10(1), Cool Ideas
should derive benefit from the building contract. This in turn
requires us to examine
the effect of acting contrary to the
prohibitions in section 10(1) when the contract was concluded.
Put differently, whether
the validity of the contract was not
affected by the non-compliance.
Validity of the building
contract
[90]
The general principle of our law is that an
act performed contrary to a statutory prohibition is invalid and has
no legal effect.
In explaining the principle in
Schierhout
,
Innes CJ said:
“
[W]hat
is done contrary to the prohibition of the law is not only of no
effect, but must be regarded as never having been done –
and
that whether the lawgiver has expressly so decreed or not; the mere
prohibition operates to nullify the act.”
[64]
[91]
However,
the question whether non-compliance with a statutory prohibition
would nullify an act is determined with reference to the
language of
the statute concerned.
[65]
But it is important to note that where a statutory provision under
consideration amounts to a prohibition such as the ones
contained in
section 10(1) of the Housing Protection Act, an act performed
contrary to it would be invalid, unless it is clear
from the statute
that, in the light of its scope and object, invalidity was not
intended. In other words, it is the prohibition
which “operates
to nullify the act” performed contrary to it.
[92]
In
Lupacchini
,
[66]
the Supreme Court of Appeal rejected a view of academic writers to
the effect that a trustee who is still to receive authorisation
from
the Master has capacity to sue or to be sued on behalf of the trust,
despite the provision that such trustee “shall
act in that
capacity only if authorised thereto in writing by the Master.”
The Supreme Court of Appeal held that legal
proceedings which were
instituted by a trustee before authorisation were invalid. The
Court reasoned:
“
I
regret that I can find no indications that legal proceedings
commenced by unauthorised trustees were intended to be valid.
On the contrary, the indications seem to me all to point the other
way. Unless it were to be the case that all transactions
performed in conflict with the section are to be treated as valid –
which clearly cannot be the case, because otherwise the
Act would be
altogether ineffective – then I find nothing to distinguish its
effect on legal proceedings. Indeed, it
would seem to me that
the case is even stronger for finding legal proceedings to be a
nullity.”
[67]
[93]
The authorities referred to suggest that
the building contract concluded by Cool Ideas and Ms Hubbard, in
contravention of
section 10(1)(a) of the Housing Protection Act, was
invalid. But the Supreme Court of Appeal here held that the
contract
remained valid. That Court stated:
“
Sections
10(1) and (2) do not in terms invalidate the agreement between the
home builder and the housing consumer. Quite the
contrary –
I think it is clear that, consistent with the overall purpose of the
Act, the validity of that agreement is unaffected
by an act of the
home builder in breach of those sections. The prohibition in
those sections is not directed at the validity
of particular
agreements but at the person who carries on the business of a home
builder without a registration. They thus
do no more than
disentitle a home builder from receiving any consideration.
That being so a home builder who claims consideration
in conflict
with those sections might expose himself or herself to criminal
sanction (section 21) and will be prevented from enforcing
his or her
claim.”
[68]
[94]
The first flaw in the reasoning advanced
for the finding that the building contract is not affected by the
breach is that the prohibition
is directed at the home builder and
not the agreement. While this is true, it does not shed light
on whether non-compliance
nullifies the contract. Indeed, in
Lupacchini
the prohibition was directed at the trustee and not the act he or she
performed. Yet, the Court held that the act was invalid
owing
to the trustee acting contrary to the prohibition.
[95]
The
second flaw in the reasoning of the Supreme Court of Appeal in the
present case lies in the fact that it approached the matter
on an
unduly narrow footing. The Court erroneously confined itself to
the prohibition in section 10(1)(b) and reasoned that
this
prohibition does no more than disentitle Cool Ideas from receiving
consideration. In this regard, the Supreme Court
of Appeal was
mistaken. It is apparent from Ms Hubbard’s plea, quoted
in the judgment of the Supreme Court of Appeal,
that she relied on
the prohibitions in both section 10(1)(a) and (b).
[69]
The prohibition in section 10(1)(a) directly affects the contract
because it prohibited Cool Ideas from undertaking
to build a
house for Ms Hubbard.
[96]
It was this narrow approach that influenced
the Supreme Court of Appeal to conclude that an unregistered home
builder who claims
consideration contrary to section 10 exposes
himself or herself to criminal sanction and would be prevented from
enforcing his
or her rights. I find nothing in the text of
section 10(1), or other sections of the Act, that indicates that the
underlying
contract should remain unaffected. It will be
recalled that the present contract embodies the undertaking by Cool
Ideas to
build a home for Ms Hubbard. It was the same
undertaking that constituted a contravention of section 10(1)(a) and
amounted
to a criminal offence in terms of section 21.
[97]
As the main judgment observes, section 10
must be read as a whole. More importantly, section 10(1)(b)
cannot be interpreted
separately. It must be construed together
with section 10(1)(a) because they are integral parts of one
provision. They
share features. Both lay down
prohibitions which forbid unregistered home builders from performing
certain acts. The
key feature in both sections is the
registration of a home builder.
[98]
A contract concluded in contravention of
the prohibition in section 10(1)(a) cannot be regarded as valid.
The fact that the
unregistered home builder may not enforce his or
her rights is irrelevant. An illegal contract cannot confer
rights on the
home consumer privy to it. Allowing the home
consumer to enforce his or her rights under such a contract would
amount to
giving legal effect to a prohibited act. In
Pottie
,
Fagan JA pointed out that—
“
[t]he
usual reason for holding a prohibited act to be invalid is not the
inference of an intention on the part of the Legislature
to impose a
deterrent penalty for which it has not expressly provided, but the
fact that recognition of the act by the Court will
bring about, or
give legal sanction to, the very situation which the Legislature
wishes to prevent.”
[70]
[99]
In
our democratic order, it is the duty of courts to apply and enforce
legislation like the Housing Protection Act.
[71]
If the validity of legislation is not impugned, there can be no
justification for not enforcing it, let alone giving legal
effect to
prohibited conduct.
[100]
In
Taljaard
,
[72]
the Supreme Court of Appeal held that a contract of mandate concluded
with an estate agent who had no fidelity fund certificate
was valid
because section 34A of the Estate Agency Affairs Act
[73]
does not in terms invalidate the contract of mandate of an estate
agent who acts in conflict with section 26 of that Act.
Bearing
in mind that section 34A was introduced in 1998 in response to the
High Court judgment in
Noragent
which held that non compliance with section 26 did not
invalidate the contract of mandate,
[74]
the Supreme Court of Appeal in
Taljaard
held that, if the Legislature intended the contravention to
invalidate the contract, it could expressly have said so in the
amendment.
[101]
The
finding in
Taljaard
was based on two reasons. First, the provision itself does not
invalidate the contract. Second, if invalidity were
contemplated and in view of
Noragent
,
the amendment would have expressly provided for that. In
Taljaard
,
the Supreme Court of Appeal did not explain why that Court adopted an
approach that was at variance with its earlier decisions.
A
court is bound to follow its earlier decisions unless it is convinced
that they are clearly wrong. As illustrated earlier,
that Court
in 1926 laid down the principle that “a thing done contrary to
the direct prohibition of the law is void and of
no effect.”
[75]
This principle was affirmed in later decisions of that Court in
Pottie
,
[76]
and recently in
Lupacchini
,
[77]
which was written by the same Judge who wrote
Taljaard
.
[102]
The
invalidity of an act performed contrary to a statutory provision does
not flow from the express terms of the prohibition but
from the fact
that the impugned act was performed contrary to a prohibition in a
statute. When the Legislature wants to put
an end to a
particular conduct, it prohibits it. As was observed in
Pottie
,
a court cannot give legal sanction to an act prohibited by the
Legislature. Therefore, in
Taljaard
,
the Supreme Court of Appeal erred in holding that the contract of
mandate concluded contrary to the prohibition in section 34A
was
valid. The principle that what is done in breach of a statutory
prohibition is invalid may be departed from only if it
is clear from
the language of the relevant legislation that invalidity was not
envisaged. It is not necessary for the prohibition
to say
non-compliance with it would lead to invalidity.
[78]
[103]
In
Metro
Western Cape
, the Appellate Division
reaffirmed the principle in these terms:
“
It
is a principle of our law that a thing done contrary to the direct
prohibition of the law is generally void and of no effect;
the mere
prohibition operates to nullify the act. . . . If therefore on
a true construction of section 3 the contracts in
question are
rendered illegal, it can make no real difference in point of law what
the other objects of the ordinance are.
They are then void
ab
initio
and a complete nullity under which neither party can acquire rights
whether there is intention to break the law or not.”
[79]
[104]
Unlike in
Metro
Western Cape
where the underlying
contracts were regarded as valid because they did not regulate the
business between the trader and his customer,
here the building
contract governed the prohibited business of a home builder.
The prohibitions in section 10(1) are the
tools chosen by the
Legislature to protect housing consumers. To hold that the
building contract is valid would seriously
undermine this purpose.
Furthermore, to hold the contract valid but enforceable only at the
instance of the consumer would
result in an injustice and unequal
treatment of the parties. While Ms Hubbard may notionally
enforce her rights under the
contract, Cool Ideas may not. This
may lead to the deprivation of property under section 25 of the
Constitution, alluded
to by Froneman J in his judgment. I can
find nothing in the language of the Housing Protection Act that
suggests this sort
of injustice was intended.
[105]
The
principle that a thing done contrary to the direct prohibition of the
law is void admits of one exception. This exception
applies
where it is clear from the language of the law in which the
prohibition is contained that invalidity of the act performed
contrary to the prohibition was not envisaged.
[80]
Consistent with this principle, the main judgment holds that section
13 of the Housing Protection Act reveals that non-compliance
with the
prohibition in section 10(1)(b) was not intended to invalidate the
building agreement between the home builder and the
housing
consumer.
[81]
[106]
I
disagree. Section 13 does not address the consequences of
acting contrary to the prohibitions in section 10(1). Instead,
section 13 introduces implied terms into building contracts and
prescribes the requirements of a valid building contract.
[82]
These requirements are set out in section 13(1). They are:
(a)
the building contract must be in writing
and signed by the parties;
(b)
it must set out all material terms,
including the financial obligations of the housing consumer; and
(c)
the specifications pertaining to the
material to be used in the construction and the plans approved by a
local authority must be
annexed to the contract.
[107]
Importantly, section 13(3) tells us the
consequences of not complying with these requirements. It
provides:
“
The
failure to comply with a provision of subsection (1)(a) and (c) shall
not render an agreement referred to in that subsection
invalid.”
[108]
This
section makes it plain that non-compliance with requirements (a) and
(c) does not invalidate the agreement. On the approach
of the
main judgment, section 13(3) is superfluous because the scheme
of the Housing Protection Act indicates that non-compliance
with the
Act does not invalidate the building contract. An
interpretation that says the contract is invalid owing to
non-compliance
would be at odds with the legislative scheme.
[83]
[109]
Notably, in saving the contract from
invalidity, section 13(3) makes no reference to requirement (b).
This suggests that a
contract which does not set out all material
terms, including the financial obligations of the consumer, is
invalid. This
is implicit from section 13(3) which deliberately
excludes requirement (b). The express terms of section 13 are
at odds with
the legislative scheme determined by the main judgment.
It is apparent from section 13 that the Housing Protection Act
envisaged
that non-compliance with some of its provisions would
render the building contract invalid.
[110]
The main judgment holds that the extract
quoted in [72] does not support the assertion that Ms Hubbard pleaded
both prohibitions
in section 10(1) as the bases for contending that
Cool Ideas was not entitled to claim payment from her. In the
first place,
that extract is taken from paragraph 6 of the judgment
of the Supreme Court of Appeal which records expressly that the
extract
is taken from the affidavit of Ms Hubbard, filed in the
High Court in opposing the arbitration award being made an order of
court.
[111]
Secondly, the plain reading of the extract
shows that Ms Hubbard states that Cool Ideas was not registered as a
home builder.
And in the italicised words, she contends that
the effect of non-registration was that Cool Ideas was not entitled
to carry on
the business of a home builder or to receive any
consideration in terms of any agreement with a person, defined as a
housing consumer
in terms of the Housing Protection Act.
As a result of this, she concludes that Cool Ideas was not entitled
to claim
any payments from her. It is difficult to appreciate
how it can be said that the extract does not rely on both
prohibitions
in section 10(1)(a) and (b) when Ms Hubbard’s
affidavit uses the words of section 10(1)(a) and (b). The fact
that,
in the affidavit filed by her in this Court, she says that she
does not dispute the validity of the building contract is irrelevant.
[112]
Even
if what she says in her affidavit in this Court were to be treated as
a concession, it would change nothing. This is
because a
concession wrongly made by one of the parties is not binding on a
court, if it relates to a point of law.
[84]
[113]
Furthermore,
the main judgment holds that the parties concluded a separate and new
arbitration agreement on 3 April 2009.
[85]
I cannot agree. The question whether Cool Ideas and Ms Hubbard
have concluded a separate agreement entails a factual
enquiry.
That has not been established. On the contrary, it is apparent
from the judgment of the Supreme Court of Appeal
that in referring
their disputes to arbitration, the parties acted in terms of clause
14 of the building agreement.
[114]
The arbitration agreement was not
self-standing. Instead, it was an integral part of the building
contract. Clause 14.1
expressly says that disputes arising from
the building agreement would be referred to arbitration. It
does not say that the
parties would enter into a further agreement
but stipulates that disputes arising from the building agreement,
during its currency
and after its termination, would be referred to
arbitration.
[115]
Although the word “may” is used
in the clause, it does not signify that the parties were not bound by
the terms of the
clause. As part of a contract intended to be
binding, clause 14 obliged the parties to act in accordance with its
terms.
Once there were disputes which the parties could not
resolve, clause 14 precluded them from approaching a court.
Instead,
the clause obliged them to take such disputes to
arbitration. Acting in terms of the clause, Cool Ideas and Ms
Hubbard referred
their disputes to arbitration. That much is
clear from the judgment of the Supreme Court of Appeal.
[116]
To facilitate arbitration, clause 14.2
obliged the parties to request that an arbitrator be appointed, not
by them, but by the person
identified in the clause.
Clause 14.2 stipulates that the arbitrator would be appointed by
the president of the Master
Builders Association, where there is one,
or by the president of the Building Industries Federation (SA).
His or her decision
would be final and binding on both parties.
Therefore, there was absolutely no need to conclude a separate
arbitration agreement.
[117]
In the circumstances, I hold that the
building contract that was concluded in contravention of section
10(1)(a) is invalid.
Effect of the invalid
contract on the arbitration award
[118]
The process of taking the dispute to
arbitration was rooted in the building contract. When the
parties appointed the arbitrator
and submitted their disputes to him,
they acted in terms of the arbitration clause in the contract.
The arbitrator too derived
his power to determine those disputes from
the building contract. Therefore, the invalidity of that
contract vitiates the
entire arbitration process. Consequently,
the arbitration award was invalid because it was made in terms of an
invalid contract.
[119]
It is not necessary to address the other
submissions advanced by Cool Ideas because they were premised on the
mistaken assumption
that the building contract was valid.
[120]
It is for these reasons that I support the
order proposed in the main judgment.
FRONEMAN J (Cameron J, Dambuza
AJ and Van der Westhuizen J concurring):
Introduction
[121]
I have had the privilege of reading the
judgments of my Colleagues Majiedt AJ (main judgment) and Jafta J
(concurring judgment).
I cannot agree with their conclusion
that the appeal must be dismissed. I would allow the appeal.
[122]
My
central difference with the main judgment lies in the constitutional
issue that needs to be determined. The main judgment reaches
the
constitutional aspect relating to the enforcement of private
arbitration awards by courts only towards the end, and then only
in
the narrow form of whether a refusal to make the arbitral award an
order of court violates section 34 of the Constitution.
[86]
It also finds equity considerations not to be applicable.
[87]
[123]
In
Lufuno
Mphaphuli
,
this Court held that section 34 does not apply directly to private
arbitrations.
[88]
I thus
agree with the main judgment that the applicant’s right of
access to courts has not been infringed.
[89]
[124]
But
that is not all that
Lufuno
Mphaphuli
decided.
It also dealt with the relevance of the Constitution to the terms and
enforcement of arbitration agreements.
[90]
It held that in determining whether a provision of an arbitration
agreement is contrary to public policy the spirit, purport
and
objects of the Bill of Rights will be of importance,
[91]
and it emphasised the importance of fairness in the arbitration
process.
[92]
Importantly
too,
Lufuno
Mphaphuli
dealt
with the relevance of the Constitution to the judicial scrutiny of
arbitration awards.
[93]
It held that “the values of our Constitution will not
necessarily best be served by interpreting section 33 [of the
Arbitration Act] in
a manner that enhances the power of courts to set
aside private arbitration awards”.
[94]
[125]
When
parties enter into private arbitration agreements they make value
choices about how they want to exercise their rights under
the
Constitution
[95]
and the
extent of interference or control they wish courts to have over the
private process.
[96]
These choices are material and relevant in determining what public
policy in the enforcement of a particular private arbitration
award
should be. The
Arbitration Act also
recognises these choices
and accepts their legitimacy in seeking to give effect to arbitration
awards.
[126]
Public
policy in the interpretation, application and enforcement of
contracts embraces issues of fairness.
[97]
Fairness “is one of the core values of our constitutional
order”.
[98]
When
the enforcement of arbitration awards on the basis of public policy
is at stake, fairness lies at the heart of the enquiry,
not at its
periphery.
[127]
The
primary issue at stake is whether a private arbitration award may be
enforced contrary to a statutory provision. The main
judgment
says, No, not in this case, and fairness plays little or no role in
determining whether it may. I disagree.
Lufuno
Mphaphuli
tells
us that public policy in accordance with the spirit, purport and
objects of the Bill of Rights, fairness in the arbitration
process,
and the personal choices of the parties play a material and relevant
part in determining the issue. When due weight
is given to
these considerations, nothing stands in the way of enforcement of the
award here, even on an acceptance of the correctness
of the main
judgment’s interpretation of the Housing Consumers Protection
Measures Act
[99]
(Housing
Protection Act or the Act).
[128]
I am in any event not convinced that this
interpretation is correct. The inevitable result of the
reasoning of the main judgment
is that Cool Ideas will be deprived of
its right to payment for work fairly and properly done. That
will amount to deprivation
of property under section 25 of the
Constitution. The provisions of the Housing Protection Act
should be interpreted in a
manner that avoids that result. It
can properly and reasonably be interpreted in that way.
[129]
The
concurring judgment of Jafta J avoids engagement with the central
issue of enforcement of a private arbitration award in the
face of a
statutory provision by finding that the building contract, which
includes the arbitration clause, is invalid and can,
for that reason,
not be enforced at all. This nevertheless has the effect that a
court can never enforce an arbitral award
if that would be contrary
to a statutory provision. For the reasons already
summarised,
[100]
I do not
agree. In addition, this was not the basis upon which the
parties approached the Court. Had this approach
been raised,
the question of severability of the arbitration clause from the rest
of the building contract would have been at the
forefront of the
enquiry.
[101]
To the
extent, however, that the concurring judgment finds that to hold the
building contact valid but enforceable only at
the instance of the
consumer would result in an injustice and unequal treatment of the
parties,
[102]
I agree.
Our disagreement is in what must be done to avoid that injustice and
unequal treatment. I consider the injustice
and unequal
treatment to be a compelling reason for enforcing the arbitration
award.
[130]
In the first part of the reasoning that
follows I accept, as a starting point, the correctness of the
interpretation of the Housing
Protection Act in the main judgment.
The next step in determining whether enforcement will be against
public policy, is to
weigh that interpretation against the parties’
choice of private arbitration and the fairness to them individually
in its
effect. Viewed from this perspective public policy is
not undermined by the enforcement of the arbitration award. For
convenience I refer to this part as the arbitration approach.
[131]
In
the second part I assess whether section 10(1)(b) of the Housing
Protection Act should not, in any event, be interpreted in a
manner
that is less restrictive of Cool Ideas’ right to
property.
[103]
That
can, I hope to demonstrate, properly and reasonably be done. I
will refer to this part as the interpretation approach.
[132]
Would the outcome, on either perspective,
deprive Ms Hubbard of any of the protections that she should enjoy
under the Housing Protection
Act? The answer is No.
[133]
It is time to substantiate these
assertions. I will do so in the following order. First
some brief reference to the
facts needs to be made in order to give
proper context to the question of fairness between the parties and
the potential prejudice
to Ms Hubbard if the arbitration award
is enforced. I will then move to the discussion of the
arbitration approach and
the interpretation approach before
concluding.
Fairness or prejudice to Ms
Hubbard?
[134]
When building started on Ms Hubbard’s
home it was being done by a registered builder, Velvori. The
only reason why Cool
Ideas did not itself register earlier was
because it understood from a letter by the National Home Builders
Registration Council
(Council) that it was not necessary to do so.
Ms Hubbard herself invoked the arbitration clause in the building
contract
and thereby triggered the arbitration proceedings. She
did so in order to claim money back from Cool Ideas. Instead,
the arbitrator found that she actually owed Cool Ideas more money.
The award of the arbitrator amounted to an award for Cool
Ideas to be
reimbursed for the balance of the contract price, for items it had
bought for Ms Hubbard. She does not allege
that the arbitration
process was unfair, nor does she allege that the actual findings of
the arbitrator in relation to the building
disputes were unfair or
wrong. When she learnt that Cool Ideas had not registered as a
home builder, she sought to avoid
payment of what she owed.
Registration occurred before judgment was granted in the High Court.
What Ms Hubbard sought
in those proceedings was not the Act’s
protection to attain proper building or correction of building works
by Cool Ideas,
but to escape payment of what she had been fairly
found to owe to Cool Ideas.
The arbitration approach
[135]
Lufuno
Mphaphuli
was
the first and, until now, the only case where this Court has dealt
with the Constitution’s applicability to private arbitrations.
The judgment expressly endorsed “the value of arbitration as a
speedy and cost-effective process”.
[104]
It saw its task as follows:
“
The
Court has had to consider the relationship between private
arbitration and the Constitution, the proper scope of section 34
of
the Constitution and the approach to the interpretation of
section
33(1)
of the
Arbitration Act in
the light of the Constitution. All
these are constitutional matters of substance falling within the
jurisdiction of this
Court and which, given the need to provide
guidance in this regard, it is in the interests of justice for this
Court to entertain.
The application of these principles to the
facts of this case, even if arguably not concerning a constitutional
issue itself,
concerns a matter connected to a decision on a
constitutional issue which it is in the interests of justice to
decide.”
[105]
[136]
The
Court further enumerated the virtues of private arbitration in its
flexibility, cost-effectiveness, privacy and speed.
In
determining the proper constitutional approach to the arbitration
process, the Court bore in mind that litigation before ordinary
courts “can be a rigid, costly and time-consuming
process”.
[106]
This led it to conclude that “it is not inconsistent with our
constitutional values to permit parties to seek a quicker
and cheaper
mechanism for the resolution of disputes.”
[107]
It also found, generally, that “courts should be careful not to
undermine the achievement of the goals of private arbitration
by
enlarging their powers of scrutiny imprudently.”
[108]
[137]
In this judgment, I accept the logical and
necessary corollary of the approach in
Lufuno
Mphaphuli
. I hold that where
parties choose private arbitration as the means of resolving disputes
between them, courts should respect
and encourage that choice.
In practical terms, here, that means that the Court should, for
powerful reasons of fairness,
license and enforce the outcome of Ms
Hubbard’s private arbitration with Cool Ideas.
[138]
In
Lufuno
Mphaphuli
the Court viewed its discussion and application of the principles
regulating the interaction between the Constitution and private
arbitration awards as properly within its jurisdictional remit.
Due regard must be given to the precedential force of the
decision.
It is for this reason that I disagree with the finding in the main
judgment that the issues in
Lufuno
Mphaphuli
have
little bearing on the central issue in this case and that it is
distinguishable on the facts and the law.
[109]
[139]
Lufuno Mphaphuli
laid
down the following principles about the applicability of the
Constitution to private arbitration awards:
(a)
Section
34 of the Constitution
[110]
does not apply directly to private arbitrations, primarily because
they do not require public hearings.
[111]
(b)
Indirect
application of section 34 was not finally considered but it was
stated that “mindful of the role courts have in giving
effect
to arbitration agreements . . . section 34 may have some relevance to
the interpretation of legislation or the development
of the common
law.”
[112]
(c)
Arbitration
agreements that contain provisions that are contrary to public policy
in the light of the values of the Constitution
will be null and void
to that extent. In determining whether a provision is contra
bonos mores, the spirit, purport and objects
of the Bill of Rights
will be of importance.
[113]
(d)
In
interpreting an arbitration agreement it should ordinarily be
accepted that when parties submit to arbitration, they submit to
a
process they intend to be fair. The arbitration agreement
“should thus be interpreted, unless its terms expressly
suggest
otherwise, on the basis that the parties intended the arbitration
proceedings to be conducted fairly. Indeed, it
may well be that
an arbitration agreement that provides expressly for a procedure that
is unfair will be contra bonos mores.”
[114]
(e)
Insofar as the interpretation of
section
33(1)
of the
Arbitration Act, which
permits an arbitration award to
be set aside, is concerned—
“
the
values of our Constitution will not necessarily best be served by
interpreting section 33(1) in a manner that enhances the power
of
courts to set aside private arbitration awards. Indeed, the
contrary seems to be the case. The international and
comparative law considered in this judgment suggests that courts
should be careful not to undermine the achievement of the goals
of
private arbitration by enlarging their powers of scrutiny
imprudently. Section 33(1) provides three grounds for
setting aside an arbitration award: misconduct by an arbitrator;
gross irregularity in the conduct of the proceedings; and the fact
that an award has been improperly obtained. In my view . . .
the Constitution would require a court to construe these grounds
reasonably strictly in relation to private arbitration.”
[115]
[140]
The
majority judgment of the Supreme Court of Appeal
[116]
and the main judgment proceed from the basis that the building
contract and the arbitration agreement between the parties are valid,
but that Cool Ideas may nevertheless not claim or enforce payment for
any work done, be it in any ordinary court or by way of arbitration.
That result is, on any standard, prejudicial and unfair to Cool
Ideas.
[141]
From
Lufuno
Mphaphuli
we know that the
determination of public policy in deciding whether an arbitration
award should be enforced should be done in accordance
with the
spirit, purport and objects of the Bill of Rights. We also know
that it requires courts to ensure fairness in the
arbitration
process, and that the personal choices of the parties in opting for
arbitration must be given proper regard.
[142]
The
loss of the right to claim performance under the contract amounts, in
terms of this Court’s decision in
Opperman
,
to the deprivation of property under section 25 of the
Constitution.
[117]
If
the building contract was held to be invalid, Cool Ideas may, in
terms of the common law, have an enrichment claim: the
condictio
ob turpem vel iniustam causam
(enrichment arising from a transfer made for an illegal or immoral
purpose).
[118]
By
clothing the contract with validity, this result is avoided, but at
some cost.
[119]
Even
if one accepts, as the main judgment does, that the deprivation is
not arbitrary in terms of statutory and constitutional
interpretation,
[120]
it does
not mean that this consideration automatically determines the issue
as far as the enforcement of the arbitration award
is concerned.
The choice of arbitration as a dispute-resolution mechanism indicates
the contrary, namely that the parties
elected to protect their
respective rights to property under the Constitution through that
process. If one determines public
policy in accordance with the
spirit, purport and objects of the Bill of Rights then the potential
deprivation of Cool Ideas’
property must count as a reason for
not finding the enforcement of the award to be contrary to public
policy, rather than the opposite.
[143]
On
the premise that fairness plays no role in determining public policy
when deciding whether private arbitration awards should
be enforced
by courts, both the majority judgment in the Supreme Court of Appeal
and the main judgment fail to give further consideration
to other
factors that may be material and relevant when stricter control of
private arbitration awards is envisaged. To reiterate:
public
policy in the interpretation, application and enforcement of
contracts generally invokes the notion of fairness.
[121]
The fairness of the terms of an arbitration agreement is an important
factor in considering their enforcement.
[122]
[144]
Material and relevant factors in this
regard include that: the parties chose private arbitration instead of
civil proceedings; Ms
Hubbard initiated arbitration proceedings; the
building was done by Velvori, which was registered from the start as
a builder;
the arbitration process was fair and not challenged as
making wrong or unfair findings; the amount ordered by the
arbitration award,
payable to Cool Ideas, mainly related to
compensation for additional personal choice items ordered by
Ms Hubbard which were
not included in the original contract
price; Cool Ideas acted in good faith at all times by enquiring
whether it should register;
it did register before judgment when told
it was necessary; and last, but not least, Ms Hubbard, not
Cool Ideas, is the recalcitrant
debtor.
[145]
It
must also be remembered that one of the arguments for the
interpretation that the Housing Protection Act did not render the
building contract and the arbitration agreement invalid was to ensure
that the warranties in section 13(2) of the Act would not
be lost to
a building consumer. On the facts here, enforcement of the
arbitration award would not have deprived Ms Hubbard
of that
protection. In addition, the threat of criminal prosecution for
late registration still hangs over Cool Ideas.
Enforcement of
the arbitration award will not, on an acceptance of the main
judgment’s interpretation of the Housing Protection
Act,
undermine the protection afforded by the Act to building consumers
and the criminal sanction for non-compliance will remain.
The
only effect non-enforcement will have is to allow Ms Hubbard to
escape payment of what has been fairly found to be owed to
Cool
Ideas. That is an impermissible use of the provisions of the
Act.
[123]
[146]
The conclusion I reach is that there was no
unfairness in the arbitration process, nor in its outcome.
There is nothing substantive,
in the sense of prejudice to
Ms Hubbard, that would justify a court in finding that public
policy should override the personal
choice made by the parties to
enforce their agreement by way of private arbitration.
[147]
This is sufficient reason for the appeal to
succeed. But even if this approach is not accepted, there is
another basis for
the same outcome.
Interpretation approach
[148]
As
noted, the loss of the right to claim performance under the contract
may amount, in terms of this Court’s decision in
Opperman
,
to the deprivation of property under section 25 of the
Constitution.
[124]
But that deprivation, says the main judgment, is not
arbitrary. Section 10(1)(b) of the Housing Protection Act is
aimed at achieving a legitimate and important statutory purpose and
there is a rational, proportional connection between the statutory
prohibition and its purpose.
[125]
I disagree.
[149]
An
interpretation that the building contract is valid, but that its
enforcement by one of the parties, Cool Ideas, is not, deprives
that
party of any redress at all for the work it has done. Under the
common law it may have a claim for enrichment if the
building
contract was declared invalid for illegality.
[126]
Counsel for Ms Hubbard sought to ameliorate this unjust and unequal
result by suggesting that the common law could be developed
to allow
an enrichment claim, but fairly and properly conceded that as the law
now stands there is none available to Cool Ideas.
[150]
There
are good reasons why it is necessary to favour an approach that may
be less intrusive on Cool Ideas’ rights. The
first is
that we are concerned with the fairness of depriving Cool Ideas of
the power to enforce an arbitration award that has
not been attacked
as being a result of an unfair process or any substantively unfair
findings. Second, and perhaps more important,
is the accepted
principle that the interpretation that best protects or enhances a
fundamental right should, where reasonably possible,
be
preferred.
[127]
Is
that kind of interpretation of the provisions of the Housing
Protection Act reasonably possible? The answer is Yes.
[151]
There can be no doubt that the Housing
Protection Act is intended to protect housing consumers. As
pointed out in the main
judgment, it employs various measures to do
so. But what, in the end, is the performance it seeks to enable
housing consumers
to obtain? The best answer to that is to be
found in the warranties that the Act seeks to be enforceable by the
housing consumer
against the home builder in terms of section 13(2):
“
The
agreement between a home builder and a housing consumer for the
construction or sale of a home shall be deemed to include warranties
enforceable by the housing consumer against the home builder in any
court, that—
(a)
the home, depending on whether it has been constructed or is to be
constructed—
(i)
is or shall be constructed in a workmanlike manner;
(ii)
is or shall be fit for habitation; and
(iii)
is or shall be constructed in accordance with—
(aa)
the NHBRC Technical Requirements to the extent applicable to the home
at the date of enrolment of the home with the Council;
and
(bb)
the terms, plans and specifications of the agreement concluded with
the housing consumer as contemplated in subsection (1);
(b)
the home builder shall—
(i)
subject to the limitations and exclusions that may be prescribed by
the Minister, at the cost of the home builder and upon demand
by the
housing consumer, rectify major structural defects in the home caused
by the non-compliance with the NHBRC Technical Requirements
and
occurring within a period which shall be set out in the agreement and
which shall not be less than five years as from the occupation
date,
and notified to the home builder by the housing consumer within that
period;
(ii)
rectify non-compliance with or deviation from the terms, plans and
specifications of the agreement or any deficiency related
to design,
workmanship or material notified to the home builder by the housing
consumer within a period which shall be set out
in the agreement and
which shall not be less than three months as from the occupation
date; and
(iii)
repair roof leaks attributable to workmanship, design or materials
occurring and notified to the home builder by the housing
consumer
within a period which shall be set out in the agreement and which
shall not be less than 12 months as from the occupation
date.”
[152]
The
registration of home builders – either those having the
capacity to build or those who need to enter into agreements with
other home builders to do so
[128]
– and the various other requirements laid down in the Act are
all geared to ensure the enforcement of proper performance
in the
building of their houses by housing consumers against home builders.
That is the substantive, overall purpose of the
Act.
[153]
There are many ways of achieving this
purpose, and of striking the correct balance between the interests of
housing consumers and
those who have performed construction work for
them. The Housing Protection Act can be read to protect
consumers without
barring Cool Ideas’ claim for its
performance.
[154]
The starting point is that section 10(1)(a)
and 10(2), read with section 21, indubitably make it a criminal
offence for a home builder
to have constructed a home while
unregistered. This provides home builders with a very strong
incentive, backed by the criminal
law, to register
before
undertaking any building work.
[155]
The
central conundrum in this case arises from the finding that the
contract (including the arbitration agreement) is valid.
How
can it be that Cool Ideas’ contract with Ms Hubbard is valid,
but its claim is unenforceable?
[129]
Could it be that section 10(1)(b) has a specific and
narrow purpose only? That it was the Legislature’s
targeted intervention to render unenforceable certain of the
contract’s terms?
[156]
Here, the presence of the other two very
broadly defined prohibitions in section 10(1)(a) and 10(2) is
significant. They
do not make the contract invalid. Hence
this third prohibition in section 10(1)(b) was necessary. The
provisions read:
“
(1)
No person shall—
(a)
carry on the business of a home builder; or
(b)
receive any consideration in terms of any agreement with a housing
consumer in respect of the sale or construction of a home,
unless
that person is a registered home builder.
(2)
No home builder shall construct a home unless that home builder is a
registered home builder.”
[157]
So seen, the prohibition in section
10(1)(b) should be understood in its own, narrowly expressed terms,
rather than broadened by
analogy with the two prohibitions flanking
it. We should not, in other words, conclude that section
10(1)(b) embodies a similar,
sweeping prohibition to section 10(1)(a)
and 10(2). It is doing something separate, and narrower.
[158]
Arising from this, an approach to the
provision becomes possible in which it is clear that, while the first
and the third prohibitions
are absolute in relation to the activities
proscribed (carrying on the business of a home builder and
construction of homes), the
prohibition on receiving consideration
applies only
at the time of receipt
.
In other words, you have to be registered to receive
consideration, but you can register late.
[159]
Weighing
in favour of permitting late registration is, first, the simple fact
that section 10(1)(b) uses the word “receive”.
And it does not interpose any qualification to the registration
requirement. For example, it does not say “unless the
person is a registered home builder
at
the time of undertaking the construction
”.
Here it differs from the provisions of the Attorneys Act
[130]
and the Estate Agency Affairs Act,
[131]
which require possession of a fidelity fund certificate at the time
of practising, for attorneys, and at the time of performance,
for
estate agents, to claim payment.
[160]
Also
in favour of this approach is the entire registration system the
Housing Protection Act constructs. The Act gives the
Minister
the usual general power to make regulations.
[132]
But, in addition, section 7(2)(b) specifically obliges the Minister
to prescribe by regulation “the terms and conditions
for the
registration and renewal of registration of home builders”.
Indeed, section 10(4) states that registration
of a home builder
“shall be subject to the terms and conditions prescribed by the
Minister under section 7(2)”.
[161]
These
provisions give particular point to the detail of the General
Regulations.
[133]
Together with other provisions of the Act, they create a powerful
supervisory body that is not only nominally present, but
actively
supervises the activities of home builders,
[134]
and actively protects housing consumers through implied
warranties
[135]
and
enrolment of housing projects.
[136]
[162]
The
Act itself says that the Council must register only home builders
with the “appropriate financial, technical, construction
and
management capacity . . . to prevent housing consumers . . . from
being exposed to unacceptable risks.”
[137]
Closely allied to this, the Council can also impose conditions
on registration and require a suretyship, guarantee, indemnity
or
other security in order to satisfy itself that consumers are
adequately protected.
[138]
And the General Regulations set out more detailed conditions
that the Council may impose before registering a home builder.
[139]
[163]
This expressly authorised system is fully
consonant with the idea that late registration for the purposes of
affording statutory
sanction to receipt of consideration from a
home-construction contract is feasible.
[164]
On this approach, the Council, powerfully
vested with authority under the legislation, will vet fly-by-night
builders, denying them
registration – but will permit
good-faith builders like Cool Ideas, which omitted to register
itself, but acted largely,
if not exclusively, through a
subcontractor that was registered.
[165]
The upshot is that only carefully vetted
builders with the necessary expertise and capacity to meet their
financial obligations
will ever be able to receive payment.
Housing consumers are thus adequately protected.
[166]
Can it be that a home builder, despite its
skill and good faith, is deprived of any claim for payment, no matter
how enormous its
outlay, in perpetuity – without any way to
remedy the mistake, even if it is carefully vetted and registered,
subject to
a range of conditions and suretyships imposed by the
Council to ensure that its customers are adequately protected?
Surely
not.
[167]
It
is thus reasonable to interpret the provisions of the Housing
Protection Act in a manner that is fair, does not deprive Cool
Ideas
of its property and does not necessitate the enhancement of the power
of courts to interfere in private arbitration awards.
Will this
construction be detrimental to Ms Hubbard? That question has
already been answered.
[140]
It will not, because she has enjoyed all the substantive protections
under the Act.
[168]
This
interpretation is in accordance with existing authority. The
broad formulation in
Schierhout
[141]
that a thing done contrary to a statutory prohibition is always a
nullity, has been qualified and flexibly applied in many later
cases.
[142]
An
illustration of the flexibility is to be found in
Pottie
.
[143]
There, as here, the conclusion of a contract in contravention of
statutory requirements was criminalised without an express
provision
that the contract itself was invalid. In holding that this did
not render the contract invalid Fagan JA stated:
“
The
usual reason for holding a prohibited act to be invalid is not the
inference of an intention on the part of the Legislature
to impose a
deterrent penalty for which it has not expressly provided, but the
fact that recognition of the act by the Court will
bring about, or
give legal sanction to, the very situation which the Legislature
wishes to prevent.”
[144]
And in relation to rendering
contracts invalid as a further penalty:
“
A
further compulsory penalty of invalidity would . . . have capricious
effects the severity of which might be out of all proportion
to that
of the prescribed penalties, it would bring about inequitable results
as between the parties concerned and it would upset
transactions
which, if . . . enforced . . . the Legislature could have had no
reason to view with disfavour. To say that
we are compelled to
imply such consequences . . . seems to me to make us the slaves of
maxims of interpretation which should serve
as guides and not be
allowed to tyrannise over us as masters.”
[145]
If
this is good law in relation to the possibility of holding agreements
valid in the face of statutory prohibition and criminal
sanction, so
much more it is for holding valid the enforcement of a valid
arbitration agreement.
[146]
Conclusion
[169]
For these reasons I would have granted
leave and allowed the appeal, with costs.
For the Applicant:
Advocate P Louw SC and
Advocate H Cowley instructed by Chetty de Villiers & Mafokoane
Inc.
For the First Respondent:
Advocate W van der Linde SC
and Advocate X Stylianou instructed by D.J. Greyling Inc.
[1]
95
of 1998.
[2]
42
of 1965.
[3]
Cool
Ideas subdivided a piece of land to which it had obtained rights and
sold a portion of it to Ms Hubbard.
[4]
Section
14 reads:
“
(1)
A home builder shall not commence the construction of a home falling
within any category of home that may be prescribed by
the Minister
for the purposes of this section unless—
(a)
the home builder has submitted the prescribed documents, information
and fee to the Council in the prescribed manner;
(b)
the Council has accepted the submission contemplated in paragraph
(a) and has entered it in the records of the Council; and
(c)
the Council has issued a certificate of proof of enrolment in the
prescribed form and manner to the home builder.”
[5]
The
terms of the order, in relevant part, are:
“
32.2.
Interest to be paid by the Claimant on R1 101 333.36 from 7
November 2007 to the date of payment at the rate of 2%
greater than
the minimum lending rate charged by the Claimant’s bank to its
client, compounded monthly, the start date
being 7 November
2007;
32.3.
Costs are awarded in favour of the Respondent;
.
. .
32.5.
Any amounts due and remaining unpaid by the due date as set out in
paragraph 32.2 herein shall accrue interest as for a
judgment date
at the rate of 15.5% per annum compounded monthly from the date due
for payment.”
[6]
“
Award
may be made an order of Court––
(1)
an award may, on application to the court
of competent jurisdiction by any party to the reference after due
notice to the other
party or parties, be made an order of court.
(2)
the court to which the application is so
made, may, before making the award an order of the court, correct in
the award any clerical
mistake or any patent error arising from any
accidental slip or omission.
(3)
an award which has been made an order of
court may be enforced in the same manner as any judgment or order to
the same effect.”
[7]
“
The
Council may, in addition to any other category that the Council may
deem appropriate, in the registration of home builders
distinguish
between––
(a)
home builders themselves having the
capacity to undertake the physical construction of homes or to
manage the process of the physical
construction of homes; and
(b)
home builders who in the normal course
need to enter into agreements with other home builders in order to
procure the capacity
referred to in paragraph (a).”
[8]
South
African Forestry Co Ltd v York Timbers Ltd
2001
(4) SA 884
(T).
[9]
Lufuno
Mphaphuli & Associates (Pty) Ltd v Andrews and Another
[2009]
ZACC 6
;
2009 (4) SA 529
(CC);
2009 (6) BCLR 527
(CC) (
Lufuno
Mphaphuli
).
[10]
Hubbard
v Cool Ideas 1186 CC
[2013] ZASCA 71
;
2013 (5) SA 112
(SCA) (Supreme Court of Appeal
judgment).
[11]
Section
21 reads:
“
(1)
Any person who––
(a)
knowingly withholds information required in terms of this Act or
furnishes information that he or she knows to be false or
misleading; or
(b)
contravenes a provision of section 10(1) or (2), 13(7), 14(1) or
(2), 18(1) or 19(5),
and
every director, trustee, managing member or officer of a home
builder who knowingly permits such contravention, shall be guilty
of
an offence and liable on conviction to a fine not exceeding R25 000,
or to imprisonment for a period not exceeding one year,
on each
charge.
(2)
Notwithstanding anything to the contrary in any other Act, a
magistrate’s court shall have jurisdiction to impose any
penalty prescribed by this Act.”
[12]
72
of 2012.
[13]
Section
167(3)(b)(ii) in its amended form now reads as follows:
“
The
Constitutional Court . . . may decide . . . any other matter, if the
Constitutional Court grants leave to appeal on the grounds
that the
matter raises an arguable point of law of general public importance
which ought to be considered by the Court”.
[14]
Section
25(1) read as follows:
“
No
one may be deprived of property except in terms of law of general
application, and no law may permit arbitrary deprivation
of
property.”
[15]
Section
34 reads:
“
Everyone
has the right to have any dispute that can be resolved by the
application of law decided in a fair public hearing before
a court
or where appropriate, another independent and impartial tribunal or
forum.”
[16]
Ferris
and Another v Firstrand Bank Limited and Another
[2013] ZACC 46
;
2014 (3) SA 39
(CC);
2014 (3) BCLR 321
(CC) at para
8.
[17]
The
provisions of section 10(1) are set out in [12] above.
[18]
See
SATAWU
and Another v Garvas and Others
[2012] ZACC 13
;
2013 (1) SA 83
(CC);
2012 (8) BCLR 840
(CC) (
Garvas
)
at para 37;
S
v Zuma and Others
[1995] ZACC 1
;
1995 (2) SA 642
(CC);
1995 (4) BCLR 401
(CC) (
S
v Zuma
)
at paras 13-4; and
Dadoo
Ltd and Others v Krugersdorp Municipal Council
1920 AD 530
at 543.
[19]
Dengetenge
Holdings (Pty) Ltd v Southern Sphere Mining and Development Company
Ltd and Others
[2013] ZACC 48
;
2014 (3) BCLR 265
(CC) at paras 84-6 and
Department
of Land Affairs and Others v Goedgelegen Tropical Fruits (Pty) Ltd
[2007] ZACC 12
;
2007 (6) SA 199
(CC);
2007 (10) BCLR 1027
(CC) at
para 5.
[20]
North
East Finance (Pty) Ltd v Standard Bank of South Africa Ltd
[2013] ZASCA 76
;
2013 (5) SA 1
(SCA) at para 24;
KPMG
Chartered Accountants (SA) v Securefin Ltd and Another
[2009] ZASCA 7
;
2009 (4) SA 399
(SCA) at para 39; and
Bhana
v Dőnges NO and Another
1950 (4) SA 653
(A) at 664E-H.
[21]
Garvas
above n 18 at para 37.
[22]
The
preamble to the Housing Protection Act states:
“
To
make provision for the protection of housing consumers; and to
provide for the establishment and functions of the National
Home
Builders Registration Council; and to provide for matters connected
therewith.”
[23]
Section
3(b).
[24]
Section
13(1) and (2).
[25]
Section
13(7)(a).
[26]
See
above [12].
[27]
See
above [21].
[28]
See
above n 14.
[29]
Joubert
et al (eds)
LAWSA
(reissue) vol 9 at para 209(d) and the cases cited there.
[30]
National
Credit Regulator v Opperman and Others
[2012] ZACC 29
;
2013 (2) SA 1
(CC);
2013 (2) BCLR 170
(CC)
(
Opperman
)
at para 63.
[31]
First
National Bank of SA Ltd t/a Wesbank v Commissioner, South African
Revenue Services and Another; First National Bank of SA
Ltd t/a
Wesbank v Minister of Finance
[2002] ZACC 5
;
2002 (4) SA 768
(CC);
2002 (7) BCLR 702
(CC) (
FNB
v CSARS
).
[32]
Id
at para 100.
[33]
Id.
[34]
Opperman
above n 30 at paras 68-72.
[35]
See
Reflect-All
1025 CC and Others v MEC for Public Transport, Roads and Works,
Gauteng Provincial Government, and Another
[2009] ZACC 24
;
2009 (6) SA 391
(CC);
2010 (1) BCLR 61
(CC) at para
49.
[36]
Clause
14.1 of the building contract reads:
“
Any
dispute arising between the parties out of and during the currency
of the contract or upon termination thereof may be referred
to
arbitration.”
[37]
As
appears from paragraph 4 of the arbitral award which reads:
“
The
terms and conditions of my appointment as Arbitrator were set down
in a document headed Arbitration Agreement dated 3rd April
2009
reference CDC/va/1459 (the Arbitration Agreement) and ultimately
agreed to and signed by the parties”.
[38]
Cool
Ideas only registered as a home builder in terms of the Housing
Protection Act after it applied to the High Court to have
the
arbitral award confirmed as an order of court.
[39]
See
in this regard
Harbour
Assurance Co (UK) Ltd v Kansa General International Assurance Co Ltd
and Others
[1993] 3 ALL E.R. 897
where the Court, in upholding an appeal in
which it determined whether an arbitration clause is a separate and
autonomous contract,
held that, “as a matter of practice, the
principle [of severability of an arbitration clause from the
principle agreement
which contains it] has been sustained by the
terms and implications of arbitration conventions and rules”.
(Parenthesis
in original.) See also
David
Taylor & Son v Barnett
Trading
Co
[1953]
1 ALL E.R. 843.
[40]
See
above [29].
[41]
“
A
home builder shall ensure that the agreement concluded between the
home builder and a housing consumer for the construction
or sale of
a home by that home builder––
(a)
shall be in writing and signed by the
parties;
(b)
shall set out all material terms,
including the financial obligations of the housing consumer; and
(c)
shall have attached to the written
agreement as annexures, the specifications pertaining to materials
to be used in construction
of the home and the plans reflecting the
dimensions and measurements of the home, as approved by the local
government body: Provided
that provision may be made for amendments
to the plans as required by the local government body.”
[42]
“
The
agreement between a home builder and a housing consumer for the
construction or sale of a home shall be deemed to include
warranties
enforceable by the housing consumer against the home builder in any
court that––
(a)
the home, depending on whether it has been
constructed or is to be constructed––
(i)
is or shall be constructed in a
workmanlike manner;
(ii)
is or shall be fit for habitation; and
(iii)
is or shall be constructed in accordance
with––
(aa)
the NHBRC Technical Requirements to the extent applicable to the
home at the date of enrolment of the home with the Council;
and
(bb)
the terms, plans and specifications of the agreement concluded with
the housing consumer as contemplated in subsection (1)”.
[43]
Section
13(6) reads:
“
Any
provision in an agreement contemplated in subsection (1) that
excludes or waives any provision of this section shall be null
and
void.”
[44]
See
[96] of the judgment of Jafta J.
[45]
See
[73] of the judgment of Jafta J.
[46]
At
[72].
[47]
S
v Zuma
above
n 18 at para 18.
[48]
Schierhout
v Minister of Justice
1926 AD 99
at 109. See also
Hoisain
v Town Clerk, Wynberg
1916 AD 236.
[49]
See
above n 6.
[50]
Lufuno
Mphaphuli
above
n 9 at para 235.
[51]
Id
at para 236.
[52]
Sections
1(c) and 165(2).
[53]
Above
n 9.
[54]
Reference
was made in this regard to Christie “Arbitration: Party
Autonomy or Curial Intervention: The Historical Background”
1994
SALJ
143.
[55]
Voet
4.8.24.
[56]
40
of 1977. Section 4(1)(a)(ii) reads:
“
A
court may refuse to grant an application for an order of court in
terms of section 3 if the court finds that . . . enforcement
of the
award concerned would be contrary to public policy in the Republic”.
[57]
1985.
Article 36(1)(b)(ii) provides:
“
Recognition
or enforcement of an arbitral award, irrespective of the country in
which it was made, may be refused only if the
court finds that . . .
the recognition or enforcement of the award would be contrary to the
public policy of this State.”
[58]
Butler
and Finsen
Arbitration
in South Africa: Law and Practice
(Juta & Co Ltd, Cape Town 1993) at 263.
[59]
This
application was instituted in terms of
section 31
of the
Arbitration
Act.
>
[60]
Schierhout
above
n 48 at 109.
[61]
Section
10 of the Housing Protection Act, in relevant part, provides:
“
(6)
The Council may, in addition to any other category that the Council
may deem appropriate, in the registration of home builders
distinguish between—
(a)
home builders themselves having the
capacity to undertake the physical construction of homes or to
manage the process of the physical
construction of homes; and
(b)
home builders who in the normal course
need to enter into agreements with other home builders in order to
procure the capacity
referred to in paragraph (a).
(7)
A home builder registered in terms of subsection (6)(b) shall be
obliged, for the purposes of the physical construction of
homes, to
appoint a home builder registered in terms of subsection (6)(a).”
[62]
Section
1(i) of the Housing Protection Act.
[63]
Section
21(1) provides:
“
Any
person who—
(a)
knowingly withholds information required
in terms of this Act or furnishes information that he or she knows
to be false or misleading;
or
(b)
contravenes section 10(1) or (2), 13(7),
14(1) or (2), 18(1) or (2) or 19(5),
and
every director, trustee, managing member or officer of a home
builder who knowingly permits such contravention, shall be guilty
of
an offence and liable on conviction to a fine not exceeding R25 000,
or to imprisonment for a period not exceeding one year,
on each
charge.”
[64]
Schierhout
above n 48 at 109.
[65]
Maharaj
and Others v Rampersad
1964
(4) SA 638
(A) and
Messenger
of the Magistrates’ Court, Durban v Pillay
1952
(3) SA 678
(A).
[66]
Lupacchini
NO and Another v Minister of Safety and Security
[2010]
ZASCA 108
;
2010 (6) SA 457
(SCA) (
Lupacchini
).
[67]
Id
at para 22.
[68]
Supreme
Court of Appeal judgment above n 10 at para 11.
[69]
Id
at para 6.
[70]
Pottie
v Kotze
1954
(3) SA 719
(A) at 726H-727A.
[71]
Section
165(2) of the Constitution provides:
“
The
courts are independent and subject only to the Constitution and the
law, which they must apply impartially and without fear,
favour or
prejudice.”
[72]
Taljaard
v TL Botha Properties
[2008]
ZASCA 38
;
2008 (6) SA 207
(SCA).
[73]
112
of 1976.
[74]
Noragent
(Edms) Bpk v De Wet
1985
(1) SA 267
(T) at 271I-272D.
[75]
Schierhout
above
n 48.
[76]
Above
n 70.
[77]
Above
n 66.
[78]
Standard
Bank v Estate Van Rhyn
1925
AD 266.
[79]
Metro
Western Cape (Pty) Ltd v Ross
1986
(3) SA 181
(A) (
Metro
Western Cape
)
at 188A-B.
[80]
Id
at 188F-G and
Pottie
above n 70 at 727H.
[81]
Main
judgment at [48].
[82]
Section
13(1) and (2) provides:
“
(1)
A home builder shall ensure that the agreement concluded between the
home builder and a housing consumer for the construction
or sale of
a home by that home builder—
(a)
shall be in writing and signed by the
parties;
(b)
shall set out all material terms,
including the financial obligations of the housing consumer; and
(c)
shall have attached to the written
agreement as annexures, the specifications pertaining to materials
to be used in construction
of the home and the plans reflecting the
dimensions and measurements of the home, as approved by the local
government body: Provided
that provision may be made for amendments
to the plans as required by the local government body.
(2)
The agreement between a home builder and a housing consumer for the
construction or sale of a home shall be deemed to include
warranties
enforceable by the housing consumer against the home builder in any
court, that—
(a)
the home, depending on whether it has been constructed or is to be
constructed—
(i)
is or shall be constructed in a workmanlike manner;
(ii)
is or shall be fit for habitation; and
(iii)
is or shall be constructed in accordance with—
(aa)
the NHBRC Technical Requirements to the extent applicable to the
home at the date of enrolment of the home with the Council;
and
(bb)
the terms, plans and specifications of the agreement concluded with
the housing consumer as contemplated in subsection (1);
(b)
the home builder shall—
(i)
subject to the limitations and exclusions
that may be prescribed by the Minister, at the cost of the home
builder and upon demand
by the housing consumer, rectify major
structural defects in the home caused by the non-compliance with the
NHBRC Technical Requirements
and occurring within a period which
shall be set out in the agreement and which shall not be less than
five years as from the
occupation date, and notified to the home
builder by the housing consumer within that period;
(ii)
rectify non-compliance with or deviation
from the terms, plans and specifications of the agreement or any
deficiency related to
design, workmanship or material notified to
the home builder by the housing consumer within a period which shall
be set out in
the agreement and which shall not be less than three
months as from the occupation; and
(iii)
repair roof leaks attributable to
workmanship, design or materials occurring and notified to the home
builder by the housing consumer
within a period which shall be set
out in the agreement and which shall not be less than 12 months as
from the occupation date.”
[83]
Main
judgment at [47].
[84]
CUSA
v Tao Ying Metal Industries and Others
[2008]
ZACC 15
;
2009 (2) SA 204
(CC);
2009 (1) BCLR 1
(CC) and
Matatiele
Municipality and Others v President of the RSA and Others
[2006]
ZACC 2
;
2006 (5) SA 47
(CC);
2006 (5) BCLR 622
(CC).
[85]
Main
judgment at [45].
[86]
See
[53]-[62] of the main judgment.
[87]
At
[52].
[88]
Lufuno
Mphaphuli
above
n 9 at para 218.
[89]
See
[62] of the main judgment.
[90]
Lufuno
Mphaphuli
above n 9 at paras 219-23.
[91]
Id
at para 220.
[92]
Id
at para 221.
[93]
Id
at paras 224-36.
[94]
Id
at para 235. Although the reference is to
section 33
of the
Arbitration Act 42 of 1965
it is clear that O’Regan ADCJ
regarded with approval the “pleasing symmetry” of the
same standards for refusing
to make an award an order of court as
for setting aside the award. See paras 227 and 232.
[95]
Id
at para 216.
[96]
Id
at para 219.
[97]
Barkhuizen
v Napier
[2007] ZACC 5
;
2007 (5) SA 323
(CC);
2007 (7) BCLR 691
(CC) at para
73.
[98]
Lufuno
Mphaphuli
above n 9 at para 221.
[99]
95
of 1998.
[100]
See
above [127].
[101]
Compare
Lufuno
Mphaphuli
above n 9 at para 220 and
North
East Finance (Pty) Ltd v Standard Bank of South Africa
[2013] ZASCA 76
;
2013 (5) SA 1
(SCA) at paras 18-23.
[102]
See
[104] of the concurring judgment.
[103]
Section
25 of the Constitution.
[104]
Lufuno
Mphaphuli
above
n 9 at para 223.
[105]
Id
at paras 237-8.
[106]
Id at para 197.
[107]
Id.
[108]
Id
at para 235.
[109]
See
[58]-[59] of the main judgment.
[110]
Section
34 of the Constitution provides:
“
Everyone
has the right to have any dispute that can be resolved by the
application of law decided in a fair public hearing before
a court
or, where appropriate, another independent and impartial tribunal or
forum.”
[111]
Lufuno
Mphaphuli
above
n 9 at paras 213-4 and 216-8.
[112]
Id
at para 215.
[113]
Id
at para 220.
[114]
Id
at para 221.
[115]
Id
at para 235.
[116]
Supreme
Court of Appeal judgment above n 10. The judgment is based on
an acceptance of the validity of the building contract,
which
includes an arbitration clause. It expressly rejected as
irrelevant arguments presented to it relying on the equities
of the
case and that due deference should be given to arbitration awards.
[117]
Opperman
above n 30 at para 63.
[118]
See
Jajbhay
v Cassim
1939 AD 537
at 545 and 547-8. See also
First
National Bank of Southern Africa Ltd v Perry NO and Others
[2001] ZASCA 37
;
2001 (3) SA 960
(SCA) at paras 21-5.
[119]
I
was unable to find any case where an admittedly valid private
contract or agreement (in terms of the applicable legislation)
was
found to be unenforceable by reason of the effect of the same
legislation. The application of the principle in
Wynberg
above n 48 has been largely in the field of public law. See
The
Master of the High Court (North Gauteng High Court, Pretoria) v
Motala NO and Others
[2011] ZASCA 238
;
2012 (3) SA 325
(SCA) at para 9;
City
of Tshwane Metropolitan Municipality v RPM Bricks (Pty) Ltd
[2007] ZASCA 28
;
2008 (3) SA 1
(SCA) at paras 22-3; and
Potchefstroom
se Stadsraad v Kotze
1960
(3) SA 616
(A) at 632G. See also
National
and Overseas Distributors Corporation (Pty) Ltd v Potato Board
1958
(2) SA 473
(A) at 480A-D where the Court distinguished the facts
before it from those in
Wynberg
and held the principle in that case could not be applied.
[120]
See
[148]-[168] below on the approach to interpretation.
[121]
Barkhuizen
above
n 97. See also [126].
[122]
See
[124] and [139](d) above.
[123]
Compare
Oilwell
(Pty) Ltd v Protec International Ltd and Others
[2011] ZASCA 29
;
2011 (4) SA 394
(SCA) and
Barclays
National Bank Ltd v Thompson
[1985] ZASCA 50
;
[1985] 2 All SA 355
(A).
[124]
Opperman
above
n 30.
[125]
See
[44] of the main judgment.
[126]
See
above [142] and above n 118.
[127]
SATAWU
and Others v Moloto and Another NNO
[2012] ZACC 19
;
2012 (6) SA 249
(CC);
2012 (11) BCLR 1177
(CC) at
para 44;
Investigating
Directorate: Serious Economic Offences and Others v Hyundai Motor
Distributors (Pty) Ltd and Others: In re Hyundai
Motor Distributors
(Pty) Ltd and Others v Smit NO and Others
[2000] ZACC 12
;
2001 (1) SA 545
(CC);
2000 (10) BCLR 1079
(CC) at
paras 22-3; and
S
v Zuma
above
n 18 at paras 15-6.
[128]
Section
10(6) and (7) of the Housing Protection Act.
[129]
Where
it is not a gambling contract or other agreement offensive to public
policy.
[130]
53
of 1979. See section 41.
[131]
112
of 1976. See section 34A.
[132]
Section
27 of the Housing Protection Act.
[133]
See
Item 11 of the General Regulations regarding Housing Consumer
Protection Measures, GN R1406
Government
Gazette
20658,
promulgated on 1 December 1999 (General Regulations).
[134]
Section
5 of the Housing Protection Act.
[135]
Section 13(2).
[136]
Sections
14 and 14A.
[137]
Section
10(3)(c).
[138]
Section
10(4) and (5).
[139]
See
Item 11of the General Regulations above n 133.
[140]
See
above [132] and [145]-[146].
[141]
Schierhout
above
n 48 at 109-10.
[142]
See
Metro
Western Cape
above
n 79 at 188F-H;
Dhlamini
en ’n Ander v Protea Assurance Co Ltd
1974 (4) SA 906
(A) at 913H-914C;
Swart
v Smuts
1971 (1) SA 819
(A) at 829C-830C; and
Estate
Van Rhyn
above n 78 at 274.
[143]
Pottie
above
n 70.
[144]
Id
at 726H-727A.
[145]
Id
at 727E-G.
[146]
This
reasoning also finds support in jurisprudence from other countries
that have dealt with similar issues. In
Loving
& Evans v Black
204 P.2d 23
(Cal 1949), a case involving almost identical facts, the
California Supreme Court refused to enforce an arbitration award
that
was based on a contract between a homeowner and an unlicensed
building contractor. The dissenting judge’s criticism
of
the majority holding (at 30) was as persuasive then as it is now:
“
The
majority opinion has attempted to resolve the problem as though it
might involve an unlawful contract or a contract contrary
to public
morals and therefore void. It may be assumed that a law
declaring such contracts illegal may not be circumvented
by
submitting controversies thereunder to arbitration and obtaining
court confirmation. But the contract here is not of
that
nature. There is nothing basically unlawful or contrary to
public morals in a contract to construct or repair a building.
. .
. The statute does not declare such a contract to be
unlawful. The declaration of unlawfulness is confined to
engaging in the business or acting in the capacity of a building
contractor without having secured a license. A person
pursuing
the activities of a building contractor without the required license
is guilty of a misdemeanour. And such person
may not maintain
an action in any court of the state for the collection of
compensation for building contractor services.
These are the
[only] consequences attached to violation.” (References
omitted.)