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[2016] ZAECPEHC 10
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Pro-Khaya Construction CC v Independent Development Trust (3065/2015) [2016] ZAECPEHC 10; [2016] 2 All SA 909 (ECP) (22 March 2016)
IN THE HIGH COURT OF
SOUTH AFRICA
EASTERN CAPE LOCAL
DIVISION, PORT ELIZABETH
CASE
NO 3065/2015
DATE
HEARD: 11/02/2016
DATEDELIVERED:
22/03/2016
In the
matter between
PRO-KHAYA
CONSTRUCTION
CC
APPLICANT
and
The Trustees for the time
being of
THE INDEPENDENT
DEVELOPMENT TRUST
RESPONDENT
JUDGMENT
ROBERSON
J:-
[1] In
this application the applicant (Pro-Khaya) seeks to have an
arbitration award made an order of court, in terms of s 31 (1)
of the
Arbitration Act 42 of 1965 (the Act), as well as an order for payment
by the respondent (the Trust) of the various sums
of money awarded to
Pro-Khaya by the Arbitrator, Advocate Kevin Trisk SC. The
arbitration arose from an agreement between
Pro-Khaya and the Trust,
which is a Schedule 2 public entity governed by its trust deed and
the
Public Finance Management Act 1 of 1999
, in terms of which
Pro-Khaya was to construct a multi-storey classroom development and
certain other buildings in Kwanobuhle, Uitenhage,
in return for
payment by the Trust of R27 586 305.69. The agreement
was styled a Principal Building Agreement prepared
by the Joint
Building Contracts Committee Inc and I shall refer to the agreement
in this judgment as the JBCC agreement.
The JBCC agreement
provided for dispute resolution by way of arbitration, and the
arbitrator was to be appointed by the Arbitration
Foundation of
Southern Africa (AFSA). The arbitration proceedings were
conducted and concluded in the absence of the Trust.
The Trust
opposed the application and raised various defences. It also
brought a counter-application for the setting aside
of the award, in
terms of s 33 (1) of the Act. The Arbitrator filed a notice to
abide the decision in the counter-application.
BACKGROUND
[2]
The JBCC agreement was concluded during 2008. It seems not to
be in dispute that during 2011 the JBCC agreement was terminated
owing to non-payment by the Trust, but at the request of the Trust
the termination was withdrawn. On 15 December 2011 the
principal agent certified that practical completion of the works had
been achieved. During 2012 Pro-Khaya obtained default
judgment
against the Trust for payment of R674 039.37, which sum was paid
after the issue of a writ of execution. A
further action was
instituted in this court during 2012 for payment of R4 379 032.80,
made up of various amounts in terms
of certain interim payment
certificates which had allegedly been issued by the principal agent.
In terms of the JBCC agreement
the Trust was obliged to pay Pro-Khaya
the amounts certified in the interim payment certificates within 21
days of the issue of
the certificates. It was alleged that the
Trust had failed to pay the various amounts so certified.
[3] The Trust entered an
appearance to defend the action and was represented by Ms Babalwa
Malgas of Cwati Malgas Mgidlana Inc of
East London, locally
represented by Siya Cokile Inc, Port Elizabeth. Pro-Khaya
applied for summary judgment and the Trust
delivered an opposing
affidavit in which it raised various defences to the claim. The
precise nature of some of the defences
raised was a little difficult
to glean from the opposing affidavit (which was annexed to
Pro-Khaya’s replying affidavit in
the present application) but
I summarise them as best I can as follows:
a.
The
principal agent denied having issued payment certificates.
b.
It
had been resolved at a meeting between the parties that Pro-Khaya
would allow a discount on one of the amounts making up the
claim, but
failed to advise the Trust of the amount of the discount in order to
enable the Trust to make payment.
c.
Payment
of one of the amounts making up the claim depended on the approval of
the final account which had not been approved.
d.
No
payments would be made until certain issues had been resolved.
These issues related to clauses 29 and 30 of the JBCC agreement
which
dealt with the revision of the date for practical completion and the
penalty for non-completion respectively. The principal
agent
had informed the applicant that the final account would not be
approved or finalised until Pro-Khaya had complied with the
requirements of clauses 29 and 30.
e.
There
was a dispute about the amounts of interest claimed, and there was no
agreement concerning the levying of interest.
f.
Pro-Khaya
had failed to submit its statements properly for payment, and had
failed to allow a debatement of those claims which had
been
submitted.
g.
The
respondent had a counterclaim against Pro-Khaya which would be set
off against Pro-Khaya’s claim in the event of the court
finding
that the Trust indeed owed the money. (It seems from the
affidavit that the counterclaim related to penalties for
late
completion of the works.)
h.
Clause
40 of the agreement provided for dispute settlement and the court had
no jurisdiction to entertain the matter.
[1]
[4] The summary judgment
application was heard on 15 April 2014 and judgment was reserved.
On 10 June 2014 Pro-Khaya’s
attorney Mr Gerald Friedman sent an
e-mail to Mr Patrick Baloyi of the Trust, copied to Siya Cokile Inc
and the principal agent.
Reference was made to the summary
judgment proceedings and the issues raised therein, and the following
was recorded:
“
Whilst no
concessions in this regard are made, our client intends to avail
itself of the opportunity to proceed to arbitration,
there clearly
being a dispute in regards to a number of aspects.
This letter serves
as notification that our client hereby declares a dispute inter alia,
in respect of the following issues:
a.
the
alleged failure by the Principal Agent to issue interim payment
certificates on due date;
b.
the
failure by the Principal Agent on behalf of the client, to issue a
final account, notwithstanding the issue of a Practical Completion
Certificate and the lapse of time in terms of the contract.
If the dispute
remains unresolved for a period of 10 days from date hereof, our
client will refer all the outstanding issues to
arbitration. As
is common cause, failing agreement in regards to the appointment of
an Arbitrator, the said appointment with
be made by AFSA Sandton,
Johannesburg.
We would propose
(if any response is forthcoming) that we agree to appoint an
Arbitrator in the Eastern Cape, which will have considerable
savings
for all the parties.
Either way, failing
agreement or resolution within 10 days, we will proceed immediately
to call for the appointment of an independent
Arbitrator.”
[5] Siya Cokile Inc
responded to the e-mail as follows:
“
We refer to
the above matter and acknowledge receipt of your email sent to us on
10 June 2014.
As you are aware
that we are only acting as Independent Development Trust’s
local Attorneys, we are forwarding the contents
of your email to our
Correspondents in East London for their client’s further
instructions.
We shall revert to
you as soon as we hear from our Correspondents herein.”
[6]
By
letter dated 3 July 2014 Siya Cokile Inc advised Friedman as follows:
“
We confirm
that our correspondent’s instructions are that their client is
willing to deal with the dispute by referring it
to arbitration, if
your client abandons the summary judgment proceedings.”
[7]
According to Friedman on 8 July 2014 he and Malgas telephonically
concluded an oral agreement in terms of which the entire dispute
between the parties was to be referred to arbitration, the High Court
action would be discontinued, and the costs of that action
would be
dealt with by the Arbitrator. Malgas denied such agreement,
denied having spoken to Friedman on 8 July 2014, and
maintained that
she only had a mandate from the Trust in respect of the High Court
action. I shall deal with this dispute
later in this judgment.
Further correspondence and events which took place up to and
including the arbitration proceedings
were however not in dispute.
[8] By letter dated 8
July 2014 Friedman informed the Registrar at the Port Elizabeth High
Court as follows:
“
1. This
matter was argued before Judge Dunya (sic) AJ on 15
th
April 2014 and Judgment in respect of the Summary Judgment is
pending.
2. In view of
the dispute between the parties, it has been agreed that the entire
matter, including additional claims, be
referred to arbitration, in
terms of the JBCC rules applicable to the contract.
3. In the
circumstances, kindly notify the Presiding Judge that this matter is
not proceeding any further and that there is
no necessity to issue a
Judgment.”
A copy
of this letter was e-mailed to Siya Cokile Inc.
[9] It
seems the presiding judge was not informed of the agreement because
his judgment, in which he refused summary judgment, was
delivered on
15 July 2014.
[10] On 10 July 2014
Friedman e-mailed a letter to AFSA, copied to Siya Cokile Inc, in
which he stated the following:
“
1. We
represent Pro-Khaya Construction CC.
2. Our client is
in dispute with the Independent Development Trust and the dispute is,
by agreement, referred to AFSA in accordance
with the JBCC Series
2000 Principal Building Agreement.
3. We annex
hereto the Post Tender information and refer to clause 42 and
specifically to clause 42.7.3.
4.
A portion of the dispute relating to the issue of various
certificates has already been heard by the High Court
and Judgment is
being awaited.
5.
The parties are in agreement that the High Court proceedings will
form part of the arbitration and the Presiding
Judge has been
notified thereof.
6.
Would you kindly, per return, furnish us with your requirements, as
well as details of the proposed appointment.”
[11]
Pro-Khaya’s statement of claim in the arbitration was served on
Cwati Malgas Mgidlana Inc on 18 February 2015.
No statement of
defence or counterclaim was delivered on behalf of the Trust.
[12]
The Arbitrator accepted AFSA’s invitation to act as the
Arbitrator and received the statement of claim and other documents.
On 1 April 2015 the Arbitrator e-mailed a letter to Friedman and
Malgas in which,
inter
alia
,
he stated that he was willing to conduct a pre-arbitration meeting by
way of a telephone conference. On being advised that
the Trust
had not paid its share of AFSA’s administration fee and had not
filed its statement of defence, the Arbitrator
issued a directive to
the effect that the Trust was to deliver its statement of defence and
to pay AFSA by or before 24 April 2015.
The Trust did not
comply. AFSA was informed by Malgas that she mistakenly
believed that a payment she had received from the
Trust was for this
matter, but it was in fact for another matter.
[13]
The Arbitrator directed that a preliminary meeting was to take place
on 5 May 2015. This meeting took place by way of
a
teleconference attended by the Arbitrator, Friedman, and Malgas.
It was agreed at the teleconference that the Trust would
deliver its
statement of defence and counterclaim, if any, and pay AFSA, by close
of business on 15 May 2015. The Arbitrator
further directed
that if the Trust did not comply the matter would proceed on a
default basis. Friedman prepared a note of
what was agreed
which was sent to the Arbitrator and copied to Malgas and AFSA.
According to Malgas she thought the teleconference
related to another
matter.
[14]
On 15 May 2015 Malgas delivered a statement of defence but it related
to another matter involving the Trust before a different
arbitrator.
The mistake was pointed out to her by Friedman and she was requested
to deliver the correct statement of defence.
[15]
By letter dated 22 May 2015 the Arbitrator informed Friedman and
Malgas that he had been advised by AFSA that the Trust had
failed to
deliver a relevant statement of defence nor had it paid the amount
due to AFSA. Pro-Khaya was therefore entitled
to request him to
enrol the matter by notice to both parties. The arbitrator
consequently and by letter addressed to Friedman
and Malgas, directed
that the hearing of the arbitration was to proceed on 9 and 10 June
2015. AFSA, by letter dated 26 May
2015 e-mailed to Friedman
and Malgas, confirmed the dates and attached an invoice for each
party for the Arbitrator’s fees.
Friedman thereafter
e-mailed Malgas requesting her to indicate if she had instructions
from the Trust. As far as the Arbitrator
was aware there was no
response from Malgas.
[16]
Under cover of an e-mail dated 1 June 2015 Friedman sent to the
Arbitrator a document containing the qualifications of Pro-Khaya’s
expert witness and a summary of the evidence to be given by the
expert. This summary was according to Friedman sent to Malgas.
[17]
On 9 June 2015 and before the proceedings commenced the Arbitrator
requested Friedman to try to contact Malgas, who did so
without
success. The Arbitrator was satisfied that notice of the
proceedings was given to Malgas and that it had in all probability,
if not in fact, come to the attention of the Trust. The
Arbitrator proceeded with the arbitration in the absence of the
Trust, as provided for in Article 10.1.1 of the AFSA rules.
[18]
Under cover of a letter dated 18 June 2015, copied to Malgas,
Friedman sent the arbitrator Pro-Khaya’s heads of argument
which contained certain amendments to the statement of claim.
[19] The award was
published on 27 July 2015. AFSA and Friedman informed Malgas in
writing accordingly. Thereafter a
representative of the Trust
e-mailed Friedman informing him that the Trust was not aware of the
arbitration award and requested
a copy of the award. A
letter from the Trust’s new attorneys, Ledwaba Mazwai Inc,
followed in which
inter alia
it was stated:
“
3. Our
client notes that the arbitration award was obtained by default.
Our client is accordingly perturbed by this
turn of events as it was
oblivious to the process which led to the granting of the arbitration
award. More specifically,
our client was not aware of the
appointment of the arbitrator; the notices and pleadings exchanged in
the arbitration; and date
of the hearing of arbitration. We are
instructed – as we hereby do – to request copies of all
of the notices
and pleadings which were exchanged in the arbitration
process.
4. The fact
that our client was oblivious to the arbitration process is an issue
which our client is taking up with their
former attorneys of record
whose mandate was terminated this Monday.”
The
letter also set out certain grounds on which the award could be set
aside and Pro-Khaya was invited to abandon the award.
DEFENCES TO THE
APPLICATION
Trustees not cited
[20]
As appears from the heading, the respondent is cited as “The
Trustees for the time being of the Independent Property
Trust”.
The Trust took the point that all the trustees were not individually
cited and that the Trust was not properly
before the court.
[21] Cameron De Waal
Wunsh
Honoré’s
South African Law of Trusts
5
th
edition at 419-420 state:
“
Unless one
or more of the trustees are authorized by the others, all the
trustees must be joined in suing and all must be joined
when action
is instituted against a trust.
In legal
proceedings the trustees must act
nomine
officii
and cannot act in their private capacities. It is usual for the
trustees to be cited as ‘A, B and C in their capacity
as the
trustees of the XYZ Trust’ but cases in which the trust as such
is cited are not unknown and there should be no objection
to a
citation of ‘the trustees for the time being of the XYZ
Trust’.”
[22] In Pro-Khaya’s
replying affidavit Friedman stated that prior to the issue of summons
in the High Court action the only
information Pro-Khaya had relating
to the identity of the trustees of the Trust was the reference in the
pre-tender information
to “The Independent Development Trust.”
Friedman attempted to discover the identity of the trustees at the
office
of the Master of the High Court, without success.
[23]
In
Desai-Chilwan
NO v Ross and Another
2003 (2) SA 644
(C) it was said that a court retains a discretion to
condone a defect in the citation of a Trust (at para [28]). In
the present
matter I am of the view that there is ample reason to
condone the defect. It was not in dispute that Friedman
attempted unsuccessfully
to discover the names of the trustees.
The deponent to the answering affidavit (founding affidavit in the
counter-application)
was Mr Nemasisi Ntsumbedzeni, employed by the
Trust as a senior legal manager. He stated that he was
authorised to depose
to the affidavit. Such authority would
have been given by the trustees. The notice of motion in the
counter application
cited all 11 trustees by name. In these
circumstances the objection is highly technical and can be condoned.
Effectively
all the trustees are before the court in their capacities
as trustees and there was no real failure to cite all the trustees.
This ground of defence is without merit. I consequently do not
need to deal with the submission that the Trust could be cited
by its
business name in terms of Uniform Rule 14.
No
agreement to refer to arbitration
[24] This defence related
to the alleged agreement concluded on 8 July 2014.
Here I
must deal with Pro-Khaya’s application to strike out a portion
of Malgas’s affidavit. I have somewhat prematurely
referred to portions of her affidavit when recounting the history of
the matter. The founding affidavit in the application
was
deposed to by Mr Eden Smith, who is Pro-Khaya’s managing
member. In his affidavit he referred to the letter from
Ledwaba
Mazwai Inc wherein it was stated that the arbitration award had been
obtained by default without the knowledge of the Trust.
Smith
stated that Malgas had represented the Trust in the High Court matter
and that those proceedings together with all the disputes
between the
parties had been consensually referred to arbitration. In the
answering affidavit the Trust denied that the High
Court proceedings
had been consensually referred to arbitration and maintained that the
arbitration had been initiated by Friedman’s
letter of 10 June
2014 (see para [4] above). That letter, so it was alleged, did
not state that the proceedings were consensually
referred to
arbitration. In his replying affidavit, which was also in part
an answering affidavit in the counter-application,
Friedman set out
full details of his interaction with Malgas, which included
correspondence following the summary judgment application,
the oral
agreement allegedly reached on 8 July 2014, Malgas’
participation in the teleconference, and subsequent correspondence
addressed to her. It was only after Friedman’s affidavit
was delivered that an affidavit from Malgas was obtained,
in which
she responded to Friedman’s allegations concerning her part in
the arbitration, from the time of the summary judgment
application
onwards.
[25]
It was contended that the portion of the affidavit sought to be
struck out was new matter and that the Trust was trying to
“relieve
the pinch of the shoe”, and that there was no reason why Malgas
could not have deposed to an affidavit when
the answering affidavit
was delivered. Malgas was, so it was contended, seeking to
supplement the allegations that the Trust
was unaware of the
arbitration proceedings and that the High Court matter was not
consensually referred to arbitration.
[26] I
have decided not to grant the application to strike out. At the
time Smith deposed to the founding affidavit, Pro-Khaya
was aware of
the contents of Ledwaba Mazwai Inc’s letter and the assertion
that the Trust had no knowledge of the events
leading up to the
arbitration award. I think that in such a situation something
more about Malgas’ involvement in these
events could have been
said in the founding affidavit. It is so that her name was
mentioned in the founding affidavit and
it would have been prudent to
obtain an affidavit from her in answer to the founding affidavit.
In addition the
arbitrator’s award was annexed to
the notice of motion and Malgas’ involvement in the arbitration
was dealt with in
some detail in the award. However in view of
the fairly extensive elaboration of her involvement in the
arbitration contained
in Friedman’s replying affidavit, which
was also an answering affidavit in the counter-application, and the
critical role
the alleged oral agreement played in this application,
I am prepared to allow those portions of her affidavit. I would
however
not in the circumstances make a costs order against the
applicant in the application to strike out.
[27] I
return now to the defence that there was no agreement to refer the
disputes to arbitration. There is a dispute of fact:
Malgas denied outright that she spoke to Friedman on 8 July 2014 and
that an agreement to refer all the disputes between the parties
to
arbitration was concluded. One must examine this denial and
other aspects of Malgas’ affidavit in the context of
much that
is common cause in order to determine whether or not there is a bona
fide and genuine dispute of fact.
[28] Friedman’s
account of the agreement between him and Malgas was given in some
detail. He stated that he dealt personally
with Malgas in
relation to the High Court proceedings. After recounting the
prior correspondence with Siya Cokile Inc, he
stated that on 8 July
2014 he telephoned Malgas and suggested that a local arbitrator,
retired Judge Franklin Kroon, be appointed.
He and Malgas
agreed that the entire dispute between the parties, which
incorporated the claim in the High Court action, the costs
of the
High Court action, and the counterclaim, would be referred to
arbitration. It was further agreed that Friedman would
write to
the judge who heard the summary judgment application and request him
not to deliver judgment, and also that Friedman would
write to AFSA
confirming the agreement. Friedman kept a file note of the
conversation with Malgas, which read as follows:
“
Attend to
call Babes Malgas
[2]
and suggest that we appoint a local arbitrator, such as Frank Kroon
as AFSA is in Johannesburg. Maybe we ask AFSA to appoint
a
local arbitrator as it is cheaper and easier for all.
She says that she
will speak to her client about it. I advised that I have
already made the suggestion but no response at
all has been received
and we are wasting our time.
I advised Babes
that I have written to the High Court Judge to advise him that the
high court proceedings will form part of the
dispute and that costs
are reserved. I will deal with the high court certificates in
my statement of claim, which will be
the entire claim.
I further advised
that I will write to AFSA. If her instructions are to go local
she must let me know.
Duration: 10
minutes.”
[29] Malgas stated that
her only dealings with Friedman were to request him to agree to a
postponement of the summary judgment application.
She denied
speaking to Friedman thereafter, in particular telephonically on 8
July 2014, and stated that his allegations of the
agreements reached
were not correct. According to her she only had instructions
from the Trust with regard to the preparation
of the opposing
affidavit in the summary judgment application and the prosecution of
the summary judgment application. She
had, so she stated,
always avoided discussing the merits of the matter because she did
not have such instructions from the Trust.
With reference to
correspondence between Friedman and Siya Cokile Inc in which
arbitration was discussed, she stated:
“…
..from
the annexures annexed to the replying affidavit it is quite apparent
that Mr Friedman directed correspondence to our correspondent
attorneys in this regard.”
[30]
Malgas’ affidavit is instructive in what it does not say.
She stopped short of saying that correspondence sent
to Siya Cokile
Inc was not forwarded to her, which it would have been in the normal
course of legal practice. She did not
deal with the content of
Siya Cokile Inc’s letters which clearly reflected that they
were taking instructions from her with
regard to the arbitration
proposal, and that ultimately arbitration was agreed to provided that
the summary judgment application
was abandoned. She failed to
mention, if indeed she had not agreed to arbitration on behalf of the
Trust, what the position
was regarding the summary judgment
application. She did not deal at all with Friedman’s
letter to the Registrar, which
was copied to Siya Cokile Inc, which
stated that the entire dispute was to be referred to arbitration.
She did not deal with
Friedman’s letter to AFSA, also copied to
Siya Cokile Inc, in which the dispute was referred to arbitration.
As the
instructing attorney she would have had the knowledge to deal
fully with the correspondence between Friedman and Siya Cokile Inc
and explain properly why in spite of this correspondence she was not
party to an agreement to refer the disputes to arbitration.
[31] Her response to
Friedman’s allegation that her firm received Pro-Khaya’s
statement of claim was to say:
“
I deny that
the fact that the statement of claim was served at our offices means
anything.”
This
is a startling statement. If indeed there had been no agreement to
refer the disputes to arbitration, the service of the statement
of
claim on her firm cried out for an explanation. She did not
explain her inaction which she would have been able to do.
As
an attorney her first reaction would have been to notify Friedman and
AFSA that there was a mistake, or seek an explanation
from the Trust.
[32]
Malgas did not deny that she participated in the teleconference held
on 5 May 2015 but denied that it was a pre-arbitration
conference in
connection with this matter. In her mind, so she stated, when
she agreed to file a statement of defence, she
thought it was in
respect of another matter. This explanation called for
elaboration which was within her knowledge.
She did not deny
that the other parties to the teleconference were the Arbitrator
Trisk SC and Friedman. She did not deny
receiving the letter
from the Arbitrator in which he directed that the teleconference in
this matter was to be held on 5 May 2015.
The other matter was
before a different arbitrator. It was open to her to explain
who she thought she was speaking to during
the teleconference, and
why, in view of the Arbitrator’s directive, she mistakenly
thought the teleconference related to
another arbitration before a
different arbitrator. She agreed that she had told AFSA that
the money paid to her by the Trust
for arbitration fees was for
another matter. She failed however to deal with Friedman’s
e-mail to her in which he pointed
out that she had delivered the
wrong statement of defence. This e-mail, which bore the heading
“Pro-Khaya’s statement
of defence” made it clear
that there were two matters.
[33]
Malgas failed to deal with the Arbitrator’s letter of 22 May
2015, addressed to her and Friedman, in which he pointed
out the
failure of the Trust to deliver a relevant statement of defence and
that Pro-Khaya was entitled to request him to enrol
the matter on
notice to both parties. She failed to deal with the
Arbitrator’s statement in his award that he had written
to her
and Friedman informing them that the hearing of the arbitration would
proceed on 9 and 10 June 2015. She did not deal
with Friedman’s
allegations that Pro-Khaya’s expert summary and the heads of
argument containing the amendments to
the statement of claim had been
sent to her. Significantly, she did not deny receiving any of
this correspondence.
[
34]
In
Wightman
t/a JW Construction v Headfour (Pty) Ltd and Another
[2008] ZASCA 6
;
2008 (3) SA 371
(SCA) Heher JA said the following at para [13]:
“
A real,
genuine and bona fide dispute of fact can exist only where the court
is satisfied that the party who purports to raise the
dispute has in
his affidavit seriously and unambiguously addressed the fact said to
be disputed. There will of course be
instances where a bare
denial meets the requirement because there is no other way open to
the disputing party and nothing more
can therefore be expected of
him. But even that may not be sufficient if the fact averred
lies purely within the knowledge
of the averring party and no basis
is laid for disputing the veracity or accuracy of the averment.
When the facts averred
are such that the disputing party must
necessarily possess knowledge of them and be able to provide an
answer (or countervailing
evidence) if they be not true or accurate
but, instead of doing so, rests his case on a bare or ambiguous
denial the court will
generally have difficulty in finding that the
test is satisfied. I say ‘generally’ because
factual averments
seldom stand apart from a broader matrix of
circumstances all of which needs to be borne in mind when arriving at
a decision.”
[35]
This dictum is particularly apposite in the present matter. I
have pointed out Malgas’ failure to deal with matters
of which
she would have had knowledge. Her bare denial of detailed
allegations, which were supported by correspondence, and
absence of
an explanation for her apparent ignorance of common cause events, do
not in my view create a bona fide and genuine dispute
of fact.
In the context of the common cause or undisputed correspondence and
events, from the time of Friedman’s letter
of 10 June 2014
onwards, culminating in the arbitration proceedings, her denial of
the agreement to refer the disputes to arbitration
is in my view
untenable and far-fetched in the extreme and can be rejected
outright.
[3]
[36] I
may therefore decide this particular dispute on the assumption that
Friedman’s account of the agreement to refer the
disputes to
arbitration is substantially true and correct. (See
Wightman
t/a JW Construction v Headfour (Pty) Ltd and Another
(
supra
)
at para [23].)
[37]
What did the Trust itself say about this dispute? Ntsumbedzeni
repeated what was stated in paragraph 3 of Ledwaba Mazwai
Inc’s
letter of 5 August 2015 (see para [19] above), and stated that the
Trust was not aware of the appointment of the Arbitrator,
the notices
and pleadings exchanged in the arbitration, and the date of the
arbitration. He denied that the High Court proceedings
were
consensually referred for arbitration. As already mentioned he
referred to Friedman’s letter of 10 June 2014,
which was
addressed to Baloyi, and pointed out that the letter did not suggest
that the High Court proceedings were consensually
referred to
arbitration.
[38]
In his replying affidavit he responded to Friedman’s
affidavit. His response to Friedman’s allegations
concerning
the correspondence with Siya Cokile Inc, the agreement
with Malgas of 8 July 2014, and the service of the statement of claim
on
Malgas’ firm was to refer to Malgas’ affidavit in
which she dealt with her involvement in the matter. It must
be
remembered that Malgas’ response in regard to these allegations
was a bare denial or a failure to deal with matters of
which she
would have had knowledge and could have explained. Ntsumbedzeni
did not deal with the contents of Siya Cokile Inc’s
letters
which indicated that Malgas was taking instructions from the Trust
and had received instructions from the Trust with regard
to
arbitration. If no such instructions had been given, this fact
would have been within Ntsumbedzeni’s or some other
official’s
knowledge. With regard to Friedman’s allegations of what
transpired after the conclusion of the agreement
with Malgas,
including the teleconference and the wrong statement of defence,
Ntsumbedzeni referred to Malgas’ affidavit.
If the other
arbitration also involved the Trust, he could have elaborated on
Malgas’ explanation of her mistake, and for
example confirmed
that there was another matter and that the Trust had paid AFSA’s
fees for the other matter. Instead
he was at best reticent.
In his affidavit Friedman stated that the Trust’s attempt to
excuse its default was inadequate
and that no explanation was given
of why the Trust never learned of the arbitration, despite being
legally represented. In
response, Ntsumbedzeni referred again
to Malgas’ affidavit.
[39]
It was the Trust itself which raised lack of jurisdiction in the
opposing affidavit to the summary judgment application, relying
on
the adjudication clause. One would imagine that after the
judgment in the summary judgment application, the Trust through
its
officials would have enquired from its attorneys about further steps,
either in the litigation or through arbitration.
Friedman’s
letter of 10 June 2014 declaring a dispute and recording an intention
to refer outstanding issues to arbitration,
was addressed to Baloyi.
Ntsumbedzini is silent on the Trust’s attitude to this letter
or the fate of the High Court
action. There was no affidavit
from Baloyi. The opposing affidavit in ithe summary judgment
application revealed numerous
disputes, involving large sums of
money. In these circumstances it was not for the Trust, a
public entity, to sit back and
do nothing.
[40]
In my view the inadequacy of Ntsumbedzeni’s affidavit
concerning the aspects mentioned, the Trust’s inertia, and
the
gross negligence on the part of Malgas in allowing the arbitration to
proceed by default, cannot avail the Trust. In
the light of
these factors, it cannot rely on its total ignorance of the
arbitration proceedings, if that was indeed the case.
Lis alibi pendens
[41]
This was a further defence, in that the High Court action was still
pending. This defence is really tied up with the
dispute about
referral to arbitration. According to Friedman once the
agreement to refer the disputes to arbitration (which
included the
disputes in the action and the costs of the action) was concluded the
action was abandoned and he and Malgas agreed
that the High Court
proceedings were of academic interest. Malgas denied that she
agreed that the High Court proceedings
were of academic interest, but
omitted to state precisely what the Trust’s interest was, if it
was not academic.
[42] Counsel for
Pro-Khaya referred me to the judgment of Lopes J in
Body Corporate
of Valence House v Malani NO and others
[2015] JOL 33407
(KZD).
In that matter the applicant had instituted action in the
Magistrate’s Court against the respondents for payment
of
levies and the respondents pleaded that the matter should have been
referred to arbitration. An arbitration award was
obtained in
due course in favour of the applicant and the applicant applied to
the High Court for an order that the arbitration
award be made an
order of court. One of the defences raised was
lis alibi
pendens
in that the Magistrate’s Court proceedings had not
been finalised. Lopes J said the following at p 10:
“
Inasmuch as
it may be suggested in this application that the body corporate has
not specifically set out in its papers that the
Magistrate’s
Court actions have been withdrawn, it could hardly be suggested that
the body corporate is able to continue
with those actions on the
basis of the original causes of action. Its conduct in bringing
the arbitration proceedings and
persisting with this application
evinces an unequivocal intention to abandon the actions relied on in
the Magistrate’s Court.”
[43]
The same applied in the present case. I have accepted that
there was an agreement to refer all the disputes between the
parties
to arbitration. The High Court claim was included in these
disputes. Pro-Khaya proceeded to arbitration, led
evidence
before the arbitrator and obtained an award. It now seeks to
have that award made an order of court. In my
view such conduct
demonstrates an unequivocal intention not to resort to the High Court
action. The defence of
lis
alibi pendens
cannot succeed.
COUNTER-APPLICATION
[44] Section 33 (1) of
the Act provides:
Setting aside of award
(1)
Where
(a)
any
member of an arbitration tribunal has misconducted himself in
relation to his duties as arbitrator or umpire; or
(b)
an
arbitration tribunal has committed any gross irregularity in
the conduct of the arbitration proceedings or has exceeded
its
powers; or
(c)
an
award has been improperly obtained,
the court may, on
the application of any party to the reference after due notice to the
other party or parties, make an order setting
the award aside.”
During
argument Counsel for the Trust indicated that the Trust relied on the
provisions of s 33 (1) (b) and (c).
[45] Ramsden
The Law
of Arbitration
at 202 says the following with regard to the
ground that the arbitrator committed a gross irregularity in the
conduct of the proceedings
(authorities omitted):
“
The ground
of review envisaged by the use of the phrase
gross
irregularity
in the conduct of arbitration proceedings
in
s 33(1)(b)
of the
Arbitration Act relates
to the conduct of the
proceedings and not the result thereof. Furthermore, every
irregularity in the proceedings will not
constitute a ground for
review under s 33(1)(b) of the Act. In order to justify a
review on this basis, the irregularity
must have been of such a
serious nature that it resulted in the aggrieved party not having his
case fully and fairly determined.
An arbitrator is always
entitled to be wrong on the merits and a wrong interpretation of an
agreement does not amount to a misconception
of the nature of the
enquiry and therefore to an irregularity.
The court must be
satisfied that the irregularity caused a
substantial
injustice.
Only in those cases where it can be said that what has happened is so
far removed from what could reasonably be expected
of the arbitral
process that we would expect the court to take action. The
ability to set aside an award due to a gross irregularity
is really
designed as a long stop, only available in extreme cases where the
tribunal has gone so far wrong in its conduct of the
arbitration that
justice calls out for it to be corrected.”
[46] With regard to the
ground that the arbitrator exceeded his powers, in
Telecordia
Technologies Inc v Telkom SA Ltd
[2006] ZASCA 112
;
2007 (3) SA 266
at para
[52]
Harms JA referred with approval to what was said by Lord Steyn in
Lesotho Highlands Development Authority v Impregilo Sp A
[2005] UKHL 43
in para [24] as follows:
“
But
the issue was whether the tribunal ''exceeded its powers'' within the
meaning of s 68(2)
(b)
[of the English Act]. This required the courts below to address the
question whether the tribunal purported to exercise a power
which it
did not have or whether it erroneously exercised a power that it did
have.
If
it is merely a case of erroneous exercise of power vesting in the
tribunal no excess of power under s 68(2)
(b)
is
involved
.
Once the matter is approached correctly, it is clear that at the
highest in the present case, on the currency point, there
was no more
than an erroneous exercise of the power available under s 48(4). The
jurisdictional challenge must therefore fail.”
[47]
In
Shoprite-Checkers
(Pty) Ltd v Ramdaw NO & others
[2000] 7 BLLR 835
(LC), a review of an arbitration award in terms of
s 145
of the
Labour Relations Act 66 of 1995
, Wallis AJ (as he then
was) said the following at para [54]:
“
Reverting to
the general principles governing reviewability of awards the last
situation is the case where an award has been improperly
obtained.
There is no authority in our courts on what this means presumably
because no case has arisen where a substantial contention
was
advanced that an award should be set aside on this ground. In my
view, if one looks at the structure of
section
33(1)
of
the
Arbitration Act it
is clear that this head of review covers
matters which relate primarily, if not entirely, to conduct on the
part of the successful
party to the arbitration which would justify
the setting aside of the award. Thus an award procured through fraud
or the subornation
of perjury could be set aside on this ground (cf
Makings
v Makings
1958 (1) SA 338
(A)).”
[48] The Trust’s
grounds for setting aside the award were:
a.
The
trustees were not properly cited.
b.
No
dispute was referred to arbitration.
c.
The
amendment to Pro-Khaya’s statement of claim was improper.
d.
The
arbitrator exceeded his powers in awarding the costs of the High
Court action.
e.
The
arbitrator applied the wrong interest rate in his award.
Trustees
not properly cited
[49]
The citation of the Trust in the arbitration was the same as that in
this application. I have already dealt with this
point.
No
dispute was referred to arbitration
[50]
It was contended that the disputes recorded in Friedman’s
letter of 10 June 2014 were not disputes but expressions of
dissatisfaction. Even if they were disputes and were properly
referred, the Arbitrator had no jurisdiction to decide any
disputes
other than those contained in the letter of 10 June 2014. The
statement of claim, so it was contended, expanded
the ambit of
disputes and the Arbitrator consequently exceeded his jurisdiction in
making the award which he did.
[51] I
have already accepted that the disputes which were referred for
arbitration were those orally agreed between Friedman and
Malgas on 8
July 2014. These disputes were, as Friedman said, “the
entire dispute between the parties from beginning
to end”.
[52] In
Telecall (Pty)
Ltd v Logan
[2000] ZASCA 97
;
2000 (2) SA 782
(SCA) at para
[12]
Plewman JA said
the following:
“
I conclude
that before there can be a reference to arbitration a dispute, which
is capable of proper formulation at the time when
an arbitrator is to
be appointed, must exist and there can not be an arbitration and
therefore no appointment of an arbitrator
can be made in the absence
of such a dispute. It also follows that some care must be
exercised in one’s use of the
word ‘dispute’.
If, for example, the word is used in a context which shows or
indicates that what is intended
is merely an expression of
dissatisfaction not founded upon competing contentions no arbitration
can be entered upon.”
[53] In
Williams v
Benoni Town Council
1949 (1) SA 501
(W) Roper J stated at 507:
“
A dispute
exists when one party maintains one point of view and the other party
the contrary or a different one.”
[54] I was referred to
the English case of
Collins (Contractors) Limited v Baltic Quay
Management (1994) Limited
[2004] EWCA Civ 1757
in which the
question of whether or not a dispute existed was considered. At
para 63 Clarke LJ said:
“
I entirely
accept that all depends on the circumstances of the particular case.
I would, in particular, endorse the general
approach that while the
mere making of a claim does not amount to a dispute, a dispute will
be held to exist once it can reasonably
be inferred that a claim is
not admitted.”
[55]
In the present matter I am satisfied that what was referred to the
arbitrator was not merely an expression of dissatisfaction,
that
there were competing contentions, that contrary points of view had
been maintained, and that it could reasonably be inferred,
if it was
not directly apparent, that Pro-Khaya’s claim was not admitted.
[56]
The Trust set out in its opposing affidavit to the summary judgment
application a number of defences which made it clear that
there were
many areas of dispute between the parties, amongst which importantly
were that no payments were going to be made and
that the final
account would not be approved. In the latter event, Pro-Khaya
would not be paid the amount owing in terms
of a properly issued
final account. These defences, as well as the proposed
counterclaim, widened the scope of Pro-Khaya’s
claim in the
action and properly fitted the description of the entire dispute
between the parties. It was clear that the
Trust was not
admitting any claim by Pro-Khaya. In addition Friedman and
Malgas agreed that the costs of the High Court action
would be
included in the disputes which were referred. Not only were
disputes apparent from the opposing affidavit, but,
having accepted
Friedman’s evidence of the agreement with Malgas, the
respective attorneys also agreed that the disputes
existed. The
Arbitrator found that he was unable to issue a final account, as had
been claimed by Pro-Khaya. However
he considered himself
empowered and obliged to afford Pro-Khaya the relief which would have
formed the subject matter of properly
issued certificates and a
competently formulated final account. Pro-Khaya’s expert
had prepared a draft final account
and the Arbitrator dealt in his
award with the elements of this draft account and awarded a specific
sum of money, interest, costs
of the arbitration, costs of the High
Court action, fees and costs associated with the arbitration,
including the costs paid by
Pro-Khaya to AFSA, and the fees of
Pro-Khaya’s expert. This ground of review cannot
succeed. The Arbitrator did
not exceed his powers.
Amendment
of statement of claim
[57]
According to the Arbitrator’s award, at the conclusion of the
proceedings on 10 June 2015 the hearing was postponed sine
die to
allow Pro-Khaya an opportunity to amend its statement of claim.
Article 11.2.13 of the AFSA rules provides that an
arbitrator is
empowered to permit the amendment of any pleading or other document
(other than an affidavit) delivered by a party.
[58]
It was contended on behalf of the Trust that the amendment was in
effect a new dispute which had not been referred to arbitration
and
consequently the arbitrator had no jurisdiction to determine this new
dispute. He accordingly, so it was contended, committed
a gross
irregularity or exceeded his powers.
[59]
In its original statement of claim Pro-Khaya sought approval and
issue of the final account in the sum of R9 921 054.56.
In its amended statement of claim it sought approval and issue of the
final account, and an order that the Trust be liable to pay
Pro-Khaya
R10 877 268.57, as calculated in the final account summary
which was annexed to the amended claim.
[60]
In support of this contention, Ntsumbedzeni reproduced Friedman’s
summary of the amendment which was contained in Pro-Khaya’s
heads of argument. It is apparent from that summary that one of
the interest claims was reduced and other interest claims
had been
recalculated. The increased interest amounts had been
calculated in accordance with the terms of the JBCC agreement.
The Trust maintained that the amendment was not merely a mathematical
calculation but a reformulation of the statement of claim
to align it
with the terms of the JBCC agreement.
[61] I
do not agree with this latter contention. As Friedman pointed
out, and as the Arbitrator’s award made clear,
the claim was
always for the approval of the final account. The amounts would
have had to be calculated in accordance with
the terms of the JBCC
agreement. Those terms were known to both parties and the
proposed amendment was served on the Trust’s
attorneys, without
apparent objection. In allowing the amendment the Arbitrator
did not commit an irregularity (let alone
a gross one) and did not
exceed his powers.
Improper
interest rate
[62]
The Arbitrator awarded interest on the sum of R6 779 931.00
at the prescribed legal rate of 15.5% per annum from
1 July 2015 to
date of payment. (The sum of R10 777 268.57 was made
up of R6 779 931.17 and interest
of R4 097 337.40.
R6 779 931.17 was the difference between the total capital
costs of the contract and
payments made.) The Trust contended
that such a rate was in conflict with what had been agreed in the
JBCC agreement.
It was the principal agent who had to calculate
the interest and not the Arbitrator, and the
Prescribed Rate of
Interest Act 55 of 1975
was not applicable. The Arbitrator, so
it was submitted, therefore committed a gross irregularity in
applying the wrong interest
rate.
[63]
Clause 41.1.3 of the JBCC agreement provided that “interest”
meant the interest rate in terms of legislation applicable
to the
State. Friedman stated that Pro-Khaya had sought interest on
all unpaid certificates from the date that they became
due and that
such interest was calculated at the rate of 15.5% per annum from due
date to date of payment. This was the prevailing
rate at the
time payment was due. For the purposes of the arbitration,
Pro-Khaya had calculated interest at 15.5% per annum
on all unpaid
certificates, up to 30 June 2015. The Arbitrator’s award
provided that interest at the same rate would
continue to be payable
on all unpaid certificates from 1 July 2015 to date of payment.
The due dates for payment occurred
prior to the amendment of the
Prescribed Rate of Interest Act which
reduced the legal rate to 9%
per annum with effect from 1 August 2014. The correct rate was
that which applied on the due
date, namely 15.5% per annum. I
agree that the Arbitrator applied the correct interest rate.
Even if the Trust’s
submissions were correct, the Arbitrator
would not have committed a gross irregularity such as that
contemplated in the extract
from
Ramsden
referred to above.
High
Court costs improperly awarded
[64]
The Trust’s submission here was that the Arbitrator exceeded
his powers by awarding these costs to Pro-Khaya. Reference
was
made to Article 13 of the AFSA rules which deals with the costs of
the arbitration. It was submitted that the High Court
costs
were not covered by Article 13. However the High Court costs
awarded by the Arbitrator formed part of the disputes
which were by
agreement referred to arbitration. In that case I am of the
view that it was competent for the Arbitrator to
award those costs
and he did not exceed his powers.
[65]
No grounds were advanced to support a finding that the award was
obtained improperly, as envisaged in s 33 (1) (c) of the Act.
CONCLUSION
[66]
In the result, the Trust failed to establish any grounds for the
setting aside of the arbitration award. I am satisfied
that
Pro-Khaya established that the award could “properly form the
subject of an order of court”. (See
Vidavsky
v Body Corporate of Sunhill Villas
2005 (5) SA 200
(SCA) at 208B.)
[67] The following order
is made:
[67.1]
In terms of
s 31
(1) of the
Arbitration Act 42 of 1965
the award of
the arbitrator Mr Kevin Trisk SC published on 27 July 2015 is made an
order of court.
[67.2]
The Respondent is to pay the Applicant:
[67.2.1]
The sum of R10 877 268.58;
[67.2.2]
Interest on the sum of R6 779 931.17 at the rate of 15.5%
per annum from 1 July
2015 to date of payment.
[67.2.3]
The Applicant’s costs of suit on the scale as between attorney
and client, as agreed
by the parties’ representatives within 21
days of the delivery by the Applicant to the Respondent or the
Respondent’s
attorneys, as the case may be, of the Applicant’s
Bill of Costs or, in the event of agreement not being reached within
the
aforesaid period or on the expiration of the twenty first day
after delivery of the Bill of Costs aforesaid as taxed by the Taxing
Master of the High Court of the Eastern Cape Local Division in Port
Elizabeth, which costs are to include:
[67.2.3.1]
The costs of the High Court proceedings in the Eastern Cape Local
Division in Port Elizabeth under case number 599/2014;
and
[67.2.3.2]
The fees and costs associated with the arbitration, including all
costs paid and payable by the Applicant to AFSA; and
[67.2.3.3]
The expert fees and qualifying fees of Mr Anton Rousseau which fees
are to include the costs incurred by the Applicant
in having Mr Anton
Rousseau attend to the preparation of the draft Final Account.
[67.3]
The respondent is to pay the costs of the application such costs to
include the costs of two counsel.
[67.4]
The application to strike out is dismissed with no order as to costs.
[67.5]
The counter-application is dismissed with costs, such costs to
include the costs of two counsel.
___________________
J M ROBERSON
JUDGE OF THE HIGH
COURT
Appearances:
For the Applicant:
Adv S C Rorke SC, with Adv M Beneke, instructed by Friedman Scheckter
Attorneys, Port Elizabeth
For the Respondent:
Adv JD Huisamen SC, instructed by Andile Ngqakayi Inc, Port Elizabeth
[1]
Clause 40 of the JBCC agreement provided
inter
alia
for a dispute to be submitted to
adjudication but clause 42.7 provided for dispute resolution
by way of arbitration and
adjudication was not to apply.
[2]
Malgas’ e-mail address is
babesmalgas@gmail.com
[3]
Plascon-Evans Paints Ltd v Van Riebeeck Paints
(Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A) at
634I-635D.