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[2019] ZAGPJHC 560
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Road Accident Fund v Mohlala Attorneys and Another (15478/2018) [2019] ZAGPJHC 560 (29 November 2019)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO: 15478/2018
REPORTABLE:
YES / NO
OF
INTEREST TO OTHER JUDGES: YES/NO
REVISED.
29/11/2019
In
the matter between:
ROAD
ACCIDENT
FUND
APPLICANT
And
MOHLALA
ATTORNEYS
FIRST RESPONDENT
ADVOCATE
PHILLIP MOKOENA SC N.O.
SECOND RESPONDENT
JUDGMENT
WINDELL
J:
INTRODUCTION
[1]
The applicant, the Road Accident Fund (“the Fund”), is a
statutory body established to compensate persons who suffer
loss from
injuries to themselves, or from the death of a breadwinner, arising
from the negligent or other unlawful driving of a
motor vehicle. To
defend itself against the claims instituted against it, the Fund
established a panel of attorneys. The first
respondent, (“Mohlala”),
was one of the attorneys on the Fund’s panel.
[2]
The relationship between the parties was governed by a Service Level
Agreement (“the SLA”) concluded on 25 November
2014. In
terms of the SLA Mohlala was appointed for a period of 5 (five) years
to provide legal services to the Fund. On 25 September
2015 the Fund
served Mohlala with a “
Breach Notice”
wherein it
recorded numerous alleged breaches committed by Mohlala. On 23
November 2015 the Fund addressed a further letter to
Mohlala, a
“
Suspension Notice”
, notifying it of the Fund’s
decision to suspend Mohlala from receiving new instructions from the
Fund. Mohlala did not respond
to the notices. It is alleged that it
did not come to their attention. On 7 December 2015 the Fund
terminated the SLA by sending
a letter (“the termination
letter”) to Mohlala in which it indicated that “
it had
resolved to and in fact terminated the SLA with immediate”
and
that Mohlala had to hand over all the files in their possession. A
dispute arose between the parties regarding the termination
letter.
Mohlala also refused to hand over the files to the Fund. A court
order was subsequently granted on 29 January 2018 against
Mohlala for
the return of the files.
[3]
The SLA contained an arbitration clause. With the consent of both
parties the dispute between them was referred for arbitration
before
the second respondent (“the arbitrator”). In its amended
statement of case Mohlala,
inter alia,
alleged that the letter
amounted to a repudiation of the SLA which it elected to accept, and
that it suffered damages as a result
of the repudiation (“the
claim”). The Fund denied that it repudiated the SLA, averred
that it was entitled to cancel
the SLA, and in addition alleged that
the Fund, in fact, suffered damages as a result of certain breaches
(referred to in the proceedings
as the “Big Five”)
committed by Mohlala (“the counterclaims”).
[4]
In a pre-arbitration conference held between the parties it was
agreed that the arbitration would be conducted in accordance
with the
Uniform Rules of Court and that the parties would exchange pleadings.
It was agreed that the arbitrator’s terms
of reference would be
defined by the pleadings.
[5]
On 25 April 2017, pursuant to an application by Mohlala pertaining to
the separation of issues, the arbitrator ordered that
the following
questions will be determined separately from any other question and
that all further proceedings are stayed until
the separated issues
have been disposed of:
1. whether the Fund’s
purported termination of the Service Level Agreement [concluded on 25
November 2014 (“the SLA”)
on 7 December 2015 was unlawful
and constituted a repudiation, alternatively breach by the Fund of
the SLA];
2. whether the SLA was
lawfully cancelled by Mohlala;
3. whether the Fund
should be ordered to pay the costs of the arbitration (in relation to
the proceedings to the date of the award
on the separated questions)
on the attorney client scale , including the costs of two counsel,
the costs of the arbitrator, the
venue and recording/transcript
services;
4. all defences raised by
the Fund in its Statement of defence in response to the aforesaid
issues;
5. all allegations raised
and as currently pleaded by the Fund in support of its counterclaims
in as far as they relate to the merits,
excluding the quantification
of damages suffered, if any.
6.
all defences raised by Mohlala in its Plea
to the counterclaims.
The
parties expressly agreed that the questions pertaining to causation
and the quantification of damages should not be determined
at this
stage.
[6]
On 9 March 2018, the arbitrator issued the first award (“the
main award”). He found in favour of Mohlala and held
that the
termination of the SLA by the Fund in terms of the termination letter
cannot be justified in light of clause 11 of the
SLA; that it
constituted a repudiation of the SLA; and, that it was therefore
cancelled and/or terminated unlawfully.
[7]
On 12 March 2018 the arbitrator received correspondence from Mohlala
wherein he was requested to make a further award in terms
of section
32(1) of the Arbitration Act.
[1]
Section 32 (1) provides for a procedure where “
the
parties to a reference may within six weeks after the publication of
the award to them, by any writing signed by them remit
any matter
which was referred to arbitration, to the arbitration tribunal for
reconsideration and for the making of a further award
or a fresh
award or for such other purpose as the parties may specify in the
said writing.
”
The arbitrator was requested to consider two questions, which formed
part of the separated questions which was referred
to arbitration,
but which the arbitrator omitted to address in the award namely: (a)
whether the SLA was lawfully cancelled by
Mohlala; and (b) whether
Mohlala is entitled to the costs of two counsel, where applicable the
costs of senior counsel. It is common
cause that the Fund did not
consent to the remittal of these two questions to the arbitrator.
[8]
On 19 March 2018 the arbitrator made a further award wherein he
addressed the two outstanding questions. He found in favour
of
Mohlala and held that Mohlala lawfully cancelled the SLA and its
annexures. As far as the costs issue is concerned the arbitrator
introduced a further paragraph to the main award. The effect of this
paragraph was that the costs order in paragraph 231.5 of the
main
award was to include the costs of two counsel where applicable,
including the costs of senior counsel. The arbitrator, however,
declined to deal with the issue in respect of reserved costs without
the benefit of argument from both parties.
[9]
The Fund, aggrieved by the awards, launched a review application to
set aside both awards in terms of section 33 (1)(b) of the
Arbitration Act. The Fund averred that the arbitrator committed gross
irregularities in the conduct of the proceedings and that
he exceeded
his powers. In its amended notice of motion the Fund seeks the
following Order:
“
1.
Reviewing and setting aside the arbitration award dated 9 March 2018.
2. Declaring the
arbitration award dated 19 March 2018 purporting to have been
delivered by the second respondent pursuant to section
32(1) of the
Arbitration Act, was not delivered in accordance with the provisions
of section 32 (1) and is accordingly null and
void, and of no force
and effect.
3. Alternatively to
prayers 1 and 2 above, reviewing and setting aside the arbitration
award dated 19 March 2018.”
[10]
Mohlala opposed the application and asked that the application be
dismissed with costs on an attorney client scale. Mohlala
seeks, in
the alternative and in the event of the court reviewing and setting
aside the further award that the court refers the
subject matter of
the further award back to the arbitrator in terms of section 32(2) of
the Arbitration Act (“the conditional
counterclaim”).
THE
SLA
[11]
Clause 11 of the SLA and Clauses 18 and 19 of “Annexure A“,
annexed to the SLA, were relevant in the dispute between
the parties.
As t
hese contractual
provisions have been set out in great detail by the arbitrator, it is
not necessary, for purposes of the question
whether the arbitrator
committed reviewable irregularities, to discuss the clauses in much
detail.
[12]
Clause 11, the so-called ”no fault” clause, provides for
termination of the SLA by the Fund by giving 30 (thirty)
days written
notice. It also provides for an elaborate process of termination
provided for in clause 11.3 and 11.4 of the SLA,
which,
inter
alia,
affords Mohlala the right to make representations to the
Fund after receiving the termination letter.
[13]
Clause 18 (“the breach clause”) provides for the
cancellation of the SLA in the event of the defaulting party
committing a breach of any provision of the SLA and failing to remedy
such breach within a period of 14 (fourteen) days after receipt
of a
written notice to remedy such breach.
[14]
Clause 19.1 states that the Fund may terminate the SLA, or suspend
its operation, in whole or in part, at any time and at the
Fund’s
sole discretion, by giving no less than 1 (one) month’s written
notice to Mohlala.
THE
DISPUTES
[15]
The first main issue, which lay at the heart of the dispute before
the arbitrator, was the termination letter. It reads as
follows:
“
2.
The Road Accident Fund (“the Fund”) noted several
breaches of the Service Level Agreement (“the SLA”)
details of which were communicated to your offices in our
aforementioned letter of 23rd November, to which you have failed to
respond or provide any explanations thereto. In light of the
seriousness of the breaches and your failure to respond or provide
reasonable explanations, the Fund has resolved to and in fact hereby
terminate the SLA with immediate.
3. In addition, and as
contemplated in clause 13 of the SLA, you are obliged to hand over
all files to the Fund and the Fund requires
your compliance with the
following logistical plan for such had over process:”
[16]
The arbitrator had to determine the meaning to be given to the letter
and whether it amounted to repudiation. Mohlala called
one witness to
testify, its director, Ms Mohlala-Mulaudzi. The Fund called no
witnesses.
[17]
Mohlala alleged that the termination letter amounted to a repudiation
or breach of the SLA as it purported to terminate the
SLA with
“immediate
effect
”
(my emphasis), when the Fund was only entitled to terminate the SLA
upon giving 30 days written notice and after compliance
with the
procedure in clause 11.4. The Fund
confined its case for
termination of the SLA to the “no fault” provisions in
clause 11 and abandoned any reliance on
the “breach”
provisions in clause 18 as the basis for its termination of the SLA.
The Fund’s argument during
the arbitration proceedings and the
hearing of the review application is the following:
The
termination
letter, properly
construed, indicates that the SLA was to terminate after 30 days.
Even if the letter purported to terminate the
SLA with immediate
effect that is of no moment, because as matter of law, the letter
would simply take effect after 30 days. The
parties understood that
the Fund intended to terminate the SLA after 30 days and conducted
themselves in accordance with this understanding.
If the SLA was
indeed terminated with immediate effect Mohlala would have been
obliged to hand over copies of all files in its
possession
immediately, yet the letter did not demand their immediate delivery,
instead it required that they be delivered within
30 days.
[18]
The evidence eventually turned on and was decided with reference to
only two key issues: (a) the “notice of termination
issue”,
namely whether the phrase in the termination letter “with
immediate”, must be objectively be understood
to have been
intended to read “with immediate
effect
” and (b)
the “second bite issue”, a phrase that was used during
the proceedings to describe the process of termination
provided for
in clause 11.3 and 11.4 of the SLA, which affords Mohlala the right
to make representations to the Fund after receiving
the termination
letter.
[19]
The second main dispute between the parties was the Fund’s
counterclaims. In its statement of defence the Fund made the
following averments:
19.1
The Fund sought damages for breach of contract arising out of
Mohlala’s handling of five matters
(“the Big Five”)
in which it represented the Fund in proceedings instituted by third
parties. The Fund’s counterclaims
are quoted verbatim in
paragraph 37 of the award.
“
51.
As a result of the aforesaid breaches and the conduct of the claimant
as aforesaid, the respondent has suffered damages made
up as follows:
51.1 In the Beytell
claim, the costs of defending the action in circumstances where the
matter ought to have been settled;
51.2 In the Herbst
claim, the costs of the postponement;
51.3 In the Mathebula
claim, the costs of defending the action in circumstances where the
matter ought to have been settled;
51.4 In the Oosthuizen
claim, the amount paid out to the plaintiff as damages which would
not have been paid out if the claim was
properly investigated
51.5 The additional
costs incurred by the respondent due to the failure of the claimant
to hand over the files timeously.”
[21]
The Fund as stated earlier called no witnesses. It contends, with
reference to Ms Mohlala-Mulaudzi evidence, that the “Big
Five“
breaches were established and that there was therefore no need for
the Fund to call any witnesses.
THE
ARBITRATOR’S FINDING
[22]
The arbitrator found that the termination letter, properly construed,
conveyed the intention to terminate the SLA with immediate
effect and
that the termination and/or cancellation of the SLA cannot be
justified in light of clauses 11 or 19 of “Annexure
A” of
the SLA. In addition he found that the Fund was in any event
precluded from relying upon clause 11 and 19 because its
earlier
correspondence and conduct was based on the existence of breaches and
that it was the breaches, consistently referred to
throughout the
correspondence, that motivated the termination of the SLA and not the
“no-fault” clauses as contemplated
in clause 11 and 19.
In other words, the Fund’s reliance upon those clauses was
therefore at odds with the letters of the
Fund.
[23]
Although the arbitrator understood that the Fund had narrowed its
case to a “no fault’ termination, he nevertheless
proceeded to deal with the breach clause (clause 18 of “Annexure
A” of the SLA) and found that there was no basis,
in law, for
the Fund to have terminated and/or cancelled the SLA premised on the
alleged breaches. At paragraph 207 of the main
award he explained his
reasons for dealing with the breach clause as follows:
“
217.
For completeness, I deemed it necessary and prudent to entertain a
question whether or not premised on the evidence
adduced in these
proceedings, the claimant had breached the agreement between the
parties.”
[24]
It was, in fact, necessary for the arbitrator to deal with the
alleged breach of the SLA, not only “for completeness”
but in order to make a determination on the Fund’s
counterclaims. The arbitrator found that no breaches had been
committed
and that the Fund was not entitled to terminate and/or
cancel the SLA premised on the alleged breaches. He also found that
as the
Fund has failed to prove any breach that the counterclaims
should also fail. The main reasons for this finding can be found in
paragraph 207.1 to 217 of the main award. I highlight but a few:
“
209.
From the documents relied upon by the parties in these arbitration
proceedings, it becomes apparent that various allegations
of breaches
are made by the Respondent in relation to the Claimant.
210. At some stage
reference was made to C1 to C9 as containing the relevant breach
notices or conduct of the Respondent justifying
the ultimate
cancellation of the SLA. In some instances reference was made to 67
breaches. During the oral testimony, more effort
was placed on the
five main matters where it was alleged that the Claimant breached the
SLA. Fundamentally, no witnesses was called
on behalf of the
Respondent to testify on any of the alleged breaches.
211. The Claimant’s
main witness was subjected to cross-examination on these breaches and
a version being put to her. However,
no oral testimony was adduced on
behalf of the Respondent to demonstrate the alleged breaches and/or
rebut and/or contradict the
testimony of the Claimant.
212 The Claimant’s
main witness testified at length pertaining to the matters of
Beytell, Herbst, Mathebula, Ntshakala and
Oosthuizen. She was also
cross-examined at length on these matters as evident from the
transcript of the proceedings and the summation
of the evidence
document presented on behalf of the Respondent, during these
arbitration proceedings.
213. It was the
evidence of the Claimant’s witness that despite the allegations
contained in various correspondence that the
Claimant has failed to
respond to breach notices and/or alleged breaches, the Claimant has
in fact on a number of occasions proffered
a detailed explanation
with annexures, in the past, pertaining to the alleged breaches.
214. Fundamentally,
during these proceedings, the Claimant’s main witness took time
to deal with each and every allegation
contained in the
correspondence allegedly dispatched by the Respondent to the Claimant
and which ultimately found its way into
the board meeting which
ultimately resolved to terminate the SLA.
215. In addition, the
Claimant’s main witness testified at length pertaining to the
Beytell matter, the Herbst matter, the
Mathebula matter, the
Ntshakala matter and the Oosthuizen matter and furnished
comprehensive and detailed answers pertaining to
the alleged
breaches. There was no single witness called on behalf of the
Respondent to refute, contradict, rebut or challenge
the evidence
adduced by the Claimant in these proceedings.
218.
On the basis of my findings above, it therefore follows that the
Respondent’s counterclaim must also fail as the respondent
failed to call any witnesses to corroborate and/or substantiate
and/or demonstrate the basis upon which its counterclaim is
premised
”
.
THE
FUND’S COMPLAINTS
The
termination letter
[25]
The arbitrator made the following findings in respect of the
termination letter:
“
(1)
The author of the letter was not called to testify as to what she
meant by paragraph 2 of the letter;
(2) Ms Mohlala-Mulaudzi
testified about her telephonic discussions with the chairperson of
the board about “
the manner in which she was treated and on
her understanding of the events leading to the termination of the SLA
but the chairperson
was not called”;
(3) Despite the fact that
correspondence was exchanged after the termination letter, no attempt
was made on the part of the Fund
to clarify what it intended in
paragraph 2 of the letter;
(4)
Legal argument based on the letter was no substitute for the
testimony of witnesses and the arbitrator “
was
left guessing as to what is the version of the respondent in relation
to the meaning and import of the letter of 7 December
2015”.
[26]
Counsel for the Fund contends that it is clear from the
abovementioned findings that, although the arbitrator considered the
arguments and the authorities cited by the Fund on the meaning to be
given to a term or a phrase in a document (dealing with the
principle
that the process of interpretation was purely objective and not
subjective and that the testimony of the Fund’s
witnesses on
what was intended was thus irrelevant and inadmissible), that “
he
did not apply them correctly”
and/or that he misunderstood
the law. But, so it is argued, it is not the fact that the arbitrator
has committed an error of law,
it is that he did not consider the
remainder of the letter at all and that he was “so beguiled”
by the failure of the
Fund to call witnesses to testify on the
meaning of the letter, that he refused to consider whether the
balance of the letter shed
meaning on the phrase in paragraph 2
thereof. The Fund contends that the arbitrator ignored the Fund’s
defences and failed
to consider the balance of the letter and the
fact that it pointed strongly to a different meaning namely that the
SLA was to terminate
after 30 days.
[27]
The arbitrator also found that here was no doubt that Mohlala
reasonably concluded that proper performance would not be forthcoming
when the Fund approached the High Court for the return of the files.
The Fund contends that this finding is in direct conflict
with both
the common cause facts and the evidence of Ms Mohlala Mulaudzi
herself. It is submitted that the approach adopted by
the arbitrator
demonstrates that he was not even prepared to accept the testimony of
Ms Mohlala Mulaudzi where such testimony favoured
the Fund. It is
submitted that it is therefore “
difficult to understand how
the arbitrator came to these conclusions except on the assumption
that he simply failed to apply his
mind properly to the issues before
him”.
[28]
The Fund contends that as far as the interpretation of the
termination letter is concerned that the arbitrator ignored the
case
pleaded by the Fund, merely paid lip service to it, and because he
did not grapple with the argument advanced by the Fund
regarding the
remainder of the letter, he failed to apply his mind and committed a
gross irregularity. It is submitted that he
made findings that were
inconsistent with the common cause facts, both on the pleadings and
in evidence and disregarded the documentary
evidence that had been
accepted. He also accepted evidence based on hearsay. The Fund
submits that Ms Mohlala–Mulaudzi’s
evidence was
adequately challenged in cross examination and that there was no need
to produce contradictory evidence as she made
concessions that
nullified and in some instances counterbalanced her testimony in
chief. He was, therefore, wrong in finding that
Mohlala provided a
detailed explanation. The Fund also contends that the arbitrator
failed to consider the Fund’s additional
defences, namely, that
even if the termination letter amounted to a repudiation it would
simply take effect after 30 days and that
the letter was not
understood by Mohlala to be terminable immediately and, in fact, both
parties conducted themselves as if the
termination would take effect
after 30 days. The Fund contends that it is therefore apparent that
the Fund had not been given a
fair hearing of the case and that the
arbitrator committed a gross irregularity.
The
counterclaims
[29]
As far as the counterclaims are concerned the arbitrator found that
the Fund failed to prove any breaches. He held that Ms
Mohlala
Mulaudzi’s evidence regarding the alleged breaches of the SLA
was unchallenged and should be accepted because “
cross-examination
cannot replace the evidence to demonstrate that the breaches were
indeed committed”.
The Fund submits that the arbitrator’s
interpretation of the testimony and evidence was entirely wrong and
that Mohlala had,
on its own version committed innumerable breaches
of the SLA. The evidence relating to the Big Five demonstrated this
and the documentation
that was discovered by Mohlala was crucial in
demonstrating the breaches. To the extent that the arbitrator found
otherwise he
did not properly apply his mind to the pleadings or to
the applicable South African law.
THE
MAIN AWARD
[30]
By agreeing to arbitration, the parties had limited the grounds of
interference in their contract by the courts to the procedural
irregularities set out in section 33 (1) of the Arbitration Act. The
Fund relies on section 33 (1)(b) which reads as follows:
“
[33]
Setting aside of an award: (1) Where-
(a)…….
(b) an arbitration
tribunal has committed any gross irregularity in the conduct of the
arbitration proceedings or has exceeded its
powers; or
(c) ………
The court may, on the
application of any party or parties, make an order setting the award
aside”.
[32]
The grounds for the
review as well as the facts and circumstances upon which the Fund
wishes to rely have been set out in a 199
page founding affidavit.
The nub of the Fund’s
complaint is that the arbitrator applied the wrong legal principles
in interpreting the termination
letter and the counterclaims; ignored
certain undisputed facts; placed too much emphasis on the failure by
the Fund to call any
witnesses; and therefore “closed his mind”
to the Fund’s defences and arguments. This, it argues, is a
latent
gross irregularity, resulting in an unfair trial, entitling
the court to review and set aside the awards. As far as the further
award is concerned, the Fund contends that the arbitrator ignored the
requirements set out in section 32(1) of the Arbitration
Act and that
he was not entitled to issue a further award. The Fund’s
complaint is summarized as follows;
“
The
essential complaint of the Fund is that the Arbitrator failed to
perform the very task he was called upon to, viz. arbitrate
the
dispute. The Fund contends that it has not had a full and fair
hearing of the dispute. In fact, the approach adopted by the
Arbitrator denied the Fund of a hearing of its case”
[33]
Mohlala avers that the review application is an attempted appeal
“dressed up as a review” and that
the
principal relief claimed by the Fund ultimately turns on the proper
application of the “Telcordia test” as laid
down in
Telcordia
Technologies Inc v Telkom SA Ltd
[2]
.
In
Telcordia,
the
Supreme Court of Appeal (“SCA”) set aside a decision by
the High Court to review and set aside an arbitrator’s
award.
One
of
the principal complaints in that matter was that the arbitrator did
not understand and did not apply our law dealing with variations
of
written contracts.
[34]
Mohlala contends that the Fund
ignored the key findings and principles stated in
Telcordia
and elected to emphasize a few peripheral findings which do not
represent the substance of the judgment. It is contended that the
Fund specifically ignored paragraph 85 and 86 of the judgment that
stated as follows:
“
[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.”
Evaluation
[35]
In
Luvuno
Phaphuli & Associates (Pty) Ltd v Andrews and Another
[3]
,
O’Regan
ADCJ said the following in relation to the review of an arbitrator’s
award in terms of section 33 (1) of the
Arbitration Act:
“
[235]…..Section
33(1) provides three grounds for setting aside an arbitration award:
misconduct by an arbitrator; gross irregularity
in the conduct of the
proceedings; and the fact that an award has been improperly obtained.
In my view, and in the light of the
reasoning in the previous
paragraphs, the Constitution would require a court to construe these
grounds reasonably strictly in relation
to private arbitration.
[236]
The final question that arises is what the approach of a court should
be to the question of fairness. First, we must recognise
that
fairness in arbitration proceedings should not be equated with the
process established in the Uniform Rules of Court for the
conduct
of proceedings before our courts. Secondly, there is no reason
why an investigative procedure should not be pursued
as long as it is
pursued fairly. The international conventions make clear that the
manner of proceeding in arbitration is to be
determined by agreement
between the parties and, in default of that, by the arbitrator.
Thirdly, the process to be followed should
be discerned in the first
place from the terms of the arbitration agreement itself. Courts
should be respectful of the intentions
of the parties in relation to
procedure. In so doing, they should bear in mind the purposes of
private arbitration which include
the fast and cost-effective
resolution of disputes. If courts are too quick to find fault with
the manner in which an arbitration
has been conducted, and
too willing to conclude that the faulty procedure is unfair or
constitutes a gross irregularity within
the meaning of s 33(1), the
goals of private arbitration may well be defeated.”
[36]
It is important to be reminded of the fact that this is not an
appeal. This court is therefore not entitled to interpret the
termination letter and the evidence afresh. Its only function is to
analyse the conduct of the proceedings and to determine whether
the
gross irregularities alleged had been committed. In
Ellis
v Morgan
[4]
,
quoted with approval by the SCA in
Telcordia
,
Mason J held as follows:
“
But
an irregularity in proceedings does not mean an incorrect judgment;
it refers not to the result, but to the methods of a 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.”
[37]
It will also be wrong of this court, in establishing whether a gross
irregularity had been committed, to confuse the reasoning
of the
arbitrator with the conduct of the proceedings. Where the legal issue
is left for the decision of the functionary,
any complaint about
how he reached his decision must be directed at the method and not
the result. This is known as the “
Doyle
v Shenker
”
principle. In
Doyle
v Shenker
[5]
,
a
case that dealt with a review on the ground of a gross irregularity
in the proceedings, Innes CJ summarized it as follows:
'Now
a mere mistake of law in adjudicating upon a suit which the
magistrate has jurisdiction to try cannot be called an irregularity
in the proceedings. Otherwise a review would lie in every case in
which the decision depends upon a legal issue, and the distinction
between procedure by appeal and procedure by review, so carefully
drawn by statute and observed in practice, would largely disappear.
Yet in this case it is a mistake of law alone which is relied upon
as constituting gross irregularity. There is neither allegation
nor suggestion that the magistrate, his attention having been drawn
to sec. 37, deliberately refused to apply his mind to it, or
to
consider it. The position, if the section means what the applicant
contends, is that the magistrate either honestly misinterpreted
or
completely overlooked it. In either event it would not, I am afraid,
be the first occasion on which a court of law has misread
a statutory
provision or overlooked one not brought to its notice at the trial.
Whichever supposition were the correct one, the
result would be
(still assuming the correctness of the applicant's interpretation) an
unfortunate error of law which, but for the
special prohibition of
the statute would afford good ground for an appeal. But there would
be no gross irregularity in the proceedings,
and therefore no
justification for a review.'
'It
was suggested that, in the present instance, the fact that the
magistrate did not deal with the merits, would constitute a gross
irregularity. But if he considered the document to be conclusive,
there was no need to discuss the merits. He may have been wrong
in
that view, but that would be an error of law only, and not an
irregularity. The admission of illegal evidence is in itself an
independent ground of review. But the document in question was not
improperly received in evidence; indeed, it could not properly
have
been excluded. If the magistrate's reading of it, and of the bearing
of the statute upon it, was wrong, that could again be
a mistake of
law, which, as already pointed out, could afford no basis for review
proceedings.'
[38]
I, however, acknowledge that an error of law may lead an arbitrator
to exceed his powers or to misconceive the nature of the
inquiry and
his duties in connection therewith.
[6]
The procedure followed by the magistrate in the matter of
Goldfields
Investments Ltd v City Council of Johannesburg
[7]
,
is a perfect example. According to the applicable Rating
Ordinance any aggrieved person was entitled to appeal to the
Magistrate’s
Court against the value put on property for rating
purposes by the local authority. The appeal was not an ordinary
appeal but involved,
in terms of the Ordinance, a rehearing with
evidence. The magistrate refused to conduct a rehearing and limited
the inquiry to
a determination of the question whether the
valuation had been 'manifestly untenable'. This meant that the
appellant did not
have an appeal hearing (to which it was entitled)
at all because the magistrate had failed to consider the issue
prescribed by
statute. The magistrate misconceived the nature of the
enquiry and “
had
asked himself the wrong question, that is, a question other than that
which the Act directed him to ask”
and
in that sense the hearing was unfair. Schreiner J referred to
Ellis
v Morgan
and reiterated that it was not merely high-handed or arbitrary
conduct which is described as a gross irregularity but behaviour
which is perfectly well-intentioned and
bona
fide
,
though mistaken, may come under that description. At 560-561 the
learned Judge held as follows:
“
The
crucial question is whether it prevented a fair trial of the
issues.
If
it did prevent a fair trial of the issues then it will amount to a
gross irregularity. Many patent irregularities have this effect.
And
if from the magistrate's reasons it appears that his mind was not in
a state to enable him to try the case fairly this will
amount to a
latent gross irregularity. If, on the other hand, he merely
comes to a wrong decision owing to his having made
a mistake on a
point of law in relation to the merits, this does not amount to gross
irregularity. In matters relating to the merits
the magistrate may
err by taking a wrong one of several possible views, or he may err by
mistaking or misunderstanding the point
in issue. In the latter case
it may be said that he is in a sense failing to address his mind to
the true point to be decided and
therefore failing to afford the
parties a fair trial. But that is not necessarily the
case. Where the point relates only
to the merits of the case, it
would be straining the language to describe it as a gross
irregularity or a denial of a fair trial. One
would say that the
magistrate has decided the case fairly but has gone wrong on the law.
But if the
mistake leads to the Court's not merely missing or misunderstanding a
point of law on the merits, but to its misconceiving
the whole nature
of the inquiry, or of its duties in connection therewith, then it is
in accordance with the ordinary use of language
to say that the
losing party has not had a fair trial.
I agree that in the present case the facts fall within this latter
class of case, and that the magistrate, owing to the erroneous
view
which he held as to his functions, really never dealt with the matter
before him in the manner which was contemplated by the
section. That being so, there was a gross irregularity, and the
proceedings should be set aside.' (Underling added)
[39]
The
setting aside of an arbitrator’s award based on gross
irregularities was the subject of the recent decision of
Palabora
Copper (Pty) Ltd v Motlokwa Transport & Construction (Pty)
Ltd
[8]
,
Wallis JA remarked at paragraph [8]:
“
[8]
This provision was the subject of detailed consideration by this
court in
Telcordia
.
It suffices to say that where an arbitrator for some reason
misconceives the nature of the enquiry in the arbitration proceedings
with the result that a party is denied a fair hearing or a fair trial
of the issues, that constitutes a gross irregularity. The
party
alleging the gross irregularity must establish it. Where an
arbitrator engages in the correct enquiry, but errs either on
the
facts or the law, that is not an irregularity and is not a basis for
setting aside an award. If parties choose arbitration,
courts
endeavour to uphold their choice and do not lightly disturb it. The
attack on the award must be measured against these standards.”
[40]
The hearing took place over the course of 27 days spread over more
than 18 months. Ms Mohlala-Mulaudzi testified for 17 days,
during
which she was cross-examined for 10 days. In the course of the
proceedings the arbitrator handed down several rulings and
awards. A
spreadsheet detailing the proceedings before the arbitrator had been
furnished to this court. There is nothing to suggest
that the
arbitrator misunderstood the nature of the inquiry. The Fund has
selectively referenced the arbitrator’s findings
in its
founding affidavit, which distorted the thrust and the meaning of the
main award. Whether the arbitrator’s conclusion
on the facts
and/or on the law was correct is beside the point. Even if the
arbitrator had been wrong it does not mean that he
misconceived the
nature of the inquiry or his duties, or that he acted irrationally.
[41]
Counsel
for the Fund contends, with reference to
Telcordia
[9]
,
that the arbitrator’s alleged wrong interpretation of the
termination letter “
prevented
the arbitrator from fulfilling his agreed function or from
considering the matter left to him for decision”
.
It is contended that the arbitrator was so fixated on the
failure
of the Fund to call witnesses to testify on the meaning of the letter
and the alleged breaches, that he
only
considered Ms Mohlala-Mulaudzi testimony and was therefore
”prevented” by his own understanding of the law to
consider her answers in cross-examination. It is submitted that
although the arbitrator’s attention was drawn to the
concessions
made by Ms Mohlala-Muladzi during cross-examination he
refused to consider it and therefore “closed his mind” to
the
admitted facts.
[39]
There are no merits in this complaint.
T
he
arbitrator specifically took into account the Fund’s “
summation
of the evidence document
” (This is the document which,
according to the Fund, identifies chapter and verse of Ms Mohlala’s
evidence relied on
by the Fund in support of its counterclaims). It
is clear from the record of the proceedings and the detailed and
reasoned award
that the
arbitrator
evaluated the evidence, both oral and documentary, considered the
applicable law and arguments of senior counsel, and
only then came to
a conclusion in favour of Mohlala, rightly or wrongly.
At
best for the Fund it could be argued that he erred on the facts or
the law. This is an argument for appeal, not review.
As aptly remarked by
the SCA in
Telcordia,
this is a case where the Fund’s complaints are merely “
a
factual issue once again dressed up as a question of law and
cross-dressed as a procedural irregularity.”
THE
FURTHER AWARD
[40]
The further award was purportedly issued in terms of section 32(1) of
the Arbitration Act which provides for a procedure where
the
parties
consent to the remittal of any matter to the arbitrator for the
making of a fresh or further award (my emphasis). The Fund did
not
consent to the remittal of the matter back to the arbitrator and
Mohalala conceded during argument that the arbitrator was
not
entitled to make a further award without the consent of the Fund. The
further award is therefore reviewable under section 33
(1)(b) of the
Arbitration Act.
[41]
Mohlala, however, contends that the two omissions dealt with in the
further award were omitted
per incuriam
in the main award and
that such omissions are the result of a slip of the arbitrator’s
pen which he had power to correct
in terms of Rule 42 of the Uniform
Rules of the High Court. I disagree. Rule 42 provides for an
application on notice and is not
applicable in the circumstances. The
arbitrator clearly exceeded his powers in making a further award. The
further award is reviewed
and set aside.
THE
CONDITIONAL COUNTER-APPLICATION
[42]
Once the further award is set aside, Mohlala’s conditional
counter-application is triggered and falls to be considered.
[44]
In the counter-application, Mohlala seeks an order in terms of
section 32(2) of the Arbitration Act for the following questions
to
be remitted to the arbitrator for reconsideration and for making of a
further award or a fresh award:
1.
whether Mohlala lawfully terminated the SLA
2.
to deal with Mohlala’s request in the
arbitration proceedings for the costs of two counsel, where
applicable.
[45]
In terms of section 32 (2) of the Arbitration Act:
“
The
court may, on the application of any party to the reference after due
notice to the other party or parties made within 6 weeks
after the
application of the award to the parties, on good cause shown, remit
any matter which was referred to the arbitration
tribunal for
reconsideration and for the making of a further award or a fresh
award or for such other purpose as it may direct”.
[46]
It is common cause that Mohlala did not bring an application for
remittal within 6 weeks. Mohlala relies on the provision of
section
38 of the Arbitration At for an extension of the 6 week period. The
section allows the court “on good cause shown”
to extend
“any period of time fixed by or under this Act, whether such
period has expired or not”.
[47]
In considering the application, I took note of the following facts,
which in my view are relevant to the question whether good
cause have
been shown to condone the failure to remit within 6 weeks as well as
good cause for remitting the two questions back
to the arbitrator.
Mohlala was not supine. Once the omissions were discovered the
attorney immediately raised the alarm within 3 days of receiving the
main award. Although Mohlala relied upon the incorrect sub-section,
the original request to the arbitrator nevertheless resulted
in all
the defects being cured by the further award. The further award is
set aside as a result of a technicality. The effect of
setting aside
the further award will be that the two questions will be left
unanswered.
[48]
The Fund does not contend that the arbitrator was correct in failing
to allow the costs of two counsel (where applicable) or
that the
arbitrator was correct in failing to answer the question whether
Mohlala lawfully terminated the SLA. The Fund however
contends that
because
Mohlala failed to deal sufficiently with
the requirement of good cause, the court should refuse to extend the
period within which
it was required to bring the application in terms
of section 32(2).
[49]
This, in my view, is an overly technical approach. I agree with
counsel for Mohlala that the better approach under the specific
circumstances of this case is for the court to place substance over
form and extend the 6 week period prescribed under Section
32 (2) as
requested in prayer 2 of the conditional counter-application That
would allow an orderly reconsideration and repair of
the relatively
minor but manifest blemishes in the main award.
[50]
In terms of section 28 of the Arbitration Act an award remains
binding until it is set aside by a court. Under the peculiar
circumstances of the present matter it was impossible for Mohlala to
apply under Section 32 (2) for the remittal of the matter
before the
further award was set aside. This fact, in itself, is “good
cause” for relief to be granted in terms of
Section 38 for the
extension of the 6 weeks prescribed in terms of Section 32 (2).
[51]
I am satisfied that good cause exists for this court to remit the two
outstanding issues to the arbitrator for the making of
a further
award.
COSTS
[52]
Mohlala was successful in its opposition of the review of the main
award and the further award has been set aside on a technicality.
Mohlala is, in my view, entitled to the costs of the application.
Mohlala seeks an attorney client scale costs order against the
Fund.
After careful consideration, exercising my discretion, I decline to
make a punitive costs order.
[53]
In the result the following order is made:
1.
The application for the review of the main
award (dated 9 March 2018) is dismissed.
2.
The arbitrator’s further award (dated
19 March 2018) is reviewed and set aside.
3.
The counter-application is granted. The
main award is remitted back to the arbitrator in terms of section
32(2) of the Arbitration
Act for reconsideration and for the making
of a further award in respect of the following two questions:
3.1 Whether the Service
Level Agreement was lawfully cancelled by Mohlala Attorneys;
3.2 Whether Mohlala
Attorneys is entitled to the costs of two counsel, where applicable,
including costs of senior counsel.
4. Costs to be paid by
the applicant including the costs of senior counsel.
L. WINDELL
JUDGE OF THE HIGH
COURT
GAUTENG LOCAL
DIVISION, JOHANNESBURG
Appearances
Counsel
for the applicant:
Advocate G.I. Hulley SC
Advocate
L.C. Segeels
Instructed
by:
Borman Dumazitha Attorneys
Counsel
for the first respondent:
Advocate C.H.J. Badenhorst SC
Instructed
by:
Werksmans Attorneys
Date
of hearing:
5
August 2019
Date
of judgment:
29
November 2019
[1]
Act
42 of 1965
[2]
2007
(3) SA 266 (A)
[3]
2009
(4) SA 529 (CC)
[4]
1909
TS at 581
[5]
Doyle
v Shenker & Co Ltd
1915
AD 233
[6]
Telcordia
par 69.
[7]
1938
TPD 551
[8]
2018 (5) SA 462
(SCA).
[9]
At
[85]