IN THE HIGH COURT OF SOUTH AFRICA
(GAUTENG DIVISION, PRETORIA)

CASE NO: 49962/2013
DATE:  11/6/2014

IN THE MATTER BETWEEN:

FOURWAYS PRECINCT (PTY) LTD                                                       APPLICANT

AND

BENTEL ASSOCIATES INTERNATIONAL (PTY) LTD           FIRST RESPONDENT
VAN DIJKHORST, K                                                           SECOND RESPONDENT

___________________________________________________________________

JUDGMENT

TOLMAY, J:

INTRODUCTION:
[1]	This is an application in terms of section 33(1)(b) alternatively section 32(2) of 	the Arbitration Act 42 of 1965 (“the Act) for review of an award on a special 	plea made on 5 July 2013 by the second respondent (the Arbitrator) who has 	not filed notice of opposition and thus presumably abides by the decision of 	this court. 

[2]	The applicant seeks the following relief: 
	2.1	That the arbitration award issued on 5 July 2013 be set aside in terms 		of sec 33(1) of the Act;
	2.2	Alternatively that the matter be remitted in terms of sec 32(2) of the Act 		to the second respondent to adjudicate on the claims struck out in his 5 		July 2013 award.

 [3]	It is alleged by applicant (Fourways) that the Arbitrator committed a gross irregularity and/or exceeded his powers in making his award on 5 July 2013 on a second special plea raised by the first respondent (Bentel), where all but 2 claims of Fourways were struck out.	
	
THE BACKGROUND:
[4]	Bentel is a company who renders architectural services and who did the design of a shopping mall for Fourways. The parties entered into a written agreement (client/consultant agreement) to this end. 
 [5]	A dispute arose between Fourways and Bentel pertaining to the payment of a portion of Bentel’s professional fees in the amount of ± R5 000 000-00. Bentel claimed payment from Fourways for professional fees and that claim was referred to arbitration before the Arbitrator in 2009. Fourways defended this claim and raised a counter-claim (the 2010 claim). The parties settled Bentel’s claim on 29 September 2010 and postponed Fourways’ counterclaim sine die. Further disputes arose and Fourways as a result of this paid Bentel only half of the sum it was obliged to pay under the settlement agreement and did not pursue its 2010 claim. Fourways’ failure to make payment in terms of the settlement agreement was again referred to the Arbitrator.  Fourways disputed the Arbitrator’s jurisdiction and the Arbitrator ruled he had jurisdiction to hear that dispute and found for Bentel pertaining to the payment of the amount outstanding in terms of the settlement agreement. Fourways thereafter filed a number of amendments to its counterclaim, finally culminating in the so-called 2013 claims. These claims were postponed to 1 – 19 July 2013. Bentel raised two special pleas against the claims.

[6]	By agreement between the parties, the first week of the hearing in July 2013 was devoted to three preliminary matters, namely, the first special plea, the second special plea and Bentel’s claim in respect of rectification. Only the first special plea and the second special plea were ruled upon.

[7]	The first special plea raised questioned the jurisdiction of the Arbitrator. It contended that none of Fourway’s claims had been referred to the Arbitrator in accordance with the provisions of clause 18.1 of the client/ consultant agreement and was accordingly not before the Arbitrator. 
 
[8]	The Arbitrator, after considering the parties’ argument, held that there had been 	proper compliance with the provisions of the relevant rules and  stated as follows: 	“[t]he history shows actual 	conferment of jurisdiction upon myself by both 	parties in respect of the counterclaim.”  He accordingly dismissed the first special 	plea.	
	
 [9]	After handing down his award on the 3rd of July 2013, the parties proceeded to 	argue the second special plea. There was no indication by any of the parties 	during argument that evidence was required in order to determine the second 	special plea. The relevance of this will become apparent later on in the judgment.

[10]	The second special plea was raised in the alternative to the second special plea 	and in the event that it was found that Fourways’ claims were competently before 	the Court. The second special plea contended that certain of the claims were 	raised outside the liability limitation period agreed upon in clause 7.3 of the 	client/consultant agreement. 

[11]	Clause 7.3 of the client/consultant agreement provides as follows:
	
LIMIT OF CONSULTANT’S LIABILITY
	… 7.3 All claims against the consultant (being Bentel) shall lapse after a liability 	period of five (5) years which period shall commence on the earlier date of
		7.3.1	practical or other equivalent completion of the works;
		7.3.2	completion by the consultant of his services;
		7.3.3	suspension, postponement, expiry, cancellation or termination of all 			the contracts;
		7.3.4	cancellation or termination of this agreement.”

[12]	Bentel contended that as the certificate for practical completion of the works was 	issued on 27 June 2007 the five years period stipulated in clause 7.3 of the 	client/consultant agreement therefore commenced on 27 June 2007 and  ended 	on 26 June 2012.

[13]	The issues that stood for determination in respect of the second special plea 	were the following: 	
13.1	what the meaning was of the term “claim” as used in clause 7.3 of the 	client/consultant agreement and whether the meaning contended for by 	Bentel 	limited Fourways to claims made and particularised in its 	2010 claim; and
13.2	whether the items marked in red in Annexure “BA3” to Bentel’s plea 	constituted “new claims” that were time barred.

[14]	Fourways contended that the claims were not new claims but merely 	reformulated the claim already made and that therefore the claims would not fall 	outside the liability period.

 [15]	After considering the meaning of the word “lapse” as used in clause 7.3, the 	Arbitrator held as follows in the Award:
“15	[…]  The important word in clause 7.3 is "lapse". It means in this context:  become void, fall away, come to an end, become invalid, in Afrikaans: verval, afloop, verstryk. Compare Shorter Oxford English Dictionary, Collins Cobuild Essential English Dictionary and Bosman van der Merwe Hiemstra Tweetalige Woordeboek. After the liability period all claims become void, fall away. There are no more claims in existence. There is nothing to arbitrate about. Whether the claims have been notified, discussed, debated, put in expert reports or made in whatsoever manner or whether they have not yet been contemplated, it matters not. They fall away. 
16.	Strictly speaking that would apply to claims subject to arbitration also. But a distinction has in my view to be drawn. Once the arbitration procedure has been set in motion, a dispute has been declared and the arbitrator appointed is seized with the dispute and the arbitration runs its course as provided for in the Rules and arbitration law.  This is not only obvious, it follows also from the power given him in clause 18.10 to "determine all matters in dispute which shall be submitted to him." It cannot have been intended by the parties to the Agreement that clause 7.3 would bring a pending arbitration to an untimely end.
17.	It follows that as all claims have fallen away at the end of the liability period, the claims that remain are ringfenced by the reference to arbitration. That is claims which exist before the arbitrator on that date. The arbitrator is not empowered to hear claims that do not exist and claims that are not before him on that date. In our context it means the issues as defined by the pleadings on the 26 June 2012. This does not mean pleadings could not be amended after that date (e.g. to clarify a point) but an extension of the scope of the claim or the insertion of a new claim would be ultra vires his powers.
18.	A claim in the context of clause 7.3 is not merely the assertion of a right, it is coupled to a demand for compensation of which details are given. In view of the purpose of clause 7.3 a material variation of the basis of the claim or of the compensation claimed would in my view amount to a new claim.” 

[16]	The Arbitrator proceeded to  issue the following award:
 “AWARD
1	Bentel's Second Special Plea is upheld with costs.
2	The portions of Fourways' claim as marked in red on Annexure BA3 to 	the Second Special Plea are struck out. 
3.	The costs are to be taxed on the High Court scale and will include the 	costs of two counsel. It is recorded that the day of hearing, 3 July 2013, 	was taken up by argument on this special plea.”

[17]	Fourways in the founding affidavit to the review application raised the following 	objection against the award:
“The arbitrator’s award on the second special plea was given on 5 July 		2013. That award in effect reversed his previous decisions in finding that 		all the struck 	out claims were not part of the arbitration on 26 June 2012 as 		they had lapsed. All those claims were then struck out. The effect thereof 		was that the Arbitrator:

	1.	declined to exercise jurisdiction over all those claims that he had 			previously accepted as claims properly submitted to him for 				adjudication;
	2.	unilaterally excluded from his purview the claims submitted to him and 		on which he was enjoined to adjudicate in fulfilment of his contractual 		obligations as an arbitrator;
	3.	gave an award on a jurisdictional issue, contrary to his previous 			determinations and in respect of which he was functus officio; and
	4.	prevented Fourways from having a fair hearing on the struck out 			claims.”

 [18]	As a result of the aforementioned Fourways alleged that the Arbitrator committed 	a gross irregularity and/or exceeded his powers as envisaged in sec 33(1)(b) of 	the Act.
[19]	Fourways’ argument pertaining to the alleged reversal of the Arbitrator’s decision is that on 3 July 2013 in his ruling on the first special plea the Arbitrator: 
19.1	had accepted the disputed claims as having been properly submitted to 	him for adjudication;
19.2	had accepted that he had jurisdiction over the disputed claims.

[20]		Fourways’ only contention in respect of the allegation that the Arbitrator 	exceeded his powers is that by “in effect [reversing] his previous decisions 	[that he has the requisite jurisdiction]” (own paraphrasing), he 	exercised powers 	which he no longer had as he had already ruled on the issue of his jurisdiction.

[21]	Fourways alleges that the arbitrator’s decision effectively non-suited 	Fourways and that his mistake negatively affected all future proceedings in 	the arbitration as Fourways would henceforth not have its struck out claims 	heard 	at all. Fourways alleged that the conduct of the Arbitrator excluded the 	possibility for Fourways to have any hearing on its claims, let alone a fair 	hearing.

[22]	Bentel contends that no gross irregularity was committed which could result in 	a setting aside of the award by this court. It was also argued by Bentel’s 	counsel that a remittal in terms of sec 32 was inappropriate. Bentel	furthermore alleged that the matter was settled after the award was made and 	that there is nothing to review. This settlement, what it meant and what the 	consequences entail are heavily disputed between the parties.  However due 	to the conclusion that I arrived at, it is in my view not necessary for me to 	determine this issue.

THE APPROACH IN LAW AND PPLICATION OF THE LAW OF THE FACTS:
[23]	In order to determine the issues at hand and the approach that should be 	followed, the requirements for the setting aside of an award in terms of sec 	33(1) of the Act should be considered. In this regard the question of what 	would constitute a gross irregularity and what 	would be required to find that 	the Arbitrator exceeded his powers need to be determined. Secondly sec 	32(2), of the 	Act must be considered which allows for a remittal. In this 	regard what would constitute good cause to allow for a remittal needs to be 	determined.

[24]	Section 33(1)(b) of the Act provides, in relevant part, as follows:
	“33	Setting aside of award 
(1)	Where –
(a)	[…]
(b)	an arbitration tribunal has committed any gross irregularity in the conduct of the arbitration proceedings or has exceeded its powers; or
(c)	[…]
(d)	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.”
(e)	

[25]	When one considers a review application it is appropriate to keep in mind that 	the parties by agreeing to a private arbitration limits interference by the Court to 	the ground of procedural irregularities. The purpose of a private arbitration to 	bring 	the disputes between the parties to finality is also of importance and the 	grounds of review should be construed reasonably strictly so as not to undermine 	the achievements of the goals of a private arbitration.

[26]	As a result of the fact that reviews are limited to procedural irregularities the 	ground of review envisaged in section 33(1)(b) of the Act relates to the 	conduct of the proceedings and not the result thereof. It is also trite that not 	every irregularity in proceedings will constitute a ground for review under section 	33(1)(b) of the Act. In order to justify review on this basis, the irregularity must 	have been of such a serious nature that it resulted in the aggrieved party not 	having his case fully and fairly determined.

[27]	If an arbitrator misdirects himself on the law, it is in itself no reason for the 	setting aside of the finding.  An Arbitrator is always entitled to be wrong on the 	merits and a wrong interpretation of an agreement will not amount to a 	misconception of the nature of the enquiry and therefore to an irregularity. It is 	also stated that:
	“[86]	Likewise, it is a fallacy to label a wrong interpretation of a contract, a 	wrong perception or application of South African law, or an incorrect reliance on 	inadmissible evidence by the arbitrator as a transgression of the limits of his 	power. The power given to the arbitrator was to interpret the agreement, rightly or 	wrongly; to determine the applicable law, rightly or wrongly, and to determine 	what evidence was admissible, rightly or wrongly. Errors of the kind mentioned 	have nothing to do with him exceeding his powers; they are errors committed 	within the scope of his mandate. To illustrate, an arbitrator in a ‘normal’ local 	arbitration has to apply South African law but if he errs in his understanding or 	application of local law the parties have to live with it. If such an error amounted 	to transgression of his powers it would mean that all errors of law are reviewable, 	which is absurd”. 

[28]	In Telecordia Technologies it was also stated that the Act “does not allow a 	review for material error of law” and “it is wrong to confuse the reasoning 	with the conduct of proceedings” – in other words, unless there was something 	procedurally wrong, no relief is to be had in terms of section 33(1)(b) of the Act. 	
[29]	The following which was stated is also of importance: 
	“Errors of law can, no doubt, lead to gross irregularities in the conduct of the 	proceedings. Telecordia posed the example where an arbitrator, because of a 	misunderstanding of the audi principle, refuses to hear the one party. Although in 	such a case the error of law gives rise to the irregularity, the reviewable 	irregularity would be the refusal to hear that party, and not the error of law. 	Likewise, an error of law may lead an arbitrator to exceed his powers or to 	misconceive the nature of the inquiry and his duties in connection therewith.”

[30]	In the light of the aforesaid this court should not ask whether the arbitrator was 	correct in law or fact or whether he interpreted the agreement correctly, but rather 	look at the procedure to determine whether any irregularity occurred which would 	justify an intervention by the court whilst keeping in mind the principles already 	discussed.

[31]	As already stated it is not every irregularity which would justify a review. The 	court must be satisfied that the irregularity caused a substantial injustice. Only in 	those cases where it can be said that what happened is so far removed from 	what could reasonably be expected of the arbitral process that one would expect 	the court to take action. 

[32]	As far as the term “exceeding its powers” is concerned in Telecordia the 	following was said:
	“[52]	The term exceeding its powers requires little by way of elucidation and this 	statement by Lord Steyn says it all. 
	“But the issue was whether the tribunal “exceeded its powers” within the 	meaning of s 68(2)(b)  [of the English Act]. This required the courts below to 	address the question whether the tribunal purported to exercise a power 	which it did not have or whether it erroneously exercised a power that it did 	have. If it is merely a case of erroneous exercise of power vesting in the 	tribunal no excess of power under s 68(2)(b) is involved. Once the matter is 	approached correctly, it is clear that at the highest in the present case, on the 	currency point, there was no more than an erroneous exercise of the power 	available under s 48(4). The jurisdictional challenge must therefore fall”
	Apart from the proper application of the test nothing more was made in 	argument of the meaning of the term. The argument focused on the meaning 	of ‘gross irregularity in the conduct of the arbitration proceedings’.

[33]	The ability to set aside an award due to a gross irregularity is designed as a long 	stop, only available in extreme cases where the tribunal has gone so far 	wrong in its conduct of the arbitration that justice calls out for it to be corrected.  	
 [34]	In the light of the applicable principles I will now proceed to apply it to the 	facts in this case.

[35]	When one looks at the procedural aspects one needs to consider what actually 	occurred at the hearing pertaining to the second special plea. After the dismissal 	of the first special plea the arbitrator proceeded to deal with the second special 	plea. The parties filed heads of argument and the Arbitrator considered 	lengthy arguments before he came to his 	conclusion. Although the point was 	raised that he should have 	referred the matter to evidence, nobody at any point 	during the proceedings argued that the matter should be so referred. The 	question that was considered was a question on the interpretation of a contract, 	which could, unless 	circumstances indicate otherwise, be determined without 	hearing evidence. It 	would have been different if the Arbitrator refused to hear 	evidence, such a refusal could have amounted to an irregularity. In this context it 	is also important to note that a party can waive any objection he may have in 	regards to an alleged irregularity in the proceedings through his conduct. The 	parties themselves could also determine the procedures and may inter alia 	dispense of the necessity to lead oral evidence. The fact that Fourways never 	indicated that evidence was required to determine the issues before the arbitrator 	is in my way indicative of such a waiver or an agreement that it was not 	necessary to lead evidence. Therefore one must conclude that Fourways was of 	the view that the issue could be determine on argument only, and can’t be seen 	to argue at this point that a procedural irregularity occurred because of the lack of 	evidence.

[36]	I now proceed with the argument that the Arbitrator actually reversed his previous 	decision. This argument, in my view can’t be correct. If one looks at the two 	special pleas the following become apparent. The first special plea’s dismissal 	confirmed the arbitrator’s jurisdiction to hear the rest of the matter including the 	second special plea. The second special plea dealt with the interpretation of 	the 	contract.  Once the second special plea was upheld the merits of the struck out 	claims became irrelevant. This could be compared with the situation where a 	plea for prescription is upheld, which would then exclude the possibility to go into 	the merits, however good they may be. There were totally different issues to be 	determined in these two pleas. 
[37]	The contention of Fourways that the arbitrator reversed his decision is based 	on a false premise, namely that the second special plea concerned a 	reconsideration of issues ruled upon by him in respect of the first special plea. 	This was not the case nor was it at any time argued by either party that there 	was such an overlap.  In point of fact the applicant’s deponent, Koupis 	expressly states that the second special plea concerned the question of 	whether Fourways’ claims were time-barred or not. If Fourways’ argument is 	correct the contention that there was an overlap would have the absurd 	consequence that a ruling in respect of the first special plea automatically also 	renders Bentel’s second special plea nugatory before it was even argued, 	which is clearly incorrect. The arbitrator did not revisit any of the issues 	decided upon in the first special plea when he considered the second special 	plea. Nor can it be said that he declined to exercise jurisdiction over these 	claims.

[38]	Fourways take issue as set out below with the following which was said in the 	award:	
	“On Friday morning 5 July 2013 in ruling on the 2nd special plea he 	declined 	to exercise jurisdiction over all those claims (totalling some 	29.9 million – the 	“disputed claims”).  This finding was that “whether I have jurisdiction or not 	have to rule that the claims which are not part of the arbitration on 26 June 	2012 have lapsed and that they cannot be introduced by amendment.”

[39]	The paraphrasing of the arbitrator must be seen in context of the wording of the 	whole award and does not in my view constitute a reversal of his previous 	decision nor a contradictory finding. The arbitrator did not decline to exercise 	jurisdiction over the 2013 claims, he considered the argument and found that the 	claims have lapsed and that as a result they should be struck out.

[40]	As far as the argument pertaining to a fair hearing is concerned and if I 	understand applicant’s argument correctly, it is that due to the fact that the 	arbitrator upheld the second special plea Fourways was deprived of the 	opportunity to have the merits pertaining to the struck out claims ventilated. I 	am of 	the view that it is consequence of the fact that the plea was upheld and 	does not impact on the procedure as such. It is the result which aggrieved 	Fourways and that is not reviewable.

 [41]	I consequently come to the conclusion that no gross irregularity was committed nor 	did the arbitrator exceeded his powers that 	would justify a setting side of the award.

[42]	In the alternative Fourways requests that the matter be remitted to another 	arbitrator. Section 32(2) provides, in relevant part, as follows: 
	“The court may, on the application of any party to the reference after due 	notice to the other party or parties made within six weeks after the publication 	of the award 	to the 	parties, on good cause shown, remit any matter which 	was referred to arbitration, to the arbitration tribunal for reconsideration and 	for the making of a 	further award or a fresh award or for such other purpose 	as the court may direct.”
[43]	The correlation between sections 33 and 32(2) of the Act was taken under 	consideration by Selikowitz J in the matter of Benjamin v Sobac South African 	Building and Construction (Pty) Limited The following observations of 	relevance 	were inter alia made:
	“I do not agree that when s 32(2) is applied in relation to allegations which fall 	to be considered under s 33(1) that “good cause” is anything less than that 	required for an order pursuant to the terms of s 33(1). To hold otherwise 	would be to all but emasculate s 33(1). It would result in an applicant who has 	complaints of the nature referred to in s 33 being able to select whether to 	apply 	for the setting aside of the award subject to the measure of proof as is 	required to have an award set aside or to take the easier route of applying for 	remittal in terms of s 32(2). In fact, the only reason for utilising s 33(1) would 	then be to ensure that a new tribunal heard the matter. In all other cases an 	applicant would make his claim for a “remittal of the entire matter” in terms of 	s 32(2).” 
furthermore:
“The Act cannot be interpreted to permit an applicant to avoid the stringent test contemplated by s 33(1) so as to achieve the same result by clothing his application as one to remit” 

 [44]	This aspect was also considered in the judgment of the Supreme Court of Appeal in Leadtrain Assessments (Pty) Limited and Others where Nugent JA and Tshiqi JA stated the following
	“It is not desirable to attempt to circumscribe when “good cause” for remitting a matter will exist. It will exist pre-eminently where the arbitrator has failed to deal with an issue that was before him or her – which was what occurred in York Timbers – but once an issue has been pertinently addressed and decided there seems to have to be little room for remitting the matter for reconsideration.  The guiding principles of consensual arbitration are finality – right or wrong – and we see no reason why an award of costs is to be treated differently to any other aspect of an award. It would be extra-ordinary if the conduct of an arbitrator that falls short of the strict constraints of section 33(1) were nonetheless to be capable of being set aside and remitted for reconsideration under section 32(2). As was pointed out in Benjamin v Sobac South African Building and Construction (Pty) Limited, correctly, the effect of so holding would be to emasculate the provisions of section 33(1). However one approaches the question of what is good cause, it seems to us that it inexorably requires something other than mere error on the part of the arbitrator”.

[45]	I agree that to allow for an interpretation of good cause to mean that a lower 	bar is set for remittal under circumstances like these will indeed mean that the 	requirements provided for in sec 33 are emasculated. In the light of the facts it 	can also not be said that the arbitrator failed to deal with any of the issues 	before him. If I find that no gross irregularity was committed it is inconceivable 	on the facts of this case that there would be good cause to remit the matter in 	terms of sec 32(2). As a result I am of the view that the matter does not meet 	the necessary requirements to be remitted in terms of sec 32(2) of the Act.

[46]	In casu it is clear that the arbitrator followed appropriate procedures and 	applied his mind and that he dealt with the issues before him. The question 	whether the arbitrator was right or wrong is irrelevant for purposes hereof. The 	fact that Fourways as a result will not get an opportunity to ventilate the struck 	out claims, did not prevent them from having a fair trial, it is the unfortunate 	result of the second plea being upheld. 

CONCLUSION
[47]	Fourways has failed to show that the Arbitrator has committed any gross irregularity that justifies setting aside the Award in terms of section 33(1)(b) of the Act. Similarly, Fourways has also failed to meet the threshold for the remittal of the Award in terms of section 32(2) of the Act. For the aforementioned reasons the application must fail.

[48]	In its answering affidavit, Bentel contends that the review application constitutes an abuse of the process of court and gives notice of its intention to seek a special costs order against Fourways on the scale as between attorney this aspect was not argued before me but I am in any event of the view that no grounds exist for such an order.

ORDER:
[49]	1.	The application is dismissed.
	2. 	The applicant is to pay the costs of the application, which costs will 		include the costs of two counsel.
________________
R G TOLMAY
JUDGE OF THE HIGH COURT

DATE OF HEARING:		26 MAY 2014

DATE OF JUDGMENT:		11 JUNE 2014

PARTIES:				FOURWAYS PRECINCT v BENTEL ASS INT

CASE NO:				49962/13

FOR APPLICANT:			JVK ATTORNEYS
COUNSEL FOR APPLICANT:	ADV JR GAUTCHI (SC); ADV S TSANGARAKIS;						ADV N JELE

FOR RESPONDENT:		FLUXMANS INC
COUNSEL FOR RESPONDENT:	ADV I ZEIDEL (SC); ADV D VAN ZYL