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[2021] ZAWCHC 120
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Bike Mob (Pty) Ltd and Others v Arbitrator and Another (7496/2020) [2021] ZAWCHC 120 (21 June 2021)
IN THE HIGH COURT OF
SOUTH AFRICA
(WESTERN CAPE DIVISION,
CAPE TOWN)
Case
no: 7496/2020
In the matter between:
BIKE MOB (PTY)
LTD
First Applicant
SEAN PATRICK
STACK
Second Applicant
NEVILLE SHANE
CRAGG
Third
Applicant
v
THE
ARBITRATOR
First
Respondent
CAPITALGRO (PTY)
LTD
Second Respondent
Coram:
Justice J Cloete
Heard:
7 June 2021
Delivered
electronically:
21 June 2021
JUDGMENT
CLOETE J
:
Introduction
[1] This is an
application for the review and setting aside of an interim
arbitration award/ruling and the arbitrator’s removal from
office. The second respondent (for convenience “the
respondent”)
opposes the relief sought. The arbitrator (“X”)
has filed an explanatory affidavit and abides the decision of the
court.
[2] The
award/ruling was made on 28 April 2020 and provides that (a) the
parties (i.e. the respondent as claimant in the arbitration and
the applicants as defendants) shall each be liable for 50%
of his
fees and charges (including those already incurred); and (b) should
it become necessary X will be entitled to demand security
from the
parties for his further fees and charges ‘
within such time
and in such amount and manner as may be deemed appropriate’.
The applicants were also directed to pay the costs of the interim
award/ruling.
Background
[3] During
October 2016 the first applicant (as lessee) and respondent
(as
lessor) concluded a written lease in respect of certain commercial
premises in Westlake. The second and third applicants bound
themselves as sureties for the first applicant’s obligations
under the lease. Unless otherwise indicated I will refer to
the first
to third applicants as “the applicants” since at all
material times they participated collectively in the
arbitration.
[4] In August
2019 a dispute arose in relation to the lease. The applicants
have
since vacated the premises. The dispute is the subject matter of the
arbitration. It is common cause that the parties are
contractually
bound by the lease itself to have their dispute determined by
arbitration, and that sub-clauses 29.4.4 to 29.4.9
thereof set out
the powers afforded to the arbitrator. These will be considered
below.
[5] The parties
were unable to agree on an arbitrator and X was subsequently
appointed by the chairperson of the Cape Bar Council in terms of
clause 29.4 of the lease on 4 October 2019.
[6] A
pre-arbitration meeting, attended also by the parties’
respective
attorneys, took place on 15 October 2019. Some of what
transpired at that meeting is in dispute. However what is not in
dispute
is that no agreement could be reached about X’s fees
and charges; X undertook to provide a memorandum setting out his
views
on the liability of the parties for the payment of his fees
during the arbitration prior to making the final award; but X –
it would seem due to a bona fide oversight – failed to do so.
[7] The
arbitration thus proceeded without any agreement regarding payment
of
X’s fees during the arbitration. Pleadings were exchanged and
evidence was led on 24 and 31 January 2020 and 9 March 2020.
Accordingly all that remained at that stage for the arbitration to be
concluded were argument (whether written, oral or both) and
the
making of the final award.
[8] On 20 March
2020 X despatched his invoice separately to the parties’
respective attorneys for work done to that date, in terms of which
each firm of attorneys was reflected as owing 50% thereof to
X. The
applicants’ attorney objected on the basis that no agreement
had been reached concerning payment of X’s fees
during
the arbitration, and informed X that the applicants would not be
paying any part of his invoice. X was further informed that the
applicants ‘
were in no position to pay’
.
[9] On 31 March
2020 X responded by letter to the parties’ respective
attorneys
in which he advised
inter alia
that he had, from the outset,
considered himself to be on brief from them; that the respondent had
since paid its 50% share of
the invoice; and that the respondent’s
attorney shared the view of the applicants’ attorney that X had
not been briefed
by his firm either.
[10] In the same letter X stated:
‘
2.6
Please clarify your respective positions. If you, as the attorneys,
are not prepared to guarantee
my fees as arbitrator, please then
advise whether you agree or disagree with the following:
2.6.1 As
arbitrator, I would be entitled, regard being had to the provisions
of clause 29.4.4 of the lease agreement,
which provides that
“
The
arbitrator shall have the fullest and freest discretion with regard
to the proceedings and his award…”
,
to make a ruling in regard to payment of my fees during the course of
the arbitration, and
2.6.2
regard being had to the same clause, I would also be entitled to
order the parties to pay a deposit in respect
of my further fees
foreseen in the arbitration.
3. It seems
to me that fairness requires that the parties must each pay half of
the arbitration costs (which would
include my fees as arbitrator),
until such time as the merits of the dispute have been determined,
when a final award will be made
which will include a decision as to
the final liability for costs.
4. If
either party disagrees with these contentions, please provide
reasons.’
[11] The respective attorneys
duly made written submissions. The respondent’s attorney
took a
different view to the applicant’s attorney, and proceeded to
request X to make an interim award/ruling on the issue,
to which X
acceded. The applicants launched the current proceedings on 19 June
2020 and, at their request (which was opposed
by the respondent), X
apparently issued a ruling suspending the arbitration pending the
outcome hereof.
[12] The grounds advanced for the
setting aside of the interim award/ruling were that X committed
a
gross irregularity or exceeded his powers in making it. However
during argument the applicants’ reliance on a ‘
gross
irregularity’
was abandoned and this leg of the dispute was
thus limited to whether or not X exceeded his powers.
[13] The grounds advanced for X’s
removal as arbitrator were both actual and perceived
bias, allegedly
because of the stance taken by him in making the interim
award/ruling, and that it was made pursuant to a request
by the
respondent’s attorney. The applicants alleged that they believe
they will not have a fair hearing ‘
from an arbitrator who is
persisting with a claim against them personally in respect of [which]
they have a
bona fide
and arguable defence (to put it at its
weakest)’.
However in both heads of argument and during the
hearing submissions by counsel for the applicants were restricted to
perceived
bias only.
[14] Relevant to the latter issue
and what was not disclosed in the founding affidavit, is
that after
the interim award/ruling was made the arbitration proceeded from
6 May 2020 until 10 June 2020. During this time
X issued
directives pertaining to the applicants’ opposed application to
amend their statement of defence, considered the
parties’
respective submissions thereon, and issued a ruling granting that
application (on 3 June 2020). Not a murmur was
made by the applicants
during this period that in adjudicating the amendment application,
and issuing various directives, X was
not impartial.
[15] The various interlocutory
skirmishes in the application before me quickly fizzled out
at the
commencement of the hearing. Counsel for the parties were also
ad
idem
that despite the length of the papers, which were
regrettably peppered with legal argument and
ad hominem
attacks
(and here I specifically exclude X), all that this court is required
to determine is whether (a) sub-clauses 29.4.4
to 29.4.9 of the
lease, properly interpreted, permitted X to make the interim
award/ruling; and (b) whether there is any substance
in the
applicants’ allegation of perceived bias.
The
interpretation of the relevant sub-clauses
[16] Sub-clauses 29.4.4 to 29.4.9
read as follows:
‘
29.4.4
The arbitrator shall have the fullest and freest discretion with
regard to the proceedings and his award
shall (unless appealed as
contemplated in clause 29.5) be final and binding on the Parties to
the dispute. Furthermore, the arbitrator:
29.4.5 may
dispense wholly, or in part, with formal submissions or pleadings;
29.4.6
shall determine the applicable procedure;
29.4.7
shall not be bound by strict rules or evidence;
29.4.8
shall take into account the practicality or otherwise of ordering the
continuance of [an] illegal relationship
between the Parties, and
29.4.9
shall include such order as to costs as he deems just and the Parties
shall be entitled to have the award
made an order of any court of
competent jurisdiction.’
[17] The settled principles
pertaining to the interpretation of documents
[1]
are in essence as follows. The starting point is the language of the
provision itself, read in context and having regard to the
purpose of
the provision and the background to its preparation and production.
It is an objective process and while a sensible
meaning is to be
preferred, courts must guard against the temptation to substitute
what they regard as reasonable, sensible or
businesslike for the
words actually used.
[18] On its plain language the
arbitrator is given ‘
the fullest and freest discretion with
regard to the proceedings’
and ‘
furthermore’
– i.e. in addition – he or she is at liberty to determine
procedural matters, amongst others.
[19] This lends itself to an
interpretation that the discretion conferred contractually by
the
parties upon the arbitrator is not limited to those matters in
sub-clauses 29.4.5 to 29.4.9 (which include procedural matters)
but
is instead the widest discretion possible in order to advance the
arbitration to its conclusion. If this were not the case
it is
difficult to discern why the parties themselves were content with the
inclusion of the word ‘
furthermore’
in sub-clause
29.4.4.
[20] Accordingly, on a plain
reading of the sub-clauses in question the arbitrator is not limited,
by agreement
between the parties, to making procedural rulings
only. He or she is empowered to make any ruling with regard to any
aspect of
the proceedings themselves, which in the absence of
agreement would logically include payment of his fees and charges,
since it
would be insensible for the parties to have contemplated
that he would work for free.
[21] This interpretation is
supported by the purpose of the arbitration clause which is to
be
invoked (as set out in clause 29.1) ‘
should any dispute,
question or difference arise between [the parties]… in the
widest sense’
as well as sub-clause 29.4.3 which provides
that:
‘
This clause 29 shall
constitute each Party’s irrevocable consent to the arbitration
proceedings, and no Party shall be entitled
to withdraw herefrom or
to claim at such arbitration proceedings that it is not bound by this
clause 29.’
[22] To my mind the interim
award/ruling made by X thus falls within the powers conferred upon
him by the parties themselves. On this interpretation it makes no
difference that X failed to secure agreement upfront about the
parties’ respective liability for his fees and charges during
the course of the arbitration. Nor does it matter that s 14
of
the Arbitration Act
[2]
empowers an arbitrator to give
procedural directions
[3]
since, as is apparent from the aforementioned section, this is always
subject to the arbitration agreement itself providing otherwise,
or
in this case, conferring additional powers on the arbitrator.
[23] Moreover:
‘
It would appear that
the most satisfactory explanation of the relationship between the
arbitrator and the parties is that it is
one
sui
generis
involving
elements of both status and contracts. This gives the parties and the
arbitrator the freedom to use the consensual basis
of arbitration to
regulate their relationship as they think fit, subject to peremptory
provisions of the Act and public policy.
[4]
[24] Also relevant are s 26
and s 34 of the Arbitration Act. Section 26 provides
that:
‘
Unless the arbitration
agreement provides otherwise, an arbitration tribunal may make an
interim award at any time within the period
allowed for making an
award.’
[25] In the present matter there
is nothing in the arbitration agreement which ‘
provides
otherwise’
so as to preclude X from having made an interim
award/ruling. It is also not in dispute that the interim award/ruling
was made
within the period allowed. No complaint has been made by the
parties that X’s fees are excessive as the basis for refusing
to pay.
[26] In any event s 34 reads in
relevant part as follows:
‘
(1)
Where the fees of the arbitrator… have not been fixed by an
agreement between him…
and the parties to the reference, any
party to the reference may, notwithstanding that such fees may
already have been paid by
the parties, or any of them, require such
fees to be taxed, and thereupon such fees shall be taxed by the
taxing master of the
court.
(2)
Any taxation of fees under this section may be reviewed by the court
in the same manner
as a taxation of costs…
(4)
The arbitrator… may withhold his… award pending payment
of his…
fees and of any expenses incurred by him… in
connection with the arbitration with the consent of the parties, or
pending
the giving of security for the payment thereof.’
[27] Section 34 thus expressly
contemplates a situation where the fees of an arbitrator have
not
been fixed by agreement. In such a case, if either party complains
that they are excessive, the fees are then subject to taxation
and,
if required, review by a court. Although s 34(4) entitles an
arbitrator to withhold an award pending payment of his or
her fees as
set out therein, there is nothing to suggest, on a reading of the
subsection, that an arbitrator is therefore precluded
by the Act
itself from making an interim award/ruling, in circumstances such as
those in the present matter.
[28] The applicants contend that
their refusal to pay an equitable share of the costs pending
finalisation of the arbitration will not hamper its conclusion, since
it is open to the respondent to pay the full amount (i.e.
their 50%
share) to the arbitrator in the interim at its election. The short
answer to this, in my view, is that there is no reason
why the
respondent should be compelled to do so in circumstances where the
parties themselves elected to be bound contractually
to the terms of
an arbitration agreement which, on my interpretation, permits an
arbitrator to make the very type of award which
he has. Moreover the
applicants can hardly suggest with any conviction that requiring each
part to pay 50% is unreasonable.
[29] I am thus persuaded that
there is no merit in the applicants’ complaint that X exceeded
his powers in making the interim award/ruling.
Perceived
bias
[30] This is easily disposed of.
If the applicants genuinely held a reasonable apprehension
of bias on
the part of X they would not have been content for X to proceed with
the arbitration after making his interim award/ruling.
Moreover he
ruled in their favour not once, but seemingly twice, after making
that award/ruling.
[31] The only reasonable
inference to be drawn from these facts is that the so-called
perception
of bias was a contrived afterthought to put pressure on X
by painting him in a poor light for purposes of this application.
This
complaint too has no merit and the relief sought for X’s
removal must fail.
Costs
[32] The respondent has been
successful and in the ordinary course costs would follow the result.
However what should have been approached by the respondent as two
crisp issues for determination was dealt with instead by an answering
affidavit of 123 pages (including annexures) replete with irrelevant
and argumentative material, and which resulted in the papers
ultimately, and quite unnecessarily, totalling 276 pages. In
addition, the respondent opposed whatever the applicants sought to
introduce (including a well-founded amendment to their notice of
motion) which caused increased costs.
[33]
The following order is
made:
1.
The application is dismissed;
and
2.
Each party shall pay their own
costs.
J I CLOETE
Cape
Town
Monday 7 June 2021
Coram:
CLOETE J
Case no: 7496/2020
BIKE MOB (PTY)
LTD
First Applicant
SEAN PATRICK
STACK
Second
Applicant
NEVILLE SHANE
CRAGG
Third
Applicant
v
THE
ARBITRATOR
First Respondent
CAPITALGRO (PTY)
LTD
Second
Respondent
For the applicants
: Adv M
Holderness
, 422 0438,
holderness@capebar.co.za
;
Instructed by: Matthew Walton &
Associates (M Walton), 702 0541,
matthew@barefootattorneys.co.za
;
For the respondents
: Adv
Donovan
Baguley
, 422 0595,
dbaguley@law.co.za
;
Instructed by:
Erleigh & Associates Inc (David Erleigh)
[1]
Natal Joint Municipal Pension Fund v Ndumeni
Municipality
2012 (4) SA 593
(SCA) at para [18].
[2]
42 of 1965.
[3]
Hyde Construction CC v Deuchar Family Trust and
Another
2015 (5) SA 388
(WCC) at para [58].
[4]
Butler and Finsen: Arbitration in South Africa 1ed at
95 fn 131.