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[2018] ZAECPEHC 11
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Pro-Khaya Construction CC v Strata Civils and Others (2889/2017) [2018] ZAECPEHC 11 (1 March 2018)
IN
THE HIGH COURT OF SOUTH AFRICA
(EASTERN
CAPE LOCAL DIVISION, PORT ELIZABETH)
CASE
NO.: 2889/2017
In
the matter
between:
PRO-KHAYA
CONSTRUCTION CC
Applicant
And
STRATA
CIVILS
First
Respondent
TONY
ASHFORD
Second Respondent
JDM
DRILLING (PTY)
LTD
Third Respondent
WILLEM
HENRIK OLIVIER
Fourth Respondent
JUDGMENT
BESHE
J
:
[1]
The applicant has approached this court seeking an order in the
following terms:
1.
That the arbitration agreement between Applicant and the:
1.1
first respondent, conducted under the auspices of the second
respondent, and
1.2
third respondent conducted under the auspices of the fourth
respondent, shall in terms of the provisions of
Section 3 (2) (c)
of Arbitration No. 42 of 1965
cease to have effect with reference
to any dispute referred.
2.
That within 30 days after court having granted an order in terms of
paragraph 1 above, the applicant institute consolidated proceedings
against the first and third respondents (jointly and severally) in
this court for the relief claimed in the arbitration proceedings
(as
amplified, where necessary) referred to in paragraph 1 above.
3.
That the costs of arbitration be reserved for determination by the
trial court in the action proceeding to be commenced.
4.
That costs of this application be borne by the applicant save in the
event of being opposed in which event the costs of opposition
be
borne by the party opposing the application.
[2]
The first respondent is that party that is opposing the application.
Second and forth respondents did not enter the fray. Third
respondent
opted to abide by the decision of the court. The following background
to the application to a large extent seems common
cause:
The
applicant, a contractor, was awarded a contract by Coega Development
Corporation (Pty) Ltd (CDC) in April 2015.
In
turn, in May of the same year the applicant in its capacity as a
contractor, entered into a domestic agreement with the first
respondent in terms of which the first respondent was to be a
subcontractor in respect of the contract with CDC. Still in 2015,
applicant entered into a domestic contract with the third respondent
in terms of which the third respondent was to be another
subcontractor in the same contract with CDC.
It
appears to be common cause that the work or part thereof, that was
done as per the contract with CDC, in particular the fire
reticulation works, was rejected by CDC engineers.
Remedial
work was required and was undertaken by the first respondent and
completed in respect of which it was paid a sum of R200
000.00 by the
applicant.
[3]
According to the applicant, this was on the assumption that first
respondent was not responsible for the defective work.
[4]
Subsequently, a dispute arose between applicant and first respondent
regarding payment of first respondent’s fees which
culminated
in the parties agreeing to the arbitration of the dispute before the
second respondent. It is also common cause that
applicant filed its
defence and a counter-claim in February 2017. The counter-claim was
inter
alia
for damages suffered flowing from the work that was rejected by CDC.
The arbitration proceeded on the 5
th
and 6
th
of June 2017. It would also appear that following an objection by the
first respondent to the counter-claim forming part of the
arbitration, the parties agreed that applicant’s counter-claim
be separated from first respondent’s claim and applicant’s
defence.
[5]
A dispute or disputes arose concerning payment between applicant and
third respondent stemming from the same contract with CDC
in respect
of which third respondent was subcontracted by the applicant. The
applicant and third respondents agreed to refer their
disputes to
arbitration before the fourth respondent.
[6]
It is the two abovementioned arbitration agreements applicant seeks
to have terminated.
[7]
Section 3 (2) (c) of the Arbitration Act
provides that:
“
(2)
The court may at any time on the application of any party to an
arbitration agreement, on good cause shown –
(a)
… … …
(b)
… … …
(c)
order that the arbitration agreement shall cease to have effect with
reference to any dispute referred.”
[8]
The good cause or sound reason for terminating the agreements as
contended for by the applicant, as would also appear from the
founding affidavit are
inter alia
the following:
·
applicant’s
defence to the first respondent’s claim and the counter-claim
are inextricably linked.
·
if
the arbitration were to continue in the agreed manner, it would mean
the second respondent will deal with issues in a piece-meal
fashion.
·
the
central issue in both arbitrations concerns the determination of,
which of the respondents (1 and 3) was responsible for the
defective
work. And that therefore out of necessity the evidence in both
instances will overlap.
·
it
is undesirable to have parallel proceedings before two separate
tribunals which could lead to conflicting decision regarding
similar
or identical issues. As this would (parallel proceedings) will amount
to extra costs and potentially cause delays.
·
the
transcript of the hearing before the second respondent is of very
little value due to its extremely poor quality.
[9]
Those reasons were confirmed by
Mr Beyleveld
for the applicant
– namely:
The
undesirability of two parallel proceedings dealing with similar legal
and factual issues which could come to different conclusions
yet if
proceedings are brought before the High Court the issues can be dealt
with in one action. He also urged the court not to
gloss over the
poor state of the record.
[10]
The issue of the separation of applicant’s counter-claim from
his defence in respect of the arbitration involving the
first
respondent has since fallen by the way side. According to the
applicant (in its replying affidavit), the second respondent
made a
finding on the 30 August 2017 that the applicant’s
counter-claim is admissible and forms part of the applicant’s
defence.
[11]
Sans the issue of the counter-claim not forming part of the issues to
be dealt with by the second respondent, is there good
cause / good
strong reasons why the two arbitration agreements concerned should be
terminated? First respondent submits that there
are no such reasons.
First respondent’s grounds for opposing the application are
succinctly summarised by the applicant in
its reply as being:
The
fact that the proceedings are at an advanced stage;
There
were alternative mechanisms available to the applicant which it did
not invoke – it could have requested the consolidation
of the
two arbitrations. Alternatively it could have applied for the joinder
of the third respondent in the arbitration agreement
with first
respondent. The applicant has failed to show good course for the
termination of the arbitration agreement. First respondent
also cited
the technical nature of the arbitration, submitting that the
arbitrators are best suited to deal with the issues that
are being
considered in the arbitrations.
[12]
Regarding the last mentioned ground, first respondent points out that
the second respondent is not only a qualified arbitrator,
or to act
as such, he is also an engineer who has specific expertise and
detailed knowledge of the technicalities associated with
the
agreement between the parties. That second respondent is well
equipped to adjudicate the disputes concerned. It was also pointed
out on behalf of the first respondent, that there are no allegations
of any unbecoming conduct or irregularities that are imputed
to the
arbitrators (second and fourth respondents).
[13]
In response to first respondent’s assertion that applicant
could have invoked article 17.5 of the
Rules
of Conduct of Arbitrators
,
applicant submits that the article applies only if the party sought
to be joined is a party to the arbitration agreement in question.
To
this, first respondent retorts that the two agreements are factually
the same. And that the consent of first and third respondents
could
have been sought for such joinder.
[14]
Counsel for the first respondent
Mr
Janse Van Rensburg
pointed out correctly in his practice note that the issue in dispute
is whether there is good cause for ceasing the arbitration
agreements.
[15]
Both parties referred me to a number of decisions where courts had
occasion to deal with this issue, which were all very useful.
From
these decisions the following principles can be discerned:
The
applicant bears the onus of showing that sound reasons exist for the
relief sought to be granted.
[1]
In
Metallurgical
and Commercial Consultants v Metal Sales Co. (Pty) Ltd
[2]
the following was said “Such onus is not easily discharged.
There are certain advantages such as finality, which a claimant
in an
arbitration enjoys over one who has to pursue his rights in the
courts, and one who has contracted to allow his opponent
those
advantages will not readily be absolved from his undertaking. In
Rhodesian
Railways v Mackentosh,
1932 AD 359
,
Wessels
ACJ
(as he then was), held that “the discretion of the court to
refuse arbitration under a submission was to be exercised judicially,
and only when “a very strong case” for its exercise had
been made out (see page 375). The court was there acting under
a
different stature from the one before me. But the observation of
Wessels
ACJ
is none the less apposite here, because it was based upon a general
principle”.
[16]
My attention was also drawn to the decision in
Welihockyj
and Others v Advtech Ltd and Others
[3]
where
the reasons for the declaring the arbitration agreement of no force
or effect appear to have been quite weighty in my view.
Those reasons
appear at page 756 A – F:
“
In
casu
it
is, of course, the applicants who desire the exclusion of the
arbitration, who stand accused of fraudulent conduct,
misappropriation
and criminal conduct. These allegations form part of
most of the respondents' counterclaims and for this reason alone it
would,
in my view, be wrong not to allow the applicants the
opportunity of having these allegations ventilated in open
court and
with a right of appeal. Having regard to all the
circumstances, it is not, in my view, correct to argue that the
Anton
Piller
and the restraining applications would afford the applicants a
sufficient opportunity to clear their names. There is another reason
for upholding the applicants' contentions. The issues in the
respondents' counterclaims also relate to and affect third parties
which are not subject to the provisions of the SOB and in respect of
which the fourth respondent has no powers of investigation.
A court
of law will not be curtailed by such factors and would be in a
position to adjudicate and conclude all the interwoven issues
in one
and the same process. The further arguments on behalf of the
respondents do not detract from the aforesaid conclusions.
[37]
As far as the applicants' claim in convention is concerned, it
appears that the respondents' defence thereto relates, to a
large
degree, to the fact the applicants owe a much larger amount to
the respondents as a result of the counterclaims. To
some degree the
allegations of fraudulent conduct, misappropriation and criminal
conduct are also interwoven in both claims in
convention and
reconvention. In my view, it would be impractical and undesirable to
direct that the applicants' claim shall remain
the subject-matter of
the arbitration before the fourth respondent whilst that
process shall cease to have effect in respect
of the
respondents' counterclaims. As regards the costs thus far incurred in
the arbitration for which orders have not already
been issued, I am
of the view that such costs should be costs in any future High Court
proceedings.”
This
prompted
Mr Janse Van Rensburg
to submit that
Welihockyj’s
matter is distinguishable from the present application because
in
casu
there are no allegations of fraud. Granted, as
Mr
Beyleveld
pointed out that the alleged fraud was not the only
reason why the court exercised its discretion to terminate the
arbitration
agreement. Whilst I agree with
Mr Beyleveld
, there
was also the issue of, amongst others, respondent’s
counter-claims relating to third parties outside of the Sale of
Business Agreement. But we also know that the issue of the exclusion
of the counter-claim
in casu
is no longer relevant. That
leaves the complaint about the piecemeal adjudication of the issues
between the applicant, first and
third respondents or the
undesirability of parallel proceedings as well as the poor state of
the record.
[17]
It was submitted on behalf of the first respondent that the poor
record could be rectified by reconstructing it or filling
the missing
words with notes from all the parties. That this cannot be a good
enough reason to terminate an arbitration.
[18]
I am inclined to agree with first respondent’s counsel in this
regard. This is not an insurmountable difficulty and one
that
warrants the termination of the arbitration.
[19]
Applicant agreed to the institution of the two proceedings. One has
already proceeded on two previous dates and is at an advanced
stage.
Bearing in mind that the parties have a right to the expeditious
adjudication of their disputes and have a right to finality,
will it
be in the interest of the parties – especially applicant, and
first respondent to halt these proceedings. Are there
strong good
reasons to do so? Applicant alleges that it is undesirable to have
parallel proceedings which may render different
conclusions. But is
that not the nature of adjudication / litigation? Will those
conclusions not be based on the evidence before
the respective
arbitrators? The arbitration agreements were concluded as far back as
2016, what it is that belatedly alerted the
applicant to the
“undesirability of having two parallel proceedings”? Had
the applicant been concerned with issues
of convenience and cost
effectiveness, in my view, it would have explored the possibility of
getting the assent of first and third
respondents to a consolidation
of the arbitrations or joinder earlier in the process. First
respondent complains that seeking termination
of the agreements
smacks an attempt on the part of the applicant to escape the
shortcomings of his case in the arbitration proceedings
underway. The
applicant has been heard to be complaining of poor legal
representation at some stage during the arbitration process.
So,
first respondent’s suspicion that this is an attempt to escape
the shortcomings in applicant’s case is not farfetched.
[20]
Be that as it may, applicant’s complaint in this regard was as
regards the separation of his counter-claim from the arbitration
proceedings, which it claims is interlinked with its defence. That is
no longer relevant or no longer applies because the second
respondent
has agreed to deal with applicant’s counter-claim.
[21]
I am not persuaded that there are compelling reasons to terminate the
two arbitration agreements.
[22]
In the result, the application is dismissed with costs.
_______________
NG
BESHE
JUDGE
OF THE HIGH COURT
APPEARANCES
For
the Applicant
:
Adv: A
Beyleveld SC
Instructed
by
:
FRIEDMAN SCHECKTER ATTORNEYS
75 Second Avenue
Newton Park
PORT ELIZABETH
Tel.: 041 – 395
8412
Ref.: Mr
Friedman/ps/L09902
For
the Respondents :
Adv: E Janse Van Rensburg
Instructed
by
:
JOHANN
VILJOEN & ASSOCIATES
C/o WIKUS VAN RENSBURG
ATTORNEYS
36 Western Road
Central
PORT ELIZABETH
Tel.: 041 – 582
2205
Ref.: Mr Wikus Van
Rensburg
Dates
Heard
:
22 February
2018
Date
Reserved
:
22
February 2018
Date
Delivered
:
1 March
2018
[1]
Multi-Links Telecommunications Ltd v Africa Prepaid Services Nigeria
Ltd
2014 (3) SA 265
(GP) at 285.
[2]
1971 (2) SA 388
T at 391.
[3]
2003 (6) SA 737
at 576 A – F.