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[2019] ZAECPEHC 29
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Netelek (Pty) Ltd v Amat (Pty) Ltd and Another (3431/2018) [2019] ZAECPEHC 29 (14 May 2019)
IN
THE HIGH COURT OF SOUTH AFRICA
(EASTERN
CAPE LOCAL DIVISION, PORT ELIZABETH)
Case No: 3431/2018
Date Heard:
02 May 2019
Date Delivered: 14
May 2019
In
the matter between:
NETELEK
(PTY)
LTD
APPLICANT
and
AMAT
(PTY)
LTD
FIRST RESPONDENT
NCEBA
CHRISTOPHER FAKU
SECOND RESPONDENT
JUDGMENT
Mullins
AJ
[1]
This application arises out of arbitration proceedings initiated by
the Applicant against the First Respondent.
The background may be
summarised as follows:
(a)
On 23
September 2015 the Applicant and the First Respondent concluded a
written agreement (“the Agreement”) in terms
of which the
Applicant was sub- contracted to provide services on behalf of the
First Respondent in respect of a contract which
it, the First
Respondent, had concluded with the Nelson Mandela Bay
Municipality;
[1]
(b)
Alleging that it had not been paid for its services, the Applicant
initiated arbitration proceedings, as it
was obliged to do in
accordance with the Agreement;
(c) In
the circumstances which are dealt with below the arbitrator made a
wasted costs order against the First
Respondent, which was taxed in
the sum of R111 045.00, and an award in favour of the Applicant
in the sum of R1 472 133.78;
(d) The
Applicant seeks an order for payment of the wasted costs order and
that the award be made an order of court
in accordance with section
31(1) of the Arbitration Act, 42 of 1965 (“the Act”)
(e) In
addition, and unrelated to the arbitration proceedings, the Applicant
seeks payment from the Second Respondent
in his personal capacity in
the sum of R455 737.00 in respect of monies allegedly lent and
advanced to the Second Respondent.
[2]
Both Respondent oppose the relief being sought against them and have
filed opposing papers.
[3]
While perusing the papers prior to the hearing of the matter, it
became apparent that the Second Respondent was
also representing the
First Respondent, a company, in his personal capacity. I accordingly
drew the parties’ attention to
the legal position, namely that
ordinarily a juristic person may only be represented by a duly
qualified legal practitioner and
that if the Second Respondent wished
to represent the First Respondent he would have to bring an
application in order to do so.
[4]
On the day of the hearing the Second Respondent brought a properly
motivated application. The Applicant, quite
correctly, did not
oppose the application.
[5]
Based on
California Spice and Marinade (Pty) Ltd and Others; in re
Bankcorp v California Spice and Marinade (Pty) Ltd and Others; Fair
O’
Rama Property Investments CC and Others; Tsaparis; and
Tsaparis
[1996] ZASCA 141
;
[1997] All SA 317
(W) and
Manong and Associates (Pty)
Ltd v Minister of Public Works and Another
2010 (2) SA 160
(SCA),
I granted the application.
[6]
The Applicant filed its replying affidavit two days out of time and
applied for condonation, the reason given being
that the attorney
dealing in the matter was otherwise engaged. Apart from pointing out
that the firm of attorneys representing
the Applicant is a very large
one and that someone else could have attended to the matter, the
Second Respondent was unable to
advance any cogent reason why
condonation should not be granted. Condonation for the late
filing of the Applicant’s
replying affidavit is hereby granted.
[7]
Clause 17 of the Agreement provides that, in the event of a dispute
arising between the parties thereto, the matter
was to be referred to
arbitration. The relevant sub-clauses provide as follows:
“
17.1
Subject to any provision to the contrary in this Agreement, should
any dispute arise from or in connection with
this Agreement (whether
such dispute arises out of or in connection with the conclusion or
existence of this Agreement, the carrying
into effect of this
Agreement, the interpretation or application of the provisions of
this Agreement, the Parties’ representative
rights and/or
obligations in terms of and/or arising out of this Agreement and/or
the validity, enforceability, rectification,
termination or
cancellation whether in whole or part of this Agreement or from any
other dispute which may arise in respect of
this Agreement) such
dispute shall be finally resolved in accordance with the Rules of the
Arbitration Foundation of Southern Africa
(“the Rules”).
17.2.
There shall be 1 (ONE) arbitrator who shall be a judge, former judge
or retired judge of the High Court of South
Africa or a senior
counsel of at least five years’ standing as such.
17.3. The
appointment of the arbitrator shall be agreed between the Parties but
failing agreement between them within
a period of 14 (FOURTEEN) Days
after the arbitration has been demanded any of the Parties shall be
entitled to request the chairman
at the relevant time of the Pretoria
Bar Council or his representative to make such appointment and, in
making such appointment,
to have regard to the nature of the
dispute.”
[8]
In the belief that the First Respondent was indebted to it, on 25
January 2018 the Applicant’s attorneys sent
the First
Respondent a letter of demand, paragraph 5 which reads as follows:
“
We are
instructed to demand payment of the balance of R473 423.67,
within 10 (ten) days of receipt hereof, failing which, we
call upon
you to agree upon the appointment of an arbitrator. Should you fail
to agree upon the appointment of the arbitrator within
14 (fourteen)
days of receipt hereof, we will have no alternative but to approach
the Chairman at the relevant time of the Pretoria
Bar Counsel
(sic)
or his representative to make an appointment and
(in)
making
such appointments
(sic)
to have regard to the nature of the
dispute.”
[9]
No response was forthcoming, and on 9 February 2018 the Applicant’s
attorneys sent the First Respondent a
further letter to the effect
that the matter was being referred to arbitration and the chairperson
of the Pretoria Bar Council
would be approached to appoint an
arbitrator. This it did in accordance with clause 17.3 of the
Agreement.
[10]
In due course Adv P Ellis SC (“the Arbitrator”) was
appointed.
[11]
A pre-arbitration meeting was arranged for 7 March 2018, but neither
the First Respondent nor a legal representative
attended. Despite the
absence of any representation by the First Respondent, the Arbitrator
determined dates for the filing of
pleadings and discovery and set
the matter down for hearing on 24/25 May 2018. The ruling was brought
to the First Respondent’s
notice by the Arbitrator.
[12]
The First Respondent failed to comply with the Arbitrator’s
ruling in regard to the filing of the further
processes and also
failed to attend the hearing on 24 May 2018. Instead its
attorney telephonically applied for a postponement.
The Arbitrator
granted the postponement and ordered the First Respondent to pay the
wasted costs. The Arbitrator also made a ruling
as to the filing by
the First Respondent of its statement of defence. The ruling
provides as follows:
“
Having heard
counsel for the claimant and the attorney for the defendant
(telephonically) the arbitrator makes the following directive:
1.
The arbitration hearing is postponed sine die;
2.
The defendant is directed to serve its plea and/or
counterclaim by close of business on 8 June 2018, together with a
discovery affidavit
and copies of all documents mentioned therein;
3.
The claimant is directed to file any further pleadings by
close of business on 14 June 2018;
4.
The parties are directed to attend a further pre-arbitration
conference with the arbitrator (which may on prior request by any of
the parties be conducted by way of teleconference) at 09h00 on 15
June 2018;
5.
The defendant is ordered to pay the wasted costs occasioned by
the postponement on the scale as between attorney and client, which
costs shall include:
a.
The arbitrator’s fee;
b.
The costs of recording of the proceedings;
c.
The costs, if any, for the hiring of the venue.
6.
The costs mentioned in sub-paragraphs 5(a), (b) and (c) supra
must be paid by close of business on 14 June 2018, failing which the
defendant may be excluded from further participation.”
[13]
The ruling was emailed to the First Respondent’s attorney by
the Applicant’s attorney on 25 May 2018.
[14]
The Applicant’s attorney thereafter communicated on two
occasions with the First Respondent’s attorney
calling upon the
First Respondent to comply with the ruling. There was no
response.
[15]
On 26 July 2018 the First Respondent’s attorneys filed a notice
of withdrawal from acting.
[16]
I should add that prior to their withdrawal, a notice of set down of
the arbitration hearing for 10 August 2018
was served on the First
Respondent’s attorneys. The return of service is dated 23
July 2018.
[17]
Once again the First Respondent did not comply and the matter was
duly set down for hearing on 10 August 2018.
The First
Respondent failed to attend and the Arbitrator, after satisfying
himself that the First Respondent had been given
reasonable and
proper notice of the date of the hearing, proceeded in its absence.
After hearing evidence, the Arbitrator
made an award in favour
of the Applicant, which is dated 16 August 2018. The conclusion
reads as follows:
“
43.
In the result, I make the following award:
43.1
The Defendant
(sic)
is ordered to pay R1 472 133.78 to the
Claimant together with interest thereon at the rate of 10, 25% per
annum from 25 January
2018 to date of payment;
43.2
The Defendant
(sic)
is ordered to pay the costs of this
arbitration including the costs of the Claimant’s Counsel, the
Arbitrator’s fees
as well as a transcription service for the
hearing of 24 May 2018, including the costs of transcribing these
proceedings.”
[18]
On 5 September 2018 the Applicant’s attorneys made demand of
the First Respondent, which demand was addressed
to the Second
Respondent. The demand was repeated on 6 September 2018 by way of
service by the Sheriff. Neither demand elicited
any response from the
First and/or Second Respondents.
[19]
In the result, on 12 October 2018, the Applicant launched this
application to have the award made an order of court,
together with
certain additional relief.
[20]
Before dealing with the merits of the application to have the
Arbitrator’s award made an order of court,
it would be apposite
to dispose of the relief sought against the Second Respondent. The
Applicant alleges that over a period of
time it lent sums of money to
the Second Respondent totalling R455 737.00. The Second
Respondent denies that the Applicant
lent him money and alleges that,
what he refers to as the “
transaction”
was between
the Applicant and an entity known as GG Way General Trading (Pty)
Ltd. In reply the Applicant concedes that the Second
Respondent has
raised a dispute of fact and submitted that the issue should be
referred to oral evidence. I am not inclined to
do so. If the
Applicant is owed money it should issue summons. Accordingly, I
intend to dismiss the claim against the Second Respondent,
but
because the Applicant could not have anticipated that a dispute of
fact would arise, to reserve the costs for determination
at the trial
in due course. The order appears at the end of the judgment.
[21]
I turn now to the First Respondent’s opposition to the
application. The First Respondent opposes the application
on the
following grounds:
(a) That there has
been a non-joinder, in that the Arbitrator should have been a party
to the proceedings;
(b) That the
appointment of the Arbitrator was not in accordance with the
Agreement, in that the Rules of the Arbitration
Foundation of South
Africa (“the Afsa Rules”) were applicable and the
arbitrator’s appointment was thus “
contractually and
procedurally flawed and unlawful”;
(c) That the
appointment of the Arbitrator was not in accordance with clause 17.3
of the Agreement, in that the Applicant
failed to allege that the
preliminary steps had been complied with, and further that they were
in fact not complied with;
(d) That clause 19
of the Agreement, which deals with Unforeseen Circumstances, was not
complied with. (This point was not
pursued in argument, correctly so,
and need not be referred to again);
(e) That there was
no arbitral dispute for the Arbitrator to decide;
(f) That there was
a failure of natural justice and a breach of the Constitution, in
that the First Respondent was not given
an opportunity to address the
Arbitrator prior to him making rulings against it;
(g) That the amount
awarded to the Applicant by the Arbitrator was not owed, in that
various factors were not taken into account
in calculating the
figure;
(h) That the First
Respondent has a counterclaim well in excess of the Applicant’s
claim;
(i) That the
arbitration proceedings stand to be reviewed and set aside.
[22]
In the heads of argument the First Respondent raised a new point,
namely that sec 23 (a) of the Act had not been
complied with.
[23]
As this last-mentioned issue is a point of law, I allowed the First
Respondent to argue it. I will deal with it
first.
Section
23(a) of the Act
[24]
The section provides as follows:
“
23
Time for making award
The arbitration
tribunal shall,
unless the arbitration agreement otherwise
provides
, make its award –
(a)
in the case of an award by an arbitrator or arbitrators,
within four months after the date on which such arbitrator or
arbitrators
entered on the reference or the date on which such
arbitrator was or such arbitrators were called on to act by notice in
writing
from any party to the reference, whichever date be the
earlier date;…” (
My underlining).
[25]
It is the First Respondent’s argument that as the
award was handed down on 16 August 2018 it fell outside
the four
month period provided for in sec 23(a) of the Act and the award was
accordingly a nullity.
[26]
Not so, argued the Applicant. Section 23(a) specifically
provides “…
unless the arbitration agreement
otherwise provides…”.
Clause 17.1 of the Agreement
makes provision for the applicability of the Afsa Rules. Article 12.1
of the Afsa Rules provides that
the final award shall be made not
later than 60 calendar days after the completion of the hearing,
unless the parties in writing
agree otherwise. As the hearing was
completed on 10 August 2018 and the award was made on 16 August 2018,
the Applicant argues
that it was timeously delivered.
[27]
I have to agree with the Applicant’s argument. The First
Respondent itself argues that the Afsa Rules apply
and, accordingly,
Article 12.1 governs the manner in which the award was to be
delivered.
[28]
Even if I am wrong, the effect of non-compliance with sec
23 (a) of the Act is far from clear. See
Ramsden: The Law of
Arbitration
; pp 156 – 158. It could never have been the
intention of the legislature that arbitration proceedings would
simply lapse
in the event of an award not being made within four
months.
[29]
The issue was considered in
Van Zyl v Von Haebler
1993 (3) SA
654
(SE). The learned judge (Kroon J) held that the phrase
“
entered on the reference
” is the date on which
the arbitrator commences hearing evidence or entertains submissions
from the parties as to the conduct
of the matter, other than the mere
determination of a date on which the proceedings will commence.
[30]
The matter first came before the Arbitrator on 7 March 2017, which
was the date of the pre-arbitration meeting.
On the date
determined for the hearing, namely 24 May 2018, the First Respondent
applied for and was granted a postponement.
The merits were not
entertained. Thereafter the matter was heard on 10 August 2018
in the First Respondent’s absence
and the award handed down on
16 August 2018.
[31]
There can be no question but that the first date does not apply.
It was merely a formal meeting to plot the
way forward. I am of
the view that the second occasion also does not apply, in that no
evidence was led and no submissions
in regard to the merits were
entertained by the Arbitrator. But even if this date is taken
as the date upon which the arbitrator
entered on the reference, the
award was still handed down within four months thereof.
[32]
In any event, it is also relevant that the delay in the finalisation
of the arbitration was occasioned by the First
Respondent’s
total lack of co-operation. Furthermore, the First Respondent
has not alleged that it suffered any prejudice
as a result of the
award allegedly having been made more than four months after the
Arbitrator’s appointment, if it was,
and, insofar as it may be
necessary, the failure to comply with sec 23 (a) of the Act is hereby
condoned.
[33]
I accordingly find that this point must fail.
Non-joinder
of the Arbitrator
[34] The
application is for the award to be made an order of court, together
with certain additional relief. The
joinder of the Arbitrator
is not necessary. Having handed down the award the Arbitrator
is
functus officio
and he has no legal interest in the further
steps the parties may wish to take.
[35]
Ironically, as the First Respondent seeks to review the
Arbitrator’s conduct of the matter it should have
joined him.
[36]
This point has no merit.
The
Arbitrator’s appointment was irregular
[37]
Although the Agreement makes provision for the application of
the Afsa Rules, it does not provide that the Arbitration
Foundation
of South Africa was to manage the arbitration and,
inter alia
,
be responsible for the appointment of the arbitrator. Clauses
17.2 and 17.3 of the Agreement, which the First Respondent
was a
party to, explicitly provides for the manner in which an arbitrator
is to be appointed. Despite initially being represented,
the First
Respondent did not, until the filing of its answering affidavit in
this application, object to the manner in which the
Arbitrator had
been appointed. It could and should have objected at the first
available opportunity and only has itself to blame
if the appointment
was irregular which, in my view, it was not.
[38]
Ironically, to compound the First Respondent’s
difficulties, it complains that the Applicant did not allege
in its
founding affidavit that it had complied with the procedural steps set
out in clauses 17.2 and 17.3 of the Agreement. Understandably,
not anticipating this to be an issue, the Applicant did not deal
therewith in its founding affidavit, but does so in reply. The
Applicant followed the said clauses to the letter. In its
letter of demand, dated 25 January 2018, it called upon the First
Respondent to make payment, failing which it (the First Respondent)
agree to the appointment of an arbitrator. Furthermore
should
agreement not be reached within 14 days it (the Applicant) intended
approaching the chairperson of the Pretoria Bar Council.
When
it did not hear from the First Respondent, on 9 February 2018 it did
precisely that.
[39]
Likewise, this point has no merit.
No
arbitral dispute
[40]
It is the First Respondent’s argument that its
failure to pay what the Applicant alleges was due to it was
a
contractual dispute and not a dispute covered by clause 17.1 of the
Agreement.
[41]
It is common cause of the Applicant’s demand for
payment was met with no response whatsoever. If I understand
the
First Respondent’s argument correctly, in the absence of a
denial that the First Respondent was indebted to the Applicant,
no
dispute arose. At least, no arbitral dispute.
[42]
What amounts to an arbitral dispute is a vexed question. The
issue was dealt with comprehensively by Eksteen J
in
Ummi
Properties (Pty) Ltd v Knight Street Properties and Another
(Case
No 3028/2016; ECP; delivered on 13 December 2016). With reference to
English authorities and in particular
Amec Civil Engineering Ltd v
Secretary of State for Transport
[2005] 1 WLR 2339
CA, which is
quoted with approval in
Ramsden
supra at pp 48 – 52, the
following is stated:
“
(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 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 the 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 not admit the claim. The defendant may
simply remain
silent for a period of time, thus giving rise to the
same inference.
”
(My underlining)
[43]
The present matter fits into the underlined portions of
paragraph (c) above. Despite a detailed demand the First
Respondent
chose to remain silent. In the circumstances it was not unreasonable
for the Applicant to draw the conclusion that its
claim was disputed.
The First Respondent had numerous opportunities thereafter to
challenge the existence of an arbitral dispute,
but did not do so. At
the first date for the hearing (24 May 2018) it was represented by an
attorney (albeit telephonically) and
time limits for the further
conduct of the matter were agreed upon. In my view it is
opportunistic for the First Respondent to,
at this stage, deny the
existence of an arbitral dispute.
[44]
At para [17] of the
Ummi
judgment Eksteen J held that
the existence of the dispute was confirmed
ex post
facto
when the respondent filed its statement of defence. In the
present matter the existence of the dispute is confirmed, albeit
ex
post facto,
in the First Respondent’s answering affidavit
in which it denies its liability to the Applicant and even alleges a
counterclaim.
[45]
Likewise, this point has no merit.
Failure
of natural justice/failure to comply with the Constitution
[46]
The First Respondent complains that it was not given a
fair hearing. The First Respondent was given every opportunity
to
take part in the arbitration proceedings. It was represented by a
firm of attorneys which subsequently withdrew, but not before
the
First Respondent was made aware of precisely what it had to do, and
when, in order to oppose the Applicant’s claim. There
is no
acceptable explanation on the papers as to why the First Respondent
did not file a statement of defence, nor appear before
the Arbitrator
on 10 August 2018 and it must accept the consequences of its actions,
or lack thereof.
[47]
Section 15(2) of the Act provides as follows:
“
If any party to
the reference at any time fails, after having received reasonable
notice of the time when and the place where the
arbitration
proceedings will be held, to attend such proceedings without having
shown previously to the arbitration tribunal good
and sufficient
cause for such failure, the arbitration tribunal may proceed in the
absence of such party.”
[48]
The circumstances of the present matter fit squarely into the
provisions of section 15(2) of the Act.
[49]
It is unclear from the First Respondent’s answering
affidavit what constitutional rights were denied.
[50]
Likewise, this point has no merit.
Challenge
as to the amount awarded
[51]
The First Respondent denies being indebted to the Applicant and sets
out its reasons for this denial in its answering
affidavit.
[52]
Whatever the merits of the First Respondent’s case
may be, this is an application to have the award made
an order of
court. If the First Respondent had a valid defence to the Applicant’s
claim it could and should have presented
it at the arbitration
proceedings. Unless there is a glaring error in the award or a patent
miscarriage of justice evident in the
manner in which the proceedings
were conducted the Court cannot, at this stage, revisit the merits of
the matter.
[53]
With reference to the Arbitrator’s award, it is clear that he
did not simply grant default judgment, but
considered the affidavit
evidence of a number of witnesses. One of these affidavits
makes reference to a letter from the
Second Respondent in which the
claim is disputed. The Arbitrator deals therewith and finds the
“defence” to have
had no merit.
[54]
Likewise, this point has no merit.
The
First Respondent’s counterclaim
[55]
For the same reasons advanced above, this Court cannot go
into the merits of the First Respondent’s alleged
counterclaim.
It could and should have raised it at the arbitration proceedings.
[56]
Likewise, this point has no merit.
The
review
[57]
The setting aside of an arbitration award is governed by section 33
of the Act. It provides as follows:
“
33
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.”
[58]
Sub-section 33(2) provides that the application
shall
be made
within six weeks after the publication of the award.
[59]
The First Respondent makes out no case whatsoever that the Arbitrator
misconducted himself and/or committed a gross
irregularity and/or
that the award was improperly obtained by the Applicant. The
challenge to the arbitration proceedings, such
as it is, is also
hopelessly out of time and there is no application for condonation.
In addition, as stated above, the First Respondent
failed to join the
Arbitrator.
[60]
I have studied the Arbitrator’s written award very carefully
and can find absolutely no evidence of misconduct
or gross
irregularity. Nor was the award improperly obtained.
Granted, the award was made in the absence of the First
Respondent,
but that was through no fault of the Arbitrator and/or the Applicant.
[61]
Any unhappiness that the First Respondent may have as to
the outcome of the arbitration proceedings can be laid
at its own
door. For reasons which are never properly explained it failed to
enter the fray and it only has itself to blame for
the fact that an
award was made in its absence.
[62]
In the result, the “review” has no merit.
[63]
In conclusion, I find that the Applicant has made out a case for the
Arbitrator’s award to be made an order
of court in accordance
with sec 31 of the Act. Insofar as the costs of this application are
concerned, there is no reason why the
costs should not follow the
result. In the circumstances I make the following order:
1. Leave is hereby
granted for the Second Respondent to represent the First Respondent
in these proceedings.
2. The claim
against the Second Respondent is dismissed. The costs are to be
reserved for determination at an action to be
instituted. In the
event of the Applicant failing to institute an action within 20 days
of this Order, the Applicant is ordered
to pay the Second
Respondent’s costs, if any.
3. There will be
judgement against the First Respondent in the sum of R113 045.00
as and for the wasted costs order in
the arbitration proceedings
dated 24/25 May 2018.
4. In terms of
section 31
of the
Arbitration Act, 42 of 1965
the arbitration award
made by the arbitrator, Adv P Ellis, on 16 August 2018 in the sum of
R1 472 133.78 (which appears at
paragraph 43 of the award) is
hereby made an Order of Court.
5. The First
Respondent is ordered to pay the costs of this application.
________________________________
N.J.
MULLINS
ACTING
JUDGE OF THE HIGH COURT
Obo
the Applicant: Adv
Tshikila
Instructed
by:
Fairbridges
Wertheim
Becker Attorneys
c/o
Kaplan Blumberg
Attorneys
70, 2
nd
Avenue
Newton Park
PORT ELIZABETH
Obo
the First
Respondent: Represented
by the Second
Respondent
Obo
the Second Respondent: In
person
[1]
The details of this contract and the services to be provided are not
relevant to the resolution of this application.