The arbitration award does not reset the clock: IDC Architects v IDT

A party that wins an arbitration award, survives an appeal, and then settles and accepts payment cannot later walk into court and ask for that same award to be enforced as if the settlement never happened. That proposition may seem obvious. What is less obvious, and what makes IDC Architects CC v Independent Development Trust worth reading carefully, is what the judgment reveals about how arbitration interacts with prescription, and how badly things can go wrong when a party approaches the court with an incomplete picture.

The case arose from a dispute over fees. IDC referred the matter to arbitration around 2015. Six years later, an award in its favour was confirmed on appeal in August 2021. Settlement negotiations followed. By March 2022, IDC had signed a written agreement to accept R8 million in full and final settlement. The same day, after further discussion, the figure was revised upward, and IDT paid R8,960,051.27 (this increase is significant later) into IDC’s account in April 2022. IDC accepted the money and said nothing for twenty-seven months. Then, in July 2024, it issued a letter of demand claiming that a further R2.9 million remained outstanding. Two months after that, it launched an application under section 31(2) of the Arbitration Act to have the original R11.8 million award made an order of court.

The application failed. IDC was ordered to pay costs on a punitive attorney-and-client scale. The judgment is instructive on two distinct points.

Arbitration does not reset the prescription clock

Both parties approached the prescription issue from the same, albeit incorrect, starting point. They each assumed that the arbitration award created a new debt and that the three-year prescription period started afresh from the date of the award. The IDT raised prescription as a defence on that basis. IDC argued for an interruption on that same basis. Strydom J corrected both, drawing on Brompton Court Body Corporate v Khumalo, a case neither party had cited.

The correct position is this: an arbitration award does not create a new debt. It affirms an existing one. The three-year period under S11(d) of the Prescription Act continues to run from the date the underlying debt became due, not from the date of the award. What arbitration does is act as an impediment to litigation under S13(1)(f) of the Prescription Act. A creditor who is contractually obliged to arbitrate cannot sue in court, so it would be unjust to allow prescription to run unchecked during that period. The Act therefore delays prescription and, crucially, extends it: under S13(1)(i), if the prescription period would otherwise expire within one year of the arbitration concluding, the creditor gets only one year from that date to act.

In this case, the arbitration concluded on 4 August 2021. IDC had, at minimum, until August 2022 to serve an application to make the award a court order. The prescription point ultimately did not determine the outcome – the April 2022 payment either settled the matter entirely or constituted a tacit acknowledgement of liability that restarted the clock under S14 — but the court’s analysis is important in its own right. The misconception that an arbitration award creates a fresh prescriptive period is evidently not uncommon. It is wrong, and acting on it can be fatal.

A settled award cannot be enforced – and concealing the settlement will cost you

The less obvious lesson concerns what happened on the merits. IDC’s position was that the R8.96 million payment was a partial payment of the larger award, leaving a balance outstanding. IDT’s position was that the award had been fully compromised by settlement, and that IDT had performed under that settlement. The court had to decide which version to accept.

Because IDC sought final relief in motion proceedings, the Plascon-Evans rule applied: the court must accept IDT’s version of disputed facts unless it is so far-fetched as to be untenable. IDT’s version was supported by a coherent body of objective facts – documented negotiations, a written settlement agreement signed by IDC for a lower amount than ultimately paid, receipt of a precise reconciled sum without any protest, and then silence for over two years. IDC’s version, by contrast, was undermined by its own conduct. It had not only failed to demand the alleged balance promptly – it had said nothing in its founding affidavit about having signed the first settlement agreement for R8 million at all.

That omission is where the punitive costs order originates. A party launching motion proceedings carries an obligation of full and frank disclosure in its founding affidavit. The existence of a signed settlement agreement was plainly a material fact. Concealing it was, in the court’s view, an abuse of process. The costs order was the direct consequence.

The court also noted that IDC had elected not to refer the matter to oral evidence despite a genuine factual dispute. Having made that election, IDC had to live with the result on the papers, and the papers did not favour it.

What this means in practice

This judgment leads to three key takeaways:

• The arbitration process suspends the prescription period for debt, which resumes after the award and lasts one year. Parties should strictly track these timeframes to avoid risk.
• Settlement of an arbitration award by written agreement or unchallenged payment ends enforceability. Clearly document payment terms, and clarify in writing if a payment is partial.
• Founding affidavits must include all material facts, even those unfavourable to your case; omitting them can result in punitive costs orders.

Contact Nikita Lalla or Ricardo Pillay to mitigate risks and unlock opportunities.