In the case of Palabora Copper (Pty) Ltd v Motlokwa Transport and Construction (Pty) Ltd an arbitration award, which had been passed ,had to be set aside on one of the grounds as listed in Section 33(1) of the Arbitration Act No. 42 of 1965 (hereafter referred to as “the Act”).

The Act was specifically implemented to provide for the settlement of disputes which arise within Arbitration Tribunals in relation to written Arbitration Agreements and to ensure that the awards of such Arbitration Tribunals are enforced.

Section 33(1)

Section 33(1) states that an Arbitration Award may be set aside on one of the following grounds:

Where:

1. Any member of an Arbitration Tribunal has misconducted him/herself in relation to his/her duties as Arbitrator or Umpire; or
2. An Arbitration Tribunal has committed any gross irregularity in the conduct of the Arbitration proceedings or has exceeded its powers; or
3. An award has been improperly obtained, the court may, on the application of any party to the reference after due notice to the other party or parties, make an order setting the award aside.

Palabora Copper (Pty) Ltd v Motlokwa Transport and Construction (Pty) Ltd (298/2017) [2018] ZASCA 23 (22 March 2018)

Palabora Copper (Pty) Ltd (hereafter referred to as “Palabora”) addressed a letter to Motlokwa Transport & Construction (Pty) Ltd (hereafter referred to as “Motlokwa”) at the conclusion of a tender process on 23 December 2014. The letter’s heading read; “Notice of Contract Award”, and the first sentence held that: “Palabora is pleased to advise you that your final tender offer for the above tender has been successful and accepted. We confirm that this award is from 01 March 2015 until 31 December 2016 depending on the Smelter Plant future… All details, terms and conditions are contained in the contact document which will be signed off by both parties in January 2015.”

The above letter was signed off under the words “Award Acceptance”.  Palabora instituted proceedings in the High Court against Motlokwa on 20 February 2015 for a declaratory order that no valid and binding contact had been entered into, alternatively, declaring that any contact that had been concluded, had been duly cancelled.  Motlokwa pleaded to the claims and counterclaimed performance, alternatively, damages.

On trial, the parties then agreed to refer the matter for arbitration to a retired judge.  The retired judge held during the course of the hearing that a valid binding contract had been concluded by way of the said letter. The defense pleaded namely that there was lack of consensus between the parties that a valid contract existed, was dismissed together with the plea that the contract had not been lawfully cancelled. This aforesaid ruling was in the final award as paragraph A and B. This did not dispose of any relief claimed in the arbitration but formed the basis upon which he held paragraph C in that Palabora’s claim be dismissed. In paragraph D he upheld Motlokwa’s counterclaim.

Paragraph C read as follows in terms of the claim and counterclaim:

“Prayers 1 and 2 of the Claimant’s claim in convention [are] dismissed.”

Further he held in paragraph D that:

“The Claimant is to pay to the Defendant:

1.  The amount of R39 885 315; and
2. Costs, which costs will include the employment of two counsel and the qualifying fees of Mr Cameron-Ellis.”

Two days after the above award, Motlokwa brought an application to make the award an order of court.

In conclusion

The court held that the appeal had to be upheld and was then faced with the question of: “What should be set aside?”  Namely; “What portion of the arbitrator’s award must be set aside?” 

The court was faced with the legal issue of the proper interpretation of the court’s power under Section 33(1)(b) of the Act.  A further question the court was faced with was: “Must a finding of a gross irregularity in the proceedings necessarily result in the entire award being set aside, or is there scope for the court to preserve and enforce the ‘good’ part of the award and set aside the ‘bad’?”

The order for appeal was not only upheld but a further order (the High Court dismissing Palabora’s application to set aside the Arbitration Award) must be set aside and replaced with a new order that paragraph D of the Arbitration Award had to be set aside and replaced. Therefore, the order to make the whole award an order of court had to be set aside.

Therefore, the order of the High Court was set aside and replaced with the following that:

• Appeal is upheld with costs;
• The application to make the Arbitration Award an order of court is dismissed;
• The application to set aside the Arbitration Award in terms of Section 33(1)(b) of the Act is upheld relating to paragraph D and the award to that extent is set aside.

Therefore, the court has the discretion to set aside the whole award or any part thereof.

Written by Beata Warnich, SchoemanLaw Inc