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[2010] ZAWCHC 39
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Bidoli v Bidoli (2982/08) [2010] ZAWCHC 39 (15 March 2010)
IN
THE HIGH COURT OF SOUTH AFRICA
[WESTERN
CAPE HIGH COURT, CAPE TOWN]
Case
No: 2982/08
In
the matter between:
GUIDO
BRUNO BIDOLI
Applicant
and
BARBARA
LIESELOTTE BIDOLI
First
Respondent
(in
her capacity as executrix in the estate of the Late Fabrizio Bidoli
as well as in her personal capacity by virtue of her marriage
in
community of property.)
ROMOLO
BIDOLI
Second
Respondent
JUDGMENT
DELIVERED: 15 MARCH 2010
FOURIE,
J:
INTRODUCTION
[1]
The main issue for decision in this application, is whether an
arbitral award made by consent (i.e. an award simply incorporating
a
settlement agreement) constitutes a valid award which may be made an
order of court.
BACKGROUND
[2]
Applicant, first respondent's late husband and second respondent were
brothers who engaged in various business ventures with
their late
father. Disputes subsequently arose regarding these ventures and the
parties agreed to submit their differences to arbitration.
To this
end, they concluded a written arbitration agreement in terms of which
senior counsel was appointed as the arbitrator.
[3]
The hearing of the arbitration took place in Cape Town from 3 - 10
December 2007. During the course of the hearing the parties
were able
to facilitate a narrowing of their disputes, with the result that the
arbitrator was only required to receive evidence
on limited issues.
However, on 7
December
2007 the parties succeeded in settling all their disputes and
concluded a written settlement agreement to that effect.
The hearing
was then adjourned to 10 December 2007.
[4]
On 10 December 2007, second respondent indicated that he was not
satisfied with the settlement agreement, and that he wished
to reopen
the proceedings. After hearing second respondent, the arbitrator
concluded that there were no grounds upon which second
respondent
could avoid the settlement agreement. He then published his written
award which simply incorporated the terms of the
settlement
agreement.
[5]
In paragraph 12 of the award the arbitrator recorded the settlement
reached by the parties, as follows:
"12.
There is no need to state the full extent of the various claims and
counterclaims made by the parties. They have settled
all of their
disputes, whether by set-off of various claims against each other;
compromise or abandonment; by agreeing that:
a.
The remaining property in Rome, presently registered in the name of
the three brothers, shall remain registered in equal undivided
shares, to which the parties shall have equal rights and remain
responsible, in equal shares, for the maintenance and upkeep, rates,
taxes, levies and other charges as may be payable;
b.
The
remaining money held in the aforesaid account in Banca Intesa, Rome,
shall be divided in accordance with the written agreement
signed by
the parties and handed in as exhibit "C" and a true copy of
which is annexed to this award.
c.
Should
the amount presently held in the said account be any different to the
amount reflected in exhibit "C", then the
funds shall be
divided in accordance with the following ratio of division agreed
upon, namely to Barbara (in her aforesaid capacities)
7.21%; to
Romolo 17.50%; and to Guido 75.29%."
[6]
Paragraph 13 of the award provides as follows:
"13.
The parties, or any one or more of them, are hereby confirmed to be
entitled to apply to the High Court of South Africa
(Cape Provincial
Division) to make this award an order of Court to enable the
registration thereof as an Order of Court in Rome,
Italy, to enable
and facilitate the withdrawal of funds from the said bank account in
accordance with this Arbitral Award and to
enable such steps (to be
taken?) as they may be advised necessary to transact also with regard
to the immovable property."
[7]
Applicant subsequently approached the court for an order that the
arbitral award published on 10 December 2007, be confirmed
and made
an order of court in terms of section 31 of the Arbitration Act No.
42 of 1965 ("the
Arbitration Act"
;). Second respondent
opposes the application, while first respondent abides the decision
of the court. Second respondent has also
filed a counter application
in which he seeks the setting aside of the award as
void
ab initio,
and
that the settlement agreement concluded by the parties be declared
void
ab initio.
In
the affidavit filed by second respondent, which serves as an opposing
affidavit and a founding affidavit for the counter application,
second respondent contends that due to a common mistake,
alternatively a unilateral mistake on his part, the settlement
agreement
concluded on 7 December 2007, is
void
ab initio.
On
this basis, he maintains that the arbitral award published on 10
December 2007, is likewise
void
ab initio.
SUBMISSIONS
OF THE PARTIES ON THE VALIDITY OF THE ARBITRAL AWARD
[8]
At the hearing of the application, Mr. Burger SC, with him Mr.
Trengove, indicated that second respondent would no longer be
moving
for an order, in terms of the counter application, that the
settlement agreement of 7 December 2007, be declared void
ab
initio.
According
to Mr. Burger, second respondent would, in reconvention, only seek an
order that the arbitral award of 10 December 2007,
be set aside as
void
ab
initio.
As
I understood Mr. Burger, the main string to second respondent's bow,
for purposes of its defence to the application and for the
relief it
seeks in terms of the counter application, is that an arbitral award
made by consent does not constitute a valid award
which is capable of
being made an order of court. It would therefore not be necessary,
for purposes of the adjudication of the
application and counter
application, to decide whether a common mistake, or unilateral
mistake on the part of second respondent,
gave rise to the conclusion
of the settlement agreement of 7 December 2007, as alleged by second
respondent in his answering/founding
affidavit.
[9]
Mr. Burger submitted that the sole purpose of appointing an
arbitrator is to have a dispute decided by him or her. From this
it
follows, he argued, that once the dispute has fallen away the
arbitrator's appointment is at an end, for there is nothing for
him
or her to decide. In regard to the arbitral award of 10 December
2007, Mr. Burger submitted that, as it was made by consent
and did
not involve a decision by the arbitrator on the disputes referred to
arbitration, it is not a valid award which may be
made an order of
court.
[10]
Mr. Mitchell SC, for applicant, submitted that where parties to an
arbitration reach a settlement of their disputes, at least
one that
affects matters
in
futuro
and
must be given effect to, an arbitrator is entitled upon the request
of the parties to make an award in terms of the settlement.
To hold
otherwise, Mr. Mitchell argued, would lead to unnecessary and
cumbersome proceedings by way of an illiquid action based
on the
agreement, if one party should (as is the case here) seek to resile
from the agreement or refuse to perform his or her obligations
thereunder.
[11]
Mr. Mitchell also submitted that it is not correct to argue, as does
second respondent, that the arbitrator was not able to
make an award
as no dispute remained to be adjudicated. He submitted that it is
clear that the conclusion of the written settlement
agreement did not
end the disputes between the parties, as it required the arbitrator
to adjudicate upon the enforceability of
the written agreement.
DISCUSSION
[12]
In their written arbitration agreement, in terms of which the parties
submitted all their disputes to arbitration, the following
provisions
are included:
"11.
Award
The
arbitrator shall submit a written award based on law as applied to
the facts. The Award of the Arbitrator shall be binding upon
the
parties without any right of appeal except for any review as may be
allowed by or under The Arbitration Act (No. 42 of 1965)
and each
party shall abide by and comply with the Award in accordance with its
terms. Each party undertakes to forthwith thereafter
sign all such
documents and authorities as may be necessary to give effect to the
Award and failing which the Case Manager is hereby
authorised and
empowered to do so.
12.
Enforcement
of the Award
Judgment
may be entered on the Award rendered in this case, and such judgment
may be enforced pursuant to processes available under
section 31 of
the Arbitration Act (No. 42 of1965). "
[13]
As appears from the provisions of clause 12 of the arbitration
agreement, the parties have agreed that the award of the arbitrator
may be enforced under
section 31
of the
Arbitration Act. Section
31(1) provides that an award may, on the application to a court of
competent jurisdiction by any party to the reference, after
due
notice to the other parties, be made an order of court.
Section 31(3)
provides that an award which has been made an order of court may be
enforced in the same manner as any judgment or order to the
same
effect.
[14]
In
Arbitration
in South Africa: Law and Practice, Butler and Finsen,
(1993),
at page 273, the following is said regarding the enforcement of an
arbitral award in terms of
section 31
of the
Arbitration
Act:
"The
application procedure under the
Arbitration Act is
designed as a
quick remedy for the enforcement of the award. The court will not
usually consider the merits of disputes submitted
to the arbitrator.
The applicant will have to prove that there was a valid arbitration
agreement covering the dispute; that the
arbitrator was duly
appointed and that there was a valid award in terms of the reference.
In making the award an order of court
the court in effect adopts the
arbitrator's decision as if it were its own."
[15]
In
Vidavsky
v Body Corporate of Sunhill Villas
2005
(5) SA 200
(SCA), it was stressed, at 208B, with reference to
Butler
and Finsen,
supra,
at 273, that in an application under
section 31
(1) of the
Arbitration Act, the
applicant accepts an onus to prove that it is in
possession of an award that can properly form the subject of an order
of court.
The
Arbitration Act contains
no definition of an award,
although certain formal requirements for a valid award are
prescribed, e.g. it has to be in writing
and signed by the arbitrator
and published in a prescribed manner. Apart from these formal
requirements, it seems that what is
required to constitute a valid
arbitral award, is that all issues submitted must be resolved in a
manner that achieves finality
and certainty. (See
SA
Breweries Limited v Shoprite Holdings Limited
2008
(1) SA 203
(SCA) at 213G-I and the authorities there cited).
[16]
In English arbitration law, which served as a model for the
development of South African arbitration law, there is also no
statutory definition of an award. In considering what an award is,
Russell
on Arbitration,
22
nd
Edition, paragraph 6-001, states that, in principle, an award is a
final determination of a particular issue or claim in the
arbitration.
[17]
In support of his submission that the instant award, which simply
refers to and incorporates a settlement agreement, is not
a valid
award, Mr. Burger relied on the following common law authorities:
Voet
4.8.11
"Paulus
advises that it is no arbitration by which it has been arranged for
the arbitrator to give a particular decision, nor
by which it was
agreed what the judgment ought to be. Since the whole force of a
decision to be given by an arbitrator proceeds
from the covenant of
the parties, it would be absurd that he should proceed still to take
in hand and settle matters which have
already been so disposed of by
compromise of the litigants that no greater stability can be added to
them by the arbitrator's judgment."
Digest
4.8.19
"Moreover,
Labeo says that it is not the business of the praetor what sort of
award an arbiter makes, provided that he states
what he himself
holds."
[18]
Mr. Burger also referred me to certain decisions. In
Parekh
v Shah Jehan Cinemas (Pty) Ltd & Others
1980
(1) SA 301
(D) at 304E-F, Didcott J stressed that arbitration is a
method for resolving disputes. He continued thus:
"A
disputed claim is sent to arbitration so that the dispute which it
involves may be determined. No purpose can be served,
on the other
hand, by arbitration on an undisputed claim. There is then nothing
for the arbitrator to decide. He is not needed,
for instance, for a
judgment by consent or default."
In
Telecall
(Pty) Ltd v Logan
[2000] ZASCA 97
;
2000
(2) SA 782
(SCA) at 786D-H the reasoning of Didcott J in the
Parekh
-case
was approved, particularly that arbitration is a method for resolving
disputes and that no purpose can be served by arbitration
on an
undisputed claim. In
Total
Support Management (Pty) Ltd and Another v Diversified Health Systems
(SA)
(Pty) Ltd and Another
[2002] ZASCA 14
;
2002
(4) SA 661
(SCA) at 673F-H, it was
stressed
that the hallmark of arbitration is that it is an adjudication, which
proceeds from an agreement between parties who consent
to a process
by which a decision is taken by the arbitrator, and as arbitration is
a form of private adjudication, the function
of an arbitrator is not
administrative but judicial in nature.
[19]
Reference can also be made to
Butler
and Finsen,
supra,
at page 271,
where
the legal consequences of an arbitral award are stated thus:
"The
most important legal consequence of the final valid award is that it
brings the dispute between the parties to an irrevocable
end: the
arbitrator's decision is final and there is no appeal to the
courts...the issues determined by the arbitrator become res
iudicata
and neither party may reopen those issues in a fresh arbitration or
court action."
[20]
In
Verhagen
v Abramowitz
1960
(4) SA 947
(C) at 950H-951C the requirement of finality for a valid
arbitral award was reiterated in the following terms:
"...
a party to an arbitration is not entitled to seek a decision of the
court on the very matters already referred to arbitration,
and when
an award has in fact been made it has been held that such an award is
equivalent to lis finita and as between the parties
the matter is res
iudicata.it seems to me, however, that a matter can only be res
iudicata if, in fact, there has been a full and
final adjudication,
otherwise one has the ridiculous result that the fact of an award can
be pleaded as a bar, even if the arbitrator
fails or refuses to
adjudicate, wholly or partially, on the matters submitted to him."
See
also
Strutt
v Chalmers and Another
1959
(2) SA 536
(N) and
Schoeman
v Van Rensburg
1942
TPD 175
at 177.
[21]
In the instant matter the arbitrator was, as a consequence of the
settlement agreement concluded by the parties, not required
to decide
the issues emanating from the disputes that were referred to
arbitration. All that the arbitrator did, was to record
and
incorporate the settlement of the parties in his arbitral award. This
resulted in the award being made simply as a procedural
consequence
of the parties settling their disputes and without the arbitrator
bringing his mind to bear upon the issues between
the parties as
defined in their respective statements of claim.
[22]
It seems to me, that the arbitral award does not meet the
requirements for a valid award, as set out above. It does not
represent
an adjudication of any particular issue or claim in the
arbitration, nor can it be said that this award is equivalent to
lis
finite
with
the result that as between the parties the matter is
res
iudicata.
It
is also significant, in my view, that, in terms of clause 11 of their
arbitration agreement, the parties envisaged that the arbitrator
would provide
"a
written award based on law as applied to the facts"
.
This conveys an intention that the arbitrator should determine their
disputes in accordance with the law and the facts presented
to him at
the arbitration, which determination would then be made an order of
court. Put differently, it shows that the parties
did not intend that
the mere recordal or incorporation of a settlement agreement by the
arbitrator, would constitute an award as
envisaged in clauses 11 and
12 of the Arbitration agreement.
[23]
I should also mention that the
Arbitration Act does
not make
provision for an arbitrator to publish a consent or agreed award,
i.e. an award simply incorporating the terms of a settlement
agreement. It is significant to note that in terms of section 51 of
the English Arbitration Act, 1996, an arbitrator is empowered
to make
an "agreed award." The relevant sub-sections of section 51
read as follows:
"51.
Settlement
If
during arbitral proceedings the parties settle the disputes, the
following provisions apply unless otherwise agreed by the parties.
The
tribunal shall terminate the substantive proceedings and, if so
requested by the parties and not objected to by the tribunal,
shall
record the settlement in the form of an agreed award.
An
agreed award shall state that it is an award of the tribunal and
shall have the same status and effect as any other award on
the
merits of the case."
Reference
can also be made to section 142A of our
Labour Relations Act No.66 of
1995
, which provides that the Commission for Conciliation, Mediation
and Arbitration may make any settlement agreement in respect of
any
dispute that has been referred to the Commission, an arbitration
award.
[24]
Russell
on Arbitration,
supra,
at para 6-025, reiterates that an agreed award made in terms of
section 51 of the English Arbitration Act, 1996, is enforceable
even
though the arbitrator has not actually made a decision, but simply
recorded agreed terms. The agreed award may be enforced
in the same
manner as a full and final award made on the merits of the disputes
referred to arbitration.
[25]
Our common law relating to arbitration, also does not provide for the
making of an "agreed award" by an arbitrator.
On the
contrary, the common law requires the arbitrator to make a decision
on the merits, i.e. to
"state
what he himself holds"
(Digest
4.8.19) or to
"deliver
his opinion"
(Voet
4.8.14).
[26]
In the report of the South African Law Commission on Domestic
Arbitration (Project 94), May 2001, it was recommended that the
Arbitration Act be repealed and replaced with a comprehensive new
arbitration statute for domestic arbitration. To this end a Draft
Arbitration Bill was proposed. Section 44 of the proposed Draft
Arbitration Bill, which makes provision for an award on agreed
terms,
reads as follows:
"44.
Award on agreed terms
[1]
If, during arbitral proceedings, the parties settle the dispute, the
tribunal must terminate the proceedings and, if requested
by the
parties and not objected to by the tribunal, record the settlement in
the form of an award on agreed terms.
[2]
An award on agreed terms must be made in accordance with the
provisions of section 43 (1) and (2) and must state that it is
an
award.
[3]
An award referred to in subsection (2) has the same status and effect
as any other award on the merits of the dispute and may
be made an
order of court under section 53 if it is otherwise within the
competence of the court to grant such order."
I
should add that section 43 (1) and (2), referred to in section 44
(2), deals with the formalities prescribed for an arbitral award.
[27]
To date the Legislature has not given effect to these recommendations
of the South African Law Commission. In the absence of
a provision in
the Arbitration Act, similar to section 51 of the English Arbitration
Act, 1996, or section 44 of the proposed Draft
Arbitration Bill,
2001, I hold the view that there is no legal basis upon which the
arbitral award of 10 December 2007, can be
regarded as a valid award
for the purpose of having same made an order of court in terms of
section 31 of the Arbitration Act.
[28]
I accordingly agree with the submission of Mr. Burger, that, upon the
settlement of their disputes by the parties, the arbitrator's
appointment was at an end, for there was nothing left for him to
decide in terms of the referral to arbitration. The publication
of
any award thereafter, which merely incorporates the settlement
concluded by the parties, did not, in my opinion, bring about
a valid
award which may be made an order of court in terms of section 31 of
the Arbitration Act. Nor can it, in terms of our common
law, be
regarded as a valid arbitral award.
[29]
The question may be asked whether the practice of the High Court to
make orders by consent in suitable cases, does not afford
support by
way of analogy for allowing arbitral awards by consent to be validly
made. I do, however, agree with the submission
of Mr. Burger, that
this is not a valid analogy, as the High Court has an independent and
inherent jurisdiction to make orders
in matters before it, which is
in no way dependent on the agreement of the parties. In addition, the
High Court has statutory jurisdiction
in terms of rule 41 (4), in the
event of the parties in pending proceedings reaching a written
settlement agreement, to make such
an agreement an order of court. To
this one should add that our courts have frequently stressed that the
court is not a mere registry
of agreements and has a discretion in
the matter, with the result that there are certain agreements which a
court would decline
to make an order of court. See
Ex
parte Venter & Spain NNO: Fordom Factoring Limited and Others
Intervening; Venter & Spain v Povey & Others
1982
(2) SA 94
(D) at 100D-E.
[30]
An arbitrator, unlike a court, has no inherent power to decide issues
or make orders that go beyond the issues which have been
referred to
arbitration and the pleadings filed pursuant thereto. In
Hos+Med
Medical Aid Scheme v Thebe Ya Bophelo Healthcare Marketing &
Consulting (Pty) Ltd and Others
[2007] ZASCA 163
;
2008
(2) SA 608
(SCA), Lewis JA put it as follows at paragraph 30:
"In
my view it is clear that the only source of an arbitrator's power is
the arbitration agreement between the parties and
an arbitrator
cannot stray beyond their submission where the parties have expressly
defined and limited the issues, as the parties
have done in this case
to the matters pleaded. Thus the arbitrator...had no jurisdiction to
decide a matter not pleaded."
[31]
As mentioned earlier, the arbitration agreement envisages an award
being made by the arbitrator in accordance with the law
and the facts
presented to him at the arbitration. The arbitral award of 10
December 2007, which simply incorporates the terms
of the settlement
agreement reached by the parties, is accordingly not the type of
award that the arbitrator was mandated to make
in terms of the
arbitration agreement. As submitted by Mr. Burger, it is not an award
in the proper sense at all and not something
that can be made an
order of court.
[32]
I am further of the opinion that the arbitrator's ruling of 10
December 2007, that second respondent is bound by the terms
of the
settlement agreement of 7 December 2007, cannot, as argued by Mr.
Mitchell, be regarded as an adjudication of the disputes
between the
parties to the arbitration. The arbitrator's inquiry in this regard
and his finding that second respondent has no grounds
for the
avoidance of the settlement agreement, were not related to any of the
disputes which had been referred to arbitration.
The issue as to the
enforceability of the written settlement agreement of 7 December
2007, could obviously not have formed part
of the disputes referred
to arbitration, nor could it have been an issue in the pleadings
filed by the parties. The issue as to
the enforceability of the
settlement agreement only arose on 10 December 2007 and, in my view,
the arbitrator did not have the
necessary jurisdiction to inquire
into and rule on this issue. I incline to the view that upon being
informed by the parties on
7 December 2007, that they had settled
their disputes, with the result that he would no longer be required
to determine such disputes,
the arbitrator's mandate was terminated
and he became
functus
officio.
[33]
It is true, as submitted by Mr. Mitchell, that it would, for
practical reasons, be convenient if an arbitrator were to be able
to
make an award in terms of a settlement agreement concluded by the
parties to the arbitration. However, absent the necessary
statutory
authority to make an award on agreed terms, the arbitrator had no
legal basis for making an award in the terms reflected
in his written
arbitral award of 10 December
2007.
[34]
It should be borne in mind that second respondent is not left without
a remedy. He contends that the parties concluded a valid
and
enforceable agreement of settlement, which would entitle him, albeit
by means of a more cumbersome route, to enforce the terms
thereof by
means of action or application proceedings.
[35]
It follows, in view of my aforesaid findings, that the main
application falls to be dismissed, while the counter application
should succeed. I should mention that in argument Mr. Burger relied
on an additional ground, namely that even if the arbitral award
of 10
December 2007 were to be made an order of court, such order will not
turn the award into an enforceable judgment of this
court. In view of
my finding that the award does not constitute a valid award which may
be made an order of court, it is not necessary
for me to deal with
this additional ground relied upon by second respondent.
COSTS
[36]
Mr. Mitchell submitted that, in the event of the court finding for
second respondent, a special order in regard to wasted costs
should
be made in favour of applicant, as virtually all the affidavits filed
by the parties have been rendered worthless due to
second
respondent's change of stance during argument.
[37]
It is clear that second respondent's failure to raise the defence
relating to the formal validity of the arbitral award at
an earlier
stage, resulted in costs being incurred unnecessarily by the filing
of voluminous affidavits dealing almost exclusively
with the issue of
common mistake, alternatively unilateral mistake, raised by second
respondent. It was only in the heads of argument,
filed on behalf of
second respondent shortly before the hearing of the matter, that the
formal validity of the arbitral award was
put in issue. The lion's
share of the costs incurred in regard to the affidavits, has
accordingly been wasted.
[38]
In
Scheepers
and Nolte v Pate
1909
TS 353
at 356, Innes CJ stated the applicable principle thus:
"I
think it is the duty of a litigant to avoid any course which unduly
protracts a lawsuit, or unduly increases its expense.
If there is a
legal defence which can be effectively raised, by way of exception or
otherwise, at an early stage, he ought at that
stage to raise it. If
he only takes it later on it may still be effective, but the fact
that it came late, and that considerable
expense was unnecessarily
incurred in consequence, seems to me an element which may well affect
the mind of the court in apportioning
the costs."
[39]
In the circumstances, I am satisfied that it would be just and
equitable to make a special costs order in regard to such wasted
costs in favour of applicant. I should also add, that I am satisfied
that this matter justified the employment of two counsel.
ORDER
[40]
In the result the following order is made:
1.
The main application is dismissed.
2.
An order is granted in terms of paragraph (a) of the counter
application, setting aside the arbitral award published on 10
December
2007, as void
ab
initio.
3.
Save for the costs incurred by second respondent in connection with
any of the affidavits (and annexures thereto) filed by either
party
in these proceedings, applicant is declared liable for the payment of
second respondent's costs in the main application and
the counter
application. The costs awarded to second respondent are to include
the costs attendant upon the employment of two counsel.
4.
Second respondent is declared liable for the payment of applicant's
costs incurred in connection with any of the affidavits (and
annexures thereto) filed by either party in the main application and
the counter application.
P B Fourie, J