Legal Review - Procedure for arbitration of a dispute pertaining to non-payment of levies

The first step in the collection of arrear levies is the institution of action by the issuing of Summons in the Magistrate’s Court.

If the action is not defended, then default judgment will be entered and the tools to collect the judgment debt will be implemented.

If the defaulting owner defends the action, it is deemed that a “dispute” as stipulated in Rule 71 of the Prescribed Management Rules is declared and the matter should be referred to arbitration.

The mentioned interpretation of a "dispute" in terms of Rule 71 was confirmed by the Supreme Court of Appeal [Body Corporate of Greenacres vs Greenacres Unit 17 CC and another, 2008 (3) SA 167 (SCA)] and the arbitration procedure is to be followed to obtain an order for payment of the arrear levies.

The proceedings in the Magistrates Court must be stayed. Although Section 6 of the Arbitration Act provides that application can be made to the Court for the stay of legal proceedings where an “arbitration agreement” applies, it is recommended that a similar application be made for the stay of proceedings if a party to the action refuses consent to the referral to arbitration.

The court will make an order staying such proceedings subject to such terms and conditions as it may consider just. It is important to keep in mind that the party referring the dispute to arbitration may be called upon to furnish security for payment of the arbitrator’s costs in terms of Rule 71(5) of the Prescribed Management Rules.

Where an action is defended, the dispute will be referred to arbitration and the following procedure set out in Rule 71 must be followed and can be summarized as follows:

• 1. The owner or his legal representatives must be advised by notice that the action instituted is to be stayed and the dispute must be referred to arbitration, unless the dispute can be resolved within 14 (fourteen) days from date of the notice;
• 2. If the dispute could not be resolved, a second Arbitration Notice must be delivered to the owner or his legal representatives. The purpose of this Notice is to reach consensus on the nomination and appointment of an arbitrator to adjudicate the dispute;
• 3. If there is no consensus reached in appointing an arbitrator, a third and final arbitration notice will be delivered.

The notice will also be filed with the Registrar of Deeds, who has the duty to appoint an arbitrator.

The appointed arbitrator will inform the parties to the dispute of his or her appointment.

Thereafter a pre-arbitration meeting will be convened wherein the parties, together with the arbitrator, will agree on certain administrative aspects such as procedures and time frames that should apply to the arbitration.

The applicant will have the opportunity to file its statement of case and the Respondent will be allowed to reply thereto with his/her Statement of Defence.

Should the arbitrator find it necessary to proceed with a formal hearing / arbitration, the dispute will be set down for hearing on a date agreed by all the relevant parties or as determined by the arbitrator.

On the date of the formal hearing / arbitration each party will have the opportunity to state its case via oral evidence.

On conclusion of the arbitration hearing, the arbitrator must furnish the parties with his findings within a reasonable period. In terms of Section 23 of the Arbitration Act, the arbitrator is required to furnish a ruling within four months from date of his/her appointment.

In terms of Prescribed Management Rule 71, it is required that the arbitration shall be concluded within 21 days after the matter has been referred to arbitration, where possible. It seldom happens that an arbitration is concluded within a period of between 2–3 months.

The arbitrator’s ruling can be made an Order of the High Court upon application of any party to or affected by the arbitration. If the Award has been made an order of Court, the normal collection procedures can be followed in order to collect the amount awarded.

Source: Nama News
Article by: Werner Loock (EY Stuart Inc)