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[2017] ZAGPJHC 187
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Buildcure CC v Brews and Others (A5015/2016) [2017] ZAGPJHC 187; [2017] 3 All SA 843 (GJ); 2017 (6) SA 562 (GJ) (20 June 2017)
REPUBLIC
OF SOUTH AFRICA
THE
HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO A5015/2016
REPORTABLE:
YES
OF
INTEREST TO OTHER JUDGES: YES
In
the matter between:
BUILDCURE
CC
APPELLANT
AND
BREWS,
GORDON DONALD N.O.
FIRST
RESPONDENT
UNTERHALTER,
GLENN N.O.
SECOND
RESPONDENT
DRUE,
WARREN N.O.
THIRD
RESPONDENT
LITVIN,
LOIS N.O.
FOURTH
RESPONDENT
MASSEY,
EUAN
FIFTH
RESPONDENT
JUDGMENT
Headnote
Appeal
against a dismissed review application in respect of an arbitration
award governed by arbitration act 42 of 1965 –
whether section
25 peremptory that parties be present when award delivered –
held section 25 is a default procedure that
parties may vary –
publication in terms of parties’ agreement to hand deliver
award constitutes compliance with agreement
and award valid
Date
of publication is the date last party received a hand delivered award
- that date is the relevant date for prescriptive
periods
within which to bring a review
History
of law on delivery of awards and jurisdiction comparisons surveyed
Challenge
to award on grounds of gross irregularity because an alleged finding
made is an incompetent challenge –
Telcordia Technologies v
Telkom
applied
The
arbitrator was in terms of the arbitration agreement, required to
make a decision only on an issue on which both sides were
heard –
appellant’s argument that a point of law and fact alluded to in
reasoning of arbitrator constituted an issue
misconceived – the
issue was whether a reliance on a breach to cancel resulted in a
valid cancellation – breach cured
when cancellation occurred –
the arbitrators finding that appellant forfeited right to elect to
cancel after breach cured
not a distinct issue
Appeal
dismissed
Sutherland
J:
INTRODUCTION
[1]
This appeal is against the order of Masipa J who, on 3 December 2015,
dismissed a review application to set aside an arbitration
award. The
appellant was the disappointed claimant in the arbitration. The
appellant is a builder who concluded a contract to effect
alterations
to a house owned by a trust of whom the first to fourth respondents
are the trustees (hereafter, simply, the respondent).
The fifth
respondent is the arbitrator.
[2]
Two questions were raised before the review court and again on
appeal; they are:
(1)
Did the
arbitrator validly publish an award within the meaning of the
Arbitration Act No 42 of 1965 (The
Arbitration Act)?
(2
)
If so, did
the arbitrator commit a gross irregularity in the conduct of the
proceedings, as contemplated in
section 33(1)(c)
of the
Arbitration
Act?
[3
]
These two question are addressed in turn.
THE
(NON) PUBLICATION OF THE AWARD ARGUMENT
[4]
The parties reached agreement on these powers to be conferred on the
arbitrator:
‘
3.1.
Save for as expressly dealt with in this agreement, the arbitration
shall be conducted in accordance
with the terms of the
Arbitration
Act 42 of 1965
. The arbitrator is expressly authorised to determine
the format and procedure of the arbitration and in so doing and more
particularly
with regard to pleadings, discovery of documents and
other matters of that kind, the arbitrator shall in his sole
discretion determine
the procedure to be adopted and shall have
regard in
that
connection to the primary need to determine the dispute or difference
as expeditiously and as cheaply as possible and with
resort to as
little formality as is reasonably practical
,
provided always that where the arbitrator is required to make a
decision on any disputed matter both parties shall be entitled
to be
heard.
3.2. ….
3.3. ….
3.4.
In
order to expedite matters, the arbitrator shall be entitled to
initially furnish his award to the legal representatives of the
parties by way of electronic mail and, thereafter, furnish the
respective parties with a signed hard-copy thereof
.
(Emphasis
supplied)
[5]
What thereupon transpired was that the arbitrator sent a hardcopy of
his award dated 14 August 2014 to each party, which, in
each case,
was delivered on 18 August 2014. No email was transmitted. No
summoning of the parties to his presence was directed.
[6]
The contentions advanced on behalf of the appellant are these:
6.1.
No award
has been published because what purports to be an ‘award’
was not delivered in the peremptory manner prescribed
by
section 25
of the
Arbitration Act.
6.2.
Moreover
,
the agreement between the parties did not vary the peremptory
provisions of
section 25.
1.2
5cm; line-height: 200%">
6.3.
In any
event, what the arbitrator did was not in accordance with their
agreement, properly interpreted.
6.4.
The
purported ‘award’ must be set aside as a nullity.
[7]
Axiomatically, the purpose of arbitration proceedings is to resolve a
dispute by the production of an award by the designated
arbitrator.
In terms of
section 28
of the
Arbitration Act an
award is binding on
the parties. The exact consequences of an award are provided for as
follows in that section:
‘
Unless
the arbitration agreement provides otherwise, an award shall,
subject
to the provisions of this Act,
be
final and not subject to appeal and each party to the reference shall
abide by and comply with the award in accordance with its
terms.’
(Emphasis
supplied)
[8]
Plainly, the status of an award as binding is dependent on compliance
with all the relevant provisions of the
Arbitration Act. The
coming into being of an award and its transmission to the parties is
closely regulated.
Sections 23
-
26
address several aspects of the
communication of an award to the parties. An arbitrator must, in
terms of
section 23
, ‘make’ an award within a period of
four months calculated from the date the arbitrator became seized of
the dispute.
[1]
The parties may
agree to a later deadline or a court may order an extension of the
deadline. The award must be in writing and signed
by the
arbitrator.
[2]
The arbitrator
may make an interim award.
[3]
Lastly, the publication of the award is dealt with thus, in
section
25:
‘
(1)
The award shall be delivered by the arbitration
tribunal, the parties or their representatives being present or
having been summoned to appear.
(2)
The award shall be deemed to have been published
to the parties on the date on which it was so delivered.’
[9]
As is apparent,
section 25
provides for a high degree of formality.
The duty of an arbitrator is to ‘deliver’ an award in the
presence of the
parties. Subsection (2) belabours the point of
‘delivery’ by describing that act as constituting
‘publication’
to the parties, but more significantly,
ordains the date of delivery with a status. The use of the term in
section 23
to ‘make’ an award hints at a distinction
between ‘making’ and ‘delivering’ though, on
a purely
textual appreciation of these sections, no such distinction
is apparent. A decision on that nuance is unnecessary in this case.
[10]
No equivalent to a formal handing down procedure exists in English
law. The English Arbitration Act, 1996 provides thus:
‘
[54]
(1)
Unless otherwise agreed by the parties, the tribunal may decide what
is to be taken to be the date on which the award was made.
(2)
In the absence of any such decision, the date of the award shall be
taken to be the date on which it is signed by the arbitrator
or,
where more than one arbitrator signs the award, by the last of them.
[55]
(1)
The parties are free to agree on the requirements as to notification
of the award to the parties.
(2)
if there is no such agreement, the award shall be notified to the
parties by service on them of copies of the award which shall
be done
without delay after the award is made.
(3)
….’
[11]
In the United States, the Federal Arbitration Act, 9 USC, (FAA) in
the context of regulating the procedure for challenging
an award,
requires the challenge to be made within three months after the award
is ‘delivered’, but does not define
‘delivery.’
[4]
However, the Rules of the American Association of Arbitrators (AAA),
in its rules for both ‘Labor’ and ‘commercial’
proceedings provide:
‘
Delivery
of Award to Parties
Parties
shall accept as legal delivery of the award the placing of the award
or a true copy thereof in the mail, addressed to the
party at its
last known address or to its representative; personal or electronic
service of the award; or the filing of the award
in any other manner
that is permitted by law.’
[5]
[12]
Very little academic attention has been devoted to implications of
section 25 of the South African Arbitration Act.
[6]
However,
Butler
and Finsen, Arbitration in South Africa, Law and Practice (1993) Juta
make several useful observations. At p 267ff, the authors’
mention that the formality of presence before an arbitrator, as
contained in section 25, has roots in the common law, according to
Voet
4.8.15.
The authors also state that, despite the Common Law requirement of
the presence of the parties, from the mid-19
th
century the universal practice in the Cape Colony was to the
contrary. They rely on the authority of
Hawes,
Stanbridge & Hedley v Meintjies and Dixon
(1858) 3 Searle 62
at
68, 74.
[7]
Moreover,
the authors state that colonial legislation on arbitration omitted a
formalistic requirement on publication. It may be
supposed that the
English practice exerted an influence in this regard.
[13]
In the UNCITRAL model law, of 21 June 1985, Article 31 which
addresses the ‘form and content of [an] award’, no
ritual
convening of a ‘handing down’ procedure exists, and in
Article 31(3) the chief concern is to determine the place
and date of
an award, which is determined by an express statement to that effect
in the award by the arbitrator or arbitrators.
Article
31(4) then provides: ‘After the award is made, a copy signed by
the arbitrators in accordance with [article
31(1)] shall be delivered
to the parties.’ No amplification of how this is to occur is
provided for. In the draft bill to
apply the model law in South
Africa, no provision is made for any ritual form of delivery.
[8]
[14]
Hans Van Houtte, ‘
The
Delivery of Awards to Parties’ (2005) Vol
21 (2) Arbitration
International 177
– 185
,
addresses the question of various modalities of rendering awards in
the countries of the European Community. Predictably, there
are
several methods. None of the examples cited stipulate a formal
convening of a ‘handing down’ ritual. In some
jurisdictions, the issue of a ‘delivery’ is wholly
encompassed from the perspective of fixing a date from which
prescriptive
periods are calculated, about which more is said
hereafter.
[9]
[15]
Accordingly, it is noteworthy that the present South African
Arbitration Act is exceptional in its prescription as to delivery
of
an award in the presence of the parties, which model is not
ostensibly to be replicated in the prospective South African
legislation
on international arbitration, at present, under
consideration.
[16]
If it is indeed correct that no award has been published then
logically, no juridically cognisable act or deed exists that
imposes
obligations on either party and the dispute remains unresolved. As
already alluded to, Section 23 regulates what may happen
if the time
to render an award expires without publication, and one or both
parties desire an extension of time for the arbitrator
to perform the
mandate of rendering an award.
[10]
[17]
What the appellant seems to want, based on the premise that there is
no proper award in existence, is a declaratory order that
the
purported ‘award’ is not capable of cognition as an
‘award’ and that, in consequence, cannot be binding,
as
contemplated by section 28. In my view, in a case where an award has
indeed been improperly ‘delivered’ the appropriate
remedy
for a party who wants the dispute finalised is to apply to a court
for an order of specific performance; ie to compel a
proper delivery.
Ordinarily, a party who took that step would do so towards having the
award made an order of court in terms of
section 31 so that its terms
could be enforced.
[11]
In this
case, the appellant is in the reverse predicament; it has failed to
impress the arbitrator that it is entitled to payment
for services
allegedly rendered. Presumably, if the purported award is set aside,
the appellant might again refer its claim to
arbitration or sue in a
court of law. However, the attempt by the appellant to both seek to
deny the existence of an award and
have it reviewed for gross
irregularity constitutes two incompatible causes of action, and can,
at best, if at all, only be advanced
in the alternative. Although
that is not the stance adopted by the appellant, and without deciding
whether it is not conceptually
incompatible to advance both
complaints, even in the alternative, we shall treat the two causes of
action in the alternative.
[18]
The first question to address is whether the provisions of section 25
are incapable of variation, thereby denying to parties
a right to
vary the need to convene in the presence of the arbitrator and oblige
them always to ritually have the award ‘delivered’
to
them whilst present. This issue has been addressed in
EP
Property Projects (Pty) Ltd v Registrar of Deeds, Cape Town &
Another & Four Related Applications
2014 (1) SA 141
(WCC) (EP
Props)
.
In that case, it was held that an agreement had been concluded
between the parties that the arbitrator would email the award to
them. The argument was advanced that such an agreement was
unenforceable in the face what was contended were the peremptory
provisions
of section 25. Louw J held thus:
‘
[49]
In view of the direct evidence by the arbitrator, that an agreement
had in fact been concluded and that he acted pursuant to
the
agreement by emailing the award to the attorneys, I conclude on the
papers that the parties did agree with the arbitrator on
the method
by which the award would be published. I return hereunder to the
reasons why Mr Singh's request that the issue be referred
to oral
evidence should be refused.
[50]
It was submitted on behalf of Tobias Marais that the provisions of s
25(1) are peremptory and that the award cannot be delivered
otherwise
than as provided for in s 25(1), that is, 'the parties or their
representative being present or having been summoned
to appear'. The
award may be delivered in the absence of one or more of the parties,
provided that they were summoned to appear.
There is no provision in
the Arbitration Act that the award must be given to the party who is
not present when it is delivered,
and there is no express provision
that a failure to publish the award in the manner set out in s 25(1)
results in an invalid award.
The basis of arbitration is consensus
between the parties, and to hold that publication in a manner agreed
between the parties
could result in an invalid award is contrary to
the consensual nature of arbitration. Tobias Marais admits that he
came into possession
of the award during February 2009. Paragraph 4
of the order made by consent states that the procedure to be followed
at the arbitration
should be agreed between the parties and the
arbitrator. This, in my view, allowed the parties to agree with the
arbitrator on
the manner in which the award would be delivered.
Section 25(2) is a deeming provision which fixes the date of
publication where
the publication occurs in terms of s 25(1). Even if
the provisions of s 25 are peremptory, it does not follow that the
award itself
is void because it was not delivered in the prescribed
manner.
The object sought to be achieved by s 25 is to fix a date
on which the award was published. Time periods run from this date; a
review
has to be instituted within six weeks. However, the object to
fix the date of publication was achieved in another manner, namely
the agreed delivery of the award by email. To hold that the award,
delivered in the manner agreed upon, is nevertheless invalid,
would
serve only a strict legalistic interpretation which takes no account
of the substance of what is sought to be achieved by
s 25.
[51]
In the present case the order referring the matter to arbitration
sanctioned an agreement regarding the procedure to be followed.
An
agreement relating to procedure, determining the manner of
publication of the award, was reached with the arbitrator. It was
complied with, and, in my view, resulted in a valid award.
[52]
I hold that on the facts of this case there was a valid publication
of the award on 18 December 2008.’ (Emphasis supplied)
[19]
I am in respectful agreement with the thesis encapsulated in these
dicta. In short, to insist on a formalistic interpretation
of a
statute whose avowed objective is, through a consensual process, to
resolve private disputes, that freely contracting parties
be held to
be obliged to observe prescribed procedures on pain of bringing about
invalidity, when alternative procedures were
agreed upon which
more readily serve the parties aims of expedition, informality and
reduction of costs, would be to strangle the
purposes of the statute
and result in a triumph of foolishness. Thus, purposefully
interpreted the provisions of section 25 the
Arbitration Act are not
immune from variation by agreement, but are merely a default
procedure which shall apply in the absence
of a contrary intention
evinced by the contracting parties.
[20]
The second argument advanced on behalf of the appellant is that the
agreement between the parties did not, in fact, vary the
provisions
of section 25. Clause 3.4, of the agreement, cited above, identifies
two ‘executory’ acts, one permissive
and the other
compulsory. First the arbitrator was ‘entitled’ to email
the award. This phrase is permissive.
No email was sent.
Accordingly, no legal consequence can occur. Second, the arbitrator
is instructed that he ‘shall….furnish
the respective
parties with a signed hard-copy [of the award]’ This phrase is
compulsory. The nub of the appellant’s
thesis is that this duty
of the arbitrator could only take place by summoning the parties to
his presence and thereupon ‘furnishing’
them with a hard
copy of the award.
[21]
In this regard, it must be observed that interpreting text in an
agreement requires a holistic reading, not a narrow focussed
obsession with a few selected words.
[12]
Clause 3.4 expressly states that the chosen methods of communication
of the award have been agreed upon ‘in order to expedite
matters’. Indeed, the provisions of clause 3.1 are replete with
allusions to expedition, informality, practicality, and cheapness.
Plainly, the parties had in mind a process that was permeated by
slick business-like procedures. If this is the ethos that the
parties
sought to dominate the arbitration, why would they intend that in
‘furnishing’ the award, the arbitrator was
obliged to
summon them to a ritual meeting, a gesture bereft of utility,
imposing more costs, and defeating the express aim mentioned
in
clause 3.4 ‘to expedite matters’? In short, such an
understanding cannot be attributed to them. Accordingly,
the
agreement did intend to vary the provisions of section 25.
[22]
A third argument was advanced on behalf of the appellant in support
of the idea that the formality of a designated moment of
‘publication’ was a critical juridical act. The
contention is that because the date of publication was functionally
linked to various legal consequences; in particular, the period of
three months within which to seek to set aside the award as
contemplated in section 33(2), ‘six weeks after the
publication’
[13]
; and
prescription of the award, if not diligently enforced, it had to
follow that the date had to be objectively capable of identification.
[23]
On the facts of this case it is suggested that the critical date is
uncertain. Is it the date of signature, ie, 14 August 2014?
Is it the
date of physical delivery, ie, 18 august 2014? However, it is common
cause that the parties each received the award on
the same day.
[24]
The facts of this case do not compel an answer to the question how to
resolve a genuine confusion about the date of delivery
of an award
because it is common cause that it was indeed received by each party
on the same day.
[25]
Nonetheless, the risk of uncertainty is generic. Accordingly, a
generic observation can be made about such risk of uncertainty:
the
date of delivery is a question of fact to be decided
ad
hoc
by
a court called upon to decide that question. If it is a correct
statement of law that the parties may vary the provisions of
section
25, then any potential vagueness must be resolved in relation to the
terms of their agreement. In the present example,
the term ‘furnish’
could arguably suggest that the date of receipt might be the
appropriate date, and, perhaps, the
date of signature might be a
likely candidate too, but the choice is the product of interpreting
the agreement. On the terms of
this agreement, in my view, the
‘furnishing’ of the hard copy on 18 August 2014 seems
more likely to be the appropriate
date of ‘publication’,
which the arbitrator achieved by delivery, as contemplated in their
agreement on the same day
to both parties.
[26]
That ‘effective delivery’ points towards ‘receipt’
by the parties is illustrated in the Indian decision,
State of
Maharashtra & Others v M/S Ark Builders
[2011] INSC 201
(28/02/2011),
applying the decision in
Union of India
v Tecco Trichy Emgineers & Contractors
[2005] INSC 180(
16/03/2005
).
In
Tecco Trichy
it was held that delivery is
‘not a matter of mere formality. It is a matter of substance.’
In construing section
34 of the Indian Arbitration and Conciliation
Act 1996, which provided that a challenge to an award had to be made
not later than
‘three months have elapsed from the date on
which the party making that application had received the arbitral
award’
the Supreme Court of India held that delivery had to
mean effective delivery and thus had to be received by the party. On
the facts
in that case, a copy had reached the offices of the party
but had taken some time to wend its way to the responsible person, ie
the general manager. The court held:
‘
Therefore,
in our opinion, service of arbitral award on the General Manager by
way of receipt in his inwards office cannot be taken
to be sufficient
notice so as to activate the Department to take appropriate steps in
respect of and in regard to the award passed
by the arbitrators to
constitute starting point of limitation for the purposes of Section
34(3) of the Act. The service of notice
on the Chief Engineer on
19.3.2001 would be the starting point of limitation to challenge the
award in the Court.’
[27]
However, in a case where it might not be possible to determine with
clarity what the date is, the solution is provided in the
judgment of
Landman JA in
South African Transport and Allied Workers Union v
Tokiso Dispute Settlement & Others
[2015] 8 BLLR 818
(LAC).
A
controversy about the date of the award arose in relation to
determining if the 6-week period prescribed in
section 145(1)
of the
Labour Relations Act 66 of 1995
, within which to bring a review, had
expired. The labour appeal Court held that the applicant for a
review bore an onus to
prove the application was in time. Landman JA
considered the matter at length and held thus:
‘
[7]
The
parties and the court
a
quo
were
content to assume that an award was duly published when the parties
received it. Implicit in this must be the further assumption
that if
the parties each received the award on different dates the award
would be assumed to have been published on the date that
it is last
received. It is unnecessary to decide when an award may be assumed to
be published where it is not delivered in the
presence of the
parties. This appeal may be decided on the assumptions which the
parties and the court
a
quo
made.
[8]
The
onus, generally speaking, was upon the appellants to show that the
review application had been launched timeously because this
is a fact
or element which goes to establishing the jurisdiction of the Labour
Court to hear the application for review. But the
question of where
the onus lies depends upon the form in which a challenge is mounted.
In
Malherbe
v Britstown Municipality
Ogilvie-Thompson
AJ (as he then was) said the following:
“
Under
the procedure now prescribed by Act
32
of 1944
any
question of onus which arises in connection with any challenge of the
Court’s jurisdiction must, in my judgment, be determined
on a
consideration of the particular form in which that challenge is
raised on the pleadings in the particular case. It is the
province of
the plaintiff to establish the jurisdiction of the Court into which
he, as
dominus
litis
,
has brought the defendant. In this sense the onus of establishing
jurisdiction is, in my view, always on the plaintiff. But the
form of
defendant’s plea may be such as to burden him with an onus to
prove certain facts. As shown by Van Den Heever, J.P.
(as he then
was) in
Lubbe
v
Bosman,
there is weighty roman-Dutch authority for the proposition that once
a defendant raises the
exceptio
fori declinatoria
as
a substantive plea ‘the onus rests upon him of proving the
facts upon which his plea to the jurisdiction is based’.
In
such a case the defendant in his plea avers the existence of certain
facts which, if proved, will defeat the jurisdiction. The
onus of
proof of such facts rests upon the defendant.”
See
also
Munsamy
v Govender
1950 (2) SA 622
(N)
at 624 [also reported at
[1950]
2 All SA 292
(N)
–
Ed].
[9]
‘
I
am of the opinion that appellants bore the initial
onus
and
it remained with them. Although the appellants may be excused for not
filing an affidavit by Tokiso setting out when the award
was
delivered, it should have made an averment about when the award was
received; more so when the date of receipt was challenged.
The
appellants placed before the court the award (this is common cause)
and a cover sheet,
prima
facie
showing
that the award was faxed by Tokiso to the appellants on 5 October
2005 but without an affidavit stating when the award was
received.
[10]
The
award was not delivered in the presence of the parties. This has the
effect that the presumption in
section
25(2)
does
not apply. The date of the award of 29 August 2005 is of no
significance in this case. The Arbitrator followed a procedure,
which
is fairly common, of providing a copy of the award to the parties by
fax. This may well be in accordance with Tokiso’s
domestic
rules but the rules have not been referred to in the papers.
[11]
Where
an award is not delivered in the presence of the parties, it would
probably not be sent simultaneously. Some interval would
elapse.
Putco does not deny that the appellants received the award by fax on
5 October 2005. It may be that the deponent to Putco’s
answering affidavit overlooked the fax cover sheet attached to the
appellants’ papers. In any event, the furthest that Putco
is
prepared to go is to say that the award was faxed by Tokiso to Putco
on 5 September 2005 and it assumes that the award was also
faxed by
Tokiso to the appellants on that date.
[12]
Of
course, the appellants should have filed a replying affidavit which
would have assisted the court but this was not done. But
they were
not obliged to do so.
[13]
The
court
a
quo
overlooked
the fact that the deponent to Putco’s answering affidavit was
making an assumption. It was incumbent on the court
a
quo
to
interrogate the assumption and to determine whether the assumption
was such that it could be elevated to a fact. L Steynberg
“
Fair
”
Mathematics
in Assessing Delictual Damages
2011
(14) 2 PER/PELJ relying on Keynes
Treatise
on Probability
points
out that:
“
Probabilities
are not surrendered to human imagination, which means that a
supposition or assumption is not probable merely because
someone
thinks so. The facts that establish the knowledge upon which the
probability is based should be determined objectively
and
independently of human opinion.
[14]
The
assumption, in the light of the fax cover sheet apparently sent with
the award to the appellants, casts doubt on the correctness
of that
assumption. But it is unnecessary to rely on this as where an award
is not delivered in the presence of parties but is
faxed to one party
it cannot be assumed as a fact that it reached the other party at the
same time or on the same date. There are
many reasons why it might
have not been faxed to the appellants on the same date that it was
faxed to Putco. The court
a
quo
should
have found that the award was published as regards the appellants on
5 October 2005.
[15]
If
the court
a
quo
could
not decide when the award was published, the court was empowered to
remit the award to the Arbitrator to deliver it in the
presence of
the parties.
Cf
M
Jacobs
The
Law of Arbitration in South Africa
Juta
1978 at 129 and
Anning
v Hartley
(1885)
27 LJ Ex 145
, 2 Dig (Repl) 453’.
(Footnotes
omitted)
[28]
Two matters of importance bear emphasis. First, the notion is that if
the ‘delivery’ is by a means of a method
of communication
to the parties that cannot guarantee that the award will be received
simultaneously, the appropriate ‘date
of delivery’ would
be that date upon which the party, last to receive it, got it.
Second, the resolution of a controversy
about the fact of which date
delivery took place lies in a remittal to the arbitrator to deliver
it in accordance with section
25(1), the default method. However, no
invalidity results from a botched initial attempt to effect delivery.
In
Anning
v Hartley (1858) 27 LJ Vol XXVII 145 (Court of Exchequer), 2 Dig 453,
t
o
which Landman JA referred, the controversy was about three
arbitrators having signed the award at different dates and places,
a
common cause fact. Pollock C.B. held that the court had the power to
remit for correction, and that ‘…it would be
indeed
lamentable if we not able to send back the award to them to be set
right…’ This approach, therefore, enjoys
the endorsement
of both common sense and ancient authority, in consequence of which
the risk of a declaration of invalidity of
an award cannot arise.
[14]
[29]
The result is, therefore, as follows:
29.1.
As a matter
of law, the provisions of section 25 are not incapable of variation,
but rather, stipulate a default procedure which
can be varied by the
intention of the parties, duly proven.
29.2.
The parties
in this case indeed varied those provisions by the terms of clauses
3.1 and 3.4 of their agreement.
29.3.
The
arbitrator’s conduct of hand-delivering hard copies of the
award to each party on 18 August 2014 satisfied his obligation
in
terms of clause 3.4 of their agreement.
29.4.
A valid
award was thus delivered and published on 18 august 2008, within the
contemplation of section 25.
THE
GROSS IRREGULARITY ARGUMENT
[30]
It was incumbent on the appellant to bring the allegation of a gross
irregularity within the compass of the dicta of Harms
JA in
Telcordia
Technologies Inc v Telkom 2007(3) SA 266 (SCA)
:
‘
The
nature of the inquiry, the duties of the arbitrator, and the scope of
his powers
[80]
Before considering the attack on the arbitrator on the ground that he
had committed gross irregularities in the conduct of
the arbitration
proceedings (by misconceiving the nature of the inquiry and his
duties) or exceeded his powers, it is necessary
to determine the
nature of the inquiry, the arbitrator's duties, and his powers.
[81]
As mentioned at the outset, according to the Integrated Agreement the
arbitrator had to determine all disputes between the
parties,
including disputes relating to the interpretation of the agreement
and disputes of a legal, financial and technical nature;
the
procedural rules of the ICC were to apply; the laws of the Republic
would govern the agreement; and, subject to the arbitration
clause,
the parties consented to the jurisdiction of South African courts.
[82]
The May issues, as defined, required the arbitrator to determine
Telcordia's primary contractual obligation under the Integrated
Agreement 'having regard to the terms thereof and all admissible
evidence in relation thereto'. In this regard, he had to choose
between two opposing contentions. It is clear from the way the May
issues were defined that the questions were interdependent and
that,
depending on the outcome of, say, question 1, question 3 could have
fallen away.
[83]
In short, the arbitrator had to: (i) interpret the agreement; (ii) by
applying South African law; (iii) in the light of its
terms; and (iv)
all the admissible evidence.
[84]
In addition, the arbitrator had, according to the terms of reference,
the power (i) not to decide an issue which he deemed
unnecessary or
inappropriate; (ii) to decide any further issues of fact or law,
which he deemed necessary or appropriate; (iii)
to decide the issues
in any manner or order he deemed appropriate; and (iv) to decide any
issue by way of a partial, interim or
final award, as he deemed
appropriate.
[85]
The fact that the arbitrator may have either 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 only
means that he erred in the performance of his duties. An arbitrator
'has the right to be wrong' on the merits of the case,
and it is a
perversion of language and logic to label mistakes of this kind as a
misconception of the nature of the inquiry - they
may be
misconceptions about meaning, law or the admissibility of evidence
but that is a far cry from saying that they constitute
a
misconception of the nature of the inquiry. To adapt the quoted words
of Hoexter JA: it cannot be said that the wrong interpretation
of the
Integrated Agreement prevented the arbitrator from fulfilling his
agreed function or from considering the matter left to
him for
decision. On the contrary, in interpreting the Integrated Agreement
the arbitrator was actually fulfilling the function
assigned to him
by the parties, and it follows that the wrong interpretation of the
Integrated Agreement could not afford any ground
for review by a
court.
[86]
Likewise, it is a fallacy to label a wrong interpretation of a
contract, a wrong perception or application of South African
law, or
an incorrect reliance on inadmissible evidence by the arbitrator as a
transgression of the limits of his power. The power
given to the
arbitrator was to interpret the agreement, rightly or wrongly; to
determine the applicable law, rightly or wrongly;
and to determine
what evidence was admissible, rightly or wrongly. Errors of the kind
mentioned have nothing to do with him exceeding
his powers; they are
errors committed within the scope of his mandate. To illustrate, an
arbitrator in a 'normal' local arbitration
has to apply South African
law but if he errs in his understanding or application of local law
the parties have to live with it.
If such an error amounted to a
transgression of his powers it would mean that all errors of law are
reviewable, which is absurd.’
(References
in footnotes omitted)
[31]
It bears emphasis that the correctness of a finding by an arbitrator
appointed under the Arbitration Act is therefore irrelevant
to a
complaint of gross irregularity.
[32]
The controversy which precipitated the referral to arbitration arose
thus:
32.1
The
parties’ agreement provided for progress payments during the
course of building operations. A quantity surveyor, Bryant,
was
responsible for issuing certificates from time, which certificates
triggered the obligation of the respondent to pay the sum
so
determined.
32.2.
On 19
September 2008, Bryant issued certificate no 5. When the
certificate was presented by the appellant to the respondent
for
payment, the respondent unilaterally deducted a sum. That conduct was
alleged to be a breach. (In due course, the arbitrator
held that the
short payment was indeed a breach, the rationale being that the
obligation to pay was triggered by a certificate
regardless of
whether the certificate itself was an accurate measurement of
progress.)
32.3.
On 15
October 2008, a demand to rectify the breach was sent, demanding
performance, failing which action would be taken. The demand
was not
met and the sum claimed remained unpaid.
32.4.
On 30
October 2008, Bryant issued certificate no 6. In that certificate,
the state of the account between the parties was declared
to be a
credit balance in favour of the respondent; ie the appellant had been
overpaid what was due and payable, as at that date.
32.5.
On 14
November 2008, the appellant purported to cancel the contract,
payment of the sums demanded, not being forthcoming.
32.6.
Thereafter,
the appellant referred the dispute about the breach to arbitration as
provided for in the agreement.
[33]
The relevant portion of arbitration agreement is in clauses 3.1 and
4.1 and 4.2; clause 3.1 is cited above, only the critical
portion of
the text is, for ease of reference, repeated here:
‘
3.
The Powers of the Arbitrator:
3.1.
….the arbitrator shall in his sole discretion determine the
procedure to be adopted and
shall have regard in that connection to
the primary need to determine the dispute or difference as
expeditiously and as cheaply
as possible and with resort to as little
formality as is reasonably practical, provided always that where the
arbitrator is required
to make a decision on any disputed matter both
parties shall be entitled to be heard.
4.
The issues to be determined:
4.1.
The issues to be determined shall be set out in the pleadings already
exchanged between the parties.
4.2.
The arbitrator shall prepare, in the light of the pleadings, a list
of issues and shall submit
this to the parties giving directions at
that time for the provision of any.’
[34]
Upon appointment, the arbitrator engaged the parties and a list of
issues, as envisaged by the terms of the agreement, was
drawn up. It
is unnecessary to mention all of them. The issues included item 37
which read ‘Has the claimant lawfully cancelled
the contract?’
The arbitrator thereafter wrote to the parties confirming their
further agreement to separate the issue of
the cancellation, as
described in item 37 of the list and to resolve that issue before
dealing with other aspects of the dispute.
The arbitrator also set
out what he thought were ‘ancillary issues’ that needed
to be addressed in order to decide
the issue about the lawfulness of
the cancellation.
[35]
After a hearing, which included the submission of written arguments
and an oral debate, the arbitrator found that the cancellation
was
unlawful.
[36]
The manner in which the arbitrator came to a conclusion and made a
finding of an unlawful cancellation is the critical issue
upon which
the allegation of gross irregularity by the arbitrator is founded.
[37]
The foundation of the appellant’s case is that, anterior to the
finding that the cancellation was unlawful, the arbitrator
made a
decision on an ‘issue’ on which the appellant was not
heard, thus violating the dictates of paragraph 3.1 of
the
arbitration agreement.
[38]
The portion of the award which is supposed to evidence this violation
reads thus:
‘
CANCELLATION
34.
Clause 12.2.2 set out the grounds upon which the claimant has relied
in its claim that it has cancelled the contract.
The thrust if this
clause is that the contractor becomes entitled to cancel the contract
if payment is not made to the contractor
in accordance with clause 11
and such default continues for seven days after notice specifying
same.
35.
As stated in paragraph 30 above, in terms of the contract, Mr Bryant
was tasked with determining amounts due. The obligation
to pay under
clause 11 is premised against the payment certificates which were
issued by Mr Bryant.
36.
Mr Bryant was not entitled to withhold retention from the payment
certificates and should not have done so. However, the
erroneous
withholding of retention does not amount to a breach of contract by
the employer as envisaged in clause 12.2.2 and would
not constitute
valid ground for termination. The defendants’ obligation to pay
was premised on the certificates issued by
Mr. Bryant. The issuing of
an incorrect certificate and the non-payment of a certified amount
are not the same thing.
37.
With regards to payment certificate number 5 Mr Brews was not
entitled to amend such payment certificate and he should
have paid
the amount as certified to the claimant. The short payment of payment
certificate 5 provided valid ground for termination
as this was a
failure to make payment in terms of clause 11.
38.
The claimant issued notice under clause 12.2.2 on 15 October 2008 and
then issued a letter to cancel the contract on 14
November 2008. The
defendant admits receipt of the letter to cancel the contract on 14
November 2008 but denies that there was
any basis for the claimant to
cancel the contract as alleged or at all.
39.
In terms of clause 12.2.2 the claimant became entitled to terminate
the contract from 23 October 2008.
40.
Mr Bryant issued payment certificate number 6 on 30 October 2008.
41.
The effect of the payment certificate was to effectively remedy the
breach complained of in the letter of 15 October 2008.
In terms of
payment certificate number 6 no payment is due to the claimant. Had
the claimant issued notice of cancellation from
23 October 2008 and
prior to the issue of payment certificate number 6 then the
termination would probably be legitimate. However,
the claimant
issued its notice of termination two weeks after it received payment
certificate number 6 and it knew that at that
date in terms of clause
11 no payment was due to the claimant.
42.
Based on the above I agree with the defendants’ assertion that
as at 14 November 2008 there was no basis for the
claimant to cancel
the contract.’
[39]
It is useful to read this finding, which spawned the controversy, in
conjunction with the pleadings to assess the context in
which it was
made. The appellant’s claim included a reference to the 6
certificates issued by Bryant, of which only certificates
5 and 6 are
pertinent. It is averred that Certificate No 5 stated a sum due to
the appellant of R201,360.91 and Certificate No
6 stated a credit
balance in favour of the respondent of R1915.75. These
averments were admitted by the respondent.
[40]
Then in paragraph 70 of the claim, the conduct that constituted the
material breach is averred:
“
T
he
Defendant has materially breached the contract in one or more of the
following manners:
70.1.
by failing to pay the Claimant the amount of R201 360-91 which
the QS determined to be due to Claimant
in terms of Payment
Certificate No 5 and making a short payment of R38 326-36;
70.2.
by failing to pay the Claimant an amount of R125 000-00 in terms
of payment Certificate No 5 which
the QS, contrary to the provision
of the contract, deducted as retention;
70.3.
by failing to pay the Claimant in terms of Payment Certificate No 5
the amounts due for tiles, pelican pools,
light fittings and sanitary
ware;
70.4.
by failing to make payment to the Claimant in terms of draw No 6 in
the sum of R813 924-65 being a
reasonable estimate of the value
of the work executed minus previous payments;
70.5.
by failing to properly consider the Claimant’s request for a
reasonable extension of time.”
The
respondent in its plea, denied these averments.
[41]
In paragraph 56 of the claim it had been alleged that notice of
breach was given, and demand made to remedy the breach, as
contemplated in the agreement, based on the non-payment of monies due
in terms of certificate No 5
.
The respondent pleaded that no monies were due and payable
as
at 21 October 2008
,
a date of significance as it was after the date of the demand and
before the purported cancellation.
[42]
The cancellation, which occurred on 11 November 2008, was pleaded in
paragraph 68. The respondent answered by pleading
that no basis
existed to cancel as alleged or at all.
[43]
The contention advanced in support of the appellant’s complaint
is that the ‘loss’ of the ‘right to
cancel’
was not an issue on the pleadings or in the list of issues and it was
therefore a gross irregularity by the arbitrator
to have made a
decision on such ‘issue’ of which the appellant was
neither alerted, nor had the opportunity to be heard.
The thesis
advanced on behalf of the appellant is not that the finding is
incorrect, but rather, the finding is challenged because
of the
absence of
audi
alterem partem
on the ‘issue’ (or, to use the exact words of the
agreement a ‘disputed matter’) of the lapsing of the
right to cancel.
[44]
In my view, the argument advanced on behalf of the appellant is
fundamentally misconceived. The misconception exists in two
respects.
First, the misconception derives from the belief that an extraneous
‘issue’ has been intruded into the case
in the shape of a
supposedly ‘lost right to cancel’. This notion cannot be
correct. The ‘issue’ or ‘dispute
matter’ on
which the parties had to be heard is the validity or lawfulness of
the cancellation. The proposition that the
cancellation was invalid,
because at the moment that the cancellation took place no obligation
to pay any money to the appellant
then existed (because such an
obligation could, in terms of the agreement, only arise pursuant to a
certificate by Bryant, and
the prevailing certificate No 6 stated a
credit balance) cannot be elevated to the status of an ‘issue’
on which the
parties had to be heard. The proposition is, after all,
merely that; ie a proposition which is one of several components of a
chain
of mixed legal and factual reasoning resulting in a conclusion
about the real issue; ie the validity of the purported cancellation.
Second, the very point that a valid cancellation cannot be effected
at a time when no money is due and payable, and by inference,
any
breach that might have existed no longer exists, is encapsulated in
the pleadings. The ‘point’ was always apparent
and there
ought not to have been any surprises to the attentive reader of the
pleadings.
[45]
Once it is appreciated that the lapsing of the right to elect to
cancel is not an ‘issue’ or ‘disputed matter’,
properly understood, the complaint about not being heard on an
extraneous ‘issue’ simply cannot arise. There cannot
be
doubt that the parties were heard on the issue of the purported
cancellation.
Conclusions
[46]
Accordingly, the order of the review court has not been shown to be
incorrect in any respect, and the appeal falls to be dismissed.
[47]
The costs of the appeal should follow the result.
The
Order
[48]
The appeal is dismissed with costs.
_______________________________
Sutherland
J
(with
whom Moshidi et Nicholls JJ Concur)
Judge
of the High Court,
Gauteng
Local Division, Johannesburg
_______________________________
Moshidi
J
Judge
of the High Court,
Gauteng
Local Division, Johannesburg
_______________________________
Nicholls
J
Judge
of the High Court,
Gauteng
Local Division, Johannesburg
Hearing:
15 May 2017.
Judgment:
20 June 2017
For
the Appellant:
Adv
Bisscoff,
Instructed
by McDonald Attorneys
For
the Respondent:
Adv
Bitter,
Instructed
by Harratt Mbuyisa Neale Inc
[1]
Section 23: The
arbitration tribunal shall, unless the arbitration agreement
otherwise provides, make its award-
(a) in the case of an
award by an arbitrator or arbitrators, within four months after the
date on which such arbitrator or arbitrators
entered on the
reference or the date on which such arbitrator was or such
arbitrators were called on to act by notice in writing
from any
party to the reference, whichever date be the earlier date; and
(b) in the case of an
award by an umpire, within three months after the date on which such
umpire entered on the reference or
the date on which such umpire was
called on to act by notice in writing from any party to the
reference, whichever date be the
earlier date,
or
in either case on or before any later date to which the parties by
any writing signed by them may from time to time extend
the time for
making the award: Provided that the court may, on good cause shown,
from time to time extend the time for making
any award, whether that
time has expired or not.
[2]
Section 24(1): The award
shall be in writing and shall be signed by all the members of the
arbitration tribunal.
[3]
Section 26: Unless the
arbitration agreement provides otherwise, an arbitration tribunal
may make an interim award at any time
within the period allowed for
making an award.
[4]
See: Tallakoy &
Others v Black Fire Energy Inc & Others Case No 15-6322 (
United States court of Appeal for 6th
Circuit)
[5]
Rules 39 and 489
respectively of the AAA Rules for Labor arbitration and for
Commercial arbitration.
[6]
See:
Marcus
Jacobs, The Law of Arbitration in South Africa (1977) Juta
,
at p129 notes the section without comment.
McKenzie,
The Law of Building contracts and Arbitration in South Africa (1977)
3
rd
ed Juta
,
at p156, likewise, merely notes the text of the section.
Ramsden,
The Law of Arbitration, South African and International arbitration,
(2009) Juta
,
in dealing with publication, offers no substantive comment. In
Ramsden’s reworking of
McKenzie
in Mckenzie’s Law of Building and Engineering Contracts and
arbitration, 7
th
ed (2014)
Juta,
he does no more than repeat the text from the 1977 edition.
[7]
In
that case, Bell J and Watermeyer J each remarked that it was the
universal practice to make the award in the absence of the
parties,
but did not elaborate on how the award was communicated to the
parties.
[8]
See: Report of The South
African Law Commission: Project 94, Arbitration: An International
Arbitration Act for South Africa (July
1998), p 119, 217, 242.
[9]
Van Houtte, (supra) p180
[10]
See
footnote 1.
[11]
Section 31:
(1) An award may, on the
application to a court of competent jurisdiction by any party to the
reference after due notice to the
other party or parties, be made an
order of court.
(2) The court to which
application is so made, may, before making the award an order of
court, correct in the award any clerical
mistake or any patent error
arising from any accidental slip or omission.
(3) An award which has
been made an order of court may be enforced in the same manner as
any judgment or order to the same effect.
[12]
See,
on interpreting text:
Natal
Joint Municipal Pension Fund v Endumeni Municipality 2012(4) SA 593
(SCA) at [17] – [18]:
[17]
The trial judge said that the general rule is that the words used in
a statute are to be given their ordinary grammatical
meaning unless
they lead to absurdity. He referred to authorities that stress the
importance of context in the process of interpretation
and concluded
that:
'A
court must interpret the words in issue according to their ordinary
meaning in the context of the regulations as a whole, as
well as
background material, which reveals the purpose of the Regulation, in
order to arrive at the true intention of the draftsman
of the
rules.'
While
this summary of the approach to interpretation was buttressed by
reference to authority, it suffers from an internal tension
because
it does not indicate what is meant by the 'ordinary meaning' of
words, whether or not influenced by context, or why,
once
ascertained, this would coincide with the 'true' intention of the
draftsman. There were similar difficulties in the heads
of argument
on behalf of Endumeni. In one paragraph they urged us, on the basis
of the evidence of the actuary who advised the
Fund, to adopt the
approach that the proviso was not intended to cater for 'a Maltman
type of event' and, in another, cited authorities
for the rule that
the 'ordinary grammatical meaning of the words used must be adhered
to' and can only be departed from if that
leads to an absurd result.
In view of this it is necessary to say something about the current
state of our law in regard to the
interpretation of statutes and
statutory instruments and documents generally.
[18]
Over the last century there have been significant developments in
the law relating to the interpretation of documents, both
in this
country and in others that follow similar rules to our own. It is
unnecessary to add unduly to the burden of annotations
by trawling
through the case law on the construction of documents in order to
trace those developments. The relevant authorities
are collected and
summarised in Bastian Financial Services (Pty) Ltd v General Hendrik
Schoeman Primary School. The present state
of the law can be
expressed as follows: Interpretation is the process of attributing
meaning to the words used in a document,
be it legislation, some
other statutory instrument, or contract, having regard to the
context provided by reading the particular
provision or provisions
in the light of the document as a whole and the circumstances
attendant upon its coming into existence.
Whatever the nature of the
document, consideration must be given to the language used in the
light of the ordinary rules of grammar
and syntax; the context in
which the provision appears; the apparent purpose to which it is
directed and the material known to
those responsible for its
production. Where more than one meaning is possible each possibility
must be weighed in the light of
all these factors. The process is
objective, not subjective. A sensible meaning is to be preferred to
one that leads to insensible
or unbusinesslike results or undermines
the apparent purpose of the document. Judges must be alert to, and
guard against, the
temptation to substitute what they regard as
reasonable, sensible or businesslike for the words actually used. To
do so in regard
to a statute or statutory instrument is to cross
the divide between interpretation and legislation; in a contractual
context it is to make a contract for the parties other than the one
they in fact made. The 'inevitable point of departure is
the
language of the provision itself', read in context and having regard
to the purpose of the provision and the background to
the
preparation and production of the document.’
[13]
Section 33(2):
An application pursuant
to this section shall be made within six weeks after the publication
of the award to the parties: Provided
that when the setting aside of
the award is requested on the grounds of the commission of an
offence referred to in Part 1 to
4, or section 17, 20 or 21 (in so
far as it relates to the aforementioned offences) of Chapter 2 of
the
Prevention and Combating of Corrupt Activities Act, 2004
, such
application shall be made within six weeks after the discovery of
that offence and in any case not later than three years
after the
date on which the award was so published.
[14]
In Tallakoy &
Others v Black Fire Energy Inc & Others (Supra)
six potential dates were
offered as the date of delivery. The Court of Appeal for the 6
th
circuit remitted the matter for clarification. No question of
invalidity was entertained.