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[2019] ZASCA 109
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Termico (Pty) Ltd v SPX Technologies (Pty) Ltd & others; SPX Technologies (Pty) Ltd v Termico (Pty) Ltd (418/2018) [2019] ZASCA 109; 2020 (2) SA 295 (SCA) (6 September 2019)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case no: 418/2018
In
the matter between:
TERMICO
(PTY)
LIMITED APPELLANT
and
SPX
TECHNOLOGIES (PTY)
LIMITED FIRST
RESPONDENT
PETER
SOLOMON SC
NO SECOND
RESPONDENT
CHRIS
ELOFF SC
NO THIRD
RESPONDENT
MICHAEL
VAN DER NEST SC
NO FOURTH
RESPONDENT
Case
No: 413/2018
And
in the matter between:
SPX
TECHNOLOGIES (PTY)
LIMITED APPELLANT
and
TERMICO (PTY)
LIMITED FIRST
RESPONDENT
Neutral
citation:
Termico (Pty) Ltd v
SPX Technologies (Pty) Ltd & others
;
SPX Technologies (Pty) Ltd v Termico
(Pty) Ltd
(418/2018; 413/2018)
[2019]
ZASCA 109
(6 September 2019)
Bench:
Ponnan, Leach, Swain, Molemela and
Mbatha JJA
Heard:
15 August 2019
Delivered:
6 September 2019
Summary:
Arbitration – application to set
aside award – no gross irregularity in terms of
s 33(1)
(b)
of the
Arbitration Act 42 of 1965
– counter-application to make
arbitration award an order of court in terms of
s 31
and for a money
judgment – not constituting an impermissible ‘hybrid
order’.
ORDER
On
appeal from
:
Gauteng
Local Division of the High Court, Johannesburg (Ismail J sitting as
court of first instance):
(a) Termico’s appeal is upheld
with costs, including those of two counsel.
(b) Paragraphs 1 to 3 of the order of
the court below is set aside and substituted by:
‘
(1)
SPXT’s application to review and set aside the arbitration
award is dismissed with costs, including those of two counsel.
(2)
Termico’s counter-application succeeds with costs, including
those of two counsel.
(2.1)
The award of the arbitration tribunal dated 5 July 2016 is made an
order of court.
(2.2)
SPXT is ordered to pay Termico the sum of R255 846 850.25,
together with interest at the rate of 9% per annum from
20 July 2016
to date of payment.’
(c) SPXT’s
repudiation appeal is dismissed with costs, including those of two
counsel.
JUDGMENT
Ponnan
JA (Leach, Swain, Molemela and Mbatha JJA concurring):
[1]
The first respondent, SPX Technologies (Pty) Ltd (SPXT), is a wholly
owned subsidiary of SPX Corporation, a multinational company
incorporated in the United States of America and listed on the New
York Stock Exchange. SPXT is the majority and controlling shareholder
in DBT Technologies (Pty) Ltd (DBT), a South African company that
provides products and services to firms in the power generation
and
petrochemical industries. In 2006, SPXT engaged the appellant,
Termico (Pty) Ltd (Termico), a company with the requisite black
economic empowerment (BEE) credentials, to become the BEE shareholder
in DBT. Termico subscribed for 25.1% of the shares in DBT
(the BEE
shares) and financed the purchase through a loan granted by SPXT
(referred to as Loan B). SPXT held the remaining 74.9%
shares.
[2]
On 15 December 2006 Termico, SPXT and DBT entered into a
shareholders’ agreement (the shareholders’ agreement),
which provides
inter alia
that:
(i) Termico was not entitled, except
in very limited circumstances, to dispose of the BEE shares for seven
years after 1 January
2007 (the lock-in period);
(ii) After 1 January 2014, if Termico
wanted to sell the shares, it was entitled to exercise a Put Option
in accordance with the
provisions of clause 19 of the shareholders’
agreement; and
(iii) At any time,
SPXT could exercise a call option to acquire the BEE shares from
Termico, the effect of which would be that the
latter would be
obliged to sell its shares to the former at the value calculated in
terms of clause 18.1 of the shareholders’
agreement. Once
exercised there would be a binding agreement between the parties in
terms of the call option.
[3]
Clause 19 of the shareholders’ agreement, headed ‘Put
Option’, reads:
‘
SPX
hereby grants to the BEE Partner the irrevocable right and option
(“Put Option”) to put the total Equity of the
BEE Partner
(“the BEE Equity”) to SPX after the expiration of the
Initial Period, upon the following terms and conditions:
19.1
the BEE Partner will give 60 (sixty) days written notice to SPX of
its intention to exercise the Put Option (“Put Option
Notice”),
after the expiry of the Initial Period;
19.2
the purchase price (“Put Price”) payable to the BEE
Partner for the BEE Equity shall be the higher of:
19.2.1
the Fair Market Value of the BEE Equity; and
19.2.2
an amount determined in accordance with the following formula:
A
= [(BxC)-D]*E%
Where:
A,
is the cash consideration in South African currency payable to the
BEE Partner:
B,
is the EBITDA Multiple;
[1]
C,
is the EBITDA of the Company as per the latest audited annual
financial statements of the Company at the time of the Put Option
Notice;
D,
is the net debt in the Company based on the latest audited annual
financial statements of the Company at the time of the Put
Option
Notice;
E,
is the percentage of Shares held by the BEE Partner which, at the
Effective Date, will be 25.1%;
19.3
within 10 Business Days of the Put Price being agreed or determined,
the Parties shall meet at the offices of the Company for
the purposes
[of] concluding the Put Option;
19.4
the Put Price shall firstly be applied in repayment of any balance
outstanding in relation to Loan B (whether as to capital
or interest
thereon) and any balance of the Put Price after repayment of Loan B
shall be paid to the BEE Partner;
19.5
upon payment of the Put Price by SPX to the BEE Partner, the BEE
Partner shall deliver to SPX all the share certificates in
relation
to its Shares (together with duly signed transfer forms in respect
thereof and left blank as to the transferee) and a
written transfer
of the Shareholders’ Loans;
19.6
SPX and the Company will use their reasonable endeavours to support
the BEE Partner’s exercising of its Put Option, including
but
not limited to providing the BEE Partner with the relevant annual
financial statements and management accounts.
[4]
The capital amount of Loan B was R19 700 000. Interest
applied at a rate linked to the prime rate.
[2]
It was
anticipated that the capital and interest would be repaid using
dividends received by Termico from DBT. During the lock-in
period,
Termico remained a shareholder in DBT. Relying on its BEE credentials
through the involvement of Termico, DBT successfully
tendered for
major contracts. Despite DBT’s revenue having grown from R250m
(in 2007) to R2.4bn (in 2012), and an amount
of approximately R1,26bn
having been paid out as fees and other charges by DBT to the SPX
Group, hardly any dividends were declared
to the shareholders of DBT.
Termico accordingly did not receive the dividend stream that it
anticipated would assist in repaying
Loan B.
[5]
On 3 June 2014 and after the expiry of the lock-in period, Termico
exercised the Put Option by sending a written notice to SPXT,
as
contemplated by clause 19.1. In the notice, Termico asserted that the
Put Price to be paid was the amount to be determined in
accordance
with the formula in clause 19.2.2 of the shareholders’
agreement, and that the audited financial statements to
be applied
were the annual financial statements of DBT for the year ending 31
December 2012 (the 2012 annual financial statements).
On 12 June
2014, SPXT acknowledged receipt of the Put Option Notice but
contended that reliance had to be placed on the 2013, and
not the
2012 annual financial statements, as the appropriate source of data
for the formula. Later, SPXT raised further disputes,
including that:
(i) the 3 June 2014 notice did not constitute an effective Put Option
Notice; (ii) a valid Put Option had not been
exercised by Termico;
and (iii) it (SPXT) could enforce a Call Option, which it purported
to exercise in September 2014, and defeat
any enforcement of the Put
Option.
[6]
The matter proceeded to arbitration before the second to fourth
respondents (the arbitrators)
[3]
in
accordance with the dispute resolution process set out in the
shareholders’ agreement. No additional arbitration agreement
was concluded between the parties. They simply exchanged pleadings,
which identified the unresolved disputes and set out their
respective
contentions. On 17 June 2016, the parties agreed to a procedure that
had the practical effect that no oral evidence
was led at the
arbitration hearing. Instead, they agreed to exchange heads of
argument and address argument to the arbitrators
on the correct
interpretation of the shareholders’ agreement.
[7]
The arbitrators (three experienced senior counsel) identified the
core issues in the arbitration as: (i) the enforceability
of the Put
Option exercised by Termico in terms of clause 19 of the
shareholders’ agreement; (ii) the calculation of the
Put Price;
(iii) whether the audited 2012 financial statements or the 2013
financial statements were the applicable and relevant
financial
statements for the determination of the Put Price; and (iv) the
enforceability of the Call Option purportedly exercised
by SPXT. The
arbitrators decided each of these issues in Termico’s favour.
On 5 July 2016, the arbitrators delivered the
following award:
‘
It
is declared that:
1.1
The claimant [Termico] validly exercised its put option in terms of
clause 19.1 of the shareholders’ agreement between
the parties
on 3 June 2014.
1.2
The put price, computed in terms of clause 19.2 of the shareholders’
agreement, is an amount of R287 337 807.
2.
The defendant’s [SPXT’s] counterclaim [that it validly
exercised the call option] is dismissed with costs . . . .
3.
The defendant is directed to pay the claimant’s costs of the
arbitration . . . .’
On
7 July 2016, Termico asked the arbitrators to supplement their award
by adding
mora
interest
on the Put Price of R287 337 807. The arbitrators explained
on 17 August 2016 that they had not made an award
sounding in money,
and had accordingly not awarded
mora
interest, because the net amount
payable to Termico still had to be determined in terms of clause 19.4
of the shareholders’
agreement by setting off the outstanding
balance of Loan B.
[8]
Following upon the award, Termico’s attorney wrote to SPXT’s
attorney on 11 July 2016 calling for the meeting contemplated
in
clause 19.3. Included in that letter was a request for disclosure of
the value of Loan B. SPXT refused to attend a meeting or
to provide a
schedule setting out the outstanding balance of Loan B. SPXT also
refused to accede to a second request for a meeting
made on 25 July
2016. Instead, on 29 July 2016, SPXT applied to the South Gauteng
High Court, Johannesburg to set aside the award
in terms of s
33(1)
(b)
of the Arbitration Act 42 of 1965 (the main application).
[4]
Termico
opposed the application. It also launched a counter-application to
make the award an order of court in terms of s 31(1)
of the Act and
for judgment against SPXT in an amount exceeding R250m, being the Put
Price less the balance owing to SPXT on Loan
B (the
counter-application).
[9]
During November 2016, SPXT informed Termico that a firm called
Empowerdex would be performing its BEE evaluation. It asked Termico
to meet with or speak telephonically with Empowerdex for purposes of
the evaluation. Termico responded in a letter dated 7 December
2016
that it no longer regarded itself as SPXT’s BEE partner and it
had remained a shareholder of DBT only because SPXT had
failed, for
some 30 months, since June 2014 to honour its contractual obligations
pursuant to Termico’s exercise of its Put
Option. On 29
December 2016, SPXT’s attorneys replied that Termico’s
letter of 7 December 2016 constituted a repudiation
of the
shareholders’ agreement; that SPXT both accepted the
repudiation and purported to exercise a Call Option, that is,
an
option to buy Termico’s shares, in terms of clause 14.5 of the
shareholders’ agreement. On 26 May 2017, just days
before the
specially allocated hearing of the main and counter-applications in
June 2017, SPXT launched what has come to be described
as the
repudiation application (the repudiation application). It was
launched almost three years after Termico had exercised its
Put
Option in June 2014 and some 10 months after the arbitrators’
award upholding Termico’s exercise of the Put Option.
[10]
Judgment was delivered on all three applications on 22 January 2018.
Ismail J issued the following order:
‘
1.
The review application succeeds, with costs. Such costs to include
the costs of two counsel.
2.
The counter application is dismissed with costs, such costs to
include the costs of two counsels.
3.
The dispute is referred to arbitration to be determined by a new
panel of arbitrators in terms of 33(4) of arbitration Act. The
arbitrators are to be appointed as previously, namely each party
would nominate an arbitrator and the nominated arbitrators will
appoint the third arbitrator.
4.
The amendment which was sought in respect of the repudiation
agreement was granted.
5.
The repudiation application is dismissed with costs – such
costs to include the costs of two counsel.
6.
The Applicant is to pay the costs of two days during June 2017 when
the matter was postponed and the repudiation application
was
launched.’
[11]
The applicable legal principles as to when a court can set aside an
arbitration award for reason of gross irregularity are
well-settled.
They were the subject of detailed consideration by Harms JA in
Telcordia
Technologies Inc v Telkom SA Ltd
[5]
and more
recently summarised by this court in
Palabora
Copper (Pty) Ltd v Motlokwa Transport and Construction (Pty) Ltd
.
[6]
The party
alleging the gross irregularity must establish it.
[7]
In the main
application, SPXT set out a number of grounds of review in its
founding papers, but these were not pressed in argument
before Ismail
J or before this court on appeal. The ground advanced by SPXT,
namely, that the arbitrators failed to deliver a ‘final’
award, thereby committing a gross irregularity as contemplated by s
33(1)
(b)
of the Act, was raised for the first time in its heads of argument
before Ismail J. That ground of review, which was not set out
as an
identifiable ground of review in SPXT’s founding papers, found
favour with the learned judge.
[8]
[12]
In my view, no case has been made out to support a finding that the
arbitrators misconceived the nature of the enquiry, with
the result
that SPXT was denied a fair hearing.
[9]
The court
a
quo
failed to identify the nature of the gross irregularity contemplated
by s 33(1)
(b)
of
the Act that warrants the setting aside of the arbitration award in
its entirety. As I shall presently show, the contention that
an
irregularity arises because of a ‘lack of finality’ is
devoid of substance. In any event, even if it could legitimately
be
concluded that the arbitrators committed a gross irregularity in
failing to finally decide an issue, there was no warrant for
setting
aside the award made on the other issues. Those issues were properly
and finally decided.
[10]
What is
more, the court
a
quo
’s
order that ‘the dispute is referred to arbitration to be
determined by a new panel of arbitrators’ is meaningless
without any clear indication as to precisely what ‘dispute’
is being referred back.
[13]
In
SA
Breweries Limited v Shoprite Holdings Limited
,
[11]
this court
considered the issue of finality in the context of an expert
determination. Albeit not in the context of an application
for review
under s 33 of the Act, the
dicta
in that matter are relevant as this court held that the requirements
for a valid arbitral award are equally applicable to an expert
determination. Scott JA stated (at para 22):
‘
In
summary, what is required is that all issues submitted must be
resolved in a manner that achieves finality and certainty. The
award
or determination may therefore not reserve a decision on an issue
before the arbitrator or expert for another to resolve.
It must also
be capable of implementation. On the other hand, what must be
determined are the matters submitted and no more. Depending
on the
questions, therefore, the determination may not necessarily result in
a final resolution of a dispute between the parties.
Generally a
court will be slow to find non-compliance with the substantive
requirements and an award or determination will “be
construed
liberally and in accordance with the dictates of common sense”
. . . . A court will, therefore, as far as possible
construe an award
or determination so that it is valid rather than invalid. It will not
be astute to look for defects’.
[14]
Despite the fact that the expert in
SA Breweries
left matters
to be addressed after the expert determination, the court found that
the decision of the expert was adequate and enforceable.
The court
a
quo
did not follow this approach. Instead, Ismail J reasoned:
‘
[29]
The arbitrators were of the view that they could not make a monetary
award for two crucial reasons. Firstly the provisions
of clause 19.3
of the shareholders agreement had to be complied with and secondly
the value of Loan B was not determined between
the parties.
.
. .
[31]
The panel of arbitrators did not give a money judgment because any
money judgment was subject to a set off of the amount of
Loan B.
Since the arbitral panel were not called upon to determine the value
of loan B it was not able to make a money judgment
or award. It did
not have the jurisdiction to determine the value of loan B.
.
. .
[48]
The court is called upon to complete an order which should have been
completed by the arbitralpanel, albeit that they did not
have the
information available, to make the set off of loan B and that clause
19.3 had not taken place, when they made their finding
regarding the
put price of the shares. It might well be so that the court can
complete the “puzzle” now that missing
information is
available to it in order to complete the picture of the jigsaw.
However, I pose the rhetorical question whether
the order sought in
the counterclaim would not be an order that consist (sic) partially
of the arbitration award and an order partially
of the court. This
would fly in the face of the full court judgment in
Britstown
,
namely that it would be a hybrid order.
[49]
In my view the arbitrators, as was submitted by applicant’s
counsel did not make an award that was final, albeit because
the
mandate given to them did not permit them to make an order since the
determination of the value of loan B was not part of their
mandate. .
. . The reality is that they were not mandated to determine the value
of loan B and that issue fell outside the purvey
of their mandate.’
[15]
The reasoning in paragraphs 48 and 49 rests on Ismail J’s
categorisation of the order sought in the counterclaim by Termico
as
an ‘hybrid order’ found to be impermissible by the full
court of the Cape Provincial Division in
Britstown
Municipality v Beunderman (Pty) Ltd
.
[12]
In
Britstown
,
Beyers JP (Watermeyer and Diemont JJ concurring) held:
‘
It
seems to me that the learned Judge
a
quo
erred in taking upon himself the function of deciding these
outstanding matters. Apparently he was under the impression that
there
was a discretion vested in him whether or not to decide
outstanding points of difference between the parties. I can find no
basis
in law for such a discretion. . . .
[13]
.
. .
But
certain other questions were still open to arbitration, questions
which were fundamental to the appellant’s liability.
Those
questions had never been finally arbitrated upon, because it is quite
clear that under [the arbitration clause] . . . those
questions could
not be finally settled by the arbitrator . . . and the Court
a
quo
then found that it had a discretion to oust further arbitration and
itself decide the outstanding questions of interpretation.
. . .
[14]
.
. .
But
there is, in my view, no room in law for a hybrid order such as the
one under appeal, which is partially a finding made by an
arbitrator
and partially a finding made by a Court of law.’
[15]
[16]
In my view, the
Britstown
judgment
is wholly distinguishable from the present matter. The facts of that
case are set out in the judgment of the court of first
instance (per
Van Zyl J).
[16]
Once the
decision of the full court is read against the backdrop of the facts
set out in the judgment of Van Zyl J, it is clear
that the reference
to an ‘hybrid order’ in the current matter is wholly
misplaced. The facts in the
Britstown
matter
were: B was contracted to install power lines (and the supporting
poles) for Britstown Municipality. The contract allowed
for
additional amounts to be paid by the Municipality if B encountered
solid rock when digging holes to plant the poles (because
of the
additional costs of drilling and blasting). A dispute arose as to
whether the Municipality was liable for an amount of £6,634
5s
claimed by B for the excavation of hard rock when planting poles. In
challenging the claim, the Municipality
inter
alia
:
(i) denied that hard rock was encountered and put B to the proof of
its allegations in relation to the quantity of rock excavated;
and
(ii) relied on a clause in the agreement that ‘no poles shall
be planted under such [hard rock] conditions, without the
consultant’s prior approval’ – it alleged that the
consultant’s prior approval had not been obtained and
therefore
it was not liable for the additional costs associated with planting
the poles in hard rock.
[17]
Importantly, the arbitration clause in the
Britstown
matter
provided that:
‘
(1)
In the event of a dispute as to the quality and/or the measurement of
quantities of materials and workmanship, the consultant/s’
decision shall be accepted.
(2)
Upon any other matter connected with this contract, the consultant/s
will act as arbitrator in the first instance, in the adjustment
of
any difficulties arising between the contractor and the client.
(3)
Should, however, the decision arrived at in this latter case be
unacceptable to either party, the point of difference shall
be
submitted to the arbitration (in terms of the
Arbitration Act 
; .
. .) by two nominees, one from each party’.
[17]
The
disputes were referred to the consultant, who determined them in
favour of B. Dissatisfied with the award, the Municipality
gave
notice that it required a further arbitration in terms of the
arbitration clause. A single arbitrator was agreed upon. The
Municipality formulated the ‘statement of case’ for the
arbitrator. B asserted that the Municipality’s contentions
related to the measurement of quantities and were consequently not
subject to further arbitration proceedings under the arbitration
clause. B then approached the court to have the consultant’s
award made an order of court.
[18]
The hybrid nature of the order granted by Van Zyl J and criticised by
the full court is therefore quite different from that
sought by
Termico in the counter-application. What Van Zyl J did was to usurp
the power given to an arbitrator, in respect of a
matter which was
still the subject of a further arbitration that had not finally run
its course. The critical statements made in
the full court judgment
quoted above were aimed at this approach, not at a situation where
the arbitration is complete and the
court is asked to deal with
issues that were not issues in the arbitration. Unlike Van Zyl J, the
court below was not asked, in
the counter-application, to decide
matters which remained undecided by the arbitrators or that were
still ‘live’ in
a pending arbitration. In the
circumstances, the reliance placed on the
Britstown
decision by SPXT and the court below
was wholly misplaced.
[19]
Here, the arbitrators had decided that, on their interpretation of
clauses 19.3 and 19.4 (particularly the latter), they could
not make
an award compelling SPXT to make payment to Termico. On their
interpretation of clause 19.4, determination of the amount
to be paid
required determination of the value of Loan B, which fell to be
deducted from the Put Price. As the value of Loan B
was not an issue
to be decided in the arbitration, the arbitrators determined that the
amount of Loan B would need to be established
and the Put Price
applied to Loan B before payment could be ordered. The arbitrators
also highlighted the provisions of clause
19.3. On their
interpretation, having held that there was a valid exercise of the
Put Option, which brought about a binding sale
at the Put Price
determined in accordance with clause 19.2, the arbitrators recorded:
‘[w]hat remained to be done was (and
still is) that a meeting
was to be held as prescribed by clause 19.3 in order to implement the
agreement of sale’. Thus none
of the issues referred for
determination by the arbitrators were left undecided.
[20]
Neither SPXT, nor the court
a quo
,
were able to identify an issue that had been referred to the
arbitrators but not finally decided by them. What was still to be
decided, before SPXT could be ordered to pay Termico, was the value
of Loan B, which fell to be deducted from the Put Price, but
it is
common cause that this issue fell outside of the jurisdiction of the
arbitrators. The additional issues that the court
a
quo
recognised as being necessary to
grant a money judgment in the counter-application, namely, the
application of the Put Price to
Loan B and the meeting to implement
the sale, had not occurred at the time of the arbitration and were
not issues before the arbitrators.
They were accordingly not issues
that the arbitrators could decide. The counterclaim relied on a cause
of action that was only
capable of prosecution when the facts
relevant to Loan B and the implementation meeting could be taken into
account. The order
sought by Termico is accordingly not one in the
nature of the ‘hybrid order’ referred to in the
Britstown
Municipality
matter. It follows that
not only should SPXT’s review application have failed before
Ismail J, but Termico’s counter-application
to make the
arbitration award an order of court in terms of s 31 of the Act,
ought to have succeeded.
[21]
It remains to consider whether Termico is entitled to the further
relief sought in the counter-application, namely a judgment
sounding
in money. The court below used the fact that it was called upon to
order a money payment as a reason to set aside the
arbitrators’
award. That flowed directly from the finding that the order claimed
in the counter-application is an impermissible
‘hybrid order’.
That finding, as I have shown, cannot be supported. Termico
originally also sought payment of R287 337 807,
less such
amount as the arbitrators determine may be due to SPXT in terms of
Loan B. SPXT excepted to this claim. It contended
inter
alia
that any dispute in relation to
Loan B was not subject to the dispute resolution processes in clauses
29 and 30 of the shareholders’
agreement and consequently the
determination of Loan B was not an issue competently before the
arbitrators. The arbitrators upheld
the exception. Termico then
amended its claim to delete the reference to Loan B.
[22]
The arbitrators’ refusal to grant a money judgment did not
preclude Termico from claiming such a judgment from a court
that has
jurisdiction to set-off the value of Loan B, after the meeting
contemplated in clause 19.3 had been held (or the meeting
is deemed
to have occurred). Once the arbitrators had determined the Put Price,
the meeting contemplated in clause 19.3 ought to
have been convened.
In response to the requests from Termico for such a meeting to be
convened, SPXT’s attorney stated that
they had instructions to
‘bring an application to have the award set aside’ and
that ‘[i]n the circumstances,
no purpose [would] be served in
holding the requested meeting, at this time’. However, it is
unclear why the fact of an application
to set aside the award meant
that SPXT was free to simply ignore the request for a meeting. The
purpose of the meeting was to determine
the value of loan B. Loan B
was not one of the issues before the arbitrators. Not having been the
subject of the arbitration, the
challenge to the award did not
relieve SPXT of its obligation to meet. In my view, SPXT’s
refusal to meet constituted a deliberate
frustration of Termico’s
right, with the result that the meeting must be deemed to have
occurred.
[18]
[23]
SPXT contends that the value of Loan B, which falls to be deducted
from the Put Price, cannot be decided by this court, but
must go back
to arbitration in terms of the dispute resolution provisions of the
shareholders’ agreement. It is so
that the dispute
resolution, mediation and arbitration provisions of the shareholders’
agreement (clauses 29-31) are also
applicable to the Loan Agreement.
However, clause 31.2 of the shareholders’ agreement provides:
‘
31.2
Notwithstanding the provisions of this clause 31:
.
. .
31.2.2
In the event of either Party having a claim against the other Party
for a liquidated amount or an amount which arises from
a liquid
document, then the Party having such claim shall be entitled to
institute action therefor in a court of law rather than
in terms of
the above clauses, notwithstanding the fact that the other Party may
dispute such claim.’
Termico’s
counter-application is a claim for a money judgment in a liquidated
amount (i.e. the Put Price less the amount of
Loan B). That, this
court can determine. In any event, as the deponent to SPXT’s
affidavits in both the main application
and counter-application, Mr
Travis Schmeling made plain:
‘
Although
there is a binding dispute resolution process, which includes an
arbitration procedure in force between the parties, the
applicant is
also of the view that the issues raised in the main application,
linked to those arising from the counter application
concerning the
issues in dispute in the arbitration (prayers 2 to 4), ought to be
decided by this court. On this basis the applicant
agrees with the
relief sought by Termico in prayer 9 of the counter application
(paginated page 563). To this end, this court must
have regard to the
pleadings, witness statement and documents before the Tribunal.’
[24]
Moreover, there appears to be no dispute as to the amount outstanding
on Loan B. Accordingly, there is no dispute to go to
arbitration.
[19]
SPXT has
consistently refused to set out what it contends is the balance of
Loan B. There is undisputed evidence of the balance
of Loan B on the
papers. The calculation appended to Mr Schmeling’s witness
statement delivered on 15 June 2016 shows the
balance owing on Loan
B, as at 12 April 2016, as R30 624 550.79. This schedule
was attached to Termico’s answering
affidavit in the main
application. In order to place the court in a position to order
payment in a specific amount, Termico prepared
a schedule that
accepted all of the assumptions in the schedule to Mr Schmeling’s
affidavit. Although SPXT’s replying
affidavit makes a number of
arguments as to why the schedule should not be considered, SPXT puts
up no contrary version and so
the amounts reflected in the Termico
schedule must be accepted as undisputed evidence in these
proceedings.
[25]
In terms of clause 19.3 of the shareholders’ agreement, ‘within
10 Business Days of the Put Price being agreed
or determined, the
Parties shall meet at the offices of the Company for the purposes
concluding the Put Option.’ The arbitral
award determining the
Put Price was delivered on 5 July 2018. The ten days contemplated in
clause 19.3 expired on 19 July 2018.
On Mr Schmeling’s
schedule, the balance owing on Loan B on 20 July 2018 is
R31 490 949.76. If that amount is deducted
from the Put
Price determined by the arbitrators of R287 337 803, it
yields a net amount of R255 846 853.24.
This is the amount
that was payable by SPXT to Termico on the date of set-off, namely 20
July 2016. Termico is accordingly entitled
to a money judgment in the
sum of R255 846 850.25, together with interest at the rate
of 9% per annum from 20 July 2016
to date of payment.
[26]
Counsel for SPXT accepted that if Termico’s appeal in respect
of the main application is upheld and the arbitrators’
award
reinstated, the appeal in respect of the repudiation application must
fail. This is because the arbitrator’s award
confirmed the
validity of the Put Option exercised by Termico in June 2014 and the
effective sale of the shares
[20]
and excluded
any possibility of SPXT exercising its Call Option over the same
shares in 2016, the exercise of both the put and call
options being
mutually incompatible.
[27]
In the result:
(a) Termico’s appeal is upheld
with costs, including those of two counsel.
(b) Paragraphs 1 to 3 of the order of
the court below is set aside and substituted by:
‘
(1)
SPXT’s application to review and set aside the arbitration
award is dismissed with costs, including those of two counsel.
(2)
Termico’s counter-application succeeds with costs, including
those of two counsel.
(2.1)
The award of the arbitration tribunal dated 5 July 2016 is made an
order of court.
(2.2)
SPXT is ordered to pay Termico the sum of R255 846 850.25,
together with interest at the rate of 9% per annum from
20 July 2016
to date of payment’.
(c) SPXT’s repudiation appeal is
dismissed with costs, including those of two counsel.
_________________
V M Ponnan
Judge of Appeal
APPEARANCES:
For
Appellant: W H Trengrove SC (with him D A Turner and M Mbikiwa)
Instructed
by:
Bowman
Gilfillan Inc., Sandton
McIntyre
van der Post, Bloemfontein
For
Respondent: J P Daniels SC (with him H Martin)
Instructed
by:
Malan
Scholes Inc., Johannesburg
Claude
Reid Attorneys, Bloemfontein
[1]
EBITDA is
defined in clause 1.23 as ‘the earnings before interest, taxes,
depreciation and amortization of the Company’.
And, the ‘EBITDA
Multiple’ is defined in clause 1.22 as ‘a multiple of
six’.
[2]
Being 11%
at the date of the agreement and then adjusted with effect from the
first adjustment to the prime rate after the effective
date, on a
quarterly basis, at the prime rate less 1%.
[3]
Advocates
PA Solomon SC; CM Eloff SC and M van der Nest SC. The arbitrators
did not participate in the court
a
quo
and they do not participate in this appeal.
[4]
Section 33
(1)
(b)
reads:
‘
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 to the reference
after due notice to the other party or parties, make
an order
setting the award aside.’
[5]
Telcordia
Technologies Inc v Telkom SA Ltd
2007
(3) SA 266 (SCA).
[6]
Palabora
Copper (Pty) Ltd v Motlokwa Transport and Construction (Pty) Ltd
2018
(5) SA 462 (SCA); [2018] ZASCA 23.
[7]
Ibid at
para 8.
[8]
As
Telcordia
Technologies Inc v Telkom SA Ltd
above fn 5 at para 32
made plain:
‘the grounds for any review as well as the facts and
circumstances upon which the applicant wishes to rely have
to be set
out in the founding affidavit’.
[9]
Supra fn 6
at para 8 (citations omitted).
[10]
Above fn 6
at para 48.
[11]
SA
Breweries Ltd v Shoprite Holdings Ltd
[2007] ZASCA 103; 2008 (1) SA 203 (SCA); [2008] 1 All SA 337 (SCA).
[12]
Britstown
Municipality v Beunderman (Pty) Ltd
1967 (3) SA 154 (C).
[13]
Ibid at 156 A.
[14]
Ibid at 156 F-G.
[15]
Ibid at 157 A-B.
[16]
Beunderman
(Pty) Ltd v Britstown Municipality
1965 (3) SA 111 (C).
[17]
Ibid at 113 C-E.
[18]
Du
Plessis NO & another v Goldco Motor & Cycle Supplies (Pty)
Ltd
2009
(6) SA 617
(SCA) at para 26 (citations omitted).
[19]
Parekh v
Shah Jehan Cinemas (Pty) Ltd
1980
(1) SA 301
(D) 304E-H.
[20]
Grey
Global Group Inc v Khumalo & another
[2011]
ZASCA 161
at para 18.