In trial proceedings under the uniform rules of court, a plaintiff would be entitled to apply for default judgment where the defendant fails to enter a notice of intention to defend the action instituted, or where the defendant fails to deliver its plea within the time period prescribed by the rules. In such an instance, the Registrar of the Court (if it is satisfied that there has been due service of the proceedings upon the defendant) is empowered to issue an order for default judgment, in many cases without the necessity of any judicial consideration (and without hearing any evidence). In certain instances, such as where the claim is not for a liquidated sum of money, the Registrar may order that the application be referred to open court for consideration.
The same is not true in arbitration proceedings, because the arbitral body has no power insofar as the enforcement of the award is concerned. This is because an arbitration award will become enforceable only once it is made an order of court. Consequently, the arbitrator will need to consider the extent of his/ her jurisdiction and will need to appropriately scrutinise the merits of the claim before him by the party appearing at the arbitration.
Section 15(2) of the Arbitration Act, 1965 ("the Act") provides as follows:
"If a party to the reference at any time fails, after having received reasonable notice of the time when and place where the arbitration proceedings will be held, to attend such proceedings without having shown previously to the arbitration tribunal good and sufficient cause for such failure, the arbitration tribunal may proceed in the absence of such party."
This envisages a situation where either the plaintiff or defendant in an arbitration fails to arrive at the arbitration proceedings where they have been properly notified of the proceedings. The Act does not provide for a situation where the defendant fails to deliver its statement of defence and the plaintiff's rights when this occurs or, indeed, the arbitrator's powers to make an award in the absence of a statement of defence.
Arbitration is a consensual alternative mechanism for dispute resolution that requires the agreement between all parties to the arbitration. Parties will generally agree to the rules that will apply in respect of the arbitration, either in the original agreement concluded between them or in terms of a specific arbitration agreement entered into.
In South Africa, the rules of the Arbitration Foundation of South Africa (AFSA) are the most commonly used rules. The Rules of the Association of Arbitrators are also commonly used.
Article 10.1.1 of the AFSA Commercial Rules contains a provision similar to section 15(2) of the Act:
"in cases where the arbitrator is satisfied that the Request for Arbitration and notices referred to in 6.1 and 6.2 has been delivered or sent to the defendant in the manner prescribed in 20.3 and 20.4.3, and that the prescribed time for responding thereto has expired, and that the party cited as defendant is in default of responding as required by 6.1, and has not furnished the arbitrator with good and sufficient cause for such failure, proceed with the arbitration to its final conclusion in the absence of the defaulting party.
Article 6.1 makes provision for the delivery of a statement of defence. Consequently, article 10.1.1 provides that, where a party fails to deliver its statement of defence and, absent any good cause shown for such failure, the arbitrator may proceed with the arbitration to its final conclusion in the absence of the defaulting party.
This requires that the arbitrator continue the arbitration in the absence of the defaulting party. However, it still requires the arbitrator to closely examine the evidence before it. In other words, the arbitrator cannot merely issue a default award.
In this sense, there is a distinct difference between court cases that end in a judgment and arbitrations, which end in awards. An arbitration tribunal does not have the jurisdiction to simply rubber stamp a claim if the respondent has declined to participate. The same is true of most, if not all, arbitration rules that will apply in respect of an arbitration in South Africa.
If the arbitrator does not examine the evidence, then he will open himself up to a possible rescission of the award, in terms of which the defendant may apply to court to have the award set aside on the basis of a gross irregularity in the proceedings - in this case, granting a default award without hearing the evidence before it.
In the case of Rebah Construction CC v Renkie Building Construction CC 2008 (3) SA 475 (T), the applicant applied to have the default award in an arbitration between the parties made an order of court. The respondent opposed the application and applied to have the default award set aside. The court, in setting aside the award, held that the arbitrator, in granting a default award without the hearing of any evidence, took a step which was not anticipated by the parties and outside of the parties' terms of reference. The parties had agreed that a default award could only be made after evidence had been presented to the arbitral tribunal - either documentary or oral.Consequently, where a defendant in an arbitration fails to deliver a statement of claim, the claimant will need to apply to the arbitrator for the arbitration to proceed in the absence of the defendant. The arbitrator will then be required to consider the evidence before him presented by the claimant and will only then be entitled to make an award.