A timely reminder regarding the limited ambit of Section 20 of the Arbitration Act

In the recent judgment of the Supreme Court of Appeal (SCA) in the matter of Padachie v The Body Corporate of Crystal Cove (705/2015) [2015] ZASCA 145 (30 September 2016) the court considered the circumstances under which the provisions of s20 of the Arbitration Act, No 42 of 1965 (the Act) can be invoked by a party to arbitration proceedings to have a question of law arising during those proceedings stated for the opinion of a court or counsel, and whether the arbitrator had deprived the Appellants of their right under that section.

30 Nov 2016 4 min read Dispute Resolution Alert Article

The Appellants were sued in the Magistrate’s Court by the body corporate of a sectional title scheme (First Respondent), for arrear monthly levies, whereafter the parties agreed to refer their disputes to arbitration. At a later stage the Appellants had written to the arbitrator advising that a number of legal points had been raised during evidence between the Appellants and First Respondent which, in their view, could not be resolved through arbitration and enquired whether they should apply for referral to court in terms of s20(1) of the Act, or deal with the issues in written argument.

The arbitrator responded that he was not aware of any issues which warranted a referral and did not respond to whether the Appellants should apply for a referral to court. The Appellants delivered their written argument on the substantive issues before the arbitrator and recorded various questions of law which ought to be referred to court, and thereafter, wrote to the First Respondent and the arbitrator advising that if the arbitrator was not amenable to a referral of same to court, that they would make application.

Shortly thereafter, the arbitrator published his award which included a finding on the questions of law, finding that the Appellants were liable to the First Respondent. The Appellants applied to the High Court to set the award aside, which court dismissed the application.

Before the SCA, the Appellants argued that the request for referral to court constituted an application in terms of s20(1) of the Act, and that the arbitrator, by issuing his award in the manner that he did, prevented the Appellants from approaching the court.

The SCA, per Makgoka AJA, stated that the appeal should fail on three grounds:

  • Firstly, it was clear that the arbitrator did not intend to refer any points of law to court and that nothing had prevented them from approaching the court to interdict the arbitrator from publishing his award, pending the outcome of an application to court for a referral of the issues. Instead, the Appellants had submitted lengthy argument dealing with all of the issues between the parties.
  • Secondly, s20(1) of the Act only applies to questions of law that arise during the course of arbitration and the Appellants were not allowed to refer to court the issues referred to arbitration. The only two issues that could possibly have constituted questions of law, namely the interpretation of the body corporate’s management rule 10 (raised in the Magistrate’s Court and thereafter referred to arbitration) and prescription (which arose during the pleadings stage in the arbitration) had both been placed before the arbitrator for determination and could not be said to have arisen during the course of arbitration.

Makgoka AJA referred to Telcordia Technologies Inc v Telkom SA [2006] ZASCA 112; 2007 (3) SA 266 (SCA) para 154 where the purpose of s20 of the Arbitration Act was stated:

[It] can be used only if the legal question arises “in the course” of the arbitration. It is not intended to apply where the parties agree to put a particular question of law to the arbitrator. Any other interpretation of the section would defeat its purpose and “it would be futile ever to submit a question of law to an arbitrator”. Its purpose, at the very least, is not to enable parties, who have agreed to refer a legal issue to an arbitrator to renege on their deal.

  • Lastly, Makgoka AJA stated that the Appellants’ argument that the arbitrator was not qualified to determine the interpretation of the body corporate’s management rule 10, was an untenable proposition, given that in the arbitration proceedings the Appellants had vacillated on this issue, on the one hand pressing that the interpretation should be referred to court, while on the other arguing for a particular interpretation of the rule. Makgoka AJA referred with approval to Government of the Republic of South Africa v Midkon (Pty) Ltd & Another 1984 (3) SA 552 (T), where Preiss J concluded that a qualified request “has no place in our law by reason of the relatively limited provisions of s 20 of the South African statute”.

Accordingly, when parties agree to resolve disputes through arbitration proceedings, those disputes that have been referred are not subject to s20(1) of the Act. Should a party be of the view that questions of law have arisen during the course of arbitration that cannot be resolved by arbitration, s20 may be invoked, provided that the application by such party to the arbitrator for the referral to court is precise (delineates the points of law) and is not qualified (not already dealt with in arbitration proceedings).

Written by Yasmeen Raffie, reviewed by Joe Whittle

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