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[2015] ZAGPJHC 84
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Brookhaven Projects CC v Mike Buyskes Construction (Pty) Limited and Another (28384/14) [2015] ZAGPJHC 84 (17 April 2015)
REPUBLIC OF SOUTH
AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
GAUTENG LOCAL DIVISION,
JOHANNESBURG
CASE NO: 28384/14
DATE: 17 APRIL 2015
In the matter between:
BROOKHAVEN PROJECTS
CC
...........................................................................................
Applicant
And
MIKE BUYSKES CONSTRUCTION (PTY)
LIMITED
.........................................
First
Respondent
DEREK
BONHEIM
.................................................................................................
Second
Respondent
J U D G M E N T
MAKUME, J:
[1] In this matter the applicant seeks
an order reviewing and setting aside awards made by an arbitrator.
The review is in terms
of section 33(1)(b) of the Arbitration Act
1965 (the Act) on the basis that the arbitrator committed a gross
irregularity in the
conduct of the proceedings or exceeded his
powers.
[2] The factual situation that led to
this application follows hereunder.
BACKGROUND
[3] During or about October 2009 the
applicant and the first respondent concluded a subcontractor
agreement in terms of which the
applicant as a subcontractor to the
respondent agreed to supply and install Civil Engineering Services at
the Fairways Hotel, Conference
Centre and Spa.
[4] The agreed contract price for the
services was the sum of R4 586 985.49 payable by the respondents to
the applicant. The agreement
is governed by the principles as set
out in the JBCC Series 2000 Nominated/Selected Subcontract Agreement
July 2007 Edition (the
agreement).
[5] Clause 40 of the agreement deals
with resolution of disputes that may arise between the parties.
Clause 40.9 of the agreement
is central to the issues in this matter
and will be dealt with later.
[6] It is common cause that a dispute
subsequently arose between the parties concerning the applicant’s
claim for acceleration
costs in the amount of R998 445.92. The
appointed adjudicator could not resolve the dispute and eventually
the parties agreed
on arbitration.
[7] At paragraphs 60 to 62 of his
statement of claim dated the 26th September 2012 the applicant says
the following:
“[60] It is common cause that
instructions to accelerate the works were in fact issued and that the
claimant executed such
instructions in order to achieve the practical
completion of 14 May 2012. The claimant refers to the Defendant’s
instructions
to accelerate the subcontract works under and contained
in paragraphs 25, 28, 43 and 47.
[61] The Defendant has as per paragraph
47 admitted liability in principle to the claimant’s claim for
acceleration costs
for the additional resources working hours and
additional scope.
[62] The claimant accordingly submits
that the costs claimed as expenses and loss are directly related to
the acceleration measures
implemented to achieve the actual practical
completion date of 14 May 2010.”
[8] In reply the respondent filed a
special plea and a plea over. In its special plea the respondent
raises two issues firstly
that a Mr Leader who they described as
being the Principal Agents Engineer and who gave instructions for
acceleration did so as
agent of the employer not as agent for the
respondent. At paragraph 4.1 the respondent says:
“The Author of the e-mail Mr
Geoff Leader is not an employee of the defendant but was employed by
Tekciv Services CC which
was the appointed Civil Engineer for the
external work for the project nor was he authorised or empowered to
act for or on behalf
of the defendant in matters relating to the
selected subcontract with the claimant.”
[9] Secondly, in paragraph 8 of the
special plea the respondent says that if the instructions to
accelerate on the contract were
oral and not in writing as required
by clause 1.8 of the agreement then such instructions are null and
void.
[10] In conclusion at paragraph 10 the
respondent says that the applicant failed to set out allegations to
sustain his cause of
action and prays that the claim be dismissed.
[11] In the plea over the respondent
largely repeated the issues raised in the special and added amongst
others that the agreement
between the applicant and the respondent
does not provide for acceleration of the works and that in terms of
clause 1.8 of the
subcontract agreement any changes thereto shall not
be effective unless reduced to writing.
[12] On the 8th November 2012 the
applicant filed his replication to the special plea and the plea
over.
[13] In the replication to the special
plea the applicant says that whilst it is correct that Mr Geoff
Leader was the agent for
the employer throughout the duration of the
contract Mr Leader issued instructions on behalf of the respondent
with the knowledge
and approval of the respondent.
[14] At paragraph 14 of the replication
the applicant says that:
“The Defendant by relying on Mr
Geoff Leader to issue all instructions on its behalf without
contradictions or other such
action represented to the Claimant
through such conduct that Mr Geoff Leader was authorised to represent
the Defendant.”
[15] In further support of his
replication the applicant says that during October 2009 he was
informed that the contract would be
managed by Mr Geoff Leader on
behalf of the respondent and that he intends calling Mr Leader to
give oral evidence at the hearing
regarding the meeting of October
2009.
[16] The above is what the arbitrator
Mr H J Savenije had to deal with and make a ruling on. In motivating
the special plea the
respondent says that the basis for the special
plea is that the respondent avers that the issue of fact or law set
out in the special
plea can properly and conveniently be decided
separately or before the other issues relating to the claim are
determined.
[17] One of the purposes which a
special plea is designed to serve is the convenience to all parties
and the court if dealing separately
with an issue which if the
special is successful will either eliminate or postpone any need to
deal with other issues in the case.
[18] Rule 24 of the Standard Procedure
Rules in terms of which the arbitration was conducted provides as
follows:
“The Arbitrator shall if both
parties so agree, or may on the application of either party or at his
own discretion determine
any particular issue of law or fact either
separately or before other issues are determined.”
[19] It was on this basis that Mr
Savenije proceeded to hear evidence and argument on the special plea.
The respondent held the
view that it will be expeditious to the
resolution of the dispute if the arbitrator makes a finding on
whether there was a need
for written instructions for accelerated
work and whether Mr Leader had the necessary authority to issue
instructions whether verbal
or in writing to accelerate on the works.
[20] It is trite that if the arbitrator
Mr Savenije had found in favour of the respondent on the special plea
as pleaded then it
was the end of the claim. Mr Savenije in fact
ruled against the respondent and found as follows in paragraph 5.1 of
his determination:
“Consequently I reject the
Defendant’s Special Defence that there are no allegations to
sustain the cause of action
pleaded by the Claimant or because no
‘contractors instructions’ to accelerate was issued by
the Defendant that the
Claimant is prevented from pursuing a claim to
be compensated for accelerating.”
[21] It is the determination as set out
in paragraphs 5.2 and 5.3 that have led to this application. These
determinations read
as follows:
“5.2 The Principal Agent’s
letter of 2nd March 2011 effectively created a disagreement between
the Defendant and the
Claimant as anticipated by 40.9 of the
Agreement.
5.3 In terms of 40.9 should any
disagreement arise between the contractor and the subcontractor
consequent upon a decision, action
or inaction of the employer or
agent then the contractor shall allow the subcontractor to use the
contractor’s name to institute
proceedings as are provided for
in the principal agreement.”
[22] Shortly after the award was made
the applicant’s attorneys addressed a letter on the 7th May
2012 to the respondents’
attorneys in which letter they raised
their concern that paragraphs 5.2 and 5.3 of Savenije’s award
and determination were
destructive and irreconcilable with one
another and asked for their consent that a correction be made.
[23] On the 11th June 2013 the
respondents’ attorneys addressed a letter to the applicant’s
attorneys. Paragraphs 4,
5 and 6 of that letter are relevant for
purposes of this application and I quote same in full:
“4. It is our client’s
contention that the only properly so-called ruling/order/award of
significance made by the arbitrator
is that contained in paragraphs
5.3 and 6.1 of the interim award.
The import of the former is patently
that your client becomes entitled to proceed against the principal in
terms of clause 40.9
of the written subcontract agreement in our
client’s name, by instituting proceedings against the
principal, claiming whatever
your client contends it is entitled to.
5. Subject to paragraph 7 our client
abides by the arbitrator’s ruling however subject to the
prescripts of the remainder
of the said clause 40.9 inter alia that
your client furnishes our client an indemnity and security in respect
of all/any liability
for the costs or otherwise our client may be
liable for as a result of the intended proceedings by our client’s
name by your
client against the principal.
6. In order to facilitate the
institution of the aforementioned intended proceedings our client
requires the written indemnification
signed by your client together
with its members’ sureties and an acceptable bank guarantee for
the costs. Our estimate for
the likely costs of the intended
arbitration would be R500 000.00 and until such time that our client
receives the said indemnity,
sureties and bank guarantee your client
shall not be entitled to take any steps to advance your claim against
the principal.”
[24] It is common cause that the
applicant on receipt of that letter rejected the contents thereof and
insisted that what the arbitrator
said in paragraphs 5.2 and 5.3 were
obiter and had nothing to do with the determination in paragraph 5.1.
The applicant invited
the respondent to furnish it with three dates
for purposes of the continuation of the arbitration.
[25] It was whilst the parties were
still exchanging correspondence on this aspect that the arbitrator Mr
Savenije passed away.
A substitute arbitrator in the person of the
second respondent Mr Derek Bonheim was appointed. The second
respondent held a preliminary
meeting with the parties on the 29th
January 2014.
[26] Of importance for purposes of this
judgment is what the second respondent recorded in the preliminary
meeting as issues raised
by the parties at paragraph 13 of the
preliminary minutes he records as follows:
“13(e) It was the Respondents’
view that the evidence led at arbitration must start afresh (de novo)
and claimant’s
view is that the previous Arbitrator’s
findings on the Special Defence must stand.”
[27] With this background the second
respondent called for amendments to the pleadings and on the 13th
June 2014 a hearing was held
and the parties asked the second
respondent to make a ruling on the interpretation of the interim
award made by Mr Suvenije the
first arbitrator.
[28] The second respondent made his
ruling on the 23rd June 2014 and made two findings. The first finding
he dismissed the respondents’
special plea in other words he
agreed with the first arbitrator that the applicant’s statement
of claim does disclose sufficient
cause of action. Secondly, he ruled
that the applicant’s claim should be pursued against the
Principal Agent and not against
the first respondent.
[29] Before I deal with the two
findings especially the finding that the applicant’s claim lies
against the Principal Agent
I deem it necessary to first deal with a
point in limine as raised by the respondents.
[30] The first respondent argues that
the application to review the first award by Mr Savenije was launched
out of time and that
there is no case made for extension of time or
condonation. The first respondent argues further that it was only
when the second
respondent’s interpretation of the first award
did not find favour with the applicant that applicant cried foul and
resorted
to the review of both the first and second awards.
[31]
Section 33(2)
of the
Arbitration
Act reads
as follows:
“An application pursuant to this
section shall be made within six weeks after the publication of the
award to the parties.”
The Act does make provision in section
38 for extension of periods fixed by the Act on good cause shown.
[32] In my view it is only paragraphs
5.2 and 5.3 of the first award that created a problem. The applicant
and the respondents could
not agree on the exact meaning of the award
as set out in the two paragraphs hence the second respondent was
specifically requested
to interpret the award. There was no problem
with the finding in paragraph 5.1 hence the second respondent
dismissed it like the
first arbitrator did. I am persuaded that a
review of paragraphs 5.2 and 5.3 could not be applied for until the
parties received
a ruling by the second respondent. This application
for review was accordingly brought within the period of six weeks
from the
time of the ruling.
[33] Even if I may be held to be wrong
in holding that view I am satisfied that the applicant has shown good
cause as required in
section 38. In the matter of South African
Forestry Co Ltd v York Timbers Ltd
2003 (1) SA 331
(SCA) at page 338
paragraph [14] the court in dealing with the phrase “good
cause” said the following:
“Good cause is a phrase of wide
import that requires a court to consider each case on its merits in
order to achieve a just
and equitable result in the particular
circumstances. As pointed out by Innes CJ in Cohen Brothers v
Samuels
1906 TS 221
at 224 in relation to the meaning of that phrase
albeit in another context:
‘No general rule which the wit of
man could devise would be likely to cover all the varying
circumstances which arise in applications
of this nature. We can only
deal with each application on its merits and decide in each case
whether good cause has been shown.’”
[34] I now turn to deal with whether
the arbitrator in their awards committed gross irregularity in the
conduct of the arbitration
proceedings or have exceeded their powers.
In determining this aspect I deem it necessary to deal with clause
40.9 of the agreement.
[35] Clause 40.9 reads as follows:
“Should any disagreement arise
between the contractor and the subcontractor consequent upon a
decision, action or inaction
of the employer or agent, then the
contractor shall allows the subcontractor to use the contractor’s
name to institute proceedings
as are provided for in the principal
agreement. Further the contractor may elect to join the subcontractor
in instituting such
proceedings. Should the subcontractor elects to
proceed, the subcontractor shall:
40.9.1 Provide the contractor with an
indemnity and security as reasonably required by the contractor.
40.9.2 Certify that the outcome of such
proceedings shall be binding on him.
40.9.3 Initiate the proceedings as
provided for in the principal agreement.”
[36] In my view the first question to
be answered is whether or not a disagreement did arise between the
contractor and the subcontractor.
Both arbitrators say the
disagreement arose when the Principal Agent suddenly changed his mind
and addressed a letter to claimant
in the following words:
“In terms of the JBCC Series 2000
Nominated/Selected Subcontract Agreement no reference is made to
acceleration and as no
instruction was given to accelerate the works
no adjustments will be made to the contract value. Your claims for
acceleration
due to inclement weather and additional work are
therefore not accepted.”
[37] Clause 40.9 must be read with
clauses 40.1, 40.2, 40.2.1 and 40.2.2 in order to decide if indeed a
disagreement did arise between
the contractor and the subcontractor.
The clauses read as follows:
“SETTLEMENT OF DISPUTES
40.1 Should any disagreement arise
between the contractor and the subcontractor arising out of or
concerning this n/s agreement
or its termination, either party may
give notice to the other to resolve such disagreement.
40.2 Where such disagreement is not
resolved within ten (10) working days of receipt of such notice it
shall be deemed to be a dispute
and shall be referred to by the party
which gave such notice to either:
40.2.1 Adjudication [40.3] where the
adjudication shall be conducted in terms of the edition of the JBCC
Rules for adjudication
current at the time when the dispute was
declared or
40.2.2 Arbitration 40.4 where the
arbitrator is to be appointed by the body selected by the parties
[41.3] whose rules shall apply.”
[38] If indeed a disagreement arose
between the contractor in this case the respondent and the
subcontractor in this case the applicant
when the Principal Agent
addressed the letter dated the 2nd March 2011 to the applicant then
such disagreement as contained in
that letter should have been
subjected to a dispute resolution as is required by clauses 40.1 to
40.2.2. This did not happen instead
what was referred to the
arbitrator to decide is whether the applicant had pleaded sufficient
cause to sustain a cause of action.
[39] In the same manner that clause
40.9 should not be read in isolation so is the letter dated the 2nd
March 2011 the letter that
the arbitrator say created a disagreement.
That letter was preceded by a series of correspondence exchanged
between the applicant,
the Principal Agent and the respondents and in
a letter dated the 20th October 2010 the respondents told the
applicant how it had
come to a valuation of the accelerated work.
Paragraphs (v) and (vi) of that letter read as follows:
“(v) Seeing the acceleration is
not defined in JBCC Series 2000 Agreements we have added an
additional 30% to your preliminary
time related costs to allow for
overtime worked etc. This the basis that we are using for all
acceleration claims.
(vi) In terms of the foregoing we
advise that we have awarded you the following (see attached
adjustment breakdown):
(a) R32 580.69 for the increase in
value related preliminaries.
(b) R73 848.89 for the increase in time
related preliminaries due to the increase in scope of works and
delays (from 26 March 2010
to 14 May 2010).
(c) R105 799.84 for the increase in
time related preliminaries (acceleration) from 7 July 2010 back to 14
May 2010).”
[40] On the 30th November 2010 the
Principal Agent sent an email to the applicant in which email a final
statement of account as
prepared by the Principal Agent. The account
included amounts due for acceleration. However for some inexplicable
reason some
four months after the dispatch of this letter the
Principal Agent repudiated the claim.
[41] The repudiation of the applicant’s
claim was not because of the fact that the applicant was claiming
payment from a wrongful
party it was because the respondents told the
applicant that there was no acceleration clause in the agreement and
also that the
person who gave the applicant written or oral
instructions to accelerate did not have the authority.
[42] In my view when the first
arbitrator made a determination on clause 40.9 he exceeded his duties
as it is not what he was asked
to rule on and accordingly his finding
or determination as contained in paragraphs 5.2 and 5.3 stands to be
reviewed and set aside.
[43] The second respondent Mr Derek
Bonheim also did not confine himself to the mandate of dealing with
the determination in 5.1
only but wrongly extended his findings to
deal with 5.2 and 5.3 when he should have refrained from doing so. In
my view his determination
also falls to be reviewed and be set aside.
[44] In the matter of Stocks Civic
Engineering (Pty) Ltd v Rip NO and Another [2002] ILJ 358 LC it was
held as follows:
“It is equally explicit in the
agreement under which an arbitrator is appointed that he is fully
cognisant with the extent
of a limit to any discretion or powers he
may have. If he is not and some ignorance impact upon his award he
has not functioned
properly and his award will be reviewable.”
[45] The issues that the first
arbitrator Mr Savenije was called upon to arbitrate on were defined
in the Special Plea. He had
no discretion to extend his mandate to
deal with the effect of clause 40.9 and accordingly exceeded his
powers and authority.
[46] The manner in which the second
respondent defined the issues he was called upon to interpret
indicates that he was not fully
cognisant with the extent of his
mandate. This had direct effect or his misinterpreting the first
award and this constituted a
gross irregularity and rendered the
award reviewable.
[47] In the premises I make the
following order:
(i) Paragraphs 5.2 and 5.3 of the
arbitration award issued on the 15th March 2013 is hereby set aside
in terms of section 33(1)(b)
of the Arbitration Act 1965.
(ii) The arbitration award issued on
the 23rd June 2014 is hereby set aside in terms of section 33(1)(b)
of the Act.
(iii) The dispute between the parties
shall be submitted to a new arbitration tribunal constituted by
Association of Arbitrators
in terms of its current rules in terms of
section 33(4) of the Act.
(iv) The first respondent is directed
to pay the costs of this application.
DATED at JOHANNESBURG on this 17th
day of APRIL 2015.
M A MAKUME
JUDGE OF THE HIGH COURT OF SOUTH
AFRICA
GAUTENG LOCAL DIVISION, JOHANNESBURG
TRIAL HEARD ON 13 FEBRUARY 2015
JUDGMENT DELIVERED ON 17th APRIL
2015
COUNSEL FOR THE APPLICANT ADV G D
WILKINS
INSTRUCTED BY MESSRS VAUGHAN
HATTINGH ATTORNEYS
111 Eckstein Street
Observatory
JOHANNESBURG
Tel: (011) 648 9400
Ref:CJB 42/Brookhaven
COUNSEL FOR THE RESPONDENTS ADV L W
DE KONING SC
INSTRUCTED BY MARK-ANTHONY BEYL
ATTORNEYS
4th Floor Schreiner Chambers
94 Pritchard Street
JOHANNESBURG
Tel: (011) 333 7790