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[2017] ZAGPPHC 482
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Mooikloof Estates (Pty) Limited v Van der Walt and Another (A700/15) [2017] ZAGPPHC 482 (1 March 2017)
IN
THE HIGH
COURT OF
SOUTH
AFRICA
GAUTENG
DIVISION, PRETORIA
CASE
NO: A700/15
Not
reportable
Not
of interest to other judges
1/3/2017
In
the matter between:
MOOIKLOOF
ESTATES
(PTY)
LIMITED
Appellant
and
OJ
VAN DER
WALT
First
Respondent
MITHRO
CONSTRUCTION
MANAGEMENT
CC
Second
Respondent
JUDGMENT
Tuchten
J
:
1.
This
is an appeal from
a judgment
of
Pretorius J.
It arises from
an arbitration
under
the
Arbitration
Act.
[1]
The
first respondent
(the Arbitrator) made
an
award in
favour of
the
second respondent
(Mithra). Aggrieved by
that award, the
appellant (Mooikloof) applied to
the
court
below
to
set
the
award
aside. Mithra
opposed
the application
and brought a counter-application to make
the award an order
of
court. Pretorius
J ruled
in
favour
of
Mithra,
dismissed
the application
and upheld the counter-application.
Mooikloof appealed
to this
court
with
the
leave of the
learned judge
below.
2.
In a
statement
of
claim
dated,
in
its final
form
after
amendment, 19 August
2013,
Mithra
claimed
payment
of a sum in excess of R16 million, interest and costs,
arising from a building agreement
(the agreement)
with Mooikloof. Mithra
had
undertaken
to
build
twelve
identical
double
storey
office
blocks with
semi-basements.
3.
The
contract
sum
was
in excess
of
R47
million,
excluding
VAT.
The works
had to
be
completed
in sections.
Penalties
could
be levied for late completion.
Payment was
to
be
made
pursuant to
monthly
payment certificates to be
issued by
the
person
described in
the
building
agreement
as the
principal
agent.
4.
The principal
agent
was
in
terms of
the agreement
appointed
by Mooikloof. One
of
the
further duties
of
the
principal
agent
was
to determine whether the
date
for practical
completion
of
the
works should
be
revised for
certain
contingencies
described
in clause
29.
5.
During the
course
of
the
execution
of
the
works,
the
principal
agent issued 19
interim
payment certificates.
Mooikloof paid
all
of
them except
certificate
no.
19. The
principal
agent
then
after
some
delay issued payment certificate
no.
20
which was described as
a
final payment
certificate.
This
final
payment
certificate
made
provision
for an
amount
of
R4,809
million
for
late
completion after
the
principal agent had granted
certain extensions
of time, called in the agreement revisions
of
the
date
for
practical
completion.
The
effect
of
the
final payment
certificate
was
that
it certified
that
an
amount
of
something under
R2 million was
owed
by the
contractor,
Mithra, to
Mooikloof.
6.
Mithra disputed
the final
payment
certificate
and
referred the dispute to
arbitration.
Clause
40
of
the
agreement
provided
for
dispute resolution.
In
the
first instance
the
parties
could
follow
processes
called in
the
clause
adjudication
and
mediation. In
the
final
result under the
agreement,
a
dissatisfied
party could
require
that the dispute
be resolved
by
arbitration.
Under
item
42.7.3
of
an annexure to
the
agreement,
the
arbitrator
for
this
purpose
would
be
a
person nominated by
the
chairman of
the
Association
of
Arbitrators.
The
agreement
is silent as to the procedure to be
followed
by
the
arbitrator so
appointed
but
it
is
common
cause
on
the
papers
that
the
sixth edition
of the
Rules
for
the
conduct
of
Arbitrations
of the Association of Arbitrators
(Southern
Africa)
(the
Rules)
applied
to
the
conduct
of
the
arbitration.
7.
The
Rules themselves
provide for the
delivery to the arbitrator
of a
statement
of claim
by the
claimant,
a statement
of defence
by the
defendant, a
counterclaim by the defendant, a reply by the claimant
to a counterclaim
and replications.
They also provide for the parties
to the arbitration
to
agree
on a
procedure
by which
the
arbitrator's
award
might
be taken
on
appeal.
No
such
appeal
procedure
was
agreed
in the
present
case.
The
arbitrator's
award
was
therefore,
subject to the
provisions of the Arbitration Act, final and binding upon
the parties to the
arbitration.
[2]
8.
The
dispute
came
before
the
Arbitrator
for
determination.
As
I have said,
Mithra
presented
its claims
in the
arbitration
in a
statement
of claim.
Mooikloof
delivered
a
reply
to
the
statement
of
claim
and
a counterclaim
in which
Mooikloof
asserted that
Mithra was
indebted to
Mooikloof in
an
amount of
at
least
some R3
million.
The
claimant delivered
a
plea
[3]
to
Mooikloof's
counterclaim.
Mooikloof
replicated
to
Mithra's
plea.
9.
Mithra's
case
in
the
arbitration
was
that
it
had
not
been given adequate
extensions
of
time
and
that
the
quantum
of
the
penalties imposed
upon
it
was
excessive.
Extensions
of time
or,
as
it
is
put
in clause
29
of
the
agreement,
revisions
of
the
date
for
practical completion,
and
the calculation of
penalties were,
under
the agreement, in
the
first instance
within
the
province
of
the
principal agent.
10.
Mooikloof's
case
was that
the
extensions of
time
which
had
been given
by the
principal
agent
had
been wrongly
so given to
Mithra
and in
its counterclaim
sought
to have
the final account between the parties
revised in accordance with what
Mooikloof
considered was the correct position. It is implicit in Mooikloof's
counterclaim that Mooikloof contended
that the
extensions
of time
given
by the
principal
agent
to Mithra were too generous
and should
be
revised in Mooikloof's favour.
11.
After
a
lengthy
hearing,
the Arbitrator
made
an
award
in which
he
declined, with one exception, to interfere with the
extensions of time
afforded by
the
principal agent and reduced
the quantum of
penalties
imposed. Mooikloof
was
aggrieved by
the
award and
launched
proceedings in
the
court below.
12.
Mooikloof
applied
to
the
court
below
to
set
the
award
aside under s
33(1), which
reads,
in relevant
part:
Where
(a)…
(b)
an arbitration tribunal
has
committed
any gross
irregularity
in the
conduct
of
the
arbitration
proceedings
or has exceeded its powers
(c)…
the
court may, on the application of any party to the reference after due
notice to the other party or parties, make an order setting
the award
aside.
13.
Mooikloof
relied in its founding
affidavit
in the court
below on three
alleged irregularities: firstly, that the
Arbitrator
had not
allowed
Mooikloof to contest the correctness of the extensions
of time
in fact
given
to
Mithro
by
the
principal
agent;
secondly, that
the
Arbitrator
had
irrationally reduced the quantum of the
penalties by R720 000; and,
thirdly, that in
granting the reduction of penalties, the Arbitrator
had
relied on evidence which he had held during the hearing
before him
to be inadmissible.
14.
In
Lufuno
Mphaphuli
&
Associates
(Pty) Ltd
v
Andrews
and
Others,
[4]
the
Constitutional
Court
dealt
with
the
concept
of
arbitration in
the modern
constitutional era. The court held that a submission to arbitration
was subject to
the
implied condition that the arbitrator should
proceed
fairly
[5]
;
and that
courts
should
be careful
not to
undermine the
achievement
of
the goals of
private
arbitration
[6]
by
enlarging the
powers of scrutiny of courts imprudently.
For this
reason the
Constitution
requires
a
court
to
construe
the
grounds
in s
33(1) "reasonably
strictly"
in relation to
private
arbitration.
15.
In para 236, the
court
in
Lufuno
Mphaphu/i
said:
[7]
The
final question that arises is
what the approach
of a court
should
be to the
question
of fairness.
First,
we
must
recognise that
fairness in
arbitration proceedings should not
be
equated
with
the process
established in
the Uniform Rules
of Court for the
conduct
of
proceedings
before our courts.
Secondly, there
is
no reason
why an
investigative procedure
should
not
be pursued
as
long
as
it
is
pursued fairly.
The
international
conventions make
clear
that
the
manner
of
proceeding
in arbitration is to be determined by agreement
between
the parties and, in default of that, by the arbitrator.
Thirdly, the process
to be
followed should be
discerned in
the
first place from the terms of
the arbitration agreement itself.
Courts should
be respectful of
the intentions of the parties in
relation to procedure.
In so doing,
they should bear in mind
the purposes of private
arbitration which include the fast and
cost-effective
resolution
of
disputes. If
courts are
too quick to
find
fault with the
manner
in
which
an arbitration
has been
conducted,
and too willing
to
conclude that
the faulty procedure
is unfair or constitutes a gross irregularity within the meaning of s
33(1), the goals of private arbitration
may
well be defeated.
16.
So
the question is: in the instances complained of, did the Arbitrator
act
fairly and in
accordance
with the contract(s) between
the parties?
17.
Mithra's pleaded
case
was
in
essence
that it
was
entitled to a
revision
of the date of
practical completion
in
the circumstances
and
on the
allegations
which Mithra proceeded to plead.
[8]
Mooikloof's reply
was
that
the
quantity
surveyor
had
correctly
calculated
Mithra's
entitlement
to
a
revision
and
that
this
calculation had
been
correctly
carried
forward
into the final
accounts.
For the
rest,
Mooikloof
denied
that
Mithra was
entitled to a revision of the date of practical completion.
[9]
Mooikloof in
its
counterclaim asked
that
the revisions
actually given
to
Mithra
be
reduced.
[10]
In
its
plea
to
the
counterclaim,
Mithra
denied
that
the revisions
actually given should be reduced.
[11]
18.
During
argument before
the
Arbitrator
after all the evidence was in, it
was raised by
the
Arbitrator that Mooikloof was
not
entitled
to challenge the
decisions
of its agent, the
principal
agent.
This
point was not
raised
on
the
pleadings by
either party.
We
were told
from
the
bar
that
the
response
of
counsel
for
Mooikloof
was
to
ask
for
an
opportunity
to
place
argument before
the
Arbitrator in
this regard.
This opportunity was given and counsel on both
sides placed such argument before
the
Arbitrator
as
they
considered appropriate. Counsel for Mithra supported the point
advanced by
the Arbitrator.
19.
It
seems
to
me fairly
arguable
that
because
the
principal
agent
was Mooikloof's
agent,
the
decision
of
the
principal
agent
was
in
law the decision
of
Mooikloof.
It was
not,
indeed
it cannot
be,
suggested
that in
making
the
decisions in
question
the
principal
agent
acted otherwise than independently,
impartially,
fairly and honestly and used his
professional
skills
to
reach
the
right
decisions.
The
point
raised,
that
Mooikloof was
not
entitled
to
raise
the
decisions
of the
principal agent for reconsideration
is
in
effect a point
of law.
There
is
no
provision in
the Rules
for
exceptions.
It
has
traditionally
not
been
essential to
raise such
points
of
law
in the
pleadings
in courts
of
law. The question
has always
been whether
the other
side
has been given fair
notice of the
point
raised.
I do
not
see why
it should
be
otherwise in arbitrations.
It
was
not suggested
that
Mooikloof's
(eminent)
senior
counsel
was not
given
fair opportunity to
deal
with
the
argument. Whether
the
Arbitrator
was
right or wrong
in the
conclusion
to
which he came
in
this
regard
is beside the
point.
He
approached
and
decided
the
point
fairly.
20.
Counsel
for Mooikloof submitted that if the point had been raised at
an
earlier stage, Mooikloof's case
would have
been
conducted
differently.
As
the
point
was
one
of
law
arising
from
the
need
to interpret the agreement, I
do not
see why this should be so. Counsel further submitted that if properly
precognised of the point, Mooikloof would have
applied
to
join the principal
agent
in
the
arbitration or
seek to
have
the
arbitration stayed
so
that
the issue
between Mooikloof
and the principal agent could be
ventilated
by litigation.
21.
But
it seems
to
me a
complete
answer
in
the
circumstances
that
the Arbitrator
gave counsel the
procedural
latitude for which
counsel asked:
an opportunity
to
present
argument
on the
point.
Counsel
did not ask for the principal agent to be
joined
or for
Mooikloof to be given time
to
take
proceedings
to
stay
the
arbitration
and
to
ventilate
the dispute
in
court.
There
was
also
no
reason why
Mooikloof
could
not have brought an action
against
the
principal
agent for
damages arising from the
allegedly
wrong
exercise
of the
latter's
powers
under the
agreement.
22.
In
the result, the Arbitrator found that Mooikloof could
not dispute in
the arbitration the actual
extensions of time given to Mithra, although
Mithra
could do so. In
these circumstances,
it
seems to me that the
Arbitrator
acted
fairly
in taking as the basis for his award the
actual
extensions
of
time
which
had
been
given
to
Mithra.
Whether
the
principal agent was right or wrong in his conclusion is
of no moment.
The first ground relied upon by
Mooikloof cannot succeed.
23.
The
second ground of complaint relates to approach of the
Arbitrator
to the claim that the
amount of the penalties should be reduced. The
submission
on behalf of Mooikloof is that the Arbitrator's decision
in
this regard
was arbitrary
and
that he
impermissibly had
regard
to
what
the industry regarded as fair, without giving Mooikloof
an opportunity
to
lead
evidence in
this regard.
The
evidence before
the
Arbitrator
was
that
the delays had caused Mooikloof
losses of R80 000
per month
per block and that the penalties
amounted to R93 000 per block per
month.
24.
The Arbitrator
stated in
the
award:
[12]
The
industry will
also expect from
an arbitrator to
interpret
and decide on issues
in terms
of the
agreement...
A
fair
and equitable interpretation of the working
of the agreement
is especially
necessary
where the interpretation of its terms may result in the unfair
treatment of one of the parties.
25.
The
Arbitrator dealt
with
the
evidence
and
concluded
that
the
principal
agent
had
unfairly
delayed
imposing
penalties
for
poor
and
late
performance and
concluded:
[13]
I
am consequently convinced that [Mithro] is financially in a worse
position that what he would have been in, had the [principal
agent]
addressed the issue of penalties from approximately 31 March 2008 (7
April for his certificate) onwards. This must be set
right so he only
carries the responsibility of his poor and late performance but
nothing in excess thereto. [Mooikloof] on the
other hand must be
entitled to his contractual penalty per the [agreement] for the late
completion by [Mithro], in so far he and
his agents acted in
accordance with the contract and what the industry would regard as
fair in this regard.
26.
It
is
quite clear from these passages
that the approach of
the
Arbitrator
is
rational. One
may
agree
or
disagree
with
the
Arbitrator
on
the findings he made leading to his conclusion
but irrational they are
not.
27.
The
recourse
of
the
Arbitrator
to
the
notion
of
what
the
building
industry
would regard as
fair is
the
same as or similar to the notion of
the
bani
mores
of
the community,
a
concept which
courts
have for
generations
applied
in
making
value
judgments, without
requiring
that
the parties
identify the concept in pleadings or lead evidence. It was
quite
obvious
that
the
Arbitrator
would
have
regard
to
fairness
in
considering the
discretion vested in him
to determine the
quantum of
penalties
which might
justly
be imposed. And in a construction case,
I do not think
that there is anything inappropriate
in considering
the
notion of fairness
obtaining in the industry. The Arbitrator's
reasons
show that he
considered the
monetary loss suffered as
a result of
the
delay
and
the
failure
to
impose
penalties,
as
the Arbitrator
found,
promptly and
the inconvenience
generally which had
been
caused on
both
sides.
[14]
28.
The
third
alleged
irregularity
is that
in awarding
a
reduction
of penalties to
Mithra, the
Arbitrator
took into account evidence which the Arbitrator
himself had
ruled
inadmissible.
But
the passages in
the award
[15]
which Mooikloof
contends
grounds
this
complaint make
no reference
to
the
evidence
which
was
ruled
inadmissible.
These passages
show that the Arbitrator relied in this regard on his conclusion that
Mooikloof could not dispute the decisions of
the principal
agent.
29.
I
therefore
conclude that there
is no
substance
in
the complaint regarding the
reduction
in the
quantum
of
the
penalties.
30.
It
therefore
follows
that
the decision
of the
learned
judge
in the
court below was
correct
and that the appeal cannot
succeed.
I propose the following
order:
The
appeal is dismissed with costs, including the costs consequent upon
the employment of senior counsel.
NB
Tuchten
Judge
of the High Court
27
February 2017
I
agree. An order is made
as
set out in paragraph 30 above.
RG
Tolmay
Judge
of the High Court
28
February
2017
I
agree
PM
Mabuse
Judge
of
the
High
Court
28
February
2017
[1]
42 of 1965
[2]
Section 28
[3]
ie a reply to use the terminology of the Rules
[4]
2009 4 529 CC
[5]
Para 221
[6]
In contradistinction to statutory tribunals such as the CCMA which
perform public functions and exercise public power. Para 233
[7]
Footnotes omitted
[8]
Paras 12-16 of the statement of claim.
[9]
Paras 19-24 of Mooikloof’s Reply to Mithro’s statement
of claim.
[10]
Paras 1 -2 of Mooikloof’s counterclaim.
[11]
Paras 1-2 of the plea to the counterclaim
[12]
Para 9.5
[13]
Para 9.26
[14]
Paras 9.27-9.29 of the award
[15]
Paras 5.8.2 and 5.8.3