Daljosaphat Restorations (Pty) Ltd v Kasteel Hof CC (2587/06) [2006] ZAWCHC 26; 2006 (6) SA 91 (C) (15 June 2006)

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[2006] ZAWCHC 26
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Daljosaphat Restorations (Pty) Ltd v Kasteel Hof CC (2587/06) [2006] ZAWCHC 26; 2006 (6) SA 91 (C) (15 June 2006)

IN THE CAPE HIGH
COURT OF SOUTH AFRICA
(CAPE OF GOOD HOPE
PROVINCIAL DIVISION)
CASE NO: 2587/2006
In the matter
between:
DALJOSAPHAT
RESTORATIONS (PTY) LTD
Applicant
and
KASTEEL HOF CC
Respondent
JUDGMENT DELIVERED
ON: 15 JUNE 2006
Meer, J:
[1] The Applicant
seeks an order in terms of Section 31 of the Arbitration Act No. 42
of 1965 (“the Act”) that the arbitration
award of Arbitrator,
Mr R Q le Roux, dated 20 January 2006, be made an order of Court.
Respondent opposes the relief sought on
the basis that the
arbitration award is in terms of an agreement, subject to an appeal
to this Court, an appeal has been noted
and not yet disposed of.
[2] Respondent has
also filed a counter application in terms whereof it seeks
inter
alia
:
1. that the
arbitration agreement, made an order of Court on 21 April 2005, be
declared void;
2. that the
proceedings before the Arbitrator and the Arbitrator’s award be
declared a nullity.
The Applicant
opposes the counter application.
Background facts.
[3] The Respondent
owns the Royal Hotel in Riebeeck Kasteel. From August 2004 the
Applicant, a construction company, performed extensive
building work
and renovations to the hotel for which it was paid an amount of 2,6
million rand.
[4] Towards the end
of 2004, a dispute arose between the parties and on 08 February 2005
the Applicant cancelled the building contract
due to the alleged non
payment of architect’s certificates. The Respondent in turn
contended that there was no contract between
the parties. The
Applicant asserted a builder’s lien over the hotel and refused to
give up possession thereof.
[5] In April 2005
the Respondent launched an urgent application in this Court for the
Applicant’s ejectment from the premises as
against provision by it
of security in the sum of R959 125.00, and the institution of a High
Court action by the Applicant for amounts
allegedly due to it within
30 days. That application was opposed and the parties then set about
negotiating a settlement thereof.
The ejectment application was
settled on 20 April 2005 and the settlement agreement was made an
order of Court on 21 April 2006 by
agreement. The order provides as
follows
1
:
Having heard
counsel for the applicant and having read the documents filed of
record
, the following order is made by agreement between the
parties:
1. That Applicant
provide security in the form of a Bank Guarantee in the amount of R1
200 000.00 to Respondent in respect of its
alleged claim against
Applicant, arising from building work effected upon Erven 73, 1364
and 1018 Riebeeck Kasteel, known as the
Royal Hotel (“the
premises”);
2. That, against
provision of the original Bank Guarantee, Respondent vacate the
premises and place Applicant in possession thereof;
3. That the dispute
relating to the amount allegedly owing to Respondent by Applicant in
respect of building work done and material
supplied by Respondent to
Applicant in regard to the Hotel, as well as the recovery of any
alleged damages, is referred to Arbitration;
4. That the
Arbitrator will be appointed from a list to be supplied by the Cape
Provincial Institute of Architects and that the Arbitration
will be
conducted in terms of an Arbitration agreement which will be
concluded between the parties, failing which the Arbitration
will
be governed by the
Arbitration Act subject
thereto that the
Arbitration process and award will not be final and the parties
having the right of appeal to this Court;
5. That the
application is postponed
sine die;
6. That the costs of
the application will be adjudicated in the Arbitration except if the
appointed Arbitrator finds him/herself unable
to do so, in which
event the Applicant will be entitled to approach this Court on the
same papers for an order thereon.”
[6] Both the main
application and the counter application before me are concerned with
clause 4 of the settlement agreement, more
specifically the appeal
provision contained therein. The arbitration award which the main
application seeks to have declared an
order of Court has its genesis
in clause 4. The counter application, in seeking that the arbitration
agreement made an order of Court
on 21 April 2005 be declared void,
attacks clause 4 on the grounds
inter alia
that there was
dissensis pertaining to the appeal provision, and consequently no
agreement was concluded.
[7] The settlement
agreement was concluded after fairly comprehensive discussions and
negotiations between the parties’ attorneys
about, in particular
the nature of the appeal that was contemplated at clause 4. Given the
significance of this issue it is necessary
to consider their
discussions in some detail.
[8] During
settlement negotiations Applicant was initially represented by its
attorney, Mr Malan and later by Mr Egypt, whilst Respondent’s
attorney was Ms Ms Neethling. In an affidavit Ms Ms Neethling states
that on 15 April 2005 she informed Mr Malan, that she would
advise
Respondent to agree to an arbitration by an architect, on condition
that the award would not be final but would be made subject
to an
appeal to the High Court. Her insistence stemmed from her concern
that an architect as an Arbitrator might not be able to interpret
the
legal principles of contract which an adjudication of the dispute
entailed, and hence recourse by way of appeal to the High Court
was
necessary. She explained that a review would not suffice, given its
narrow ambit which would not enable a consideration of any
incorrect
interpretation and application of the law.
[9] The founding
affidavit (in the counter application) of Mr Brendel, Respondent’s
sole member, likewise states that due to the
nature of the dispute
and extent of the claim, Respondent would not have agreed to an
arbitration without the right of appeal to
the High Court.
[10] As to the High
Court’s jurisdiction to entertain an appeal against an arbitration
award, Ms Ms Neethling expressed the opinion
that were the agreement
providing for such appeal to be made an order of Court, the effect of
the Court’s acceptance of the agreement,
would mean that it would
be seized with jurisdiction to hear an appeal.
[11] An affidavit by
Mr Malan in response states that he did not seriously consider the
implications of Ms Neethling’s remarks pertaining
to an appeal to
the High Court, and certainly did not point out to Ms Neethling that
such an appeal was a nullity. Mr Malan went
on leave soon thereafter
and his colleague, Mr Egypt dealt with Applicant’s case in his
absence.
[12] On 18 April
2005, Ms Neethling faxed to Applicant’s attorneys a draft order
which she contemplated would be made an order
of Court by agreement,
in settlement of the matter. Clause 3 of the order provided for the
dispute to be referred to arbitration.
Clause 4 stated that the
parties would have the right of appeal to this Court against an
arbitration award. The Applicant’s response
faxed to Ms Neethling
the next day rejected the notion of an appeal, proposing instead that
the decision of the Arbitrator would
be final and binding and there
would be no provision for an appeal either to appeal tribunal or the
High Court.
[13] Ms Neethling
was surprised at this response given her discussions with Mr Malan,
and the agreement which she assumed therefrom,
had been reached on
the appeal issue. She telephoned Mr Egypt on the same day and pointed
out that a right of appeal equal to an
appeal from a magistrate’s
Court to the High Court, as opposed to a review, had been agreed
between her and Mr Malan. She once
more emphasized that if Applicant
accepted a full right of appeal, she would advise Respondent to agree
to an Arbitrator appointed
by the Council of Architects. Mr Egypt
undertook to obtain instructions.
[14] On 20 April
2005, Mr Egypt informed Ms Neethling that Applicant would agree to
the draft order proposed by her, if paragraph
4 was amended to
indicate that the Arbitrator would be appointed from a list supplied
by the Cape Provincial Institute of Architects.
[15] Later that day,
Ms Neethling faxed an amended draft order to Mr Egypt. Clause 4 which
provided for an appeal to the High Court
was accepted by Applicant,
as conveyed per return fax by Mr Egypt. The version of Clause 4
agreed to is, as appears in the Court
order of 21 April 2005, and
which appears at paragraph 5 above.
[16] Ms Neethling’s
affidavit in reply in the counter application states that she was, at
the time of concluding the agreement with
Mr Malan and Mr Egypt and
still is of the opinion that, (and I quote):
“
as superior
Courts can do anything that the law does not forbid (see
Herbstein
and van Winsen
The Civil Practice of the Supreme Court of South
Africa (fourth edition Cape Town Juta and Co. 1997 at page 38), there
should be
no doubt that the High Court would have jurisdiction to
hear and adjudicate such an appeal if parties in a High Court matter
agree
to refer a portion of their dispute to arbitration; and want to
seize the High Court with jurisdiction to consider an appeal against
an award by the Arbitrator in such arbitration; and have their
agreement reflected in an order of the High Court (and thus accepted
by the Court).”
[17] An affidavit by
Mr Egypt indicates a different understanding. Mr Egypt states he
always understood as a matter of law that arbitration
proceedings
are final and binding unless there is specific agreement in relation
to an appeal tribunal. He assumed that this was
Ms Neethling’s
understanding of the situation as well, and reasonably concluded from
the following words in her letter of 20 April
2005 accompanying the
final amended draft order,
“
Please consider
paragraph 4 of the order, which we have amended to reflect your
request, although not in the exact words you suggested”,
that her client was
in agreement that the proposed arbitration would not be subject to an
appeal properly so called but rather an
approach to the High Court
under
Section 33
4
>
2
of the
Arbitration Act. He
understood that the use by Ms Neethling of
the word appeal in the draft order was a reference to the right
enjoyed under Section
33 of the Act.
[18] At this
juncture it should be noted that the settlement agreement negotiated
between attorneys Ms Neethling and Mr Egypt and
specifically clause 4
thereof which became an order of Court did not contain an arbitration
agreement. Clause 4 reflects an agreement
to submit to arbitration
which will be conducted in terms of an arbitration agreement which
will be concluded between the parties.
[19] The terms of
the arbitration agreement were concluded at two meetings held on 09
June 2005 and 28 October 2005 respectively.
It was decided that the
Arbitrator should first determine whether there was an enforceable
building contract between the parties
and, if so, what the terms
thereof were. The issue of quantum was left over for later
determination.
Clause 10.3 of the minutes of the first meeting and clause 2.7 of
those of the second meeting record the right of appeal
to this Court.
[20] On 01 November
2005 shortly after the second meeting Mr Raymond, Applicant’s sole
director wrote a letter to the Arbitrator,
(which he copied to
Respondent’s attorney), recording his reservations about the
enforceability of the agreed right of appeal.
He cited the case
Goldschmidt and Another v Folb and Another
1974 (1) SA 576(T)
as authority for the proposition that this Court lacked jurisdiction
to hear such an appeal.
[21] Respondent in
reply pointed out that Applicant had agreed to a right of appeal to
the High Court and that it was bound thereby.
On 02 December 2005 the
Arbitrator himself indicated that he had been advised that there may
be a successful challenge to the appeal
provision. He cautioned the
parties “to consider an appeal very carefully”.
[22] On 06 December
2005 Respondent’s attorneys informed the Arbitrator that unless the
Applicant agreed to the appeal provision,
Respondent would not be
prepared to proceed with the arbitration.
[23] In response
Raymond in a letter also of 6 December, clearly spelt out the
Applicant’s stance on the right of appeal and its
motive for
agreeing to the appeal. He stated:
“
1. The right of
appeal to the Supreme Court was inserted at your client’s instance,
in an agreement drafted by your client’s advocate.
The arbitration
clause was agreed to facilitate a speedy and efficient resolution to
the problems. In agreeing to vacate the property
we accepted a
guarantee less than our actual claim to ensure arbitration from which
will flow the necessary legal consequences.
2. We conceded to
you the right of appeal to the Supreme Court. This we did in full
knowledge of the law (as you must have), which
allows appeals only
under very limited circumstances and this right still exists. The
general right to appeal on the merits that
you so forcefully insisted
upon at the meeting of 28.11.2005, at the same time rejecting my
opinion out of hand does not and never
did exist, nor was it our
intention…”
[24] On 07 December
2005 the Respondent’s attorneys once again stated their
understanding of the content of the right of appeal.
The arbitration
thereafter commenced on 12 December 2005. The Applicant was
represented by Raymond and the Respondent by their legal
representatives. After hearing evidence and argument the Arbitrator
delivered his award on 21 January 2006. The award which was in
favour
of the Applicant, held that there was a binding contract between the
parties and that the terms thereof were, “the JBCC
principle
building agreement (2000 ED)”.
[25] On 25 January
2006 the Respondent filed a notice of appeal against the whole award
and finding of the Arbitrator. Thereafter
a further dispute ensued
concerning the validity of the notice of appeal and Respondent’s
right to prosecute the appeal.
[26] On 13 February
2006 Respondent itself informed Applicant that there was uncertainty
about the jurisdiction of the High Court
to hear its proposed appeal
and asked Applicant to agree to a rectification of the arbitration
agreement by affording an appeal to
a tribunal appointed by the
President of the Cape Bar. The Applicant was advised that should it
deny the existence of a right of
appeal, such denial would constitute
a repudiation of the arbitration agreement entitling the Respondent
to cancel the agreement.
The Applicant refused to agree to such an
appeal tribunal and maintained that the arbitration agreement was
valid and enforceable.
The Main
Application
[27] The provisions
of
Section 31
of the
Arbitration Act grant
this Court a general
discretion to make an arbitrator’s award an order of Court, thereby
adopting the arbitrator’s decision as
if it were its own. The
Applicant in a case such as this must prove that there was a valid
arbitration agreement covering the award,
that the Arbitrator was
duly appointed, and that there was a valid award in terms of the
reference. See
Butler and Finsen
“Arbitration in South
Africa” Juta & Co. Ltd 1993 at page 273. Mr Gamble for
Applicant submitted that Applicant had established
these criteria and
was entitled to the relief sought in the main application.
[28] Mr Olivier for
the Respondent argued that the award could not be made an order of
Court under
Section 31
of the
Arbitration Act as
the award was not
final and the appeal had not been disposed of. He argued further that
should it be found that the appeal provision
at paragraph 4 of the
settlement agreement was invalid, the settlement agreement would
likewise become invalid.
[29] The first issue
to be considered is whether the filing of a notice of appeal by
Respondent to this Court is a bar to the granting
of an order in
terms of
Section 31
of the
Arbitration Act as
sought by Applicant. It
will be so if this Court has the requisite jurisdiction to entertain
an appeal against an arbitration award,
for then a valid appeal would
be pending.
[30] Generally the
appeal jurisdiction of a High Court is circumscribed by Section 19 of
the Supreme Court Act No. 59 of 1959, which
at Section 19(1)(a)(i)
provides for the jurisdiction of a High Court to hear and determine
appeals from all inferior Courts within
its area of jurisdiction.
[31] In addition
appellate power may be vested in the High Court by Statute. Here, Mr
Gamble pointed by way of example to Section
20 of the Health
Professions Act, No 56 of 1974, which accords the right of appeal to
a High Court by a person aggrieved with a decision
of the Health
Professions Council. The
Arbitration Act does
not accord a similar
right of appeal to a High Court. There is no other general power
which a High Court may exercise in relation
to the hearing of an
appeal to it other than from an inferior Court or in terms of a
statutory provision. Certainly, a High Court
does not have such power
in terms of the common law or its inherent jurisdiction.
[32] Accordingly and
flowing from this, a High Court has no jurisdiction to hear an appeal
against an arbitration award. This much
has been acknowledged by our
Courts. In
Goldschmidt supra
at 577A - D Hiemstra, J stated;
“
The appellant
labours under an erroneous reading of
Section 28.
The section is
unfortunately phrased and can
prima facie
raise the impression
that a right of appeal can be created by agreement. The appeal there
meant can, however, within the context
only mean an appeal to an
umpire or another Arbitration Tribunal. The common law in arbitration
has always been that there is no
appeal. Voet says so at 4.8.25…
The only function of the Courts in regard to arbitration are to
enforce an award, to give an opinion
on a question of law in a stated
case, to set aside an award because of some illegality or generally
to regulate the proceedings.
The Court will not take the place of the
Arbitrator and decide the disputes on their merits.”
In
Blaas v
Athanassiou
1991 (1) SA 723W
at 724H, Hartzenberg J stated:
“
I know of no
legislation or Rule of any Court which creates a right or an
opportunity for a party to arbitration to appeal directly
to the
Appeal Court. I think it can safely be accepted that the parties were
wrong when they thought that the Appeal Court would
entertain an
appeal against the Arbitrator’s award”
[33] These views are
echoed in
Butler and Finsen
,
supra
at page 271:
“
The most
important legal consequence of a valid final award is that it brings
the dispute between the parties to an irrevocable end;
The Arbitrator’s
decision is final and there is no appeal to the Courts. For better or
worse, the parties must live with the award,
unless their arbitration
agreement provides for a right of appeal to another arbitration
tribunal”.
McKenzie
,
The
Law of Building and Engineering Contracts 5
th
Edition
1994 Juta and Company at page 184, similarly states,
“
A provision for
an appeal to a Court of law in an arbitration agreement is void”.
[34] It is
acknowledged that the very essence of arbitration is to consensually
remove a matter from the jurisdiction of the ordinary
courts of the
land, thereby depriving a party of the right to avail itself of a
court’s appellate jurisdiction. See
Amalgamated Clothing and
Textile Workers Union of South Africa v Veldspun Pty Ltd
1994 (1)
SA 162A
at 169F-H;
Patcor Quarries
QCC v ISSROFF and others
1998 (4) 1069 (SECLD) at 1085E-H.
[35] The further
question that then arises is whether a High Court, by declaring a
settlement agreement an order of court as in the
present matter, can
confer upon itself jurisdiction to hear an appeal, in this instance
from an arbitration award. In
Goldschmidt supra,
at 577A
Hiemstra, J confronted also with an application to declare an
arbitration agreement appealable to a High Court by agreement,
stated,
“
Private
individuals cannot confer jurisdiction on the Courts which they do
not possess in terms of the common law or of statute;
Nor can they
impose tasks upon the Courts which they are not legally obliged to
perform”.
It would be
ludicrous if, for example, parties to a divorce who do not fall under
the jurisdiction of a particular High Court were
permitted to consent
to its jurisdiction and that Court by confirming their consent would
thereby be allowed to adopt jurisdiction.
[36] I therefore
find that the appeal provision at clause 4 of the settlement
agreement, in so far as it relates to an appeal to this
Court is of
no force and effect, and incapable of implementation as this Court
lacks the requisite jurisdiction to hear an appeal
against an
Arbitration award. The filing of a Notice of Appeal by Respondent
to this Court cannot, in the circumstances, be a bar
to an order in
terms of
Section 31
of the
Arbitration Act.
The Counter
Application
Severability
[37] Mr Olivier
argued that were I to find the appeal provision to be invalid, the
settlement agreement must likewise be found to
be invalid. The appeal
provision, he stated, is a material term of the settlement agreement
without which clause 4 of the settlement
agreement would not have
come into effect. That provision accordingly cannot be severed and
the whole agreement must be declared
invalid.
[38] In
Blaas v
Athanassiou
supra
, in circumstances very similar to the
present, a clause in an agreement between the parties also provided
for an appeal against the
decision in an arbitration to the High
Court. It was also there argued by the Respondent that as the appeal
provision was a material
term of the agreement, the agreement itself
became invalid because of the invalidity of the appeal provision.
Respondent’s stance
similar to the present case was that he would
not have agreed to arbitration at all without the appeal provision.
Finding against
the Respondent Hartzenberg J at 725 C-D stated:
“
In my judgment,
further, the right in the agreement as to an appeal, as opposed to an
automatic right of review, was merely incidental
to the main
agreement, ie to submit to arbitration. In my view the Respondent is
bound by the agreement.”
These words are
particularly apposite to this case where too, the appeal provision at
clause 4 is clearly incidental to the main decision
which is to refer
the dispute to arbitration. That this must be so, appears from the
fact that even though the issue of the appeal
jurisdiction was not
resolved between the parties prior to the actual arbitration,
Respondent elected to participate in the arbitration.
Respondent did
so knowing full well there was no certainty that an appeal against
the arbitration award would lie to the High Court.
[39] This being so,
I find that the appeal provision is clearly severable from the rest
of the agreed order, it being incidental thereto.
Its severance does
not affect the validity of the settlement agreement.
Dissensis
[40] I now turn to
consider whether the settlement agreement can nonetheless be set
aside on the basis of dissensis, and whether the
proceedings before
the Arbitrator and the Arbitrator’s award can accordingly be
declared a nullity, as claimed in the counter application.
[41] There are two
agreements which have a bearing on this enquiry. The first is the
settlement agreement which was made an order
of Court on 21 April
2005, and more specifically clause 4 thereof. The second is the
arbitration agreement which has its genesis
at clause 4, but the
terms whereof were, as specified by the clause, still to be concluded
between the parties.
[42] The principles
guiding an enquiry into dissensis were referred to by Harms AJA (as
he then was) in
Sonap Petroleum SA (Pty) Ltd (formerly known as
Sonarep (SA)(Pty)(Ltd) v Pappadogianis
1992 (3) SA 234 (A) at 239
G – 240B and restated by the SCA in
Constantia Insurance Co Ltd
v Compusource (Pty) Ltd
2005 (4) SA 345 at 353J to 354D. In the
latter case Brand JA referring to
Sonap
stated as follows:
“
In that case
Harms AJA referred as his starting point (at 239 G-H) to the
following frequently quoted statement by Blackburn J in
Smith v
Hughes
(1871) LR6 QB 597 at 607, namely:
‘
If, whatever a
man’s real intention may be, he so conducts himself that a
reasonable man would believe that he was assenting to
the terms
proposed by the other party, and that other party upon the belief
enters into the contract with him, the man thus conducting
himself
would be equally bound as if he had intended to agree to the other
party’s terms’
He then proceeded to
formulate the key inquiry into matters of this kind as follows (at
239I-240B):
‘
In my view,
therefore, the decisive question in a case like the present is this:
did the party whose actual intention did not conform
to the common
intention expressed, lead the other party as a reasonable man to
believe that his declared intention represented his
actual
intention?... To answer this question, a threefold enquiry is usually
necessary, namely, firstly, was there a misrepresentation
as to one
party’s intention; secondly, who made that representation; and
thirdly was the other party misled thereby?... The last
question
postulates two possibilities: was he actually misled and would a
reasonable man have been misled?”
[43] It is clear
that when the settlement agreement was being negotiated and
importantly concluded, Ms Neethling insisted on and agreed
to an
appeal on the merits to the High Court, no more no less. Her reasons
for doing so were made clear to both Mr Malan and Ms Neethling.
She
wanted the High Court to have the last say on the legal issues of
contract raised in the arbitration. She specifically rejected
a
review stating that it would be too narrow to deal with any incorrect
legal interpretation which might flow from the arbitration.
[44] Mr Egypt, in
contrast as aforementioned stated he understood that the arbitration
would not be subject to an appeal on the merits
but a more limited
approach to the High Court under
section 33
of the
Arbitration Act,
akin
to review, and he assumed Ms Neethling’s understanding to be
likewise on the basis of the contents of her letter of 20 April. I
have difficulty in understanding how the words in her letter referred
to by him convey what he suggests and how they lead to such
an
understanding, given the Respondent’s clear and explicit insistence
on an appeal on the merits, as conveyed to him by Ms Neethling.
[45] Mr Egypt did
not during his discussions with Ms Neethling disclose his
understanding of the term appeal. The reason for his silence,
and for
Respondent agreeing to the arbitration, notwithstanding Egypt’s
knowledge of the law that such an appeal would not be permitted,
and
notwithstanding Respondent’s intention not to be bound by the
appeal provision, was to facilitate a speedy and efficient resolution
of the problems. This much is clear from Raymond’s letter of 06
December. To achieve this Applicant misled Respondent into believing
that what had been agreed to, was an appeal on the merits.
Applicant’s contention that it had no obligation to disclose to
Respondent
what the correct position in law was, given that
Respondent was legally represented, does not detract from this.
[46] Applying the
principles formulated in the
Sonap
case (supra) to these
circumstances, dissensis was present when the settlement agreement
was being negotiated. There was a misrepresentation
as to applicant’s
intention to be bound by the appeal provision. Respondent was misled
thereby into believing Applicant had agreed
to an appeal on the
merits. A reasonable person in the position both of Ms Neethling and
indeed Respondent, her client, would similarly
have been misled given
the preceding discussions, the clear expression by Ms Neethling of
Respondent’s understanding of the appeal
provision, and the failure
not only to disclose Respondent’s differing understanding of the
appeal provision, but its knowledge
about the invalidity of the
provision agreed to.
[47] Is the
Respondent entitled to an order declaring the settlement agreement,
proceedings before the Arbitrator and arbitration
award void, given
my finding on dissensis? I think not. For their subsequent conduct in
performing in terms of the settlement agreement
and participating in
the arbitration, notwithstanding the existence of dissensis, is, in
my view, a bar to their claiming such relief.
[48] It is clear
that whatever dissensis existed when the settlement agreement was
being concluded, at the stage when the provisions
of the arbitration
agreement were being concluded there was no dissensis, and certainly
by the time the arbitration agreement was
to be put into operation
each party knew precisely what the other understood by the appeal
provision.
[49] Notwithstanding
the differences in opinion about an appeal, the Respondent chose to
go ahead with the arbitration. It could at
that stage have taken
steps to prevent the arbitration but elected not to do so.
[50] To the extent
that Applicant through its conduct may have been regarded by the
Respondent at that stage already to be in breach
of the agreement,
such conduct could have been seen as constituting an anticipatory
breach giving rise on the part of the Respondent
to immediate
entitlement to exercise its remedies at law. The Respondent could
have resiled from the agreement, or it could have
held the other
party thereto.
[51] The Respondent
chose not to resile from the agreement but in fact demanded strict
compliance with its terms, fully participated
in the arbitration
proceedings and later purported to exercise the right of appeal. In
electing not to resile Respondent abandoned
the right to challenge
the validity of the contract. It is trite that a party to an
agreement who is faced with two inconsistent
remedies, must make an
election between them and cannot both approbate and reprobate. A
classic statement of this well established
principle of the law of
contract is that of Innes CJ in
Bowditch v Peel and Magill
1921 AD 561
at 572:
“
A person who has
been induced to contract by the material and fraudulent
misrepresentation of the other party may either stand by
the contract
or claim rescission… It follows that he must make his election
between those two inconsistent remedies within a reasonable
time
after knowledge of the deception and the choice of one necessarily
involves the abandonment of the other. He cannot both approbate
and
reprobate”.
[52] In the
circumstances there is no basis for the cancellation of the
arbitration agreement, nor is there any basis upon which the
proceedings before the Arbitrator and the Arbitrator’s award can be
declared a nullity. This, and my finding that the phrase at
clause 4
of the settlement agreement providing for an appeal to this Court, is
severable, does not entitle the Respondent to the
relief it seeks in
the counterclaim.
Costs in the
Application for Security for Costs brought by Applicant.
[53] On 18 April
2006, after the Counter Application was launched, Applicant filed a
Notice in terms of
Rule 47
requesting Respondent to provide Security
for Costs in the sum of R150 000.00. The grounds upon which security
was claimed were as
follows:
- Respondent had
difficulty in providing security in its claim against Applicant by
way of bank guarantee in the amount of R1 200
000.00 as provided for
by an order of court under Case No. 3160/05;
- Mr Rober Richard
Brendal, the sole member of Respondent, is not a South African
citizen;
- Respondent’s
property is mortgaged up to its value;
- In the event of
the Respondent’s liquidation, the Applicant would not be able to
recover costs from Respondent.
[54] The application
for Security for Costs did not proceed. Applicant seeks an order that
Respondent bear the costs occasioned in
the drafting of the
application. The application appears to have been well founded and
Applicant should, I believe, be entitled to
such costs.
The following order
is made:
AD THE MAIN
APPLICATION:
The arbitration
award of Arbitrator Mr R Q le Roux, granted on 20 January 2006, is
made an order of Court pursuant to the provisions
of
Section 31
of
the
Arbitration Act;
>
The Respondent is
ordered to bear the costs of the main application;
The Respondent is
ordered to bear the Costs occasioned in the preparation of the
application for security for costs.
AD THE COUNTER
APPLICATION:
4. The counter
application is dismissed with costs.
MEER, J
1
The deleted part of the order indicates that the
order was granted without the judge either hearing counsel or
reading the papers.
The order was granted by the Motion Court Judge.
2
Section 33
permits a High Court to set aside an
arbitration award, on application of a party to an arbitration
in circumstances of misconduct
or gross irregularity by a member of
an arbitration tribunal or where an award has been improperly
obtained. The section also
allows for the enforcement of an award to
be stayed, pending determination of the application to set aside and
for the subsequent
referral to a new arbitration tribunal
constituted in a manner directed by the court.