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IN THE HIGH COURT OF SOUTH AFRICA

(CAPE OF GOOD HOPE PROVINCIAL DIVISION)

Case No. 6474/02

SHOPRITE HOLDINGS LIMITED Applicant

And

EDWIN OBLOWITZ First Respondent

SA BREWERIES LIMITED Second Respondent

ARTHUR ANDERSEN & CO. Third Respondent

JUDGMENT

DAVIS J:

Introduction:

Applicant seeks the setting aside of a number of decisions of an expert determination made by first respondent in February 2000 regarding a range of disputes between the applicant and second respondent. Pursuant to this application (‘the main application’) applicant launched two interlocutory applications; in the first it seeks an order referring for the hearing of oral evidence for trial certain disputes that have arisen in the main application (‘the oral evidence application’). Secondly it seeks an order, in the alternative, that the rules of discovery shall apply to the main application (‘the discovery application’)

Background.

On 21 October 1997 applicant entered into a written agreement with second respondent for the purchase of the issued share capital and certain loan claims against OK Bazaars (1929) Ltd (‘OK Bazaars’) and an associate company in Botswana, Retail Holdings (Botswana)(Pty) Limited (‘the Botswana company’). In terms of the sale agreement, the purchase price of the share capital alone was specified to be R1.00. Provision was made for the payment of further sums by the seller to the purchaser. Clause 8 of the sale agreement made provision for the preparation of closing date accounts at at 31 October 1997 (‘the CDA’s’).

The main purpose of the CDA’s was to verify that on 31 October 1997 (‘the closing date’) the ordinary shareholders funds of the OK Bazaars Group and the Botswana company together with any claims which second respondent or its subsidiaries had against the OK Bazaars Group and/or the Botswana Company on the closing date would amount to R540 million. Clause 4.2 of the sale agreement provided that, in the event that such funds were less than the stipulated amount, second respondent would be required to fund the shortfall by way of a cash loan to OK Bazaars. The CDA’s were therefore to form the basis for the determination of the amount, if any, to be advanced by second respondent on loan account in respect of a possible shortfall of the ordinary shareholders fund below the value of R540 million.

In terms of clause 8.1 of the agreement, CDA’s were to have been prepared by the auditors of OK Bazaars and certified by them. Clause 8.2 of the agreement provided that OK Bazaars would consult with the auditors of second respondent. Any disagreement between the respective auditors as to the inclusion or exclusion of any amount or the principle basis of calculation would be referred to second respondent or an alternative firm of accountants for determination. The auditors of OK Bazaars, KPMG, indicated, prior to their appointment, that preparation of the CDA”s was the responsibility of OK Bazaars and that their responsibility was to report on these accounts. Accordingly, by agreement, CDA’s were not prepared by the auditors of OK Bazaars but were instead prepared by OK Bazaars itself with the assistance of certain employees representing second respondent.

During the preparation of the CDA’s disagreements arose between applicant and second respondent. It was agreed to pursue the preparation of draft CDA’s as far as possible and then to identify the matters which were still in dispute for referral to third respondent for determination as provided for in the agreement.

Applicant and second respondent jointly submitted to first respondent, who was then a partner of third respondent, certain disputes that had arisen in respect of the preparation of the CDA’s for determination pursuant to the agreement.

The relevant portions of the referral letter of December 1998 read thus:
’In certain circumstances, the Agreement envisages that disputes be first referred to the Company’s Auditor and the Purchasers Auditor, with a view to the Auditors resolving the dispute. The parties have agreed not to follow this procedure and to refer all matters of dispute directly to the Expert’.

The letter then defines the areas of dispute thus:

‘The areas upon which the parties are unable to reach agreement and which are the subject of this instruction, are:

1. Trade creditors;

2. Provision for unpaid VAT

3. Stock;

4. Fixed assets;

5. Sundry items.’

First respondent is then instructed to determine:

‘1.1 whether the exercise performed by the Company constitutes a reconciliation as is required by clause 5.1.2 of the Agreement;

1.2whether the Company has complied with its obligation under 5.1.1 of the Agreement to obtain statements from all its suppliers;

1.3whether the Company has complied with its obligation under 5.1.2 to list all differences and to keep records and supporting documentation for all items relating to such differences;

1.4what adjustments constitute ‘timing differences’ for the purposes of determining ‘the unrecorded or unreconciled trade creditors of the Group’ as required under clause 4.4.1 of the Agreement;

it being agreed that the Expert shall as part of the exercise undertaken in terms of 1.1 to 1.4 above be called upon to determine what the nature of the calculation should be to determine the ‘unrecorded and/or unreconciled trade creditors’ as contemplated by clause 4.4.1;

and

1.5 what further steps, if any, need to be taken by the Company to prepare a reconciliation as required by the Agreement.

Dependent on the outcome of your determination, there are likely to be other areas of dispute regarding the nature and amount of adjustments to Trade Creditors. The following will then apply:

(i)Any party who wishes to refer any further area of dispute to you, must identify such area of dispute by written notification to you (copied to the other party) within 10 (ten) days of the outcome of your determination having been communicated to the parties.

ii) In such event you will be required to convene a meeting within ten (10) days of receiving such written notification under sub-paragraph (i) at which meeting the parties will be required, in conjunction with you, to agree on the further procedures that are to be followed and time limits to be adhered to by the parties to enable you to determine the further areas of dispute. Failing such agreement the Expert shall determine such further procedures and time limits in his sole discretion after consultation with the parties and consideration of their requirements.’

First respondent delivered his determination in respect of the disputes referred to him in a written determination dated 28 February 2000. On 17 April 2000 applicant launched proceedings in terms of which it sought, inter alia, an order remitting, under section 32 of the Arbitration Act 42 of 1965, certain matters to first respondent but only for the purposes of obtaining his reasons. On 11 July 2000 first respondent provided these amplified reasons.

Pursuant to the determination and the amplification of reasons, applicant now contends that first respondent did not carry out his mandate in making the determination and giving his amplified reasons. Accordingly, it instituted the main application on 23 August 2002 in terms of which it complains that in three particular respects first respondent failed to determine the dispute between the parties, or that effect could not be given to the determination (on the basis of impossibility) or that the determination has simply recast the dispute in different terms.

Arbitration proceedings have been instituted between applicant and second respondent and also between Shoprite Checkers (Pty) Ltd, (the present name of OK Bazaars) and second respondent. In the first set of arbitration proceedings applicant claimed a declarator to the effect that interest accrued to its benefit in respect of an unpaid shortfall that had been established in terms of clause 4.2 of the sale agreement. This arbitration was resolved in favour of second respondent, the arbitrator’s ruling being that applicant was not a creditor in respect of a debt as contemplated by the Prescribed Rate of Interest Act 55 of 1975

A second arbitration commenced in the name of Shoprite Checkers. During the course of these arbitration proceedings, second respondent made discovery of documentation that forms the subject of the discovery application. These second arbitration proceedings culminated in an award by the arbitrator on 14 February 2005 in which he determined that Shoprite Checkers was not a party to the sale agreement and accordingly did not have locus standi to seek the relief that it sought in the arbitration. I am led to understand that this award is subject to an appeal that is still pending.

As a result of these proceedings, five disputes arose between the parties:

1. Whether first respondent discharged his obligation in respect of a fixed assets dispute.

2. A reconciliation dispute relating to trade creditors.

3. A dispute relating to timing differences concerning trade creditors.

4. The capacity of first respondent.

5. Applicant’s delay in the launch of the main application.

It is therefore important to deal briefly with the nature of these disputes, save for the question of first respondent’s capacity, it having been accepted by the parties that he performed his functions as an expert.

The fixed asset dispute.

The fixed asset dispute arises from discrepancies between the value of the assets reflected in the general ledger (‘GL’) and the value reflected in the fixed asset register (‘FAR’). The FAR is a register of the details of the fixed assets held by OK Bazaars. GL should be supported by FAR in the sense that the fixed asset accounts in the GL ought to reflect the total of the value of the assets in the FAR. The GL, in turn, determines (in part) the CDA’s.

FAR was thus relevant to the CDA’s. A discrepancy between FAR and GL might reflect that the GL was inaccurate. If the value of the fixed assets in the GL required a downward or upward adjustment, this in turn could affect second respondent’s obligation in terms of clause 4 of the sale agreement. Part of the process of preparing the CDA involved a determination of the accuracy of FAR and GL. OK Bazaars carried on business through a large number of retail outlets. Each outlet had a registrar of fixed assets. As a first exercise of establishing the reliability of FAR, twenty six stores were selected as a sample. This sampling exercise however was not accepted by second respondent.

A second exercise to assess the reliability of FAR and GL involved comparing them with each other and noting the differences in value. The parties then attempted to identify reasons for the differences. When the fixed assets accounts on the GL were compared to FAR, a discrepancy of R8,8 million was noted. An analysis of this discrepancy revealed the basis for some of these differences but an unexplained residue remained. Applicant contended that GL was subject to downward adjustment of the sum of R8,8 million, while second respondent disputed this contention.

With regard to this particular dispute, the first respondent was instructed to determine the following:

‘Whether the adjustments reflected under items 11 to 14 on Appendix 3 which affect the values at which fixtures and fittings and computers are stated in the draft CDA’s are in accordance with the Agreement. If not, what adjustment should properly be made and what further steps, if any does the Company have to take?’

In their respective submissions to first respondent, it appears that applicant contended that FAR was more reliable than the GL, whereas second respondent contended that FAR was not reliable and had not been properly maintained.

First respondent decided:

‘It is impractical for me to determine whether or not R8,8 million should be adjusted for in CDA.

I determine that adjustment, if any should be made in terms of item 12 in respect of specific assets which had been acquired (or scrapped) in the financial years following that in which the R87 million write-off had been made, and that steps be taken by the parties to establish this.’

First respondent was then asked to amplify on these reasons which he duly did. In his amplified reasons he stated:

‘While sympathetic to the submission by Shoprite that there might be assets included in the general ledger incapable of substantiation, I was concerned that the sampling exercise performed in order to estimate the R8,8 m proposed adjustment had been based on the information contained in the FAR, a register which was accepted by both parties as being deficient. The possibility exists that amounts included in the proposed R8,8 m adjustment may already have been covered by the R87 m write-off in August 1995, and I therefore determined that the CDA should be adjusted only for those ‘missing’ assets which could be clearly identified as not having been written off in the R87 million (namely those ‘missing’ assets acquired after the write-off date or those assets acquired before that date which could be shown to have been scrapped after that date without corresponding adjustment to the general ledger). In other words, my Determination accepted the principle that the ‘missing’ assets be adjusted for, but aimed to ensure that there was no ‘double-counting’ in respect of the quantum of the write-off proposed in applying the principle.’

Applicant contends that first respondent was required to determine what steps must be taken, namely in respect of adjustments which should have been made. In its view, first respondent had not identified the steps to be taken to resolve the dispute as to whether the GL or the FAR was more accurate.

Trade Creditors.

As Mr Goosen, deputy managing director of applicant who deposed to the founding affidavit in the main application observed, an essential aspect of CDA’s related to trade creditors. A creditors’ reconciliation normally involves a comparison between the `amounts owing to creditors according to the creditors’ ledger and the amounts reflected as owing according to the creditors’ statements.

Applicant and second respondent disagreed on what type of reconciliation was required. First respondent contended that a full reconciliation, in the sense of an analysis of every creditor in which all discrepancies were identified, was required in terms of the agreement. Applicant contended that such a reconciliation was not envisaged in the agreement. In its view, there were a number of substantial difficulties with the detailed reconciliation for which second respondent contended. Applicant provided the following amplication: ‘The transaction is in dispute but it has been recorded by only one of the parties to the transaction. This could arise where the dispute existed as to whether the goods were in fact delivered or not or where a discount is claimed by but not granted by the creditor or a credit is passed by the creditor for reasons unknown to the customer. In this context, a detailed reconciliation of the nature proposed by first respondent would, in applicants view, constitute an enormous exercise, in the case of the company of the size and nature of OK Bazaars ‘

OK Bazaars undertook a process of reconciliation but at its conclusion second respondent and applicant disagreed on whether it had complied with clauses 4 and 5 of the sale agreement. Accordingly first respondent was requested to determine the following questions:

‘1. Whether the exercise performed by the company constituted a reconciliation as required by clause 5.1.2 of the agreement.

2. Whether the company had complied with the obligation under clause 5.1 .2 to list all differences and to keep records and supporting documentation for all items relating to such differences..

3. What further steps, if any, were needed to be taken by the Company to prepare a reconciliation as required by the Agreement.’

In his initial determination first respondent concluded: ‘I find that the Company has complied with the requirement of the first part of clause 5.1.2 to list all differences represented by (A – B)’. He then concluded: ‘I determine that the Company has not complied with the requirement of the second part of clause 5.1.2 namely to keep all the records, and supporting documents relating to such differences’.

According to applicant the dispute between the parties began with a dispute about the documents that company was required to obtain, and first respondent merely left them in the same position. First respondent’s determination merely perpetuated the same dispute as had previously existed between the parties, albeit in different terms.

Timing differences.

Clause 4.4.1 and 5 deal with timing differences. In terms of clause 4.4.1 the figure ‘C’ in the prescribed form represents timing differences that arise due to there being different cut-off dates between the creditor statements and the books of the company. In terms of clause 5.1.3 timing differences that arise in different cut-off dates were to be excluded from the list of differences that were to be prepared.

The expression ‘timing differences’ gave rise to a dispute between the parties. Accordingly, first respondent was requested to determine ‘What adjustments constituted ‘timing differences’ for the purposes of determining the ‘unrecorded or unreconciled trade creditors of the Group as required under clause 4.4.1 of the agreement?’ First respondent determined thus: ‘I determine that all the abovementioned adjustments constitute timing differences for the purposes of clause 4.4.1 of the Agreement. In determining such timing differences, the differences arising from transactions effected within the period more than thirty days before and after closing date should also be examined’.

According to applicant, the dispute that first respondent agreed to determine remained unresolved in that there remains uncertainty as to how items beyond a thirty day period should be investigated in respect of each of the respective timing differences.

Delay.

Applicant previously launched proceedings against second respondent on 17 April 2000. that application was followed first respondent’s initial determination on 28 February 2000 and contained in first respondent’s view, the same allegations contained in the main application.

As Mr Stringfellow stated in his answering affidavit in the main application:

‘The applicant also sought in the previous application to obtain amplified reasons from the expert for his determinations. That application was premised on the assumption that the expert had determined the issues referred to him in terms of the referral letter. It is this anterior assumption that the applicant now seeks to challenge in the current proceedings.

None of the factors set out in paragraphs 72 to 81 of the founding affidavit explains why the applicant was not able to challenge the expert’s determinations on the preliminary grounds set out above at the same time that it sought amplified reasons for the expert’s determination in the previous proceedings.’

I should add that central to second respondent’s objection to the main application is the contention that applicant was a party to an agreement in terms of which the determination of first respondent was final and binding on the parties in respect of certain accounting disputes between them. First respondent made a determination in respect of each dispute referred to him and this determination pursuant to clause 6.4.6 of the agreement was final and binding on the parties. In second respondent’s view, there was nothing ineffective or non-definitive about the first respondent’s determination.

To the extent that applicant relied on correspondence generated on 10 October 2001 as evidence of a change of stance on the part of second respondent which was material to applicant’s case, second respondent contends that the launch of the main application took place on 22 August 2002, more than ten months after this letter had been generated. If, according to second respondent, the essence of the adjudicative exercise requested of the court is in form of a review and setting aside of first respondent’s decision, that application should have been brought within a reasonable time. According to second respondent as there had been far too much unexplained and lengthy delay, the relief sought in these interlocutory applications should be dismissed.

Analysis.

I have sketched only the essential basis of each of the disputes, primarily through the prism of the party making the principal attack; applicant in all cases save for the dispute about delay. This background now makes it possible to turn to the oral evidence application. This application is predicated upon the following:

1. Applicant contends that the disputes identified might not be capable of resolution on affidavit and accordingly it seeks the referral of these disputes for the hearing of oral evidence.

2. During the course of arbitration proceedings, to which reference has already been made, the discovery of documentation made by second respondent has come into the possession of applicant and it contends that these documents have ‘a material bearing on an important issue in the main application’.

3. The cross examination of second respondent’s witnesses during the arbitration proceedings revealed a clear tension between what was asserted by second respondent’s in its answering affidavit in the main application and what witnesses conceded under cross examination during the arbitration proceedings.

Preliminary Objections.

Before analyzing the details of these justifications, it is necessary to deal with two fundamental attacks launched by second respondent, which is based upon the following provision in the agreement:

‘Subject to the Experts having acted reasonably, honestly and in good faith, neither party will bring an action or proceedings to make any claim against the Expert relating to or arising from his duties hereunder’.

Mr Kuper, who appeared together with Ms Kentridge on behalf of second respondent, submitted that, on a reasonable reading of first respondent’s determination there was no basis for concluding that his determination trespassed into unreasonable conduct or that he had not conducted himself other than honestly and in good faith. Hence no application in the form of the main application could legally be brought by applicant.

Mr Kuper raised a second fundamental objection. He submitted that, upon an examination of the founding affidavit to the oral evidence application, the only justification given by applicant to justify the application was the following averment:

‘During the course of that evidence SAB’s position was examined at length in cross examination and it is Shoprite’s case that concessions were made by SAB inconsistent with what is alleged in the answering papers in the main application’

In Mr Kuper’s view, the answer provided by Mr Stringfellow who deposed to an affidavit on behalf of second respondent provided a complete answer to this contention: ‘It is apparent that the true motivation for the present application is simply opportunistic, and Shoprite have now decided it would have done better to proceed differently from the outset. In the circumstances I request that little weight should be attached to the designedly nebulous statement that it is in the interests of justice for the Court to hear that evidence, undermining as it does in several respects the version put up on oath by SAB in the main application’.

The justification for relief sought.

I shall deal firstly with whether applicant has made out a case for the hearing of oral evidence. In his founding affidavit to the oral evidence application Mr Bosman seeks to incorporate the background to the main application as set out in Mr Goosen’s affidavit into his (Bosman’s) affidavit. It is in this latter affidavit that the essence of applicant’s case is to be located:

‘It is clear that Mr Oblowitz assumed his function of dispute determination under a contractual arrangement which was determined the extent of his mandate and the manner in which he was to discharge such mandate. The very essence of his contractual undertaking to the parties was to determine the differences and disputes between them. This enjoined Mr Oblowitz firstly to answer questions put to him for determination. Secondly, Mr Oblowitz had to answer such questions in a way which was definitive. Thirdly, Mr Oblowitz’s answers were by necessary implication required to be reasonably clear. Fourthly, Mr Oblowitz’s ruling had to be capable of implementation by the parties and not required doing the impossible.’

To this second respondent replied: ‘Second respondent denies that the expert has breached the terms of his mandate with the parties, even in the ways alleged by the applicant or at all. Second respondent denies furthermore that the expert failed to act “reasonably, honestly and in good faith” within the meaning of the referral letter and that the expert, in making his determinations, was guilty of any “manifest error in calculations” in the meaning of clause 4.6 of the agreement. In the circumstances, it is not permissible for the applicants to claim any relief against the first and third respondents or to seek to reveal or appeal the expert’s determination before this Honourable Court. Such determinations are final and binding on the parties in terms of clause 4.6 of the agreement’.

The dispute, as it is relevant to these proceedings, turns on whether the determination by first respondent represents a proper ‘determination’. That is applicant’s case. The key question does not depend upon good faith or reasonable conduct but whether the written determination and amplified reasons constitutes a determination. Applicant contends that oral evidence can resolve the interpretative conundrum created by first respondent’s determination and amplified reasons. If it is shown that the determination is incomprehensible, in that it is impossible to know what action to take thereon, there is then no determination.

When the main application is read with the founding affidavit in the oral evidence application, applicant’s case becomes apparent. Mr Kuper is correct to contend that much of the amplification as to the content of the evidence sought to be read appears only in the replying affidavit to the oral evidence application. However Mr Bosman does state in his founding affidavit that:

‘From time to time between May 2003 and September 2004 Shoprite Checkers and SAB were engaged in an arbitration hearing before an arbitrator, Mr M Tselentis QC. Shoprite Checkers claimed payment of interest on the shortfall determined in terms of clause 4.2 of the sale agreement. The arbitration was lengthy and traversed many of the disputes now dealt with on the papers in the main application.

During the course of that evidence SAB’s position was examined at length in cross-examination and it is Shoprite’s case that concessions were made by SAB inconsistent with what is alleged in the answering papers in the main application.

Shoprite alleges that it is in the interests of justice for the Court to hear that evidence, undermining as it does in several respects the version put up on oath by SAB in the main application.’

In my view, on a fair reading of applicant’s papers, particularly the founding affidavit read together with the founding affidavit in the main application, applicant has made out a sufficiently clear case.

Recourse to oral evidence.

Both counsel referred me to a dictum of Milne JA in Wallach v Louis Geffin Estates CC 1993(3) SA 258(A). In that case an order was granted in terms of Rule 6(5)(g) of Uniform Rules for a hearing of viva voca evidence. When the matter came before the court a quo Lazarus J took the view that it was competent for him to decline to hear oral evidence and therefore to depart from the earlier order. In confirming the correctness of this approach Milne JA said: ‘That being so, it was open to the Court a quo to hold, as it did, that it was unnecessary to hear oral evidence and to decide the matter on the papers. I do not consider that it did so lightly. Indeed there were considerations of the most weighty why it should do so. To have heard oral evidence in circumstances that would not and could not have affect the outcome of the claim for substantive relief would have been to incur wholly unnecessary costs and to involve wholly unnecessary delays’. at 263 H

Mr Kuper invoked this case to contend that great caution should be exercised before burdening a court with oral evidence which could subsequently prove to be unnecessary.

However, as Mr Kuschke who appeared together with Mr Olivier on behalf of applicant observed, the test as to the admission of oral evidence outlined in this case is important, namely whether such evidence could affect the outcome of the claim. In the present case, the claim pursuant to the main application is based on an argument that first respondent’s determination is not definitive of the questions which were put to him, that the determination is not at all clear, let alone reasonably clear, and furthermore that whatever steps first respondent has required of the parties are impossible (and have proved to be impossible) to implement. On the basis of the Wallach supra test, it would appear that the critical question in this regard is: Is there material which could be placed before the Court which could inform an evaluation of these contentions, the resolution of which is critical to the determination of the main application?

For this reason, I am of the view that recourse to clause 4.6 of the agreement cannot be definitive of these interlocutory applications. If, in the main application, it is shown, on the evidence, that first respondent did not discharge the obligations imposed on him in terms of the written agreement of 31 October 1997 read together with the referral letter of 5 December 1998 (the day it was signed by applicant), it may be (and I emphasize the word may in that I do not wish to make any determination with regard to matters to be decided in the main application) that there has not been performance sufficient to conclude that a determination has been made. Hence compliance would have not been completed in respect of first respondent’s obligations. Accordingly the application of clause 4.6 of the agreement is not dispositive of the present dispute.

For this reason and applying the Wallach test I am in agreement with Mr Kuschke that the starting point of the enquiry must be to examine the facts placed before the Court and then to construe the determination within the context of these facts. It is not possible to examine first respondent’s determination in abstract terms. Expressed differently, applicant contends that the determination cannot be understood and the steps recommended by first respondent cannot be implemented. Applicant contends that there is evidence which can prove this to be common cause. Respondent contends that it is not proper to examine facts which have occurred, after the determination had been delivered. In my view, failure to comprehend or be able to implement first respondent’s recommendations are facts which may assist to test the applicant’s contention with regard to impossibility of ascertainment of the determination performance pursuant thereto. For an example of a similar interpretive approach see Mostert NO v Old Mutual Life Assurance Co (SA) Ltd. 2002(1) SA 82 (SCA) at para 8. See also the test as to the proper application of the ‘golden rule’ of interpretation which places emphasis upon ‘subsequent conduct of the parties showing the sense in which they acted on the document’ in Cooper & Lybrand and Others v Bryant 1995(3) SA 761(A) at 768D.

This conclusion finds support in the judgment in Ronly Holdings Ltd. and J S C Zestaphoni G Nikoladze Ferro Alloy Plant [2004] EWHC 1354 (Comm) at para 325 where Gross J said that an award ‘must be complete as to all the issues placed before it and that an award which leaves issues undecided cannot be maintained’. Thus, if the award cannot be understood nor implemented by the parties it is an incomplete award.

Could the evidence influence the outcome of the Main Application?

I now turn to examine the particular issues raised.

I. Fixed Assets.

In paragraph 39 of the founding affidavit to the main application Mr Goosen states that ‘Mr Oblowitz was to determine what steps OK Bazaars must take. He indicated that the parties had to take steps to identify assets acquired or scrapped in the period in question. He did not, however, identify the steps to be taken, as he had been required to do’.

In the replying affidavit in the oral evidence application, deposed to by Mr Bosman, applicant asserts that concessions were made by second respondent’s witnesses which were relevant to the averments made in paragraph 39 of the founding affidavit to the main application. In particular, Mr Bosman states that Mr Stringfellow was shown his answering affidavit during the course of the interest arbitration which took place between May 2003 and September 2004. Mr Stringfellow was shown:

‘the fact that in relation to fixed assets Mr Oblowitz had directed the parties (i.e. SAB and Shoprite together) to take steps to ensure that no double counting occurred. Mr Stringfellow was shown his affidavit where he had said it was up to Shoprite to do this, and that SAB in effect had to do nothing. He conceded (among other things) two matters:……

37.211 that Mr Oblowitz’s determination imposed a positive obligation on SAB to co-operate with Shoprite to identify assets scrapped (the double counting point); and

37.2.12 that as he sat in the witness box, he could provide no explanation for what he stated in his affidavit. The point has fundamental significance in verifying paragraph 39 of the founding affidavit in the main application’.

Mr Kuschke also referred to a letter generated by second respondent’s attorneys on 26 July 2001, in which in dealing with the differences between the GL and the FAR, they stated ‘we can think of no possible steps that could be taken to establish which assets comprise these differences between the GL and the FAR. It is certainly not possible therefore to meet the test set by the Expert, only to show that they were acquired before or after the R87 million write-off’.

If no such steps can be taken, then the discrepancy of R8,8 m which arises when the fixed assets accounts on the GL are compared to the FAR cannot be fully explained. In his amplified reasons first respondent expresses concern that the assets of R8,8 m (or some of them) may have been written off in the earlier write off of R87 m of assets.

The initial dispute turned on whether GL or FAR should be relied upon to resolve the problem. The FAR does not contain the R8,8 m assets; the GL has insufficient information about them. First respondent only suggests that steps should be taken. But, if the FAR and GL do not provide sufficient guidance as to the resolution of the discrepancy, how must the matter be resolved? Applicant’s case is that first respondent’s determination does not assist; if second respondent agrees with the contention, then this approach is relevant to the main application.

II Reconciliation.

First respondent was instructed to determine whether the exercise performed by the Company constitutes a reconciliation as required by clause 5.1.2 of the agreement.

This clause reads: ‘[S]tatements from suppliers will be reconciled to the amounts owing to creditors according to the books of the Company.’

The Agreement does not set out a definition of the word ‘reconciled’ although clause 4.4 read with clause 4.4.1 of the Agreement requires that a provision be made in the CDA for

‘an amount equal to 80% of the unrecorded and/or unreconciled creditors…., calculated as follows:

‘(A minus B plus or minus C) x 80%

Where:

A = the total of creditors statements rendered to the group and the Botswana company

B = the amount owing to creditors according to the books of the group and the Botswana company.

C = the timing differences due to different cut off dates between the creditors statements referred to in A and the books of the group referred to in B

and following the procedure set out in 5.1’

First respondent concluded thus:

‘The exercise performed by the Company adequately identifies the totals of “A” and “B” as defined above but does not deal adequately with “C” as defined above, (e.g. claims on suppliers were sampled and not comprehensively determined; only transactions one month either side of cut-off date were considered).

I determine that the exercise performed by the Company does not constitute a reconciliation as required by clause 5.1.2 of the Agreement.

First respondent was then asked whether the company had complied with its obligations under 5.1 of the Agreement to obtain statements from all its suppliers. First respondent determined that there had been compliance with the obligation under clause 5.1.1 of the Agreement to obtain statements from all its suppliers. He was then asked whether the company had complied with its obligations under 5.1.2 to list all differences and keep records and supporting documentation for all items relating to such difference. Clause 5.1.2 of the Agreement required ‘all differences to be listed and shall be represented by (A-B). All records and supporting documents shall be kept of items relating to such differences’.

He found that there had been compliance with the requirement of the first part of clause 5.1.2 to list all differences and keep records and supporting documentation for all items relating to such difference. He did not consider that there had been compliance with the second part of the clause namely, to keep all records and supporting documents of items relating to such differences.

The essence of applicant’s case is that there is no clarity as to the meaning of ‘keep all records and supporting documents relating to such differences’. In a letter of 31 August 2001 addressed to second respondent’s attorney, the attorneys of applicant, capture the core of this dispute:

‘Shoprite’s interpretation is that, given the finding that A and B have been adequately identified, what remains is that C must be identified, whereafter the calculation in terms of the formula can be done.

SAB on the other hand, contends that a full reconciliation must take place, i.e. that every item making up the difference between A and B must be explained and that thereafter those items that constitute timing differences must be identified.

Unless this dispute can be resolved at our meeting, Shoprite proposes that this issue be referred to Mr Oblowitz and that he be required to indicate which one of the two interpretations accords with his intention and, if neither does, that he be required to explain how his ruling should be interpreted.

Ad question 1.2

Mr Oblowitz determined as follows:

determine that the Company has complied with its obligations under 5.1.1 of theAgreement to obtain statements from all its suppliers.”

Shoprite understood from this ruling that the Company was not required to obtain any further statements from suppliers

SAB, however, contends as follows:

. “We recognize that your client has responded to this issue in the past by referring to the Expert’s determination that the Company has met the requirement to obtain suppliers’ statements, and has taken from this, that no further enquiries are required under the Agreement. This is too literal an interpretation. Since the Agreement requires full reconciliations to be performed, as described above, so too does it require, implicitly, that all and any steps needed to achieve this, also need to be taken. This includes obtaining fully detailed statements.”

Unless this dispute can be resolved at our meeting, Shoprite proposes that this issue be referred to Mr Oblowitz and that he be required to indicate which one of the two interpretations accords with his intention and, if neither does, that he be required to explain how his ruling should be interpreted.’

To the argument that applicant should have had recourse to the internal mechanism provided for in the agreement as opposed to launching the main application, Mr Kuschke referred to a letter of Price Waterhouse Coopers of 10 March 2000 in which the following was stated: ‘Each party has the right to object to any of the Expert’s findings within ten days. SAB has no objections. It is possible that Shoprite will ask the Expert to establish an alternative means of assessing the creditors’ ledgers. We would aim to object to this’.

As Mr Kuschke noted, the adoption of this approach by second respondent made it extremely difficult to employ the internal mechanism to obtain clarity with regard to the determination in respect of the reconciliation. There is a clear dispute between the parties as to the meaning and implications of the determination with regard to reconciliation. Evidence by witnesses of second respondent and its representative together with documentation generated might bring clarity to the meaning of the determination or lack thereof. This could effect the outcome of the main application.

In a letter generated by second respondent’s attorneys on 26 July 2001 with regard to this issue, the following was stated: ‘No sensible obvious alternative procedures have been developed or implemented to test the reasonableness and accuracy of the exercise performed by the company. This might include obtaining up to date statements from suppliers showing amounts still owing which pre-date 31 October 1997. We think it is pointless and unconstructive for your client to maintain that (‘the Expert’) did not require the additional statement be obtained. We agree this is literally true but does not seem consistent with the real desire to discover the genuine level of trade creditors balances’.

A further question relates to the evidence at the arbitration of Mr Jamieson, advisor to second respondent in relation to trade creditors from 1998 to date. According to Mr Bosman, Mr Jamieson conceded that if what was intended was ‘full reconciliation’ as has been asserted by first respondent then this would have required ‘one to read into the text of the determination, a further, (apparently) implicit obligation to effect a full reconciliation and for that purpose to go back to suppliers to ask for what Mr Oblowitz had determined was not necessary’. Mr Bosman then states:

‘Mr Jamieson accepted that his stance required one to read into the determination what was not there…..Second, he accepted that in the process of implementation of Mr Oblowitz’s determination there would come a point where implementation would become impossible, by reference to the determination. He accepted that the parties would inevitably reach a point where negotiation and agreement was necessary to give content to Mr Oblowitz’s determination.’

On the basis of this argument, evidence which may support the conclusion urged by applicant, whether by Mr Stringfellow or Mr Jamieson or by way of documentation, that the determination is incapable of reasonable ascertainment, could influence the outcome of the main application and accordingly stands to be admitted subject to two further considerations with which I shall deal presently, being confidentiality and delay.

Timing Differences.

First respondent was requested to determine the following:

‘What adjustments constitute ‘timing differences’ for the purposes of determining ‘the unrecorded or unreconciled trade creditors of the group’ as required under clause 4.4.1 of the Agreement?’

First respondent ruled thus ‘I determine that all the abovementioned adjustments constitute timing differences for purposes of clause 4.4.1 of the Agreement. In determining such timing differences, the differences arising from transactions effected within the period more than thirty days before and after closing date should also be examined’.

Applicant complains that first respondent’s determination did not state for what exact period before or after the closing date transactions must be examined for the purposes of identifying timing differences and, given the state of the books of OK Bazaars, how such timing differences must be identified. Second respondent contends that this determination means the transactions between OK Bazaars and its suppliers should be examined up to the point where all differences between the statements and the suppliers in the books of the company had been explained, irrespective of the time of such transaction; that is a full reconciliation is required.

Applicant contends that first respondent could not have meant that which has been asserted by second respondent in that the performance of the exercise proposed by second respondent in respect of every timing difference in excess of thirty days, before and after the closing date would be an impossible task and would, in any event, be unnecessary and was not contemplated in the sale agreement. Applicant contends further that the dispute that first respondent agreed to determine remains unresolved, albeit in a marginally different form. The question as to how items beyond a thirty day period should be investigated in respect of each of the respective timing differences identified, and for what periods before or after the closing date each of such items should be investigated, remains unanswered in the determination and amplified reasons.

Mr Kuschke latched on to Mr Kuper’s contention that the reconciliation should go back as far as is necessary to determine these timing differences. This appeared to introduce a new phrase into first respondent’s determination. It also raised the further question as to the meaning of ‘necessary’ as employed in this context.

Once second respondent is required to have recourse to ‘reading in’ to the determination, it raises a doubt as to the certainty of the determination, particularly if the ‘reading in’ produces a vigorously contested reading. If oral evidence should support the difficulties raised by applicant, namely that there is no reasonable interpretation available, it should be admitted.

Confidentiality.

Second respondent asserts that the documents that were discovered pursuant to obligations pertaining to discovery in the arbitration should be treated as confidential and governed by the privacy arrangement that applied to that arbitration.

Mr Kuper referred to a judgment of the Court of Appeal in Dolling – Baker v Merrett [1992] ALL ER 890 (CA) where the Court was confronted with an issue as to whether a defendent in an action should be ordered to discover all documents emanating from an earlier arbitration to which it had been a party. Parker LJ held at 899:

‘As between parties to an arbitration, although the proceedings are consensual and may thus be regarded as wholly voluntary, their very nature is such that there must, in my judgment, some implied obligation on both parties not to disclose or use for any other purpose any documents prepared for and used in the arbitration, or disclosed or produced in the course of the arbitration, or transcripts or notes of the evidence in the arbitration or the award, - and indeed not to disclose in any other way what evidence had been given by any witness in the arbitration - save with the consent of the other party, or pursuant to an order or leave of the Court’

Mr Kuper conceded that the courts had not held that a document used in an arbitration is rendered confidential or immune from disclosure in subsequent proceedings if it is relevant to those proceedings. However he contended that the obligation of confidentiality existed as a matter of implied obligation arising out of the nature of the arbitration itself. To this obligation, a court asked to order the discovery or production of documents in subsequent proceedings must have regard thereto. If a court is satisfied that discovery inspection is necessary despite the obligation, it must order accordingly but it should first consider whether there are ways of obtaining information sought which would not breach the implied obligation. See Dolling-Baker at 899h.

Both counsel also referred to an Australian Court judgment in Esso Australia Resources Ltd v Plowman 128 ALR (HC of A) 391. Mr Kuschke placed considerable emphasis on the following dictum of Brennan J at 406:

‘I would hold that, in an arbitration agreement under which one party is bound to produce documents or disclose information to the other for the purposes of the arbitration in which no other provision for confidentiality is made, a term should be implied that the other party will keep the documents produced on the information disclosed confidential except (a) where disclosure of the otherwise confidential information is under compulsion of law; (b) where there is a duty, albeit not a legal duty, to the public to disclose; (c) where disclosure of the material is fairly required for the protection of the party’s legitimate interests; (d) disclosure is made with the express or implied consent of the party producing

the material’. See also Toulson and Phipps Confidentiality (1996) at 263.

The upshot of this debate between counsel regarding the implications of confidentiality of documents generated during arbitration proceedings is that there is no absolute bar to disclosure of such documents. Mr Kuper sought to qualify its scope and thus submitted that the Esso Australia judgment should be read within the context of a dispute which concerned prices charged to consumers by public utilities and accordingly turned on the affairs of public authorities. In his view this context shaped the narrow interpretation to confidentiality adopted in this case.

However, in Ali Shipping Corporation v Shipyard Trogir [1997] EWCA Civ 3054; [1998] 2 ALL ER 136 (CA) at 148f-h Potter LJ referred to a broader public interest justification for permitting disclosure of such documents. He concluded: ‘[I] see no reason why such a principle, which I would approve, should not equally apply to witnesses of fact who may be demonstrated to have given a materially different version of events upon a previous occasion. As a matter of terminology, I would prefer to recognize such an exception under the heading ‘interests of justice’ rather than ‘the public interest’ in order to avoid the suggestion that use of that latter phrase should be read as extending to the wider issues of public interest contested in the Esso Australia case’.

In my view, this dictum embraces the spirit, purport and object of the constitution in that it permits integrity, transparency and justice to trump a rigid adherence to Rule formalism. I use the word ‘allows’ deliberately in that the dictum does not mandate such a step but permits (or affords) a court the power to so act when a rigid adherence to form would subvert the very purpose of a just adjudicative process.

Conclusion

In the present case applicant submits that first respondent’s determination is unclear, being incapable of implementation or of reasonable comprehension. The disputes may not be capable of resolution on the papers. Hence applicant seeks to have this court apply Rule 6(5)(g) of the Uniform Rules:

“Where an application cannot properly be decidedon affidavit the court may dismiss the application or make such order as to it seems meet with a view to ensuring a just and expeditious decision. In particular, but without affecting the generality of the aforegoing, it may direct that oral evidence be heard on specified issues with a view to resolving any dispute of fact and to that end may order any deponent to appear personally or grant leave for him or any other person to be subpoenaed to appear and be examined and cross examined as a witness or it may refer the matter to trial with appropriate directions as to pleadings or definition of issues, or otherwise.” (my emphasis).

From the evidence placed before the court it appears that there is a possible tension between what second respondent avers in its answering affidavit and what it conceded at the arbitration proceedings. To recapitulate: applicant has alleged that:

‘Mr Stringfellow was shown his answering affidavit in the main application. He was shown the fact that in relation to fixed assets Mr Oblowitz had directed the parties (ie SAB and Shoprite together) to take steps to ensure that no double counting occurred. Mr Stringfellow was shown his affidavit where he had said that it was up to Shoprite to do this, and that SAB in effect had to do nothing. He conceded (among other things) two matters:

37.2.1.1 that Mr Oblowitz’s determination imposed a positive obligation on SAB to co-operate with Shoprite to identify assets scrapped (the double counting point):

And

2. that as he sat in the witness box, he could provide no explanation for what he stated in his affidavit.’

It further alleges with regard to trade creditors that ‘Mr Jamieson however did concede that, if what was intended was a ‘full’ reconciliation (as he and SAB asseret), then doing so required one to read into the text of the determination a further (apparently implicit) obligation (for some reason not stated) to effect a full reconciliation, and for that purpose to go back to suppliers to ask for what Mr Oblowitz had determined was not necessary (full open item statements). (Replying affidavit of Mr Bosman in the ‘oral application’).

From this evidence, it may be that second respondent through documents which it has generated and testimony of its witnesses, albeit within an arbitration, has acknowledged that it is unable to implement the determination of first respondent or to bring reasonable clarity thereto. In my view, it would be in the interests of justice for this evidence to be made available to the court which is required to determine the merits of the main application. The main application turns on the interpretation of a determination. Evidence which shows that the determination is so unclear that neither party understands what steps they are required to take pursuant to the wording thereof, could well influence the outcome of the main application.

Delay.

This then brings me o the final issue of delay. Second respondent has noted that the founding affidavit in the main application was signed on 22 August 2002. First respondent’s initial determination was delivered to applicant and second respondent on 6 March 2000. On 10 July 2000 first respondent provided amplified reasons. The question arises as to whether the main application has been brought within a reasonable time. According to Mr Kuschke, delay only is relevant to review proceedings and does not impinge upon the form of relief sought by the applicant. Accordingly, in his view the determination by first respondent does not fall to be labeled as administrative or judicial decision making and thus the delay principle as enshrined in Wolgroeiers Afslaers (Edms) Bpk v Munisipaliteit van Kaapstad 1978(1) SA 13(A) and Associated Institutions Pension Fund v van Zyl [2004] 10 BPLR 607 (SCA) are inapplicable.

Assume that it is found that the Wolgroeiers principle applies, the test is not restricted to whether the proceedings are brought within a reasonable time but concerns the broader issue as to whether an unreasonable delay should be excused. In this regard, a relevant factor is prejudice to the other parties to the proceedings.

In this case first respondent has withdrawn his opposition to the main application and abides the decision of the Court. He has accepted the tender made by applicant to meet any costs which he might have incurred. There does not appear to be any evidence generated by second respondent as to the prejudice it may suffer other than that of time and costs, had these proceedings been brought as part of the previous proceedings.

A detailed explanation as to the time taken to launch the application was also provided in the founding affidavit. As Mr Goosen sets out in his founding affidavit to the main application, the size and complexity of this dispute should be under estimated. In the light of the complexity of the dispute he says:

‘[T]he process of analyzing Mr Oblowitz’s award, obtaining commentary and the award and the Amplified Reasons from various people, briefing senior management thereon, obtaining outside opinions, instructing attorneys and counsel was not a simple task. On each occasion that a new professional was added to the team (for example, counsel) a figurative mountain of information had to be collated, consumed and consulted on for the purpose of bringing the particular professional into the team.

Second, I wish to explain that there was a relatively small number of people with an intimate knowledge of the accounting background who were able to give insights and instructions to other professionals. These were essentially the internal accountants of Shoprite and OK Bazaars and professionals employed from the auditors of Shoprite and SAB. I explain this because it was not always a simple matter of co-opting another professional when an existing professional was unable….. During the process of completing the CDA’s (as well as related arbitrations, that I refer to below) SAB has not been enthusiastic about completing the process.’

In my view, the intensity with this dispute has been fought (decidedly) supports this latter averment Assuming that the delay principle does apply, I am satisfied that the prejudice to applicant, who clearly has no other remedy together with the relatively minimal prejudice caused to second respondent as well as the explanation relating to the volume of documentations and complexity of this dispute, justifies a conclusion that the delay in bringing these proceedings has not been so unreasonable so as to preclude applicant from proceeding with the main application.

ORDER.

Given the decision to which I have arrived, the discovery application falls away.

For the reasons set out the following order is made:-

1. The matter is referred for the hearing of oral evidence at a time to be arranged with the Registrar in relation to the disputes which have emerged from the founding, answering and replying affidavits in the main application.

2. All parties shall make discovery of all documentation in their possession or under their control within thirty days of the making of this order.

3 Such discovery shall be made in accordance with Rules 35(3) and 35(4) of the Uniform Rules of Court.

4.If any party intends to lead evidence of any witnesses who have not deposed to an affidavit in the main application, or intends to lead the evidence of witnesses in respect of material not dealt with in the affidavit deposed to by such witness then such party shall not later than sixty days after the making of this order deliver to the other parties a signed witness statement setting forth the evidence or such further evidence of the witnesses concerned.

5. The cost of this application shall stand over for determination at the hearing of oral evidence.

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DAVIS J

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