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[2014] ZAGPPHC 81
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Prime Fund Managers (Pty) Ltd v Rowan Angel (Pty) Ltd and Another (27283/2012) [2014] ZAGPPHC 81; [2014] 2 All SA 227 (GNP) (28 February 2014)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(NORTH
GAUTENG, PRETORIA)
Case
No 27283/2012
Date:
28 January 2014
In
the matter between:
PRIME
FUND MANAGERS (PTY)
LTD
.........................................................
Applicant
and
ROWAN
ANGEL (PTY)
LTD
...................................................................
First
Respondent
ADV
NIC VAN DER WALT SC
N.O
....................................................
Second
Respondent
JUDGMENT
MURPHYJ
1.
This
application raises important issues in relation to the enforcement of
arbitration awards made in terms of the Arbitration Act,
[1]
(“the Act”). The applicant seeks to have an arbitration
award of the second respondent, Advocate N van der Walt SC,
on 14
February 2012, made an order of court in terms of section 31(1) of
the Act. The first respondent, (“the respondent”),
objects to the award being made an order of court for various
reasons.
2.
Section
31 (1) of the Act provides:
“
An
award may, on the application to a court of competent jurisdiction by
any party to the reference after due notice to the other
party or
parties, be made an order of court.”
An
award which has been made an order of court may be enforced in the
same way as any judgment or order to the same effect.
[2]
3.
An
unsuccessful party may oppose an application for enforcement in terms
of section 31(1) of the Act on the grounds that the award
is invalid
for some reason. Where the aggrieved party challenges the award on
the grounds that the arbitrator was guilty of misconduct,
committed a
gross irregularity in the conduct of the proceedings, exceeded his
powers or that the award was improperly obtained,
the award is
considered to be valid or voidable until the court sets it aside
under a review on these grounds brought in terms
of section 33(1) of
the Act. When opposing an application in terms of section 31(1) on
the grounds that the award is void ab initio,
the respondent
therefore must establish grounds of invalidity different to those
mentioned in section 33(1 ).
[3]
Grounds of invalidity would include: the arbitrator exceeded his
jurisdiction; the arbitrator failed to decide all the matters
referred to him; the award was made out of time as contemplated in
section 23 of the Act, which requires the award to be made within
4
months of entering upon the reference unless a court extends the
period; the award is illegal or contrary to public policy;
[4]
or there is some other defect in the form or substance of the award
which is serious enough to make it incapable of enforcement.
The fact
that a court may disagree with the arbitrator’s findings of law
and fact is not sufficient to refuse an application
for
enforcement
[5]
. An arbitration
award is normally not appealable to court.
4.
The
respondent’s grounds of objection to the making of the award an
order of court are: the application is premature as the
matter has
been referred to further arbitration which is pending; the award is
not an award sounding in money and is unenforceable
in its terms;
there was no proper separation of the issues of merits and quantum
before the arbitrator; the award cannot be enforced
as the
applicant’s claim for payment has prescribed; the award
declares an illegal agreement to pay commission in contravention
of
section 58(1) and 65 (1) of the Medical Schemes Act
[6]
(“the MSA”) binding on the respondent; and the order
sought is contrary to and in conflict with an order which made
the
award of a prior arbitration between the parties an order of court.
The
history of the dispute
5.
The nature of the grounds of objection
make it necessary to consider the history of the dispute between the
parties in some detail.
Unfortunately, the papers do not set out the
history in a coherent fashion or in chronological order. However, the
events seem
to be common cause and can been gleaned from an analysis
of various agreements and arbitration awards which are annexed
somewhat
randomly to the papers.
The
respondent was at all times the administrator of the Spectramed
Medical Scheme (“the scheme”). The relationship
of the
parties goes back to 1999. Originally both parties were close
corporations and later became private companies. In 1999
the
predecessor of the respondent, Rowan & Angel CC, acting as the
administrator of the scheme, entered into an agreement
with PFM
Medical Scheme Marketing (Pty) Ltd (“PFM Marketing”), a
company associated with the applicant, in terms
of which PFM
Marketing, the “servicing administrator” was given the
sole mandate to market the scheme’s “Genesis
Option”
(which later became the Spectra Prime and Spectra Alliance Options).
To that end it was obliged to pre-underwrite
and check the
correctness of each application for membership, and to forward all
duly completed and checked applications to the
respondent within 5
days of receipt. It also had the responsibility upon acceptance of a
member to the scheme to ensure that
the relevant stop order was
activated with the member’s employer and that contributions
were paid to the scheme timeously.
Fees were payable to PFM
Marketing in the amount equal to 2,6% of the premium contributions
of the members introduced to the
scheme by PFM Marketing. Its
functions were that of a broker introducing members to the scheme.
7.
The contract with PFM Marketing was
terminated when an agreement was concluded between the applicant
(then Prime Fund Managers CC)
and the respondent on 1 March 2001. In
terms of this agreement the applicant was appointed as
“co-administrator” to
administer members of the Genesis
Option of the scheme. The functions of the applicant were similar to
those performed by PFM Marketing
under the 1999 servicing agreement.
It had to process applications, arrange stop orders, ensure all
applications for membership
were completed correctly, service members
by responding to any queries or complaints concerning benefit
schedules, membership,
stop orders or products. Clause 5.1 of the
agreement regulated remuneration and provided that the respondent (as
administrator)
would pay the applicant (as co-administrator) an
amount equal to 3% of the premium contributions of the members of the
Genesis
Option.
8.
In January 2003 the respondent and
Prime Fund Managers CC concluded a third agreement, stated to be “an
agreement for contract
services”, in terms whereof the
respondent appointed the applicant “to perform services as an
independent contractor”.
The services to be provided are
described in Annexure A to the agreement as being inter alia: the
management and implementation
of customer service offices; the
staffing of the offices with properly trained and skilled staff; the
establishment of good relationships
with local providers and the
resolution of problems experienced by providers in relation to the
reimbursement of claims, understanding
of benefits, arranged care
and the limits; providing member education concerning scheme
products and the healthcare market; and
the resolution of member
queries concerning benefits, claim payment problems and other
issues. In addition, the applicant undertook
to perform analytical
reviews of the administration processes of the respondent, to make
recommendations on product design, to
design relevant member
communications and to recommend information technology improvements.
These services differ, at least prima
facie, from those in the prior
agreements.
9.
In clause 6.1 of the services agreement
the respondent undertook to pay the applicant the remuneration set
out in Annexure B of
the agreement, “in consideration for the
rendering of the services”. Annexure B does not expressly
include a tariff
of fees or disbursements. It provides that unless so
negotiated, the applicant shall not be entitled to any remuneration
other
than the reimbursement of costs and fees and that payment shall
be made within 30 days of presentation of the invoice and shall
include, inter alia, the following charges: branch operating costs;
vehicle and travel costs incurred in the provision of services
to and
education of members and providers; expenses incurred for training of
staff; fees for management of branch offices; and
fees for consulting
services rendered. The agreement does not stipulate any basis for the
calculation of fees payable.
10.
Clause 11 of the services agreement
comprises an agreement providing for the reference to arbitration of
any disputes regarding
the interpretation, effect or rectification of
the agreement, or in regard to the respective rights and obligations
under the agreement.
It is accordingly “an arbitration
agreement” as defined in section 1 of the Act. Clause 11.12
provides:
“
The
arbitrator shall decide the matter as submitted to him according to
what he considers just and equitable in the circumstances
and,
therefore, the strict rules of law need not be observed or be taken
into account by him in arriving at his decision”.
11.
In February 2008, following a purported
termination of the agreement with effect from 31 December 2007, by a
notice of cancellation
dated 28 September 2007 addressed to the
applicant by the entity responsible for marketing services of the
respondent, “Contact
SPI”, the applicant referred a
dispute with the respondent to arbitration (“the first
arbitration”). The proceedings
were conducted before Advocate
JP Coetzee SC (‘the first arbitrator”).
12.
The statement of claim filed by the
applicant in the first arbitration sets out the history of the
parties’ relationship and
refers to the three written
agreements. In paragraph 5.4 of the statement of claim, the applicant
alleged that the terms of the
contract services agreement included a
term that the respondent would make payment to the applicant “in
the amount equal
to 3% (incl. VAT) of the premium contributions of
the PFM members to the Scheme each month”. The PFM members are
defined
in paragraph 3.3.1 of the statement of claim to be the
members introduced to the scheme by the applicant. In paragraph 6 of
the
statement of claim the applicant pleaded that it had complied
with its obligations and that it had been paid the 3%.
13.
The applicant pleaded that Contact SPI
was not a party to the services agreement and accordingly that the
notice of cancellation
did not constitute a valid notice of
termination in terms of clause 8.1 of the contract. The primary issue
referred for determination
by the arbitrator was thus whether the
notice did indeed constitute a valid termination. The applicant
sought a declaratory order
that the contract services agreement had
not been validly terminated, and, in terms of paragraph 10.3 of the
statement of claim,
an order of specific performance in the following
terms:
“
That
the Defendant (the respondent) be ordered to make payment to the
Claimant (the applicant) in an amount equal to 3% (incl.VAT)
of the
premium contributions of the PFM members to the Scheme each month,
from 1 January 2008 until the agreement is validly terminated
in
terms of clause 8.1 thereof’
14.
The respondent admitted that the notice
of cancellation by Contact SPI was not a valid cancellation but
pleaded that the contract
services agreement was terminated on
conclusion of a new arrangement in 2004 between the respondent, the
applicant and Contact
SPI. In terms of that arrangement, the
respondent contended, the respondent paid Contact SPI “a
marketing customer appreciation
fee” of 3,1% (incl. VAT) of the
premium contributions of the PFM members to the scheme each month and
that the applicant
agreed to provide services to Contact SPI in
exchange for 2,9% of the contributions.
15.
In his award dated 7 April 2008, the
first arbitrator found (on the basis of the admission made by the
respondent) that the letter
of 28 September 2007 from Contact SPI did
not validly terminate the contract and also that it was not
consensually terminated by
means of the alleged arrangement of 2004.
He found though that the contract had in fact been terminated with
effect from 30 June
2008 by a notice of cancellation dated 28
March 2008. Moreover, on the basis of the evidence regarding the
practice of payment
of 3% or 2,9% (the latter being accepted under
protest by the applicant), the first arbitrator concluded that there
was a tacit
term to pay 3% as remuneration (presumably for costs and
fees). He accordingly declined to grant the declaratory order but
awarded
specific performance in the following terms:
“
14.1
I order Rowan Angel (Pty)Limited to pay to Prime Fund Managers (Pty)
Limited an amount equal to 3% (including VAT) of the monthly
premium
contributions received during the period from 1 January 2008 until 30
June 2008 from those members of the Spectramed Medical
Scheme who
were introduced thereto by Prime Fund Managers (Pty) Limited”;
and
14.2
I order Rowan Angel (Pty) Limited to pay the costs of Prime Fund
Managers (Pty) Limited.”
16.
In the course of his award, the first
arbitrator mentioned the possibility that the agreement might have
contravened the provisions
of the MSA. However, because the issue had
not been pleaded or canvassed during evidence, he declined to deny
relief on the grounds
of illegality.
17.
After the arbitration award was handed
down, the applicant claimed payment of the amount of R7 751 786,34,
together with interest
and costs. I assume the amount claimed was
based on past payments made prior to the termination of the
agreement. The respondent
disputed the amount owing on the ground
that it was not established in the arbitration proceedings with
reference to the members
introduced, the contributions paid etc. More
significantly, the award only provided for payment to the applicant
in respect of
members introduced by it to the scheme. The applicant
did not introduce any members to the scheme. The members were in fact
introduced
by the broker, PFM Marketing, which was not party to the
arbitration proceedings.
18.
The applicant accordingly sought
amendment of the first award in terms of section 30 of the Act, which
application was refused by
the first arbitrator.
19.
The applicant managed to obtain a writ
of execution without the award being made an order of court. When the
applicant sought to
execute the writ, the respondent brought an
application for a stay of execution pending an application to set
aside the writ, which
application was granted on 10 November 2008.
The applicant then launched proceedings to have the award made an
order of court and
for payment. It obtained judgement against the
respondent by default on 20 January 2009 for payment of the amount it
had calculated
as owing in terms of the award. This prompted an
application for rescission of the judgment which was granted by this
court on
13 February 2009. The award of the first arbitrator was
eventually made an order of court on 3 December 2009.
20.
In seeking to enforce the order, the
applicant found itself unable to prove any members introduced by it
because it did not itself
introduce any members. As mentioned, all
the members had been introduced to the scheme by PFM Marketing. The
applicant accordingly
decided to re-submit the matter to fresh
arbitration (“the second arbitration”).
21.
During March 2010 the attorneys of the
applicant, acting in terms of Clause 11 of the contract services
agreement, wrote to the
Chairman of the Johannesburg Bar Council
requesting the appointment of an arbitrator “to decide another
issue”. On
21 April 2010, the respondent’s attorney
addressed a letter to the applicant’s attorney objecting to the
arbitration,
on the grounds, inter alia, that the dispute between the
parties had been dealt with in the first arbitration and was thus res
judicata. Some months later, on 6 August 2010, the applicant’s
attorney addressed a letter to the respondent demanding payment
of
the amount contemplated in the arbitration award of the first
arbitrator, but modifying its terms to be 3% of the contributions
of
those members in respect of whom the contract services agreement
found application. The attorneys contended that the issue of
payment
to the applicant based on the premium contributions of the members in
respect of whom the agreement found application (as
opposed to
members who were introduced to the scheme by the applicant) had not
been laid to rest by the award in the first arbitration
and
consequently that the same thing was not being claimed by way of the
second arbitration. They thus gave notice of their intention
to again
request the Chairman of the Johannesburg Bar Council to appoint
Advocate N van der Walt SC as arbitrator. Advocate van
der Walt SC,
the second respondent, (‘the second arbitrator”) was
appointed as arbitrator to determine the dispute
on 18 August 2010.
22.
The applicant filed its statement of
claim in the second arbitration on 30 September 2010. The factual
averments in the statement
are virtually identical to those made in
the statement of claim filed in the first arbitration except that in
paragraph 7.1 the
applicant averred that the respondent terminated
the contract services agreement with effect from 30 June 2008 by
giving three
months’ notice of termination in terms of clause
8.1 of the agreement. The relief sought was different to that sought
in
the first arbitration. In paragraph 8 of the statement of claim
the applicant sought an order in the following terms:
“
That
it be declared that the defendant (respondent) is liable to make
payment to the claimant (applicant) in an amount equal to
3% (incl.
VAT) of the premium contributions paid each month by the members in
respect of whom the contract services agreement found
application to
the Spectramed Medical Scheme during the period 1 January 2008 until
30 June 2008.”
The
relief sought differs from that sought in the first arbitration in
three apparent respects. Firstly, the applicant did not ask
for
specific performance, but merely a declaratory order; secondly, the
claim is expressed not as a percentage of contributions
paid by
members introduced by the applicant but as a percentage of the
contributions paid by members to whom the contract services
agreement
applied, being those in the options known as Genesis, Spectra Prime
and Spectra Alliance; and lastly, the period to which
the claim
related was not open-ended, as in the first statement of claim, but
was limited to the 6 month period from 1 January
2008 until 30 June
2008.
23.
The
respondent filed two special pleas, including one of res judicata, a
plea over and a counterclaim. On 26 November 2010 the applicant
and
the respondent entered into a supplementary arbitration agreement
regarding the reference to the second arbitrator. In clause
3 of that
agreement they agreed that the second arbitrator would first
determine whether the claim was res judicata as pleaded
in the
respondent’s first special plea. They agreed further in clause
4, for the purposes of determining this issue, that
the second
arbitrator would decide the matter according to what he considered
just and equitable, and was not obliged follow the
strict rules of
law. In other words, the second arbitrator was at large to decide the
res
judicata
issue
as an
amiable
compositeur
or ex
aequo
et bono.
This clause permitted the second arbitrator to depart from the strict
rules of law if their application would produce a substantial
injustice, but only to the extent necessary to achieve justice
between the parties, provided the result was not illegal or contrary
to public policy.
[7]
24.
The hearing for the purpose of
determining the plea of res judicata was held on 30 November 2010.
The second arbitrator handed down
his award dismissing the special
plea with costs on 18 January 2011. His reasons for dismissing the
plea were essentially that
the applicant sought different relief and
relied on a different tacit term to that asserted in the first
arbitration. He did not
agree with the respondent’s submission
that the applicant was seeking essentially the same relief as in the
first arbitration.
Moreover, in the second arbitrator’s
opinion, the first arbitrator had not been asked to grapple with the
description of
the members in respect of whom a percentage of their
contributions would be payable monthly to the applicant. Nor, I would
add,
had he been asked to make a declaratory order in that regard.
And finally, perhaps ex abundanti cautela, relying on his authority
to decide as amiable compositeur, the second arbitrator held that it
would not be just and equitable in the circumstances of the
case to
uphold the plea and deny the applicant the opportunity to establish
the correct interpretation of the category of members
from which it
was entitled to earn income.
25.
The respondent did not seek a review in
terms of section 33 of the Act of the ruling of the second arbitrator
on the issue of res
judicata.
26.
Clause 9 of the arbitration agreement of
26 November 2010 provided that after the outcome of the hearing of 30
November 2010 the
parties would meet “to agree or have
determined by the arbitrator the future conduct of this matter.”
The second arbitration
to deal with the remaining issues was
eventually held on 24 January 2012 and the second arbitrator handed
down his award on 14
February 2012. Attempts to set the arbitration
down earlier were frustrated by various events.
27.
It appears from the reasons for the
award that the second special plea was abandoned by the respondent.
The second arbitrator dismissed
the respondent’s counterclaim
for R2,6 million, found that the contract services agreement was not
concluded in fraudem legis,
and rejected the plea that the agreement
and claims for payment were in contravention of section 58(1) or
section 65(1) of the
MSA. It is the latter finding which is of most
importance in determining the present application. I shall return to
the second
arbitrator’s reasoning in relation to this issue
when I consider the respondent’s objection to the award being
made
an order of court. The second arbitrator made an award in the
following terms:
“
A.
It is declared that the defendant (respondent) is liable to make
payment to the claimant (applicant) in an amount of 3% (incl.
VAT) of
the premium contributions paid each month by their members in respect
of whom the contract services agreement found application
to the
Spectramed Medical Scheme during the period 1 January 2008 until 30
June 2008;
B.
The members of Spectramed Medical Scheme
in respect of whom the contract services agreement found application
are those members
of Spectramed Medical Scheme in respect of whom PFM
Medical Scheme Marketing (Pty) Limited was the broker;
C.
Costs of the arbitration to be paid by
the defendant;
D.
The counterclaim is dismissed with
costs.”
28.
It is notable that in the second
arbitration the applicant only sought and was granted declaratory
relief on the basis of a tacit
term that remuneration was payable in
terms of the contract services agreement in the amount of 3% of
members contributions of
those members in respect of which the
contract services found application, being the members of Spectramed
of whom PFM Marketing
was the broker. The applicant did not seek
payment of any amount and made no attempt to quantify its claim in
the arbitration proceedings.
It led no evidence identifying the
members of whom PFM Marketing was the broker, nor of the
contributions paid by each of such
members, which would vary from
member to member depending upon various factors, such as the number
of dependants per member. The
issue of payment remains an arbitral
issue in dispute which, as the respondent pointed out in paragraph 9
of its answering affidavit,
has been referred back to arbitration to
determine quantum. I was informed from the bar during argument that
the pleadings have
closed and a third arbitration is now pending. A
central issue arising from those pleadings is a special plea raised
by the respondent
that the applicant’s claim for payment has
prescribed.
Objection
on the grounds that the application is premature, involves
declaratory relief and the award is not final
29.
The respondent maintains that the award
of the second arbitrator should not be made an order of court because
the application is
premature in that the quantification of the claim
has been referred to arbitration which is pending. The applicant has
agreed to
refer the matter to arbitration and it is submitted should
therefore not be allowed in the circumstances to persist in the
current
application until the arbitration is finalised. The
application, in the opinion of the respondent, is a wasteful
utilisation of
the court’s time and resources. It also argued
that the court should not grant declaratory relief in that any order
made
will be academic as the order cannot be enforced in its current
terms and can serve no more than to declare that the first respondent
is liable in terms of the contract services agreement. The amount of
such liability has not been established. There is no purpose
or
advantage to be gained by the applicant in the award being made an
order of court at this stage, the respondent submitted, as
it cannot
be executed against to enforce payment of an undefined quantum.
Execution will be possible only if the applicant is successful
in the
pending arbitration and obtains an award for payment.
30.
The respondent’s submissions are
without merit. Before a court can refuse to make an arbitration award
an order of court there
must be substantive grounds of invalidity
justifying the refusal. That the relief granted by the second
arbitrator was of a declaratory
nature, and the fact that
consequential quantification relief is pending arbitration, are not
defects in the form or substance
of the award making it incapable of
enforcement. In terms of clause 11 of the contract services agreement
“any dispute”
regarding the respective rights and
obligations of the parties may be referred to arbitration and the
arbitrator may make an order
which is just and equitable, which would
include a declaratory order. The respondent did not complain at the
arbitration that the
dispute was outside the ambit of the arbitration
agreement. Likewise, the referral to arbitration of the
quantification of the
applicant’s claim is in accordance with
the terms of the agreement between the parties and does not
constitute any bar to
making the award an order of court. There is no
reason in law why the award cannot be made an order of court and the
quantification
of the applicant’s claim be duly dealt with in
the pending arbitration.
31.
Insofar
as the respondent’s contention implies that the award is not
final and thus invalid, such too is incorrect. The requirement
that
an arbitration award must be final means that the award should deal
with all the matters submitted to the arbitrator and leave
no matter
unsettled; it must be complete.
[8]
The arbitrator in this instance dealt precisely with what was
submitted to him in the statement of claim. His terms of reference
required him to grant declaratory relief and he completed his task by
doing that. The arbitrator was empowered by the arbitration
agreement
to enquire into and determine any existing, future or contingent
right or obligation, notwithstanding that the claimant
could not
immediately execute for relief consequential upon the determination.
Courts often make such orders. Though, it is important
to note, the
applicant does not seek declaratory relief from this court but only
to make the award an order of court in accordance
with the provisions
of section 31(1). The relief sought is to make an un-executable award
an order of court with the advantages
such may entail.
32.
Furthermore, the award brought finality
to the issues raised by the respondent in the second arbitration. It
has been determined
that the respondent is indebted to the applicant
for a percentage of contributions paid by a distinctly identified
category of
members for a clearly defined period. The remaining
issues pertaining to whether the applicant is entitled to quantify
its claim,
the manner and method of such quantification and whether
such quantification is correct are all issues that will be dealt with
in the pending arbitration. As will become evident presently, the
most obvious advantage to the applicant of the court making the
award
an order of court is that the indebtedness arising from the award by
virtue of it becoming a judgment debt will prescribe
only after 30
years from the date of the court order.
33.
In variants of the preceding arguments,
the respondent argued further that the applicant was barred from now
seeking to quantify
its claim because the doctrine of res judicata
requires parties to claim all the relief they are entitled to in one
action. It
also reproached the applicant for not making a formal
application to the second arbitrator to separate merits and quantum.
With
regard to the first contention, whether or not the matter of
quantification is res judicata is properly a question for the
arbitrator
in the pending arbitration and has no bearing upon whether
the award declaring the indebtedness should be made an order of
court.
I assume the matter in any event may be lis pendens. As for
the second submission, the arbitration agreement does not require a
formal application for separation of quantum and merits. Clause 11.7
of the contract services agreement provides that in the referral
to
arbitration it shall not be necessary to observe or carry out the
usual formality or procedures relating to pleadings, discovery
or the
strict rules of evidence. More importantly, the issue of quantum, or
relief in the form of specific performance, did not
form part of the
terms of reference and the second arbitrator would have exceeded his
powers had he determined the issue and granted
relief. The
arbitration agreement imposed no express obligation on the applicant
to follow the once and for all rule in this context
or to seek leave
to separate the issues.
34.
There was furthermore no obligation on
the applicant, as the respondent maintains, to apply to court for the
matter to be remitted
to the arbitrator in terms of section 32 of the
Act for the purpose of determining quantum. In terms of that
provision the court
may, on the application of any party to the
reference after due notice to the other party, on good cause shown,
remit any matter
which was referred to arbitration to the arbitrator
for reconsideration and for the making of a further award or a fresh
award
or for such other purpose as the court may direct. The matter
of quantification was never referred to arbitration and the court
would not have had jurisdiction to remit it had the applicant applied
for relief in terms of that provision. And accordingly the
assumed
existence of such a remedy could not constitute a valid bar to making
the award an order of court in this instance.
35.
Finally, there is no legal basis or
principle supporting the respondent’s argument that the court
should not make the award
an order of court as “it does not
sound in money” - in the sense that payment is not ordered. The
jurisdictional preconditions
of section 31(1) of the Act require only
the existence of an award, which is not defined in section 1 to
exclude awards not sounding
in money. In any event the second
arbitrator’s costs award against the respondent is one sounding
in money (in the sense
that payment is ordered) which can be
enforced; but the applicant requires a court order to do so.
Conflicting
orders of court and the issue of
res
judicata
36.
The next ground of objection raised by
the respondent is that if the award is made an order of court it will
give rise to two conflicting
orders of court containing two
contradictory and mutually exclusive findings of fact. In the first
arbitration, the first arbitrator
found that the contract services
agreement contained a tacit term that the respondent would make
payment to the applicant in an
amount of 3% (incl. VAT) of the PFM
members to the scheme each month; the “PFM members”
having been defined as the
members introduced to the scheme by the
applicant. As explained earlier, the award, even though it was made
an order of court,
was a hollow victory as no members had been
introduced to the scheme by the applicant, but were in fact
introduced to the scheme
by PFM Marketing and no monies, apart from
costs, were due to the applicant in terms of the award. The applicant
thereafter launched
the second arbitration, again relying on the
contract services agreement but asserted the existence of a different
tacit term,
namely that the respondent was obliged to pay the
applicant an amount equal to 3% (incl. VAT) of the premium
contributions paid
by members in respect of whom the agreement found
application to the scheme each month. The second arbitrator’s
award declared
the respondent to be liable to the applicant in terms
of that tacit term and declared the members concerned to be the
members introduced
by PFM Marketing and not the applicant.
37.
The respondent submitted that the
problem arose because the issue was in fact res judicata as a
consequence of the first award.
Should the award of the second
arbitration also be made an order of court, there will be conflicting
orders (both potentially capable
of being executed against once
quantified) purporting to declare the same agreement enforceable but
on the basis of conflicting
tacit terms. The principle behind a plea
of res judicata, the respondent argued, is to avoid precisely this
sort of difficulty
and not to permit the same thing to be demanded
more than once. Accordingly, notwithstanding the ruling of the second
arbitrator
that the dispute before him was not res judicata, it
remained an issue that the court must consider should it wish to
ensure that
it does not make a conflicting judgment against the same
party in favour of the applicant on essentially the same subject
matter.
In other words, the respondent contended that the second
arbitrator’s ruling on the res judicata issue was wrong.
38.
There are two difficulties with these
submissions. The first is that the previous court order is of no
consequence and cannot be
executed upon to obtain payment. It is
common cause that the applicant did not introduce any members to the
scheme. Therefore the
order, should there ever be an attempt to
quantify it, will be worth nothing. Except for the award of costs, it
is an inconsequential
order. Secondly, and more importantly, the
respondent is in effect seeking to appeal the second arbitrator’s
ruling on the
res judicata issue. In clause 11.9 of the contract
services agreement the parties agreed that any arbitration would be
held under
the provisions of the Act. Section 28 of the Act provides:
“
Unless
the arbitration agreement provides otherwise, an award shall, subject
to the provisions of this Act, be final and not subject
to appeal and
each party to the reference shall abide by and comply with the award
in accordance with its terms”
There
is no provision made in clause 11 of the contract services agreement
for an appeal against any arbitration award. Likewise,
the
arbitration agreement of 26
November
2010 referring the res judicata
issue
to arbitration makes no provision for an appeal of that award either.
39.
In consequence, the appropriate remedy
available to the respondent, if it objected to the res judicata
ruling, was to bring a review,
within 6 weeks after publication of
the award, on one or more of the grounds set out in section 33 of the
Act, namely the arbitrator
misconducted himself, committed a gross
irregularity in the proceedings or exceeded his powers; or the award
was improperly obtained.
40.
It
is at least arguable depending on the circumstances, that an
incorrect ruling on the question of res judicata might amount to
the
arbitrator committing an irregularity or exceeding his powers if it
results in a party not having its case fully or fairly
determined.
However, as is well known, the grounds of review under section 33 of
the Act are narrow. It is one of the incidents
of arbitration that
the parties may be compelled to abide by decisions which err on the
law or the facts. Misconduct by an arbitrator
does not encompass
errors of law and fact, unless they are so gross as to be symptomatic
of grave irregularity. There is likewise
no assumption that an
arbitrator knows and applies the principles of law. Accordingly, if
an arbitrator misdirects himself on the
law, that in itself is no
reason for setting aside the award; the parties are bound by the
arbitrator’s finding even if he
errs on the facts or the law.
Likewise, gross irregularity in the conduct of arbitration
proceedings ordinarily relates to procedural
irregularities, such as
conducting a material part of the arbitration in the absence of one
party. The irregularity only attains
the level of “gross”
when it results in the aggrieved party not having his case fully and
fairly determined.
[9]
And “exceeding powers” in the context of an arbitration
usually refers to a situation where the arbitrator acts beyond
the
powers conferred upon him or her under the terms of reference.
41.
By the same token, it cannot be said
that any error of fact or law in the ruling on res judicata, if any
such did indeed occur,
would be sufficient to invalidate the award
thereby disallowing it from being made an order of court in terms of
section 31 of
the
Act.
Such errors would not amount to defects in form or substance serious
enough to make the award incapable of enforcement. The
fact that the
court may disagree with the conclusion reached by the arbitrator on
the law or the facts is not in itself a ground
for refusing to
enforce the award.
[10]
If the respondent believed the ruling on res judicata led to it not
having its case fully and fairly determined, as I have said,
it was
for it to challenge the award by invoking the statutory review
provisions of section 33(1) of the Act rather than to adopt
the
passive attitude that it did.
[11]
Prescription
42.
The
respondent submitted that the award should not be made an order of
court because the underlying claim for payment has prescribed.
The
applicant’s claim for payment was originally based upon the
amount owing in terms of the contract services agreement
for the
period 1 January 2008 until lawful termination of the contract,
determined by the first arbitrator to be 30 June 2008.
In terms of
the agreement, payment was due within 30 days of presentation of
invoices which were rendered on the last day of every
month and
accordingly fell due 30 days thereafter. In the premises, according
to the respondent, the claims upon which the current
dispute (being
the referral of the quantification issue) are based would normally
have prescribed on 29 February 2011, 29 March
2011, 29 April 2011, 29
May 2011; 29 June 2011 and 29 July 2011, respectively, alternatively
by no later than 29 July 2011. The
current dispute was only referred
to the third arbitration on 17 May 2013 after the 3-year prescription
period as contemplated
in section 11(d) of the Prescription Act
[12]
in respect of each of the claims had elapsed. The dispute, however,
was referred to the second arbitration in early 2010. The second
arbitration was finalised on 15 February 2012, on which date the
impediment delaying prescription in terms of section 13 of the
Prescription Act ceased to exist. In terms of section 13 (1)(f) of
the Prescription Act, read with section 13(1 )(i), if the debt
is the
object of a dispute subjected to arbitration (“the impediment’)
and the relevant period of prescription of that
debt would be
completed before or on, or within one year after,
the
day on which the impediment has ceased to exist, the period of
prescription shall not be completed before a year has elapsed
after
the impediment ceased to exist. This means that where the debt is the
object of a dispute referred to arbitration and the
debt but for the
referral to arbitration would already have prescribed, or
prescription has less than a year to run, the prescription
period of
the debt is extended for a year from the date the debt is no longer
an object of dispute in arbitration. In the present
case, accepting
the date of the debt’s prescription to have been 29 July 2011
or before, and the ceasing of the existence
of the impediment to be
15 February 2012, the period of prescription of the debt would have
been extended by one year and prescription
was completed on 15
February 2013.
43.
The respondent believes its plea of
prescription will succeed before the arbitrator in the pending
arbitration proceedings. In such
circumstances, it was submitted, the
court should not make the award an order of court.
44.
The
respondent’s arguments miss the mark and misconstrue the
correct legal position, in my judgement, in their failure to
recognise that the award of the arbitrator created new rights and
obligations between the parties. Clause 11 of the contract services
agreement provides that the parties irrevocably agree that the
decision of the arbitrator made at an arbitration shall be binding
on
each of them. In addition, section 28 of the Act provides that each
party to the reference shall abide by and comply with the
award in
accordance with its terms. A new debt accordingly arises when a
binding award is made. The party wishing to enforce the
award will
sue on the award and not on the original contract from which the
dispute arose. The impediment arising by the debt being
the object of
a dispute subjected to arbitration is an impediment delaying the
prescription of the original debt. That impediment
may cease to exist
in a variety of ways: the arbitration may be abandoned; the
arbitrator may refuse jurisdiction; the arbitrator
may become
incapacitated; the arbitrator may make a ruling creating no new
rights or obligations; and so on. But where, as in this
case, the
arbitrator declares the existence of a disputed debt and defines the
basis of its calculation, new rights are created
and a fresh
prescription period commences, as with a judgment debt, because the
debt is only due or immediately claimable from
the date of the award.
Only then does the creditor acquire a right to enforce the award, the
terms of which were contingent or
uncertain before the arbitration
was finalised, but which right accrues and is binding on the debtor,
by reason of the arbitration
agreement and the Act, once it is made
certain by the award. Although the debt arising from the award in
this case may not be payable
until quantification, that does not mean
that there is no new right or debt due. A debt under the Prescription
Act is a right of
which the converse is a liability.
[13]
The quantification of that liability is not necessary before a debt
can be said to exist or be due.
45.
Accordingly,
the right to have an arbitration award made an order of court and to
enforce it prescribes, in terms of section 11(d)
of the Prescription
Act, 3 years after the award is made.
[14]
Once the award is made an order of court it will become a judgment
debt in respect of which the period of prescription will be
30 years;
a consequence of some benefit to the applicant in the further conduct
of proceedings in relation to the dispute. The
award, as said, was
made on 15 February 2012. Hence the right to enforce it will only
prescribe in early 2015, unless the running
of prescription has been
interrupted or delayed in terms of the Prescription Act, in which
event the period will be longer. Prescription
thus poses no obstacle
to making the award an order of court.
Illegality
46.
The respondent has objected to the award
being made an order of court on the ground that the award orders it
to do that which is
illegal by requiring it to pay the applicant for
administrative and broker services, and excessive broker commission,
when the
applicant was not accredited as an administrator or broker
in terms of section 58 and section 65 of the MSA. The effect of
making
the award an order of court, the respondent argued, would be
to declare it bound by an illegal agreement.
47.
Where
a party is of the view that an award is invalid it is entitled to
adopt a passive approach and wait until the successful party
applies
to court to enforce the award and then raise the defence that the
award is void on grounds of illegality as a reason for
the court to
refuse enforcement.
[15]
There
is no need to seek to review and set aside the award under section 33
of the Act. A court will not enforce an arbitration
award where the
required action is illegal or contrary to public policy, as when the
award directs a party to perform an act prohibited
by
legislation.
[16]
The approach adopted by courts was described in the English case of
Soleimany v Soleimany
[17]
as follows:
“
The
difficulty arises when arbitrators have entered upon the topic of
illegality, and have held that there was none... In such a
case there
is a tension between the public interest that arbitrator’s
awards should be respected, so that there is an end
to law suits, and
the public interest that illegal contracts should not be enforced.
...In our view an enforcement judge, if there
is prima facie
evidence that from one side that the
award is based on an illegal contract, should enquire further to some
extent...But, in an appropriate
case [the court] may inquire... into
an issue of illegality even if the arbitrator had jurisdiction and
has found that there is
no illegality...”
The
finding as to the legality of the agreement by the second arbitrator,
if incorrect, cannot bind this court. This is particularly
so where
the mischief the legislature has sought to avoid in the MSA is the
charging of broker commission in excess of the prescribed
limit or
fees for administrative and broker services where the person
rendering them is not accredited by the regulator.
48.
Section 58 of the MSA provides:
“
No
person shall administer a medical scheme as an intermediary unless
the Council has, in a particular case or in general, granted
accreditation to such person.”
In
order to appreciate the significance of the word
“
intermediary”,
it is necessary to have regard to the
definition of “administrator” which means:
“
any
person who has been accredited by the Council in terms of section 58,
and shall, where any obligation has been placed on a medical
scheme
in terms of this Act, also means a medical scheme”.
Thus
where the medical scheme itself undertakes to deal with its members
directly it is an administrator; where it appoints a third
party to
deal with its members that person, of necessity, acts as an
intermediary between the scheme and the members.
49.
The relevant subsections of section 65
of the MSA read as follows:
(1)
No person may act or offer to act as a
broker unless the Council has granted accreditation to such a person
on payment of such fees
as may be prescribed.
(2)
The Minister may prescribe the amount of
the compensation which, the category of brokers to whom, the
conditions upon which, and
any other circumstances under which, a
medical scheme may compensate any broker.
(3)
No broker shall be compensated for
providing broker services unless the Council has granted
accreditation to such broker in terms
of subsection (1).
(4)
...
(5)
A medical scheme may not directly or
indirectly compensate a broker other than in terms of this section.
(6)
A broker may not be directly or
indirectly compensated for providing broker services by any person
other than—
(a)
a medical scheme;
(b)
a member or prospective member, or the
employer of such member or prospective member, in respect of whom
such broker services are
provided; or
(c)
a broker employing such broker."
50.
A broker is defined to mean any person
whose business or part thereof entails providing broker services
which are defined to mean:
(a)
the provision of services or advice in
respect of the introduction or admission of members to a medical
scheme; or
(b)
the on-going provision of service or
advice in respect of access to, or benefits or services, offered by a
medical scheme.
51.
In terms of section 66(1 )(a) of then
MSA, a person who contravenes any provision of the Act or fails to
comply therewith is guilty
of an offence.
52.
In terms of section 67 of the MSA, the
Minister may, after consultation with the Council, make regulations
relating to various matters
stipulated in section 67(1 )(a) to (q).
Regulations were promulgated in terms of GNR. 1262 of 20 October
1999, and have been amended
from time to time thereafter. The
compensation of brokers is regulated by regulation 28(2), which
provides:
(2)
Subject to subregulation (3), the
maximum amount payable to a broker by a medical scheme in respect of
the introduction of a member
to a medical scheme by that broker and
the provision of ongoing service or advice to that member, shall not
exceed—
(a)
R50, plus value added tax (VAT), per
month, or such other monthly amount as the Minister shall determine
annually in the Government
Gazette, taking into consideration the
rate of normal inflation; or
(b)
3% plus value added tax (VAT) of the
contributions payable in respect of that member, whichever is the
lesser.
53.
It is common cause that the applicant is
not an accredited broker or administrator, but that PFM Marketing is.
54.
A
contractual arrangement in contravention of a statutory prohibition
will normally (but not always) be void and unenforceable by
a court.
In Standard Bank v Estate Van Rhyn,
[18]
Solomon JA said:
“
The
contention on behalf of the respondent is that when the Legislature
penalises an act it impliedly prohibits it, and that the
effect of
the prohibition is to render the act null and void, even if no
declaration of nullity is attached to the law. That, as
a general
proposition, may be accepted, but it is not a hard and fast rule
universally applicable. After all, what we have to get
at is the
intention of the Legislature, and, if we are satisfied in any case
that the Legislature did not intend to render the
act invalid, we
should not be justified in holding that it was. As Voet
(1.13.16) puts it - ‘but that
which is done contrary to law is not ipso jure
null and void, where the law is content
with a penalty laid down against those who contravene it.’ Then
after giving some
instances in illustration of this principle, he
proceeds: The reason for all this I take to be that in these and the
like cases
greater inconveniences and impropriety would result from
the rescission of what was done, than would follow the act itself
done
contrary to the law.’ These remarks are peculiarly
applicable to the present case, and I find it difficult to conceive
that
the Legislature had any intention in enacting the directions
referred to in sec. 116(1) other than that of punishing the executor
who did not comply with them.”
55.
Nonetheless,
where a statute prohibits an act or conduct in order to protect the
public from specified undesirable trade practices,
a contract
requiring the performance of such act or obliging conduct in
contravention of the prohibition ordinarily will be unenforceable
in
addition to inviting the statutory penalty, especially where trade
licences or professional accreditation are involved.
[19]
To permit an unlicensed trader or unaccredited professional to make
valid contracts and carry on business facing only the risk
of the
prescribed penalty would in most cases defeat the intention of the
legislature to offer consumer or public protection against
undesirable practices. As Fagan JA put it in Pottie v Kotze
[20]
“
The
usual reason for holding a prohibited act to be invalid is not the
inference of an intention on the part of the Legislature
to impose a
deterrent penalty for which it has not expressly provided, but the
fact that recognition of the act by the Court will
bring about, or
give legal sanction to, the very situation which the Legislature
wishes to prevent.”
56.
The intention of the legislature in
enacting the accreditation requirements in the MSA was not only to
penalise contraventions but
to hold the prohibited acts to be
invalid. Section 65(3) is explicit in prohibiting compensation to
unaccredited brokers, but the
necessary implication of section 58
also is that invalidity would attend any conduct in contravention. To
hold otherwise would
give legal sanction to what the MSA wishes to
prevent. Consequently, should it be established that the award has
sanctioned a contract
or payments in contravention of section 58 or
section 65 of the MSA, that contract would be unenforceable and the
second arbitrator’s
award will be invalid on grounds of
illegality.
57.
The second arbitrator found that the
applicant did not contravene section 58 of the MSA when rendering the
services in Annexure
A of the contract services agreement of 2003.
With reference to the language of the provision, he held that the
requirement of
accreditation applied only to administrators acting as
intermediaries between the scheme and the members; and that it was
permissible
for an accredited administrator, like the respondent, to
sub-contract services to an unaccredited subcontractor, such as
the
applicant. There was no nexus between the applicant and the
scheme, meaning that accreditation was not required. In reaching his
conclusion, the second arbitrator attached weight to a policy
statement of the Council for Medical Schemes included in
correspondence
which makes it plain that sub-contracting of
administration services is permissible. The document in question,
referred to as Exhibit
A in the award, apparently dealt with the
functions performed specifically by the applicant under the
agreement. It is quoted as
saying:
“
Note
that the ultimate responsibility for the performance of
administration functions vests with the administrator which contracts
with the scheme concerned. Accordingly, the administrator is liable
towards the scheme being administered for the actions of the
sub-contractor.”
From
this the second arbitrator inferred that there was no obligation on
the applicant to obtain accreditation to perform its functions
under
the contract. After analysing the document further, and taking
account of the evidence of Mr Mashele, (the CEO of the applicant
and
the only witness to testify in the proceedings) regarding the
functions performed under the contract, he held that there was
no
illegality or contravention of section 58 of the MSA.
58.
The document in question, Exhibit A,
does not form part of the record of this application. Nor does the
record include a transcript
of Mr Mashele’s evidence. And the
award offers no detailed analysis of it. Absent that evidence it is
difficult to reach
a conclusive finding on whether or not
accreditation was required and if the second arbitrator erred in his
determination. As a
general proposition, the administration contract
should be presumed to be valid, but in terms of the MSA it will be of
no force
or effect if the administrator lacks accreditation, when and
if such is in fact required. The onus is therefore on the respondent
relying on statutory illegality as a defence to prove that
accreditation was required in relation to this contract. In my
opinion
it has not discharged that onus.
59.
The respondent dealt with the question
of illegality in paragraphs 40-44 of the answering affidavit. In
those paragraphs it failed
to take issue with the second arbitrator’s
reasoning or the basis of his finding. It maintained rather that the
applicant
rendered no services to it, but did so to Contact SPI,
something denied by the applicant and found to be false by the first
arbitrator.
In paragraph 44 it in fact averred that the purpose of
the 2003 contract services agreement was to ensure compliance with
the law.
The parties agreed, in a contract drafted by the respondent,
and in response to changing legislative policy, to re-define the
contractual
duties of the applicant in order to avoid the prescribed
limits on broker remuneration. The intention was to offer
compensation
to the applicant over and above that paid to its
associated broker company, PFM Marketing. The second arbitrator found
the arrangement
was legitimate and not in fraudem legis, which
finding has not been challenged on review. But, whatever the nature
and character
of the schemes the parties may have engaged in to
arrange their affairs, the evidence contained in the answering
affidavit is simply
not sufficient to conclude that the agreement
violated section 58 of the MSA and that the second arbitrator erred
in that regard.
Nor does it appear ex facie the contract that it is
illegal. The services identified in Annexure A to the contract are of
a varied
nature. If they are of the kind normally done by an
administrator they have evidently been sub-contacted to the
applicant, but
no case is made out that the sub-contacting violated
the prohibition.
60.
The courts should be careful not to
discourage parties from resorting to arbitration by undermining its
purpose and finding fault
with awards too easily, even where the
arbitrator has entered upon the topic of illegality. They should
expect parties to honour
their commitment to implement the decision
of the arbitrator in good faith. When an unsuccessful party to
arbitration alleges that
the award is invalid it must make out a
proper case with appropriate and sufficient evidence. After all, in
this case, it was the
respondent who drafted the contract services
agreement. On the limited evidence placed before me, and on a proper
interpretation
of section 58 of the MSA, whether the contract was in
contravention of section 58 ultimately remains indeterminate as a
matter
of certainty. On the basis of the arbitrator’s
unchallenged reasoning it seems unlikely or improbable that it was.
The respondent
accordingly has failed to establish good cause for
refusing to make the award an order of court on this account.
61.
The respondent’s claim that the
agreement contravened section 65 of the MSA is predicated on two
contentions: the applicant
acted as a broker when it was not
accredited to do so; and the applicant received compensation in
excess of that permitted to be
paid to brokers in terms of the Act.
In order to sustain those allegations the respondent must establish
that the applicant was
a “broker” as defined in section 1
of the MSA. If the applicant did not act as a broker under the
agreement, the regulatory
requirements do not apply to it.
62.
No witness gave evidence on behalf of
the respondent at the arbitration. However, the submissions made on
behalf of the respondent
at the arbitration have been repeated in
paragraphs 40-44 of the answering affidavit and in the heads of
argument filed on its
behalf. The respondent alleged that the
applicant was in fact acting as a broker in rendering the services in
Annexure A of the
agreement and that the fees were disguised broker
commission in contravention of the MSA. It is common cause that PFM
Marketing
earned commission for the broking services rendered by it
and that both companies are controlled by the same person, Mr
Mashele.
The contract services agreement, according to the
respondent, was in reality a disguised agreement for additional
brokerage commission
beyond the 3% stipulated statutory maximum. The
applicant denied that it acted as a broker. The second arbitrator
found that the
duties circumscribed in the 2003 agreement do not
constitute broker services and the applicant did not act as a broker.
63.
The respondent averred that the
illegality of the contract services agreement can be ascertained
merely by having regard to the
nature of the services to be provided
as set out in Annexure A and the content of the alleged tacit term
that despite the provisions
in the agreement with regard to
remuneration, the amount payable was 3% of the contributions of
members introduced to the scheme
by PFM Marketing, which itself
earned 3% commission in respect of these self-same members for broker
services.
64.
The starting point is to determine if
the applicant acted as a broker, defined, it will be recalled, as any
person whose business
or part thereof entails providing broker
services, being: (a) the provision of service or advice in respect of
the introduction
or admission of members to a medical scheme; or (b)
the on-going provision of service or advice in respect of access to
benefits
or services offered by a medical scheme. Neither the
affidavits nor the award provides a description or details of any
services
in fact rendered by the applicant in terms of the agreement.
Which of the services in Annexure A of the contract were actually
performed, is by no means self-evident. In order to be a broker, the
applicant would have had to provided service or advice in respect
of
the introduction or admission of members to Spectramed. There is no
evidence that it did so. In fact, it is common cause that
the
applicant did not introduce members to the scheme, which is the
reason the second arbitration became necessary. It seems unlikely
therefore that it provided any service in that regard and there is no
evidence that it gave any advice on that score. Paragraph
(b) of the
definition of “broker services” brings the “on-going
provision” of services or advice in relation
to the benefits
and services of the scheme into the ambit of the definition. The
intention there, it would seem to me, is to include
within the
definition the continuing servicing of members by the person or
entity who introduced them to the scheme. If that is
correct, which I
believe it is, then the applicant did not act as a broker in respect
of the members who were introduced by PFM
Marketing. Accordingly, it
did not require accreditation as a broker to perform the services in
Annexure A of the agreement, and
the remuneration to which it is
entitled is not subject to regulation 28(2).
65.
But even if I am mistaken in my
interpretation of the definition of “broker services”,
the services listed in Annexure
A for the most part do not resemble
those typically performed by a broker. They do not relate to the
introduction of members or
their on-going servicing. They include the
establishment, management and staffing of customer service offices (a
network of more
than 40 offices was set up); managing service
providers; providing member education; analytical reviews; product
design etc. The
fact that remuneration was paid at a rate of 3% of
contributions paid by the members introduced by PFM Marketing does
indeed give
the appearance of a commission arrangement normally
applicable to brokers and may have been indicative of a
brokerage contract
if supported by evidence. But without evidence
explaining the arrangement one is left to speculate. As the second
arbitrator found,
that fact standing on its own does not support an
inference of a broker relationship. One might speculate equally that
the parties
found it easier for the remuneration to be a percentage
rather than for the applicant to invoice as the agreement initially
provided.
But the method of remuneration is not decisive. The primary
determinants are the services rendered. And the limited evidence
presented
does not establish that what the applicant did or was
obligated to do under the contract services agreement amounted to
rendering
broker services.
66.
In the result, I am unable to find on
the evidence that the agreement contravened section 65 of the MSA, or
that the award of the
second arbitrator is invalid for compelling the
respondent to comply with an illegal agreement.
Section
23 of the Arbitration Act: extending the time for making the award
67.
Unless the arbitration agreement
provides otherwise, in terms of section 23 of the Act, the arbitrator
is generally required to
make his award within four months of
entering on the reference. In its answering affidavit the respondent
took the point that the
award was out of time. The applicant has not
denied that the award should have been made on 30 March 2011 but was
in fact made
almost a year late on 14 February 2012. The respondent
initially submitted that the award was a nullity for this reason.
68.
The applicant in the replying affidavit
set out a detailed history of the arbitration and submitted that most
of the delays were
caused by the reluctance of the respondent to
proceed with the second arbitration. The proviso to section 23 of the
Act provides
that the court may, on good cause shown, from time to
time extend the time for making any award, whether that time has
expired
or not. The applicant has applied for the time to be extended
and has made out a cogent case that good cause exists to do so.
During
argument the respondent indicated that it did not oppose the
application. Accordingly, I propose to make an order retroactively
extending the time for the making of the award to 15 February 2012.
Costs
69.
In the notice of motion in the main
application filed on 8 June 2012 the applicant (or his erstwhile
attorney) neglected to include
a prayer for costs. On 27 September
2013, the applicant, then represented by his present attorneys, filed
an amended notice of
motion including a prayer for costs supported by
an affidavit explaining that it had always been its intention to seek
costs.
70.
The respondent did not object to the
proposed amendment and did not file any opposing papers. In argument
though, it submitted that
there were no grounds for condoning the
belated prayer for costs.
A
court may grant leave to amend the notice of motion by the insertion
of a prayer for costs.
[21]
The general approach to an amendment of a notice of motion is the
same as to a summons or pleading in an action.
[22]
Absent an objection to a proposed amendment the amendment should
ordinarily be allowed. It was incumbent on the respondent to
take
issue with the amendment by filing a notice of opposition, which it
failed to do. Once the amendment is allowed the ordinary
principles
of cost will apply. But even absent an amended prayer, the award of
costs is always in the court’s discretion
to be exercised
judicially upon consideration of the facts in each case. The
decision is in essence a matter of fairness to both
sides.
[23]
It was nowhere stated in the respondent’s answering affidavit
that it opposed the application on the basis that the applicant
was
not seeking an adverse costs order. It cannot be said that the
respondent was not alive to the risk of an adverse cost order,
which
is borne out by its failure to object to the proposed amendment at
the time it was made.
In
the premises, I am satisfied that the amendment should be allowed
and that costs should follow the result.
Order
73.
For the aforesaid reasons, I make the
following orders:
i)
In terms of the proviso to
section 23
of
the
Arbitration Act 42 of 1965
the time for the making of the award
by the second respondent is extended to 15 February 2012.
ii)
The award of the second respondent dated
14 February 2012 is hereby made an order of this court in terms of
section 31(1)
of the
Arbitration Act 42 of 1965
.
iii)
The first respondent is ordered to pay
the costs of this application.
JR
MURPHY
JUDGE
OF THE HIGH COURT
NORTH
GAUTENG
Representation
for the applicant:
Counsel:
PM van Ryneveld
Instructed
by Attorneys: Rooth & Wessels Attorneys
Representation
for respondent:
Counsel:
SM Wentzel
Instructed
by Attorneys: Mahons Attorneys
[1]
Act 42 of 1965
[2]
Section 31 (3) of the Act.
[3]
Bantry Construction Services (Pty) Ltd v Raydin Investments (Pty)
Ltd 2009 (3) SA 533 (SCA)
[4]
Veldspun (Pty) Ltd v Amalgamated Clothing and Textile Workers Union
of South Africa
1992 (3) SA 880
(E); and Amalgamated Clothing and
Textile Workers Union of South Africa v Veldspun (Pty) Ltd
[1994] 1
All SA 453
(A) at 462-463.
[5]
Butler and Finsen: Arbitration in South Africa (Juta 1993) 273-274.
[6]
Act 151 of 1998
[7]
Butler
and Finsen: Arbitration in South Africa (Juta 1993) 253-255
[8]
Butler and Finsen: Arbitration in South Africa (Juta 1993) 262
[9]
Ellis v Morgan; Ellis v Desai 1909 TS 576
[10]
Dickenson & Brown v Fisher’s Executors
1915 AD 166
at 176
[11]
Bantry Construction Services (Pty) Ltd v Raydin Investments (Pty)
Ltd
2009 (3) SA 533
(SCA) at 541-542
[12]
Act 68 of 1969
[13]
Duet and Magnum Financial Services v Koster
[2010] 4 All SA 154
(SCA) at para 24
[14]
Cape Town Municipality v Aliie NO
1981 (2) SA 1
(C); Primavera
Construction SA v Government, North-West Province
2003 (3) SA 579
(B); and Police and Prisons Civil Rights Union obo Sifuba v
Commissioner of the SA Police Service (2009) 30 ILJ 1309 (LC).
[15]
Butler and Finsen: Arbitration in South Africa (Juta 1993) 273
[16]
Veldspun (Pty) Ltd v Amalgamated Clothing and Textile Workers Union
of South Africa
1992 (3) SA 880
(E); and Amalgamated Clothing and
Textile Workers Union of South Africa v Veldspun (Pty) Ltd
[1994] 1
All SA 453
(A) at 462-463.
[17]
[1999]
3 All ER 847
[18]
1925 AD 266
at 274-275
[19]
Delport v Viljoen 1953 (2) SA 511 (T) 516-517
[20]
1954
3 SA 719 (A) 726-727
[21]
Jacobs v Joyce & McGregor
1937 CPD 468
at 470; and Adamson i/
Vorster
1956 (4) SA 803
(O) at 805H-806A;
[22]
Devonia Shipping Ltd v MV Luis (Yeoman Shipping CO Ltd Intervening)
1994 (2) SA 363
(C) at 369
[23]
Fripp v Gibbon & Co
1913 AD 354