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CASE LAW UPDATE

8 October 2024

ARBITRATION – Jurisdiction of arbitrator – Unilateral referral – Without consent from appellant – Contrary to terms of arbitration clause – Clause stipulates that dispute must arise before any arbitration can take place – No mutual agreement to arbitrate an existing dispute – No basis for arbitration under SLA – No dispute identified – Both parties did not consent to arbitration as required – Arbitrator had no jurisdiction – High Court misdirected itself – Appeal upheld – Arbitration Act 42 of 1965.

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)

CONSTITUTION – Just and equitable remedy – Unlawful tender process – Municipality behaved unconscionably – Accepted services from contractor without paying – Part of broader phenomenon of organs of state seeking to rely on own unlawful conduct to avoid compensating innocent contractors – Supreme Court of Appeal order that contractor receive just and equitable compensation – Once amount determined by High Court – Outcome plainly in the interests of justice – Leave to appeal refused.

Facts: Bravospan was awarded the tender to provide the Municipality with security services for an initial term of 12 months. All invoices for these services were honoured and paid in full by the Municipality in terms of the agreement. The parties purported to extend the duration of the agreement for a further period of 24 months (extension agreement), without an additional tender process. The terms of the extension agreement included additional sites at which Bravospan would provide security services. Bravospan continued to provide the services specified in the extension agreement to the Municipality until the end of the 24-month period and delivered monthly invoices to the Municipality. The Municipality failed to honour these invoices.


Appeal: The High Court delivered judgment in favour of the Municipality and held that the extension agreement was invalid for want of compliance with the Municipality’s legal obligations when conducting procurement processes. Bravospan issued summons and claimed from the Municipality an amount of R9,624,000 comprising the contractual amount specified in the extension agreement. The High Court found in favour of Bravospan on the basis of the unjustified enrichment cause of action. The Municipality appealed to the Supreme Court of Appeal. The court declared that Bravospan is entitled to compensation for the services rendered to the Municipality as a just and equitable remedy under section 172(1)(b) of the Constitution.


Discussion: The Municipality has behaved unconscionably. The Municipality wrongly assured Bravospan that it could lawfully extend the contract without a new tender process. It accepted services from Bravospan under the extended contract without paying for these services. It is now more than nine years since the Municipality stopped paying Bravospan for services from which it was benefiting and that Bravospan was providing at its repeated requests. It is certainly not in the interests of justice to allow the Municipality to continue to avoid paying Bravospan fairly for the services that it has taken from Bravospan. The effect of the judgment of the Supreme Court of Appeal is that Bravospan will finally receive just and equitable compensation for these services once the amount of such compensation has been determined in a hearing before the High Court. That outcome is plainly in the interests of justice.


Findings: The judgment of the Supreme Court of Appeal will ensure that, after close to a decade of waiting, Bravospan will finally receive just and equitable compensation for the services that it has provided to the Municipality. The dismissal of the application for leave to appeal will send a clear message to the Municipality and other organs of state that they must pay for services that are provided to them by an innocent contractor. This is not a case where there is any pleaded allegation, still less evidence, of corruption or other wrongdoing on the part of Bravospan that would justify the Municipality’s refusal to pay it. Instead, the Municipality is opportunistically raising its own irregular conduct to avoid paying Bravospan. The Municipality’s unconscionable conduct in the present case is part of a broader phenomenon of organs of state seeking to rely on their own unlawful conduct to avoid compensating innocent contractors for services that those contractors have provided to them. This court must make clear that conduct of this sort will not be tolerated.


Order: Leave to appeal is refused.

CHASKALSON AJ (majority) at paras [54]-[63]

BILCHITZ AJ (concurring) at paras [1]-[53]

DODSON AJ (concurring) at paras [64]-[68]

IMMIGRATION – Permanent residence – Special circumstances – Mother and two children from Angola – One child with cerebral palsy and needing medical care – Refusal by minister – No indication from reasons that the children’s rights taken into account – Decision set aside on grounds that he failed to consider relevant information – Decision not substituted – Court not equipped to give proper consideration to what is a policy-laden decision to make – Matter remitted to minister for reconsideration – Immigration Act 13 of 2002, s 31(2)(b).

Facts: S was born in 2007 in Luanda, Angola and is approximately 17 years of age. As a result of severe dystonic spastic cerebral palsy, he is unable to walk, cannot talk and cannot take care of himself. Ms E was in a long-term relationship with S’s father, SM. The family came to South Africa in 2013. P is S’s minor sister. They entered the country using visitors’ visas which expired in 2014. The reason they came to South Africa was to seek the medical care that S required. Shortly after they arrived in South Africa, Mr M returned to Angola. Mr M subsequently stopped sending money and cut ties with his wife and children, leaving Ms E as an impoverished single parent. She approached the Department of Home Affairs to apply for a medical treatment visa for S, but was informed that the applicants would have to do so from Angola. For various reasons, including both S’s health and the expense, they did not do so. The applicants have remained in South Africa unlawfully since the expiration of their visitors’ visas.


Application: The applicants sought a special exemption for permanent residence under section 31(2)(b) of the Immigration Act 13 of 2002. The respondent (the Minister) informed the applicants that having carefully considered all the information at his disposal he could not find special circumstances which would justify the granting of permanent residence to them pursuant to section 31(2)(b) of the Immigration Act. This refusal is the subject matter of this review application.


Discussion: The Minister is empowered to grant a permanent residence exemption when special circumstances exist that justify such decision. The primary exceptional circumstance relied on to obtain a ministerial exemption stems from S’s condition and his need to receive specialised treatment in South Africa. It was stated in the application that S’s condition would severely deteriorate were he no longer to have access to treatment at the Friends Centre and Red Cross. In the refusal the Minister mentioned the economic situation South Africa is facing and the high rate of unemployment amongst our citizens and permanent residents, and further that the responsibility for Ms E lay with her country of origin, Angola. It was contended that the Minister was exercising a public power concerning a disabled child in South Africa and as such he was required to treat S’s best interests as of paramount importance. The consequences for S if he returned to Angola were so harsh, and the burden on South Africa, if he remained, were so negligible that the decision could not be found to be reasonable, rational or constitutional.


Findings: There is no indication from the reasons furnished that S and P’s rights as children were taken into account. On the totality of the evidence presented before this court, the inescapable conclusion is that the Minister failed to consider the impact of his decision on S and P with reference to their rights encapsulated under section 28 (children) of the Constitution read with section 36 (limitation of rights) of the Constitution and the relevant provisions of the Children's Act 38 of 2005. Consequently, the Minister's decision must be reviewed and set aside on the grounds that he failed to consider relevant information under section 6(2)(e)(iii) of the Promotion of Administrative Justice Act 3 of 2000. As regards substitution of the Minister’s decision, were the court to be careless in assuming powers bestowed on the Minister, especially in the context of S’s medical condition, it may well create a ground for permanent residence carved as an exemption that was not contemplated by the Legislature. The implications require careful consideration, more so, because it may set some sort of precedent. The court is not equipped to give proper consideration to what ultimately is a policy-laden decision to make.


Order: The Minister's decision is reviewed and set aside and the matter remitted to the Minister for reconsideration in the light of this judgment and to do so within a period of six months. There is no order as to costs.

BAWA AJ

LABOUR – Dismissal – Operational requirements – Severance pay – Entitlement – Given in excess of 4-weeks’ notice of intended retrenchment – Applicant assisted acquiring employer who offered their retrenched employees’ alternative employment – No basis upon which employee could obtain both alternative employment and severance pay – Commissioner either misconceived nature of enquiry or arrived at an unreasonable result – Award reviewed and set aside – Basic Conditions of Employment Act 75 of 1997, s 41.

Facts: The applicant is a contract cleaning services company. Its contract validity period with its client came to its natural end and was extended on a month-to-month basis to allow its client’s tender application process to be completed. The effect was that the applicant became unable to employ its employees who rendered cleaning services on the applicant’s behalf. The applicant embarked on a retrenchment process. The employees sought severance pay. The applicant placed in dispute the employees’ entitlement to receive such severance pay, on the basis that the employees who had found alternative employment with a different employer, had done so through its intervention. Similarly, it placed in dispute the individual members’ entitlement to receive notice pay as it had given in excess of 4-weeks’ notice of the intended retrenchment.


Review: The commissioner found in his award that the affected employees were entitled to severance pay because they had secured for themselves the alternative employment through no assistance of the applicant. He also found that the affected employees were entitled to notice pay in lieu of a termination notice in terms of section 38 to the Basic Conditions of Employment Act 75 of 1997. The applicant prosecutes this review application to review and set aside an award made by the commissioner under the auspices of the CCMA. The issue in dispute was whether the employees were entitled to severance and notice pay in terms of section 41 and 37(1)(c) respectively to the BCEA.


Discussion: The applicant contends that it gave the affected employees more than 4-weeks’ notice of termination and that their employment with Supercare was affected though its efforts. It also asserts that it isn’t obliged to make payment of severance pay to the individual members as they were all offered alternative employment by Supercare through the applicant’s intervention. Instead of using Mr Nqgoboka’s evidence in the determination of his outcome, as he ought to have done, the commissioner lasers in on the fact that the applicant hasn’t concluded a special term in an agreement between it and Supercare for Supercare to employ all its employees who were likely to be retrenched for operational requirements. The applicant assisted the acquiring employer who offered their retrenched employees’ alternative employment. It is accepted that the purpose of severance pay is to cushion an employee from the loss of her employment. It is also accepted that the purpose of section 41(4) is to incentivise employers to ensure that their employees secure alternative employment.


Findings: There was no basis upon which an employee could obtain for herself both alternative employment and severance pay. There is no purpose to compensate an employee with severance pay for the loss of her employment when she has already found alternative employment and not spent a moment unemployed. This is done all done through her own efforts and without the aid of her retrenching employer. This employee needs no soft cushion of severance pay to land on. If an employee were to prosecute a referral for that type of compensation, she would need to clearly quantify the basis of her claim as she would do for a contractual breach in the civil courts. The commissioner’s misunderstanding of the principle in Irvin & Johnson Ltd v CCMA (2006) 27 ILJ 935 (LAC), in which he regarded that anything less than a special term between the applicant and Supercare that Supercare would employ all of its retrenched employees could only relieve the applicant from its statutory obligation to pay severance pay to the individual members, was the wrong approach. This approach has caused the commissioner to commit irregularities in terms of section 145(2)(a)(ii) to the Labour Relations Act 66 of 1995. He either misconceived the nature of the enquiry or arrived at an unreasonable result.


Order: The arbitral award is reviewed and set aside. The respondents are not entitled to both notice pay, and severance pay.

SMITH AJ

CITY ENTITLED TO DISCONNECT WATER SUPPLY

The applicant, on her own version, owes the City approximately R87,000. The City alleges that she owes R193,055,89. Yet she seeks to declare the removal of the water metre at her residence and the disconnection of water supply to be wrongful spoliation of her access to water and in violation of her basic constitutional rights to have access to water. The applicant did not follow the dispute process dictated by the Local Government: Municipal Systems Act 32 of 2000 and the City’s Credit Control By-Laws. The applicant is not entitled to the protection offered by section 102(2) of the Act. The City was accordingly within its rights to enforce the legislatively sanctioned credit control measures, which included the right to discontinue the water supply to the applicant’s property and to remove the water meter. The application is dismissed with costs.

LAWYER’S FAILURE TO PAY MAINTENANCE

His non-compliance was wilful and deliberate, because the presented factors or reasons to cease the maintenance contribution were known to him even during the first month he complied with the court order. He should have known better of its irrelevance since he is an astute admitted and practising legal practitioner of the Honourable Court. He failed to present factual evidence to justify his inability to continue complying with the Rule 43 order, instead, this court finds his non-compliance to have been determined, deliberate, wilful and in bad faith. The respondent made argument on misrepresentation of facts in respect of the alleged putative marriage and the alleged misrepresentation of facts by the applicant on who the actual biological father of the minor was. This was by no stretch of one's imagination of assistance to the case he had to answer. He was required to adduce reasons to prove that his default was neither wilful and/or mala fide.

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