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[2020] ZAGPPHC 6
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Mangolene N.O and Others v Small Enterptise Finance Agency (SOC) Limited (89435/2018) [2020] ZAGPPHC 6 (29 January 2020)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
(1)
REPORTABLE:
YES/
NO
(2)
OF
INTEREST TO OTHER JUDGES:
YES
/NO
(3)
REVISED.
CASE
NO:
89435/2018
29/1/2020
In the matter between:
In the matter between:
ABEL MANGOLENE
N.O
FIRST APPLICANT
DON MASHELLE N.O
SECOND APPLICANT
JOY BALIPELE
N.O
THIRD APPLICANT
And
SMALL
ENTERPRISE FINANCE AGENCY
RESPONDENT
(SOC) LIMITED
Coram:
Sardiwalla J
Interpretation
-
Whether a
question or issue contemplated in respect of an arbitration award
creates a
new
dispute to be referred to arbitration in terms of the arbitration
provision in the principal agreement.
JUDGMENT
SARDIWALLA
J:
[1]
In this matter. the Applicant seeks to make an earlier arbitration
award an order
of this Court. Alternatively, that the dispute between
the parties had properly and validly been referred to arbitration and
therefore
there is no live dispute that needs to be referred to
arbitration.
[2]
The Respondent has a different
view
and insists that the applicant's
claim gives rise to new disputes which only arbitration in terms of
the written Trust Deed has
jurisdiction to resolve. According to the
Respondent, the purported written agreement entered into between the
parties is still
valid and binding1 including the arbitration clause
22 which reads as follows;
“
22
Arbitration
22.1
Should any dispute (other than
a
dispute in respect of which urgent
relief may be obtained from
a
court
of
competent
jurisdiction)
arise
between
the participants and/or parties in the widest sense in connection
with
-
22.1.1
the formation or existence of;
22.1.2
the carrying into effect
of,·
22.1.3
the interpretation
or
application of the provisions
of;
22.1.4
the participants and/or parties
respective rights and obligations in terms
of
or arising out
of;
22.1.5
the validity, enforceability,
rectification, termination or cancellation, whether in whole
or
in part of·,
2.16
any documents furnished
by the participants and/or parties pursuant to the provisions of this
deed or which relates in any way to
any matter affecting the
interests of the participants and/or parties in terms of this deed,
that dispute shall, unless resolved
amongst the participants and/or
parties
within
ten
business
days from the
dispute, be referred to and determined by arbitration in terms of
this clause, provided that
a
party to the
dispute has demanded the arbitration by written notice to the other
participant and/or parties."
[3]
The underlying
dispute between the parties can be summarised as follows: On 28
September 2017 Advocate J H Josephson handed down
an arbitration
award in favour of the Applicant ordering that;
“
1.
The Respondent is to pay the Claimants the sum of R 3 555 511.23;
2.
The Respondent is
to
pay the Claimants interest against
the unpaid drawdowns at the prime rate plus 5% calculated from the
date of expiry
of
the
10 business day period set
out
in
the drawdown notices to date of payment;
3.
Interest
on
all other amounts that may be
included in the claims are to be paid by the Respondent at the rate
of 10
. 25%
per
annum from date
of
demand
to date of payment;
4.
The Respondent is
to
pay the Claimants
60%
of the taxed or agreed party and
party costs of the arbitration;
5.
Claimants are to pay the
Respondent the taxed
or
agreed
party and party costs of the application to reopen the Claimant's
case including the casts of correspondence
between
the parties' attorney prior thereto;
6.
The Claimants are to pay the
Respondent's
costs
or
agreed party and party costs occasioned by the Respondent's
counterclaim;
7.
The Small Business Growth Trust
Fund which is annexure
"S1"
to the claimant's statement of claim
is to be dissolved in accordance with the provisions of clause 18
of
the trust deed in respect
of
the said trust fund."
The
arbitration award was in respect of the respondent's liability for
existing drawclowns issued for the period of 2013 to 2014
and 2015 to
2016. The matter was set down for hearing on 2-3 March 2017 however
on 7 March 2017 the applicant requested the matter
be re-opened on
the basis that the respondent's accounting was inherently flawed and
new evidence be tendered. The re-opening of
the matter was initially
opposed by the respondent, however on 14 March 2017 the parties
agreed to a further hearing. Advocates
J H Josephson's award was made
having regard to evidence led at both hearings. The applicant
contends that by ordering the Fund
dissolved according to the
provisions of Section 18, the arbitrator was fully aware of the fact
that, the Fund could only be dissolved
after the Funds existing
liabilities for the period of 2013-2014 and 2015-2016 together with
the future drawdowns issued by the
Fund, had been fully discharged to
its creditors. The dissolution award in accordance with Section 18
was therefore done with the
intention of expenses or creditors being
paid up to that date.
[4]
The Respondent however disputes that the
extent of the Fund's current liabilities extends after 1 October
2016. It further disputes
that it is obliged to pay the Fund such an
amount in terms of clause 10.2.9.1 of the trust deed and that the
drawdowns issued for
the period 1 October 2016 to 2017 are claims
covered by the arbitrator's award. It therefore pleads that the
relief sought in payers
2 and 3 of the notice of motion cannot be
made orders of court on the pretext of such being part of the earlier
arbitration award
but are rather new disputes that ought to be
referred to arbitration.
[5]
The Respondent accordingly launched an
application in terms of section 6(1) of the Arbitration Act 42 of
1965 (the
"
Arbitration Act"
;),
which appears at page 116 of the
papers. That application, to which reference will be made as the
"stay application",
is based on the fact that the parties'
relationship is regulated in terms of a written trust deed. It avers
that the written trust
deed contains an arbitration clause with an
ambit that covers the types of disputes that are raised by the
Applicants in the main
application, as well as the fact that the new
disputes aired in the main application raise factual issues that are
not capable
of being resolved in motion proceedings where the
applicants are seeking final relief on affidavit.
[6]
The approach adopted by our Courts in
deciding whether a dispute comes within the provision(s) of an
arbitration clause in a contract,
was discussed by the
Supreme Court of Appeal, in
North
East
Finance
(Pty) Ltd v Standard Bank of South Africa LTD
[1]
,
which dealt in particular
with the effect fraud has on an arbitration clause in general. The
parties entered into a settlement agreement
which contained an
arbitration clause. The two issues considered on appeal were firstly,
whether the arbitration clause could be
construed so as to compel
submission to arbitration on whether the bank was induced by North
East's fraud to conclude the settlement
agreement and secondly, if
so, whether the allegations were wholly unfounded.
[2]
The arbitration clause provided specifically that
'any
dispute including any question as to the enforceability of this
contract’
would be referred to
arbitration.
[7]
Lewis JA, speaking on behalf of the
Court in North East, stated in paras 15 and 16, the following:
"[15]...It is not, however, necessary
(indeed it is not possible, given the disputes of fact in respect
of
the alleged fraud) for this court
to
determine whether the settlement
agreement
was
void
from inception
or
voidable
until the bank had elected
to
resile. I consider that the term
'enforceability' refers to both
a
void and
a
voidable contract ff the parties had
intended that the question whether fraud inducing the contract should
be determined by an arbitrator,
then he
or
she would determine whether the
contract was valid and enforceable, or voidable
or
void.”
[16] It is in principle possible for the
parties
to
agree
that the question of the validity
of
their agreement may be determined by
arbitration even though the reference to arbitration is part of the
agreement being questioned.
That is suggested in
Heyman
v Darwin's Ltd
[3]
.
Lord Porter said:
'I think it essential
to
remember that the question whether
a
given dispute comes within the
provisions
of
an
arbitration clause
or
not
primarily depends upon the terms of the clause itself. If two parties
purport
to
enter
into
a
contract
and
a
dispute
arises as
to
whether
they have done so
or
not,
or as
to
whether
the alleged contract is binding upon them, I see no
reason
why they should not submit that
dispute
to
arbitration.
Equally, I see no reason why, if at the time when they purport to
make the
contract
they
foresee the possibility of such
a
dispute arising, they should not
provide in the contract itself for the submission to arbitration of a
dispute
as
to
whether the contract ever bound them
or
continues to
do
so. They might, for instance,
stipulate that, if
a
dispute
should
arise
as
to
whether
there had been such
a
fraud,
misrepresentation
or
concealment
in the negotiations between them as
to
make a purported contract voidable,
that dispute should be submitted to arbitration. It may require very
clear language to effect
this result, and it may be true
to
say that such
a
contract is really collateral to the
agreement supposed to have been
made,
but I do not
see
why it should not be done."
[8]
Having examined the
ambit of the arbitration clause in that matter and what the parties
intended by having regard to the purpose
of their contract (the
settlement agreement), it was held by the SCA that the parties
intended that the arbitrator's role would
only be to determine
disputes in respect of accounting issues, and it was not intended
that the validity or enforceability of the
contract, which was
allegedly induced by fraudulent misrepresentations and
non-disclosures would be subject to arbitration.
[4]
[9]
In casu,
the
facts in the present instance are distinguishable from the cases
discussed by the Supreme Court of Appeal
[5]
as in both those matters fraud was either common cause or proven by
the aggrieved party who wanted to resile from the arbitration
agreement. In the present instance, the parties agreed
inter
alia,
that
“
any
documents furnished by the pal1.icipants and/or parties pursuant
to
the
provisions of this deed or which relates in any way to any matter
affecting the interests of the participants and/or parties
in terms
of this deed, that dispute shall, unless resolved amongst the
participants and/or parties within ten business days from
the
dispute, be referred ta and determined by arbitration in terms of
this clause, provided that
a
party
to the dispute has demanded the arbitration by written notice to the
other participant and/or parties.
"
The respondent contends that, on a
proper reading of clause 22 the parties clearly intended that all
disputes that affect the parties'
Interests Including the
Interpretation of the arbitrator's award should be determined by the
arbitrator.
[10]
Counsel for the Respondent argued that the context in which the
parties argued at the arbitration
hearing and to which the award was
made excluded the current dispute as this was not foreseen and or
foreseeable by the Applicants
at the time and could not have been in
the contemplation of the parties.
[11]
The principles regarding the
interpretation of contracts is well settled in our law and it is
unnecessary to recite them again.
The same approach applies in
considering the ambit of an arbitration agreement or award. A Court
must ascertain what the parties
intended by having regard to the
purpose of their agreement, and interpret it contextually so as to
give it a commercially sensible
meaning
[6]
.
[12]
In the present instance, given the
disputes of fact regarding the award and what it included, it is not
possible for this Court
to make a determination. The ultimate
question for consideration is whether the parties intended that if
such a dispute arose,
as in this instance. that dispute would be
determined by an arbitrator.
[13]
In
casu,
at the heart of the Respondent's
opposition is that the Applicants at the time did not foresee and
therefore never raised the issue
of the future drawdowns that would
be issued until the dissolution of the trust, therefore the
arbitrator did not and could not
make an award to that effect. The
Applicants only raised the drawdowns that existed at the time for the
periods specified. To this
end I am mindful of the reference that the
Applicants have made with respect to what was argued at the
arbitration hearing by the
Respondent's counsel, "/
think
it is important not to lose sight of the fact that the Fund brought
a
case which says that
we
are ultimately liable for their
obligations, existing, any obligation or existing liability, not
spent
ones". This is my opinion
provides a clear context to what was argued and what needed to be
established. If the Respondent
intended only to argue existing
liabilities for the period of 2013 to 2014 and 2015 to 2016, the
arbitrator could not in my mind
have made an award that extended
after such period.
[14]
In considering the arbitration agreement
as recorded in clause 22, It is evident that the parties agreed that
where a dispute affected
the rights of any party that such dispute
would be subject to arbitration. Having regard to the abovementioned
arbitration clause
and the agreement as a whole, it is evident the
parties envisaged and intended, at the time of concluding the
agreement, that all
their disputes would be determined by
arbitration. To view it differently would in my view give the
agreement a commercially insensible
meaning.
[15]
For these stated reasons, it follows
that the Respondent properly referred the matter to arbitration in
terms of the agreement.
[16]
In
the result the following order is made:
The Application is dismissed
with costs.
CM
SARDIWALLA
JUDGE
OF THE HIGH COURT
Date
of Hearing:
19 August 2019
Date
of Judgement
29 January 2020
Appearances:
For
the Applicant:
Adv. J
Berlowitz
Instructed
by:
Salant Attorneys
For
the First Respondents:
Adv.: SW Burger
Instructed
by:
Mothle Jooma Sabdia
Inc
[1]
2013 (5) SA 1 (SCA)
[2]
North East supra, at p5
par.11
[3]
[1942] ALL ER 337
(HL)
at 334; 357 8-D.
[4]
Supra para 30.
[5]
North West Provincial Government and Another v Tswalng
Consulting CC and Others, supra; and North East Finance (Pty) Ltd v
Standard
Bank of South Africa Ltd, supra
[6]
See
North East. supra at paras 24
-
25
and the
cases
referred to therein.