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[2013] ZASCA 207
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Reward Ventures 01 CC v Walker and Another (946/2012) [2013] ZASCA 207 (5 December 2013)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case
no. 946/2012
DATE:
05 DECEMBER 2013
In
the matter between:
REWARD
VENTURES 01
CC
.......................................................................
Appellant
And
ROLAND
GUY
WALKER
..................................................................
First
Respondent
PIETRO
LUIGI GUISEPPE CARRARA
...................................
Second
Respondent
Neutral
citation: Reward Ventures 01 CC v Walker (946/12)
[2013] ZASCA
207(05 December 2013)
Coram: Maya,
Bosielo, Wallis, Petse JJA and Meyer AJA
Heard: 7
November 2013
Delivered:
5 December 2013
Summary: Review
application –
s 33(1)
of the
Arbitration Act 42 of 1965
–
whether arbitration award which did not expressly dismiss the
opposing parties’ counter-claims final – whether
the
arbitrator committed a gross irregularity by making such an award.
ORDER
On
appeal from: South Gauteng High Court, Johannesburg
(Kathree-Setiloane, Moshidi and Makgoka JJ sitting as court of
appeal):
1
The appeal is upheld with costs including the costs of two counsel.
2
The judgment of the court below is set aside and replaced with the
following:
‘
The
appeal is dismissed with costs.’
JUDGMENT
MAYA
JA (BOSIELO, WALLIS, PETSE JJA and MEYER AJA concurring):
[1]
This is an appeal against an order of the South Gauteng High Court,
Johannesburg (Kathree-Setiloane J, Moshidi and Makgoka JJ
concurring). The full court upheld an appeal against the order of the
court of first instance (Tsoka J) dismissing the respondents’
application for the setting aside of an arbitration award made by Mr
Clifford Mosdell (the arbitrator) in terms of
ss 33(1)(a)
and (b) of
the
Arbitration Act 42 of 1965
. The appeal is with the special leave
of this court.
[2]
The dispute arose from a written sale agreement (the agreement)
concluded by the parties on 4 June 2008 in terms of which the
appellant sold the respondents the Paquita restaurant situated in
Knysna for a sum of R2,64 million. According to the agreement,
this
sum excluded Value Added Tax (VAT). But the respondents contended
otherwise. They alleged that the price included VAT as previous
drafts and a prior cancelled agreement in respect of the restaurant
attested. They reckoned that the appellant had, prior to signature
of
the agreement, surreptitiously altered the agreement to reflect the
purchase price as ‘R2,64 million plus Value Added
Tax’.
Accordingly, they refused to pay the VAT portion which the appellant
claimed from them.
[3]
The parties could not resolve the dispute. In January 2009, the
appellant commenced arbitration proceedings against the respondents
as provided by the agreement. It claimed payment of the VAT portion
in the sum of R369 000 less R123 518,43 which it said it owed
the
respondents under the agreement. In their defence, the respondents
averred that clause 4 of the agreement, which set out the
purchase
price, did not reflect the true agreement between the parties. They
pleaded that it was a tacit alternatively implied
term of the
agreement that the purchase price was inclusive of VAT and that the
insertion of the words ‘plus Value Added
Tax’, which they
sought to have deleted by rectification of the agreement in a
counterclaim, was occasioned by a common error
or an intentional act
by the appellant. They also sought a statement and debatement of the
detailed account of all transactions
of the restaurant for the period
14 April to 15 July 2008 and the calculation of profit for that
period.
1
[4]
The proceedings started. After making certain procedural directives
and an interim award concerning the venue, allowing the
exchange and
amendment of the pleadings and the giving of discovery between the
parties and hearing evidence, the arbitrator decided
the matter in
the appellant’s favour. He granted the relief sought by the
appellant without furnishing his reasons or expressly
dismissing the
counterclaims. The respondents were not pleased with the arbitrator’s
award and complained that it was incomplete
because it did not give
his reasons and did not address their counterclaims. In their
opinion, this constituted a failure by the
arbitrator to discharge
his arbitral duties and they asked him to furnish his reasons. The
arbitrator refused the request because
he regarded himself functus
officio and the agreement made no provision for the furnishing of
reasons which the parties did not
seek during the proceedings. The
respondents then launched the review proceedings under
ss 33(1)(a)
and (b) of the
Arbitration Act which
provides for the review of an
arbitrator’s award in certain circumstances. They cited gross
irregularity and misconduct based
on several grounds chief of which
were that the award was arbitrary, biased and unfair because it
ignored the counterclaims and
was not supported by the evidence.
[5]
Tsoka J found that the arbitrator had committed no irregularity or
misconduct and dismissed the review application. He reasoned
that the
arbitrator had merely exercised the discretion vested in him by the
parties and was not obliged to provide reasons in
accordance with
their agreement; that the evidence adduced at the arbitration that
the respondents had requested a tax invoice
from the appellant to
claim a VAT refund from the Receiver of Revenue, which they were
actually paid, after establishing that
the purchase price excluded
VAT, was fatal to the contention that rectification was not
considered and that the record made clear
that the arbitrator dealt
with and dismissed the counterclaim by implication; and that it was
unnecessary for the arbitrator to
deal with the second counterclaim
expressly as the accountant’s testimony in the arbitration
showed that the respondents,
and not the appellant, bore the
obligation to furnish the accountant with a detailed account of the
relevant transactions because
they were in possession of the
restaurant during the period in issue and the award took the
accountant’s determination of
R123 518,43 into account and
accordingly credited the respondents’ account.
[6]
The respondents’ application for leave to appeal against this
judgment was granted to the full court to decide only whether
the
arbitrator made a final order. The full court characterized the
issues before it as being whether (a) the arbitrator had made
a
finding in respect of the counterclaims; (b) the award was final; and
(c) the arbitrator, in making the award as he did, committed
an
irregularity as contemplated in
s 33(1)
of the
Arbitration Act. The
full court overturned Tsoka J’s judgment on the following
findings. The need to infer that the counter-claims were considered
and dismissed by implication resulted in an impermissible hybrid
order which was partially a finding made by the arbitrator and
partially a finding made by the court. This meant that the award was
not final as it did not deal expressly with the counterclaims
especially where reasons had not been given, which constituted
misconduct. Furthermore, the court of first instance improperly
enquired into the merits of the award and thus conflated its review
powers with its appeal powers. The arbitration award was therefore
set aside and the appellant was ordered to pay the costs of the
review application and the appeal. It is against this decision
that
this court granted the appellant special leave.
[7]
The issues on appeal before us were whether (a) the full court
exceeded the ground on which the court of first instance granted
leave to appeal; (b) the arbitrator’s decision was final; and
(c) if it was not, the arbitrator was guilty of gross misconduct
in
the conduct of the arbitration. The appellant argued that the full
court should have confined its adjudication to the sole question
whether the arbitrator granted a final order which included the
counterclaims and that the judgment of the court of first instance
was correct for the reasons it gave. The respondents countered that
the question whether or not the award was final was inextricably
intertwined with the question whether the arbitrator, in making the
award as he did, committed a gross irregularity and that once
the
full court found that the award was not final, it was competent for
it to consider whether the arbitrator committed a gross
irregularity
in the conduct of the arbitration and whether the award should be set
aside.
[8]
It seems to me that the question whether or not the full court
exceeded its jurisdiction need not engage us as it would not
be
dispositive of the entire appeal in any event. The primary issue
between the parties, ie whether the award constitutes a final
order
encompassing the counterclaims, was squarely before the full court
and the correctness of its finding in that regard would
still have to
be decided even if it were found that it went beyond the scope of the
issue referred to it. I will therefore assume
without deciding that
the full court acted within its appeal powers.
[9]
Section 28
of the
Arbitration Act indeed
requires an award to be
final to be binding upon the parties and decrees that ‘[u]nless
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’.
Section 33(1)
, upon which the
respondents relied, allows a court to interfere with an award where
an arbitration tribunal has misconducted itself
or committed a gross
irregularity or has exceeded its powers in relation to its duties or
the award has been improperly obtained.
2
[10]
As indicated, the parties’ dispute was referred to arbitration
in terms of their agreement the relevant part of which
provided as
follows:
‘
12.
Any dispute at any time between any of the parties hereto in regard
to any matter arising out of this agreement or its interpretation
or
rectification shall be submitted to and decided by arbitration . . .
The arbitration shall be held . . . in a summary manner
. . . on the
basis that it shall not be necessary to observe or carry out either .
. . the usual formalities of procedure; or the
strict rules of
evidence . . . The arbitrator shall decide the matters submitted to
him according to what he considers just and
equitable in the
circumstances and therefore the strict rules of law need not be
observed or be taken into account by him in arriving
at his decision
. . .’
[11]
The respondents’ counsel rightly accepted during argument that
the arbitrator was not obliged to furnish an award embodying
reasons
because of the provisions in clause 12 of the agreement. However, he
urged us to draw an inference that the arbitrator
did not apply his
mind to the counterclaims because had he done so he would have
ordered rectification as he previously did, on
the strength of the
prior cancelled agreement, in respect of the parties’ dispute
concerning the venue of the arbitration
proceedings which stood on
the same grounds as the VAT counterclaim. Surprisingly, this
submission was made for the first time
in the entire proceedings on
appeal before us and had not been raised in the affidavits or even in
argument in the courts below.
I daresay that its merit is highly
doubtful and it would, in any event, be unfair to the appellant to
allow it to be raised when
it has not been properly canvassed or
investigated previously.
3
[12]
But there is a more compelling yet simple answer to the respondents’
contention that the arbitrator disregarded their
counterclaims. In
the award itself, the arbitrator first set out clause 12 of the
agreement in terms of which the dispute was referred
to him and its
provision for summary proceedings. He then described the relief
sought by the appellant. And thereafter, in paragraph
three of the
award, he fully described the relief sought by the respondents in
their counterclaims. Finally, the arbitrator referred
to the parties’
agreement in relation to the determination of his fees and gave his
order for payment of a sum of R246 081,57
which comprised the VAT sum
of R369 600 less the amount due in respect of the respondents’
claim for a debatement of account,
R123 518,43. Surely, no other
inference but that the arbitrator considered the respondents’
counterclaims and found them
wanting can be drawn from these facts.
Therefore, the arbitrator executed his mandate as envisaged in clause
12 of the agreement
and did not breach any provisions of the
Arbitration Act.
>
[13]
This, in my view, is the end of the enquiry. The questions whether
the arbitrator committed a gross irregularity or misconduct
or
whether the respondents even invoked the correct provisions of the
Arbitration Act, if
the award was indeed inchoate, do not arise. It
should be pointed out though that the soundness of the arbitrator’s
assessment
of the evidence, in particular regarding questions such as
whether the accountant’s evidence provided a ‘reconciliation
contemplated in terms of the agreement’, seem to me to be
issues to be properly decided in an appeal. They bear no relevance
in
these proceedings which are concerned purely with the conduct of the
arbitration and not its merits.
[14]
In the result, the following order is made:
1
The appeal is upheld with costs including the costs of two counsel.
2
The judgment of the court below is set aside and replaced with the
following:
‘
The
appeal is dismissed with costs.’
MML
Maya
Judge
of Appeal
APPEARANCES:
For
the Appellant:PMM Lane SC (with G Doubell)
Instructed
by:
Smit
Jones & Pratt, Johannesburg
Symington
& De Kok, Bloemfontein
For
the First Respondent: JP Daniel SC
Instructed by:
Thompson Wilkes Inc, Johannesburg
Webbers
1
In
an addendum to the agreement the parties had,
inter alia
,
agreed that the respondents would be entitled to Paquita’s
profits for this period in respect of which the appellant would
provide, effective from 15 July 2008, a detailed account of all
transactions for the period, verified by an independent accountant,
and pay them the amount determined. According to the appellant,
supported by an accountant’s report, the sum of R123 518,43,
which it offered to set off against its claim for VAT, represented
these profits. The relief sought by the respondents for a
detailed
account and debatement thereof was claimed on the basis that the
appellant had failed to provide a detailed account
on the effective
date or appoint an independent accountant to verify it.
2
Leadtrain
Assessments v Leadtrain
2013
(5) SA 84
(SCA) para 9.
3
Road
Accident Fund v Mothupi
2000
(4) SA 38
(SCA) para 30 and cases there cited.