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[2019] ZAGPPHC 216
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Red Finch Investments v Elegant Line Trading 898 CC and Another (5577/18) [2019] ZAGPPHC 216 (4 June 2019)
REPUBLIC OF SOUTH AFRICA
IN THE HIGH COURT OF SOUTH
AFRICA
GAUTENG DIVISION, PRETORIA
Case No: 5577/18
4/6/2019
In
the matter between:
RED
FINCH INVESTMENTS
Applicant
(Registration
Number: 2006/026359/23)
and
ELEGANT
LINE TRADING 898 CC
1
st
Respondent
(Registration
Number: 2007/088945/23)
JESSIE
CONRADIE
2
nd
Respondent
JUDGMENT
MNGQIBISA-
THUSI, J
[1]
The applicant is seeking the review and
setting aside of an arbitration award made by the second respondent,
Mr Jesse Conradie,
published on 18 December 2017.
[2]
The second respondent has filed a notice
to abide .
[3]
In order to have a proper perspective of
the dispute between the parties, it is necessary to set out the
chronology of events leading
to the arbitration being made.
[4]
The dispute referred to arbitration
concerns issues relating to a construction agreement ("the
agreement") concluded by
the applicant, Red Finch Investments CC
and the first respondent, Elegant Line Trading 898 CC, in August 2016
with regard to the
Witfield Ridge Residential Block Project in
Boksburg. More specifically the disputes relates to the validity of
payment certificates
submitted by the first respondent and signed off
for payment by the project manager.
[5]
The agreement provided that in the event
of a dispute arising concerning the interpretation of the agreement,
such dispute would
be resolved through a private arbitration in terms
of the Arbitration Act
[1]
("the Act").
[6]
On 20 April 2017, the first respondent
declared a dispute and the parties agreed on the appointment of an
independent arbitrator.
On 1 September 2017 the Master Builders
Association appointed the second respondent as arbitrator. Upon his
appointment as arbitrator,
the second respondent dispatched a letter
(dated 29 September 2017) to the parties in which he set out the
terms and conditions
under which he would conduct the arbitration.
Besides confirming his acceptance of his appointment as arbitrator,
the letter in
part provides that:
"1.
…
(iii)
the
Rules for the Conduct of Arbitrations, 2013 Edition, published by the
Association of Arbitrators (Southern Africa) or any modification
thereof shall apply to this arbitration,
(iv)
the Parties agree to conduct the
proceedings in the most cost efficient and expeditious manner
possible, namely on the basis of
a 'documents only ' arbitration.
…
3.
In
order to mitigate costs I suggest that we avoid unnecessary
preliminary meetings. To this effect, the Arbitrator shall after
entering the reference convey in writing the process and procedure
including provisional timetable which shall govern this arbitration
as far as the modified Rules of Conduct is concerned.
4.
The
Arbitrator shall consider facilitating a preliminary meeting upon
receipt of a well motivated and reasonable request from either
Party
.
5.
The
Parties are invited, in their response to this letter, to submit
proposals which might facilitate the efficient conduct of their
arbitration".
[7]
The second respondent also requested the
parties to sign the appointment letter, which letter was signed by
the applicant's and
the first respondent's respective attorneys on 23
October 2017 and 12 September 2017, respectively.
[8]
On 23 October 2017 at 12h38, the
applicant's attorneys, J H Boshoff, sent the second respondent an
email to which they attached
a power of attorney, signed tariff fees
and proof of payment of the deposit. Further in the same email the
attorneys inquired from
the second respondent whether a preliminary
meeting scheduled for 27 October 2017 at 12h00 would still take
place. On the same
day the second respondent, without addressing the
query about the scheduled preliminary meeting of 27 October 2017,
responded to
the applicant's email (at 13h27). The response in part
reads as follows:
"I take it, by way of your
correspondence that you agree with the process, procedure and content
of my last letter.
On this basis there will be no
need for a preliminary meeting and the submission of pleadings may
ensue in accordance with my set
procedure.
Trust this clarifies any
ambiguity".
[9]
On the same day (23 October 2017) the
second respondent wrote a letter to the parties in which he
indicated, in part, that:
"1.
Furthermore to my letter referenced ELEGANTRED/101817/PREL/05 and
dated 10/18/2017
I herewith confirm the following in terms of which
the Claimant and Respondent agreed to by way of email confirmation
received
on 20 October 2017 and 23 October 2017 respectively.
2.
Subsequent
to being afforded reasonable opportunity to make submissions, the
Parties have opted to do away with a preliminary meeting
and
consequently confirms the following:
3.
The
Parties agree that an arb1tr able dispute exists in terms of the
matters initially notified by the Claimant.
4.
The
provisional timetable dated 18/10/2017 is accepted. Should
variation(s) ensue as determined by the Arbitrator for whatever
reason, the working days as reflected shall, without reducing, be
shifted to accommodate such variation(s).
5.
A
stay of proceedings shall ensue during the period of 09 December 2017
and 14 January 2018 in the event that the arbitration prolongs
past
08 December 2017.
…
13.
The
Rules for the Conduct of Arbitrations, 2013 Edition, published by the
association of Arbitrators (Southern Africa) as amended
by the
Arbitrator shall apply to this arbitration. Initial amendments
include:
a.
Article
32 - A failure by any party to object promptly to any non
compliance with these Rules as amended or with any requirement
of the
arbitration agreement shall be deemed to be a waiver of the right of
such party to make such objection.
b.
…
15.
Both
parties agree that the Arbitrator shall not be obliged to follow the
strict rules of law and may determine any question by
reference to
considerations of general justice and fairness.
16.
Both
Parties agree that the Arbitrator may depart from any statutory or
common law rules of evidence to the extent that it deems
reasonable
provided that the rules of natural justice shall be observed.
…
.
19.
The arbitrator shall take into account such circumstances as it
considers relevant, including
the extent to which each Party has
conducted the arbitration in an expeditious and cost effective
manner".
[10]
The second respondent further detailed the time frames for the
submission of the statement of
claim (24 October 217); the statement
of defence (2 November 2017) and the claimant's reply, if any, (9
November 2017).
[11]
On 3 November 2017, the applicant's
attorneys wrote to the second respondent that on the basis of advice
from counsel, who was briefed
for the cancelled preliminary meeting
of 27 October 2017, they were requesting that a preliminary meeting
be held in order to discuss
and agree on the time-table and
procedure. In response and in a letter addressed to both parties
(dated 5 November 2017), the second
respondent reminded the parties
that they had made a choice against holding a preliminary meeting.
Further, the second respondent
stated that the applicant had failed
to submit its statement of defence and that in terms of the rules
[2]
,
he was empowered to continue to consider an award on the basis of
only the documents before him. Further, the second respondent
informed the parties that the applicant had not shown sufficient
cause for a preliminary meeting to be held. In a further communique
to the parties on 9 November the second respondent reiterated the
contents of his letter of 5 November 2017 and that he will continue
with the arbitration proceedings in the absence of the applicant's
statement of defence. On the same day Boshoff Attorneys withdrew
as
the applicant ' s attorneys.
[12]
On 10 November 2017, Booyse Attorneys in
formed the respondents that it had been appointed as the applicant's
new attorneys of record
and requested an extension in that they were
still awaiting the complete record of the proceedings thus far from
the applicant.
[13]
After being granted an extension and on
12 November 2017, Booyse attorneys again confirmed that it was still
not in possession of
the required documents and was therefore not in
a position to advise the applicant. Further, Booyse Attorneys noted
that it was
aware that a preliminary meeting had not as yet being
held and that it was its understanding that the arbitration was not a
'documents
only' process.
[14]
After receiving a complaint from the
first respondent about the applicant's alleged delaying tactics, on
14 November 2017 the second
respondent wrote a letter to the parties'
attorneys in which he reiterated that it was his understanding that
all preliminary matters
were dealt with in terms of his letter dated
23 October 2017. He further reminded the parties that in terms of the
rules of the
arbitration he was entitled to make an award in the
absence of any submission from the applicant as it had been given
ample opportunity
to provide its submission(s). Furthermore, the
second respondent informed the parties that he would consider a
preliminary meeting
only if this was agreed to by the parties. On 16
November 2017 the mandate of Booyse Attorneys was terminated and JH
Boshoff Attorneys
were reinstated as applicant's attorneys.
[15]
On 17 November 2017 Boshoff Attorneys
wrote an email to the second respondent stating the following:
15.1
that it appears that the second
respondent had a mistaken understanding that the applicant had agreed
to the procedure suggested
by the second respondent;
15.2
that a request was made on 3 November
2017 for the holding of a preliminary meeting where the procedure and
the time-table for the
arbitration would be agreed upon, which
request was rejected by the second respondent;
15.3
that the applicant was of the view that
it was being coerced into accepting the procedure suggested by the
second respondent and
as a result was of the opinion that from the
conduct of the second respondent, it perceived that he will be biased
in favour of
the first respondent and that a fair and impartial
arbitration would not be conducted; and
15.4
that in view of their concern pertaining
to the second respondent's perceived bias, they requested the second
respondent to excuse
himself from the arbitration proceedings.
[16]
On 18 November 2017 second respondent
dismissed the applicant's concerns with regard to the procedure and
his perceived bias. However
the second respondent did offer the
parties a teleconferencing on specific preliminary points raised.
[17]
On 1 December 2017 and after the
applicant 's statement of defence
[3]
and the first respondent's replication, and after the applicant had
declined an invitation from the second respondent to replicate,
wrote
a letter to the second respondent that in light of the documents
already sub mitted, a dispute of fact existed which could
be resolved
only through oral evidence. The request for oral evidence was
rejected and on confirming his view that all preliminary
issues had
be settled by agreement, he closed the proceedings and informed the
parties that he was considering the papers before
him and would
prepare an award soon.
[18]
The second respondent issued his award
on 18 December, 2017.
[19]
It is the applicant's contention that
the second respondent misconducted himself in that he did not conduct
himself in an impartial
manner with regard to the arbitration. In
particular, the applicant's complaint is that the second respondent
was unfair in that
he did not give the parties an equal opportunity
to present their case. It is the applicant's content ion that the
main dispute
between the parties related to the validity of certain
payment certificates submitted by the first respondent which way
accepted
and signed off by the project manager. It was submitted on
behalf of the applicant that at no stage did the applicant agree to a
document only arbitration . In this regard Counsel for the applicant
argued that 4t h respondents were aware by 17 November 2017
that the
applicant informed them of its position with regard to the process
followed in the arbitration. Further that on 01 December
2017 the
second respondent was informed that it was the applicant's view that
a dispute of fact existed and that a 'documents only'
approach was
not appropriate.
[20]
Furthermore that the applicant had
suggested that there was a need for oral evidence to be led in light
of the evidence submitted
to the second respondent from which issues
in dispute arose. It is the applicant's contention that it was not
provided with the
opportunity to present its case or to deal with the
factual disputes existing. It is further submitted that the evidence
which
form the basis for the award was obtained in an improper
manner. Further, it is the applicant's contention that it was under
the
impression that a preliminary meeting which had been scheduled
and later cancelled would be re-scheduled where issues pertaining
to
the time schedules, further documents as well as the procedure to be
followed in the conduct of the arbitration wound be discussed.
It is
the applicant 's contention that the haste in which the arbitrator
conducted the arbitration prevented it to deal with a
bundle of
documents as listed in annexure "A4" to the founding
affidavit. From the founding affidavit it appears that
the said
documents related to, amongst others, the status of the project
manager who authorized certificates which are being disputed.
According to the applicant the dispute which exists between the
parties cannot be properly dealt with on the basis of a 'documents
only' the process. Applicant complains that it was denied the
opportunity to call witnesses and to cross-examine. In its founding
affidavit, the applicant avers that the award was based on documents
it did not consent to.
[21]
Whilst conceding that the second
respondent had suggested that a preliminary meeting should be held in
a letter dated' 8 October
2017, it was submitted on behalf of the
first respondent that the decision to proceed with the documents only
process was as a
result of the failure of the applicant to submit the
necessary documentation on time. It was furthermore submitted that a
preliminary
meeting could not be held as the applicant had failed to
give a well-motivated and reasonable request for such meeting.
Further
that even though the second respondent had stated that there
was agreement between the parties on a ' documents only' process the
applicant did not object to the process adopted by the second
respondent and thereby acquiesced thereto. On behalf of the first
respondent, it was incorrectly submitted on behalf of that the
applicant had for the first time on 03 of November 2017 requested
a
preliminary meeting to be held. According to the first respondent
timetable and the procedure for the arbitration were agreed
upon
already when the applicant's attorneys requested the preliminary
meeting. According to the first respondent timetable and
the
procedure for the arbitration were agreed upon already when the
applicant's attorneys requested the preliminary meeting. According
to
the first respondent the timetable and the procedure for the
arbitration were agreed upon already when the applicant 's attorneys
requested the preliminary meeting. However, note is taken of the fact
that already on 23 October 2017, the applicant's attorneys
had
inquired from the second respondent as to when the cancelled
preliminary meeting scheduled for 27 October, 2017 would be held.
The
first respondent disputes the allegation that the applicant was
denied the opportunity to fully present its case in that in
the
letter from the second respondent dated 18 November, 2017, the second
respondent had invited the applicant to submit its preliminary
issues, together with a proposal as to how the dispute pertaining to
the preliminary matters, could be resolved. It is the first
respondent's contention that the request for a preliminary meeting
was merely a delaying tactic on the part of the applicant. It
was
submitted on behalf of the first respondent that the applicant failed
to timeously make a well-motivated request for a preliminary
meeting
to be held, hence the conclusion that was drawn that the parties had
agreed on a 'documents only' procedure would be adopted.
Further
Counsel for the first respondent urged this Court to dismiss the
application on the basis also that from the applicant
founding
affidavit it is not clear on which of the three grounds set out in s
33(1) of the Act is the applicant relying on for
the review of an
award.
[22]
Section 33(1) of the Act reads as
follows:
"33.
Setting aside an award. - (1) Where -
(a)
any
member of an arb it ration 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
make an order setting the award
aside."
[23]
The applicant seeks the review and
setting aside of the award on the ground that the process followed by
the arbitrator in the arbitration
was inappropriate and as a result
the award was also inappropriate.
[24]
When parties refer a dispute to
arbitration, the arbitrator is confined to the terms of reference
agreed upon between the parties.
[25]
If an arbitrator makes an error of law
in his award, such award does not necessarily amount to a gross
irregularity unless the applicant
can show that the arbitrator's
mistake is so gross and manifest in nature that it imputes moral
turpitude or bad faith on the part
of the arbitrator. Mistakes in law
or fact are not per se bases for setting aside an arbitration award.
In
Total Support Management (Pty) and
another v Diversified Health Systems (SA) (Pty) Ltd and Another
[4]
.
[26]
In
Telcordia
Technologies Inc v Telkom SA Ltd
[5]
the court stated that:
"[72] It is
useful to begin the oft quoted statement from
Ellis
v Morgarn
[6]
where Mason J
laid down the basic principle in these terms:
'But an irregularity in
proceedings does not mean an incorrect judgment, it refers not to the
result, but to the methods of a trial,
such as, for example, some
high-handed or mistaken action which has prevented the aggrieved
party from having his case fully and
fairly determined'.
[73] The
Goldfields
Investment
qualification to this general principle dealt with two
situations. The one is where the decision-making body misconceives
its mandate,
whether statutory or consensual. By misconceiving the
nature of the inquiry the hearing cannot in principle be fair because
the
body fails to perform its mandate. Goldfields Investment provides
a good example. According to the applicable Rating Ordinance any
aggrieved person was entitled to appeal to the magistrates' court
against the value put on property for rating purposes by the
local
authority. The appeal was not an ordinary appeal but involved, in
terms of the Ordinance, a rehearing with evidence. The
magistrate
refused to conduct a rehearing and limited the inquiry to a
determination of the question whether the valuation had
been
'manifestly untenable' . This meant that the appellant did not have
an appeal hearing (to which he was entitled) at all because
the
magistrate had failed to consider the issue prescribed by statute.
The magistrate had asked himself the wrong question, that
is, a
question other than that which the Act directed him to ask. In this
sense the hearing was unfair. Against that setting the
words of
Schreiner J should be understood .
'The law, as stated in
Ellis v
Morgan(supra)
has been accepted in subsequent cases, and the
passage which has been quoted from that case shows that it is not
merely high
handed or arbitrary conduct which is described as a
gross irregularity; behaviour which is perfectly well-intentioned and
bona
fide, though mistaken, may come under that description. The
crucial question is whether it prevented a fair trial of the issues.
If it did prevent a fair trial of the issues then it will amount to a
gross irregularity. Many patent irregularities have this
effect".
[27]
The question to be determined is whether
the second respondent had denied the applicant the opportunity of a
preliminary meeting
and for oral evidence to be led.
[28]
From the chronology as set out above, it
is clear that the applicant's attorneys had raised the issue of
preliminary meeting on
23 October 2017. It appears to be common cause
that such a meeting had been scheduled for 27 October, 2017. In all
the correspondence
to the parties by the second respondent, there is
nowhere where the second respondent categorically addresses the issue
of the
cancelled preliminary meeting. It appears that the second
respondent based his conclusion that there was agreement on the
timetable
and the procedure to be followed on the fact that the
applicant's attorneys had forwarded to him a power of attorney,
signed tariff
fees and proof of payment of a deposit. However, in the
same letter to which the above mentioned documents were attached
,
the applicant's attorneys did the race the issue of the preliminary
meeting. It cannot therefore be said that the attachment of
the said
documents trumped the issue of the about the preliminary meeting.
[29]
The applicant is entitled to a fair
hearing and to be given the opportunity to present its case. It was
incumbent on the second
respondent, on receiving the query about the
cancelled meeting, to pursue the issue so that there is no
misunderstanding about
the procedure to be followed. To brush off the
concerns of the applicant amounts to an irregularity in the conduct
of the proceedings
in that the second respondent failed to address
the applicant's concerns with regard to the holding of a preliminary
meeting. There
is no explanation as to why it became unnecessary to
hold a scheduled preliminary meeting which appears to have been
agreed upon.
[30]
On the issue of the existence of a
dispute of fact, it appears that this issue came up after the parties
had submitted their statements
of claim and difference the defence.
At this stage, it was again incumbent on the second respondent to
interrogate and deal with
the claim of the existence of a dispute of
fact before proceeding to deal with the merits of the arbitration .
Nothing turns on
the fact that the applicant refused to respond to
the first respondent's application. By that stage, the perception on
the part
of the applicant was that the second respondent was not
impartial.
[31]
I am of the view that, despite the
second respondent professing that the arbitration will be conducted
taking into account the rules
of natural justice, that by failing to
address the issue of a preliminary meeting, particularly as one had
already been scheduled,
and was cancelled and the refusal to consider
the complaint that there is a dispute of fact, merely on the basis
that there was
agreement that the arbitration was a documents only
process. The prejudice to the applicant in the failure by the second
respondent
to consider holding a preliminary meeting vitiated the
fairness of the arbitration proceedings.
[32]
In the result, the following order is
made:
1.
That
the arbitration award published by the second respondent on 18
December 2017 is set aside.
2.
The
first respondent to pay the costs of this application on a party and
party scale.
NP MNGQIBISA-THUSI
Judge of the Gauteng High Court
Division
For the applicant, Adv L K Van der
Merwe (instructed by Attie Schlechter Inc) and for the first
respondent, Adv E Van As (instructed
by Hills Inc)
[1]
Act 42 of 1965
[2]
Specific reference was made to article 30(1) of the Rules.
[3]
Applicant's statement of defence was submitted on 17 November
2017.
[4]
[2002] ZASCA 14
;
2002 (4) SA 661
(SCA) at 670H-672H).
[5]
[2006] ZASCA 112
;
2007 (3) SA 266
(SCA) .
[6]
1909 TS 576
at 581.