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[2012] ZAKZDHC 10
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Umgeni Water v Hollis NO and Another (11876/10) [2012] ZAKZDHC 10; 2012 (3) SA 475 (KZD) (8 March 2012)
IN THE KWAZULU-NATAL HIGH COURT, DURBAN
REPUBLIC OF SOUTH AFRICA
Case Number : 11876/10
In the matter between:-
UMGENI WATER
…...........................................................................
Applicant
and
NIGEL HOLLIS N.O.
…..........................................................
First
Respondent
SIZA WATER (PTY) LIMITED
…........................................
Second
Respondent
___________________________________________________________________________
JUDGMENT
___________________________________________________________________________
VAN ZYL, J.:-
This is an application aimed at securing the removal from office of
the first respondent as an arbitrator in terms of the provisions
of
section 13(2)(a) of the Arbitration Act, No. 42 of 1965 (“the
Act”). The order sought, as per the applicant’s
notice
of motion, is as follows;
“
1. The appointment of first respondent
as arbitrator in the dispute between applicant and Second respondent
be and is hereby set
aside.
2. It is declared that first respondent is not entitled to any
further remuneration pursuant to his appointment as arbitrator in
the
dispute between applicant and second respondent.
3. respondents are ordered to pay the costs of this application,
such costs consequent (sic) upon the employment of two counsel.
”
The first respondent has opposed the order sought by the applicant,
but only insofar as it affects his personal interests. As
pointed
out by Mr Acker who appeared for him, the applicant sought an order,
inter alia,
as against the first respondent, claiming payment
of the legal costs incurred in the course of this application. It is
against
such order that the first respondent’s opposition is
directed, whilst he abides the decision of the court regarding the
termination of his appointment as arbitrator.
The second respondent has also opposed the application, but it did
so upon the merits as well. The second respondent contended
that the
application had no merit at all and should be dismissed, with costs.
The dispute between the parties has its origins in a written
agreement concluded between the applicant and the fist respondent.
The applicant did not attach a complete copy of the agreement to its
founding affidavit, but instead contented itself with an
extract
(annexure “A” to the founding affidavit) essentially
containing clause only 12 thereof dealing with the referral
of any
subsequent disputes between the parties thereto, to arbitration. In
such proceedings the second respondent was in the
position of the
plaintiff and the applicant in the position of the defendant.
Clause 12 of annexure “A” reads as follows:-
“
12.1 Any dispute arising between the
parties and arising out of this agreement in respect of which a
dispute resolution provision
has not been specifically provided for
in this agreement, shall be submitted and decided by arbitration.
12.2 Each arbitration shall be held:-
12.2.1 at Durban;
12.2.2. in an informal summary manner without any pleadings or
discovery of documents and without it being necessary to observe the
strict rules of evidence, or in any such other manner as the
arbitrator may in his sole discretion determine to be appropriate
in
the circumstances;
12.2.3 forthwith with a view to it being completed within two(2)
months from the date on which the dispute is referred to the
arbitrator;
12.2.4 except where the provisions of this clause 12.2 provide
otherwise, under the provisions of the
Arbitration Act, No. 42 of
1965
, or any superperseding legislation.”
12.3 The arbitrator shall be a senior attorney of at least ten(10)
years experience or Senior Counsel mutually agreed upon between
the
parties involved in the dispute and, failing agreement, appointed by
the Chairman for the time being of the Natal Society of
Advocates.
12.4 The decision of the arbitrator in any arbitration proceedings
in terms of this agreement shall be final and binding upon the
parties to this agreement.”
As indicated above, the applicant relies upon the provisions of
section 13(2)(a) of the Act for the removal of the first respondent
as arbitrator. The relevant portion of the section reads as
follows:-
“
The court may at any time on the
application of any party to the reference, on good cause shown, set
aside the appointment of an
arbitrator or umpire or remove him from
office.
”
The Act does not define
"good cause"
, but the
expression is not foreign to our law. For instance, for condonation,
or for rescission to be granted in terms of rule
31(2)(b) of the
Consolidated Rules of Court, the applicant is required to establish
"
good cause
". In Saraiva Construction (Pty) Ltd v
Zululand Electrical and Engineering Wholesalers (Pty) Ltd
1975 (1)
SA 612
(D), Howard J (as he then was) commented at page 613 B-D
that;
"
In terms of Rule 31 (2) (b) the Court has a discretion to
set aside a default judgment "upon good cause shown." The
Rules
contain no definition of "good cause" but the Courts
have provided one, in effect, by laying down certain requirements
which an applicant must comply with before he can be held to have
shown good cause or, what is practically synonymous, "sufficient
cause" for various kinds of procedural relief.
"
In the earlier and well known decision in Silber v Ozen Wholesalers
1954 (2) SA 345
(AD), Schreiner JA at 352 G-H remarked that –
“
It seems clear that by introducing the
words 'and if good cause be shown' the regulating authority was
imposing upon the applicant
for rescission the burden of actually
proving, as opposed to merely alleging, good cause for rescission,
such good cause including
but not being limited to the existence of a
substantial defence …
”
Also in Interaccess (Pty) Ltd v Van Dorsten
[1999] 2 All SA 561
(C)
Immerman AJ remarked at page 573 that:-
“
The requirements of the concept of
“sufficient cause” were considered in Chetty v Law
Society Transvaal
1985 (2) SA 756
(A). At page 765A–C Miller JA
stated as follows:
‘
The term ‘sufficient cause’
(or ‘good cause’) defies precise or comprehensive
definition, for many and various
factors require to be considered.
’
It is therefore no coincidence that the Act presently under
consideration makes no attempt at defining the concept of “
good
cause
” and the remarks made by the courts in relation to
rescission applications are also instructive in a wider context.
Against that background it becomes necessary to consider the grounds
upon which the applicant in the present matter alleges that
good or
sufficient cause exists for this court, in the exercise of its
discretion, to remove the first respondent from his office
as
arbitrator. It is quite clear from the wording of section 13(2)(a)
that the court is vested with a discretionary power which,
as is the
norm, it has to exercise judicially and with great care.
Having concluded the agreement of which clause 12 aforementioned
forms part, the applicant and the second respondent indeed
subsequently found themselves in a position of dispute. It appears
that they were both content that the matter be referred to
arbitration and that the arbitrator favoured by both parties was
advocate Lopes SC of Durban. However, when it became known that
Adv
Lopes was likely to be appointed to the Bench and would therefore
not be able to embark upon and discharge his duties as
arbitrator in
the dispute between the parties before his elevation to the Bench
became effective, the need for resort to an alternative
arbitrator
became apparent.
In the end the first respondent accepted appointment as arbitrator
and the arbitration process commenced and proceeded before
him,
until interrupted by the present dispute, culminating in this
application for his removal as arbitrator.
The applicant alleges that it, in the light of the events and
circumstances upon which it relies in support of the position which
it has adopted, after much internal discussion resolved to ask the
first respondent to step down as arbitrator. It asserts that
its
decision was motivated by the cumulative effect of the grounds upon
which it relies in support of this application and as
set out in the
present application papers. The application was brought after first
respondent refused, when requested to do so
at the resumed
arbitration hearing, to voluntarily step down as arbitrator.
The applicant relies, for purposes of the application, not upon any
allegation of actual bias against it on the part of the first
respondent, but upon the perception of such bias and went on to
explain that by reason thereof it was not seeking to deprive
the
first respondent of any remuneration earned in the process of
arbitration up to the point where his appointment as such is
terminated.
The applicant also recognised, in its founding papers, that the Act
does not contain any express provision for the voluntary
resignation
of an arbitrator, once appointed, but relied upon the provisions of
section 10(1) which provides for the appointment
of a substitute
arbitrator,
inter alia
, where an arbitrator refuses to
continue acting as such.
The first respondent adopted the attitude that he would stand down
in the event of both parties, that being the applicant and
the
second respondent as the parties to the original reference, jointly
requesting him to do so. However, since the applicant
urged and the
second respondent resisted his withdrawal, he did not consider that
he was entitled to step down by virtue of the
provisions of section
13(1) of the Act.
In its founding papers the applicant alleges that such refusal by
the first respondent to step down voluntarily both necessitated
the
present application and justified its claim for costs as against the
first respondent.
The applicant relies upon the cumulative effect of six distinct
grounds of justification, which it set out in its founding papers
and which it alleges justifies the perception of bias attributed to
the first respondent. It therefore becomes necessary to consider
these in context in order to decide the issue.
The applicant has broadly taken the approach and relevant to the
perception of bias attributed to the first respondent, that
the
latter’s position to a certain degree equates to that of a
judge presiding over a litigious matter. However, so the
argument
ran, the concept of “
good cause
” in terms of the
Act needed to be afforded an even wider meaning because, unlike a
judge, an arbitrator is not bound by
an oath of office, has a direct
pecuniary interest in the continuation of his appointment, has an
interest in securing future
similar appointments, is chosen to
arbitrate by consensus and is not arbitrarily allocated to the
matter. Thus a sterner test
for the perception of bias needs to be
applied to an arbitrator than is applied in a similar situation to
an application for
the recusal of a judge.
In Lufuno Mphaphuli & Associates (Pty) Ltd v Andrews and Another
2009 (4) SA 529
(CC) the Constitutional Court was called upon to
consider whether the provisions of section 34 of the Constitution
relevant to
access to the courts also applied to private
arbitrations. The majority of the Court held (per O’Regan
ADCJ) that arbitration
proceedings are regulated by the law and the
Constitution in that they must be fair, but that those proceedings
nevertheless
differ from proceedings before a court, or a statutory
tribunal or forum. A party which opts for arbitration will have
chosen
these consequences. Thus, in the context of fairness O’Regan
ADCJ remarked at page 594 in paragraph 223 that:-
“
[223] Of course, as this court has said
on other occasions, what constitutes fairness in any proceedings will
depend firmly on context.
Lawyers, in particular, have a habit of
equating fairness with the proceedings provided for in the Uniform
Rules of Court. Were
this approach to be adopted, the value of
arbitration as a speedy and cost-
effective process would be undermined.
It is now well recognised in jurisdictions around the world that
arbitrations may be conducted
according to procedures determined by
the parties. As such the proceedings may be adversarial or
investigative, and may dispense
with pleadings, with oral evidence,
and even oral argument.
”
In that matter the Constitutional Court was further tasked to
consider the circumstances under which a court should set aside
an
arbitration award in terms of section 33(1) of the Act. In this
context O’Regan ADCJ at page 599 in paragraph 236 observed
that:-
“
[236] The final question that arises is
what the approach of a court should be to the question of fairness.
First, we must recognise
that fairness in arbitration proceedings
should not be equated with the process established in the Uniform
Rules of Court for the
conduct of proceedings before our courts.
Secondly, there is no reason why an
investigative procedure should not be
pursued as long as it is pursued fairly. The international
conventions make clear that the
manner of proceeding in arbitration
is to be determined by agreement between the parties and, in default
of that, by the arbitrator.
Thirdly, the process to be followed
should be discerned in the first place from the terms of the
arbitration agreement itself.
Courts should be respectful of the
intentions of the parties in relation to procedure. In so doing, they
should bear in mind the
purposes of private arbitration which include
the fast and cost-effective resolution of disputes. If courts are too
quick to find
fault with the manner in which an arbitration has been
conducted, and too willing to conclude that the faulty procedure is
unfair
or constitutes a gross irregularity within the meaning of s
33(1), the goals of private arbitration may well be defeated.
”
In my respectful view these observations also find application to
proceedings under section 13(2) of the Act.
The grounds for the alleged perception of bias relied upon by the
applicant require more detailed consideration. The first of
these
relate to the events giving rise to the appointment of the first
respondent. The applicant claims that at the outset it
had
reservations about the appointment of the first respondent but in
the end acquiesced therein and embarked upon the process
of
arbitration by the first respondent. It seems to me that once it has
done so, the complaint loses its force.
The second cause of complaint relates to an aspect of the second
respondent’s pleadings which the applicant considered
to be
vague and embarrassing and to which it sought to except in the
course of the arbitration proceedings. The exception was
dismissed
and the applicant is critical of this decision because it alleges
the reasons given were confusing. It nevertheless
contends that such
dismissal gives rise to a perception of bias on the part of the
first respondent. I have difficulty in finding
justification for
this conclusion in the circumstances of the matter. As conceded by
the applicant, adverse interlocutory rulings
in matters of this
nature are commonplace.
The applicant’s third ground of complaint also relates to a
procedural matter. Here it relies upon the first respondent’s
alleged tolerance of attempts by the second respondent to introduce
evidence regarding an earlier (1998) agreement concerning
the
maintenance of levels at a water reservoir. It alleged that on a
proper interpretation of the arbitration pleadings reference
to this
earlier agreement was irrelevant and it accordingly wished to resist
any references thereto.
Underlying this complaint is that the first respondent had earlier
during the hearing indicated that the proceeding before him
should
be guided by the Rules of Court and consequently the applicant took
the view that any latitude or deviation from the strict
application
of the Rules of Court amounted to an irregularity in the proceedings
and/or favouritism towards the second respondent.
The difficulty I
have in this regard is that clause 12.2.2 of the arbitration
agreement set out above clearly envisages that
there will be no need
for strict rules of evidence and that pleadings may be dispensed
with.
The applicant suggests that procedurally the first respondent should
have excluded any reference to the earlier agreement, but
that he
did not do so, that his reasoning in this regard was confusing and
technically incorrect, that it had the effect of favouring
the
position of the second respondent and that, therefore, the
perception of bias in favour of the second respondent arose. The
mere fact that the ruling went against cannot in my view be elevated
to creating a perception of bias.
The fourth ground of complaint concerns the first respondent’s
refusal to entertain an application for a costs order adverse
to the
second respondent and in favour of the applicant. This incident
occurred the day following the day when the arbitration
was
side-tracked into the dispute about the exception and the
prospective amendment of the second respondent’s claim which,
in the end, was not pursued. Counsel for the applicant wished to
advance argument for such an order and the first respondent
cut him
short and indicated that he proposed reserving the decision on such
costs until the conclusion of the arbitration proceedings.
There is
nothing in the exchange relied upon by the applicant which I find
either remarkable, or indicative of bias. A ruling
to reserve costs
is not only discretionary, but commonplace in materially similar
circumstances in our courts.
The fifth complaint was that first respondent, whilst trying to
expedite proceedings, was less tolerant towards the applicant
than
towards the second respondent. At the root of this complaint is who
was primarily responsible for the delays in proceedings
which had
occurred as a result of the squabbling about the attempted
introduction by the second respondent of evidence concerning
the
earlier agreement. The applicant favours the view that the second
respondent was at fault by attempting to do so, but considers
that
the first respondent gave the impression that the delays arose from
the applicant’s procedurally motivated opposition
thereto. The
applicant draws attention to selective excerpts from the record in
order to support the “
impressions
” allegedly
created by the exchanges, but even taken at face value these do not
to my mind support the objective inference
of bias on the part of
the first respondent. It may of course be that by then elements of
exasperation had crept in, but that
does not summarily translate
into bias.
The sixth and final complaint is associated with the fourth
complaint referred to above and where the first respondent summarily
evinced an intention to reserve the costs order relevant to the
proceedings of the previous day. Having done so the applicant’s
counsel asked for the matter to stand down and it was then that
applicant alleges the decision was taken to request the first
respondent to relinquish his appointment as arbitrator.
Nevertheless what applicant did when the proceedings resumed was to
give notice, firstly that it reserved its rights to bring
a formal
application for the first respondents recusal and secondly to renew
its application for a ruling that the second respondent
was not at
liberty to relay upon or refer in evidence to the earlier (1998
reservoir) agreement. In effect it was trying to overturn
the
earlier ruling, which forms the basis for the second ground for
recusal dealt with above, by seeking a formal ruling against
the
second respondent. The first respondent is criticised for being
“
reluctant
” to make such an order. However, on
the applicant’s own version, no ruling was given, the matter
stood down and was
then overtaken by the demands made by the
applicant that the first respondent voluntarily stand down and
later, when he finally
refused to do so, the present application
resulted.
The second respondent, in opposing this ground of alleged bias, not
only disputes that the first respondent gave any evidence
of bias,
but suggests that the application for a formal ruling by first
respondent adverse to the second respondent was a stratagem
to force
the first respondent either to acquiesce to its demand, or to force
him into a position where he would feel obliged
or have to recuse
himself. There would appear to be some force in the argument,
especially since by applicant’s own admission
it would appear
that the decision to ask the first applicant to step down had
already been taken and thereafter the application
for a ruling
excluding reference to the earlier (1998) agreement was made, but
prefaced with a reservation of rights regarding
an application for
the first respondent’s recusal.
However, since the applicant did not pursue the matter to its
logical conclusion, but opted to proceed with the present
application
before the first respondent was required to formally
rule on the application, I have difficulty in identifying how the
attitude
attributed by the applicant to the first respondent gives
rise to any reasonably objective inference of bias.
In Ndlovu v Minister of Home Affairs
2011 (2) SA 621
(KZD) at page
631, paragraphs 20 to 21 Wallis J (as he then was) gave an
instructive summary of the law relevant to the recusal
of Judges of
the High Court and stated that:-
“
In
The
law
[20] The law in regard to applications for recusal is now well
settled, as a result of a trilogy of cases in the Constitutional
Court. What follows is a distillation of the law, as laid down in
those judgments. It is largely expressed in the language used
by the
Constitutional Court.
[21] The correct approach to an application for a recusal is
objective, and the onus of establishing it rests upon the applicant.
The question is whether a reasonable, objective and informed person
would on the correct facts reasonably apprehend that the judge
has
not brought or will not bring an impartial mind to bear on the
adjudication of the case, that is, a mind open to persuasion
by the
evidence and the submissions of counsel. Two factors are of
fundamental importance in this regard. The first is the presumption
of impartiality, arising from the judge's oath of office, requiring
him or her to administer justice to all persons alike without
fear,
favour or prejudice, in accordance with the Constitution and the law,
and judges' ability, by virtue of their training and
experience, to
put on one side any irrelevant matter or predisposition that they may
have in regard to a case. The second is the
double requirement of
reasonableness, in that both the person who apprehends bias and the
apprehension itself must be reasonable.
”
Whilst the position of Judges and arbitrators differ in some
respects there are also areas of great similarity in their
respective
positions. And all the more so here where the applicant
limits the attack upon the position of the first respondent to the
perception
of bias, as opposed to actual bias. The first respondent
is a practising advocate and a senior counsel to boot. Like judges,
advocates also, upon their admission as advocates, take an oath to
behave honestly and faithfully in the course of their professional
careers. Also advocates, as referral practitioners and by virtue of
their training, have greater scope for impartiality when
sitting as
an arbitrator than say a lay person. In the present instance the
original agreement of the applicant and the second
respondent
clearly envisaged the appointment of a senior legally trained
arbitrator. That is, either an attorney with at least
ten(10) years’
experience, or an advocate with Senior status.
On behalf of the applicant the proposition was advanced that,
because judges do not choose their cases and litigants not their
judges, a less stringent application of the rules relating to a
perception of bias should be applied to them than to arbitrators.
But there is some significance of its own in the fact that an
arbitrator is appointed by consensus. Not only do the parties in
dispute have to reach agreement as to the arbitrator’s
appointment, but the latter also has to agree to assume the
responsibilities
which flow from such appointment. The foundation
for the arbitrator’s powers and functions are to be found in
such tri-parte
agreement.
Barring any term in such agreement which entitles the arbitrator at
will to resign his position, he becomes upon appointment
obliged to
perform the duties which he so assumed. It is no doubt for this
reason that section 13(1) of the Act provides for
the voluntary
termination of an arbitrator’s appointment effectively only
where the parties to the reference consent thereto.
It is common
cause that the second respondent refused to agree to the release of
the first respondent from his duties as arbitrator.
In my view it is correct, as was submitted in argument on behalf of
the first respondent, that were the first respondent to refuse
to
continue with his functions as arbitrator despite the lack of
consensus in this regard as between the applicant and the second
respondent as the parties to the reference, then he would be
exposing himself to potential claims for damages for breach of the
duties which he assumed upon accepting appointment as arbitrator.
I do not agree that the applicant can legitimately invite the first
respondent to refuse to continue with his arbitration duties
and
then reproach him for failing to accept such invitation. Even less
so does the first respondent’s refusal to abandon
his duties
entitle the applicant to a costs order as against him.
Once an arbitrator has accepted his appointment and has embarked
upon his duties arising therefrom, he is both morally and legally
bound to discharge his duties to the best of his ability. In this
regard the arbitrator has much in common with a judge, in respect
of
whose position Wallis J (as he then was) in the Ndlovu matter
(supra) at pages 631-2 in paragraph 22 remarked as follows:-
“
[22] A judge confronted with an
application for his or her recusal must bear in mind that he or she
has a duty to sit in all cases
in which they are not disqualified
from sitting. Litigants must not be encouraged to believe that, by
seeking the disqualification
of a judicial officer, they will have
their case heard by another judicial officer who is likely to decide
it in their favour.
”
In regard to voluntary arbitrations it should be emphasised, as was
done by O’Regan ADCJ in the Lufuno Mphaphuli matter
(supra) at
page 599 in paragraph 236, relevant to the third requirement of
fairness in arbitration proceedings, that courts should
be
respectful of the intentions of the parties and should bear in mind
the purposes of private arbitration. These include cost-effective
resolution of disputes and if courts were too quick to fault the
manner in which an arbitration has been conducted and are too
willing to conclude that a faulty procedure is unfair, or
constitutes a gross irregularity, then the objects of private
arbitration
may well be defeated. Those sentiments, whilst expressed
in relation to the setting aside of arbitration awards in terms of
section
33(1) of the Act also in my view apply to considerations of
good or sufficient cause under section 13(2).
There needs to be a certain tolerance for the hurly burly to be
found in the course of litigation and trial hearings. Where they
are
arbitration proceedings and the foundational agreement, as here, by
prior agreement between the parties require expedition
at the
expense of procedural precision, then the ultimate question is not
whether one agrees with every unguarded utterance by
the arbitrator,
or every ruling he made in the course of the proceedings. It is
rather whether the proceedings, viewed holistically,
may be
considered substantially fair.
In the context of the present matter the further question arising is
whether, again viewed holistically, the applicant upon whom
the
burden of proof rests, has objectively demonstrated on a
preponderance of probabilities that the proceedings gave rise to
the
perception of bias. In other words whether a reasonable, objectively
informed person would, on the facts demonstrated and
relied upon by
the applicant, reasonably apprehend that the first respondent has
not brought, or will not bring, an unbiased
mind to bear upon the
adjudication of the arbitration. Put differently, that he is not
likely to approach such proceedings with
a mind open to persuasion
by the facts and submissions to be placed before him in due course.
As pointed out by Wallis J in the Ndlovu matter (supra) in paragraph
21, there are further factors also of importance in the
circumstances. These include the so-called double requirement of
reasonableness. Not only does the applicant need to demonstrate
that
it reasonably apprehends bias on the part of the first respondent,
but it also needs to show that such apprehension itself
is
reasonable.
Having considered at some length the grounds for the apprehension of
bias relied upon by the applicant, I remain unpersuaded
that the
grounds for criticism advanced, either individually or cumulatively,
meet the tests as discussed above. Even allowing
for the fact that
some of the rulings, expressions or conduct of the first respondent
may be open to criticism, it does not follow
that a reasonable,
objective and informed person would on those facts reasonably
apprehend that the first respondent has not
and will not bring, an
unbiased mind to bear upon the arbitration.
It follows that the application must fail. I see no reason why costs
should not follow the result. Such a costs order is also
permissible
in terms of the provisions of section 36 of the Act.
In the result the application is dismissed, with costs, such costs
to include those consequent upon the employment of Senior
Counsel,
where actually so employed.
_____________________
VAN ZYL , J.
APPEARANCES:
For Applicant : Adv O A Moosa SC and Adv A J Boulle
Instructed by Venn Nemeth & Hart Inc c/o Audi Botha & Edy,
Dbn.
(Ref: Mr Edy/V0194)
For First Respondent : Adv B A Acker SC
Instructed by Neerajh Ghazi Attorneys, Durban
(Ref: NG/TG/SHA 36).
For Second Respondent : Adv D Gordon SC
Instructed by Shepstone & Wylie, Umhlanga Rocks
(Ref: Mr Chetwynd-Palmer/Siza9732.10).
Date
written argued : 21 June 2011
Judgment delivered : 8 March
2012
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