By Snazo Tuswa and checked by Jordan Dias
The matter is premised on the provisions of section 33 (1) of the Arbitration Act 42 of 1965 (“the Act”), which provides for the setting aside of an arbitration award by a competent court, where-
- 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 has exceeded its powers; or
- an award has been improperly obtained.
This section provides that any party who wishes to challenge an award, handed down by an arbitrator, may approach a court on application to challenge said award.
In July 2018, Ten Four Consulting (Pty) Ltd and Fourth Dimension Financial Services (Pty) Ltd (“the Applicants”) and Germa Beukes (“the Second Respondent”) concluded an Arbitration Agreement as various disputes had arisen from a previous Restraint of Trade Agreement concluded between the parties in June 2008.
In the matter before the Court, the Applicants sought to review and set aside the arbitrator’s (“the First Respondent”) award on the basis that the First Respondent commenced with the arbitration process in the absence of the Applicants. The Applicants further contended that the arbitrator did not give them an opportunity to argue whether or not their claim for damages should be dismissed. In addition, the Applicants contended that the First Respondent misconstrued his powers in relation to the arbitration, exceeded his powers as an arbitrator, and committed a gross irregularity in the conduct of the proceedings as contemplated in section 33(1) of the Act.
The Applicants thus sought an order declaring that the dispute, which formed the subject matter of the arbitration, be submitted to a new arbitrator agreed upon by the parties.
The Applicants grounds of review were based on the fact that, prior to the arbitration proceedings, the Second Respondent’s counsel had approached the First Respondent to advise him that the parties would argue a point in limine first.
The Applicants alleged that the Second Respondent did not only inform the First Respondent about the point in limine, but about all the facts pertaining to the merits of the Second Respondent’s argument insofar as the point in limine was concerned. Thereafter, during the arbitration hearing, the First Respondent confirmed that the Second Respondent had informed him about the point in limine and directed the parties to lead argument thereon. The First Respondent handed down the interim award, dismissing the Applicant’s claim for damages, on 23 January 2019.
In the High Court, the Applicants contended that is was irregular for the First and Second Respondent to discuss the matter beforehand, in the absence of the Applicants. Arguably, the First Respondent had failed to articulate or define the issues to be decided separately and to make an order in that regard. The Applicants stated that the First Respondent had exceeded his powers as an arbitrator to the extent that he had failed to define the issues and went further than the content of the pleadings.
The Second Respondent argued that the Applicants case was based on inferences and assumptions and therefore, had failed to make out a case in the first place. The Second Respondent further argued that, when she informed the First Respondent about the point in limine, no evidence was led, and no examination witness of witness took place in the absence of the Applicants. The Second Respondent stated that informing an arbitrator of what was to be argued by the parties did not amount to the leading of evidence and therefore, there was no gross irregularity.
In determining whether the conduct of the First Respondent constituted a gross irregularity, in terms of section 33 (1) (b) of the Act, the Court referred to Telcordia Technologies Inc v Telkom SA Ltd, wherein the concept of gross irregularity was considered. In Ellis v Dessai, it was held that a gross irregularity refers to the methods of trial, and not an incorrect judgment or the result of a proceeding. Furthermore, in Telcordia Technologies Inc v Telkom SA Ltd, the court quoted a passage from Goldfield Investment and Another v City Council of Johannesburg, stating that if the conduct of the arbitrator prevented a fair trial of the issues, such conduct will amount to a gross irregularity.
In applying the principles in the abovementioned case, the Court held that the First Respondent’s conduct prevented a fair trial of the issues as the First Respondent failed to address the parties before the commencement of the arbitration hearing and that he did not exercise his own judgment in deciding the issues. The Court held that the First Respondent had failed to address the parties on the point in limine and that his conduct prevented the Applicants from having its case fully and fairly determined. Concluding, the Court held that the First Respondent’s decision-making function had been usurped by the Second Respondent, which prevented the First Respondent from exercising his own judgment in deciding the issues in arbitration.
The court therefore set aside the arbitration award.
The case highlights that if the conduct of an arbitrator prevents the fair trial of issues in arbitration proceedings, such conduct shall constitute a gross irregularity in the arbitration proceedings.
The primary issue that the Court had to determine was whether the conduct of the arbitrator constituted a gross irregularity according to section 33 (1) (b) of the Arbitration Act 42 of 1965.
Section 33 (1) (b) of the Arbitration Act 42 of 1965, arbitration, gross irregularity, fair trial.