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[2024] ZAECQBHC 50
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Ascon Trading CC t/a Ascon Trading Civil Engineering v Wilson and Another (3387/2020) [2024] ZAECQBHC 50 (20 August 2024)
IN THE HIGH COURT OF
SOUTH AFRICA
(EASTERN CAPE
DIVISION, GQEBERHA)
CASE NO: 3387/2020
(1) REPORTABLE: YES/NO
(2) OF INTEREST TO OTHER
JUDGES: YES/NO
(3) REVISED.
DATE:
SIGNATURE:
In the matter between:
ASCON TRADING CC t/a
ASCON TRADING
CIVIL
ENGINEERING
Applicant
and
CLIVE
WILSON
First Respondent
NELSON
MANDELA BAY MUNICIPALITY
Second
Respondent
JUDGMENT
POTGIETER
J
INTRODUCTION
[1]
This matter is a sequel to a contractual dispute relating to the
construction of certain sewerage infrastructure by the applicant
on
behalf of the second respondent, the Nelson Mandela Bay Municipality
(“the Municipality”) in terms of a construction
contract
concluded by the said parties.
[2]
In an attempt to resolve the dispute, the applicant pursued the
dispute resolution provisions of the contract which include
adjudication and finally arbitration
.
The adjudication process
was exhausted resulting in a decision having been made in favour of
the applicant on 27 May 2022 for payment
of the aggregate sum of
R11 722 975.95 (‘the adjudication capital sum’)
in respect of various individual
amounts claimed by the applicant.
The adjudicator found that no interest was payable on any of these
individual amounts. The dispute
was subsequently referred to
arbitration and the first respondent was appointed as arbitrator. The
arbitration is currently pending
in respect of the various disputed
claims and counter claims of the parties.
[3]
Due to non-payment of the adjudication capital sum, the applicant
obtained an interlocutory decision from the first respondent
(styled
by the latter as an Interim Measure in terms of the applicable
arbitration rules) on 24 September 2022 ordering the Municipality
to
comply with the adjudication decision notwithstanding the pending
arbitration. Pursuant to proceedings instituted in this court
by the
applicant, an order was granted by agreement between the parties on
27 July 2023,
inter alia,
directing the Municipality to pay
the adjudication capital sum in the amount of R11 722 975.95
to the applicant. In terms
of the order, the applicant’s claim
for interest on the adjudication capital sum calculated from 27 May
2022 and certain
unresolved aspects of legal costs were separated and
postponed for hearing on 14 September 2023. The prayer to make the
interlocutory
arbitration decision an order of court was not pursued.
The adjudication capital sum has since been paid to the applicant by
the
Municipality.
[4]
The present proceedings (the main application) concern the
determination of the abovesaid separated issues. The application
is
opposed by the Municipality. The matter was fully argued and judgment
was reserved on 14 September 2023. Mr Friedman, the applicant’s
attorney, appeared on its behalf and Mr Ford SC, together with Mr
Richards, appeared on behalf of the Municipality. The arbitrator
is
not participating in the proceedings.
[5]
On 19 September 2023 (while judgment was pending) the applicant’s
attorney unilaterally delivered via email supplementary
heads of
argument raising a new issue and informally sought leave to file the
same. In view of the objection raised by the Municipality’s
attorney, the supplementary heads of argument were not considered and
the applicant’s attorney was directed to deal with
the matter
formally in terms of the rules of court. Subsequently on 27 September
2023, before judgment could be delivered, the
applicant applied in
terms of rule 28 to amend its notice of motion to claim interest in
the alternative from 24 September 2022,
being the date of the said
interlocutory arbitration decision, instead of 27 May 2022 (the date
of the adjudication decision).
The application to amend was also
opposed. Considerable delays were occasioned by the exchange of
papers and re-enrolment of the
matter to deal with the intervening
opposed application to amend which was heard on 14 June 2024. It is
apposite to deal with the
merits of the application to amend before
reverting to the main application.
APPLICATION
TO AMEND
[6]
Mr Beyleveld SC appeared on behalf of the applicant at the hearing of
the application to amend and Mr Richards SC (who has since
acquired
the status of senior counsel) appeared on behalf of the Municipality.
The
approach to applications to amend
[7]
The
approach to be adopted to applications to amend is not in issue
between the parties and is in fact trite. The court has a wide
discretion to permit amendments which discretion must be exercised
judicially. The decision should not be arrived at capriciously,
but
for substantial reasons. The position has been stated as follows in
Devonia
Shipping Ltd v Luis (Yeoman Shipping Ltd Intervening)
[1]
:
The general rule is that
an amendment of a notice of motion, as in the case of a summons or
pleading in an action, will always be
allowed unless the application
to amend is
mala fide
or unless the amendment would cause an
injustice or prejudice to the other side which cannot be compensated
by an order for costs
or, in other words, unless the parties cannot
be put back for the purposes of justice in the same position as they
were when the
notice of motion which it is sought to amend was filed.
[8]
The court
indicated in
Caxton
Ltd & Others v Reeva Forman (Pty) Ltd & Another
[2]
that
although ‘…
the
decision whether to grant or refuse an application to amend a
pleading rests in the discretion of the Court, this discretion
must
be exercised with due regard to certain basic principles’.
In
Trans-Drakensberg
Bank Ltd (Under Judicial Management) v Combined Engineering (Pty) Ltd
& Another
[3]
the
court stated that ‘
[h]aving
already made his case in his pleading, if he wishes to change or add
to this, he must explain the reason and show prima
facie that he has
something deserving of consideration, a triable issue; he cannot be
allowed to harass his opponent by an amendment
which has no
foundation’.
White J held in
Commercial
Union Assurance Co Ltd v Waymark NO
[4]
that
the latter dictum is one of the ‘
basic
principles’
to
which regard must be had in deciding applications to amend.
Submissions
of the parties
[9]
It is indicated in the founding affidavit that the applicant’s
legal representative should have but inadvertently failed
to address
the issue that ‘
at the very least interest should be payable
from the date of the Second Respondent’s Award of 24 September
2022’
(the reference to Second Respondent is erroneous and
should be first respondent). The contention accordingly is that
interest should
be payable at the very least from the date of the
arbitrator’s decision if not from the date of the adjudication
decision.
[10]
Mr
Beyleveld submitted that the argument that the arbitrator’s
decision does not attract interests is misconceived and conflates
‘post-judgement’ interest with interest in terms of the
agreement between the parties. The adjudicator’s determination
that no interest is payable, dealt with the situation prior to the
award. In any event, the matter has advanced to the stage where
there
is an arbitral award and on a purposive interpretation it cannot be
said that interest is not payable once an arbitral award
has been
made. Interest is payable in terms of both the Prescribed Rate of
Interest Act, 55 of 1975 (“the Interest Act”)
and the
Arbitration Act, 42 of 1965 (“the
Arbitration Act&rdquo
;). The
provisions of
section 29
of the
Arbitration Act
[5
]
are of some significance and make it abundantly clear that the
arbitrator’s award carries interest from the date of the award.
The fact that this award was not made an order of court is of no
moment because the starting date for interest is prescribed by
statute and does not require repetition in a court order. Given that
no prejudice has been shown by the Municipality, the application
for
the amendment of the notice of motion should be granted to provide
for the payment of interest in the alternative from 24 September
2022
being the date of the arbitrator’s decision. Mr Beyleveld
finally contended that the argument is misconceived that this
relief
is not competent in the absence of the variation of the court order
of 27 July 2023. He submitted that interest is payable
ex
lege
on
the arbitrator’s award which renders the variation of the court
order superfluous.
[11]
Mr Richards submitted that the relief sought to amend the notice of
motion in terms of
rule 28
is not competent. The court order of 27
July 2023 specified the two reserved issues which are the only
remaining issues for determination
in the main application. To that
extent the notice of motion was superseded by the court order.
Comprehensive argument was presented
on those reserved issues at the
hearing whereafter judgement was reserved. Significantly, the
applicant is not seeking the amendment
of the court order in terms of
rule 42
as it should have done. In any event, there is no basis for
amending the court order even
mero motu
by the court, as none
of the circumstances set out in
rule 42
applies in this case. The
order is not interlocutory in nature but rather meets the attributes
of an ‘
order or judgement’
as envisaged in the
rules of court. It is final in effect and not susceptible to
alteration by the court. It grants definite and
distinct relief, and
disposes at least of a substantial portion of the relief claimed in
the main application, namely payment of
the adjudication capital sum.
Furthermore, the order was not erroneously sought or granted in the
absence of the applicant nor
does it contain an ambiguity or a patent
error or omission. Finally, it did not result from a mistake common
to the parties nor
is there a causative link between a mistake and
the grant of the order. He furthermore submitted that the guiding
principle is
the certainty of judgements and that rescission or
variation of the court order should only be allowed in exceptional
circumstances.
The court has no discretion to set aside an order in
terms of
rule 42
in the absence of the relevant jurisdictional
requirements contained in the rule. The application should therefore
be dismissed
with costs on this basis alone.
[12]
Mr Richards contended that the
rule 28
application in any event lacks
merit. Firstly, it seeks to introduce a new cause of action. The case
being pursued in the main
application was that interest was payable
from the date of the adjudication decision. Reliance was placed in
this regard on the
cause of action that the adjudication decision
gave rise to an obligation to pay interest. The amendment on the
other hand is in
effect based on a different contention, namely that
the arbitral decision relating to the adjudication capital sum gave
rise to
an obligation to pay interest. Accordingly, the prejudice
which the Municipality stands to suffer having been deprived of the
opportunity
to address this new cause of action fully in the papers,
cannot be compensated for by a costs order. The court will
accordingly
decline to exercise its discretion to allow an amendment
in the circumstances.
[13]
Secondly, the applicant has failed to establish that the amendment,
if granted, would have any prospect of success or that
it puts up
‘
something deserving of consideration, a triable issue
’.
Pursuant to the Municipality’s defence of
lis pendens
,
the applicant withdrew all interest claims (including to the extent
applicable, also ‘post-adjudication award interest’)
that
were before the arbitrator. As a result, the adjudicator’s
determination of contractual entitlements would have become
final and
contractually binding upon the parties. The contract provides for a
two-fold dispute resolution process, namely adjudication
and for any
disagreements that result from that process to be determined in the
succeeding component, being arbitration. The arbitration
process has
been engaged and has yet to be finalised. Any remaining issues of
interest fall to be determined in that process. This
deprives the
court of jurisdiction to determine such issues, including interest on
the arbitral decision, which arise from the
contract.
[14]
Thirdly,
the adjudicator’s decision was not exhaustive of the dispute
between the parties. Adjudication has been characterised
by the
Supreme Court of Appeal (SCA) as ‘
an
intervening provisional stage in the dispute resolution process’.
[6]
The amount of the adjudicator’s decision was not a separate
award in its own right but was simply the aggregate of the various
amounts reflected in the decision. The adjudicator accordingly
determined on a provisional and interim basis the contractual amounts
considered to be due to the applicant but pertinently held that
pursuant to the provisions of the contract, the applicant was not
entitled to interest on such amounts. The arbitrator found in his
decision that ‘
Respondent
is indeed obliged to comply with the Adjudication Decision and
accordingly order that it do so forthwith’
,
however, that, enforcement of the decision should be sought in the
competent court having jurisdiction. It is clear that the arbitrator
did not go further than to declare that the Municipality was obliged
to comply with the adjudication decision. The arbitrator’s
decision could not found a claim for anything more than is provided
for in the adjudication decision which expressly excluded any
liability for interest whatsoever.
[15]
Furthermore,
the Interest Act does not assist the applicant. The amount of the
adjudication decision, which does not concern an
unliquidated debt,
was not determined as contemplated in section 2A(1)
[7]
of the Interest Act, nor did the arbitrator’s decision amount
to the determination of an unliquidated debt. The latter decision
went no further than to record the trite principle that the amount of
an adjudication decision is payable on an interim basis,
pending the
determination of any dispute with regard to that decision in the
arbitration. The contract clearly provides that no
interest is
payable thus excluding the applicability of section 1(1)
[8]
of the Interest Act. Neither the adjudication decision nor the
arbitrator’s decision constitutes a ‘
judgement
debt’
or a ‘
judgement
or order’
and
section 2(1)
[9]
of the Interest
Act accordingly does not apply.
[16]
It was
finally submitted that the applicant’s contention for
mora
interest, is unfounded. The contract does not provide for payment of
an adjudication decision by a stipulated date. Its enforcement
pending the final determination of disputes with regard thereto by
arbitration, arises from general practice. The SCA cautioned
that
sight should not be lost that adjudication is merely an intervening,
provisional stage in the dispute resolution process and
that the
parties ‘…
still
have a right of recourse to litigation and arbitration. Only a
tribunal may revise an adjudicator’s decision’
[10]
.
The arbitrator’s decision did not constitute the final
determination of the disputes between the parties. It reflected
nothing
more than the practice that payment be made in the interim,
subject to the right of recovery thereof to the extent that the
disputes
are determined in favour of the Municipality in the
arbitration.
[11]
Neither the
requirement that payment be made, as referred to by both the
adjudicator and the arbitrator, nor any demand for payment
converts
the adjudication decision into anything other than what the contract
provides. In this instance the contract pertinently
provides that no
interest is payable. It follows inexorably that the common law
principles of
mora
cannot prevail and override the principle of
pacta
sunt servanda.
The application to amend therefore falls to be dismissed with costs,
including the costs of counsel on Scale C in terms of rule
69(7).
Evaluation
[17]
Having considered the matter, I agree with the submission of Mr
Richards that the application to amend the notice of motion
in terms
of rule 28, is not competent in the absence of an application for the
variation or rescission of the court order of 27
July 2023 which
defined the remaining issues for determination. The order that was
taken by agreement clearly superseded the notice
of motion in
delineating the ambit of the hearing. Amending only the terms of the
notice of motion would thus be ineffectual in
the circumstances. The
main application was fully argued on the basis of the court order.
The application for the amendment was
an afterthought (this much is
acknowledged by the applicant) on the part of the applicant’s
legal representative seemingly
prompted by a submission that was made
by the Municipality’s counsel during argument of the main
application. It appears
to have been based on the realisation that
the claim for interest on the adjudication decision was bound to
fail. Furthermore,
the applicant failed to establish any of the
jurisdictional requirements set out in rule 42 dealing with the
rescission or variation
of court orders. The argument lacks merit
that there is no need to vary the court order of 27 July 2023 because
there is statutory
provision for interest on the arbitrator’s
award which renders the variation of the court order superfluous. In
view of what
is set out below concerning the merits of the
application to amend, it is clear that the statutory provisions
relied upon by the
applicant find no application in the matter. The
application accordingly falls to be dismissed on this ground alone.
[18]
In any event, in my view the submission of Mr Richards is
well-founded that the rule 28 application lacks merit. It purports
to
introduce a completely new cause of action not dealt with at all in
the papers at the stage when the issues determined in terms
of the
relevant court order have been fully argued and judgement was
reserved. A costs order cannot adequately compensate the Municipality
for the prejudice that it will clearly suffer in the circumstances
should the application be granted. It follows that I do not
agree
with the submission of Mr Beyleveld that no prejudice has been
established by the Municipality. I am not persuaded in the
circumstances to exercise my discretion in favour of allowing the
application to amend which would have the practical effect of
re-commencing the matter on a completely new cause of action.
[19]
The issue
arising from the envisaged amendment concerns what is referred to by
the applicant as ‘
post-judgement
interest’
which
according to Mr Beyleveld should not be conflated with interest in
terms of the contract. The applicant’s argument is
that it is
statutorily determined that the arbitrator’s decision attracts
‘
post-judgement’
interest
by virtue of the provisions of both the Interest Act and the
Arbitration Act. In
this regard, I agree with the submission by Mr
Richards that this argument is not supported by any of the above
provisions of the
Interest Act relied upon by the applicant. Neither
the adjudication decision nor the arbitration decision gave rise to a
‘
judgement
debt’
in
terms of a ‘
judgement
or order’
[12]
or amounts to the determination of an unliquidated debt. Moreover,
the issue of interest is governed by the contract which provides
that
no interest is payable by the Municipality. The principles of
mora
interest equally do not apply given the said no-interest provisions
in the contract.
[20]
In my view,
section 29
of the
Arbitration Act equally
does not assist the
applicant. The nature of adjudication has been clearly established as
an interim, provisional step in the dispute
resolution process which
does not finally resolve any issue. Equally, the arbitration decision
did not determine any of the issues
between the parties which issues
await determination at the pending arbitration. It is akin to a
status
quo
determination confirming, as it does, that the Municipality was
obliged to comply with the terms of the adjudication decision despite
the pending arbitration. It clearly does not qualify as an award that
determines that the Municipality is liable to make payment
and
ordering it to pay a sum of money as contemplated in
section 29.
An
award of that nature could conceivably result from the pending
arbitration. However, it cannot in my view be constituted by
an
Interim Measure simply confirming that the adjudication decision had
to be complied with in the interim subject to reimbursement
of any
monies paid should the Municipality successfully challenge the
adjudication decision in the pending arbitration. The fact
that the
arbitration decision indirectly facilitated payment of the
adjudication capital sum, did not convert the decision into
an award
ordering the payment of a sum of money. It does not go any further
than declaring that the Municipality was obliged to
comply with the
adjudication decision notwithstanding the pending arbitration and
ordering it to do so. In my view
section 29
envisages a decision
taken by the arbitrator after due consideration of the merits of the
claim finally determining a substantive
issue and not rulings of an
interim and procedural nature as in the present case.
[13]
The issuing of an interim measure does not constitute an award
[14]
and the interest provisions of
section 29
accordingly do not apply to
it.
[21]
The applicant suggests that it is anomalous that no interest is
payable where the capital sum is paid a considerable period
after the
relevant decision was made. The short answer is that enforcement
steps are available to the successful claimant to ensure
expeditious
satisfaction of the decision. The claimant has no cause for complaint
about late payment if it neglects to act promptly
to enforce payment
and would have no reason to complain where it does act promptly.
[22]
It follows that there is no merit in the
rule 28
application to amend
the notice of motion and that it does not raise a triable issue. The
application thus falls to be dismissed.
I now revert to the merits of
the main application.
MERITS
OF THE MAIN APPLICATION
Relevant
background
[23]
In the unamended notice of motion, the applicant is claiming interest
on the adjudication capital sum at the rate of 7.25 percent
per annum
calculated from 27 May 2022 to date of payment, while the
Municipality contends that in terms of the provisions of the
contract
no interest is payable by it.
[24]
The issue concerning interest in fact arose during the adjudication
proceedings. The adjudicator decided the issue in favour
of the
Municipality and held that in terms of the provisions of the
contract, the applicant was not entitled to interest on the
amounts
awarded in the adjudication.
[25]
There has been a flurry of supplementary papers exchanged between the
parties in the main application. The most pertinent whereof
for
present purposes is a supplementary affidavit deposed to by the
Municipality’s attorney Mr Kailash Karsan which was filed
on 5
September 2023. At the commencement of the hearing on 14 September
2023, I granted the Municipality’s unopposed application
for
leave to file this affidavit. The affidavit disclosed material
information that became available to the Municipality subsequent
to
having filed its opposing papers in the main application during
November 2022. The Municipality contended in its answering affidavit
that the relief sought by the applicant with regard to interest was
lis pendens
in the pending arbitration. The supplementary
affidavit dealt with evidence supporting this contention, contained
in a written submission
by the applicant dated 8 August 2023 that was
filed in the arbitration. This document made it abundantly clear that
the issue of
interest was indeed pending before the arbitrator. The
document, for example, requested that the issue whether or not
interest
was payable should be disposed of separately from the other
issues in the arbitration. It also contains comprehensive submissions
in support of the contention that interest was indeed payable.
[26]
The supplementary affidavit of Mr Karsan reiterated the earlier
contention contained in the Municipality’s answering
affidavit
that the issue of interest was
lis pendens
before the
arbitration and that the applicant’s claim for interest should
accordingly be dismissed.
[27]
In response to the supplementary affidavit, the applicant promptly
withdrew the claim for interest from the arbitration and
filed a
further affidavit, seemingly in response to the supplementary
affidavit of Mr Karsan, confirming that the claim for interest
on the
awarded amounts is abandoned. The purpose clearly was to alleviate
where the shoe pinched. The issue of
lis pendens
accordingly
fell away.
[28]
Both parties filed supplementary heads of argument dealing with the
new developments.
Submissions
on behalf of the parties
[29]
In both his heads of argument and his address at the hearing, Mr
Friedman indicated that the only issue for determination was
whether
the non-interest-bearing provisions of the contract cover all overdue
payments. In view of the late payment of the adjudication
capital
sum, the question in his submission therefore was whether interest
was payable from the date of the adjudication decision
to the date of
payment. I proceed to deal with this issue.
[30]
The aforesaid ruling of the adjudicator that no interest was payable
on the amounts constituting the aggregate capital sum
was based on
the amended provisions of clause 6.10.6.2 contained in
Part C
of the
contract. In its initial unamended form, the clause made provision
for simple interest to be payable on outstanding amounts.
However, it
was subsequently amended to read:
“
No interest
shall be payable to the Contractor upon any monies retained or
overdue in terms of the Contract.”
[31]
Mr Friedman submitted that the amended provisions of clause 6.10.6.2
are limited to outstanding or arrear amounts due in terms
of clause
6.10 of the contract. He indicated that the applicant accepts the
ruling to that effect by the adjudicator. However,
he submitted that
once the adjudication decision was issued it constituted a judicial
novation and gave rise to an entirely separate
and new independent
cause of action falling outside of the payment obligations of clause
6.10 of the contract. He submitted that
the capital sum determined by
the adjudicator was unaffected by the amended interest provisions of
clause 6.10.6.2 and constitutes
a new obligation bearing interest in
terms of the Interest Act, as well as
section 29
of the
Arbitration
Act from
the date of the decision to the date of payment. He
emphasised that the issue of ‘post-award’ interest was
not before
the adjudicator and was therefore an open question that
was not decided by the adjudicator.
[32]
Mr Ford submitted that the effect of the applicant’s withdrawal
of the claim for interest before the arbitrator, was
to render the
adjudicator’s ruling final and binding that no interest was
payable by the Municipality. The aggregate quantum
of the capital sum
is constituted by various individual items which the adjudicator
found were due and payable by the Municipality.
There was no
composite lump sum awarded in favour of the applicant. The
adjudicator’s ruling is final and was based upon
the provisions
of the contract. None of the individual claims upheld in the decision
accordingly bears any interest in light of
the provisions of clause
6.10.6.2. The withdrawal of the interest claim from the arbitration
does not vest jurisdiction in the
court to decide the same issue
which was finalised by the adjudicator or to order the payment of
interest contrary to the terms
of the contract. That would be in
conflict with the dispute resolution mechanism established in terms
of the contract which provides
for a progressive process culminating
in arbitration which is in fact currently pending before the first
respondent. Any further
legal remedies outside of the agreed dispute
resolution process are circumscribed by the provisions of the
Arbitration Act. The
applicant accordingly does not enjoy unfettered
access to judicial proceedings to resolve the contractual dispute
between the parties.
Mr Ford further submitted that there was no
substance in the contention that the adjudication decision
constituted a judicial novation
or a new cause of action or that the
interest provisions of the Interest and Arbitration Acts find
application in the matter. Given
the fact that interest is governed
by the terms of the contract and that the adjudication decision does
not create a judgment debt
or constitute a judgment or order, the
Interest Act does not apply. Moreover, the decision is not an
arbitral determination. The
interest provisions of the
Arbitration
Act therefore
equally find no application in the matter.
Evaluation
[33]
I am in agreement with the submission of Mr Ford that the
adjudicator’s ruling with regard to interest has become final
pursuant to the withdrawal of the applicant’s challenge in this
regard before the arbitrator. The parties are bound by the
dispute
resolution process agreed upon in the contract. The issue of interest
has now been finalised in the course of that process
and cannot be
reopened in the present application. The applicant’s recourse
to court has been curtailed by the dispute resolution
provisions
which the parties agreed upon and is further circumscribed by the
Arbitration Act.
[34
]
As indicated, the applicant accepts the validity of the adjudicator’s
decision that no interest is payable on the individual
amounts
constituting the adjudication capital sum on the strength of the
provisions of the contract. It, however, contends for
what it terms
statutory ‘post-award’ interest seemingly based on the
provisions of the Interest and Arbitration Acts.
[35]
The amended
clause 6.10.6.2 expressly precludes the applicant from claiming
interest on any of the amounts constituting the aggregate
capital
sum. The terms of that clause are, in my view, not limited to arrear
or outstanding payments only, but apply to any payment
due in terms
of the contract including the quantum of the adjudicator’s
determination. All of the various individual items
covered in the
decision are subject to the provisions of clause 6.10.6.2. There is
clearly no question of a judicial novation creating
a new obligation
or cause of action as contended by the applicant which somehow
transformed the nature of these amounts and took
them outside of the
payment provisions of clause 6.10 of the contract. Novation whereby
an existing obligation is extinguished
and a new one substituted for
it may take two forms. It may either come about voluntarily by
consensus between the parties ie
novatio
voluntaria
,
or compulsorily by operation of law arising out of judicial
proceedings between the parties ie
novatio
necessaria.
There
clearly is no scope for a
novatio
voluntaria
in
this matter. The question is whether the adjudicator’s decision
has given rise to a
novatio
necessaria
extinguishing
and replacing the contractual obligation of the Municipality. There
is clear authority that a judgment enabling a
claimant to enforce
specific contractual rights, by execution if need be, without
affecting the remaining rights under the contract,
is not regarded as
novating the enforced rights but rather as strengthening or
reinforcing them.
[15]
The same
principles apply to an arbitral award which likewise does not novate
but merely confirms and strengthens the enforced
rights.
[16]
A
fortiori
,
the adjudicator’s decision (which is neither a judgment nor an
arbitral award) cannot conceivably give rise to a judicial
novation
or a
novatio
necessaria
in the circumstances of this matter.
[36]
Furthermore, the contract expressly deals with the issue of interest
and the adjudication decision is quite obviously neither
a judgement
or order creating a judgment debt nor an arbitral award in terms of
section 29
of the
Arbitration Act. The
interest provisions of either
the Interest Act or the
Arbitration Act accordingly
do not apply to
the adjudicator’s decision and there cannot be any issue of
‘post-award’ interest. Mr Friedman’s
submission to the contrary is bereft of any merit. The
applicant has accordingly failed to make out a case for so-called
‘post-award’ interest.
CONCLUSION
[37]
I am in the circumstances not persuaded that there is any merit in
either the application to amend or the main application,
which both
fall to be dismissed.
[38]
In the court order of 27 July 2023, the applicant has been awarded
the costs of set down and appearance consequent upon the
successful
proceedings to obtain payment of the adjudication capital sum. It is,
however, unsuccessful in the further proceedings
to amend the notice
of motion and to pursue the separated issues and should be held
liable for the costs of such further proceedings.
ORDER
[39]
In the result, I make the following order:
(a)
the applications to amend the notice of motion and in respect of the
separated issues relating to interest on the adjudication
award and
costs, are dismissed;
(b)
the applicant is directed to pay the costs of the above proceedings,
including the costs of counsel on Scale C as contemplated
in Uniform
Rule 69(7).
D.O. POTGIETER
JUDGE OF THE HIGH
COURT
APPEARANCE
Counsel
for the Applicant:
Mr
G Friedman Attorney (in the main application);
Adv
A Beyleveld SC (in the application to amend),
instructed
by Friedman Scheckter, 75 Second Avenue, Newton Park, Gqeberha
For
the Second Respondent:
Adv
Ford SC with Adv JG Richards (in the main application);
Adv
JG Richards SC (in the application to amend),
instructed
by Karsans Incorporated, 11 Bird Street, Central, Gqeberha
Date
of hearing:
14
September 2023 & 14 June 2024
Date
of delivery of judgment:
20
August 2024
[1]
1994(2)
SA 363 (C) at 369F-G
[2]
1990(3)
SA 547 (A) at 565G
[3]
1967(3)
SA 632 (D) at 641A
[4]
1995(2)
SA 73 (TK) at 77G
[5]
The
section provides as follows:
‘
Interest
on amount awarded
Where
an award orders the payment of a sum of money, such sum shall,
unless the award provides
otherwise,
carry interest as from the date of the award and at the same rate as
a judgment debt.’
[6]
Framatome
v Escom Holdings SOC Ltd
2022(2)
SA 395 (SCA) at para 20.
[7]
The
section provides as follows under the heading ‘
Interest
on unliquidated debts’
:
‘
Subject
to the provisions of this section, the amount of every unliquidated
debt as determined by a court of law, or an arbitrator
or an
arbitral tribunal or by agreement between the creditor and the
debtor, shall bear interest as contemplated in
section 1
’.
[8]
The
section is to the effect that if a debt bears interest and the rate
at which the interest is to be calculated
is
not governed by
any other law or by
an
agreement
or a trade custom or in other manner such interest shall be
calculated at the rate prescribed in terms of subsection 1(2)(a).
[9]
The
section provides that:
‘
Every
judgment debt
which, but for the provisions of this subsection, would not bear any
interest after the date of the
judgment
or order
by virtue of which it
is due, shall bear interest from the day on which such
judgment
debt
is payable, unless that
judgment or order
provides otherwise’.
(emphasis
added)
[10]
Framatome
supra
para 23.
[11]
Radon
Projects (Pty) Ltd v NV Properties (Pty) Ltd & Another
2013(6)
SA 345 (SCA).
[12]
An
arbitral award is not a judgment:
Administrasie
van Transvaal v Oosthuizen en ’n Ander
1990(3) SA 387 (W) at 397 I-J. The same would obviously apply to an
adjudicator’s decision.
[13]
Law
of South Africa (LAWSA) Vol 2 (3 ed) para 132; Jacobs
The
Law of Arbitration in South Africa
p124 para 146;
Harlin
Properties Ltd v Rush & Tomkins (SA) Ltd
1963(1) SA 187 (1) at 196 D; cf Johannes Voet
Commentarius
ad Pandectas
4.8.18 (Gane’s translation):
“
Arbitration
must dispose of every question submitted. – But there may be a
submission not merely on a single matter, but
also on many or all
causes and disputes. That kind of submission is called a
“full” submission, though that
expression is also used
in varying senses in the passages cited below. An arbitrator will
not therefore be considered to have
discharged his duty unless he
has disposed of all questions by his award. Otherwise he must
still be forced by the praetor
to settle what has not yet been
decided.
Disposition
must be final. – But even if only one matter of controversy
has been referred to him, it will not suffice for
him to have made
an interlocutory order in regard to it; but he must give such a
judgment as to show his intention that in accordance
with it, the
litigants shall be done with the whole controversy. It is thus
not possible for an arbitrator by his judgment
to send the
submitting parties away to another arbitrator or to the ordinary
judge.’
[14]
LAWSA
op
cit
para 132 footnote 4;
SA
Breweries Ltd v Shoprite Holdings Ltd
2008(1) SA 203 (SCA) para 22; P Ramsden
The
Law of Arbitration: South African & International Arbitration
(2ed) p203 para 9.5.4.
[15]
Trust
Bank of Africa v Dhooma
1970(3)
SA 304 (N) at 310A-C;
Swadif
(Pty) Ltd v Dyke NO
1978(1) SA 928 (A) at 944E-G. Whether a judgment for cancellation of
a contract and damages would give rise to a
novatio
necessaria
as suggested in the
Trust
Bank
matter is not entirely clear but requires no further consideration,
since the applicant has not sought the cancellation of the
contract
but payment of the amounts which it averred were due to it by the
Municipality.
[16]
Zygos
Corporation v Salen Rederierna AB
1984(4)
SA 444 (C) at 455F&I.