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[2018] ZAWCHC 37
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Africa Opportunity Fund LP and Another v Shoprite Holdings Ltd and Another (8543/17) [2018] ZAWCHC 37 (23 March 2018)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case
Number: 8543/17
Reportable
In
the matter between:
AFRICA
OPPORTUNITY FUND LP
First
Applicant
AFRICA
OPPORTUNITY CAYMAN LTD
Second
Applicant
and
SHOPRITE
HOLDINGS LTD
First
Respondent
LA
ROSE-INNES
N.O.
Second
Respondent
Delivered:
23 March 2018
JUDGMENT
BOQWANA,
J
Introduction
[1]
The
applicants brought an application in terms of s 32 (2) of the
Arbitration Act 42 of 1965 (‘the Act’) to remit the
matter to the second respondent (‘the arbitrator’) for
reconsideration and for the making of a further or a fresh award
after hearing or considering new evidence. In terms of s 32 (2)
of the Act:
“(2) The court may, on the
application of any party to the reference after due notice to the
other party or parties
made within six weeks after the publication of
the award to the parties, on good cause shown, remit any matter which
was referred
to arbitration, to the arbitration tribunal for
reconsideration and for the making of a further award or a fresh
award or for such
other purpose as the court may direct.”
[2]
This
application is accompanied by an application to extend the time
period of six weeks in s 32 (2) of the Act. Section 38 of the
Act
permits this Court to extend the time period on good cause shown. It
states the following:
“
38.
Extension of periods fixed by or under this Act.
-The
court may, on good cause shown, extend any period of time fixed by or
under this Act, whether such period has expired or not.”
[3]
The
applicants also seek leave to introduce a supplementary affidavit, by
Ms Ziyanda Nyanda of its attorney of record.
[4]
In
essence, three issues stand to be determined by this Court:
4.1
Whether the late filing of this application should be condoned;
4.2
Whether the supplementary affidavit of Ms Nyanda should be allowed;
and
4.3
Whether the matter should be remitted back to the arbitrator for
reconsideration.
[5]
The
first respondent, which, for the sake of convenience, I shall refer
to as the respondent in this judgment, opposes all these
applications. Before considering these questions, it is important to
briefly outline the background facts underpinning the matter
before
me.
Factual
background
[6]
The
first applicant is an exempted limited partnership, formed and
registered in the Cayman Islands. The second applicant, on the
other
hand, is an open-ended investment company also duly registered and
incorporated in the Cayman Islands. The applicants
were
claimants in the arbitration proceedings, conducted during August and
September 2016 (‘the arbitration’), which
are the subject
of this application and to which I shall return in more detail later
on.
[7]
The
respondent is a public company duly incorporated in the Republic of
South Africa (‘the Republic’). It was also the
respondent
in the arbitration. Although the respondent has its primary listing
on the Johannesburg Stock Exchange (‘the JSE’),
with its
registered address within the jurisdiction of this Court, it is
registered as a foreign company in Zambia and has a secondary
listing
on the Lusaka Stock Exchange (‘LuSE’).
[8]
Pursuant
to the secondary listing on 14 February 2003, Shoprite Checkers (Pty)
Ltd (‘Shoprite Checkers’), a wholly-owned
subsidiary of
the respondent, provided and delivered 2 700 000 ordinary shares
in the respondent to the Central Share Depository
of the LuSE, to
facilitate the respondent’s listing on the LuSE and to allow
the sale of those shares in Zambia to would-be
investors.
[9]
According
to the respondent, on 13 February 2003 it appointed one Lewis
Chisanga Mosho (‘Mosho’) as its Resident Representative
Zambian Director. Mosho was a partner in a firm known as Lewis
Nathan Advocates (‘LNA’), at whose chambers he
practised
as an advocate.
[10]
Mosho
was to act as the respondent’s representative in Zambia and
also to conduct and manage the respondent’s affairs
in Zambia.
On 14 February 2003 the respondent also appointed LNA as its transfer
agent in respect of its shares listed on the LuSE.
[11]
During
the period of February 2003, 479 103 shares of the respondent
were sold on the LuSE pursuant to the company’s
initial public
offering. This left a balance of 2 220 897 shares.
These were then held as treasury shares
by LNA, as nominee for
(on behalf of) Shoprite Checkers.
[12]
According
to the respondent, on 2 September 2004 the board of Shoprite Checkers
provided LNA with the mandate (‘the Mandate’)
to sell the
treasury shares in the following manner:
12.1 The
treasury shares were to be sold in tranches of approximately 35 000
shares;
12.2 The
treasury shares were to be sold against payment in full of the
purchase price equal to the Zambian Kwacha equivalent to
the ruling
market price of the respondent’s shares on the JSE;
[13]
It
became apparent (and
confirmed
during
the arbitration) that Mosho and LNA, respectively, committed various
fraudulent breaches of the terms of the engagement,
the Mandate and
the written instructions. Up until 3 April 2011, Mosho traded
the treasury shares on the LuSE without consulting,
disclosing or
accounting for those shares or transferring the proceeds thereof to
Shoprite Checkers. He sold those shares
at a deep discount to
the daily JSE price.
[14]
The
respondent instituted proceedings, in the commercial registry in
Lusaka, against the registered shareholders who purchased the
treasury shares at a deep discount, for a declaration that no title
passed in respect of those shares. The basis of the declaration
was that Stockbrokers Zambia, being the firm of stockbrokers
appointed by LNA, was at all times aware of the express terms and
limitations of the Mandate given to LNA, in particular relating to
the purchase price and volume of the respondent’s shares
to be
traded.
[15]
With
the Zambian proceedings still pending, the applicants instituted
action proceedings against the respondent in this Court on
16
September 2014. The basis of the action was that the applicants
had good title
to
the shares that
they
purchased on the LuSE, and by extension therefore they were entitled
to dividends. By agreement between the parties,
the action
proceedings were converted into arbitration proceedings.
Arbitration
proceedings
[16]
At
the arbitration, the arbitrator considered a number of issues; I will
not deal with them all however. The applicants had
alleged that
the first applicant was the beneficial owner of 679 145 shares
and the second applicant of 128 536, together
totalling 807 681
shares. As appears from the arbitration award
,
the respondent, broadly, had mounted a defence that it was not aware
of these transactions, that the sale of those shares was
in breach of
the Mandate and that this breach was within the knowledge of
Stockbrokers Zambia and African Alliance in their capacity
as the
agents of the applicants. The knowledge of Stockbrokers Zambia and
African Alliance was said to be imputed to the claimants
by operation
of law. Therefore, there would not have been transfer of good and
legal title, Shoprite Checkers remained the beneficial
owner of those
shares and consequently neither the applicants, nor Standard
Chartered Securities (which held the shares as a nominee
on behalf of
the applicants), were entitled to dividends. In other words,
they were not
bona
fide
purchasers. The
shares, to which the claims related, were classified in the award as
Class A shares. The second defence was
that Mr Francis Daniels (a
director of the applicants) (‘Daniels’), acting on behalf
of the applicants in acquiring
shares, had knowledge of the
limitations imposed by the Mandate and that the shares were purchased
contrary to that Mandate.
[17]
The
arbitration award was published on 27 January 2017. The
arbitrator found that the applicants had been able to show, as
supported by documentary evidence, that they had acquired the shares,
but that that conclusion was subject to the findings made
in respect
of the respondent’s defence on the Mandate. He found that
the evidence conclusively established that LNA
acted in breach of the
terms of the Mandate, and that there was undisputed evidence that
Stockbroker Zambia and African Alliance
had knowledge of the Mandate
and the limitations imposed on it. That knowledge, however, was
not acquired in their capacity
as the applicants’ agents,
therefore their knowledge of the Mandate could not be imputed to the
claimants and that defence
was thus rejected. However, as to
the second defence relating to Daniels’ knowledge, the
arbitrator found that Daniels
knew that Shoprite Checkers was the
biggest seller of the respondent’s shares. In fact, it
was common knowledge. He
further knew that the seller had
instructed the shares to be sold at JSE prices.
[18]
The
arbitrator noted that in about October 2009, Daniels was told in
email communications by
Ms
Sophia Cheelo (a representative of Stockbrokers Zambia, who later
moved to African Alliance
in
2010) of ‘the seller’ who wished to offload a large block
of 800 000 shares. He was then informed that the seller
had
40 000 shares which were already in the market and that there
were 2227 additional shares available from other sellers.
This
led to the first applicant’s purchase of 42 227 shares on
19 October 2009. He was advised that the seller
had agreed to
release a further 40 000 shares. This led to a second
purchase of 40 024 shares by the first applicant
on 20 October
2010, the balance of 24 shares being from a source other than
Shoprite Checkers. The arbitrator found that
although the
seller was not directly identified by name, Daniels should have
understood that the seller was in all probability
Shoprite Checkers,
as in fact Ms Cheelo had informed him that it was the biggest seller
(although it could not be determined with
certainty whether this
communication from Ms Cheelo to Daniels was made prior to the share
acquisitions made by the first applicant
on 19 and 20 October 2009).
He also knew that Shoprite Checkers had 2.2 million unsold treasury
shares and there was a free
float of some 500 000 shares sold
after the listing.
[19]
Whilst
the arbitrator found that Daniels must have known, that the seller of
large parcels of the respondent’s shares would
in all
probability have been Shoprite Checkers, he could not find that he
must have known this prior to the acquisition of the
two lots of
40 000 shares purchased on 19 and 20 October 2009, because of
the uncertainty as to exactly when Ms Cheelo told
him Shoprite
Checkers was the biggest seller. It may be that the
communication preceded the first sale, in which case he
would have
been aware, or it may have been after the two transactions. What
was clear, the arbitrator found, was that
shortly
after
the
two sales, Daniels knew that Shoprite Checkers was the seller. The
respondent’s defence was based on Daniels’
knowledge as
of 23 November 2009, and what is clear is that 99 800 shares
were acquired on 27 November 2009.
[20]
The
arbitrator then made the following crucial findings:
“80. Mr Daniels must also have realised
in the circumstances that Shoprite Checkers was the seller of other
large parcels
of shares acquired by the claimants later in 2009 and
in the following two years. Large parcels of shares are
transactions
involving 40,000 or more shares. Mr Daniels
appreciated at the time that the sales of large parcels of shares
were made by
one seller. There are eight sales reflected in
schedule FD2 in excess of 40,000 shares, excluding the first two
transactions.
These are the following
:
27/11/2009
99,800
22/02/2010
85,876
26/04/2010
97,852
16/06/2010
104,000
23/06/2010
100,000
27/10/2010
100,000
27/10/2010
50,000
11/07/2011
50,000
__________
687,528
The first seven sales relate to shares acquired
by Africa Opportunity Fund totalling 637,528 shares. The eighth
transaction
consists of shares acquired by Africa Opportunity Cayman.
81. As far as the smaller sales of
shares are concerned it cannot be found that Mr Daniels should have
realised that
Shoprite Checkers was probably the seller. As the
biggest seller of shares, holding a large quantity of treasury
shares,
the expectation would have been that Shoprite Checkers would
dispose of the shares in larger rather than smaller parcels.
Sales of smaller quantities of shares could have been understood
as having been made by entities other than Shoprite Checkers
.
We now know that this is in fact the case.
82. It follows therefore that when
the claimants purchased the eight large parcels of Shoprite shares
totalling 687,528
shares, they knew through Mr Daniels, that Shoprite
Checkers was the seller. They were also aware of the
instruction given
by Shoprite Checkers to their stockbroker that the
shares were to be sold at a price equivalent to the JSE ruling price.
83. In the light of this it is
necessary to consider, applying English law, whether good title in
these shares passed
to the claimants or whether Shoprite Checkers
retained beneficial ownership thereof.
…..
107. …. It must have been obvious to Mr
Daniels, in these circumstances that it was questionable whether
these sales at those
prices were authorised. The natural and
most logical thing for Mr Daniels to have done would have been for
him to query this
with Ms Cheelo and Mr Du Preez. He had
already been in regular communication with them regarding the
purchase of Shoprite
shares. A simple telephone call or email
would have allowed Mr Daniels to establish the true position.
Instead he made
no enquiry. He probably did not want the
answer. He shut his eyes to the fact that these sales may very
well have been
unauthorised.”
[21]
Based
on the above, the applicants were partially successful. The
arbitrator found that good title had passed in respect of
120 153
shares (i.e. 807 681 less 687 528 – shares he
considered as large shares, i.e. in excess of 40 000).
He
ordered the respondent to pay the first applicant dividends in
respect of 41 617 of its ordinary shares (out of the
679 145
shares in terms of which dividends were claimed) and to the second
applicant, to pay dividends in respect of 78 536
of its ordinary
shares (out of the 128 536 shares in terms of which dividends were
claimed).
[22]
Not
satisfied with this decision, the applicants filed a notice of appeal
against the arbitration award on 17 February 2017 and
the respondent
filed its notice of cross-appeal on 3 March 2017. On 7 April
2017, the appeal panel was constituted and on
9 April 2017 members of
the panel agreed to stay the proceedings pending the result of this
application.
The
applicants’ contentions regarding the new evidence sought to be
introduced
[23]
The
applicants wish to lead further evidence relating to the identity of
the seller in two share transactions on the LuSE. In
particular, they wish to show that Shoprite Checkers was not the
seller in two of the eight transactions identified by the arbitrator
as the large parcels of shares (i.e. those of over 40 000
shares), regarding which the arbitrator had held that the applicants
did not hold good title. These are:
(a)
the
first applicant’s purchase of 100 000 respondent shares on
23 June 2010 (‘June 2010 Trade’); and
(b)
the
second applicant’s purchase of 50 000 respondent shares on
11 July 2011 (‘July 2011 Trade’)
[24]
The
applicants contend that the new evidence will prove that they do have
good title to the 150 000 shares which they purchased
on the
LuSE and, by extension, are entitled to the dividends claimed, which
during the period of September 2011 to March 2016 alone
exceeded R
2.5 million before interest.
[25]
This
is on the basis of the arbitrator having found that they had no valid
ownership of the shares purchased in the large transactions,
since
they ought to have known, through their representative, Daniels, that
Shoprite Checkers was the seller and that the Mandate
regarding the
sale of shares had been exceeded. If it is proved that Shoprite
Checkers was not the seller of the two sets
of shares totalling 150
000, which is what the new evidence in their view will show, then
those would not have been affected by
the Mandate as they would have
been acquired from someone else.
[26]
They
contend that this issue, concerning the identity of the seller, had
been taken to be common cause at the arbitration because
the
respondent had made a positive averment in its plea that Shoprite
Checkers was the seller in respect in the affected shares.
Whilst
the applicants denied that Shoprite Checkers was the seller, they had
no evidence to the contrary at the time and
so it was taken as common
cause that Shoprite Checkers was the seller.
[27]
Based
on the arbitrator’s finding, that the conclusion that the
applicants have beneficial ownership was subject to the findings
made
in regard to the respondent’s mandate defence, it followed,
from the applicants’ point of view, that, if the respondent’s
defence did not hold, the applicants had good title.
[28]
According
to the applicants, the arbitrator’s finding presupposed that
Shoprite Checkers was the seller in all eight transactions,
which the
respondent had pleaded that it was. The unavoidable consequence
of proving that Shoprite Checkers was not the seller
in the two
affected trades, so contend the applicants, was that the 150 000
shares will move, if regard is had to the arbitrator’s
reasoning, from the category of shares affected by the Mandate and
therefore without good title, to the ‘remainder’
category
to which the applicants have been found to have good title.
[29]
The
import of the new evidence is that the 150 000 shares were
incorrectly classified. They ought to have been part of the
‘remainder’ category to which the applicants were found
to have had good title. It therefore follows that they
are
entitled to the outstanding dividends on those shares. The new
evidence sought to be introduced fundamentally challenges
the
arbitrator’s finding regarding the applicants’ knowledge
(or imputed knowledge) that Shoprite Checkers was the
seller.
The
new evidence
[30]
Daniels,
who deposed to the founding affidavit, alleges that on 31 March 2017
the applicants obtained a letter from LuSE, in which
LuSE confirmed
in writing that Shoprite Checkers was not the seller in the June 2010
trade and the July 2011 trade (‘the
LuSE confirmation’).
A letter from Ms Miria Mazyambe, Legal and Compliance Officer
of LuSE, recorded the following:
“ ...
Dear Sir
SHOPRITE SHARES HELD BY AFRICA OPPORTUNITY LP
AND AFRICA OPPORTUNITY CAYMAN LIMITED
Reference is made to the above captioned matter
and to your letter dated 31 March 2017.
We have noted the contents therein and wish to
confirm as follows:
a)
That Shoprite was not the seller of the
100,000 Shoprite shares purchased by AOF [first applicant] on 23
rd
June 2010, which trade settled on 29 June 2010;
b)
That Shoprite was not the seller of the
50,000 shares purchased by AOCL [second applicant] on 11
th
July 2011, which trade was settled 14
th
July 2011.
Yours sincerely
Miria Mazyembe
LEGAL AND COMPLIANCE OFFICER”
[31]
He
further alleges that subsequent attempts were made to obtain further
corroborating evidence. These attempts remained ongoing.
He
contends that the applicants’ efforts must be understood in the
context of the difficulties presented by the following
factors:
“(a) The stock exchange
confidentiality rules which prohibit the disclosure of identities of
counterparties, in
this case the disclosure of the sellers’
identities to the applicants as purchasers;
(b) The evidence and
potential witnesses all being in Zambia and not subject to South
African law; and
(c) The unique and
privileged position of Shoprite who, as issuer of the Shoprite
shares,
does
have access to the identities of the sellers.
Shoprite is thus in a position to easily and objectively verify
the veracity
of the applicants’ new evidence.”
[32]
Since
the filing of the founding affidavit, Daniels alleges in the replying
affidavit, that on 14 July 2017, they received a letter
from Mr
Chanda Mutoni of Stockbrokers Zambia, who confirmed that: “
Shoprite
Holdings Limited, Shoprite Checkers (Pty) Ltd, Lewis Nathan Advocates
and/or Mr. Lewis Chisanga Mosho was not the counter
party to the
abovementioned trade which was purchased on 23 June 2010 and settled
on 29 June 2010 by Africa Opportunity Fund”
.
[33]
A
letter dated 14 July 2017 from Fumanikile Bbuku, Manager –
Trading at Autus Securities Limited (‘Autus’), sent
to
the applicants’ attorneys, records that as a firm, Autus acted
on behalf of both the seller and the buyer in the 11 July
2011 trade
of the 50 000 respondent’s shares, purchased on behalf of
the second applicant. It further stated that
“
Shoprite
was not the seller in the above trade
”.
[34]
The
applicants continued to seek for more information. On 5 July
2017 a Zambian firm of advocates and notaries, Musa Dudhla
& Co,
wrote a letter to LuSE requesting confirmation that none of the
respondent’s relevant companies and representatives
were
counter party to the two affected trades. On 17 July 2017, LuSE
responded as follows: “
Please
be advised that the LuSE is only able to provide the information
requested to and upon the request of the issuer
[the
respondent].”
[35]
The applicants
allege that the respondent is in a unique and privileged position
because, as the issuer of shares, it does have
access to the
identities of the sellers. It is thus in a position to easily
and objectively verify the veracity of the applicants’
new
evidence. To this, the respondent alleges that it “
only
has direct knowledge of its registered shareholders, as reflected on
the share register of the exchange”
and that it has “
no
further knowledge of the trades which may have occurred in its shares
by independent buyers and sellers”
.
According to the applicants, the respondent is able to access
its shareholder records from the days immediately before and
after
the trades, which it can obtain from LuSE. The respondent’s
contention, that it had no direct contract with Stockbrokers
Zambia
and the selling broker, does not assist the respondent, in that it
has not made any enquiries whatsoever. The applicants
themselves had no contractual relationship with LuSE either, but they
nonetheless made enquiries with LuSE to understand which
information
it could provide. LuSE stated that the information was
accessible only to the respondent, issued upon request.
[36]
The respondent’s
response to this, is that it has no procedural duty to ask LuSE for
the information. Its stance is
that it has an arbitration award
in its favour, which it has a right to defend. According to the
applicants, an inference
must be drawn that the respondent does not
want it to be found that it was not the seller of the affected
trades. By doing
so it is either dishonest, by attempting to
hide behind this fiction whilst it perpetually benefits from the
share ownership in
the affected trades and dividends arising
therefrom, in the name of finality, or if it had mistakenly included
the two trades in
its amended schedule to the plea it could simply
clarify that. If the inclusion was intentional, it could provide
evidence contrary
to the applicants’ alleged new evidence.
Respondent’s
submissions
[37]
The respondent
opposes this application on the basis that the issue whether good
title passed in respect of those shares was raised
and decided in the
arbitration and it cannot now be reopened. The point of
departure being that arbitration proceedings are
final and it is not
permitted for an unsuccessful party to go on a fishing expedition for
further evidence after the publication
of the award as, according to
the respondent, the applicants have done.
[38]
According
to the respondent, the theme of the applicants’ case at the
arbitration, through its sole factual witness Daniels,
was that the
identity of a seller of shares, and any mandate given by a seller to
its stockbroker, was irrelevant to the question
whether title in such
shares had passed to the purchaser. This, in the context of
shares traded on an electronic exchange,
with notional anonymity
between buyer and seller. It contends that the applicants
deliberately refrained from leading any
evidence relating to the
identity of the sellers in the trades in terms of which they alleged
themselves to have acquired a beneficial
interest in an aggregate of
807 681 of the respondent’s shares
.
In the absence of any such, the respondent submits that the
arbitrator was justified in making certain factual findings, and
drawing certain inferences.
[39]
The respondent
further contends that this alleged new evidence did not emerge
independently, but was actively solicited by Daniels.
The
applicants, however, have elected not to place any of the
correspondence in terms of which this evidence was solicited
before
the Court, either in the founding or replying papers.
[40]
The respondent
further submits that it was the successful respondent in the
arbitration and it was under no procedural duty to re-open
a case
against itself. Its unwillingness to do so can hardly be
construed as ‘
snatch[ing]
at a bargain
’
as the applicants have suggested.
[41]
According to the
respondent, the applicants have failed to discharge the burden of
satisfying the Court that it was not due to any
remissness on their
part that they failed to adduce the evidence in question before the
arbitrator. It was incumbent upon
them to do so, and their
failure means that the Court ought to deny them, as a matter of
discretion, the indulgence which they
seek. In this regard
reference is made to, amongst others, the decision of
Simpson
v Selfmed Medical Scheme and Another
.
[1]
[42]
A further point
raised by the respondent is that in terms of a principle raised in
Leadtrain
Assessments (Pty) Ltd and Others v Leadtrain (Pty) Ltd and Others
[2]
,
which
I come to later,
the
Court in the first instance has no jurisdictional basis for the
remittal because the applicants cannot be permitted to side-step
the
strict requirements for the setting aside of an award in s 33 (1) by
resorting to s 32 (2) of the Act. It submits that
the case for
remittal falls under s 33 (1) (c) of the Act on the grounds that ‘
(c)
an award has been improperly obtained
’.
Counsel for the respondent submit that under this heading the
applicants would have failed, because they would have
had to show
that the successful party had fraudulently concealed evidence which
would have been detrimental to its case.
The
supplementary affidavit
[43]
I
first deal with the supplementary affidavit by Ms Nyanda, which was
filed on 31 January 2018, and which the applicants seek to
introduce.
It is alleged that the purpose of this affidavit was to put a
letter from Autus, alleged to be the selling broker
in the second
affected transaction of 50 000 of the respondent’s shares
on 11 July 2011, before this Court. The
applicants seek
condonation for the late filing of this letter, which they say they
only obtained on 30 January 2018. It
is apparent therein, that
this letter was sent in response to a letter that they only sent on
the same day (i.e. 30 January 2018).
The applicants failed to
attach their own letter requesting the alleged information
.
I agree with the respondent’s counsel, Mr Kuschke SC, who
appeared with Mr Wagener, that the lateness in filing the
further
affidavit was self-created. Mr Van der Berg SC, who appeared
with Ms Drake, for the applicants, had to concede that
this letter
added nothing of material
importance
warranting its reception. He agreed that it merely repeated
what had already been stated by Autus and its content
did not take
matters further. The affidavit is therefore not allowed.
Late
filing of this application
[44]
Turning to the
condonation application for the late filing of the remittal
application. The six weeks within which to file the application
in
terms of s 32 (2) of the Act, expired on 10 March 2017. The
application was only lodged on 16 May 2017, nine weeks later.
[45]
The explanation
for the delay, given by Daniels, is that after the arbitration award
was handed down on 27 January 2017, by 4 February
2017, he had
noticed a discrepancy between the schedules of trades in the
respondent’s shares used by the respondent in the
arbitration
and the schedules of shares which it used in separate legal
proceedings in Zambia. The schedule used by the respondent
in the
arbitration included the two affected trades while the schedule used
in its Zambian litigation did not.
[46]
This triggered
further investigation which was complicated by,
inter
alia
, the
confidentiality restrictions applicable to trading on a stock
exchange, and geography. He first engaged with Mr Mutoni
regarding whether he had been the selling broker of the two affected
trades. Mr Mutoni confirmed on 17 February 2017 that
Stockbrokers Zambia had been the selling broker in respect of only
the first affected trade, on 23 June 2010. On 10 March
2017 Mr
Mutoni confirmed this message via teleconference. It proved
difficult to obtain a corroborating affidavit from Mr
Mutoni and
other role players based in Zambia. On 30 March 2017 Daniels
established that African Alliance had been the selling
broker in
respect of the second affected trade, on 11 July 2011. On that
day (30 March 2017) a call was arranged with Autus,
who confirmed
telephonically that Shoprite Checkers had not been the selling
principal in respect of the second affected trade.
He took
steps with his legal team to obtain written confirmation from Autus.
On 31 March 2017, the applicants’
Zambian attorneys
engaged with LuSE to confirm that Shoprite Checkers was not the
selling principal in respect of both trades and
LuSE confirmed as
much in a letter the same day.
[47]
After the new
evidence was obtained on 31 March 2017, steps were taken to obtain
further legal advice and inform the respondent
of the developments.
On 11 April 2017, the applicants’ attorneys wrote a
letter to the respondent’s attorneys
presenting them with
several proposals. After a number of follow ups, the respondent
responded on 2 May 2017, in which it
rejected any proposed course of
action. On 5 May 2017, Daniels met with the applicants’
attorneys and counsel and an
application was drafted a few days
later.
[48]
Mr Kabelo Mashigo,
of the applicants’ attorneys, deposed to a supporting affidavit
outlining that he had experienced difficulties
in reaching Mr Mutoni
telephonically from 27 February to date, and experienced the same
with getting hold of Ms Bbuku. On
8 May 2017 he informed the
arbitration appeal panel of the intention to institute the
application and requested the appeal to be
stayed. On 9 May
2017 he received a response from Judge Howie, for the panel, agreeing
to stay the appeal proceedings.
[49]
The respondent
queried, in its answering affidavit, that Daniels had failed to give
an explanation as to why he failed to act before
the expiry date of
10 March 2017. This went unanswered by the applicants in their
replying affidavit. Mr Mashigo in his supporting
affidavit to the
founding affidavit had stated that the documents supporting the
applicants’ explanation for the time period,
are largely
contained in privileged correspondence and as privilege had not been
waived, it limited the degree to which a full
explanation could be
provided. This assertion was challenged by the respondent in the
answering affidavit which required the applicants
to give a full
account for the delay. Neither Daniels nor Mashigo responded to this
in reply.
[50]
The applicants
submit good cause has been shown for the delay. It is trite
that an applicant for condonation must set out
fully the explanation
for the delay, which must cover the entire period of delay and must
be reasonable.
[3]
[51]
According to the
respondent, the applicants have failed to provide full explanation
and take the Court into its confidence in seeking
the indulgence.
I return to the issue of whether good cause has been shown in this
respect given that the explanation given
for the late filing of this
application is intertwined with the explanation given on the question
of whether good cause has been
shown for the purposes of s 32 (2) of
the Act.
It
is further trite that the prospects of success on the merits of the
case play an important role in considering whether good cause
has
been shown to condone non-compliance.
Has
a case for remittal been made out?
[52]
In
terms s 32 (2) ‘good cause’ must be shown by the
applicants for the matter to be remitted to arbitration. In
South
African Forestry Co Ltd v York Timbers Ltd
[4]
the Court observed that the requirement that remittal should only be
permitted “
when
there are compelling reasons put forward”
was not the test a court was enjoined to apply – “
an
award may be remitted where ‘good cause’ has been shown
for doing so and not only where the circumstances are ‘compelling’.
‘Good cause’ is a phrase of wide import that
requires a court to consider each case on its merits in order to
achieve a just and equitable result in the particular
circumstances
….
Undoubtedly
the principle of finality will weigh heavily with a court that is
charged with considering an application to remit (Benjamin
v SOBAC
South African Building and Construction (Pty) Ltd
1989 (4) SA 940
(C)
at 963I – 964D) but against that must be weighed other relevant
factors and in particular the relative prejudice that
will be caused
to the parties if the matter is or is not remitted
.”
[53]
The
point to be emphasised here is that good cause depends on the
circumstances of the case. In
Leadtrain
supra
at para 14, whilst the Court recognised that the import of the term
‘good cause’ was wide as stated in
York
Timbers
[5]
,
it observed that it must, nonetheless, be applied “
in
the context in which it is used
.
That
context in this case is the
Arbitration Act, which
is directed at the
finality of arbitration awards”.
[54]
Importantly, the
Court in
Leadtrain
went on to state the following:
“[15] It is not desirable to attempt to
circumscribe when ‘good cause’ for remitting a matter
will exist. It will exist pre-eminently where the
arbitrator
has failed to deal with an issue that was before him or her
–
which was what occurred in
York Timbers
–
but once an
issue has been pertinently addressed and decided there seems to us to
be little room for remitting the matter for reconsideration
.
The
guiding principle of consensual arbitration is finality
–
right or wrong – and we see no reason why an award of costs is
to be treated differently to any other aspect of an
award.
It
would be extraordinary if the conduct of an arbitrator that falls
short of the strict constraints of
s 33(1)
were nonetheless to be
capable of being set aside and remitted for reconsideration under
s
32(2)
. As pointed out in
Benjamin v Sobac South African
Building and Construction (Pty) Ltd,
correctly, the effect of so
holding would be to emasculate the provisions of
s 33(1).
However
one approaches the question what is ‘good cause’ it seems
to us that it inexorably requires something
other than to mere error
on the part of the arbitrator.” (Footnotes omitted) –
(Own emphasis)
[55]
A
few principles arise from this passage. The first one being
that ‘good cause’ is necessarily case based, it
cannot be
circumscribed. The Court does however give some guidelines as to what
could be considered to constitute ‘good cause’
and that
would be principally when the arbitrator fails to deal with an issue
before him or her; but when an issue has been pertinently
addressed
and decided there will be little room to remit for reconsideration.
Secondly, the guiding principle of finality built
into arbitrations
must be observed. The Court also expresses an anomaly that would
arise, if conduct that fell short on the strict
requirements of
s 33
(1) (that deals with the review and setting aside of the arbitrator’s
decision) would in the same breath be capable of being
set aside
under
s 32
(2). This is the jurisdictional point that the
respondent raises.
[56]
In
the instant case, the applicants seek to introduce new evidence
before the arbitrator, as the basis of the remittal. The
question that must be asked is what attitude or principles have the
courts adopted in relation to the admission of new evidence.
Whilst
good cause is an elastic term, the reasons underlying the request for
a remittal, in a particular case, are important.
In some cases
the issue requiring a remittal might be ancillary, or of such a
nature that it will not lead to the re-opening
of the issues that had
already been thrashed out in arbitration, as was the case in
York
Timbers
.
[6]
In that case I would agree with the applicants that the court is as
likely to grant a remittal. Having regard to the
principles
laid down by the courts, an order for remittal cannot just be for the
taking. Due to the guiding principle of
finality that parties
consent to when referring a matter to arbitration, the threshold for
remittal cannot be too low.
[57]
In
Colman
v Dunbar
[7]
the Court adopted certain guiding principles upon which such
applications may be granted, as follows:
“1.
It is essential that there should be finality to a trial, and
therefore if a
suitor elects to stand by the evidence which he
adduces,
he should not be allowed to adduce further evidence
except in exceptional circumstances
…
2.
The party who makes the application “must show that the fact
that he had
not brought it forward was not owing to any
remissness
on his part
…He must satisfy the Court that he could not
have got this evidence
if he had used reasonable diligence
.”…
3.
The evidence tendered must be weighty and material and presumably
to be believed, and must be such that if adduced it would be
practically
conclusive
, for if not, it would still leave the
issue in doubt and the matter would still lack finality. It is
not enough that the
fresh evidence merely corroborates evidence which
has been investigated and rejected. It must go further.
In the words
of VAUGHAN WILLIAMS, J. in
Warham v Selfridge &
Co.
(30 T.L.R. 344
,345), ‘in order to justify the granting
of a new trial on the ground that fresh evidence has been discovered,
this evidence
must be of such character as to justify one in saying
that the verdict could not in the interest of justice be relied on
because
it was based on mistake, surprise or fraud’….
4.
If the conditions have so changed that the fresh evidence will
prejudice the
opposite party, the Court will not grant the
application…” (Own emphasis)
[58]
Although
the guidelines in
Colman
were
developed in an application to lead evidence in court proceedings,
they also find application in an application seeking the
re-opening
of arbitration proceedings in order to lead new evidence.
[8]
[59]
The
Court in
Benjamin
added
the following:
“The guidelines referred to all assume
that the
further evidence is evidence
properly so-called and that it is admissible. If the evidence
tendered would be inadmissible
or the witness not competent or
compellable, the Court would consider the application no further.
It is in this regard that I earlier said that the rules for
Court proceedings might need to be adapted when applied to
arbitrations.
It is to be borne in mind that the ‘new
evidence’ here in issue is intended to be placed before the
arbitration
tribunal and not before a Court. It is therefore
necessary to have regard to the admissibility of the evidence before
the
arbitrator. In other words, in each case the evidence must
be tested for admissibility in the light of the rules which govern
the admissibility before the particular arbitration tribunal. If
that tribunal is not bound by the rules of evidence as applied
in
Court proceedings, then evidence which is inadmissible in a Court of
law cannot on that basis be rejected
.”
[9]
(Own emphasis)
[60]
In
that case the Court could not reject as hearsay evidence in newspaper
extracts annexed to the applicant’s supplementary
affidavit,
because the arbitrator was enjoined in the agreement between the
parties, known as the Mannheim agreement, to conduct
the arbitration
‘informally’.
[10]
Mindful of those guidelines, I now return to the facts of this
case.
Was
the fact that evidence was not led not due to the applicants’
remissness?
[61]
It
is incumbent upon the applicants to show that the fact that the new
evidence was not brought forward (at the arbitration) was
not due to
their remissness. In other words even if they had acted with
reasonable diligence they would not have gotten this new
evidence.
It is instructive that Daniels does not explain exactly at what
point before 4 February 2017 he noticed the discrepancies
between
schedules. He simply states that he, by 4 February 2017, had noted
discrepancies. The two affected trades were among those
in issue at
the arbitration. On their own version, the applicants allege that
these shares were initially not included in the schedule
to the plea,
but later placed in the amended plea. It is not explained how
that would not give rise to questions, requiring
scrutiny.
[62]
Secondly,
the Zambian proceedings were instituted before the action proceedings
in this Court, which were converted to arbitration
proceedings. It is
significant that the applicants do not deal with the issue raised in
the answering affidavit by the respondent
that this discrepancy could
have been picked up earlier; they simply put blame on the respondent
for supplying an incorrect schedule.
The applicants had made a formal
discovery of the schedule used in the Zambian proceedings as far back
as 3 July 2015. In that
regard, had Daniels acted with reasonable
diligence, he would have compared the schedules used in the different
proceedings and
noted the discrepancies before the commencement or
the conclusion of the arbitration.
[63]
Thirdly,
the applicants’ case at the arbitration was premised on the
fact that the identity of the seller, as well as any
given Mandate,
was irrelevant to the question whether the title had passed to them
as purchasers. This in the context that shares
were traded on an
electronic exchange with notional anonymity between buyer and seller.
The applicants failed to lead any evidence
with regard to the
identity of the seller. Their case was that they had acquired
beneficial ownership of the shares and were able
to prove that by
means of documentary evidence. Because the arbitrator made
factual findings, that Daniels knew that Shoprite
Checkers was the
biggest seller and in all probability the seller of the large parcels
of shares, the applicants wish to now lead
new evidence, essentially
to disprove the arbitrator’s findings, which would make the
identity of the seller relevant. I
agree with the respondent’s
counsel that this is essentially presentation of a new case. This
view is supported by Daniels’
assertions in the replying
affidavit where he states that the applicants are “
entitled
to present an alternative case in light of new evidence having come
to light and based on the Arbitrator’s reasoning
in the award”
.
The purpose of the
s 32
(2) remittal is not to afford a
dissatisfied litigant an opportunity to advance a new case. As was
stated in
Saamwerk
Soutwerke
[11]
,
to avoid tailoring of evidence and prejudice to the other party, the
power to remit should be exercised sparingly and only in
exceptional
circumstances.
[64]
Fourthly,
it is clear that it was the findings of the arbitrator or the
arbitration award that gave rise to the investigations by
Daniels.
It is therefore not correct to submit that the applicants were
not aware that the parties could provide this evidence
during the
arbitration proceedings. That evidence would not have been
their focus. They were minded to show that the
identity of the
seller and the attached Mandate was irrelevant. In other words,
whether Shoprite Checkers was the seller
was not an issue upon which
they based their case. Daniels went to look for evidence in
order to challenge some of the findings
of the arbitrator,
inter
alia
,
that he must have known that Shoprite Checkers was in all probability
the seller of all large parcels of shares.
[65]
Fifthly,
Daniels had existing relationships with the individuals or entities
that he requested information from. Had he acted
with
reasonable diligence, he
would
have requested verification from Mr Mutoni when he was called as an
expert witness at the arbitration proceedings.
[66]
Similarly,
enquiries could have been made from LuSE representatives a lot
earlier. Daniels had had interactions with them
as early as 4
March 2016. Had he acted reasonably he would have established
the position as to the identity of the seller(s)
in each of the
trades then. Furthermore, the queries raised in the answering
affidavit regarding lack of detail in the explanation
and
correspondence were not addressed in the replying affidavit.
[67]
I agree with the
respondent’s counsel, the enquiries were insufficient and
woefully out of time. This issue also becomes
relevant to the
determination of the condonation application.
[68]
Referring to the
Barclays Western Bank
Ltd v Gunas and Another
[12]
decision
,
Mr Van der Berg submitted that the issue of lack of reasonable
diligence is not decisive on the question of whether good cause
has
been shown. There, the Court held that “
the
modern view is that applicant’s failure to show that he
exercised due diligence is not decisive of the application”.
While that may be so, it must be borne in mind that in
Barclays
the application to lead further evidence was made after the parties
had closed their case but before judgment. The Court in
Barclays
noted the distinction between that scenario and an application to
lead evidence on appeal. Referring to authorities on this point
[13]
,
it recognised that “…
in
an application to lead fresh evidence on appeal, the onus is upon the
applicant to show that he has used proper diligence, reasonable
diligence in not presenting evidence at the trial that with due
diligence might have been available. That case can be distinguished
as it was an application to lead evidence on appeal. In Du Plessis v
Ackermann 1932 EDL 139 a distinction was drawn between the
stages at
which the application is made. That was an application to call
further evidence after both sides had closed their cases
and during
the course of argument.”
[14]
[69]
Also, the case of
Mkhwanazi v Van der
Merwe and Another
[15]
which the applicants also rely on, dealt with the discretion to
permit leading of further evidence in a situation where judgment
had
not yet been made. Holmes JA stated at 616 E-F that:
“ …decisions of this Court dealing with the
exceptional situation
of leading further evidence on appeal
after judgment (such as Colman v. Dunbar,
1933 A.D. 141
at pp.
160-161 are of scant assistance, if any at all, in the present case.
In those cases the element of the public interest in
the finality of
judgments is a most cogent factor weighing against the applicant, who
is therefore required to show
special circumstances
.
Aliter
in the present case.
(Own
emphasis)
[70]
Therefore, the
attitude of the courts in applications to re-open cases when judgment
had already been given has not been as accommodating
as the
applicants would seek to suggest. The element of finality requires of
an applicant to show special circumstances, which
would demand of it
to demonstrate that failure to present the evidence at the trial was
not due to the remissness on their part,
that they acted with
reasonable diligence, but even having done so, they would not have
been able to bring the new evidence forward
at that stage. I have
found that the applicants in this case fell short on this score.
Admissibility
of evidence
[71]
Moving to the
question of admissibility of evidence, which is a crucial
consideration referred to in
Benjamin
supra
[16]
,
which I have already quoted above. While I hear the applicants’
counsel that the new evidence is material and weighty and
could
indeed result in a different outcome in respect of the two affected
shares, the evidence is not accompanied by any confirmatory
affidavits. Besides that, there is no indication that if the matter
were to be remitted, the authors of the letters would be available
to
testify at the hearing. In fact, Daniels himself stated that he could
not get Mr Mutoni to confirm the content of the letter
on affidavit.
Secondly, he confirmed the difficulty of getting the
individuals involved to the hearing as witnesses by stating
that:
“
The evidence
and potential witnesses all being in Zambia and not subject to South
African law”
and that “[
t]he
LuSE is a regulatory agency in Zambia.
It
cannot be subpoenaed or otherwise
compelled to
cooperate and provide information
.”
The applicants also say that: “
As
Mr Mutoni, the LuSE and other roleplayers are based in Zambia, it is
no simple matter to obtain evidence from them and they
cannot
be compelled to participate
.”
[72]
It is therefore
not clear who would be called by the applicants to prove the
assertions made in the letters in relation to the two
affected
trades.
The
applicants’ potential witnesses, on their own version, are not
compellable.
[73]
Because of these
difficulties, Mr Van der Berg submitted the case should be determined
on the basis of the hearsay evidence they
have. He submits that
it must be left to the arbitrator to decide whether to admit this
evidence. According to him,
they were able to prove ownership
of the shares based on documentary evidence, which was not disputed
and was accepted by the arbitrator.
Similarly, he argues, the
applicants would be able to do the same in this instance too. He
submits that the respondent
has not denied the allegations in the
letters and has put no version in relation thereto. He contends
further, that it is
the respondent that could shed light on this
issue by admitting or denying that Shoprite Checkers was the seller
or by requesting
LuSE to give them (as they are the issuer)
information as to who the seller was.
[74]
The problem with
this proposition is that if the Court finds the evidence to be
inadmissible or the witness not competent or compellable,
it need not
consider the application any further.
[17]
There is no point in remitting the matter to the arbitrator when the
evidence intended to be placed there is inadmissible. The
parties in this case agreed in clause 4.3 of their arbitration
agreement that ordinary rules and laws of evidence shall apply to
the
arbitration. They also agreed in clause 4.1 that “
[i]n
relation to the Disputes, the Arbitrator shall to the fullest extent
possible have the same powers as if he were a Judge of
the of the
High Court including the power to make such directions as he deems
necessary for the just and expeditious conduct of
the proceedings
subject to the provisions of the Act and the Uniform Rules of
Court.”
[75]
It
is not helpful to suggest that the respondent should have obtained
the information itself. I agree with Mr Kuschke, the
respondent
has no procedural duty to re-open proceedings to prove a case against
itself. It was successful in the arbitration
and cannot be said
to be dishonest by being unwilling to do what the applicants suggest
it should do.
Is
the evidence weighty and material?
[76]
In
view of my findings above, I need not deal with the weight and
materiality of this new evidence in any great detail. It will
be
recalled that one of the guidelines referred to in
Colman
supra
was that evidence to be tendered must be weighty and material and
presumably to be believed, and must be such that it would
practically
be conclusive.
[77]
It
may be argued that the letter from Ms Mazyambe referred to earlier,
sought to be presented as new evidence, raises questions
which may
need to be verified by the witness. For instance she refers to
‘Shoprite’ as not being the seller of
the affected
trades, when it is common cause that Shoprite Checkers and not the
respondent was the beneficial owner of the treasury
shares. It is
alleged by the respondent that only LNA would have reflected as the
seller of treasury shares, being the registered
holder (nominee), not
the respondent or Shoprite Checkers. In the replying affidavit, the
applicants try to overcome this by referring
to a letter from Mr
Mutoni mentioning LNA as not being the seller, as well. Even so I am
not persuaded that the letters by themselves
remain conclusive
without the need for the witnesses to testify.
[78]
There
is also doubt as regards Mr Mutoni’s independence as a witness,
given Stockbrokers Zambia’s alleged role in the
events leading
to the dispute which was the subject matter of the arbitration
proceedings. The respondent pointed out that given
Stockbrokers
Zambia being cited as the defendant in the Zambian proceedings, Mr
Mutoni as a managing director may not give an unbiased
opinion, which
is all the more the reason why reliance could not be placed on Mr
Mutoni’s ‘say-so’. The applicants
do not counter
the allegations regarding Mr Mutoni’s lack of independence as a
witness.
[79]
In
light of all this it cannot be said that the evidence sought to be
introduced passes the test for weightiness.
Prejudice
[80]
Then
comes the question of prejudice. Prejudice is inherent in matters
where parties had agreed that the arbitration award would
be final
and binding, but that does not entail that a matter can never be
re-opened if circumstances call for that to happen. I
am alive to the
applicants’ submission regarding the amount of money that is at
stake should the matter not be remitted;
however, the element of
finality, viewed in the context of my findings in this case, is a
factor that must weigh against the applicants.
[81]
Furthermore,
the kind of prejudice to be suffered by the respondent is not that
which could be dealt by an appropriate cost order.
This matter
differs from a case like
York
Timbers
supra
where the issue to be remitted was narrow and ancillary and would not
require a rehashing of issues already thrashed out.
[82]
Mr
Van der Berg conceded that all the applicants have are the letters,
which constitute hearsay evidence and submitted that the
matter
should be resolved on that basis. As things stand, the respondent
would be deprived of an opportunity of testing this alleged
evidence.
Extension
of time period
[83]
Returning
to the condonation application the applicants fell short on showing
good cause, not only by virtue of inadequate explanation
but also due
to the failure of their case on the merits. The application to extend
the time period, therefore, cannot succeed.
Conclusion
[84]
In
view of my findings on the remittal in terms of s 32 (2), I do not
need to deal with the question of whether the applicants side-stepped
the strict requirements of s 33 (1) of the Act by resorting to s 32
(2), as well as the alleged
incoherent
nature of the relief sought.
[85]
For those reasons,
I make the following order:
1.
Condonation application
is refused.
2.
Application to file
applicants’ further affidavit is refused.
3.
The application is
dismissed with costs, including the costs of two counsel.
_____________________
N
P BOQWANA
Judge
of the High Court
.
APPEARANCES
For
the Applicants: Adv P Van der Berg SC with Adv H Drake
Instructed
by: Tim Sukazi Inc., Sandton, C/O Dunster Attorneys, Cape Town
For
the Respondent: Adv L S Kuschke SC with Adv S Wagener
Instructed
by: Werksmans Attorneys, Cape Town
[1]
1995 (3) SA 816
(A) at 824I-J
[2]
2013 (5) SA 84 (SCA)
[3]
Minister of Agriculture and Land Affairs v CJ Rance
(Pty) Ltd
[2010] 3 All SA 537
(SCA) at para
35
[4]
2003 (1) SA 331
(SCA) at para 14
[5]
South African Forestry Co Ltd v York
Timbers Ltd
supra at para 14
[6]
See
South African Forestry Co Ltd v York
Timbers Ltd
supra at para 15
[7]
1933 AD 141
at 161-162
[8]
Benjamin v Sobac South African Building and Construction (Pty)
Ltd
1989 (4) SA 940
(C) at 964D
[9]
Benjamin
supra at 964 G-I
[10]
Benjamin
supra at 964 J-965 A
[11]
Saamwerk Soutwerke (Pty) Ltd v Minister of Mineral Resources and
Another
(1098/2015, 206/2016)
[2017] ZASCA 56
(19 May 2017) at
para 33
[12]
1981 (3) 91 (D) at 95 C- D
[13]
Referring to
Deintje v Gratus & Gratus
1929 AD 1
[14]
Barclays
supra at 94 B-D
[15]
1970 (1) SA 609
(A) at 626 E-H
[16]
Benjamin
supra at 964 G-I
[17]
See
Benjamin
supra at 964 G