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[2007] ZASCA 163
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Hos+Med Medical Aid Scheme v Thebe ya Pelo Healthcare and Others (015/07) [2007] ZASCA 163; [2007] SCA 163 (RSA); [2008] 2 All SA 132 (SCA); 2008 (2) SA 608 (SCA) (29 November 2007)
Links to summary
THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
Reportable
CASE NO:015/07
In the
matter between
HOS+MED
MEDICAL AID SCHEME
................................
APPELLANT
and
THEBE YA
BOPHELO HEALTHCARE MARKETING & CONSULTING (PTY) LTD
................................
1
ST
RESPONDENT
P J VAN
DER WALT NO
................................
2
ND
RESPONDENT
K VAN
DIJKHORST NO
................................
3
RD
RESPONDENT
I W B DE
VILLIERS NO
................................
4
TH
RESPONDENT
CORAM
:
HOWIE P, CLOETE and LEWIS JJA, HURT and MHLANTLA AJJA
HEARD: 9
NOVEMBER 2007
DELIVERED
:
29 NOVEMBER 2007
SUMMARY:
Order of High Court, Pretoria setting aside an arbitration appeal
tribunal’s award confirmed on basis that tribunal
had exceeded
its powers. Dispute referred to new appeal tribunal in terms of
s
33(4)
of the
Arbitration Act 42 of 1965
.
Neutral Citation:
This judgment may be referred to as Hosmed Medical Aid Scheme v Thebe
Ya Bophelo Healthcare [2007] SCA 163(RSA)
JUDGMENT
LEWIS JA
[1] This is an appeal against an order of the High
Court, Pretoria (per Seriti J), setting aside an award made by an
arbitration appeal
tribunal. The appellant, Hos+Med Medical Aid
Scheme (‘Hosmed’) is, as its name suggests, a medical aid
scheme registered
in terms of the
Medical Schemes Act 131 of 1998
.
The first respondent, Thebe Ya Bophelo Health Care Marketing and
Consulting (Pty) Ltd (‘Thebe’), is a company that acts
as
a broker to Hosmed, and is accredited under the
Medical Schemes Act.
A
dispute between the parties as to fees payable by Hosmed to Thebe
was referred to arbitration.
[2] The arbitration agreement provides for an appeal against the
award to an arbitration appeal tribunal. Hosmed appealed against
the
award of the arbitrator, who held that Hosmed was liable to pay the
fees claimed. The quantum was to be determined subsequently,
the
issue of liability having been separated by agreement. Hosmed
succeeded in its appeal. Thebe successfully brought an application
to
have the appeal award set aside. The members of the appeal tribunal,
all retired judges, are cited as respondents, but none opposed
the
application to set aside the award, and they are not party to this
appeal. The appeal is with the leave of the high court.
[3] The only issue before the court below, and in this appeal, was
whether the appeal tribunal exceeded its powers, or was guilty
of
gross misconduct, such that a court should set aside its award. There
were two issues before the appeal tribunal itself, one of
which was
decided in favour of Thebe, and the other against it. Hosmed seeks to
have the decision of the court below set aside in
terms of
s 33
of
the
Arbitration Act 42 of 1965
, on the basis that the court erred in
finding that the appeal tribunal’s award was vitiated, but only
in respect of the second
issue decided by it. Although the
Arbitration Act does
not specifically refer to an award of an appeal
tribunal, its terms clearly enable an agreement to refer an
arbitrator’s award
to an appeal body, and the provisions of the
Act must apply to an appeal tribunal, and its award, in the same way
as they do to an
arbitration and an arbitral award.
[4] Some background is necessary, but I shall be
brief since many of the issues are not relevant to this appeal. In
order to facilitate
the conduct of the medical aid scheme run by
Hosmed, it uses the services of brokers and administrators. In
November 1999 Hosmed
entered into a contract with Thebe,
1
part of the ‘Thebe Group of Companies’,
engaging Thebe to introduce new members for the scheme, for which an
introduction
fee was payable, and requiring it to provide ongoing
services to members of the scheme, for which another fee was payable.
[5] Both types of fee were regulated by regulations promulgated in
1999 under the
Medical Schemes Act and
the contract between the
parties complied with the regulations. However, in June 2000 the
regulations were amended. The parties believed
that as a result of
the amendment it was no longer permissible for Thebe to charge fees
for ongoing services. This was apparently
a general perception among
people working in the medical aid field.
[6] As a result of that perception the parties concluded an agreement
in March 2001 varying the 1999 agreement so as to delete the
clause
providing for the payment to Thebe for ongoing services. In August of
the same year the parties concluded a second amending
agreement,
which retained much of the first agreement and of the amending
agreement concluded in March, but also gave Thebe certain
exclusive
rights as a broker.
[7] The regulations under the
Medical Schemes Act were
amended again
with effect from 1 January 2003. The amended regulations made
provision for brokers to charge fees for ongoing services.
Accordingly, yet another agreement was concluded by the parties in
August 2003, again making provision for Thebe to charge fees for
ongoing services to Hosmed members. Between March 2001 and August
2003 Thebe claimed no fees for such services, presumably having
forgone them in the 2001 amendments to their original agreement.
[8] In February 2003 Mr R D Laird became the chief executive officer
of Thebe: he was unaware of the existence of the amending agreements
of 2001, and, on discovering that no fees had been paid for ongoing
services between 2001 and 2003, sent invoices to Hosmed claiming
a
substantial sum of money. Hosmed denied liability for payment and
Thebe sued in the Johannesburg High Court. Hosmed pleaded that
the
agreement provided for the resolution of disputes by arbitration. The
parties accordingly concluded a written arbitration agreement
and
appointed Mr R T van Schalkwyk as the arbitrator. The terms of the
arbitration agreement are significant to the issue on appeal.
[9] These are the most important:
‘
4 The
issues to be determined by the arbitrator are the issues contained in
the pleadings referred to at clause 8 below.’
‘
7.1
The arbitration shall be conducted in accordance with the rules of
the High Court, subject to any specific directions that the
arbitrator may give in regard to the conduct of the arbitration;
7.2 The arbitrator shall have
full powers in connection with the arbitration, and in particular,
without limitation, the arbitrator:
7.2.1 Shall have the power set
forth in the
Arbitration Act, as
amended, or any replacement Act;
7.2.2 May make such award or
awards, whether interim, provisional or final, as he may consider
appropriate.’
8.1 The parties have agreed that
the pleadings filed in the High Court action . . . will serve as the
pleadings in this matter; .
. .’
The clause then sets out, for the sake of clarity, which pleadings
had been filed and what their status in the arbitration would
be, and
continued:
‘
8.3
All further pleadings and notices may be exchanged between the
parties on their due dates by E-mail (confirmed by telefax) or
by
telefax . . . .
’
[10] In so far as the right of appeal is concerned, the agreement
provides:
‘
16 The
award made by the arbitrator shall be final and binding on the
parties, subject to the right of appeal contained at clause
17
below.’
’
17.1
The final award made by the arbitrator shall be subject to a right of
appeal;
. . .
17.4 Such appeal shall be heard
by a panel as agreed to within ten court days [after notices of
appeal and cross appeal had been lodged]
failing which three
arbitrators shall be nominated and appointed by the Arbitration
Foundation of South Africa. . . .’
[11] The pleadings were indeed amended: the existence of the amending
agreements of 2001 to the broking contract were introduced
in an
amendment to Hosmed’s plea, and Thebe responded, in a
replication, by averring that these agreements were void because
they
were in contravention of s 228 of the Companies Act 61 of 1973. The
basis of this defence was that the amending agreements,
by which
Thebe gave up its right to claim fees for ongoing services to
Hosmed’s members, constituted a disposal of the greater
part of
Thebe’s assets, yet had not been approved by a general meeting
of Thebe’s shareholders.
[12] Section 228 provides that:
‘
(1)
Notwithstanding anything contained in its memorandum or articles, the
directors of a company shall not have the power, save with
the
approval of a general meeting of the company, to dispose of –
the whole or substantially the
whole of the undertaking of the company; or
the whole or the greater part
of the assets of the company.
(2) No resolution of the company
approving any such disposal shall have effect unless it authorizes or
ratifies in terms the specific
transaction.’
[13] Hosmed’s rejoinder denied that s 228
had not been complied with, and relied in the alternative on estoppel
or the Turquand
rule. In essence, Hosmed alleged that Thebe had
represented that its managing director, Mr Frank Bartlett, had
authority to conclude
the amending agreements, and that Hosmed had
relied on such representations; and that, further, it had entered
into the amending
agreements in good faith and on the assumption that
the internal requirements of Thebe had been complied with – the
Turquand
defence.
2
[14] The parties agreed that the arbitrator should assume that
Thebe’s agreement not to claim fees for ongoing services did
constitute a disposal of the greater part of its assets. Thus, when
the arbitration commenced, the disputes to be determined were
whether
the amendment to the regulations in 2001 precluded Thebe from
claiming fees for ongoing services, and whether the amendments
to the
parties’ agreement in 2001 were in contravention of s 228 of
the Companies Act. This entailed also a determination of
the defences
based on estoppel and the Turquand rule. It was agreed that the
quantum of Thebe’s claim would be determined after
these issues
had been decided.
[15] The evidence of two witnesses was led for Thebe at the
arbitration hearing: Mr J Alderslade, the financial director of
Thebe’s
holding company, and Laird, the chief executive officer
of Thebe, referred to earlier. A director of Thebe, Mr P McCulloch,
who was
involved in the negotiations with Hosmed, did not testify.
Hosmed called the evidence of Mr M Brown. The evidence of Thebe’s
witnesses was of limited value since they had not participated in the
negotiations leading to any of the agreements. Indeed, Laird
had
joined Thebe only in 2003, two years after the broking agreement had
been amended by the parties.
[16] When the arbitration was adjourned for the arbitrator to
consider his award, Thebe realized that it had not led evidence to
substantiate its contention that the amending agreements had not been
authorized as contemplated in s 228 of the Companies Act. It
was
granted leave to recall Laird. Laird testified that he could not find
in Thebe’s documents any record of a resolution of
the
company’s members authorizing the disposal of a major part of
its assets or undertaking. He was cross-examined by Hosmed’s
counsel on the existence of such a document. The evidence adduced,
according to Hosmed, was designed to show that Thebe’s sole
shareholder, the Thebe Hosken Group (Pty) Ltd, of which McCulloch was
a director, as well as being a director of Thebe, had agreed
to the
disposal of Thebe’s right to fees for ongoing services to
Hosmed’s members. There was thus, it was argued before
the
appeal tribunal, unanimous assent to the disposal and no
contravention of s 228. The principle of unanimous assent is that
where
all the shareholders of a company agree on a matter that
ordinarily requires a resolution of a general meeting of the company,
the
need for the formal resolution falls away.
[17] Much store is placed by Hosmed on Laird’s evidence when he
was recalled. Counsel argued before us that his questioning
was
directed to the issue of unanimous assent, even though it had not
been pleaded. The gist of Laird’s evidence on recall
was that,
despite a careful search, he could not find any resolution
authorizing the amendments of the broking agreement and thus
no
evidence that the disposal was authorized under s 228. He testified
that the Thebe Hosken Group was indeed the only shareholder
in Thebe
and confirmed that McCulloch had been a member of the boards of both
Thebe and the Thebe Hosken Group.
[18] In support of the contention that there was unanimous assent,
and that this was raised as an issue in the arbitration, Hosmed
points to the following passage:
‘
Mr
Swart [counsel for Hosmed]: . . . I put it to you the shareholder
must have been aware of this [the disposal] through Mr McCulloch.
Mr Laird: If
Mr McCulloch disclosed it. But as I’ve said to you, I’ve
looked through all of the minutes, etcetera, and
I haven’t
found anything in there that would say that this is what happened.
Mr Swart: But we’ve
already agreed that there was only one shareholder. It would be
senseless to have a formal meeting with
yourself. Not so?
Mr Laird: Well, I think
something as important as this I think it would have been important
for it to have been documented and I found
no documentation
whatsoever.
. . . .
Mr Swart: . . . And I put it to
you that on a reading of this the only inference to be drawn is that
the shareholder, through McCulloch,
was aware of this and consented
to it.’
[19] No objection was made to these questions and submissions and
Thebe did not re-examine Laird. Counsel for Hosmed contends both
in
his heads of argument and before this court that it was clear that he
was placing before the arbitrator the issue of unanimous
assent. He
also asserts that he argued the point before the arbitrator, and
there was no objection to his argument. Counsel for Hosmed
have no
recollection of this aspect of the argument before the arbitrator,
and indeed it does not appear from the written heads of
argument
submitted to the arbitrator and which form part of the appeal record.
The arbitrator did not deal with the issue of unanimous
assent in
making his award which was that portion of Thebe’s claim, plus
interest, and costs was payable by Hosmed (the balance
having
prescribed). The arbitration was postponed sine die to deal with the
quantification of the claim.
[20] Hosmed appealed against the award to the appeal tribunal
constituted in accordance with the arbitration agreement. The issues
on appeal were whether Thebe could, despite the amendment to the
regulation in 2000, claim for fees for ongoing services between
2001
and 2003 when the regulations were again amended; and whether Thebe
had complied with s 228 of the Companies Act. The appeal
tribunal
found that Thebe was entitled to claim the fees in issue (there was
in fact no legal impediment to doing so, despite the
perception about
the effect of the 2000 amendment), thus confirming the arbitrator’s
award in this respect. But it also considered
that the amendments to
the original agreements, which had the effect (assumed for the
purpose of the question of liability) of disposing
of its business
within the meaning of s 228 of the Companies Act, were valid. It held
that there was unanimous assent to the disposal,
and that the
amending agreements were thus enforceable. Accordingly Thebe had
disposed of its right to claim fees for ongoing services.
[21] The application by Thebe for the setting aside of the award is
based on the appeal tribunal’s finding on unanimous assent
since, it argued, it had not been pleaded, nor canvassed in evidence.
The arbitration appeal tribunal, Thebe contended, had thus
both
exceeded its powers and committed a gross irregularity in terms of
s
33
of the
Arbitration Act
, in not observing the audi alteram partem
rule .
[22] The appeal tribunal accepted Hosmed’s
argument that although unanimous assent had not been pleaded –
despite the
numerous amendments to the pleadings by both parties,
including an amendment made during the course of the appeal
proceedings –
the ‘issues were . . . substantially
broadened during the hearing before the arbitrator (cf
Shill
v Milner
1937 AD 101
at 105) to include
a defence of unanimous assent.’ It analysed the evidence of
Hosmed’s witness, Brown, to the effect
that no payments had
been made to Thebe for ongoing services after the amending agreements
were concluded, and no claims had been
made. The arbitrator had found
that there was no evidence of an agreement, alleged by Hosmed, that
this loss of income would be made
up by increased administrative
charges levied by Thebe.
[23] The appeal tribunal adopted a different approach. It said:
‘
In
terms of
s 228
the directors of a company have no power to dispose of
the greater part of the assets of a company without the approval of a
general
meeting of the company. On a proper interpretation of
s 228
,
it matters not whether the company is getting something in return for
such disposal or not. Even if the company were to receive
the market
value of the assets disposed of in return for the disposal, the
directors would not have the power to dispose of such
assets without
the approval of the general meeting of the company. In our view it
is, therefore, irrelevant whether there was a “credible
or
enforceable contract” in terms of which the claimant was
entitled to be remunerated for the ongoing services it was providing
to the respondent. On the assumption that the claimant [Thebe]
disposed of the greater part of its assets . . . [by virtue of the
amending agreements]
s 228
would
in
principle be applicable.’
[24] The appeal tribunal considered that the lack
of a formal resolution was no bar to the disposal if there were
unanimous assent,
which could be inferred from the circumstances.
3
The appeal tribunal had regard to a number of
factors in concluding that it was a probable inference that ‘all
the directors’
of the sole shareholder in Thebe, the Thebe
Hosken Group, assented to the disposal of the right to claim fees for
ongoing services.
These included the fact that prior to the
amendments Thebe had claimed fees for ongoing services, and Hosmed
had paid, whereas no
claims were made or paid after the amendments;
the view of the medical aid industry that such fees were contrary to
the amended regulations;
amendments to the original broking agreement
had been discussed at a meeting of the board of trustees of Hosmed;
and the directors
of Thebe were aware of the new regulations and the
problems that they apparently posed to claiming fees for ongoing
services. Since
there was only one shareholder in Thebe, the assent
of the directors of the holding company would be the assent of the
holding company
itself and a formal meeting would be redundant. The
disposal was thus with the unanimous assent of the shareholder in the
company,
and Thebe’s claim had to be dismissed.
[25] I shall set out the award in full since, although setting aside
the award, the court below substituted its own order for that
of the
appeal tribunal.
‘
1 The
appeal is upheld with costs and the award of the arbitrator is set
aside.
2 The following award is
substituted therefor:
2.1 The claimant’s first
claim is dismissed.
2.2 The claimant is ordered to
pay Hosmed’s costs pertaining to this part of the arbitration,
which costs are to include the
costs consequent upon the employment
of two counsel.
2.3 The
arbitration is postponed
sine
die
in
respect of the issue of quantification as set out in the separation
order.
3 The costs referred to above
include the costs of the arbitrator/appeal tribunal, the costs of two
counsel, the recording and record,
the venue, witnesses and all
ancillary costs. In the absence of agreement between the parties
these costs will be taxed on the High
Court scale by the Taxing
Master of the High Court, Johannesburg.’
[26] The Pretoria High Court, as I have said, set aside the appeal
tribunal’s award in terms of
s 33
of the
Arbitration Act 42 of
1965
, apparently on the basis that the tribunal exceeded its powers.
I shall revert to the order made by the court.
[27]
Section 33
of the
Arbitration Act provides
for the setting aside
of an arbitration award (and this applies also to an appeal
tribunal’s award) –
Where-
any member of an arbitration
tribunal has misconducted himself in relation to his duties as
arbitrator or umpire; or
an arbitration tribunal has
committed any gross irregularity in the conduct of the arbitration
proceedings or has exceeded his powers;
or
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.’
[28] Thebe argues that the appeal tribunal both exceeded its powers
and was guilty of a gross irregularity. The same conduct, however,
was relied on as giving rise to both grounds for the setting aside of
the award. The gravamen of the complaint is that the issues
before
the arbitrator, and thus before the appeal tribunal, were defined by
the pleadings. The arbitration agreement said so expressly.
The
agreement also made provision for amendments, and both parties
amended and added to their pleadings during the course of the
proceedings. Hosmed even introduced an amendment at the stage of
appeal. The arbitration appeal tribunal could not, it was argued,
go
beyond the pleadings and decide an issue not pleaded. Unlike a court,
which has the inherent jurisdiction to decide a matter even
where it
has not been pleaded, an arbitrator has no such power. It was common
cause that the issue of unanimous assent was not pleaded
at any
stage.
[29] Hosmed, on the other hand, argues that the arbitration agreement
expressly confers on the arbitrator, and therefore also on
the appeal
tribunal, the powers of a high court and of the Supreme Court of
Appeal, respectively. Thebe’s response is that
these are
procedural powers and do not confer jurisdiction to determine matters
on which the parties have not agreed.
[30] In my view it is clear that the only source
of an arbitrator’s power is the arbitration agreement between
the parties and
an arbitrator cannot stray beyond their submission
where the parties have expressly defined and limited the issues, as
the parties
have done in this case to the matters pleaded.
4
Thus the arbitrator, and therefore also the appeal
tribunal, had no jurisdiction to decide a matter not pleaded.
5
Hosmed’s rejoinder
6
put in issue Thebe’s allegation that there
had been compliance with
s 228.
Had Hosmed intended to rely on the
principle of unanimous assent it would have had to plead it
specifically because it amounts to
a classic confession and
avoidance. There is a fundamental difference between a denial (where
allegations of the other party are
put in issue) and a confession and
avoidance where an allegation is accepted, but the other party makes
an allegation which neutralises
its effect – which is what the
raising of unanimous assent would seek to achieve.
7
It is of course possible for parties in an
arbitration to amend the terms of the reference by agreement, even
possibly by one concluded
tacitly, or by conduct, but no such
agreement that the pleadings were not the only basis of the
submission can be found in the record
in this case, and Thebe
strenuously denied any agreement to depart from the pleadings.
[31] The appeal tribunal held, however, that it
was entitled to go beyond the pleadings where the issue had been
traversed in evidence.
It relied, as I have said, on
Shill
v Milner
8
where De Villiers JA said:
‘
The
importance of pleadings should not be unduly magnified. “The
object of pleading is to define the issues; and parties will
be kept
strictly to their pleas where any departure would cause prejudice or
would prevent full inquiry. But within those limits
the Court has
wide discretion. For pleadings are made for the Court, not the Court
for pleadings. Where a party has had every facility
to place all the
facts before the trial Court and the investigation into all the
circumstances has been as thorough and as patient
as in this
instance, there is no justification for interference by an appellate
tribunal merely because the pleading of the opponent
has not been as
explicit as it might have been.”
Robinson
v Randfontein Estates GM Co Ltd
(1925
AD 198).
’
Relying on these dicta in
Shill
v Milner
and in
Robinson
v Randfontein Estates
the appeal
tribunal held, as mentiond in para 22, that the issues were
‘substantially broadened during the hearing before the
arbitrator . . . to include a defence of unanimous assent’.
[32] I have already said that the appeal tribunal was not entitled to
take this approach: its powers were conferred by the arbitration
agreement and it did not have the power to go beyond that. But even
if, for the sake of argument, it were accepted that the appeal
tribunal did have jurisdiction, it can hardly be contended that the
question whether there was unanimous assent was properly canvassed
before the arbitrator. Counsel for Hosmed said that that was the
issue on his mind when he cross-examined Laird on recall. But he
conceded that he did not communicate this expressly to the witness or
to Thebe’s counsel. I have set out the relevant evidence
above.
It is far from clear that what counsel was attempting to elicit from
Laird was whether the sole shareholder in Thebe had assented
to the
disposal of the right to claim fees for ongoing services. At its
highest, Laird conceded that it would have been pointless
for
McCulloch to call a meeting with himself to pass a resolution. But
Laird could not testify on what had in fact happened since
he had not
been part of Thebe when the amending agreements were concluded.
[33] Hosmed contends that Thebe did not object to the questions asked
of Laird. It is not clear why they should have done so: it
was not
obvious that a new issue was being raised, and even if counsel for
Thebe had realized what was on Hosmed’s counsel’s
mind,
he was entitled to remain silent knowing that the issue had not been
pleaded. But there is no point in examining this issue
further. On
any basis, the question whether there had been unanimous assent,
obviating the need for a meeting and a special resolution,
was not
really, let alone fully, canvassed in the evidence. It was first
raised in the oral argument before the arbitrator, and did
not
feature even in counsel’s heads of argument which form part of
the record.
[34] The facts on which the
Shill
v Milner
principle can be applied, even
if it had been open to the appeal tribunal to rely on it, were not
traversed in evidence. There was
thus no basis for the appeal
tribunal to find that there was unanimous assent to the disposal of
the right to claim fees for ongoing
services.
[35] In the circumstances the appeal tribunal
exceeded its powers: it went beyond the terms of the arbitration
agreement. This is
a clear case where the arbitration appeal tribunal
exercised a power that it did not have. This court recently referred
with approval
9
to the decision of the House of Lords in
Lesotho
Highlands Development Authority v Impreglio SpA
10
where Lord Steyn distinguished between cases where
a tribunal mistakenly exercises a power that it does have, and those
where a tribunal
exercises a power that it does not have. In the
latter type of case the tribunal exceeds its power, and, under our
Arbitration Act, that
warrants the setting aside of the order. This
is the position stated earlier in
Dickenson
& Brown v Fisher’s Executors
11
applied by the court in
Telcordia
.
12
The judgment of Harms JA in
Telcordia
embodies a comprehensive account of the bases on
which an arbitrator’s award may be set aside and there is no
need to repeat
what is said in that case.
[36] In view of the finding that I make that the appeal tribunal
exceeded its powers, it is not necessary to consider whether its
decision on unanimous assent constituted a gross irregularity.
[37] The appeal against the decision of the court below to set aside
the award in terms of
s 33(1)(b)
must accordingly be dismissed. It
remains to determine what consequences follow. Hosmed has argued that
the matter should be remitted
to the appeal tribunal so that it can
apply to reopen its case and amend its pleadings so as to include the
issue of unanimous assent.
Thebe’s response is, naturally, that
it had had that opportunity when the appeal tribunal hearing
commenced, and declined to
take it. Seriti J in the court below
refused to remit the matter on the basis that Hosmed should have
sought to reopen its case when
the appeal tribunal was convened. The
learned judge considered that he should substitute the court’s
order for that of the
appeal tribunal.
[38] The order reads:
‘
(1)
The award or order of the arbitration appeal tribunal is set aside
and is substituted by the following:
“
(a)
The appeal is dismissed with costs and the award of the arbitrator
[Mr] Van Schalkwyk is upheld.
(b) Hosmed is ordered to pay the
claimant’s costs pertaining to this part of the arbitration,
which costs are to include the
costs consequent upon the employment
of two counsel in the appeal proceedings.
The costs referred to above
include the costs of the arbitrator, appeal tribunal, the costs of
two counsel, the recording and record,
the venue, witnesses and all
ancillary costs. In the absence of agreement between the parties
these costs will be taxed on the
High Court scale by the Taxing
Master of the High Court, Johannesburg.
The arbitration is to continue
before the arbitrator [Mr] Van Schalkwyk for arbitration of the
issue of quantification as set out
in the separation order agreed to
between the parties in December 2005.”
(2) The fourth respondent
[Hosmed] is ordered to pay the costs of the applicant on a party and
party scale, which costs will include
costs consequent upon the
employment of two counsel.’
[39] Hosmed contends that it was not open to the court to substitute
its own order for that of the appeal tribunal. This court, it
argues,
should remit the dispute to an appeal tribunal to consider the matter
having regard to this court’s finding, and to
give Hosmed the
opportunity to apply to reopen its case and to amend its pleadings.
[40] Counsel for Thebe, on the other hand, argues that if the court
has the power to remit a matter to an arbitrator it must also
have
the power to substitute its own order. But even if that is not the
case, Thebe argues, the order of the arbitrator should stand,
and
that takes care of the costs and other orders made by the court
below. There is no purpose served in remitting the matter to
the
appeal tribunal, it argues, since it could make no award other than
to refuse or allow Hosmed to reopen its case and amend its
pleadings.
If an appeal tribunal refused Hosmed’s application, that in
turn would require remittal by the appeal tribunal to
the arbitrator
to deal with the quantification of Thebe’s claim. If, on the
other hand, Hosmed can show that there had been
unanimous assent,
then the arbitrator will have to determine whether the amending
agreements did have the effect of disposing of
Thebe’s assets
as contemplated in s 228 of the Companies Act. Either way, Thebe
contends, the arbitrator will be required to
consider the dispute
again: it should thus be remitted directly to the arbitrator if the
appeal is not simply dismissed.
[41] The difficulty with Thebe’s approach is that it is the
award of the appeal tribunal, and not the arbitrator, that is to
be
set aside. What power does this court have to remit the matter
directly to the arbitrator? If such a course were open to us it
would
no doubt obviate the time and expense entailed in referring the
matter back to the appeal tribunal, when it is likely that
it would
have still to go back to the arbitrator irrespective of the appeal
tribunal’s conclusion. It is important to note,
however, that
the award of the appeal tribunal is not a foregone conclusion.
[42] It is not apparent that the court below was
referred to
s 33(4)
of the
Arbitration Act or
that either party
requested submission to a new appeal tribunal. In any event, in my
view it is not possible to refer the matter
directly to the
arbitrator. It is the appeal tribunal’s award that has been set
aside, and
s 33(4)
of the
Arbitration Act requires
that ‘If the
award is set aside the dispute
shall, at
the request of either party
, be
submitted to a new arbitration tribunal constituted in the manner
directed by the court’ (my emphasis).
The
section, which is peremptory, must refer also to an appeal tribunal’s
award.
[43] Where neither party requests that the matter
be referred back to the arbitrator, or appeal tribunal, then an award
made in excess
of its powers should simply be set aside by the court
in terms of
s 33
of the
Arbitration Act. And
, presumably, if both
parties wished to refer the matter back to the same arbitrator or
appeal tribunal, the court would be entitled
to make such an order.
13
Hosmed submitted that it had no difficulty with a
reference back to the same appeal tribunal. But Thebe asserted that
it had lost
confidence in the appeal tribunal. Irrespective of
Hosmed’s views, however, the section is clear: if either party
requests
it the dispute must be referred to a new tribunal. The court
is not, in my view, given a discretion in this regard.
14
Equally, because of the peremptory wording of
s
33(4)
, a court does not have the discretion to substitute its own
order for that of the appeal tribunal.
[44] I consider that the only order appropriate is
to refer the matter to a new arbitration appeal tribunal, to be
constituted in
accordance with clause 17.4 of the arbitration
agreement between the parties (cited above), save that the
composition of the tribunal
should be agreed within ten court days of
the date of the handing down of this judgment, failing which a new
tribunal should be constituted
in terms of the arbitration
agreement.
15
[45] Thebe has been substantially successful in
this appeal in having prevailed on the primary issue: that the appeal
tribunal exceeded
its powers, with the consequence that its order
must be set aside. Hosmed, on the other hand, is successful in so far
as the dispute
has to be remitted, and the order of the court below
set aside. Hosmed has not succeeded, however, in its request for the
dispute
to be referred back to the same appeal tribunal. And if the
new appeal tribunal refuses Hosmed the opportunity to reopen its case
and amend its pleadings, then its success in this court may turn out
to be hollow. But it does gain the opportunity to canvas the
merits
in the new appeal tribunal, and that, in my view, also constitutes
substantial success. In the circumstances I conclude that
there
should be no order as to costs.
[46]
(a) The appeal succeeds in part and fails in part.
(b) The order of the court below is set aside.
(c) The order of the court below is replaced with:
‘
1 The application succeeds with costs
including those occasioned by the employment of two counsel.
2 The award of the arbitration appeal tribunal is set aside.
3 The dispute between the parties is referred to a new arbitration
appeal tribunal to be constituted in terms of clause 17.4 of the
arbitration agreement between the parties.
4 The appeal procedures shall be those prescribed in clause 17 of the
agreement, save that the parties must agree the composition
of the
arbitration appeal tribunal within ten court days of this order,
failing which they shall request the Arbitration Foundation
of South
Africa to nominate three arbitrators, as envisaged in terms of clause
17.4 of the arbitration agreement.’
(d) No order is made as to costs.
_____________
C H Lewis
Judge of Appeal
Concur:
Howie P
Cloete JA
Hurt AJA
Mthlantla
AJA
1
Thebe
underwent several name changes, and changes of shareholders and
directors over the years, but none is of any significance
in this
appeal.
2
The
‘rule’ takes its name from
Royal
British Bank v Turquand
(1856) 6 E &
B 327
[1856] EngR 470
; ;
119 ER 886
, and is to the effect that a person entering into
a contract is not required to ascertain whether the company’s
internal
requirements have been met.
3
It
referred in this regard, inter alia, to
Gohlke
& Schneider v Westies Minerale (Edms) Bpk
1970
(2) SA 685
(A) and
De Villiers NO v BOE
Bank Ltd
2004 (3) SA 1
SCA para 52.
4
See
LAWSA 2 ed vol 1 para 607 and the authorities there cited.
5
The
arbitration agreement in
Telcordia
Technologies Inc v Telkom SA Ltd
[2006] ZASCA 112
;
2007
(3) SA 266
(SCA), on which Hosmed relied, was completely different
in its ambit.
6
Referred
to in para 13 above.
7
The
Uniform Rules of Court make this plain: Rule 18(4) provides that
‘Every pleading shall contain a clear and concise statement
of
the material facts upon which the pleader relies for his claim,
defence or
answer
to
any pleading . . . with sufficient particularity to enable the
opposite party to reply thereto’ (my emphasis).
8
1937
AD 101
at 105.
9
Telcordia
Technologies Inc
above para 52.
10
[2005]
UKHL 43
para 24.
11
1915
AD 166.
12
Above
paras 56ff.
13
Contrast
s 32(2)
of the
Arbitration Act which
permits a referral back within
six weeks of the publication of the award only on ‘good cause
shown’.
14
See
Benjamin v Sobac South African Building
& Construction (Pty) Ltd
1989 (4)
SA 940
(C) at 961J-962B and
Steeledale
Cladding (Pty) Ltd v Parsons NO
2001
(2) SA 663
(D) at 674A.
15
The
arbitration agreement remains binding on the parties unless they
agree to terminate it or it is set aside by an order of court:
s 3
of the
Arbitration Act.