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[2017] ZAGPJHC 106
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Eskom Holdings Soc Limited v Khum MK Investments and Bie Joint Venture and Others (A5018/2016) [2017] ZAGPJHC 106 (23 February 2017)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
(1)
REPORTABLE: NO
(2)
OF INTEREST TO OTHER JUDGES: NO
CASE
NO: A5018/2016
In
the matter between:
ESKOM
HOLDINGS SOC
LIMITED
Appellant
and
KHUM
MK INVESTMENTS AND BIE
JOINT
VENTURE
First Respondent
KHUM
MK INVESTMENTS CC & BIE
INTERNATIONAL
ENGINEERS
(PTY)
LTD JOINT VENTURE
Second Respondent
JUDGE
LI
GOLDBLATT
Third Respondent
J U D G M E N T
KATHREE-SETILOANE
J:
[1]
On 16 April 2009, the appellant, Eskom Soc Limited (“Eskom”),
concluded
a
Professional Services Contract (“the agreement”) with the
second respondent, Khum MK Investments CC & BIE International
Engineers (Pty) Ltd Joint Venture (“the joint venture”).
Clauses Z3 and Z11 of the agreement respectively, stated
expressly that “[n]either party hereto may cede and delegate
any of its rights and obligations (including liabilities) under
this
Agreement to any person without the written consent of the other”
and that “If the
Consultant
[i.e. the joint venture]
constitutes a joint venture, consortium or other unincorporated
grouping of two or more persons…(t)he
Consultant
does
not alter its composition or legal status without the written consent
of the
Employer
[i.e. Eskom]”.
[2]
When the agreement was concluded, the joint venture was represented
by Mr Byron Van Rensburg (“Mr Van Rensburg”)
and Eskom
was represented by Mr Sipho Tjabadi (“Mr Tjabadi”). Mr
Tjabadi was appointed and designated the “Employer’s
Agent” in terms of the agreement with the authority to carry
out all the actions of Eskom except for payment, indemnity and
insurance.
[3]
The agreement was an enabling agreement entitling the joint venture
to render Safety, Health, Environmental and Quality inspection
services (“SHEQ services”) to Eskom on an
ad hoc
basis
as and when Eskom required them to be provided on construction and
installation sites at mainly generation and/or transmission
projects,
as well as on power generation, transmission and/or distribution
equipment around South Africa. The joint venture would
render
services in terms of “task orders” issued under the
agreement. A task order is essentially an instruction by
Eskom to the
joint venture to render the required SHEQ services on particular
terms, after a “proposal” by the joint
venture to render
such services had been accepted by Eskom. The task order would
set out
inter alia
the nature of the services that Eskom
required, the number and types of resources required to render the
services, the budget for
the task order and its duration. Eskom
issued approximately 57 task orders to the joint venture during the
life of the contract
which spanned the period of some 4½
years.
[4]
On 2 September 2009, XTLS Trading 109 (Pty) Ltd was registered as a
shelf company. On 10 February 2010, its name was changed
to
Khum MK Investments and BIE Joint Venture (Pty) Ltd (the company),
which is the first respondent in the appeal. On 30 August
2010, a
meeting was held at BIE’s new offices. The company contended
that it was at this meeting that Eskom had accepted
and/or ratified
the substitution of the company for the joint venture as the
contracting party. The company alleged that from 27
May 2010
alternatively
30 August 2010 it, as opposed to the joint
venture, rendered the SHEQ services to Eskom as it had been
substituted as the contracting
party to the agreement.
[5]
During 2013, certain disputes arose between Eskom and the company
regarding payment of amounts allegedly due to it in terms
of the
agreement. These disputes are relevant because the arbitration
originated from an urgent application which the company launched
in
this court relating directly to them. The urgent application
was subsequently settled on the basis that Eskom would pay
the
company R96 million and that all disputes would be referred to urgent
arbitration under the auspices of the Arbitration Foundation
of South
Africa (“AFSA”) in terms of an agreement concluded
between Eskom and the company (not the joint venture).
Eskom paid the
company R96 million on 25 October 2013, and terminated the agreement
three weeks later on 14 November 2013. By this
time, Eskom had paid
the company almost R1 billion.
The
Arbitration
[6]
The third respondent, Judge Goldblatt (“the arbitrator”),
was appointed to arbitrate the dispute. The company and
the joint
venture respectively, were the first and second claimants in the
arbitration. The arbitration hearing concerned two separated
issues,
namely a special plea and the contracting party defence. The special
plea was in effect that the joint venture was not
a party to the
arbitration agreement and, therefore, had no right to join in the
arbitration. The arbitrator upheld the special
plea. Since
there is no challenge to that decision, no more need be said about
it.
[7]
The principal issue in the arbitration was the resolution of Eskom’s
contracting party defence which, as pleaded in its
statement of
defence, was that the company was not the party with whom it had
contracted and it, therefore, lacked the
locus standi
to
pursue any claims under, in terms of, or in connection with, the
agreement. In its replication, the company alleged that
Eskom
had accepted and/or ratified its substitution as the contracting
party in place of the joint venture. It alleged, in the
alternative,
that Eskom had represented, by conduct, that it had accepted and/or
ratified the company as the contracting party
and was, therefore,
estopped from denying that the agreement remained with the joint
venture (“the estoppel argument”)
.
[8]
In its rejoinder, Eskom denied that the substitution took place with
its full knowledge and consent. It also rejected the company’s
reliance on estoppel on the basis that to allow it would validate an
otherwise illegal act (“the illegality argument”)
.
The illegality argument was
basically that as an organ of state, Eskom is subject to the
peremptory procurement process provisions
of inter alia s 217
[1]
of the Constitution, and that although the joint venture had
participated in such a process that led to it being awarded the
contract,
the company had not. Instead, it simply substituted itself
in place of the joint venture without Eskom’s knowledge or
written
consent (as required by the agreement) and rendered services
pursuant to the agreement in place of the joint venture. Eskom
pleaded,
in the alternative, that none of its representatives
responsible for the alleged representations, on which the company
sought to
rely, had the authority to accept or ratify the company as
the contracting party substituting the joint venture, or to consent,
in any way, to the joint venture altering its legal status.
[9]
The contracting party defence of Eskom depended on the resolution of
two subsidiary issues, namely the estoppel argument raised
by the
company and Eskom’s counter by way of the illegality argument.
The arbitrator upheld the company’s plea of estoppel
and
dismissed Eskom’s contracting party defence. He found that
Eskom had represented by conduct that it accepted the company
as the
contracting party and was, therefore, estopped from denying the truth
of those representations. In support of this
finding, the
arbitrator referred to and relied on the fact that Eskom:
(1)
accepted and paid invoices and received timesheets that bore
the name of the company;
(2)
accepted services rendered by the company;
(3)
addressed letters to the company that referred to a contract
with the company;
(4)
made certain statements at the meeting of 30 August 2010 where
Eskom is alleged to have accepted and/or ratified the substitution
of
the contracting party.
[10]
The arbitrator found that these representations and various other
actions by Eskom were sufficient to preclude it from denying
that the
company was substituted for the joint venture. He accordingly found
that the estoppel had been proved. Aggrieved by the
award,
Eskom
sought to review the arbitration award in terms of s 33(1) (a) and
(b) of the Arbitration Act 42 0f 1965
[2]
(‘the Arbitration Act”) on the basis that the arbitrator
had purportedly misconducted himself in relation to his duties
as
arbitrator and/or had committed a gross irregularity in the conduct
of the arbitration proceedings.
The
Review Application
[11]
The
review
came before
Moshidi J in this Court (the court a quo).
T
he
issue in the review was whether the arbitrator had misconducted
himself or committed a gross irregularity as envisaged in s 33(1)(a)
and (b) of the Arbitration Act. Eskom submitted that despite the
overwhelming evidence in Eskom’s favour, the arbitrator
set his
mind against Eskom’s defence, closed his mind to that defence,
and ignored virtually every factual and legal impediment
that
prevented the company from succeeding in its claim. It contended that
the arbitrator essentially decided the issues without
reference to
Eskom’s case and arrived at a result at which no reasonable
arbitrator could have arrived having regard to the
evidential
material placed before him. In addition, Eskom argued that the
reviewable irregularities could be inferred from the
arbitrator’s
plainly expressed view that he considered the contracting party
defence to be “unconscionable” and
from the fact that he
questioned Eskom’s witnesses with a view to establishing facts
in the company’s favour.
[12]
On 4 June 2015, the court a quo handed down its judgment, in which it
dismissed the review application
on the basis
inter
alia
that the arbitrator
had not committed any reviewable irregularities. It is this finding
that Eskom challenges on appeal. The appeal
is with leave of the
Supreme Court of Appeal.
Estoppel
[13] It is established law that a
person who bases a plea of estoppel on a representation made to him
must establish that a representation
was made to him, that he
believed in the truth thereof, and that he acted thereon to his
prejudice.
[3]
This representation may consist of conduct. In addition, the estoppel
assertor must show that he acted reasonably in relying
on the
representation. In
Concor
Holdings (Pty) Ltd t/a Concor Technicrete v Potgieter,
[4]
the SCA held that the test regarding a representation made by conduct
is whether the representor should reasonably have expected
that the
representee might be misled by his conduct and whether, in addition,
the representee acted reasonably in construing the
representation in
the sense in which the representee did so. Put differently, the
representation must be such as to lead a reasonable
man to believe
that he might act safely thereon.
[5]
The representation must be precise and unambiguous.
[6]
This would apply both to a representation in words and a
representation by conduct. In
Concor
the SCA stated as follows in respect to a representation by conduct:
‘…
if
a representation by conduct is plainly ambiguous, the representee
would not be acting reasonably if he chose to rely on one of
the
possible meanings without making further enquiries to clarify the
position.’
[7]
[14]
Eskom
submitted in the review that the arbitrator was acutely
aware of these principles but ignored or deliberately closed his mind
to
them. The essence of Eskom’s submissions on this aspect was
that the company’s reliance on such inconsistent or ambiguous
representations was not only unreasonable, but was also
irresponsible. The contention advanced is that the arbitrator’s
misconduct could be inferred
inter alia
from the fact that he
deliberately ignored evidence and argument relating to all the
representations that proved that Eskom did
not recognise the company
as the contracting party but still considered itself to be
contractually bound to the joint venture.
[15]
The agreement between Eskom and the joint venture was purely an
enabling agreement. Pursuant thereto, Eskom would from
time to
time call for proposals for particular tasks it wanted performed, and
issue task orders if satisfied with the proposals.
The evidence which
Eskom contends that the arbitrator ignored are primarily a host of
documentary evidence including proposals
submitted in the name of the
joint venture spanning the period March 2012 to September 2013; task
orders which Eskom issued in
the name of the joint venture; several
letters which Eskom employees addressed to the joint venture (as
opposed to the company)
during the period 9 July 2013 to 14 November
2013, when the company was ostensibly rendering services in place of
the joint venture.
Eskom maintains that these representations are
entirely at odds with the suggestion that Eskom had accepted the
company as the
contracting party.
[16]
Eskom furthermore argues that the evidence relating to proposals,
task orders and letters, is crucial to understanding the
misconduct
and/or gross irregularity complained of as it shows that, in part,
Eskom did not represent that it recognised the company
as the
contracting party; on the contrary it shows that it continued to
recognise the joint venture as its contracting party. It
argues that
representations by words and conduct which the claimants relied on
were inconsistent and ambiguous, and no reasonable
arbitrator could
ever have found that it was reasonable for the company to have relied
on such inconsistent and ambiguous representations,
or that such
inconsistent and ambiguous representations could have founded an
estoppel.
The
review application
[17]
Eskom contends that in seeking to justify the conclusion that the
arbitrator had not misconducted himself or committed a gross
irregularity, the court a quo essentially approached the matter in
the same manner as the arbitrator in that he relied selectively
on
the evidence of representations that tended to show that Eskom had
accepted the company as the contracting party. The contention
advanced is that this misdirection materially affected the court a
quo’s ability to appreciate the facts from which misconduct
or
a gross irregularity could be inferred, and had the court a quo not
ignored these facts, then it would have been driven to conclude
that
the award should be set aside in terms of section 33(1) (a) or (b) of
the Act.
[18]
For Eskom to have succeeded in reviewing the arbitrator’s
award under section 33(1) (a) and (b) of the Act, it was required
to
show that the award of the arbitrator was reviewable on the ground
that the arbitrator had misconducted
himself
in relation to his duties as arbitrator, or had committed a gross
irregularity in the conduct of the proceedings. In relation
to the
“misconduct” ground of review, our courts have said that
there can be no misconduct unless there has been wrongful
or improper
conduct on the part of the arbitrator.
[8]
Where an
arbitrator
makes
a
bona
fide
mistake of either fact or law (whether gross or slight) it will not
warrant interference on review, unless the mistake is of the
nature
that demonstrates moral turpitude in the sense of dishonesty,
partiality or bad faith”.
[9]
Thus any conduct of an arbitrator that falls short of this standard
of misconduct will not be considered to be reviewable under
s
33(1)(a) of the Act.
[19]
For conduct of an arbitrator to amount to “a gross
irregularity” as envisaged under s 33(1) (b) of the Act, it
must be shown that the arbitrator misconstrued the nature of the
inquiry or arrived at an unreasonable result. As held by the SCA
in
Andre Herholdt v Nedbank Ltd
(Congress of South African Trade Unions as amicus curiae),
[10]
albeit in the context of a review under 145(2) (a) of the
Labour
Relations Act 66 of 1995
:
‘
A
result will only be unreasonable if it is one that a reasonable
arbitrator could not reach on all the material that was before
the
arbitrator. Material errors of fact as well as the weight and
relevance to be attached to particular facts, are not in and
of
themselves sufficient for an award to be set aside, but are only of
any consequence if their effect is to render the outcome
unreasonable.
I
understand this to mean that an applicant seeking to review the
decision of an arbitrator, must establish that the irregularity
–
this could be a failure to apply one’s mind to the evidence or
a material error of fact or law − is material
to the outcome.
In assessing this, the reviewing court must ascertain whether the
arbitrator has evaluated all the evidence presented
at the
arbitration hearing and arrived at a decision which is reasonable.
[20]
I now turn to consider the judgment of the court a quo in the review
application. After a complete and thorough survey
of the
evidence which was led by both Eskom and the company at the
arbitration hearing, the court a quo held that the allegation
against
the arbitrator, including that of misconduct, gross irregularity and
bias, not understanding his mandate, ignoring Eskom’s
evidence
and treating Eskom’s witnesses unfairly are not borne out by
the record of the arbitration proceedings. I fully
endorse this
holding as there is no evidence on record that justifies a different
one.
[21]
The evidence reveals that Mr Tjabadi was Eskom’s agent in the
contract with authority to carry out all its actions except
for
payment, indemnity and insurance. From about May 2010, the company
rendered invoices for services rendered to Eskom under the
agreement.
Prior to this date, all timesheets were submitted in the name of the
company and not the joint venture. The company’s
VAT
registration number appeared on all the invoices. The company had
submitted its statutory documentation, namely its broad based
black
economic empowerment (“BBBEE”) certificates and tax
clearance certificates to Eskom annually. Neither this evidence,
nor
the evidence that the company had rendered the services under the
agreement, and that Eskom paid the company and not the joint
venture
or partnership for those services, was placed in dispute by Eskom.
Notably, Ms Vishala Panday, of Eskom, was constrained
to concede that
if a contract file of the contracting party, as in this instance,
only contained documentation, SARS clearance
certificates and BBBEE
verifications of the company, and no documentation relating to the
joint venture, the only probable inference
to be made was that those
were the documents of the contracting party. Ms Panday was employed
in middle management by Eskom. Her
functions included the development
of commercial policies, procedures, procurement control and
management of the commercial regulatory
universe.
[22]
In addition, Mr Van Rensburg, the Managing Director of the company,
testified at the arbitration hearing that Mr Tjabadi, the
General
Manager of Eskom, had suggested that the joint venture be
incorporated to become a formal legal entity and that pursuant
to his
suggestion, the joint venture decided to buy a shelf company and
changed its name to that of the company. Mr Van Rensburg
testified,
in relation to the meeting held on 30 August 2010, that he informed
Mr Tjabadi, Ms Dondashe, Ms Manthe and Mr Andrew
Botes that: (a) the
joint venture was now a company; (b) the partners to the joint
venture (MK Investments CC and BIE Engineers
(Pty) Ltd) were equal
shareholders in the company; (c) the individuals involved and
employees were the same; and (d) the infrastructure
of the company
was the same as before its incorporation. The minutes of the meeting
recorded under the heading “Purpose of
meeting”, inter
alia, that:
“
Contractual
and Legal Documentation to be communicated through Andrew [Botes] in
terms of signing a new contract as the JV is now
a (Pty) Ltd.”
The
minutes also recorded the following comment of Mr Tjabadi relating to
the company:
“
Congratulate
the JV for the effort the company was making in terms of services
offered…Tjabadi was impressed to see that
the company was
focussed on the work at hand, happy with the ‘JV marriage’
and that the company was proudly South African
– that we are
local empowered and what Eskom is looking for in the company…”
[23]
It is apparent from these minutes coupled with Van Rensburg’s
unchallenged testimony that, at the latest on 30 August
2010, Eskom
through its agent Mr Tjabadi had been aware that the partnership had
changed its legal status to a company. Van Rensburg’s
testimony
remained unchallenged as neither Mr Tjabadi, nor any of the other
individuals present at the meeting of 30 August 2010,
were called by
Eskom to testify on its behalf in the arbitration hearing.
[24]
Having informed the Eskom representatives at the meeting of 30 August
2010 that the company was formed, Mr Van Rensburg waited
for Eskom to
produce the new contract. Other than that this was an internal
process, Mr Van Rensburg had no knowledge of what the
process
entailed. Neither Ms Panday, Mr Quickfall (a senior manager and
Corporate Legal Counsel at Eskom with 24 years of service),
nor Mr
Masango, (Manager: Contracts in the Program Management Office) were
aware of what the internal process entailed. Ms Panday
testified that
the only procedure for such change would be a modification. This
entailed the successful tenderer writing to Eskom
and notifying it of
the change. This would require the approval of Eskom’s Board
Tender Committee. However, moments later,
in response to the question
of whether a consultant, who has achieved a BEE partner or
shareholding, should have to go through
the procurement process
again, she said that there was no such requirement and that “the
modification process relating to
a change of the status of an entity
contracting with Eskom was an “internal process” that a
contracting party outside
of Eskom would be oblivious to. Mr Masango
testified that he had not noticed the change of the legal status of
the joint venture
because no one alerted him to it, but had he known,
he would have followed Eskom’s “formal process”.
What this
process entailed Mr Masango could not say. His testimony
was, however, in direct contradiction to that of Mr Quickfall, who
was
unaware of any formal process. Mr Quickfall testified as follows
at the arbitration hearing:
‘
Mr
Arbitrator, I do not know the process. I cannot point you to a
process in Eskom…What I can say is that there is no doubt
that
we should have followed a process that is authorized by the
adjudicating authority or some formal process, supply management
process in Eskom.’
In
argument, counsel for Eskom conceded that the process to be followed
was not one in terms of s 217 of the Constitution but rather
one
where there was some element of due process. What exactly this means
remains unclear on the evidence as well as from argument.
[25]
Mr Van Rensburg referred to numerous employees of Eskom as having
dealt with the agreement, including Ms Sikani, Mr Govender
and the
accounts department personnel. None of them were called by Eskom to
testify. On 25 October 2015, Eskom paid the company
just over R96
million under the contract pursuant to a settlement that was reached
in the urgent application during October 2013.
However, the
employees who authorised these payments were not called to testify on
behalf of Eskom. Nor were
the employees who processed other
invoices for payment called by Eskom to testify on its behalf.
Significantly, Mr Masango testified
that the payments department
would need to deal with the fact that the invoices were in the name
of the company and reflected the
VAT registration of the company. Yet
no one from the payments department was called by Eskom to testify. I
consider this to be
a crucial omission as one does not simply make
payments on a contract worth millions of rands without first checking
that the invoices
are received from, and the payments are made to,
the correct contracting party. Similarly, tasks orders ought to have
been made
out to the correct party. It is not enough to say that the
inconsistent documentation and payments were the result of
administrative
sloppiness as conceded by counsel for Eskom at the
hearing of the appeal. On a consideration of the totality of the
evidence, this
does not amount to an ambiguity as the evidence makes
it abundantly clear that Eskom knew that it was doing business with
the joint
venture as a company, accepted invoices in the name of the
company and made payment to the company. Eskom’s election not
to call the employees who authorised and processed the payment to the
company justifies the inference that Eskom was aware of the
change of
status of the joint venture to the company, accepted it and
benefitted from it. Accordingly, the court a quo did not
err in
arriving at this finding.
[26]
The court a quo made mention in its judgment of the numerous emails
exchanged between the parties that referred to the company
as the
contracting party. Some of these emails were sent by Ms Sikani and Mr
Govender. Ms Sikani was the contracts manager at the
time. As
testified by Mr Masango, she ought to have been acutely aware of the
difference between a partnership and a company and
that the agreement
was initially concluded with the joint venture, yet Eskom did not
call Ms Sikani to testify at the arbitration
hearing. Nor did it call
Ms Naidoo to testify.
[27]
That proposals, task orders and some correspondence reflected the
joint venture as a partnership and not a company does not,
in my view
detract from Eskom’s consistent representations over the years
that the company (as the joint venture) replaced
the partnership (as
the joint venture) as the contracting party. This is corroborated by
the numerous payments, totalling in the
region of R1 billion, which
Eskom made to the company without demur. Thus, as rightly found by
the court a quo, “the contracting
party defence is clearly an
afterthought on Eskom’s part to evade its legal obligations”.
[28]
The evidence led at the arbitration reveals that Eskom’s
conduct fell clearly within the legal principles of estoppel
as
enunciated more recently by the SCA in
Concur
Holdings
in that Eskom’s
conduct was such as to lead a reasonable man to believe that he might
act safely thereon
[11]
.
There is nothing ambiguous or imprecise in Eskom’s conduct of
accepting timesheets and invoices issued in the name of the
company,
and then making payment to the company. Thus, in my view, the company
acted reasonably in acting upon these and other
representations of
Eskom, and was not obliged to make any further enquiries to clarify
the position. On an evaluation of the evidence
as a whole it is clear
that Eskom had accepted that the company (as the joint venture) had
replaced the partnership (as the joint
venture) as the contracting
party.
[29]
On the unchallenged testimony of Mr Van Rensburg nothing had changed.
The shareholders in the company, namely MK Mohlala’s
close
corporation and BIE Engineering (Pty) Ltd were each 50% shareholders
in the company. Hence its BBBEE status remained the
same in
compliance with clauses Z8 (BEE compliance) and Z10 (Skills Transfer)
of the agreement. In her testimony, Ms Panday confirmed
that the
written consent to the alteration of the composition of a consultant
is an action of the employer, and that whoever is
authorised to
execute actions on behalf of the employer can give that written
consent. There is nothing in the contract that requires
compliance
with an undefined procurement process when the consultant becomes
BBBEE compliant or changes its legal status. Neither
Ms Panday nor Mr
Quickfall could refer to any policy of Eskom in this regard.
[30]
During the arbitration proceedings, Eskom disclosed what was in the
contract file. From this it appeared that at least
two other
joint ventures on the SHEQ panel had changed their legal status from
a joint venture to a company, but were seemingly
not required to
submit to any further procurement process in terms of s 217 of the
Constitution or at all. These were
Lechabile Quality
Strategies and Bureau Veritas International SA Joint Venture
(“Letchabile”) and Tata Project Limited
and TQA Africa
Joint Venture (“Tata”). This information was peculiarly
within the knowledge of Eskom, but its witnesses
could shed no
information on how Lechabile and Tata were accepted as the
contracting parties despite their change of status from
a joint
venture to a company. This much was clear from the testimony of Mr
Quickfall. Other than to confirm that in the case Lechabile
the
tender was submitted by a joint venture and the contract concluded
with a company, he could not say why no formal process was
followed.
In respect to Tata Projects, he had not investigated the position and
was unable to assist the arbitrator.
[31]
The record of evidence reveals that individuals involved in the
company were the same, the employees were the same and the
infrastructure of the company was the same. The only thing that
changed was that the partnership as a joint venture became the
company as the joint venture at the behest, and with the full
knowledge, of Eskom. The company as the joint venture in its
incorporated form rendered services to Eskom, submitted time sheets,
submitted invoices, submitted statutory documents and was
paid close
to R100 million after it launched the urgent application against
Eskom. So although Eskom and the company, on occasion,
referred to
the joint venture in its partnership form, that does not detract from
the fact that from 27 May 2010 all invoices and
timesheets were
rendered in the trading name of the company and that the timesheets,
in particular, referred to the task orders
of Eskom. Thus on an
evaluation of the evidence as a whole, Eskom had accepted that the
company had replaced the joint venture
as the contracting party.
The contention that the arbitrator accorded insufficient weight to
some documents but not others
does not, in my view, render the
outcome that he arrived at unreasonable. There is accordingly no
merit in the contention that
both the arbitrator and the court a quo
dealt with the evidence selectively. The court a quo arrived at the
decision that Eskom
had accepted the company as the contracting party
on a consideration of the totality of the evidence, as did the
arbitrator.
[32]
Eskom’s contention that the court a quo treated the review as
an appeal, in my view, also lacks substance. In view
of Eskom’s
gratuitous censure of the arbitrator’s conduct, in particular
that he wilfully ignored every piece of evidence
that supported
Eskom’s case justifying the inference of misconduct and/or a
gross irregularity, the court a quo was constrained
to carry out a
full evaluation of the evidence, presented at the arbitration
hearing, in order to demonstrate that the arbitrator
did not ignore
the evidence and argument that Eskom presented at the arbitration
hearing. It painstakingly, in this regard, analysed
each piece of
evidence considered by the arbitrator in order to demonstrate that
the balance of evidence overwhelmingly supported
the arbitrator’s
finding that Eskom had accepted the company as the contracting party
and that, as such, in arriving at that
decision, he did not, commit a
gross irregularity in the conduct of the proceedings or misconduct
himself in relation to his duties
as an arbitrator.
[33]
That the court a quo may be seen to have exceeded the bounds by
making certain factual and credibility findings that do not
appear
from the arbitration award cannot, to my mind, render a patently
reasonable arbitration award such as we have here, where
the findings
are fully supported by the evidence, unreasonable. As is apparent
from its judgment, the court a quo was clearly mindful
of the
principle that was enunciated by the Appellate Division in
Ellis
v Morgan; Ellis v Desai
[12]
as far back as 1909 in relation to a review, namely that:
‘
[A]n
irregularity in proceedings does not mean an incorrect judgment. It
refers not to the result, but to the method of trial, such
as, for
example, some high-handed or mistaken action which has prevented the
aggrieved party from having his case fully and fairly
determined.’
Accordingly,
I endorse the finding of the court a quo that:
‘…
the
finding made by the Arbitrator in the award, that as a result of the
various correspondence, and various other actions by it,
Eskom is
estopped from denying the truth of such representations, which were
believed by the company and acted upon by the company
to its
prejudice, was in my view correct
and
properly arrived at
. It
cannot be faulted in anyway.’
[13]
Conduct
of Arbitrator not Improper
[34]
As alluded
to earlier in the judgment, misconduct for the purpose of s 33(1)(a)
of the Act has been held to include acts performed
in bad
faith, bias or conduct touching upon the moral turpitude of the
decision maker.
[14]
An arbitrator who conducts a hearing in circumstances where there is
an actual or reasonable perception of bias commits misconduct
as
contemplated in s 33(1)(a) of the Act. Such conduct will be
inconsistent with the provisions of s 34 of the Constitution, which
guarantees a party the right to have any case which can be determined
by the application of law decided before an independent and
impartial
tribunal. The impartiality and independence of an arbitrator is
therefore a fundamental prerequisite to the right to
a fair hearing.
[35]
The test for establishing bias is whether, seen objectively, the
presiding officer (arbitrator) is actually biased or whether
a
reasonable, objective and informed person would, on the correct
facts, reasonably apprehend that the presiding officer (arbitrator)
had not or will not bring an impartial mind to bear on the
adjudication of the case, i.e. a mind open to persuasion by the
evidence
and submissions of counsel.
[15]
In arbitration proceedings an arbitrator has a fair amount of leeway
to determine whether the proceedings will be conducted in
an
adversarial or inquisitorial manner, but he or she remains duty-bound
to observe the rules of natural justice
[16]
and to conduct the proceedings in a manner which is free from actual
or reasonably perceived bias. An arbitrator, in my view, is
expected
to take an ‘active role’ in the hearing subject to not
abandoning the principles of natural justice.
[17]
Whilst at times, this may result in interference with
cross-examination, provided it is ‘in accordance with the
normal practice
of asking questions to obtain clarity’, there
can be no objection. The arbitrator may not, however, descend into
the arena.
[18]
[36]
There is no indication from the record of evidence that the
arbitrator’s conduct during the arbitration proceedings was
improper in the sense of acting dishonestly, partially or in bad
faith.
[19]
As
correctly found by the court a quo, Eskom’s criticism of the
arbitrator’s conduct, in particular his purported bias
towards
the company’s witnesses was ill-founded. Viewed objectively on
the evidence led at the arbitration hearing, the questions
which the
arbitrator had posed to both Mr Quickfall and Mr Masango did not
demonstrate bias, but were in search of “clarity”,
and
were “helpful and relevant”. He did not descend into the
arena or take sides. I am, therefore, unable to
find fault with
this finding of the court a quo:
‘
For
all the above reasons, I conclude that the rather strongly worded
allegations of misconduct, and in particular that, ‘
an
arbitrator possessed of a misguided sense of injustice…
’
were exceedingly exaggerated and unfortunate in the extreme. Quite
clearly, the somewhat robust exchanges between the Arbitrator
and
Eskom’s witnesses (limited to Masango), and on the odd occasion
with Eskom’s counsel, cannot constitute sufficient
grounds for
interference.’
Illegality
Argument
[37]
Lastly, and as relates to the illegality argument, the court a quo
was correct in concluding that the arbitrator’s election
not to
deal with this issue did not indicate that he misconstrued the nature
of the enquiry. In my view, once the arbitrator found
that Eskom had
accepted by its conduct that the company was the contracting party,
there was no need for him to make a finding
on the illegality
argument as the company was in law the correct contracting party.
The tender was awarded to a joint venture.
The entities
comprising the joint venture were Khum MK Investments CC and BIE
International Engineers (Pty) Limited. The
legal structure of
the joint venture was a partnership. In assessing the
tender, Eskom would have assessed each of
these entities, their
directors, shareholders, members, key personnel and all other
relevant considerations. A joint venture may
be a partnership or a
limited liability company whose share capital is held by the joint
venture parties. In assessing the tenders,
Quickfall, Eskom’s
corporate legal counsel at the time, said that:
‘…
notice
must be taken that it does not matter in which way the bidders want
to contract with Eskom as long as the bidder assures
Eskom of the
contractor’s inherent and residual obligations.’
There
is no suggestion that these obligations, which would include
compliance with clauses Z8 (BBBEE status) and Z9 (skills transfer)
of
the agreement, were not complied with by the company. To reiterate,
there is also nothing in the agreement that requires compliance
with
an undefined procurement process when the consultant becomes BBBEE
compliant or changes its legal status.
[38]
To sum up, where
a joint venture changes its
status from a partnership to a limited liability company
,
this
may change the legal entity, but it does not change the
joint venture. The joint venture remains as a collaboration
between
the same parties, only in a different legal form. Thus
on consideration of the totality of the evidence presented at the
arbitration hearing, there was no illegality on the part of Eskom or
the joint venture, as the company (as a joint venture) was
the
correct contracting party having been accepted as such by Eskom.
Accordingly, the
court a quo was correct in
finding that there was no basis for interfering with the arbitrator’s
award on review.
Punitive Costs Order
[39] In the exercise of its
discretion, the court a quo ordered Eskom to pay the company’s
costs on the scale as between attorney
and client. The discretion
conferred upon a court of review to award costs must be exercised
judicially and upon a consideration
of all the relevant facts and
circumstances of the case. In the final analysis, it is a matter of
what is fair and just as between
the parties. The court a quo awarded
costs on a punitive scale on the basis that:
‘…
the
application had no merit at all since it was premised on the basis
that the Arbitrator’s conduct was ‘wrongful and
improper’, or ‘dishonest’ or mala fide, or
‘partial’, or and due to ‘moral turpitude’.
The [company] further argued that there was no basis for such
allegations coupled with the fact that Eskom persisted in pursuing
such allegations. I agree. This was a lengthy special motion case,
characterized by the prolixity of papers and annexures, as stated
earlier in the judgment. It was a complex matter involving huge sums
of money. The urgency of the matter compelled this Court to
prepare
judgment even during its long leave.’
On a consideration
of these reasons, I am unable to find that the costs order was not
made judicially upon a consideration of the
facts and circumstances
of the case. Special circumstances were shown justifying the order on
a punitive scale. There is,
accordingly, no basis to interfere
with it on appeal.
For all of the reasons
set out above, the appeal against the decision of the court a quo
falls to be dismissed.
[40] In the result, it is ordered
that:
‘
The
appeal is dismissed with costs, such costs to include the costs of
two counsel.’
____________________________
F
KATHREE-SETILOANE
JUDGE OF THE
HIGH COURT
OF SOUTH AFRICA
GAUTENG LOCAL
DIVISION
JOHANNESBURG
I
concur:
L WEPENER
J
UDGE
OF THE HIGH COURT
OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION
JOHANNESBURG
I
concur:
B MASHILE
J
UDGE
OF THE HIGH COURT
OF
SOUTH AFRICA
GAUTENG
LOCAL DIVISION
JOHANNESBURG
Counsel
for the Appellant:
Gautshi SC with M Seape
Instructed
by:
Koikanyang Attorneys
Counsel
for the Respondent: GC
Pretorius SC with IM Lindeque
Instructed
by:
Breytenbach Mostert Skosana Inc
Date
of Hearing: 30 November 2016
Date
of Judgment: 24 February 2017
[1]
Section 217 of the Constitution provides:
(1)
Where an organ of state
in the national, provincial or local sphere of government, or any
other institution identified in national
legislation, contracts for
goods or services, it must do so in accordance with a system which
is fair, equitable, transparent,
competitive and cost effective.
(2)
Subsection (1) does not
prevent the organs of state or institutions referred to in the
subsection from implementing a procurement
policy providing for:
(a)
categories of preference
in the allocation of contracts; and
(b)
the protection or
advancement of persons, or categories of persons, disadvantaged by
unfair discrimination;
(3)
National legislation must
prescribe a framework within which the policy referred to in
subsection (2) must be implemented.’
[2]
Section 33(1) of the Act states in relevant part:
any
member of an arbitration tribunal has misconducted himself in
relation to his duties as arbitrator or umpire; or
an
arbitration tribunal has committed any gross irregularity in the
conduct of the arbitration proceedings or has exceeded its
powers;
or
(c)
… .’
[3]
Aris
Enterprises (Finance) (Pty) Ltd v Protea Assurance Co Ltd
1981 (3) SA 274
(A) at 291D-F.
[4]
Concor
Holdings (Pty) Ltd t/a Concor Technicrete v Potgieter
2004 (6) SA 491 (SCA).
[5]
MAN
Truck & Bus (Pty) Ltd v Dusbus Leasing CC and Others
2004 (1) SA 454
(W) para 55.
[6]
B
& B Hardware Distributors (Pty) Ltd v Administrator, Cape
1989 (1) SA 957
(A) at 964H-I;
Saflec
Security Systems (Pty) Ltd v Group Five Building (East Cape) (Pty)
Ltd
1990 (4) SA 626
(E) at
634-5.
[7]
Concor
Holdings
para 9
[8]
Dickenson & Brown v
Fisher’s Executors
1915
AD 166;
[9]
Johan Louw Konstruksie
(Edms) Bpk v Mitchell N.O. & Another
2002
(3) SA 661
(C) para 46.
[10]
Andre Herholdt v Nedbank
Ltd (Congress of South African Trade Unions as amicus curiae) 2013
(6) SA 224 (SCA.)
[11]
MAN
Truck & Bus (Pty) Ltd v Dusbus Leasing CC and Others
2004 (1) SA 454
(W) para 55.
[12]
Ellis v Morgan; Ellis v
Desai
1909 566 (A) at 581.
See also:
Telcordia
Technologies Inc v Telkom SA Ltd
[2006] ZASCA 112
;
2007 (3) SA 266
(SCA) at 299H-300A.
[13]
Own emphasis.
[14]
Country Fair Foods (Pty)
Ltd v Theron NO & others
[2001] 2 BLLR 134
(LC) at 136;
Johan
Louw Konstruksie (Edms) Bpk v Mitchell N.O. & Another
2002 (3) SA 661
(C) para 46.
[15]
President of the Republic
of South Africa & others v South African Rugby Football Union &
others
[1999] ZACC 9
;
1999 (4) SA 147
(CC) at 177A-B.
[16]
Mutual & Federal
Insurance Co Ltd v Commission for Conciliation Mediation &
Arbitration & others
[1997] 12 BLLR 1610 (LC).
[17]
Quartermark Investments
(Pty) Ltd v Mkhwanazi & Another
[2014]
All SA 22
(SCA) para 20.
[18]
Mutual and Federal
Insurance (above).
[19]
Johan Louw Konstruksie
(Edms) Bpk v Mitchell N.O. & Another
2002
(3) SA 661
(C) para 46.