About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Free State High Court, Bloemfontein
SAFLII
>>
Databases
>>
South Africa: Free State High Court, Bloemfontein
>>
2023
>>
[2023] ZAFSHC 19
|
|
Vleissentraal Bethlehem (Pty) Ltd v Konsortium Operations (Pty) Ltd and Others (1611/2022; 1728/2022) [2023] ZAFSHC 19 (31 January 2023)
IN
THE HIGH COURT OF SOUTH AFRICA,
FREE
STATE DIVISION, BLOEMFONTEIN
Case
number: 1611/2022
Reportable:
YES/NO
Of
Interest to other Judges: YES/NO
Circulate
to Magistrates: YES/NO
In
the matter between:
VLEISSENTRAAL
BETHLEHEM (PTY)
LTD
Applicant
And
KONSORTIUM
OPERATIONS (PTY) LTD
First
Respondent
FREDERIK
DANIEL JACOBUS BRAND N.O.
Second Respondent
LORIMER
ERIC LEACH
N.O.
Third
Respondent
EBERHARD
BERTELSMAN
N.O.
Fourth Respondent
BURTON
FOURIE
N.O.
Fifth
Respondent
Case
number: 1728/2022
In
the matter between:
KONSORTIUM
OPERATIONS (PTY) LTD
Applicant
And
VLEISSENTRAAL
BETHLEHEM (PTY)
LTD
Respondent
CORAM:
NAIDOO, J et LOUBSER, J
HEARD
ON:
17 OCTOBER 2022
JUDGEMENT
BY:
LOUBSER, J
DELIVERED ON:
The judgment was handed down electronically by circulation to the
parties’ legal representatives
by email and release to SAFLII
on 31 JANUARY 2023. The date and time for hand-down is deemed to be
31 JANUARY 2023 at 11:00
[1]
In this instance the court is seized with two different applications
emanating from
the same arbitration proceedings. In the first
application (1611/2022) the applicant seeks an order reviewing and
correcting or
setting aside an arbitration award made by the second
respondent against the applicant, as well as an order reviewing and
correcting
or setting aside the subsequent arbitration appeal award
by the third, fourth and fifth respondents confirming the initial
award.
In a further prayer the applicant seeks an order declaring
that the first respondent is not entitled to recover the amount of
the
award without deduction of the amount it received subsequent to a
settlement of its claim in the arbitration against Paul Steyn
Boerdery (Pty) Ltd (in liquidation). In the arbitration proceedings
itself Konsortium featured as the claimant, while Paul Steyn
Boerdery
(PSB) was the first defendant, Vleissentraal Bethlehem the second
defendant and Standard Bank the third defendant. On
the first day of
the arbitration proceedings Konsortium entered into a settlement
agreement with the liquidators of PSB and with
Standard Bank, with
the result that the only disputes remaining were between Konsortium
and Vleissentraal.
[2]
To avoid confusion, and for the
sake of convenience, the parties are referred to by name
and not as
they are cited in the two applications. In the second application
(1728/2022) Konsortium seeks an order to the effect
that the award
made by the arbitrator and the subsequent award by the arbitration
appeal panel confirming that award, be made an
order of court. It
follows that the two applications are inextricably bound since they
involve the same legal issues. They were
therefore heard together, as
separate hearings would lead to a multiplicity of hearings on the
same issues, and the possibility
of different outcomes by differently
constituted courts. In this judgement, the second application will be
referred to as the “enforcement
application”.
[3]
The review application is brought in terms of the provisions of
section 33(1) of the
Arbitration Act.
[1]
The section provides as follows:
“
33(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”.
[4]
The circumstances under which an arbitration award may be reviewed
and set aside by
a court are therefore of a limited nature. In the
present case, the applicant in the review application, Vleissentraal,
relies
on two of the grounds under section 33(1). Firstly,
Vleissentraal submits that the arbitration panels exceeded their
powers in
making determinations on a claim that did not arise under
the arbitration agreement. To put it differently, it contends that
they
acted
ultra vires
or outside the jurisdiction afforded to
them by the arbitration agreement. Secondly, Vleissentraal submits
that the award was improperly
obtained due to the non-disclosure of a
material fact by Konsortium, which material fact it was under a duty
to disclose.
[5]
In order to give perspective to the grounds of review, the following
needs to be mentioned:
In the arbitration proceedings Konsortium
claimed an award declaring that it was the owner of a number of ewes,
and payment of
the amount of R7 108 376.49 plus interest by the
first defendant, namely PSB (in liquidation). In the alternative, and
in
the event of the arbitrator finding that Konsortium was not the
owner of the sheep, Konsortium claimed payment of the amount of
R6 773 880.00 from Vleissentraal, who is now the applicant
in the review application.
[6]
On the first day of the arbitration proceedings, the arbitrator
(second respondent)
was informed by Konsortium that its claim against
PSB and Standard Bank had become settled. The contents and the terms
of the settlement
agreement were not disclosed to the arbitrator. The
arbitrator then proceeded to hear evidence in respect of the
alternative claim
against Vleissentraal, and he eventually found that
Konsortium was not the owner of the ewes. He then made an award
directing Vleissentraal
to pay to Konsortium the amount of
R6 773 880.00 plus interest. It is this award that is now
challenged on the basis
that the arbitrator had exceeded his powers
by considering the claim against the second defendant, which was
stated in the alternative.
When the claim against PSB became settled,
there was nothing left to be considered as an alternative, it is
contended by Vleissentraal.
[7]
At this point it is perhaps apposite to refer to the facts that gave
rise to the arbitration
proceedings.
[8]
Konsortium’s claim against PSB was premised on a joint venture
agreement it
had with PSB. This agreement provided that Konsortium
shall deliver sheep to PSB, of which Konsortium shall at all times
retain
ownership. Konsortium alleged that, for purposes of the
agreement, it purchased 2 740 head of sheep for an amount of
R6 773 880.00
through its duly authorised livestock agent
Vleissentraal, which sheep were delivered to the joint venture, or
then to PSB. However,
Vleissentraal never informed Konsortium that
the sheep were purchased from PSB itself.
[9]
Hereafter PSB was wound up and
the liquidators took possession of the sheep in question,
which were
the subject of the joint venture agreement. When Konsortium requested
delivery of the sheep on the basis that they were
the owners of the
sheep, the liquidators refused to give them up, contending that they
still belong to PSB. This dispute as to
whether ownership of the
sheep had passed to Konsortium or not, was eventually referred to the
arbitration which now forms the
subject matter of the review
application. As mentioned earlier, Konsortium’s claim against
Vleissentraal was in the alternative
and in the event that the
arbitrator finds that Konsortium was not the owner of the sheep. In
such event, according to the statement
of claim, Konsortium claimed
against Vleissentraal on the basis of a negligent, alternatively
fraudulent breach by Vleissentraal
of its livestock agency agreement
with Konsortium.
[10]
Konsortium’s alternative claim against
Vleissentraal was premised on the allegation that Vleissentraal
intentionally, alternatively negligently made a misrepresentation
that it had taken possession of the sheep from the seller, and
in
doing so, transferred ownership of the sheep to Konsortium. Further
to this, that it transported the sheep from the seller to
PSB and
delivered the sheep to PSB, in circumstances where Vleissentraal knew
that PSB itself was the seller of the sheep, and
that Vleissentraal
never effected the transfer of ownership of the sheep to Konsortium
by taking possession of the sheep. Vleissentraal
also never
transported the sheep to PSB and the sheep were never delivered to
PSB. After hearing evidence, the arbitrator found
in favour of
Konsortium on the issue of a misrepresentation by Vleissentraal, and
came to the conclusion that Konsortium did therefore
not become owner
of the ewes.
[11]
In his award the arbitrator referred to the fact
that the terms of the settlement agreement remained undisclosed.
He
pointed out that it was argued that because the terms remained
undisclosed, it is unknown whether Konsortium received any benefit
from the settlement which would obviously reduce its loss. The
arbitrator then reasoned as follows: “On the pleadings the
claim of Konsortium against PSB is premised exclusively on the basis
that Konsortium was the owner of the sheep. It follows that
if it was
not, it had no claim against PSB. Any benefit it received from the
settlement would therefore be
res inter alios acta
as far as
Vleissentraal is concerned.” Broadly speaking,
res inter
alios acta
is a reference to a collateral issue.
[12]
It was further pointed out in the award that the claim against
Vleissentraal, for the amount
of R6 773 880.00, represents
the sum that Konsortium had paid for the sheep. The claim of
R7 108 376.49 against
PSB arose as follows: Because of the
dispute regarding the ownership of the sheep, the sheep were sold by
agreement, and the proceeds
of the sale, namely the amount mentioned,
were invested in an interest-bearing trust account pending the
outcome of the arbitration.
[13]
Earlier in the award, the arbitrator came to the following conclusion
in respect of the alternative
claim against Vleissentraal: “It
is true that the claim against Vleissentraal is premised on the basis
that Konsortium did
not become owner of the ewes. If I should
therefore find, as contended for by Vleissentraal, that Konsortium in
fact became the
owner of the ewes, the claim cannot succeed. But if I
should come to the opposite conclusion, namely that Konsortium did
not become
owner, the premise of the claim against Vleissentraal
would be established. The fact that PSB is no longer a party would be
of
no consequence”.
[14]
On behalf of Vleissentraal it was contended before us that, in this
respect, the arbitrator exceeded
his powers by considering the claim
against Vleissentraal and determining the ownership of the sheep in
circumstances where Konsortium
did not pursue its claim against PSB
because of the settlement it had reached with PSB. The result of the
settlement was that the
determination of ownership in Konsortium’s
claim against PSB was taken out of the hands of the arbitrator by the
settlement
agreement, the argument went. This is so, it was
submitted, because Konsortium pleaded in respect of its claim against
Vleissentraal
as follows: “In the alternative, and in the event
that the arbitrator finds that Konsortium was not the owner of the
sheep,
as it is alleged by the liquidators of PSB, then and in that
event, Konsortium pleads as follows.”
[15]
The appeal panel succinctly dealt with this argument by pointing out
that Konsortium could at
any time have sued Vleissentraal without PSB
being a party to the litigation, although it could only succeed on
establishing that
it had not become the owner of the sheep. The panel
further pointed out that the ownership of the sheep was essentially
what the
arbitrator was called upon to decide in the referral to
arbitration and the pleadings subsequently filed.
[16]
I respectfully agree with the exposition provided by the appeal
panel. By the time the arbitrator
proceeded to deal with the claim
against Vleissentraal, and the issue of ownership, PSB was no longer
involved in the proceedings.
That fact could not affect Vleissentraal
adversely, because Konsortium could have claimed from it without the
presence of PSB as
a party to the litigation in any event. Moreover,
the pleadings expressly called upon the arbitrator to decide the
issue of ownership,
albeit in the alternative, by stating that “in
the event that the arbitrator finds that Konsortium was not the owner
of the
sheep … Konsortium pleads as follows”. This is
exactly what Konsortium could and should have pleaded in a separate
action against only Vleissentraal, namely that Konsortium was not the
owner of the sheep. The settlement agreement with PSB could
therefore
never preclude Konsortium from pursuing its claim against
Vleissentraal in the arbitration proceedings, and the arbitrator
did
not act
ultra vires
by proceeding to determine the issue of
ownership.
[17]
In this respect it must be emphasized that arbitrators do not have
inherent jurisdiction. An
arbitrator’s powers emanate from the
arbitration agreement between the parties, and as such, an arbitrator
is confined to
the issues as defined and delineated by the parties.
In
Hos+Med
Medical Aid Scheme v Thebe Ya Bophelo Healthcare and others
[2]
the
Supreme Court of Appeal stated this principle as follows:
“In
my view it is clear that the only source of an arbitrator’s
power is the arbitration agreement between the parties
and an
arbitrator cannot stray beyond their submission where the parties
have expressly defined and limited the issues, as the
parties have
done in this case to the matters pleaded. Thus the arbitrator,
and therefore also the appeal tribunal, had no
jurisdiction to decide
a matter not pleaded.”
[3]
In the present case the arbitration agreement stated that, if
Konsortium is unsuccessful in its claim for delivery of the sheep
from PSB, and in the event of it being found that Konsortium was not
the owner of the sheep, then Konsortium alleges that Vleissentraal
breached its mandate of agency to purchase sheep on Konsortium’s
behalf and/or that Vleissentraal committed a fraud against
Konsortium, and is consequently liable to Konsortium. Having regard
to the pleadings, it is clear that the arbitrator was therefore
vested with the power to determine the ownership of this sheep
irrespective of the undisclosed settlement agreement between
Konsortium
and PSB.
[18]
The review application can therefore not succeed on the basis of lack
of jurisdiction of the
arbitrator. The next question is whether the
application should succeed on the basis that the award was improperly
obtained by
Konsortium due to the non-disclosure of a material fact,
which material fact Konsortium was under a duty to disclose. This
material
fact refers to the contents and terms of the settlement
agreement, but more specifically to the amount of compensation, if
any,
that Konsortium had received in terms of the settlement.
Konsortium had a duty to disclose such an amount, because it should
have
been taken into account in determining any amount of damages for
which Vleissentraal could be held liable, it is contended.
[19]
There are a number of difficulties with this contention. Firstly, it
appears that it was a term
of the settlement agreement that the
contents thereof would not be disclosed. The legal representatives of
Konsortium were therefore
placed in a position where they could not
disclose, even if they had a duty to do so. Secondly, the appeal
panel referred in its
appeal award to
Minister
van Veiligheid en Sekuriteit v Japmoco Bpk h/a Status Motors,
[4]
where
the Supreme Court of Appeal had the following to say:
[5]
“
Waar
'n eiser, soos hier, die omvang van sy skade
prima
facie
bewys,
berus dit by die verweerder om aan te toon dat daar sekere voordele
is wat die eiser toekom en wat na regte van die
skadevergoedingsbedrag afgetrek moet word. Word daardie feit deur die
verweerder bewys of deur die eiser erken, maar die omvang
daarvan is
onseker, berus dit by die eiser, …. om dit te kwantifiseer,
ten einde te bewys wat die balans is waarop hy teenoor
die verweerder
op betaling geregtig is.”
[20]
In view hereof, the appeal panel explained that, to discharge its
evidential burden, Vleissentraal
would have been entitled to
cross-examine the Konsortium witnesses on the issue, to amend its
pleadings, to subpoena witnesses
and to require the discovery of
relevant documentation. “However, it did nothing to discharge
its evidential burden and accordingly
failed to disturb the
prima
facie
proof of the loss suffered by Konsortium, that is the
purchase price paid for the ewes,” the appeal panel concluded.
[21]
In view of what was stated in the
Minister van Veiligheid
case
referred to above, these remarks of the appeal panel cannot be
faulted. In the result, I am not persuaded that Konsortium
conducted
itself improperly by the non-disclosure of a material fact. There
clearly seems to be other factors present which contributed
to the
non-disclosure. Consequently, the review application can also not
succeed on its second leg.
[22]
However, this finding does not have a bearing on prayer 2 of the
Notice of Motion in the review
application. In that prayer
Vleissentraal seeks an order declaring that Konsortium is not
entitled to the recover the amount of
the claim referred to in the
awards, without deduction of the amount received by Konsortium in
terms of the settlement agreement.
This issue is obviously closely
linked to the relief sought in the enforcement application, namely
that the award made against
Vleissentraal in the arbitration
proceedings be made an order of court. Should the said prayer 2 be
granted, then the enforcement
application cannot succeed in the form
and in the terms sought by Konsortium.
[23]
In adjudicating the merits of prayer 2, this court finds itself in a
much better position than
the arbitrators when the matter came before
them. This is so, because merely a week before the matter was heard
by this court,
Konsortium produced the previously undisclosed
settlement agreement in response to a notice in terms of rule 35(12)
served upon
it by Vleissentraal. In terms of the settlement
agreement, PSB agreed to pay an amount of R2 500 000.00 to
Konsortium
in full and final settlement of all and any claims that
the parties have against each other.
[24]
Should this amount now be deducted from the amount of R6 773 880.00
awarded to Konsortium
by the arbitrator, which award was subsequently
endorsed by the appeal panel? On behalf of Konsortium it was
maintained before
us that the amount should not be deducted, since
the payment thereof still remains an issue which is
res inter
alios acta
to Konsortium’s claim against Vleissentraal, as
it was held by the arbitrator.
[25]
I am unable to agree with this submission. In my view, considerations
of fairness and public
policy must certainly override the sentiments
expressed by counsel appearing for Konsortium. If the amount in
question is not deducted,
it would result in double compensation for
Konsortium, which would be unfair. This is a reality that cannot be
denied. The claim
of Konsortium against Vleissentraal was for damages
suffered, and where damages are involved, any benefit received by a
plaintiff
which reduced his loss becomes relevant. But benefits would
only be deductible if they are not collateral benefits. According to
Visser
and Potgieter
[6]
it now seems to be generally accepted that there is no single test to
determine which benefits are collateral and which are deductible.
“Both in our country and in England it is acknowledged that
policy considerations of fairness ultimately play a determinative
role”, the learned authors state.
[26]
In the appeal award the following is stated: “It is trite that
Konsortium bears the onus
to prove the damage it has suffered, i.e. a
diminution in its universitas by virtue of the payment made for the
sheep. This diminution
occurred upon it paying the purchase price.
That constitutes
prima
facie
proof of the damage it had suffered and it was then up to
Vleissentraal to show that Konsortium had derived some benefit from
the settlement which should properly be deducted from Konsortium’s
loss. Put differently, Vleissentraal had the evidential
burden to
show what amount, if any, had to be deducted from Konsortium’s
prima
facie
loss to avoid double compensation being awarded for the same
loss.”
[7]
[27]
It has now been shown what amount has to be deducted to avoid double
compensation. On the basis
of public policy and fairness, prayer 2 of
the review application must therefore be granted in amended form,
while the enforcement
application must accordingly succeed only to
the extent of the amended form of prayer 2 of the review application.
The respective
applicants in both the applications before us are
therefore only partially successful, and this should be reflected in
the orders
of costs.
[28]
The following orders are made:
Case
no 1611/2022 (the review application)
1.
The application for the review and setting aside of the arbitration
award of the second respondent
dated 22 May 2021, and of the
arbitration appeal award of the third, fourth and fifth respondents
dated 25 February 2022, is dismissed.
2.
The application for the review and correcting of the arbitration
award of the arbitrator
dated 22 May 2021, and of the arbitration
appeal award of the third, fourth and fifth respondents dated 25
February 2022, is granted.
3.
It is declared that Konsortium is not entitled to recover the amount
of the claim referred
to in the awards, without deduction of the
amount of R2 500 000.00 received by it in settlement of its
claim in the abovementioned
arbitration proceedings against Paul
Steyn Boerdery (Pty) Limited (in liquidation).
4.
Konsortium is ordered to pay 50% of Vleissentraal’s costs in
the application.
Case
number 1728/2022 (the enforcement application)
1.
The arbitration award of the arbitrator dated 22 May 2021 is made an
order of court in the
following amended terms:
1.1
Vleissentraal is ordered to pay to Konsortium an amount of
R4 273
880.00, plus interest on such amount calculated at 10.25% per annum
from 6 October 2017 until date of payment.
1.2
Vleissentraal is ordered to pay the costs of the arbitration,
including the costs of the arbitrator and the costs of the two
counsel where so employed.
2.
The dismissal of Vleissentraal’s appeal against the
arbitrator’s award and the
subsequent award by the arbitration
appeal panel is made an order of court in the following terms:
2.1
Vleissentraal’s appeal is dismissed with costs on a High
Court
scale, such costs to include the costs of 2 counsel, the fees of the
appeal arbitrators, the charges of preparing the record
of the
arbitration
a quo
and the costs, if any, of the appeal venue.
3.
Vleissentraal is ordered to pay 50% of Konsortium’s costs in
this application.
P.
J. LOUBSER, J
I
agree:
S.
NAIDOO, J
For
the applicant in Case No 1611/2022 and respondent in Case No
1728/2022:
Adv.
C. Watt-Pringle SC
Instructed
by:
Coetzee-Engelbrecht Inc., Harrismith
c/o
Phatshoane Henney Inc., Bloemfontein
For
the applicant in Case No 1728/2022 and the first respondent in Case
No 1611/2022:
Adv.
P.J.J. Zietsman SC
Instructed
by:
McIntyre van der Post Attorneys, Bloemfontein
[1]
Act 42
of 1965
[2]
[2008]
2 All SA 132 (SCA)
[3]
Ibid at
par [31]
[4]
2002
(5) SA 647 (SCA)
[5]
At par
[25]
[6]
Law of
Damages, 2
nd
edition, page 204, footnote 5 and authorities referred to.
[7]
Par 56
of the appeal award