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[2007] ZASCA 45
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Gutsche Family Investments (Pty) Ltd and Others v Mettle Equity Group (Pty) Ltd and Others (133/06) [2007] ZASCA 45; [2007] 3 All SA 223 (SCA); 2007 (5) SA 491 (SCA) (29 March 2007)
Links to summary
THE SUPREME
COURT OF APPEAL
OF SOUTH
AFRICA
Case no: 133/06
REPORTABLE
In the
matter between:
GUTSCHE
FAMILY INVESTMENTS (PTY) LTD
......................
1
ST
APPELLANT
FORMEX
HOLDINGS PTY) LTD
......................
2
ND
APPELLANT
THE
TRUSTEES FOR THE TIME BEING OF
THE LYNCH
TRUST
......................
3
RD
APPELLANT
and
METTLE
EQUITY GROUP (PTY) LTD
......................
1
ST
RESPONDENT
JEREMY
JOHN GAUNTLETT SC N.O.
......................
2
ND
RESPONDENT
THE
ARBITRATION FOUNDATION OF
SOUTHERN AFRICA
......................
3
RD
RESPONDENT
Before: Harms ADP, Farlam, Jafta, Ponnan, Cachalia JJA
Heard: 19 March 2007
Delivered: 29 March 2007
Summary: Jurisdiction – Arbitration – In the absence of
an express agreement an appeal arbitrator is not entitled finally
to
decide his own jurisdiction.
Neutral citation:
This judgment may be referred to as
Gutsche Family
Investments v Mettle Equity Group
[2007] SCA 45 (RSA).
JUDGMENT
CACHALIA JA
[1] This is an appeal against a judgment of the
Johannesburg High Court (CJ Claassen J) reviewing and setting aside
an appeal arbitrator’s
award. It deals with whether an
arbitrator’s dismissal of an exception is appealable and also
examines the appeal arbitrator’s
jurisdiction finally to
determine this question in the context of an arbitration agreement.
[2] The appellants and first
respondent entered into a sale agreement as sellers and purchaser
respectively. The agreement required
disputes arising therefrom to be
referred to arbitration. During April 2004 the appellants referred
such a dispute to arbitration.
It involved a claim in an amount of
R4 803 558.89 against the first respondent, which they
alleged was due and payable
to them in terms of the agreement. The
first respondent filed a statement of defence and a counterclaim to
the appellants’
claim admitting that it was indebted to the
appellants in the amount claimed, but pleaded that such indebtedness
was extinguished
by set-off arising from losses it had suffered in
the sum of R5 398 394.91 in consequence of the appellants’
breach of warranties
contained in the agreement. In its counterclaim
the first respondent claimed payment of that amount from the
appellants.
[3]
The
appellants took exception to the counterclaim on two grounds. First
they averred that the claim was premature in that the first
respondent had failed to comply with its contractual obligation to
notify them of the alleged breaches within 30 days of their
occurrence;
secondly they asserted that the first respondent’s
claim was not liquidated and hence could not be set-off against the
amount
admittedly owed. In response the first respondent sought to
amend its pleading, but the appellants objected to the proposed
amendment
on the basis that it would not cure the defect complained
of.
[4] The arbitrator dismissed the first exception. In
relation to the second, he upheld it to the extent only that the
first respondent’s
claims did form part of the schedule of
liquidated claims, but not those that were not. He thus declared that
the appellants were
not entitled to an award in their favour at that
stage.
[5]
The
appellants sought to appeal against the arbitrator’s ruling
dismissing the exception in part to the second respondent, the
appeal
arbitrator. The first respondent, however, objected to his
jurisdiction on the basis, so it maintained, that the parties had
agreed on an appeal procedure (‘the appeal agreement’)
against the arbitrator’s final award only, not against
interlocutory
rulings. The dismissal of the exception, being in the
nature of a ruling and not final in effect was, the first respondent
submitted,
not appealable in terms of the appeal agreement. The
parties however agreed that appeal arbitrator could determine both
the appealability
issue and, in the event that he decided this
against the first respondent, also the merits of the disputed claims
in a single hearing.
[6] The scope and content of the
appeal agreement was not contained in a single document but had to be
gleaned from the correspondence
that had passed between the parties
before the arbitration commenced. The correspondence was made
available to the appeal arbitrator
who, after considering it,
concluded that the arbitrator’s ruling was appealable. He thus
dismissed the jurisdictional objection
and proceeded to decide the
merits of the dispute in the appellants’ favour.
[7] The first respondent then
instituted review proceedings in the Johannesburg High Court to
review and set aside the appeal arbitrator’s
award on the basis
that he had wrongly assumed jurisdiction over the appeal. The High
Court upheld the first respondent’s interpretation
of the
appeal agreement (as contained in the correspondence) as envisaging a
single right of appeal against a final award only and
hence also its
jurisdictional objection. It consequently set aside the appeal
arbitrator’s award and also refused the appellants
leave to
appeal. The appeal is with leave of this court.
[8] In this court the first
respondent no longer contends, as it did before the two other
tribunals, that the appeal agreement limits
appeals to a single
appeal against a final award only. It now contends that their
agreement extended only to any appeal that this
court would consider
appealable – and because, so it contends, according to this
court’s jurisprudence the dismissal
of an exception is not
appealable, the appeal agreement does not permit an appeal against a
dismissal of an exception. This is the
first issue in this appeal;
the second is whether the appeal arbitrator could finally determine
this issue in the context of the
appeal agreement.
[9] As I have mentioned, the sale
agreement contained an arbitration clause – hence the referral
of the disputed claims to arbitration.
The clause made no provision
for an appeal against any award of the arbitrator, but it did provide
for disputes to be ‘submitted
to and decided by arbitration in
accordance with the rules of and by an arbitrator or arbitrators
appointed by, the Arbitration Foundation
of South Africa’
(AFSA).
[10] The AFSA rules relevant to this
appeal are the following: Rule 22.1 provides that when the parties
(who have agreed to arbitration
according to AFSA’s rules) have
in writing agreed that an interim award or the final award of the
arbitrator shall be subject
to a right of appeal, ‘the
following rules shall, save to the extent otherwise agreed by them in
writing, apply’. Rules
22.2 to 22.7 then deal with procedural
matters: the time limits and requirements of a notice of appeal and
cross-appeal; payment
of fees to the AFSA Secretariat; the
appointment of the appeal arbitrator or arbitrators; and the
determination of the time and place
for the appeal hearing. Then
follows rule 22.8, which deals with and circumscribes the powers of
the appeal arbitrator or arbitrators –
‘
22.8 The nature of the appeal and
cross-appeal, and the powers of the appeal arbitrator or arbitrators
shall,
save to the extent that the
written agreement between the parties or this article 22 provides
otherwise,
be
the same as if it were a civil appeal and cross-appeal to the
Appellate Division of the Supreme Court of South Africa.’
(My
emphasis.)
[11] Thus, in terms of the
arbitration clause, which incorporates the AFSA rules, including rule
22.8, the appealability of any interim
award and the jurisdictional
power of the appeal arbitrator depend on whether the matter would be
appealable if it were a civil appeal
to the Appellate Division of the
Supreme Court of South Africa (now the Supreme Court of Appeal (the
SCA)) – unless the written
agreement between the parties or
article 22 of the AFSA rules provided otherwise.
[12] The appeal agreement provides
only for an appeal procedure according to the AFSA rules –
including rule 22.8. It does not
provide ‘otherwise’, ie
it does not provide that interim awards which are not of final effect
are appealable and the
appellants do not advance that contention. The
real and only issue is whether the arbitrator’s order
dismissing the exception,
would, if it had been made by the High
Court, have been regarded as an order having final effect, and thus
appealable to the SCA.
This is precisely the test prescribed by rule
22.8 and (in the absence of agreement ‘otherwise’) is
applicable in the
present case. On this matter it is settled law that
a High Court order dismissing an exception in the High Court is not
appealable
to the SCA.
1
It follows that the first issue,
whether the arbitrator’s order was appealable, must be decided
in the first respondent’s
favour. The arbitrator is entitled to
reconsider the interpretation issue.
2
[13] I turn to the second issue,
whether the appeal arbitrator had the power to hear and finally
decide the appealability point and
thereby determine his own
jurisdiction. The appellate jurisdiction of the SCA is derived from s
168(3) of the Constitution
3
read with the Supreme Court Act 59 of
1959.
4
Because, as I have mentioned, the
dismissal of an exception (in the High Court) is not appealable under
the Supreme Court Act, the
SCA will decline to exercise jurisdiction
over an appeal of this nature. The appeal will accordingly be struck
from the roll.
5
Similarly where an arbitration
agreement (incorporating the AFSA rules) does not confer on an appeal
arbitrator the power to entertain
the dismissal of an exception he
has no power to entertain the appeal. He may consider the appeal only
provisionally, as the SCA
would, for the purposes of deciding the
extent of his jurisdiction.
[14] Where the parties themselves
disagree as to the powers conferred on an appeal arbitrator, the
appeal arbitrator cannot extend
the area of jurisdiction over the
very matter which he is required to resolve. And if he does, he will
act beyond his mandate.
6
The contention advanced by the
appellants is that the appeal agreement empowered the appeal
arbitrator finally to determine his own
jurisdiction.
7
It is a far-reaching contention
implying that the agreement constituted an ouster of the court’s
jurisdiction. Such an agreement
must be provided for specifically,
and in the clearest terms.
[15] It is clear that at the
commencement of the arbitration appeal there was no agreement on the
ambit of the appeal arbitrator’s
jurisdictional powers. All
that was agreed, in the face of the first respondent’s
jurisdictional objection, was that the appeal
arbitrator would deal
with both the issue of appealability and the merits in a single
hearing. There is no suggestion in the correspondence
that the appeal
arbitrator was given the power contended for. Indeed, even the appeal
arbitrator recognised that any finding he made
as to his jurisdiction
would be provisional. In these circumstances, where there was no
clear agreement conferring such power on
the appeal arbitrator, the
appellants’ contention must founder. Thus by deciding the
jurisdictional question wrongly and then
hearing and deciding the
merits of the appeal (and the cross-appeal) the appeal arbitrator
exceeded his powers, and his award fell
to be set aside in terms of
s
33(1)
of the
Arbitration Act 42 of 1965
, and the arbitration appeal
fell to be declared of no force and effect. The court below therefore
arrived at the correct conclusion.
[16] I turn to the question of costs.
Counsel for the first respondent submitted that it was entitled to
the costs of two counsel.
I do not agree with this submission for the
reasons that follow. It is true, as the first respondent pointed out,
that it objected
to the jurisdiction of the appeal arbitrator at the
very outset. The grounds for the objection were based on an
interpretation of
the appeal agreement as excluding appeals against
interlocutory orders only. But the first time that it raised the
present ground
of objection based on AFSA
rule 22.8
was when it filed
its supplementary heads of argument shortly before the hearing of the
appeal. Indeed had the first respondent pertinently
raised the point
in opposition to the appellants’ application for leave this
court would doubtlessly have refused leave and
the costs of appeal
would have been saved. To the extent that the appellants also failed
to appreciate the appealability point it
seems fair that it should
shoulder the responsibility for costs, although not to the extent of
two counsel.
8
[17] The following order is made:
The appeal is dismissed with costs.
______________
A CACHALIA
JUDGE OF APPEAL
CONCUR:
HARMS ADP
FARLAM JA
JAFTA JA
PONNAN JA
1
Maize
Board v Tiger Oats Ltd
2002 (5) SA 365
(SCA) at para 14.
2
Kett
v Afro Adventures (Pty) Ltd
1997 (1)
SA 62
(SCA) at 65G-H.
3
Section
168(3)
provides: ‘The Supreme Court of Appeal may decide
appeals in any matter. It is the highest court of appeal except in
constitutional
matters, and may decide only –
(a) appeals;
(b) issues connected with appeals; and
(c) any other matter that may be referred to it in circumstances
defined by an Act of Parliament.’
4
Moch
v Nedtravel (Pty) Ltd t/a American Express Travel Service
1996 (3) SA 1
(SCA) at 7D-G.
5
Kett
v Afro Adventures (Pty) Ltd
1997 (1)
SA 62
(SCA) at 65H-I.
6
Joubert
(2 ed)
The Law of South Africa
vol 1 para 607;
McKenzie
v Basha
1951 (3) SA 783
(W) 788;
Attorney-General for Manitoba v Kelly
[1922] 1 AC 268
(PC) at 276.
7
Amalgamated Clothing and Textile
Workers Union of South Africa v Veldspun (Pty) Ltd
[1993] ZASCA 158
;
1994
(1) SA 162
(SCA) at 169E-F.
7
8
Cf
Kett v Afro Adventures (Pty) Ltd
1997 (1) SA 63
(SCA) at 65I-67F.