---

         IN THE HIGH COURT OF SOUTH AFRICA

(EASTERN CAPE DIVISION – GRAHAMSTOWN)

    Case No: CA238/2019

              Date heard: 06/10/2020

                                 Date delivered: 10/11/2020

In the matter between:

THE TRUSTEES OF THE MVULA TRUST                 Appellant

and

MARISWE (PTY) LTD (FORMERLY

UWP CONSULTING (PTY) LTD                                     First Respondent

RIVAROLA N.O.                                                                Second Respondent

 JUDGMENT

MBENENGE JP, DAWOOD J and BEYLEVELD AJ:

Background

[1]             This appeal is against the dismissal by the Court a quo of an application wherein the appellant[1] sought an order reviewing and setting aside an unfavourable arbitration award.[2]  Mvula faces a vertiginous pathway to establish that the award of the parties’ chosen arbitrator should be disturbed.[3]

[2]             In this regard, and more than a century ago, Gardiner J[4] stated: 

“The Court will always be most reluctant to interfere with the award of an arbitrator.  The parties have chosen to go to arbitration instead of resorting to the Courts of the land, they have specially selected the personnel of their tribunal and they have agreed that the award of that tribunal shall be final and binding.  As Halsbury, L.C., said in Holmes Oil Co. v Pumpherston Oil Co. (Court of Sess., R. 18, p. 53):

‘One of the advantages which people are supposed to get by a reference to arbitration is the finality of the proceeding when the arbitrator has once stated his determination.  They sacrifice something for that advantage - they sacrifice the power to appeal.  If, in their judgment, the particular judge whom they have selected has gone wrong in point of law or in point of fact, they have no longer the same wide power to appeal which an ordinary citizen prosecuting his remedy in the courts of law possesses, but they sacrifice that advantage in order to obtain a final decision between the parties.  It is well-settled law, therefore, that when they have agreed to refer their difficulties to arbitration, as they have here, you cannot set aside the award simply because you think it wrong.  The parties have agreed that it shall not be subject to the ordinary modes of appeal and that it shall be final; and that is, in nine cases out of ten, the very object which they mean to attain by submitting their difficulties to arbitration.’

It is true that the arbitrators must carry out their duties in a judicial manner.  I do not mean that they must necessarily observe the precision and forms of a court of law, but they must proceed in such a manner as to insure a fair administration of justice between the parties.  If, therefore, an arbitrator has misconducted himself, has been corrupt, has heard one party and refused to hear the other, the Court will interfere and will set aside his award.”

[3]             No matter how much one excogitates the pleadings and evidence, what is lacking therefrom is any acceptable basis to conclude that the arbitrator failed to engage in a factual or legal enquiry vitiating the arbitration proceedings by virtue of conduct, which constitutes gross irregularity as envisaged in section 33 of the Arbitration Act 42 of 1965.

[4]             The relevant facts and background are comprehensively set out in the judgment of the court a quo[5], as well as in the written award by the arbitrator.

[5]             In summary, the first respondent[6] instituted arbitration proceedings against Mvula. The cause of action was based on a written agreement concluded between the parties during January 2018. In terms of the agreement, UWP was appointed to provide certain project management support to Mvula in connection with the project described as the “Accelerated Schools Infrastructure Delivery Initiative Program” undertaken by Mvula for the supply of water and sanitation facilities to 221 schools in the Amathole and OR Tambo Municipal Districts in the Eastern Cape Province.

[6]             The fee structure for the services to be rendered by UWP are set out in an annexure to the written agreement concluded between the parties.[7]

[7]             The claim of UWP was based on two invoices[8] for R1 424 562.06 and R831 221.83, respectively.[9]

[8]             After deduction of payments received from Mvula, UWP claimed R1 691 837.92, together with interest[10] and costs.

[9]             Leave to appeal to this Court was granted by the Supreme Court of Appeal, the Court a quo having declined to grant such leave.  The grounds relied upon by Mvula are threefold, namely:

[9.1]       The finding by the Court a quo that Mvula had not pleaded that UWP’s claim was not in accordance with annexure “D”.  This ground of attack is based on the contention that UWP’s compliance with the terms of the agreement and the fulfilment of its obligations were not admitted, which made it incumbent upon UWP to prove such compliance, which it failed to do.

[9.2]       A failure by UWP to prove that its claim for payment was in accordance with the contract and in particular annexure “D” and that the Court a quo erred in not finding that the arbitrator’s finding in this regard constituted a gross irregularity.  Grounds one and two in reality overlap.

[9.3]       The contention that the Court a quo erred in not finding that the arbitrator was biased because he had regard to inadmissible evidence[11] which resulted in the arbitrator making gratuitous and negative findings against Mvula.

[10]        Section 33(1) of the Arbitration Act provides:

“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 as being improperly obtained,

the court may, on application of any party to the reference after due notice to the other party or parties, make an order setting the award aside.”[12]

[11]        At this juncture, it is apposite to summarize the principles applicable to the review of an arbitrator’s award.[13]

[12]        Some of the salient features are the following:

[12.1]     At common law, it was accepted that all arbitration was subject to an implied condition that the arbitrator should proceed fairly.  Accordingly, the parties submit to a process they intend should be fair.[14]

[12.2]     Although it has been held that section 34 of the Constitution does not apply to arbitration[15], the Constitutional Court did hold that fairness is one of the core values of our constitutional order[16].

[12.3]     A party who seeks to impugn an arbitration award, has a restricted and mainly procedural scope of attack.[17]

[12.4]     Section 33 of the Arbitration Act governs the grounds on which impugnment must be based and the merits, however, are not as such, open to attack.[18]

[12.5]     Where an arbitrator has committed an error, which is one of law, it is not reviewable.[19]

[12.6]     A review of an arbitrator’s award is, in essence, an attack on the conduct of the arbitration and not on the merits.[20]

[12.7]     Parties, by agreeing to arbitration, limit the grounds of interference by a court to procedural irregularities as set out in section 33(1) of the Arbitration Act.[21]

[12.8]     A bona fide mistake of law or fact by an arbitrator does not constitute misconduct or an irregularity.[22]

[12.9]     In order to justify a review on gross irregularity, 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.[23]

[12.10]   The onus rests on an applicant[24] to prove that the arbitrator misconducted himself in relation to his duties, or committed a gross irregularity.

[12.11]   Identifiable grounds of review must be set out in the founding papers.[25] 

The asserted lack of proof by UWP of compliance with its obligations in terms of the agreement

[13]   The Statement of Claim, and after pleading the terms of the agreement between the parties, records that UWP at all material times complied with its obligations in terms of the agreement and submitted the two invoices which were only partially paid.

[14]   What is pleaded to the Statement of Claim is a denial of compliance but in the context of Mvula contending that UWP failed to comply with its obligations in eight specifically pleaded respects.[26]

[15]   Contextually (and illustrative of the aforegoing), Mvula, in pleading to the allegations as to the submission of the two invoices, admits receipt of the invoices, but denies that such invoices are due and payable or that there is any liability for the payment thereof “on account of the material breaches by the claimant referred to above and its failure to provide the Respondent with final or actual construction values and source documentation in order to calculate and verify the correct amounts due to the claimants in terms of the written agreement as amended”.

[16]   Ineluctably, the issue before the arbitrator was firstly whether or not UWP breached, to the extent pleaded by Mvula and, secondly, whether or not its failure to provide the respondent with final actual construction values was established.  The arbitrator was not called upon to make any findings in respect of the first issue as no evidence was led by Mvula to contradict the evidence on behalf of UWP that they were not in breach of the agreement.

[17]   It is trite law that the issues before an arbitrator are defined by the pleadings.[27]

[18]   The evidence on behalf of UWP, and particularly the evidence of Richter, was to the effect that the agreed services were rendered up to 95% of the services[28]  that invoices in respect thereof were submitted but not fully paid.

[19]   The major portion of the evidence in chief by Richter was an exposition of the rebuttal by UWP of the specific breaches relied upon by Mvula[29].

[20]   Besides some cross-examination relating to the alleged breaches, Richter was cross-examined on the issue of annexure “D” with the clear purpose of indicating (according to Mvula) that the values claimed by UWP were not construction cost values as contended for by Mvula but rather award values[30].

 [21]  Mvula’s counsel understood during the arbitration proceedings the limited issue.  In this regard and in so far as UWP is concerned he remarked that “[t]he plaintiff’s case is simply in terms of the contract, we done the work in terms of the contract, now we want to be paid”.

[22]   The cross-examination was essentially aimed at an issue relating to the calculation of fees on the final construction value as opposed to the contract award values.  Mvula’s case, which ties up with the only remaining live issue on the pleadings, was therefore whether payment was dependent upon final construction values.  In this regard the following was put to Mr Richter:

“And that is why Mr Richter[‘s] contract says that you are only entitled to be paid on final construction values and we will argue to the Arbitrator at the end of the day and this is, as I understand it, the essential point, the issue on which the arbitrator is required to make a finding . . . (indistinct) finding, is that when the contract says final construction value we say it means what it says, you say no it means a tender amount correct?  That is the disagreement between us, not so that is what this case is all about pretty much.  Do you have any comment on that?”

[23]   The remaining live issue in dispute as articulated in the pleadings was therefore whether or not fees could be based on the indicative value or on the final construction value.

[24]   In cross-examination, Mvula’s counsel asserts the following to the witness Richter:

“In your pleading you say the reason why you are entitled to be paid for these final accounts is because you basically save for what has to be done under the retention you have completed your work on the project?”  In this regard Richter responded in cross-examination as follows: “We have claimed our fee for work that has been done and completed to date, in accordance with your contract and that is what we are expecting compensation from Mvula Trust for our services”. 

[25]   It is therefore not disputed that the services were rendered (and presumably Mvula was paid by its principal for such services), but rather whether UWP was entitled to claim based on the indicative values rather than the actual construction values which, as testified by Richter, would only have been apparent at the end of the contract.[31]

[26]   Accordingly, there was no misunderstanding that the issue in dispute related to whether or not construction values had to be applied or whether or not indicative (tender awards) values could be applied to calculate fees.

[27]   What the Court a quo found, correctly so in our view, in respect of the issue relating to performance by UWP of its obligations, was that the sole issue in dispute in the arbitration was whether or not the calculation of fees due to UWP was in accordance with the final construction values or otherwise, more particularly as in the context, the arbitration hearing was delineated by the pleadings and the evidence tendered.

[28]   In line with the aforegoing, the learned Judge concluded as follows: 

“In the Statement of Claim UWP alleged that it performed its obligations in terms of the contract.  In the Statement of Response Mvula did not allege that UWP had not provided professional services as required by the contract.  Mvula cited eight (8) areas of non-performance which are not relevant for the present purposes”.

[29]   The learned Judge then records the following:

“[19]    In the arbitration hearing UWP tendered the evidence of two witnesses who asserted that it had fulfilled its contractual obligations and the payment claimed was due to it.  Mvula did not lead any evidence even on the alleged eight areas of non-performance.”

[30]   It is therefore self-evident that the arbitrator performed his mandate by interpreting the agreement (and in particular annexure “D”) contextually and found in favour of UWP.  Having regard to what remained in dispute on the pleadings and the evidence tendered, an interpretation by the arbitrator that fees were to be calculated based on the indicative values inexorably could lead to one conclusion only, namely that UWP was entitled to the payment of the balance of the two invoices.

[31]   On a careful analysis of the arbitrator’s award,[32] it is apparent that he was fully aware of the import of annexure “D” and appreciated the materiality thereof.  He carefully sets out in his award the issues that remain alive on the pleadings and expressly deals with Mvula’s contention and interpretation that monthly fee claims should have been based on the actual value of work constructed.  He weighed up the arguments on interpretation by the parties[33] and found in favour of UWP.

[32]   In applying his mind[34] he says the following with regards Mvula’s argument on the question of construction value:

“… in my considered opinion the Notes to the revised agreement (the notes) provide the key to meaning: ‘the indicative quantum of fees based on estimated construction values are included under addendum D’.”

[33]   With regards the contention on behalf of UWP the arbitrator paraphrases as follows:

“UWP’s argument has been that any logical interpretation of the contract could lead to the conclusion of inference that fees were to be calculated on the basis of the best estimate available of the construction values based on information received from the PSP’s at the time fees were being calculated and further that as these costs were fluid and capable of being changed from time to time as a result of a change in circumstances, so too fees were capable of similar adjustment.  The notes referred to an indicative quantum and, in my view, for good reason.”[35]

[34]   He then concludes[36] in summarizing what he refers to as the logical interpretation of the agreement.  The arbitrator’s interpretation[37] of the agreement was as follows:

“My understanding of the contract is that a more or less fixed monthly amount was intended to be paid each month for the duration of the contract (which at the time the original agreement was revised was intended to be 9 months) and that such an amount would be subject to small adjustments from month to month, depending on the changes to the scope of work to be executed, and a final larger adjustment based on the final value of the constructed works once Final Completion had been achieved.  This is evident from the history of the project as certain work was removed other was added by Mvula to make up and in fact ultimately exceed the difference (this was also confirmed at the hearing during examination and cross-examination of the witnesses)”.

[35]   The suggestion that the arbitrator misdirected himself and committed a gross irregularity by confusing or transferring the onus on Mvula is similarly without any merit.  On a careful reading of the award, what the arbitrator did was to interpret the agreement, and once having concluded that the applicable interpretation was that fees were claimed on the basis of tender award values, there remained no defence to UWP’s claim.  It is in this context that one must understand his comments that Mvula has not made a “plausible case for not paying what is legitimately owed to UWP”. 

[36]   On a conspectus of the evidence read in conjunction with the pleadings and the content of the award, the arbitrator simply interpreted the agreement in favour of UWP, which led to the inescapable conclusion that payment was due.[38]

[37]   In conclusion, and having regard to the principles applicable to the review of arbitration awards as set out above, Mvula has not established that the first ground of appeal constituted a gross irregularity.  Insofar as the interpretation and content of annexure “D” is concerned, the arbitrator, rightly or wrongly, interpreted the clause which is what he was called upon to do.  His interpretation does not, therefore, constitute a gross irregularity.

The contention that the court a quo erred in not finding that UWP had failed to prove its claim for payment was in accordance with the written agreement more particularly annexure “D”

[38]   This aspect has been fully ventilated above.  As previously indicated, the two grounds overlap.

[39]   The arbitrator was entitled and at liberty to find that the evidence substantiated UWP’s claim that it had rendered the services in respect of the two invoices,[39] in terms of the agreement (as interpreted by the arbitrator).

[40]   Once again, and even assuming his findings in this regard were incorrect, he applied his mind to what was placed before him and, based on the authorities, this cannot constitute a gross irregularity in the proceedings.

Reliance on inadmissible evidence and bias

[41]   The contended for irregularity based on bias is predicated on certain introductory remarks by the arbitrator in his award where he embarks upon a discussion of the issues.

[42]   Mvula relies on a passage,[40] which, as argued in the heads of argument filed on its behalf, “displayed a measure of partiality in favour of his fellow consulting engineers and against the trust”.[41]

[43]   What Mvula finds objectionable is a portion of the passage where the arbitrator records that Mvula either did not perform their side of the contractual bargain or continued stalling the pre-arbitral process by reneging on what seemed to be agreed terms of settlement notwithstanding without prejudice meetings and agreements concluded.

[44]   These remarks must be seen against the background of the preceding portion in the particular paragraph, which relates to the initial allegation by Mvula that UWP negotiated in bad faith and failed to follow conditions precedent to the declaration of a dispute in terms of the arbitrator provision.  This is buttressed by the following paragraph where the arbitrator refers to his previous ruling that UWP’s referral was in order and he then says:  

“I see little reason to entertain further argument on the subject matter nor to explain further my prior ruling more so as a detailed explanation has already been provided to both Mvula and UWP in my ruling.”

[45]   The essence of the contention regarding bias is that the arbitrator relied on inadmissible evidence, which formed the basis for negative remarks concerning Mvula.  As correctly pointed out in the judgment of the Court a quo, these remarks were not material to the resolution of the pleaded disputes between the parties nor did it play any role in the decision reached by the arbitrator.

[46]   There was, accordingly, no causal link between the throwaway remarks and the finding by the arbitrator, which was ultimately formulated and based on an interpretation of the agreement.

[47]   Having regard to the reasoning of the arbitrator and the way he conducted himself in formulating his award, it cannot be suggested that he acted with actual bias.

[48]   The argument on behalf of Mvula was that he displayed a measure of impartiality[42] and in essence, what is contended is that there was a reasonable apprehension of bias, which vitiated the entire proceedings.

[49]   The threshold for a finding of real or perceived bias is high.[43] 

[50]   The Court a quo was therefore correct in finding that the record, on a proper reading thereof, does not support any allegations of bias.

[51]   This must also be seen against the background of the following comments by the Constitutional Court in Bernert[44]:

“[35]    The presumption of impartiality and the double-requirement of reasonableness underscore the formidable nature of the burden resting upon the litigant who alleges bias or its apprehension.  The idea is not to permit a disgruntled litigant to successfully complain of bias simply because the judicial officer has ruled against him or her. . . ”

Conclusion

[52]   The arbitrator correctly understood his mandate and interpreted the agreement to the best of his ability.  As previously indicated, the interpretive process undertaken by the arbitrator formed the basis for the ultimate finding that the monies outstanding in respect of the unpaid invoices were due and payable.

[53]   Mvula’s complaint that his award is tainted with gross irregularity and stands to be impugned, must therefore fail. 

[54]   For the reasons set out above, we make the following order:

(a) The appeal is dismissed.

(b) The appellant is ordered to pay the respondents’ costs.

_______________

S M MBENENGE

JUDGE PRESIDENT OF THE HIGH COURT

_________________

F B A DAWOOD

JUDGE OF THE HIGH COURT

_______________

A BEYLEVELD

ACTING JUDGE OF THE HIGH COURT

Counsel for the appellant                  :         TMG Euijen SC

Attorney for the appellant                :         Cheadle Thomson & Haysom Inc

                                                                   Grahamstown

C/o Whitesides Attorneys

Grahamstown

Counsel for the first respondent                 :         TJM Paterson SC

Attorneys for first the respondent    :         Stirk Yazbek Attorneys

                                                                   East London

                                                                   C/o McCallum Attorneys

Grahamstown

---