ARBITRATION

Facts: The applicant, Kidrogen, negotiated with the City of Cape Town, on behalf of certain taxi associations, concerning the conclusion of an operating agreement in respect of an improved and extended public transport system. The respondents were taxi operators belonging to the taxi associations which participated in this venture. Kidrogen concluded a vehicle operator agreement with the city in in terms of which participating taxi operators could subscribe for shares in Kidrogen subject to certain conditions. Mr Erasmus acquired 20 shares in Kidrogen and Mr Ncube acquired 12 shares. A dispute arose between Kidrogen, on the one hand, and Mr Erasmus and Mr Ncube, on the other, concerning shares acquired by the latter. Kidrogen concluded a written "share sale agreement" with Mr Erasmus in terms of which he sold to Kidrogen his entire shareholding for an agreed price and Kidrogen agreed to repay his loan account in Kidrogen. A similar agreement was concluded between Kidrogen and Ncube, in terms of which Mr Ncube sold his entire shareholding to Kidrogen and the latter agreed to repay Mr Ncube’s loan account in Kidrogen. In both agreements the parties agreed that they would agree on an arbitrator within 15 days of signature of the agreement and that within 30 days from the date of the agreement the parties would meet with the arbitrator to obtain directions concerning the exchange of pleadings, discovery and the hearing of the matter. Kidrogen sought an award declaring that it was not obliged to pay the purchase price of the disputed shares. It alleged that they were not entitled to the disputed shares and sought repayment of the dividends that were paid to them, respectively, for those shares.

Appeal: The respondents raised a special plea to the effect that Kidrogen failed to pursue the arbitration against them as agreed and more particularly "within 30 (thirty) days of signature" of their agreements. The arbitrator issued an award in terms of which he, among other things, upheld the special plea. He found in respect of both respondents, that Kidrogen’s failure to pursue the arbitration within 30 days of signature of the respective share sale agreements, was, as agreed by them in the Erasmus and Ncube agreements, deemed to be determination in favour of the respondents on the merits. The High Court dismissed an application by the applicant in terms of section 8 of the Arbitration Act 42 of 1965 to extend the period within which it was obliged to commence an arbitration in terms of two similar arbitration agreements it entered into with the first and the second respondents, respectively.

Discussion: Even though Kidrogen’s counsel criticised the High Court’s exercise of its discretion, the High Court did weigh different relevant factors in considering the question of undue hardship and whether to grant the extension sought by Kidrogen. In terms of section 8, a court seized with such an application has a discretion whether to extend the time fixed for commencement of the arbitration proceedings. It must exercise that discretion judicially. If it concludes that in the circumstances of the case "undue hardship" would otherwise be caused, it may extend the time for such period as it considers proper, whether the time so fixed has expired or not, on such terms and conditions as it may consider just, but subject to the provisions of any law relating to the time for commencing arbitration proceedings. After the award was issued by the arbitrator, the matter was finally determined, as envisaged in the arbitration agreements of both Mr Erasmus and Mr Ncube, and as contemplated in section 28 of the Act. The extension of the time-bar after the issue of the award by the arbitrator in this matter would have been meaningless, unless the award itself was set aside. There is no basis for implying such a power, or effect, in section 8 of the Act. Kidrogen did not seek to review and set aside the award. Nor did it suggest that it was susceptible to impugnment. Instead, it accepted the award as final.

Findings: Kidrogen freely agreed to the time-bar and was aware of it all along. Even after Erasmus and Ncube had raised the time-bar issue in their special plea, Kidrogen seems to have taken the matter for granted. It did not deal with the issue of extension at all in its first response to that special plea and only pleaded its intended reliance on section 8 in an amendment to that document. It had ample opportunity to bring an application for an extension in terms of section 8, before the arbitration commenced, but elected not to do so. It did not even pursue the stay of the arbitration proceedings foreshadowed in its amended replication. That Kidrogen had failed to meet the agreed time-bar was without question. The award could almost be said to have been a foregone conclusion. Kidrogen’s hardship was self-created, and it was not undue. Its hardship is in proportion to its fault. Section 8 was not available to Kidrogen because it only applies to future disputes. The disputes were pre-existing and not "future disputes" as envisaged in that section. The arbitrator’s time-bar award is indeed final and was not impugned or shown to be susceptible to review.

Order: The appeal is dismissed with costs.

COPPIN AJA (MAKGOKA JA, MEYER JA, KGOELE JA and CHILI AJA concurring)

Facts: The arbitration process between Transnet and Umhlatuze initiated in June 2021. The parties agreed that King SC would serve as the arbitrator. Another division of Transnet, Transnet Pipelines, was engaged in an arbitration with a company called Spill Tech. Transnet Pipelines initiated an urgent application in the High Court to prevent King from continuing with that arbitration. Transnet Pipelines sought King’s recusal based on assertions made in their founding affidavit, which included comments that his “approach has been unfortunate and flawed at best, and dismissive and callous at worst.”  Transnet criticised King's ruling on his jurisdiction as being “questionable at best, and downright unfair at worst.” King delivered his decision in the matter between Transnet and Spill Tech, ruling in favour of Transnet. The following day, the urgent application seeking his removal as arbitrator was removed from the roll, since it was rendered moot in light of his ruling.

Application: Transnet brings this application for the removal of King from his role as the appointed arbitrator in terms of section 13(2) of the Arbitration Act 42 of 1965 which provides recourse, on application by any party to court, to set aside the appointment of or remove an arbitrator from office, on good cause. The basis for Transnet's application is its assertion that King failed to disclose the prior legal dispute that potentially compromised his impartiality, giving rise to a reasonable apprehension of bias.

Discussion: Transnet contends that, had King informed them that he was a respondent in a matter where Transnet SOC sought to interdict his involvement in an arbitration, they would have immediately sought his removal. They further argue that this, combined with his perceived "bad attitude" and "hostility" towards them in the current arbitration, makes him unsuitable to continue. Transnet contends that King’s failure to disclose the Spill Tech litigation, especially given his later stance that Transnet should have been aware of it as a single corporate entity, lacks reasonable explanation. Transnet submits that it is significant that King found the allegations in the Spill Tech matter offensive, using the term “disparaging” to describe them. This conclusion is understandable considering the litigant’s use of terms such as “flawed, callous, dismissive, and unsuited” to describe an arbitrator’s conduct. It was contended that any right-minded litigant, having levelled such remarks against an arbitrator and having regard to his response thereto, would likely apprehend prejudice in a subsequent hearing before the same arbitrator, especially one occurring just months later.

Findings: King concluded that a reasonable person, after reading his decision in the Spill Tech case, could not objectively and reasonably find him biased against Transnet Pipelines. However, the critical issue is whether there was a duty on King, having become aware of the nature of the allegations against him by Transnet in the Spill Tech matter, to have as soon as possible thereafter, disclosed the existence of that litigation, as well as his response thereto. As King breached the duty to disclose, the court is satisfied that the facts of the matter warrant the granting of an order for his removal as arbitrator. Furthermore, In light of the missives exchanged between the applicant’s legal representatives and those of Umhlatuze, as well as towards the arbitrator who has been accused of acting in a manner that raises the likelihood of impartiality and bias, too much water has passed under the bridge for the parties (or for the applicant, at least) to have confidence that King will render an unbiased verdict. A fair and just result would be best served by having a fresh perspective cast on the dispute between the parties, with the proceedings commencing de novo before a new arbitrator.

Order: King SC is removed as an arbitrator in the arbitration between Transnet and Umhlatuze General Sales. Each party is liable for its own costs.

CHETTY J

Facts and issue: The appellant instituted action in the magistrate’s court against the respondent for payment of contractual damages. The respondent raised by way of special plea that the action was to be stayed pending the resolution of the dispute between the parties in terms of the dispute resolution mechanism provided for in the agreement by way of arbitration. The appellant appeals the magistrate’s upholding of a special plea staying the appellant’s magistrate’s court action in terms of section 6(1) of the Arbitration Act 42 of 1965, pending the outcome of an arbitration process.

Discussion: The magistrate in her reasons of a page for upholding the special plea found that the parties were bound by the arbitration clause, and so upheld the special plea, staying the action pending the outcome of an arbitration process. The basis of the appeal is relatively narrow, and that is that the magistrate erred in the exercise of her discretion. The appellant does not dispute that the arbitration clause is binding or otherwise not enforceable. The appellant accepts that the dispute falls within the ambit of the arbitration clause. As the magistrate allegedly did not exercise her discretion judicially, the appellant seeks that the appeal court interfere in the magistrate’s decision and that the appeal court decide whether the stay is to be granted. The appellant’s grievance that the magistrate appeared not to have any regard for the appellant’s reasons advanced during argument why the stay should be refused and that this affected the ‘due process’ of the proceedings before the magistrate is also the tenor of that used to challenge an exercise of a narrow discretion.

Findings: Assuming in favour of the appellant that the costs of arbitration would exceed the quantum of the claim, that the costs of the arbitration would be prohibitively expensive and that the appellant would be unable to afford arbitration, these factors do not constitute adequate grounds why the arbitration clause should not be enforced and the stay granted. The appellant voluntarily entered into the agreement which contains the arbitration clause. That it subsequently transpires that the arbitration clause is financially disadvantageous for the appellant because it results in a form of dispute resolution that is too expensive is no different to any other clause that a party voluntarily agrees to and then turns out to be to its financial detriment. The parties voluntarily entered into the agreement in a commercial context where the appellant was engaged as an independent contractor carrying out courier services for the respondent. The appellant has not made out a strong case as to why its action in the magistrate’s court should not be stayed pending the outcome of the arbitration.

Order: The appeal is dismissed.

Facts: McDonalds and the late Mr Frans Mmakola concluded four franchise agreements in respect of the restaurants. The conclusion of the franchise agreements and the terms stipulated therein are not in dispute. Mr Mmakola passed away in January 2021. A dispute arose between the parties about the identity of the person as to whom Mr Frans Mmakola’s right in terms of the franchise agreements must be transferred. The respondents were of the view that such right must be transferred to the second and third respondents, which was contrary to the views held by McDonalds. The dispute was as a result referred to arbitration. The award in relevant parts reads that McDonald's is entitled in terms of clause 16.1.3 to operate and manage the four McDonald's franchise restaurants at Lephalale, Groblersdal, Thabazimbi and Kwaggafontein in issue in the arbitration in accordance with the terms of the franchise agreements concluded in respect of the restaurants. The parties have failed to reach an agreement on the details and the arrangements which the arbitrator and the arbitration award require them to agree on, hence this application.

Application: The applicant brings an application to enforce an arbitration award. In paragraph 1.2 of its notice of motion, the applicant seeks an order that it is entitled to operate and manage four McDonald's restaurants situated at Lephalale, Groblersdal, Thabazimbi and Kwaggafontein (the restaurants) without the involvement of the respondents in such operation and management in terms of the provisions of clause 16.1.3 of the franchise agreement. The application arises out of an award made by the arbitrator, in arbitration proceedings between the parties.

Discussion: From a plain reading of clause 16.1.3 and as the arbitrator concluded, it entitles McDonald's to exercise the option to operate and manage or to designate a person to operate and manage the restaurants on an interim basis in accordance with the terms of the franchise agreement until the late Mr Mmakola's interest in the restaurants as franchisee is transferred to another person acceptable to McDonald's in accordance with the terms and conditions of the franchise agreement. Clause 16.1 governs the position upon the death of Mr Mmakola. It binds Ms Q Mmakola as the executrix of the estate, which includes Ms Mahlasedi Mmakola as the appointed family representative. Both incur legal obligations towards McDonald's under the clause and in turn acquire the right to enforce compliance by McDonald's with the terms of the clause. Clause 1(D) provides that the franchise agreement will be interpreted giving effect to the intention of the parties so that the restaurant is operated in conformity to the McDonald's restaurant system through strict adherence to the company standards and policies as they exist and as may be modified. McDonald’s contends that simply making “the arbitration award an order of court" would perpetuate the deadlock which led to the institution of this application and would not serve the interests of justice.

Findings: The court is urged to convert the arbitration award into its own order so that the arbitration award as converted into a court order that is enforceable “just like a court order”. McDonald’s contends that the relief which it seeks is nothing more than a mechanism to give effect to and enforce its right to operate and manage the restaurants as contemplated in the arbitration award without being frustrated by the respondents. The court is urged to go further and grant relief consequential thereto which would make the arbitration award unconditionally enforceable. McDonald's is entitled in terms of clause 16.1.3 to operate and manage the four McDonald's franchise restaurants at Lephalale, Groblersdal, Thabazimbi and Kwaggafontein in accordance with the terms of the franchise agreements. To manage and operate the four restaurants, requires granting the relief sought in the notice of motion in its entirety. For instance, the keys to the restaurants are key to managing a business entity. Also, there is no difficulty to read in that the relief sought in 1.4.7 of the notice of motion regarding “the codes, if any, which are required and are necessary to enable the applicant to access and operate all electronic systems relevant to the operation and management of the restaurants,” are necessary to give effect and meaning to the award given by the arbitrator.

Order: The award is made an order of court. See the order at para [26] regarding the keys, details of the employees, codes to the electronic systems, and other aspects.

MUDAU J

Facts: DIRCO (appellant) invited tenders for the removal, packing, storage and insurance of household goods and vehicles of transferred officials, to and from missions abroad. After due process, DIRCO informed Neo Thando (respondent) that it was awarded the tender. The parties signed a service level agreement (SLA) which contained all the responsibilities of both parties. In terms of the SLA, Neo Thando had to take possession of the goods at the premises at which they were to be stored. DIRCO had an existing SLA with AGS Frasers, which DIRCO contended would terminate when Neo Thando began operating under the SLA. DIRCO wrote to AGS Frasers demanding that it hand over the stored goods to Neo Thando. AGS Frasers wrote back to DIRCO confirming its refusal to return the goods. Correspondence was exchanged between DIRCO, AGS Frasers and Neo Thando without any solution until the parties reached a deadlock. Neo Thando wrote a letter to the Chairperson of the Pretoria Bar Council in which they alleged that a dispute existed between the parties.

Appeal: The legal representatives of the parties held a pre-arbitration meeting with the arbitrator. The arbitrator found that he had jurisdiction to preside and determine the disputes in the arbitration proceedings. The arbitrator rendered a "Final Award", in which he determined that DIRCO has a contractual obligation to ensure that all goods stored with AGS Fraser be transferred by AGS Fraser to Neo Thando. Not satisfied with the outcome, DIRCO approached the High Court for a review of the arbitrator’s awards. Neo Thando filed a counter-application in which it sought confirmation of the arbitrator’s awards and to have them made an order of court. The Hight Court made the award an order of court. This appeal is against the judgment of the High Court.

Discussion: The central issue for determination is whether the arbitrator had jurisdiction to arbitrate the dispute referred to him by Neo Thando. Flowing from that is the question of whether the dispute that was referred is an "arbitrable dispute" as contemplated in the Arbitration Act 42 of 1965. Clause 13 of the SLA states that the parties must have reached a disagreement over something. They must agree that they disagree in a way that there is no other solution to their problem than to go in a particular direction that they agree upon. If it is accepted that the purpose of the letter was to declare a "dispute" or spell out the "difference", it however, fails to achieve that purpose to the extent that it makes no reference to any difference or dispute. It demands payment of damages calculated at R53 million plus interest calculated from 30 days from the date of receipt of the letter of demand. The letter stated that Neo Thando would prefer to arbitrate the matter than go to court. The letter was framed as a conditional proposition should a dispute arise. The clause stipulates that a dispute must arise before any arbitration can take place, indicating that the choice of language was deliberate, allowing for voluntary arbitration agreed to by both parties, rather than compulsory submission.

Findings: It is uncontroverted that Neo Thando did not allow DIRCO any time to deal with what it believed was a "difference or dispute" between the parties. Without mutual agreement to arbitrate an existing dispute, there is no basis for arbitration under the SLA. There was no dispute, as defined by the Arbitration Act, that existed at the time Neo Thando referred the matter to arbitration. If there was any difference between the parties, it was at most a difference of opinion about the extent to which DIRCO should have intervened in persuading AGS Fraser to release the goods of the officials it held in its possession to Neo Thando. Neo Thando was aware that in terms of the agreement that obligation did not fall on DIRCO. Contrary to the clear terms of clause 13.3 and in stark contradiction to the clear language used by the parties, Neo Thando unilaterally referred the matter for arbitration without DIRCO’s consent. The SLA required both parties to consent to arbitration. The words "if the parties wish" makes this clear. Second, the letter of demand was for payment of damages. There was no existing dispute identified as to how the transitional arrangement was to be implemented and/or who was responsible therefor. The High Court misdirected itself in holding otherwise.

Order: The appeal is upheld with costs. The second respondent did not have jurisdiction to arbitrate the alleged dispute between the parties. The second respondent’s award is declared invalid and is set aside.

MOCUMIE JA (ZONDI DJP, WEINER JA, HENDRICKS AJA and DIPPENAAR AJA concurring)

Facts: Level Seven concluded a management agreement with the respondent, Signature, under which Signature was to manage Level Seven’s restaurant. The arrangement turned sour and Level Seven cancelled the management agreement. Signature claimed that the cancellation was in fact a repudiation of the agreement and referred a claim for the damages allegedly sustained to arbitration, in line with the arbitration clause in the management agreement. Level Seven defended the claim for damages and brought its own counterclaim. Signature then excepted to Level Seven’s statement of defence and counterclaim on the basis that it failed to disclose a cause of action. The arbitrator upheld the exception, and granted Level Seven leave to amend its statement of claim.

Application: Level Seven noted an appeal against the arbitrator’s decision. Clause 19.9 of the management agreement provides that either party “shall be entitled to review or appeal the arbitrator’s decision, in which case the High Court of South Africa, Gauteng Local Division shall be authorised to determine such review or appeal”.

Discussion: Section 28 of the Arbitration Act 42 of 1965 states that: “unless the arbitration agreement provides otherwise, an award shall, subject to the provisions of this Act, be final and not subject to appeal and each party to the reference shall abide by and comply with the award in accordance with its terms”. This embodies the default position: that, by agreeing to arbitration, the parties generally waive their right to appeal, with the effect that the arbitrator’s decision is final, even if it is wrong. The only rights of appeal are those created by agreement between the parties. Section 28 does not set out to whom an agreed right of appeal lies. The question is accordingly whether the High Court is entitled to assume appellate jurisdiction merely because the parties, relying on section 28, agree that it should.

Findings: To read section 28 of the Act as permitting a right of appeal to the High Court would defeat everything else the Act seeks to achieve, and would contradict the numerous indications elsewhere in the Act that the courts should have no jurisdiction over the merits of an award. The Arbitration Act cannot reasonably be interpreted to permit an appeal to the High Court against an arbitral award. The pursuit of arbitration implies submission to the legal machinery that makes arbitration possible. Under the Arbitration Act, that means the waiver of any right of appeal to the High Court. The right of appeal agreed to in clause 19.9 of the management agreement does not exist and the clause is of no force or effect to the extent that it purports to confer such a right on the parties.

Order: The application to set aside the arbitrator’s award is dismissed. The applicant will pay the respondent’s costs, including the costs of two counsel where employed, which may be taxed on the “B” scale.

WILSON J

Facts and issue: The plaintiff sues the defendant for damages and the return of equipment in terms of a written contract concluded. The defendants raised a special plea that the disputes between the parties are subject to an arbitration agreement. A written contract for the provision of services was entered between the plaintiff and the defendant. The contract includes an arbitration clause.

Discussion: There are several reasons why the opposition to the special plea must fail. First, the plaintiff did not act in terms of section 3(2) of the Arbitration Act 42 of 1965. Second, it did not plead to the special plea. In terms of Uniform Rule of Court 25 the plaintiff is taken to have denied all the allegations in the special plea. Although the plaintiff admitted all the allegations in argument, it persisted in its challenge to the relief. Third, the paragraphs relied upon by the plaintiff set out its case regarding the defendants’ alleged breach of the agreement, and nothing more. On no reasonable reading of these paragraphs, or the declaration, did the plaintiff plead a basis to avoid the consequences of the arbitration clause. Fourth, the allegations in the paragraphs relied upon are not common cause.

Findings: Save for admitting the delivery of the notices of suspension and termination, the defendants denied these allegations. The plaintiff elected not to lead any evidence in support of its opposition to the special plea. The plaintiff did not establish any of the facts upon which it sought to rely in its opposition to the special plea. The plaintiff has not established any reason for the court to exercise its discretion to refuse arbitration.

Order: The action is stayed pending the final determination of the disputes on the pleadings by an arbitrator in terms of clause 24 of the agreement.

Facts and issue: This is Part B of the application brought by the applicants seeking relief declaring that the arbitrator has no jurisdiction to adjudicate the dispute between the first respondent (Paul’s Homemade) and the applicants. The applicants’ case is predicated in their view that the franchise agreement that they entered with Paul’s Homemade offends certain provisions of the Consumer Protection Act68 of 2008. The applicants seek to invoke the provisions of section 52(1)(a) and (3) of the CPA on the basis that Paul’s Homemade contravened sections 40, 41 and 48 of the CPA.

Discussion: The applicants contended that, in the light of the fact that they intend to invoke section 52(1)(a) and (3) in their defence, the arbitrator has no jurisdiction to adjudicate the disputes between the parties and only a court can determine the issues. It was further submitted that upon a plain reading of section 52 of the CPA, it is a jurisdictional requirement that the matter be before a court, and not an arbitrator or tribunal, and clearly reserves the jurisdiction relating to remedies in terms of section 52 of CPA for the courts. This court does not agree with the suggested interpretation of the said provision of the CPA. The interpretation proposed by the applicants does not take into consideration the context of the legislation in question. Section 52 does not oust the jurisdiction of the arbitrator.

Findings: The applicants, in their objection to the arbitration process, state that the reason is because they intend to raise the provisions of section 52 of the CPA as a defence. A proper reading of section 52 envisages a litigant bringing a claim, as a consumer and as dominus litis. It does not afford a defendant or respondent the right to rely on the section as a defence. Section 52 can be invoked only in those situations where the CPA does not provide a remedy sufficient to correct the relevant prohibited conduct, unfairness, injustice or unconscionability. The parties voluntarily entered into an agreement that made provision for the resolution of disputes between them, which incorporated arbitration.

Order: The application is dismissed.

Facts and issue: Application to review and set aside an arbitration award. During Ms Masilela's shift, she administered medicine to Mr Basson via the wrong line. The hospital claims damages from V & A for the financial losses it alleges to have led as a result. The claim was referred to arbitration. The arbitrator gave an award in favour of the hospital. V & A relies exclusively on section 33(1)(b) of the Arbitration Act 42 of 1965 in support of the relief it seeks. The section provides for the review and setting aside of an award if an arbitration tribunal has exceeded its powers or committed any gross irregularity in the conduct of the arbitration proceedings.

Discussion: V & A’s first argument is that the arbitrator exceeded her powers by interrupting its counsel’s cross-examination. Even accepting that this review ground goes to anything other than substantive jurisdiction doesn’t assist V & A. The arbitrator was empowered to make findings of fact. She had to be able to understand witnesses’ answers to questions and know that the answers witnesses gave were in reply to questions they understood. The remaining nine arguments seek to convince the court that the arbitrator committed a gross irregularity in her conduct of the arbitration proceedings. Any argument based on this ground must have as its primary focus the methods or conduct of the arbitrator in her conduct of the proceedings they agreed upon. V & A’s second argument is that an irregularity occurred in the conduct of proceedings because the arbitrator was biased.

Findings: The assertion of bias has no merit and never had any prospects of success. While V & A’s founding affidavit is by no means clear on the point, the impression one is left with, is that the arbitrator eventually agreed with counsel for V & A that he is not to be interrupted during his cross-examination. This happened in the presence of the hospital’s legal representative. The arbitrator’s only “failure” was therefore not to directly reprimand the legal representative of the hospital. Even if the applicant’s failure to place any reliance on section 13 of the Act is overlooked, no good cause has been shown for the removal of the arbitrator.

Order: The application is dismissed with costs.

Facts and issue: Weinberg brought arbitration proceedings seeking payment of monies lent and advanced to the applicant, Kesef. Kesef failed to honour its payment obligations under the loan agreement. The learned arbitrator made his award in favour of Weinberg. Kesef seeks to have the award set aside and roots its cause of action in section 33(1)(a) and (b) of the Arbitration Act on the basis that the arbitrator is said to have displayed irregular and biased conduct to the prejudice of Kesef and which resulted in the arbitrator committing several gross irregularities in conducting the arbitration proceedings.

Discussion: The crux of the complaint is that the learned arbitrator showed partiality to Weinberg and his legal representatives to the detriment of the applicant and its legal representatives. There is no evidence to show that the arbitrator misconducted himself. The record does not begin to hint at it. The arbitrator appeared to be mindful of the attempts of Kesef to derail the arbitration proceedings and did no more than what he was entitled to, namely, to exercise the wide discretion entrusted to him to ensure the just, expeditious, economical, and final determination of all the disputes raised in the proceedings. He was therefore free to approach the matter as he deemed fit to ensure the expeditious resolution of the dispute before him with the parties in electing to resolve their dispute by way of arbitration, having chosen to forgo the strict formalism routinely association with High Court litigation.

Findings: Kesef expressly pleaded its case on repudiation in its statement of defence. It was accordingly before the arbitrator when he issued the award. Mr Garratt acknowledged that the learned arbitrator had the power to make the determination and it was incumbent on Kesef to prove a repudiation and its subsequent cancellation of the loan agreement before the learned arbitrator. It failed to do so and by making an award in favour of Weinberg, he by implication dismissed any defence based on an alleged repudiation by Weinberg. No basis exists to stay the enforcement of the award. There is in the circumstances no reason why the award should not be made an order of court. The allegations of bias levelled against the arbitrator lacked substance.

Order: The application is dismissed. The arbitration award is made an order of court in terms of section 31(1) of the Arbitration Act 42 of 1965.

Facts: This entire matter arose from a coal supply agreement (CSA) concluded between the applicant (Eskom) and the respondents. A dispute arose between the applicant and the respondents concerning a renegotiation of the pricing mechanisms under the CSA. This resulted in the respondents terminating the CSA on the basis that the applicant had allegedly repudiated the CSA. The arbitrator upheld the respondents’ alternative claims in the arbitration and awarded them R696,243,120.42 in damages. The applicant was dissatisfied with the award and noted an appeal. This was done by way a written notice of appeal sent to the respondents and the arbitrator. The respondents indicated that they were only prepared to submit their nomination of an appeal arbitrator under article 22.5 of the Arbitration Foundation of Southern Africa (AFSA) rules but were awaiting the directive from the Secretariat of AFSA as to the fees payable, before making its nomination. AFSA effectively refused to accept the appeal, because it did not administer the arbitration from the outset. The respondents’ view is that the applicant’s appeal had lapsed.

Application: The applicant seeks declaratory relief as against the respondents, that it be declared that an appeal, noted by the applicant against a private arbitration award in favour of the respondents, be declared not to have lapsed. Associated relief sought by the applicant is that it be directed that the arbitration appeal panel be formally appointed, so that the appeal proceedings can get underway.

Discussion: The applicant did file a notice of appeal promptly, being some five days after delivery of the arbitration award. The notice of appeal was served on all the parties involved in the appeal, including the arbitrator. That would at least prima facie constitute compliance with clause 33.6.2 of the CSA, as it reads. The respondents allege that the appeal notice should have been delivered to the Secretariat of AFSA. The distinction between an arbitration conducted under the auspices or administration of AFSA itself on the one hand, and an arbitration that is conducted by the parties themselves by applying the rules of AFSA, becomes critical. In terms of the AFSA Rules themselves, it is intended that these Rules apply as they stand, in all respects, only where AFSA administers the arbitration proceedings. The appeals process found in article 22 of the AFSA Rules clearly contemplates proceedings where AFSA administers the appeal itself. Conducting an arbitration outside the auspices/administration of AFSA, but "in accordance with" the AFSA Rules, must mean the applying of only those AFSA Rules that may be applicable to the conducting of the arbitration proceedings itself, subject to the specific processes prescribed in the arbitration agreement.

Findings: The CSA prescribed how not only the original arbitrator had to be appointed, but also how the appeal arbitrators should be appointed. This does not in any manner involve AFSA but requires appointment by the parties themselves. It should not be expected that notices are required to be issued to AFSA in the circumstances. The parties managed the exchange of pleadings, and the conducting of the arbitration process themselves, under the auspices of the arbitrator herself. That being so, it can hardly be now said that the proceedings are irregular or invalid because it may not have followed what is prescribed in the AFSA Rules about the referral of the dispute and then administration of the arbitration. It cannot be expected that a process, such as a notice of appeal, be delivered to an institution such as AFSA where such institution is not involved in the arbitration of the case at all. Such an action cannot serve any purpose. What is being propagated by the respondents is notice for the sake of notice, without the notice serving any purpose. The applicant has noted a proper appeal as contemplated by clause 33.6.2 of the CSA, and such appeal is valid and extant. The applicant’s appeal has accordingly not lapsed.

Order: It is declared that the applicant’s appeal against the arbitration award has not lapsed.

SNYMAN AJ

Facts: The Development Bank (applicant) agreed to advance funds to Proline Trading, for the purpose of funding, by way of a loan, a property development being conducted by Proline. This agreement was reduced to writing and was contained in a document known as a Loan Facility Agreement (LFA). In terms of the LFA, the applicant advanced a total capital amount of R125 million to Proline, payable in tranches as the development progressed. Suretyships were concluded between the applicant and the respondents. The applicant issued summons and an order ensued that the litigation be stayed pending the outcome of private arbitration. The LFA provided for private arbitration to resolve any disputes between the applicant and Proline.

Application: The applicant seeks to make the arbitration award an order of court as contemplated by section 31 of the Arbitration Act 42 of 1965. The award was in its favour, with the respondents’ claim for rectification having been disposed of by the arbitrator, and is uncontested. In a counter-application, the respondents have prayed for either the dismissal of the applicant’s application, alternatively the stay of the proceedings until a further claim the respondents have instituted in the High Court against the applicant has been decided.

Discussion: Despite being ordered to do so in the award, the respondents refused to pay the R12,500,000 and this led to the current application to make the award an order of court, for the purposes of execution thereof against the respondents. The conduct of the respondents in this case and by raising a new defence (regarding their release from the suretyships) is lamentable. What happened in this case flies squarely in the face of what is sought to be achieved by way of private arbitration proceedings, which is to finally resolve all disputes between the parties and bring a final end to the litigation in an expeditious manner. The broad issue in both instances, is that the release of the respondents from their suretyships based on the terms of the LFA and suretyships and as a result of certain payment, was agreed to be arbitrated, and not be continued to be litigated. The respondents simply cannot do a volte face and return to litigation in the High Court again.

Findings: In conducting a comparison between the proceedings before the arbitrator and the proceedings before this court, it is clear that the parties to the dispute remain the same and the facts remain the same. The consequential relief demanded (sought) is also the same. The only difference between the case before the arbitrator and the case now articulated in the respondents’ new particulars of claim, is the issue of rectification. The distinction is of little consequence when considering the facts and the legal principles that have to be decided. The respondents cannot approbate, and rely on rectification, but when that does not turn out well for them, reprobate, and rely on the very same contractual provisions without seeking rectification. The claim/defence proffered in the counter application is not competent, either because it had been disposed of in the arbitration proceedings and thus being hit by the application of res judicata, or by way of the application of the “once and for all” rule, or because the respondents had made an election to which they must be held bound.

Order: The arbitration award is made an order of court. The respondents’ counter application is dismissed. The respondents are ordered to pay the applicant’s costs on a party and party scale C.

SNYMAN AJ