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[2023] ZAGPJHC 637
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IDS Industry Service and Plant Construction South Africa (Pty) Ltd v Industrius D.O.O. (A5010/2022 ; 15862/2020) [2023] ZAGPJHC 637 (5 June 2023)

REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, JOHANNESBURG
Appeal
Case No:  A5010/2022
GJ
Case No:  15862/2020
In
the matter between:
IDS
INDUSTRY SERVICE AND PLANT CONSTRUCTION
SOUTH
AFRICA (PTY) LTD
Appellant
And
INDUSTRIUS
D.O.O.
Respondent
Neutral
Citation:
IDS Industry Service and Plant Construction South
Africa (Pty) Ltd v Industrius D.O.O.
(2020-15862) [2023] ZAGPHJHC
637 (5 June 2023)
Summary:
Enforcement
of an International Arbitration Award as contemplated by article 1(3)
of the UNCITRAL Model Law on International Commercial
Arbitration
read with the International Arbitration Act, 15 of 2017- Application
to stay pending the outcome of an action- Action
has no prospects of
success and barred by the arbitration agreement- No real and
substantial injustice established- Appeal dismissed.
ORDER
1 Appeal is dismissed
with costs.
JUDGMENT
WINDELL, J:
Introduction
[1] On 9 June 2020, an
arbitral award was made against the appellant, Industry Service and
Plant Construction South Africa (Pty)
Ltd (‘IDS’). The
award was made in an international arbitration as contemplated by
article 1(3) of the UNCITRAL Model
Law on International Commercial
Arbitration (Model Law) read with the International Arbitration Act,
15 of 2017 (‘the Act’),
as the claimant in the
arbitration, Industrius D.O.O. (‘Industrius’) has its
place of business in the Republic of Croatia
and IDS has its place of
business in South Africa.
[1]
In
terms of the award, IDS had to pay  Industrius, an amount of €
2 775 853.08  together with interest and costs.
IDS’s
counterclaim, in the amount of € 20 834 137.87, was
dismissed with costs. The award was made in the absence
of IDS.
[2] IDS failed to pay the
amount due and Industrius instituted motion proceedings against IDS
in terms of article 35 of the Model
Law for the enforcement of the
award (‘the enforcement application’). IDS opposed the
application and counter applied,
inter alia, for an order staying any
order making the award an order of court, alternatively that
Industrius be interdicted pendente
lite from executing the said order
pending the final adjudication of an action instituted by IDS against
Industrius on 20 August
2020 under case number: 19156/2020 (‘the
action’).
[2]
On 20 August
2021 the court a quo (per Senyatsi J) granted the enforcement
application with costs and made the award an order of
court. The
counter application to stay the proceedings was dismissed with costs.
After leave to appeal was refused by the court
a quo, IDS petitioned
the Supreme Court of Appeal. The appeal is with leave of that Court.
[3] IDS does not
challenge the award. It, in fact, concedes that there was no legal
impediment for the award to be made an order
of court. What is
appealed against is the dismissal of the counter application, i.e.,
the decision of the court a quo to decline
to grant a stay of the
enforcement of the court order.
Background Facts
[4] IDS is a wholly owned
subsidiary of a German company, namely IDS Industrieservice und
Anlagenbau Gmbh (IDS Germany). IDS Germany
was approached by
Mitsubishi Hitachi in Germany to assist its companies in South Africa
in relation to the Medupi and Kusile Eskom
Power Station Projects.
The controlling person in IDS Germany (and IDS), Mr Drazan Vrca
(“Vrca”) a Croatian national,
approached Ms Milenka Barac
(Barac”), to assist in providing certain skilled Croatian
workers who would work on the projects
in South Africa, under the
full supervision and control of IDS Germany and/or IDS.  For
this purpose, Barac formed Industrius.
Over the four years, between
2013 and 2017, Industrius recruited artisans in Croatia who were sent
to work under the supervision,
direction, and control of Industrius
at the power stations. Industrius was remunerated by IDS for the
provision of this service
in Euros in Croatia.
[5] However, during 2017
and 2018 disputes arose between the parties. To resolve their
respective disputes, the parties concluded
an arbitration agreement
on 11 July 2018, referring their disputes to an arbitration tribunal
in South Africa. The parties agreed
that the arbitration would be
conducted in accordance with the Rules for the Conduct of
Arbitrations (2013 edition) of the Association
of Arbitrators
(Southern Africa).
[6] During July 2018 two
claims were referred to arbitration for determination by an
arbitration tribunal in South Africa which
consisted of a sole
arbitrator, Mr K. Trisk SC viz: (a) a claim by Industrius against IDS
for payment of a number of unpaid invoices
dated from 2016 and 2017
totalling € 2 775 853.08 in terms of the oral agreement between
Vrca and Barac; and (b) a counter-claim
by IDS for payment of an
amount due to it in terms of the so-called “Medupi subcontract”
and the “Kusile subcontract”
in the amount of € 20
834 137.87. Industrius disputed that these “subcontracts”
governed the contractual relationship
between it and IDS.
[7] During the
arbitration process, IDS sought to amend its counterclaim by
introducing unjust enrichment claims as an alternative
to its
contractual claims. Industrius opposed the amendment. The arbitrator
refused leave to amend on the basis that the proposed
unjust
enrichment claims fell outside his terms of reference, and the
arbitration agreement. As a result, IDS launched two applications
out
of the High Court Gauteng Local Division, firstly to interdict the
arbitration proceedings from proceeding and secondly, to
inter alia,
review the arbitrator’s decision to dismiss the proposed
amendment.
[8] Prior to the hearing
of the interdict proceedings, the matter was settled between the
parties, and it was agreed that the unjustified
enrichment claims
could be dealt with in the arbitration proceedings. IDS, accordingly,
amended its counter-claim in the arbitration
on 27 September 2019 to
include the enrichment claims. However, before the amendment was
formally effected by way of a written
amendment to the arbitration
agreement, IDS’s attorneys of record withdrew from the
proceedings due to a fee dispute. The
arbitration was scheduled for
25 May 2019. For procedural reasons, the Arbitrator ruled prior to
the hearing of 25 May 2020 that
what was before him insofar as IDS'
counterclaims were concerned, was the counterclaim in its original
form —i.e. prior to
the amendment to include the alternative
enrichment claims. The arbitration hearing therefore proceeded on
IDS’ original
unamended counterclaim. On 9 June 2020 the
arbitrator gave his final award in the arbitration.
Court proceedings
pursuant to the arbitration proceedings
[9] The claim instituted
by IDS against Industrius, contains the same cause of action, in the
same amount, which formed the basis
of IDS’s counterclaim in
the arbitration. The claim also includes, in the alternative, the
enrichment claims IDS wanted to
introduce during the arbitration.
Industrius is defending the action and has filed a plea therein. IDS
submitted that as its claim
far exceeds all amounts claimed by or
awarded to Industrius, the debt owed by IDS to Industrius would by
virtue of set-off be entirely
extinguished. It is further contended
that the prospects of success at trial are good and if the stay is
refused, IDS’ set
off would be defeated, as it would be
required to pursue its claims whilst having no way of preventing
Industrius from executing
its judgment.
[10] The court a quo,
found, inter alia, that the appellant’s action was res judicata
and had little, if no prospects. It
stated further: ‘If IDS was
aggrieved by the arbitral award, it ought to have taken steps to
challenge it and this was not
done. It follows that the enforcement
of the arbitral award cannot be delayed as doing that would cause an
injustice to Industrius’.
The court’s
inherent discretion to stay the order
[11] Article 35 of the
Model Law provides for the enforcement of an arbitral award in an
international arbitration, irrespective
of the country in which it
was made. The article provides that the award ‘shall be
recognised as binding and, upon application
to the competent court,
shall be enforced, subject to the provisions of this article and of
article 36’.
[3]
IDS did
not allege that any of the grounds for refusal of an application for
enforcement in article 36 applied, but instead relied
on the inherent
discretion of the court to grant a stay.
[12] The court a quo
found that the only remedies that an aggrieved party in an
international arbitration had at its disposal to
refuse the
enforcement were those to be found in terms of article 36 and the
Act. The appellant contends that the court a quo erred
as it never
challenged the award and conceded that there was no legal impediment
for the award to be made an order of court. The
challenge was
therefore not directed at the award itself, but at the court's
discretion to stay its order.
[13] I accept that the
court retains a discretion to stay the execution of a court order
outside the Model Law. I do so without
determining the policy
question of the effect of the Model Law on such discretion, as it is
not decisive of this appeal. In my
view, the only question that is
decisive of this appeal and that needs to be determined is whether
the court a quo exercised its
discretion correctly in refusing to
stay the order.
[14]  In
BP
Southern Africa (Pty) Ltd v Mega Burst Oils and Fuels (Pty) Ltd
2022 (1) SA 162
(GJ), a stay was sought pending an appeal. Although
the current matter deals with a stay pending the determination of an
action,
the principles to be applied in the exercise of such
discretion are instructive:
‘
In exercising its
discretion to stay execution pending completion of a petition for
leave to appeal, this court must ask if real
and substantial justice
requires such a stay (if an injustice will otherwise be done). There
is merit in exercising the discretion
under these circumstances of a
pending petition by having regard to the factors listed above and to
the following factors (freely
borrowed from South Cape Corporation v
Engineering Management Services ...) and not intended to limit the
court's discretion to
see that justice be done: ... The potentiality
of irreparable harm being sustained by the applicant on appeal if
execution were
not stayed. ... The potential of irreparable harm
being sustained by the respondent if execution were not stayed.’
[15] IDS’s main
claim in the action is identical to its counterclaim in the
arbitration. One of the special defences raised
by Industrius in the
action is based on res judicata. The defence is based on the fact
that the arbitrator dismissed the counterclaim
based on the Kusile
and Medupi “subcontracts” on its merits. The arbitrator
held as follows:
‘
40. The evidence
of Barac made it apparent, as was pleaded by the Claimant, that both
of the written contracts were nothing more
nor less than a fiction.
The express terms contemplated by the written instruments upon which
IDS relied, on Barac's evidence,
were self-evidently of no
application whatever to the nature or purpose of the relationship
which subsisted between the Claimant
and IDS. The purpose for Vrca
wishing to have these documents signed by Barac is not apparent. What
is clear, however, is that
neither of the documents which are
attached to the Defendant's (IDS') Amended Counterclaims, were of any
moment insofar as the
proceedings before me were concerned.
41. I am satisfied that
the version advanced by Barac, in this regard, is to be preferred to
that advanced by IDS and it is her
version which I accept.
47. It will be apparent
from the aforegoing that I dismiss the Defendant's Counterclaim not
only on the basis of there having been
no appearance on behalf of the
Defendant at the hearing before me on 25 May 2020, but also on the
basis that the version advanced
by the Defendant in its Counterclaim,
given the evidence which was adduced before me, it seems to me, is so
improbable as to warrant
rejection.’
[16]  In the court a
quo IDS, amongst other things, submitted that the counterclaim was
not res judicata as it was dismissed
by default, and that the
‘purported dealing with the merits of the counterclaim in its
absence is of no force and effect’,
and that IDS was therefore
free ‘to pursue its counterclaim in the Courts of South Africa’
(referring to the action
that was instituted by IDS against
Industrius).
[17] These arguments were
abandoned on appeal and IDS seems to accept that its main claim in
the action (the contractual claim founded
on the ‘fictional
“subcontracts”’) is res judicata. The argument
pursued by IDS in this appeal, is that
the action is not res judicata
because the alternative claims based on unjust enrichment were not
before the arbitrator and were
thus not dismissed by him. It is
submitted that the action therefore has prospects of success and
enforcing the award in the meantime
will deprive IDS of its set-off.
In addition, it is submitted that if the order is not stayed, IDS
will have difficulty enforcing
an eventual judgment in its favour in
the action because Industrius is a foreign peregrinus which has no
assets in the Republic
of South Africa other than the arbitration
award that has been made an order of court. A refusal to stay, so it
is argued, will
therefore cause real and substantial injustice to
IDS.
[18] In its action, the
appellant, in the alternative, alleges that the payments in the
aggregate amount of Euro 20 834 137.87 were
made to the respondent
sine causa. It pleads as follows:
‘
In the
alternative, and if it is found that the defendant is not obliged to
reimburse the plaintiff in terms of clause 6.1. 1 of
the Kusile
subcontract, the defendant is obliged to do so on the basis that the
amounts paid by the plaintiff were neither due
nor owing by the
plaintiff and were paid on the defendant’s behalf and the
defendant was enriched unjustly in such amounts
at the expense of the
plaintiff.’
[19]   During
argument it was contended that IDS’s alternative claim is in
fact brought under the condictio indebiti
in that IDS laboured under
the false misapprehension that the payments were due and payable,
when in fact they were not. The respondent,
on the other hand, and in
support of the res judicata point, contends that the appellant's
enrichment claims are in respect of
alleged ‘overpayments’
or ‘overcharges’ or the application of incorrect exchange
rates, resulting in IDS
paying more than what it says was properly
due to lndustrius under the ‘subcontracts’. As the
obligation to pay can
only be found in the ‘subcontracts’
which are fictitious, it cannot give rise to any obligation. It
further argues,
that if the alternative claims are under the
condictio indebiti, and that IDS thus mistakenly believed that the
‘subcontracts’
obliged Industrius to reimburse IDS for
airfare, hours worked and the exchange rate fluctuations, there is no
such mistake nor
is it excusable, since IDS knew that the
‘subcontracts’ were fictions.
[20] In my view, the
alternative claim, does not assist IDS. It is a requirement of the
condictio indebiti that the payment was
mistaken, and the mistake
excusable.
[4]
IDS pleaded that
the alleged ‘false misapprehension’ stems from a mistaken
belief that the ‘subcontracts’
obliged Industrius to
reimburse IDS for making payments that it was not obliged (by the
‘subcontracts’) to pay. The
arbitrator found that the
‘subcontracts’ were fictional and were never intended to
govern the relationship between
the parties. In light of such finding
it will be very difficult for IDS to show that it paid, mistakenly
thinking that an actual
subcontract applied. IDS is estopped from
relying on such subcontracts and consequently raising such claims,
since they are res
judicata. The prospects of success on the
alternative claims are, in my view, very slim.
[21] In any event, even
if there were some merit in the alternative claims, the action is
barred from proceeding by the arbitration
agreement. This is because
the parties agreed that the unjustified enrichment issues could be
dealt with in the arbitration proceedings.
The agreement was
committed to writing in the form of emails. This suffices for an
international arbitration agreement. Article
7 of the Model Law
requires an arbitration agreement to be in writing but qualifies this
in sub- articles (3) and (4) as follows:
‘
(3) An arbitration
agreement is in writing if its content is recorded in any form,
whether or not the arbitration agreement or contract
has been
concluded orally, by conduct, or by other means.
(4) The requirement that
an arbitration agreement be in writing is met by an electronic
communication if the information contained
therein is accessible so
as to be useable for subsequent reference.
[22] IDS contends that
this agreement was not ‘formally effected by way of written
amendment to the arbitration agreement’
as required by the
rules for the 2013 Conduct of Arbitrations [of the Association of
Arbitrators]. It unfortunately does not quote
the particular rule
that ostensibly requires this. The 2013 Rules define an agreement as
‘the written agreement entered into
between the parties’
[5]
and Section 1: Article 1
provides:
‘
1. Where parties
have agreed in writing that disputes between them in respect of a
defined legal relationship, whether contractual
or not, shall be
referred to arbitration under the Association’s Rules for the
Conduct of Arbitration, then such disputes
shall be settled in
accordance with these Standard Procedure Rules subject to such
modification as the parties may agree in writing.’
2. For purposes of
paragraph 1 an agreement in writing includes an electronic
communication if the information contained in it is
accessible so as
to be useable for subsequent reference.
3. For purposes of
paragraph (2), “electronic communication” means a
communication by means of data messages and “data
message”
means data generated, sent, received or stored by electronic means
and includes a stored record.
[23] In any event, the
question whether the Association of Arbitrators has jurisdiction over
the particular dispute can have no
bearing on whether there is a
valid arbitration agreement as it is governed by the Act and the
Model Law.
[24] There is accordingly
a binding agreement to arbitrate the enrichment claims. Thus, even if
those claims were not res judicata
they cannot be pursued by way of
action in the High Court.
Conclusion
[25] The dismissal of the
counter application is unassailable. The pending action has no real
prospects of success and is barred
by the arbitration agreement. In
the exercise of the court’s discretion to stay, the court a quo
held that South African
courts should exhibit a ‘pro-enforcement
bias’ with regard to the enforcement of foreign arbitral
awards. I agree.
The ‘pro-enforcement bias’ is a strong
factor in the exercise of a court’s discretion and should weigh
in favour
of enforcement of arbitral awards and against delaying it.
However, accepting this, the counter application does not meet the
threshold
for a stay, namely the avoidance of real and substantial
injustice.
[26] The disadvantage to
IDS of having to enforce its claim against Industrius if, one day, it
actually pursues and finally succeeds
in that claim does not
constitute ‘real and substantial injustice’. If that were
so, a stay of enforcement could always
be obtained by the simple
device of instituting a claim against the enforcer.
[27] IDS failed to show
why this court should interfere with the court a quo’s
discretion in the dismissal of its counter
application. Any further
delay in the enforcement of the arbitral award would cause an
injustice to Industrius. In the result the
following order is made:
1. The appeal is
dismissed with costs.
L.
WINDELL
JUDGE OF THE HIGH
COURT
GAUTENG DIVISION,
JOHANNESBURG
I agree
D.C.
FISHER
JUDGE OF THE HIGH
COURT
GAUTENG DIVISION,
JOHANNESBURG
I agree
A.A.
CRUTCHFIELD
JUDGE OF THE HIGH
COURT
GAUTENG DIVISION,
JOHANNESBURG
Delivered:
This judgement was prepared and authored by the Judges whose name are
reflected and is handed down electronically
by circulation to the
Parties/their legal representatives by email and by uploading it to
the electronic file of this matter on
CaseLines.  The date for
hand-down is deemed to be 5 June 2023.
APPEARANCES
Counsel
for the appellant:
Advocate
H.J. Fischer
Attorney
for the appellant:
Spellas
Lengert Kuebler Braun Inc
Counsel
for the respondent:
Advocate
I.B. Currie
Attorney
for the respondent:
Knowles
Hussain Lindsay Inc
Date
of hearing:   1 March 2023
Date
of judgment: 5 June 2023
[1]
IDS is a private company registered in terms of the laws of the
Republic of South Africa with its place of business and registered

address in Boksburg. Industrius is a foreign company registered in
terms of the laws of the Republic of Croatia as a limited
liability
company with its place of business in Bajagić, a village in
Croatia.
[2]
IDS
abandoned the first two prayers in the Notice of Motion and pursued
only the third prayer.
[3]
Article 36. Grounds for refusing recognition or enforcement (1)
Recognition or enforcement of an arbitral award, irrespective
of the
country in which it was made, may be refused only: (a) at the
request of the party against whom it is invoked, if that
party
furnishes to the competent court where recognition or enforcement is
sought proof that: (i) a party to the arbitration
agreement referred
to in article 7 was under some incapacity; or the said agreement is
not valid under the law to which the parties
have subjected it or,
failing any indication thereon, under the law of the country where
the award was made; or (ii) the party
against whom the award is
invoked was not given proper notice of the appointment of an
arbitrator or of the arbitral proceedings
or was otherwise unable to
present his case; or (iii) the award deals with a dispute not
contemplated by or not falling within
the terms of the submission to
arbitration, or it contains decisions on matters beyond the scope of
the submission to arbitration,
provided that, if the decisions on
matters submitted to arbitration can be separated from those not so
submitted, that part of
the award which contains decisions on
matters submitted to arbitration may be recognized and enforced; or
(iv) the composition
of the arbitral tribunal or the arbitral
procedure was not in accordance with the agreement of the parties
or, failing such agreement,
was not in accordance with the law of
the country where the arbitration took place; or 4The conditions set
forth in this paragraph
are intended to set maximum standards. It
would, thus, not be contrary to the harmonization to be achieved by
the model law
a State retained even less onerous conditions.
22 UNCITRAL Model Law on International Commercial Arbitration (v)
the award has
not yet become binding on the parties or has been set
aside or suspended by a court of the country in which, or under the
law
of which, that award was made; or (b) if the court fi nds that:
(i) the subject-matter of the dispute is not capable of settlement

by arbitration under the law of this State; or (ii) the recognition
or enforcement of the award would be contrary to the public
policy
of this State.
[4]
Affirmative
Portfolios CC v Transnet Ltd t/a Metrorail
[2008] ZASCA 127
;
2009
(1) SA 196
(SCA) para 24.
[5]
Article 1 paragraph 6