Introduction

Cool Ideas 1186 CC v Hubbard and Another [2014] ZACC 16 (“Cool Ideas”) is an interesting case that touches on aspects of arbitration, contract, unjustified enrichment, legislation, interpretation and the balancing act courts undertake to protect rights without unjustifiably infringing others. 

This is a case which could spark debates on the role of law in a society, the malleability and rigidity of the letter of the law, the power of debate and the importance of disagreement, but this article does not purport to enter the fray on any such tumultuous topics. This article attempts to provide a reader with a snap shot into the reasoning of the Justices: from the facts through to the interpretation of the law, its application and finally to the conclusions.

BACKGROUND

Cool Ideas 1186 CC (“CC”) undertook to build Mrs Hubbard (“Hubbard”) a home, after completion Hubbard claimed compensation for defective workmanship and the CC counterclaimed that the remaining portion of the payment price was outstanding. The matter was referred to arbitration and an award was made in favour of the CC. However, section 10 of the Housing Consumers Protection Measures Act 95 of 1998 (“Housing Protection Act”) prohibits an unregistered home builder from receiving compensation for the construction of a home. The CC was an unregistered home builder when it approached the High Court to make the award a court order. Before judgment, the CC registered as a home builder and the High Court, for this and numerous other reasons, made the award an order of court. The Supreme Court of Appeal set aside the High Court’s order and the CC appealed the matter to the Constitutional Court and here things get interesting.

THE LAW

The case revolves around the Housing Consumers Protection Measures Act 95 of 1998 (“Housing Protection Act”) which was legislated with the protection of consumers in mind. Protection from unscrupulous builders. In terms of the Housing Protection Act a builder must register as such and comply with certain prescribed standards. Consumers are protected by, inter alia, the imposition of warranties upon building contracts providing that the home will be fit for habitation and of an acceptable quality. Further protection is provided by Section 10 which reads:

“No person shall––
(a) carry on the business of a home builder; or
(b) receive any consideration in terms of any agreement with a housing consumer in respect of the sale or construction of a home,
unless that person is a registered home builder.”

This prohibition is met with a criminal sanction as per section 21. This appears to be a straightforward case but of the multiplicity of issues that arose in this case, the most divisive was whether the prohibition rendered the building contract void.

THE JUDGMENTS

Three judgments were written. The majority judgment was written by Majiedt AJ with Moseneke ACJ, Skweyiya ADCJ, Khampepe J and Madlanga J (“Majority”). The concurring judgment was written by Jafta J with Zondo J concurring (“Concurring”). The dissenting judgment was written by Froneman J with Cameron J, Dambuza AJ and Van der Westhuizen J concurring (“Dissenting”).

The Majority held that from a purposive reading of the Act as a whole and in this instance, the arbitration award requiring Hubbard to pay the CC in the face of a criminal prohibition could not be sanctioned by the Court. Accordingly, the Majority refused to make the arbitration award a court order.

On the issue of the validity of the contract the Majority held that the contract remains in force but unenforceable by the CC. This was considered necessary and in line with the purpose of the Act as the contract provided protection to the consumer and to declare it void would undermine these protective measures. This had an interesting and intended consequence. As the contract remains in existence, the CC is unable to bring a claim against Hubbard on the basis that she was unjustifiably enriched.

The Concurring judgment agreed with the Majority that the arbitration award could not be made an order of court but for a very different reason. The prohibition on remuneration and carrying on a business as a builder without having registered rendered the contract invalid. The contract contained the arbitration agreement under which authority the arbitrator made an award. As the contract is void, the arbitration agreement is void and thus there can be no valid arbitration award.

The Dissenting judgment examined the importance of various public policy factors in play, such as the fact that the parties choose to have their dispute resolved through the alternative dispute resolution mechanism of arbitration. Central to this examination was the importance of the constitutionally enshrined right to property as per section 25 of the Constitution. In the end the Dissenting judgment held that it would be unfair to deprive the CC of compensation for work done and opted for a less stringent interpretation of the Act in these circumstances.

CONCLUSION

Cool Ideas is a monumental case for arbitration, builders, home owners, the right to property but most importantly the principle of legality. What effect this case will have on the interpretation of law in the future only time will tell. Fortunately for legal scholars out there the case demonstrates that debate and its necessary bedfellow, disagreement, are alive and well. A healthy sign in a democratic society such as ours. 

Written and prepared by Patrick Wainwright

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