Space and Place of Arbitration in Community Scheme Disputes | Legal Articles


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Space and Place of Arbitration in Community Scheme Disputes

The Community Schemes Ombud Service (CSOS) was established by the Community Schemes Ombud Services Act, 9 of 2011 to handle disputes between parties that approach it in respect of community living schemes.

csos dispute resolution

CSOS Dispute Resolution

As part of its dispute resolution procedure the CSOS attempts to resolve disputes firstly through Conciliation (formal or informal) and where the dispute remains unresolved, Adjudication follows.

However, there are instances where Management Rules (the Rules) in sectional title schemes or the Memorandum of Incorporation (MOI) in Share Block Schemes provide for arbitration as a process for dispute resolution.

CSOS Arbitration

It then begs a question on whether it constitutes an irregular step to bypass arbitration in favour of CSOS procedures where such a clause exists that disputes need to be arbitrated first.

The decisions in various cases have shown that each case must be determined by its own merits such that arbitration may be deemed essential in other cases whilst in another case it may be decided that the matter be adjudicated by another forum such as the CSOS.

For example, in the case of Body Corporate of Greenacres v Greenacres Unit 17 CC and Another 2008 (3) SA 167 (SCA) it was held that arbitration is compulsory since it was part of the Management Rules. It is important to note that this case was decided before the coming into operation of the CSOS and therefore the adjudication of disputes was through the Courts at the time.

In PCL Consulting (Pty) Ltd t/a Phillips Consulting SA v Tresso Trading 119 (Pty) Ltd the Court held that the fact that there is provision for arbitration does not take away the Court’s jurisdiction, but that it may be stayed until the matter is attempted to be resolved through arbitration while in Pinewood Park Scheme No. 202 v Dellis (Pty) Ltd the Court held that arbitration was not required by law and that its foundation in that instance is contractual as it was adopted into the Rules of the scheme, and therefore the Court may decide to dispense with arbitration if needs be.

From the above cases it can thus be concluded that the presence of an arbitration clause in the Rules or MOI does not automatically dispense with the jurisdiction of the CSOS or Court if the parties agree that the matter be decided by such forum and not arbitration.

In the event that a party protests to the dispute being brought to the CSOS before arbitration where there is a clause for arbitration, the CSOS will have to hear motivations and compelling reasons why the dispute must be heard by the CSOS and not by arbitration.

This must be weighed against the natural inclination to give effect to a provision of a contractual document requiring that arbitration be done first, but also not impeding on the right of parties to access of justice.

Community Schemes Ombud Service Act

The CSOS was created by statute to preside over community scheme disputes in a much faster and inexpensive way and therefore to limit one’s right to approach the CSOS in demand that the arbitration procedure be followed first, somewhat defeats the purpose especially because arbitration is quite an expensive process.

Further, section 40 of the CSOS Act provides that the CSOS may request proof that internal dispute resolution procedures have been exhausted before the CSOS is approached. Objectively speaking, hiring an external Arbitrator to preside over a dispute in a community scheme does not seem to amount as an internal procedure especially read with the above.

This is in so far as it does not follow that an expensive process (arbitration) should be regarded as an internal prerequisite to satisfy requirements before approaching a CSOS procedure that is meant to resolve disputes in a cost-effective manner.

Further, having to hire an external arbitrator obviously means the parties have failed to resolve the dispute between themselves (internally). Our view is that these two lines of reasoning cannot be harmonised with a conclusion that arbitration is an internal procedure in terms of section 40 of the Community Schemes Ombud Service Act, 9 of 2011.

Despite the above where arbitration has already commenced and the other party approaches the CSOS, a plea that the matter is already pending before another forum may successfully be raised resulting in the CSOS finding that the arbitration must be concluded first before the dispute can be taken to CSOS. Alternatively, the parties may agree to withdraw the arbitration procedure and bring the dispute before the CSOS.

Van Deventer & Van Deventer Incorporated – Property Law Attorneys in South Africa

Community scheme disputes are fraught with technical and legal hurdles that are not easily conquered, it is important to seek expert legal assistance.

At Van Deventer & Van Deventer Attorneys we stand ready to assist in various Property law matters. Contact us for an appointment.


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