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[2006] ZASCA 112
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Telcordia Technologies Inc v Telkom SA Ltd (26/05) [2006] ZASCA 112; [2006] 139 SCA (RSA) ; 2007 (3) SA 266 (SCA); [2007] 2 All SA 243 (SCA); 2007 (5) BCLR 503 (SCA) (22 November 2006)

Links to summary

THE
SUPREME COURT OF APPEAL
OF
SOUTH AFRICA
Case
number: 26/05
Reportable
In
the matter between:
TELCORDIA
TECHNOLOGIES INC
APPELLANT
And
TELKOM
SA LTD
RESPONDENT
CORAM :
HARMS, CONRADIE, CLOETE, LEWIS
AND PONNAN JJA
HEARD
:
30 & 31 OCTOBER 2006
DELIVERED
:         22 NOVEMBER 2006
Summary:
Arbitration – review of award – grounds for setting
aside
Neutral
Citation:
This judgment may be referred to as
Telcordia Technologies Inc v Telkom SA
[2006] 139 SCA (RSA).
Order:
The court order appears at para 158.
J
U D G M E N T
HARMS
JA/
HARMS
JA:
A.
Introduction
[1]
This appeal relates to the review of consensual international
commercial arbitration proceedings.
The review is under
s 33(1)
of
the
Arbitration Act 42 of 1965
. The court below, per de Villiers J,
upheld an application brought by Telkom SA Ltd for the review of an
arbitral award. It set
aside an interim award (which was final in
effect) in favour of the appellant, Telcordia Technologies Inc, a
Delaware corporation.
The arbitrator was Mr Anthony Boswood QC, a
London barrister. Telkom is a local company and is the present
respondent. The high
court not only set aside the award; in addition
it removed the arbitrator and appointed three new arbitrators,
retired South African
judges, in his stead.
[2]
In spite of the fact that the argument before the high court lasted
six weeks, and the hearing
of the application for leave to appeal
another three days, the court dismissed the latter application out of
hand. This Court,
on petition, granted the necessary leave. We uphold
the appeal for the reasons that follow but because of the nature of
the submissions
this judgment contains some repetition.
[3]
The high court in essence held that the arbitrator had committed
gross irregularities in the proceedings
in the course of interpreting
a contract between the parties. The alleged irregularities related in
summary to the nature of the
evidence that the arbitrator took into
account; and whether he had failed to appreciate the import of South
African law in relation
to both contractual interpretation and to the
amendment of written contracts. Matters not decided below but raised
as grounds of
review were, broadly, whether the arbitrator had
exceeded the bounds of the terms of reference; whether he had made
findings without
evidence; whether he had failed to give Telkom the
opportunity to lead further evidence; and whether he had erred in
refusing to
state a case for an opinion by the court in terms of
s 20
of the Act.
[4]
The high court in setting aside the award disregarded the principle
of party autonomy in arbitration
proceedings
[1]
and failed to give due deference to an arbitral award, something our
courts have consistently done since the early part of the
19th
Century.
[2]
This approach is not
peculiar to us; it is indeed part of a worldwide tradition. Canadian
law, for instance, ‘
dictates
a high degree of deference for decisions . . . for awards of
consensual arbitration tribunals in particular.’
[3]
And
the ‘concerns of international comity, respect for the
capacities of foreign and transnational tribunals, and sensitivity
to
the need of the international commercial system for predictability in
the resolution of disputes’
[4]
have
given rise in other jurisdictions to the adoption of ‘a
standard which seeks to preserve the autonomy of the forum selected

by the parties and to minimize judicial intervention when reviewing
international commercial arbitral awards’.
[5]
[5]
Blackmum J made these pointed remarks in this regard:
[6]
‘
As international
trade has expanded in recent decades, so too has the use of
international arbitration to resolve disputes arising
in the course
of that trade.  The controversies that international arbitral
institutions are called upon to resolve have increased
in diversity
as well as in complexity.  Yet the potential of these tribunals
for efficient disposition of legal disagreements
arising from
commercial relations has not yet been tested.  If they are to
take a central place in the international legal
order, national
courts will need to “shake off the old judicial hostility to
arbitration”,
Kulukundis Shipping Co v
Amtorg Trading Corp
126 F2D 978
, 985 (CA2
1942), and also their customary and understandable unwillingness to
cede jurisdiction of a claim arising under domestic
law to a
foreign or transnational tribunal.  To this extent, at least, it
will be necessary for national courts to subordinate
domestic notions
of arbitrability to the international policy favouring commercial
arbitration.’
[6]
The structure of the remainder of this judgment is as follows:
B. The arbitration clause
(para 7-10).
C. The non-variation
clause (para 11-13).
D. The structure of the
Integrated Agreement and Telcordia’s delivery obligations (para
14-22).
E. The dispute (para
23-24).
F. Telcordia’s
claims (para 25-27).
G. The second amendment
(para 28).
H. The May issues (para
29-30).
I. The arbitrator’s
award (para (31).
J. The grounds for review
(para 32-43).
K. The relationship
between the Constitution and the
Arbitration Act (para
44-51).
L. The meaning of
s
33(1)(b):
‘gross irregularity’ and ‘exceeding
powers’ (para 52-79).
M. The nature of the
inquiry, the duties of the arbitrator, and the scope of his powers
(para 80-89).
N. How did the arbitrator
understand his duties? (para 90-93).
O. The findings by the
high court relating to the arbitrator’s misconceptions about
his duties, and exceeding his powers (para
94-101).
P. The primary question
and the Shifren doctrine (para 102-116).
Q. The sign-off
requirement (para 117-122).
R. The disclaimers (para
123-126).
S. Testing for compliance
(para 127-131).
T. The London agreement
(para 132-142).
U. The
section 20
issue
(para 143-156).
V. Conclusion (para 157).
W. The order (para 158).
Repudiation is dealt with
in the accompanying judgment of Cloete JA.
B.
The Arbitration Clause
[7]
The agreement which formed the subject matter of the arbitration is
known as the Integrated Agreement
and was concluded on 24 June 1999.
It contained an arbitration clause which was independent of the
validity of the Integrated Agreement.
The clause provided that ‘all
disputes between the parties that may arise’ had to be
determined by an arbitrator. This
included ‘disputes related to
interpretation’ of the agreement, as well as ‘disputes of
a legal nature’.
It further stated that the award would be
final and binding, and the parties undertook to give effect to the
award.
[8]
The arbitration had to take place before a single arbitrator in terms
of the rules of the International
Chamber of Commerce (the ICC).
Under these rules, a sole arbitrator has to be of a nationality other
than those of the parties.
No provision was made for an arbitral
appeal board. Mr Boswood was appointed accordingly.
[9]
The terms of reference cited and incorporated the arbitral clause. In
addition, they provided
that the issues that had to be decided were
those that arose from the claims and counterclaims as set out in the
pleadings. Importantly,
they contained a provision to the effect that
the arbitrator did not necessarily have to decide all the issues
raised in the pleadings
if he deemed it unnecessary or inappropriate.
On the other hand, he could also decide ‘any further issues of
fact or law’
which he, in his discretion, deemed ‘necessary
or appropriate’. And he was entitled to decide the issues ‘in
any manner or order he deems appropriate’.
[10]
Both the proper law and the law governing the arbitration proceedings
were, in terms of the Integrated Agreement,
South African law, and
our courts have jurisdiction over the arbitration and the review
proceedings.
C.
The Non-Variation Clause
[11]
One of the principal complaints of Telkom was that the arbitrator did
not understand and did not apply our
law dealing with variations of
written contracts. The Integrated Agreement contained a non-variation
clause – the contract
could only have been amended by means of
a written agreement signed by certain duly authorised persons –
as well as a provision
preventing either party from relying on waiver
or estoppel. The exact terms of the non-variation clause are of
little consequence
because it is common cause that the Integrated
Agreement was not amended according to its terms.
[12]
The effect of a non-variation clause has been the subject of two
judgments of this Court, namely
Shifren
[7]
and, latterly,
Brisley
v Drotsky
.
[8]
For the sake of convenience I intend to refer to the principles as
the
Shifren
doctrine. The
arbitrator, although not formally schooled in South African law,
understood the principles perfectly well and he summarised
them in
these terms: A non-variation clause is in principle valid; it takes
effect so as effectively to entrench both itself and
all the other
provisions of the contract against oral variation; courts do not have
a general discretion to ignore it in favour
of an oral amendment on
the ground of some over-arching notion of bona fides; and the
principle does not create an unreasonable
straitjacket because the
general principles of the law of contract still apply, and these may
release a party from its workings.
One of these would, for instance,
be the rule that a party may not approbate and reprobate. This would
mean, as Telkom correctly
accepted during argument, that a party may
not rely on a non-compliant variation (for instance, in its
pleadings) and subsequently
invoke the non-variation term in order to
avoid the effect of the amendment.
[13]
To this the arbitrator added:
[9]
‘
My own provisional
view, expressed with all due diffidence, would be that the position
may be very different in a case where the
evidence shows that A and B
have orally agreed on a mode of performance by B of his contractual
obligation to A different from
that originally specified in the
contract, where that different mode of performance was agreed upon
for the mutual benefit of both parties
,
and where B has, to the knowledge and with the acquiescence of A,
done the work and/or laid out the necessary
resources in pursuance of that different mode of performance
.
In such a case it would be, to say the least, most surprising if the
law was that A, when presented with the results of B’s

substituted performance, could simply refuse to accept it on the
ground that the agreement to such substituted performance was
not
concluded in writing or otherwise memorialized in accordance with the
requirements of a No Oral Variation Clause. I was shown
a number of
authorities which strongly suggest that such is, indeed, not the
law.’
He relied in this
regard on the judgment in
Van
der Walt v Minnaar
[10]
which, it would appear to me, provides some support for his view. The
effect of
Van
der Walt v Minnaar
is, quite
sensibly, that the acceptance of substituted performance does not
amount to a variation of the contract.
D.
The Structure of the Integrated Agreement and Telcordia’s
Delivery Obligations
[14]
Telkom provides mainly two types of telecommunication services: voice
and non-voice. Voice services are services
and network components
that provide customers with the ability to transmit voice
conversations over a telecommunication network.
Non-voice services
enable customers to transmit data. The main object of the Integrated
Agreement was to provide Telkom with a
state-of-the-art automated
telecommunication system driven by 14 different highly specialized
software products. These had to be
developed and individualized to
satisfy Telkom’s specific operational requirements. They had to
provide Telkom with the capability
of managing both Voice and
Non-Voice Flow-Thru service activation and provide quality assurance
of the activated services. Flow-Thru
was defined as an end to end
process flow. The information had to flow between functions,
organisation parts, and groups of systems.
[15]
These software systems had to be delivered in phases called releases.
For present purposes two releases are
important: Telcordia had to
ship (a) the Voice Software on 30 June 2000; and (b) the Non-Voice
Software on 29 December 2000. The
total contract value of the Voice
software was some US$ 51,8m and US$ 34,8m for the Non-Voice software.
[16]
Both shipments of software had to be preceded by the shipment (six
months earlier) of the ‘specifications’
of the software
to be delivered. These ‘Software Feature Specifications (FDD)’
were defined in the Integrated Agreement.
It is important to note at
this juncture that the arbitrator found as a fact that specifications
– called FSDs or Feature
Specification Descriptions –
were mutually developed and agreed between Telcordia and Telkom, and
that Telkom had paid for
them some US$ 5,1m and US$ 3,48m
respectively on the agreed dates.
[17]
The essence of the dispute the arbitrator was called on to decide at
the proceedings that gave rise to the
interim award related to the
benchmark of Telcordia’s software Voice (‘06/00’)
and the Non-Voice (‘12/00’)
delivery obligation. This
depended on an interpretation of the Integrated Agreement.
[18]
Thus far I may have created the impression that the Integrated
Agreement was a contract that could be read
and understood from the
first page to the last. Nothing could be further from reality. But
first some background. In October 1998,
Telkom issued to prospective
bidders a Request for Bid, setting out its requirements. Telcordia
responded by means of Statements
of Compliance (SOC), contained in 14
binders, stating the extent to which it could or would comply with
the Request for Bid. The
updated Request for Bid and SOCs were
incorporated into the Integrated Agreement as ‘exhibits’.
(The Integrated Agreement
had various parts, all except the first
(which was also called the Integrated Agreement) referred to as
exhibits; and all had different
contractual rankings.)
[19]
The Project Plan (exhibit F) ranked first. The Project Plan was
defined as the detailed plan and schedule
for the delivery of the
software systems. It was to include the delivery milestones for the
software and the dates on which it
had to be delivered; and it was to
identify the capability of the software (the ‘specific
functionality (and features) to
be included in each release of the
Licenced Software delivered by Telcordia on a particular delivery
milestone’). The Project
Plan could have been amended by means
of the ‘scope change provisions’.
[11]
[20]
The Project Plan consisted of a number of ‘annexures’.
Annexure A was the Flow-Thru WBS (work
breakdown structure) Project
Schedule for the execution of the various tasks required. Annexure B
was a bar chart containing a
very brief summary of some of the
information set out in Annexure A. For instance, in relation to the
Non-Voice release it indicated
the shipping date and then gave the
periods for installation, testing, live pilot and production/rollout.
This particular bar contained
a caveat which is dealt with later.
Annexure D contained a payment schedule while Annexure E set out
certain general assumptions
as well as Telkom’s
responsibilities, and some conditions precedent.
[21]
Exhibit C, ranking lower than the Project Plan, dealt with the
software ‘specifications’ and
defined this term. In
particular it stated in clause 9.2 that the software had to be
delivered in compliance with the conditions
of the Integrated
Agreement and that the Project Plan would be the operative document
for Telcordia’s delivery obligations.
[12]
[22]
I have not quoted the text of the other relevant contractual
provisions because they have been set out in
great detail by both the
arbitrator and the high court and because this judgment is not
concerned with the interpretation of the
Integrated Agreement but
with the question whether the arbitrator committed reviewable
irregularities.
E.
The Dispute
[23]
I have already alluded to the dispute between the parties concerning
Telcordia’s delivery obligations.
Telcordia, in short,
contended that it had to deliver software that complied with the
preceding specifications (the FSDs), which
had been mutually
developed and agreed upon, and had been paid for by Telkom. Telkom,
on the other hand, argued that the Project
Plan had precedence over
Exhibit C, which contained the definition of ‘specifications’.
The Project Plan, it said,
in terms of the Integrated Agreement had
to identify the specific functionality and features of each release.
This meant that these
must be sought in the Project Plan, especially
the WBS read with the bar chart. In any event, clause 9.2.2 required
that the software
should be in accordance with the Project Plan.
Because the Project Plan was not specific and did not detail the
required functionalities
and features, the Integrated Agreement by
necessary implication required that
all
the features and
functionalities necessary for purposes of providing the 06/00 Voice
and 12/00 Non Voice Flow-Thru had to be included
in the respective
releases.
[24]
Telcordia justified its 06/00 delivery and its tender to deliver the
12/00 software on its interpretation
of its delivery obligations.
Telkom, relying on its contrary interpretation, disputed that
Telcordia had duly performed in relation
to the 06/00 release, which
justified its refusal to pay the balance outstanding on that release;
and, in addition, Telkom rejected
Telcordia’s tender of the
12/00 software. Telcordia therefore sent Telkom a notice, requiring
it to cure its alleged repudiation.
Telkom refused to do so and
Telcordia accordingly sent a notice of cancellation. Telkom, in turn,
purported to cancel on the ground
that Telcordia’s delivery of
the 06/00 and its tender of the 12/00 software were not in accordance
with its obligations under
the Integrated Agreement; and that
Telcordia’s attempted cancellation amounted to a repudiation,
which Telkom accepted. Many
of the claims and counterclaims were
therefore dependent on the correct interpretation of the Integrated
Agreement in relation
to the capability of the software that had to
be delivered.
F.
Telcordia’s Claims
[25]
Some of Telcordia’s claims need special mention because of the
fact that they play a role in this judgment.
Claim B was in respect
of the balance owing in respect of the 06/00 release. Telkom had paid
60 per cent of the amount due on delivery
but had failed to pay the
balance. Telcordia relied in the main on the Integrated Agreement for
its entitlement to be paid. In
the alternative it relied on the
so-called London agreement, something I deal with in part T of this
judgment. This agreement was
concluded orally in London on 12 October
2000. Telkom undertook to pay the 60 per cent immediately (which it
did) and the balance
with the 12/00 release. All this is common
cause. What is not is Telkom’s reliance on conditions precedent
for payment of
the 40 per cent.
[26]
Claim C was for the moneys due as a result of the 12/00 release, of
which Telkom refused to accept delivery.
These moneys were claimed on
either a contractual basis or as damages.
[27]
Claim G dealt with Out of Scope services (extras). As mentioned,
there is a provision dealing with changes
to the Project Plan by
means of extras.  Telkom’s plea to this claim included a
reliance on the
Shifren
principle. Significantly, for what
follows, it was not raised in connection with any other claim,
including claims B and C.
G.
The Second Amendment
[28]
Telcordia’s so-called second amendment was an amendment to its
plea to Telkom’s counterclaim.
There it raised an alternative,
based on the supposition that Telkom’s primary interpretation
would have been upheld and
Telcordia’s interpretation rejected.
In this Telcordia relied in relation to the Non-Voice software on a
term of the moratorium
agreement, which had been entered into ‘on
or about 1 April 2000’, and also on an oral or implied
agreement somewhat
later concerning the Voice software. Telkom
informed the arbitrator that it would rely on
Shifren
and
Telcordia stated that it would raise estoppel. These issues were not
expressed in the pleadings because the ICC rules do not
permit
further pleadings but they were nevertheless issues in the
arbitration and were articulated in para 3 of the May issues.
H.
The May Issues
[29]
The parties agreed during the course of the arbitration to a separate
adjudication of some aspects of the
case. The issues thus formulated
were referred to as the May issues. The outcome would have disposed
of much of the case: indeed,
Telkom’s view was that a ruling in
its favour would have disposed of all Telcordia’s claims. As it
turned out, the
ruling was in Telcordia’s favour and a
dismissal of all Telkom’s claims followed.
[30]
The May issues were thus formulated (para 2.1 reflecting Telcordia’s
interpretation of its contractual
obligations while para 2.2
reflected Telkom’s understanding):
[13]
1.
On a proper construction of the Integrated Agreement (IA) dated 24
June 1999, having regard
to the terms thereof and all admissible
evidence in relation thereto:
1.1
What is the contractual baseline for determining the specific
features and functionality of the software
to be delivered by
Telcordia to Telkom in each of the various software releases provided
for in the IA;
1.2
How are the contractual delivery dates for particular software
features and functionality to be determined?
2.
In particular, on a proper construction of the IA, having regard to
the terms thereof and
all admissible evidence in relation thereto,
was Telcordia required:
2.1
to deliver software in June and December 2000 which complied with the
Feature Specification Descriptions
(FSDs) in respect of each of those
software releases (as contended by Telcordia); or
2.2
to deliver all features and functionality necessary for purposes of
providing Voice Flow-Thru by way
of the June 2000 software releases
and all features and functionality necessary for purposes of
providing Non-Voice Flow-Thru by
way of the December 2000 software
release (as contended by Telkom)?
3
If Telcordia was required in terms of the IA to deliver all features
and functionality
necessary for purposes of providing Voice Flow-Thru
by way of the June 2000 software release and all features and
functionality
necessary for purposes of providing Non-Voice Flow-Thru
by way of the December 2000 software release, was Telcordia’s
obligation
modified in any way as a consequence of the allegations
pleaded in Telcordia’s second amendment (of which notice was
given
on 25 March 2002) and, if so, in precisely what way was the
obligation modified?’
I.
The Arbitrator’s Award
[31]
The arbitrator accepted Telcordia’s interpretation in relation
to the primary question and accordingly
found it unnecessary to deal
with the subsidiary questions. He went further by disposing of
another issue, namely the repudiation
issue. This he did by holding
that Telkom had repudiated the Integrated Agreement and that
Telcordia had validly accepted the repudiation,
and by dismissing
Telkom’s counterclaims. Whether he was entitled to do this is a
matter which is dealt with in the accompanying
judgment of Cloete JA
where the relevant parts of the award are quoted. Suffice it to say
already at this juncture that the position
of the parties, as
expressed by Telkom, was that the arbitrator was requested, in the
best interests of the parties and in accordance
with the spirit of
the ICC rules, to decide as many of the issues that could fairly have
been determined in the light of the evidence,
both oral and written,
led at the May proceedings.
J.
The Grounds for Review
[32]
The grounds for any review as well as the facts and circumstances
upon which the applicant wishes to rely
have to be set out in the
founding affidavit. These may be amplified in a supplementary
founding affidavit after receipt of the
record from the presiding
officer, obviously based on the new information which has become
available.
[14]
[33]
Telkom, in its founding affidavit relied for reviewing the
arbitrator’s award on some of the provisions
of
s 33(1)
of the
Act. It reads:
‘
Where—
(a)
any member of an arbitration tribunal has misconducted himself in
relation to his duties as arbitrator
or umpire; or
(b)
an arbitration tribunal has committed any gross irregularity in the
conduct of the arbitration
proceedings or has exceeded its powers; or
(c)
an award has been improperly obtained,
the court may, on the
application of any party to the reference after due notice to the
other party or parties, make an order setting
the award aside.’
Telkom did not rely on
para (c) but on misconduct under (a) and the two grounds of (b),
namely, gross irregularity and the exceeding
of power.
[34]
Telkom alleged that the arbitrator had committed gross irregularities
in the conduct of the proceedings by
–
(i) breaching an
undertaking or promise to receive further evidence relevant to the
‘London agreement’;
(ii) failing to refer
legal questions for the opinion of the court under
s 20
; and
(iii) proceeding to hand
down his award in the face of a pending
s 20
application.
[35]
The accusation of misconduct in relation to his duties was based on
the allegations that the arbitrator –
(i) had made key findings
which were ‘grossly incorrect, unfair and unreasonable’;
and
(ii) had expressly
ignored relevant evidence which manifested bias and partiality.
[15]
[36]
The statement that the arbitrator had exceeded his powers was based
on the allegations that –
(i) he proceeded to hand
down his award in the face of a pending
s 20
application;
(ii) he had made key
findings which were ‘grossly incorrect, unfair and
unreasonable’; and
(iii) he had ignored
important provisions of the Integrated Agreement.
[37]
The arbitrator filed a short report to the court in which he dealt
with the nub of the attack on his integrity;
his alleged inability to
deal with South African law; the allegation that he had made findings
for which there was no evidence;
his alleged breach of an
undertaking; and some allegations concerning
s 20.
[38]
Telkom used, if not abused, its right to amplify by filing a
supplementary affidavit of 120 pages in which
it attacked the
arbitrator’s report and expanded on the allegation of bias. In
addition, Telkom raised a new ground of review,
relating to the
finding that Telcordia had validly cancelled the agreement and the
dismissal of Telkom’s counterclaims. This
argument was based on
both legs of
s 33(1)(b).
[39]
In its replying affidavit and without explanation or apology Telkom
withdrew the allegation of misconduct.
This allegation, as noted, had
two legs but as time went on Telkom sought, successfully in the high
court, to rely on some of the
facts that were proffered in support of
this allegation.
[40]
At the hearing in the high court Telkom relied on two review grounds
only, namely the
s 20
issue and the repudiation issue. But during
Telcordia’s argument in answer, and through the intervention of
the court, the
alleged ‘grossly incorrect’ findings (on
which Telkom no longer relied) were metamorphosed into ‘gross
irregularities’
and expanded, and, in the event, became the
basis of the judgment below.
[41]
The case as developed by Telkom in its written argument also deviated
appreciably from the allegations that
were levelled against the
arbitrator in the founding papers, and the number of points taken was
in inverse proportion to their
merit. During the hearing of the
appeal another seismic shift took place.
[42]
Symptomatic of this case is the ‘verbal manipulation’
[16]
indulged in by the high court and by Telkom by reclassification and
relabelling. As the Bard said about roses, a spade remains
a spade
even if called a shovel or a pitchfork. Telkom for example raised for
the first time on appeal the complaint that the arbitrator
had acted
irrationally. It spent pages and pages on the legal argument but did
not even bother to provide us with the factual foundation
for the
submission. This came only after a questionnaire from this Court was
put to the parties. In the answer given by Telkom
we were told that
what in the past had been called gross irregularities or misconduct
was now irrational behaviour. For the legal
submission Telkom relied
on the panoply of the common law, the rule of law, the right to a
fair trial, the right to property, and
the Act. During oral argument,
though, Telkom limited its submission. Irrationality, it now said,
was a species of gross irregularity.
This submission failed to
appreciate that irrationality is an outcome standard while, as I
shall demonstrate, gross irregularity
is a process standard.
Interestingly, it is not alleged that the arbitrator’s
interpretation of the Integrated Agreement
was irrational. As will
appear in due course, there is no factual basis for any of these
attacks.
[43]
After all is said and done, the grounds of review ultimately relied
on were these:
(a)
by interpreting the Integrated Agreement incorrectly the arbitrator
committed a material error
so fundamental that he misconceived the
nature of the inquiry and his duties;
(b)
by breaching an undertaking to hear oral evidence on the London
agreement the arbitrator committed
a gross irregularity;
(c)
by denying Telkom the opportunity to apply to court under
s 20
of the
Act for an order compelling him to state legal questions for the
decision by the court, the arbitrator committed a gross
irregularity
and acted irrationally;
(d)
by deciding the repudiation question and dismissing Telkom’s
counterclaims the arbitrator
exceeded his authority and decided a
question without evidence, thereby committing a gross irregularity
and acting irrationally.
K.
The Relationship between the Constitution and the
Arbitration Act
[44
]
As a starting point, the constitutionality of the
Arbitration Act is
not in issue and its validity is a given.
[17]
Indeed, Telkom conceded without any judicial prodding that the Act as
interpreted by our courts passes constitutional muster. However,
the
Act must be read in the light of the provisions of the Bill of Rights
and the meaning attributed to it must promote the spirit,
purport and
objects of the Bill of Rights.
[45]
Two sections of the Bill of Rights were raised during argument. They
are
s 33
, which deals with just administrative action, and
s 34
,
which deals with access to courts. In the light of the judgment of
this Court in
Total
Support
[18]
the administrative justice provision can be discounted. There it was
pointed out that administrative justice is concerned with
the
exercise of public power or the performance of a public function,
something with which consensual arbitration is not concerned.
[19]
Smalberger ADP said in this regard (para 24):
‘
Arbitration does
not fall within the purview of “administrative action”.
It arises through the exercise of private rather
than public powers.
This follows from arbitration's distinctive attributes, with
particular emphasis on the following. First, arbitration
proceeds
from an agreement between parties who consent to a process by which a
decision is taken by the arbitrator that is binding
on the parties.
Second, the arbitration agreement provides for a process by which the
substantive rights of the parties to the
arbitration are determined.
Third, the arbitrator is chosen, either by the parties, or by a
method to which they have consented.
Fourth, arbitration is a process
by which the rights of the parties are   determined in an
impartial manner in respect
of a dispute between parties which is
formulated at the time that the arbitrator is appointed.”
Telkom did not
argue that this decision was wrong and approached the matter from a
different angle, as I shall indicate later.
[20]
[46]
That brings me to the access to courts provision,
s 34
, which reads
as follows:
‘
Everyone has the
right to have any dispute that can be resolved by the application of
law decided in a fair public hearing before
a court or, where
appropriate, another independent and impartial tribunal or forum.’
[47]
The question whether
s 34
is at all applicable was also discussed in
Total
Support
but
this Court left the question open. On balance, I believe that
s 34
is
indeed applicable. This would be in accordance with the approach of
the European Court of Human Rights (ECHR).
[21]
But, as Smalberger ADP said (para 28), there is nothing to prevent
parties from defining (at least in private consensual disputes)
what
is fair for purposes of their dispute. This is consonant with the
approach in
Napier
v Barkhuizen
[22]
where Cameron JA, with reference to
Brisley
v Drotsky
,
[23]
said (para 12):
‘
the Constitution
prizes dignity and autonomy, and in appropriate circumstances these
standards find expression in the liberty to
regulate one’s life
by freely engaged contractual arrangements. Their importance should
not be under-estimated.’
And (para 13):
‘
the Constitution
requires us to employ its values to achieve a balance that strikes
down the unacceptable excesses of “freedom
of contract”,
while seeking to permit individuals the dignity and autonomy of
regulating their own lives. This is not to
envisage an implausible
contractual nirvana. It is to respect the complexity of the value
system the Constitution creates. It is
also to recognise that
intruding on apparently voluntarily concluded arrangements is a step
that judges should countenance with
care, particularly when it
requires them to impose their individual conceptions of fairness and
justice on parties’ individual
arrangements.’
[48]
The rights contained in s 34 (as the ECHR accepted) may be waived
unless the waiver is contrary to some other
constitutional principle
or otherwise
contra
bonos mores
.
Parties to a private dispute may, for instance, compromise their
dispute and thereby forego all their rights under s 34. By agreeing

to arbitration, parties waive their rights
pro
tanto
.
[24]
They usually waive the right to a public hearing. They may even waive
their right to an independent tribunal.
[25]
Counsel gave the example of two children who ask a parent to
arbitrate their commercial dispute. The example in the ECHR is even

more telling. The parties each appointed their own arbitrator and
they, in turn, appointed a third. The one arbitrator had earlier

acted for and advised the one party to the dispute. The second party
became aware of this but proceeded happily with the arbitration.
The
national court had held that the second party thereby waived his
right to an independent tribunal. The ECHR confirmed that
such a
waiver was permissible and not inimical to a fair trial guarantee
similar to that in s 34.
[49]
In this case, by agreeing to arbitration under the ICC rules, the
parties agreed (in terms of art 28.1) to
the following:
[26]
‘
Every Award shall
be binding on the parties. By submitting the dispute to arbitration
under these Rules, the parties undertake to
carry out any Award
without delay and shall be deemed to have waived their right to
recourse insofar as such waiver can validly
be made.’
In addition, art 33
provides:
‘
A party who
proceeds with the arbitration without raising its objection to a
failure to comply with any provision of these Rules,
or of any other
rules applicable to the proceedings, any direction given by the
Arbitral Tribunal, or any requirement under the
arbitration agreement
relating to the constitution of the Arbitration Tribunal, or to the
conduct of the proceedings, shall be
deemed to have waived its right
to object.’
[50]
By agreeing to arbitration parties to a dispute necessarily agree
that the fairness of the hearing will be
determined by the provisions
of the Act and nothing else.
[27]
Typically, they agree to waive the right of appeal,
[28]
which in context means that they waive the right to have the merits
of their dispute re-litigated or reconsidered.
[29]
They may, obviously, agree otherwise by appointing an arbitral appeal
panel, something that did not happen in this case.
[51]
Last, by agreeing to arbitration the parties limit interference by
courts to the ground of procedural irregularities
set out in s 33(1)
of the Act. By necessary implication they waive the right to rely on
any further ground of review, ‘common
law’ or otherwise.
If they wish to extend the grounds, they may do so by agreement but
then they have to agree on an appeal
panel because they cannot by
agreement impose jurisdiction on the court. However, as will become
apparent, the common-law ground
of review on which Telkom relies is
contained – by virtue of judicial interpretation – in the
Act, and it is strictly
unnecessary to deal with the common law in
this regard. But, by virtue of the structure of the judgment below
and the argument
presented to us, it is incumbent on me to take the
tortuous route.
L.
The Meaning of Section 33(1)(b): ‘Gross Irregularity’ and
‘Exceeding Powers’
[52]
The term ‘exceeding its powers’ requires little by way of
elucidation and this statement by Lord
Steyn says it all:
[30]
‘
But
the issue was whether the tribunal “exceeded its powers”
within the meaning of section 68(2)(b) [of the English
Act]. This
required the courts below to address the question whether the
tribunal purported to exercise a power which it did not
have or
whether it erroneously exercised a power that it did have.
If
it is merely a case of erroneous exercise of power vesting in the
tribunal no excess of power under section 68(2)(b) is involved
.
Once the matter is approached correctly, it is clear that at the
highest in the present case, on the currency point, there was
no more
than an erroneous exercise of the power available under section
48(4). The jurisdictional challenge must therefore fail.’
Apart
from the proper application of the test nothing more was made in
argument of the meaning of the term. The argument focussed
on the
meaning of ‘gross irregularity in the conduct of the
arbitration proceedings’.
[53]
This term must be understood in context, historical and textual. (I
have already dealt with the constitutional
considerations.) The
ground is to all intents and purposes identical to a ground of review
available in relation to proceedings
of inferior courts.
[31]
Although the textual setting is different, which might affect its
meaning,
[32]
I am content to
hold that for present purposes the two provisions are identical and
that cases decided in relation to the review
of inferior courts are
relevant in determining the meaning and scope of para (b).
[54]
The Act was preceded by three colonial statutes. They, following the
approach of the pre-Union courts, broke
completely with the
Roman-Dutch tradition by providing that an arbitral award is not
appealable, that is, that its merits may not
be the subject of
attack.
[33]
But they
particularly provided that an award could be set aside on the ground
of misconduct or if improperly procured.
[34]
[55]
The review of an award based on a wrong construction of a deed of
partnership was the subject of
Dickenson
& Brown
.
[35]
This Court held that a review on this basis was impermissible
on two grounds. The first was the general principle that when
parties
select an arbitrator as the judge of fact and law, the award is final
and conclusive, irrespective of how erroneous, factually
or legally,
the decision was. Second, the colonial laws (in that case the one of
Natal) did not change the position. Such an error,
he held, could not
amount to misconduct unless the mistake was so gross and manifest
that it could not have been made without some
degree of misconduct or
partiality, in which event the award would be set aside not because
of the mistake, but because of misconduct.
[36]
[56]
Solomon JA recognised that it would have been a valid ground for
setting aside the award if an arbitrator
had ‘exceeded his
powers’: to exceed one’s powers does not go to merit but
to jurisdiction. He also held that
there is no distinction between a
mistake on the face of the award and one not appearing on the face of
it, a rule abolished in
England only in 1969.
[37]
Furthermore, he held that the English rule, which permitted courts to
set aside awards on the ground of mistakes of law, was not
part of
our law
[38]
[57]
Did the introduction by the 1965 Act of para (b) indicate a changed
intention? Is it likely that the legislature
would have intended to
introduce a review on substantive grounds (taking into account that
an appeal is also not possible) by using
the procedural language of
‘gross irregularity in the conduct of the arbitration
proceedings’? I think not and this
Court also did not think so
when called upon to decide the effect of errors of law on an award
under the current Act. In two instances,
namely
Veldspun
and
Total
Support
this
Court confirmed the correctness of the
Dickenson
& Brown
approach
.
[39]
[58]
Telkom expressly disavowed reliance on a general power of courts to
review errors of law committed by arbitrators
but instead relied on
(i) a common-law power to review awards that are tainted by ‘material
errors of law’ and (ii)
s 33(1)(b), arguing that where the
arbitrator misconceives the whole nature of the inquiry or his duties
in connection therewith
he commits a gross irregularity in the
proceedings. The high court, I should mention, decided the matter on
ground (ii).
[59]
I intend to deal first with the common-law point. As Telcordia
mentioned, Telkom was unclear on whether it
intended to rely on the
common law relating to arbitration or that concerning administrative
law.
Dickenson
& Brown
,
[40]
I have said, held that there was no common-law review under
arbitration law. In addition, I have already expressed the view that

a party to a consensual arbitration under the Act is not entitled to
rely on an administrative common-law review ground.
[60]
In our law the principles of administrative justice have now been
subsumed by the Constitution and, as stated,
the considerations
underlying them are different from those that apply to arbitration.
This difference has also been recognised
in England, as Lord Steyn
said:
[41]
‘
The
reasoning of the lower courts, categorising an error of law as an
excess of jurisdiction, has overtones of the doctrine in
Anisminic
Ltd v Foreign Compensation Commission
[1968] UKHL 6
;
[1969] 2 AC 147
which is so
well known to the public law field. It is, however, important to
emphasise
again that the
powers of the court in public law and arbitration law are quite
different. This has been clear for many years, and
is now even more
manifest as a result of the enactment of the 1996 [English
Arbitration] Act.’
[61]
Telkom sought to rely in argument on
Anisminic
and
a statement by Malan J
[42]
(relying
indirectly on
Anisminic
)
for the proposition that all decisions based on a material error of
law stand to be reviewed. As mentioned,
Anisminic
was
concerned with administrative action, as was Malan J’s
judgment. In any event,
Anisminic
has
been misunderstood by many, including Denning MR, who sought to
derive from it the general principle mentioned by Malan J. Denning
MR
put his view with characteristic vigour when he said in a public
lecture that no court or tribunal has any jurisdiction to make
an
error of law
on
which the decision of the case depends.
[43]
He was soon put right by the House of Lords in
Racal
.
[44]
[62]
Racal
was followed by
the House in
Page
,
[45]
a judgment on which Malan J relied for his general proposition so
eagerly embraced by Telkom. The House emphasised
[46]
that in the case of decisions of administrative tribunals made under
statutory powers a relevant error of law in the actual making
of the
decision, which affects the decision, may be corrected on review
unless Parliament intended that the administrative body
was to be the
final arbiter of questions of law. If, however, a law provided that a
judicial body’s decision was to be final
and conclusive on a
question of law, there was no reason to assume that a review would be
permitted. In
Page
the issue
concerned the position of a ‘visitor’, someone who, in
terms of university rules, was the ‘sole judge’
of the
interpretation and application of the university’s domestic
rules. Errors of law committed by a visitor within his
jurisdiction
were held not to be subject to judicial scrutiny.
[63]
As mentioned, even before the 1979 English
Arbitration Act, legal
questions, such as the construction of a contract that had been
specifically referred to an arbitrator, could not be reviewed on
the
ground of error.
[47]
In the
present case, it will be recalled, the interpretation of the contract
was specifically referred to the arbitrator.
[64]
This Court, in
Hira
v Booysen
,
[48]
dealing with a statutory administrative tribunal, referred with
approval to
Anisminic
and
to
Racal,
and
did so without suggesting that the Denning approach, which had been
rejected in
Racal
,
was correct. It was in this context that Corbett CJ formulated the
following rule (at 93C-D):
‘
Where the
complaint is that the tribunal has committed a material error of law,
then the reviewability of the decision will depend,
basically, upon
whether or not the Legislature intended the tribunal to have
exclusive authority to decide the question of law
concerned. This is
a matter of construction of the statute conferring the power of
decision.’
[65]
Corbett CJ was at pains to draw a distinction between common-law
reviews and those based on statute (such
as the present)
[49]
and to state expressly that the quoted rule (and the others mentioned
by him) applies to the former.
[50]
Apart from the fact that I do not believe that he intended to
propound a rule applicable to consensual arbitrations, the rule would

in any event prevent the review of material errors of law because the
arbitrator was, subject to the limitations in the Act, intended
to
have exclusive jurisdiction over questions of fact and law. That
follows from the provisions of the Act, which exclude appeals
and
limit reviews. The fact that a court may be approached to decide a
question of law under
s 20
does not affect this conclusion. If
s 20
were used, a review or appeal for an error of law is not possible
because, once again, the opinion of the court (of first instance)
and
even that of counsel (learned or otherwise) is final. A statutory
provision such as that contained in
s 28
, that unless the arbitration
agreement provides otherwise, an award is, subject to the provisions
of the Act, final and not subject
to appeal, and that each party to
the reference must abide by and comply with the award in accordance
with its terms, clearly indicates
that the Legislature intended the
arbitral tribunal to have exclusive authority to decide whatever
questions were submitted to
it, including any question of law. That
is what the parties agreed. This does not imply that the arbitrator
has the exclusive right
to decide the scope of his jurisdiction
because if he exceeds his powers the award is reviewable on that
ground.
[66]
Telkom also sought to rely on a tacit term of the arbitration
agreement, submitting that it would not have
agreed to a term
permitting the arbitrator to commit a gross error of law. In this
regard Telkom referred to what Jansen JA had
said in
Theron
[51]
when dealing with the interpretation of a constitution of a church,
namely that it is not to be assumed that parties to a contract
would
have agreed to be subjected to unreasonable actions.
[52]
Although I agree with the generality of the proposition, it should be
stressed that the judgment of Jansen JA dealt with the question
of
whether a church body had interpreted its constitution correctly and
had followed the correct disciplinary appeal procedure:
in other
words, he sought to determine the scope of the mandate of the church
body as agreed in its constitution. This question,
he held, was not
something falling within the exclusive jurisdiction of the church
body. Apart from the fact that the principles
concerning domestic
tribunals are not the same as those governing administrative or
arbitration proceedings
[53]
here the scope of the arbitrator’s mandate is not in issue.
[54]
[67]
In any event, the parties bound themselves to arbitration in terms of
the Act and if the Act, properly interpreted,
does not allow a review
for material error of law, one cannot imply a contrary term. Also,
parties cannot by agreement extend the
grounds of review as contained
in the Act.
[68]
Even assuming the jurisdiction to review on the ground of material
error of law, the question arises as to
what is meant by the
adjective ‘material’. Telkom sought to draw a distinction
between ‘mere’ errors and
‘material’ errors
and in effect argued that all errors that make a party lose the
arbitration are material. This approach
renders the difference
between appeals and reviews meaningless and in effect gives a right
of appeal, which the Act prohibits.
[69]
Errors of law can, no doubt, lead to gross irregularities in the
conduct of the proceedings. Telcordia posed
the example where an
arbitrator, because of a misunderstanding of the audi principle,
refuses to hear the one party. Although in
such a case the error of
law gives rise to the irregularity, the reviewable irregularity would
be the refusal to hear that party,
and not the error of law.
Likewise, an error of law may lead an arbitrator to exceed his powers
or to misconceive the nature of
the inquiry and his duties in
connection therewith.
[70]
Hira v Booysen
concerned the scope of the tribunal’s
mandate or ‘jurisdiction’. The tribunal had to determine
whether Hira had
done something ‘in public’. It
misconstrued this term, which defined its powers, and, accordingly,
committed a ‘material’
error. Fortunately I need not
pursue this further because Telkom relied on only one type of error
as being material: where a decision
maker misconceives the whole
nature of the inquiry or his duties in connection therewith. This
common-law ground also applies to
a review under a statute that
provides that a gross irregularity in the course of the proceedings
may be reviewed. It is therefore
unnecessary to delve much further
and redo the exercise that Corbett CJ did in
Hira v Booysen
and
analyse the line of cases again.
[71]
That brings me to the judgments of Greenberg and Schreiner JJ in
Goldfields
Investment.
[55]
The case dealt with a review of a lower court on the statutory ground
of ‘gross irregularity’ and held that the term

encompasses the case where a decision-maker misconceives the whole
nature of the inquiry or his duties in connection therewith.
In the
light of the general acceptance of the rule, also by this Court, a
reconsideration of its validity does not arise. But that
is not the
end of the inquiry because it is apparent that both the high court
and Telkom misunderstood the rule and misapplied
it. I therefore
propose to analyse the case law in this regard and then consider
whether the arbitrator’s alleged misconceptions
fall within the
rule.
[72]
It is useful to begin with the oft quoted statement from
Ellis
v Morgan
[56]
where Mason J laid down the basic principle in these terms:
‘
But an
irregularity in proceedings does not mean an incorrect judgment; it
refers not to the result, but to the methods of a trial,
such as, for
example, some high-handed or mistaken action which has prevented the
aggrieved party from having his case fully and
fairly determined.’
[73]
The
Goldfields
Investment
qualification to
this general principle dealt with two situations. The one is where
the decision-making body misconceives its mandate,
whether statutory
or consensual. By misconceiving the nature of the inquiry a hearing
cannot in principle be fair because the body
fails to perform its
mandate.
[57]
Goldfields
Investment
provides
a good example. According to the applicable Rating Ordinance any
aggrieved person was entitled to appeal to the magistrates’

court against the value put on property for rating purposes by the
local authority. The appeal was not an ordinary appeal but involved,

in terms of the Ordinance, a rehearing with evidence. The magistrate
refused to conduct a rehearing and limited the inquiry to
a
determination of the question whether the valuation had been
‘manifestly untenable’. This meant that the appellant
did
not have an appeal hearing (to which it was entitled) at all because
the magistrate had failed to consider the issue prescribed
by
statute. The magistrate had asked himself the wrong question, that
is, a question other than that which the Act directed him
to ask.
[58]
In this sense the hearing was unfair. Against that setting the words
of Schreiner J should be understood:
[59]
‘
The law, as stated
in
Ellis v Morgan (supra)
has been accepted in subsequent cases, and the passage which has been
quoted from that case shows that it is not merely high-handed
or
arbitrary conduct which is described as a gross irregularity;
behaviour which is perfectly well-intentioned and
bona
fide,
though mistaken, may come under that
description.
The crucial question is whether
it prevented a fair trial of the issues
. If
it did prevent a fair trial of the issues then it will amount to a
gross irregularity. Many patent irregularities have this
effect.
And if from the magistrate’s reasons it appears that his mind
was not in a state to enable him to try the case
fairly this will
amount to a latent gross irregularity. If, on the other hand, he
merely comes to a wrong decision owing to his
having made a mistake
on a point of law in relation to the merits, this does not amount to
gross irregularity. In matters relating
to the merits the magistrate
may err by taking a wrong one of several possible views, or he may
err by mistaking or misunderstanding
the point in issue. In the
latter case it may be said that he is in a sense failing to address
his mind to the true point to be
decided and therefore failing to
afford the parties a fair trial. But that is not necessarily the
case.
Where the point relates only to the
merits of the case, it would be straining the language to describe it
as a gross irregularity
or a denial of a fair trial.
One would say that the magistrate has decided the case fairly but has
gone wrong on the law. But if the mistake leads to the Court’s

not merely missing or misunderstanding a point of law on the merits,
but to its misconceiving the whole nature of the inquiry,
or of its
duties in connection therewith, then it is in accordance with the
ordinary use of language to say that the losing party
has not had a
fair trial.
I agree that in the present case
the facts fall within this latter class of case, and that the
magistrate, owing to the erroneous
view which he held as to his
functions, really never dealt with the matter before him in the
manner which was contemplated by the
section.
That being so, there was a gross irregularity, and the proceedings
should be set aside.’
[74]
The other line of cases, which dealt with reviews of inferior courts,
was concerned with orders made where a jurisdictional
fact was
missing or, put differently, ‘a condition for the exercise of a
jurisdiction had not been satisfied’.
[60]
A typical example is
Primich
.
[61]
The magistrate could order, in terms of the relevant court rule, the
provision of security if the plaintiff was not resident in
the
country. The magistrate, in spite of the limitation on his
jurisdiction, made such an order against a plaintiff who was resident

in the country. Objectively, this was not a case of an error of law;
it was an error of fact dressed up as an error of law. Decisions
of a
factual nature can all too easily be dressed up as issues of law.
[62]
There was no indication that the magistrate had misinterpreted the
rule; he misunderstood the facts, holding that a jurisdictional
fact
was present while it was not. A similar instance was
Visser
v Estate Collins
.
[63]
In terms of the statute concerned, the magistrates’ court could
set aside a void judgment granted by default provided the
application
for rescission was made within one year of the date on which the
applicant first had knowledge of the invalidity. The
magistrate set
aside a  void judgment by default without any evidence as to
when the applicant had become aware of the invalidity.
Once again,
the magistrate had failed to determine whether a jurisdictional fact
for the setting aside of the judgment was present.
Whether this was
due to an error of law is really beside the point.
[75]
In all these cases the complaint was directed at the method or
conduct and not the result of the proceedings.
[64]
Where the legal issue is left for the decision of the functionary any
complaint about how he reached his decision must be directed
at the
method and not the result. This is known as the
Doyle
v Shenker
[65]
principle.
[76]
It is wrong to confuse the reasoning with the conduct of the
proceedings. Although the line may be fine and sometimes
difficult to
draw, I believe that the following example makes the difference
clear. In
Jooste
Lithium
[66]
the inspector had the authority to decide any dispute that could
arise in regard to the validity of the pegging or beaconing of
claims
and to decide any dispute arising through over-pegging. Against that
background O H Hoexter JA said:
[67]
‘
It is clear that
in deciding the disputes which he is authorised to decide, there is
entrusted to the inspector the duty not only
of finding the relevant
facts but also of deciding the legal issues involved (see
Johannesburg City Council v Chesterfield House
(Pty) Ltd
1952 (3) SA 809
at p 825 (AD). In
deciding the legal issues involved it would also be the duty of the
inspector to interpret the relevant sections
of the Proclamation and
the regulations.’
[77]
The Proclamation conferred a right of appeal from the inspector to
the Administrator, whose decision was to be
final. With that in mind,
Hoexter JA continued:
[68]
‘
It seems to me,
with respect, that the learned Judge erred in holding that the
interpretation of the regulations is a matter for
the Court and that
the Administrator is bound by the Court's interpretation. In my
opinion the Legislature intended that the regulations
should be
interpreted in the first instance by the inspector and on appeal by
the Administrator. It is for the Administrator to
decide any legal
issues involved in a dispute as to the pegging of a claim, and the
most important legal issue is the interpretation
of the regulations.
It cannot be said that the wrong
interpretation of a regulation would prevent the Administrator from
fulfilling its statutory function
or from considering the matter left
to it for decision. On the contrary, in interpreting the regulations
the Administrator is actually
fulfilling the function assigned to it
by the statute, and it follows that the wrong interpretation of a
regulation cannot afford
any ground for review by the Court.
(See
Doyle v Shenker & Co Ltd
1915 AD 233.)
The present case differs
from cases like
Goldfields Investment Ltd v City Council of
Johannesburg
,
1938 TPD 551
, in which the result of the wrong
interpretation of a section in the relevant statute was that the
magistrate never directed his
mind to the issue which in terms of the
statute it was his duty to decide. In the present case the
Administrator must direct [his]
mind to the issue whether the
requirements of the regulations have been observed and in order to
decide that issue it is bound
to interpret the regulations.’
[78]
It will be necessary to consider the facts on which the high court
relied to determine whether what the arbitrator
did in this matter
falls within the purview of
Goldfields Investment
or within
Doyle v Shenker
. This does not mean that the two principles
are mutually exclusive. It simply means that if the arbitrator does
not fall foul of
Goldfields Investment
, the principles of
Doyle v Shenker
apply.
[79]
Before turning to the facts it is necessary to dispose of Telkom’s
concluding argument on this aspect
of the case. It was that the issue
of ‘gross irregularity’ should be answered by asking
whether Telkom, in the words
of Schreiner J, had a fair trial on the
interpretation issue. That a party is entitled to a fair trial, as
Telcordia said, is not
contentious. Telkom accepted that the high
court never had asked itself this question and that its own heads of
argument had not
dealt with the point. When invited by us to state
why the hearing had been unfair, counsel who argued this aspect
deferred to his
lead counsel who, in turn, chose to disregard the
invitation. We were left with a chasm between the legal and factual
argument.
M.
The Nature of the Inquiry, the Duties of the Arbitrator, and the
Scope of his Powers
[80]
Before considering the attack on the arbitrator on the ground that he
had committed gross irregularities
in the conduct of the arbitration
proceedings (by misconceiving the nature of the inquiry and his
duties) or exceeded his powers,
it is necessary to determine the
nature of the inquiry, the arbitrator’s duties, and his powers.
[81]
As mentioned at the outset, according to the Integrated Agreement the
arbitrator had to determine all disputes
between the parties,
including disputes relating to the interpretation of the agreement
and disputes of a legal, financial and
technical nature; the
procedural rules of the ICC were to apply; the laws of the Republic
would govern the agreement; and, subject
to the arbitration clause,
the parties consented to the jurisdiction of South African courts.
[82]
The May issues, as defined, required the arbitrator to determine
Telcordia’s primary contractual obligation
under the Integrated
Agreement ‘having regard to the terms thereof and all
admissible evidence in relation thereto’.
In this regard he had
to choose between two opposing contentions. It is clear from the way
the May issues were defined that the
questions were interdependent
and that, depending on the outcome of, say, question 1, question 3
could have fallen away.
[83]
In short, the arbitrator had to (i) interpret the agreement; (ii) by
applying South African law; (iii) in
the light of its terms, and (iv)
all the admissible evidence.
[84]
In addition, the arbitrator had, according to the terms of reference,
the power (i) not to decide an issue
which he deemed unnecessary or
inappropriate; (ii) to decide any further issues of fact or law,
which he deemed necessary or appropriate;
(iii) to decide the issues
in any manner or order he deemed appropriate; and (iv) to decide any
issue by way of a partial, interim
or final award, as he deemed
appropriate.
[85]
The fact that the arbitrator may have either misinterpreted the
agreement, failed to apply South African law correctly,
or had regard
to inadmissible evidence does not mean that he misconceived the
nature of the inquiry or his duties in connection
therewith. It only
means that he erred in the performance of his duties. An arbitrator
‘has the right to be wrong’
on the merits of the case,
and it is a perversion of language and logic to label mistakes of
this kind as a misconception of the
nature
of the inquiry
–
they may be
misconceptions about meaning, law or the admissibility of evidence
but that is a far cry from saying that they constitute
a
misconception of the nature of the inquiry. To adapt the quoted words
of Hoexter JA:
[69]
It cannot
be said that the wrong interpretation of the Integrated Agreement
prevented the arbitrator from fulfilling his agreed
function or from
considering the matter left to him for decision. On the contrary, in
interpreting the Integrated Agreement the
arbitrator was actually
fulfilling the function assigned to him by the parties, and it
follows that the wrong interpretation of
the Integrated Agreement
could not afford any ground for review by a court.
[86]
Likewise, it is a fallacy to label a wrong interpretation of a
contract, a wrong perception or application of South
African law, or
an incorrect reliance on inadmissible evidence by the arbitrator as a
transgression of the limits of his power.
The power given to the
arbitrator was to interpret the agreement, rightly or wrongly; to
determine the applicable law, rightly
or wrongly; and to determine
what evidence was admissible, rightly or wrongly.
[70]
Errors of the kind mentioned have nothing to do with him exceeding
his powers; they are errors committed within the scope of his

mandate. To illustrate, an arbitrator in a ‘normal’ local
arbitration has to apply South African law but if he errs
in his
understanding or application of local law the parties have to live
with it. If such an error amounted to a transgression
of his powers
it would mean that all errors of law are reviewable, which is absurd.
[87]
In support of this I revert to
Doyle
v Shenker
,
[71]
a case that dealt with a review on the ground of a gross irregularity
in the proceedings. Innes CJ said in a passage that speaks
for
itself:
[72]
‘
Now a mere mistake
of law in adjudicating upon a suit which the magistrate has
jurisdiction to try cannot be called an irregularity
in the
proceedings. Otherwise a review would lie in every case in which the
decision depends upon a legal issue, and the distinction
between
procedure by appeal and procedure by review, so carefully drawn by
statute and observed in practice, would largely disappear.
Yet in
this case it is a mistake of law alone which is relied upon as
constituting gross irregularity.  There is neither allegation

nor suggestion that the magistrate, his attention having been drawn
to sec. 37, deliberately refused to apply his mind to it, or
to
consider it. The position, if the section means what the applicant
contends, is that the magistrate either honestly misinterpreted
or
completely overlooked it. In either event it would not, I am afraid,
be the first occasion on which a court of law has misread
a statutory
provision or overlooked one not brought to its notice at the trial.
Whichever supposition were the correct one, the
result would be
(still assuming the correctness of the applicant's interpretation) an
unfortunate error of law which, but for the
special prohibition of
the statute would afford good ground for an appeal. But there would
be no gross irregularity in the proceedings,
and therefore no
justification for a review.’
[88]
Innes CJ added:
[73]
‘
It was suggested
that, in the present instance, the fact that the magistrate did not
deal with the merits, would constitute a gross
irregularity. But if
he considered the document to be conclusive, there was no need to
discuss the merits. He may have been wrong
in that view, but that
would be an error of law only, and not an irregularity.
The admission of illegal
evidence is in itself an independent ground of review.
[74]
But the document in question was not improperly received in evidence;
indeed, it could not properly have been excluded. If the
magistrate's
reading of it, and of the bearing of the statute upon it, was wrong,
that could again be a mistake of law, which,
as already pointed out,
could afford no basis for review proceedings.’
[89]
There is another matter that falls under this rubric and that
concerns the repudiation issue. I have already mentioned
that at the
conclusion of the May hearing the arbitrator was requested, in the
best interests of the parties and in accordance
with the spirit of
the ICC rules, to decide as many of the issues as could fairly have
been determined in the light of the evidence,
both oral and written,
led at the May proceedings. Using this power he decided that Telkom
had repudiated and that Telcordia had
accepted the repudiation. It
was within the power of the arbitrator, in the light of the extension
agreement between the parties,
to decide the scope of his
mandate.
[75]
N.
How did the Arbitrator understand his Duties?
[90]
The arbitrator understood clearly that his duty was to interpret the
agreement and that he had, in this regard,
to choose between the
conflicting contentions of Telcordia and Telkom. Nowhere in his award
is there any indication that he sought
to do anything else. He
understood particularly well that he had to determine the meaning of
the contract with reference to its
true construction and that he
could only have regard to admissible evidence.
[76]
In fact, he complained during the hearing about the relevance of some
of the evidence relating to construction but the parties
insisted
that he should hear it. He ‘stressed’ (his word) that his
interpretation was based on the wording and structure
of the
Integrated Agreement itself.
[91]
The arbitrator understood that he had to apply South African law. He
knew that he could only rely on background
evidence and not on
surrounding circumstances, and he stated that he had kept this in
mind in interpreting the Integrated Agreement.
[77]
He did not refer to any identifiable surrounding circumstances in his
award although he did refer to the subsequent conduct of
the parties
in order to interpret the agreement without finding that the
agreement was ambiguous. This he did consciously, relying
on
Christie,
[78]
who in turn
relies on
Shill
v Milner
[79]
as explained by Goldstone J in
Briscoe
v Deans
.
[80]
The rule is that evidence of subsequent conduct is admissible, even
where the agreement is on its face unambiguous, if the parties
by
consent lead such evidence.
[92]
The arbitrator was fully conscious of
Shifren
and, as I have
mentioned, his award shows that he understood the principle and its
implications fully. He did, however, come to
the conclusion that the
doctrine did not arise in the circumstances of the case.
[93]
In the end, the arbitrator accepted Telcordia’s interpretation
and he answered the questions put accordingly.
Some of the questions
became academic as a result of the primary finding and therefore he
did not answer them. In fact, they could
not have been answered in
the light of his conclusion. In answering only some questions and
refraining from answering others, and
in making rulings and orders
consequent upon his primary finding, he consciously used the powers
he had according to his terms
of reference.
[81]
O.
The Findings by the High Court relating to the Arbitrator’s
Misconceptions about his Duties, and Exceeding his Powers
[94]
The findings of the high court on this issue are many and
repetitive
[82]
and are
scattered all over the judgment. I have no intention of dealing with
them all but shall limit myself to the main findings.
The first
finding was that the arbitrator had misinterpreted the pleadings. For
this the high court undertook a detailed analysis
of the pleadings to
find that Telkom had relied on
Shifren
in relation to the
primary (interpretation) question. The problem is that Telkom had
never alleged that the arbitrator had misconstrued
the pleadings –
it was not a ground of review – and before us Telkom did not
seek to make out such a case.  I
can only say that the court
embarked on what could in fairness be described as a judicial snipe
hunt.
[83]
[95]
Although formulated as a separate and alternative ground, the essence
of the high court’s finding in
relation to the interpretation
of the Integrated Agreement was that the arbitrator had ‘failed
to refer to and apply’
the applicable principles of proper
interpretation, and that this constituted a misconception of the
whole nature of the inquiry
and of his duties in connection
therewith, and that he had exceeded his powers.
[96]
The statement that the arbitrator had failed to refer to the
applicable principles of construction, as I
have indicated in the
preceding section of this judgment, amounts to a gross
misrepresentation of what the arbitrator did. The
court, when dealing
with the inadmissibility of surrounding circumstances, provided the
reader with a veritable compendium of case
law while the arbitrator
articulated the same rule in a single sentence but the court did not
refer to a single rule of interpretation
that the arbitrator had
failed to take into account.
[97]
Particularly disturbing about the high court’s
treatment of the arbitrator is that it simply ignored
the fact that
the arbitrator had relied on authority for utilising evidence
concerning subsequent conduct
where the agreement is unambiguous
in interpreting a contract. The court did not even consider this rule
– accepted by Telkom as valid – in coming to
its
decision. It also ignored the fact that Telkom itself had submitted
to the arbitrator that evidence of subsequent conduct of
the parties
would irrefutably contradict Telcordia’s primary contractual
argument; that no argument was addressed to the
arbitrator by either
party that the evidence led was inadmissible; and that Telkom did not
allege in the review proceedings that
the arbitrator had relied on
irrelevant or inadmissible evidence. How it could be said, in these
circumstances, that the arbitrator
had committed a gross irregularity
is incomprehensible.
[98]
The high court in any event failed to distinguish between the
interpretation issue and the contractual compliance
issue, a
distinction the arbitrator perceived at an early stage of the
proceedings. The interpretation issue was whether the
‘specifications’
were to be found in FSDs; and the
compliance issue was whether, by delivering the particular FSDs and,
thereafter releasing or
tendering the software described in the FSDs,
Telcordia had complied with its contractual obligations. However, the
court considered
the latter also to be a matter of interpretation as
is apparent from its treatment of the sign-off and disclaimer issues,
matters
to which I shall revert in due course.
[99]
The high court’s approach was to interpret the agreement
afresh; to come to a different conclusion about
its meaning; and then
to conclude that as a result of the difference ‘the arbitrator
did not apply his mind thereto in a
proper manner, [and] that he
misconceived the whole nature of the inquiry and his duties
therewith’ and that he simultaneously
exceeded the bounds of
his powers. But it was not for the high court to reinterpret the
contract; its function was to determine
whether the gross
irregularities alleged had been committed. By its reinterpretation
the court dealt with the matter as an appeal,
reasoning in effect
that because the arbitrator was wrong it had to follow that he had
committed an irregularity. The failure to
apply the applicable
principles of interpretation or to come to a wrong conclusion does
not amount to a ‘gross irregularity’,
as the quotations
from
Doyle
v Shenker
[84]
illustrate. It is circuitous to reason, as the court did, that this
alleged failure amounted to a misconception of the whole nature
of
the inquiry and that consequently the failure amounted to a gross
irregularity. The court sought to distinguish
Doyle
v Shenker
on
the basis that in that case the magistrate committed an error of law
while acting within his jurisdiction, implying that by interpreting

the Integrated Agreement the arbitrator had acted outside his
jurisdiction, which is simply wrong. If one considers the length
of
the proceedings, the arbitrator’s active involvement in
defining and refining the issues, and the detailed and reasoned

award, it was as presumptuous as it was fallacious for the court to
have held that the arbitrator did not apply his mind properly
to the
issues at hand.
[100]
The high court justified its approach in first interpreting the
Integrated Agreement by reference to judgments dealing
with statutory
reviews where courts, in order to determine whether the functionary
had acted within the scope of the statute, first
interpreted the
enabling statute. This was always done in order to determine the
powers and mandate of the functionary.
[85]
The parallel exercise in this instance required a consideration of
the terms of reference and the provisions of the Act, not of
the
Integrated Agreement.
[101]
The gravamen of the high court’s decision on the gross
irregularity resulting from a wrong interpretation
was that the
arbitrator had failed to apply
Shifren
when answering the
primary question about the delivery baseline. In addition, the court
relied on what it thought were three further
errors of interpretation
to which l shall revert. As stated before, I do not intend to
reinterpret the contract because that is
not the issue and it does
not matter for purposes of a review whether the arbitrator was right
or wrong. I shall accordingly limit
myself to a discussion of the
reviewable acts said to have been committed by the arbitrator.
P.
The Primary Question and the Shifren Doctrine
[102]
The primary question in terms of the May issues was whether
Telcordia’s interpretation relating to its software
delivery
obligations was correct or whether the interpretation advanced by
Telkom was the correct one. Telcordia’s case,
as repeatedly
stated, was that it had to deliver software which complied with the
FSDs. Telkom’s case, on the other hand,
was that Telcordia had
to deliver ‘all’ features and functionalities necessary
for purposes of providing the two Flow-Thrus.
Both parties relied on
the terms of the Integrated Agreement for their different points of
view.
[103]
The arbitrator upheld Telcordia’s interpretation while the high
court upheld Telkom’s interpretation.
In doing so, the court
ignored the fact that Telkom had, in its pleadings, disavowed the
allegation that ‘all’ had
to be delivered and that it was
unable to articulate before the arbitrator exactly what had to be
delivered – it advanced
eight versions.
[104]
Telcordia’s case, simply put, was this. The Project Plan
provided for the delivery by Telcordia of complete
specifications
(named FDDs in the Project Plan but called in practice, according to
the finding of the arbitrator, FSDs) of the
software that had to be
delivered subsequently. In other words, the specifications were
‘deliverables’ – part
of Telcordia’s delivery
duty. They did not form part of the Integrated Agreement because they
did not exist for a reason,
which was spelt out in the definition of
‘specifications’: specifications in Exhibit C were
defined to be the ‘requirement
specifications’, which
Telcordia had to supply six months before the delivery date of the
actual software, that fully described
the capabilities of the
software that had to be delivered. In particular, the agreement
recorded that ‘the parties understand
and agree that
[Telcordia’s] Integrated Response [ie, the SOCs] to [the
Request for Bid] is not a typical off-the-shelf offering
and that
Specifications for the Licenced Software [to be provided by
Telcordia] shall be subject to mutual development and agreement
by
the Parties, and sign off by Telkom.’
[105]
In other words, what was required by way of software delivery had to
be developed and agreed to by the parties.
According to annexure D to
the Project Plan, Telkom had to pay substantial amounts for the FDDs.
Because FDDs had to be developed
in cooperation and agreement with
Telkom in the course of performing the contract, FDDs (which were
thus mutually developed and
agreed upon during the course of the
Integrated Agreement and were to be delivered) did not amend the
Integrated Agreement. They
did not change the ultimate delivery
obligation, which was to comply eventually with the SOCs. Since a set
of FDDs was developed
for each release, it had to follow that they
would also determine when particular features and functionalities had
to be delivered.
[106]
The arbitrator understood this to be Telcordia’s case where he
stated that the FSDs were not a substitute
for the contractual
requirements ‘but rather the means whereby they are met’.
But the high court, although recognising
that Telcordia alleged that
it had tendered delivery of the software in terms of the Project Plan
while at the same time alleging
that it had tendered the software as
described in the agreed FDDs, and which had been paid for by Telkom
as such, failed to understand
this.
[107]
In the light of this it is not surprising that Telcordia did not in
its pleadings rely on an amendment of the Integrated
Agreement which
had been effected by the FSDs. It is also not surprising that Telkom
did not plead that the FSDs were impermissible
amendments to the
agreement. This explains why Telkom never argued before the
arbitrator that
Shifren
prevented
Telcordia from relying on the FSDs.
[86]
Even when Telkom launched the section 20 proceedings after the
conclusion of the proceedings before the arbitrator, it did not
raise
Shifren
in connection with
the primary question. It raised it in relation to Telcordia’s
second amendment and later in relation to
the London agreement.
[87]
This confirms the impression the arbitrator had, namely that Telkom’s
reliance on
Shifren
did not arise in
relation to the primary question; and it effectively disposes of the
high court’s interpretation of the pleadings
and its assessment
of the course of the proceedings, namely that Telkom had raised
Shifren
in the present
context.
[88]
[108]
It is no wonder that the arbitrator said, both in his award and in
his memorandum, that
Shifren
did not arise in the context of
the primary question and did not need to be considered for the
purpose of his award. For the high
court to have held that the
arbitrator had ignored the
Shifren
rule by failing to consider
Telkom’s
Shifren
argument in this context is
inexplicable. It was not the arbitrator who misconceived the issue;
it was, with respect, the court.
[109]
The high court found (contrary to the finding of the arbitrator) that
one had to look to the Project Plan and
the SOCs to determine the
specific functionalities and features of the software to be
delivered. For this finding the court relied
– impermissibly –
on parts of the contract that the parties by agreement did not place
before the arbitrator. This
is another indication of the fact that
the court misconceived its function: it even dealt with the review as
an appeal in the broad
sense taking into account facts that were not
before the lower tribunal.
[110]
The arbitrator, in reaching his conclusion, had regard to the
evidence of Telcordia’s expert witness, Prof Bernstein,
which
was to the effect that the SOCs could not in themselves identify the
specific features and functionalities that had to be
included in each
individual release of customized software. This evidence the
arbitrator used in order to give business efficacy
to the agreement.
The high court held that the evidence was inadmissible.  I fail
to see on what basis it could so have been
held. It was expert
evidence that was necessary for the arbitrator to construe the
agreement by placing him as near as may be in
the position of the
parties to the agreement.
[89]
[111]
Furthermore, since Telkom had abandoned the argument that the SOCs
identified the specific features and functionalities
of the software
that had to be delivered, it is difficult to appreciate how it can be
said that the arbitrator committed a gross
irregularity by failing to
accord to the SOCs a contractual meaning which neither party
propounded. Telkom jettisoned this argument
for good reason: it was
common cause that the SOCs did not contain a description of the
features and functionalities of each software
release; further that
the specifications referred to in the Project Plan were those defined
in Exhibit C; and in addition that
these had to be mutually
developed, delivered by specific dates and paid for on agreed dates.
It was common cause that the SOCs
were not mutually developed nor
were they intended to be; and, additionally, they were not
deliverables – they were pre-existing
documents.  This
explains why Telkom’s case was that Telcordia had to deliver
all
features and functionalities necessary, and not that the
SOCs defined the specific software functionalities. But the ‘all’

argument also had a fatal flaw in the view of the arbitrator because
the Project Plan envisaged delivery of upgrades of software.
No
wonder the arbitrator had a problem with Telkom’s case (he
could never establish what its case about the FSDs was) and
why
Telkom as a last resort sought to attack the validity of the contract
on the basis that it had no exigible content.
[112]
I digress for a moment and deal with the essence of the arbitrator’s
reasoning. He accepted that the Project Plan
had to identify the
specific functionality and features to be included in each release.
He found that neither the WBS nor the bar
charts performed this
function and that the only way in which the Project Plan could be
read as identifying the specific functionality
and feature of each
release is if the ‘specifications’ were read into it.
After developing the point he concluded that
‘the parties must
have intended that the necessary detailed and specific descriptions
of those obligations should be found
elsewhere
.’
[90]
[113]
It is quite clear that the ‘elsewhere’ the arbitrator had
in mind was the delivery obligation of ‘specifications’,

ie, the FSDs. The high court was under the impression that the
arbitrator had thereby referred to the moratorium agreement
(discussed
above in part G) which, according to it, amounted to an
invalid variation of the Integrated Agreement. The court also held
that
FSDs had their origin in the moratorium agreement, something in
conflict with the arbitrator’s factual finding that they were

not so derived.
[91]
(Some were
developed as a result of the moratorium agreement but that is beside
the point since there had to be agreement about
their content.) As
early as 29 October 1999, it was Telcordia’s stated position
that the FSDs defined the software that had
to be delivered and that
they were official Telcordia deliverables, which required sign-off by
Telkom.
[92]
By December
1999, Telcordia had already delivered the 06/00 FSDs and during March
2000, Telkom had paid for them in full.
The moratorium agreement was
concluded thereafter, at the end of March 2000. There are two
additional points. Telkom relied on
the moratorium agreement as part
of its defence to the claim (which raises the approbation/reprobation
question) and, as the arbitrator
explicitly stated, he had not made
any findings in relation to the moratorium agreement. His statement
that once Telkom had agreed
in terms of the relevant FSDs what a
particular release should contain, it was not open to it to complain
that the same release
did not contain something in addition, was
entirely consistent and logical, especially in the light of his view
that the FSDs had
to be agreed to between the parties without thereby
amending the Integrated Agreement.
[114]
The arbitrator found as a fact that the parties jointly developed and
agreed to the content of the FSDs; that
they were delivered when the
‘specifications’ had to be delivered; and that Telkom
paid the contract price for ‘specifications’
for them.
The evidence about subsequent conduct was, as the arbitrator noted,
in the circumstances admissible (see the discussion
above). It was,
accordingly, proper for the arbitrator to have had regard to ‘the
events which happened’ in interpreting
the Integrated
Agreement. The high court, without considering the basis on which the
arbitrator used the evidence, held that it
was inadmissible. It
erred.
[115]
The foregoing also disposes of Telkom’s submission that the
arbitrator transgressed the parol evidence rule. This
was not an
issue foreshadowed in the review application. In any event, the basis
of the argument was, once again, that the FSDs
altered the terms of
the Integrated Agreement, an argument that I have already dismissed.
The submission furthermore conflates
and confuses different matters:
the integration rule (or parol evidence rule);
[93]
the rules relating to interpretation;
[94]
and the
Shifren
rule. The
integration rule concerns agreements that
precede
the relevant
written jural act.
[95]
They
may not be proved because they are supposed to have been subsumed by
or integrated into the written jural act.
[96]
The arbitrator did not once refer to evidence which could even
remotely have been so classified.
[116]
But, as the arbitrator noted, some of the December FSDs were not
signed off by Telkom. I have already mentioned that
according to the
definition of ‘specifications’ they were not only subject
to mutual development and agreement by the
parties, but also required
‘sign off’ by Telkom.
[97]
This is the subject of another debate to which I shall turn. In the
present setting, however, the fact that the FSDs were not signed
off
has no bearing on the meaning of the Integrated Agreement, especially
as to what the baseline was. It could only mean that
Telcordia should
not have been paid for them, but Telkom, so the arbitrator held, had
no explanation for having paid.
[98]
As I have said earlier, the interpretation issue was whether the
‘specifications’ were to be found in FSDs; and the

compliance issue was whether, by having delivered the particular FSDs
and by delivering the software described therein or tendering

delivery, Telcordia had complied with its contractual obligations.
Q.
The Sign-Off Requirement
[117]
The high court found that because the arbitrator had held that the
12/00 FSDs qualified as ‘specifications’,
although they
had not all been signed off by Telkom, he committed an irregularity
in the interpretation of the contract; that he
rewrote the contract;
and that he ignored the evidence about the absence of sign-off. All
this, according to the court, meant that
the arbitrator had
misconceived the nature of the inquiry and his duties in connection
therewith.
[118]
The high court further found that the sign-off requirement in the
definition of specifications  ‘
probably’
referred to the contractual requirement in the non-variation clause
that amendments be in writing and signed by both parties, and

‘
probably
’ required sign-off only by Telkom
because the specifications would, in the nature thereof, be prepared
by Telcordia for Telkom’s
acceptance. These provisional views,
which are devoid of any merit, are further indications of the fact
that the court conflated
the interpretation and compliance issues.
[119]
The high court also dealt with the absence of ‘agreement’
about the content of the 12/00 FSDs. It
appears that the court held
as a matter of fact that there was no agreement about their content,
a factual finding in conflict
with that of the arbitrator. The
arbitrator’s factual finding to the effect that there was
agreement on the 12/00 FSDs is
binding on the parties. I may add that
although Telkom complained in its supplementary affidavit about the
arbitrator’s finding,
it did not allege that the finding
amounted to either misconduct or gross irregularity; that was
reserved for the lack of any finding
about sign-off.
[120]
The high court’s judgment in any event did not do justice to
the findings of the arbitrator. The arbitrator
did not ‘ignore’
the evidence about the absence of a formal sign-off; on the contrary,
he repeatedly noted that the
FSDs had not been signed off. The
arbitrator also did not ‘rewrite’ the contract – he
understood that signing
off was required, and he never suggested
otherwise.
[121]
It is apparent that the arbitrator thought, rightly or wrongly, that
having mutually developed and agreed on the contents
of the FSDs, and
having paid for them, the formal requirement of signing off was
dispensed with by Telkom. This one can deduce
from the arbitrator’s
reference (in another context) to the principle that acceptance of
substitute performance does not
fall foul of
Shifren
[99]
and the lack of response by Telkom to the letter of 6 July 2000
written by Telcordia’s solutions architect, Mr Bariso, who
said
that sign off was required as an acknowledgement of the receipt of
the FSDs.
[122]
The arbitrator may have been wrong but this does not mean that he has
misconceived the nature of the inquiry or his
duties, or that he
acted irrationally. The statement by Innes CJ quoted earlier has to
be borne in mind, namely that the failure
to deal with facts that go
to the merits of a case is not an ‘irregularity’.
[100]
Even if one assumes that the arbitrator had forgotten about the
significance of the lack of signing off, his oversight is still
not
an irregularity. A factual issue was once again dressed up as a
question of law and cross-dressed as a procedural irregularity.
[101]
R.
The Disclaimers
[123]
The FSDs contained disclaimers inserted by Telcordia. These were not
all worded in identical terms but they stated
in essence that the
features contained in them represented Telcordia’s ‘current
understanding of the functionality
required to support this solution’
and that they did not represent a ‘commitment on behalf of
Telcordia to implement
the functionalities’ since ‘such
commitments are made by formal contracts’.
[124]
The arbitrator did not deal with the disclaimers in his award. This
led to a finding by the high court that he
had ‘apparently
ignored the issue’ although the ‘relevant facts were
placed before him’; and this, in turn,
meant that he had
misconceived the whole nature of the inquiry. The disclaimers, in my
judgment, had nothing to do with the interpretation
of the Integrated
Agreement and by ‘ignoring’ them the arbitrator could not
have erred in his interpretation or committed
a material error of
law.
[125]
The failure to have dealt with a particular factual sub-issue does
not mean that the arbitrator misunderstood
the nature of the inquiry.
It also does not mean that the arbitrator ignored them. It is equally
conceivable that he thought that
the issue was not worth pursuing in
the light of some of his other findings, which I repeat: he found
that the FSDs were deliverables;
that they did not amend the
Integrated Agreement; that they prescribed the scope of the software
that had to be delivered; that
they were mutually developed and
agreed; and that they were paid for in full without error.
[126]
What then is the value of a unilateral statement by Telcordia about
the status of the FSDs, inserted without Telkom’s
consent (as
pointed out by Telkom)? I would have thought that the answer is self
evident: nothing. It follows that this attack
has to fail.
S.
Testing for SOC Compliance
[127]
The Project Plan made provision for the testing of software for SOC
compliance. As the arbitrator accepted, the
Project Plan ‘suggests’
that testing had to take place release by release. If SOC testing had
to be release by release,
according to Telkom and the high court,
Telcordia’s argument concerning the FSDs would of necessity
have been incorrect.
The arbitrator, rightly or wrongly, did not
agree.
[128]
As Telkom accepted in its founding affidavit, the arbitrator held
that testing for SOC compliance had to take
place once everything had
been delivered and not with each release. The high court also
accepted that the arbitrator ‘in
effect’ had made such a
finding. This is an understatement.
[129]
There is nothing to justify the conclusion that the arbitrator
misconceived the nature of the inquiry. At most
the arbitrator may
have misconceived the importance of the testing provision in the
Project Plan. He did not as the high court
held (contrary to its ‘in
effect’ finding) ignore the provision. He thought that the
provision, which the court held
was definitive of the whole issue,
only ‘suggested’ the possibility but, in the context of
the Integrated Agreement
as a whole, he must have come to the
conclusion that what he called a suggestion could not have overridden
the other considerations
which he took into account in reaching his
conclusion on the interpretation of the Integrated Agreement.
[130]
Once again, by virtue of the nature of the inquiry before the high
court, and before us, I do not wish to deal
with either the argument
by Telcordia about the correctness or that of Telkom about the
incorrectness of the arbitrator’s
conclusion – both are
beside the point.
[131]
This also applies to the debate surrounding the caveat in the bar
chart. Evidence was led to put a perspective
on its meaning and
Telcordia made much of this in support of its argument about the
interpretation of the Integrated Agreement.
The arbitrator noted the
argument but did not deal with it. In order to bolster its argument
that the arbitrator’s interpretation
of the Integrated
Agreement was correct, Telcordia repeated the argument before the
high court. The court did not agree with Telcordia,
accepting instead
an interpretation which was first mooted by Telkom in its replying
affidavit in the review application. Importantly
for present
purposes, the court did not hold that the arbitrator had committed
any reviewable act in this regard and it could in
any event not have
done so in view of the fact that Telkom did not attempt to make out
such a case. The meaning of the caveat was
thus yet another
irrelevant side show in the review proceedings.
T.
The London Agreement
[132]
That disposes of the high court’s decision and Telkom’s
attempt to review the award on the ground
of the arbitrator’s
interpretation of the Integrated Agreement. I now turn to deal with
the other review grounds, the first
of which relates to the London
agreement.
[133]
Telkom did not pay the agreed US$ 23,3m for the 06/00 software
shipment on due date as required by the Project
Plan. Its ostensible
reason was that the software did not comply with the Project Plan and
had a number of critical gaps based
on its understanding of
Telcordia’s delivery obligations. Eventually, and pursuant to
the oral London agreement, Telkom paid
60 per cent of the invoice.
[134]
Telcordia claimed, as a self-contained claim ‘B’, payment
of the balance of 40 per cent based on the
allegation that the
software complied with the FSDs, that Telkom took delivery of the
software, and had not paid the full price.
In addition, Telcordia
claimed amounts that were payable in respect of this software
shipment at later pay points.
[135]
Telcordia did not rely on the London agreement in its original
statement of claim. Telkom, on the other hand,
in its answering
pleading, did so. Its defence to the claim for payment was that the
40 per cent balance would have been paid in
December 2000 ‘on
condition that rectification by Telcordia of the discrepancies
[Telkom’s problems with the 06/00
release] was verified by
Telkom’. Rectification of the software, it was alleged, had to
take place by means of the 12/00
release, which had to remedy the
critical gaps, and had to be verified by means of a demonstration of
the 12/00 release during
November 2000. Importantly, Telkom did not
allege that the November demonstration was a precondition for its
accepting delivery
of the 12/00 shipment; and Telkom did not allege
(in the pleadings or in the repudiation correspondence) that it was
entitled to
reject delivery of the 12/00 software on this ground. Nor
did it in the counterclaim allege any breach of the demonstration
undertaking.
[136]
Although the London agreement was not one of the May issues, the wide
ranging evidence covered it to some extent.
Towards the conclusion of
the argument before the arbitrator Telkom had second thoughts about
the agreement and tentatively argued
that the London agreement might
not have been covered by the arbitration clause and that in any event
it might have been in conflict
with
Shifren
.
[137]
An affidavit with supporting documents was filed by Telcordia just
before the conclusion of argument setting out its
version of the
London agreement. The documents gave the arbitrator the impression
that Telkom’s version about the precondition
for payment was
implausible. He then told Telkom that if it wished to dispute
Telcordia’s version it should file affidavits
to that effect.
In response Telkom then filed the evidence of two Telkom employees,
Messrs Morgan and September. Their statements
tended to confirm the
allegations contained in Telkom’s pleadings. However, they did
not state that a pre-delivery demonstration
(or anything else) was a
precondition for acceptance of delivery of the 12/00 software.
[102]
[138]
The next stage in the proceedings was the filing of the s 20
application in which Telkom argued, as foreshadowed,
that the high
court should decide whether the London agreement fell outside the
scope of the arbitration agreement. The arbitrator
pointed out that
the point is probably bad. I agree. It is difficult to see how a
party to arbitration can rely on an agreement;
fight the case on that
basis; ask the arbitrator to hear evidence on the issue; complain
that he failed to give enough attention
to it; and when the shoe
pinches claim that the agreement falls outside the purview of the
arbitration. This is just another instance
of Telkom’s
inconsistency in the conduct of its case. Telkom also raised the
question whether, in any event, the London agreement
was in breach of
the
Shifren
principle.
[139]
In the review application Telkom performed another dizzying
pirouette. In the first set of affidavits Telkom attacked
the award
on the ground that the alleged November demonstration pre-condition
had not been fulfilled but when the arbitrator stated
in his
Memorandum that he had made no findings with regard to the London
agreement, Telkom – in the supplementary founding
affidavit –
alleged for the first time that the London agreement amounted to a
separate and independent compromise agreement,
which was not in
conflict with
Shifren
and which made acceptance of the 12/00
software subject to two suspensive conditions.
[140]
Telkom’s case on review was that the arbitrator committed a
gross irregularity in the proceedings by deciding
the issue that
Telkom’s failure to take delivery of the 12/00 software could
constitute a repudiation without hearing the
evidence of Morgan and
September about the two suspensive conditions, something he undertook
to do. The arbitrator’s undertaking
on which Telkom relied was
not in the terms Telkom suggests. The arbitrator asked for affidavits
dealing with the pleaded issue
surrounding the London agreement,
namely the preconditions to payment of the 40 per cent. If, he said,
there was a serious dispute
on this issue he would require
cross-examination. As he noted in his memorandum, Telkom neither
pleaded nor advanced any case to
the effect that the London agreement
was determinative of Telcordia’s delivery obligations under the
Integrated Agreement.
[141]
The arbitrator kept his promise: he did not decide the issue pleaded
although he expressed the prima facie view that
Telkom’s
version was not supported by the documents.
[103]
Expressing prima facie views on common cause documents is not
improper and can by no stretch of the imagination be considered to
be
an irregularity.
[142]
There is accordingly no basis for the allegation that the arbitrator
had failed to afford Telkom a hearing on
this matter, which was not
before him and was only articulated, without proper supporting
evidence, during the review proceedings.
He was entitled to ignore
any evidence by Morgan and September that dealt with issues not
pleaded (assuming they gave such evidence).
U.
The Section 20 Issue
[143]
This brings me to the last ground of review with which I shall deal.
It concerns the events surrounding Telkom’s
s 20 application.
Section 20 of the Act is in these terms:
‘
Statement of case
for opinion of court or counsel during arbitration proceedings.—
(1)  An
arbitration tribunal may, on the application of any party to the
reference and shall, if the court, on the application
of any such
party, so directs, or if the parties to the reference so agree, at
any stage before making a final award state any
question of law
arising in the course of the reference in the form of a special case
for the opinion of the court or for the opinion
of counsel.
(2)  An opinion
referred to in subsection (1) shall be final and not subject to
appeal and shall be binding on the arbitration
tribunal and on the
parties to the reference.’
[144]
Telkom asked the arbitrator to state a number of questions of law by
means of a special case for the opinion of the
court. The arbitrator
refused and proceeded to finalise his award. Telkom then launched an
application to the high court, for an
order that the arbitrator state
a case. Before the application could be heard the award had already
been published by the ICC.
Upset, Telkom sought to review the
arbitrator on two further grounds. As mentioned earlier, the first
was that he committed a gross
irregularity and exceeded his powers by
refusing to state a case; and secondly, that he prevented Telkom from
itself securing the
statement of a case.
[104]
The first ground was abandoned before us.
[145]
It will be recalled that the primary question raised in the May
issues concerned the interpretation of the Integrated
Agreement.
Interpretation is usually regarded as a legal question but it is not
necessarily so. It may be a mixed question of fact
and law, as the
present case illustrates.
[105]
The remaining May issue raised the applicability of
Shifren
in
relation to the moratorium agreement (the alternative response in
Telcordia’s second amendment). This issue could only
have
arisen if the arbitrator had found against Telcordia on the primary
question. After pre-hearings, three weeks of oral evidence
(plus
forests of paper evidence), argument written and oral, and at the
conclusion of the latter on 1 August 2002, Telkom, patently
fearing
an unfavourable decision, suggested that the arbitrator should state
a case concerning the applicability of
Shifren
in relation to the
moratorium and London agreements. The arbitrator refused because, as
he said, these issues were alternative issues
and they might never
arise, depending on his conclusion on the primary question. He also
informed the parties that he proposed
to go ahead with writing the
award as quickly as possible.
[146]
Two weeks later, on 14 August, Telkom tried another tactic. It now
asked the arbitrator to state, in addition to the
Shifren
point, the primary
question for an opinion by the court and requested him to defer his
award if he was not prepared to accede to
their request. The
arbitrator (after obtaining Telcordia’s answer) responded on 27
August by not only raising a number of
valid concerns about the
request to state a case but by stating that his award would be
available in final draft form shortly after
9 September; that he
would then submit the draft to the ICC for consideration pursuant to
its art 27;
[106]
and that he
would inform the ICC of Telkom’s request and leave it to the
ICC.
[147]
Without responding to the letter due to an oversight, Telkom issued
its s 20 application. The founding affidavit was
sworn on 28 August
and the arbitrator informed of the application on 30 August. Keeping
his word, the arbitrator submitted his
draft award to the ICC on 9
September and informed the ICC of Telkom’s request. Eventually,
on 27 September the award was
signed and on the same date the
arbitrator submitted a report to court setting out his reasons for
having refused Telkom’s
request for a stated case. Apart from
some general policy considerations he referred to the stage of the
proceedings when the request
was made; the incongruity in Telkom’s
stance; the evidence led; the wasted costs; the lateness of the
requests; the close
analogy between this instance and the
Midkon
case;
[107]
the importance of evidence for construing the Integrated Agreement;
the fact that the s 20 option was not exercised within a reasonable

time; and Telkom’s changes of heart about the validity of the
London agreement.
[148]
In his report the arbitrator added that he did not accede to Telkom’s
request since it was a matter for
the court to decide, implying that
he preferred to leave the question of referral to the court. This
implication, on which Telkom’s
submission about irrationality
was based, is not understood because once the arbitrator had issued
his award the court was precluded
from ordering him to state a case
for its opinion.
[149]
The first question was whether the arbitrator in fact prevented
Telkom from obtaining a court order. If he did, it would
have
amounted to an irregularity. On the facts as set out he did not.
Telkom knew at the end of August that he was not going to
delay the
award. He gave them a timetable. According to existing South African
law, as expressed in
Midkon
,
[108]
he had no duty to delay his award in order to enable Telkom to
approach the court. Nobody prevented Telkom from asking in the notice

of motion or thereafter for an interim order to delay the issuing of
the award, which was the duty of the ICC and not of the arbitrator.

This Telkom did not do.
[150]
There are further reasons why the award cannot be reviewed on the
basis of ‘irregularity’ or irrationality.
These require a
discussion of the scope of s 20 and depend on whether Telkom had a
‘right’ under s 20 to approach the
court, which right the
arbitrator frustrated.
[151]
The first matter I wish to address is the nature of the arbitrator’s
discretion. Eloff J, in
Kildrummy
,
[109]
sought to curtail the general and unrestricted discretion the section
gives to the arbitrator. There is no reason, having regard
to the
wording of the section, for such an approach. Rules circumscribing
the way any discretion has to be exercised are generally

unacceptable. Eloff J sought to justify his approach with reference
to a dictum by Denning MR in
Halfdan
Grieg.
[110]
‘
When
one party asks an arbitrator or umpire to state his award in the form
of a special case, it is a matter for his discretion.
If the issues
are on matters of fact and not of law, he should refuse to state a
case. If they raise a point of law, it depends
on what the point of
law is. He should agree to state a case whenever the facts, as proved
or admitted before him, give rise to
a point of law which fulfils
these requisites. The point of law should be real and substantial and
such as to be open to serious
argument and appropriate for decision
by a court of law . . . as distinct from a point which is dependent
on the special expertise
of the arbitrator or umpire . . . The point
of law should be clear cut and capable of being accurately stated as
a point of law
─ as distinct from the dressing up of a matter
of fact as if it were a point of law. The point of law should be of
such importance
that the resolution of it is necessary for the proper
determination of the case ─ as distinct from a side issue of
little
importance.
If those three requisites
are satisfied, the arbitrator or umpire should state a case.’
[152]
The Master of the Rolls, it will be recalled from my discussion of
Anisminic,
[111]
was a proponent of the view that all matters of law should fall
within the sole domain of courts. The other judges who sat
with
Denning MR did not concur in this regard. Scarman LJ made it quite
clear that the discretion is ‘unqualified’
(at 1083) and
Megaw LJ was of the view that the exercise was not a matter of
general principle but depended on the circumstances
of the case (at
1080). Eloff J justified his adoption of the Denning test on the
basis that our Legislature would have intended
s 20 to have the
meaning attached to a similar section by English courts. But as
Preiss J mentioned in
Midkon
,
[112]
there is a vital distinction between our statute and the (now
repealed) English statute. There is in any event no justification
for
presuming that our Legislature (past or present) intended to give the
meaning to words that foreign courts may have done, especially
where
the Denning test came after the passing of the Act.
[113]
Ultimately Eloff J relied on
Theron’s
case,
[114]
which I have discussed earlier and all that I wish to say is that the
passage relied on was put in its correct perspective by this
Court
and that it does not support him.
[115]
In other words, I hold that there is no obligation on an arbitrator
to state a case if the requirements set out by Denning MR are

present. They are important factors to consider but they are not
definitive. By way of a metaphorical footnote: The Denning approach

gave rise to legislative action and what he had done to arbitration
law was soon undone by the adoption of the Arbitration Act
of
1979.
[116]
[153]
If an arbitrator decides not to state a case, the aggrieved party may
under s 20 approach the high court. The
court must then determine
whether or not the arbitrator had erred in the exercise of his
discretion as happened in both
Kildrummy
and
Midkon
. If
there is no fault to be found with the arbitrator’s exercise of
his discretion, the court cannot order him to state a
case. As
mentioned, Telkom accepts that there was nothing wrong with the
arbitrator’s reasoning and that his refusal to state
a case was
justifiable. Once that is the case, the s 20 application was doomed
from the outset especially since Telkom did not
in that application
seek to impugn the arbitrator’s decision.
[154]
Moreover, s 20 can be used only if the legal question arises ‘in
the course of’ the arbitration. It is not
intended to apply
where the parties agree to put a particular question of law to the
arbitrator. Any other interpretation of the
section would defeat its
purpose and ‘it would be futile ever to submit a question of
law to an arbitrator’.
[117]
Its purpose, at the very least, is not to enable parties, who have
agreed to refer a legal issue to an arbitrator to renege on
their
deal. They have in such a case chosen their decision-maker for the
particular issue and they are bound by their choice. In
this case,
the primary question, as well as the validity of the moratorium
agreement, was specifically referred to the arbitrator
for his
decision. To allow a party in these circumstances to utilise s 20
would frustrate the arbitration agreement. It is not
against public
policy to agree to the finality of an extra-curial decision on a
legal issue especially where the review rights
contained in s 33
remain available, enabling the courts to retain control over the
fairness of the proceedings.
[118]
[155]
Finally, a party does not have the right to have a hypothetical
question stated because it does not in truth ‘arise’
in
the arbitration proceedings. The arbitrator made it quite clear that
the
Shifren
issue was at that stage hypothetical because it
could only ‘arise’ once he had come to a conclusion on
the primary interpretation
question in favour of Telkom. In the event
he concluded otherwise and the issue never arose.
[156]
I therefore conclude that since Telkom had no right to approach the
high court in the circumstances of the case
the arbitrator did not
infringe any of its rights when he, in the face of the s 20
application, proceeded to do what he said he
would do.
V.
Conclusion
[157]
Cloete JA has dealt with the repudiation issue and I agree with his
judgment. This means that the appeal has to
succeed with costs.
Telcordia is in the circumstances of the case entitled to the costs
of three counsel during all stages of the
proceedings, including the
petition for leave to appeal, which Telkom opposed.
W.
The Order
[158]
The following order is made:
(a)
The appeal is upheld with costs, including those consequent on the
employment of three counsel,
which shall also be allowed in relation
to the different stages of the application for leave to appeal.
(b)
The order of the court a quo is set aside and in its stead the
following order issues:
‘
The application is
dismissed with costs, including the costs of three counsel.’
L
T C HARMS
JUDGE
OF APPEAL
CLOETE
JA:
[159]
The issues which remain for decision in this appeal are whether, as
argued by Telkom, the arbitrator, in finding
that Telkom had
repudiated the Integrated Agreement so entitling Telcordia to cancel
it, exceeded his authority or decided a question
without evidence,
thereby committing a gross irregularity. If this were to be the case,
the dismissal of Telkom’s counterclaim
would also fall to be
set aside.
[160]
In the section of his award entitled ‘Telcordia’s
delivery obligations’ the arbitrator summarised
Telcordia’s
argument as to its delivery obligations under the Integrated
Agreement, and followed with a summary of Telkom’s
argument. In
each instance, he also dealt with the parties’ respective
contentions on repudiation. Reduced to the barest
essentials
Telcordia’s argument was that its contractual obligations were
to be found in the FSDs, whereas Telkom’s
argument was that
Telcordia’s contractual obligations were to be found in the
SOCs. The arbitrator concluded that Telcordia’s
case was to be
preferred and gave detailed reasons for this conclusion. In the next
section of his award, entitled ‘Termination
of the Integrated
Agreement: Telkom’s Counterclaim’, the arbitrator
commenced by saying:
‘
102. In their
submissions to me both parties proceeded, quite correctly in my view,
on the footing that the answer given to the
question considered in
the previous section of this Award would determine which party’s
termination of the Integrated Agreement
was justified in law. Since,
as I have found, Telcordia’s tender of the December 2000
software release was in accordance
with its contractual obligations,
it must follow that Telkom’s subsequent refusal to accept
delivery of the software, or
to go on with the contract, was a
repudiation of the Integrated Agreement which Telcordia was entitled
to accept as discharging
the contract, by its letter dated 12 January
2001. It is clear law that the test for repudiation is an objective
one, so that it
makes no difference that Telkom may have considered
that it was perfectly entitled to act as it did.’
[119]
The arbitrator then said:
‘
103. It follows
from the above that Telkom’s counterclaim, which depends for
its validity on the proposition that the IA [Integrated
Agreement]
was properly terminated by it in consequence of Telcordia’s
breach, must fail.’
Several sections of the
award follow, none of which are relevant for present purposes, before
the concluding section entitled ‘Formal
Award’. The
formal award reads in part:
‘
1.
That the Answer to Question 1.1 in the List of Issues
[120]
to be determined by this Award is that the contractual baseline for
determining the specific features and functionality of the
software
to be delivered by Telcordia to Telkom in each of the various
software releases provided for in the IA is the Feature
Specification
Descriptions (FSDs) applicable to such release. Question 1.2 does not
require a separate answer.
2.
That the Answer to Question 2.1 in the said List of Issues is that on
the true construction of
the IA and in the events which happened
Telcordia was required to deliver software in June and December 2000
which complied with
the FSDs in respect of each of those software
releases. Question 2.2 does not require a separate answer, and
Question 3, does not
arise.
…
4.
That by refusing to take delivery of
software which complied, in
all material respects, with the FSDs applicable to
the December
2000 software release Telkom repudiated the IA.
5.
That Telkom’s counterclaims are dismissed.’ (Italics
added.)
It is necessary to
emphasise for reasons which will become apparent that at no point
prior to this had the arbitrator discussed
the question whether the
December 2000 (‘12/00’) software release complied with
the FSDs applicable to it. All that
he had said, in passing, was the
following:
‘
It is to be noted
that Telkom was not contending, and has not subsequently contended,
that what was delivered by the December 2000
release was not in
compliance with the FSDs . . .’.
[161]
Telkom submitted that the arbitrator exceeded his powers in making
any finding in regard to repudiation, as this
was not covered by the
May issues. Indeed, Telkom went so far as to say that the
arbitrator’s finding was a ‘dramatic
development’
as contemplated in those cases in South Africa
[121]
and in England
[122]
which
hold that it is a gross irregularity for an arbitrator to decide a
dispute on a point that has not been put to the parties
and on which
they have not been heard. It is true that the May issues as
originally formulated involved questions of interpretation
of the
Integrated Agreement and not performance of it. But the deponent to
the replying affidavit delivered on behalf of Telkom
in these
proceedings said unequivocally:
‘
I admit that,
during the course of the proceedings, the scope and focus of the
issues widened and that, at the end of the May hearing,
Telkom said
that the Arbitrator should decide as many of the issues between the
parties as could fairly be determined in the light
of oral and
documentary evidence presented during May.’
Indeed,
by the end of the hearing in 2002, each party had requested the
arbitrator to deal with its right to cancel on the basis
of the
evidence that had been placed before him. Telkom even sought judgment
in respect of its counterclaim. The arbitrator’s
statement in
para 102 of his award (quoted in the previous paragraph of this
judgment) that the parties proceeded on the footing
that his decision
on Telcordia’s delivery obligations would determine which
party’s termination of the Integrated Agreement
was justified
in law, is amply justified by the record. Far from being a ‘dramatic
event’, the arbitrator did no more
than what the parties had
requested him to do.
[162]
Telkom submitted that the arbitrator had nevertheless exceeded his
authority, in that the question whether it
had repudiated the
Integrated Agreement could not fairly have been determined by the
arbitrator on the evidence before him, because
it might have been
able to justify its conduct ─ which would not then have
amounted to a repudiation ─ by showing that
the 12/00 software
release did not comply with the FSDs. The argument amounts to this:
The arbitrator held that it had repudiated
the Integrated Agreement
by insisting that Telcordia perform in terms of its fallacious
interpretation of the contract. But if
the software tendered by
Telcordia did not comply with the FSDs, that would have entitled it
to refuse to receive the software.
Therefore if it can establish such
non-compliance, its rejection of the software was justified. And if
its rejection was justified,
it cannot amount to repudiation. The
finding by the arbitrator that it had repudiated the Integrated
Agreement was therefore premature
and he exceeded his powers in
making the finding at that stage of the arbitration. It must be borne
in mind, as pointed out by
Harms JA in para [89] of his judgment that
it was within the power of the arbitrator to decide the scope of his
mandate. That apart,
there are at least three reasons why Telkom’s
contention must fail ─ two of fact, and one of law.
[163]
First, as the arbitrator observed, it was never Telkom’s case,
either on the pleadings or during the 2002
hearing, that the 12/00
software release did not comply with the FSDs. Telkom sought in this
court to argue the contrary. Its argument
is unsustainable. So far as
the pleadings are concerned, Telcordia alleged in its statement of
claim that Telkom had repudiated
the Integrated Agreement inter alia
‘by refusing to take delivery of the December 2000 release
notwithstanding that Telcordia
tendered delivery of such release in
accordance with the Project Plan and that Telkom is obliged to take
delivery thereof’.
These allegations were simply ‘disputed’
by Telkom in its plea; but that bald denial was wholly inadequate to
support
a case that Telkom was entitled to reject the software
tendered because it did not comply with the FSDs. A defendant who
wishes
to raise the
exceptio
non adimpleti contractus
on the basis of an
incomplete tender must particularise in the plea in what respects
performance was defective and will ordinarily
have to give evidence
on this aspect first (although the overall onus to disprove the
existence of the defects will remain on the
plaintiff).
[123]
The reason is obvious: a plaintiff cannot be expected to prove a
negative where the complaints of the defendant are unknown.
Furthermore,
when Telcordia requested further particulars from Telkom
as to the respects in which Telkom alleged that the software tendered
in December 2000 failed to comply with Telcordia’s delivery
obligations, Telkom replied that Telcordia should have regard
to the
SOCs and the fact that the December release was required to contain
all features and functionality necessary to achieve
Non-Voice
Flow-Thru. It was not even suggested that there was any discrepancy
between the software tendered and the FSDs. In other
words, Telkom’s
pleaded case involved a comparison of the FSDs with the SOCs and not
a comparison between the software and
the requirements of the FSDs.
[164]
So far as the hearing is concerned, Telkom’s counsel made it
clear that Telkom did not follow the acceptance
test procedure in
respect of the software tendered, which is the procedure for which
the Integrated Agreement provides to identify
and remedy shortcomings
in the software, because it was known that the software contained
‘gaps’ and would accordingly
not comply with Telkom’s
interpretation of Telcordia’s obligations. Telkom’s
counsel at no time suggested that
Telkom was entitled to reject the
12/00 software release because it did not comply with the FSDs.
[165]
The second reason why Telkom’s argument that it could have
justified its conduct by showing that the 12/00
software release did
not comply with the FSDs must fail, is this. Telcordia was entitled
to remedy any shortcomings during the
subsequent testing process. The
testing process could take place only over a period of time and only
within Telkom’s own
systems and Telcordia was entitled and
obliged through updates to rectify any problems. It was simply not
open to Telkom to reject
the software release on the basis that it
did not comply with the FSDs, because the contract contemplated that
this could well
be the case and it allowed Telcordia to cure any
defects in the software within the time allowed for performance. The
corollary
to Telcordia’s right is that Telkom was not entitled
to refuse to accept the December software when it was tendered even
if it did not fully comply with the FSDs ─ it was obliged to
receive it and proceed with the testing process.
[166]
In any event Telkom’s argument is unsound in law. Telkom prayed
in aid the
falsa
causa non nocet
principle laid
down in cases such as
Putco
Ltd v TV & Radio Guarantee Co (Pty) Ltd
1985 (4) SA 809
(A) and
Datacolor
International (Pty) Ltd v Intamarket (Pty) Ltd
[2000] ZASCA 82
;
2001 (2) SA 284
(SCA). Those cases hold that: ‘Where a party seeks to terminate
an agreement and relies upon a wrong reason to do so he is
not bound
thereby, but is entitled to take advantage of the existence of a
justifiable reason for termination, notwithstanding
the wrong reason
he may have given’.
[124]
But this principle has no application in a case such as the present,
where it is the other party who has cancelled the contract.
In such a
case, the party who repudiated cannot put the clock back and undo the
valid cancellation by relying on a ground that
he legitimately could
have, but did not, advance, in substitution for the ground that he
did advance and which resulted in the
cancellation of the contract.
Once cancelled, the contract is irrevocably at an end. The rule
exists for the protection of an innocent
party and does not enure to
the benefit of a party guilty of a breach of contract: it does not
entitle the latter to claim that,
since it could have done something
similar without breaching the contract, its breach had no adverse
legal consequences.
[167]
Finally, Telkom submitted that the italicised part of para 4 of the
arbitrator’s award (quoted in para [160]
above) constituted a
finding that the 12/00 software release in fact complied with the
FSDs applicable to it; and that as there
had been no evidence on this
point, the arbitrator’s finding that it had repudiated the
Integrated Agreement fell to be set
aside on review. Paragraph 4 of
the award must, however, be read in context. The fundamental issue
between the parties was, as
I have said, whether Telcordia’s
contractual obligations were to be determined with reference to the
FSDs (Telcordia’s
case) or the SOCs (Telkom’s case). The
arbitrator, in his detailed reasons which preceded the formal award,
decided this
issue in favour of Telcordia and embodied that decision
in paras 1 and 2 of his formal award (also quoted in para [160]
above).
Once he had made this decision, and since it was not pleaded
or argued by Telkom that the 12/00 software release did not in fact

comply with the FSDs (as the arbitrator expressly noted), it followed
that Telkom’s rejection of the 12/00 software release
was a
repudiation of the Integrated Agreement. That was the finding
embodied in para 4 of the arbitrator’s formal award.
In that
paragraph the arbitrator did not intend additionally to decide that
the December software release as a matter of fact accorded
with the
FSDs nor must that paragraph be interpreted as embodying such a
finding; the arbitrator clearly intended merely to articulate
the
conclusion already reached by him, namely, that Telkom had repudiated
the Integrated Agreement by rejecting software developed
in
accordance with the FSDs (as opposed to the SOCs). In the absence of
a challenge by Telkom that the software did not in fact
comply with
the FSDs, it is not surprising that the arbitrator expressed himself
as he did. If Telkom subsequently seeks to make
out a case, in
relation to the remaining issues relating to quantum not decided by
the arbitrator’s interim award, that the
12/00 software release
did not comply in fact with the FSDs applicable to it, it is entitled
to do so ─ but its right to
do so does not affect in any way
the arbitrator’s conclusion that it repudiated the Integrated
Agreement.
[168]
I therefore conclude that Telkom’s attack on the arbitrator’s
finding that it repudiated the Integrated
Agreement, is without
merit. It follows that the arbitrator’s dismissal of Telkom’s
counterclaim must stand. On the
other issues raised in the appeal I
respectfully agree with the reasoning and conclusions reached by
Harms JA, and concur in the
order made.
T
D CLOETE
JUDGE
OF APPEAL
Concur:
Conradie
JA
Lewis
JA
Ponnan
JA
[1]
See the article series by RH Christie beginning with ‘Arbitration:
Party Autonomy or Curial Intervention: The Historical
Background’
(1994) 111
SALJ
143.
CBI
NZ Ltd v Badger Chiyoda
[1989] 2 NZR 669.
[2]
Eg
Dutch
Reformed Church v Town Council of Cape Town
(1898) 15 SC 14
at 21;
Dickenson
& Brown v Fisher’s Executors
1915 AD 166
at
174;
Amalgamated
Clothing & Textile Workers Union of SA v Veldspun (Pty) Ltd
[1993] ZASCA 158
;
1994
(1) SA 162
(A). The Roman Dutch approach mentioned in
Theron
v Ring van Wellington van die NG Sendingkerk in SA
1976 (2) SA 1
(A)
is of historical interest only.
[3]
United
Mexican States v Feldman Karpa
2005
CanLII 249 (ON CA)
para 37. For the current English approach:
Lesotho
Highlands Development Authority v  Impregilo SpA
[2005]
UKHL 43.
The New Zealand approach is set out in
Trustees
of Rotoaira Trust v Attorney-General
[1998]
3 NZLR 89
(HC) at 101-102.
[4]
Mitsubishi
Motors Corporation v Soler Chrysler-Plymouth Inc
473
50 US 614
(1985) per Blackmum J at 629.
[5]
Re The
International Commercial Arbitration Act, SBC
(Quintette
Coal Ltd v Nippon Steel Corp
)
1986, C. 14
,
1990
CanLII
304 (BC SC)
quoted
in
United
Mexican States
at
para 36. A special deference approach does not arise on the facts of
this case. It should be noted that South Africa has not
adopted the
1985 UNCITRAL Model Law, which strictly limits the involvement of
courts in the arbitral process.
[6]
Mitsubishi
Motors Corporation v Soler Chrysler-Plymouth Inc supra.
[7]
SA
Sentrale Ko-op Graanmaatskappy Bpk v Shifren
1964 (4) SA 760
(A).
[8]
2002 (4) SA 1 (SCA).
[9]
Emphasis in the original.
[10]
1954 (3) SA 932 (O).
[11]
The arbitrator found that no such variations had taken place.
[12]
‘9.2   Contractual Delivery Date
9.2.1
The Contractual Delivery Dates specified in the Project Plan are of
the utmost importance. Non-compliance
with said dates will
constitute a material breach of this Agreement. Partial delivery
will not constitute Delivery.
9.2.2
The Licenced Software will be delivered in accordance with this
Agreement and the Project Plan set
forth as Exhibit F to the
Integrated Agreement. The true intention and meaning of this
Agreement is that the SUPPLIER will, in
all respects, supply,
deliver, install, commission, render and complete the Licenced
Software in a workman-like manner to the
satisfaction of TELKOM as
mutually agreed in the Proposal and the acceptance criteria mutually
agreed upon by the Parties.’
[13]
It is not necessary to quote paras 4 and 5.
[14]
Uniform r 53.
[15]
The allegation relating to bias and partiality was also linked to
the common law but nothing turns on this.
[16]
A phrase used by Wade and Forsyth
Administrative
Law
8
ed at 270.
[17]
Du Toit
v Minister of Transport
2006 (1) SA 297
(CC) at para 29.
[18]
Total
Support Management (Pty) Ltd v Diversified Health Systems (SA) (Pty)
Ltd
2002
(4) SA 661 (SCA).
[19]
Cf
Pharmaceutical
Manufacturers Association of SA: In re Ex parte President of the RSA
[2000] ZACC 1
;
2000 (3) BCLR
241
,
2000 (2) SA 674
(CC) para 45: ‘Whilst there is no bright
line between public and private law, administrative law, which forms
the core
of public law, occupies a special place in our
jurisprudence. It is an incident of the separation of powers under
which courts
regulate and control the exercise of public power by
the other branches of government. It is built on constitutional
principles
which define the authority of each branch of government,
their interrelation ship and the boundaries between them.’
[20]
The position with statutory arbitrations is different:
Rustenburg
Platinum Mines Ltd v CCMA
[2006] 115 (RSA).
[21]
Suovaniemi
v Finland
ECHR
case no 31737/96 (23 Feb 1999).
[22]
[2006] 2 All SA 469
(SCA). See also
Marlin
v Durban Turf Club
1942 AD 112
at
130
in
fine.
[23]
2002 (4) SA 1
(SCA) para 94 and 95.
[24]
First
Options of Chicago Inc v Kaplan
115 S Ct
[1995] USSC 50
;
1920; 514 US 938
per Breyer J: ‘ . . . a party who has not
agreed to arbitrate will normally have a right to a court’s
decision about
the merits of its dispute (say, as here, its
obligation under a contract). But, where the party has agreed to
arbitrate, he or
she, in effect, has relinquished much of that
right’s practical value. The party still can ask a court to
review the arbitrator’s
decision, but the court will set that
decision aside only in very unusual circumstances.’
[25]
This is not possible under the ICC rules although it has always been
possible under our legal system: Johannes Voet 4.8.9;
The
Rhodesian Railways Ltd v Mackintosh
1932 AD 359
at
373;
Marlin
v Durban Turf Club supra
.
[26]
CBI NZ
Ltd  v  Badger Chiyoda
[1989] 2 NZR 669.
[27]
They may even reduce the level of procedural fairness by, e g,
agreeing that the arbitrator may decide the matter without hearing

them.
[28]
Without a special provision there is in any event no appeal possible
because appeals are only possible from lower courts to higher

courts.
[29]
Amalgamated
Clothing & Textile Workers Union of SA v Veldspun (Pty) Ltd
[1993] ZASCA 158
;
1994
(1) SA 162
(A) at 169F-G;
CBI
NZ Ltd v Badger Chiyoda
[1989] 2 NZR 669.
This is also possible in ordinary litigation and is specifically
provided for in the
Magistrates’ Courts Act 32 of 1944
s 82.
[30]
Lesotho
Highlands Development Authority v  Impregilo SpA
[2005]
UKHL 43
para 24. Emphasis added. Cf
Bull
HN Information Systems Inc v Hutson
229 F 3d (1st Cir
2000) 321 at 330: ‘To determine whether an arbitrator has
exceeded his authority . . . courts “do
not sit to hear claims
of factual or legal error . . .”  . . . and “[e]ven
where such error is painfully clear,
courts are not authorized to
reconsider the merits of arbitration awards” . . .’
[31]
Supreme Court Act 59 of 1959, s 24(1):
‘
The
grounds upon which the proceedings of any inferior court may be
brought under review before a [high court], are—
(a)
absence of jurisdiction on the part of the court;
(b)
interest in the cause, bias, malice or the commission of an offence
referred to
in Part 1 to 4, or section 17, 20 or 21 (in so far as it
relates to the aforementioned offences) of Chapter 2 of the
Prevention and Combating of Corrupt Activities Act, 2004
, on the
part of the presiding judicial officer;
(c)
gross irregularity in the proceedings; and
(d)
the admission of inadmissible or incompetent evidence or the
rejection of admissible
or competent evidence.’
[32]
One problem, which does not arise in this case, concerns the
boundary between ‘misconduct’ and ‘gross
irregularity’.
These two concepts may overlap, especially if
regard is had to the fact that historically ‘legal misconduct’
was
nothing other than a procedural lapse:
Zermalt
Holdings SA v Nu-Life Upholstery Repairs Ltd
[1985] 2 EGLR 14
(QBD) per Bingham J.
[33]
Dutch
Reformed Church v Town Council of Cape Town
15 SC 14
at 21;
Dickenson
& Brown v Fisher’s Executors
1915 AD 166
at
174
[34]
Eg Arbitration Act 29 of 1898 (C) s 17.
[35]
Above.
[36]
Cf
Crystal
Springs Aerated Water Co v Kan
1902
TH 21
at 27.
[37]
At 167-169.
Anisminic
Ltd v Foreign Compensation Commission
[1969] 1 All ER
208 (HL).
[38]
At 177-178. English law at that stage provided that if a specific
question of law was submitted to an arbitrator, as happened
in this
instance when the interpretation of the Integrated Agreement was
submitted to the arbitrator for decision, an erroneous
decision
could not have been reviewed. ‘Otherwise it would be futile
ever to submit a question of law to an arbitrator’:
In
re King and Duveen
[1913] 2 KB 32
at
36. But if a question of law had not specifically been referred but
was material to the decision, and he made a mistake, apparent
on the
face of the award, the award could be set aside:
Attorney-General
for Manitoba v Kelly
[1922] 1 AC 268
(PC) at 283. To decide whether there was an error ‘apparent on
the face of the award’ the court could only have regard
to the
terms of the award or some paper accompanying and forming part of
the award. Also
FR
Absalom Ltd v Great Western (London) Garden Village Society Ltd
[1933] AC 592
(HL). As to the artificiality surrounding the meaning of ‘forming
part’ see
Giacomo
Costa Fu Andrea v British Italian Trading Co Ltd
[1962] 2 All ER
53 (CA).
[39]
Amalgamated
Clothing & Textile Workers Union of SA v Veldspun (Pty) Ltd
[1993] ZASCA 158
;
1994
(1) SA 162
(A);
Total
Support Management (Pty) Ltd v Diversified Health Systems (SA) (Pty)
Ltd
2002
(4) SA 661 (SCA).
[40]
Above.
[41]
Lesotho
Highlands Development Authority v Impregilo SpA
[2005]
UKHL 43
para 25.
[42]
South
African Jewish Board of Deputies v Sutherland NO
2004 (4) SA 368
(W) at para 27.
[43]
Quoted by Malan J.
[44]
Re
Racal Communications Ltd
[1980] UKHL 5
;
[1980] 2 All ER
634
(HL). Also in
South
East Asia Fire Bricks Sdn Bhd v Non-Metallic Mineral Products
Manufacturing Employees Union
[1980]
2 All ER 689
(HL) at 692f-j.
[45]
Page v
Hull University Visitor
[1993] 1 All ER
97 (HL).
[46]
Per Lord Browne-Wilkinson at 108j.
[47]
FR
Absalom Ltd v Great Western (London) Garden Village Society Ltd
[1933] AC 592
(HL).
[48]
1992 (4) SA 69 (A).
[49]
Eg at 83G-H, 85I-J, 87A, 89B-C. As Botha JA mentioned, the statutory
grounds are narrower than the common-law grounds:
Paper,
Printing, Wood & Allied Workers’ Union v Pienaar NO
[1993] ZASCA 98
;
1993
(4) SA 621
(A) at 639E-F.
[50]
At 93A.
[51]
Theron
v Ring van Wellington
van die NG
Sendingkerk in SA
1976 (2) SA 1
(A)
at 21E-F. What Jansen JA had to say about arbitrations was put in
perspective in
Hyperchemicals
International (Pty) Ltd v Maybaker Agrichem (Pty) Ltd
1992
(1) SA 89
(W) at 99-100. See also Total
Support
Management (Pty) Ltd v Diversified Health Systems (SA) (Pty) Ltd
[2002] ZASCA 14
;
2002 (4) SA 661
(SCA) paras 19-21.
[52]
A much wider statement by Van Dijkhorst J in
Stocks
Civil Engineering (Pty) Ltd v Rip NO
(2002) 23 ILJ 358
(LAC) para 38 is contrary to all authority. Obviously, the
supposition underlying any arbitration agreement
is that the
arbitrator has to apply the law of the land; it does not follow that
if he errs his award can be set aside.
[53]
Lamprecht
v McNeillie
[1994] ZASCA 45
;
1994
(3) SA 665
(A) at 668. Also
Lee
v Showmen’s Guild of Great Britain
[1952] 1 All ER
1175
(CA) at 1180D-1181.
[54]
This does not apply to the repudiation issue but that is a separate
matter.
[55]
Goldfields
Investment Ltd v City Council of Johannesburg
1938 TPD 551.
[56]
Ellis
v Morgan; Ellis v Dessai
1909
TS 576
at 581.
[57]
Mabaso
v Native Commissioner, Ladysmith
1958 (1) SA 130
(N) provides another example. For common-law review examples see
Local
Road Transportation Board v Durban City Council
1965 (1) SA 586
(A) esp at 598A-D.
[58]
Anisminic
Ltd v Foreign Compensation Commission
[1968] UKHL 6
;
[1969] 1 All ER
208
(HL) at 234A-B.
[59]
At 560-561, emphasis added.
[60]
An expression used in
Anisminic
Ltd v Foreign Compensation Commission
[1968] UKHL 6
;
[1969] 1 All ER
208
(HL) at 230C.
[61]
Primich
v Additional Magistrate, Johannesburg
1967
(3) SA 661 (T).
[62]
Page v
Hull University Visitor
[1993] 1 All ER
97
(HL) at 101a.
[63]
1952 (2) SA 546
(C).
[64]
Bester
v Easigas (Pty) Ltd
1993 (1) SA 30
(C) at 42G-43D.
[65]
Doyle v
Shenker & Co Ltd
1915 AD 233.
[66]
Administrator,
South West Africa v Jooste Lithium Myne (Edms) Bpk
1955 (1) SA 557
(A).
[67]
At 564G.
[68]
At 569B-G, emphasis added.
[69]
Administrator,
South West Africa v Jooste Lithium Myne (Edms) Bpk
1955 (1) SA 557
(A).
[70]
Armah v
Government of Ghana
[1966] 3 All ER
177
at 187 quoted in
Anisminic
Ltd v Foreign Compensation Commission
[1968] UKHL 6
;
[1969] 1 All ER
208
(HL) at 223D-F.
[71]
Doyle v
Shenker & Co Ltd
1915
AD 233.
[72]
At 236-237.
[73]
At 238.
[74]
But not under the Arbitration Act.
[75]
Amalgamated
Clothing & Textile Workers Union of SA v Veldspun (Pty) Ltd
[1993] ZASCA 158
;
1994
(1) SA 162
(A) where the English authorities are also mentioned. For
the USA:
First
Options of Chicago Inc v Kaplan
[1995] USSC 50
;
115 S Ct 1920
;
514 US 938
at 943 per Breyer J.
[76]
The award is replete with references to this.
[77]
This is not the occasion to consider whether there is any
discernable difference between background facts and surrounding
circumstances.
[78]
RH Christie
The
Law of Contract in South Africa
5 ed p 218. The
arbitrator relied on the fourth edition where the same statement
appears.
[79]
Shill v
Milner
1937
AD 101
at 110-111.
[80]
Briscoe
v Deans
1989
(1) SA 100
(W) at 105B.
[81]
His findings relating to the repudiation issue will be dealt with
separately.
[82]
The ‘additional’ reasons are a repetition of the main
reasons.
[83]
Cf
Dawahare
v Spencer
[2000] USCA6 159
;
210
F3d 666
(6th Circuit 2000) at 670.
[84]
1915 AD 233.
[85]
The same happened in
Theron
v Ring van Wellington van die NG Sendingkerk in SA
1976 (2) SA 1
(A), concerning the constitution of a church.
[86]
The one sentence at the dying moments of the argument before the
arbitrator on which the high court relied did not say otherwise.
[87]
This was the position as late as 27 August 2000.
[88]
The best evidence of Telkom’s understanding of the issues
especially that
Shifren
does not arise in
relation to the determination of the contractual baseline is
Telkom’s ‘List of the Issues to be
Decided’ of 1
August 2002, the final day of the argument before the arbitrator.
[89]
Cf
Gentiruco
AG v Firestone SA (Pty) Ltd
1972 (1) SA 589
(A) at 614E-G.
[90]
Emphasis added.
[91]
There may be some confusion in this regard. On the arbitrator’s
finding there had to be some or other non-
Shifren
agreement on the
content of the FSDs and the content of the 12/00 FSDs may in that
sense have been derived from the moratorium
agreement.
[92]
This disposes of the argument that reliance on the FSDs was a
strategy which Telcordia dreamt up later.
[93]
Cf
National
Board (Pretoria) (Pty) Ltd v Estate Swanepoel
1975 (3) SA 16
(A) at 26
[94]
Cf
Rand
Rietfontein Estates Ltd v Cohn
1937
AD 317
at 326
.
[95]
DT Zeffertt, AP Paizes, A St Q Skeen
The
South African Law of Evidence
(2003) p 322.
[96]
Johnston
v Leal
1980
(3) SA 927
(A) at 943B-D.
[97]
See also the provision in Exhibit F of the Integrated Agreement.
[98]
The pleaded defence of payment under protest was according to the
arbitrator not pursued.
[99]
See para 13 of this judgment.
[100]
Doyle v
Shenker & Co Ltd
1915
AD 233
at 238.
[101]
This is apparent from the way the founding affidavit was formulated.
[102]
The later letter of 9 January 2001 on which Telkom relies also does
not support the existence of a precondition. In fact, a request
at
that late stage of ‘some means/evidence’ of compliance
before payment (not delivery) says the opposite. Record
7/554.
[103]
His statement that Morgan did not refute allegations made in a
letter by Telcordia to Morgan was clearly a reference to the fact

that Morgan did not respond at the time. This follows from the fact
that he was at this stage only having regard to documents
and not to
affidavits.
[104]
Relying on
Czarnikow
v Roth, Schmidt and Co
[1922] 2 KB 478
(CA).
[105]
Cf
Dorman
Long Swan Hunter (Pty) Ltd v Karibib Visserye Ltd
1984
(2) SA 462
(C) 474E-F.
[106]
‘Before signing any Award, the Arbitral Tribunal shall submit
it in draft form to the [International Court of Arbitration].
The
Court may lay down modifications as to the form of the Award and,
without affecting the Arbitral Tribunal’s liberty
of decision,
may also draw its attention to points of substance. No Award shall
be rendered by the Arbitral Tribunal until it
has been approved by
the Court as to its form.’
[107]
Government
of the Republic of SA v Midkon (Pty) Ltd
1984 (3) SA 552
(T).
[108]
At 562E-G, 563E-G.
[109]
Administrator,
Transvaal v Kildrummy Holdings (Pty) Ltd
1978 (2) SA 124
(T).
[110]
Halfdan
Grieg & Co A/S v Sterling Coal and Navigation Corp
[1973] 2 All ER
1073
at 1077c-g.
[111]
Anisminic
Ltd v Foreign Compensation Commission
[1969] 1 All ER
208 (HL).
[112]
Government
of the Republic of SA v Midkon (Pty) Ltd
1984 (3) SA 552
(T) at 562G-I.
[113]
LC Steyn
Uitleg
van Wette
5
ed at 132.
[114]
Theron
v Ring van Wellington
van die NG
Sendingkerk in SA
1976 (2) SA 1
(A).
[115]
Total
Support Management (Pty) Ltd v Diversified Health Systems (SA) (Pty)
Ltd
[2002] ZASCA 14
;
2002
(4) SA 661
(SCA) para 19-21;
Hyperchemicals
International (Pty) Ltd v Maybaker Agrichem (Pty) Ltd
1992
(1) SA 89
(W) at 99-100.
[116]
Michael Kerr ‘The Arbitration Act 1979’ (1980) 43
MLR
45.
[117]
In re
King and Duveen
[1913] 2 KB 32
at
36 in a different context.
[118]
Cf
Pioneer
Shipping Ltd v BTP Tioxide Ltd
[1982] AC 724,
740
[119]
As authority for this latter proposition, the arbitrator referred to
two decisions of this Court:
Metalmil
(Pty) Ltd v AECI Explosives and Chemicals Ltd
[1994] ZASCA 96
;
1994 (3) SA 673
(A) and
Datacolor
International (Pty) Ltd v Intamarket (Pty) Ltd
2001 (2) SA 284
(SCA).
[120]
The List of Issues, also referred to as the May Issues, is set out
in part H of the judgment of Harms JA.
[121]
Kannenberg
v Gird
1966
(4) SA 173
(C) at 186G-187E;
Lukral
Investments (Pty) Ltd v Rent Control Board, Pretoria
1969 (1) SA 496
(T) at 509C and 510F-511A;
Theron
v Ring van Wellington, NG Sendingkerk in SA
1976 (2) SA 1
(A)
at 29C-F;
Steeledale
Cladding (Pty) Ltd v Parsons NO
2001 (2) SA 663
(D) at 672F-673I.
[122]
Societe
Franco-Tunisienne D’Armement-Tunis v The Government of Ceylon
(The “Massalia”
)
[1959] 2 Lloyd’s Rep 1 (CA) at 13 and 17-18;
Montrose
Canned Foods Ltd v Eric Wells (Merchants) Ltd
[1965] 1 Lloyd’s
Rep 597 (QBD) at 601-2;
Fox
v Wellfair Ltd
[1981] 2 Lloyd’s
Rep 514 (CA) at 517, 520, 522 and 528-530;
Interbulk
Ltd v Aiden Shipping Co Ltd (The “Vimeira”
)
[1984] 2 Lloyd’s Rep 66 (CA) at 74-76.
[123]
HA
Millard and Son (Pty) Ltd v Enzenhofer
1968 (1) SA 330
(T) at 332G-H.
[124]
Putco
at 832C-D.