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[2012] ZASCA 41
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Enviroserv Waste Management (Pty) Ltd v Wasteman Group (Pty) Ltd and Others (378/11) [2012] ZASCA 41; [2012] 3 All SA 386 (SCA) (29 March 2012)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case No: 378/11
Reportable
In the matter between:
ENVIROSERV WASTE
MANAGEMENT (PTY) LTD
…..............................
APPELLANT
and
WASTEMAN GROUP (PTY)
LTD
….................................................
1
ST
RESPONDENT
ARBITRATORS COMPRISING
THE ARBITRATION
APPEAL TRIBUNAL
….....................................................................
2
ND
RESPONDENT
OLIVIER MEYER
…...........................................................................
3
RD
RESPONDENT
PETER NOVELLA
….........................................................................
4
TH
RESPONDENT
Neutral citation
:
Enviroserv Waste Management v Wasteman Group
(378/11)
[2012]
ZASCA 41
(29 March 2012)
Coram:
FARLAM,
HEHER, VAN HEERDEN, SNYDERS JJA and PETSE AJA
Heard:
13 March
2012
Delivered:
29
March 2012
Updated:
Summary:
Arbitration
– Act 42 of 1965
s 33(1)(b)
– arbitration appeal tribunal
exceeding its powers or committing gross irregularity – finding
of (unpleaded) tacit
agreement proper step in deciding issues before
it on appeal.
____________________________________________________________________________________
ORDER
On appeal from:
Western Cape High Court (Cape Town)
(Ngewu AJ and Saldanha J sitting as court of first instance):
1. The appeal is upheld
with costs.
2. The cross-appeal is
dismissed with costs.
3. The costs in both
instances are to include the costs of two counsel.
4. The order of the court
a quo is set aside and replaced by the following:
‘
The
application is dismissed with costs, including the costs of two
counsel.’
__________
_______________________________________________________________________
JUDGMENT
_____________________________________________________________________
HEHER JA (FARLAM, VAN
HEERDEN, SNYDERS JJA AND PETSE AJA concurring):
[1] The first respondent
(‘Wasteman’) succeeded in persuading the Western Cape
High Court (Ngewu AJ, Saldanha J concurring)
that the second
respondent, an arbitration appeal tribunal, had decided the most
important aspect of the appeal (‘Issue B’)
according to
its own finding of a tacit agreement raised neither in the pleadings
nor in the grounds of appeal and which the first
respondent had been
afforded no opportunity to address by evidence or argument. This, so
the court concluded, amounted to a gross
irregularity and exceeded
its powers.
[2] The High Court
accordingly made the following order in terms of
s 33(1)(b)
of the
Arbitration Act 42 of 1965
:
‘
i.
That the application succeeds.
ii.
That the award of the arbitration appeal tribunal is set aside.
iii.
That the dispute between the parties, (being first respondent’s
[Enviroserv’s] appeal on issue B and [Wasteman’s]
cross
appeal), is referred to a new arbitration appeal tribunal to be
constituted in terms of clause 10 of the arbitration agreement
between the parties.
iv.
No order as to costs.’
[3] The High Court
refused Enviroserv leave to appeal. This Court however granted its
application in terms of s 21(4)(c) of the
Supreme Court Act 59 of
1959.
[4] The genesis of the
dispute was a shareholders’ agreement, to which Enviroserv and
Wasteman were parties, concluded at
Bellville on 26 September 1994.
The parties agreed to set up a company, Vissershok Waste Management
Facility (Pty) Ltd, which would
carry on the business of managing a
landfill site for waste disposal. They were to become equal
shareholders, each entitled to
appoint two directors. Both these
requirements were duly fulfilled.
[5] Clause 12 of the
agreement provided that:
‘
The
management of the business of the Company, the administrative and
accounting functions, the marketing of the services of the
Company,
the maintenance of equipment on site and the provision of engineering
and chemical services shall initially be carried
out and provided by
Waste-Tech [Enviroserv] for a 6 (six) month period and for a monthly
fee agreed with the directors of the Company,
provided that the
amount payable to Waste-Tech for such services is a market-related
rate. Dedicated staff shall be seconded from
Waste-Tech on a
full-time basis, supervisory and technical staff shall be seconded
from Waste-Tech on a part-time basis and other
staff required to
conduct the affairs of the Company shall be employed from the general
public. The management of the business
of the Company and the other
functions and services to be carried out by Waste-Tech as provided in
this paragraph shall be reviewed
after a period of 6 (six) months has
elapsed with a view to the directors of the Company deciding who will
thereafter manage which
aspects of the business of the Company. If
agreement accordingly cannot be reached, Waste-Tech and Wasteman
shall, to such extent
as may reasonably be possible, thereafter
jointly provide such management.’
[6] Notwithstanding that
the initial period of management had been limited to six months,
Enviroserv remained in exclusive control
of the day-to-day affairs of
the company for more than eight years without objection from
Wasteman. Only during 2003, with the
advent of new shareholders in
Wasteman, were demands made that gave rise to the dispute between the
parties.
[7] The
agreement required such disputes to be settled by arbitration and
Wasteman invoked it. In the arbitration various claims
were made. Of
particular relevance was the declaratory relief claimed by Wasteman:
1
‘
1.
Declaring that the Defendant’s [Enviroserv’s] rights as
set out in Clause 12 of the Agreement to manage the business
of the
Company and to provide the other functions and services referred to
in Clause 12:
(a)
are not permanent in the sense of enduring for the life of the
Vissershok facility, or at all;
(b)
are instead now subject to immediate review, with a view to the
directors of the Company deciding who will manage which aspects
of
the business.
2.
Declaring that it is possible for the directors of the Company to
decide as to who will manage which aspects of the business.
3.
Declaring that if the Directors of the Company are unable, within a
reasonable period, to agree as to who will manage which aspects
of
the business, then joint management of the Company by the First
Claimant and the Defendant:
(a)
is reasonably possible as contemplated in clause 12 of the agreement;
(b)
and should follow.’
[8] The arbitrator
characterised the essence of the declaratory claims as follows:
‘
Issue
A1 – The Review Issue
Whether,
in reference to clause 12, defendant should be ordered to review the
management of the business of Vissershok with a view
to deciding
which of its directors should manage which aspect of the business.
2
Issue
A2 – The Joint Management Issue
Whether,
should such relief not be granted, there should be an order for joint
management as provided for in clause 12.
Issue
B – Continued Exclusive Management Issue
Whether
defendant is entitled to continue with its exclusive management until
the expiry of the lease:
(1)
On the ground that on a proper construction of clause 12 it was never
intended that after continued exclusive control of the
management for
some 14 years, the “six months only” provision can be
invoked by the claimant in order that such exclusive
management comes
to an end.
(2)
On the ground that a tacit term exists in the agreement giving such
an exclusive right to the defendant for the duration of
the lease.
(3)
On the ground that the claimant by its conduct tacitly agreed to such
exclusive rights until the end of the lease.’
He made an award in the
following terms:
‘
1.
An order that the parties are to review in terms of clause 12 is
refused.
2.
An order that they are to jointly manage the business of Vissershok
is refused.
3.
An order that the defendant [Enviroserv] is entitled exclusively to
manage the business of Vissershok at the weighbridge or elsewhere
is
rejected. . . .
6.
The question of costs is to be decided later in the light of this
award and after the submission of written argument.’
[9] After the making of
the award Wasteman apparently drew to the attention of the arbitrator
that para 3 of the order did not accord
with the relief claimed in
claim 1(a). It submitted that this represented a patent error which
fell to be rectified as provided
for in s 30 of the
Arbitration Act.
At
the conclusion of his award on costs the arbitrator responded to
this application as follows:
‘
This
was in fact and in substance what was decided. The ground for this
objection is that there was no counter-claim on the part
of the
defendant. This is so but, first, the essential and acknowledged
issue was whether defendant could exercise exclusive management
for
the duration of the lease and, second, this issue was fully canvassed
without any objection that it did not feature as a counter-claim.
The
award in substance, and read in context, was a declaration that the
defendant is not entitled to remain in exclusive control
as from the
date of the award and it naturally and necessarily follows that such
control must cease. The defendant’s attitude
was that there was
no error, patent or otherwise, in the form of the award. To overcome
what seemed to me to be no more than an
objection to the wording of
the award, I suggested that it be altered to read:
“
The
defendant is not entitled exclusively to manage the business at
Vissershok at the weighbridge or elsewhere.”
Such
substitution satisfied Mr Harper on behalf of the claimant. However,
Mr Wasserman opposed any alteration of the award for a
reason not
disclosed by him. In these circumstances I must let the matter rest
to be dealt with, if necessary, on appeal.’
[10] Apart from certain
procedural costs, the arbitrator directed that there should be no
order as to costs.
[11] Enviroserv appealed
against the award in respect of Issue B ‘relating to the
defendant’s continued exclusive management’
and the award
of costs. It is clear from the grounds of appeal that it limited its
contentions to ‘a proper interpretation
of clause 12 of the
shareholders’ agreement’ and did not seek to impugn
findings of the arbitrator against the existence
of a tacit term and
a tacit agreement relating to continued management by Enviroserv.
[12] Wasteman
cross-appealed against the award in respect of Issue A1 and A2. Such
cross-appeal was conditional upon the appeal
tribunal finding that
the arbitrator’s interpretation of clause 12 was wrong or that
a review was essential as contended
by it. Wasteman further
cross-appealed in respect of costs on the grounds that it, as the
successful party in the arbitration,
should be entitled to all its
costs.
[13] The arbitration
appeal was heard by the tribunal. It made the following appeal award:
‘
(i)
The claimant’s appeal and cross-appeal are dismissed with
costs;
(ii)
The defendant’s appeal in respect of issue B is upheld with
costs;
(iii)
Paragraph 3 of the arbitrator’s award which provides that “an
order that the defendant is entitled exclusively
to manage the
business of Vissershok at the Weighbridge or elsewhere is rejected”
is set aside;
(iv)
Paragraph 3 of the arbitrator’s costs award providing that “For
the rest, there is to be no order as to costs”
is
set aside and substituted with the following award:
“
3
3.1 The first claimant is to pay the defendant’s costs on the
High Court party and party scale, such costs to include the
costs of
two counsel;
3.2
The first claimant is to pay the costs of the arbitration, including
the costs of the arbitrator and the venue”.
(v)
The costs referred to in paragraphs (i) and (ii) hereof are to be
paid on the High Court party and party scale, and are to include
the
costs of two counsel.
(vi)
The first claimant is to pay the costs of the appeal arbitration,
including the costs of the appeal arbitrators and the venue.’
[14] In its
application under
s 33(1)(b)
of the
Arbitration Act
3
to
the High Court to set aside the appeal award Wasteman
relied on alleged irregularities in the award. The court upheld the
contention.
It held that the tribunal
‘
adopted
an entirely new approach and determined issues
mero
motu
on
a basis which had not been raised as part of the appeal. From the
notices of appeal and cross-appeal it is clear that the tribunal
was
not enclothed with jurisdiction to determine the existence or
otherwise of the tacit agreement it concluded (sic) in its award.
. .
The conclusion by the tribunal that there existed a tacit agreement
(i) between the first
respondent and the company styled Visserhok Waste Management Facility
(Pty) Ltd (“The Company”);
(ii) of indefinite
duration, but subject to termination on reasonable notice;
(iii) in terms whereof
the first respondent would continue to manage the business of the
company;
(iv) against payment by
the company of a fee, which would be adjustable by agreement between
the company and the first respondent;
and
(v) which must have come
about from some time in the second half of 1999,
was not anticipated by
any of the parties.
As a result applicant
argued, correctly so, that it fell victim to an unfairness in that it
was never given an opportunity before
the arbitrator to conduct and
more particularly to respond to a case based on the tacit agreement
as construed by the tribunal.’
[15] I am unable to agree
with the conclusion of the court a quo for the reasons that follow.
[16] The structure of the
appeal award is cardinal in deciding what the tribunal decided and
why. A court faced with an application
under s 33(1)(b) of the Act
which requires it to construe an award must at least be sure that it
fully grasps the logic employed
by the tribunal before it can
contemplate the setting aside of the award. This, I think, is a
failing
in the reasoning of the
court below.
[17] In its award the
tribunal adopted the arbitrator’s characterisation of the
issues (as set out in para 8 above). In relation
to Issue B:
Exclusive Management, having set out clause 12 of the agreement, the
tribunal continued:
5.
The first claimant [Wasteman] contends that the right granted to the
defendant [Enviroserv] to manage the Company terminated
at the end of
the envisaged six months’ period. If it did not, clause 12
should be interpreted as giving the first claimant
a right to insist
upon a review of the management issue, a right that can, and should,
be specifically enforced. The defendant,
whilst not maintaining that
the clause entitled it to manage the site exclusively for the
duration of the lease, disputes that
the arrangement terminated after
the first six months. It further strongly resists the suggestion that
if a review
right
was conferred by the
shareholders’ agreement, it is enforceable by the first
claimant by way of specific performance.
6.
This was a burning issue before the arbitrator who declined to make
an award for specific performance but nonetheless granted
relief in
the following terms:
“
An
order that the defendant is entitled exclusively to manage the
business of Vissershok at the Weighbridge or elsewhere is rejected.”
7.
In the view we take of the matter, the refusal to compel the parties
to review the management of the Company was correct, not
only because
it would have meant giving an unenforceable award but also because
(whatever review obligation was imposed on the
parties by clause 12)
the directors of the Company did at a later stage review the conduct
of the Company’s business.
8.
Much of the debate on the review and exclusive management issues
centred on the true meaning to be extracted from clause 12.
It is
trite that all agreements must be interpreted against their
background circumstances. This is particularly true of agreements
that are ambiguous. Since it cannot be said that on its face clause
12 indisputably proclaims its meaning, it is helpful to look
at the
climate in which it came to be agreed.
9.
When the joint venture was concluded, the defendant had already for
twenty years conducted a hazardous waste disposal facility
at the
same Vissershok site. Upon its expiry the lease for the site was
renegotiated and the defendant, utilising its infrastructure
and
expertise, continued its operation of the site as a joint venture
with the first claimant.
10.
For much of what we know of the early history of the venture, we are
indebted to Mr Andre Swanepoel, at the time a director
and major
shareholder of the first claimant. His evidence makes it clear that
the first claimant was the junior partner in the
joint venture,
junior in the sense that it was a smaller enterprise than the
defendant and, unlike the defendant, operated no waste
disposal
sites, whether for hazardous waste or otherwise, and had no expertise
in this field. The Vissershok operation being a
small one at the
time, it is fair to infer that it was hardly worth the first
claimant’s while to set about acquiring the
necessary expertise
when the site had been run for twenty years by the defendant.
Nevertheless, it seems obvious that the first
claimant was not
prepared to agree to the defendant continuing to operate the site
without giving itself an opportunity to observe
at first hand how it
performed. If the first claimant was at the end of the six months
dissatisfied with the defendant’s
performance, or any aspect of
it, it might ask that the arrangement be reviewed. For good measure
the shareholders included a deadlock
breaking mechanism in clause 12:
in case the parties could not agree they were to exercise joint
management to the extent that
this was possible.
11.
It is evident that clause 12 was a start-up provision intended to
offer an opportunity to the first claimant to look things
through for
six months and then decide whether and to what extent it desired or
needed to participate in the management. We agree
with the defendant
that clause 12 was not intended to operate long after the six months
trial period had elapsed. Even less was
it intended automatically to
put an end to the interim management by the defendant at the end of
six months: that would have placed
a considerable burden on the first
claimant who, apart from Swanepoel’s input, was not at the time
geared for day to day
management of the site.’
[18] In the quoted
paragraphs the tribunal first summarised its view on why an order for
specific performance of the review provision
would be inappropriate
(para 7) and then proceeded (in paras 8-11) to interpret clause 12
according to its terms and the circumstances
surrounding its
inclusion in the agreement. From its synopsis of matters relevant to
the last-mentioned question it was able to
conclude that clause 12
was intended by the parties to have effect for a limited period not
much exceeding the initial six months
of the agreement; after that
the review provision could no longer be invoked. More importantly,
the tribunal was able to find that
passing of the initial review
period and the non-operation of the review provision did not
automatically put an end to the interim
management of Enviroserv.
Thus the tribunal implicitly held that, absent timeous invocation of
clause 12 review, Enviroserv was
entitled to remain in control of the
company’s business until the happening of some event (perhaps,
termination on reasonable
notice) extraneous to clause 12. In
carrying out this analysis the tribunal was, entirely properly,
adjudicating the appeal based
on the proper interpretation of clause
12.
[19] First respondent’s
counsel would have us interpret the appeal award as a concurrence
with the finding of the arbitrator
as to the proper interpretation of
clause 12. But that cannot be. As the arbitrator made clear, his
award in relation to the rejection
of exclusive management by
Enviroserv was intended to mean that after the lapse of the initial
period without invocation of the
review, Enviroserv’s right to
exclusive management ipso facto came to an end. The tribunal
disagreed. That is why it set
the award flowing from the
interpretation aside.
[20] It will be observed
that in addressing the proper interpretation of clause 12 in paras 8
to 11 the appeal award makes no reference
to any tacit agreement. Nor
have I found it necessary to refer to such thus far.
[21] The appeal award
continues:
‘
12.
From Swanepoel’s testimony it is also clear that the first
claimant was not at the end of the trial period dissatisfied
with the
defendant’s management of the site. There was no “official”
review, says Swanepoel. Things were allowed
to continue as before
because it was “convenient”. With at least the tacit
approval of both parties, matters continued
like this for the next
four years without any problems that could not be resolved by the
board, consisting, as we have seen, of
two appointees of each of the
shareholders. The joint venture developed into a profitable business.
13.
Things might have continued in this way with the defendant (through
seconded employees) operating the Vissershok landfill to
the evident
satisfaction of the first claimant, were it not for the former’s
growing dissatisfaction with the terms of the
arrangement. The
defendant which, in terms of the shareholders’ agreement,
should within the first six months have agreed
a monthly fee with the
Company’s directors, had neglected to do so and had been
providing services free of charge to the
Company. This, one supposes,
was not burdensome while Vissershok was a small operation, but, it is
fair to infer, the defendant
began to think that it ought not to
continue doing so when the Company was growing and financially
beginning to do extremely well.
It accordingly sought a new
agreement.
14.
In seeking to establish the meaning of the new agreement that was
negotiated, it is important to understand that the impetus
for the
change originated with the defendant’s and not with the first
claimant’s dissatisfaction with the existing
situation. The
defendant was the one that sought change and the only change it
wanted was remuneration for its services. Swanepoel’s
concern
during the negotiations centred on the charges proposed by the
defendant for its services. He considered them to be unreasonable
and
thought that fees could be better monitored and kept under control if
the agreement was to be one for the rendering of specific
services
rather than broadly defined “management services”. So he
resisted the idea of a management fee, but that is
all. We know from
the undisputed evidence of Mr Des Gordon, a director of the Company
and of the defendant, that the first claimant
was at that time still
a smaller enterprise than the defendant. It carted waste material but
did not have its own waste disposal
sites. Save by employing skilled
personnel, it was not in a position to manage any aspect of the
day-to-day business of the Company
and it did not seek to do so.
15.
On 1 March 1999 Swanepoel wrote to the defendant expressing
satisfaction at the operation of the Vissershok site:
“
After
the unfortunate incident involving Geoff Charters (efficiently and
ably resolved by Alistair McLean) the Board decided that
Vissershok
should operate independently in every respect and appropriate
management and staff be relocated to Vissershok landfill
site.
This
proved to be an excellent decision as it enabled staff to concentrate
their efforts on their core business with a consequent
heightening in
motivation and responsibility levels being achieved. Further
demonstrated by the excellent profit and operational
performances and
supported by central and local Authorities, Brick and Clay (site
owners), customers, RMS, etc.
I
am (and I know I speak on behalf of all parties involved) very proud
of the achievements of the Vissershok site and its operational
standards.”
Then
Swanepoel goes on to identify his concerns:
“
We
do appreciate your proposal made for a site management contract,
however this concept is not acceptable to ourselves.
Having
said this, we appreciate and accept that you provide certain services
to Vissershok for which you should be compensated.
We should
therefore identify these services and determine the cost implications
thereof.”
16.
In a later letter and following on further discussions, Swanepoel
proposed that “the fee and future process be reviewed
and
agreed three months prior to the anniversary date”, and
reiterated that “to avoid any confusion, the services should
be
clearly defined and agreed;” a sentiment that is repeated in a
letter dated 29 March 1999 where he complained about the
wording of a
draft resolution of the Company that had been forwarded to him:
“
The
fees are not management fees but a contribution towards the indirect
costs incurred for systems, procedures and technical support.”
He
emphasised that in his previous letter he had “confirmed that
the future process also be reviewed prior to the anniversary
date.”
17.
On 30 March 1999 the defendant through Mr Des Gordon acting, one
would think, both for the Company and for the defendant, approved
the
scheme proposed by Swanepoel: the “fee and future process”
would be reviewed and agreed three months prior to the
anniversary
date.
18.
The negotiations were confirmed and adopted by a resolution of the
Company dated 25 March 1999 reading as follows:
“
RESOLVED
‘
That
the company shall for the period 1 July 1998 to 30 June 2000 pay to
Enviroserv a monthly management fee of R35 000 per month
(excluding
VAT). After 30 June 2000 the fee shall be adjusted by a quantum which
shall be agreed by the partners prior to 1 July
2000.’
19.
This resolution was followed by another passed on 13 May 1999 and
apparently intended to clarify the earlier one:
“
It
is acknowledged that Vissershok is an independent company with the
responsibility of Management vested in the Board of Directors.
For
practical purposes the staff is seconded to Vissershok from
Enviroserv Holdings Ltd (Enviroserv) and remunerated by Vissershok.
It
is further acknowledged that Enviroserv in addition provides
technical and certain other support services for the benefit of
Vissershok.
It
is therefore agreed that Enviroserv be compensated for these services
by an amount of R35 000 per month (excluding VAT)
effective 1
July 1998 until 30 June 2000.
The
Board will review this arrangement timeously.”
20.
At the end of the two year period service delivery by the defendant
was not reviewed. The first claimant, who lacked the resources
anyway, remained satisfied with the way the site was being operated.
For the next three years it did not challenge the defendant’s
operation of the site. The system set up by the resolutions of 25
March and 13 May 1999 remained in place. The evidence does not
reveal
whether there was an oral agreement to continue the system
established in 1999, but the conduct of the parties presents
a clear
instance of a tacit agreement to continue the arrangement for the
rendering of (specified) services for an indefinite time
at a fee to
be adjusted by mutual agreement from time to time. Until Mr Olivier
Meyer, (a director nominated to the Company’s
board by a
purchaser of Swanepoel’s shareholding) appeared on the scene in
2003 the delivery of services was not re-examined,
let alone altered,
and they continued to be rendered without demur.
21.
What Meyer encountered when he was appointed to the Company’s
board was not (as the arbitrator correctly found) a contract
entitling the defendant to manage the Company’s business until
the expiry of the lease. What he did encounter was an agreement
without a termination date. Such a contract is terminable on
reasonable notice. The Company was thus at any time at liberty to
terminate the service contract. Although, from the time of Meyer’s
appointment to the board, the directors nominated by the
first
claimant desired to terminate the arrangement, the directors
nominated by the defendant were disinclined to do so. The deadlock
has prevented the giving of an appropriate notice of termination. The
first claimant’s difficulty is one created by the absence
of a
mechanism for resolving deadlocks between the directors of the
Company. The first claimant cannot demand that this deficiency
be
remedied by judicial intervention. It is not permissible for a court
or an arbitrator to resolve a deadlock like this by simply
declaring
at the instance of an aggrieved party that an open-ended agreement
has terminated. Our company law provides means for
resolving a
deadlock in management, but this is not one of them.
22.
We have indicated in regard to claim “A” (Issue A1 and
A2) that we consider the claim to have been correctly dismissed.
The
first claimant did not appeal against the dismissal of this, its
first claim, but in its cross appeal, conditional upon the
reversal
of the award on claim “B” (Issue B), it did urge us, in
the alternative, to grant an order for specific performance.
Apart
from anything else, the award sought would have to operate against
the directors of the Company (the persons charged with
reviewing the
operation of the Company) who are not parties to the litigation.’
[22] The tribunal added
(in para 23 of its award):
‘
As
we have observed, the deadlock in the board cannot be resolved by
ordering the parties to conduct a review of the open-ended
contract
presently in existence. The first claimant is not in terms of its
cross-appeal entitled to an order specific performance
so the
cross-appeal is dismissed.’
[23] I have set out this
part of the appeal award at some length because it shows that the
tribunal was, from paragraph 12, no longer
concerned with the
interpretation issue but had moved on to deal with Issue A1: the
Review Issue and Issue A2: the Joint Management
Issue. These issues,
it will be recalled, only arose as subjects of the conditional
cross-appeal if the tribunal disagreed with
the arbitrator’s
interpretation of clause 12, as it had. Paragraphs 12 to 21 are at
pains to explain, from a historical perspective,
how, as presaged in
para 7 of the appeal award, the directors of the company, at a later
stage, did review the conduct of its business.
It is in this context
that what the tribunal described as a ‘tacit agreement’
and ‘an agreement without a termination
date’ arose,
entirely unrelated to its interpretation of clause 12, and directed
only to explaining why a further compulsory
review, outside the ambit
of the clause, was inappropriate.
[24] In the
course of argument, counsel for Wasteman enunciated an approach which
differed somewhat from that in his heads of argument,
where
res
judicata
on the finding that a tacit
agreement had been reached between the parties (in para 20 of the
appeal award) had been raised in the
context of the interpretation
issue (Issue B) and not related to the tribunal’s judgment on
the cross-appeal (Issues A1 and
A2) which, so it had been submitted,
should not have arisen for decision. The new submission was that the
finding of a tacit agreement
in relation to the issues in the
cross-appeal represented a gross irregularity because such an
agreement had not been pleaded,
and Wasteman had been afforded no
opportunity to meet, such a case. The finding had, in counsel’s
submission, the effect
of an issue estoppel against Wasteman. This,
said counsel, was unfair and would result in substantial injustice as
the effect would
be to exclude any future possibility of Wasteman
bringing about a termination of the management agreement between
Enviroserv and
the company.
[25] I do not agree with
the submission that the tribunal, whether in its approach to the
interpretation issue or the cross-appeal,
exceeded its powers. The
finding of a tacit agreement occurred as part of a bona fide survey
of the history of the management of
the operations of Vissershok
since the conclusion of the written agreement in 1994. The question
of interpreting clause 12 was
not influenced by that finding as I
have pointed out. Wasteman’s cross-appeal claimed an order
reviewing the management provided
for in the agreement and
substituting for it an order of joint management, in accordance with
its pleaded case. The tribunal undertook
the survey in order to
decide these questions. Its conclusion was that the parties had by
their own agreement committed the decision
as to who should manage
the operations to the company’s board of directors. Moreover,
the need for the relief sought by Wasteman
flowed from the factual
and legal consequences of that joint decision (and, in particular
from Wasteman’s inability to command
a majority on the board)
and not from the implementation of the written agreement. That
conclusion also led to the tribunal’s
refusal to countenance an
order for review or joint management: the company and its directors
who were not parties to the arbitration,
nevertheless possessed an
interest in the claim for such an order, but their non-participation
rendered the making of an order
for specific performance incompetent.
[26] The
evidence that led to the tribunal making the finding of a tacit
agreement was placed before the arbitrator for the purpose
of
enabling it to decide the issues. It was open to the arbitrator (and
the tribunal) to make what it would of the evidence within
that
context. In concluding that the parties had tacitly agreed to the
company employing Enviroserv the tribunal was merely interpreting
the
evidence. Its conclusion was an outcome of the evidence and not a
fault in the process of the arbitration.
4
Therefore, whether its conclusion, and the reliance it
placed on the tacit agreement, was right or wrong, it committed no
gross
irregularity as contemplated in s 33(1)(b) of the Act and the
award of the tribunal was not reviewable on that ground either.
[27] If it should
transpire that the finding of the tacit agreement has the effect of
an issue estoppel in law – which in
the light of my conclusion
in the preceding paragraph I find it unnecessary to decide –
with the adverse consequences for
Wasteman which it fears, that will
be a consequence of a binding arbitration award, lawfully arrived at,
and Wasteman must, if
so advised, regulate its affairs, accordingly.
[28] In summary the
tribunal did not, as the court a quo found, base its interpretation
of clause 12 on an unpleaded tacit agreement,
constructed by the
tribunal itself, and of which Wasteman had been afforded no notice in
the proceedings. That such a term afterwards
governed the parties’
relationship was an inference drawn from their later conduct and was
one of the factors which led it
to conclude that the parties had,
after the opportunity for review expired, reconsidered the future
conduct of the operation, thus
rendering an order in terms of Issue
A1 inappropriate.
[29] It follows from what
I have said that the court a quo should not have found that the
tribunal committed any irregularity or
acted beyond its jurisdiction.
[30] The court a quo,
without stating reasons, ordered that no order for costs would follow
its upholding of the review application.
Wasteman cross-appeals
against that finding on the assumption that it succeeds in resisting
the appeal, in which respect it must
fail.
[31] In the result the
following order is made:
1. The appeal is upheld
with costs.
2. The cross-appeal is
dismissed with costs.
3. The costs in both
instances are to include the costs of two counsel.
4. The order of the court
a quo is set aside and replaced by the following:
‘
The application is
dismissed with costs, including the costs of two counsel.’
____________
J A Heher
Judge of Appeal
APPEARANCES
APPELLANT: J G Wasserman
SC (with him J P Daniels SC)
De Villiers, Evans &
Petit, Durban
Matsepes Inc,
Bloemfontein
FIRST RESPONDENT: C M
Eloff SC (with him I B Currie)
Allan Levin &
Associates, Johannesburg
Lovius-Block,
Bloemfontein
1
Wasteman
had other claims that have no relevance in the present appeal.
2
The
relief, so encapsulated, does not accord with Wasteman’s
statement of claim in the arbitration as set out in para 1(b)
of the
order sought. There Wasteman does not ask that Enviroserv should be
ordered to review the management or that Enviroserv
should decide
which of
its
directors should manage the business. As the
tribunal pointed out in paras 7 and 22 of its award the review
relief required the
joinder of the company’s directors, none
of whom was, or could be, made parties to the arbitration.
3
‘
Where
–
. . . (b) an arbitration
tribunal has committed any gross irregularity in the conduct of the
arbitration proceedings or has exceeded
its powers; . . . 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.’
4
To
apply the terminology used by Harms JA in
Telecordia Technologies
Inc v Telkom SA Ltd
[2006] ZASCA 112
;
2007 (3) SA 266
(SCA) at 288, para 42.