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[2024] ZALMPPHC 81
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Axton Matrix Construction CC v Roads Agency Limpopo Soc Limited and Another (HCAA07/2023) [2024] ZALMPPHC 81 (1 August 2024)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
LIMPOPO
DIVISION, POLOKWANE
HCA
CASE NO: HCAA 07/2023
A
QUO CASE NUMBER: 5103/2018
(1)
REPORTABLE:
YES/
NO
(2)
OF INTEREST TO THE JUDGES:
YES
/NO
(3)
REVISED
DATE:
01.08.2024
SIGNATURE
In
the matter between:
AXTON
MATRIX CONSTRUCTION CC
APPELLANT
-and-
ROADS AGENCY
LIMPOPO SOC LIMITED
FIRST
RESPONDENT
MATLA
CONSULTANTS CC
SECOND
RESPONDENT
JUDGMENT
BRESLER
AJ:
Introduction:
[1]
The matter came before court as an Appeal and Cross appeal against
the judgment and order granted by the Honourable Acting Madam
Justice
Lithole delivered on the 29
th
of November 2022. Neither
the appeal, nor the cross appeal is directed at the judgment and
order as a whole, but rather against
specified prayers only.
[2]
The judgment and order were granted pursuant to an application and
counter application respectively launched by the Appellant
(hereinafter referred to as ‘Axton’) and the First
Respondent (hereinafter referred to as ‘RAL’) and heard
on an opposed basis on the 4
th
of August 2021. Axton only
appeals against the order dismissing the Counter Application with
costs. In return, RAL Counter Appeals
against the order dismissing
the Main Application.
Factual
background relevant to the proceedings:
[3]
In or about May 2014, Axton and RAL concluded a construction contract
for the Upgrading (gravel to bitumen) of Road D3537 from
Harry
Oppenheimer (N11) to Pudiyakgopa to Bakenberg in the Waterberg
District of the Limpopo Province (the ‘Contract’).
[4]
The Second Respondent (Matla Consultants CC) (hereinafter referred to
as ‘Matla’) was appointed as the agent of
RAL. Matla was
appointed by RAL to,
inter alia,
design the road and supervise
Axton during the construction process.
[5]
The completion date of the project was duly extended by agreement
between RAL and Axton purported on the premise of a defective
design.
According to Axton, the project was effectively completed in November
2016. This is disputed by RAL. The actual completion
date is not
relevant to these proceedings.
[6]
On or about the 30
th
of June 2017, RAL discovered defects
in the road – same is described in their Founding affidavit as:
‘
The main
problem identified by the independent experts was the incorrect
vertical alignment of the road.’
[7]
RAL claimed that the defects resulted in damages being suffered in an
amount of approximately R64,900,000.00. Consequently,
RAL issued
summons against Matla, and Axton in the alternative, in the above
court and under case number 5103/2018 for the recovery
of the said
amount on the basis of breach of contract. A further alternative
claim was instituted against Axton on the premise
that a separate and
independent legal duty / duty of care rested on Axton to perform its
work properly and not for the sake of
monetary gain, ignore defective
designs or instructions from the Engineer.
Proceedings
in the court
a quo
:
[8]
RAL applied for the following relief:
8.1 An order setting
aside the dispute resolution provisions, including the arbitration
agreement contained in Clause 10 of the
General Conditions of
Contract for Construction Works (2010) (hereinafter referred to as
the ‘GCC’).
8.2 Alternatively, that
the dispute resolutions provisions of the arbitration agreement
contained in Clause 10 of the GCC shall
cease to have effect with
reference between the to any dispute between the Applicant and
Respondent already referred, or which
may be referred by any of the
parties in future for dispute resolution or arbitration.
[9]
Simultaneously with opposing the relief applied for by RAL, Axton
applied for the following relief by means of a counter application:
9.1 Ordering RAL to make
payment of the following sums to Axton within 30 (thirty) days from
the date of order and in accordance
with the undertaking from RAL’s
attorneys:
9.1.1 Payment in the sum
of R5,257,959.31 (VAT inclusive) being the retention amount withheld
by RAL.
9.1.2 Payment in the sum
of R125,913.66 (VAT inclusive), being the difference between the sum
of R1,630,617.18 (VAT inclusive) admitted
as owing by or on behalf of
RAL.
9.1.3 Payment of interest
at the prescribed rate of interest,
a tempore morae
from 11
June 2018 on the aforesaid sums.
[10]
In the alternative to the above, Axton claimed:
10.1 That the decisions
delivered by Mr Brian Westcott (the ‘Adjudicator’) on or
about the 27
th
of February 2020 (in respect of the merits)
and on or about the 7
th
of August 2020 (in respect of the
quantum), are binding on Axton and RAL.
10.2 That RAL makes the
following payments to Axton within 30 days from the date of order:
10.2.1 The sum of
R2,440,031.05 (VAT inclusive) being the amount as determined by the
Adjudicator.
10.2.2 The sum of
R127,684.01 (Vat inclusive) being the 50% share payable by RAL for
the costs of the adjudication proceedings.
10.2.3 Payment of
interest at the prescribed rate of interest,
a tempore morae,
from
11 June 2018 on the aforesaid amounts.
[11]
Both the Main Application as well as the Counter Application was
opposed. Of particular importance to the current proceedings
are the
following concessions made by RAL in their Founding affidavit:
11.1 They participated in
the adjudication proceedings, albeit reluctantly. They will however
not abide by the Adjudicator’s
decision.
[1]
11.2 Despite RAL’s
protestations, there are currently two parallel processes pending
pertaining to the disputes between the
parties, being the
adjudication process in respect of the retention amount and the
litigation in the Main action in respect of
the damages claims based
on breach of contract and delict.
[2]
11.3 RAL submits that the
two processes have nothing to do with each other and are premised on
separate causes of action.
[3]
11.4 RAL in effect raises
the defence of set off in as far as unliquidated damages should in
due course be set off against the claim
for retention amounts.
[4]
The
judgment and order in the Court
a quo:
[12]
The Honourable Acting Madam Justice Lithole dismissed both the Main
Application as well as the Counter Application with costs.
In her
reasoning she confirms that the Main Application is launched in terms
of the provisions of Section 3(2) of the
Arbitration Act,
Act
45 of 1965. It is therefore a requirement that ‘good cause’
be shown for the setting aside of the arbitration agreement.
[13]
The learned Acting Judge
concluded that RAL failed to discharge the
onus
of
showing that good cause exists for the setting aside of the
arbitration agreement. More specifically:
[5]
‘
RAL failed to
prove that if the arbitration agreement, is implemented, it would
“unjustifiably” diminish or limit protections
afforded by
the Constitution. It only raised the point that it would lead to
multiplicity of proceedings which would be inconvenient
and expensive
for RAL.’
[14]
On this basis the Main Application was therefore dismissed with
costs.
[15]
As to the Counter
Application, the learned Acting Judge found that there is a real
dispute of facts. She furthermore found:
[6]
‘
For one it is
not quite clear how much is Axton entitled to in the retention
amount. Axton is claiming different amount to the amount
awarded by
the Adjudicator. Based on the facts it is impossible to decide on
paper as to whether, it is Matla or Axton or both
the parties, which
are to be blamed for the defective road complained about. There is
real dispute which cannot be decided on paper’.
[16]
The Counter Application was thus likewise dismissed with costs.
Analysis
of the Facts and Law:
The
Main Application
[17]
In this Court’s view, the Court
a quo
correctly
dismissed the Main Application.
[18]
First and foremost, it must be noted that RAL applies for the setting
aside of the dispute resolution provisions contained
in Clause 10 of
the GCC, alternatively that the provisions of Clause 10 shall cease
to have effect with reference to any dispute
between the Applicant
and the Second Respondent already referred or may be referred by any
of the parties in future for dispute
resolution or arbitration.
[19]
In support hereof they submit that the current litigation
proceedings, instituted by them, fall outside of the ambit of Clause
10 of the GCC. As stated before, they also concede that the
adjudication proceedings are ‘pending’ thus rendering
them valid.
[20]
Section 1 of the
Arbitration Act,
defines an ‘arbitration
agreement’ as follows:
‘
arbitration
agreement’ means a written agreement providing for the
reference to arbitration of any existing dispute or any
future
dispute relating to a matter specified in the agreement, whether an
arbitrator is named or designated therein or not.
[21]
Clause 10.5 of the GCC provides for adjudication. Clause 10.6.1
clearly states that either party shall have the right to disagree
with any decision of the Adjudication Board and refer the matter to
arbitration or court proceedings, whichever is applicable in
terms of
the Contract.
[22]
Clause 10.7 provides for arbitration. RAL however does not apply in
their Notice of Motion for the setting aside of this clause.
It
stands to be noted that Counsel presumably made a proposal to the
Court
a quo
as to a revised order referring to Clause 10.7.
This is in line with the submission in the Replying affidavit. The
record however
does not show that a formal amendment was affected,
and the court therefore need not determine if this proposed revised
order should
be considered.
[23]
Having realised their oversight, the concede in their Heads of
Argument that their relief, as prayed for, cannot and should
not
succeed. They consequently move for revised relief only dealing with
the current litigation and arbitration proceedings.
[24]
Be that as it may, RAL’s argument in its Founding affidavit is
mutually destructive. On the one hand it argues that the
current
litigation falls outside of the provisions of the GCC and on the
other hand it argues that the clauses pertaining to adjudication
and
arbitration should be set aside so as to not apply to the pending
litigation.
[25]
In this Court’s view, the concept of ‘good cause’
does not include an instance where the Applicant submits
that the
alternative dispute resolution provisions are not applicable. More
specifically, it is not appropriate to apply for relief
in the form
of setting aside an arbitration agreement on the basis that the
dispute is not susceptible to arbitration. A court
should not be
burdened with determining a theoretical dispute that may or may not
exists.
[26]
The pending litigation is however not the only dispute between the
parties. It is common cause that an adjudication award was
made that
forms the
crux
of the Counter Application. It must therefore
be determined if this dispute is capable of being resolved by means
of arbitration
and if it can be considered by the Court by means of
litigation. It must also be borne in mind that the adjudication award
does
not feature as a dispute in the Main Action. It is common cause
that no Counterclaim was instituted by Axton for the recovery of
this
amount.
[27]
Before the Court can determine if RAL’s application has any
merits in respect of the adjudication award, this court must
first
determine if there is a dispute capable of being referred to
arbitration. There can be no referral to arbitration if there
is no
dispute. Section 1 of the
Arbitration Act
provides that the
purpose of an arbitration agreement is the reference of an
existing
or future
dispute to arbitration.
[28]
On the 6
th
of April 2020 and on the 14
th
of
September 2020, Axton delivered Notices of Dissatisfaction in respect
of the First and Final Adjudicator’s decisions and
awards. On
the 29
th
of October 2020, Axton pertinently withdrew its
respective Notices of Objection.
[29]
On the 18
th
of November 2020, Axton delivered a Notice of
Arbitration as contemplated in Article 3 of the Rules in respect of
Arbitrations.
[30]
Clause 10.6.1.2 of the GCC states the following:
’
10.6.1.2 A
party shall not dispute the validity or correctness of the whole or a
specified party of the decision before 28 days
or after 56 days from
receipt of this decision.
Unless either party
shall on or after the said 28 days, or on or before the said 56 days
from receipt of the decision, give written
notice to the other party,
referring to this Clause, disputing the validity or correctness of
the whole or a specified part of
the decision, he shall have no
further right to refer such a dispute to arbitration or court
proceedings, whichever is applicable
in terms of the Contract.’
[31]
Clause 10.6.2 furthermore provides:
’
10.6.2 In the
event that a decision of the Adjudication Board was not disputed and
a party fails to comply with the decision, the
other party may,
without prejudice to any right he may have, refer the failure to
arbitration or court proceedings, whichever is
applicable in terms of
the Contract’.
[32]
It must be noted that this Court is not privy to the full Contract,
nor is this Court privy to specifically the full Contract
Data. It
appears from the Arbitration notice and the Replying affidavit that
the parties have elected arbitration as dispute resolution
mechanism
as opposed to litigation. One would have assumed that this election
would be a prominent feature in the respective affidavits.
It
furthermore appears from the Replying affidavit that they agreed that
the Arbitration will be stayed pending outcome of these
proceedings.
[33]
Having regard to the aforesaid, a dispute therefore exists as
contemplated in the
Arbitration Act.
This dispute is currently
pending and stands to be determined by means of arbitration. In
opposition of the Adjudicator award, RAL
inter alia
raised the
issue that the matter is pending before this Court and that a
possible counter claim stands to be determined against
Axton. For the
sake of convenience, so they submit, the final determination of the
Adjudicator award should be dealt with by the
Court. Hence, they
refuse to comply with the award. This objection defies the object of
arbitration proceedings and is quite counterproductive.
Essentially,
they are forcing Axton to make use of litigation for the sake of
their own convenience. The issue that stands to be
determined by
means of arbitration does not relate to an intricate factual synopsis
or any legal argument that is not suitable
for determination by means
of arbitration. There is no reason why it cannot be referred to
arbitration and dealt with by a suitable
Arbitrator accordingly.
[34]
In the often referred to
matter of
De
Lange v Methodist Church and Another
[7]
the
following was stated:
‘
The Supreme
Court of Appeal correctly ventured the view that the requirement of
good cause in order to escape an arbitration agreement
entails a
consideration of the merits of each case in order to arrive at a just
and equitable outcome in a specific set of circumstances.
Put another
way: is it in the interest of justice to hold a party to an
arbitration agreement that would result in a futile, unfair
or
unreasonable outcome or perhaps an unconscionable burden? The Act is
of the pre-Constitution kind. Now our understanding of
good cause
must embrace an enquiry into whether the arbitration agreement, if
implemented, would unjustifiably diminish or limit
protections
afforded by the Constitution. Absent infringement of constitutional
norms, courts will hesitate to set aside an arbitration
agreement
untainted by misconduct or irregularity unless a truly compelling
reason exists. As this court itself stated:
‘
the valued of
our Constitution will not necessarily best be served by ...
enhance[ing] the power of the courts to set aside private
arbitration
awards ... If courts are to quick to find fault with the manner in
which an arbitration has been conducted ... the
goals of private
arbitration may well be defeated.’
[35]
The court
a quo
therefore correctly found that no good cause
has been shown to set aside the arbitration agreement. No compelling
reason exists
for this Court to come to a different conclusion.
[36]
The Appeal of RAL therefore cannot succeed and stands to be dismissed
with costs.
Counter
Application:
[37]
The Counter Application
of Axton can also not succeed. In the first instance, Axton wants an
alleged settlement agreement to be
made an order of court whilst the
conclusion of the agreement is in dispute. In terms of the well-known
principle enunciated in
Plascon
Evans Paints Limited v Van Riebeeck Paints (Pty) Ltd
[8]
,
motion
court is not the correct forum to address an issue that is disputed
on
bona
fide
grounds.
[38]
The court
a quo
made reference to the liability of either
Axton or Matla with regards to the damages as being the critical
factual dispute that
cannot be determined on the papers before court.
In this Court’s view, the dispute of fact relevant to the
relief prayed
for, is not the liability for the damages (as this will
be determined in the Main Action in due course) but rather the
dispute
pertaining to the authority of the erstwhile attorney of RAL,
Ms Mangena, to bind RAL to any undertaking (which likewise forms the
subject of a dispute raised in the Main Case).
Under
the circumstances this prayer cannot succeed.
[39]
Axton applied in the alternative for an order in terms whereof the
adjudication award must be made an order of court. As stated
herein
before, the provisions of GCC read with the Contract Data provides
that an arbitration process must be followed should there
be
non-compliance with the adjudication award.
[40]
No case is made out why the Court should disregard the alternative
dispute resolution procedures agreed upon between the parties.
No
good cause exists as contemplated in the
Arbitration Act
and
no compelling reason is displayed in the papers to circumvent the
agreed procedural relief. This prayer can therefore also not
be
granted.
[41]
As to the declaratory relief, Axton expects from the court to make a
ruling in an opposed application pre-empting the outcome
of a
defended trial. More specifically, contrary to the trite principles
applicable to opposed applications, Axton requires an
order declaring
a final outcome on a factual dispute. This is inappropriate and not
the intended utilisation of declaratory proceedings.
[42]
In lieu of the fact that it is common cause between the parties that
these damages claims are the subject of the pending litigation
in the
Main Case, same cannot be determined on motion.
[43]
As such, Axton cannot succeed with the relief and the order by the
court
a quo
was therefore correctly granted.
Costs:
[44]
There is no reason why the cost order should not follow the outcome
of the proceedings. As neither party was successful, the
unsuccessful
party should be responsible for the costs.
[45]
Having regard to the voluminous nature of the matter, as well as the
considerable preparation time spent having regard to the
complex
nature of the proceedings and history in this matter, this court is
of the view that awarding costs to Counsel on Scale
C is warranted.
Order:
[46]
In the result the following order is made:
46.1 The Appeal is
dismissed with costs, including costs to Counsel on Scale C.
46.2 The Counter
Appeal is dismissed with costs, including costs to Counsel on Scale
C.
M BRESLER
ACTING JUDGE OF THE
HIGH COURT,
LIMPOPO
DIVISION, POLOKWANE
I concur,
TC TSHIDADA
JUDGE OF THE HIGH
COURT,
LIMPOPO
DIVISION, POLOKWANE
I
concur,
T DEANE
ACTING JUDGE OF THE
HIGH COURT,
LIMPOPO
DIVISION, POLOKWANE
APPEARANCES:
FOR
THE APPELLANT
:
Adv. S Tshikila
INSTRUCTED
BY
:
Orelowitz
Incorporated
daniella@orelowitz.co.za
stan@orelowitz.co.za
FOR
THE RESPONDENT
:
Adv. S Mills SC
INSTRUCTED
BY
:
Machaba
Incorporated
law@machabainc.co.za
DATE
OF HEARING
:
26
April 2024
DATE
OF JUDGMENT
:
01
August 2024
[1]
See paragraph 6.44 of the Founding affidavit contained on page 36 of
the record.
[2]
See paragraph 6.45 of the Founding affidavit contained on page 36 of
the record.
[3]
See paragraph 6.46 of the Founding affidavit contained on page 36 of
the record.
[4]
See paragraph 6.48 of the Founding affidavit contained on page 37 of
the record.
[5]
Paragraph 66 of the Judgment on page 737 of the record.
[6]
Paragraph 57 of the Judgment on page 734 of the record.
[7]
2016 (2) SA 1
(CC) at [37]
[8]
[1984] ZASCA 51
;
1984 (3) SA 623
(A) at 634