By Sean Buskin and checked by Khotso Mmatli
This case concerns an application by Magoveni Pharmaceutical (Pty) Ltd (the “applicant”) to review and set-aside an arbitration award, granted by the arbitrator in favour of Pick ‘n Pay Retailers (Pty) Ltd (the “first respondent”). The arbitrator is cited in the review proceedings as the second respondent.
During the course of the arbitration proceedings, the applicant had, on numerous occasions, changed counsel and the new counsel, upon taking over the matter, sought a postponement from the bar which had the effect of prolonging the proceedings. Prior to the commencement of the arbitration proceedings, the applicant had already failed to comply with various procedural matters relating to the filing of its pleadings and during April 2018, the applicant had breached of an order requiring it to make discovery of documents.
During July 2018, at the close of the part-heard arbitration proceedings, the parties agreed that the arbitration proceedings would recommence during 26 and 27 November 2018. During the period leading up to recommencement of proceedings, the applicant’s attorneys withdrew from the matter. During September, the first respondent requested that the arbitrator issue a notice in terms of Section 15 of the Arbitration Act 42 of 1965 (“the Act”), placing the applicant on terms as to where and when the arbitration proceedings would proceed. By the end of October, the applicant had not yet appointed new attorneys. On 12 November 2018, the parties held a pre-arbitration meeting at the arbitrator’s chambers wherein the applicant stated that it was aware that the arbitration was to commence on 26 and 27 November 2018 and it would appoint new attorneys accordingly. The applicant was further informed that any contemplated any application for postponement should be brought by way of formal application.
On 26 November 2018, counsel for the applicant sought a postponement of the proceedings on the grounds that he had not received a formal brief and was therefore not familiar with the substantive context of the matter. The arbitrator ruled that in the absence of a formal application, the matter would proceed as the applicant had already been granted numerous indulgences and postponements.
In the review proceedings in the High Court of South Africa, Gauteng Local Division, Johannesburg, the court was required to consider whether or not the arbitrators ruling that the arbitration proceedings should resume unless a formal application was brought constituted a reviewable irregularity, as contemplated by section 33 (1)of the Act.
At the outset, the court had regard to the agreement between the parties which empowered arbitrator to determine the procedure to be followed during the arbitration proceedings and how interlocutory applications would be dealt with. the court held that generally, arbitration proceedings would not be interfered with and their awards may only be set aside on the limited grounds set out in Section 33 of the Act.
Section 33(1) of the Act states as follows:
- any member of an arbitration tribunal has misconducted himself in relation to his duties as arbitrator or umpire; or
- an arbitration tribunal has committed any gross irregularity in the conduct of the arbitration proceedings or exceeded its powers; or
- an award has been improperly obtained the court may, on the application of any party to the reference…make an order setting the award aside.”
The court held that a court will not lightly find that an arbitrator has been guilty of misconduct, based on a mistake of law or fact where the arbitrator has acted in a manner where due consideration has been given to the matter. Misconduct must be in the form of wrongful or improper behaviour entailing moral turpitude, dishonesty, bad faith or the like. A court will only inquire into whether or not the arbitrator was so grossly unreasonable in the exercise of his discretion that it justifies the inference of bad faith on his part.
However, courts have acknowledged that arbitrators have a right to be wrong and thus an incorrect exercise of a discretion or power will not, on that basis alone, constitute an irregularity. There exists an implied term, in all arbitration agreements, that, unless specifically excluded in the arbitration agreement, the arbitration proceedings will be conducted in a procedurally fair manner. What constitutes fairness will be decided on a case by case basis and the context of each case.
In light of the above, the court, in analysing the discretion so exercised by the arbitrator, stated that the purpose of procedural requirements governing postponement applications, was to ensure that the proceedings were conducted as efficiently as possible, in the interests of all parties to the proceedings. The arbitrator took into account the purpose of arbitration proceedings, being an expedited, cost-effective and fair process.
The enormous delays to the proceedings had resulted in the overall purpose of arbitration proceedings being undermined. The court acknowledged that the conduct of the arbitrator, in implementing the requirement that postponement applications be brought by way of a substantive application, may have been an error, but same was not motivated by malice of bad faith.
Thus, the court concluded that the conduct of the arbitrator was not subject to review. The application was dismissed with costs.
The case provides significant value on the overall purpose of and the discretion afforded to an arbitrator in the course of arbitration proceedings. Furthermore, the case provides an outline of the grounds, as contemplated by section 33 of the Act, by which the court will interfere with arbitration proceedings.
The court did not interfere with the arbitration proceedings as the procedural requirements imposed by the arbitrator, although possibly a mistake, was not motivated by malice or bad faith.
The conduct of arbitration proceedings