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[2016] ZAECPEHC 79
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Ummi Properties (Pty) Ltd v Knights Street Properties (Pty) Ltd and Another (3028/2016) [2016] ZAECPEHC 79 (13 December 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
EASTERN
CAPE LOCAL DIVISION, PORT ELIZABETH
Case
No.: 3028/2016
Date
Heard: 8 December 2016
Date
Delivered: 13 December 2016
In
the matter between:
UMMI
PROPERTIES (PTY) LTD
(Reg
No. 1993/001976/07)
Applicant
And
KNIGHT
STREET PROPERTIES (PTY) LTD
(Reg
No.
1993/001534/07
)
First
Respondent
ADV
S RORKE SC
Second
Respondent
JUDGMENT
EKSTEEN
J:
[1]
Notwithstanding
that the applicant and the first respondent have specifically agreed
to refer their dispute to arbitration they
have subsequently become
embroiled in an acrimonious dispute about whether there is a dispute
between them capable of resolution
by way of arbitration. By
agreement between them the second respondent was appointed as
arbitrator. Certain pre-arbitration
meetings were held and the
second respondent has made a number of rulings. The applicant
now seeks an order declaring that
no arbitrable dispute is set forth
in the statement of dispute and that the second respondent therefore
has no
locus
standi
as arbitrator for the purposes of adjudicating any dispute between
the parties. It seeks a further declarator that rulings
made by
the second respondent in the course of the arbitration proceedings
between the parties are therefore of no force and effect.
Background
[2]
The
applicant holds a long-term lease over a property situated in
Humewood Port Elizabeth in terms of a notarial lease concluded
with
Transnet Limited, the owners of the property. The applicant
has, in turn, sublet the property to the respondent in terms
of a
notarial agreement of sub-lease and the respondent has further sublet
the property to the Paxton Hotel (Pty) Ltd.
[3]
On
31 March 2000 the parties entered into a notarial agreement of
variation of the sub-lease. Notwithstanding the conclusion
of
the variation agreement the provisions thereof were never put into
effect until the first respondent demanded in 2015
that the
provisions thereof be implemented. The applicant declined to
implement these provisions without articulating any
reasons for its
failure to do so. This prompted Mr Peterseil, on behalf of the
first respondent to enquire from Mr Denton,
a director of the
applicant, whether the applicant accepted that the notarial agreement
of variation was binding and enforceable
between the parties.
Despite repeated approaches he was unable to obtain a direct and
unequivocal response from Denton.
In the circumstances, on 30
November 2015, the first respondent prepared a document headed “Terms
of Dispute”
wherein it raised two disputes. The second
dispute is headed “The status of the Notarial Agreement of
Variation of
Sub-Lease”. It records:
‘
1.1
On 31 March 2000, the Defendant and the Claimant entered into a
Notarial Agreement of Variation
of Sub-Lease (“
the
Variation Agreement
”)
varying the terms of the Agreement;
…
1.3
The Defendant refuses to recognise the validity
of
the Variation Agreement
.
2.
The Claimant contends that the
Variation
Agreement
is valid and binding on the parties and falls to be implemented
between them and the
Agreement
to be varied accordingly.’
[4]
These
“Terms of Dispute” were forwarded to the applicant under
the cover of a letter by the first respondent’s
attorneys of
record. They enclosed the statement of the “Terms of
Dispute” which were prepared in terms of clause
17 of the
notarial agreement of lease and they proposed that the dispute be
referred to arbitration. I pause to record that
clause 17 of
the notarial agreement of lease provides for any dispute of whatever
nature in respect of or arising out of the agreement
or its
termination, interpretation or how so ever to be referred to a
referee for decision. The proposal that the disputes
set out in
the “Terms of Dispute” be referred to arbitration was
accordingly at variance with the notarial agreement
of lease.
Upon receipt and, no doubt, consideration of the disputes raised in
the “Terms of Dispute”, however,
the applicant and the
first respondent agreed that the first dispute raised should not be
decided by arbitration but rather by
the applicant’s auditors.
This dispute is not material to these proceedings. In respect
of the remaining dispute
the parties agreed that the matter be dealt
with by arbitration and they nominated the second respondent as the
arbitrator.
[5]
A
pre-arbitration meeting was convened on 10 February 2016. The
minute of the pre-arbitration meeting records that there is
an
arbitrable dispute as to “whether or not the notarial agreement
was varied”. This prompted Attorney Schoeman,
acting on
behalf of the applicant, to challenge the existence of such a
dispute. On the papers before me it does not appear
to be
contentious that the recordal is incorrect. It is the
enforceability of the notarial agreement of variation of sub-lease
which is in issue. Lengthy communications between the attorneys
of the applicant and the first respondent followed and the
terms of
the dispute were redrafted on a number of occasions. The
material portions of the current formulation records:
“
The
status of the Notarial Agreement of Variation of Sub-Lease
1.
The
material facts are:
1.1
on 31
March 2000, the Defendant and the Claimant entered into a Notarial
Agreement of Variation of Sub-Lease (“the Variation
Agreement”)
varying the terms of the Agreement;
1.2
a
copy of the Variation Agreement is annexed hereto marked
KSP2
;
1.3
1.3.1
The Applicant has called upon the Respondent to confirm the
enforceability
of the Variation Agreement.
1.3.2
The Respondent has, repeatedly, refused to so confirm such
enforceability.
1.3.3
In the circumstances the Applicant contends that the inference is to
be drawn
that the Respondent disputes (on grounds thusfar
undisclosed) the enforceability of the Variation Agreement.
2.
Claimant contends that the Variation Agreement is valid and binding
on the parties
and falls to be implemented between them and the
Agreement be varied accordingly.”
[6]
The
second respondent ruled at a further pre-arbitration meeting that a
dispute capable of arbitration exists and put the applicant
to terms
to file its statement of defence in respect of the variation issue.
A statement of defence was eventually forthcoming
on 30 May 2016.
In
limine
the applicant contended that there can be no arbitration between the
parties on the strength of any of the claimant’s statement
of
disputes as the “Terms of the Dispute”, fails to
articulate an arbitrable dispute. In addition, as a second
point
in
limine
,
the applicant finally reveals its contentions. It pleads that
the notarial agreement of variation of sub-lease conferred
upon the
first respondent a personal right which has become prescribed and is
therefore unenforceable.
[7]
The
only material dispute which emerged from the papers relates to the
assertion on behalf of the first respondent that Mr Peterseil
had
repeatedly approached Denton to admit or deny that the notarial
agreement of the variation of sub-lease was valid and binding.
Denton did not depose to the founding affidavit. Attorney
Schoeman records that to the best of his knowledge the applicant
has
never been requested to confirm the enforceability of the variation
agreement. In answer Mr Peterseil states unequivocally
that he
asked Denton whether the applicant accepts that the notarial
agreement of variation will be enforceable between the parties
and
that despite doing so repeatedly he was never able to obtain a direct
and unequivocal response. Peterseil contended that
in the
circumstances surrounding his repeated enquiries from Denton and the
nature of the equivocation with regard thereto leads
inescapably to
the conclusion that Denton on behalf of the applicant does not admit
the enforceability of the notarial variation
agreement.
[8]
Denton
thereafter deposed to a replying affidavit. In response to
these direct assertions by Peterseil Denton declares:
“
I have
never, whilst acting on behalf of the Applicant, felt myself obliged
to inform Mr Peterseil whether the Applicant was of
the view that the
Agreement of Variation is enforceable or not. The Applicant
has, for reasons which are not germane hereto,
simply declined to
comply with its terms.”
[9]
The
relief which the applicant seeks is final and in those circumstances
the averments made by the respondent must prevail for purposes
of the
adjudication of the application. (See
Plascon-Evans
Paints Ltd v Van Riebeeck Paints
(Pty)
Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A) at 634E-I.) Even if I err in this regard I
do not consider that there is any denial by Denton of the essence of
Peterseil’s
averment. The averment by Attorney Schoeman
is clearly hearsay and Denton’s response is at best evasive.
Application
of the facts to the legal principles
[10]
In
Parekh
v Shah Jehan Cinemas (Pty) Ltd and Others
1980 (1) SA 301
(D) Didcott J set out an articulate description of
arbitration proceedings and its purpose. At 304E-G he stated:
“
Arbitration
is a method for resolving disputes. That alone is its object, and its
justification. A disputed claim is sent to arbitration
so that the
dispute which it involves may be determined. No purpose can be
served, on the other hand, by arbitration on an undisputed
claim.
There is then nothing for the arbitrator to decide. He is not
needed, for instance, for a judgment by consent or default.
All this
is so obvious that it does not surprise one to find authority for the
proposition that a dispute must exist before any
question of
arbitration can arise.”
[11]
Mr
Scott
SC
,
on behalf of the applicant, contends that the first respondent has
failed to properly formulate a dispute, and the terms of such
a
dispute. Denton articulated the applicant’s stance in the
replying affidavit. He stated:
“…
until
the First Respondent sets forth, in its Statement of Claim, a
description of the dispute between the parties, that is, their
respective and differing or competing views with regard to a
particular aspect of the matter, … there can be no talk of
the
commencement of arbitration proceedings.”
[12]
For
this contention Mr
Scott
seeks refuge in the decision of
Telecall
(Pty) Ltd v Logan
[2000] ZASCA 97
;
2000 (2) SA 782
(SCA) where Plewman JA stated at para [12]:
“
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 cannot 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.”
[13]
All
of this, I think, is uncontentious and Mr
Buchanan
SC
,
on behalf of the first respondent, does not take issue with these
statements. He has referred me, however, to
Peter
Ramsden: The Law of Arbitration
at p. 50-51 wherein the author summarises the position in English Law
by reference to a judgment of Jackson J in the matter of
Amec
Civil Engineering Ltd v Secretary of State for Transport
[2005]
1 WLR 2339
CA,
[2005] EWCA Civ 291.
At p. 50-51 the
author quotes the
dicta
of Jackson J to the following effect:
“
(a)
The word “dispute” which occurs in many arbitration
clauses should be given its normal
meaning. It does not have
some special or unusual meaning conferred upon it by lawyers.
Despite the simple meaning
of the word ‘dispute’, there
has been much litigation over the years as to whether or not disputes
existed in a particular
situation or not.
(b)
The mere fact that one party notifies the other party of a claim does
not automatically
and immediately give rise to a dispute. It is
clear, both as a matter of language and from judicial decisions, that
a dispute
does not arise unless and until it emerges that the claim
is not admitted.
(c)
The circumstances from which it may emerge that a claim is not
admitted are protean.
For example, there may be an express
rejection of the claim. There may be discussions between the
parties from which objectively
it is to be inferred that the claim is
not admitted. The defendant may prevaricate, thus giving rise
to the inference that
he does no admit the claim. The defendant
may simply remain silent for a period of time, thus giving rise to
the same inference.
(d)
…
(f)
If the claim as presented by the claimant is so nebulous and
ill-defined that the
defendant cannot sensibly respond to it, neither
silence by the defendant nor even an express non-admission is likely
to give rise
to a dispute for the purposes of arbitration or
adjudication.”
In
Collins (Contractors) Ltd v Baltic Quay Management (1994) Ltd
[2004]
2 All ER 982
,
[2004] EWCA Civ 1757
, Lord Clarke, after
quoting this dictum of Jackson J stated at para 63:
“…
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 the claim is
not admitted. …”
[14]
He
proceeded at para 64 to state:
“
It
appears to me that negotiation and discussion are likely to be more
consistent with the existence of a dispute, albeit an as
yet
unresolved dispute, than with an absence of a dispute. It also
appears to me that the court is likely to be willing readily
to infer
that a claim is not admitted and that a dispute exists so that it can
be referred to arbitration or adjudication.”
[15]
English
authority dealing with the requirements for a dispute for arbitration
do, of course, have strong persuasive value in our
law. See
The
Law of Arbitration in South Africa – Jacobs
at p. 1-2.
[16]
I
agree with the views expressed by Ramsden. A party who has
bound himself to have his disputes resolved by arbitration cannot,
in
the face of a patent dispute, avoid arbitration by refusing to
engage. Situations may often arise where the contentions
advanced by one party may not be known to the other, even though the
conduct of the former, viewed in context, demonstrates unequivocally
that a dispute exists. I am fortified in this view by the
finding of Plewman JA in
Telecall
(Pty) Ltd
supra
at 786I where he held:
“
In
short a dispute for the purposes of the Act is one in relation to
which opposing contentions are or can be advanced.”
[17]
This,
I think, acknowledges that a valid dispute under the Act may arise
even though the contentions of the opposing party supporting
the
position which he evinces by his conduct are not known to the
counterparty. On the facts of the present matter I think
that
the prevarication on the part of Denton gives rise to the inescapable
inference that the enforceability of the notarial agreement
of
sub-lease was being disputed and that the referral to arbitration was
valid. It follows that in my view the dispute is
properly and
accurately formulated in the most recent “Terms of Dispute”
quoted earlier. The existence of this
dispute is ultimately
confirmed, albeit
ex
post facto
,
by the statement of defence filed wherein the applicant contended
that the agreement is unenforceable by virtue thereof that it
conferred a personal right which has prescribed. This clearly
is a matter for the arbitrator to decide.
[18]
In
the result, the application is dismissed with costs.
J
W EKSTEEN
JUDGE
OF THE HIGH COURT
Appearances:
For
Applicant:
Adv PWA Scott SC instructed by BLC Attorneys, Port Elizabeth
For
First Respondent: Adv
R Buchanan SC instructed by Rushmere Noach Incorporated,
Port
Elizabeth