Altech Data (Pty) Ltd v M B Technologies (Pty) Ltd

• Jurisdiction: South Africa
• Court: Witwatersrand Local Division
• Judge: Shakenovsky AJ
• Judgment Date: 20 March 1998
• Citation: 1998 (3) SA 748 (W)
• Docket Number: 97/34813
• Counsel: WH Klevansky for the applicant A Subel for the respondent

Shakenovsky AJ:

In terms of its notice of motion the applicant seeks an order in the following terms: D

'1.

Judgment against the respondent for payment of the sum of R7 836 450,26.

2.

Judgment against the respondent for payment of interest on the sum of R7 836 450,26 at the rate of 19,25% per annum calculated from 13 December 1997 to date of final payment. E

3.

Costs of suit on the attorney and client scale.'

During the hearing of this matter, which lasted for some three days, Mr Klevansky, senior counsel for the applicant, gave notice of certain amendments to its prayers as contained in its notice of motion, so that applicant now claims as follows: F

'1.

Judgment against the respondent for payment of the sum of R7 656 830,03.

2.

Judgment against the respondent for payment of interest on the sum of R7 656 830,03 at the rate of 19,25% per annum calculated from 5 February 1998 to date of final payment. G

3.

Costs of suit.'

Applicant abandoned its prayer for such costs to be on the attorney and client scale.

Lengthy and detailed answering affidavits were filed by the respondent and the applicant thereafter filed similar lengthy replying affidavits. H

The basis for applicant's claims

1.

The applicant claims payment of the aforesaid sum, same being the balance due and owing by the respondent to the applicant arising out of an agreement of sale ('the agreement') concluded between the I parties on 14 November 1997. The agreement is annexed to the founding affidavit and will be more fully referred to hereinafter.

(a)

In terms of the agreement, the applicant sold to the respondent the business, including the sale assets and the goodwill, as a going concern with effect from the effective date (clause 3.1 of the agreement). J

Shakenovsky AJ

(b)

The purchase price payable by the purchaser to the seller for the business and the sale assets is the sum A of R31 191 000 (clause 4.1 of the agreement).

(c)

In terms of clause 4.2 of the agreement, the respondent was obliged to pay the applicant the purchase price, in cash, free of exchange, without deduction or set-off (my emphasis) on the following dates: B

(i)

On the signature date the sum of R17 393 000 (clause 4.2.1). It is common cause that the 'signature date' is 14 November 1997, being the date of signature of the agreement by the last signing party (clause 2.3.23). C

(ii)

On 5 December 1997 the sum of R12 258 000 plus interest thereon in terms of clause 26.2 read with clause 26.1 (clause 4.2.2).

(iii)

On 1 May 1998 the sum of R1 540 000, adjusted in accordance with para 6.6 of the agreement (clause 4.2.3).

(The emphasis in this judgment is my emphasis.) D

2.

The dispute in this matter relates to the respondent's failure to make payment of the full amount of R12 258 000 on 5 December 1997 together with interest thereon as above set out. The respondent made payment of the sum of R17 393 000 on the signature date of the agreement in accordance with clause 4.2.1. E

3.

On 12 December 1997 the respondent tendered payment to the applicant of an amount of R4 499 247,10 which the respondent invited the applicant to deposit without prejudice to its rights. The applicant did so and the balance therefore owing by the respondent to the applicant after deposit of the aforesaid sum was the sum of R7 836 450,26 (this amount being further reduced by the amendment sought by the applicant F as previously stated) plus interest thereon also as previously stated.

4.

It is common cause that the aforesaid balance of R7 836 450,26 has not been paid by the respondent. Respondent contends (as will be more fully detailed hereunder) that it is not obliged to make such payment. G

The essence of the respondent's defence to applicant's claim

1.

The respondent objects to the applicant having proceeded by way of application and requires the disputes between the parties to be adjudicated upon by arbitration in accordance with the provisions of clause 19 of the agreement. H

Clause 19 of the agreement provides:

'Should any dispute arise under this agreement or out of its termination or cancellation, then the matter shall be submitted to and decided by arbitration in terms of the rules of the Arbitration Foundation of Southern Africa I (''AFSA''). The arbitration shall be held in Johannesburg before an arbitrator appointed by AFSA.'

The respondent further contends that there is indeed a dispute under the agreement with regard to the relief sought by the applicant in this application.

2.

Respondent therefore submits that this Court ought not to entertain J

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this application and prays that the application be refused with costs, alternatively that it be stayed A pending adjudication of the respondent's claim, it being further alleged that these claims are inextricably tied up with the applicant's claim in this application.

3.

Respondent, in its answering affidavit, has in considerable detail set out the facts and allegations relating to its counterclaims in response to the application. B

The central issue for determination

Respondent in its answering affidavit opposed the relief claimed by the applicant. The argument by Mr C Klevansky and Mr Subel (for the respondent) was directed to the issue of the stay of judgment on applicant's claim pending adjudication of the respondent's counterclaims by arbitration as aforesaid.

The legal principles to be adopted by the Court in determining the issue of referral of a dispute to arbitration and D the stay of judgment on the applicant's claim pending determination by the arbitrator

Before embarking on an analysis of the relevant provisions of the agreement and the facts relevant to this application, it seems to me that it would be helpful first to set out the legal principles which should guide a Court in determining this issue. E

Section 6 of the Arbitration Act 42 of 1965 provides as follows:

'6.

Stay of legal proceedings where there is an arbitration agreement

(1) If any party to an arbitration agreement commences any legal proceedings in any court (including any inferior court) against any other party to the agreement in respect of any matter agreed to be referred to arbitration, any party to such F legal proceedings may at any time after entering appearance but before delivering any pleadings or taking any other steps in the proceedings, apply to that court for a stay of such proceedings.

(2) If on any such application the court is satisfied that there is no sufficient reason why the dispute should not be referred to arbitration in accordance with the agreement, the court may make an order staying such proceedings subject to such terms and conditions as it may consider just.' G

I also refer to s 3(2)(b) of the said Arbitration Act, which provides as follows:

3.

(1) . . .

(2) The court may at any time on the application of any party to an arbitration agreement, on good cause shown - H

(a)

. . .

(b)

order that any particular dispute referred to in the arbitration agreement shall not be referred to arbitration; or

(c)

. . . .' I

The approach of our Courts in dealing with a referral to arbitration is set out in a number of authorities. In the case of Metallurgical and Commercial Consultants (Pty) Ltd v Metal Sales Co (Pty) Ltd 1971 (2) SA 388 (W) at 391B--H Colman J stated the following:

'But it becomes necessary now to consider the respondent's second contention which, if accepted, will make it unnecessary to resolve the dispute which I have J

Shakenovsky AJ

been discussing. It is argued that even if there was an effective contract between the parties, and hence an effective A submission to arbitration of the difference relating to the applicant's claim, the Court should, in the exercise of its discretion, hold that that difference ought not to be submitted to arbitration, but should be resolved in open Court.

That the Court has a discretion in that regard appears from s 3(2) of the Arbitration Act which provides that - B

''The Court may at any time on the application of any party to an arbitration agreement, on good cause shown . . . order that any particular dispute referred to in the arbitration agreement shall not be referred to arbitration.''

Although the respondent has not filed a formal counter-application, embodied in a notice of motion, for the exercise of my discretion under s 3(2), it did invoke that discretion in its affidavits, and from the Bar. I think that I am justified, on that C basis, in saying that I have before me the application of one of the parties to an arbitration agreement (which is assumed, for immediate purposes, to be valid) for the exercise of such discretion. The question, it seems to me, is whether the respondent has shown good cause, within the meaning of the subsection.

Such an onus is not easily discharged. There are certain advantages, such as finality, which a claimant in an arbitration D enjoys over one who has to pursue his rights in the Courts; and one who has contracted to allow his opponent those advantages will not readily be absolved from his undertaking. In Rhodesian Railways v Mackintosh 1932 AD 359, Wessels ACJ (as he then was), held that the discretion of the Court to refuse arbitration under a submission was to be exercised judicially, and only when a ''very strong case'' for its exercise had been made out (see 375). The Court was E there acting under a different statute from the one before me. But the observation of Wessels ACJ is none the less apposite here, because it was based upon general principles. Similarly, in Halifax Overseas Freighters Ltd v Rasno Export; Technoprominport and Polskie Linie Oceaniczne PPW (The 'Pine Hill') [1958] 2 Lloyd's List Law Rep 146, McNair J held that there should be ''...