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[2018] ZAGPJHC 548
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Transasia 1 (Pty) Limited and Another v Arbitration Foundation of South Africa and Another (2018/25821) [2018] ZAGPJHC 548 (13 September 2018)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO
:
2018/25821
In
the matter between:
TRANSASIA
1 (PTY)
LIMITED
First
Applicant
11
MILES INVESTMENTS (PTY)
LIMITED
Second
Applicant
and
ARBITRATION
FOUNDATION OF SOUTH AFRICA
First
Respondent
UMSOBOMVU
COAL (PTY)
LIMITED
Second
Respondent
JUDGMENT
ADAMS
J
:
[1].
This is an urgent
application by the applicants for an order interdicting arbitration
proceedings currently pending and conducted
by the first respondent
in terms of an agreement concluded between the applicants and the
second respondent. In their notice of
motion the first and second
applicants apply for an order
inter
alia
in
the following terms:
(a)
‘
Directing that the first and second
respondents be interdicted from commencing and / or proceeding with
the arbitration of the dispute
involving the second respondent and
the applicants, and which dispute was referred to the first
respondent by the second respondent
on the 24
th
April 2018 for the purpose of the adjudication by way of arbitration.
(b)
Directing that the interdict shall be in
place pending the finalisation of the second respondent’s
application for a stay
of the applicants’ application before
the KwaZulu – Natal High Court in Pietermaritzburg under case
number: 3163/18P.
(c)
That the costs of this application are to
be paid by the respondents on the scale as between attorney and own
client, jointly and
severally, the one paying the other to be
absolved’.
[2].
Central to this application is the issue
whether or not the second respondent has elected not to exercise its
right to have any
dispute between it (the second respondent) and the
applicants relating to an agreement, which contains an arbitration
clause, referred
to arbitration.
[3].
I interpose here to mention that the first
applicant played no part in these proceedings. In a short affidavit
filed on its behalf
the first respondent indicated that it would
abide the decision of this court.
[4].
On the 24
th
of April 2018 the second respondent referred a dispute to the first
respondent for the purpose of having such dispute adjudicated
in an
expedited arbitration.
[5].
On the 12
th
of July 2018 the applicants launched this application to interdict
the arbitration, initially as a normal application, which was
later
converted to an urgent application. Much was made by the second
respondent of the form in which this urgent application was
brought
before court. In my judgment, there is no merit in the second
respondent’s objection to the procedure followed by
the
applicants in pursuing their urgent application. Form should never be
valued over substance.
[6].
The salient
facts pertinent to this application are as follows.
[7].
At all
relevant times there was in place a written agreement concluded
during January 2010 between the applicants and the second
respondent
for the purchase and sale of prospecting rights (‘the
agreement’). In terms of the agreement the second
respondent,
as the holder of certain coal prospecting rights in KwaZulu –
Natal, had sold to the applicants those prospecting
rights.
[8].
The agreement
contained a dispute resolution clause 11 which provided as follows:
‘
11.1
Any and all disputes arising from or in connection with this
Agreement shall be finally resolved in accordance with the rules
of
the Arbitration Foundation of Southern Africa by a single arbitrator
in Sandton appointed by the Arbitration Foundation of Southern
Africa, or its successor.
11.2
The provisions of clause 11.1 shall not preclude any party from
obtaining interim relief on an urgent basis from a court of
competent
jurisdiction pending the decision of the arbitrator’.
[9].
On the 23
rd
of November 2017 the second respondent purported to cancel the
agreement on the basis of a breach by the applicants of certain
terms
of the agreement. This is disputed by the applicants, who on the 15
th
of March 2018 launched an application in the KwaZulu – Natal
Division of the High Court in Pietermaritzburg for a declaratory
order that the purported cancellation of the agreement is unlawful,
null and void and therefore should be set aside. In that opposed
application the applicants also ask for an order akin to one for
specific performance by the second respondent of the terms and
conditions of the agreement.
[10].
The second
respondent delivered notice of intention to oppose the application in
the Pietermaritzburg High Court and also delivered
a notice in terms
of Uniform Rule of Court 35 (12), which was replied to by the
applicants on the 12
th
of April 2018. Subsequently the second respondent filed an
application to stay that application, which application to stay will,
so I was advised, be heard shortly.
[11].
On the 24
th
April 2014 the second respondent referred the dispute between them
and the applicants to Arbitration and since then the Arbitration
has
been well under way. In its Statement of Claim in the Arbitration the
second respondent bases its claim on its cancellation
of the
agreement. The award which the second respondent seeks in the
Arbitration proceedings is that the applicants vacate the
mining site
to which the coal mining rights relate. There can accordingly be no
doubt that the dispute which is the subject of
the opposed
application in the High Court in Pietermaritzburg is the exact same
dispute which the second respondent has referred
to Arbitration.
Equally true is the fact that the dispute between the parties falls
within the terms of the arbitration clause
contained in the agreement
and quoted above.
[12].
The question
then is whether the second respondent is entitled to pursue the
Arbitration in the face of the High Court application.
Put another
way, do the applicants have the right to insist that the Arbitration
proceedings be stopped in view of the pending
motion proceedings in
the High Court.
[13].
Mr Mpofu,
Counsel for the applicants, submitted that the second respondent is
precluded from instituting the Arbitration proceedings
notwithstanding the fact that the parties agreed that any and / or
all disputes would be referred to arbitration, because it (the
second
respondent) had made an election to go the litigation route in the
High Court. This election, so the argument goes, is evidenced
by the
fact that the second respondent took a further step in the High Court
application by delivering a notice in terms of rule
35(12). There is
no merit in this argument if for no other reason than the fact that
it has to be accepted that by launching an
application to stay that
application, the second respondent has clearly demonstrated that it
has elected to enforce its right to
refer the dispute to
arbitration.
[14].
As was pointed
out by Wallis J in
Aveng
(Africa) Ltd (formerly Grinaker – LTA Ltd) t/a Grinaker –
LTA Building East v Midros Investments (Pty) Ltd,
2011
(3) SA 631
(KZD), the approach to arbitration clauses is to respect
the parties’ autonomy in concluding the arbitration agreement
and
to minimise the extent of judicial interference in the process.
The historical desire of courts to protect their own jurisdiction
and
their consequent suspicion of arbitration as a means of resolving
disputes has been replaced by a recognition that arbitration
is an
acceptable form of dispute resolution with which the courts should
not interfere.
[15].
As was said by
O’Regan ADCJ said in
Lufuno
Mphaphuli and Associates v Andrews
,
2009 (4) SA 529
(CC):
‘
[219]
The decision to refer a dispute to private arbitration is a choice
which, as long as it is voluntarily made, should be respected
by the
courts. Parties are entitled to determine what matters are to be
arbitrated, the identity of the arbitrator, the process
to be
followed in the arbitration, whether there will be an appeal to an
arbitral appeal body and other similar matters.’
[16].
An arbitration
clause is inserted in a contract at the time of its conclusion
because the parties contemplate as a matter of commercial
convenience
that it is desirable to adopt this as a mechanism for resolving the
disputes that may arise in the course of their
business relationship.
[17].
That brings me
back to the issue of whether it is open to the second respondent to
insist to proceed to arbitration under the arbitration
clause 11. The
contention by applicants is that it cannot do so because it has
elected not to go the arbitration route by going
along with the
motion court proceedings in the Pietermaritzburg High Court. The
second respondent, so the applicants contend, is
now precluded from
referring the dispute to arbitration.
[18].
Election is
generally regarded as a form of waiver, the onus of proving which
rests on the applicants. This requires the applicants
to show that
the second respondent, with full knowledge of its right to arbitrate,
decided to abandon it. As I have indicated above,
by no stretch of
the imagination can it be said that the second respondent had
abandoned its right to arbitrate. After all, it
is the one which has
launched an application to stay the motion court proceedings –
there cannot possibly be a more emphatic
indication on the part of
the second respondent that it has not elected not to exercise its
right to refer a dispute to arbitration.
[19].
It is now well
– established that an arbitration agreement does not oust the
jurisdiction of the courts. Where a party to
an arbitration agreement
commences legal proceedings against the other party to that
agreement, the defendant is entitled either
to apply for a stay of
the proceedings pursuant to
s 6
of the
Arbitration Act 42 of 1965
or
to deliver a special plea relying upon the arbitration clause.
Whichever course it adopts the onus then rests on the claimant
to
persuade the court to exercise its discretion to refuse arbitration.
This requires a very strong case to be made out.
[20].
A party to an
arbitration agreement who commences litigation instead of proceeding
to arbitration does not, merely as a result of
adopting that course,
abandon its right to have resort to arbitration under the agreement.
That being so it is not open to the
other party to contend that it
has ‘accepted’ the resort to litigation by not itself
seeking a stay, and that this
‘acceptance’ debars
subsequent resort to arbitration. A corollary of this principle of
necessity has to be that a party
who is taken to Court in breach of
an arbitration clause remains entitled all the more to insist that
the court proceedings be
stayed and that it (the ‘innocent’
party) be allowed to have the dispute adjudicated in an arbitration.
[21].
Therefore, the
election for which the applicants contend cannot be sustained on the
basis of agreement. In my view, its involvement
in the High Court
litigation, instituted by the applicants no less, does not preclude
the second respondent from invoking the arbitration
clause in the
contract. The flip side of this proposition is that the applicants
then do not have a right to prevent the first
respondent from having
recourse to arbitration as contemplated by the arbitration clause in
the agreement.
[22].
This then in
turn means that the applicants, who seek interim interdictory relief
in this urgent application, has not proven at
least one of the
requirements for an interdict, that being that they have a
prima
facie
right. In light of the arbitration clause the applicants, in my view,
do not have the right to have the dispute adjudicated in
the High
Court. On the contrary, the second respondent has the right to have
the dispute adjudicated in an arbitration and is,
in my judgment,
entitled to a stay of the High Court application. That matter is
however not before me.
[23].
I am, in any
event, not persuaded that the applicants have satisfied the other
requirements for an interim interdict, namely: that
they are
threatened with immediate and irreparable harm; that they have no
alternative remedy, and that the balance of convenience
favours them.
[24].
Ms
Milovanovic, Counsel for the second respondent, submitted that all of
the issues relating to these three requirements for the
interdict are
closely tied in with the question of balance of convenience and
prejudice. I find myself in agreement with this submission.
In the
bigger scheme of things, it is difficult to perceive of any real harm
to the applicants if the second respondent is permitted
to proceed
with the arbitration, which, in all likelihood, will be finalised a
lot sooner than would an opposed application in
the High Court. Bur
more importantly, in my view, the applicants have no right to choose
a forum against the letter and the spirit
of the arbitration clause
which they have agreed upon.
[25].
There is, in
my judgment, no reason in principle why the applicant can claim an
interdict of the arbitration.
[26].
The urgent
application of the first and second applicants therefore stands to be
dismissed.
Costs
[27].
Counsel for
the second respondent has submitted that cost on the scale as between
attorney and client should be awarded against
the applicants in
favour of the second respondent.
[28].
In re:
Alluvial Creek Ltd
,
1929 CPD 532
, the court laid down the principle that, in its
discretion to award a punitive costs order, the court should have
regard to the
proceedings by a party which are vexatious in that they
put the other side to unnecessary trouble and expense which the other
side
ought not to bear.
[29].
I am not
persuaded that in the circumstances of this matter a punitive cost
order is warranted, and in the exercise of my discretion
I intend
awarding cost in favour of the successful party on the ordinary scale
as between party and party.
Order
In
the result, I make the following order:-
1.
The urgent application of the first and
second applicants be and is hereby dismissed.
2.
The first and second applicants, jointly
and severally, the one paying the other to be absolved, shall pay the
second respondent’s
cost of this urgent application.
_________________________________
L R ADAMS
Judge of the High
Court
Gauteng Local
Division, Johannesburg
HEARD
ON:
12
th
September 2018
JUDGMENT
DATE:
FOR
THE APPLICANTS:
13
th
September 2018
Adv
D Mpofu SC, together with Adv Cornwell Dauds
INSTRUCTED
BY:
Victor
Nkhwashu Attorneys
FOR
THE SECOND RESPONDENT:
Adv
A Milovanovic
INSTRUCTED
BY:
Edward
Nathan Sonnenbergs Inc