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[2014] ZAGPJHC 321
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B v B (45681/13) [2014] ZAGPJHC 321 (25 September 2014)
SAFLII
Note: Certain personal/private details of parties or witnesses
have been redacted from this document in compliance
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IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
Case
number: 45681/13
DATE:
25 SEPTEMBER 2014
In the matter
between:
[B……..
A…….
C……]
................................................................
APPLICANT
And
[B…………
J……..]
.................................................................
RESPONDENT
JUDGMENT
NICHOLLS J:
[1]
The applicant, the former husband of the
respondent, seeks to set aside the award of an arbitration appeal
tribunal in terms of
which he was ordered to pay his former wife an
amount of R35 739 287. The award arose out of a delictual claim
brought by the respondent
two years after the conclusion of the
divorce on the basis of fraudulent non-disclosure of his assets at
the time of the divorce.
[2]
The applicant seeks the following relief:
2.1
that the arbitration agreement be set
aside, cease to have any effect and the dispute be referred back for
hearing and adjudication
to the South Gauteng High Court;
alternatively
2.2
that the arbitration appeal tribunal award
dated 15 October 2013 be set aside and remitted for hearing of
further evidence before
Justice Harms for fresh consideration and for
the making of a fresh award; alternatively
2.3
that the dispute be referred to a new
arbitration appeal tribunal using procedures prescribed in the
arbitration agreement, or as
directed by court; alternatively
2.4
that the award be referred back to the
arbitration appeal tribunal to correct the mistakes and/or errors
appearing in the appeal
award.
[3]
Although various defences were raised in the papers, counsel for the
applicant confined himself to two points. Firstly, that
the
dispute referred to arbitration is one that is incidental to the
matrimonial cause and therefore prohibited in terms of Section
2 of
the Arbitration Act 42 of 1965 (“the
Arbitration Act&rdquo
;).
Secondly, that the arbitrators misconceived the nature of the inquiry
by assessing the accrual as at the date of divorce rather
than at the
date of
litis contestatio
.
Background facts
[4]
The parties were married to each other on 14 February 1987 out of
community of property but subject to the application of the
accrual system in terms of section 3 of the Matrimonial Property Act
88 of 1984 (“the MPA”) which provides:
3.
Accrual system
(1)
At the dissolution of a marriage subject to the accrual system, by
divorce or by the death of one or both of the spouses, the
spouse
whose estate shows no accrual, or a smaller accrual than the estate
of the other spouse, or his estate if he is deceased,
acquires a
claim against the other spouse or his estate for an amount equal to
half of the difference between the accrual of the
respective estates
of the spouses.
(2)Subject
to the provisions of section 8(1) a claim in terms of subsection (1)
arises at the dissolution of the marriage…
[5]
On 26 November 2006 the respondent sued for divorce and ancillary
relief including a claim under section 3. She claimed an amount
equal
to half of the difference between the accrual of the respective
values of their estates, her estate showing no accrual.
[6]
The trial was set down for 5 May 2008 but the day before the trial
commenced, the parties arrived at a settlement agreement.
Consequently the divorce proceeded on an unopposed basis and the
settlement agreement was made an order of court. It dealt with
custody of the minor children, maintenance for the respondent and the
minor children, as well as the division of the estate.
[7]
The applicant’s main asset was his 23% shareholding in a
private company, Patula Construction (Pty) Ltd (“Patula”).
The accrual was resolved on the basis that the respondent was paid R8
007 340 and the amount outstanding in respect of a mortgage
bond
registered over the matrimonial home situate at 5 Stratton Avenue,
Bryanston. The agreement was in full settlement of all
claims the
respondent may have against the applicant. At the time the applicant
represented that his net asset value was R20 712
527.
[8]
In July 2008, two months after signing the agreement of settlement,
it became public knowledge that a listed construction company,
Esor
Limited (“Esor”), was interested in acquiring Patula.
This culminated in the signing of agreement of sale between
the
Patula group of companies and Esor on 19 September 2008. The
agreement of sale provided for a purchase price of R423 550 000
of
which 60% was payable in cash and 40% by the issue of shares in Esor.
[9]
On 21 January 2010 the respondent launched an ex parte Anton Piller
application out of the South Gauteng High court. An order
was granted
on 2 February 2010. During the execution of the order, management
accounts of Patula for the periods 31 August 2007,
30 November 2007
and 29 February 2008 were obtained. (Insofar as it is relevant there
is a dispute as to where the account of 29
February 2008 was
obtained). Nonetheless, whatever their origin, these accounts
indicated that the net income of Patula had shown
a substantial
growth from R16.8 million in February 2007 to R60.9 million in
February 2008.
[10]
On 4 February 2010 the respondent instituted a claim for delictual
damages in the sum of R83.9 million on the basis that the
applicant
falsely or negligently represented that his shares were worth only
R20 712 527 and that she would not have settled for
R8 007 340 had
she known of the true value of the shares. In the alternative,
she claimed that the applicant knew the true
value of the shares but
fraudulently or negligently failed to disclose this information
thereby inducing her to settle for R8 007
340.
[11]
On 26 March 2010 the respondent obtained default judgment against the
applicant. He apparently first became aware of the judgment
against
him when the Sheriff came to attach his household furniture on 22
April 2010. He applied for rescission of judgment which
was finally
granted by consent on 28 June 2011.
[12]
The trial was to proceed in August 2012 but on 14 August 2012 the
parties entered into an arbitration agreement referring “the
dispute... in the action” to arbitration on an urgent basis.
[13]
The arbitration proceeded before retired Deputy President of the
Supreme Court of Appeal, Judge Harms from 20 August 2012 to
21
November 2012. He made his award on 26 November 2012 and held that
misrepresentation had not been established. The arbitrator
did
however find that the applicant failed, at least negligently, to
disclose his greatly increased loan account. He awarded the
respondent R3 900 000 with interest as from date of summons being 14
February 2010, plus costs. On 7 November 2012
the
respondent served a notice of appeal against the Harms’ award.
The applicant cross-appealed.
[14]
On 5 October 2013 the hearing of the arbitration appeal took place
before an appeal tribunal comprised of retired judges Howie
and
Streicher and Advocate van der Linde SC. The appeal tribunal
signed their award on15 October 2013. The appeal of the
respondent
succeeded and the Harms award was set aside. The applicant was
ordered to pay the respondent R35 739 287 minus the maintenance
which
was payable to her. The applicant’s cross-appeal was dismissed.
[15]
The appeal tribunal found that misrepresentation had not been
established but that non-disclosure, in circumstances where the
applicant had a duty to disclose, had been established. It found that
the requirements for delictual liability had been proved
as well as
factual and legal causation. It found that the non-disclosure was
deliberate and intended to induce the respondent into
agreeing to an
accrual value of the applicant’s estate that was materially
understated. The damages awarded to her was the
difference between
the amount she was awarded taking into consideration the true value
of the estate and the amount she agreed
to in the settlement
agreement.
[16]
In December 2013 this application was launched to set aside the
arbitration appeal award.
Is
referral to arbitration prohibited?
[17]
The applicant’s first argument is that the parties referred the
dispute, which is incidental to their matrimonial cause
in that it
dealt with the proprietary consequences of their marriage, to
arbitration in circumstances where this is expressly prohibited
by
the Act in terms of section 2. Therefore the arbitration agreement,
the arbitration and the arbitration appeal are void ab initio.
[18]
Section 2 of the Arbitration Act 42 of 1965 (“the Act”)
provides that:
2.
A reference to arbitration shall not be permissible in respect of-
(a)
Any matrimonial cause or
matter incidental to such cause……”
[19]
In support of his argument that the dispute is incidental to a
matrimonial cause, the applicant points to the pleadings, which
indicate that the determination of the accrual of the respective
estates forms a material part of the dispute. Moreover the
arbitrator’s
award and the appeal tribunal’s award make
frequent reference to “the accrual”, “the accrual
system”
and to the applicable sections in the
Matrimonial
Property Act.
[20
]
In essence the applicant argues that the finding of the appeal
tribunal was that as a result of the breach of the duty to disclose
in terms of
section 7
of the MPA, the respondent did not get what she
was entitled to in terms of
section 3
of the MPA.
Section 7
obliges a
spouse to furnish full particulars of the value of his or her estate
within a reasonable time for the purposes of determining
the accrual.
[21]
Furthermore, the arbitration appeal tribunal held at paragraph 51 of
the arbitration appeal award that:
”
The
appellant’s accrual claim against the respondent was once-off
and unique, statutorily created and circumscribed. The appellant’s
delictual damages claim is aimed at recovering loss suffered as a
result of a wrong committed in the context of that claim, and
is
therefore also unique and circumscribed”.
[22]
All the above, the applicant submits, is indicative of a dispute
falling squarely within the realm of a matrimonial cause or
a claim
incidental to the matrimonial claim. It is therefore void
ab
initio.
[23]
The respondent on the other hand contends that the phrase “
any
matrimonial cause“
means a cause of action arising from a
marriage but must refer to a live cause - one that is either pending
or in the process of
being instituted.
[24]
“
A matter incidental to such cause”
must also
refer to a matter which is incidental to a live matrimonial cause.
The respondent concedes that the value of the applicant’s
accrual as an issue in a divorce action could not have been referred
to arbitration. However, if the accrual is quantified for
a different
purpose such as for a business venture (the parties not contemplating
divorce at all) it cannot be said that the accrual
was incidental to
a matrimonial cause. Similarly, to quantify an accrual for the
purposes of a delictual claim once the marriage
has already been
dissolved, cannot be incidental to a matrimonial action.
[25]
What the respondent argues is that at the time of issuing the divorce
summons the claim for decree of divorce (the matrimonial
cause), the
claims for custody of the children and maintenance for a share of the
accrual were all matters incidental to a matrimonial
cause. However,
once the settlement agreement became an order of court on 5 May 2008,
the matrimonial cause, and all matters incidental
thereto, including
the claim for half of the accrual, were no longer alive. The
matrimonial cause had come to its natural conclusion.
[26]
The applicant relied on
Taylor v Kurtsag NO
2005 (1) SA 362
(W) 394-395 as authority for the proposition that proprietary
consequences of the marriage were excluded from arbitration. In that
matter disputes regarding custody, maintenance and the proprietary
consequences of the marriage were referred to an ad hoc Beth
Din for
binding determination ‘’according to the arbitration laws
of the Republic”. The award of the Beth Din
was declared
invalid in terms of
section 2
of the
Arbitration Act.
[27
]
I am not convinced that
Taylor
is helpful to the applicant. In
the present matter no proprietary consequences of the marriage were
referred to arbitration. These
had been finalised on the date of
dissolution of the marriage. Insofar as the court held that:
“
The legislature has thus decreed ‘to reserve
jealously for the Court, control of this and the right to determine
what was
good and what was not good for a child in a matrimonial
dispute, whether the dispute was
before or after the
divorce’
(Ressell v Ressell 1976(1) SA 289 (W) at
292A and cf Pitt v Pitt
1991 (3) SA 863
(D))’,
this
statement relates to children, and is accordingly distinguishable.
Ressell v Ressell
1976(1) SA 289 (W) also dealt with children
and is distinguishable for this reason.
[28]
In
Pitt v Pitt
1991 (3) SA 863
(D) before signing an agreement
of settlement in a divorce matter, the parties concluded a separate
oral agreement that the distribution
of certain furniture between the
parties should be referred to an arbitrator “
who should go
into the proprietary rights in relation to that property and that the
decision should be final”.
A statement of the court that
the appointment of arbitrator to determine property rights of spouses
falls foul of
section 2
of the
Arbitration Act is
obiter. The real
issue was held to be whether the agreement constitutes impermissible
parole evidence. There can be no doubt that
the agreement in
Pitt
clearly referred to arbitration of a marital cause, alternatively a
matter incidental to a live matrimonial cause. In the present
case
the proprietary consequences of the marriage with regard to accrual
were not determined in the arbitration as they had already
been
disposed of.
[29]
At first blush therefore the applicant’s argument is compelling
but a careful analysis of
section 3
of the MPA and the applicable
case law leads one to a different conclusion. It seems to me that
when the respondent issued summons
for misrepresentation and
fraudulent or negligent non-disclosure, this was a delictual action
based not on the marriage, but which
had its roots in delict. It is
correct that the duty to disclose the accrual was a statutory duty
arising out of
section 7
of the MPA. However, the delictual
claim was not for payment of the accrual in terms of
section 3
of the
MPA but for payment of damages suffered as a result of fraudulent or
negligent misrepresentation, alternatively non-disclosure
with regard
to the true amount of the accrual. Therefore the amount of the
accrual was not incidental to a divorce action
(a matrimonial cause)
but rather incidental to a delictual action.
[30]
The determination of the accrual was relevant for the purposes of
determining wrongfulness and the quantum of damages rather
than for a
claim in terms of
section 3
of the MPA. The amount of accrual can
only be a matter incidental to a matrimonial cause if it is
determined for the purpose of
a claim in terms of
section 3.
A
matrimonial action must be alive for the matter to be incidental
thereto. This one was concluded in May 2008 when the settlement
agreement was made an order of court.
[31]
The submission that the dispute was referred to arbitration in
circumstances expressly prohibited by the
Arbitration Act is
misplaced. The dispute arises from a civil claim for damages flowing
from the law of delict. Even if it is true that the present
proceedings arise out of a settlement agreement in a divorce matter,
this, in my view, does not make the dispute one incidental
to a
matrimonial cause. The dispute that was referred to arbitration was
fraud.
Was
the nature of the enquiry misconceived?
[32]
The second leg of the applicant’s argument is that the
assessment date used to establish the accrual was the incorrect
one.
In consequence thereof the arbitrator and the arbitration appeal
tribunal misconceived the whole nature of the enquiry in
the
arbitration thereby rendering the entire process procedurally unfair.
The applicant accordingly seeks an order that the arbitration
appeal
award be set aside and the dispute be referred back to Harms for the
hearing of further evidence and for reconsideration.
[33]
The applicant filed a supplementary affidavit shortly before the
hearing setting out that during the course of preparation
his counsel
established that the operative moment when the values of the
respective estates had to be assessed is at the date of
litis
contestatio
and not at the time that the divorce order was
granted.
[34]
The applicant contended that as a result of this error the arbitrator
and the arbitration appeal tribunal misconceived the
entire nature of
the inquiry and their duties associated therewith. They failed to
direct their minds to the causes of action in
respect of the
assessment date, being the date on which the values of the estates
had to be determined. This is so important that
the whole enquiry is
fundamentally affected thereby. The correct assessment date is
crucial to every element of each cause of action
of the respondent
and is an essential inquiry in the determination of damages. Instead
the arbitrator and the appeal tribunal assumed
that the assessment
date was the date of divorce rather than the date of
litis
contestatio
being 4 April 2007 when pleadings closed.
[35]
In failing to even consider the correct assessment date, the
arbitrator and the arbitration appeal tribunal prevented themselves
from applying their minds to the question that ought to have been
considered. This date is the essential enquiry into the determination
of the damage; the duty to disclose is dependent on the assessment
date; fault and wrongfulness cannot be determined without reference
to this date. This, so the argument goes, prevented a fair
arbitration and a fair trial of the issues. In essence it is argued
that the arbitrators asked themselves the wrong question.
[36]
For the submission that the correct date of the assessment is the
date of
litis
contestatio
when pleadings closed on 4 April 2007, the applicant relies on the
judgment of Brassey AJ in
MB
v NB
2010
(3) SA 220
(GSJ). Here it was held that although the date of
dissolution of the marriage was the date upon which the one spouse
had a legally
enforceable entitlement to claim half of the net
accrual of the other spouse’s estate
[1]
,
the date when the respective estates had to be assessed was at
litis
contestatio
.
[37]
The judgment acknowledged that while
section 3
of the MPA makes it
clear that the contingent right may be perfected only on dissolution
of the marriage, it does not establish
the moment that the respective
estates must be assessed. Brassey AJ pointed out that it was a
problem of procedure rather than
substance as litigation takes time
to complete. He went on to find that this moment is, according to
established principle, at
litis contestatio
when the pleadings
close. This was the date on which the dispute crystallised. The court
held that all transactions subsequent to
that date were irrelevant to
the assessment of the accrual. The use of the date of
litis
contestatio
was a response to the malicious dissipation of assets
during the period between the break-up of the marriage and the actual
dissolution
of the marriage. The reasoning of Brassey AJ was followed
in
MB v DB
2013 (6) SA 86
KZD by the High Court in Kwa-Zulu
Natal.
[38]
On this scenario using
litis contestatio
as the date on which
the respective estates had to be quantified, namely 4 April
2007, there was no question of the sale
of the Patula shares to Esor
and the settlement figure of R8 000 000 would be correct.
[39]
In another case of this division
J
Allan v DM Allan
[2]
,
Sutherland J dealt at length with the date of the assessment of the
respective estates of spouses for the purposes of accrual
and came to
a different conclusion. He found
litis
contestatio
to be a “
an
archaic label for a banal event”
and
the fact that it was purely procedural was the very reason it could
not have any bearing on when, by operation of law, a certain
right
comes into existence. When a claim is based on the existence of a
right and the claim is for a performance measured by value,
it is not
possible to calculate that value before the right itself comes into
existence.
[3]
[40]
Sutherland J concluded that albeit an attempt to prevent
dissipation of assets, it was not acceptable to find a solution
which
was irreconcilable with the legislation.
Section 3(2)
specifically
provides that a claim for accrual arises at the date of dissolution
of the marriage. To take
litis contestatio
as the date when
the value of the estates was to be assessed, would compromise the
integrity of the provisions of the statute. Insofar
as he disagreed
with Brassey AJ on this aspect he found it was obiter because no
decision was made pursuant thereto.
[41]
I am in agreement with Sutherland J. The MPA is clear that the claim
for accrual arises on dissolution of the marriage. It
makes no sense,
either practically or conceptually, to make the day on which
pleadings close the date on which the assessment of
the values of the
accrual must take place.
[42]
In any event I am not convinced that even if the arbitration appeal
tribunal were wrong in their quantification of the operative
moment
when the values of the respective estates of the spouses in divorce
proceedings has to be assessed, that this means that
they have
misconceived the whole nature of the arbitration.
[43]
An arbitration award may be set aside in terms of
section 33(1)
of
the
Arbitration Act which
provides:
“
Where-
(a)
Any member of an arbitration
tribunal has misconducted himself in relation to his duties as an
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 application of any party to the reference after due
notice to the other party or parties, make an order setting
the award
aside.”
[44]
The general principle that our courts have frequently re-iterated is
that an irregularity in the proceedings does not mean
an incorrect
judgment or an incorrect result but is a reference to the method of
the proceedings.
[4]
The question
to be asked in an arbitration is whether the procedure followed
afforded both parties a fair opportunity to present
their case
[5]
.
The
Arbitration Act does
not allow for a review of a material error
of law.
[6]
[45]
The applicant in submitting that the nature of the enquiry was
misconceived by the appeal tribunal placed reliance on
Goldfields
Investments Ltd and Another v City Council of Johannesburg
1938
TPD 551.
Goldfields
provided a qualification to the general
rule that an arbitration could be set aside only as a result of a
procedural irregularity.
A further ground was included and this was
where a decision maker misconceived the whole nature of the inquiry.
Goldfields dealt
with an instance where an ordinance entitled an
aggrieved person to a rehearing with the leading of evidence.
The magistrate,
apparently in good faith, refused to conduct a
rehearing.
[46]
It was held that the magistrate had misconceived his mandate in that
he had asked himself the wrong question, a question other
than that
which the relevant act directed him to ask. Although it could
be said that he decided the case fairly but was wrong
on the law, the
court found that he had misconceived the nature of the inquiry in
that he never dealt with the matter in a manner
as contemplated by
the section, For this reason the court found that there was a gross
irregularity and the proceedings should
be set aside.
[47]
The
Goldfields
qualification
was dealt with by Harms JA, as he was then, in
Telcordia
Technologies Inc v Telkom SA Ltd
[2006] ZASCA 112
;
2007
(3) SA 266
(SCA)
.
It
was held that first the arbitrator has to determine the nature of the
inquiry and the arbitrator’s duties. (In
Telcordia
the arbitrator had to interpret the agreement by applying South
African law). Then he has to decide further issues of law or facts
which he deemed necessary or appropriate in any manner which he
deemed necessary or appropriate. The fact that the arbitrator
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 merely means that the arbitrator
erred in the
performance of his duties. He has the ‘right to be wrong’.
[7]
[48]
In this case, even if it is accepted that the incorrect date was used
at which to assess the value of the applicant’s
estate for the
purposes of the accrual, this does not mean that the appeal tribunal
misconceived the nature of their inquiry. It
merely means that they
erred. This is insufficient ground for setting aside an arbitration
award in terms of
section 33
of the
Arbitration Act. Brand
J, as he
was then, cautioned against parties trying to take the arbitrator on
appeal under the guise of remittal.
[8]
In my view this is no more than an attempt to appeal the ward of the
arbitration appeal tribunal.
[49]
Accordingly the applicant must fail on this ground as well.
Patent
error
[50]
It is common cause that the arbitration appeal award contains an
error. At paragraph 87 of the award it is stated that: “
At
the time of the settlement agreement the parties were in agreement
that the value of the respondent’s accrued estate excluding
shares and loan accounts in companies was R19 295 281.00”
.
In fact this figure should have been R7 489 431.00.
[51]
The respondent agrees that this aspect should be referred back to the
appeal tribunal for the correction thereof. Counsel for
the applicant
has agreed that there will be no cost implication for the respondent
should this occur.
In
the result I make the following order:
1.
The application is dismissed with costs
2.
Paragraph 87 of the award of the
arbitration appeal tribunal is referred back to the arbitration
appeal tribunal for correction.
C.
H. NICHOLLS
JUDGE OF THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION
JOHANNESBURG
Appearances
Counsel
for the applicants : Adv. W Trengove SC
Adv.
K W L
üderitz SC
Adv.
C Woodrow
Instructing
Attorneys : Thomson Wilks Inc
Counsel
for the respondent : Adv. M Smit
Instructing
Attorneys: David C Feldman Attorneys
Date
of hearing : 16 September 2014
Date
of judgment : 25 September 2014
[1]
Reeder
v Softline Ltd and Another
2001 (2) SA 844 (W)
[2]
Case 2007/27065 judgment delivered on 4 June 2013
[3]
Case 2007/27065 judgment delivered on 4 June 2013, paragraph 17
[4]
Ellis
v Morgan; Ellis v Desai
1909 TS 576
;
Telcordia
Technologies Inc v Telkom SA Ltd
[2006] ZASCA 112
;
2007
(3) SA 266
(SCA) para 54
[5]
Lufuno
Mphaphuli & Associates (Pty) Ltd v Andrews
2009
(4) SA 529
(CC) 221
;
Sidumo
and Another v Rustenburg Platinum Mines Ltd and Others
2008 (2) SA 24
(CC) para 265;
[6]
Telcordia
Technologies Inc v Telkom SA Ltd
[2006] ZASCA 112
;
2007
(3) SA 266
(SCA) para 67.
[7]
Telcordia
Technologies Inc v Telkom SA Ltd
[2006] ZASCA 112
;
2007
(3) SA 266
(SCA) para 83- 85
[8]
Kolber
and Another v Sourcecom Solutions (Pty) Ltd and Others
2001 (2) SA 1097
(C)