[1] This matter concerns an application in terms of s 31(1) of the Arbitration Act 42 of 1965 ("the
Act") to make an arbitration award an order of court, coupled with a counter -application in
terms of s 33 of the Act to review and set aside the award. The awar d was issued by the
second respondent, Advocate Schalk Aucamp N.O., acting as arbitrator under the auspices
of the Arbitration Foundation of Southern Africa ("AFSA").
[2] The application and counter -application are inextricably linked. If the award is valid and
enforceable, the applicant is entitled, subject to any residual discretion that I may have , to
have it made an order of court. If, however, the first respondent establishes that the award
is invalid or reviewable under s 33 of the Act, the main application cannot succeed and its
counter-claim must be granted.
[3] The dispute before me requires consideration of two principal questions. The first is whether
the arbitrator retained jurisdiction to deliver the award more than 30 days after the finalisation
of the matter without an extension. The second is whether, in making the award, the
arbitrator determined a dispute that did not arise from the pleadings and the arbitration
agreement, thereby exceeding his powers or committing a gross irregularity as contemplated
in section 33 of the Act.
[4] For the reasons that follow, I conclude that the first respondent’s counter -application must
succeed, that the award falls to be set aside, and that the application under s 31 of the Act
for enforcement of the award must accordingly be dismissed.
The parties and the background
[5] The applicant, SIGC (Pty) Ltd, concluded a written consultancy agreement with the first
respondent, 3Sixty Health (Pty) Ltd, on 7 September 2022. The agreement provided for the
rendering by the applicant of defined consultancy services and for payment of m obilisation
consultancy fees, RFP award consultancy fees, and revenue consultancy fees , the latter
consultancy fees, RFP award consultancy fees, and revenue consultancy fees , the latter
framed as consideration for the rendering of the services set out in clause 6.2 of the
consultancy agreement. The agreement also incorporated an arbitration clause which
invoked the rules applicable to expedited arbitration proceedings.
[6] It is common cause that the first respondent paid the mobilisation consultancy fees and the
RFP award consultancy fees. However, a dispute arose between the parties after the award
of the RFP whether the applicant was entitled to the revenue consulting fees. This dispute
was referred to arbitration under the AFSA Rules. The arbitrator issued an award on 2
October 2024 directing the first respondent to pay the revenue consultancy fees as claimed
by the applicant in the amount of R2 694 068.12 together with interest and costs.
[7] During October 2024, the applicant launched these proceedings to make the award an order
of court and to compel compliance with it. The first respondent opposed the relief and
delivered an answering affidavi t opposing enforcement, and simultaneously brought a
counter-application to review and set aside the award sought to be enforced by the applicant.
The legal framework
[8] In Dickenson,1 the then Appellate Division emphasised the importance of the finalisation of
awards. In Veldspun,2 this principle was reaffirmed by the Supreme Court of Appeal ("SCA"),
where it was stated:
“…when parties agree to refer a matter to arbitration, unless the submission provides
otherwise, they implicitly, if not explicitly (and, subject to the limited power of the Supreme
Court under s 3(2) of the Arbitration Act), abandon the right to litigate in courts of law and
accept that they will be finally bound by the decision of the arbitrator. … In my opinion the
Courts should in no way discourage parties from resorting to arbitration and should
deprecate conduct by a party to an arbitration who does not do all in his power to implement
the decision of the arbitrator promptly and in good faith.”
1 Dickenson & Brown v Fisher’s Executors 1915 AD 166
2 Amalgamated Clothing and Textile Workers Union of South Africa v Veldspun (Pty) Ltd (97/92) [1993]
ZASCA 158; 1994 (1) SA 162 (AD); [1994] 1 All SA 453 (A) (30 September 1993).
[9] More recently in Telcordia,3 the SCA emphasised that courts should seek to preserve the
autonomy of the forum selected by the parties and that they should seek to minimise judicial
intervention in such awards.
[10] That being said, the applicant who seeks enforcement bears the onus of establishing, at
least, a valid arbitration agreement and that the dispute decided f alls within the tribunal’s
jurisdiction. That proposition was stated in The World Food Programme, 4a case relied upon
in the first respondent’s counsel’s heads of argument.
[11] Section 31(1) of the Act provides that an award may, on application to a competent court,
be made an order of court. But that remedy presupposes an award that is valid and
enforceable. A court does not merely act as a rubber stamp and is required to apply its mind
as to the validity and enforceability of the award. That is not to say that the court is entitled
to reconsider the merits of the award; it is not: The court’s powers are limited to the
circumscribed grounds of review set out in section 33 of the Act and it may not act like an
appeal court.
[12] The principles governing judicial interference with arbitration awards are settled. Arbitration
is founded on the respect for party autonomy and their agreement to resolve their dispute
by way of arbitration, finality in arbitration proceedings as well as limited court intervention.
A review under s 33 is not an appeal and courts will not interfere merely because the
arbitrator erred on the merits. That much emerges from the authorities referred to in
applicant’s heads of argument , including Dickenson,5 Veldspun,6 Telcordia,7 Stocks Civil
Engineering,8 Lufuno9 and, more recently, Altech,10 and Mabra Construction.11
3 Telcordia Technologies Inc v Telkom SA Ltd 2007 (3) SA 266 (SCA)
4 The World Food Programme v Massoudi Emille And Another [2011] ZAGPJHC 141
5 supra
6 supra
7 supra
8 Stocks Civil Engineering (Pty) Ltd v Rip NO 2002 (4) SA 705 (SCA)
5 supra
6 supra
7 supra
8 Stocks Civil Engineering (Pty) Ltd v Rip NO 2002 (4) SA 705 (SCA)
9 Lufuno Mphaphuli & Associates (Pty) Ltd v Andrews 2009 (4) SA 529 (CC)
10 Altech Radio Holdings (Pty) Ltd v Aeonova 360 Management Services (Pty) Ltd [2023] ZAGPJHC 475 (15
May 2023)
11 Mabra Construction (Pty) Ltd v Ecolab (Pty) Ltd [2023] ZAGPPHC 660 (8 August 2023)
[13] Section 33(1) of the Act only permits a court to set aside an award where an arbitrator has
misconducted himself in relation to his duties, committed a gross irregularity in the conduct
of the proceedings, or exceeded his powers.
[14] However, where an arbitrator determines a dispute beyond the bounds of the arbitration
agreement or the pleaded issues, or misconceives the nature of the enquiry so as to deny a
party a fair hearing on the true issues, the court is obliged to intervene. That is also clear
from the authorities referred to in the first respondent’s heads of argument ,
including Sidumo,12Lufuno,13 Palabora,14and Eskom Holdings ,15 all cited in support of
counsel’s contention that the arbitrator exceeded his powers and/or committed a gross-
irregularity because he denied a party a fair hearing.
[15] It is well established that arbitration is consensual in nature and that an arbitrator derives his
powers from the arbitration agreement. 16 Where an arbitrator acts outside the limits of his
mandate, the court is obliged to intervene.17
[16] I will now deal with the two main issues in the proceedings before me.
The timing of the award and the arbitrator’s mandate
[17] The first respondent’s case in this regard is that the arbitration was conducted under the
AFSA Rules for Expedited Arbitration. Those Rules required the arbitrator to publish the
award within 30 days after finali sation of the proceedings. The parties presented oral and
written submissions on 31 July 2024. The award was delivered on 4 October 2024 , well
beyond the prescribed 30 day period. As the arbitrator published the award long after the
expiry of the agreed period , it is submitted by the first respondent that the arbitrator’s
12 Sidumo And Another v Rustenberg Platinum Mines Ltd And Others 2008 (2) SA 24 (CC) paras 263-264
13 supra
14 Palabora Copper (Pty) Ltd v Motlokwa Transport & Construction (Pty) Ltd 2018 (5) SA 462
(SCA).
(SCA).
15 Eskom Holdings Limited v The Joint Venture of Edison Jehano (Pty) Ltd and KEC International
Limited And Others [2021] ZASCA 138
16 Telcordia supra
17 Lufono supra
mandate lapsed by effluxion of time and the award is consequently invalid and
unenforceable.
[18] The first respondent further contends that the arbitrator could depart from the agreed
timeframe only with the consent of the parties or by extension from the AFSA Secretariat,
and that no such extension was granted. It is thus further submitted that the delivery of the
award after the agreed period was not merely an irregularity but a jurisdictional fact that had
not been complied with. This it was argued was necessarily fatal to the applicant’s claim for
enforcement.
[19] The applicant’s answer is that the 30 -day period did not run from 31 July 2024. It says the
arbitrator was entitled to withhold delivery of the award until the arbitration fees had been
paid; that the first respondent repeatedly failed to pay its portion of the fees; that the applicant
ended up paying them; and that the final payment occurred on 4 September 2024, with the
result that the award was delivered within 30 days thereafter and was accordingly valid and
enforceable.
[20] The applicant emphasises that the delay in delivering the award was caused by the first
respondent’s non-payment of fees, and argues that the period for delivery should run from
the date when all fees were paid, namely 4 September 2024.The applicant further submits
that, in practice, the release of an award is often linked to the payment of fees, and this
should be considered when interpreting the Rule under consideration. Finally, the applicant
maintains that the arbitrator acted within a reasonable time i n the circumstances and that
the intent of the Expedited Rules was substantially met.
[21] The applicant also relies on a provision of the AFSA rules concerning default in payment of
fees and on correspondence from AFSA stating that the arbitrator would release the award
only once the outstanding fees had been paid.
[22] There are, however, several difficulties with the applicant’s position.
[23] The first is that rule 10.1 of the AFSA Expedited Rules provide that the arbitrator must give
his or her award within 30 days “ after the finalisation of the proceedings unless the parties
otherwise agree or unless the AFSA Secretariat permits an extension of time” . On that
wording, the operative event is the “finalisation of the proceedings”, not the later payment of
fees.
[24] The applicant attempts to align “ finalisation of the proceedings ” with full payment of fees.
But that is not what the Rule says. The non-payment of fees may have a bearing upon the
release or publication of the award; it does not, however, in and of itself serve to extend the
time when as a matter of fact the proceedings were finalised.
[25] Section 10 of the AFSA Expedited Rules expressly provides in relevant part:
“10.1 The ARBITRATOR must give his/her award within 30 (thirty) days after finalisation of
the proceedings unless the parties otherwise agree or unless the AFSA Secretariat
permits an extension of that time.”
10.2 The ARBITRATOR’s award must be published to the parties in an appropriate fashion
as determined by the AFSA Secretariat.”
[26] The Rule is expressed in mandatory terms and requires that the award be delivered within
30 days unless an extension is granted. The rule is disjunctive and not conjunctive; it
requires only that either the parties or the Secretariat grants an extension, not both.
[27] The applicant relies upon the email from the Secretariat to the applicant’s attorneys dated 4
September 2024, in which Ms Zambella stated on behalf of the Secretariat:
“Dear Moeketsi
I refer to our telephone conversation yesterday and advise that the defendant has not paid
its share of the arbitrator’s further fees.
I confirm that the arbitrator will not release his award once both parties have paid the
outstanding fees.
You advised that you wish to pay the defendant’s share to facilitate the release of the award.
Please quote the following reference when making the payment: S.387/SLZ4314”
[28] This email, however, does not establish, with the necessary clarity, any formal extension
granted by AFSA Secretariat under rule 10.1. The applicant says in effect that AFSA
accepted payment on 4 September 2024 and that the period should therefore be treated as
running from then. But acceptance of payment, or even an indication that the award would
be released once fees were paid, is not the same thing as proof that AFSA Secretariat
formally extended the time for delivery of the award in terms of the governing rule.
[29] The second difficulty is that the aforementioned email from the Secretariat was only provided
on 4 September 2024, more than 30 days after the expiry of the initial thirty day period, and
was thus not capable of further extending the mandate of the arbitrator.
[30] The third difficulty is that the applicant’s reliance on non -payment by the first respondent,
while factually significant, does not fully answer the jurisdictional objection. It may well be
factually correct that the award was delayed because of the first respondent’s non-payment
of the arbitrator’s fees and that it shou ld not benefit from its recalcitrance ; but I regrettably
cannot see how this translates into lawful authority to extend the mandate conferred upon
the arbitrator to determine the dispute between the parties.
[31] The arbitrator’s powers derive from the agreement read with the institutional rules applicable
to the arbitration. Once those parameters are fixed, one party’s obstructive conduct cannot
to the arbitration. Once those parameters are fixed, one party’s obstructive conduct cannot
confer jurisdiction on the arbitrator as defined in the rules surrounding his appointment.
[32] Dickenson18 is authority for the proposition that the arbitrator must act within the limits of his
jurisdiction and within the limits of his submission. West Rand Estates19 made it plain that
the arbitrator’s powers are confined to the agreement and its limits, including the time periods
prescribed in the agreement (which are to be read together with the AFSA Rules
incorporated into the agreement).This principle has been rea ffirmed in Telcordia,20 where
Harms JA ruled that an arbitrator must act within the powers conferred upon him.
[33] It goes without saying that the first respondent’s dilatory behaviour and non -payment of its
share of the arbitrator’s fees does not endear it to the court. This is also an issue that ought
properly to have been raised prior to, if not immediately after delivery of the award, a nd it
reflects badly on the first respondent that it awaited until the applicant sought enforcement
of the award before this was raised as a substantive defence to enforcement of the award.
Regrettably, the issue before this Court is not whether the first respondent acted
opportunistically; it is whether the award was made within the arbitrator’s mandate as
conferred by the parties’ agreement and the applicable rules. That is a matter of jurisdiction,
not discretion.
[34] The first respondent’s heads place considerable emphasis on the notion that the arbitration
agreement itself, under the expedited regime, contemplated that the process would come to
an end by effluxion of time if the award was not delivered within the stip ulated period.
Whether one expresses the point as lapse of mandate or expiry of consensual authority, the
essential submission by the first respondent is that an award delivered outside the agreed
timeframe, without a proper extension, is not one rendered under the arbitration clause in
the contract between the parties and thus is invalid.
[35] In dealing with the principles concerning the enforcement of an arbitration award, the court
in World Food Programme21 made it clear that the party seeking enforcement must establish
a valid arbitration agreement and that the dispute fell within the tribunal’s jurisdiction. If, when
18 supra
19 West Rand Estates Ltd v New Zealand Insurance Co Ltd 1926 AD 173
20 SI
21 The World Food Programme v Massoudi Emille And Another [2011] ZAGPJHC 141.
the award was delivered, the arbitrator’s authority under the expedited agreement had
already expired, the applicant cannot satisfy that threshold requirement.
[36] There is no provision in the rules as to the effect of non -compliance with the 30 -day rule
without an extension, and neither counsel for the parties before me could refer me to case
law dealing with whether the 30 -day period could be validly extended in th e event that the
award is validly withheld by the arbitrator in view of non -payment of fees. There is nothing
in the plain wording of Rule 10 tying finalisation to payment of fees or publication of the
award.
[37] Counsel for the applicant argued that the effect of non -compliance with Rule 10 contended
for by the first respondent is contrary to the very purpose of arbitration proceedings, and that
is to have an expedited hearing. Were the arbitrator’ jurisdiction to lapse should he not
timeously deliver his award, this would require the proceedings to commence de novu with
a new arbitrator, protracting the proceedings and causing the incurrence of unnecessary
costs. The applicant was also not prejudiced by the late delivery of the award and manifestly
was responsible for the withholding of the award by refusing to pay his share of the
arbitrators fees. The strict application of Rule 10 in such circumstances would appear to be
patently unfair to the applicant.
[38] The first respondent’s counsel, on the other hand, referred to several foreign cases that are
both persuasive and I am enjoined to consider in terms of section 39(1)(c) of the Constitution.
In the English case of K/S Norjarl A/S v Hyundai Heavy Industries ,22 it was held that time
limits in arbitration proceedings can have jurisdictional and not only procedural
consequences unless extended. In the result, an award delivered outside the stipulated time
limits will be invalid. Margulead Ltd v Exide Technologies 23 was cited as authority for the
limits will be invalid. Margulead Ltd v Exide Technologies 23 was cited as authority for the
proposition that an arbitrator’s authority may expire by the effluxion of time; an award
delivered outside of the stipulated period will be invalid unless the period was extended.
22 [1992] QB 863
23 [2004] EWCA Civ 402
[39] Where an arbitrator acts beyond his powers, his decision is reviewable.24 Enforcement of an
arbitration award requires the proper exercise by the arbitrator of his jurisdiction.25
[40] After considerable thought, and having considered all the authorities cited, I cannot conclude
that the failure by the arbitrator to seek a formal extension of time to deliver his award can
in the current circumstances be fatal to his jurisdiction, particularly where the Secretariat
itself appears to have allowed an arbitrator to withhold his award until his fees have been
paid. This is common practice in arbitration proceedings conducted under the ASFA Rules.
The email from the Secretariat relied upon by the applicant could be construed as an implicit
extension of the time frame within the arbitrator’s award was to be delivered.
[41] Fairness dictates that a recalcitrant respondent should not benefit from its own wrongdoing
to avoid an arbitration award against it. In view of the Constitutional court’s injunction that
the courts develop the common law in the pursuit of justice, I feel I have some latitude and
discretion in rejecting a over-technical defence that would cause injustice . This is all the
more so as courts are encouraged to interpret legislation purposefully and this applies
equally to the AFSA Rules which are to be interpreted in the context of the arbitration process
as a whole and how it may be expedited, whilst at the same time ensuring fairness to the
parties. It would also be contrary to public policy and unconscionable to allow a litigant to
rely on delays caused by its own non-compliance to invalidate an award. To hold otherwise
would permit a party to frustrate the arbitration process by refusing to pay arbitration fees
and then relying on the resulting delay to challenge the award.
[42] Although it is accepted that the English courts and foreign jurisdictions have found that time
limits for the delivery of an arbitration award are jurisdictional and not procedural, I must find
in this matter that the purpose of the time limit is to expedite the proceedings , which is
procedural; to refuse to enforce the award where an extension would have clearly been
granted by the Secretariat had the arbitrator formally applied for it cannot be right in law.
24 Stocks supra
25 Total Support Management (Pty) Ltd v Diversified Health Systems 2002 (4) SA 661 (SCA)
[43] At the end of day, however, my views in this regard are academic as the second ground
upon which the second ground upon which the first respondent’s defence to the enforcement
of the award is based is firmly supported by law. I set out my reasoning below.
Whether the arbitrator exceeded his powers or committed a gross irregularity
[44] The first respondent’s case is that the dispute referred to arbitration was clearly pleaded by
the applicant in the statement of claim as one for payment based on its own performance of
the consultancy services required by the agreement. In the pleadings the applicant alleged,
in substance, that despite its performance in accordance with the terms of the consultancy
agreement, and in particular clause 6.2 of the consultancy agreement, the first respondent
failed or refused to pay the revenue consultancy fees when due. On that pleaded case,
performance by the applicant of its reciprocal obligations formed part of its cause of action.
[45] The first respondent says that the arbitrator nevertheless determined the matter on a
different footing, namely that the applicant was entitled to payment even if it had not rendered
consultancy services in the sense contemplated by clause 6.2 of the consultancy agreement.
The first respondent stresses that this was not the applicant’s pleaded case, was not the
dispute referred to arbitration, and was not an issue the first respondent was called upon to
answer. On that basis , the respondent contends that th e arbitrator exceeded his powers
and/or committed a gross irregularity substantially impacting upon the fairness of the
proceedings.26
[46] In assessing this ground of objection, it is important to have regard to the express provisions
of clauses 6.2 and 9 of the Consultancy Agreement.
[47] Clauses 6.2 the Consultancy Agreement provide:
26 Close-Up Mining (Pty) Ltd And Others v The Arbitrator Judge Phillip Boruchowitz And Another [2023]
ZASCA 43; Hos+Med Medical Aid Scheme v Thebe ya Bophelo Healthcare Marketing & Consulting
(Pty) Ltd And Others 2008 (2) SA 608 (SCA); Lugedlane Developments (Pty) Ltd and Another v Mjejane
Parent Game Reserve Homeowners Association And Others [2024] ZAGPJHC 391
“6.2. Without limiting the provisions of clause 6.1, services to be rendered by the
Consultant in terms of this Agreement to the Principal shall include the following-
6.2.1. analysing the RFP for the purposes of the preparation of th e RFP
Response of the Principal;
6.2.2. providing the Principal with such strategic and commercial insight as the
Consultant may deem appropriate for the purposes of ensuring that the
RFP Response of the Principal is highly competitive;
6.2.3. providing general advice and support to the Principal in relation to the
management of the process to prepare and submit the RFP Response of
the Principal;
6.2.4. if invited by the Principal, attend such meetings and presentations with SAB
Medical Scheme as may be required from time to time;
6.2.5. support and lead, where required or necessary, the discussions with
strategic partners and key suppliers in respect of the RFP Response of the
Principal;
6.2.6. provide overall support in the preparation of the strategy of the Principal to
prepare and submit the RFP Response that will be successful;
6.2.7. if the Principal received written notice from SAB Medical Scheme that it is
the RFP Successful Bidder -
6.2.7.1. providing all assistance that the Principal will require from time to
time in the negotiation of the RFP Agreements; and
6.2.7.2.assisting the Consultant to resolve any issues between the
Principal and SAB Medical Scheme during the subsistence of the
RFP Agreements;
6.2,8 any other service that the Consultant may consider
necessary and providing the Principal with any other assistance
that the Principal may require, in relation to the above and matters
ancillary to the above.” (emphasis added)
[48] Clause 9.1 provides for ongoing payments to the applicant throughout the subsistence of
the contract at a fixed rate of 10% of the gross monthly turnover excluding VAT and reads;
9.1 In addition to the Mobilisation Consultancy Fees and the RFP Award Consultancy
Fees, as additional consideration for rendering the Consultancy Services, the
Principal shall pay to the Consultant an amount equivalent to 10 % (ten percent) of
the Gross Monthly Turnover, excluding VAT ("Revenue Consultancy Fees").
[49] The first respondent argues that “consultancy services” are defined by reference to clause
6.2; that consultancy fees are payable as consideration for the rendering of those services;
that clause 9.1, dealing with revenue consultancy fees, must be read in the same contractual
context; and that there is no contractual room for payment divorced from the rendering of
services. The first respondent also points out that certain categories of services to be
rendered prior to the award of the RFP were indisputably rendered and paid for on the basis
of services rendered, namely the mobilisation consultancy fees and the RFP award
consultancy fees.
[50] It was argued by the first respondent that, like the mobilisation and RFP award consultancy
fees were dependent upon a set outcome, the revenue consultancy services were equally
dependent upon the services set out in clause 6.2.7 being rendered during the subsistence
of the RFP agreements.
[51] The respondent further relies on what it says was the applicant’s acknowledgement during
the hearing of the arbitration that the issue ultimately answered by the arbitrator did not arise
from its pleaded case. This admission is indeed significant. The first respondent also relies
upon an admission in the replying affidavit in the current proceedings that the applicant was
entitled to a retainer of 10% of the first respondent’s gross earnings, irrespective of whether
or not the services set in clause 6.2 wer e rendered, was not pleaded. However, whatever
the applicant may have said in its replying affidavit was not before the arbitrator and cannot
support a finding of gross irregularity on his part. I will thus not have regard to this. However,
the admission made by the applicant during the course of the proceedings is part of the
record and ought properly to have been considered.
[52] Lufuno,27 emphasises that parties to arbitration proceedings are entitled to a fair
process. Altech28 stresses that a gross irregularity is one that prevents a party from having
its case properly heard and thus substantially impacts upon the fairness of the proceedings.
Sidumo29 is to the same effect . The first respondent’s counsel relies on Palabora30 for the
proposition that an arbitrator who misconceives the nature of the enquiry and thereby denies
a party a fair trial of the issues commits a gross irregularity.
[53] The applicant, for its part, characterises the respondent’s complaint as a disguised appeal
on the merits. It says the arbitrator simply interpreted the agreement, decided the real
dispute between the parties, and that the respondent cannot convert its dis satisfaction with
the result into a review. The authorities cited by the applicant in its heads of argumen t
support a number of propositions which favour this approach:
Dickenson31, Veldspun32 and Telcordia33 establish the narrowness of the review power and
Dickenson31, Veldspun32 and Telcordia33 establish the narrowness of the review power and
the finality of arbitration. Likewise, Telcordia34 underscores that mere errors of reasoning
are not enough to set aside an award by an arbitrator.
27 supra
28 supra
29 supra
30 supra
31 supra
32 supra
33 supra
34 supra
[54] These general propositions are indeed correct , and in many cases it would be dispositive.
However, arbitration proceedings are distinct from court proceedings and arbitrators do not
have the latitude or discretion to decide the real issues in the interests of justice and are
confined to the pleadings unless the parties confer broader powers on him in terms of the
arbitration agreement.
[55] In my view, the first respondent’s complaint is not merely that the arbitrator interpreted the
contract incorrectly; it is narrower and more fundamental: It is that the arbitrator answered a
different question from the one referred to him by the pleadings, and thus treated the first
respondent unfairly.
[56] In consensual arbitration, the pleadings serve not only to define factual disputes but also to
delineate the arbitrator’s jurisdiction in respect of the particular dispute submitted for
decision. While arbitral pleadings may sometimes be approached less fo rmalistically than
court pleadings, they still set the bounds of the case to be met. An arbitrator is not at liberty
to substitute a new basis of claim for the one advanced in the pleadings before him.
[57] The applicant’s pleaded basis for payment in its statement of claim was predicated upon its
performance of its obligations under clause 6.2 of the Consultancy Agreement. It did not
plead in its statement of claim an entitlement to payment absent the rende ring of services,
nor an entitlement to a retainer of 10 % of the gross earnings after the contract had been
awarded to the respondent, regardless of whether or not it rendered any of the services set
out in clause 6.2. In so far as the arbitrator awarded r elief on this this basis which had not
been pleaded, he made findings beyond the pleaded dispute and exceeded his powers
and/or committed a gross irregularity.
[58] The significance of the arbitrator’s departure, however is twofold; not only did he exceed his
jurisdiction by deciding the matter before him on the basis of an issue not referred to him,
but the first respondent was denied the opportunity to meet a case which had not been
pleaded but was found to be the case by the arbitrator he was called upon to meet . This
seriously impacted upon the fairness of the proceedings which in itself warrants the setting
of the award made.
[59] Whilst I accept that the allegation that the applicant was entitled to payment of the revenue
consulting fees as a retainer in the amount of 10 percent of the gross revenue was indeed
raised by the applicant in its replication. However, it is trite that a claimant’s cause of action
needs to be set out in the pleadings and may not be amplified in a replication. The first
respondent is correct that should the applicant have wished to amplify its cause of action it
needed to amend its statement of claim or include an alternative cause of action.
[60] The first respondent cannot be said to have waived its right to object to this in filing its
rejoinder as there it made it plain that the applicant was not entitled to extend the basis of
its claim by way of replication and needed to do so by way of amendment. This
notwithstanding, the applicant took no steps to amend its claim in line with the new stance
taken that it was entitled to a retainer of 10 % of the gross earnings of the respondent from
the award of the RFP, irrespective of whether or not it rendered any services.
[61] Without such an amendment, the arbitrator was not empowered to entertain the new cause
of action raised by the applicant in its replication. This is particularly so as when the
applicant’s counsel sought to adduce this evidence in cross -examination, an objection was
immediately taken that this case had not been pleaded. After this objection was raised, it
was conceded that the new formulation of the claimant’s claim had not been pleaded. This
ought properly to have presented a red flag to the arbitrator and should have immediately
been addressed. Despite the objection raised and the concession made, the arbitrator went
on to define the issues and decide the matter on the basis that no consultancy services
needed to be rendered in order to entitle the applicant to revenue consultancy fees.
[62] The first respondent has shown, and the applicant has not disputed in its answering affidavit
to the counter-application, that the award rested on a contractual premise materially different
from that pleaded.
[63] In these circumstances, I find that the arbitrator exceeded his powers because he
determined a dispute not submitted to him as defined in the pleadings. He also committed a
gross irregularity because he misconceived the nature of the enquiry and thereby deprived
the first respondent of a fair hearing on the true issues.
[64] I have taken cognizance of the fact the first respondent’s bona fides in raising this defence
have also been called into question. In this respect, reference was made to the email sent
by the first respondent to the applicant on 28 August 2023 in which it is made plain that it
had honoured its obligations under the contract in so far as payment of the mobilisation
consultancy fees and the RFP award consultancy fees were concerned, but felt it unfair that
it should continue to pay the revenue consultancy fees now that the RFP had been awarded
to it.
[65] Three complaints were raised by the first respondent to the continued payment of the
revenue consultancy fees The first was that there was a possibility of overpayment. The
second was that 34% of the total contract values was paid in the first seven months of the
60 month contract. It was argued that if the first respondent had to continue paying at the
rate of 10% of the gross revenue of the first respondent, it would end up having to pay the
applicant an additional R12 million in 2023. This meant that the first respondent would have
paid the applicant 41% of the contract value in year one. The final issue raised was one of
fairness, it being pointed out that the scheme membership numbers had declined and it
anticipated reduced earnings. The first accordingly proposed that a monthly fee of R50 000
plus VAT be paid to the applicant going forward from August 2023 until December 2024.
[66] There was no complaint raised by the first respondent that the applicant had claimed
revenue consultancy fees without having rendered any services as was pleaded in the
arbitration. This tends to suggest that the current objection to the enforcement of the award
is yet a further technical defence to try avoid having to pay the award when , in truth and in
fact, the first respondent itself did not believe that the payment of consultancy fees was
linked to the rendering of services.
[67] This is supported by the plain reading of clause 9.1 quoted above which, if not read in
conjunction with clause 6.2.7, which provides for the payment of 10% of the monthly gross
turnover of the applicant with no reference to further services being rendered . In terms of
clause 9.1 it was made plain the applicant’s entitlement to a monthly fee equivalent to 10%
of the first respondent’s gross turner was said to be over and above the payment of the
mobilisation consultancy fee and the RFP award consultancy fee.
[68] For convenience a requote the relevant clause. It says:
“In addition to the Mobilisation Consultancy Fees and the RFP Award Consultancy Fees, as
additional consideration for rendering the Consultancy Services , the Principal shall pay to
the Consultant an amount equivalent to 10 % (ten percent) of the Gross Monthly Turnover,
excluding VAT ("Revenue Consultancy Fees"). (emphasis added)
[69] What makes the provision ambiguous perhaps is the reference to the rendering of “the
Consultancy Services”, which arguably are all of the services listed in clause clause 6 of the
agreement; these include not only the mobilisation consultancy services and the RFP award
consultancy services but the services said to be provided on an ongoing basis after the
award of the RFP for the duration of the contract. This certainly is how the applicant’s case
had been pleaded; it is not how the arbitrator interpreted clause 9.1 and in this respect it is
arguable that the objection raised by the first respondent is not one of jurisdiction but rather
the arbitrator’s interpretation of the provisions of the agreement, that goes to the merits and
cannot be challenged.
[70] In the recent Supreme Court of Appeal decision in Rabinowitz,35 this was said:
“[19] A review in terms of s 33(1)(b) of the Act will include where an arbitrator has
exceeded his or her powers. The focus is on whether the arbitrator purported to exercise a
power he or she did not have. An erroneous exercise of a power that the arbitrator has does
not amount to a ground for review. As much as an award going beyond the terms of an
arbitrator’s reference may result in a successful review of an award, it is a ‘fallacy to label a
wrong interpretation of a contract, a wrong perception or application of South African law, or
35 Rabinowitz v Levy and Others (1276/2022) [2024] ZASCA 8 (26 January 2024)
an incorrect reliance on inadmissible evidence’ by the arbitrator, as a transgression of the
limits of the arbitrator’s power…”36 (footnotes omitted)
[71] Although the Court went on to say that an arbitrator may exceed his power if he decides and
issue beyond the pleadings, a more liberal approach was recommended. This was set out
in paragraph [20] thus:
“[20] An arbitrator might also exceed his or her jurisdiction if a matter is decided on a
basis not covered by the pleadings. This will depend on the nature and ambit of what was
referred to the arbitrator to determine. Whether an arbitrator has straye d beyond the
pleadings, and possibly exceeded his or her powers requiring under s 33(1)(b) that the
award be set aside, is a question to be decided on the facts of each case. Courts, however,
generally remain reluctant to interfere with an arbitrator’s a ward and are prepared to adopt
‘a rather generous approach to the pleadings’.” (footnotes omitted)
[72] Such a generous approach to the pleadings may have persuaded me to accept that the
issues to be decided were those defined in the pleadings as a whole, including the replication
in order to ensure that the real issues were decided . Had such an approach been taken, I
may have been inclined to find that the arbitrator was entitled to take cognizance of the fact
that the general entitlement to a monthly fee of 10% of the gross turnover was payable
irrespective whether or not services were rendered . This is particularly so as this was an
issue raised in the replication and dealt with in the rejoinder. Such an approach may well
have been appropriate in this case were it not for the fact that the first respondent expressly
took issue with the fact that a new case was being pleaded in the replication that conflicted
with the case set out in the applicant’s statement of claim and enjoining the applicant to
apply to amend its statement of claim should it wish to rely upon th is new cause of action.
apply to amend its statement of claim should it wish to rely upon th is new cause of action.
The applicant decided not to do so but nevertheless put what was to all intense and purposes
an entirely different basis for its claim in cross-examination to a witness. When he did so this
immediately caused counsel for the first respondent to object, and counsel for the applicant
conceded this issue had not been pleaded. The difficulty was thus squarely raised in the
36 At paragraph [19]
arbitration proceedings which make this a case where it would not be appropriate to take a
more generous approach to the pleadings.
[73] Where an arbitrator exceeds his power and decides an issue manifestly and admitted to be
outside of the pleadings, I feel I have less latitude to come to the first respondent’s
assistance and have no option but to find that the arbitrator committed a gross irregularity
that vitiated the proceedings.
[74] I also must mention that I question whether clause 6.2. 7 of the consultancy fee agreement
quoted above was not purposefully drafted to create the impression that services were
required to be rendered , when in truth and in fact both parties knew that they were not . I
have a suspicion that this was to ensure that the revenue consultancy fees were not
regarded as entitling the applicant a percentage of the monthly earnings of the first
respondent for the duration of the contract, over and above the vast sum of R6 million rand
already to be paid to the first respondent as a “reward” for securing the contract (the reward
consultancy fees) not linked in any manner at all to services rendered. The reason I say this
because the payment of so-called “consultancy fees” are often disguised bribes for securing
a contract, particularly in the government sector.
[75] I am somewhat fortified in by suspicions by the fact that nowhere in the consultancy fee
agreement is any fee structure set out for the post award services to be rendered. The
meaning sought to be ascribed to the contract in the arbitration was that the first respondent
was obliged to render the services set out in clause 6.2.7, but irrespective of how many of
those services were rendered and regardless how much time was spent rendering those
services, the applicant was entitled to a monthly fee of 10% of the gross monthly turnover.
This is why the applicant describes the revenue consultancy services to which he alleges he
This is why the applicant describes the revenue consultancy services to which he alleges he
was entitled as a retainer -that is fee paid to him for making himself available to render
services if ever required of it (and even of no services were rendered.)
[76] Thus, the contract was in fact not a contract for reward for the rendering of consultancy
services as its name suggest but rather a lump sum payment in the event of the RFP award
being secured and an ongoing share of rev enue for the duration of the contract,
notwithstanding that to earn these amounts no services at all were required to be rendered.
Despite this both the RFP award lump sum payment and the guaranteed share of the
revenue stream were described as “consultancy services.” In truth, the only consultancy
services expected to be rendered were the mobilisation consultancy services for which the
relatively negligible amount of R 150 000 was payable . The real revenue was earned simply
as a reward for the securing of what must have been an extremely lucrative contract to
administer the SAB Medical Scheme, for which no further services had to be rendered . To
the extent that my suspicions are founded, the contract was a sham disguised to appear as
if it was contract for the rendering of services. The term for the ongoing share of revenue ,
“revenue consultancy fees”, says it all.
[77] Agreements in terms of which a party undertakes under the guise of consultancy services
to procure the award of a contract through the exercise of influence, and is remunerated by
way of lump sum or a continuing share of the revenue derived therefrom, are inimical to
public policy and unenforceable. Payments structured as “ consultancy fees ” but which in
substance constitute consideration for the exertion of influence or the securing of contractual
benefits have repeatedly been condemned by the courts as unl awful. Such arrangements,
particularly in the context of public procurement, undermine the constitutional imperatives of
transparency and fairness, and fall to be struck down as contra bonos mores.
[78] By way of example, so-called “influence peddling” was considered in S v Shaik37 as well as
in AllPay;38 Maseko39 made it plain that “[a] transaction which is designed to conceal its true
nature… is contrary to public policy and unenforceable ;40 and o ngoing revenue-based
payments in a government contract were declared invalid and unenforceable in Gobela41
payments in a government contract were declared invalid and unenforceable in Gobela41
[79] As I said at the outset of this judgment, a court is not obliged to act as a “rubber stamp” when
requested to make an arbitration award an order of court . On the contrary, it is obliged to
37 S v Shaik and Others 2008 (2) SA 208 (CC)
38 AllPay Consolidated Investment Holdings (Pty) Ltd v Chief Executive Officer 2014 (1) SA 604 (CC)
39 Maseko v Maseko 1951 (3) SA 590 (T)
40 At 593H–594A
apply an independent mind to the matter and cannot permit contracts which are contra bonus
mores or contrary to public policy to be enforced. The contract before be sought to be
enforced smacks of a simulated, disguised transaction or a sham. Had it not been for my
finding that the arbitrator exceeded his power by deci ding an issue not pleaded in the
statement of case, I would have found it difficult to enforce the current award. In the absence
of evidence of undue influence, I may have had to. It is, however, unlikely that such evidence
would have been led by either party as if I am correct in my suspicious, both parties would
have been complicit in making the unlawful arrangement. My suspicions are thus based
solely on the plain meaning of the text of the so -called “consultancy agreement” set out
above and do not for m the ratio for my decision in this matter. I have felt constrained to
mention my suspicions, albeit obiter, as what to me appears to be a manifest sham should
not go un-noted by the court.
[80] There is one remaining issue that I need to canvass which I do as a postscript, as it warrants
no better attention.
The applicant’s contention that there was no separate answer to the counter-application
[81] In the first respondent’s heads of argument it is also argued that the applicant filed no
separate answering affidavit to the counter-application and that, for that reason, the counter-
application ought to be granted. That submission is entirely without m erit. The applicant’s
replying affidavit in the main application was also framed as an answering affidavit in the
counter-application. One must therefore consider its substance, not merely its label as a
replying affidavit.
[82] That said, the first respondent is correct that the applicant’s answering affidavit did not
squarely meet the central grounds for review set out in its answering affidavit and counter -
application. In particular, it did not identify any formal extension of time under the AFSA
application. In particular, it did not identify any formal extension of time under the AFSA
rules, and it did not satisfactorily answer the respondent’s complaint that the arbitrator
resolved a question that was not pleaded.
[83] I thus find that it is incumbent upon me to uphold the counter -application. That has as an
inevitable consequence that I must dismiss the application to make the arbitration award an
order of court and the relief sought for its enforcement.
Costs
[84] There now remains the issue of costs.
The first respondent has succeeded in resisting enforcement of the award and establishing proper
grounds for review in support of its counter-application. Although the costs should ordinarily
follow the result, I find that the first respondents conduct in failing to pay the fees of the
arbitrator and then relying on this as a basis for avoiding the enforcement of the award was
unconscionable. I am thus disinclined to award it costs.
[85] I thus order that each party bear their own costs.
Order
[86] The following order is made:
1. The arbitration award issued by the second respondent on 2 October 2024 is reviewed and
set aside in terms of s 33 of the Arbitration Act 42 of 1965.
2. The applicant’s application in terms of s 31(1) of the Arbitration Act 42 of 1965 to make the
arbitration award an order of court and for enforcement of that award is dismissed.
3. Each party is to pay their own costs