About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: South Gauteng High Court, Johannesburg
SAFLII
>>
Databases
>>
South Africa: South Gauteng High Court, Johannesburg
>>
2021
>>
[2021] ZAGPJHC 350
|
|
Industrius D.O.O v IDS Industry Service and Plant Construction South Africa (Pty) Ltd (2020/15862) [2021] ZAGPJHC 350 (20 August 2021)
SAFLII
Note:
Certain
personal/private details of parties or witnesses have been
redacted from this document in compliance with the law
and
SAFLII
Policy
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO: 2020/15862
REPORTABLE:
YES
OF
INTEREST TO OTHER JUDGES:
YES
REVISED:
NO
20-08-2021
In
the matter between:
INDUSTRIUS
D.O.O.
Applicant
and
IDS
INDUSTRY SERVICE AND
PLANT
Respondent
CONSTRUCTION
SOUTH AFRICA (PTY) LTD
JUDGMENT
Delivered:
By transmission to the parties via email and uploading onto Case
Lines the Judgment is deemed to be delivered. The date for hand-down
is deemed to be 20 August 2021
SENYATSI
J:
[1]
This is an opposed application
that the arbitral award given on 9 June 2020 in the arbitration
proceedings between the applicant (“Industrius”) and the
respondent (“IDS”) be made an order of court.
Industrious
seeks an order that IDS pay its costs in the main arbitration
and counterclaim.
[2]
Industrius D. O. O. is a foreign company registered in terms of
the laws of
the Republic of Croatia as “Drustvo s orgrani-cemon
odgovornoscu” that is a limited liability company, with its
place
of business and registered address at H[....],241 O[....]
S[....], B[....] 11, Croatia.
[3]
IDS Industry Service and Plant Construction South Africa (Pty) Ltd
(“IDS”)
is a private company registered in terms of the
laws of the Republic of South Africa with its registered address at 7
L[....] Park,
83 A[....] Road, D[....], Boksburg.
[4]
A dispute arose between the parties during 2017. Consequently, the
parties decided
to refer the dispute to arbitration and concluded an
arbitration agreement. They agreed that the arbitration tribunal
would be
constituted by a single arbitrator, Mr KJ Trisk SC and that
the arbitration would be conducted under the rules of the Association
of Arbitrators (“AOA Rules”).
[5]
The agreement itself is an arbitration agreement as defined in
article 7 of the International
Commercial Arbitration (“Model
Laws”) as incorporated by the International Arbitration Act 15
of 2017 (“the Act”)
for enforcement of an international
arbitral award and this is common cause between the parties. In terms
of the agreement, which
was in writing, the parties agreed to submit
certain disputes which had arisen in respect of the parties’
contractual relationship.
It is also common cause between the parties
that the arbitration was contemplated by article 1(3) of the Model
Law because at the
time of the conclusion of the arbitration
agreement the parties had their places of business in different
countries. The seat of
arbitration in terms of article 20 of the
Model Law was South Africa.
[6]
The disputes referred to arbitration consisted of a contractual claim
by Industrious
who was the claimant in the arbitration and a
counterclaim by IDS, the defendant in the arbitration.
[7]
IDS participated in the arbitration proceedings. These proceedings
included several
interlocutory applications which were conducted
during 2018 and 2019. The arbitration was scheduled to commence on 25
May 2020.
IDS ceased participation in the proceedings during January
2020. This was due to a dispute that arose, apparently, between
itself
and its former attorneys regarding payment of fees. The
arbitrator invited IDS to bring an application for postponement of
the
hearing and the invitation was ignored by IDS. The latter also
failed to properly appoint attorneys to represent it.
[1]
[8]
On 25 May 2020, and in the absence of IDS, the arbitration hearings
proceeded. The
arbitrator gave his final award in the arbitration on
9 June 2020
[2]
in terms of which
he upheld the Industrius’ claim and dismissed IDS’s
counter-claim. Industrius claimed payment on
various unpaid invoices
in the sum of € 2,75 million plus interest and costs of suit.
[9]
It is the award set out in [8] above that Industrius seeks to be made
an order of
court which IDS opposes. IDS does not dispute that the
award is binding on it.
[3]
Furthermore, IDS has not challenged the award or applied to have it
reviewed and set it aside in terms of Model Law, which is the
exclusive recourse to a court against an arbitral award.
[10]
IDS’s defence to the application for enforcement of the
arbitral award is based on a separate
action that it has instituted
in the High Court under case number 15812/2020 seeking the same
relief it bought in its counter-claim
in the finalised arbitration,
alternatively an interim interdict to the same effect. IDS prays that
the enforcement of the arbitral
award be stayed pending the
finalisation of the action it has instituted against Industrius.
[11]
IDS contends that the counterclaim was dismissed by default and avers
that the purported dealing
with the merits of its counter-claim by
the arbitrator, in the absence of IDS is of no force and effect. It
contends therefore
that the issue of the counter-claim has not been
determined at all and that it is free to pursue its counterclaims in
the courts
of South Africa.
[4]
[12]
IDS also contends that because the counterclaim was dismissed by
default, the arbitrator's award
in that regard is not final and that
the doctrine of
res judicata
does not apply and that this is a
trite principle.
[13]
IDS furthermore contends that having dismissed the counterclaim for
non-appearance, the arbitrator
was precluded from deciding the
counter-claim on its merits
[5]
as this was an error.
[6]
[14]
In addition, it was IDS's submission that its claims in case no
15862/2020 have been set off
and the prospects of success at trial
are good
[7]
and relies on
article 36(1)(a)(ii) of the Model Law as the source of the Court’s
power to grant the stay of the arbitral
award.
[15]
The issues that require determination are whether the grounds
contended by IDS are good in law
to suspend the enforcement of the
arbitral award. To deal with each ground raised, I shall restate the
legal principles governing
the arbitral award in terms of the Model
Law as set out below.
[16]
International commercial dispute resolutions are governed by the
Model Law, that is United Nations
Commission on International Trade
Law (UNCITRAL) Model Law on International Commercial Arbitration
which was adopted into South
African law in terms of the
International Arbitration Act, No15 of 2017 (“ the Act”).
Accordingly, this dispute is
regulated in terms thereof.
[17]
The preamble of the Act provides as follows:
“
To
provide for the incorporation of the Model Law on International
Commercial Arbitration, as adopted by the United Nations Commission
on International Trade Law, into South African law; to provide anew
for the recognition and enforcement of foreign arbitral awards;
to
repeal the Recognition and Enforcement of Foreign Arbitral Awards
Act, 1977; to amend the Protection of Businesses Act, 1978,
so as to
delete an expression; and to provide for matters connected
therewith.”
[18]
In terms of s3 of the Act, the objects thereof are to
[8]
-
“
(a)
facilitate the use of arbitration as a method of resolving
international commercial disputes;
(b) adopt the Model Law
for use in international commercial disputes;
(c) facilitate the
recognition and enforcement of certain arbitration agreements and
arbitral awards; and
(d) give effect to the
obligations of the Republic under the Convention on the Recognition
and Enforcement of Foreign Arbitral Awards
(1958), the text of which
is set out in Schedule 3 to this Act, subject to the provisions of
the Constitution.”
[19]
It is without doubt therefore that the Model Law has been
incorporated in our law and applies
in the Republic subject to the
provisions of the Act.
[9]
The
parties to an international commercial dispute may refer such dispute
to arbitration in terms of an arbitration agreement.
[20]
The arbitration is an international arbitration as contemplated by
Article 1(3) of the Model
Law because, as already stated, at the time
of conclusion of the arbitration agreement the parties’
business locations were
in different countries, namely Croatia and
South Africa.
[21]
The arbitral award made in terms of the Model Law can only become
impermissible to enforce under
certain conditions contained in s18 of
the Act, such as:
“
(a) If the court
finds that-
(i)
a reference to arbitration of the subject
matter of the dispute is not permissible under the law of the
Republic; or
(ii)
the recognition or enforcement of the award
is contrary to the public policy of the Republic; or
(b) the party against
whom the award is invoked, proves to the satisfaction of the court
that—
(i) a party to the
arbitration agreement had no capacity to contract under the law
applicable to that party;
(ii) the arbitration
agreement is invalid under the law to which the parties have
subjected it, or where the parties have not subjected
it to any law,
the arbitration agreement is invalid under the law of the country in
which the award was made;
(iii) that he or she did
not receive the required notice regarding the appointment of the
arbitrator or of the arbitration proceedings
or was otherwise not
able to present his or her case;
(iv) the award deals with
a dispute not contemplated by, or not falling within the terms of the
reference to arbitration, or contains
decisions on matters beyond the
scope of the reference to arbitration, subject to the provisions of
subsection (2);
(v) the constitution of
the arbitration tribunal or the arbitration procedure was not in
accordance with the relevant arbitration
agreement or, if the
agreement does not provide for such matters, with the law of the
country in which the arbitration took place;
or
(vi) the award is not yet
binding on the parties, or has been set aside or suspended by a
competent authority of the country in
which, or under the law of
which, the award was made.”
The
onus is on the party seeking the resistance of the enforcement of the
arbitral award to allege and prove any of the grounds
set out in s18
of the Act and the Model Law. There is no record of the averment and
proof of any of the grounds as set out in s18
of the Act that is
before me to prove and to persuade me that the refusal to make the
arbitral award an order of this court would
be justified. That alone
must be the reason for the IDS’s defence to fail. I will
demonstrate later why the defence as averred
by IDS finds no support
on the facts and the law.
[22]
IDS has relied on the fact that it has issued a counterclaim as the
basis that this court should
consider refusal of the enforcement of
the arbitral award. After proper inspection of the counterclaim, it
is clear that it deals
with the same cause of action which was before
the arbitrator. The counterclaim was properly considered by the
arbitrator when
he made an arbitral award on 9 June 2020.
[23]
This is evident from the award itself
[10]
because on its face, the arbitrator held as follows:
“
It will be
apparent from the aforegoing that I dismiss the defendant's
Counterclaim not only on the basis of there having been no
appearance
on behalf of the Defendant at the hearing before me on 25 May 2020
but also on the basis that the version advanced by
the Defendant in
its Counterclaim given the evidence which was adduced before me, it
seems to me, is so improbable as to warrant
rejection.”
Based
on this finding by the arbitrator, I find that the contention by IDS
that the counterclaim was not dealt with on merits is
without any
factual basis as the arbitrator clearly dealt with the merits of that
counterclaim. The arbitrator was required to
deal with all the
disputes of the parties and in my respectful view, he did precisely
that.
[24]
If IDS was aggrieved by the arbitral award, it ought to have taken
steps to challenge it and
this was not done. It follows that the
enforcement of the arbitral award cannot be delayed as doing that
would cause an injustice
to Industrius.
[25]
On the issue whether the counterclaim can be considered to have been
decided on merits the Court
in
United
Enterprise Corporation v STX Pan Ocean Company Ltd
[11]
held that a dismissal of an application can give rise to the
successful raising of the exception
rei
judicata
where regard being had to the judgment of the court which dismissed
the application, the import of the order [was] clearly that
on issues
raised the Court found against the party which in this case is IDS in
the previous proceedings and in favour of Industrius
in the
counterclaim arbitration proceedings. The Court furthermore held it
is not the form of the order granted but the substantive
question
(did it deceive on the merits or merely grant absolution?) that
is decisive in our law and that what is required
for the defence to
succeed is a decision on the merits.
[12]
[26]
Furthermore, IDS also contends as already stated that the arbitrator
erred when he made a finding
on the counterclaim in the arbitral
award. In
Phalabora
Copper (Pty) Ltd v Motlokwa Transport & Construction (Pty)
Ltd
[13]
the court held as follows:
“
The
party alleging the gross irregularity (of the arbitrator) must
establish it. Where an arbitrator engages in the correct enquiry
but
errs either on the facts or the law, that is not an irregularity and
is not a basis for setting aside an award. If parties
choose
arbitration, courts endeavour to uphold their choice and do not
lightly disturb it.
The
attack on the award must be measured against these standards.”
I
am of the respectful view that contending simply that the arbitrator
has erred in dealing with the counterclaim on merits in the
absence
of IDS is not a valid ground to refuse enforcement of an arbitral
award.
[27]
From the evidence adduced by IDS in the instant application based on
the subcontracts that are
used in support of the counterclaim in the
pending High Court action, case number 15862/2020, the subcontracts
have been found
by the arbitrator to be a fiction. The defence of the
res judicata
in those proceedings is likely to succeed against
IDS.
[28]
In dealing with the arbitrator’s ability to hear evidence as
part of the process of resolving
the dispute between the parties the
Court in
Wilton
v Gatonby
[14]
held as follows:
“…
tribunal
should not simply issue an award as though entering judgment under
the Rules of Court but rather should proceed to hear
such evidence as
may be tendered. Short of an express agreement between the parties,
any award resolving the dispute between the
parties should be made
only on the available evidence. The arbitrator’s decision to
hear no evidence at all resulted in an
award being made simply as a
procedural consequence of the respondent's wilful absence from the
arbitration and without the arbitrator
bringing his mind to bear upon
the issues between the parties as defined in the pleadings."
The
same conclusion cannot be made in the present case because as already
stated, the arbitrator clearly articulated and dealt with
all the
issues before him. It can be inferred from the IDS’s inability
to attack the award, that procedurally, the arbitrator
cannot be
faulted in the instant case.
[29]
Over and above the grounds that IDS can raise in terms of section 18
of the Act, to ask the Court
to refuse to make an award the order of
this court, IDS also has recourse in terms of article 36 of the Model
Law which is a mirror
of section 18 of the Act.
[30]
Under Article 36 (2) the Court may adjourn a decision on enforcement
under the Model Law only
where an application for setting aside or
suspension of an award has been made to another court in terms of
Article 36(1)(a)(v).
There is no evidence on record that such
application has been made or is pending.
[15]
[31]
It is evident from the authorities quoted above that the basic
principle articulated in the Act
is that the Model Law is
pro-enforcement of arbitral awards. The academic literature surveying
judicial policy regarding arbitration
in Australia and
Asian-Pacific
[16]
regions
extrapolate this pro-enforcement approach as follows:
“
In a Federal Court
of Australia decision,
ESCO Corporation v Brandken Resources (Pty)
Ltd
, Foster J interpreted these provisions in accordance with
international norms:
“…
a foreign
arbitral award is to be enforced in Australia unless one of the
grounds in s8(5) of the [International Arbitration Act]
is made out
by the party against whom the award is sought to be enforced or
unless the public policy of Australia requires that
the award not be
enforced. The pro-enforcement bias of the [New York] Convention and
its domestic surrogate, the IAA, requires
that this Court weigh very
carefully all relevant factors when considering whether to adjourn a
proceeding pursuant to s8(8) of
the IAA. The discretion must be
exercised against the obligation of the Court to pay due regard to
the objects of the IAA and the
spirit and intendment of the
Convention.
The pro-arbitration
approach has been highlighted by a number of judges speaking and
writing extra-curially. For example, Chief
Justice Marilyn Warren of
the Supreme Court of Victoria has said:
‘
In arbitration,
the directive role of the Court needs to be minimised. The focus
instead, turn to ways in which the Court can support
the arbitration
process and enforce arbitral awards in a timely and cost effective
manner.’
Additionally, Justice
James Allsop observed at CIArbs Asia Pacific Conference in 2011:
‘
The clear trend in
judicial decision-making about arbitration in Australia [has
transformed] from suspicion, to respect and support…In
terms
of intervention [by the judiciary], restraint is essential.
Arbitration depends for its success on the informed and sympathetic
attitude of the court.’
[32]
In Australia Courts have held that in accordance with this
pro-enforcement of international arbitral
award in terms of the Model
Law, recognition and enforcement of an arbitral award could only be
denied in limited circumstances
which are clearly spelt out in
article 36 (1) of the Model Law:
“…
which
provides for the only grounds on which recognition or enforcement of
an award may be refused by a competent court. The grounds
are
primarily, but not exclusively, concerned with independence and
impartiality of the arbitrator and the fairness of the arbitral
process…They do, however, include a competent court finding
that the recognition or enforcement of the award would be contrary
to
the public policy of [Australia]
For avoidance of doubt,
s19 of the IA Act states that an award is contrary to the public
policy of Australia if its making was induced
or affected by fraud or
corruption or a breach of the rules of natural justice occurred in
connection with the making of the …award.
Article 5 limits the
power of the court to Intervene in matters governed by the Model Law
to those categories of curial intervention
provided for in the Model
Law.
Article 34 (1) relied
upon by ICL in its separate proceedings in the Federal Court to set
aside the awards, provides that recourse
to a court against an
arbitral award may be made only by an application for setting aside
the award and only on the grounds set
out in Art 34 (2), which
substantially mirror those in Art 36 (1) limiting the grounds upon
which a court may refuse to recognise
or enforce a foreign award.”
I
am of the view that our courts should have a similar approach when
seized with an application for enforcement of foreign arbitral
award
as the Model Law is part of the laws of the Republic.
[33]
It follows therefore, in my view, that the Act and the Model Law do
not provide for the court
to refuse or delay to enforcement of the
award on the basis that a party has instituted other proceedings that
are not related
to the arbitral award or have no bearing on the
finality or enforceability of the arbitral award. Equally not
applicable, is an
attempt by a party to set off a proven debt in
terms of the arbitral award against its unproven claim in the
unrelated proceedings.
Staying the enforcement of an international
arbitral ward under those circumstances would not accord with the
spirit of the Model
Law in our Republic.
[34]
Allowing the delaying tactics in the enforcement of the arbitral
award under these circumstances
would be counter-productive and
create an imbalance in international trade.
[35]
Although IDS had conceded that the arbitrator was entitled to dismiss
its counterclaim by default,
I find it difficult to understand the
basis upon which it contends that the same action which failed at the
arbitration hearing
can properly be pursued through action
proceedings. The parties agreed to an arbitration process and once an
arbitral award was
made, that brought the arbitration to an end
unless and until the arbitral award is set aside.
[36]
Rule 39 (3) of the Uniform Rules provides that:
“
If, when a trial
is called, the defendant appears and the plaintiff does not appear,
the defendant shall be entitled to an order
granting absolution from
the instance with costs but may lead evidence with a view to
satisfying the court that the final judgment
should be granted in his
favour and the court, if so satisfied, may grant such judgment.”
This
rule has no application to arbitrations. There is no provision under
the AOL Rules permitting the arbitrator to grant absolution
from the
instance and in the instant case, he rightfully did not grant or
purport to grant absolution from the instance and concluded
the
arbitration to finally resolve the parties’ disputes.
[37]
The arbitrator was enjoined with the duty to resolve the disputes
between the parties before
him. In
Termico
(Pty) Ltd v SPX Technologies (Pty) Ltd
[17]
it was held that all issues submitted to the arbitrator must be
resolved in a manner that achieves finality and certainty. The
award
may not reserve a decision on an issue before the arbitrator or
expert for another or for the court to resolve. It follows
therefore
that to bring a failed counterclaim before court by way of action
proceedings is a proverbial flogging of a dead horse
and cannot as
already stated, be used as a ground to delay the enforcement of the
arbitral award.
[38]
In
Telcordia
Technologies Inc v Telkom SA Ltd
[18]
,
the court held, in considering whether an error on the side of the
arbitrator in his award can be used as a ground to oppose the
enforcement of the award, that:
“
The
fact that the arbitrator may have either misinterpreted the
agreement, failed to apply South African law correctly, or had regard
to inadmissible evidence does not mean that he misconceived the
nature of the inquiry or his duties in connection therewith. It
only
means that he erred in the performance of his duties. An arbitrator
‘has the right to be wrong’ on the merits
of the case,
and it is a perversion of language and logic to label mistakes of
this kind as a misconception of the
nature
of the inquiry
–
they may be misconceptions about meaning, law or the admissibility of
evidence but that is a far cry from saying that
they constitute a
misconception of the nature of the inquiry.”
The
dismissal of IDS’s counterclaim has been brought to finality
and whether or not the arbitrator was correct in doing that
should
not and cannot be used as a ground to challenge the enforcement of
the arbitral award.
[39]
Another point that has been raised by IDS is that Industrius must
provide security for costs
before the award can be enforced. This
submission must fail because it runs against the provisions of
article 5 of the Model Law
which provides as follows:
“
In matters
governed by this Law, no court shall intervene except where so
provided in this Law.”
I
have already dealt with instances where the court can intervene and
none of those grounds find application in the matter before
me.
[40]
Based on the reasons already stated, I hold the view that Industrius
has made out a case for
the enforcement of the arbitral award.
ORDER
[41]
Having read the documents filed of record and having heard the
submissions made by Counsel and
considered the matter:
It
is ordered that:
1. The arbitral award
given on 9 June 2020 in the arbitration proceedings between
Industrious and IDS is made an order of court.
As a consequence
thereof:
1.1.
IDS must pay the Industrius the amount of €
2 775 853.08;
1.2.
IDS must pay Industrius interest on the
amount in paragraph 1.1 above calculated in accordance with the
following table with effect
from the dates reflected in the column
immediately adjacent to the amount in question and at the rate
allocated in regard thereto,
until date of payment:
Amount
Due date
Rate of Interest
€
2
100.00
31
July 2016
10.5%
€
3
648.00
31 July 2016
10.5%
€
91
210.00
31 October 2016
10.5%
€
23
104.00
31 January 2017
10.5%
€
66
395.00
31 May 2017
10.5%
€
297
785.30
30 June 2017
10.5%
€
683
395.40
30 June 2017
10.5%
€
604
319.17
31 July 2017
10.5%
€
261
407.95
31 July 2017
10.5%
€
629
641.90
31 August 2017
10.5%
€
247
920.61
31 August 2017
10.5%
€
258
794.50
30 September 2017
10.25%
€
101
955.25
30 September 2017
10.25%
1.3.
IDS must pay Industrius’s costs in the counterclaim instituted
in the arbitration proceedings between Industrius and
IDS.
1.4.
IDS must pay Industrius’s costs in the arbitration proceedings
between Industrius and IDS including:
1.4.1. The costs
associated Industrius’s preparation of its defence to the
counterclaim insofar as such costs are not covered
by the Award set
out in subparagraph 1.3 above; and
1.4.2. the costs of
the arbitration; and
1.4.3. the costs incurred
by Industrius in consequence of the employment of two counsel.
2.
IDS must pay the costs of this application.
SENYATSI
ML
Judge
of the High Court of South Africa
Gauteng
Local Division, Johannesburg
REPRESENTATION
Date
of hearing: 28 April 2021
Date
of Judgment: 20 August 2021
Applicant’s
Counsel: Adv S Du Toit
Adv
I Currie
Instructed
by: Knowles Husain Lindsay Inc.
Respondent’s
Counsel: Adv HJ Fischer
Instructed
by: Spellas Lengert Kuebler Braun Inc.
[1]
See power of attorney which was provided to the attorneys in this
application only on 24 June 2020, p009-82, para 41-2 of Caseline.
[2]
See FA2, 001-21 on the Caseline
[3]
See FA p001-11, para 15; IDS AA, p009-6, papa10
[4]
See
AA, P007-7, para 21-2
[5]
See IDS RA, p010-11, para16
[6]
See IDS RA, P010-10, para9
[7]
See AA, p009-10, para 40
[8]
See s3 of the Act
[9]
s3(d) of the Act
[10]
Para 47 of the arbitral award
[11]
[2008] ZASCA 21
;
[2008] 3 All SA 111
(SCA) at para
[9]
[12]
Same para [9]
[13]
2008(3) SA 585 (SCA) para [8]
[14]
1994 (4) SA 1690
(W) at 166H-167B
[15]
See
Admart
AG v Stephen and Mary Birch Foundation Inc.
US Court of Appeals for the 2
nd
circuit, 8 August 2006 where request for adjournment pending outcome
of an arbitration in Switzerland was refused because the
arbitration
was not an attempt to set aside or suspend the Award.
[16]
See Also, Justice James- Judicial Support or arbitration (FCA)
[2014] FedJSchol
[17]
2020 (2) SA 295
(SCA) [13]
[18]
[2006] ZASCA 112
;
2007 (3) SA 266
(SCA) at
[85]