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[2017] ZAFSHC 103
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Mangaung Metropolitan Municipality v Lesole Agencies CC; In re: Lesole Agencies CC v Mangaung Metropolitan Municipality (4772/2015) [2017] ZAFSHC 103 (14 June 2017)
IN
THE HIGH COURT OF SOUTH AFRICA,
FREE
STATE DIVISION, BLOEMFONTEIN
Case
No.: 4772/2015
Reportable:
NO
Of
Interest to other Judges: NO
Circulate
to Magistrates: NO
In
the matter between:
THE
MANGAUNG METROPOLITAN
MUNICIPALITY
Applicant
and
LESOLE
AGENCIES
CC
Respondent
In
re:
LESOLE
AGENCIES
CC
Plaintiff
and
THE
MANGAUNG METROPOLITAN
MUNICIPALITY
Defendant
HEARD
ON:
25 May
2017
JUDGMENT
BY:
DAFFUE, J
DELIVERED
ON:
REASONS DELIVERED ON 14
JUNE 2017
REASONS FOR JUDGMENT
[1]
I heard an opposed application between the above parties on 25 May
2017 and dismissed the application with costs on the same
day,
indicating that my reasons would follow in due course. These
are my reasons.
[2]
On 12 October 2015 Lesole Agencies CC (“Lesole”)
instituted action under case number 4772/2015 against Mangaung
Metropolitan Municipality (“the municipality”), claiming
damages in the amount of R709 822.62 plus interest and
costs in
respect of the municipality’s alleged breach of a written
agreement entered into between the parties.
[3]
On 26 November 2015 the municipality filed its plea which
incorporated two special pleas and a plea on the merits. It
is
alleged in the first special plea that the relationship between the
parties was governed by a written JBCC contract which provided
for
dispute resolution in the form of arbitration to be conducted by an
arbitrator. Consequently, and as the plaintiff did
not refer
the dispute to arbitration, the municipality pleaded that plaintiff’s
claim be dismissed with costs, alternatively
that the claim be stayed
pending the outcome of the arbitration proceedings.
[4]
After the close of pleadings, the parties exchanged requests for
further particulars and responses thereto. On 28 August
2016
and after the close of pleadings a conference in accordance with rule
37 of the Uniform Rules of Court (“the Rules”)
was held
wherein the municipality recorded that it was suffering severe
prejudice due to plaintiff’s refusal that the dispute
be
adjudicated by way of arbitration. The parties agreed that in
the event of the matter not being referred to arbitration,
the
municipality’s two special pleas would be entertained first.
It was also recorded on behalf of the municipality
that the matter
should be referred to arbitration in terms of clause 40, read with
clause 42.7 of the written agreement.
[5]
No trial date has been allocated for the hearing of the defended
action, but bearing in mind the waiting list for trial-ready
matters,
there is no reason why the matter should have been enrolled and even
finalized by now.
[6]
On 20 January 2017 and under the same case number, the municipality
caused a notice of motion to be issued, claiming the following
relief:
“
1.
The respondent’s action against the applicant is stayed,
pending the finalization of arbitration proceedings,
or determination
of the dispute between the parties by way of arbitration.
2.
The respondent is directed to
enter into negotiations with the applicant within 60 days of date of
this order for the conclusion
of an arbitration agreement in order to
determine the dispute between the parties.
3.
The respondent to pay the costs
of the application.”
[7] The application is
opposed on two so-called primary contentions, to wit
“
6.1
Firstly, a proper consideration of the written agreement between the
parties reveals there is no obligatory
arbitration clause. The
municipality has, it would seem purposefully, misread the terms of
the agreement throughout.
6.2
Secondly as an alternative postulation, there is no reason why the
matter should now be referred
to arbitration. Indeed, the
municipality seems bent on playing an elaborate game of ducks and
drakes with Lesole. It
has unlawfully cancelled the agreement,
but simply refuses to accept that it is liable for damages because of
this unlawful cancellation
and change in scope of the works.”
[8]
It has always been my understanding that parties provide for dispute
resolution by way of arbitration in their agreements in
order to have
a dispute resolved quickly. No doubt, arbitration procedure is
more expensive than litigation in our courts.
Arbitrators
are being paid handsomely, but because of the nature of the
proceedings it is possible to have a dispute resolved speedily
and
within a few weeks, instead of having to wait for a year or even two
or three years to have the dispute finalised in a court
of law.
However, it also depends on the
bona
fides
of
the parties and an unambiguous arbitration agreement. The
municipality might have achieved finalisation of the dispute
by way
of arbitration if it acted immediately when the dispute arose.
In my view it would serve no purpose at all to refer
the matter to
arbitration at this late stage of the proceedings, i.e. nearly two
years since the dispute has arisen.
[9]
A party confronted with a contractual claim emanating from a contract
containing a proper arbitration clause, has two options,
i.e. either
to file a dilatory plea in accordance with rule 22 of the Rules, or
to apply in terms of
s 6
of the
Arbitration Act, 42 of 1965
for
relief.
[10]
In terms of the common law an arbitration defence is raised by way of
a special plea, also referred to as a dilatory plea.
It is not
a plea on the merits and the purpose thereof is to obtain a stay of
the proceedings pending final determination of the
dispute by way of
arbitration. Because of the very nature of the special plea it
does not afford a defendant an absolute
defence and its purpose is
merely to determine the correct forum to which the parties have
agreed to submit themselves. The
high court’s
jurisdiction is not ousted by an arbitration agreement. See:
The
Rhodesian Railways Ltd v Mackintosh
1932
AD 359
at 375
,
referred
to with approval in
Aveng
Africa t/a Grinaker-LTA v Midros Investments
2011
(3) SA 631
(KZD) at para [17]. When such a special plea is
raised, the onus of satisfying the court that the matter should not
be referred
to arbitration is on the plaintiff who instituted the
action. Such party must convince the court that due to
exceptional
circumstances the special plea should be refused. It is
unnecessary to consider this any further, bearing in mind the present
proceedings
before me.
[11]
The second option available to a party insisting that a dispute
should be resolved by way of arbitration is the application
of
s 6
of
the
Arbitration Act. The
section reads as follows:
“
(1)
If any party to an arbitration agreement commences any legal
proceedings in any court (including any inferior court) against
any
other party to the agreement in respect of any matter agreed to be
referred to arbitration, any party to such legal proceedings
may at
any time after entering appearance
but
before delivering any pleadings or taking any other steps in the
proceedings
, apply to that
court for a stay of such proceedings.
(2)
If on any such application the court is satisfied
that there is no sufficient reason why the dispute should
not be
referred to arbitration in accordance with the agreement, the court
may make an order staying such proceedings subject to
such terms and
conditions as it may consider just.”
[12]
Although the
Arbitration Act has
not ousted the common law, it
provides for a better and more efficient means of having disputes
submitted to arbitration and the
enforcement of the awards of
arbitrators. As mentioned
supra
,
the municipality could have brought an application in terms of
s 6(1)
of the
Arbitration Act as
long ago as October 2015 and if it did that
and the parties acted
bona
fide
at
all relevant times, the dispute could have been resolved before the
end of 2015 or early 2016. The municipality elected
not to take
the preferred route provided for in the
Arbitration Act.
[13
]
I do not intend to adjudicate on the JBCC contract and make a finding
pertaining to the allegations made on behalf of Lesole pertaining
to
the alleged lack of a proper arbitration clause in the written
contract between the parties. I merely wish to say that
there
appears to be sufficient room for argument that the parties did not
provide for proper arrangements pertaining to arbitration
in the
event of a dispute between them. There is uncertainty as to
whether an arbitration clause forms part of the agreement,
but more
particularly, there is no indication as to the procedure to be
followed in the event of a dispute and who should act as
arbitrator
in such an event. It is apparent from the notice of motion that
the municipality anticipated a problem in this
regard and therefore
it seeks the relief set out in prayer two of the notice of motion.
[14]
Bearing in mind the animosity between the parties and the stage of
the litigation, there is no doubt great uncertainty as to
whether
they would ever come to an agreement in respect of the person to be
appointed as arbitrator to mention just one aspect.
The
municipality believes that an engineer should be appointed whilst the
plaintiff is of the view that the dispute is a pure legal
matter,
ideally to be adjudicated by the court. The arbitrator may
possibly be a senior counsel or attorney if the matter
is to be dealt
with by way of arbitration. Further disputes in this regard are
reasonably foreseeable and this may cause
the parties to eventually
come back to court to adjudicate these issues.
[15]
The matter is not before me as trial judge in order to adjudicate the
first special plea referred to
supra
,
but as a judge having to deal with an opposed application presumably
brought in terms of
s 6
of the
Arbitration Act, although
the
municipality’s counsel submitted that the application was
brought under the common law. I mentioned
supra
that the pleadings in the action are closed, that further pleadings
have been exchanged in accordance with the provisions of
rule 21
and
that the parties have even conducted a
rule 37
conference. Bearing in
mind the unambiguous wording of
s 6(1)
of the
Arbitration Act, the
municipality is barred from applying at this stage for the stay of
the proceedings instituted by plaintiff by way of action.
See:
Conress
(Pty) Ltd and another v Gallic Construction (Pty) Ltd
1981
(3) SA 73
(W) at 75H - 76A.
[16]
The fundamental rule pertaining to costs is that it is always in the
discretion of the presiding officer which discretion must
be
exercised judicially. Furthermore, the general rule is to the
effect that the successful party is entitled to his/her
costs.
There was no reason not to grant costs to the successful party
in
casu
.
[17] Therefore I
dismissed the application with costs.
_____________
J.P. DAFFUE, J
On
behalf of applicant:
Adv LA Roux
Instructed
by:
EG Cooper Majiedt Inc
Bloemfontein
On
behalf of respondent: Adv S Grobler
Instructed
by:
Peyper Attorneys
Bloemfontein