About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: South Gauteng High Court, Johannesburg
SAFLII
>>
Databases
>>
South Africa: South Gauteng High Court, Johannesburg
>>
2020
>>
[2020] ZAGPJHC 102
|
|
Lubbe Construction (Pty) Ltd v Mahon NO and Another (0044751/17) [2020] ZAGPJHC 102 (23 April 2020)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
Case
No.: 0044751/17
In
the matter between:
Lubbe
Construction (Pty) Ltd
Applicant
and
Terry
Mahon N
O First
Respondent
Matatiele
Local
Municipality Second
Respondent
JUDGMENT
Vally
J
Introduction
and telescopic view of the facts
[1]
Relying on s 33 of the Arbitration Act No 42 of 1965 (the Act) the
applicant seeks to review and set aside an arbitration award
issued
by the first respondent. The applicant and the second respondent
concluded a construction agreement on 21 August 2014. As
so often
occurs in the construction industry, problems between the parties
surfaced during the construction process. This resulted
in a dispute
between them. On 1 July 2016 the second respondent terminated the
agreement. On 16 November 2016 the parties agreed
to refer their
dispute to arbitration. On 23 November 2016 the first respondent was
jointly appointed as the arbitrator. On 1 December
2016 the parties
agreed that the 6
th
edition of the Rules of the
Association of Arbitrators (the rules) should govern the arbitrator’s
and their conduct. On 29
December 2016 the applicant unilaterally
withdrew from the arbitration. The arbitration proceedings continued,
with the hearing
taking place on 5 June 2017. The applicant launched
an application to interdict the respondents from proceeding with the
arbitration.
The arbitration proceedings halted while the interdict
application was alive. On 31 July 2017 the interdict application was
entertained
by this Court. On 4 August 2017 this Court, per Trengove
AJ, dismissed the application with costs. Soon thereafter the
arbitration
proceedings continued. On 3 October 2017 the first
respondent rendered his award. On 17 November 2017 the applicant
launched this
application.
[2]
That in broad terms constitutes the history of this application.
Greater elaboration on these facts will be provided as the
application is analysed in detail below.
The
applicant’s case
[3]
The applicant relied on a number of grounds for the relief it sought.
Realising that many of these were without merit, its counsel,
in his
heads of argument, dispensed with most of them and elected to rely
only on two. These are:
a. First. The first
respondent misconducted himself in proceeding with the arbitration
pendente lite
in the absence of a plea from the applicant, and
therefore failed to afford the applicant a hearing in the matter as a
whole; and
b. Second. The award was
based on a bill of quantities whose accuracy was not proved.
[4]
At the hearing the second ground it relied upon was dispensed with as
its counsel came to accept that there was no merit in
it. Thus, I
need concern myself with the only ground it built its case on. It is
the applicant’s case that the decision of
the first respondent
to proceed with the arbitration, in spite of its protests against the
arbitration continuing, constituted
a misconduct as envisaged in s
33(1)(a) of the Act, and/or a gross irregularity as envisaged in s
33(1)(b) of the Act. In either
case, the award stands to be reviewed
and set aside.
[5]
To make sense of this claim, it is necessary to examine
microscopically what exactly prevailed between the parties. Special
attention would naturally have to be given to the moment immediately
preceding the first respondent’s decision to proceed
with the
arbitration despite the protests of the applicant.
A
microscopic view of the relevant facts
[6]
A pre-arbitration meeting was held on 1 December 2016. The legal
representatives of the parties as well as the first respondent
were
present. At this meeting, the agreement referring the dispute to
arbitration and the appointment of the first respondent as
the
arbitrator were confirmed. The meeting was in accordance with the
rules. The first respondent decided that it was necessary
for an
inspection
in loco
to be held. The applicant on 29 December
2016 changed its mind and attempted to resile from all of these
agreements, especially
the agreement to refer the dispute to
arbitration. The decision was formally conveyed to the attorney of
the second respondent
in the following terms:
“
Our client,
consequent to a further consideration of its position does not wish
to refer the matter to arbitration as earlier indicated.”
[7]
A clearer statement than this would be difficult to find. The
applicant is explicit: firstly, its decision was “
consequent
to a further consideration of its position
” and secondly,
it did not “
wish to refer the matter to arbitration
”.
It was a consideration of its own position that gave rise to its
change of heart, which led it to “
wish
” it had not
agreed to refer the matter to arbitration. There was nothing wrong
with the process involved in the matter being
referred to
arbitration. The second respondent did not do anything legally wrong
during the process of the agreement being concluded.
The agreement
itself was not legally flawed. And, finally, the appointment of the
first respondent, which was jointly agreed, was
not flawed or
irregular in any manner or form.
[8]
The letter was sent to the first respondent who responded thereto by
email on 3 January 2017 stating,
inter alia
,:
“
The legal
representatives of the parties are no doubt aware that an Arbitration
Agreement can, in principle, only be terminated
with the consent of
all the parties to it.”
[9]
His response recorded that there was a binding contract between the
parties to refer the matter to arbitration, which contract
compelled
him to carry out his duties as an arbitrator. On that logic he ruled
that the inspection
in loco
which was scheduled for 12 January
2017 was to continue; advised the parties to attend the inspection,
and warned them that any
party which failed to attend would be doing
so at its own peril. On 9 January 2017 the applicant’s attorney
wrote to the
second respondent’s attorney stating that the
applicant is of the view that there “
there is no agreement
to arbitrate
[sic]
between the parties
” and that
“
our client has reconsidered its position and will therefore
not participate in this arbitration and shall not be attending the
inspection
in loco.
” The letter was also sent to the first
respondent who responded on 10 January 2017 reiterating his ruling.
On the same day,
the applicant’s attorney wrote to the second
respondent’s attorney (presumably this was written after
receiving the
first respondent’s response) stating,
inter
alia
,:
“
On the one
hand, we note with grave concern that the Arbitrator has elected to
make a ruling on the issue of whether there is an
arbitration
agreement between the parties without any invitation from the parties
to do so and having not considered submissions
from both parties in
this regard
.”
[10]
The second respondent’s attorney responded that the allegation
that the first respondent made a ruling without first
giving the
parties an opportunity to make submissions was factually incorrect.
[11]
On 11 January 2017 the attorney for the applicant wrote, once again,
to the attorney for the second respondent stating that
the applicant
remained steadfast in its decision that it would not participate in
the arbitration. He indicated further that it
was the applicant’s
view that the arbitration agreement had lapsed on the basis that it
had withdrawn its dispute with the
second respondent. As its counsel
at the hearing accepted that this contention was wrong, I say no more
about it. The applicant’s
attorney wrote another letter on the
same day stating that, as the first and second respondents were
determined to proceed with
the arbitration, the applicant is “
left
with no choice but to approach a court to exercise its rights.
”
The applicant, however, took no further steps in the matter. The
second respondent proceeded to file its statement of claim
of 31
January 2017. The applicant failed to file its response thereto.
[12]
The second respondent’s attorney wrote two letters to the
applicant’s attorney asking him to clarify if his client
had
decided to participate in the arbitration proceedings, or if it
intended to approach the court for appropriate relief. The
letters
were sent on 7, and 17 February 2017. On 22 February 2017 the
applicant’s attorney responded to the letter of 17
February and
placed on record that the applicant would be approaching the court,
and that papers in this regard would be served
“
in due
course
”. An application seeking to interdict the first
respondent from continuing with the arbitration was finally launched
on 7
March 2017. The main relief sought was a declaratory to the
effect that the first respondent lacked the jurisdiction to entertain
any dispute between the parties. Following from that relief, the
applicant sought to interdict the first respondent from proceeding
with the arbitration.
[13]
The second respondent complained that this would prejudice it as it
would effectively put the arbitration on hold until the
application
was finalised, which could take months. It invited the applicant to
bring the application on an urgent basis. The applicant
declined the
invitation on the basis that it was of the view that an urgent
application would not succeed.
[14]
The first respondent was cited in the application and a costs order
was sought against him. He responded on 14 March 2017 by
way of
letter to the attorneys for the applicant. He indicated that he had
no personal interest in the matter, and that if no costs
order was
sought against him he would abide the decision of the court. However,
if the costs order was persisted with then he would
only oppose that
aspect of the application. As regards the issue of the continuation
of the arbitration proceedings he had this
to say:
“
The current
application is likely to take months to be finalised and as there is
no interdict in place I consider it my duty as
the arbitrator to
continue to fulfil my obligations and to bring the arbitration to
finality as soon as possible. The [applicant]
is again invited to
participate in this process.”
[15]
Despite being informed by the first respondent that he was intent on
continuing with the arbitration, the applicant elected
not to
approach the court on an urgent basis even for interim relief.
[16]
Pursuant to his decision that the arbitration proceedings would
continue the hearing of the matter was set down for 5 June
2017. The
second respondent indicated that it was ready and prepared to proceed
with the arbitration hearing. The applicant sent
its attorney on a
“watching brief” but with instructions that he should
make his own recording of the proceedings.
He was allowed to do so by
the first respondent.
[17]
The second respondent led its witnesses, presented documentary
evidence and made submissions. The first respondent wrote his
award,
which is dated 14 July 2017, and signed it, but did not issue it.
[18]
The
application was served before this Court on 2 August 2017. A judgment
was handed down by Trengove AJ on 4 August 2017. The application
focussed on whether there was a valid arbitration agreement and if
so, whether the decision of the applicant to withdraw its dispute
with the second respondent resulted in the termination of the
arbitration agreement. Trengove AJ found that there was a valid
referral to arbitration and that the “
purported
withdrawal of [the applicant’s] “dispute” did not
detract from the Arbitrator’s jurisdiction to
determine the
[second respondent’s] claim.
”
[1]
Pursuant to this finding, an order dismissing the application in
favour of the respondents, together with costs, was issued.
[19]
The applicant did not appeal against the order. Having now received
judicial pronouncement that the arbitration agreement was
valid, and
that the first respondent was jurisdictionally empowered to determine
the dispute between the parties, the applicant
elected to remain
docile. It was fully aware that the arbitration proceedings had
concluded on 5 July 2017 but that no award was
yet rendered. It did
not apply to the first respondent to re-convene the proceedings and
allow it to participate therein. On 3
October 2017, i.e. two months
after the dismissal of the application by this Court, the first
respondent handed down the arbitration
award on 3 October 2017.
Is
the first respondent’s decision to continue with the hearing
despite the pending application for a declaratory order susceptible
to a review?
[20]
The applicant takes the view that the first respondent should have
suspended the hearing pending the outcome of the application.
It
contends that his failure to do so constituted a misconduct on his
part, or constituted a gross irregularity in the arbitration
proceedings. That these contentions must be scrutinised in the
context of the facts set out above is obvious. But they must also
be
viewed in the light of the powers and duties imposed on the first
respondent by the statutory and common law.
[21]
Section 15(2) of the Act provides:
“
If any party to
the reference at any time fails, after having received reasonable
notice of the time when and place where the arbitration
proceedings
will be held, to attend such proceedings without having shown
previously to the arbitration tribunal good and sufficient
cause for
such failure, the arbitration tribunal may proceed in the absence of
such party.
[22]
There can, therefore, be little doubt that the first respondent was
legally empowered to proceed with the hearing despite the
stated
intention of the applicant to effectively boycott it. After noting
the applicant’s intention to boycott the hearing,
the first
respondent urged it to reconsider its decision, but made it
absolutely clear that he would continue should it not do
so. The Act
certainly empowered him to continue.
[23]
The common law requires that he conducts the hearing in a manner that
is procedurally and substantively fair. At core, he is
required to
ensure that all affected parties are allowed to present any relevant
evidence, and to make whatever appropriate submissions
they wish to
before rendering his decision.
[24]
The applicant, we know, decided not to bring an urgent application to
interdict the hearing from proceeding. This was so, even
after the
second respondent indicated that it would welcome an urgent
application. It would make common cause with the applicant
that the
matter was worthy of the urgent attention of this Court, given the
first respondent’s unambiguous indication that
he intended to
proceed with the hearing unless an interdict was secured. The
applicant, in my view, ought to have brought the urgent
application.
The consequence of failing to do so must be one it should bear. It
was wrong to expect the first respondent to revoke
his decision to
continue with the hearing despite the applicant’s failure to
bring the interdict application. Instead, the
applicant would be
satisfied if it succeeded with its other prayer – one that
asked the Court to declare that the first respondent
lacked the
jurisdiction to arbitrate the dispute. The continuation of the
hearing would be of no moment, for once it secured the
declaratory
order the award would automatically have no legal force. The risk it
took by adopting this approach was that if it
failed to secure the
declaratory order the award would have to hold. The problem it now
faces is a consequence of its own conduct,
not that of the first
respondent. Its own actions or omissions can never be a misconduct on
the part of the first respondent.
[25]
The first
respondent, we know, took the view that he was jurisdictionally
empowered to continue with the hearing. He informed the
parties of
his view. He set out his reasoning for holding that view. He finally
stated that unless an interdict from this Court
was secured he would
proceed with the hearing because he believed that it was his legal
duty to complete the mandate conferred
upon him. Further, we know
that s 15 of the Act allowed him to continue with the hearing despite
the boycott by the applicant.
He therefore acted within the
parameters set by the law. At best, for the applicant, the reasoning
underlying his decision to continue
could have been wrong, but that
does not make the action to continue a misconduct on his part.
[2]
Nor does it taint the hearing with a gross irregularity. It could
hardly be a misconduct if he was acting within the parameters
of the
law. And, for it to be found that the hearing was grossly irregular,
it has to be established that he failed to perform
his duties as an
arbitrator in a manner consistent with the requirements of holding a
fair and impartial hearing.
[3]
There are no facts to support this. In fact he conducted the hearing
in a fair and impartial manner. That only one party partook
in the
hearing does not mean that the hearing was unfair or impartial. He
allowed evidence to be led, he accepted submissions and
he did not
prevent anyone with an interest from attending and presenting any
evidence or submissions. He thus complied with his
duty to see that
justice was done. That the applicant failed to present its case to
him is a matter that falls exclusively within
the purview of the
applicant’s own decisions and conduct. It alone was the author
of its own misfortune.
[26]
The test
for reviewability of his award, either on the grounds that he
misconducted himself or that the proceedings were contaminated
by an
irregularity, does not allow for an examination of whether the
decision was correct or not. However, it is necessary to say
that in
my view his decision to continue with the hearing was correct.
Applying the law to the facts he was confronted with lead
to a single
conclusion that - unless an interdict preventing him from continuing
with the hearing was in place - the hearing had
to proceed in the
interest of finality
[4]
, which
is a sub-set of the interests of justice. After all, one of the
advantages of a reference to arbitration rests in finalising
the
proceedings with resolute speed.
[5]
[27]
Under these circumstances, the applicant’s contentions must
fail.
Order
[28]
The following order is made:
1. The application to
review the award of the first respondent is dismissed.
2. The applicant is to
pay the costs of the application.
_________________
Vally
J
Dates
of hearing: 4 February2020
Date
of judgment: 23 April 2020
For
the Applicant: Adv P Ellis SC
Instructed
by: Roelf Nel Inc
For
the Second Respondent: Adv S I Vobi
Instructed
by: Tiefenthaler Attorneys Inc
[1]
Lubbe
Construction v Terry Mahon and Matatiele Local Municipality
- Case No 07717/17, Unreported Judgment at [36]
[2]
Dickenson
& Brown v Fisher’s Executors
1915 AD 166
at 176;
Amalgamated
Clothing and Textile Workers Union of South Africa v Veldspun (Pty)
Ltd
[1993] ZASCA 158
;
1994 (1) SA 162
(A) at 169C-E;
Total
Support Management (Pty) Ltd and Another v Diversified Health
Systems (Pty) Ltd and Another
[2002] ZASCA 14
;
2002 (4) SA 661
(SCA) at 672G
[3]
Ellis v
Morgan; Ellis v Desai
1909 TS 576
at 581; Telcordia Technologies Inc v Telcom SA Ltd
[2006] ZASCA 112
;
2007
(3) SA 266
(SCA) at
[72]
– [73]
[4]
The principle of finality in litigation as expressed in the latin
phrase as “
interest
rei publicae ut sit finis litium
”,
has long been part of our law. See:
Firestone
South Africa (Pty) Ltd v Genticuro AG
1977 (4) SA 298
(A) at 309A
[5]
Sysphus
and Others v Schoeman
1923 CPD 113
at 116;
Dexgroup
(Pty) Ltd v Trustco Group International (Pty) Ltd and Others
2013
(6) SA 520
(SCA) at [20]