|The appeal in casu was a result of a dismissal of a review application brought by State Information Technology Agency SOC Ltd (SITA) (“the Appellant”) , against ELCB Information Services (Pty) Ltd (“ the First Respondent”) and Leon Dicker NO(“the Second Respondent”). |
The court a quo also granted a counter-application by the First Respondent which sought an order that the Arbitrator’s award granted on 31 March 2014, be made an order of court in terms of s 31(1) of the Arbitration Act 45 of 1965 (“the Act”).
The Appellant applied for leave to appeal on a number of grounds upon which the court a quo allegedly erred in respect of. However, the Supreme Court of Appeal (“the Court”) only concerned itself with whether or not the Arbitrator committed gross irregularities.
In short, the Appellant and Respondent concluded two agreements:
1. the first agreement provided that if a dispute between the parties was not resolved, such a dispute shall be referred to arbitration which would be conducted in accordance with the rules of the Arbitration Foundation of South Africa (AFSA);
2. the second agreement was purportedly concluded pursuant to a letter dated 11 January 2007, from the Superintendent-General of the Eastern Cape Department of Health, requesting the Appellant to appoint the Respondent to develop a records management system for that department. The Appellant was not been able to locate the signed copy of the second agreement.
As such, the Appellant argued that the First Respondent could not rely on the said second agreement and arbitration was only applicable to the first contractual claim.
It must be noted that an arbitration agreement was signed on 12 March 2006 and the Appellant fulfilled its obligations in respect of both the aforementioned agreements. During the duration of the agreements, the First Respondent submitted various invoices for payments and on 11 March 2013 the First Respondent sent a letter demanding payment – failing which would result in a summons being issued. On 21 June 2013, the Respondent then sent a letter requesting that the matter be referred to mediation as agreed.
The First Respondent then lodged a statement of claim as per the arbitration agreement and a pre-arbitration meeting was held on 1 October 2013. The Appellant did not raise any objections and also failed to deliver any statement of defence by the agreed upon date of 8 November 2013.
On the commencement of the prescribed arbitration, the Appellant brought an application for an order declaring both agreements constitutionally invalid, unlawful and unenforceable and for the arbitration proceedings to be stayed or postponed pending the validity of the agreements.
On 4 March 2014, the Arbitrator ruled against the Appellant and effectively dismissed the application of invalidity with costs. As a result, the Appellant and its legal representatives left the proceedings. The Arbitrator proceeded to assess the evidence and make an award without reasons on 31 March 2014. The result of this was that the Appellant then filed an application on 9 May 2014, seeking an order reviewing and setting aside the arbitration award as well declaring both agreements invalid and unconstitutional. As mentioned, this application was dismissed and the court a quo granted the counter-application.
The present court believed it to be in the interests of justice to grant leave to appeal and therefore did so. The Appellant amended its notice of appeal to exclude the ground regarding the constitutional validity of both agreements – resulting in the only issue being the alleged gross irregularities of the Arbitrator. The Appellant raised five grounds upon which it contended that the Arbitrator committed gross irregularities. These grounds were that (a) the Appellant was excluded from participating in proceedings; (b) that the second agreement was not signed by the Appellant; (c) that the Arbitrator exceeded his powers in terms of awarding the large sum of interest; (d) that the Arbitrator failed to properly apply his mind, and (e) that the Arbitrator contravened clause 23.6 of the second agreement by failing to give reasons.
As a result, the Court was of the opinion that the Appellant failed to persuade the Court that the Arbitrator committed gross irregularities and the appeal was subsequently dismissed with costs.
The SCA will not easily overrule a High Court’s decision without sound and logical reasoning for an appeal application as well as substantial grounds for the appeal. Arbitrators have wide discretion in their power to make awards.
Written by Jonathan Green and supervised by Omphile Boikanyo
9 July 2019