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IN THE NORTH WEST HIGH COURT, MAFIKENG

CASE NO:  M 168/16

Not reportable

Not of interest to other judges

In the matter between:

MAGEZA SAMUELS INCORPORATED                                            Applicant

and

NORTH WEST HOUSING CORPORATION                                  Respondent

 

DATE OF HEARING: 13 SEPTEMBER 2017

DATE OF JUDGMENT: 12 OCTOBER 2017

COUNSEL FOR THE APPLICANT: ADV. WILLEMSE

COUNSEL FOR RESPONDENT: ADV. NXUMALO

JUDGMENT

HENDRICKS J

 

Introduction

[1] On the 23^rd September 2008 the applicant and respondent entered into an agreement in terms of which the applicant would provide debt collection services to the respondent. A service level agreement (SLA) was concluded. Subsequently, a dispute arose between the two parties. In terms of the agreement between the parties, any dispute must be referred for arbitration by the arbitrator. On 02^nd April 2009 Adv. De Vos SC, was appointed by this Court to act as arbitrator. Adv. De Vos SC has in the meantime been elevated to the Bench and could no longer act as arbitrator. Adv. Sibeko SC was appointed as arbitrator on 06^th April 2015 to replace Adv. De Vos SC.

[2] On 31^st August 2015 the respondent filed an amended plea in the arbitration process. In this amended plea, the respondent pleads that the SLA is null and void because it is inconsistent with Section 217 of the Constitution of the Republic of South Africa, Act 108 of 1996 (the Constitution). The arbitrator, so it is alleged, cannot consider the question of jurisdiction. Furthermore, that the SLA was not properly entered into in terms of Section 22 of the North West Housing Corporation Act 24 of 1982, in that it lacked the signature of a second board member of the respondent.

[3] It is contended on behalf of the applicant that the amended plea has the practical effect that the arbitration proceedings can no longer continue because the arbitrator himself cannot rule on his own lack of jurisdiction nor can the arbitrator adjudicate on matters of constitutional validity. Therefore, so it was contended, was it necessary to approach this Court to adjudicate on this matter.

 

The relief sought

[4] The applicant approached this Court for an order in the following terms:

“1. THAT: The Respondent's new amended Plea filed in this arbitration on the 21 August 2015 raising Constitutional invalidity of the contract dated 23 July 2008 concluded between the parties herein appointing the Applicant to conduct debt collection on behalf of the Respondent be declared irregular and be set aside.

In the alternative;

2. THAT: The Respondent's new amended Plea filed in this arbitration on the 21 August 2015 raising Constitutional invalidity of the contract dated 23 July 2008 concluded between the parties herein appointing the Applicant to conduct debt collection on behalf of the Respondent is mala fide, without foundation and has been filed solely for the purposes of delay and be set aside;

3. THAT: The Respondent be directed-to pay the costs of this application on the scale as between attorney and own client.

4. THAT: Further and/or alternative relief.”

[5] The respondent filed a counter-application praying that these proceedings be stayed and the matter be referred back to arbitration, as contemplated in clause 10 of the SLA dated 23^rd September 2008. The issues to be determined by this Court is whether the amended plea filed by the respondent was filed mala fide, without foundation and solely for the purposes of delay and should therefore be declared irregular and set aside or whether these proceedings should be stayed and the matter be referred back for arbitration.

[6] Clause 10 of the SLA provides as follows:

“10. DETERMINATION OF DISPUTE

10.1 Any dispute arising out of or in connection with this agreement including, but not limited to, any dispute or difficulty arising in connection with the interpretation, application and/or effect of any of the terms, conditions or restrictions imposed or any procedure to be followed under this agreement and/or arising out of the termination or cancellation of this agreement or any provisions hereof, except where an interdict or urgent relief is sought from a court of competent jurisdiction, or where otherwise provided in this agreement, shall be determined in. the manner set out below.

10.2 If a dispute arises, either party to this Agreement shall notify the other party to this agreement in writing. Should the dispute not be resolved between the parties within 14 (fourteen) days of receipt by the other party of such notice, then either of the parties to the dispute may refer the dispute for determination in terms of clause 10.3.

10.3 If either party exercises its right in terms of clause 10.2 to refer the dispute for determination, such dispute shall be finally resolved in accordance with the Rules of the Arbitration Forum Limited ("the Forum) by an arbitrator or arbitrators appointed by the forum. In the event of a conflict between the provisions of this clause 10 and the provisions of the Forum's Rules, the provisions of the Forum shall prevail.

10.4 This clause constitutes an irrevocable consent by the parties to any proceedings in terms hereof and neither of the parties shall be entitled to withdraw from the provisions of this clause or claim at any such proceedings that it is not bound by this clause.

10.5 This clause is severable from the rest of this agreement and shall remain in effect even if this agreement is terminated or cancelled for any reason.

10.6 The receipt by either party to this agreement of a notice in terms of clause 10.2 shall constitute the service of a process for the purpose of interruption of prescription in terms of section 15 of the prescription Act No. 68 of 1969 or the corresponding provision in any amendment thereto or replacement legislation.

10.7 The parties agree to keep the proceedings for determination of the dispute, including the subject matter of the dispute and evidence heard during the proceedings confidential and-not to disclose them any other person, except for the purpose of obtaining any order of court.

10.8 Nothing contained in this clause, shall preclude either party from urgent relief, if necessary.”

[7] It is common cause between the parties that an arbitrator is appointed to arbitrate the dispute between them. It is furthermore common cause that the matter is pending before the arbitrator. Section 6 (1) and (2) of the Arbitration Act 42 of 1965 provides:

“(1) If any party to an arbitration agreement commences any legal proceedings in any court (including any inferior court) against any other party to the agreement in respect of any matter agreed to be referred to arbitration, any party to such legal proceedings may at any time after entering appearance but before delivering any pleadings or taking any other steps in the proceedings, apply to that court for a stay of such proceedings.

(2) If on any such application the court is satisfied that there is no sufficient reason why the dispute should not be referred to arbitration in accordance with the agreement, the court may make an order staying such proceedings subject to such terms and conditions as it may consider just.”

[8] In Altech Data vs MB Technology (Pty) Ltd 1998 (3) SA 748 (WLD) the following was stated on page 754 F – J and page 755 J – 756 A:

“The onus in the present application is upon the applicant to satisfy the Court ‘… that it should not, in the exercise of its discretion, refer matter to arbitration …’. See Universiteit van Stellenbosch v J A Louw (Edms) Bpk 1983 (4) SA 321 (A) at 333H.

The Court, per Galgut AJA, whilst stating that

‘… the discretion of the Court to refuse arbitration, where such an agreement exists, was to be exercised judicially, and only when a “very strong case” had been made out’,

went on to state at 334A that:

'It is not possible to define, and certainly it is undesirable for any court to attempt to define with any degree of precision, what circumstances would constitute a “very strong case”.’

(My emphasis.)

In my judgment I am therefore required, in the exercise of my judicial discretion, to bear in mind the principles set out in the above authorities both with regard to the onus of proof being upon the applicant in this case and also that the applicant is required to discharge such onus with the requisite degree of proof referred to in the above-quoted authorities.

However, as stated by Galgut AJA, I am required to determine in this application whether circumstances constituting a ‘very strong case’ or ‘compelling reasons’ exist to justify a refusal to hold the present applicant to the agreement to have ‘any dispute’ resolved by arbitration as provided in clause 19 of this agreement.”

and

“In my view, therefore, even if it could be said that the determination of the dispute in the present case involves the determination of a pure question of law, this fact alone would not justify a refusal to stay the present application and to refer the matter to arbitration.”

Therefore, a party resisting the stay of court proceedings bears the onus of convincing the Court that owing to exceptional circumstances the stay should be refused.

[9] In Radon Projects vs NV Properties 2013 (6) SA 345 (SCA) the following is stated:

“[28] The response of the arbitrator cannot be faulted. When confronted with a jurisdictional objection an arbitrator is not obliged forthwith to throw up his hands and withdraw from the matter until a court has clarified his jurisdiction. While an arbitrator is not competent to determine his own jurisdiction that means only that he has no power to fix the scope of his jurisdiction. The scope of his jurisdiction is fixed by his terms of reference and he has no power to alter its scope by his own decision (in the absence of agreement to the contrary).

[29] But that does not preclude him from enquiring into the scope of his jurisdiction, and even ruling upon it, when a jurisdictional objection is raised. He does so at the risk that he might be wrong – in which case an award he makes will be invalid – but in some cases it might be convenient to enter upon the arbitration nonetheless. As it is expressed in the fifth edition of Keating on Building Contracts¹³ (before the Arbitration Act 1996), in reliance on Christopher Brown Ltd v Genossenschaft Oesterreichischer etc:

‘If the arbitrator's jurisdiction is challenged he should not refuse to act until it has been determined by some court which has power to determine it finally. He should inquire into the merits of the issue to satisfy himself as a preliminary matter whether he ought to get on with the arbitration or not, and if it becomes abundantly clear to him that he has no jurisdiction then he might well take the view that he should not go on with the hearing at all.’

[10] The arbitrator has not ruled on the scope of his jurisdiction, nor has he withdrawn from the matter. Section 34 of the Constitution guarantees everyone the right to have any dispute that can be resolved by the application of law decided in a fair public hearing before a court or where appropriate another independent and impartial tribunal or forum.

[11] Even though an agreement to arbitrate does not deprive this Court of its jurisdiction over the dispute covered by the agreement, this Court ought to allow the arbitrator to adjudicate this matter. There is clearly pending litigation before an arbitrator between the same parties based on the same cause of action in respect of the same subject matter.

See: Caesarstone Sdot-Yam v The World of Marble and Granite 2000 & Others 2013 (6) SA 499 (SCA).

 

Conclusion

[12] In conclusion therefore, the matter is pending before the arbitrator, Adv. Sibeko SC, for arbitration. The arbitrator has not pronounced on any of the aspects referred for arbitration including but not limited to what is raised in the amended plea. Therefore, I am of the view that these proceedings should be stayed and the matter should be remitted to the arbitrator for adjudication. Insofar as costs are concerned it should follow the result. I am of the view that it would be fair and just to award costs in favour of the respondent.

 

Order

[13] Consequently, the following order is made:

(i) The proceedings under case number M168/16 filed in this Court are stayed pending finalization of the arbitration hearing.

(ii) The counter application is upheld.

(iii) The matter is remitted to the arbitrator (Adv. Sibeko SC) for arbitration.

(iv) The applicant is ordered to pay the costs of this application.

 

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R D HENDRICKS

JUDGE OF THE HIGH COURT,

NORTH WEST DIVISION, MAHIKENG

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