By Duncan Wild February 2014

The issue in this case involves the correct interpretation of section 10 of the Housing Consumers Protection Measures Act 95 of 1998 (“Housing Consumers Act“), and, second, whether a contravention of its provisions of the may be used to resist enforcing an arbitral award. 

Christine Hubbard entered a building contract Cool Ideas 1186 CC (“Cool Ideas“), a property developer, who employed Velvori Construction CC (“Velvori“), a registered home builder under section 10 of the Housing Consumers Act, for the construction of a residential home.

After a period of construction, Mrs Hubbard, brought instituted an arbitration against Cool Ideas to seek compensation for what she claimed was poor workmanship.  Cool Ideas brought a counterclaim for payments it alleged were owing.

The arbitrator found certain amounts owing by each party to the other, and in the result, found that Mrs Hubbard should pay Cool Ideas R550,211 plus interest. She did not do so, and so Cool Ideas sought to have the arbitrators award made an order of court in accordance with section 31 of the Arbitration Act 43 of 1965 (“the Arbitration Act“).

Mrs Hubbard resisted this application on the basis that to have the award made an order of court would violate the provisions of the Housing Conumers Act.  This Act requires that home builders be registered in order to carry on business, and “receive consideration in terms of any agreement with a housing consumer in respect of the sale or construction of a home”. Mrs Hubbard argued as Cool Ideas was not registered, to enforce the award would enforce a criminal act (charging consideration whilst not registered).

The High Court dismissed this argument on the basis that, although not registered at the time it entered the contract, Cool Ideas was registered by the time the matter came to court. In addition, Velvori, who had done the actual construction work, was registered. The High Court therefore found the Housing Consumers Act did not prevent making the award and order of court, and so did so.

On appeal, the SCA overturned the High Court’s decision by a four-to-one majority, reasoning that the Housing Consumers Act was meant to protect consumers, and that both Cool Ideas and Velvori were required to be registered before undertaking the construction work. The SCA went on to find that an arbitral award could not be enforced in the face of a law clearly prohibiting what the award required.

In the Constitutional Court, Cool Ideas contends that section 10(1) of the Housing Consumers Act should be read to allow a builder to claim payment where, although not registered at the time the building contract was entered, is registered at the time the claim for payment is made. In addition they argue that the award should be enforced, as the parties freely entered the contract, which included an arbitration provision. To not enforce the award would contradict the principle of party autonomy which allows persons to choose to bind themselves to contracts, and which is based in the right to human dignity.

Mrs Hubbard argues that as the constitutional issues have been raised for the first time in the Constitutional Court, the appeal should be dismissed, and that enforcing the award would amount to endorsing a criminal act, which should not be permitted.

The Constitutional Court also issued directions requesting submissions on whether the Constitution Seventeenth Amendment Act, which came into effect on 23 August 2013, and which expands the jurisdiction the Constitutional Court, in particular to cases which do not involve a constitutional issue. This application was lodged on 31 July 2013, and the question was whether the Amendment could have an effect on a case. Mrs Hubbard argues that the Amendment does effect cases lodged before 23 August 2013, but that even if it does no” arguable point of law of general public importance which ought to be considered by the court” (as the new section 167(3) of the Constitution reads) is raised.