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[2013] ZASCA 33
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Leadtrain Assessments (Pty) Ltd and Others v Leadtrain (Pty) Ltd and Others (427/2012) [2013] ZASCA 33; 2013 (5) SA 84 (SCA) (28 March 2013)
THE SUPREME COURT OF
APPEAL OF SOUTH AFRICA
JUDGMENT
Case no
:
427/2012
REPORTABLE
In the matter between:
LEADTRAIN ASSESSMENTS
(PTY) LTD
..........................................
FIRST
APPELLANT
COLLEGE-ON-LINE CC
................................................................
SECOND
APPELLANT
STEVE BYRON
...................................................................................
THIRD
APPELLANT
and
LEADTRAIN (PTY) LTD
..................................................................
FIRST
RESPONDENT
RICHARD LILFORD
...................................................................
SECOND
RESPONDENT
RICHARD LILFORD N.O.
ON BEHALF OF
THE RIVAL SHARE TRUST
...........................................................
THIRD
RESPONDENT
RICHARD LILFORD N.O.
ON BEHALF OF
THE LEADTRAIN
EMPLOYEES SHARE TRUST
......................
FOURTH RESPONDENT
D P DE VILIERS N.O
.......................................................................
FIFTH
RESPONDENT
Neutral citation:
Leadtrain Assessments (Pty) Ltd v
Leadtrain (Pty) Ltd
(427/12)
[2013]
ZASCA 33
(28 March 2013)
Coram:
Nugent,
Ponnan and Tshiqi JJA and Swain and Saldulker AJJA
Heard: 11 March 2013
Delivered: 28 March
2013
Summary: Arbitration
awards in terms of the
Arbitration Act 42 of 1965
–
final and binding in
terms of
s 28
– correct interpretation of
s 32(2)
– no
good cause shown for remittal.
_____________________________________________________________________
ORDER
_____________________________________________________________________
On appeal from:
South
Gauteng High Court, Johannesburg (Mabesele J sitting as court of
first instance)
a. The appeal is upheld
with costs to be paid by the respondents jointly and severally.
b. The orders of the
court below are set aside and the following orders are substituted:
‘
(i)
The application succeeds to the extent that paragraphs 4 and 5 of the
costs award made by the arbitrator on 5 August 2011 are
made an order
of court. The respondents are to pay the costs of the application.
(ii) The
counter-application is dismissed with costs.
(iii) In each case the
costs are to be paid by the respondents jointly and severally.’
_____________________________________________________________________
JUDGMENT
_____________________________________________________________________
NUGENT AND TSHIQI JJA
(PONNAN JA AND SWAIN AND SALDULKER AJJA CONCURRING):
[1] Various disputes
between the appellants, on the one hand, and the respondents, on the
other hand, were referred to arbitration
by agreement. The nature of
the disputes, and the award that was made on the merits, are not
material to this appeal. The appeal
concerns only the costs that were
awarded by the arbitrator.
[2] In his costs award
the arbitrator ordered the first respondent – Leadtrain (Pty)
Ltd – to pay 80 per cent of the
costs of the arbitration, and
80 per cent of certain costs that had been incurred in the high
court. He went on in paragraph 4
of the award to direct that certain
costs be included in the costs of the arbitration. In paragraph 5 he
ordered the second respondent
– Mr Lilford – to bear half
the costs jointly and severally with Leadtrain (Pty) Ltd. It is those
two paragraphs that
are relevant to this appeal.
[3] The appellants
applied to the South Gauteng High Court for the award to be made an
order of court as provided for by
s 31
of the
Arbitration Act 42 of
1965
. That prompted a counter-application by Mr Lilford for an order
setting aside paragraph 4 (partially) and paragraph 5 of the costs
award, alternatively, remitting those portions of the award to the
arbitrator under
s 32(2)
of the Act for reconsideration.
[4] By agreement between
the parties the award – excluding paragraphs 4 and 5 of the
costs award – was made an order
of court by Meyer J. The
application so far as those paragraphs were concerned, and the
counter-application, were postponed and
the costs of the proceedings
were reserved.
[5] The matter then came
before Mabesele J. The effect of the order that had been made by
Meyer J was that only a remnant of the
prayers in the application –
the remnant being a prayer that paragraphs 4 and 5 of the costs award
be made an order of court
– and the counter-application were
before the learned judge. That notwithstanding, the learned judge
purported to dismiss
the application in toto. He also granted the
counter-application, and set aside the contentious parts of the costs
award. This
appeal against his orders is before us with his leave.
[6] The order dismissing
the application has now been abandoned so far as it relates to those
parts of the award that were made
an order of court by Meyer J. The
dispute before us thus centres on the remaining two orders –
the orders granting the counter application
and setting aside
the contentious paragraphs of the costs award. If the appeal against
those orders succeeds then the appellants
are entitled to have
paragraphs 4 and 5 of the costs award made an order of court.
[7] An arbitrator, like a
court, exercises a discretion when he or she makes an award of costs.
In support of the counter-application
it is alleged by Mr Lilford
that the arbitrator in this case misdirected himself in exercising
that discretion. We need not elaborate
upon the manner in which he is
said to have done so. The central question is whether misdirection in
the exercise of his discretion
– if it occurred –
entitles Mr Lilford to have the affected part of his award set aside
and the matter remitted for
reconsideration by the arbitrator.
[8] It is trite that the
award of an arbitrator is ordinarily final. That is provided for
expressly in
s 28
of the Act:
‘
Unless the
arbitration agreement provides otherwise, an award shall, subject to
the provisions of this Act, be final and not subject
to appeal and
each party to the reference shall abide by and comply with the award
in accordance with its terms.’
[9]
Section 33(1)
of the
Act permits a court to interfere with an award where an arbitration
tribunal has misconducted itself, or committed a gross
irregularity,
or exceeded its powers, or the award has been improperly obtained,
but Mr Lilford does not seek to bring himself
home on any of those
grounds. On the contrary, conduct of that kind has been disavowed. He
confines himself instead to
s 32(2)
, which provides as follows:
‘
The court
may, on the application of any party to the reference after due
notice to the other party or parties made within six weeks
after the
publication of the award to the parties, on good cause shown, 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 court may direct.’
[10] In support of his
submission that misdirection on the part of an arbitrator in
exercising his discretion in relation to costs
allows a court to set
aside his award and remit the matter for reconsideration counsel for
Mr Lilford relied upon various decisions
in which that has been done
-
Joubert
t/a Wilcon v Beacham,
1
Benab Properties CC v
Sportshoe (Pty) Ltd,
2
and
Clarke
v Semenya NO.
3
[11] In
Joubert
it was said
4
that ‘it is trite
that an arbitrator is obliged to award costs on the same basis as
would a Court’ – and in that
respect the court was no
doubt correct. The court went on to say that ‘his award is
liable to be set aside on review if he
fails to do so’ –
but in that respect it was not correct. The authority relied upon for
that proposition was the decision
of this court in
Kathrada
v Arbitration Tribunal and another
5
but that reliance was
misplaced.
[12]
Kathrada
did not concern a
consensual arbitration, which is what was in issue in
Joubert
,
and is in issue in this case. It concerned an arbitration mandated by
the Community Development Act 3 of 1966 to determine the
compensation
to be paid upon expropriation. The statute conferred a discretion
upon the arbitrator to award costs, which, as the
court said, ‘must
be exercised judicially and in accordance with recognised
principles’. But in that case it was because
the arbitrator was
exercising statutory authority that his conduct was subject to
judicial review – as is the case whenever
statutory authority
is exercised. The power of a court to review the exercise of
statutory authority has no application to consensual
arbitration
under the
Arbitration Act.
6
The
grounds upon which a
court may review the award of a consensual arbitrator are confined to
those stipulated in s 33(1) of the Act
– which are decidedly
narrower than the grounds of review that were available in
Kathrada
.
[13] The other cases
referred to by counsel take the matter no further. In
Benab
the parties agreed that
the costs award of the arbitrator was reviewable on the same basis as
that of the arbitrator in
Kathrada
and the case was disposed
of on that basis.
7
Clarke
founded itself on
Kathrada,
and for
the reason we have already given the court’s reliance upon that
case was misplaced.
8
The power of a court to
review the decision of a consensual arbitrator must be found in the
Act or not at all.
[14] We have already said
that the review grounds in s 33(1) have been disavowed in this case.
The submission was instead that misdirection
on the part of the
arbitrator provided ‘good cause’ for the matter to be
remitted under s 32(2). It is true that the
term has a wide meaning –
as this court said in
South
African Forestry Co Ltd v York Timbers
9
–
but the term
falls nonetheless to be applied in the context in which it is used.
That context in this case is the
Arbitration Act, which
is directed
at the finality of arbitration awards.
[15] It is not desirable
to attempt to circumscribe when ‘good cause’ for
remitting a matter will exist. It will exist
pre-eminently where the
arbitrator has failed to deal with an issue that was before him or
her – which was what occurred
in
York
Timbers
10
–
but once an issue
has been pertinently addressed and decided there seems to us to be
little room for remitting the matter for reconsideration.
The guiding
principle of consensual arbitration is finality – right or
wrong – and we see no reason why an award of
costs is to be
treated differently to any other aspect of an award.
11
It would be extraordinary
if the conduct of an arbitrator that falls short of the strict
constraints of
s 33(1)
were nonetheless to be capable of being
set aside and remitted for reconsideration under
s 32(2).
As pointed
out in
Benjamin
v Sobac South African Building and Construction (Pty) Ltd,
12
correctly, the effect of
so holding would be to emasculate the provisions of
s 33(1).
However
one approaches the question what is ‘good cause’ it seems
to us that it inexorably requires something other
than to mere error
on the part of the arbitrator.
[16] In this appeal the
case that is made out amounts to alleged error on the part of the
arbitrator without more. As Brand J observed
in
Kolber
v Sourcecom Solutions (Pty) Ltd
,
13
‘
a party to
arbitration proceedings should not be allowed to take the arbitrator
on appeal under the guise of a remittal in terms
of
s 32(2)
’.
It seems to us that that is precisely what is sought to be done in
this case and the counter-application ought to have
failed.
Opposition to the application was founded solely upon the
counter application and in those circumstances the court
below
ought to have dismissed the counter-application and ordered that
paragraphs 4 and 5 of the award be made an order of court.
The costs
of the application and the counter-application were reserved by Meyer
J for the decision of the court below. There is
no reason why they
should not follow the result. In this court the appellants sought a
punitive award of costs but in our view
there is no justification for
such an award.
[17] The following order
is made:
a. The appeal is upheld
with costs to be paid by the respondents jointly and severally.
b. The orders of the
court below are set aside and the following orders are substituted:
‘
(i)
The application succeeds to the extent that paragraphs 4 and 5 of the
costs award made by the arbitrator on 5 August 2011 are
made an order
of court. The respondents are to pay the costs of the application.
(ii) The
counter-application is dismissed with costs.
(iii) In each case the
costs are to be paid by the respondents jointly and severally.’
______________________
R Nugent
______________________
ZLL Tshiqi
Judges of Appeal
APPEARANCES:
For the Appellant DJ
Vetten
Instructed by
Thomson Wilks
Incoporated, Johannesburg
Webbers, Bloemfontein
For the Second Respondent
JH Josephson
Instructed by
Botha & De Klerk
Attorneys, Midrand
Honey Attorneys,
Bloemfontein
1
Joubert
t/a Wilcon v Beacham
1996
(1) SA 500
(C).
2
Benab
Properties CC v Sportshoe (Pty) Ltd
1998
(2) SA 1045
(C).
3
Clarke
v Semenya NO
2009 (5) SA
522 (W).
4
At
502D.
5
Kathrada
v Arbitration Tribunal and another
1975
(2) SA 673
(A) at 680H-681B.
6
Telcordia
Technologies Inc v Telkom SA Ltd
[2006] ZASCA 112
;
2007
(3) SA 266
(SCA) para 59.
7
At
1049E-F.
8
At
528A.
9
South
African Forestry Co Ltd v York Timbers
2003
(1) SA 331
(SCA) para 14.
10
Para
15.
11
In
John Sisk & Son (SA) (Pty) Ltd v Urban Foundation
1985
(4) SA 349
(N) it seems to have been accepted by both parties that
the conduct of the arbitrator in that case provided ‘good
cause’
for remittal.
12
At
960G-H.
13
Para
61.