About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Western Cape High Court, Cape Town
SAFLII
>>
Databases
>>
South Africa: Western Cape High Court, Cape Town
>>
2014
>>
[2014] ZAWCHC 118
|
|
Hyde Construction CC v Deuchar Family Trust and Another (12471/2012; A460/2013) [2014] ZAWCHC 118; 2015 (5) SA 388 (WCC) (11 August 2014)
THE HIGH COURT OF
SOUTH AFRICA
(WESTERN CAPE
DIVISION, CAPE TOWN)
Appeal
Case No: A460/2013
WCHC
Case No: 12471/2012
DATE:
11 AUGUST 2014
In the matter
between:
HYDE CONSTRUCTION
CC
............................................................
APPELLANT
And
THE DEUCHAR
FAMILY TRUST
......................................
FIRST
RESPONDENT
TERTIUS DU
TOIT
........................................................
SECOND
RESPONDENT
Coram: TRAVERSO
DJP AND BOZALEK & ROGERS JJ
Heard: 30 JULY
2014
Delivered: 11
AUGUST 2014
JUDGMENT
ROGERS J:
Introduction
[1] The appellant
(‘Hyde’) appeals against a judgment of Blignault J in
which he granted with costs an application by
the first respondent
(‘the DFT’) to have the second respondent (‘Du
Toit’) removed as an arbitrator in
terms of s 13(2) of the
Arbitration Act 42 of 1965 (‘the Act’).
[2] The arbitration
arises from a building contract concluded between the DFT (as
employer) and Hyde (as contractor) in October
2007 in terms of which
Hyde was to construct a house on a property owned by the DFT in
Knysna. Disputes regarding the amount owed
to Hyde arose by not later
than December 2008. It is lamentable that, after more than five and a
half years, our judgment, whatever
it is, will not take the parties
materially closer to a resolution of the real disputes between them.
[3] The issues in
the removal application brought by the DFT in the court a quo case
were broadly three, namely: (i) whether the
DFT was properly before
the court as a litigant; (ii) whether there was a removal procedure
in the arbitration agreement which
precluded the DFT from invoking s
13(2) of the Act; and (iii) whether there were grounds for Du Toit’s
removal. It is a remarkable
feature of the removal application and
the present appeal that by far the most attention was devoted by Hyde
to the first two questions.
Relatively little was said or could be
said in support of an argument that it was appropriate for Du Toit to
remain as the arbitrator.
The facts
[4] The DFT is a
family trust. The trust deed stipulated that during the lifetime of
the donor, Allan Deuchar, there should be no
fewer than three
trustees. As at 2007, when the DFT decided to have the house built,
the trustees were Allan and Judy Deuchar and
a professional trustee
nominated by Maitland Trust Ltd. During May 2009 Maitland Trust Ltd
resigned and the Deuchars’ son
and daughter were appointed to
act as co-trustees with their parents. Letters of authority had
previously been issued by the Master
to Mr and Mrs Deuchar in terms
of s 6(1) of the Trust Property Control Act 57 of 1988, and similar
letters were issued to the son
and daughter upon their appointment.
[5] Clause 40(4) of
the building contract between the DFT and Hyde provided that if one
or other of the parties was dissatisfied
with a determination of a
dispute by the adjudicator, the dispute was to be resolved by an
arbitrator appointed by the Association
of Arbitrators (Southern
Africa) (‘the Association’). During May 2011 Hyde
requested the Association to appoint an
arbitrator. During July 2011
the Association appointed a Ms Van Zyl. On 6 January 2012 a
pre-arbitration meeting was held. The
DFT was represented by Mr and
Mrs Deuchar and their then attorney Ms Yates. According to the minute
of the meeting prepared by
Van Zyl, the DFT questioned Van Zyl’s
‘jurisdiction’, contending that an adjudication process
had been completed
and that Hyde had been fully reimbursed. Van Zyl
responded that clause 40(4) of the building contract made provision
for arbitration
if one of the parties was dissatisfied with the
adjudication (as Hyde apparently was).
[6] Van Zyl said
that she had previously forwarded the proposed arbitration agreement
to both parties but that only Hyde had signed.
The DFT indicated that
it did not agree that there should be arbitration and thus refused
‘to acknowledge the arbitrator’s
agreement’. Van
Zyl noted this comment but indicated that the arbitration would
proceed. According to the minutes, she informed
the parties that the
rules to be followed in the arbitration would be the Standard
Procedure Rules for the Conduct of Arbitrations
6th Ed, being rules
issued by the Association (‘the Rules’).
[7] Rule 2 of the
Rules states: ‘Save as varied herein or, insofar as the
provisions of the
Arbitration Act are
mandatory, the Act shall apply’
[sic].
[8] Rule 9 contains
a procedure for challenging the appointment of an arbitrator. A party
to the arbitration may make written application
to the Chairman of
the Association to revoke an arbitrator’s appointment and to
appoint a new arbitrator if the existing
arbitrator ‘falls
seriously ill, or becomes unable or unfit to act’ or ‘lacks
the necessary independence’
or ‘for any other reason
ought not to continue as Arbitrator (eg. lacks impartiality)’.
The application must be made
within ten days of the litigant becoming
aware of the circumstances justifying removal. The Chairman appoints
a committee consisting
of not fewer than three members to consider
the removal application. The Association notifies the applicant of
‘the relevant
fee’ to be lodged in order for the
committee to consider the removal application. Failure to pay the fee
within ten days
renders the challenge ‘invalid’. The
committee may give directives regarding the costs of the challenge
and, if the
challenge is successful, the amount of fees and expenses
to be paid for the outgoing arbitrator’s services but may only
give
directions regarding the costs of the arbitration proceedings if
the parties so agree.
[9] During February
2012 the DFT lodged an application in terms of Rule 9 for Van Zyl’s
removal. On 5 March 2012 she notified
the parties that she was
resigning as arbitrator without admitting any fault or failure on her
part.
[10] On 20 March
2012 the Association appointed Du Toit as the new arbitrator. A
pre-arbitration meeting took place before him on
17 April 2012. There
is no minute of the meeting. By this stage the DFT appears to have
accepted that clause 40(4) of the building
contract entitled Hyde to
proceed to arbitration. At the meeting a short arbitration agreement
was signed. Clause 1 dealt with
the arbitrator’s fees and
disbursements. In terms of clause 2 the parties consented ‘to
the procedures for the conduct
of the arbitration as directed from
time to time by the Arbitrator’. The agreement contained
nothing else of relevance to
the present case. A timetable for
pleadings and other procedural steps was determined, and the hearing
was scheduled to start on
2 July 2014.
[11] By the time of
Du Toit’s appointment the DFT had engaged Adv DJ Coetsee
(‘Coetsee’) to represent them in
the arbitration, and he
was present at the meeting on 17 April 2012. The application which
the DFT subsequently brought for Du
Toit’s removal arose from
the fact that several years previously Coetsee had represented
another client in proceedings in
which Du Toit personally was the
plaintiff. HJ Erasmus J, sitting on circuit, dismissed Du Toit’s
claim with costs in a judgment
delivered on 27 March 2009. Coetsee
and Du Toit recognised each other when they met on 17 April 2012. At
that stage, according
to the DFT, Coetsee was not concerned about Du
Toit’s role as arbitrator because he assumed that Du Toit had
accepted the
outcome of his case and that it was water under the
bridge.
[12] Things changed
after the meeting of 17 April 2012. On 3 May 2012 Du Toit served, in
the circuit court proceedings, an application
for condonation and for
leave to appeal against the judgment of Erasmus J. The application
contained a scathing attack on the propriety
of Coetsee’s
conduct in the case. The DFT’s legal representatives learnt of
the existence of this application on 23
May 2012. On 29 May 2012 the
DFT’s attorneys wrote to Du Toit asking him to recuse himself.
In a response dated 3 June 2012,
Du Toit, apart from persisting in
his attack on Coetsee, denied that he was disqualified. Somewhat
curiously, he concluded his
letter by stating that, if the DFT
persisted in pursuing its attack in the High Court, he would not
oppose it.
[13] On 6 June 2012
the DFT lodged with the Association an application for Du Toit’s
removal in terms of Rule 9. On 12 June
2012 the Association’s
secretary notified the DFT’s attorneys that a committee had
been appointed to consider the challenge
and it was now necessary for
the DFT to lodge R75 000 ‘as a deposit towards the fees of’
the committee. In an email
of 19 June 2012 the DFT’s attorneys
said that they and the DFT was ‘quite perturbed’ by the
requested deposit,
which to them seemed ‘completely
exorbitant’. They requested particulars of the computation of
the fee. They asked
whether the committee would have the power to
make a costs order against Du Toit. They also referred to Practice
Note 26 issued
by the Association which they interpreted to mean that
the DFT was not obliged to follow the Rule 9 procedure but could
apply for
Du Toit’s removal in terms of s 13(2) of the Act .
1
[14] On 21 June 2012
the Association’s Chairman, Mr FC Blackie, responded. He
pointed out that the challenge would need to
be considered by three
senior practitioners who were entitled to remuneration. The matter
did not appear to be as straightforward
as the previous request for
Van Zyl’s removal (where the requested fee had been R40 000).
Mr Blackie said that there was
nothing in the Rules which precluded a
party from making an application to the High Court for removal in
terms of s 13(2) of the
Act
2
and he noted that Du Toit had indicated that such an application
would not be opposed.
[15] On 25 June 2012
Hyde filed an opposing affidavit in the Rule 9 application together
with heads of argument.
[16] On 26 June 2012
the 10-day period for the DFT to lodge the deposit of R75 000
expired. This meant, in terms of Rule 9.4, that
its challenge became
‘invalid’.
[17] According to
the DFT, its decision to make application to the High Court for Du
Toit’s removal (and not to pursue the
Rule 9 application to the
Association) was made on the morning of Wednesday 27 June 2012
following a meeting with its legal representatives.
At this stage the
arbitration was still scheduled to begin on Monday 2 July 2012
although there had been correspondence as to whether
the arbitration
should be placed on hold pending resolution of Du Toit’s
appointment. On Friday 29 June 2012 the DFT’s
attorneys wrote
to Hyde’s attorneys asking whether they were in agreement that
the arbitration could not start on 2 July
2012. In the early
afternoon Hyde’s attorneys replied, stating that Hyde did not
agree to Du Toit’s removal as arbitrator.
Regarding the
commencement of the arbitration, they said that they had previously
suggested to Du Toit that the hearing start on
9 July 2012, with the
preceding week to be used for perusal of bundles. They informed the
DFT’s attorneys that, if Du Toit
declined to make such a
direction, Hyde insisted that the arbitration proceed on the already
scheduled date of 2 July 2012.
[18] Later on the
afternoon of Friday 29 June 2012 Du Toit notified the legal
representatives by email that he would be proceeding
with the
arbitration hearing at 10h00 on Monday 2 July 2012.
[19] On Sunday 1
July 2012 the DFT served an urgent application for hearing the
following day. In this application the DFT sought
Du Toit’s
removal in terms of s 13(2) and an urgent interdict to prohibit the
arbitration from continuing pending a determination
of the removal
application. Unsurprisingly, in the circumstances, the arbitration
did not proceed on Monday 2 July 2012.
[20] Hyde opposed
the application for Du Toit’s removal. Du Toit himself did not
oppose, though he filed an explanatory affidavit
in which, among
other things, he made further remarks highly critical of Coetsee.
[21] On 6 July 2012
Binns-Ward J suspended the conduct of the arbitration pending
determination of the removal application, with
costs to stand over.
The removal application was to be heard on 10 September 2012 but was
postponed to 8 November 2012 because
the DFT’s legal
representatives failed to file the requisite practice note. On 5
November 2012 Hyde filed supplementary answering
papers in which it
contended, on the basis of additional facts which it had discovered,
that the DFT was not properly before the
court. The hearing on 8
November 2012 was, as a result, postponed to 14 February 2013. The
DFT filed supplementary replying papers
on 1 February 2013.
[22] The matter was
eventually argued before Blignault J on 14 February 2013. He
delivered judgment on 12 April 2013, setting aside
Du Toit’s
appointment, directing that he not be entitled to any remuneration
for his services and ordering Hyde to pay the
DFT’s costs.
Against these orders Hyde appeals with the leave of the court a quo.
In his judgment granting leave, Blignault
J said that it had been
brought to his attention that the DFT had conceded its liability for
the wasted costs of 10 September 2012.
He thus amended the costs
order by adding the qualification that the DFT was liable for Hyde’s
wasted costs relating to the
proceedings on 10 September 2012.
The authority
point
[23] Hyde’s
first point in the court a quo and on appeal, although put in various
ways, is concerned with the question whether
the DFT was properly
before the court as an applicant.
[24] In the founding
papers Mr Deuchar said that he and his wife were the only trustees
and that they had resolved to bring the
application. The statement
that Mr and Mrs Deuchar were the only trustees was incorrect. This
factual inaccuracy was ascertained
by Hyde’s attorneys upon
investigations apparently made after the matter was postponed on 10
September 2012. These investigations
led to the filing of the
supplementary answering papers on 5 November 2012.
[25] In the
supplementary replying papers, Mr Deuchar admitted that the statement
in the founding affidavit was wrong. He explained
the history of the
trust and that he and his wife had decided during 2009 that they
should bring their children in as co-trustees.
He alleged that, by
virtue of a resolution passed by the DFT as long ago as 21 June 2007
authorising him to sign all documents
relating to the development of
the property, he had been authorised inter alia to institute the
removal application. (At that time,
as noted, the trustees were Mr
and Mrs Deuchar and the nominee of Maitland Trust Ltd.) In any event,
so Mr Deuchar said, all the
current trustees had ratified the
institution of the proceedings by way of a resolution attached to his
affidavit as annexure “G”.
[26] Affidavits by
Mrs Deuchar and the son and daughter were filed in confirmation. In
her confirmatory affidavit, the daughter
said that she had read her
father’s founding affidavit and confirmed the contents thereof.
She continued:
‘I confirm
specifically that my brother and I consider the project of the
building of the house to be my father’s project
and even though
we are trustees, my father, with the assistance of my mother, has
been in charge and has been responsible for the
entire project,
including the disputes that have arisen from the building contract.
My brother and I are both fully aware of the
disputes that have
arisen between the trust and the builder as well as the arbitration
proceedings and High Court proceedings that
have emanated therefrom.
We approve my father’s decisions in all matters relating to the
development of the property as is
formally confirmed by the contents
of the resolution, annexure “G”.’
Her brother stated
that he had read, and confirmed, the founding affidavit of his father
and the confirmatory affidavit of his sister.
[27] Blignault J
upheld all three grounds on which the DFT’s counsel argued that
the DFT was properly before the court, namely
(i) that the
institution of the proceedings had been authorised by the resolution
of 21 June 2007; (ii) that the son and daughter
had tacitly
authorised the institution of the proceedings; (iii) that any
deficiency in authority had been cured by ratification.
[28] I do not find
it necessary to determine the first two points. As to the first
point, I am somewhat doubtful whether the resolution
is sufficiently
wide. As to the second point, it is unclear that the supplementary
replying papers advanced the case that the institution
of the
proceedings had been tacitly authorised (as distinct from ratified).
The daughter’s affidavit, the relevant part of
which I have
quoted, indicates that by the time she made her affidavit she was
aware of the disputes and the proceedings but she
does not say that
she was so aware at the time the proceedings were instituted. What
the daughter says, coupled with the way in
which the trust appears to
have been administered, may, however, justify the inference that,
even though the two children were
not at the time aware that the
legal proceedings had been instituted, they had authorised their
parents in general to conduct the
trust’s affairs, at least
insofar as they related to the Knysna project, as agents for all of
them (cf Land and Agricultural
Bank of South Africa v Parker &
Others
2005 (2) SA 77
(SCA) para 37 and Nieuwoudt & Another NNO v
Vrystaat Mielies (Edms) Bpk
2004 (3) SA 486
(SCA) para 23). Such a
delegation would have been permissible in terms of clause 13.18 of
the trust deed as amended in 1994.
[29] Be that as it
may, I think Blignault J was right to uphold the ratification point.
There is no doubt that, in general, proceedings
which have been
instituted in the name of a particular party but without the
authority of those entitled to decide the matter on
behalf of that
party may be ratified (see, for example, Moosa and Cassim NNO v
Community Development Board
1990 (3) SA 175
(A) at 180I-181C; Smith v
Kwanonqubela Town Council
1999 (4) SA 947
(SCA) para 14). In the
nature of things, when such a challenge is raised and the deficiency
emerges, the ratification would need
to be proved by way of
supplementary papers, as occurred here (see Baeck & Co SA (Pty)
Ltd v Van Zummeren & Another
1982 (2) SA 112
(W) at 119C-D).
[30] Mr Bruwer, who
appeared for Hyde in the appeal (as he did in the court a quo),
submitted that this general principle did not
apply to trusts, at
least not in the circumstances of the present case.
[31] Mr Bruwer
referred us to the decisions in Parker supra and Lupacchini NO &
Another v Minister of Safety and Security
2010 (6) SA 457
(SCA),
submitting that their effect was that the unauthorised institution of
proceedings on behalf of a trust cannot be ratified
by a subsequent
decision of all the trustees. I do not think that these cases,
properly understood, support Mr Bruwer’s contention.
[32] In Nieuwoudt
supra Harms JA said, in a judgment concurred in by the other members
of the court, that the fact that trustees
have to act jointly ‘does
not mean that the ordinary principles of the law of agency do not
apply’ (para 23). For example,
he said, the trustees might
expressly or impliedly authorise someone to act on their behalf and
that person might be one of the
trustees. Ratification is one of the
ordinary principles of the law of agency. In principle, therefore,
there appears to be no
good reason why a decision taken ostensibly in
the name of the trust by (say) two out of the four trustees should
not subsequently
be ratified by the full body of trustees. It is no
objection that the original decision was unauthorised; that is always
so where
ratification comes into play. The principle that the
trustees must act jointly is satisfied by the ratifying conduct of
the full
body of trustees. The position is in principle no different,
to my mind, from the case where a decision is initially made on
behalf
of a company by (say) two out of four directors and the
decision is subsequently ratified by the full board.
[33] Parker and
Lupacchini do not bring this analysis of general agency principles
into question. Those cases address the position
which arises where
the trust deed requires that there should be no fewer than a
specified number of trustees and where, at the
time the act which is
sought to be attributed to the trust was performed, fewer than that
number existed. Where that is the case,
the trust lacks the capacity
to act; it is not a problem of authority but capacity.
[34] Cameron JA in
Parker dealt with this distinction in paras 10-14 under the heading
‘A sub-minimum of trustees cannot bind
the trust’. In
that case the trust deed required a minimum of three trustees. In
para 11 he said that a provision in a trust
deed requiring that a
specified minimum number of trustees must hold office is a
‘capacity-defining condition’ and
lays down a
‘prerequisite that must be fulfilled before the trustee can be
bound’. Where fewer trustees than the specified
number are in
office, ‘the trust suffers from an incapacity that precludes
action on its behalf’.
[35] Cameron JA did
not specifically hold that in such circumstances there could be no
‘ratification’. In relation to
the three loan
transactions which the bank was seeking to enforce, there was in fact
no purported ratification because the evidence
did not indicate that
the Parkers’ son (the third trustee) purported to ratify the
first two loans (which had been concluded
before his appointment) or
was consulted in respect of the third loan (which was made after his
appointment). By the time the bank
wished to enforce the loans, it
naturally suited the Parker family not to ratify the loans. The
family was, however, hoist by its
own petard, because Cameron JA
found (‘by happy symmetry’, as he put it in para 39) that
the trust’s purported
petition for leave to appeal and its
appeal to the full bench had also been invalid because by then the
trust again only had two
trustees. Although a daughter was belatedly
appointed to fill the vacancy, Cameron JA said in para 45 that,
‘whether by design
or oversight’, no attempt at
ratification was made after her appointment.
[36] Nevertheless,
one can understand that, where a party does not have the capacity to
act, a purported act in its name is a nullity
and cannot be ratified.
That this is so appears to me to have been confirmed in Lupacchini,
to which I now turn.
[37] Lupacchini was
again a case where fewer than the specified number of trustees
existed at the relevant time. Although this
is not specifically
mentioned in the judgment of the Supreme Court of Appeal, it appears
clearly from para 8 of the judgment of
the trial court ([2008] ZAFSHC
7) and para 2 of the judgment of the full bench ([2009] ZAFSHC 82)
that the trust deed required
there to be not fewer than two trustees.
Nugent JA commenced his judgment in Lupacchini by quoting from paras
10 and 11 of Parker,
where the point was made that the existence of
the specified minimum number of trustees is a capacity-defining
condition. In para
13 he said that the true question in the case was
‘not whether the trustees had a sufficient interest, but
instead whether
they were capable of suing or being sued at all’.
And in para 23 he said that Parker made it clear that ‘legal
proceedings
commenced by persons who lack capacity to act for the
trust are a nullity’.
[38] In Lupacchini
two persons (Mr Gabrielle Lupacchini and Ms Conradie) purported to
institute proceedings as trustees at a time
when only Mr Lupacchini
was a duly appointed trustee with letters of authority from the
Master in terms of s 6(1) of the Trust
Property Control Act. Letters
of authority were only issued in favour of Ms Conradie several months
after the institution of the
proceedings.
[39] It was taken
for granted, I think, in Lupacchini that if the specified minimum
number of trustees (two) did not exist when
the proceedings
commenced, the proceedings were a nullity. The focus of attention in
Lupacchini was not on this aspect but on whether
Ms Conradie was a
trustee when the proceedings were instituted, even though letters of
authority had not yet been issued to her.
If she was already a
trustee despite the absence of letters of authority, the requisite
number of trustees existed. The Supreme
Court of Appeal upheld the
decision of the full bench that action by a purported trustee who has
not received letters of authority
in terms of s 6(1) of the Trust
Property Control Act is invalid, approving in this respect the
decisions in Simplex (Pty) Ltd v
Van der Merwe NNO
1996 (1) SA 111
(W) and Van der Merwe v Van der Merwe en Andere
2000 (2) SA 519
(C).
The result was that, at the time the proceedings were instituted,
there was only one trustee and the trust was thus incapable
of acting
altogether.
[40] It is apparent
from Lupacchini that, where there is an incapacity to transact or to
institute proceedings because of the absence
of the specified minimum
number of trustees, the transaction or the institution of the
proceedings is a nullity and cannot be ratified.
In Lupacchini
itself, the second trustee, Ms Conradie, self-evidently continued to
support the proceedings after she received her
letters of authority
but this was not regarded as saving the proceedings.
3
In Simplex (at 113F114G) and Van der Merwe (para 21), which Nugent JA
cited with approval, it was specifically said that ratification
could
not apply in such circumstances. (In those two cases there was no
duly appointed trustee at all at the time the relevant
transactions
were concluded.)
[41] I should
perhaps add that I do not read Lupacchini and the cases it approved
as holding that an act purportedly performed in
the name of a trust
is invalid merely because one of the purported trustees did not have
letters of authority in terms of s 6(1)
of the Trust Property Control
Act. If, for example, a trust deed requires a minimum of three
trustees and there are at least three
trustees holding letters of
authority from the Master, a decision by them would not be
invalidated merely because a fourth person,
who they mistakenly
believed was a co-trustee, did not have letters of authority. The
absence of letters of authority would mean
that the fourth person’s
actions could not be taken into account in determining whether the
trust had acted validly. This
would not invalidate a unanimous
decision of the other three trustees. So, for example, in Lupacchini,
if the trust deed had permitted
there to be only one trustee, the
proceedings would not, I apprehend, have been held to be invalid
merely because the one duly
appointed trustee (Mr Lupacchini) was
joined in the proceedings by a purported co-trustee (Ms Conradie).
Non-compliance with s
6(1) becomes important where the question is
whether there existed the specified minimum number of trustees at the
time the action
was taken. The non-compliance with s 6(1) invalidates
the actions of the purported trustee who did not hold letters of
authority.
If this results in there being fewer than the specified
number of trustees required for trust action, action by the remaining
trustees
(even though they hold letters of authority) is invalid not
because of the violation of s 6(1) per se but because, as a result of
the disqualification of one of the purported trustees, the remainder
of the trustees lack capacity to act.
[42] In the present
case there were four duly appointed trustees holding letters of
authority from the Master at the time the legal
proceedings were
instituted. The trust deed required there to be a minimum of three.
One is thus not dealing, as in Parker and
Lupacchini, with an
incapacity on the part of the trust to institute legal proceedings.
The question is only one of authority and
in principle, therefore,
the unauthorised institution of the proceedings could be ratified.
[43] The only
remaining point that need be considered on this part of the case is
Mr Bruwer’s contention that ratification
can apply only to an
act which the agent professed to perform on behalf of his principal.
Mr Bruwer referred us, in support of
this proposition, to Caterers
Ltd v Bell & Others
1915 AD 698
at 710 and Lazarus v Gorfinkal
1988 (4) SA 123
(C) at 136C-D (and see, on the same point, Kerr The
Law of Agency 4th Ed at 82-83 and De Villiers and Macintosh The Law
of Agency
in South Africa 3rd Ed (Silke) at 289-291 and cases there
cited). Mr Bruwer submitted that, in the present case, Mr Deuchar
only
intended to act on behalf of himself and his wife, because he
said in the founding affidavit that they were the only trustees. He
thus did not purport to act for his two children in their capacity as
trustees.
[44] The authorities
cited by Mr Bruwer and the cases mentioned in the two textbooks dealt
with contracts. A contract ostensibly
concluded between A and B
cannot through any process of ratification become a contract between
A and C. C may only ratify the contract
if B intended and professed
to act not on his own behalf but on behalf of C. One is there
concerned with a bilateral transaction
founded on consensus.
[45] The question of
authority in relation to legal proceedings is different, because one
is not dealing with consensual transactions
but with legal processes
which are ultimately controlled by the court. One knows, for example,
that if A institutes an action against
B, the court might in
appropriate circumstances grant an application for C to be
substituted as the plaintiff or joined as a co-plaintiff
to ensure
that the true plaintiff is before the court (see Page v Malcomess
1922 EDL 284
at 285-286, where the court permitted a partnership to
be substituted where the action had initially been instituted in the
name
of only one of the partners; Mias de Klerk Boerdery (Edms) Bpk v
Cole
1986 (2) SA 284
(N), where a company was substituted in place of
an individual when it emerged that property damaged in a fire had
belonged to
the company and not the individual; Tecmed (Pty) Ltd v
Nissho Iwai Corporation & Another
2011 1) SA 35
(SCA) paras
12-14).
4
[46] If, in the
present case, the removal application had been instituted in the
names of Mr and Mrs Deuchar nomine officii, I do
not see why, when it
later emerged that the son and daughter should have been cited as
co-trustees, the court could not have permitted
them to be joined.
There were no considerations such as prescription which would have
made the joinder inappropriate. The alternative,
of refusing the
joinder and requiring the full body of trustees to recommence
proceedings, would have been an unattractive one
which I cannot see
would have been compelled by our substantive or procedural law. One
would simply have been dealing with a combination
of lack of
authority and non-joinder, both of which are matters which can be
remedied.
[47] As a fact,
though, the removal application was not brought in the name of Mr and
Mrs Deuchar nomine officii. The applicant
was cited as the Deuchar
Family Trust. Of course, a trust is not a juristic entity. Whether it
is procedurally acceptable to cite
a trust by name as a litigant, and
whether in that regard rule 14 is applicable to trusts (as to which,
see Cupido v Kings Lodge
Hotel
1999 (4) SA 257
(E) at 265B-C), need
not be decided, because no objection was ever taken in the court a
quo or for that matter on appeal to this
mode of citation. One
commonly refers to a trust by name even though it is not a juristic
entity. Given the legal character of
a trust, the citation of a trust
by name in litigation must, I think, be understood as a reference to
the trustees for the time
being of the trust, whoever they may be.
[48] It is so that
Mr Deuchar erred in asserting in his founding affidavit that there
were only two trustees. Nevertheless, the
cited litigant was the
Deuchar Family Trust, being a shorthand reference to the trustees for
the time being. The factual error
in the founding affidavit was
brought to light, the additional trustees were named, and it was
confirmed that they had ratified
the proceedings. As I have said, if
the mode of citation had been to name the trustees as applicants,
there can be little doubt
that, when the error came to light,
application would have been made to join the daughter and son as
co-applicants. But since the
applicant was simply cited as the trust
by name, no such procedure was necessary.
[49] Apart from the
fact that one is dealing in this case with ratification in relation
to the institution of legal proceedings
and not in relation to the
conclusion of a contract, the present case is plainly distinguishable
from the authorities mentioned
by Mr Bruwer. Mr and Mrs Deuchar did
not purport to institute proceedings in their personal capacities or
on behalf of anyone else
apart from the Deuchar Family Trust. They
did not try to convert legal proceedings brought in the name of A
into legal proceedings
in the name of B.
[50] There is a case
not mentioned by Mr Bruwer which might at first blush have provided
supported his contention. I refer to the
judgment of Streicher J (as
he then was) in Van der Westhuizen v Van Sandwyk
1996 (2) SA 490
(W).
That case is, however, distinguishable. There, one of three trustees
(Van der Westhuizen) instituted proceedings citing himself
nomine
officii and alleging that he had been duly authorised by the other
trustees to institute the action. One of the points taken
by the
defendant was that the action should have been instituted in the
names of all of the trustees and that the other trustees
could not in
law give Van der Westhuizen locus standi to sue on behalf of the
trust. Streicher J upheld this contention (at 494G-495E).
Streicher J
in any event found, on the facts, that the other trustees had not
authorised Van der Westhuizen so to act (at 495F-496H).
[51] The learned
judge proceeded to consider whether the matter had been remedied by a
ratifying resolution passed by all the trustees.
He held that,
because Van der Westhuizen had chosen to institute proceedings in his
own name on behalf of the trust, the deficiency
could not be remedied
by ratification in the absence of an amendment to the pleadings, an
amendment which Van der Westhuizen apparently
did not seek
(496H-497E).
[52] The Van der
Westhuizen case is distinguishable because in our matter Mr and Mrs
Deuchar did not institute proceedings in their
own name but in the
name of the trust, and no point was taken as to that mode of
citation. There was thus no need for an amendment.
The waiver point
[53] The next point,
although it was again put in various different ways, is whether the
DFT was precluded from invoking
s 13(2)
of the
Arbitration Act
because
it had agreed to a different procedure. Mr Bruwer laid great
emphasis on the need to respect choices made by contracting parties
in relation to arbitration (see, in particular, the judgment of
O’Regan ADCJ in Luphano Mphaphuli & Associates Pty Ltd
v
Andrews & Another
2009 (4) SA 529
(CC)).
[54] Two broad
questions arise, namely (i) whether the parties did in fact conclude
an agreement which they intended to be to the
exclusion of
s 13(2)
;
and (ii) if so, whether this was a special case where the court a quo
was, despite the general principle, justified in exercising
its
undoubted residual jurisdiction to decide the matter.
[55] In relation to
the first of the questions just mentioned, there are two
sub-questions, namely (i) whether the parties as a
fact concluded an
agreement which incorporated the Rules; and (ii) if so, whether the
Rules, on a proper construction, exclude
the operation of
s 13(2).
[56] The question
whether the parties in fact concluded an agreement which incorporated
the Rules was not squarely canvassed in
the papers. Hyde in its
answering affidavit referred to the directions given by Van Zyl on 6
January 2012. Its further assertions
regarding the exclusion of
s
13(2)
proceeded on the assumption that the parties were bound by the
Rules, and the DFT in its replying papers seems to have responded
on
that basis. In his heads of argument, Mr Rosenberg SC for the DFT
submitted, in a different context (namely, whether there had
been
good cause for the court a quo to entertain the application despite
Rule 9)
, that it was to be borne in mind that the ‘applicability’
of the Rules arose in the first instance not from consensus
between
the parties but from a ruling by Ms Van Zyl.
[57] I am by no
means satisfied that the parties concluded an arbitration agreement
which incorporated the Rules. Neither clause
40(4) of the building
contract nor the written arbitration agreement signed on 17 April
2012 incorporated the Rules. I do not see
how a direction given by
Van Zyl at a pre-arbitration agreement could make the Rules, or at
least
Rule 9
, part of the arbitration contract between the parties.
Indeed, and whether for good reason or bad, the DFT said at the
meeting
on 6 January 2012 that it did not agree to the arbitration.
[58] A duly
appointed arbitrator is empowered by
s 14
of the
Arbitration Act to
give directions on various matters (the delivery of pleadings,
discovery and the like) and these powers might be varied by the
arbitration agreement. However, these are powers to give procedural
directions with a view to the proper adjudication of the dispute.
As
at 6 January 2012 there was no contract between the parties which
entitled their appointed arbitrator to prescribe to them the
procedure to be followed if they wanted to remove her or anyone else
as an arbitrator nor was that power conferred on Van Zyl
by the
Arbitration Act.
[59] It is true that
after 6 January 2012 the DFT invoked
Rule 9
on two occasions, first
in relation to the removal of Van Zyl and then in relation to Du
Toit’s removal. This does not show,
however, that
Rule 9
was
already part of the contract between the parties. The DFT’s
conduct is explicable, in my view, on the basis that, because
the
Association had appointed Van Zyl and because the Association had
issued rules which proclaimed the circumstances in which
the
Association would remove one of their arbitrators and appoint a new
one, the DFT saw itself as entitled to invoke the Rules.
It is not a
necessary inference that the DFT regarded
Rule 9
as part of its
contract with Hyde. (In the same way, a member of the public might
invoke the rules of a professional association
to pursue a complaint
against a professional belonging to that body. This does not make a
member of the public a party to the contract
contained in the
constitution and rules of the association.)
[60] However, and
assuming in favour of Hyde that the arbitration agreement between the
parties incorporated
Rule 9
, the question must still be answered
whether, on a proper construction of the arbitration agreement as
read with the Rules,
Rule 9
was intended to lay down an exclusive
procedure for the removal of the arbitrator. In relation to the main
dispute and matters
truly interlocutory to the proper adjudication of
the main dispute, it will almost always be the intention of the
parties to exclude
recourse to the courts, whether they say so
expressly or not. Furthermore, where parties have agreed to refer a
question of law
for decision by an arbitrator, it will generally be
inconsistent with that agreement to permit one of the parties to
apply to court
in terms of
s 20(1)
of the
Arbitration Act to
state
the same question of law for opinion by the court (see Telecordia
Technologies Inc v Telkom SA Ltd
[2006] ZASCA 112
;
2007 (3) SA 266
(SA) para 154).
[61] In relation to
the removal of the arbitrator, on the other hand, the inference that
a removal procedure provided for in the
arbitration agreement is
intended (in the absence of clear language) to be to the exclusion of
the statutory right conferred by
s 13(2)
is less compelling.
[62] There was
debate about the proper interpretation and effect of
Rule 2.
In my
opinion, the word ‘mandatory’ in that rule refers to a
statutory provision which, on a proper interpretation
of the
Arbitration Act, must
be followed despite a contrary provision in an
arbitration agreement, ie a peremptory statutory provision.
Provisions of the Act
which are not mandatory in this sense apply
unless ‘varied’ by the Rules.
[63] I do not think
that the removal procedure contained in s 13(2) can be described as
‘mandatory’ in this sense. In
other words, I do not think
it was the intention of the lawmaker that the only method by which an
arbitrator can be removed is
by application in terms of s 13(2). If s
13(2) were mandatory, a party to an arbitration would not be entitled
to invoke a procedure
of the kind laid down in Rule 9, even if it
wished to do so.
[64] ‘Mandatory’
may perhaps have been used in a different sense, namely a statutory
provision which could not in law
be waived, even though use of an
alternative private procedure was not impermissible. If that is the
sense in which ‘mandatory’
is used, I doubt whether the
statutory right conferred by s 13(2) is one which cannot be waived,
at least where an adequate alternative
private procedure is
stipulated. A statutory provision which is laid down for individual
benefit rather than in the public interest
can generally be waived by
the individual (Road Accident Fund v Mothupi
2000 (4) SA 38
(SCA)
para 15). In Telecordia, as noted, Harms JA considered that in
general an agreement to refer a point of law to an arbitrator
for a
decision rendered recourse to the statutory procedure in s 20(1)
impermissible. In effect, the referral of the point of law
for
decision by an arbitrator constituted a waiver of the right to
approach the court in terms of s 20(1). The same would apply
to s
13(2). In the context of arbitration, waiver might not strictly be
the correct term, because of the court’s residual
discretion to
entertain the matter on good cause. I use ‘waiver’ here
as meaning an agreement by which the parties
intend to adopt a
private procedure to the exclusion of the statutory procedure.
[65] Waiver is not
presumed, and the onus rests on the party alleging it (here, Hyde).
Clear proof is required of an intention to
waive. The conduct from
which waiver is inferred must be unequivocal, ie consistent with no
other hypothesis (Road Accident Fund
v Mothupi supra para 19). This
brings me to a consideration of the word ‘varied’ in Rule
2.
[66] ‘Varied’
as used in Rule 2 appears to envisage a provision of the Rules which
is inconsistent with a provision
of the Act, because it is only in
the case of inconsistency that the Rules could be expected to exclude
rather than operate alongside
the Act. So if it is contended that a
particular rule has ‘varied’ the Act, one must examine
the rule in question to
ascertain whether its operation is
inconsistent with the Act. Formulated with reference to the
principles of waiver, the question
is whether Rule 9 unequivocally
manifests an intention to oust s 13(2) and that such an
interpretation is consistent with no other
hypothesis.
[67] Rule 9 does not
state that it operates to the exclusion of s 13(2). It affords to a
party the right to bring an application
to the Association to appoint
a committee to consider the removal of an arbitrator on specified
grounds. It is probable that those
grounds are as wide as those which
a court could take into consideration in an application in terms of s
13(2) but this does not
give rise to the necessary inference the Rule
9 procedure was mandatory and exclusive rather than permissive. As I
have said, the
matter with which Rule 9 deals, namely the removal of
an arbitrator, is not concerned in any direct way with the arbitral
dispute
and matters truly interlocutory to the determination of the
dispute, and therefore the natural inference that the parties
intended
to exclude the court’s jurisdiction is not present. If
a party fails to lodge the Rule 9 application or the relevant fee
within the time limits laid down in the Rule, his right to challenge
the arbitrator’s appointment in terms of Rule 9 falls
away. Non
constat that he loses his right to approach the court in terms of s
13(2).
[68] On balance,
therefore, I think Blignault J was right to find that Rule 9 was not
inconsistent with the parallel operation of
the Act and that it did
not serve to exclude the operation of s 13(2).
[69] In any event,
and if Rule 9 was intended to be exclusive, the court a quo was
nevertheless in my view justified in exercising
its residual
jurisdiction to entertain the removal application. Even in relation
to the main arbitral dispute, the court has the
jurisdiction to
determine the dispute on good cause shown (s 3(2) of the Act). For
sound reasons of policy, many of which were
rehearsed in the judgment
of O’Regan ADCJ in Mphaphuli supra, a court will not lightly
entertain a dispute which the parties
have agreed to submit to
arbitration. The party seeking to invoke the court’s residual
jurisdiction must make out a ‘very
strong case’ or
provide ‘compelling reasons’, though in Universiteit van
Stellenbosch v JA Louw (Edms) Bpk
1983 (4) SA 321
(A) Galgut AJA
thought it impossible and indeed undesirable to attempt to define
with any degree of precision what would constitute
a ‘very
strong case’ (at 334A-B).
[70] Whether
s 3(2)
of the
Arbitration Act strictly
applied in the present case is not
altogether clear. DFT was not seeking to set aside the arbitration
agreement. Nor was it asking
that Hyde’s disputed claim under
the building contract not be referred to arbitration or that the
arbitration agreement should
not have effect with reference to the
arbitral dispute.
Section 3(2)
would only have been applicable if one
viewed
Rule 9
as referring to arbitration the separate dispute as to
whether the appointed arbitrator should be removed. Be that as it
may, the
parties accepted that the court retained a residual
discretion, despite any contrary stipulation in the arbitration
agreement,
to entertain the
s 13(2)
application on good cause.
[71] In assessing
the question of good cause, I regard as an important consideration
that the matter which the DFT asked the court
to adjudicate was not
the main dispute or a procedural matter truly ancillary to the
determination of the main dispute but a more
fundamental question as
to the propriety of Du Toit’s continued role as the arbitrator.
This was a legal question going to
the fairness of the arbitration
and on which the court could be expected to be at least as good a
judge of the matter as the Association.
[72] While that
would naturally not in itself suffice to justify a disregard by one
of the litigants of an agreed procedure for
removal, it is not a
consideration which stands alone. A second consideration is that the
Association’s Chairman himself
expressed the view, upon enquiry
by the DFT, that the Rules did not preclude an application to court
in terms of
s 13(2).
Now I accept Mr Bruwer’s submission that
the opinion of the Chairman cannot determine, and is indeed not even
relevant to,
the proper interpretation of the Rules. But when it
comes to the question whether there was good cause for the court to
entertain
the
s 13(2)
application, it is of undoubted relevance that
the DFT was given to understand by the Association that it did not
regard its own
rules as precluding such a challenge.
[73] One can
understand why, if the DFT and its legal representatives were under
the impression that
Rule 9
was not exclusive, they preferred to
approach the court in terms of
s 13(2)
rather than to seek the ruling
of the Association in terms of
Rule 9.
The DFT believed, justifiably
in my view, that it was obvious that Du Toit should be removed.
However, in order to achieve this
obvious outcome by way of
Rule 9
,
the DFT was required to deposit a sum of R75 000 so that the matter
could be considered be three senior professionals. This was
undoubtedly a substantial amount in respect of what could
legitimately have been regarded as a straightforward case.
Furthermore,
there were uncertainties, if the
Rule 9
procedure were
followed, about the fees it any to which Du Toit might be entitled.
This was a matter which, if
s 13(2)
were invoked, the court could
determine in terms of
s 13(3).
[74] Furthermore,
over the weekend of 30 June/1 July 2012 the DFT was faced with a
position in which Du Toit had intimated an intention
to proceed with
the arbitration on Monday 2 July 2012. I accept that, if the DFT had
by 26 June 2012 deposited the sum of R75 000
and shown an intention
to proceed with the
Rule 9
challenge, Du Toit would probably have
held matters in abeyance. Nevertheless, and even if the DFT could be
criticised for having
not hitherto pursued the
Rule 9
application to
conclusion, the DFT’s options narrowed considerably after Du
Toit informed the parties on Friday 29 June 2012
that he intended on
the Monday to proceed with the arbitration. The institution of an
urgent application in the court was probably
the only realistic
course apart perhaps from appearing at the arbitration on the Monday
to again ask Du Toit to recuse himself
(something it seems he was
unlikely to do without the concurrence of Hyde).
[75] In the unusual
circumstances of the case, therefore, I think the entertaining of the
s 13(2)
application was permissible. This conclusion is certainly not
intended as any encouragement to litigants to resort to the courts
where they have agreed to an arbitration procedure. The circumstances
of this case are most unusual, as illustrated by the fact
that
neither counsel was able to refer us to any judgment in which a court
had considered the applicability
s 13(2)
in the face of a different
removal procedure laid down in the arbitration agreement.
The merits of Du
Toit’s removal
[76] The grounds for
Du Toit’s removal is the aspect on which the least need be
said. I have nothing to add to the reasons
given by Blignault J for
his conclusion that Du Toit should be removed. These reasons, I
hasten to add in fairness to Du Toit,
are not concerned with his
honesty and integrity but only with the manifest inappropriateness of
his continuing to function as
the arbitrator after expressing such
strong criticisms of the DFT’s counsel in relation to
litigation in which he (Du Toit)
was a litigant.
[77] As I have
already mentioned, Mr Bruwer devoted very little attention to this
question in his written argument and virtually
none in oral argument.
In fact, he acknowledged at the hearing that, if the DFT had
persisted with the
Rule 9
application, it would probably have
succeeded. This renders the conduct of the proceedings in the court
a quo and in this court
all the more inexplicable.
Conclusion
[78] It follows that
the appeal on the merits of the matter must fail.
[79] In regard to
the costs in the court a quo, Blignault J corrected his order so as
to provide that the DFT would be liable for
the wasted costs of 10
September 2012. We raised with Mr Rosenberg whether the DFT should
not also be responsible for the additional
costs occasioned by the
supplementary affidavits, given that Hyde raised legitimate questions
in its supplementary papers concerning
the authorisation of the
proceedings. Mr Deuchar had made incorrect allegations in his
founding affidavit, and, in the absence
of the supplementary replying
papers, the points raised by Hyde would probably have led to the
dismissal of the application.
[80] Blignault J
does not appear to have given consideration to the question whether
the costs arising from the supplementary papers
should be dealt
differently from the main costs. I thus consider that we are at large
to make an order which we regard as just.
The DFT, should in my view,
be responsible for the costs arising from the filing of the
supplementary papers. The DFT must also
pay the costs wasted by the
postponement of 8 November 2012.
[81] Mr Rosenberg,
when we put these matters to him, left the question of the costs of
the supplementary papers in our hands but
resisted an order for
wasted costs in respect of 8 November 2012. It was clear, he said,
that Hyde intended in any event to continue
its opposition to the
application, inter alia on the basis of a supposed lack of authority.
That does not explain why the DFT should
not pay the wasted costs of
8 November 2012. Hyde provided a reasonable explanation for only
having discovered the true position
in regard to the identity of the
trustees in late October/early November 2012. The need for
supplementary answering papers would
not have existed if Mr Deuchar
had not stated the matter inaccurately in his founding affidavit. And
once Hyde raised these issues
in its supplementary answering papers,
the hearing on 8 November 2012 could not proceed because the DFT
needed an opportunity to
explain (and correct) the position.
[82] The limited
success which Hyde will be achieving in regard to the court a quo’s
costs order does not disentitle the DFT
to its costs on appeal.
[83] I would thus
make the following order:
(a) The appeal
against paras (1) and (2) of the order of the court a quo is
dismissed.
(b) Para (3) of the
court a quo’s order is set aside and replaced with the
following:
‘(3) The
Second Respondent is to pay Applicant’s costs in respect of the
application, save that Applicant shall pay
the costs wasted by the
postponements of 10 September 2012 and 8 November 2012 and shall also
pay the costs associated with the
filing of the supplementary
answering and supplementary replying papers.’
(c) The appellant
is to pay the first respondent’s costs of appeal.
TRAVERSO DJP
[84] I concur. An
order is made as proposed by Rogers J.
BOZALEK J
[85] I concur.
TRAVERSO DJP
BOZALEK J
ROGERS J
APPEARANCES
For Appellant:
Mr ECD Bruwer
Instructed by:
Modsell Pama & Cox
c/o Van der Spuy
Cape Town
4th Floor, 14
Long Street
Cape Town
For First
Respondent: Mr SP Rosenberg SC
Instructed by:
Millers Incorporated
c/o Van der Spuy
& Partners
Suite 603,
Constitution House
Adderley Street
Cape Town
1
The
DFT’s attorneys’ letter refers to s 32 of the Act.
This was clearly erroneous, as the practice note in question
correctly referred to s13(2). Section 32 of the Act is not relevant
to the removal of an arbitrator.
2
This
letter perpetuated the erroneous reference to s 32 of the Act.
3
This
would naturally not have precluded the two trustees from instituting
a fresh action. The capacity point was probably pressed
because, by
the time it came to be argued in the court of first instance (August
2007) and decided (February 2008), the trust's
claim for damages,
which was alleged to have arisen from police raids conducted during
2003 (see he full bench judgment para
5), is likely to have become
prescribed.
4
See
also
Marais
NO v Zoo Net Trading CC t/a Durr Estates
[2005]
ZAECHC 20
where Froneman said, in a case where the magistrate had
refused summary judgment because not all the trustees had been
joined:
‘
The
first concession counsel made was that, at best, success on appeal
(without the benefit of the knowledge gained by the joinder
application) would have resulted not in the summary judgment
application being dismissed, but only in the matter being referred
back to the court below in order for the new trustees to be joined
in the summary judgment proceedings. This is in line with
the
principle that a plea of non-joinder of necessary parties usually
results in a postponement to enable their joinder, not
in a final
determination of the substantive merits of the litigation. This kind
of approach is particularly appropriate in disputes
about the proper
citation of trustees where the trend is away from excessive
formalism, to cutting to the quick in ensuring that
the trust is
properly represented or cited in court proceedings.