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[2011] ZAKZDHC 23
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Future Rustic Contruction (Pty) Ltd v Spillers Waterfront (Pty) Ltd and Another (9120/2010) [2011] ZAKZDHC 23; 2011 (5) SA 506 (KZD) (27 May 2011)
IN THE KWAZULU-NATAL
HIGH COURT, DURBAN
REPUBLIC OF SOUTH
AFRICA
CASE NO. 9120/2010
In the matter between:
FUTURE RUSTIC
CONSTRUCTION (PTY) LTD.
…................
APPLICANT
and
SPILLERS WATERFRONT
(PTY) LTD.
….....................
1
st
RESPONDENT
GRANT L. LISTER-JAMES
N.O.
…...............................
2
nd
RESPONDENT
JUDGMENT
Delivered
on 27 May 2011
______________________________________________________
SWAIN J
[1] At the conclusion of
argument in this matter, the relief sought by the applicant was in
the form of an amended order, in terms
of the alternative prayer,
contained in the notice of motion, reading as follows:
“
In terms of
Section 32
(2) of the
Arbitration Act No. 42 of 1965
the award is
remitted to the second respondent for reconsideration and the making
of a fresh award with particulars as to
(a) The final amounts awarded upon
each of the applicant’s twenty-two causes of action upon which
the applicant’s claim
is based.
(b) The amount deducted for omitted
work arising out of variation orders 1 to 18.
(c) The rate of interest on the amount
of the final award.
(d) The date from which interest on
the amounts awarded will commence to run”.
[2] The applicant no
longer sought an order in terms of the primary relief sought in the
notice of motion, namely that the award
made by the second respondent
as arbitrator in the arbitration between the applicant and the first
respondent, published on 25
June 2010, be set aside in terms of
Section 33 (1) (b) of the Arbitration Act No. 42 of 1965 (the Act).
The grounds upon which
the applicant sought such primary relief,
which was contested by the first respondent, and which are not
relevant to the alternative
relief sought, accordingly no longer have
to be considered, except in so far as they may be relevant to the
issue of costs. The
applicant’s cause of complaint was that
because of the paucity of information supplied by the second
respondent (the arbitrator)
the applicant was unable to correlate the
globular award made by the arbitrator, to the twenty-one separate
claims which the applicant
alleged were the subject matter of the
arbitration (the applicant no longer contending for twenty-two
separate causes of action).
[3] The main ground of
opposition by the first respondent (the arbitrator having offered no
opposition) to the relief sought, was
that at a pre-arbitration
meeting it was agreed between the parties
inter
alia
that
“The award will be
without reasons”.
Mr. Mullins S C, who appeared
for the first respondent, argued that because the parties agreed that
the arbitrator need only furnish
an award without reasons, no party
to the arbitration could complain (or seek a remittal to the
arbitrator) in order to obtain
any details of the reasoning behind
the award. He submitted that the applicant did not seek, and the
reference did not require
of the arbitrator, that he make separate
awards in respect of the various items to be taken into account, in
determining the balance
of the adjusted contract price due to the
applicant. The applicant sought a single award and that is what the
arbitrator provided.
On this approach it is a misnomer to describe
the applicant’s claim as comprising twenty- one causes of
action, and to do
so is simply an attempt to compel the arbitrator to
furnish reasons for the award made, when he is not obliged to do so.
[4] The argument of Mr.
Harcourt S C, advanced on behalf of the applicant, was that the
applicant’s claim was one for payment
of twenty-one separate
claims for the prices of seventeen variation orders issued by the
architect, appointed as the principal
agent, in terms of an agreement
concluded between the applicant and the first respondent, in terms of
which the first respondent
employed the applicant, to do alterations
and additions to a shopping centre in Port Shepstone. The total
claim, including additional
preliminary general expenses and price
escalation, totalled R1,520,625.00 together with interest and costs.
He submitted that the
primary concern of the applicant was not the
reasons for the award, but simply the calculation of the twenty-one
component parts
of the globular award made by the arbitrator.
[5] Clearly, the
furnishing of reasons in respect of the award made by the arbitrator,
would encompass not only his reasons as to
“why”
he made the award, but also his reasons as to
“how”
he arrived at the award.
[6] Consequently, unless
the arbitrator was required in terms of the referral, to make
separate awards in respect of each of the
amounts claimed for each of
the variation orders, as well as the amount claimed as a consequence
of such variations, for preliminary
and general expenses, as well as
price escalation, this would constitute his reasons as to
“how”
he arrived at the amount awarded and would be precluded
in accordance with the terms of the referral.
[7] In my view, the
answer to this issue must be found within the applicant’s
statement of claim. In respect of each of the
variation orders issued
by the architect, details are furnished by the applicant of precisely
how each claim is made up. In addition,
precise details are furnished
of the additional preliminary and general expenses claimed by the
applicant, as a consequence of
the extensions of time for practical
completion, caused by the variation orders. In addition, precise
details are furnished by
the applicant of the amount claimed in
respect of price escalation, in the cost of materials.
[8] The claim of the
applicant is then calculated by adding the amounts claimed in respect
of each of the variation orders, the
amount claimed in respect of
preliminary and general expenses, and the amount claimed in respect
of the price escalation. From
these amounts are deducted credits due
to the first respondent for work omitted in terms of variation orders
numbers 18 and 18
A, as well as the amounts paid by the first
respondent.
[9] As regards the rate
of interest awarded and the date from which it was to run, it is
quite clear that the applicant alleged
that the agreement provided
for interest at the rate of one hundred and fifty percent of the
prime overdraft rate. Specific allegations
were made as to what the
rate of interest was and in the prayer for relief, detailed claims
were made as to the rate of interest
and the dates from which
specific rates of interest were to run. In the alternative interest
was claimed at the legal
mora
rate.
[10] The response of the
first respondent was to deny these allegations and make specific
averments in support of its denial of
liability to make payment of
the amounts claimed. The first respondent denied that the applicant
was entitled to the interest claimed
on the basis that
“no
amount is due to the claimant and therefore no interest is due to the
claimant”:
[11] It is self evident
that in order to determine the dispute between the applicant and the
first respondent, the arbitrator had
to decide each of the amounts
claimed in respect of the variation orders, as well as the
preliminary and general expenses, as well
as the price escalation. In
addition, the arbitrator had to decide the rate of interest to be
applied to any amount owing to the
applicant and the date from which
it was to run. Without a determination by the arbitrator on each of
these issues, it would not
be possible to decide the applicant’s
claim. Without a decision by the arbitrator on each of these issues,
the award would
be
“incomplete”
and
the award would be
“vague and uncertain”.
[12] I use the quoted
terms advisedly, derived as they are from
dicta
in the cases of
Basson v Herman
1904 TS 98
at 100
and
Dutch Reformed
Church v Town Council of Cape Town
(1898) 15 SC 14
at
23
both of which were quoted
with approval by Selikowitz J in
Benjamin v Sobac
South African Building & Construction
1989 (4) SA 940
(C) at
960 C – D and 962 I – J
as examples of factors to
be considered in deciding whether a matter should be remitted to an
arbitrator.
[13] In Basson, Innes C J
in a judgment concurred in by Wessels J and Curlewis J stated the
following where the objector claimed
the award was not an award at
all, as it was incomplete
‘
The Court
has under our law a wide discretion, and could in my opinion refer
the award back to the arbitrator to be rendered final
and complete.
But it does not follow that the Court will always follow that course;
it will exercise its discretion. There may
be circumstances when the
Court would not only refuse to make an incomplete award a rule of
Court but would treat it as null; but
it does not follow that it is
null unless the Court so determines.’
[14] In Dutch Reformed
Church, Lord de Villiers found that the Court had a discretion to
remit awards and suggested that remittal
of an award would be
appropriate to
“render certain that portion which is
somewhat vague and uncertain”
.
[15] Although both of
these cases were concerned with the power of a court to remit a
matter to the arbitrator, and as pointed out
by Selikowitz in
Benjamin, at 959 I, by reference to the decision in
Dickenson &
Brown v Fishers Executors
1915 AD 166
at 174
it is to the legislation
and not to the common law, to which a court must look to determine
the courts’ jurisdiction to review
and set aside an award, and
that at common law the court had a discretion to remit even where the
application was to set aside
the award, I regard the
dicta
as instructive in deciding whether
“good
cause”
has been shown in terms of Section 32 (2)
of the Act, to remit a matter to an arbitrator.
[16] As decided in
S A Forestry
Company Ltd. v York Timbers Ltd.
2003 (1) SA 331
(SCA) at 338 I – J
the test for remittal
“on
good cause shown”
is a phrase of wide import that
requires the Court to consider each case on its particular merits, in
order to achieve a just and
equitable result in the particular
circumstances. In order to decide whether it would be just and
equitable to remit the matter
to the arbitrator, it is necessary to
examine, in respect of which items, awards were made by the
arbitrator. The awards were made
as follows:
[16.1] The arbitrator
awarded a single amount in respect of variation orders 1 to 17 (paras
5 to 21 of the statement of claim) without
specifying the amount
awarded in respect of each variation order.
[16.2] The arbitrator
awarded as a deduction
(“omissions”)
a
single amount in respect of variation orders 18 and 18 A (paras 22
and 24 of the statement of claim) without specifying the amount
awarded in respect of each variation order.
[16.3] The arbitrator
made a specified award in respect of variation order No. 19 (para 25
of the statement of claim).
[16.4] The arbitrator
made a specified award in respect of the claim for additional
preliminary and general expenses (para 26 A
of the statement of
claim).
[16.5] The arbitrator
made a specified award in respect of the claim for price escalation,
in the cost of materials (para 26 B of
the statement of claim).
[16.6] The arbitrator
made a specified award in respect of the claim for interest at the
rate of one hundred and fifty percent of
the prime overdraft rate
from 15 March 2008 (para 32 of the statement of claim) but then
awarded interest on the balance owing
by the first respondent, after
deduction of the amounts awarded on first respondent’s
counter-claim, at the
mora
rate, from the date of the award.
[17] In my view, it is
therefore clear that the award made by the arbitrator was neither
complete, nor certain and the information
to be furnished by the
arbitrator to render it so is as follows:
[17.1] The separate
amounts awarded in respect of reach of the variation orders 1 to 17
inclusive.
[17.2] The amount
deducted in respect of variation order 18.
[17.3] The amount awarded
for extra work done and materials supplied, as well as the amount
deducted for omissions, in respect of
variation order 18 A.
[17.4] The rate of
interest awarded and the date or dates, from which such interest was
to run in respect of the interest claimed
in para 32 of the
applicant’s statement of claim.
[18] An order that the
arbitrator furnish specified information to render the award complete
and certain, does not require the making
of a
“fresh”
award by the arbitrator, nor the making of a
“further”
award by the arbitrator. All that is required is that
the arbitrator reconsider the matter and furnish the specified
details which
he must have determined in making the award he did.
That this Court has the power to remit the matter to the arbitrator
to furnish
the specified details, is comprehended by the terms of
Section 32 (2) of the Act, which provides that a matter may be
remitted
to the Arbitration Tribunal not only for
“reconsideration
and for the making of a further award or a fresh award”
but
also
“for such other purpose as the Court may direct”.
In this regard the authors of the section headed
“Arbitration”
in
The Law of South
Africa Volume 1
Second Edition para
603
state the following:
“
Section 32
(2) does not contemplate a remittal by the court for explanation or
elucidation”
quoting as authority for
this proposition, the decision in
Silpert v Seymour
1932 T P D 329
Silpert however was
concerned with the provisions of Section 15 of the Arbitration
Ordinance No. 24 of 1904 – Transvaal (as
repealed by the Act)
which provided as follows:
“
15 (1) In
all cases of reference to arbitration the Court or a Judge may from
time to time remit the matters referred or any of
them to the
reconsideration of the arbitrators or umpire”.
Barry J, in whose
decision Soloman J and Grindley-Ferris J concurred, held on appeal
that the purpose for which remission was made
in terms of Section 15,
was for such matters to be reconsidered. The Court held that the
order made by the Court
a quo,
for
the arbitrators to explain their award, did not fall within the
provisions of Section 15, stating at page 332
“
If it did
fall within the provisions of Section 15 then the arbitrators would
have to reconsider the matter”.
Section 32 (2) of the
Act, although envisaging a reconsideration of the matter by the
arbitrator, provides that the remittal may
be for a purpose, to be
directed by the court, other than the making of a
“further”
or
“fresh”
award.. The
wording of Section 32 (2) is therefore entirely different and
consequently the decision quoted is no authority for the
proposition
stated. It is therefore unnecessary for an order to be made in the
terms sought by the applicant, for the making of
a fresh award. I do
not regard such an order as one which violates the agreement between
the parties that no reasons be furnished
by the arbitrator. The
arbitrator is asked to explain neither why, nor how, he made the
award that he did. All that is required
of the arbitrator is to
furnish the specified details to render the award complete and
certain.
[19] As regards the issue
of the costs of this application, Mr. Mullins S C, submitted that if
the applicant was successful in obtaining
relief in terms of the
alternative prayer, the first respondent should not be mulcted in
costs for the following reasons. The applicant
had without good cause
sought as primary relief, an order setting aside the award in terms
of Section 33 (1) (b) of the Act and
it was only in the applicant’s
replying affidavit, that the applicant indicated it would be seeking
an order in terms of
the alternative prayer. In addition, he
submitted that it was only in argument when I suggested to Mr.
Harcourt S C, that the alternative
claim for the arbitrator to
furnish particulars of the
“calculation”
of
each of the amounts awarded, as well as the amounts deducted, would
be tantamount to directing the arbitrator to furnish reasons
for the
amounts awarded, that he further limited the relief sought to one
directing the arbitrator to furnish the separate amounts
awarded. The
fact remains however that at no stage did the first respondent
withdraw its opposition to any of the relief sought.
That the relief
which I will grant is more limited than that which was sought at the
hearing, I do not regard as of significance,
in the light of first
respondent’s opposition to any relief being granted at all.
[20] In coming to the
conclusion I have on the merits of the application, I have not
overlooked the clearly expressed objective
of the applicant, to seek
a review of the arbitrator’s award, in the event that the
information furnished by the arbitrator
as a result of this
application, reveals a reviewable irregularity in the arbitration
award. Such an objective cannot detract from
the entitlement of the
applicant to receive the defined information, on the grounds I have
set out above.
The order I make is the
following:
The matter is remitted
to the second respondent for reconsideration and the second
respondent is ordered to furnish to the applicant
and the first
respondent:
The separate amounts
awarded in respect of each of the variation orders 1 to 17 in the
applicant’s statement of claim.
The amount deducted in
respect of variation order 18 in the applicant’s statement of
claim.
The amount awarded for
extra work done and materials supplied, as well as the amount
deducted for omissions in respect of variation
order 18 A in the
applicant’s statement of claim.
The rate of interest
awarded and the date or dates, from which such interest was to run,
in respect of the interest claimed in
paragraph 32 of the
applicant’s statement of claim.
The first respondent is
ordered to pay the applicant’s costs.
___________
K. SWAIN J
/Appearances
Appearances:
For the Applicant :
Mr. A.W.M. Harcourt S C
Instructed
by :
Wilhelm Styenberg Attorneys
C/o
Mooney Ford Attorneys’
Durban
For the 1
st
Respondent
:
Mr. S.R. Mullins S C
Instructed by :
Beall
Chaplin & Hathorn Durban
No appearance for the
Second Respondent
Date of Hearing
:
06 May 2011
Date of Filing of
Judgment :
27 May 2011