Body Corporate of the Pinewood Park Scheme No. 202 v Dellis (Pty) Limited

The respondent (Dellis) was the registered owner of Sectional Title Unit 7 in the Pinewood Park Scheme No. 202 in Pinetown, KwaZulu-Natal. The appellant body corporate issued summons on 2 November 2006 claiming arrear levies of R123,101.00 plus interest and attorney-client costs. The owner admitted the obligation to pay levies but denied liability for the claimed amount, pleading prescription and improper appropriation of payments. At a pretrial conference on 23 February 2010, the owner's representatives contended that the High Court's jurisdiction was ousted by the Body Corporate of Greenacres v Greenacres Unit 17 CC judgment, arguing the claim must be resolved by arbitration under management rule 71. The trial court upheld this point in limine and dismissed the claim. The Full Court dismissed the body corporate's appeal. The matter came before the Supreme Court of Appeal on an application for special leave to appeal.

• Whether management rule 71 of the Sectional Titles Act regulations provides for compulsory arbitration that ousts the jurisdiction of the High Court
• Whether a proper dispute existed between the parties that was capable of being referred to arbitration
• Whether section 6 of the Arbitration Act 42 of 1965 applies to arbitration proceedings under management rule 71
• The status and nature of management rules governing sectional title schemes - whether statutory, contractual or consensual
• What procedure should be followed when a defendant raises arbitration as a bar to court proceedings

1. The application for special leave to appeal was granted. 2. The appeal was upheld with costs. 3. The order of the Full Court was set aside and replaced with an order that: (a) The appeal is upheld with costs; (b) The order of the court below is set aside and replaced with: "The defendant's point in limine is dismissed with costs."

1. Management rules governing sectional title schemes under the Sectional Titles Act 95 of 1986 are contractual/consensual in nature, not purely statutory prescriptions. They constitute terms of an agreement between owners inter se and between owners and the body corporate. 2. Management rule 71 does not provide for compulsory arbitration that excludes the application of the Arbitration Act 42 of 1965. 3. The provisions of the Arbitration Act apply mutatis mutandis to arbitration proceedings under management rule 71 by virtue of regulation 39. 4. Section 6 of the Arbitration Act applies to disputes under management rule 71, giving the court discretion whether to stay proceedings pending arbitration or to continue with the action. 5. Where arbitration is raised as a defense, the proper procedure is not to dismiss the claim outright, but to dismiss the point in limine and then exercise judicial discretion under section 6 of the Arbitration Act as to whether to grant a stay or continue with the proceedings, depending on whether a proper arbitrable dispute exists and other relevant factors.

The court noted that special leave to appeal should be granted where there are reasonable prospects of success and the appeal raises a substantial point of law of general importance. The court observed that the dispute put up by the owner in correspondence prior to institution of action was completely different from what was ultimately pleaded, suggesting this was relevant to whether a proper arbitrable dispute existed. The court approved the dictum in Wiljay Investments that sectional title rules contain "a constitution or the domestic statutes of the body corporate" which can properly be construed as containing terms of an agreement. The court cited with approval the principles from Telecall regarding when a dispute capable of arbitration exists - there must be a dispute capable of proper formulation, not merely an expression of dissatisfaction.

This judgment is of great importance to sectional title law in South Africa. It clarified the nature of management rules under sectional title schemes as being contractual/consensual rather than purely statutory, and established that arbitration under management rule 71 is not compulsory in the sense that it excludes court jurisdiction. The judgment confirmed that the Arbitration Act 42 of 1965, including section 6 which gives courts discretion to stay or continue proceedings, applies to sectional title disputes. It provides important guidance on the proper procedure when arbitration is raised as a defense - the claim should not be dismissed outright, but the court must exercise its discretion under section 6. The court recognized this as raising a substantial point of law of importance not only to the parties but to the sectional title industry as a whole. The judgment clarified the ambiguity left open in the Greenacres case regarding whether arbitration is compulsory under management rule 71.