South African court could not reopen arbitrated claim once time barred

The South Gauteng High Court found that a court did not have the power to extend the time period under a time bar clause where, as here, the arbitrator had already made an award upholding the time bar defence.

Time bar clauses are a feature of many arbitration agreements. They require parties to act within a prescribed time period failing which they may be barred from proceeding with their claim. However, under section 8 of the Arbitration Act 41 of 1965 (the Act), a court persuaded that “undue hardship” would be caused by a time-bar clause may extend the time for such period as it considers proper.

Justice Keightley distinguished the facts of this case from the leading case on successful applications for extensions under section 8 on the grounds that, in that case, the section 8 claim was lodged prior to the arbitrator handing down their determination. The judgment shows that, although section 8 of the Act can assist a party in instances where it is time barred but where it can persuade a court that undue hardship would be caused by the implementation of that time bar clause, it is imperative to keep in mind the courts’ guidance on timing and procedure.

The decision

The dispute arose in connection with a company placed under business rescue proceedings, Kleinfontein Colliery (Pty) Ltd. Under the business rescue plan, the creditors of the colliery could lodge claims with the business rescue practitioner and, should that claim be rejected, could apply to have the decision reviewed by an arbitrator. A creditor of Kleinfontein Colliery, Genet, submitted its claim to the business rescue practitioner who rejected a portion of its claim. Genet exercised its right to review the decision under the business rescue plan. However, Genet did not issue the notice of dispute within the required time period set out in the business rescue plan, resulting in the arbitrator ruling that the claim had been time-barred.

Genet then sought a court order under section 8 of the Act contending that this provision allowed the court to extend the time period for giving notice of its dispute. The court in this case had to decide whether the extension could be granted after the arbitrator had handed down his finding that the claim had been time barred. Section 28 of the Act embodies the common law position that arbitration awards are final and binding, and consequently prevents a court from extending a time bar clause in an arbitration agreement in instances where the arbitrator had already issued a determination

Genet argued that the final nature of the award does not preclude the court from exercising its discretion under section 8 as, on a proper interpretation of both sections 8 and 28, the former is the dominant and the latter is the subordinate provision. This, it argued, is because section 28 is expressly made “subject to the provisions of this Act”. Genet argued that this meant that the final nature of an arbitral award, as provided under section 28, is “subject to” section 8 and must give way to that section in a case of a conflict between the two.

The court considered the relationship between, and interpretation of sections 8 and 28 of the Act. Having done so, the court’s view was that while section 28 of the Act may be subject to other provisions within the Act, section 8 is not one of those provisions. The court noted that Genet’s interpretation overlooks the fundamental importance of the principle of finality in arbitral awards. Accordingly, it was held that the court did not have the power to extend the time period under the time-bar clause after the arbitrator had made an award upholding the time-bar defence.

The circumstances in which Genet initiated the proceedings under section 8 of the Act are distinguishable from that of the applicant in the leading case dealing with an extension of the time period of a time bar provision, the Supreme Court of Appeal’s 2021 decision in Samancor Holdings (Pty) Ltd and Others v Samancor Chrome Holdings (Pty) Ltd and Another.

In the Samancor case, the defending company raised a time bar defence, in response to which the claiming company pleaded that if the arbitrator dismissed the preliminary issue it should be granted a stay of the arbitration proceedings to allow it to seek relief under section 8 of the Act. This relief was granted by the arbitrator, who had not ruled that the claimant was time barred. As such, that issue remained open for the arbitrator to determine in the event that the court refused to grant the extension sought. The High Court was therefore able to grant the extension, and its decision was later upheld by the Supreme Court of Appeal.

As highlighted by the court in the Genet case, relief sought under section 8 of the Act should be lodged prior to the arbitrator handing down their determination. It was further suggested by the court that an applicant seeking an order under section 8 of the Act should follow the same procedure as set out in the Samancor case in order to preserve its rights to have its claim heard on the merits before the arbitrator.

Written by Muhammed Somrey and Maseeha Chothia of Pinsent Masons