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[2021] ZASCA 138
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Eskom Holdings Limited v The Joint Venture of Edison Jehano (Pty) Ltd and KEC International Limited and Others (177/2020) [2021] ZASCA 138 (6 October 2021)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
Reportable
Case No: 177/2020
In
the matter between:
ESKOM
HOLDINGS
LIMITED
APPELLANT
and
THE
JOINT VENTURE OF EDISON
JEHANO
(PTY) LTD AND
KEC
INTERNATIONAL
LIMITED FIRST
RESPONDENT
SYMBION
PNC (PTY) LTD
(IN
LIQUIDATION) SECOND
RESPONDENT
JOHANNES
ZACHARIAS HUMAN
MULLER N
O THIRD
RESPONDENT
FRANS
LANGFORD N
O FOURTH
RESPONDENT
HLALELENI
WATHLEEN DLEPU N O FIFTH
RESPONDENT
ELMARIE
BOOYSE N
O SIXTH
RESPONDENT
KEC
INTERNATIONAL LIMITED SEVENTH
RESPONDENT
JUSTICE
LTC HARMS N
O EIGHTH
RESPONDENT
Neutral
citation:
Eskom Holdings Limited
v
The Joint Venture of Edison Jehano (Pty) Ltd and KEC International
Limited and Others
(case no 177/2020)
[2021] ZASCA
138
(06
October
2021)
Coram:
DAMBUZA,
MAKGOKA, NICHOLLS JJA, GORVEN and EKSTEEN AJJA
Heard:
16
February 2021
Delivered:
This
judgment was handed down electronically by circulation to the
parties' representatives by email, publication on the Supreme
Court
of Appeal website and release to SAFLII. The date and time for
hand-down is deemed to be 10h00 on
06
October
2021.
Summary:
Arbitration
– Review of an arbitral award – principle of party
autonomy confirmed – interpretation of ‘gross
irregularity’ and ‘exceeding powers’ under
s 133
of
the
Arbitration Act 42 of 1965
affirmed.
ORDER
On
appeal from:
Gauteng
Division of the High Court, Johannesburg (Nel AJ sitting as court of
first instance):
1 The
appeal is upheld with costs including the costs of two counsel where
so employed;
2 The
order of the high court is set aside and replaced with the following:
‘
The application is
dismissed with costs’.
JUDGMENT
Dambuza
JA (Makgoka, Nicholls JJA, Gorven and Eksteen AJJA concurring)
Introduction
[1] This
is an appeal against the judgment of the Gauteng Division of the high
court, Johannesburg (the high court),
per Nel AJ, in terms of which
an application for review of an arbitral award was upheld. In terms
of the arbitral award 13 claims
that had been made by the first
respondent, the Joint Venture of Edison Jehano (Pty) Ltd and KEC
International Limited (the Joint
Venture), against the appellant,
Eskom Holdings Limited (Eskom), for payment of moneys had been
dismissed. In setting aside the
arbitral award the high court
referred six of the claims for fresh consideration before a new
arbitrator. This appeal, against
the order of the high court, is with
its leave.
Backround
[2] On
6 May 2011 Eskom and the Joint Venture concluded a written
engineering and construction agreement (the agreement)
in terms of
which the Joint Venture would construct a 100 km Section B of the 765
KV Gamma-Kappa single circuit transmission line.
The agreement
incorporated the NEC Engineering and Construction Contract (second
edition, with the main option B, November 1995)
as published by the
Institution of Civil Engineers. The project was to be completed
within 547 days i.e. on 10 July 2012, from
the date of conclusion of
the agreement. The contract price was R320 404 064.98.
[3] The
‘core clauses’ of the agreement
[1]
stipulated, amongst other things, that completion of the contract
work would be attained when all the work due to be executed as
per
the ‘Works Information’, was effected, and the defects
that could prevent Eskom from using the works had been ‘corrected
and notified’. The Joint Venture and Eskom had an obligation to
notify each other as soon as they became aware of any matter
that
could result in an increase in the total price, or a delay in the
completion of the works, or impairment of performance of
the works.
[4] Clause
60.1 of the agreement stipulated a number of compensation events
which would entitle the Joint Venture
to extension of time for
completion of the works, together with consequent change in the
contract prices. These included instructions
by Eskom, through its
Project Manager, changing the works specifications, and failure by
Eskom to give possession of the site or
a portion thereof to the
Joint Venture on the date specified in the accepted programme.
[5] Clauses
61.1 to 61.3 regulated notification of claims as follows:
‘
61.1 For
compensation events which arise from the Project Manager or the
Supervisor giving an
instruction or changing an earlier decision, the
Project Manager notifies the contractor of the compensation event at
the time
of the event. He also instructs the Contractor to submit
quotations, unless the event arises from a fault of the Contractor or
quotations have already been submitted. The Contractor puts the
instruction or changed decision into effect.
61.2 The
Project Manager may instruct the Contractor to submit quotations for
a proposed instruction
or a proposed changed decision. The Contractor
does not put a proposed instruction or a changed decision into
effect.
61.3 The
Contractor notifies an event which has happened or which he expects
to happen to happen
to the Project Manager as a compensation event if
· the
Contractor believes that the event is a compensation event,
· it
is less than two weeks since he has become aware of the event and
· The
Project Manager has not notified the event to the Contractor.’
[6] Disputes
arising in relation to the agreement had to be ‘submitted to
and settled’ by an adjudicator
within the period specified in
an ‘adjudication table’ which formed part of the
agreement. Clause 90.1 provided that
a notice to submit a dispute to
the adjudicator had to be given ‘not more than four weeks’
or ‘between two and
four weeks’ after an event.
[2]
The adjudicator’s decision could be reviewed by an arbitration
tribunal. The adjudicator’s decision was final and binding
on
the parties subject to revision by the tribunal. In terms of clause
93.1 if a party was dissatisfied with the decision or non-decision
of
the adjudicator, the matter was ‘not referable to the tribunal
unless the dissatisfied party notified his intention within
four
weeks’ of certain events.
[3]
[7] The
Joint Venture failed to complete the works within the stipulated
period. It was afforded an extension until
10 May 2013. However it
became apparent that it would still not be able to complete the works
within the agreed extended period.
In a letter dated 13 March 2013 it
requested a further extension from Eskom. In its recovery plan it
listed challenges that it
had encountered, including some which it
attributed to Eskom. Attached to that letter was an annexure with
‘early warning
and compensation events’.
[4]
As a result of the delays the cost of the project escalated to
R807 129 083.00, substantially more than double the initial
contract price.
[8] During
the period 23 December 2014 to 14 May 2015 the Joint Venture notified
Eskom of 13 claims amounting to
R625 079 491.77 which
allegedly emanated from the delays occasioned during the 165 days of
the extended period. The Joint
Venture justified its claims by
setting out events which it alleged, led to the delays and
disruptions. Eskom denied responsibility
for the delays and raised
four special pleas. One of these was a time-bar, in terms of which
Eskom pleaded that the Joint Venture
had failed to notify 11 of its
13 claims and the related compensation events, and to refer disputes
emanating therefrom within
the stipulated two to four week period.
Eskom pleaded that clauses 61.3 and 93.1 of the agreement were
time-bar clauses with which
the Joint Venture had failed to comply in
relation to its claims.
[9] Eskom
also filed a counterclaim of R36 million in which it sought to
recover from the Joint Venture penalty
damages payable in relation to
the delays in the completion of the works. In response thereto the
Joint Venture declared a dispute.
The dispute was referred for
adjudication.
[10] On
17 March 2017 the adjudicator issued a decision in terms of which he
dismissed all Eskom’s special
pleas. He further ruled that: (a)
the Joint Venture be afforded an extension of time to 31 March 2014;
and that (b) Eskom pay to
the joint venture R82 449 937.02
together with interest on that amount as additional compensation for
the extended contract
period (ending on 31 March 2014). In relation
to the special plea of time bar, the adjudicator found that ‘it
[was] clear
from a consideration of the documents produced by the
parties that the time frames governing the notification of
compensation events,
the determination required to be made by the
project manager pursuant thereto and, where necessary, the referral
of disputes to
adjudication were not adhered to’. He, however,
went on to find that nothing in the language of the time-bar clauses
reflected
an intention by the parties to preclude any claim for
relief not made or notified within the stipulated period.
[11] Both
parties issued notices of dissatisfaction with the ruling of the
adjudicator, and the matter was referred
for arbitration. Of
relevance to this appeal is an agreement reached by the parties at
the pre-arbitration meeting, that: (1) the
issues referred for
arbitration were those set out in their respective notices of
dissatisfaction with the adjudicator’s
decision, (2) the
pleadings filed by them in the adjudication proceedings, would serve
before the arbitrator, with each party retaining
the right to amend
its pleadings, and (3) Eskom’s special pleas would be heard as
initial, separated issues. The arbitrator
ruled, accordingly, that
there should be a separate hearing dealing initially with the four
special pleas.
[12] At
the start of the hearing the arbitrator sought clarity from the
parties as to which of the 13 claims were
time barred. This inquiry
led to each of the parties preparing and submitting to the arbitrator
a schedule showing the claims that
each contended had not been lodged
or notified within the stipulated periods.
[13] In
the arbitral award the arbitrator found that clauses 61.3 and 90.1
were time bar clauses. He then upheld
the time bar special plea in
respect of all 13 claims that had been notified by the Joint Venture.
His decision in this regard
was premised on, amongst other factors,
the schedules prepared for him by the parties and the adjudicator’s
factual finding
that the time frames relating to notification of
compensation events and referral of disputes to adjudication had not
been adhered
to. The arbitrator then set aside the award of
compensation in favour of the Joint Venture together with the ruling
granting the
Joint Venture a further extension of time for completion
of the works and the dismissal of Eskom’s counterclaim for
delay
damages.
[14] The
Joint Venture applied for correction of the arbitral award in terms
of Rule 38 of the Arbitration Rules.
It then became common cause
that, to the extent that the arbitrator had, in the arbitral award,
granted costs of the adjudication,
the award was incorrect. Eskom’s
response to the Joint Venture’s Rule 38 application gives an
indication as to other
bases for that application.
[5]
First the Joint Venture contended that the arbitrator misunderstood
his mandate by ‘failing to consider the impact of clause
61.1
on clause 61.3 of the agreement’. Second it contended that it
was not clear whether the award intended to render clause
90.1 a
time-bar stipulation.
[15] In
an Addendum prepared in response to the Rule 38 Application the
arbitrator said:
‘
7. To
the extent that it is alleged that the Award is ambiguous or unclear:
I found as a matter of
law that clauses 61.3 and 90.1 are, each, time
bar provisions.
8. My
factual finding that all the claims are time barred by clause 61.3
and/or 90.1 was not
a clerical mistake or an error arising from an
accidental slip or omission. I referred in the Award to the
Adjudicator’s
assessment, which was in these terms:
“
it is clear from a
consideration of the documents produced by the parties that the time
frames governing the notification of compensation
events, the
determination required to be made by the project manager pursuant
thereto and, where necessary, the referral of disputes
to
adjudication were not adhered to.”
9 In
addition, at the hearing I requested the parties for a list of claims
affected by
the different special pleas. The Contractor’s list
in respect of all the claims assumed that I would accept its
interpretation
of the time-bar provisions. It did not state or even
suggest that the defence in relation to some of the claims did not
fall within
my jurisdiction.
10. The
Employer [Eskom] submitted that the claims listed under its column
‘time bar’ would be
disposed of if its interpretations
were to be upheld. All the claims were so listed.
The contractor
[the Joint Venture] did not dispute the correctness of the conclusion
on that assumption, and I accepted it and hence
my award
. I may
have erred but it was not a clerical mistake or an error arising from
an accidental slip or omission.’ (emphasis supplied)
[16] It
is the award and the Addendum thereto that was taken on review before
the high court. The basis of the
application for review was that the
arbitrator: (1) committed a gross irregularity in failing to apply
his findings concerning
the interpretation of clauses 61.3 and 90.1
of the contract, to the factual averments made by the Joint Venture
in its pleadings;
(2) exceeded his jurisdiction and/or committed a
gross irregularity by accepting the schedule prepared by Eskom as
‘conclusive
proof as to whether which of the JV’s claims
were time barred’ without having regard to the pleadings, which
set out
factual disputes; (3) committed a gross irregularity in
accepting the assessment of the adjudicator that the time period
relating
to the notification of compensation events and referral of
disputes to adjudication were not adhered to ‘without allowing
the JV opportunity to prove or disprove such assessment’. The
arbitrator thus denied the Joint Venture the opportunity to
disprove
the adjudicator’s conclusion, especially because the time-bar
special plea was raised only in respect of 11 of the
13 claims, so it
was contended.
[17] Eskom
insisted that there was no dispute of fact between the schedule
prepared by it and the factual chronology
that had been pleaded by
the Joint Venture, and that it was apparent from both documents that
the Joint Venture had not submitted
the compensation events
timeously, and had not referred the dispute for adjudication within
the set time period. Although Eskom
admitted that in its pleadings it
had not raised the time bar defence in respect of two of the 13
claims (U and V), it insisted
that the defence was advanced in its
Heads of Argument in respect of all the claims, and was fully
ventilated in argument by both
parties.
[18] The
court high court reviewed and set aside the award in respect of six
of the 13 claims. It ordered that
the six be considered afresh by
another arbitrator. In doing so the Learned Judge was of the view
that the ‘expanded issues’
(ie the inclusion of the two
claims in respect of which the time bar had not been raised in the
pleadings) had not been ‘fully
ventilated’ and that the
raising thereof ‘by way of argument [did] not equate to a full
hearing’. He also found
that the arbitrator’s
consideration of the ‘unpleaded issues’ contained in the
Eskom schedule (the aspects on
which dispute of fact was alleged)
resulted in an unfair hearing.
[6]
The Learned Judge found however, that the arbitrator did not exceed
his powers as contended by the Joint Venture because he determined
issues that were set out in the Notices of Dissatisfaction filed by
the parties.
On
appeal
[19] In
the appeal Eskom maintained that the Joint Venture was aware at all
times that all 13 claims were affected
by the time bar plea. It had
the opportunity to address that defence, and it did. Counsel for
Eskom submitted that the manner in
which the arbitration was
conducted was consistent with the less formal, more robust procedures
employed in arbitrations and the
principle of party autonomy accepted
by courts in relation to commercial arbitrations.
[20] The
Joint Venture contended that it was unfair to hold that it should
have understood that the issues were
‘expanded’ merely
because of the submissions made by Eskom in its Heads of Argument
regarding the relevance of the
plea of time bar on the two claims. It
was submitted that the issues before the arbitrator were limited to
interpretation of the
time bar clauses – the impact thereof on
the individual claims was never canvassed.
The
law
[21]
Section
33(1)
of the
Arbitration Act 42 of 1965
regulates review of arbitral
awards as follows:
‘
(1) Where-
(a)
any member of the arbitration 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 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 or parties, make an order setting
the award aside.’
[22] Speed,
efficiency, flexibility and finality of the arbitration process are
the reasons that parties opt to
select their own dispute resolution
method. Admission of evidence which is not strictly necessary or
beneficial to resolution of
a dispute detracts from these
advantages.
[7]
However, the
rules of natural justice remain applicable. In
Telcordia
Technologies Inc v Telkom SA Limited
[8]
this
Court was concerned with the interpretation of the terms ‘gross
irregularity’ and ‘exceeding its power’
which
justify interference by courts with arbitral awards as provided in
s
33(1)
(b)
.
The court reaffirmed the principle of party autonomy – a
realisation of freedom enjoyed by parties to execute arbitration
agreements. It defined gross misconduct as a ‘process
standard’
[9]
which is ‘to
all intents and purposes identical to a ground of review available in
relation to proceedings in inferior courts’
[10]
.
The ultimate test of whether an arbitrator’s conduct
constituted gross irregularity is whether the conduct of the
arbitrator
or arbitral tribunal prevented a fair trial of the
issues.
[11]
The common law
grounds of review are excluded.
[12]
[23] In
Lufuno
Mphaphuli and Associates (Pty) Limited v Andrews
and
Another
2009
(4) SA 529
(CC) the Constitutional Court approved the principle of
party autonomy in arbitration proceedings by holding that s 34 of the
Constitution,
which provides for a right to a fair public hearing,
did not apply to private arbitrations. In modern arbitral practice
fairness
goes beyond strict observation of the rules of evidence,
provided that the procedure adopted is fair to both parties and
conforms
to the rules of natural justice.
[13]
[24] With
regard to ‘exceeding [arbitrator’s] powers’ this
Court in
Telcordia
referred
to the distinction made by Lord Steyn in
Lesotho
Highlands Development Authority v Impregilo SpA and Others
[14]
between a tribunal purporting to exercise a power or jurisdiction
which it does not have and erroneous exercise of power that it
has.
Therein the court held that ‘If it is merely a case of
erroneous exercise of power vesting in the tribunal no excess
of
power under section 68
(b)
is
involved’.
[25] The
powers given to an arbitration tribunal in each case are determinable
with regard to the
Arbitration Act, the
arbitration agreement, the
pleadings (or statements of case) and any other document prepared by
the parties for that purpose. As
already explained, in this case, the
agreement between the parties was that the pleadings that had served
before the Adjudicator
would stand in the arbitration proceedings and
that issues to be determined by the tribunal were those set out in
the parties’
Notices of Dissatisfaction. The arbitrator
recorded in the award that both parties duly filed their Notices of
Dissatisfaction.
[26] However,
the Notice of Dissatisfaction prepared by the Joint Venture did not
form part of the record in this
court. It is therefore not clear what
issues were raised therein. But Eskom’s Notice of
Dissatisfaction raised expressly
the issue of failure by the Joint
Venture ‘to notify a claim and refer disputes within the time
periods stipulated under
the construction agreement concluded between
the parties’. From this stipulation in Eskom’s Notice,
there can be no
doubt that, apart from the interpretation issue,
determination of whether there was compliance with the time-bar set
in the agreement
was placed squarely before the arbitration tribunal.
[27] In
addition, it is clear from the remarks of the arbitrator as referred
to in para 15 above that he did consider
the pleadings filed by the
parties. It is on consideration thereof that he formed the view that
the Joint Venture had responded
in detail to the time-bar special
plea raised by Eskom. In the award he remarked that:
‘
In the pleadings
before me the employer [Eskom] once again raised the time bar issue
with reference to clauses 61.3 and 90.1. The
contractor [Joint
Venture] responded in detail, even attaching opinions of eminent
counsel,
on the effect of clauses 61.3 and
90.1
. Its
contentions did not touch on clause 61.1. It did not allege that 61.3
was irrelevant because the compensation claims fell
under clause 61.1
and not under 61.3. It did not allege that the PM had failed in his
duties under 61.1, or that absent proof of
his prior compliance with
61.1, the time bar clauses 61,3 and 90.1 could not have arisen - a
quasi
exceptio non adimplenti contractus
argument.’
(emphasis supplied)
[28] Not
only that, the arbitrator also considered the event notifications as
listed in the schedule filed by the
Joint Venture, the contents of
which, with regard to notification of events, must be assumed to have
been the same as its pleadings.
From that list he formed the view
that the Joint Venture schedule had assumed that he would accept its
interpretation of the time-bar
provisions. All this in the context of
Eskom having submitted that the claims listed under its time-bar
column would be disposed
of if its interpretations were to be upheld.
Again, as the arbitrator remarked, the Joint Venture never disputed
the correctness
of that submission.
[29] Notably,
the Adjudicator’s own conclusion that the specified time-frames
had not been adhered to was
drawn from the documents filed before
him. There was no suggestion by the Joint Venture that the conclusion
could not be drawn
without evidence having been led.
[30] In
the high court, instead of filing the pleadings the parties gave
evidence by way of affidavits on the contents
of the pleadings. Eskom
contended that the dates set out in an annexure (SOR6) to the
statement of reply filed by the Joint Venture
showed that the Joint
Venture’s notifications were out of time. The Joint Venture
referred to another annexure (RA1) that
had been prepared by Eskom
arguing that Eskom had pleaded different dates in its statement of
defence. This became the basis of
the submission on behalf of the
Joint Venture that there was a dispute of fact with regard to the
notification dates cited by the
parties.
[31] However,
it was not in dispute that Eskom’s schedule as filed in the
arbitration proceedings was prepared
on the dates that had been
pleaded by the Joint Venture. Although the Joint Venture responded
that the contents of Eskom’s
schedule were wrong it did not
deny that it had set out the dates as referred to by Eskom in its
schedule. The award was therefore
not made on the basis of disputed
of facts. In addition there is no evidence that the factual finding
made by the adjudicator,
that the time limits agreed on between the
parties for notification of claims and disputes had not been met, was
in contention
before the arbitrator.
[32] With
regard to the contention that the time bar was pleaded only in
relation to 11 of the claims, the Arbitrator
explained that Eskom had
submitted that if its interpretation of the time bar clauses were to
be upheld the claims listed in its
schedule would be disposed of. The
Joint Venture was therefore alerted to that argument and never
refuted it. In the Notice of
Dissatisfaction the time bar was
referred to the Arbitrator in relation to all claims and the matter
was argued before him on the
basis that the time bar findings would
be applicable to all 13 claims. His determination thereof on the
record before him was consistent
with the speed, efficiency,
flexibility, fairness and finality required in arbitration
proceedings.
[33] In
the result no gross irregularity or exceeding of authority was shown
on the part of the Arbitrator.
[34] Consequently,
1 The
appeal is upheld with costs including the costs of two counsel where
so employed;
2 The
order of the high court is set aside and replaced with the following:
‘
The application is
dismissed with costs’.
N
DAMBUZA
JUDGE
OF APPEAL
Appearances:
For
A
ppellant:
J
Babamia SC with Luc Spiller
Instructed
by: Gildenhuys
Malatji Inc, Sandton.
Honey
Attorneys, Bloemfontein.
For
1
st
to
7
th
Respondents:
A Bester SC
Instructed
by:
Tiefenhaler
Attorneys, Sandton.
Webbers,
Bloemfontein.
[1]
As quoted in the Adjudicator’s determination (extracted from
the ‘NEC Engineering and Construction Contract Core
Clauses’
portion of the agreement).
[2]
Para 47 of the Arbitral Award at page 48.
[3]
Ibid Para 46.
[4]
As referred to in the arbitral award.
[5]
The
Rule 38
Application did not form part of the appeal record.
[6]
In respect of the six claims: M, N, Q (2), R(3), U, and V.
[7]
2
Lawsa
3rd Ed
at paras 80 and 122.
[8]
Telcordia
Technologies Inc v Telkom SA Limited
2007
(3) SA 266 (SCA).
[9]
At para 42.
[10]
At para 53. The court recognised however that this meaning might be
affected by the different ‘textual setting in relation
to
proceedings of inferior courts’ but for the purposes of the
case (which are similar to this case) judgment relating
to review of
inferior court proceedings were relevant to the meaning of ‘gross
irregularity’ under
s 33(1)
(b)
of the
Arbitration Act 42 of 1965
.
[11]
Ellis v
Morgan; Ellis v Dessai
1909 TS 576
at 581.
[12]
At para 51.
[13]
Dexgroup
(Pty) Ltd v Trustco Group International (Pty) Ltd and Others
2013
(6) SA 520 (SCA).
[14]
Lesotho
Highlands Development Authority v Impregilo SpA and Others
[2005]
UKHL 43
at para 24. The court was considering the meaning of
‘exceeding its powers’ within s 68(2)(b) of the English
Arbitration
Act 1996.