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[2021] ZAWCHC 46
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Josephson v Blacher (17504/2020 ; 18835/2020) [2021] ZAWCHC 46 (25 June 2021)
IN THE HIGH COURT OF
SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case
no: 17504/2020
In
the matter between:
DAVID
JOSEPHSON
Applicant
and
COLIN
STEWART BLACHER
Respondent
Case
no: 18835/2020
In
the matter between:
COLIN
STEWART BLACHER
Applicant
and
DEBORAH
WATSON
First
Respondent
DAVID
JOSEPHSON
Second
Respondent
JUDGMENT
Delivered by email to the
parties’ legal representatives
The judgment shall be
deemed to have been handed down on 25 June 2021
NEL AJ:
INTRODUCTION:
1.
Two applications are presently before me. The first application
is one in which the applicant seeks an order that the arbitration
award published on 4 November 2020 (“the award”)
be made
an order of Court (“the enforcement application”).
That application is opposed by the respondent.
2.
The second
application has been launched in terms of section 33(1) of the
Arbitration Act 42 of 1965 (“the Act”) in
which the
applicant seeks an order that the award of the first respondent be
set aside
[1]
(“the review
application”). The second respondent opposes the
application; the first respondent (hereinafter
referred to as the
arbitrator) filed a notice of intention to abide by the decision of
this Court.
3.
The issues raised in both applications are, for all intents
and
purposes identical, the founding papers in the review application
almost mirroring the answering papers in the enforcement
application.
4.
For ease of reference I shall refer to the applicant in the
enforcement application, who is the second respondent in the review
application as Josephson; and the respondent in the enforcement
application who is the applicant in the review application as
Blacher.
THE
FACTS:
5.
The relevant common cause facts can be summarized as follows:
5.1.
During the
period of 26 February 2015 to 1 July 2015, Josephson lent the
combined amount of R 2.5 million to Blacher.
[2]
5.2.
On 2 March
2015, Blacher signed the first acknowledgment of debt.
[3]
5.3.
During
October 2015, there was a transaction involving Mr Panico Protopapa
in terms whereof Josephson paid R750 000.00 to an
entity which
was controlled by Blacher at the time in order to acquire shares in a
separate property owning entity (“the
Panico debt”).
[4]
Blacher denied that he was personally liable for the Panico debt.
[5]
5.4.
On 15
October 2015 Blacher signed the second acknowledgment of debt.
[6]
5.5.
In 2016,
Blacher made certain repayments to Josephson however in 2017, he
failed to make any repayments.
[7]
5.6.
By 29
October 2018, Blacher had repaid the total amount of R2 121 500.00
to Josephson.
[8]
5.7.
In late
2018, Blacher asked for a discount on the amount of money which was
owing, and Josephson suggested a discount of R1.4 million
provided
that payment was made by a certain date. Blacher did not
respond to the proposals which Josephson made.
[9]
5.8.
On 2 April
2019, Blacher asked Josephson once again for a discount on the amount
of money which was owed by him. Josephson
responded but that
proposal was not accepted by Blacher.
[10]
5.9.
On 26 June
2019, Josephson’s attorneys delivered a letter of demand to
Blacher in terms of which he demanded repayment of
the amount of
R3 861 500.00 in terms of the second AOD and repayment of
the amount of R750 000.00 in respect of the Panico
debt.
[11]
5.10.
On 1 July
2019, Blacher’s attorneys replied to the letter of demand and
disputed liability in respect of the Panico debt and
stated,
inter
alia
,
that the second AOD was one to which the NCA applied and in respect
of which Josephson was not a registered credit provider.
[12]
This latter aspect was conceded by Josephson.
5.11.
On 16 July
2019, Blacher’s attorney addressed certain correspondence to
Josephson’s attorneys in which he offered to
repay the sum of
R2.5 million on or before 31 December 2019, and stated that the
offer was subject to Josephson acknowledging
that Blacher was not
liable for the Panico debt.
[13]
5.12.
On 16 July
2019, Josephson responded to Blacher’s WhatsApp correspondence
and stated that he would agree to release him from
any liability in
respect of the Panico debt if Blacher signed a new acknowledgement of
debt in the amount of R2.5 million.
[14]
5.13.
On 23 July
2019, Blacher informed Josephson by way of WhatsApp message that the
correspondence from his attorneys dated 16 July 2019
and
the first and second AOD were sufficient to protect Josephson.
Josephson responded and stated that he wanted a new agreement
which
was “
clean”
and asked Blacher to sign a new AOD.
[15]
5.14.
In August
2019, Josephson instructed his attorneys to draft an acknowledgement
of debt incorporating the terms of repayment which
had been proposed
by Blacher.
[16]
5.15.
On 28
August 2019, Blacher signed the third acknowledgement of debt after
amending the draft thereof which had been sent to him
by
Josephson.
[17]
5.16.
Clause 13 of the third AOD provides as follows:
13.
Any dispute between the parties arising from or in connection with
this Agreement, shall be submitted to arbitration
in accordance with
the Expedited Rules of the Arbitration Foundation of Southern Africa
(“AFSA”).
13.1
The parties hereby consent to the arbitration being
dealt with on an
urgent basis.
13.2
The arbitration is to be held in Cape Town.
13.3
The arbitrator shall be a practising advocate of the
Cape Bar of at
least 10 (ten) years’ standing, appointed by agreement between
the parties to the dispute and failing such
agreement being reached
within 7 (seven) days, appointed by the Cape Town Branch of AFSA.
13.4
The decision of the arbitrator shall be final and binding
on the
parties to the dispute and may be made an order of the court at the
instance of any of the parties to the dispute.
5.17.
Blacher
failed to make payment in terms of the third AOD which required
payment of R2 500 000.00 in full or in part by 30 September
2019.
[18]
5.18.
On 8
November 2019, Blacher paid Josephson an amount of R965 000.00.
[19]
5.19.
On 20
January 2020, Josephson declared a dispute and referred same to
arbitration in accordance with the third AOD.
[20]
5.20.
On 21
January 2020, Blacher instituted an action in this court under case
number 1205/2020 in which he sought an order declaring
the three
AOD’s to be void and further declaring them to constitute
reckless credit agreements in accordance with the
National Credit Act
34 of 2005
.
[21]
5.21.
It appears
that AFSA proposed three potential arbitrators and Josephson’s
attorneys then ranked the three in the following
order of preference:
(1) Adv N Traverso; (2) Adv D Watson; and (3) Adv J Van Niekerk.
[22]
Blacher’s attorneys responded stating that they had no
objection to Adv D Watson being appointed as arbitrator
and she was
thereafter duly appointed by AFSA.
[23]
5.22.
The
arbitration commenced and ran for two days by way of a virtual
hearing making use of Zoom.
[24]
5.23.
Both
parties were represented by counsel: Mr. Van Reenen representing
Josephson and Mr. De Oliveira representing Blacher.
[25]
5.24.
On 17 July
2020, Mr. De Oliveira received a call from Mr. Van Reenen during
which call certain events relating to the arbitrator,
and the fact
that she was unwell, were communicated to Mr. De Oliveira. It
was accordingly agreed between the parties that
final argument in the
arbitration would be postponed.
[26]
5.25.
On 17 July
2020, Mr. Van Reenen sent an email to the arbitrator informing her
that the parties had agreed to postpone argument of
the matter.
[27]
5.26.
On 20 July
2020, Mr. Van Reenen received an email from a senior colleague, Mr.
Kuschke SC, in which he stated that the arbitrator
was indisposed due
to illness and requested Mr. Van Reenen to inform the parties that
she was unable to hear argument on 21 July
2020. Mr. Van
Reenen then forwarded that email to Mr. De Oliveira.
[28]
5.27.
On 23 July
2020, the arbitrator sent the parties’ legal representatives an
email in which she thanked them for accommodating
her and requested
new dates for the hearing of argument.
[29]
5.28.
On 29 July
2020, Blacher’s attorneys sent Josephson’s attorneys an
email in which they confirmed the postponement of
the arbitration
proceedings and indicated that the matter could proceed when, if at
all, the arbitrator would be in a position
to hear the matter.
[30]
5.29.
On 31
August 2020, the parties appeared before the arbitrator and argued in
the arbitration.
[31]
5.30.
On 8
October 2020, Josephson’s attorney enquired from AFSA when the
parties could expect the arbitration award. On 9
October 2020,
the arbitrator responded and advised that she remained booked off for
medical reasons.
[32]
5.31.
On 4
November 2020, the arbitrator published the award,
[33]
which directed Blacher to make payment to Josephson in the sum of R
1 535 000.00 together with interest
a
tempore morae
and costs of suit on the attorney and client scale.
[34]
5.32.
On 6
November 2020, Josephson’s attorney sent an email to Blacher’s
attorney in which she asked when payment would be
made by Blacher in
accordance with the arbitration award.
[35]
5.33.
On 16
November 2020, Josephson’s attorneys caused a chamber book
application to be served on Blacher’s attorneys in
terms of
which it was sought that the award be made an order of court.
[36]
5.34.
On 17
November 2020, Blacher’s attorneys sent Josephson’s
attorneys an email, attaching a notice of opposition to the
chamber
book application, and stating that Blacher had instructed them to
bring a review application which they were in the process
of
preparing.
[37]
5.35.
On 18
November 2020, Josephson’s attorneys sent Blacher’s
attorneys an email attaching correspondence in which they
stated that
the chamber book application would be withdrawn subject to receipt of
the review application by 20 November 2020.
[38]
5.36.
In response, and on 20 November 2020, Blacher’s attorneys in an
email addressed
to Josephson’s attorneys stated that they
intended on bringing the review application in the first week of
December 2020.
5.37.
On 23
November 2020, Josephson’s attorney withdrew the chamber book
application from the roll.
[39]
5.38.
On 24
November 2020, Josephson launched an application to have the
arbitration award made an order of court.
[40]
5.39.
On 14
December 2020, Blacher’s attorney launched the review
application.
[41]
5.40.
On 18 February 2021, Gamble J granted an order in terms whereof the
two applications
would be heard together on the fourth division roll
on 17 June 2021, which is when the matter came before me.
6.
From the papers, the grounds upon which Blacher sought to set
aside
the award could be summarized as follows:
6.1.
The arbitrator knew Josephson’s counsel and attorney “
outside
the arbitration
” and that, together with the conduct of the
arbitration, creates a reasonable apprehension of bias.
6.2.
The
arbitrator was unwell and failed to disclose certain events relating
to her illness to Mr. Oliveira, which she had disclosed
to Mr. Van
Reenen.
[42]
6.3.
The arbitration award perpetuates an unlawful credit agreement,
and
gives effect to it, which is against public policy.
6.4.
The arbitrator paid-lip service to Blacher’s application in
terms of section 20 of the Act.
6.5.
The arbitrator failed to consider Blacher’s main defence in
the
arbitration.
6.6.
The arbitrator summarised the evidence of Blacher incorrectly.
7.
I was informed by Mr. Tsele who appeared on behalf of Blacher,
when
the matter was argued before me, that Blacher was no longer relying
on the last two grounds for review. The matter accordingly
falls to be decided upon the first four grounds only.
THE
LEGAL PRINCIPLES:
8.
As a rule, if the complaint is against the result of the proceedings,
the appropriate remedy is by way of appeal; if the method of the
proceedings is attacked, the remedy is to bring the matter in
review.
9.
The grounds for review of arbitration proceedings are set out
in
section 33 of the Act. The procedure for bringing a matter on
review is regulated by Rule 53 of the Uniform Rules of Court.
10.
Section 33 of the Act accordingly provides as follows:
(1)
Where—
(a)
any member of an arbitration tribunal has misconducted himself in
relation to his duties as arbitrator or
umpire; or
(b)
an arbitration tribunal has committed any gross irregularity in the
conduct of the arbitration proceedings
or has exceeded its powers; or
(c)
an award has been improperly obtained,
the court may, on the
application of any party to the reference after due notice to the
other party or parties, make an order setting
the award aside.
11.
The relevant portions of Rule 53 are as follows:
(1)
Save
where any law otherwise provides, all proceedings to bring under
review the decision or proceedings of any inferior court and
of any
tribunal, board or officer performing judicial, quasi-judicial or
administrative functions shall be by way of notice of
motion directed
and delivered by the party seeking to review such decision or
proceedings to the magistrate, presiding officer
or chairperson of
the court, tribunal or board or to the officer, as the case may be,
and to all other parties affected –
(a)
Calling upon such persons to show cause why such decision or
proceedings should not be reviewed and corrected or set aside; and
(b)
Calling upon the magistrate, presiding officer, chairperson or
officer, as the case may be, to despatch, within fifteen days after
receipt of the notice of motion, to the registrar the record of such
proceedings sought to be corrected or set aside, together
with such
reasons as he or she is by law required or desires to give or make,
and to notify the applicant that he or she has done
so.
(2)
The
notice of motion shall set out the decision or proceedings sought to
be reviewed and shall be supported by affidavit setting
out the
grounds and the facts and circumstances upon which applicant relies
to have the decision or proceedings set aside or corrected.
(3)
The
registrar shall make available to the applicant the record despatched
to him or her as aforesaid upon such terms as the registrar
thinks
appropriate to ensure its safety, and the applicant shall thereupon
cause copies of such portions of the record as may be
necessary for
the purposes of the review to be made and shall furnish the registrar
with two copies and each of the other parties
with one copy thereof,
in each case certified by the applicant as true copies. The
costs of transcription, if any, shall
be borne by the applicant and
shall be costs in the cause.
(4)
The
applicant may within ten days after the registrar has made the record
available to him or her, by delivery of a notice and accompanying
affidavit, amend, add to or vary the terms of his or her notice of
motion and supplement the supporting affidavit.
12.
At the
hearing of the matter I informed Mr. Tsele that the court had not
been furnished with the record of the arbitration proceedings.
Mr. Tsele submitted that the record was not necessary, and that
Blacher intended relying solely on the papers filed of record and
wished to proceed to argue the review application without a record.
Whilst this was not a desirable situation,
[43]
it is trite the provisions of Rule 53 exist principally in the
interests of an applicant, and the right to require the record of
the
proceedings is primarily intended to operate in favour of and to the
benefit of an applicant.
[44]
It is further trite that an applicant can waive procedural
rights.
[45]
Moreover,
Mr. Van Reenen, who appeared on behalf of Josephson, had no
difficulty with the application proceeding without
regard to the
record. I accordingly continued to deal with the matter and, in
the absence of a record, any material dispute
of fact in respect of
the arbitration proceedings, and the review application as a whole,
falls to be determined by application
of the
Plascon-Evans
principle.
[46]
13.
Before turning to the facts of the present matter it is necessary to
set out
a few further legal principles applicable to review
applications.
14.
In
Telcordia
Technologies Inc v Telkom SA Ltd
[2006] ZASCA 112
;
2007 (3) SA 266
(SCA) Harms JA at para [4] stressed the need, when
courts have to consider the confirmation or setting aside of arbitral
awards,
for adherence to the principles of party autonomy, which
requires a high degree of deference to arbitral decisions and
minimises
the scope for intervention by the courts.
15.
Moreover, in
Lufuno
Mphaphuli & Associates (Pty) Ltd v Andrews and Another
2009 (4) SA 529
(CC) the O’Regan ADCJ at para [235] held as
follows:
…
it
seems to me that the values of our Constitution will not necessarily
best be served by interpreting section 33(1)
[of
the Act]
in
a manner that enhances the power of courts to set aside private
arbitration awards. Indeed, the contrary seems to be the case.
The
international and comparative law considered in this judgment
suggests that courts should be careful not to undermine the
achievement of the goals of private arbitration by enlarging their
powers of scrutiny imprudently. Section 33(1) provides three
grounds
for setting aside an arbitration award: misconduct by an arbitrator;
gross irregularity in the conduct of the proceedings;
and the fact
that an award has been improperly obtained. In my view, and in the
light of the reasoning in the previous paragraphs,
the Constitution
would require a court to construe these grounds reasonably strictly
in relation to private arbitration.
16.
O’Regan ADCJ went on at para [236] to state that:
Courts
should be respectful of the intentions of the parties in relation to
procedure. In so doing, they should bear in mind the
purposes of
private arbitration which include the fast and cost-effective
resolution of disputes. If courts are too quick to find
fault with
the manner in which an arbitration has been conducted, and too
willing to conclude that the faulty procedure is unfair
or
constitutes a gross irregularity within the meaning of section 33(1),
the goals of private arbitration may well be defeated.
17.
In
Total
Support Management (Pty) Ltd and Another v Diversified Health Systems
(South Africa) (Pty) Ltd and Another
(457/2000)
[2002] ZASCA 14
(25 March
2002) at the Supreme Court of Appeal at para [21] held that:
…
The
appellants can challenge the second respondent's award only by
invoking the statutory review provisions of sec 33(1)(a) and
(b) of
the Act. Proof that the second respondent misconducted himself in
relation to his duties or committed a gross irregularity
in the
conduct of the arbitration is a prerequisite for setting aside the
award. The onus rests upon the appellants in this regard.
As appears
from the authorities to which I have referred, the basis on which an
award will be set aside on the grounds of misconduct
is a very narrow
one. A gross or manifest mistake is not
per
se
misconduct.
At best it provides evidence of misconduct (
Dickenson
& Brown v Fisher's Executors
,
supra
,
at 176) which, taken alone or in conjunction with other
considerations, will ultimately have to be sufficiently compelling to
justify an inference (as the most likely inference) of what has
variously been described as "wrongful and improper conduct"
(
Dickenson
& Brown v Fisher's Executors
,
supra
,
at 176), "dishonesty" and "
mala
fides
or
partiality" (
Donner
v Ehrlich
,
supra
,
at 160 - 1) and "moral turpitude" (
Kolber
and Another v Sourcecom Solutions (Pty) Ltd and Others
,
supra
,
at 1108 A).
18.
I turn now to deal with the facts of the present matter.
First
ground of review: That the arbitrator knew Josephson’s counsel
and attorney socially:
19.
Blacher
alleges in his founding affidavit that at the commencement of the
arbitration and during other times, the arbitrator referred
to Ms.
Samantha Frost, an associate in the employ of Josephson’s
attorneys, by her first name, and appeared to know Mr. Van
Reenen
outside of the arbitration.
[47]
Blacher concedes that on its own, a right-minded and reasonable
person could not reasonably apprehend partiality and bias
on this
basis alone.
[48]
However, it was contended on behalf of Blacher that this, viewed
together with the fact that the arbitrator had called Mr.
Van Reenen
in the early hours of the morning on 17 July 2020 to request him to
take over a brief which she was unable to attend
to, and that Mr. Van
Reenen had indeed attended at her chambers, at which point the
arbitrator had informed Mr. Van Reenen of some
peculiar facts,
[49]
gave rise to a reasonable apprehension of bias.
[50]
These facts are however clarified by Josephson in his answering
affidavit. At a pre-trial hearing before the
arbitrator, it was
evident that the arbitrator had mistaken Ms. Frost for another
attorney with the same name and that she was
indeed not familiar with
Ms. Frost who was in the employ of Josephson’s attorneys.
[51]
It is moreover evident from the answering affidavit that Mr. Van
Reenen had received a call from the arbitrator on 16 July
2020
wherein she requested him to take over a brief for a recusal
application. Mr. Van Reenen was requested to meet the
arbitrator at the chambers of the Chairman of the Cape Bar Council
where the arbitrator was present. At this meeting it became
apparent that the arbitrator was not well. Mr. Van Reenen then
went to the arbitrator’s chambers and discussed the
recusal
matter further with the arbitrator, her instructing attorney and the
clients. Mr. Van Reenen took over the matter
and the parties
were able to take an order by agreement.
[52]
What is not in dispute between the parties is that at no stage did
Mr. Van Reenen discuss the pending arbitration with the
arbitrator,
or the argument in respect thereof, which was scheduled to be heard
on 21 July 2020.
[53]
20.
The
interaction between Mr. Van Reenen and the arbitrator was immediately
disclosed by Mr. Van Reenen to Mr. De Oliveira, and the
parties, in
light thereof, agreed to postpone the argument set to take place on
21 July 2020.
[54]
The
further events have already been set out above. Josephson
continues to state that Mr. Van Reenen has no relationship
with the
arbitrator other than that of colleagues and, other than assisting
the arbitrator on 16 July 2020 with the aforementioned
recusal
application, Mr. Van Reenen has not previously worked with her and
has also not had the arbitrator as an opponent.
21.
Mr. Tsele takes issue with the fact that the evidence given by
Josephson in
his answering affidavit amounts to hearsay evidence.
However, it is evident that the hearsay evidence adduced was in order
to address the hearsay evidence contained in Blacher’s founding
affidavit. Both parties adduced hearsay evidence
because
the evidence relied upon by Blacher was in respect of correspondence
which took place between Mr. De Oliveira and Mr. Van
Reenen.
22.
In the matter of
President of the Republic
of South Africa and others v South African Rugby Football Union and
Others
[1999] ZACC 9
;
1999 (4) SA 147
(CC) the
Constitutional Court considered the test applicable to determine
whether a judicial officer is disqualified from hearing
a case by
reason of a reasonable apprehension of bias. The court held
that at para [48]:
It
follows from the foregoing that the correct approach to this
application for the recusal of members of this court is objective
and
the onus of establishing it rests upon the applicant. The
question is whether a reasonable, objective and informed
person would
on the correct facts reasonably apprehend that the judge has not or
will not bring an impartial mind to bear on the
adjudication of the
case, that is a mind open to persuasion by the evidence and the
submissions of counsel.
23.
Mr. Tsele
attempted to distinguish this from the present matter on the basis
that the aforementioned case dealt with the recusal
of judges who
take an oath to administer justice without fear or favour. The
principles are however also applicable to matters
such as the present
where an arbitrator acts in a
quasi
-judicial
capacity. See in this regard the matter of
Lufuno
Mphaphuli & Associates (Pty) Ltd v Andrews and Another
(supra)
where Kroon AJ used the same test to determine whether there was a
reasonable apprehension of bias on the part of an arbitrator.
24.
The
threshold for a finding of real or perceived bias is high and the
onus
of proving such lay on the applicant.
[55]
25.
Applying those principles to the facts of this case, the applicant
has failed
to establish a reasonable apprehension of bias. The
arbitrator at no point in time met alone with Mr. Van Reenen (not
that
this in and of itself would constitute a reasonable apprehension
of bias), nor was any aspect of the arbitration discussed between
them on 16 July 2020. Both Mr. Van Reenen and the arbitrator
are members of the Cape Bar. The fact that they had conversed
on 16 July 2020 does not, even in light of the peculiar facts
disclosed by the arbitrator to Mr. Van Reenen in the presence of
the
Chairperson of the Cape Bar Council, create a reasonable apprehension
of bias. Furthermore, the allegation of an apprehension
of bias was
raised for the first time after the award had been published. I
am in agreement with the submissions of Mr. Van
Reenen that if
Blacher had truly perceived any bias on the part of the arbitrator
these concerns would have been raised prior thereto.
Second
ground of review: The arbitrator’s illness and her failure to
disclose same to Blacher:
26.
As with the first ground of review, this ground was also raised for
the first
time after the award had been published.
27.
Furthermore, Mr. De Oliveira was informed of the arbitrator’s
illness
and the difficulties with hearing the argument by Mr. Van
Reenen as soon as he became aware of it. He had immediately
disclosed
the contact which he had had with the arbitrator and the
fact that she appeared unwell. There is nothing sinister in the
arbitrator’s failure to inform Mr. De Oliveira of her illness
on the day that Mr. Van Reenen had discovered it, and her failure
to
do so certainly does not constitute misconduct in terms of section
33(1) of the Act.
28.
Moreover, the arbitrator did not contact Mr. Van Reenen to inform him
that she
was ill. She contacted Mr. Van Reenen in order to pass
on a brief. The probabilities are that the arbitrator herself
at that point in time, given the nature of her illness and the facts
of this matter, was unaware that she was ill. She could
therefore not have been expected to convey an illness, of which she
was likely not aware, to Mr. De Oliveira.
29.
In addition, on 20 July 2020, Mr. Van Reenen received an email from a
senior
colleague, Mr. Kuschke SC, which read as follows:
I understand that you
are in arbitration before Deborah Watson in which argument is set
down for tomorrow.
Unfortunately, Deborah
is indisposed through illness and has asked me to let you know that
she will be unable to do the hearing
tomorrow.
She will be in touch
with the parties to rearrange the date in the near future.
I do not know who is
involved on the opposition side. Can I ask you to please pass
this message on to them?
30.
Mr. Van Reenen on the same date forwarded this email to Mr. De
Oliveira.
There can accordingly be no doubt that Blacher and
his legal representatives were kept abreast in respect of the
arbitrators wellbeing.
There is accordingly no merit in the
contention that the arbitrator chose to disclose information to Mr.
Van Reenen which was not
disclosed to Mr. De Oliviera.
31.
Insofar as
Blacher suggests that the arbitrator was unwell during the course of
the proceedings or during argument of the matter,
this is again only
raised after the award had been published, and there is nothing on
the papers to prove such a suggestion.
Blacher does not allege
that the arbitrator showed any signs of illness during the hearing or
during argument. Josephson
on the other hand alleges that it
was apparent that she was fit to arbitrate.
[56]
32.
Blacher has accordingly not discharged the
onus
upon him in
this regard.
Third
ground of review: arbitration award perpetuates an unlawful credit
agreement:
33.
As set out
above, it is common cause between the parties that the first two
AOD’s constitute credit agreements as defined
in the
National
Credit Act. It
is moreover common cause that Josephson was not
a registered credit provider at the time, and that no credit
assessment had been
conducted by him on Blacher before the monies
were advanced. Blacher accordingly contended that the first two
AOD’s
constituted unlawful credit agreements and are void.
[57]
On 16 July 2019, after taking issue with the legality of the first
two AOD’s, Blacher’s attorneys addressed correspondence
to Josephson’s attorneys wherein he offered to repay the sum of
R 2.5 million on or before 31 December 2019, which offer
was subject
to Josephson releasing him from any liability in respect of the
Panico debt.
[58]
In the
arbitration, Blacher resisted the admission of this letter into
evidence; however, the arbitrator found it to be admissible.
[59]
Blacher’s evidence at the hearing was that he intended to pay a
total sum of R 2.5 million to Josephson (including
monies he had
already paid) and not that he would pay a further R 2.5 million in
addition to that already paid.
[60]
This was denied by Josephson who stated that what was meant was that
R 2.5 million would be paid in addition to whatever
repayments had
already been made.
[61]
On 28
August 2019 the parties signed the third AOD in which Blacher
acknowledged being indebted to Josephson in the sum of R 2.5
million.
[62]
Josephson
contends that had Blacher’s version been true, he would not
have agreed to sign the third AOD which clearly
reflected the sum of
R 2.5 million as his indebtedness to Josephson.
[63]
34.
After
hearing all of the evidence, the arbitrator rejected the version of
Blacher,
[64]
and accepted the
version of Josephson that the third AOD was a compromise of the loan
amounts and the Panico debt.
[65]
35.
What was
further argued before the arbitrator was the lawfulness of the third
AOD with Blacher contending that it was unlawful as
it perpetuates
the original invalidity of the first and second AOD’s.
[66]
The arbitrator was specifically referred to the matter of
Shabangu
v Land and Agricultural Development Bank of South Africa and Others
2020 (1) SA 305
(CC). In that matter, an agreement was entered
into between parties which was invalid for lack of statutory
compliance.
The parties to the loan then entered into an
acknowledgment of debt. The Land Bank argued that the AOD
constituted a compromise
and was not tainted by the invalidity of the
loan agreement. The Constitutional Court considered the terms
of the AOD, and
held that the acknowledgment of debt was invalid
because it related to the same indebtedness flowing from the invalid
agreement.
It was a resuscitation of the invalid agreement
which did not change the essential claim of the Land Bank or the
obligations of
Westside as debtor. In this regard it is trite
that the validity of a subsequent agreement entered into between the
same
parties following upon an earlier invalid agreement depends on
whether it amounts to a novation (in which case it remains tainted)
or a compromise (in which case it is not tainted).
[67]
36.
Blacher also relied upon the decision in
Weltmans Customs Office
Furniture (Pty) Ltd (in liquidation) v Whistlers CC
1999 (3) SA
116
(SCA) to which the arbitrator was also referred. In that
matter, the sale of the business was invalid for statutory
non-compliance
and a subsequent agreement was entered into in terms
of which the purchase price in respect of the sale of the business
was reduced
and paid off over a number of months. The Supreme
Court of Appeal considered the agreement and held that it was
sufficiently
closely connected to the invalid agreement, that it was
void by virtue of the same statute.
37.
Mr. Van
Reenen argued that
Shabangu
and
Weltmans
were distinguishable from the facts of the present matter in that
when viewed in light of the correspondence from Blacher’s
attorneys on 16 July 2019, the third AOD, which Blacher himself made
amendments to, was clearly a compromise between the parties
in that
it also involved the Panico debt. That the third AOD
constituted a compromise is denied by Blacher.
[68]
This matter was however fully ventilated and argued before the
arbitrator.
38.
The arbitrator at paras [53] to [55] of her award found as follows:
[53]
Despite documentary evidence to the contrary, the Defendant persisted
with the argument that
the third AOD was not a compromise.
[54]
As a settlement agreement, the third AOD must be considered on its
own merits. The time
the agreement is entered into is when the
applicability of the NCA should be assessed. The third AOD
contains no provisions
for the payment of interest, no discount and
no fee or charges in respect of the deferred payment. The
Defendant’s
reliance on the case of Carter Trading with respect
to the attorney client costs clause making the NCA applicable is
somewhat contrived
as this would render most commercial agreements as
credit agreements which is obviously not the case.
[55]
Given the above, it is inescapable that the third AOD was intended by
the parties to be a compromise
/ settlement of the loan as well as
the Panico transaction, and the provisions of the NCA do not apply.
39.
Without the
benefit of the record, which Blacher has elected not to place before
the court,
[69]
I can find no
difficulties with the reasoning of the arbitrator and her finding
that the third AOD constituted a compromise between
the parties.
Moreover, one has to bear in mind that the present matter is a
review application, and not an appeal, and accordingly
does not
constitute a rehearing of the merits of the matter.
[70]
It may be for this reason that Mr. Tsele placed less weight on these
contentions as a ground for review, and more weight
on them in his
argument in respect of the enforcement application, and it is as a
result of the latter application that I have
considered these
contentions in more detail than would have been the case if only the
review application was before me. Nevertheless,
as stated
above, I can find no fault with the reasoning or finding of the
arbitrator who had the benefit of hearing oral evidence
on behalf of
both parties.
[71]
It is
evident from her award that she paid due weight to the versions of
both parties, the relevant documentary evidence
presented, and the
legal arguments on behalf of the parties, including the relevant case
law.
[72]
40.
On the papers before me there is accordingly no basis to find that
the third
AOD did not constitute a compromise between the parties and
that its enforcement would therefore perpetuate an unlawful credit
agreement and be contrary to public policy.
41.
Moreover, given the provisions of the third AOD there can be no doubt
that the
arbitrator correctly found that the
National Credit Act is
not applicable to it.
42.
There is accordingly no merit in this ground for review, nor is there
any merit
in this ground of opposition to the enforcement
application.
Fourth
ground of review: arbitrator paid lip-service to Blacher’s
application in terms of section 20 of the Act
43.
Blacher alleges that the arbitrator failed to refer a question of
law, being
whether she had the power to stay the arbitration
proceedings pending the outcome of the High Court proceedings under
case number
1205/2020, for determination in terms of section 20 of
the Act. He alleges that the arbitrator paid lip-service to his
application
in terms of that section.
44.
Section 20(1) of the Act provides as follows:
An
arbitration tribunal may, on the application of any party to the
reference and shall, if the court, on the application of any
such
party, so directs, or if the parties to the reference so agree, at
any stage before making a final award state any question
of law
arising in the course of the reference in the form of a special case
for the opinion of the court or for the opinion of
counsel.
45.
It is evident that, upon an application of any party, the arbitrator
has a discretion
as to whether or not, any question of law should be
referred to a court. It is only where a court has ordered such
referral,
or the parties have agreed thereto, that the arbitrator has
no discretion.
46.
The arbitrator exercised her discretion against a referral of the
question of
law to a court. She essentially found that Blacher
was attempting to forum shop, despite the provisions of clause 13 of
the
third AOD in terms whereof the parties had expressly agreed that
any dispute arising out of the AOD would be referred to arbitration.
47.
The arbitrator at paras 25 to 30 of her award found as follows:
[25]
The Defendant then launched a late application
[73]
for a referral to the High Court of a question of law, namely,
whether the arbitrator is possessed of the power to stay the present
arbitration proceedings pending the outcome of the High Court
proceedings [under case number 1205/2020].
[26]
Mr. Van Reenen, for the Claimant, contended that the true purpose of
the application was to delay
the proceedings, and that moreover, the
question of law sought to be referred to the Court is settled.
[27]
The effect of the proposed stay of proceedings is that the
arbitration would be suspended, and
the disputes would eventually be
determined by the High Court thereby rendering the arbitration
proceedings redundant.
[28]
It appears that the purpose intended by the Defendant in preferring
the matter to be dealt with
by the High Court is due to what his
counsel terms “the massive and inordinate prejudice that may
result if the proceedings
are not stayed”, given that in terms
of the parties’ arbitration agreement, there is no right of
appeal in these proceedings.
[29]
It is evident from
section 3(1)
of the
Arbitration Act that
an
arbitration agreement may only be terminated with the consent of all
the parties, or by a court. An arbitrator does not
have this
power. The arbitrator is appointed by agreement between the
parties and is obliged to act in terms of that agreement
and in
accordance with the
Arbitration Act.
>
[30]
The arbitration agreement contained in the third AOD was signed by
both parties and dated 28
August 2019, which means it preceded the
institution of the High Court action. While the Defendant may
prefer at this stage
to hedge his bets on the High Court with the
concomitant right of appeal, there is no legal justification
therefor.
48.
It is evident from these paragraphs of the award that the arbitrator
did not
simply pay lip-service to the application, as alleged by
Blacher, but gave it due consideration and ultimately exercised her
discretion
against referring any question of law to a court.
49.
In this regard the comments of Harms JA in respect of section 20 of
the Act
in the matter of
Telcordia Technologies Inc v Telkom SA
Ltd (supra)
at para [154] are on point:
Its purpose, at the
very least, is not to enable parties, who have agreed to refer a
legal issue to an arbitrator to renege on their
deal. They have
in such a case chosen their decision-maker for the particular issue
and they are bound by their choice.
In this case, the primary
question, as well as the validity of the moratorium agreement, was
specifically referred to the arbitrator
for his decision. To
allow a party in these circumstances to utilise s 20 would frustrate
the arbitration agreement.
It is not against public policy to
agree to the finality of an extra-curial decision on a legal issue
especially where the review
rights contained in s 33 remain
available, enabling the courts to retain control over the fairness of
the proceedings.
50.
Insofar as
Mr. Tsele argues that the arbitrators reference to section 3 of Act
evidences that she misconstrued the nature of the
application, that
cannot be so. Her reference to the section has to be read in
context of the award and the paragraphs quoted
above. When that
is done it is evident that the arbitrator did not misconstrue the
nature of the application before her.
[74]
Moreover, even if she did, it would not amount to a gross
irregularity as envisaged in section 33(1)(b) of the Act.
This
ground for review must therefore also fail.
CONCLUSION:
51.
In light of what is set out above, there is no basis for the award to
be set
aside in terms of section 33(1) of the Act, nor is there any
reason to refuse Josephson’s application in terms of section
31(1) to have the award made an order of court.
52.
In
Cool Ideas 1186 CC v Hubbard and Another
2014 (4) SA 474
(CC) Majiedt AJ held at para [56] that:
…
If a court
refuses too freely to enforce an arbitration award, thereby rendering
it largely ineffectual, because of a defence that
was raised only
after the arbitrator gave judgment, that self-evidently erodes the
utility of arbitration as an expeditious, out-of-court
means of
finally resolving the dispute.
53.
The four grounds of review relied upon by Blacher also formed the
basis of his
opposition to the enforcement application. The
first two of these grounds were raised for the first time after the
arbitrator
had published her award, and for the reasons set out
above, are without merit. The last two grounds, whilst argued
during
the arbitration, are similarly, for reasons already stated,
without merit.
54.
In concluding, in
Cool Ideas 1186 CC v Hubbard (supra)
Majiedt
AJ at para [59] went on to state that:
…
A court’s
refusal to enforce an arbitration award will also erode, to some
extent, the utility of the arbitration process.
But where a
court is called upon actively to facilitate an illegality there is a
need for greater caution.
55.
The facts of
Cool Ideas 1186 CC
are however distinguishable
from the facts of the present matter. In that matter the arbitration
award was in violation of a statutory
prohibition backed by a
criminal sanction. The court correctly held that enforcing such
an award would be contrary to public
policy. This is not the
case in the present matter where, as herein stated, there is no basis
to find that the third AOD
did not constitute a compromise between
the parties and that its enforcement would therefore perpetuate an
unlawful credit agreement
and accordingly be contrary to public
policy.
ORDER:
56.
I therefore make the following order:
(i)
The application under case number 18835/2020 is dismissed with
costs.
(ii)
In respect of case number 17504/2020 it is ordered that:
(a) The arbitration
award made by Advocate Deborah Watson on 2 November 2020, a copy of
which is annexed to the founding affidavit
of Ms. Samantha Marie
Frost and marked “
SMF1
”, is made an order of
court;
(b) The respondent
shall pay the costs of the application, including all reserved costs.
NEL AJ
[1]
The
applicant also seeks that the matter should be remitted to be heard
before another arbitrator.
[2]
Review
application: founding affidavit: p8, para 17.
[3]
Review
application: founding affidavit: p9, para 18.
[4]
Review
application: answering affidavit: pp69-70, para 14.
[5]
Review
application: founding affidavit: p11, para 28.1.
[6]
Review
application: founding affidavit: p9, para 19.
[7]
Review
application: answering affidavit: p70, para 15.
[8]
Review
application: founding affidavit: p11, para 25.
[9]
Review
application: answering affidavit: p70, para 16.
[10]
Review
application: answering affidavit: p70, para 17.
[11]
Review
application: founding affidavit: p11, para 26.
[12]
Review
application: founding affidavit: p11, para 28.
[13]
Review
application: founding affidavit: p12, para 32.
[14]
Review
application: answering affidavit: p71, para 21.
[15]
Review
application: founding affidavit: p13, para 35.
[16]
Review
application: answering affidavit: p71, para 22.
[17]
Review
application: founding affidavit: p13, para 37.1.
[18]
Review
application: answering affidavit: p72, para 25.
[19]
Review
application: founding affidavit: p14, para 37.2.
[20]
Review
application: answering affidavit: p72, para 26. It is unclear
from the papers whether a separate arbitration agreement
had been
concluded between the parties prior to the commencement of the
arbitration proceedings.
[21]
Review
application: founding affidavit: p14, para 41. See also the
pleadings under case number 1205/2020.
[22]
Review
application: answering affidavit: annexure “
A4
”,
p 102 – 103.
[23]
Ibid.
[24]
Review
application: founding affidavit: p16, para 47 read with answering
affidavit: p76, para 40.
[25]
Review application: founding affidavit: p16, para 48..
[26]
Review
application: founding affidavit: pp18-19, paras 57-62.
[27]
Review
application: answering affidavit: p78, para 50.
[28]
Review
application: answering affidavit: p78, para 51.
[29]
Review
application: founding affidavit: p20, para 67.
[30]
Review
application: founding affidavit: p19, para 63.
[31]
Review
application: founding affidavit: p20, para 68.
[32]
Review
application: founding affidavit: p20, para 69.
[33]
Review application: founding affidavit: p21, para 72.
[34]
Review application: p46,
para
70.2 of the award.
[35]
Enforcement application: founding affidavit: pp8 – 9, para 24.
[36]
Enforcement application: founding affidavit: p9, para 25.
[37]
Enforcement application: founding affidavit: pp9-10, para 28.
[38]
Enforcement application: founding affidavit: p10, paras 29 and 30.
[39]
Enforcement application: founding affidavit: p11, para 33.
[40]
Enforcement
application: notice of motion: pp1-3.
[41]
Review
application: notice of motion: p1-3.
[42]
It
is common cause from the papers that the illness of the arbitrator
related to a period in which she suffered from a possible
mental
illness.
[43]
The
purpose of the record is to enable the applicant and the court fully
to assess the lawfulness of the decision-making process.
Whilst the record would not have assisted this court in deciding the
first two grounds for review, it would have assisted in
deciding the
third and fourth grounds for review. See in this regard the
matter of
Turnbull-Jackson
v Hibiscus Coast Municipality
2014 (6) SA 592
(CC) where the court held at 608C-D that:
“
Undeniably,
a rule 53 record is an invaluable tool in the review process.
It may help: shed light on what happened and why;…
in the
substantiation of as yet not fully substantiated grounds for review;
in giving support to the decision-maker’s stance;
and in the
performance of the reviewing court’s function
”.
See also
Helen
Suzman Foundation v Judicial Service Commission
2018 (4) SA 1
(CC) at 10C-11A.
[44]
See
Jockey
Club of South Africa v Forbes
[1992] ZASCA 237
;
1993 (1) SA 649
(A) at 660E-H.
[45]
See
South
African Football Association v Stanton Woodrush (Pty) Ltd t/a Stan
Smidt & Sons
2003 (3) SA 313
(SCA) at 319F-H.
[46]
See
Plascon-Evans
Paints Ltd v Van Riebeek Paints (Pty) Ltd
1984(3)
SA 623 (A) at 634E – 635C where the court held that:
The
appellant nevertheless sought a final interdict, together with
ancillary relief, on the papers without resort to oral evidence.
In such a case the general rule was stated by Van Wyk J (which whom
De Villiers JP and Rosenow J concurred) in Stellenbosch Famers
Winery Ltd v Stellenvale Winery (Pty) Ltd 1957(4) SA 234 (C) at 235E
– G, to be: ‘(W)here there is a dispute as to
the facts
a final interdict should only be granted in notice of motion
proceedings if the facts as stated by the respondents
together with
the admitted facts in the applicant’s affidavits justify such
an order … Where it is clear the facts,
though not formally
admitted, cannot be denied, they must be regarded as admitted.’
[47]
Review application: founding affidavit: p16, para 49.
[48]
Review application: founding affidavit: p16-17, para 51.
[49]
Blacher
alleges that the arbitrator had informed Mr. Van Reenen that she
thought the Judge President of this division had “put
a hit”
on her. Josephson simply alleges that the arbitrator wished to
hire a bodyguard to protect herself from threats
which she believed
may arise from her wishing to apply for the recusal of a judge in an
urgent application (no particular judge
is mentioned).
[50]
Review application: founding affidavit: p18, para 57 – 58.
[51]
Review application: answering affidavit: p74, para 33.
[52]
Review application: answering affidavit: pp76-77, para 42 –
46.
[53]
Review application: answering affidavit: p77, para 47 read with
replying affidavit: p118, para 33.
[54]
Review application: answering affidavit: p77-78, para 48-49.
[55]
Lufuno
Mphaphuli & Associates (Pty) Ltd v Andrews and Another (supra)
at
para [179].
[56]
Review application: answering affidavit: p94, para 124.
[57]
Review application: founding affidavit: pp9 – 10, para 21 –
23. Josephson conceded that the first two AOD’s
could be found
to be unlawful and/or found to constitute reckless credit by a
court. See review application: answering
affidavit p86, para
86.
[58]
Review application: founding affidavit: p12, para 32.
[59]
Review application: answering affidavit: p88, para 95.
[60]
Review application: founding affidavit: p12, para 33.
[61]
Review application: answering affidavit: p88, para 96.
[62]
Review application: founding affidavit: p13, para 37.1.
[63]
Review application: answering affidavit: p88, para 96.
[64]
Review application: founding affidavit: p13, para 34.
[65]
Review application: answering affidavit: p92, para 113.
[66]
Review application: founding affidavit: p22, para 75 – 78.
[67]
See
para [30] of the
Shabangu
judgment. See also the matter of
Benefeld
v West
2011 (2) SA 379
(GSJ) at para [14] where Coppin J held as follows:
A
compromise is a settlement of litigation or envisaged litigation.
It is a substantive contract that exists independently
of the
original cause. In the case of a novation, the original
invalid contract taints the novated contract, but a compromise
is
not affected by the invalidity of the original obligation.
[68]
Review application: replying affidavit: p116, para 23.
[69]
It
is however evident from Blacher’s founding affidavit that he
has access to the recording of the Zoom meeting as he makes
reference to certain time recordings of the evidence in paragraph 54
of such affidavit, review application: p 17.
[70]
In
State
Information Technology Agency Soc Limited v ELCB Information
Services (Pty) Ltd and Another
(995/16)
[2017] ZASCA 120
(22 September 2017) the Supreme Court of
Appeal at para [17] held that:
Whether
the
arbitrator
came
to an incorrect conclusion is irrelevant in review applications. It
would appear that the appellant conflates appeals and
reviews thus
blurring the difference. A review of an arbitrator’s award
does not deal with the merits, but the manner in
which a decision
was reached. It does not concern whether the decision was right or
wrong. An appeal, on the other hand, amounts
to a re-hearing of the
matter and the appeal tribunal is restricted to the record of the
proceedings before it, unless the statute
provide otherwise.
(See Telcordia Technologies Inc v Telkom SA Ltd
[2006]
ZASCA 112
;
2007 (3) SA 266
(SCA) para 85 where this
court held that an arbitrator ‘has the right to be wrong’.)
Therefore this ground is
misconceived as a ground to have the impugned award reviewed and set
aside.
[71]
Para
60 of the award states as follows:
While the Defendant
was aware that the Claimant believed his indebtedness was over R 3.5
million, on cross-examination the Defendant
conceded that the third
AOD was for a reduced amount. His evidence was that he
signed it as the Claimant agreed not
to sue him for the R 750 000.00
relating to the Panico transaction.
[72]
The arbitrator referenced both the
Shabangu
and
Weltmans
decisions in her award.
[73]
Which
was apparently launched only after argument – see the heads of
argument filed on behalf of Josephson.
[74]
In
Telcordia
Technologies
Inc v Telkom SA Ltd (supra)
the following is stated at para [85]:
The
fact that the arbitrator may have either misinterpreted the
agreement, failed to apply South African law correctly, or had
regard to inadmissible evidence does not mean that he misconceived
the nature of the inquiry or his duties in connection therewith.
It
only means that he erred in the performance of his duties. An
arbitrator ‘has the right to be
wrong’
on the merits of the case, and it is a perversion of language and
logic to label mistakes of this kind as a misconception of the
nature of the inquiry – they may be misconceptions about
meaning, law or the admissibility of evidence but that is a far
cry
from saying that they constitute a misconception of the nature of
the inquiry.