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[2019] ZAWCHC 73
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Rural Maintenance (Pty) Ltd v Fast Pulse Trading 63 (Pty) Ltd and Another (17331/2018) [2019] ZAWCHC 73 (17 June 2019)
THE
HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
CASE
NO
: 17331/2018
DATE
:
2019.06.10
In
the matter between
RURAL
MAINTENANCE (PTY)
LTD Applicant
And
FAST
PULSE TRADING 63 (PTY)
LTD 1
st
Respondent
D2
SA (PTY)
LTD 2
nd
Respondent
JUDGMENT
BOZALEK,
J
:
The
applicant in these proceedings seeks the following main relief:
1. An order in
terms of Section 3(2)(c) (of the Arbitration Act), that the
arbitration agreement shall cease to have effect in respect
of the
dispute forming the subject matter of the pending arbitration
proceedings between the parties.
2. An order directing the first
respondent, alternatively the respondents, to immediately effect
transfers in certain stands, seven
of them, as set out in Annexure E
to the memorandum of agreement annexed to the founding affidavit,
being erven on portion 9 of
erf 957, Saldanha, Western Cape, to the
applicant, or in the alternative the relief sought in prayer 1, which
I have mentioned,
plus orders:
(i) Granting judgment against the
first respondent in the sum of some R25 000 000,00.
(ii) Declaring the said erf in
Saldanha executable, it having been bonded in favour of the
applicant, plus costs on the attorney
and client scale.
The
application is opposed by the respondents.
The
applicant is a provider of civil and electrical infrastructure,
whilst the first respondent is the owner of the immovable property
in
question and the second respondent is the development rights holder
of the property. In 2015 the applicant contracted
with the
respondents to provide the civil and electrical infrastructure to 31
individual saleable stands on the property which
was being developed
by the respondents. These services included the entire
electrical reticulation, as well as the water,
sanitation, storm
water and road infrastructure.
The
agreement provided that the applicant would provide these services to
the value of R23 380 301,60 excluding VAT, and
would
receive payment through the transfer and acquisition of ownership of
seven of the 31 stands referred to in Annexure E to
the agreement
upon completion of 85% of the bulk services. The first
respondent was required to provide the applicant with
a first
covering bond over the property to secure the applicant's investment
made on the property and this the first respondent
duly did.
The applicant would be entitled to have recourse to the covering bond
upon failure by the first respondent to meet
its said obligations to
the applicant. Upon registration of the stands in the name of
the applicant, the covering bond would
be simultaneously cancelled.
The
agreement further provided that should any dispute arise from or in
connection with the agreement, it would be resolved in accordance
with the rules of the Arbitration Foundation of South Africa.
Should additional or less work be performed by the applicant
than was
initially envisaged, adjustments would be made either by the
allocation of further stands to the applicant, or by the
applicant
sacrificing stands or paying further amounts to the first
respondent. It is common cause that the applicant has
fully
rendered all the services it was required to provide, but the
respondents have yet to effect transfer of any stands to the
applicant.
It
is also common cause that a dispute arose between the applicant and
the respondents relating to the value of the work performed
by the
applicant, which dispute was referred to arbitration by the
applicant. The dispute was fully pleaded through a statement
of
claim, a statement of defence, a counterclaim, a plea thereto and a
replication. No arbitration hearing was commenced
before the
appointed arbitrator, but one or more pre-arbitration meetings were
held. In its statement of claim, the applicant
claimed the
following relief. I am quoting from prayers 1.1 to 1.6:
"1. The claimant is entitled to
re-elect the stands to be transferred to it as remuneration for the
services rendered by the
claimant in terms of the agreement between
the parties dated 31 March 2015.
2. That industrial stands are valued
at R400,00 per square metre as set out in the agreement.
3. That the table in Annexure E be
replaced with a table so provided for in paragraph 12.2.
4. That the total cost project be
R31 305 694,01 excluding VAT.
5. That the respondent pay the VAT on
the stands to be so transferred to the claimant, so that the stands
can be transferred.
6. An order that
the defendant shall transfer or caused to be transferred to the
claimant, the stands in the industrial estate,
situated on portion 9
of erf 957, Malmesbury Road, Saldanha Bay, Western Cape,
re-elected by the claimant to the value of
R31 305 000,00."
In
their counterclaim the respondents pleaded:
"5. Defendants
are entitled to an award to the effect that by operation of the
agreement and the addendum, claimant is to be
remunerated in the sum
of R24 890 000,00 excluding VAT, to be paid by means of the
transfer of stands in accordance with
Annexure E to the agreement and
the table therein."
and
claimed an award against the applicant in terms of prayer 1
reading:
"By operation
of the agreement and addendum, claimant is to be remunerated in the
sum of R24 890 000,00 (I am rounding
out these figures)
excluding VAT, to be paid by means of the transfer of stands in
accordance with Annexure E to the agreement
and the table therein."
In
paragraph 3.1 of its plea to the respondent's counterclaim, the
applicant pleaded as follows in paragraph 3.1:
"In view of
the concession by the defendant that it is liable to remunerate the
claimant by means of the transfer of stands
in accordance with
Annexure E to the agreement, and the table therein, in the sum of
R24 890 000,00, the claimant is
entitled to an interim
award as set out in the claimant's replication."
In
the applicant’s, i.e. the claimant's replication to the
respondents' plea, the applicant repeated the above assertions,
claiming an interim award, but also reserved its rights in the
following terms:
"1.4 Subject thereto that the
claimant reserves its right to:
1.4.1 claim the balance of the amount
due to the claimant as set out in certain paragraphs of the statement
of claim.
1.4.2 claim rectification of Annexure
E to the agreement… which will have the effect that the agreed
values of the stands
to be transferred to the claimant is reduced to
R24 135 000,00.
1.4.3 claim transfer of further stands
in accordance with the agreement, as remuneration for any balance
between the amount that
may be found to be due to the claimant and
the amount conceded by the defendant to be due to the claimant;
1.4.4 The claimant
hereby accepts transfer of the stands in accordance with Annexure E
to the agreement and the table therein, to
the value of
R28 374 000,00… ."
It
concluded its replication as follows:
"1.6 In the
premises the claimant, tendering as set out in paragraph 1.4 above
claims an interim award that stands in accordance
with Annexure E to
the agreement and the table therein, be transferred to the plaintiff
to the value of R28 374 000,
subject thereto that the
claimant's rights, as set out in paragraph 1.4 above, be reserved."
Against
this background, one would fully expect that the applicant would
immediately seek from the arbitrator, at the least, the
interim award
to which it claims it was entitled by virtue of the respondents'
alleged concessions. This did not occur however,
principally it
would appear, for two reasons. Firstly, the respondents
disagree that the applicant was entitled to any such
interim award
and secondly, before the arbitration could commence, as it was
scheduled to in October or November 2018, the applicant
launched the
present proceedings and declined to participate in the arbitration
before these proceedings were finalised.
In
its opposing affidavit, the respondents explained why they oppose the
granting of the interim award sought by the applicant as
follows, I
am commencing with paragraph 9:
"9.
Respondents in fact delivered a claim in reconvention in which it
pleaded the essence of the opposing versions of the parties
and the
essence of the points of disputes as follows:”
And
then paragraphs 3 and 4 are quoted as follows:
"3. In the
statement of claim in convention, claimant avers that by operation of
the agreement and addendum, it is to be remunerated
in the sum of
R31 305 000,00 to be paid by means of the transfer of
stands not in accordance with Annexure E to the agreement
and table
therein, and claims an award to such effect.
4. In the plea in
convention, defendants aver that by operation of the agreement and
addendum, claimant is to be remunerated in
the sum of R24 890 000,00,
to be paid by means of the transfer of stands in accordance with
Annexure E to the agreement."
Paragraph
12:
"12. As
applicant had claimed stands re-selected by it beyond the parameters
of Annexure E, respondents were not in position
to instruct
conveyancers in regard to commencing the process for the transfer
thereof.
13. Applicant then
delivered a replication in which it accepted that Annexure E would
apply insofar as the identity of the stands
was concerned and averred
that an interim award was to be granted in its favour. That
made no sense, bearing in mind the
pleaded issues and disputes.
It was respondents' case that the Annexure E stands applied and had
prayed for declaratory relief
in that respect against the applicant.
14. Applicant
called for a meeting between the legal representatives of the
parties, at which it requested an interim award, directing
the
transfer of the Annexure E erven. Respondents naturally
declined to agree thereto, its version all along being that the
Annexure E erven applied and not a re-selection outside its
parameters. There was accordingly no dispute that the Annexure
E stands applied and no need for an award, either interim or
otherwise, that being respondents version. It was further
stated
that the conveyancers could now be instructed that these
stands were to be transferred and to do what was necessary in this
respect
and to request them to confirm this with the applicant.
15. The
conveyancers were duly instructed and the correspondence from them is
attached to the founding affidavit. The establishment
of new
stands by means of subdivision, as in the instant matter, involves
various procedures and offices, such as the surveyor
general and not
infrequently involves aspects such as conditions of subdivision
approval having to be complied with or relaxed
or amended or
departures having to be obtained. This may even involve appeals
as in the instant matter.
20. In essence,
applicant should have simply agreed to an award as sought by the
respondents in reconvention in the arbitration,
as it is effectively
what it now seeks as primary relief in this application insofar as
quantification and the applicable stands
are concerned. That
award was sought by the respondents to be made against applicant,
wherefore defendants claim an award
against claimant as follows:
(i) By operation of the agreement and
addendum, claimant is to be remunerated in the sum of R24 890 000,00,
to be paid
by means of the transfer of stands, in accordance with
Annexure E to the agreement.
(ii) Costs.
Paragraph
21 of the opposing affidavit reads:
"Once the effective capitulation
had been made by applicant as aforesaid, the way was cleared and
respondents, of course, had
no problem in instructing its conveyancer
that the Annexure E stands were to be transferred and do what was
necessary in this respect,
and to request them to confirm this with
the applicant. That process, of course, requires all procedures
to have been completed
as referred to above."
22. The actual
physical transfers and the timing thereof was, and is, obviously
dependent on the stands themselves being ready for
and capable of
transfer in law and fact. It is wholly unbusinesslike to expect
that the transfer must of necessity be capable
of being given effect
to immediately, because there may be processes which still have to be
dealt with."
The
respondents then go on to explain various difficulties which arose as
a result of the expropriation by the province of a portion
of land
near a bridge and the location of an access road, all of which
necessitated amendments to certain conditions of approval
of the
subdivision plan by the local authority and which amendments have to
be done through an appeal against those conditions.
Another
difficulty was the omission of an internal road which, in turn,
required stand boundaries to be amended and thus the amendment
of the
subdivision plan.
In
this regard the respondents’ deponent stated in the opposing
affidavit : “(v)ariations of the above nature
are part
and parcel of the process of undertaking a property development of
the nature of that in issue in this matter and were
contemplated by
the parties thereto.”
In
a supplementary affidavit dated 11 March 2018, the respondents'
deponent gives an update on the process of transferring the promised
stands to the applicant and states as follows:
"We believe
that they are now satisfied and that the subdivision plan will be
endorsed within a number of days to enable our
surveyor to proceed
with lodgement of the two general plans for the two phases. As
indicated above, it should take the surveyor
general between four and
six weeks to approve these general plans. On receipt of the two
approved plans, it will go to our
conveyancing attorney, who will
then be in a position to register the general plan for phase 1 and
simultaneous therewith transfer
the necessary properties to
(applicant). The transferring process normally takes about two
an a half months from date of
receipt of the approved general plans."
Earlier
the respondents stated that the process of transfer of amending the
development plan, the subdivision plan, was currently
being
undertaken and should be completed and the stands ready for transfer
within the next few months. If correct, and if, in particular,
the
contents of the supplementary affidavit are taken into account, this
would mean that transfer of the stands to the applicant
is now
imminent.
As
I see this matter, the applicant faces two major difficulties in
obtaining the primary relief it seeks, namely an order in terms
of
Section 3(2)(c) of the Arbitration Act that the arbitration agreement
shall cease to have effect in respect of at least part
of the
dispute, and an order directing transfer of certain erven to the
applicant. The first difficulty is to establish that
there
exists "good cause" for the court to make an order in terms
of Section 3(2)(c) of the Act. The second difficulty
is to
establish that if such an order could or should be granted, it is
also entitled to the further relief it seeks, namely an
order
directing transfer of the erven to the applicant.
I
deal, firstly, with the requirement of good cause necessary for the
court to invoke the provisions of Section 3(2)(c) of the Act.
Section 3(2)(c) provides as follows:
"The court may
at any time on the application of any party to an arbitration
agreement on good cause shown… (c) order
that the arbitration
agreement shall cease to have effect with reference to any dispute
referred."
Firstly,
it must be noted that our courts do not lightly override the
agreement of parties to resolve their business disputes by
way of
arbitration. As was recently stated in
Riversdale Mining
Limited v Du Plessis
2007 JDR 0501 (SCA), albeit in the context
of a dispute concerning the interpretation of an arbitration clause,
at paragraph 28:
"The basic
principle in the interpretation of arbitration clauses is that they
must be construed liberally to give effect to
the essential purpose
which is to resolve legal disputes arising from commercial
relationships before privately agreed tribunals
instead of through
the courts. When business people choose to arbitrate their
disputes, they generally intend all their disputes
to be determined
by the same tribunal, unless they express their wish to exclude any
issues from the arbitrator's jurisdiction
in clear language.
There is thus a presumption in favour of "one stop
arbitration"."
Accordingly,
the applicant bears the onus to avoid arbitration. See
Kathmer
Investments v Woolworths (Pty) Limited
1970 (2) SA 498
(A) at 504H. Furthermore that onus is "not
easily discharged" and the applicant must make out "a very
strong
case". See
Metallurgical
& Commercial Consultants (Pty) Ltd v Metal Sales Company (Pty)
Ltd
1971 (2) SA 388
(W) at 391E. and
The Rhodesian Railways Limited v
Mackintosh
1932 AD 359.
Some
courts have even gone further and found that the discretion to make
the order is one which "will very seldom be
exercised" and
the instances in which it "should be exercised are few and far
between". See
Polysius v
Transvaal Alloys
1983 (2) SA 630
(W) at
640B.
Mr
Labuschagne, who appeared on behalf the applicant, was unable to give
me a satisfactory reason why this court should in effect
assume
jurisdiction over at least a part of the dispute between the
parties. In particular, he could give no satisfactory
explanation why the arbitrator could not have been asked to give the
"interim award" to which he submitted the applicant
was
entitled. Inasmuch as he sought to explain this on the basis
that the respondents would not consent to such an interim
order or
award, this is, of course, no explanation at all. In that
instance the logical and obvious cause of action was to
press that
claim upon the arbitrator. In this regard, it is also material
that an arbitration hearing was imminent in October
or November of
2018 but instead the applicant chose not to participate, but to
launch these proceedings at that time which have
taken a further
eight months to come to hearing.
Turning
to the second difficulty facing the applicant. An examination
of the applicant's statement of claim in the arbitration
shows that
the primary relief it sought was declaratory in nature to the effect
that it was entitled to re-elect the stands to
be transferred to it
as remuneration. It also sought rectification of Annexure E to
the agreement and an upwards variation
in the total project cost to
some R31 000 000,00 odd. In the nature of this
relief, it could not ask for an order
directing transfer to it of any
given erven, since it had yet to re-elect them as claimed. Even
when it in effect capitulated
in its main claim to re-elect the
stands it would ultimately take transfer of and claimed an interim
award that stands in accordance
with Annexure E to the agreement be
awarded to it, it misread the respondent's plea as a
tender to immediately transfer
such stands to the applicant.
This is not a fair reading to the respondent's plea which was a
response to the applicant's
primary prayer for declaratory relief.
As
Mr Kantor, who appeared on behalf of the respondents, pointed out, at
that stage the respondents were in no position to tender
immediate
transfer of the erven which, following its somersault, the applicant
had decided were at least part of its due.
The reasons why the
respondents could not tender immediate transfer have been discussed
above. To these can be added that
it could not reasonably have
been expected of the respondents to have instructed their lawyers to
pass transfer of the originally
elected erven in circumstances when,
until an advanced stage in the pleadings, the applicant decided to
abandon the primary relief
it initially sought.
There
are further reasons why the directory or executive relief now sought
by the applicant relating to the transfer of the original
erven, is
unjustified. In terms of the arbitration clause, all disputes
between the parties must be determined in such a
forum. I can
find no sign in the applicant's statement of claim of a dispute to
the effect that notwithstanding that transfer
of certain erven are
due to it, the respondents have breached the agreement by not passing
such transfer timeously. Rather,
that is now the case which the
applicant seeks to make out before this court, but which, as I have
sought to indicate, is not borne
out by its statement of claim.
The
respondents have raised the defence to such a case in the form of
their assertion that properly interpreted, the agreement between
the
parties contemplated that there could well be amendments to the
initial plan of subdivision and that, as a result, there could
also
be knock-on effects which would delay the transfer of erven to the
applicant. So, thus, even if one assumes that the
applicant has
made out such a case, it is one which the respondents are entitled to
meet in the arbitration hearing. Having regard
to the provisions of
the
Plascon-Evans
rule, this is certainly not an defence which a court could reject on
the papers, even assuming that it should assume jurisdiction
as
opposed to an arbitrator.
In
a nutshell, through this application the applicant is pursuing
executive or directory relief when, in the arbitration proceedings,
its primary claim was for declaratory relief. It is, moreover,
relief which does not assert a failure or unreasonable delay
on the
part of the respondents in passing transfer of erven to it.
In
the draft order which Mr Labuschagne handed up during argument the
relief sought was varied. The applicant's directory
relief now
envisages a
spatium transferendi
of two months and also makes it clear that the balance of the
dispute, not excised in terms of Section 3(2)(c) of the Arbitration
Act, will be referred back to the arbitrator. The altered
format of the draft order in which the relief is claimed, does
not
address, however, the principal difficulties I have referred to
above. What is more, it inadvertently illuminates the
incongruity of this court pronouncing on part of the relief now
sought by the applicants whilst leaving other issues to the
arbitrator.
For
these reasons, I consider that the applicant has failed to make out a
case for this court to make any declaration in terms of
Section
3(2)(c) of the Arbitration Act and accordingly, for the further
relief it seeks.
Costs
must follow the event but what must be addressed is Mr Kantor's
argument that the respondents should be awarded attorney and
client
costs. He based such an order,
inter
alia
, on the authority of
In
re Alluvial Creek
1929 CPD 532
at 535
and what he submitted was the "palpable lack of merit of a
misguided and ill-conceived application", and it being
an abuse
of process and vexatious.
The
application has no merit but the further strictures are somewhat
harsh. What must also be taken into account is the difficult
position in which the applicant finds itself, albeit arguably through
no fault on the part of the respondents. Over the course
of
four years the applicant has rendered services to the respondents to
the value of at least R25 000 000,00. It
has received
no remuneration at all to date because transfer of the erven due to
it have been delayed for any number of reasons
and notwithstanding
that the applicant has long since delivered on its side of the
agreement.
Taking
all these and other relevant factors into account, I am not persuaded
that a punitive costs order is justified.
In the result, the
order I make is simply that the application is dismissed with costs
.
__________________
BOZALEK,
J
JUDGE
OF THE HIGH COURT
DATE
:
17 JUNE 2019