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[2014] ZAWCHC 201
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City of Cape Town v Joint Venture Between Little Mead No. 37 (Pty) Ltd and Firstex Engineering Holdings (Pty) and Joint Venture Between Little Mead No. 37 (Pty) Ltd and Firstex Engineering Holdings (Pty) Ltd v City of Cape Town (9995/2014, 13769/2014) [2014] ZAWCHC 201 (17 December 2014)
Republic
of South Africa
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case
numbers: 9995/2014 and 13769/2014
Before:
The Hon. Mr Justice Binns-Ward
In
the matter in case no. 9995/2014 between:
THE
CITY OF CAPE
TOWN
..................................................................................................
Applicant
and
THE
JOINT VENTURE BETWEEN LITTLE MEAD No. 37
(PTY)
LTD AND FIRSTEX ENGINEERING HOLDINGS (PTY)
LTD
.........................................................................................................................................
Respondent
and
In
the matter in case no. 13769/2014 between:
THE
JOINT VENTURE BETWEEN LITTLE MEAD No. 37
(PTY)
LTD AND FIRSTEX ENGINEERING HOLDINGS (PTY)
LTD
.............................................................................................................................................
Applicant
and
THE
CITY OF CAPE
TOWN
..............................................................................................
Respondent
JUDGMENT
DELIVERED ON 17 DECEMBER 2014
BINNS-WARD
J:
[1]
On 5 August 2011, Mr W.G. Burger SC,
sitting as an arbitrator in a claim by The Joint Venture between
Little Mead No 37 (Pty) Ltd
t/a Firstex Ikapa and Firstex Engineering
Holdings (Pty) Ltd against the City of Cape Town, made an award in
the following terms:
BY
AGREEMENT BETWEEN THE PARTIES THE FOLLOWING AWARD IS MADE:
1.
It is recorded that all of the Claimant’s
claims are withdrawn.
2.
The Claimant is to pay the Respondent’s
costs on a party and party scale, including the costs of the
arbitration proceedings.
[2]
The costs thus awarded in favour of the
City have not been paid, and the City now applies, in terms of
s 31(1)
of the
Arbitration Act 42 of 1965
, in case
no. 9995/2014, for the award to be made an order of court.
In a separate application, subsequently instituted
by Little Mead in
the name of the joint venture under case no. 13769/2014, an
order is sought providing for a setting aside
of the award. The
order for the setting aside of the arbitrator’s award has been
applied for in terms of
s 33(1)(c)
of the
Arbitration Act on
the
ground that it had been ‘improperly obtained’. The
two applications first came to hearing together before
me on
25 November 2014.
[3]
At
the hearing on 25 November counsel for Little Mead pointed out that
Little Mead had been deregistered as a company on 13 November
2009
and that its nominal co-claimant in the arbitration proceedings,
Firstex Engineering Holdings (Pty) Ltd, had been deregistered
on
24 February 2011. Thus, when the relevant arbitration
agreement had been entered into, on 23 December 2009, Little
Mead had
ceased to exist as a company and therefore been incapable of
concluding the agreement ostensibly made on that date.
The
registration of Little Mead as a company was administratively
reinstated in terms of
s 82(4)
of the
Companies Act 71 of
2008
[1]
only on 1 August
2014. The company had therefore also not been in existence
during the conduct of the arbitration hearing,
which commenced on 1
August 2011. The deregistration of Firstex Engineering Holdings
had also preceded those proceedings.
Firstex has to date not
been reinstated on the register of companies. Little Mead’s
counsel submitted on these facts
that the arbitration had been a
nullity by virtue of the legal non-existence of the claimant parties.
[4]
This
point had not been taken on the papers, so the hearing was briefly
adjourned to enable the City to consider its position.
The City
reacted by applying, in terms of
s 83(4)
of the
Companies Act 71
of 2008
,
[2]
for an order
declaring that the arbitration proceedings conducted during the
period that Little Mead had not been registered as
a company should
be deemed to have been validly and effectively instituted and
conducted. The availability of such a remedy
was affirmed in
comparable circumstances in
Peninsula
Eye Clinic (Pty) Ltd v Newlands Surgical Clinic And Others
2014 (1) SA 381 (WCC).
[3]
Little Mead’s counsel then indicated that he needed time to
consider the application and the hearing was consequently
postponed
to 8 December 2014 on a timetable providing for the exchange of
further papers.
[4]
[5]
The ostensible claimants in the arbitration
had ceded their rights in the claims being arbitrated to Nedbank
Limited in terms of
an agreement purportedly entered into on
23 November 2010. The cession agreement would appear to be
a nullity by reason
of the non-existence of the cedents. It
nevertheless seemed inappropriate in the circumstances to hear and
determine an application
for the arbitration to be deemed to have
been effectively conducted without notice to Nedbank. I raised
this with counsel
at the commencement of the hearing on 8 December.
The City’s legal representatives were able to procure a
letter advising
that the bank did not require to be joined as a party
and that it abided the judgment of the court. I should also
mention
that both sides appeared to have consciously decided not to
make anything of the fact that Firstex Engineering Holdings has not
been reinstated on the register of companies and joined in any of the
applications currently before the court.
[6]
Little
Mead’s counsel sought to identify various points of distinction
between the current case and
Peninsula
Eye Clinic
as a basis to argue against the City’s application under the
Companies Act. None of them
impressed me as being of any
relevance to the question of whether it would not be just and
equitable to grant the relief sought
by the City in terms of
s 83(4)
of the
Companies Act. After
all, it is plain that the parties
to the arbitration had all conducted the proceedings on the
assumption that Little Mead and Firstex
Engineering Holdings were
extant companies. Mr Shutler, who is the deponent to the
affidavits in Little Mead’s current
application to set aside
the arbitration award, was apparently in control of the deregistered
companies’
de
facto
affairs at the time, just as he appears to be in control of Little
Mead’s now that its registration has been reinstated.
The points of distinction that counsel sought to make all related to
the conduct of the arbitration and the circumstances in which
the
award had been taken. Those matters bear more on the question
of whether the award could be said to have been improperly
obtained
than on whether the arbitration should be deemed to have been validly
conducted. Indeed, if the relief sought by
the City were not to
be granted, the application by Little Mead for the setting aside of
the arbitral award would have no foundation.
It is evident that
Little Mead’s pending application in terms of
s 33(1)(c)
of the
Arbitration Act is
predicated on an acceptance of the
effectiveness of the arbitration proceedings. In that context
the opposition by Little
Mead to the City’s application ran
into danger of assuming a farcical character. Little Mead’s
counsel came to
that realisation himself in the course of his
argument. As I understood him, he ultimately accepted that the
grant of the
City’s application in terms of
s 83(4)
of the
Companies Act wo
uld not detract from Little Mead’s application
in terms of the
Arbitration Act. On
the contrary, the remedy
would be necessary, not only for the viability of the City’s
application in terms of
s 31
, but also to give a footing to Little
Mead’s application in terms of
s 33
of the
Arbitration
Act. I
accordingly indicated at that stage of Little Mead’s
counsel’s argument that he might proceed on the assumption that
the relief sought by the City in terms of the
Companies Act would
be
granted. The reasons for granting the City relief under
s 83(4)
are essentially the same as those cited in
Peninsula
Eye Clinic
at para 55 in support of the similar order made in that case.
[5]
[7]
Little Mead, having initially opposed the
City’s application in terms of
s 31
of the
Arbitration
Act, subsequently
indicated by notice dated 21 November 2014 that it
was not persisting with such opposition. Its change of stance
was no doubt
inspired by the appreciation that the City’s
application would necessarily fall from consideration if Little
Mead’s
application in terms of
s 33(1)(c)
of the Act were
upheld. In the result the only remaining contentious matter for
resolution is the application to set the
arbitral award aside.
[8]
The arbitration claims were founded on the
joint venture parties’ claims against the City arising out of
the execution of
a contract for the removal of asbestos from the
Athlone power station, which had been decommissioned.
Proceedings had commenced
by way of two actions instituted in this
court in 2007 and 2009, respectively. The actions were
consolidated for the purpose
of hearing, but before they went to
trial it was agreed between the parties that they should be referred
to arbitration.
[9]
Mr Shutler was the only witness to testify
before the arbitrator. His evidence was given over a period of
more than three
days. An important part of it appears to have
been given with reference to a document which Shutler described as
his ‘workings’.
A copy of the document that had
been provided to the City’s legal representatives and was
contained in a trial bundle put
together for the purpose of the
arbitration hearing was used during Shutler’s evidence in
chief. For reasons that are
not apparent on the papers, senior
counsel appearing for the City at the arbitration called for the
original document to be provided
before the completion of Shutler’s
evidence. When the original was forthcoming it differed in
certain, apparently material,
respects from the copy on which
Shutler’s testimony had been premised.
[10]
The City’s attorney described the
position as follows in the affidavit filed by the City in opposition
to Little Mead’s
application:
When
the document was delivered it was noticed that it did not correspond
with the one which had been referred to by Shutler in
evidence.
The copy which had previously been provided (and on which Shutler had
testified) appeared to have been manipulated
and differed materially
from the original.
The
view was taken that this document would cause serious problems for
the JV in the further conduct of the arbitration as the original
in
essence destroyed the claims. The JV’s representatives
discussed settlement and made certain proposals. After
taking
instructions [senior counsel] and I responded that [the City] would
accept the withdrawal of the claims and a tender of
costs, including
the costs of the arbitration proceedings. After some discussions the
JV’s legal team agreed to this.
An
award was drawn up on those terms and made by the arbitrator on 5
August 2011. The award was made by agreement and in the
presence of the legal representatives of the parties. I assumed
that the agreement was made on the instructions of Shutler
and in the
light of the document which had been produced which would have caused
the JV difficulties due the contents of the document.
The
conduct of the JV was considered and the advice, which was presumably
given to Shutler, was sound in the circumstances.
There
was certainly nothing improper in the manner in which the award was
agreed and made by the arbitrator. The arbitrator
signed the
award and gave copies of the signed document to the parties that same
day.
[11]
In his affidavit in support of Little
Mead’s application, Mr Shutler averred that there had in fact
been three sets of ‘workings’
in the possession of the
joint venture’s legal team at the arbitration. He said
that the claims had been based on the
2007 workings, but that during
the hearing the City had referred to the amended 2005 workings.
He alleged that the claimants’
‘legal team, who obviously
forgot about the 2005 workings which they had in their possession
were caught off guard and accused
me of misleading [them], which was
not the case’. He explained the circumstances in which
the award was made as follows:
I
was told that the [claimants] would have to withdraw the arbitration
proceedings, failing which I will perjure myself under
cross-examination
and it would become apparent that I had been trying
to defraud [the City], which was most definitely not the case.
I
submit that it was improper for the [claimants’] legal team to
advise me as set out hereinabove and as it motivated me to
consent to
the award attached hereto, as above. The award was improperly
obtained and stands to be set aside by this Honourable
Court.
Due
to my mental state of mind, as set out hereinbelow, and the financial
crisis [the claimants] and I were experiencing, I buckled
under the
pressure exerted on me by the [claimants’] legal team and
consented to the award being granted by agreement, which
I should not
have done.
It
was not explained to me that by consenting to the award [the
claimants] would have no further chance to proceed with the
arbitration
proceedings. I was under the impression that it was
merely a question of withdrawing the arbitration proceedings and to
fight
another day should the [claimants] wish to do so.
It
was only now that I was in a position to obtain legal opinion on
behalf of [Little Mead] that it was explained to me that the
arbitrator’s award is final, unless this Honourable Court is
prepared to set it aside in terms of
Section 33
of the
Arbitration
Act.
[12
]
Section 33
of the
Arbitration Act provides
as follows in relevant part:
33
Setting aside of award
(1)
Where-
(a)
…; or
(b)
…; or
(c)
an award has been improperly obtained,
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.
(2)
An application pursuant to this section shall be made within six
weeks after the publication of the award to the parties: Provided
that when the setting aside of the award is requested on the grounds
of the commission of an offence referred to in
Part 1
to
4
, or
section 17
,
20
or
21
(in so far as it relates to the aforementioned
offences) of Chapter 2 of the
Prevention and Combating of Corrupt
Activities Act, 2004
, such application shall be made within six weeks
after the discovery of that offence and in any case not later than
three years
after the date on which the award was so published.
(3)
….
(4)
If the award is set aside the dispute shall, at the request of either
party, be submitted to a new arbitration tribunal constituted
in the
manner directed by the court.
Section
38
of the Act invests the court with the power ‘on good cause
shown, [to] extend any period of time fixed by or under th[e] Act,
whether such period has expired or not’.
[13]
The current application was instituted by
Little Mead on 4 August 2014. The company therefore requires an
extension of the
six week period within which the application was
ordinarily required to be brought. Mr Shutler sought the
required extension
on the basis that he had been affected by a
debilitating psychological condition, which he described as ‘major
depression’.
He stated that he had been hospitalised for
this condition in 2008, 2010, 2011 and 2012. He was also in
financial difficulties
and Nedbank had foreclosed on mortgages over
his late life partner’s property and that of his late mother.
He said
that he had lacked the financial resources to approach the
court for the relief now sought, or to oppose the measures taken in
execution of judgment against him by Nedbank. An affidavit was
made by a psychologist confirming that Mr Shutler had been
treated
for ‘severe burnout, severe exhaustion, depression and
heightened anxiety’ between 2009 and 2012 and that his
treatment had included three periods of hospitalisation ‘lasting
approximately nine weeks in total’. An affidavit
by a
medical practitioner was included in Little Mead’s replying
papers. It was to the effect that the doctor had treated
Mr Shutler for being severely depressed between September and
November 2013. The doctor had first seen Mr Shutler as
a
patient in September 2013. He stated that Shutler had
‘specifically related a severe depressive illness as a
consequence
of …significant financial loss coupled with the
tremendous loss of his life partner, Ilze, during 2012’.
The
general practitioner described the medication he had prescribed
for Shutler and concluded ‘[t]he turnaround came about in
2014
when Mr Shutler started to appear much improved and with a more
stable mood. I can however confirm that Mr Shutler still
needs
significant ongoing medical management to stay at his present and
improved health status. I furthermore confirm that
his mood is
stable and he is functioning normally’.
[14]
The
period of six weeks prescribed for the bringing of applications to
set aside arbitral awards is a relatively short one.
The reason
is obvious. It is because of the importance attached as a
matter of public and legal policy to finality in litigation
(‘
interest
rei publicae ut sit finis litium
’).
Mindful that ‘good cause’ is ‘a phrase of wide
import that requires a Court to consider each case
on its merits in
order to achieve a just and equitable result in the particular
circumstances’,
[6]
it
follows nonetheless that the longer the delay beyond the period of
six weeks entailed in moving for the setting aside of an
award, the
more exacting the requirements of showing good cause for any
extension of the period become. The context also
requires a
court seized of an application in terms of
s 38
in relation to
one in terms of
s 33(1)
to take into account that it has been
held authoritatively that the courts should construe the grounds upon
which they may set
aside an award in terms of
s 33(1)
‘reasonably strictly’, in other words they should
intervene only when a material failure of justice enjoins
intervention.
[7]
The
latter consideration bears primarily on the merits of an application
in terms of
s 33(1)
, but it will also incidentally colour the
approach that a court will adopt to a related application for a
relaxation of the applicable
time bar. The applicant will have
to overcome an initial diffidence by the court. The reasons
advanced by Mr Shutler
in respect Little Mead’s three year
delay do not measure up to what is required.
[15]
It is quite clear that even accepting that
Mr Shutler, who appears to have been the claimant companies’
effective
alter ego
,
was disabled by depression from taking active steps at certain
stages, there were nevertheless times when he was able to act
assertively. This is demonstrated, for example, by the fact on
12 March 2014 he was able to write a lengthy letter to the
City
expressing his determination to pursue the companies’ claims
and requesting a ‘high-level meeting’.
He was
advised in reply in an email from the deputy executive mayor, dated
17 March 2014, that the City had legal advice that the
claims had
been finally determined in terms of the award and that a meeting
would serve no purpose. He responded to the email
in a further
lengthy letter, dated 17 April 2014, in which, amongst other matters,
he recorded ‘we have on hand the
TOP
Advocate in this country skilled and experienced in these matters,
willing to work on a no win, no pay basis and this indicates
how
confident he is on the merits of our case’. The delay in
instituting the application after 17 March 2014 is
not
adequately explained. Indeed, I have the impression that it was
only after the institution of the City’s application
in terms
of
s 31
of the
Arbitration Act on
5 June 2014 that Mr Shutler
bestirred himself towards the eventual institution of the application
in terms of
s 33(1)(c)
and attended to the prerequisite measure
of procuring the administrative reinstatement of Little Mead’s
registration as a
company.
[16]
It is also apparent that during 2012 Mr
Shutler was involved in interpleader proceedings arising out of the
attachment of certain
goods by Nedbank in execution of judgment.
He drew the affidavits and pleadings in the matter himself, and
successfully conducted
the subsequent trial of the interpleader
action in person before Schippers J. He also deposed to a
lengthy affidavit on 1
February 2013 in support of an application for
condonation for the late filing of an application for leave to appeal
against a
summary judgment granted against Firstex Engineering
Holdings and himself in 2010. In that affidavit he referred to
the arbitration
proceedings, stating ‘For various reasons I did
not understand at the time, and still do not, the arbitration has
been terminated,
and I am currently in the process of taking advice
in respect of how to deal with the matter against the City of Cape
Town on the
strength of the original summons’.
[17]
There is no explanation offered by Mr
Shutler as to why, if he could have been active and effective on a
number of other fronts
during the period from 2012 to earlier in
2014, he could not have caused Little Mead to bring its application
much earlier.
In
Coetzee v Paltex
1995 (Pty) Ltd
2003 (1) SA 78
(C), at
92J-93A, Davis J held that a failure by the applicant to give ‘a
complete account’ as to the delay was good
reason to withhold
condonation. I regard the inadequacy of the explanation offered
as a factor to be weighed with all the
other features of the case.
It is, however, a very material factor.
[18]
Furthermore, it is evident that Shutler
procured the issue of summons on 4 August 2014 by Little Mead against
the arbitration claimants’
legal team. It is apparent
from the particulars of claim in that action, a copy of which was
annexed to the City’s
opposing affidavit, that Little Mead is
claiming damages from its erstwhile legal representatives in the
amount of R19,5 million
arising out of the withdrawal of the
arbitration claims. The amount of the claim is computed as the
sum of the claims in
the 2007 and 2009 actions that had been referred
to arbitration, together with interest thereon, and R2 million
in legal costs
(presumably those incurred in the litigation that went
to arbitration). The particulars of claim include allegations
that
‘Acting on the [defendants’] advice, the Plaintiff
agreed to withdraw the arbitration proceedings against the City of
Cape Town. As a result of the [defendants’] incorrect and
negligent advice, the plaintiff suffered damages in the amount
of
R19 508 310,88.’ The institution of proceedings
against its former legal representatives points to an
acknowledgment
by Mr Shutler that Little Mead has a discrete remedy to that of
setting aside the award and commencing the arbitration
afresh before
a different tribunal. Having regard to the interest that the
City obviously has in the finality of the arbitration
process, that
Little Mead is availing of the discrete remedy is a relevant factor
to consider in determining whether condonation
for the late bringing
of the application in terms of
s 33(1)(c)
should be granted.
The purpose of the current application would be to enable the
arbitration to be recommenced; see
s 33(4)
of the
Arbitration Act.
There
seems little point in that if there is merit in the pending
action against the legal practitioners upon whose advice Little Mead
the arbitration was settled. At the same time, if there is no
merit in the action, there can also be no merit in Mr Shutler’s
complaint that the arbitration award should be set aside because his
consent to it had been predicated on bad legal advice.
Indeed,
in the overall conspectus of the alleged facts, redress pursuant to
the action would seem to offer a fairer result than
a resumption of
arbitration proceedings against the City; for it has not been
suggested that the City’s representatives had
been in any way
to blame for the joint venture claimants’ decision to settle
the arbitration. It has also not been
suggested that the action
by Little Mead against its former legal representatives is likely to
be fruitless if the company succeeds
in obtaining judgment.
[19]
For all these reasons, and also the fact,
that, as I shall explain presently, I do not have a positive view of
the merits of the
application, I have not been persuaded that Little
Mead has shown good cause, as required in terms of
s 38
of the
Arbitration Act, for
an extension of the period within which it was
required to institute the application to set the award aside.
[20]
It bears mentioning that Little Mead’s
counsel ventured that the effect of the grant of the City’s
application in terms
of
s 83(4)
of the
Companies Act at
this
stage means that condonation in terms of
s 38
of the
Arbitration
Act is
not required because prior to the granting of the relief no
legally effective award had existed. There is no merit in that
contention. Granting the remedy sought by the City under the
Companies Act would
not somehow transmute the date of the publication
of the award from 5 August 2011 to the date of the order deeming the
arbitration
to have been validly conducted. As mentioned,
s 33
of the
Arbitration Act requires
any application to set aside an award
to be made within six weeks of the publication of the award.
The provision speaks to
the fact of the publication of the award, not
its legal validity.
[21]
It might be that in an appropriate case a
party could seek condonation in terms of
s 38
of the
Arbitration
Act for
the late bringing of an application in terms of
s 33(1)
on the grounds that it had been entitled, prior to grant of an order
in terms of
s 83(4)
of the
Companies Act deeming
arbitration
proceedings purportedly conducted by a deregistered company to have
been validly conducted, to have regarded the award
as legally
ineffectual. What would constitute such an appropriate case
need not be considered, for the current matter certainly
does not
qualify as such. The delay by Little Mead in instituting its
application in terms of
s 33
had nothing to do with any
perception by its director that proceedings to set aside the award
were not necessary by reason of the
arbitration having been conducted
at a time when the company had been deregistered.
[22]
These conclusions are sufficient to impel
the dismissal of Little Mead’s application without any
necessity to determine its
case on the merits. I shall
nevertheless deal with the matter on its merits in case Little Mead
should be permitted to take
the application further. As
mentioned, my view on them was in any event a consideration that was
weighed in concluding that
good cause for condonation in terms of
s 38
had not been shown.
[23]
Counsel
were not able to find any judgment in which the import of
s 33(1)(c)
of the
Arbitration Act has
been specifically considered.
According to the tenor of its language, resort may be had to the
provision when an impropriety
has affected the
obtaining
of the award. An application in terms of
s 33(1)(c)
would
rarely be brought by a successful party in an arbitration.
There would usually be no need for a successful party to
have an
award in its favour set aside; it would simply abandon the award.
The only circumstance in which I can conceive of
a successful party
wanting to set the award aside in terms of the provision would be if
it had, by reason of some impropriety,
obtained an award that gave it
less than it might otherwise have been awarded. These
considerations suggest that the impropriety
must lie in the conduct
of the party to the arbitration who has benefitted thereby. An
obvious example of relevant impropriety
would be fraud.
[8]
Other forms of dishonesty, such as the deliberate concealment of
documents that a party was bound to disclose, would also
qualify.
It goes almost without saying that a causal connection between the
impropriety and the obtaining of the award has
to be demonstrated.
Thus, if a party to the arbitration were shown to have obtained the
award by means of himself giving
perjurious evidence or by procuring
the giving of such evidence, the award would be susceptible to being
set aside. It is
not obvious, however, that the same result
would follow upon a subsequent discovery that a witness who was not a
party to the proceedings
had given untruthful evidence of his own
accord and not at the behest, or to the knowledge at the time, of the
party who obtained
the award. The distinction falls to be drawn
on the basis that the conduct in the first of the postulated examples
is directed
at obtaining an award, whereas the actor in the second
example does not obtain an award, or act as the agent of the party
that
obtains it.
[24]
I
have found some support for my construction of the language of
s 33(1)(c)
in the treatment by the English courts of the
equivalent provision in the Arbitration Act, 1996 (
c.23
),
where the language is ‘
the
award being obtained by fraud or the award or the way in which it was
procured being contrary to public policy
’
.
[9]
In my view the words ‘
improperly
obtained
’
in s 33(1)(c) of Act 42 of 1965 broadly denote the type of
impropriety which the equivalent English legislative provision
covers
using the expressions ‘fraud’ or ‘procured contrary
to public policy’. The subject is discussed
as follows in
Sutton et al.,
Russell
on Arbitration
23
rd
ed (2007) at 8-099:
This
[category of serious]
irregularity
contemplates a situation where either the award was obtained by fraud
or the way it was procured was contrary to public
policy.
Although the second part of the sub-section, “an award procured
contrary to public policy” is wider on
its face than the first
part, “an award obtained by fraud”, the courts have in
fact interpreted the twin concepts consistently.
….The
award must be obtained by the fraud of a party to the arbitration or
those privy to that party, not for example by
the fraud of third
party witnesses. The term “public policy” is
capable of covering a wide variety of matters,
other than
fraud…..Bribery or some other form of corruption would offend
public policy, and so may unconscionable conduct
in certain
circumstances. The fact that witnesses can be shown to have
lied when giving evidence does not of itself mean
that any award
subsequently produced by a tribunal will trigger this ground.
It will need to be shown that the defendant[
[10]
]
can
fairly be blamed for the adducing of the evidence and the deception
of the tribunal and that the evidence of deception, which
could not
have been produced at trial with reasonable diligence, could be
expected to be decisive at a re-hearing.
[25]
In
Elektrim SA
v Vivendi Universal SA & Ors Rev 1
[2007] EWHC 11
(Comm), [2007] 1 Lloyd's Rep 693, which the City’s
counsel, Mr
van Reenen
,
brought to my notice, Aikens J approached the construction of
s 68(2)(g) of the 1996 Arbitration Act (
c.23
)
as follows, at para 79-80:
79.
I next consider the question: what actions or inactions are within
the ambit of the phrase “obtained by fraud” in
the
context of the facts in this case? Neither side drew my attention to
any cases where the English courts have considered the
ambit of the
phrase “..the award being obtained by fraud” in section
68(2)(g). Therefore I have to consider the phraseology
in principle
and attempt to construe it in accordance with section 1 of the Act. I
agree with Moore-Bick J (as he then was) who
stated in
Profilati
Italia SRL v Paine Webber Inc
[2001] 1
All ER (Comm) 1065
([2001] 1 Lloyd's Rep 715)
at
paragraph 17, that it would be unwise to attempt to define all the
circumstances when an award is “obtained by fraud”
or
“procured contrary to public policy” within section
68(2)(g). However, I note that section 68(2)(g) does not refer
to the
fraud of a party to the arbitration. On the face of the wording it
would seem that the “fraud” referred to in
the paragraph
can be committed by anyone who is connected with the arbitration
process. If this were right, then (for example)
if it were proved
that a witness for one side or another has committed perjury when
giving evidence before the tribunal, that would
be a “fraud”
within paragraph (g). If so then, if it were also proved that the
perjured evidence resulted in the award
being in favour of that party
then, logically, the award would have been “obtained by fraud”.
80.
But I have concluded that this is not the correct construction of the
words “obtained by fraud”. It is a party to
an
arbitration that obtains an award in its favour or has one made
against it. The words “obtained by fraud” must refer
to
an award being obtained by the fraud of a party to the arbitration or
by the fraud of another to which a party to the arbitration
was
privy. This fits in with the general ethos of the Act, which is to
give the courts as little chance to interfere with arbitrations
as
possible. If this wording referred to the fraud of anyone that was
involved in the arbitral process, whether or not the fraud
was
committed with the knowledge of the relevant party to the
arbitration, then that would give unsuccessful parties carte blanche
to apply to the court to set aside or remit an award. The
unsuccessful party need only assert (for example) that a witness of
the successful party had committed perjury (even without the
knowledge of the successful party) and the award had as a result been
in the favour of that party. It could then be asserted that the award
had been “obtained by fraud”, resulting in “substantial
injustice”; therefore the award must be set aside or
remitted.
[11]
In
response to an argument that if a document were wrongfully withheld
as a result of either negligence or an error of judgment,
and it was
demonstrated that the award would have been different in consequence,
then the award had been ‘
procured contrary to public policy
’
within s 68(2)(g), Aikens J held as follows at para 86-87:
86.
Moore-Bick J did not accept this argument.
He concluded that, in the context of disclosure, documents had to be
deliberately withheld
to the knowledge of a party to the arbitration
(or its solicitors), before it could be said that the award had been
procured contrary
to public policy. He said that normally it would
have to be shown that there had been some “
reprehensible
or unconscionable conduct”
by the
party concerned, that had contributed in a substantial way to
obtaining an award in that party's favour:
see
para 17
.
87.
I respectfully agree with that analysis.
Thus, at least in the context of allegations of perjury and
deliberate concealment of relevant
documents, the phrase “
an
award procured contrary to public policy”
goes
no wider than the phrase “
an award
obtained by fraud”
for the
purposes of section 68(2)(g).
[26]
It is apparent from the summary of the
factual allegations given at the outset of this judgment that Little
Mead is relying on the
allegedly unfounded advice given to its
director, Mr Shutler, by its own legal representatives as the
relevant impropriety for
the purpose of its application in terms of
s 33(1)(c) of the Arbitration Act. Mr Shutler is in effect
contending that
the arbitration award should be set aside because he
allowed himself to consent to it on bad advice. The negligent
conduct
of the case by one of the parties’ legal
representatives is a matter which might very conceivably result
unhappily in an
adverse award for the party concerned, whether upon
settlement of the matter or otherwise. The causal effect of
such negligence
on the outcome of the arbitration does not mean,
however, that the award was improperly obtained. The award in
the current
case was obtained because Mr Shutler, purporting at the
time to represent the legally non-existent Little Mead and Firstex
Engineering
Holdings, consented to it. If one thinks away the
legal non-existence of the companies at the time, his consent was
competently
given and there was thus nothing improper about its
intended consequence being realised by the making of the award.
It was
the claimants’ consent that caused the City to obtain
the award, not the advice given to Mr Shutler that preceded such
consent.
If the consent was ill advised, that is a matter to be
resolved between the claimants and the persons on whose advice they
acted
in agreeing to the award.
[27]
The award was obtained pursuant to a
settlement agreement between the parties to the arbitration.
The lack of any impropriety
in the obtaining of it can be illustrated
by considering the situation in its contractual context. Whether
the terms of the
agreement compromised the claims might be open to
debate, but it is certain that they provided for the consensual
termination of
the arbitration on the terms reflected in the award.
In that context, Little Mead’s position in now seeking to have
the award set aside because of the effect of advice given to it in
confidence in its counsel’s chambers is indistinguishable
from
that of a party seeking to escape a contract on the basis of a mental
reservation, or a lack of real consensus in contradiction
of the
objectively discernible manifestations of its outward conduct in
appearing to conclude the contract. It is trite that
such a
party is held bound to the contract because it would be unreasonable
to the other party, in the context of an objective
assessment of the
first party’s conduct, to hold that there was no contract.
Little Mead is in precisely such a position
vis
à
vis
the
City in its attempt to escape the award to which it had agreed.
[28]
In the result the following orders are
made:
1.
In case no. 13769/2014:
(a)
It is declared, in terms of
s 83(4)
of
the
Companies Act 71 of 2008
,
vis à
vis
Little
Mead No. 37 (Pty) Ltd, that the arbitration proceedings between The
Joint Venture between Little Mead No. 37 (Pty) Ltd
t/a Firstex
Ikapa and Firstex Engineering Holdings (Pty) Ltd, of the one party,
and the City of Cape Town, of the other party,
before Mr W.G. Burger
SC shall be deemed to have been validly and effectively instituted
and conducted.
(b)
The application by Little Mead No. 37
(Pty) Ltd in terms of
s 33(1)(c)
read with
s 38
of the
Arbitration Act 42 of 1965
to set aside the arbitral award made by
agreement between the parties to the arbitration on 5 August 2011 is
dismissed.
(c)
Little Mead No. 37 (Pty) Ltd is
ordered to pay the costs incurred by the City of Cape Town in the
application in terms of
s 83(4)
of the
Companies Act and
in the
application in terms of
s 33(1)
of the
Arbitration Act.
2.
In
case no. 9995/2014:
(a)
The ‘Arbitrator’s Award’
made by Mr W.G. Burger SC on 5 August 2011 is made an order of court
in terms of s 31(1)
of the Arbitration Act 42 of 1965.
(b)
The costs incurred by the City of Cape Town
arising out of the opposition to the application by Little Mead
No. 37 (Pty) Ltd
up to the date of the delivery of notice by the
latter of its withdrawal of opposition to the application shall be
paid by Little
Mead No. 37 (Pty) Ltd.
A.G.
BINNS-WARD
Judge
of the High Court
Before:
Binns-Ward J
Dates
of hearing: 25 November and 8 December 2014
Judgment
delivered: 17 December 2014
Counsel
for Little Mead no.37 (Pty) Ltd: A. M. Heunis
Counsel
for the City of Cape Town
D. Van Reenen
Attorneys
for Little Mead no.37(Pty) Ltd:
JP
Joubert Attorneys, Somerset West
Attorneys
for the City of Cape Town
EN Bester & Associates, Hout Bay
[1]
Section
82(4)
of the
Companies Act provides
: ‘
If
the Commission deregisters a company as contemplated in subsection
(3), any interested person may apply in the prescribed manner
and
form to the Commission, to reinstate the registration of the
company
’.
[2]
Section
83(4)
of the
Companies Act provides
:
At
any time after a company has been dissolved-
(a)
the liquidator of the company, or other person with an interest in
the company, may apply to a court for an order declaring
the
dissolution to have been void, or any other order that is just and
equitable in the circumstances; and
(b)
if the court declares the dissolution to have been void, any
proceedings may be taken against the company as might have been
taken if the company had not been dissolved
.
The
sub-section falls to be understood in the context of
s 83(1)
,
which provides in relevant part:
A
company is dissolved as of the date its name is removed from the
companies register…
.
A
company that is administratively deregistered in terms of s 82(3)
of the Act is dissolved with effect from the date of
its removal
from the register of companies by the Companies and Intellectual
Property Commission.
[3]
An
appeal against that judgment is set down for hearing in the Supreme
Court of Appeal under SCA case no. 086/2014 on 5 March
2015.
[4]
The
City’s application in terms of s 83(4) was brought
ancillary to the proceedings under case no. 13769/2014.
[5]
At
para 55 of
Peninsula
Eye Clinic
,
it was held ‘…
there
is no doubt that it would be just and equitable that the arbitration
proceedings should be declared valid. The respondent's
directors
were in
de
facto
control of the conduct of the proceedings on the respondent's
behalf, and the respondent's interests were represented by senior
counsel briefed to represent it at the arbitration hearings and in
the application to court for the review of the arbitrator
at first
instance's decision to decline to reopen the arbitration. No doubt
both parties incurred considerable expenditure in
respect of the
arbitration proceedings in the
bona
fide
but mistaken belief that the respondent was legally existent. The
only reason of which I am aware for the reinstatement of the
respondent's registration was to allow for the current proceedings,
which are directly related to the outcome of the arbitration
proceedings, to go ahead and be effectively determined. A further
consideration in favour of validating the arbitration proceedings
between the applicant and the respondent is that the only reason the
issue has arisen is because the company was deregistered
through the
failure of its directors to ensure that its annual returns were duly
lodged. While it would be manifestly unjust
to the applicant were
the arbitration proceedings not rendered effective, deeming them to
have been validly conducted would occasion
the respondent no
cognisable injustice whatsoever
’.
[6]
South
African Forestry Co Ltd v York Timbers Ltd
2003
(1) SA 331
(SCA) at para 14 (per Nugent JA, treating of the
expression in the context of s 32(2) of the
Arbitration Act).
In
Kalmneft
JSC v Glencore International AG
[2001] 2 All ER (Comm) 577
at para 59, Colman J observed of
applications in terms of the equivalent to
s 38
of Act 42 of
1965 in s 80(5) of the English Arbitration Act 1996 (
c.23
)
that ‘…
although
each case turns on its own facts, the following considerations are,
in my judgment, likely to be material: (i) the
length of the
delay; (ii) whether, in permitting the time limit to expire and
the subsequent delay to occur, the party was
acting reasonably in
all the circumstances; (iii) whether the respondent to the
application or the arbitrator caused or
contributed to the delay;
(iv) whether the respondent to the application would by reason
of the delay suffer irremediable
prejudice in addition to the mere
loss of time if the application were permitted to proceed;
(v) whether the arbitration
has continued during the period of
delay and, if so, what impact on the progress of the arbitration or
the costs incurred the
determination of the application by the court
might now have; (vi) the strength of the application;
(vii) whether in
the broadest sense it would be unfair to the
applicant for him to be denied the opportunity of having the
application determined
’.
Those observations were endorsed by the Court of Appeal in
Nagusina
Naviera v Allied Maritime Inc
[2002] EWCA Civ 1147
at para 38. At para 42 of the latter
judgment, Mance LJ emphasised, with regard to the general
considerations included
in category (vii) of Colman J’s list
of considerations, that ‘
..the
judge must have had well in mind considerations of overall justice
and fairness. They must, however, always be viewed in
the particular
context that Parliament and the courts have repeatedly emphasised
the importance of finality and time limits for
any court
intervention in the arbitration process
’.
[7]
See
Lufuno
Mphaphuli & Associates (Pty) Ltd v Andrews and Another
2009 (4) SA 529
(CC)
(2009 (6) BCLR 527
at para 235 (per O’Regan
ADCJ). The learned Acting Deputy Chief Justice’s remarks
at the place cited should
be read in the context of paragraphs
224-236 of the judgment, which include some discussion of relevant
international policy
trends in respect of judicial intervention in
private arbitral proceedings. See also
Telcordia
Technologies Inc v Telkom SA Ltd
[2006] ZASCA 112
;
2007
(3) SA 266
(SCA)
(2007 (5) BCLR 503
;
[2007] 2 All SA 243)
in para 4
.
Compare
too Lord Steyn’s opinion in
Lesotho
Developments v Impregilo SpA
[2005] UKHL 43
;
[2006] 1 AC 221
(
[2005]
2 All ER (Comm) 265)
,
at
para 17 and 18, where he highlights the ethos of the English
statute as emphasising respect by the courts for party autonomy
in
private arbitrations, having been notably influenced in that
direction by the UNCITRAL Model Law on International Commercial
Arbitration. Lord Steyn emphasised that s 68 of the
English statute (the counterpart of s 33 of South Africa’s
Arbitration Act) was ‘
really
designed as a long stop, only available in extreme cases where the
tribunal has gone so wrong in its conduct of the arbitration
that
justice calls out for it to be corrected
’
or
where the award is obtained in circumstances in which to permit it
to stand would result in a serious failure of justice.
He
stated that ‘a high threshold must be satisfied’ for
judicial interference in an award.
[8]
Indeed,
in the equivalent provision of the English Arbitration Act, 1996
(c.23), the position is articulated expressly with reference
to
fraud and public policy thus in s 68(2)(g) as a type of
‘serious irregularity’ upon which a court may set
aside
an award:
Serious
irregularity means an irregularity of one or more of the following
kinds which the court considers has caused or will
cause substantial
injustice to the applicant–
…
(g)
the award being obtained by fraud or the award or the way in which
it was procured being contrary to public policy.
[9]
See
note 8, above.
[10]
[?party
who benefitted from the impropriety].
[11]
The
approach stated by Aikens J was subsequently endorsed by Blair
J in
Double
K Oil Products 1996 Ltd v Neste Oil Oyj
[2009] EWHC 3380
(Comm), [2010] 1 Lloyd's Rep 141,
at
para 35.