Case Name:
Aveng (Africa) Ltd (formerly Grinaker-LTA Ltd) t/a Grinaker-LTA Building East v Midros Investments (Pty) Ltd 2011 (3) SA 631 (KZD)

Area of law:
Is a party who commences litigation free to abandon the proceedings so as to have the matter referred to arbitration, or must the party apply for a stay of the proceedings?

Facts:
The Applicant in the matter was Aveng, who had entered into a contract with Midos to build a shopping complex. After completion of the work, the Respondent refused to pay the Applicant the amount owing to them in terms of the contract. The Respondent alleged that the work was not properly completed. The Applicant then attended to completing further work in order to correct these defects, however the Respondent still refused to pay the Applicant. The Applicant therefore instituted an action to recover the balance. After six years the matter had still not been heard, and the parties were informed that it was to take a further three years to reach finalisation. In order to expedite the proceedings the Applicant applied for a stay of the proceedings in order to apply to have the matter referred to arbitration, as allowance was made for this in the contract. The court, however, dismissed the application for the stay of the proceedings with costs. The court held that whilst the applicant was in breach of his obligations under the arbitration agreement, he nevertheless sought to enforce the agreement against the respondent and this was held to be an unsustainable situation which was contrary to the principle.

Held/Importance of Judgment:
It was held by Wallis, J that an arbitration agreement did not oust the jurisdiction of the courts. If a party to an arbitration agreement had commenced legal proceedings against the other party, the defendant in these proceedings was fully entitled to either apply for a stay of the proceedings, pursuant to Section 6 of the Arbitration Act 42 of 1965, or to deliver a special plea which relies on the arbitration clause. The onus rests on the claimant to persuade the court to exercise its discretion and to refuse arbitration.

However, Wallis, J made the emphasis that a party to an arbitration agreement who had commenced litigation instead of first proceeding to arbitration, did not in fact abandon its right to have the matter referred to arbitration under the agreement. This does not mean, however, that the applicant was entitled to seek a stay of the action, it only meant that the party was free to abandon the litigation and to then to proceed to the arbitration.

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