SOCIETY OF CONSTRUCTION LAW FOR AFRICA
Builder cannot claim payment if not registered with NHBRC
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Author: Stoffel Ackermann
Director STBB | Smith Tabata Buchanan Boyes
Hubbard v Cool Ideas 1186 CC (580/12) [2013] ZASCA 71 (28 May 2013)
The Housing Consumers Protection Measures Act requires that home builders must be registered with the Council as a measure to ensure that consumers are protected from shoddy building work. Here, the Court confirmed that since the builder was not registered with the Council, it could not succeed in its application to make an arbitrator’s award that was granted in its favour, an order of Court. To do so, the Court held, would condone something the legislature aimed to prevent.
FACTS
In February 2006, Hubbard entered into a written building agreement with Cool Ideas 1186 CC (‘Cool Ideas’) in terms of which the latter would erect a residential home for Hubbard on a property she owned. Building works commenced, although Cool Ideas was not enrolled with the National Home Builders Registration Council (‘the Council’) as a builder, as required in terms of the Housing Consumers Protection Measures Act 95 of 1998 (‘the HCPMA’).
A dispute arose between Hubbard and Cool Ideas and this was referred to arbitration, as provided for in the building agreement. The arbitrator found in favour of Cool Ideas and ordered Mrs Hubbard to pay it an outstanding amount of some R 1,2 million in respect of work it had performed. Mrs Hubbard failed to make the payment and Cool Ideas approached the Court for an order making the arbitrator’s award an order of court (so that Cool Ideas could execute against Hubbard’s possessions). The South Gauteng High Court found in favour of Cool Ideas. Hubbard appealed to the Supreme Court of Appeal, arguing that since Cool Ideas was not enrolled with the Council as a builder as required in the HCPMA, Cool Ideas was not entitled to claim any payment from her.
Sections 10 and 21 of the HCPMA provide as follows:
“10 Registration of home builders
1) 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 inrespect of the sale or construction of a home, unless that person is a registered home builder.
2) No home builder shall construct a home unless that home builder is a registered home builder.’
21. Offences
1) Any person who –
a) knowingly withholds information required in terms of this Act or furnishes information that he or she knows to be false or misleading; or b) contravenes section 10(1) or (2), 13(7), 14(1) or (2), 18(1) or (2) or 19(5), and every director, trustee, managing member or officer of a home builder who knowingly permits such contravention, shall be guilty of an offence and liable on conviction to a fine not exceeding R25,000, or to imprisonment for a period not exceeding one year, on each charge.”
HELD
The purpose of the HCPMA is to afford protection to housing consumers. It does so in various ways, including the establishment of a Council and the requirement that home builders must be registered as such with the Council.
Such registration depends upon the Council being satisfied that the home builder:
meets the criteria prescribed by the Minister of Housing;
will meet its obligations in terms of the Act; and
has appropriate financial, technical, construction and management capacity in order to prevent housing consumers and the Council from being exposed to unnecessary risk. These measures protect the consumer in such agreements.
What is the consequence for the validity of an act that has taken place in conflict
with a statutory prohibition?
As a general rule, our Courts consider that something done contrary to the direct prohibition of the law, is void and has no effect. This is, however, not always the case: where the relevant provision in the legislation does not itself clearly indicate that a contravention or failure to comply renders the action/transaction void, the outcome of the failure to comply will depend on the intention of the legislature, as it is illustrated from the wording used.
With regard to sections 10(1) and (2) of the HCPMA, it is apparent that the wording does not invalidate the agreement between the home builder and the housing consumer. What sections 10(2) and (3) aim to do is to penalise the home builder who carries on the business of a home builder without the required registration. That being so, a home builder who claims consideration in conflict with those sections might expose himself or herself to criminal sanction (s 21) and cannot be entitled to claim compensation in clear contravention of the law.
Section 10 makes it clear that a home builder may not act in that capacity at all without the requisite registration. If the arbitrator’s award was to be upheld, it would mean that the Court is giving legal sanction to the very situation that the legislature wished to prevent. The Court’s inability to assist Cool Ideas stems further from the consideration that it is one of the objects of the Act to protect members of the public who transact with home builders. The prohibitions in sections 10(1) and (2) and the penalties in section 21 of the HCPMA are intended to make that protection effective.
Hubbard’s claim accordingly succeeded.