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REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION

CASE NO: 2013/42685

Reportable

Of interest to other judges

Revised.

11 June 2017

In the matter between

HEMMINGWAYS SHOPPING CENTRE [Pty] Ltd                                            APPLICANT

and

P D NAIDOO & ASSOCIATES                                                               1^ST RESPONDENT

CONSULTING ENGINEERS (PTY) LTD

SHORT DAIRMUID N.O.                                                                        2^ND RESPONDENT

 

JUDGMENT

VICTOR J:

 

Issue for determination

[1] The applicant seeks to review and set aside an arbitrator’s ruling in medias res.

[2] On 7 October 2013 the arbitrator refused the applicant leave to reopen its case to proceed with the examination-in-chief of Mr Arno Ellmer a structural engineering expert. The applicant contends that this is procedurally unfair.  An order is sought that the arbitrator’s ruling be corrected and remitted back to him to allow  the applicant to reopen its case and proceed with the examination-in-chief of Mr Arno Ellmer as envisaged by the applicant’s rule 36 (9) (b) notice dated 27 September 2013, also known as the Ellmer 4 report.

[3] The first respondent submitted that the arbitration had progressed far down the line into its fourth year. It had reached a stage where in the light of all the amendments and the inability by the applicant to demonstrate what its case was together with the fact that the leading of further evidence by Mr Ellmer was really another attempt at trying to relieve its lack of direction. The first respondent claimed that it had suffered substantial prejudice. It is the first respondent’s case that the applicant had not demonstrated that this attempt to re-open its case was not yet another exercise in futility. The first respondent argued that it had spent a lot of money preparing itself for the initial claim by the applicant and that this had changed dramatically over the four years. More importantly it was submitted that each time the applicant was faced with a difficulty it would simply amend its claim. 

[4] A court’s power of intervention in arbitration matters is limited. In order to justify the intervention of the courts in medias res a high threshold must be satisfied. It must be established that the irregularity caused or will cause substantial injustice to the applicant. This must be weighed against the prejudice to the first respondent. In order to make this assessment a close analysis of the procedural elements leading up to the impugned decision of the arbitration is required.

[5] In the founding affidavit a very full history is set out. In brief, the applicant points out that it is still presenting its case in respect of the first respondent’s counterclaim. On 16 and 17 October 2012 the applicant presented Mr Ellmer’s evidence-in-chief and indicated to the arbitrator that it had no further questions where after the arbitration hearing was postponed. Mr Ellmer is the only expert witness that the applicant would call in respect of its claim. At the recommencement of the arbitration hearing on 7 October 2013 the applicant applied to the arbitrator to reopen his case and proceed with the examination-in-chief of Mr Ellmer.  The arbitrator refused the application.

 

The Arbitrator’s report

[6] The arbitrator’s report was placed before the court to provide an explanation for his decision which is under review.  He is a consultant and a member of a Dispute Resolution Practice. He has been an attorney for 41 years.  He has been involved in a number of matters in the construction and engineering fields, both in dispute resolution, contract negotiation and implementation.  It is common cause that the parties appointed him by agreement.  His experience seems to span over a large number of matters which include advising the sponsors and the contractor on South African Department of Trade and Industry, accommodation deal, worked on the Medupi and Kusile power station projects as an advisor to the contractors.  He has also been involved as an advisor to the Bakwena Platinum Highway project and has been an arbitrator in this dispute between the parties since 2002.

[7] There was a pre-arbitration meeting where a time table was agreed to by the parties.  There were a number of interlocutory applications in this matter. On 13 November 2010 the claimant’s application to compel discovery was granted.  On 28 June 2011 the arbitrator granted the first respondent’s application to compel particulars. On 3 April 2012 the first respondent sought a postponement and this was refused but subsequently that award was abandoned by the parties and the matter was postponed.

[8] On 10 April 2012 the claimant’s application to compel compliance in terms of rule 35 (3) was granted.   On 29 August 2013 the first respondent’s application to compel further particulars was granted. On 13 September 2012 the first respondent’s application to set aside the report of Ellmer in terms of rule 32 was refused.  On 3 December 2012 the applicant’s application to amend was granted as well as condonation for the late delivery of the expert notices.

[9] I refer to this particular timeline to demonstrate that, in my view, the arbitrator has dealt with procedural aspects, in an even handed manner. He explains what happened and states that at the conclusion of the hearing of 17 October 2012 the applicant’s expert Mr Ellmer was in the witness box. The applicant’s legal representative announced that he had no further questions of the witness and on behalf of the first respondent it was indicated that he would cross-examine Mr Ellmer.  The matter was then postponed on the understanding that the cross-examination would commence at the resumption of proceedings.

[10] When the proceedings commenced on 7 October 2013 applicant’s counsel applied to reopen the examination of Mr Ellmer in order to introduce further evidence. This was yet one of several attempts by the applicant to amend and amplify the amounts claimed. It was the first respondent’s case that this further indulgence sought was one of many amendments and demonstrated unequivocally the inability by the applicant to really demonstrate what its case was.

 

Arbitration Agreement

[11] In terms of clause 13.6 of the Appointment Agreement the arbitrator had the fullest and freest discretion with regard to the proceedings and his award was final and binding on the parties to the dispute.  Furthermore, the arbitrator could dispense wholly or in part with formal submissions or pleadings.  Clause 13.6.2 will determine the applicable procedure taking into account the fact that it is intended that the dispute will be determined as quickly as possible and shall not be bound by strict rules of evidence and shall be entitled to take equity into account.

[12] The arbitrator stated that he was persuaded by the first respondent’s submissions and concluded that the claimant should not be permitted to reopen its case in effect to remedy what was perceived to be shortcomings in the evidence and the report filed by Mr Ellmer.  The arbitrator had decided that in the light of the duration of the matter and the agreed intention of the parties that the dispute would be determined as quickly as possible he decided that the claimant should not be allowed to reopen the evidence-in-chief of Mr Ellmer and thus refused the application.

The four year chronology

[13] There was a chronology presented by the first respondent that demonstrated the lengthy period that this arbitration has taken. Just by way of background the construction commenced in September 2007. Hemmingway’s is a shopping centre in East London in the Eastern Cape.

[14] A dispute was declared on 1 December 2009 and this was directed at a claim that there was an overdesign on the part of the first respondent. The matter commenced.  In June 2010 there was an amended statement of defence and annexure P1 was introduced. On June 2010 the plea to the counterclaim was filed.  In February 2011 the defendant’s request for trial particulars including a request to identify elements which were overdesigned and quantity by which each element was overdesigned.  This yielded a paucity of detail from the applicant.

[15] On 29 March 2011 the applicant answered the trial particulars in a most general way and stated that the applicant’s case presently does not pertain to specific elements of the structure.  In the first respondent’s request for further particulars the following question is directed at paragraph 11 of the statement of claim.  The applicant is requested to provide a detailed breakdown of the manner in which the overdesign resulting in 8 476 tons of steel is made up with reference to the structural elements of the Hemmingway’s Mall on Annexure P1 to the first respondent’s defence.

[16] In a further question directed at 13.1 of the statement of claim the applicant is requested to identify the structural elements of the Hemmingway Mall, which were overdesigned. Various questions were directed in respect of the statement of claim so that the first respondent could understand very clearly what case it had to meet.

[17] On 21 June 2011 there was an opposed application to compel better trial particulars.  On 28 June 2011 an order was issued directing the applicant to provide better particulars, inter alia, regarding the overdesign of each element. On 28 July 2011 the better particulars were delivered but stated that the pile caps type B were overdesigned by 3 172 tons in aggregate and columns in the basement were overdesigned by 96.5 tons in aggregate. A complete lack of specificity.

[18] Expert reports were filed on 26 August 2011 and on 30 August 2011 the claimant’s notice of amendment reduced the overdesign claim by 1 000 tons in respect of variations. On 31 August 2011 the applicant’s notice of intention to amend trial particulars stating that the instances of overdesign in respect of pile caps and columns were mere examples of negligent overdesign.  So even at that stage the first respondent was not quite sure of the exact case that it had to meet.

[19] On 13 to 19 September 2011, the experts agreed that the additional steel due to actual overdesign amounted to 185 tons. On 20 September 2011, at the first hearing, the defendant stated that annexure P1 would be amended in the light of the increase and scope of the trial, particularly from 99 tons to an unknown quantity.  A lot of argument was directed to this during this application.  The applicant refused to consent to a postponement and two parties in-chief despite this substantial adjustment on the part of the applicant.

[20] On 7 October 2011, the parties agreed to seek further particulars by 31 January 2012 but these were only provided at the end of February 2012. On 31 January 2012 the applicant’s request for particulars amounted to 600 hundred questions. On 21 February 2012 the claimant’s notice of claim 3 for 2 320 tons of steel based on the original rebar allowances was made. In March 2012 the amended pages in respect of claim 3 were filed. On 16 April 2012 the plea was amended following introduction of claim 3 and reliance on P1 was abandoned and Huff 2 was filed.

[21] During the second hearing on 2 May 2012 until 15 May 2012 Messrs Townsend, Perry and Van den Linden testified.  On 11 May 2012 there was a supplementary affidavit filed.  On 28 May 2012 the third hearing was again postponed to 15 August 2012 at the instance of the applicant.  On 15 June 2012 the applicant appointed Mr Ellmer.  On 1 August 2012 the report known as Ellmer 1 was served and this was an audit in respect of 1 631 columns and the pile caps and independent beams.

[22] From 20 to 24 August the fourth hearing, a rule 30 notice of an irregular step was argued in relation to Ellmer 1. On 13 September 2012 the rule 30 application was dismissed. On 28 September 2012 Ellmer 2 and JP Theron 1 were served.  Again, demonstrating that the case had now moved very far away from the original statement of claim.  There was the averment on behalf of the applicant that there was an overdesign in respect of coffers of the 2 977 columns, transfer beams and independent beams audited. There was an overdesign of some 1 969 tons of steel found in the coffers.

[23] On 17 October 2012, the fifth hearing, a condonation application was argued and granted. Ellmer presented his evidence and the matter was postponed to 12 November 2012 for cross-examination. It was granted to that date on the basis that the 1^st respondent’s experts would be ready to proceed.  On 23 October 2012 there was a notice to amend the claim.  It was now no longer a rebuttal but a new claim.

[24] On 29 November 2012, the sixth hearing, the opposed amendment was argued and the matter was postponed to 18 March 2013 and thereafter postponed to 7 October 2013 for a week in respect of the latter.  On 3 December leave to amend was granted. 28 February 2013 Huff 3 delivered calculations that were done by 9 October 2012.

[25] On 13 March 2013 an important date, the expert meeting between Mr Ellmer and Huff. Mr Ellmer presented 15 spreadsheets with no quantification. On 18 March 2013 the scheduled date for a fourth hearing stood down for expert meetings at the direction of the arbitrator.  On 22 March 2013 a further expert meeting minute was signed. The hearing stood down for the preparation of an opposed postponement application.

[26] A seventh hearing took place, commencing 18 March 2013 and I have already referred to the fact that the postponement was refused incorrectly and the parties, by agreement, agreed to the postponement.

[27] On 26 April 2013 a notice was given by Snowdon, as an expert witness.  On 26 April 2013 the first respondent filed a request for further particulars. On 7 June 2013, Ellmer 4 was delivered abandoning the spreadsheets of March 2013 and introducing 15 new spreadsheets. JP Theron 2 was also delivered quantifying overdesign of coffers as being 978 tons of steel.  On 18 June 2013 the defendant’s application to compel further particulars was served and the application to compel further particulars was argued in August 2013 and on 29 August 2013 the applicant was directed to answer the further particulars. 

[28] The timeline goes on to show that a reply was filed on 30 August. On 13 September Snowdon 1 was delivered. 27 September 2013 Ellmer 5 was delivered with 15 new spreadsheets, no quantification of steel and by 2 October it was evident to the applicant that the first respondent would object to the reopening of the evidence-in-chief of Mr Ellmer. The eighth hearing, leave to reopen the evidence, was refused. 

 

Evaluation of the issue

[29] In my view the arbitrator allowed every possible issue to be canvassed. Against this background the parties have referred to a number of cases dealing with the effects of arbitration and in what circumstances a Court can interfere with an arbitrator’s decision and also to the principles dealing with the reopening of a litigant’s case. I deal with the first aspect, namely, that is the question of whether a High Court can interfere with arbitration proceedings midstream or indeed even an arbitration award.

[30] In Lufuno Mphaphuli and Associates (Pty) Ltd v Andrews 2009 (4) SA 529 CC as well as Telecordia Technologies Inc v Telkom (Pty) Ltd [2006] ZASCA 112; 2007 (3) SA 266 (SCA).  Kroon AJ referred to the case of Telecordia Technologies with approval and stated the following in para 28:

‘The Supreme Court of Appeal stressed the need when courts have to consider the confirmation or setting aside of arbitral awards for adherence to the principle of party autonomy, which requires a high degree of deference to arbitral decisions and minimises the Court for intervention by the Court. The decision of the Supreme Court of Appeal in the present matter was informed by this principle. Resolving, for the purposes of the present case, the tension between this principle and the duty of the courts to ensure, before ordering that an arbitration award be enforced by the State, that the award was obtained in a manner that was procedurally fair, as required by s 34 of the Constitution’

[31] Ms Justice O’Regan ADCJ in Lufuno supra, in dealing with the question of a Court interfering in arbitral awards approached the matter in the following way.  The starting point for her was that the nature of proceedings is really private in nature.  It is a process built upon by consent between the parties and the hallmark of an arbitration is that it is an adjudication flowing from the consent of the parties to the arbitration award who define the powers of adjudication and now equally free to modify or withdraw from that power at any time by way of further agreement, and in this regard she referred with approval to the case of Total Support Management (Pty) Ltd and another v Diversified Health Systems SA (Pty) Ltd and another [2002] ZASCA 14; 2002 (4) SA 661 (SCA).

[32] She also referred to the fact that private arbitration is used widely, domestically and internationally and that most jurisdictions in the world permit private arbitration of disputes and also provide for the enforcement of arbitration awards by the ordinary courts. Reference was made to various treaties and in particular, on behalf of the applicant the following submissions were made in respect of the Lufuno principles. 

 

Applicant’s submissions regarding Lufuno

[33] It is common cause that the majority judgment of the Constitutional Court in Lufuno emphasised the fact that an arbitration hearing must be conducted in a procedurally fair manner, emphasised that fairness depends on the context and more that the Court should not be too quick to find fault with the manner in which the arbitration hearing was conducted and/or that a faulty procedure is or was unfair and in each particular case the alleged procedural irregularity had to be looked at.

[34] In this case the applicant contends that the procedural irregularity by not allowing the evidence of Mr Ellmer was such that this Court can intervene and that the principles set out in the Lufuno judgment do not preclude this court from setting aside the arbitrators order.

[35] The case of the applicant was that notwithstanding the postponements and amendments caused at its instance the ‘cumulative effect’  was not the proper test as the litigation history was only relevant to those instances and particular occasions and were the ‘procedural ashes of the arbitration proceedings’. According to the applicant the first respondent’s accommodating stance did not count for anything as it had remedies to protect its rights and interests at the time but failed to do so.  In this regard the applicant refers to the first respondent’s complaint about the many postponements and lack of compliance with the further particulars sought for trial and the evolving nature of the applicant’s case as irrelevant to an assessment at this stage.  In other words, the applicant contends that the first respondent cannot complain about all these amendments and interlocutory applications, it should have complained about them way before this particular review application.

[36] It is the applicant’s case that the refusal by the second respondent, in fact, impairs the applicant from proving the actual overdesign of the 400 millimetre and 500 millimetre coffer slabs. It matters not that the arbitrator condoned the late delivery of Ellmer 1 and 2, he should also condone the introduction of the further Ellmer reports.

[37] The applicant also contends that the arbitrator also granted leave to the applicant to lead Mr Ellmer’s evidence at a time when the reports known as Huff 3 and Snowdon 1 did not exist and were delivered subsequent to his initial evidence. The Ellmer 4 report used the volumes and top rebar measurements as set out in the Snowden 1 report. A further reason to re-open the applicant’s case was also based on the fact that the arbitrator held on 4 April 2013 that he wanted Mr Ellmer’s amended calculations to be tested and more importantly inhibited the applicant from proving part of its defence to the 1^st respondent’s counterclaim. 

 

The first respondent’s claim of prejudice

[38] The First respondent contends that the arbitrator did not exclude the evidence of Mr Ellmer to prevent a further version of the overdesign claim arbitrarily but it was within a context of evasive and obstructive conduct on the part of applicant. The time line is instructive as to the enormous latitude granted by the arbitrator to the applicant.

 

Evaluation

[39] The weighing up of the applicant and respondent’s approaches must be assessed in the light of the considerable and settled jurisprudence pertaining to arbitration. The question of the principles pertaining to arbitration and to what extent a Court can interfere was further dealt with in the matter of Cool Ideas 1186 CC v Habit and another 2014 (4) SA 474 (CC).  In the minority judgment Justices Froneman, Cameron, Dambuza and Van der Westhuizen dealt with the fact that obviously, if the procedures of an arbitration are contrary to public policy the spirit and purport and object of the Bill of Rights then this is an important consideration. They also reemphasised the importance of fairness in arbitration following on the Lufuno judgment, but also upheld the principle that the values of our Constitution would not necessarily be served by interpreting section 33 of the Arbitration Act in a manner that enhances the powers of the Court to set aside a private arbitration award.

[40] When parties enter into a private arbitration agreement they make a value choice about how they want to exercise their rights under the Constitution and the extent of interference or control they wish the courts to have over the private process.  These choices are material and relevant in determining what public policy is in the enforcement of a particular private arbitration and what it should be.  The Arbitration Act recognises these choices and accepts their legitimacy in seeking to give effect to arbitration awards.

[41] Clearly this Court has to consider whether the refusal by the arbitrator to allow the applicant to reopen its case and continue to lead the evidence of Mr Ellmer on yet a further set of calculations, was fair in the circumstances.  Obviously fairness is one of the core values of our Constitution.

[42] The approach of the Supreme Court of the United States is clearly another benchmark against which to assess whether the fairness aspect was dealt with and whether or when a higher court must interfere in the arbitration process.  In the case of AT&T Mobility LLC v Vincent Conception et ux, 563 U.S. __ (2011, the following principles emerged from the Supreme Court and dealing also with the statute pertaining to the control and oversight of arbitrations the following was said:

‘The overarching purpose of the Act is to ensure the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings. The point of affording parties discretion in designing arbitration processes is to allow for efficient, streamlined procedures tailor-made for the type of dispute.  In particular, the parties could choose an expert in the field and, therefore, obtain possibly a better result than they would obtain in a Court where possibly the presiding officer is not versed in the content of the matter.’

 

The re-opening of the applicant’s case

[43] There were also various cases referred to on behalf of the applicant on the reopening and the relevant principles on reopening its case after the close of its case.  In the case of Oosthuizen v Stanley 1938 (AD) in an application by a plaintiff for leave to call a fresh witness after the case for the defendant was closed, the requirement of materiality was raised and where the aspect is absolutely material that principle should be persuasive of the decision whether to allow the reopening of the case or not.  See pg 333 :

‘There is no doubt that the Trial Court has the power to allow a plaintiff to call a fresh witness after the defendant has closed its case but the exercise of that power is in the discretion of the Court and again, the benchmark of materiality was erased and clearly that is the benchmark which has to be applied in this matter.  The test of materiality should be held to be satisfied where the evidence tendered, if believed, is material and likely to be weighty.’

[43] The question for determination in this matter is whether the evidence of Mr Ellmer will be sufficiently material and weighty in order to dispose of the matter in its entirety. The first respondent submitted very clearly that in the light of the applicant’s approach to this litigation, its failure to really define its case at the outset and the extensive evolution of the case does not mean that the evidence of Mr Ellmer, will bring an end to the matter and, therefore, it will not be dispositive.  The applicant’s propensity to amend was never ending as it had even at this late stage not finalised its claim. I was not persuaded that the further evidence of Mr Ellmer would not illicit a plethora of further expert reports.

[44] I was also referred to Mkhwanazi v Van der Merwe and another 1970 (1) SA 609 in regard to the wide discretion a Court has in allowing the reopening of a case and in particular the dictum of Holmes JA at pg 618 where he held that the question of allowing the reopening is a question of discretion. In that particular case the reopening would not result in any prejudice at all to the defendants and the party should have been allowed to lead the additional evidence.  In addition, the fresh evidence would not have involved any amendment of the pleadings as the attorney for the plaintiff, again rightly submitted to the Magistrate, that even if an amendment were to have been necessary who can doubt that it would have been proper to grant it.

[45] Quite clearly the cases referred to by the applicant deal with the very specific limited consequences of allowing the reopening of the case.  Reference was also made to the judgment of Leon J in Barclays Western Bank v Gunas and another 1981 (3) SA 91 D.  Although in an application to reopen a case there is no obligation on the part of the applicant to show that the evidence will likely be believed and, therefore, reduce the level of proof required to succeed in the reopening of a case.  But what was clear is that the result of the reopening must be decisive. 

[46] Reference was also made to a number of other cases referred to by Davis J, 2000 (4) SA 616 in the case of Fortis Street 69 Eiendomme (Pty) Ltd v PA Venter Worcester (Pty) Ltd 2000 (4) SA 59 (C) where the principles were set out very clearly and these included: the reason why the evidence was not led timeously, the degree of materiality, the possibility that it may have been shaped to relieve the pinch of the shoe, the balance of prejudice, the stage which the particular litigation has reached, the healing balm of an appropriate costs order and the general need for finality in judicial proceedings.

[47] In very detailed heads of argument by both parties the first defendant submitted that the consequences of the application to lead the evidence of Mr Ellmer cannot be ignored. This is not an ordinary situation there were minor adjustments to the pleadings where this may form part of the normal ebb and flow of litigious proceedings. The first respondent contends that the applicant has delayed significantly and the delays have simply been aimed at getting the applicant out of what would be a difficult situation as its case proceeded.

[48] The first respondent contends that the focus of the application for review focuses on selective isolated facts and thus the application as a whole is really distorted. This is not a formalistic objection on the part of the first respondent, but really to a situation where it simply does not know which way the applicant is going. 

[49] I am persuaded that the first respondent is correct in this view.  This claim by the applicant has evolved from a very simple claim where it is clear even from the request for further particulars that the applicant itself was unable at an early stage prior to the arbitration commencing and to date, to state exactly how its claim was made up. It simply responded that reference in the statement of claim was one example of how the claim was made up and then the first respondent was simply left to guess how the various elements of the claim were comprised and how they were computed. 

[50] The applicant in very detailed heads of argument, referred to the common law position, the duties of an arbitrator and the rights of parties and the role of the High Court during the arbitration proceedings. It relied on the case of Parekh v Shah Jehan Cinemas [Pty] Ltd and  others 1980 (1) SA 302, where the Court held that while the arbitration is in progress the Court is there whenever needed to give appropriate directions and to exercise supervision. 

[51] Section 33 of the Arbitration Act does not apply as this is not the final award. As I understood the applicant’s submissions no reliance was placed on the award as a gross irregularity as defined but rather a common law right to fairness. What is before this Court are the very detailed facts, which I have referred to and an analysis of  the application of the principles in of Lufuno supra and the international jurisprudence which emphasises the limited manner in which arbitration proceedings can be interfered with.

[52] I am of the view that it would be inappropriate for this Court to interfere with the ruling of the arbitrator. The parties chose the arbitrator. He is experienced in matters such as these. Obviously, the parties at the outset must have been satisfied with the extent of his expertise and, therefore, they contractually bound themselves to the terms of the arbitration and the arbitration procedure itself. I can discern no level of unfairness in the ruling. A limit had to be placed on the applicant’s ever evolving claim.

 

The order that I would make is the following:

The review application is dismissed with costs. 

 

Counsel for Applicant: Attorney Gerrie Ebersohn Attorney

Ref Dr Gerrie Ebersohn, 011 791 1104

 

Counsel for First Respondent: Adv L J Van der Merwe Sc

Attorney for First Respondent: Norton Rose Fullbright South Africa

 

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