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[2021] ZAECPEHC 6
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Pro-Khaya Construction CC v Ashford and Others (1107/2020) [2021] ZAECPEHC 6 (19 January 2021)
IN
THE HIGH COURT OF SOUTH AFRICA
(EASTERN
CAPE LOCAL DIVISION, PORT ELIZABETH)
CASE
NO: 1107/2020
Heard
on: 3 December 2020
Delivered
on: 19 January 2021
In
the matter between:
PRO-KHAYA
CONSTRUCTION CC
APPLICANT
and
TONY ASHFORD
1
ST
RESPONDENT
STRATA CIVILS
2
ND
RESPONDENT
JDM
DRILLING (PTY) LTD
3
RD
RESPONDENT
JUDGMENT
GQAMANA
J:
[1]
In the main, the relief the Applicant seeks in this application is to
review and set aside an arbitration
award dated 5 March 2020 issued
by the arbitrator (the First Respondent). Such relief is
opposed by the Second Respondent
and the latter has also filed a
provisional counter-application seeking an order that such award be
made an order of court.
[2]
A short background and common cause facts in this are as follows.
The Applicant, a close corporation
with its principal place of
business in Port Elizabeth was awarded a contract on or about April /
May 2015 by the Coega Development
Corporation (Pty) Ltd (“CDC”)
for works in respect of contract No. CDC/132/5 relating to extensions
and addition to
existing Coega Dairy Zone 3. The Applicant, on
or about 20 May 2015 then appointed the Second Respondent (a private
company
with its principal place of business in Port Elizabeth) as a
sub-contractor in terms of a sub-contract agreement.
[3]
In terms of the aforesaid sub-contract agreement, the Second
Respondent was required to
inter
alia
,
lay fire reticulation system using (uPVC pipes) underground in open
excavated areas. The contract and relationship between
the
Applicant and Second Respondent was governed by what is called the
FIDIC
[1]
.
[4]
Although not much relevant for purposes of the issues herein, but the
Third Respondent was also appointed
by the Applicant as a second
sub-contractor. In terms of such agreement, the Third
Respondent was required to
inter
alia
,
supply and install HDPE pipes under existing roads via horizontal
directional drilling and to connect such pipes to the uPVC pipe
works
installed by the Second Respondent. Such pipes were to be
connected to each other by a klamflex dedicated flange adaptor.
[5]
The CDC rejected the works
[2]
on
account of movement and slippage of the uPVC and HDPE pipes and
insisted on remedial works. The Second Respondent represented
to the Applicant that the defective work was caused solely by the
Third Respondent. However, the Third Respondent refused
to
attend to such remedial works. The Applicant then appointed the
Second Respondent to attend to such remedial works and
same were
completed on 24 June 2016.
[3]
The Second Respondent was paid the sum of R200 000.00 for the
remedial works.
[6]
A dispute then arose between the parties pertaining to the payment of
the Second Respondent’s
fees on account of the extension of the
sub-contract time for completion of the project which was delayed,
inter
alia
,
because of the rejected works. The parties agreed to refer such
dispute to arbitration and to the appointment of the First
Respondent
as the arbitrator. Subsequent thereto, the Second Respondent
submitted on 3 February 2017, a statement of case.
[4]
Thereafter the Applicant submitted its statement of defence and a
counterclaim.
[5]
Relevant
hereto for the moment is that, the Applicant’s counterclaim was
prepared after it had obtained an expert opinion
on 27 February 2017
from Uhambiso Consult (Pty) Ltd. The exact date as to when the
Applicant became aware of the possibility
that the Second Respondent
was potentially to blame for the defective works as mentioned in
paragraph 5 above is a hotly contested
issue between the parties, but
in this application, I do not have to decide that issue because the
present review is confined on
the procedural irregularity and not the
merits of the counterclaim. However, this was one of the
lis
before the First Respondent.
[7]
At the arbitration hearing in June 2017, the Second Respondent
objected on the adjudication of the Applicant’s
counterclaim on
the basis that the First Respondent had no jurisdiction to determine
it. An agreement was reached between
the parties to file heads
of argument on the issues serving before the First Respondent and
also whether the counterclaim should
be included in the arbitration
proceedings.
[8]
Key to the issues in this application is that, on or about 13 July
2017,
[6]
the First Respondent
penned an email to the parties wherein he recorded the following:
“
In
conclusion the Parties mutually agreed the following course of action
to be adopted:
1.
Whereas
all proceedings in the arbitration had been concluded, apart from the
matter of the Respondent’s counterclaim, and
for which appeared
that some further presentations to the Arbitrator by the parties
would warrant consideration, the arbitration
process between Strata
Civils and Pro-Khaya Construction with particular regard to the
matter of the Respondent’s, counterclaim,
would be
suspended
.
”
[9]
Sometime in August 2017, an application was instituted by the
Applicant in this Court under case no:
2889/17 involving the same
parties and one Willem Hendrik Olivier as the Respondents. Such
application was dismissed.
However, in between the filing of
such application and the judgment thereto, the First Respondent on 30
August 2017, issued a ruling
on the counterclaim
[7]
wherein he effectively ruled that the counterclaim formed part of the
proceedings before him.
[10]
The Applicant appealed against the judgment under case no: 2889/17
referred to above. The appeal was however
dismissed with costs
on 19 November 2019. Shortly thereafter, the First Respondent
informed the parties of his intention
to finalise the arbitration
award and he anticipated to have same issued early in 2020, but due
to his commitments the issuing
of the arbitration award was delayed.
[11]
Towards the end of the first quarter of 2020,
[8]
the First Respondent directed an email to the parties indicating that
he was in the process of drafting the arbitration award and
that, no
further comments had been received since the suspension of the
arbitration proceedings and as such he would approach the
matter on
the basis of the documents / evidence provided to him.
[9]
[12]
The response of the Applicant’s attorneys to the aforesaid
email was forwarded to the First Respondent on
the eve of the
National Lockdown Level 5. The Applicant contends that the
purport of the First Respondent’s email was
not fully
appreciated by its attorney. On 5 May 2020, the relevant
arbitration award was issued. In the award, the
First
Respondent dismissed the counterclaim on the basis that the Applicant
was time-barred as envisaged in clause 3.3 of the FIDIC
conditions
[10]
to institute a
claim against the Second Respondent.
[13]
From the outset and as indicated in paragraph 6 above, the First
Respondent’s substantive findings on clause
3.3 of FIDIC
conditions is not an issue in this application. The Applicant’s
sole gripe is the procedural approach
adopted by the First
Respondent. Its fundamental argument is that, it was not
afforded an opportunity to either present evidence
or argument on its
counterclaim.
[14] In
its founding affidavit, the Applicant contends
inter alia
,
that:
(a)
the First Respondent misconducted himself in not allowing it to
present evidence and argument on its
counterclaim;
(b)
it was not afforded opportunity to lead evidence as to when it became
aware of the possibility that
it may have a claim against the Second
Respondent for the defective works; and
(c)
as a consequence thereof, the First Respondent committed a gross
irregularity in the conduct of
the arbitration proceedings.
[15]
In terms of s 33(1) of the Arbitration Act 42 of 1965, (“the
Act”), this court may review and set aside
an arbitration award
if the arbitrator misconducted himself in relation to his duties or
has committed a gross irregularity in
the conduct of the arbitration
proceedings.
[11]
[16]
The Second Respondent, in its heads of argument
[12]
has referred me to various authorities on the interpretation and
application of the word “misconduct”
as set out in s
33(1) (a) of the Act. All those authorities were very useful
and of great help. However, in argument
the Applicant’s
case was basically confined to the contention that the First
Respondent committed a gross irregularity as
envisaged in s 33(1) (b)
of the Act.
[17]
Although in
Herholdt
v Nedbank Ltd (Cosatu as Amicus Curiae)
,
[13]
the Supreme Court of Appeal held that in a review application of an
arbitration award, the emphasis is on the result of the case
rather
than the reasons for arriving at the result. However, in
Telcordia
Technologies Inc v Telkom SA Ltd
[14]
,
Harms JA with reference to the
Ellis
v Morgan
1909
TS 576
said the following:
“…
But
an irregularity in proceedings does not mean an incorrect judgment,
it refers not to the result, but the methods of a trial,
such as, for
example, some high-handed or mistaken action which has prevented the
aggrieved party from having his case fully and
fairly determined
.”
In
the instant matter, the challenge against the First Respondent’s
award is that the Applicant was not afforded the opportunity
to lead
evidence and present argument on the counterclaim. As a result,
so the argument goes, the First Respondent committed
gross
irregularity in the conduct of the arbitration proceedings.
[18]
The Second Respondent in its opposition (leaving aside its
contentions on prescription of the counterclaim) argued
that an
opportunity was given to the parties to indicate their stance on
whether they intend to make further submissions and the
Applicant did
not file any submissions. Furthermore, the argument was
advanced that, having regard to all the string of emails
[15]
the First Respondent had in his possession sufficient evidence to
determine the issue of the counterclaim. And as such, his
award
on the counterclaim issue, is supported by the documents at his
disposal and accordingly the procedural irregularity, if
any, has not
caused prejudice to the Applicant.
[19]
The aforesaid argument is devoid of merits. Evident from the
First Respondent’s email of 13 July 2017,
[16]
he acknowledged that some further representations on the counterclaim
would warrant consideration. So the point here is that,
no
evidence was presented on the counterclaim. It was not
competent for the First Respondent to determine the issue of the
counterclaim on the pleadings only without hearing evidence or
submissions thereto. On the invitation by the First Respondent
to make further submissions, the Applicant states that its attorney
failed to appreciate the purport of the First Respondent email
due to
the fact that it was received on the eve of the National Lockdown on
24 March 2020. What is clearly evident in this
matter is that,
the Applicant intended and still intends to lead evidence based on
the expert report by Uhambiso Consult (Pty)
Ltd in support of its
counterclaim. The issue of the counterclaim was not ventilated
at all and as such the Applicant was
not afforded a fair trial of the
issues. In
Lufuno
Mphaphuli and Associates (Pty) Ltd v Andrews and Another
[17]
the Court held that fairness is one of the core values of our
Constitutional order. The First Respondent’s failure
to
afford the Applicant an opportunity to lead evidence and/or make
submissions on the counterclaim caused severe prejudice to
the latter
and prevented a fair trial of the issues.
[18]
[20]
Accordingly, viewed objectively and on the facts at my disposal, the
First Respondent committed a gross irregularity
in the conduct of the
arbitration proceedings and as such his award must be reviewed and
set aside.
[21]
In the light of my findings above, the counter-application is
premature and must fail.
[22]
It will not only be fair but also expeditious to remit the matter to
the First Respondent to remedy the defect
and allow the parties to
either lead evidence or submit representations on the counterclaim.
[23]
There is no reason why the general rule that costs follow the results
should not apply herein. The Applicant
also argued that the
employment of two counsel was justified and accordingly it should be
awarded such costs. I disagree.
Although the papers were
voluminous, but the matter itself involved a very crisp issue as
indicated in paragraph 6 above.
As such it was not wise and
prudent to brief two counsel.
[19]
[24] In
the circumstances, the following order is issued:
1.
The arbitration award issued by the First Respondent dated 05 May
2020 is hereby reviewed
and set aside.
2.
The arbitration is remitted to the First Respondent to remedy the
defect and allow the parties
to present evidence or submit
representations on the Applicant’s counterclaim.
3.
The Second Respondent’s counter-application seeking an order
that the said award be
made an order of this court is dismissed.
4.
The Second Respondent is ordered to pay the costs of this
application.
________________________
N GQAMANA
JUDGE
OF THE HIGH COURT
APPEARANCES:
Counsel for the
Applicant
:
A Beyleveld SC and
T
Rossi
Instructed
by
: Friedman Scheckter
Attorneys
PORT
ELIZABETH
Counsel for the 2
nd
Respondent :
E J Van Rensburg
Instructed
by
: Johann Viljoen & Associates Attorneys
C/O
Wikus Van Rensburg Attorneys
PORT
ELIZABETH
[1]
The
Fèdèration Internationale des Ingènieurs –
Conseils
,
conditions of sub-contract for construction for building and
engineering works designed by the employer, first edition, published
1999.
[2]
On or about
15 December 2015.
[3]
A period of
approximately 160 days after the contractual completion date.
[4]
Index to
Review application, pp 96 – 139.
[5]
Index to
Review application, pp 140 – 182.
[6]
Index to
application, pp 257 and 258.
[7]
Index to
Review application, p 305.
[8]
On 24 March
2020.
[9]
Index
application; p 310 annexure “M”.
[10]
For
completeness sake, clause 3.3 reads:
If
the contractor considers himself to be entitled to any payment under
any clause as these conditions or otherwise in connection
with the
subcontract, the contractor shall give notice to the subcontractor
describing to the event or circumstance giving rise
to the claims.
The notice shall be given as soon as practicable and not later than
28 days after the contractor became
aware of the event or the
circumstances giving rise to the claim and shall specify the basis
of the claim.”
[11]
S 33(1) (a)
and (b) of Act 42 of 1965.
[12]
From par 4.3
to 4.8 of the heads of argument, pp 9 – 15 and the footnotes
thereon.
[13]
2013(6) SA
224 (SCA).
[14]
2007(3)
SA 266 (SCA) at para (72).
[15]
Index
application; pp 414 – 419.
[16]
Index to
application, pp 257 – 258.
[17]
2009(4) SA
529 (CC) at par 221.
[18]
Goldfields
Investment Ltd v City Council of Johannesburg
1938
TPD 551
at 560.
[19]
Law
v Kin
1966(3) SA 7(E).