IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG DIVISON, PRETORIA

(1) REPORTABLE: YES / NO (2)OF 1NTERB\O OTHER JUDGES; YES/NO

0S mct SIGN A DATE

Case No.: 7937/2017

In the matter between:

TEN FOUR CONSULTING (PTY) LTD

FOURTH DIMENSION FINANCIAL SERVICES (PTY) LTD and

THE HONURABLE JUSTICE BAREND RUDOLPH DU PLESSIS

GERMA BEUKES

First Applicant

Second Applicant

First Respondent

Second Respondent

JUDGMENT

SARDIWALLA J:

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[1] The Applicants seek to review and set aside an arbitration award, delivered on 23

January 2019, by the First Respondent in terms of Section 33 (1) of the Arbitration Act 42 of

1965 ("the Arbitration Act"), on the grounds of gross irregularity on the part of the arbitrator.

[2] The Second Respondent opposes the application. The First Respondent abides the

decision of the Court.

Background Facts

[3] On 30 June 2008 the Applicant and the Second Respondent entered into a Restraint of

Trade Agreement. After disputes between the parties arose where it was alleged that the

Second Respondent breached the provisions of the Restraint of Trade Agreement, a written

Arbitration Agreement was concluded on 30 July 2018. The matter was then referred to

arbitration and it was agreed that the Uniform Rules of Court would apply as well as the

ordinary rules of evidence.

[4] Prior to the arbitration hearing on 21 January 2019 the Second Respondent's Counsel

telephoned the Applicant's Counsel to inform him that he intended arguing the defence raised

in paragraph 12.2 of the Second Respondent's Statement of Defence in limine. On 22 January

2019 the matter was before the First Respondent. It is common cause that prior to the hearing

and in the absence of the Applicants the Second Respondent's Counsel had a discussion with

the First Respondent wherein the Second Respondent advised the First Respondent that the

parties would argue a point in limine first. It is however alleged that the Second Respondent's

Counsel and imparted facts pertaining to the merits of the Second Respondent's contentions

in so far as the point to be dealt with in limine was concerned. When the arbitration

commenced the First Respondent confirmed that the Second Respondent informed him about

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the point in limine and directed the parties to lead argument thereon. The parties argued the

point in limine and the First Respondent handed down the following interim award on 23

January 2019 as follows:

11 1. The first claimant's claim for damages in the sum of R 3, 129,078.00

(paragraph 9.2 of the Statement of Claim) is dismissed.

2. The costs are reserved."

[5] It is that decision which the Applicants in these proceedings seek to have reviewed

and set aside. The applicant further seeks an order that the dispute which forms the subject

matter of the Arbitration before the First Respondent be submitted to a new arbitrator agreed

upon by the parties within 14 days from the date of this order or alternatively failings such

agreement, appointed by the Chairperson of the Arbitration Foundation of South Africa.

Grounds of Review

[6] The Applicant's grounds of review are that:

6.1 The First Respondent allowed the arbitration process to commence in the absence

of the Applicants;

6.2 The First Respondent did not afford the parties the opportunity to be heard on the

question of whether or not the Applicant's damages claim should be dismissed;

6.3 The First Respondent misconstrued his powers in relation to the arbitration;

6.4 The First Respondent exceeded his powers as an arbitrator and committed a gross

irregularity in the conduct of the proceedings as contemplated in Section 33(1)(b) of

the Arbitration Act.

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The Applicants submission in support of the relief

[7] The Applicants contend that the award stands to be set aside in terms of Section

33(1)(b) of the Arbitration Act on the grounds that, in rendering the award which he did, the

Arbitrator committed a gross irregularity in the conduct of the arbitration proceedings. The

First Applicant submits that it was irregular for the Arbitrator and the Counsel for the Second

Respondent to have had a discussion on the matter in the Applicant's absence. They contend

that although they are uncertain of the contents of the communication, the transcript clearly

indicates that there was more than merely informing the Arbitrator that there was a point in

limine to be dealt with separately from the remainder of the issues. The Applicants rely on a

further irregularity in that the Arbitrator failed to properly articulate or define the issues to be

decided separately and to make an order in that regard. The parties agreed that the High Court

rules would apply and the Arbitrators failure to define the issues and going beyond the

pleadings therefore illustrates that the Arbitrator exceeded his powers by dismissing the

Applicants claim for damages upon upholding the point in limine. Therefore, the award

issued falls to be reviewed and set aside.

The Second Respondent's opposition

[8] The Second Respondent's contention is that the Applicants have failed to make out a

case on the facts as their case is made up of inferences and assumptions. It submits that there

was never any evidence led nor examination of witnesses in the absence of the Applicants

and that informing the arbitrator what would be argued before the hearing can never amount

to the leading of evidence and therefore there can be no gross irregularity in this regard.

[9] The Second Respondent further contends that the parties were aware of what was to

be argued insofar as it related to paragraph 12.2 of the amended statement of defence and that

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the Applicants at no stage indicated a desire to lead evidence as to the interpretation of the

contract. Therefore, the Arbitrator was requested to interpret the contract without the leading

of evidence and to determine whether it expressly provided that damages may be claimed in

lieu of a penalty.

Should the Award be set aside under Section 33(1) (b) of the Arbitration Act?

[10] The answer to the above question requires me to consider whether the conduct of the

Arbitrator constituted a gross irregularity under Sections 33 (1) (b) of the Arbitration Act

respectively

Section 33 (1) of the Arbitration Act, provides as follows:

"33. Setting aside of award.-(1) Where -

(a) any member of an arbitration tribunal has misconducted himself in relation

to his duties as arbitrator or umpire; or

(b) an arbitration tribunal has committed any gross irregularity in the conduct

of the arbitration proceedings or has exceeded its powers; or

(c)an award has been improperly obtained,

the court may, on the application of any party to the reference after due notice to the

other party or parties, make an order setting the award aside."

Section 33 (1) (b) gross irregularity

[11] In Telcordia Technologies Inc v Telkom SA Ltd 2007 (3) SA 266 (SCA) the Court had

occasion, at paragraph 72, to consider the concept of gross irregularity. It quoted from Ellis v

Morgan; Ellis v Dessai 1909 TS 576 at 581, where Mason J laid down the basic principle in

the following terms:

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"But an irregularity in proceedings does not mean an incorrect judgment; it refers not

to the result, but to the methods of the trial, such as, for example, some high-handed

or mistaken action which has prevented the aggrieved party from having his case fully

and fairly determined."

At paragraph 73 of Telcordia, Harms JA (as he then was) went on to quote from Goldfield

Investment and Another v City Council of Johannesburg 1938 TPD 551, at pages 560 - 561,

as follows:

"The law, as stated in Ellis v Morgan supra has been accepted in subsequent cases,

and the passage which has been quoted from that case shows that it is not merely

high-handed or arbitrary conduct which is described as a gross irregularity;

behaviour which is perfectly well-intentioned and bona fide, though mistaken, may

come under that description. The crucial question is whether it prevented a fair trial

of the issues. If it did prevent a fair trial of the issues then it will amount to a gross

irregularity. Many patent irregularities have this effect. And ifftom the magistrate

reasons it appears that his mind was not in a state to enable him to try the case fairly

this will amount to a latent gross irregularity. If, on the other hand, he merely comes

to a wrong decision owing to his having made a mistake on a point of law in relation

to the merits, this does not amount to gross irregularity. In matters relating to the

merits the magistrate may err by taking a wrong one of several possible views, or he

may err by mistaking or misunderstanding the point in issue. In the latter case it may

be said that he is in a sense failing to address his mind to the true point to be decided

and therefore failing to afford the parties a fair trial. But that is not necessarily the

case. Where the point relates only to the merits of the case, it would be straining the

language to describe it as a gross irregularity or a denial of a fair trial. One would

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say that the magistrate has decided the case fairly but has gone wrong on the law.

But if the mistake leads to the Court 's not merely missing or misunderstanding a point

of law on the merits, but to its misconceiving the whole nature of the inquiry, or of its

duties in connection therewith, then it is in accordance with the ordinary use of

language to say that the losing party has not had a fair trial. I agree that in the

present case the facts fall within this latter class of case, and that the magistrate,

owing to the erroneous view which he held as to his functions, really never dealt with

the matter before him in the manner which was contemplated by the section. That

being so, there was a gross irregularity, and the proceedings should be set aside."

[12] In Total Support Management (Pty) Ltd and another v Diversified Health Systems

(SA) (Pty) Ltd and another 2002 (4) SA 661 (SCA), at para 41, Smalberger ADP had these

apposite words to say about the conduct of an arbitrator:

"[41] When selecting an arbitrator the parties to the arbitration agree to someone in

whom, by dint of his (or her) experience and ability, they can repose the necessary

confidence and trust to determine their dispute. What they seek is a judgment from

the person chosen. An arbitrator is not entitled to delegate this function. He alone

must perform the duties he has undertaken and with which he has been entrusted,

unless the parties agree otherwise. Because of the essentially personal nature of his

appointment he should be circumspect about utilising the services of an assistant.

Making use of an assistant is not per se objectionable. Where the parties agree to an

arbitrator doing so, care should be taken to reach consensus on what precise

functions the assistant may perform, to obviate any later dispute in this regard.

Failing agreement, an assistant should not be allowed to perform tasks that may

encroach on what would be regarded as the normal functions of an arbitrator In no

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circumstances may the assistant be allowed to usurp the decision-making function of

the arbitrator or act in a manner subversive of his independence. Ultimately the

question to be asked, and answered, is whether the arbitrator exercised his own

judgment in deciding the issues. This will depend upon the facts of each particular

case."

[13] I am inclined to agree with the Applicants' that in the present case the crucial question

posed in Goldfield, namely whether the behaviour of the arbitrator prevented a fair trial, has

to be answered in the affirmative. I agree that the manner in which the arbitrator abrogated

his duty to the Second Respondent to identify the issues to be determined, and his failure to

address the parties on this at the outset of the hearing, prevented a fair trial of the issues. In

confirming that the Second Respondent informed him of the point in limine to be argued prior

to the hearing, the Arbitrator clearly did not exercise his own judgment in deciding the issues.

The First Respondent despite being informed by the Second Respondent that the point in

limine was to be argued first, failed to address both parties on this aspect nor did he seek

guidance on what award would be issued in the event that the point in limine was upheld.

Whilst the Second Respondent alleges that the First Respondent was requested to determine

the interpretation of the contract without the leading of any evidence and to determine

whether it expressly provided that damages may be claimed in lieu of a penalty, there is no

evidence that such a request was made and that the arbitrator was aware of the enquiry before

him in his opening address on the transcript of the hearing. The First Respondent merely

states that the Second Respondent informed him of the point in limine without alluding

further to the issue to be determined or the award that may follow as a result. The Arbitrator's

actions clearly prevented the Applicants from having its case fully and fairly determined and

thus falls under the purview of gross irregularity as enunciated in Goldfield at paragraph 73

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supra. His actions also permitted his decision-making function to be usurped by the Second

Respondent in a manner subversive of his independence, and prevented the exercise of his

own judgment in deciding the issues. This is the very conduct to be avoided by arbitrators,

referred to in Total Support supra. The award qualifies to be set aside for gross irregularity in

terms of Section 33 (1) (b).

[14] I see no reason why the costs should not follow the result. I grant the following

order:

1. The Arbitration Award is set aside.

2. The matter is remitted to arbitration, with the agreed appointment of a new

arbitrator within 14 days of this order.

3. The Second Respondent shall bear the costs of the application.

MINI C M SARDIWALLA JUDGE OF THE HIGH COURT

Date of Hearing: Date of Judgement (Reasons) Appearances: For the Applicant: Instructed by: For the First Respondents: Instructed by: For the Second Respondents: Instructed by:

22 October 2019 5 May 2020

Adv. L W DE KONING SC Gerber Attorneys

Adv.: A G SOUTH SC MacRobert Attorneys

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