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[2010] ZAGPJHC 108
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Envirodrum (Pty) Ltd v Repo Wild 23 (Pty) limited t/a Enviro Transport and Others (34055/10) [2010] ZAGPJHC 108 (10 November 2010)
SOUTH GAUTENG HIGH
COURT, JOHANNESBURG
CASE NO:
34055/10
NOT REPORTABLE
DATE: 10/11/2010
In the matter between:
ENVIRODRUM
(PTY) LTD
Applicant
And
REPO
WILD 23 (PTY) LIMITED t/a ENVIRO
TRANSPORT
..
First
Respondent
G
C PRETORIUS SC (ARBITATOR
)
Second
Respondent
J U D G M E N T
LAMONT, J:
[1]
This is an application brought in terms of the provisions of section
33(1) of the Arbitration Act No. 42 of 1965 (the Act) to
review and
set aside an award made by the second respondent. For the sake
of convenience I refer to the first respondent
as the respondent.
On 4 November 2008 the applicant and respondent entered into an
arbitration agreement in terms whereof
the parties referred and
submitted the disputes between them which were identified in the
arbitration agreement to arbitration.
The disputes and matters
referred to arbitration were “
those
as contained in the High Court action under Case No. 04/7121 and any
subsequent amendments thereof
”.
The arbitrator the second respondent was appointed to act as an
arbitrator and determine the said matters and disputes.
In the High
Court action the respondent as plaintiff claimed payment of damages
arising out of an alleged repudiation of an agreement
concluded
between the parties. I paraphrase the relevant allegations
concerning the claim:
1.
The
parties concluded an agreement. The respondent undertook to
transport certain drums for the applicant.
2.
The respondent was to pay
for the transportation on the basis of the actual number of drums
moved alternatively 51 000 drums per
month at a particular rate.
3.
The
contract would endure for a fixed period of 3 years after which there
would be a relocation for an indefinite period subject
to
cancellation on 6 months written notice.
4.
The
applicant repudiated the contract which came to an end.
5.
In
consequence the respondent became entitled to payment of loss of
profits for the damages suffered for the remaining period of
the
contract.
[2] The respondent was
required to prove at least two things:
1.
That it was a term of the
agreement that it would endure for a particular period for the
guaranteed minimum number of drums (51
000).
2.
The
difference between the amount which contractually would accrue
(number of drums x reward) and actual costs.
[3] The pleadings in an
action are designed to identify the legal dispute between the
parties. The evidence including documents
and the hearing of
witnesses is designed to identify the factual issues between the
parties. The factual issues are resolved by
way of the judge or
arbitrator in this case giving judgment. The evidence which is
admissible (and accordingly the factual
issues which arise) is
dependent upon the particular legal issues which exist.
[4]
In the present case insofar as the damages suffered by the
respondent are concerned the legal issue was whether or not
the
respondent had suffered damages in the form of loss of profit.
The factual issues were those which arose in the course
of the
respondent proving the issues comprising its case and included
whether or not the term guarantee concerning delivery of
a set number
of drums for a set period was proven, the charge per drum, the
expenses of the respondent in procuring the profit.
The claim for
loss of profits is not a claim for general damages but for special
damages. See
Shatz Investments (Pty) Ltd
v Kalovyrnas
1976 (2) SA (AD). A
claim for general damages in the present matter would have involved
evidence establishing the increased
costs to the respondent arising
out of the repudiation.
[5] The applicant
properly did not raise questions concerning the ability of the
respondent to have reduced overheads and/or to
have adjusted its
position in consequence of the repudiation to mitigate the loss as
those matters were irrelevant to the legal
issues determined by the
pleadings.
[6] Theoretically if
during the course of the arbitration the issues became wider then
there may have been scope for submissions
concerning the
admissibility of evidence to prove the wider issues and the right of
the arbitrator to deal with the matter on that
basis. It
is common cause however that throughout the arbitration the evidence
which was led was directed towards proving
loss of profits.
[7] The applicant stated
this to be the position and it appears from the respondent’s
heads of argument which were filed
in the arbitration that the
damages issue was correctly identified as being a loss of profit. At
the end of those heads of argument
the respondent requested an award
to be made as set out in the particulars of claim. Those
particulars set out only a claim
based on loss of profit.
[8] The unexpired period
of the contract referred to as a guarantee by the parties was not
proven to exist. Hence the respondent
was unable to establish loss of
profit.
[9] During argument
before the arbitrator the question of whether or not the respondent
was entitled to claim its proven expenses
when its claim was for loss
of profit arose. The arbitrator accepted that that was an issue which
he should decide. The arbitrator
decided the issue in the
following terms:
“
102.
Envirodrum argued that I cannot award damages on the basis of
expenses as the claim was formulated as a loss of profit
claim.
I do not agree. Apart from the fact that the proof of expenses
forms an integral part of a loss of profit claim,
no objection was
raised against any of the evidence led in this regard and Envirodrum
cannot claim any prejudice. In fact as will
appear from my award, I
base it mainly on Mr Erasmus’ evidence. Lastly and to the
extent that it may be necessary I
regard this as a case where the
principle of Shill v Milner should be applied.
”
[10] No objection could
be raised against the evidence concerning proof of expenses as same
was as the arbitrator correctly pointed
out relevant to the loss of
profit claim. Whether or not the applicant was entitled to
claim prejudice is dependent upon
the manner in which the proof of
expenses was dealt with and what the wider issue may have been had
this claim been pleaded. From
the applicants’ point of view the
more the expenses were the less the loss of profit would be.
It’s approached
would have been totally different were the
claim for damages as the applicant would then approach the matter on
the basis of seeking
to reduce the expenses as much as possible.
Wider issues which could have been raised in pleading included
matters as for example
that respondent could have mitigated damage.
These matters were neither pleaded nor canvassed at the hearing.
[11] The approach of the
applicant to the evidence would be totally different depending upon
the claim which it has to meet.
To the extent that the award
was based upon the evidence of Mr Erasmus, the applicant’s
expert, it needs to be noted that
the applicant is not bound by the
evidence of Erasmus. Erasmus is a witness who gives such evidence as
Erasmus believes to be proper
and correct. Erasmus calculation
of the total damages suffered by the respondent calculated on costs
was some R223 824,57
namely the amount the arbitrator awarded. The
relevance and hence admissibility of the evidence is a matter for the
arbitrator.
[12] The second
respondent patently failed to have regard to the legal issue which
served before him namely whether or not the
loss of profits had been
established.
[13] His ruling that he
was entitled to decide the matter and award damages as he did on the
basis that the expert had found same
to have been suffered
is one which he was not
in my view entitled to make.
[14] The question is
whether or not a review lies to deal with the natter.
[15]
Under and in terms of section 33 of the Act if an arbitration
tribunal commits a gross irregularity in the conduct of
the
arbitration proceedings or has exceeded its powers or an award has
been improperly obtained the court may make an order setting
the
order aside. The Constitution requires a court to construe
these grounds reasonably strictly in relation to arbitrations
of this
nature. See
Lufuno Mphaphuli and
Associates (Pty) Ltd v Andrews and Another
2009 (4) SA 592
(CC) para [235]. The procedure is determined
primarily from the terms of the arbitration agreement itself.
Questions
of fairness do not dictate that particular procedures need
to be followed. See
Lufuno (supra)
at para [236].
[16]
A wrong interpretation of the arbitration agreement does
not mean necessarily that the arbitrator has exceeded
his powers.
He has powers to interpret the agreement, determine the applicable
law and determine the admissible evidence.
See
Telcordia
Technologies Inc v Telkom SA Ltd
[2006] ZASCA 112
;
2007
(3) SA 266
(SCA) at paras [71] to [73]. In the present matter
in the conduct of the proceedings the arbitrator, on the basis of the
reasoning set out above, determined a legal issue which was not
before him. In consequence of that determination he accepted
as
evidence properly admissible and submitted to him evidence which he
should not have received. The respondent in the arbitration
was
prejudiced in that had the legal issue considered by the arbitrator
been an issue in the process he may have raised other legal
issues
and may have furnished in consequence other evidence to support the
contentions. In addition the respondent’s
approach to the
case would have been different.
[17]
The arbitrator’s approach did not result in him
merely finding wrong law to be of application it affected
the
entirety of the proceedings. In these circumstances in my view the
approach of the arbitrator to the matter and the rulings
he made
resulted in a gross irregularity occurring. It was submitted
that the facts in
Hos + Med Aid Scheme v
Thebe Ya Bophelo Health Care Marketing and Consulting (Pty) Ltd and
Others
[2007] ZASCA 163
;
2008 (2) SA 608
(SCA) were
distinguishable. The distinction was, so it was submitted, that
an entire defence was found to exist which had
not been raised.
Here the characterisation by the arbitrator of the issue before him
resulted in an entire claim which did
not exist being created. In my
view the application for review should succeed and the award made by
the arbitrator set aside.
[18] Subsequent to
making the initial order the arbitrator amended the costs order.
To the extent that that order may be
seen to be a separate order
rather than an order comprising part of the original order that order
too is set aside in this order.
[19] The parties agreed
that an application for remittal be postponed sine die costs of the
application in this matter.
[20] I would make the
following order:
1.
The
award of the second respondent dated 2 March 2010 (including the
award made on 20 July 2010) is reviewed and set aside.
2.
The
first respondent is to pay the costs of this application.
3.
The matter 2010/33176 is
postponed sine die costs of the application to be in the cause in
this matter.
C
G LAMONT
JUDGE
OF THE SOUTH GAUTENG
HIGH
COURT, JOHANNESBURG