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[2007] ZASCA 143
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Lufuno Mphaphuli & Associates (Pty) Ltd v Andrews and Another (434/06) [2007] ZASCA 143; [2008] 1 All SA 321 (SCA); 2008 (2) SA 448 (SCA); 2008 (7) BCLR 725 (SCA) (22 November 2007)
Links to summary
REPUBLIC
OF SOUTH AFRICA
THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
Reportable
Case Number :
434 / 06
In the matter
between
LUFUNO MPHAPHULI &
ASSOCIATES (PTY) LTD
...........................
APPELLANT
and
NIGEL A ANDREWS
...........................
FIRST RESPONDENT
BOPANANG
CONSTRUCTION CC
...........................
SECOND RESPONDENT
Coram
:
HARMS ADP, MTHIYANE, LEWIS, PONNAN JJA et MALAN AJA
Date
of hearing
: 5 NOVEMBER 2007
Date
of delivery
: 22 NOVEMBER 2007
SUMMARY
Arbitration –
review of award – grounds for setting aside – condonation
– refusal of
Neutral
citation: This judgment may be referred to as :
Lufuno
Mphaphuli & Associates
v
Andrews
[2007]
SCA 143 (RSA)
___________________________________________________________________
J U D G M E N T
___________________________________________________________________
PONNAN JA
[1] The appellant, Lufuno Mphaphuli and Associates (Pty) Ltd
('Lufuno'), was one of Eskom's principal contractors on the Tjatane,
Malegale and Sebitse Electrification Project in the Limpopo Province.
It in turn concluded, pursuant to a tender process, a written
agreement incorporating the engineering and construction short
contract with the second respondent, Bopanang Construction CC
('Bopanang'),
on 16 May 2002, in terms of which the latter had to
execute certain electrical and construction work.
[2] Certain disputes having arisen between Lufuno and Bopanang
relating to the execution of the work and payment, the latter issued
summons out of the Pretoria High Court for payment of what it alleged
were moneys due to it in terms of the agreement. It furthermore
launched an urgent application on 11 April 2003 to interdict Eskom
from effecting payment of the sum of R656 934.45 (being the amount
claimed by it) to Lufuno in terms of the principal electrification
agreement. The parties agreed that the dispute between them would
be
resolved by arbitration and in consequence of that agreement the
action was abandoned. The first respondent, Nigel Andrews
('Andrews'),
was duly appointed arbitrator.
[3] On 16 October 2003 and after certain preliminary meetings, the
parties concluded an arbitration agreement which defined the purpose
of the arbitration as follows: 'To determine whether payment is due
in terms of the contract …' and, if so -
'The extent of such payment
due, having regard to the scope of the agreement, any agreed
amendments or instructions for amendments
thereto by the defendant or
Eskom; the value of the work that has been done by Bopanang; the
effect of any defects, if any, and the
rectification thereof; any and
all payments made to Bopanang. Therefore a final assessment of monies
reasonably due by one of the
parties to the other needs to be made by
the arbitrator.'
The further material terms of the arbitration agreement, to the
extent here relevant, were that:
'2 The final award made by the arbitrator
. . . shall be final and binding on the parties.
3 Any payment to be made by any of the
parties in terms of the award . . . shall be due and payable to the
other party within 21 calendar
days of the date of the written award
. . . .
6 The arbitrator shall be entitled to
liaise with Eskom's duly authorised representatives, and to request
any documentation with regard
to this project from Eskom, who is
hereby authorised by both parties to make such documentation
available.
7 The arbitrator shall commence with the
inspection and measurement of the work done on site on or about 27
October 2003. Each party
shall provide their reasonable co-operation
with the aim of completing the process as speedily as possible, and
appoint representatives
to attend the physical inspection and
measurement.
10 This agreement constitutes the full
and complete agreement reached between the parties and no variation,
amendment, alteration,
addition or omission shall be valid and
binding on the parties unless reduced to writing and signed by all
parties or their duly
authorised representatives.'
[4] The parties filed their claim and counter-claim respectively and
the arbitration was duly conducted before Andrews. On 23 August
2004,
Andrews despatched his award (‘the award’) as well as his
reasons therefor to the parties per facsimile. He held
that Lufuno
was liable to Bopanang in the sum of R339 998.83 with interest at the
rate of 0.5 per cent per week, computed from 6
October 2002. Insofar
as the costs were concerned, he ordered each party to pay half of his
costs and their own legal costs.
[5] After having sought and obtained legible copies of an appendix to
the award, Lufuno's then attorney sent a letter to Andrews
on 25
August 2004. That letter asserted that Lufuno had already identified
certain items which required further clarification and
undertook to
revert to Andrews with specific queries once the appendix had been
thoroughly considered. The letter further suggested
a round table
discussion with Andrews, in order that 'matters be clarified as soon
as possible', which according to the writer would
be in the best
interests of everybody. That letter elicited the following reply from
the Andrews on 27 August 2004:
'In terms of Clause 2 of the signed
arbitration agreement between the parties the final award made by the
arbitrator is final and
binding on the parties. There is no provision
in the arbitration agreement for you to respond to the arbitrator on
his decision or
for the arbitrator to enter into any further
discussion on such. I therefore cannot enter into any further
discussions upon this
issue and it becomes a matter between the
parties. I trust this clarifies the situation.'
[6] On 16 September 2004, Lufuno's then attorney wrote to Bopanang’s
attorney that they held instructions to take the matter
on review to
the High Court. When nothing further was heard from him and after the
expiry of the 21 calendar days envisaged in Clause
3 of the
arbitration agreement, Bopanang applied during October 2004, in terms
of
s 31(1)
of the
Arbitration Act 42 of 1965
, for the award to be
made an order of court, and for judgment in its favour in the sum of
R339 998.82, with interest. That application
was opposed by Lufuno.
It filed its answering affidavit on 13 December 2004 and
simultaneously launched an application to review
and set aside the
award, as also for an order that the matter be remitted to the
arbitrator for him to review his award.
[7] The principal thrust of Lufuno’s application was that
Andrews '… had awarded numerous costs in favour of Bopanang
for work never done nor even claimed …' by it. And, as Andrews
had refused to discuss the matter any further, Lufuno, so it
was
further contended, would suffer final and irreparable loss. It thus,
so the contention proceeded, had no alternative but to approach
the
High Court for a review of the arbitrator's decision and award.
[8] On 7 March 2005, Andrews filed his reasons as well as a record of
the arbitration proceedings with the registrar of the High
Court in
accordance with
Rule 53.
On 11 April 2005, Lufuno's then attorney
informed Bopanang and Andrews that it did not wish to amend, add to
or vary the terms of
its notice of motion or supporting affidavit and
that they could therefore proceed to file their answering affidavits
in the review
application. Bopanang and Andrews duly did so, by
filing what came to be termed their first answering affidavits on 12
and 16 May
2005 respectively.
[9] In its affidavit Bopanang asserted that Lufuno had failed to
comply with
s 32(2)
of the Act, inasmuch as the review application
had not been launched within six weeks after publication of the
award. Nor, for that
matter, had Lufuno sought an extension of time
in terms of
s 38
of the Act. Accordingly, as the review application
was out of time and as good cause had not been shown, nor relief
sought in terms
of
s 38
, the application fell, on that basis alone,
to be dismissed with costs.
[10] During June 2005 Lufuno's then attorney withdrew and was
replaced with its current attorney of record. There then followed an
exchange of correspondence between Lufuno's new attorney and
Bopanang’s attorney of record. On 21 July 2005, Lufuno's
attorney
sent a letter of demand to Bopanang's attorney claiming
payment of an amount of R136 000 in respect of what it alleged were
penalties
arising from Bopanang’s repudiation of the contract.
In the meanwhile, no replying affidavit having been filed by Lufuno
in
the review application, Bopanang applied for a court date and the
matter was set down for hearing on the opposed roll on 7 October
2005.
[11] On 4 August 2005, Lufuno delivered an amended notice of motion
and a supplementary founding affidavit. It now sought in addition
to
the relief envisaged in its original notice of motion, a declaratory
order that Bopanang was liable to it in the sums of R136
000, R115
859.76 and R85 200, with interest on each of those amounts. It
accordingly sought an order that the award be substituted
with an
order that Bopanang pay to it the sum of R623 035.20 together with
interest. It furthermore sought an order condoning '…
to the
extent necessary, the late filing of this application and the amended
notice of motion and supplementary founding affidavit.'
[12] Bopanang and Andrews then filed a second set of answering
affidavits to Lufuno's supplementary founding affidavit on 16 and
29
September 2005 respectively. On 3 and 4 October 2005 Lufuno delivered
replying affidavits respectively to those answering affidavits.
On 20
December 2005, Lufuno delivered a second notice of intention to amend
its notice of motion. It now sought, in addition, an
order in terms
of
s 38
of the Act, to the effect that the periods stipulated in
s
33(2)
be extended to provide for the admission of its original
founding affidavit as amended by its supplementary founding
affidavit. It
also sought as an alternative to the matter being
remitted to Andrews, that the dispute be referred to trial
alternatively for the
hearing of oral evidence on certain specified
issues.
[13] Both Lufuno’s review application and Bopanang’s
application for the award to be made an order of court were heard
by
Van der Merwe J in the Pretoria High Court on 24 and 25 January 2006.
In each instance Bopanang succeeded with costs on the punitive
scale
as between attorney and client. Various applications for condonation
by Lufuno confronted Van der Merwe J. The learned judge
held that
Lufuno had
'. . . made out no case on the merits of
the application. No case was made out in the founding affidavit. The
attempts to make out
a case in the various supplementary affidavits
did not succeed. The applications for condonation are therefore
refused on the basis
that there was no proper explanation for the
delay as well as on the basis that no case was made out for the
relief sought.'
Having expressed himself quite firmly on the merits and having
demonstrated his displeasure at what he described as vexatious
conduct
on the part of Lufuno with a punitive costs order, the
learned judge thereafter and without furnishing any reasons, somewhat
surprisingly,
granted leave to appeal to this court.
[14] The legal principles applicable to an enquiry of this kind were
recently set out by Harms JA on behalf of this court.
1
Applying those principles to the facts of this case, which I have set
out in some detail in this judgment, illustrates, to my mind,
that
Lufuno fundamentally misconceived the nature of its relief. Moreover,
Lufuno’s founding papers assumed, erroneously so
- as was
subsequently conceded by it - that the private arbitration process
was an administrative one, which had to be lawful, reasonable
and
procedurally fair.
2
That fundamental misapprehension permeated its founding application,
which as I shall presently show, it subsequently sought in its
supplementary papers, to remedy. The parties clearly intended Andrews
to have exclusive authority to decide whatever questions were
submitted to him and that each was precluded by virtue of the
provisions of Clause 2 of the arbitration agreement from appealing
against his decision. The parties had accordingly waived the right to
have the merits of their dispute re-litigated or reconsidered.
3
Interference by a court was therefore limited to the ground of
procedural irregularities as set out in
s 33(1)
of the Act.
4
Lufuno could thus challenge the award only by invoking the statutory
review provisions of
s 33(1)
of the Act, as any further ground of
review, either at common law or otherwise, had by necessary
implication been waived by it.
5
[15] The grounds for any review, as well as the facts and
circumstances upon which a litigant wishes to rely, have to be set
out
in its founding affidavit amplified insofar as may be necessary
by a supplementary affidavit after the receipt of the record from
the
presiding officer, obviously based on the new information that has
since become available.
6
The original founding affidavit filed by Lufuno comprised ten pages
excluding annexures. Lufuno abused its right to amplify in this
case
by filing a supplementary affidavit of 80 pages in which it raised
all manner of new allegations.
[16] The only new information that emerged from the record of the
arbitration proceedings filed by Andrews in terms of
Rule 53(1)(
b
)
was what Lufuno described as evidence of three ‘secret
meetings’ between Andrews and Bopanang’s representative.
That new information could hardly justify the lengthy supplementary
affidavit that had been filed, ostensibly in terms of
Rule 53(4).
Leaving aside for the moment the secret meetings to which I will
return, Lufuno sought in effect to make out a completely new case
in
its supplementary affidavit. That plainly was not authorised by
Rule
53
or by any other principle of our law. In those circumstances, it
seems to me, the court below can hardly be faulted for having
exercised
its judicial discretion against Lufuno under
s 38
of the
Act. It has not been suggested that the discretion was exercised
capriciously or upon a wrong principle or upon any other
ground
justifying interference by a court of appeal.
7
That, one would have thought, would have been the end of the matter.
But, says Lufuno, relying primarily on the ‘secret meetings’
to which I have already alluded, Andrews exhibited conscious bias in
favour of Bopanang and against it. Bopanang, on the other hand,
urged
upon us that in this case an arbitration
stricto
sensu
was not intended and that the Act does not apply. Foundational to
that argument is the contention that Andrews was acting as an expert
or valuer and not as an arbitrator whose position was governed by the
Act. Each of these contentions will be considered in turn.
[17] In its founding affidavit Lufuno stated :
‘
It
should be noted that the task of the arbitrator was primarily to work
through the documentation provided and to conduct a physical
inspection and measurement of the work factually done by [Bopanang].
The agreement does not provide for pleadings or oral evidence
by the
parties or their witnesses.’
In that context, Andrews had invited comment from the parties on
technical issues pertaining to the measurements that he had made.
As
Lufuno itself stated, the agreement had not provided for pleadings or
oral evidence by the parties or their witnesses. It followed
that
Andrews’ inspection, re-measurement and estimation had to form
the basis upon which he would arrive at a determination
which by
agreement between the parties was to be conclusive. That, plainly,
had to have been within the contemplation of the parties
when they
concluded their agreement. Lufuno fully participated in that process.
Furthermore, no legal argument or submissions were
to be made by the
parties prior to Andrews’ finalisation of his award.
[18] Were an arbitrator to discuss the merits of the matter with one
of the parties to the exclusion of the other that, ordinarily
at any
rate, would constitute a serious irregularity, which may without more
warrant the award being set aside.
8
But, against the backdrop of the arbitration agreement and the
context of the arbitrator’s mandate, those meetings were quite
innocuous and had no effect whatsoever on Andrews. To describe them
as ‘secret meetings’, as Lufuno does, is to give
to them
a sinister connotation that is wholly unwarranted. The purpose of
those meetings was simply to verify certain figures and
to clarify
the use of certain items. That fell within the parameters of Andrews’
mandate. That being so, even if he had been
wrong those would have
been errors of the kind committed within the scope of his mandate.
9
[19] Proof that Andrews misconducted himself in relation to his
duties or committed a gross irregularity in the conduct of the
arbitration
is a prerequisite for the setting aside of the award. An
error of fact or law, or both, even a gross error, would not
per
se
justify the setting aside the award.
10
It followed that Lufuno had to go further than that. For, as
Smalberger ADP put it:
'A gross or manifest mistake
is not
per se
misconduct.
At best it provides evidence of misconduct … which, taken
alone or in conjunction with other considerations, will
ultimately
have to be sufficiently compelling to justify an inference (as the
most likely inference) of what has variously been described
as
"wrongful and improper conduct" …, "dishonesty"
and "
mala fides
or
partiality" … "moral turpitude".’
11
[20] Lufuno asserted bias. It was for it to establish a reasonable
apprehension of bias.
12
The threshold for a finding of real or perceived bias is high.
13
The bias complained of was, according to Lufuno, grounded in the
relationship between Andrews and Bopanang. Why Andrews would have
shown an inclination to favour the one party to the dispute does not
emerge on the papers. The three ‘secret meetings’,
as I
have just illustrated, were not only innocuous but also occurred
within the scope of Andrews’ mandate. The proceedings,
on any
yardstick, were thus not infected by them. No other overt act is
relied upon in support of the proposition that the proceedings
were
contaminated and that the award is therefore susceptible to attack.
Simply put, there are no reasonable grounds to think that
Andrews
might have been biased. It must follow that the award, on this score,
is immune from interference.
[21] I turn to Bopanang’s argument that Andrews was not in
truth an arbitrator but rather a valuer. The distinction urged upon
us in this case is illustrated by Ogilvie -Thompson JA, who
observed:
14
‘
This
argument assumes something in the nature of an appeal to the
arbitrator against the decision of the auditor. That is, however,
not
the position. In making his valuation, the auditor hears neither
party. His is not a
quasi-
judicial
function. He reaches his decision independently on his knowledge of
the company’s affairs. His function is essentially
that of a
valuer (
arbitrator
,
aestimator
),
as distinct from that of an arbitrator (
arbiter
),
properly so called, who acts in a
quasi-
judicial
capacity. The distinction between
arbitri
and
arbitratores
was well known to our writers
.... The
arbitrator
or
aestimator
need not necessarily be an
entirely impartial person. In discharging his function he is of
course required to exercise an honest judgment,
the
arbtirium
boni viri
; but a
measure of personal interest in not necessarily incompatible with the
exercise of such a judgment.’
[22] It seems to me that the parties intended the
Arbitration Act to
apply to their dispute, within the limits of their agreement. A
finding that Andrews was a valuer would not assist Lufuno and does
not require a decision. Unlike an arbitrator, a valuer does not
perform a
quasi
-judicial function but reaches his decision
based on his own knowledge, independently or supplemented if he
thinks fit by material
(which need not conform to the rules of
evidence) placed before him by either party. Whenever two parties
agree to refer a matter
to a third for decision, and further agree
that his decision is to be final and binding on them, then, so long
as he arrives at his
decision honestly and in good faith, the two
parties are bound by it.
15
It has not been suggested that Andrew’s decision was not
arrived at honestly and in good faith. Nor was such a case made out
on the papers. Here as well therefore, Lufuno must fail.
[23] It follows that the conclusion reached by Van der Merwe J cannot
be faulted. In the result the appeal is dismissed with costs.
V M PONNAN
JUDGE OFAPPEAL
CONCUR
:
HARMS ADP
MTHIYANE JA
LEWIS JA
MALAN AJA
1
Telcordia
Technologies Inc v Telkom
SA
Ltd
[2006] ZASCA 112
;
2007 (3) SA 266
(SCA).
2
Total
Support Management (Pty) Ltd v Diversified Health
Systems
(SA)(Pty) Ltd
[2002] ZASCA 14
;
2002 (4) SA 661
(SCA) para 25.
3
Telcordia
para 50.
4
Telcordia
para 51.
5
Telcordia
para 51.
6
Telcordia
para 32.
7
Ex
parte Neethling
1951 (4) SA 331
(A) at
335.
8
S
v Roberts
1999 (4) SA 915
(SCA) para
23.
9
Telcordia
para 86.
10
Total
Support
para 35.
11
Total
Support
para 21.
12
S
v Basson
2007 (3) SA 582
(CC) para 29.
13
South
African Commercial Catering and Allied Workers Union v Irvin &
Johnson Ltd (Seafoods Division Fish Processing)
[2000] ZACC 10
;
2000
(3) SA 705
(CC) para 15.
14
Estate
Milne v Donohoe Investments (Pty) Ltd
1967
(2) SA 359
(A) at 373H – 374C.
15
Per
Lord Denning MR
Arenson v Arenson
[1973] 2 All ER 235
at 240 e-f;
SA
Breweries v Shoprite Holdings
[2007]
SCA 103 (RSA) paras 6, 22 and 41.