No claim for payment against buyer if both builder & developer is not registered with NHBRC

NO CLAIM FOR PAYMENT IF NOT REGISTERED WITH HOME BUILDER’S COUNCIL 

Cool Ideas 1186 CC  v  Hubbard and Another (CCT 99/13) [2014] ZACC

The Housing Consumers Protection Measures Act obliges home builders to register with the Council as part of a regulatory system aimed at protecting consumers from shoddy building work. Here, the Constitutional Court found that it could not confirm an arbitrator's award that was granted in the developer's favour if the latter was not registered with the Council at the time of contracting. This is because, even though the developer had subcontracted a builder who was registered, it also had to be registered in order to receive a consideration "in terms of an agreement with a housing consumer in respect of the sale or construction of a home".

FACTS

In February 2006, Ms Hubbard and a property developer, Cool Ideas 1186 CC (‘Cool Ideas’) entered into a building contract. Cool Ideas enlisted the services of a building construction company, Velvori Construction CC (‘Velvori’), to undertake the construction of Ms Hubbard’s home. Velvori was registered as a home builder in terms of the Housing Consumers Protection Measures Act ('the Act') at the time, but Cool Ideas was not.

The building works were completed in October 2008. Ms Hubbard took issue with the quality of the work and refused to make final payment. She instituted arbitration proceedings in terms of an arbitration clause in the building contract, claiming the costs of remedial works. Cool Ideas instituted a counter-claim for the balance of the contract price. The arbitrator found in favour of Cool Ideas but Ms Hubbard refused to comply with the arbitral award.

Cool Ideas thereupon approached the South Gauteng High Court for an order enforcing the arbitral award. Ms Hubbard opposed the application, contending that Cool Ideas was not a registered home builder in terms of the Act and was therefore precluded from claiming remuneration under the building contract. (Cool Ideas did, however, register with the National Home Builder’s Council ('the NHBRC') during the litigation proceedings.)

Cool ideas argued that it had subsequently registered and, in any event, that the construction was done by Velvori, which was a registered home builder. As such, it was entitled to claim remuneration. 

The High Court granted the order and made the arbitral award an order of court. Ms Hubbard thereupon appealed to the Supreme Court of Appeal (the 'SCA'). The latter court held that the requirement that home builders register with the NHBRC is part and parcel of the Act’s purpose to protect consumers. Both Cool Ideas and Velvori were required, in terms of the clear provisions of the Act, to be registered before commencing with construction. As such, enforcing the arbitral award would disregard a prohibition in law and the court accordingly found in favour of Ms Hubbard.

Cool Ideas appealed to the Constitutional Court in the present matter.

Section 10 of the Act provides that:

"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.”

The Act clearly requires home builders to register before they may commence building works. Cool Ideas was accordingly prohibited from commencing building works and this failure was not rectified by the fact that Velvori was registered at the time. Velvori, as builder, had to be registered in terms of section 10(1)(a) and Cool Ideas had to be so registered for purposes of section 10(1)(b).

By enforcing the arbitrator’s award, the court would be condoning an illegality.

As such the court noted that the interpretation given by the Supreme Court of Appeal to section 10(1)(b) of the Act, namely that registration is a prerequisite for building works to be undertaken by a home builder, had to be upheld.

Failure to register would result in the home builder being ineligible to seek consideration for work done in terms of a building agreement.

Cool Ideas' appeal against the SCA judgment was dismissed with costs.