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[2016] ZASCA 145
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Padachie and Another v Body Corporate of Crystal Cove and Another (704/2015) [2016] ZASCA 145 (30 September 2016)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
Reportable
Case
no: 704/2015
In
the matter between:
KRISHNA
SOOBRAMONEY PADACHIE
FIRST APPELLANT
AMANDA
MARCELLA PADACHIE
SECOND APPELLANT
and
THE
BODY CORPORATE OF CRYSTAL COVE
FIRST RESPONDENT
BRIAN
EDWARD SHELTON AGAR N.O.
SECOND RESPONDENT
Neutral
citation:
Padachie
v The Body Corporate of Crystal Cove
(704/2015)
[2016] ZASCA 145
(30 September 2016)
Bench:
Maya DP, Petse, Willis JJA and Fourie
and Makgoka AJJA
Heard:
29 August 2016
Delivered:
30 September 2016
Summary:
Arbitration -
Arbitration Act 42 of
1965
- statement of case to court in terms of
s 20(1)
refused for
being imprecise - appellant making a qualified request for referral
to court - such request impermissible -
s 20(1)
only applicable where
questions of law arise during the course of arbitration - party to an
arbitration not entitled to refer to
court the very issues referred
for arbitration - Arbitrator did not deprive appellant of his right
in terms of
s 20
to approach court.
ORDER
On
appeal from
:
KwaZulu-Natal
Local Division of the High Court, Durban (Nkosi J sitting as court of
first instance):
The
appeal is dismissed with costs.
JUDGMENT
Makgoka
AJA (Maya DP, Petse, Willis JJA and Fourie and Makgoka AJJA):
[1]
This is an appeal against the judgment of the KwaZulu-Natal Local
Division of the High Court, Durban (Nkosi J). The high
court
dismissed with costs, the appellants’ application to review and
set aside an arbitration award made by the second respondent,
Mr
Brian Agar, an attorney, who was appointed as an arbitrator by the
parties in this matter. The appeal is with leave of the high
court.
[2]
The first and second appellants, Mr and Mrs Padachie, were married to
each other in community of property. They were registered
owners of a
unit in a residential estate situated at La Mercy, Durban. The first
respondent, the Body Corporate of Crystal Cove
(the Body Corporate)
is a sectional title body corporate established in terms of
s 36(1)
of the
Sectional Titles Act 95 of 1986
. It was responsible for the
management of the sectional title scheme in which the appellants’
property was situated. The
second appellant, Mrs Padachie, and the
arbitrator, did not take part in the appeal. For the sake of
convenience, I shall refer
to Mr Padachie as ‘the appellant’.
[3]
The narrow issue for determination is whether the
arbitrator deprived the appellant of his right, in terms of s 20 of
the Arbitration
Act 42 of 1965 (the Act) to have certain questions of
law stated for the opinion of the court. If he did, his conduct may
have
been susceptible to be reviewed and set aside as a gross
irregularity in terms of
s 33(1) of the Act
.
[4]
Section 20 of the Act reads as follows :
‘
Statement
of case for opinion of Court or counsel during arbitration
proceedings
(1)
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.
(2)
An opinion referred to in ss (1) shall be final and not subject to
appeal and shall
be binding on the arbitration tribunal and on the
parties to the reference.’
[5]
The facts
are simple. As registered owners of a unit in a sectional title
scheme managed by the Body Corporate, the appellants were
liable to
the Body Corporate for monthly levies and other costs.
[1]
During July 2009 the Body Corporate instituted action against the
appellants in the Magistrate’s Court, Inanda, for a sum
of
R9 891.83 in respect of alleged arrear levies and ancillary
charges. The appellants defended the action and delivered their
plea.
Subsequently, the parties agreed to refer the disputes arising from
that action to arbitration. In the arbitration, the Body
Corporate
filed five claims against the appellants. Claims 4 and 5 were
abandoned during the course of the arbitration. Three of
the
remaining claims were:
(a)
Claim 1 – the payment of R1 362.95 for alleged arrear
levies, legal costs, interest
and other charges for the period
February 2009 to September 2012;
(b)
Claim 2 – the re-payment of R4 000 made to the appellant
by the trustees of the
Body Corporate on 28 July 2008 for carrying
out his duties as the chairperson of the board of trustees of the
Body Corporate, which
payment the Body Corporate alleged was
unlawful, and in breach of rule 10(1) of the Body Corporate’s
Management rules;
[2]
(c)
Claim 3 – the repayment of
R3 500 arrear levies which were alleged to have been unlawfully
credited to the appellants’ levy account during April 2009.
[6]
The appellant filed his statement of defence in which he denied any
indebtedness to the Body Corporate, and pleaded, among others,
that
the claims had been extinguished by prescription. The arbitration
hearing ultimately commenced before the arbitrator on 13
November
2012 and concluded on 19 November 2012. As agreed between the
parties at the conclusion of the arbitration, the
Body Corporate, as
the claimant, filed its written argument on 26 November 2012. The
appellant’s written argument was due
on 3 December 2012, and
the Body Corporate’s replying argument was to be filed on 5
December 2012. However, the appellant
was afforded an extension of
time to file his written argument by no later than 7 December 2012.
[7]
On 3 December 2012 the appellant’s attorneys delivered a letter
to the arbitrator in which they stated that a number of
legal points
had been raised during the evidence and arguments, which, in their
view, could not be resolved by way of arbitration.
They further
enquired from the arbitrator whether they should apply for referral
to court in terms of s 20, or deal with the issues
in their written
argument. In response, on 5 December 2012, the arbitrator stated that
he was not aware of any issues which warranted
such referral. He
accordingly left it to the appellant to decide how best to deal with
the matter. But he also reminded the
appellant’s
attorneys that he was expecting their written argument on or before 7
December 2012, as agreed.
[8]
On 7
December 2012 the appellant’s attorneys delivered their written
argument on the substantive issues before the arbitrator.
In the
penultimate paragraph of the written argument, under the heading
‘Referral to Court under
Arbitration Act’ it
was
recorded that the interpretation of Management
rule 10
of the Body
Corporate’s rules,
[3]
the
nature of the claims and whether the claims had prescribed, were all
questions of law, which ought to be referred to court.
[9]
On 12 December 2012 the appellant’s attorneys wrote a letter to
both the Body Corporate’s attorneys and the arbitrator,
reiterating that the issues they had raised in their written
argument, should be referred to court for an opinion. Those issues
were summarised in that letter as follows:
‘
(a)
The interpretation of Management
rule 10
;
(b)
Whether the nature of the claim is
ultra vires
; (sic)
(c)
Whether the claimant [the Body Corporate] has pleaded a proper claim;
(d)
What, if any parts of the claim has prescribed;
(e)
If establishing a breach in terms of management
rule 10
, the claimant
[the Body Corporate] bears the onus of proving unlawful payments to
the first respondent [the appellant]’
The
appellant’s attorneys enquired from the arbitrator whether he
intended to refer those issues to court, and stated that
if the
arbitrator was not amenable to a referral, they intended to bring the
necessary application to the high court. The arbitrator
was requested
to advise the appellants of his intention by close of business on 13
December 2012, to allow them adequate time to
bring the application.
[10]
On 13 December 2012 the arbitrator, without responding to the letter
mentioned above, published his award, in which he dealt
comprehensively with the issues in dispute between the parties,
including the alleged questions of law raised by the appellant.
I
shall revert to the latter aspect. In the end, the arbitrator found
the appellants liable to the Body Corporate in the amounts
claimed.
He accordingly ordered the appellants to pay the Body Corporate a
total sum of R8 862.95.
[11]
Aggrieved by the arbitrator’s decision, the appellant, on 4
April 2013, launched an application in the high court, seeking
to set
aside the arbitrator’s award in terms of
s 33(1) of the Act. The appellant raised a
number of points, among
others, that the arbitrator had in essence prevented him from
approaching court for an opinion on points
of law. The Body Corporate
opposed the application and filed a counter-application for the
enforcement of the award in terms of
s 31 of the Act. The high
court rejected the appellant’s arguments and dismissed his
application, primarily on two
grounds. First, that the arbitrator had
not committed any irregularity in the course of the arbitration, and
second, that the arbitrator
had not prevented the appellant from
approaching the court for an opinion on questions of law. The high
court further granted the
Body Corporate’s counter-application
in terms of which the arbitrator’s award was made an order of
court.
[12]
Before us, it was argued on behalf of the appellant that the request
for referral to court, made in the appellant’s written
argument
on 7 December 2012, constituted an application in terms of s 20(1) of
the Act. Accordingly, it was argued that by issuing
his award in the
circumstances referred to above, the arbitrator effectively prevented
the appellant from approaching the court
for an opinion.
[13]
I disagree. As early as 5 December 2012, the arbitrator had made his
position clear to the appellant’s attorneys: he
discerned no
points of law requiring referral to court. He further made it
plain that he intended finalising his award, and
to that extent,
reminded the appellant’s attorneys to submit written argument
as agreed. It could not have been clearer to
the appellant’s
attorneys, at that time already, that the arbitrator did not intend
to refer any issue to court. Nothing,
for instance, prevented the
appellant from approaching the court to interdict the arbitrator from
publishing his award, pending
the determination of an application for
referral.
[14]
Counsel for the appellant submitted that as of 5 December 2012, the
questions of law had not been precisely stated, and accordingly,
that
that request could not be regarded as a proper application before the
arbitrator. There is no merit in this submission. If
the questions
were not properly formulated, it was only because the appellant and
his attorneys had not sufficiently applied themselves
in formulating
them. The appellant was therefore the author of his own misfortune.
But
,
in any event, the arbitrator’s
response should have prompted the appellant’s attorneys
immediately
to delineate the alleged
points of law. Instead of doing that, they submitted lengthy
written argument, running into some 30 pages, dealing with all
the issues in dispute between the parties. As already
mentioned,
after written arguments had been submitted on behalf of
the parties, the arbitrator published his award, in which he dealt
thoroughly
with all the disputes between the parties, including the
alleged points of law, in respect of which he said:
‘
What
respondent’s [i.e. appellant in the present appeal] counsel is
asking for is much more than mere questions of law, delving
further
into the nature of the claimant’s [i.e. respondent] claim; and
claimant’s pleadings.
The
questions of law, on the interpretation of Management rule 10 and
“the issues of prescription” are also imprecise.
To
raise this request at such late stage of the procedure is, to say the
least, inopportune. The claimant does not wish to state
such a case
and the arbitrator does not wish to state such a case and the
arbitrator declines to do so. The request for interpretation
of
management rule 10 is also inconsistent with the contention of the
Body Corporate’s counsel in paragraph 18 where he states:
“
The
language of Management rule 10(1) is, with submission, clear and
unambiguous and therefore effect must be given to its ordinary
everyday meaning.”’
[15]
There is nothing wrong with the arbitrator’s reasoning. I
therefore conclude that the arbitrator did not prevent the
appellant
from approaching the court to compel a referral. It is the
appellant’s own inaction, and to some extent,
acquiescence,
which led to the arbitrator publishing his award without a referral.
I have alluded to the steps which were open
to the appellant, but
which he failed to take. This should be the end of the matter, and
the appeal should fail on this point alone.
[16]
However, there are two further bases on which the appeal should fail.
The first is that the appellant is not entitled to refer
to court the
very issues referred for arbitration. The second concerns the manner
in which the appellant formulated his request
for a referral. These
issues were fully debated in this court with counsel. I briefly
consider them, in turn.
[17]
The purpose of s 20 of the Act was stated by this court in
Telcordia
Technologies Inc v Telkom SA Ltd
[2006] ZASCA 112
;
2007 (3) SA
266
(SCA) para 154 thus:
‘
[It]
can be used only if the legal question arises “in the course”
of the arbitration. It is not intended to apply where
the parties
agree to put a particular question of law to the arbitrator. Any
other interpretation of the section would defeat its
purpose and “it
would be futile ever to submit a question of law to an arbitrator”.
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.’ (Footnote omitted.)
[18]
In the present case, only two issues could possibly constitute
questions of law, namely, the interpretation of Management rule
10,
and prescription. The alleged contravention of Management rule 10 was
first raised in the Body Corporate’s amended particulars
of
claim in the magistrate’s court. As stated earlier, that action
was withdrawn, and the parties agreed on arbitration.
Thus, it was
part of the disputes which the parties agreed to refer to
arbitration. When the Body Corporate delivered its statement
of claim
in the arbitration during October 2012, that claim was one of the
five it initially pursued against the appellant. Properly
construed,
therefore, the contravention of Management rule 10, and by parity of
reasoning, also its interpretation, had been placed
squarely before
the arbitrator for determination. On that premise, the issue did not
‘arise in the course of’ the arbitration
as envisaged in
s 20. It is therefore not open to the appellant to seek an opinion
from the court on it.
[19]
The issue whether any of the Body Corporate’s claims had become
extinguished by prescription, similarly arose during
the pleading
stage in the arbitration. The appellant raised it in his statement of
defence in October 2012. By electing to plead
this issue without any
suggestion that it ought to be referred to court, the appellant
placed it among the issues which the arbitrator
had to determine. It
therefore, similarly did not arise ‘in the course’ of the
arbitration. Thus the appellant was
not entitled to invoke the
provisions of s 20.
[20]
I turn now to the manner in which the appellant formulated his
request for referral of the interpretation of Management rule
10 to
court. The appellant vacillated on this issue. While, on the
one hand, he pressed that the interpretation should be
referred to
court, on the other, he argued, extensively with reference to case
law, for a particular interpretation of the rule.
He accordingly
invited the arbitrator to adopt his preferred interpretation of the
rule. No less than fifteen paragraphs, running
over six pages, of the
appellant’s written argument, were devoted to the appellant’s
interpretation of Management rule
10.
[21]
The significance of this should not be lost. The appellant’s
stance amounted to a qualified request for referral to court:
only if
the arbitrator did not accept the appellant’s preferred
interpretation of the rule, would the appellant seek referral
to
court. Put differently, had the arbitrator adopted the appellant’s
preferred interpretation of the rule, the appellant
would not have
pressed for a referral. It is an untenable proposition, and serves
only to demonstrate the fallacy in the appellant’s
argument
that the question was one which the arbitrator was not qualified to
determine, and which only the court could.
[22]
In
Government
of the Republic of South Africa v Midkon (Pty) Ltd & another
1984 (3) SA 552 (T),
[4]
it was
submitted, with reference to English authorities, that a qualified
request for a referral was entirely permissible (at 561I-562D).
Preiss J, after a careful analysis and comparison of the English
counterpart of our s 20 of the Act, concluded (at 563H) that a
qualified request ‘has no place in our law by reason of the
relatively limited provisions of s 20 of the South African statute.’
[23]
The facts in
Midkon
closely resemble those in the present
case. There, the application for questions of law to be referred to
the court was made after
the hearing of the evidence was concluded,
and at the commencement of argument. It was submitted to the
arbitrator that if he was
not prepared to accede to the application
he should not make the award, but should first give the applicant an
opportunity to approach
the court for an order compelling him to
state a special case in terms of s 20 of the Act. The arbitrator did
not accede to the
request. He published an award which dealt with all
the disputes between the parties, including the alleged questions of
law. Dealing
with that situation, the court made the following
pointed observations (at 561E-F):
‘
I
am of the view that the request made to [the arbitrator] in its
qualified form must have fortified the arbitrator’s scepticism.
It seems to me that the department was saying to the arbitrator, “I
am content for you to decide any question of law arising
in the
dispute provided you resolve it in my favour, but if you are going to
be against me, I submit that this will be the type
of question for
which you are disqualified and for which a court of law is fitted.”
In doing so, I am of the view that the
department deprived itself of
the contention that these latter issues were such as necessarily
possessed the three requirements
postulated in the
Halfdan
Grieg
case
supra
.
[5]
Moreover, I find it quite inexplicable that on some as yet undefined
legal issues an arbitrator was to be regarded as an adequate
Judge
while at the same time on other as yet undefined issues he was to be
regarded as inadequate.’
[24]
In my view, the appellant’s approach suffers the same fate.
What is more, the arbitrator noted in his award that the
appellant’s
counsel had, in para 18 of his written argument before him, argued
that Management rule 10 was clear and unambiguous,
and that effect
must be given to its ordinary meaning. That contention by counsel, to
my mind, was correct. But it undermines the
substratum of the
appellant’s argument, for if the rule is clear and unambiguous,
there would be no point in referring it
to court for interpretation.
It is on that very basis that the arbitrator deemed it prudent to
approach the issue in the manner
he did. I am unable to find fault in
that approach.
[25]
Lastly, it should be borne in mind that, although
the question whether the arbitrator has some form of legal training
is generally
irrelevant in determining whether a referral to court
should occur, an arbitrator, in the course of of his or her duties,
may frequently
be called upon to decide questions of law. See
Strutt
v Chalmers & another
1959 (2) SA
536
(N) at 539E-F. In my view, the present case falls within that
category. The parties decided to place issues which involved
questions
of law before the arbitrator, an attorney.
As
it is often said, an arbitrator is entitled to be wrong on the
merits. A wrong interpretation of a document like the Body
Corporate’s
Management rules, in this instance, would
ordinarily not amount to an irregularity susceptible to a review in
terms of s 33 of
the Act.
As explained in
Telecordia
para 154:
‘
They
have in such a case chosen their decision-maker for the particular
issue and they are bound by their choice….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.’
(Footnote omitted.)
[26]
To my mind, the arbitrator did not commit any irregularity, let alone
the one envisaged in s 33(1) of the Act. He correctly
declined the
appellant’s request to state issues for the opinion of the
court, for the reasons already stated. There was
nothing wrong with
that approach, as the high court correctly found. The appeal
therefore stands to fail.
[27]
Before I conclude, there is a related issue that
requires comment. The capital amount in dispute is just under R 9000.
As it stands,
the absurdity is that the costs of litigation and
arbitration by far exceed the capital. The matter should never have
been allowed
to reach this point. It is extra-ordinary that it has
taken two arbitrators, a high court judge and five judges of appeal
to determine
a dispute involving such a paltry sum.
[28]
The following order is accordingly made:
The
appeal is dismissed with costs.
_________________
T
M Makgoka
Acting
Judge of Appeal
APPEARANCES:
For
First Appellant:
C B Edy
Instructed
by:
Ashlyn
Kandhai Attorneys, Tongaat
Van
Pletzen Lambrechts Attorneys, Bloemfontein
For
Second Appellant:
No appearance
For
First Respondent:
K J Kemp SC (Heads of argument prepared
by A Stokes SC)
Instructed
by:
De Wet
Leitch Hands Incorporated, Ballito
Honey
Attorneys, Bloemfontein
For
Second Respondent: No appearance
[1]
In terms of
s 37
of the
Sectional Titles Act 95 of 1986
.
[2]
Annexure
8 of the Sectional Titles Schemes Management Act 8 of 2011,
promulgated in terms of ss 35(3) and 55 of that Act.
[3]
Management rule 10(1) provides:
‘
Unless
otherwise determined by a special resolution of the owners, trustees
who are owners shall not be entitled to any remuneration
in respect
of their services as such: provided that the body corporate shall
reimburse to the trustees all disbursements and
expenses actually
and reasonably incurred by them in carrying out their duties and
exercising their powers.’
[4]
Cited
with approval in
Telecordia
Technologies Inc v Telkom
(above) and
Road
Accident Fund v Cloete N.O. & others
[2009] ZASCA 126
; 2010 (6) 120 (SCA).
[5]
The requirements referred to here are those formulated in a
dictum
by
Denning MR in
Halfdan
Grieg & Co A/S v Sterling Coal and Navigation Corporation and
another
[1973] 2 All ER 1073
(CA) with reference to comparable provisions of
the English Arbitration Act of 1959. They are that:
(a)
the point of law should be real and substantial and such as to be
open to serious
argument and appropriate for decision by a court of
law as distinct from a point which is dependent on the special
expertise
of the arbitrator or umpire.
(b)
The point of law should be clear cut and capable of being accurately
stated as a
point of law – as distinct from the dressing up of
a fact as if it were a point of law.
(c)
The point of law should be of such importance that the resolution of
it is necessary
for the proper determination of the case – as
distinct from a side issue of little importance.
This
court, in
Telecordia Technologies Inc v Telkom
(above) paras
151 -153, did not endorse Denning MR’s
dictum
, and held
that there is no obligation on an arbitrator to state a case if the
requirements set out by Denning MR are present.
Those requirements
remain important factors to consider, but they are not definitive.