The Supreme Court of Appeal delivered judgment on 1 June 2012 in the case of the Body Corporate of the Pinewood Park scheme no 202 v Dellis (Pty) Ltd (498/11)  ZASCA 105 in an appeal concerning the arbitration provisions contained in Prescribed Management Rule 71 of Schedule 8 to the Sectional Titles Act 95 of 1986.
In issue was whether Section 6 of the Arbitration Act 42 of 1965 is excluded by arbitration procedure provided for in rule 71.
The Court determined that it is not, and in reaching this conclusion decided that the Management and Conduct Rules are consensual or contractual in nature. Rule 71 does not constitute a "compulsory arbitration clause" in the sense that it is prescribed as such by statute. As the Management Rules are a contract between the owners inter se and between each owner and the Body Corporate Rule 71 itself is a consensual clause.
Section 6 of the Arbitration Act 42 of 1965 is repeated below:
Stay of legal proceedings where there is an arbitration agreement
- If any party to an arbitration agreement commences any legal proceedings in any court (including any inferior court) against any other party to the agreement in respect of any matter agreed to be referred to arbitration, any party to such legal proceedings may at any time after entering appearance but before delivering any pleadings or taking any other steps in the proceedings, apply to that court for a stay of such proceedings.
- If on any such application the court is satisfied that there is no sufficient reason why the dispute should not be referred to arbitration in accordance with the agreement, the court may make an order staying such proceedings subject to such terms and conditions as it may consider just.
The implication of this case is to confirm that:
If a Body Corporate institutes action for recovery of arrear levies in a Court:
- The Owner concerned enters appearance to defend and delivers its plea;
- The matter should proceed in Court unless the Body Corporate agrees to a stay in proceedings and referral to arbitration.
- If the Owner declares an arbitrable dispute prior to pleading, the Court retains a discretion whether or not to stay the proceedings pending the outcome of an arbitration, or to proceed with trying the action before it.