Arbitration plays a major role in the construction industry as alternative dispute mechanism. Section 13(1)(f) of the Act states that the completion of prescription will be delayed if the debt is the object of a dispute subjected to arbitration.
What is a Reference to Arbitration?
In Murray & Roberts Construction (Cape) (Pty) Ltd v Upington Municipality 1982 3 SA 385 (NC) it was held that the referral to an engineer (in terms of a written agreement between the plaintiff and the defendant) was also “a dispute subjected to arbitration” for purposes of Section 13(1)(f) of the Act. This decision was upheld in the Appellant Division. It therefore follows that the completion of prescription was delayed until one year after the arbitration proceedings came to an end.
Proceeding with the Arbitration
It should also be noted that the mere existence of an agreement between parties for disputes between them to be referred to and decided by arbitration does not suffice for the purposes of delaying the running of prescription and that the words “subjected to arbitration” means that the parties are required to refer disputes to arbitration and to actually proceed with the arbitration proceedings.
In Primavera Construction SA v Government of Northwest Province & another 2003 (3) SA 579 (BPD) the settlement agreement and the resultant Court Order provided, inter alia, that the award by the arbitrator would operate as an Order of Court.
The arbitrator’s award therefore acquired the status of a judgment debt for purposes of Section 11(a)(2) of the Prescription Act, which meant that a 30 year prescriptive period would be applicable to the award.