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IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE DIVISION, CAPE TOWN)
Case No: A516/25
In the matter between
TRANSPENINSULA INVESTMENTS (PTY) LTD APPELLANT
AND
THE CITY OF CAPE TOWN FIRST RESPONDENT
JAN CHRISTIAAN HEUNIS SC SECOND RESPONDENT
CORAM: CLOETE, J et THULARE, J et O’BRIEN, AJ
Heard: 20 FEBRUARY 2026
Delivered electronically: 25 MAY 2026
ORDER
1. The appeal is dismissed with costs on scale C, including the costs of two
counsel.
2. The order of the court a quo is confirmed, save that para 2 thereof is
amended to read as follows:
‘The determination of claim D (which for sake of clarity includes the respondent’s
counterclaim) is referred to a new arbitrator. The new arbitrator shall be appointed by
agreement between the parties within 20 calendar days from date of this order, and failing
agreement, within a further 20 calendar days by the Chairperson of the Legal Practice
Council from the ranks of an advocate or attorney with at least 15 years experience
including arbitration experience.’
JUDGMENT
___________________________________________________________________
THULARE, J (CLOETE, J et O’BRIEN, AJ concurring separately):
[1] This is an opposed appeal against the decision of the court of first
instance wherein it reviewed and aside the award of the 2 nd respondent in a
dispute between the appellant (TPI) and the first respondent (the City) (the
parties). The court of first instance refused an application for leave to appeal,
which application was granted by the Supreme Court of Appeal. The second
respondent did not participate in any of the proceedings in respect of the review
of his award.
[2] TPIs case is that the application to review the arbitration award was
fatally flawed as it alleged only errors of law and fact, not procedural
irregularities or actual excesses of powers, and sought to re -argue the merits;
that the arbitrators interpretation of the parties agreement and his assessment of
the evidence, even if mistaken, were merits issues, unrelated to the conduct of
the arbitration; that the court of first instance ignored the binding authority,
overstepped its limited review powers, co nflated review and appeal, and set
aside awards untouched by procedural defects and that the court referred the
matter to a new arbitrator despite the parties preference for remittal to the same
arbitrator.
[3] The position of the City is that the appeal had to be dismissed primarily
on two grounds, which were the grounds of review:
3.1 The arbitrator did not determine all the pleaded issues in dispute between
the parties. Regrettably, the arbitrator’s failure was premised in part, on a
misunderstanding of the parties’ joint agreement on the quantum of claim D,
(Noticeably in the court of first instance the appellant did not dispute the terms
of this agreement). This constituted a gross irregularity in the conduct of the
arbitration proceedings; and
3.2 The arbitrator (a) went beyond that which was at issue between the
parties in relation to claim D and (b) granted relief that was never sought by the
appellant or ventilated at the arbitration. Consequently, the arbitrator
overstepped his mandate to adjudicate the claim D dispute, and in doing so
exceeded his powers in a manner severely prejudicial to the City, resulting in
millions of rands of public fund having to be paid out twice.
[4] The parties had two competing interpretations of Table 4 of annexure A
within the broader context of their a greement. The City pleaded that it
compensated TPI for the provision of the tyres category of the kilometre -related
costs for 9m buses provided for in Table 4 of Annexure A of the agreement, and
that it compensated TPI for brake pads and brake discs in terms of the other
category of the kilometre -related costs for the 9m buses as set out in the same
Table and Annexure. The City denied TPIs alleged terms alternatively that TPIs
construal of the agreement was at all viable. The City accepted that there was no
similar express provision for the payment of the costs of brake discs and pads ,
however its version was that 23% of the 14.33% allocated to other in Table 4
was in fact allocated to brake pads and discs. TPI received for year 1 to 5
R2 612 601 under the tyre portion and R2 870 291-00 under other, a total
consideration of R5 482 892-00. The pleadings and the parties agreed minute
regarding the quantum of claim D did not delineate between ordinary wear and
tear and a risk portion for the tyres.
[5] The agreement between the parties , on the initial maintenance period ,
provided for the City to negotiate the benefit of various vehicle maintenance
agreements from relevant City vehicle suppliers and which agreements covered
each City vehicle in the initial fleet for the initial maintenance period . All
maintenance repairs which did not fall within the parameters of the vehicle
maintenance agreements was to be promptly carried out by the operator at its
own costs in terms of a preventative maintenance programme. During the initial
maintenance period, the specific maintenance provisions set out in annexure L
of the agreement applied. In terms of annexure L , there was a Busmark Fleet
management Agreement between the City and Busmark (2000) (Pty) Lt d in
terms of which the maintenance and servicing of all vehicles (chassis and body)
must be carried out by Busmark and/or its subcontractors over the initial period
of 3 years or 240 000km whichever occurred first and the Busmark agreement
was provided to TPI. The Busmark agreement excluded maintenance or repairs
required due to abuse, incidents and accidents and these were for the operator’s
account. Where Busmark responsibility was excluded, the operator would be
liable for the relevant risk, maintenance or work. In terms of Annexure L, the
operator would receive free of charge from Busmark the following tyres and
spare parts for each vehicle after which the operator would be liable for the cost
of subsequent replacements : 6 new tyres, 4 brake pads and 4 brake discs and
Busmark would return used tyre casings to the operator. The brake testing fell
outside the scope of the Busmark agreement and was to be carried out by the
operator every 5000km at its own cost. The Maintenance Plan was for 3 years or
240 000km service and maintenance parts on chassis and body work
components. The City was to extend to 5 years from the date of commencement
of operators agreement with an option to extend to 6 years should the City elect
to tender the work.
[6] TPI, as operator, was liable for further maintenance obligations which
included regular servicing, maintenance and repair of all vehicles for the
remaining period of the agreement . The maintenance and repair obligations
included the repair and replacement of tyres and/or wheels subject to accident
damage, excessive wear and tear and uneven wear , and the operator always had
to adhere to the tyre specifications determined by the City from time to time.
The parties agreed to review the 9m vehicle maintenance.
[7] Busmark was contracted for 3 years to amongst others main the chassis
and bodies of the 9km vehicles, the initial maintenance period. The operator
was obliged to commence the maintenance of the 9km vehicles immediately
upon expiry of the maintenance contract with Busmark or its relevant
subcontractor. Due to inadequate reliable information on the cost and life
expectancy of major parts under the South African Bus Rapid transport
conditions, the operator was unable to predict the future maintenance costs for
the 9m vehicles without being exposed to unacceptable risk. It was
acknowledged that the initial maintenance period did not allow for sufficient
time to collate reliable data pertaining to maintenance costs excluding tyres , as
failure rates of components were typically lower for new vehicles than for
vehicles which had operated a higher number of kilometres . This informed the
decision to extend the initial maintenance period to 5 years with either Busmark
or another maintenance service provider, to allow for the establishment of a
reliable history regarding maintenance costs and contributing component life
cycles subject to further provisions, which included maintenance monitoring
and enhanced information gathering through scout vehicles.
[8] Scout vehicles were designated vehicles constituting 10% of all 9m
vehicles, rounded do wnwards to disregard fractions, required to run at the
maximum number of scheduled kilometres possible in preference to other 9m
vehicles with the aim of establishing the likely maintenance costs of the 9m
vehicles. The comprehensive exercise of monitoring the scout vehicles included
identification of imported components that could be substituted by local
products including but not limited to window glass, body parts, brake friction
material, seats, filters, radiators and electrical component substitutes. The
maintenance service provider and operator were still obliged to utilize genuine
original equipment components exclusively in respect of all safety critical
component replacements such as suspension, steering and brake callper
components unless the City agreed otherwise thereto in writing beforehand . The
City was to conduct a review of the actual life of the major parts, which were
set out as the drive -train components which were the engine, gearbox and
differential.
[9] The costing model agreed to was the one referred to in the Operational
Specifications Schedule as a guide for the basis upon which they were to seek to
reach agreement with regard to the kilometre -related rate to be paid to the
operator in respect of the maintenance of the 9m vehicles for the remaining 7
year period of the agreement and having regard to the weighting allocated to
maintenance costs within the 9m vehicle kilometre rate as set out in Table 4 of
the Operator Specific Addendum. The parties were to commence their
negotiations to reach an agreement at the start of the 54th month to finalise by no
later than the 56 th month following the commencement date. The revised
kilometre-related rate agreed was to be implemented with effect from the 61 st
month following the commencement date . Should the parties fail to reach
agreement, the maintenance contract with the relevant maintenance service
provider would be extended for a period of 1 year subject to the City’s supply
chain management policy to afford the City an opportunity to advertise the
maintenance of the 9m vehicles for the remainder of the period of the agreement
by way of a tender process in which the operators fee per kilometre was to be
adjusted accordingly.
[10] The kilometre-related rates agreed to in Table 1: Table of Rates for the
9m vehicles was R5.95 for year 1 to 5 and R10.54 for year 6 to 12 as provided
in Annexure A, the Operator Specific Addendum. Table 4 of Annexure A
provides for the proportional weights for costs adjustment reflecting average
weight of the different cost components across the vehicle operators as referred
to in the Cost Adjustment Schedule and as required in the agreement. For the
9m vehicle, for tyres the proportion was 3.00% for year 1 to 5 and 2.66% for
year 6 to 12. For other the proportion was 14.33% for year 1 to 5 and 49. 96%
for year 6 to 12. The remaining percentage for each periods was for fuel to add
to a total of 100%. The proportion for kilometre-related rate for the vehicle
maintenance for the 9m vehicle for years 6 to 12 was 46.91%.
[11] The principal issue on appeal is whether grounds existed in terms of
section 3(1)(b) of the Arbitration Act, 1965 (Act No. 42 of 1965) (the Act) for
setting aside the three awards in respect of claim D, or any of them. Section
33(1)(b) of the Act provides that:
33 Setting aside of award
(1) Where-
(b) an arbitration tribunal has committed any gross irregularity in the conduct of the
arbitration proceedings or has exceeded its powers;
the court may, on the application of any party to the reference after due notice to the other
party or parties, make an order setting the award aside.
Paragraphs 211 to 213 of the Arbitration award reads as follows:
211. I am therefore of the view that there is a lacuna in the agreement i.e. that the parties
must have intended provision of compensation for tyres and brakes after the first 3 years in
respect of years 4 and 5 or that they were, mistakenly, under the impression that such
provision had in fact been made.
212. This follows from the fact that such provision as had been made in the agreement in
respect of the 9m initial maintenance period i.e. the free tyres, brake pads and brake discs ,
was intended to be compensation in respect of years 1 to 3 only and not beyond that even
though it had been foreseen that TPI would not become responsible for maintenance during
years 4 and 5 of the 5 year initial maintenance period.
213. I am therefore able to find that there is a lacuna inasmuch as there is, in effect, no
provision for what the parties, given various provisions of the Agreement, must have
intended, i.e. compensation in respect of tyres, brake discs and brake pads during the years 4
and 5 of the Agreement.
[12] The dispute in relation to claim D arose in relation to the payment of
replacement tyres, brake pads and brake discs on the 9m buses operated by TPI.
TPI contended that the agreement required the City to be liable for those costs,
whilst the City contended that the agreement required TPI to pay. The arbitrator
was called upon, by interpreting the agreement, to determine which of the
parties was required to pay for the replacement of the tyres and brakes. It was
common cause between the parties that the liability was either that of the City or
TPI. None of the parties pleaded a lacuna in the agreement . But most
importantly, The City’s case was that it already compensated TPI for the
provision or the obligation to maintain tyres in terms of the tyre category of the
kilometre-related cost for 9m buses as provided for in Table 4 Annexure A of
the agreement as well as for brake pads and discs in terms of the other category
of the kilometre -reated costs. The arbitrator did not evaluate or consider this
aspect of the pleaded defence and the evidence in relation thereto . This was a
material issue in dispute between the parties and evidence was led in relation
thereto. Furthermore, the City argued that if needed, calculation of TPIs
contractual damages should consider the consideration that TPI was already
paid for tyres and brakes and was to be deducted from any monetary award
determined. These were pleaded and argued , but not dealt with in the award .
The quantification of the damages was an issue in dispute, and was not
The quantification of the damages was an issue in dispute, and was not
adjudicated. TPI, in opposition, simply sought to advance its own analysis and
findings on the pleaded case.
[13] The parties did not negotiate a revised kilometre -related rate from year 6
onwards. It was not a pleaded issue in dispute . The arbitrator has no power to
make an agreement for the parties. TPI itself did not seek an order wherein until
the kilometre -related rate was increased, it assumed the responsibility to
maintain the 9m vehicles and that the City remained responsi ble for the cost of
provision for tyres, brake pads and brake discs . There was no such cause of
action before the arbitrator. TPI understood that it was not yet responsible for
the major vehicle service, which is the most comprehensive type of vehicle
service, with a full inspection of the vehicle. It includes the outside of the
vehicle, hinges and latches, and the timing belt. This is where every defect will
be checked and replaced if necessary. In a major vehicle service the technician
works through a comprehensive checklist that insures the vehicle is inspected
from head to tail. If the technician detects any problems during the service, TPI
would receive a quote for any additional work that might be required [The
difference between a major service and a minor service, M[...], 30 January
2023].
[14] The complaint by the City that the arbitrator’s failures were in part
premised on the misunderstanding of the parties’ agreements cannot be faulted.
The brake friction material includes brake lining, brake pads, discs and drums
(Comprehensive Review on Brake Friction Materials, DN Kumar, Vijayakumar
and G Murali , Journal of Polymer and Composites , Engineering Journals,
Researchgate.net publications , 31 January 2024 ). These components, together
with the tyres condition , tread depth and pressure forms what is commonly
referred to as minor services of vehicles [The difference between a major
service and a minor service, M[...], 30 January 2023] , which the parties agreed
would take place every 5000km.
[15] Whilst the brake friction material was included in the scout vehicles,
against the background of the intended purpose of identification of imported
components that could be substituted by local products , except for filters the
other components which formed the subject matter of the study were what the
parties agreed their cost and life expectancy was unpredictable before some
exposure to actual use . The research to which the scout vehicles were subject,
were to deal with that challenge , to wit, the cost and lif e expectance of major
parts under the South African Rapid Transport conditions, to enable the operator
to predict the future maintenance costs for the 9m vehicles without being
exposed to avoidable risk which would be unacceptable. The parties clearly
identified the drive -train, that is the engine, gearbox and differential as major
parts with high value . These are not parts that require attention every 5000km ,
just like products like window glasses, body parts , seats, radiators and electrical
components which were also added in the study but may require attention after
5 years of actual use on the road. The products implicated in minor services did
not require years to have an idea of the risk to which one would be exposed. It is
the products implicated in the minor service which were the subject matter of
the dispute between the parties. I t was tyres, which were excluded from the
study, and brake discs and brake pads, which did not require years to study as
envisaged in the scout agreements. The parts in dispute were in use, frequently
under assessment and attention , to determine their life cycle and costs in the
project and did not require beyond 3 years or 240 000km to determine their cost
and life cycle.
[16] Palabora Copper (Pty) Ltd v Motlokwa Transport and Construction (Pty)
Ltd (298/2017) [2018] ZASCA 23; [2018] 2 All SA 660 (SCA); 2018 (5) SA
462 (SCA) (22 March 2018) at para 8, with reference to section 33(1)(b) of the
Act, it was said that:
[8] This provision was the subject of detailed consideration by this Court in Telcordia. It
suffices to say that where an arbitrator for some reason misconceives the nature of the
enquiry in the arbitration proceedings with the result that a party is denied a fair hearing or a
fair trial of the issues that constitutes a gross irregularity. The party alleging the gross
irregularity must establish it. Where an arbitrator engages in the correct enquiry, but errs
either on the facts or the law, that is not an irregularity and is not a basis for setting aside an
award. If parties choose a rbitration, courts endeavour to uphold their choice and do not
lightly disturb it. The attack on the award must be measured against these standards.
The parties were agreed that one of them was liable for the tyre, brake pads and
brake discs costs in terms of their written agreement. The issue was which one
of them. The arbitrator did not decide on this issue but made a different
determination which was not pleaded, with no opportunity granted to the parties
for argument being advanced to the arbitrator as to why this was or was not
appropriate. The arbitrator did not direct his mind to the central issue in the
dispute. Furthermore, the City’s case was also for a determination to be made in
relation to what it already paid for the tyres and the brake pads and brake discs,
and the City was entitled to a decision on the issue . It was for TPI to allege as it
did, and prove, the fact of loss and the amount thereof [Aucamp v Morton 1949
(3) SA 611 (A) ; Palabora para 31]. Breach of contract is not in itself a wrong
carrying an award of damages unless the aggrieved party has suffered
patrimonial loss [LAWSA V ol 7 (2 ed, 2005), sv ‘Damages’ para 47 and the
cases cited in fn 2 ; Palabora para 31]. The arbitrator did not find that TPI had
cases cited in fn 2 ; Palabora para 31]. The arbitrator did not find that TPI had
established its tacit term or that it had in fact suffered a loss because of the
alleged breach. The arbitrator made a prospective order on his award in
circumstances where the relief was not sought.
[17] In OCA Testing and Certification South Africa (Pty) Ltd v KCEC
Engineering Construction (Pty) Ltd and Another (1226/2021) [2023] ZASCA
13 (17 February 2023) at para 31 and 32 it was said that:
[31] However, what then followed was that the arbitrator inexplicably dismissed the claim
in its entirety without, for once, engaging in any analysis in regard to the legitimacy or
otherwise of the amounts claimed pursuant to the second and third agreements. That OCA
Testing had elected to claim a composite amount combining three separate agreements was
beyond question and the arbitrator, too, was cognisant of this fact. Thus, in failing to address
the residue of the claim, just as he had done with the component of the claim flowing from
the first agreement, the arbitrator effectively closed off his mind to the fundamental question
that he was called upon to answer, namely whether OCA Testing’s claim for the residual
amount – that had its genesis in the second and third agreements – was sustainable. In my
view, this omission prevented a fair trial of the totality of the issues and therefore amounts to
a gross irregularity.
[32] In summary therefore, I am satisfied that OCA Testing has established that there is
good cause to remit the dispute to a new arbitrator. As I have already found, this must be so
because the arbitrator in this matter failed to deal with all the issues that were before him. As
already indicated, we are here not dealing with a situation where the arbitrator got it horribly
wrong without more, in which event there would have been no basis to disturb the award.
Rather, he simply overlooked some of the crucial issues that he was required to
determine. Section 28 of the Act explicitly provides that absent an agreement between the
parties to the contrary, an award shall, subject to the provisions of the Act, ‘be final and not
subject to appeal and each party to the reference shall a bide by and comply with the award in
subject to appeal and each party to the reference shall a bide by and comply with the award in
accordance with its terms.’ And as Harms JA forcefully put it: ‘[A]n arbitrator “has the right
to be wrong.”’ Consequently, where an arbitrator errs in his or her interpretation of the law or
analysis of the evidence that would not constitute gross irregularity or misconduct or
exceeding powers as contemplated in s 33(1) of the Act.
[18] All these gross irregularities were done in good faith, but the cumulative
effect was to deprive the City of a fair trial of these issues. It follows that the
decision in claim D of the award c ould not stand. In its notice of motion the
City had prayed for remittal to the arbitrator alternatively to a new arbitration
tribunal constituted in the manner directed by the court. Section 33(4) of the Act
provides that if the award is set aside the dispute shall at the request of either
party be submitted to a new arbitra tion tribunal constituted in a manner directed
by the court. The City expressed as a preference submission to a new arbitration
tribunal. Save for the amendment to the order proposed by Cloete J, I am
unable to find anything wrong with the order of court. For these reasons I would
make the order.
________________________
DM THULARE
JUDGE OF THE HIGH COURT
CLOETE, J ( O’BRIEN, AJ concurring):
[19] I have had the benefit of reading the judgment of my colle ague, Thulare
J. Although I agree with the outcome proposed, save for an amendment to the
court a quo’s order, I arrive at the outcome by a somewhat different route.
[20] In order to provide context, I will briefly sketch the background although
it overlaps to a degree with Thulare J’s summary thereof. For convenience, I
refer to the appellant as ‘TPI’; the first respondent as ‘the City’, and TPI and the
City collectively as ‘the parties’.
[21] The arbitrator’s award (the award) covered four claims brought by TPI
against the City, which were refer red to in the arbitration as claims A, B, C and
D. The City’s review application which served before the court a quo was
directed only at the award in respect of claim D, which read as follows:
“235.1 the Respondent (the City) is ordered to pay the Claimant (TPI) the amount of
R2 721 670-19, being the fair and reasonable cost incurred by it between 1 February 2017
and 31 October 2018 in respect of new and recapped tyres, brake pads and brake discs as well
as interest on the aforesaid amount at the legal rate a tempore morae;
235.2 it is declared that until the kilometre -related rate is increased as provided for in the
Table of Rates and the Claiman t assumes responsibility for the maintenance of the 9m
vehicles, the Respondent remains responsible for the cost of the provision of tyres, brake pads
and brake discs for those vehicles as may be reasonably required with the exclusion of
maintenance or repairs required due to abuse, incidents or accidents which will be for the
Claimant’s account.
236. The Respondent’s counterclaim is dismissed.”
[22] The City’s counterclaim pertained to repayment of R7 001 244 ‘and all
further sums incurred subsequent to November 2021 to date and yet to be
incurred by the respondent (the City) for the replacement of tyres, brake pads
and brake discs’ together with interest thereon.
[23] Claim D and the City’s counterclaim were both the subject of the proper
interpretation of certain portions of a written agreement concluded between the
parties during August 2013. This was a vehicle operator agreement for the
provision of a bus-based public transport service in respect of Phases 1A and 1B
of an Integrated Rapid Transit System within the City’s metropolitan area (the
IRT system). In terms thereof, TPI was to provide a public transport service on
certain designated routes utilizing 9m, 12m and 18m buses for a period of 12
years from 1 November 2013 until 31 October 2025.
[24] On 17 May 2018, TPI declared a dispute in relation to claim D. TPI took
issue with the City’s interpretation of the agreement in relation to the provision
of tyres, brake pads and brake discs (other than those pertaining to abuse,
incidents and accidents, in respect of which there was no dispute that TPI would
be liable therefor). According to the City, there would only be one free issue by
it of these items during the lifespan of the agreement . According to TPI, it was
entitled to one free issue during the first three years , and another free issue
thereafter once a new maintenance contract was awarded.
[25] Prior to commencement of the arbitration, the parties agreed to a joint
minute regarding the quantum of TPI’s claim in respect of claim D (joint
minute). The joint minute made it clear that the agreed quantum was dependent
upon a finding of liability on the part of the City in respect of the unit price for
the items fitted to the 9m busses. The joint minute also expressly recorded (in
para 5) that ‘although the parties have agreed the quantum as stated in
paragraph 3, the reason for the replacement has not been agreed ’. In other
words, even if the City was found to be liable – depending upon which of the
competing versions the arbitrator accepted as being the proper interpretation of
the relevant portions of the agreement – what would still need to be determined
by the arbitrator was which items had been damaged due to ordinary wear and
tear, and which had been damaged due to so-called risk or abuse . TPI bore the
onus in this regard.
[26] The written arbitration agreement made no provision for an appeal. The
arbitrator interpreted the relevant portions of the vehicle operator agreement and
found against the City in respect of claim D . He thus also dismissed its
counterclaim.
[27] Given that the arbitration agreement precluded any appeal from the
arbitrator’s award, the City was limited to purs uing a review in terms of s 33 of
the Arbitration Act. 1 As sta ted by Thulare J , the City relied on s 33(1)(b),
namely that where an arbitration tribunal:
“has committed any gross irregularity in the conduct of the arbitration proceedings or has
exceeded its powers;
the court may, on the application of any party…make an order setting the award aside.”
[28] The City relied on both elements in s 33(1)(b). The first ground of review
was that the arbitrator did not determine all the pleaded issues in respect of
claim D because his findings were premised, in part, on a misunderstanding of
the joint minute (the ‘gross irregularity’ element). The second ground of review
was that the arbitrator : (a) went beyond that which was at issue between the
parties in relation to claim D; and (b) granted TPI relief that was never sought
by it, or even ventilated in the arbitration (the ‘exceeding of powers’ element.)
[29] Before the court a quo the City also sought an order remitting the matter
to the arbitrator, alternatively submitting the matter to a new arbitration tribunal.
At the hearing before the court a quo the City indicated its preference for the
alternative relief in this regard.
1 Arbitration Act 42 of 1965.
[30] The court a quo set aside the impugned award and referred claim D to a
new arbitrator to be agreed between the parties, and failing agreement, an
arbitrator appointed by the Legal Practice Council. Each party was directed to
pay its own costs. TPI’s application for leave to appeal failed before the court a
quo. The Supreme Court of Appeal subsequently granted leave to a Full Court
of this Division. TPI thus seeks to set aside the order of the court a quo and
replace it with one that the arbitrator’s award is made an order of court in terms
of s 31 of the Arbitration Act.
[31] As previously indicated, the issue s in dispute before the arbitrator in
respect of claim D were not only the resolution of two competing interpretations
of the vehicle operator agreement , but al so, if he found against the City, the
extent of the City’s liability on quantum as formulated in the joint minute. The
City contends that the arbitrator failed to determine the second leg.
[32] It was also common cause that the parties had not nego tiated a revised
rate for the maintenance of tyres and brake pads and discs from year 6 onwards
(the second period). The arbitrator found that upon a proper interpretation of
the relevant portions of the vehicle operator agreement , TPI would only be
liable for these costs if a rate could be agreed upon between the parties for TPI
to take over the maintenance of the 9m busses. Despite this finding, the
arbitrator then made an award that until the rate had been agreed, the City
would have to pay TPI for all its maintenance costs.
[33] The City argues that the arbitrator, in so doing, made an agreement for the
parties which he was not permitted to do, and thus exceeded his powers. This,
says the City, is exacerbated by the fact that clause 45.4.10 of the vehicle
operator agreement expressly preclude s from arbitration a failure to reach
agreement in respect of a revised rate for the second period.
[34] Regrettably, in its judgment the court a quo conflated the two distinct
grounds of review. It also impermissibly entered into the merits of the dispute,
and did not deal at all with the City’s counterclaim. To this extent, it is perhaps
understandable that TPI pursued an appeal, although an appeal lies against the
order of a court, and not its reasoning or findings.2
[35] I now deal with TPI’s opposition to the City’s review grounds. First, TPI
submits that the ‘gross irregularities’ identified by the City relate to the
arbitrator’s reasoning; and the City does not complain that it did not receive a
fair hearing in the ‘method’ or ‘conduct’ of the arbitration, which is the true test.
[36] This submission fails to withstand scrutiny. The arbitrator was bound to
determine all the issues before him. It is not contended by TPI – at least with
any vigour – that he did so. The failure to determine an agreed issue in dispute
goes directly to the conduct of the arbitration proceedings , and constitutes a
gross irregularity. In addition to the authorities referred to by Thulare J, it was
stated in Goldfields 3 that:
“It seems to me that gross irregularities fall broadly into two classes, those that take place
openly, as part of the conduct of the trial- they might be called patent irregularities- and those
that take place inside the mind of the judicial officer, which are only ascertainable from the
reasons given by him and which might be called latent…the law , as stated in Ellis v Morgan
2 Absa Bank v Mkhize and two similar cases 2014 (5) SA 16 (SCA) para 64. See also Neotel (Pty) Ltd v
Telkom Soc Ltd and Others (605/16) [2017] ZASCA 47 (31 March 2017) paras 22-24.
3 Goldfields Investment Ltd and Another v City Council of Johannesburg and Another 1938 TPD 551 at
560.
(supra) has been accepted in subsequent case s , and the passage which has been quoted from
that case shows that it is not merely high -handed or arbitrary conduct which is described as a
gross irregularity; behaviour which is perfectly well -intentioned and bona fide, though
mistaken, may come under that description. The crucial question is whether it prevented a fair
trial of the issues . If it did prevent a fair trial of the issues then it will amount to gross
irregularity…if, on the other hand, he merely comes to a wrong decision owing to his having
made a mistake on a point of law in relation to the merits, this does not amount to gross
irregularity.” (my emphasis)
[37] As to the second ground (the exceeding of powers complaint ) TPI’s
argument proceeds as follows. It was common cause that the parties had not
negotiated a revised rate applicable from year 6. The City had even pleaded this
in its statement of defence in the arbitration . The arbitrator therefore did not
need to decide the issue, nor did he attempt to – it was a given. Accordingly, for
the City to contend that it was not an issue in dispute is meaningless. Moreover,
on a proper construction of the pleadings and vehicle operator agreement, it fell
within the arbitrator’s powers to make the award that he did.
[38] TPI relies on an alleged finding by the arbitrator of the existence of a tacit
term in its favour. Nowhere in the award did the arbitrator specifically find that
such a term was proven. Further, TPI itself conceded in heads of argument filed
on its behalf that ‘the arbitrator did not make a separate award in which he
specifically declared his interpretation of the agreement, but it is clear what his
interpretation was’. 4
[39] No relief was sought before the court a quo for a declarator, and
understandably so, given that this is not a review power. However, as pointed
4 Appellant’s heads of argument para 68.
out by the City, the arbitrator did not uphold either party’s contentions in respect
of liability for tyres, brake pads and brake discs from year 6. In other words, he
did not accept either party’s interpretation of the disputed clauses in the vehicle
operator agreement.
[40] Instead the arbitrator made an order akin to interim , but open ended,
relief, namely that until such time as agreement on the revised rate was reached,
the City was liable to pay all TPI’s mainte nance costs. He clearly exceeded his
powers in doing so , since no general discretion had been conferred upon him
under the terms of the arbitration agreement.
[41] In any event, as was reiterated by the Constitutional Court in Mphaphuli5
quoting Interbulk6:
“The essential function of an arbitrator, indeed a judge, is to resolve the issues raised by the
parties…if an arbitrator believes that the parties or their experts have missed the real point
…then it is not only a matter of obvious prudence, but the arbitrator is obliged, in common
fairness or, as it is sometimes described, as a matter of material justice to put the point to
them so that they have an opportunity of dealing with it .”
[42] The effect of the arbitrator exceeding his powers was highly prejudicial to
the City. It is unclear how, if at all, the City c ould have compelled TPI to
negotiate with it for purposes of reaching agreement on a revised rate , and there
was no incentive for TPI to have done so either , given that the City was to pay
for all of TPI’s maintenance costs until such an agreement was reached.
5 Lufuno Mphaphuli & Associates (Pty) Ltd v Andrews and Another 2009 (4) SA 529 (CC) para 168.
6 Interbulk Ltd v Aidan Shipping Co Ltd, The ‘Vimiera’ [1984] 2 Lloyd’s Rep 66.
[44] There is one final aspect. Para 2 of the court a quo’s order reads as
follows:
“2. The matter is referred to a new arbitrator to determine claim D within 20 days from the
date of this order and failing such agreement an arbitrator shall be appointed by the Legal
Practice Council of South Africa from amongst the senior advocates, and or senior attorneys
with the requisite experience in arbitration proceedings of not less than 15 years.”
[45] What the court a quo must have meant was that the referral, not the
determination, of claim D was to occur within 20 days. This is an error which
we can correct. It is also prudent to make it clear that the determination of
claim D includes the City’s counterclaim.
[46] The following order is made :
1. The appeal is dismissed with costs on scale C, including the costs of
two counsel.
2. The order of the court a quo is confirmed, save that para 2 thereof is
amended to read as follows:
‘The determination of claim D (which for sake of clarity includes the respondent’s
counterclaim) is referred to a new arbitrator. The new arbitrator shall be
appointed by agreement between the parties within 20 calendar days from date of
this order, and faili ng agreement, within a further 20 calendar days by the
Chairperson of the Legal Practice Council from the ranks of an advocate or
attorney with at least 15 years experience including arbitration experience.’
___________________________
JI CLOETE
JUDGE OF THE HIGH
COURT
I agree,
_____________________________
S O’ BRIEN
ACTING JUDGE OF THE HIGH COURT
Appearances
For appellant: Advocate D Melunsky
Instructed by: Ward Brink Attorneys
For first respondent: Adv N Bawa SC
Adv G Solik
Instructed by: Mulangaphuma Incorporated t/a DM5 Incorporated
For second respondent: Abides (no appearance)