Hyde Construction CC v Deuchar Family Trust and Another

• Jurisdiction: South Africa
• Judge: Traverso DJP, Bozalek J and Rogers J
• Judgment Date: 11 August 2014
• Docket Number: A460/2013
• Hearing Date: 30 July 2014
• Counsel: ECD Bruwer for the appellant. SP Rosenberg SC for the first respondent.
• Court: Western Cape Division, Cape Town

Rogers J (Traverso DJP and Bozalek J concurring):

Introduction D

[1] The appellant (Hyde) appeals against a judgment of Blignault J in which he granted with costs an application by the first respondent (the DFT) to have the second respondent (Du Toit) removed as an arbitrator E in terms of s 13(2) of the Arbitration Act 42 of 1965 (the Act).

[2] The arbitration arises from a building contract concluded between the DFT (as employer) and Hyde (as contractor) in October 2007 in terms of which Hyde was to construct a house on a property owned by the DFT in Knysna. Disputes regarding the amount owed to Hyde arose by not later than December 2008. It is lamentable that, after more than F five and a half years, our judgment, whatever it is, will not take the parties materially closer to a resolution of the real disputes between them.

[3] The issues in the removal application brought by the DFT in the court a quo case were broadly three, namely: (i) whether the DFT was properly G before the court as a litigant; (ii) whether there was a removal procedure in the arbitration agreement which precluded the DFT from invoking s 13(2) of the Act; and (iii) whether there were grounds for Du Toit's removal. It is a remarkable feature of the removal application and the present appeal that by far the most attention was devoted by Hyde to the H first two questions. Relatively little was said or could be said in support of an argument that it was appropriate for Du Toit to remain as the arbitrator.

The facts

I [4] The DFT is a family trust. The trust deed stipulated that during the lifetime of the donor, Allan Deuchar, there should be no fewer than three trustees. As at 2007, when the DFT decided to have the house built, the trustees were Allan and Judy Deuchar and a professional trustee nominated by Maitland Trust Ltd. During May 2009 Maitland Trust Ltd resigned and the Deuchars' son and daughter were appointed to act J as co-trustees with their parents. Letters of authority had previously been

Rogers J (Traverso DJP and Bozalek J concurring)

issued by the Master to Mr and Mrs Deuchar in terms of s 6(1) of the A Trust Property Control Act 57 of 1988, and similar letters were issued to the son and daughter upon their appointment.

[5] Clause 40(4) of the building contract between the DFT and Hyde provided that if one or other of the parties was dissatisfied with a determination of a dispute by the adjudicator, the dispute was to be B resolved by an arbitrator appointed by the Association of Arbitrators (Southern Africa) (the Association). During May 2011 Hyde requested the Association to appoint an arbitrator. During July 2011 the Association appointed one Ms Van Zyl. On 6 January 2012 a pre-arbitration meeting was held. The DFT was represented by Mr and Mrs Deuchar and C their then attorney, Ms Yates. According to the minute of the meeting prepared by Van Zyl, the DFT questioned Van Zyl's 'jurisdiction', contending that an adjudication process had been completed and that Hyde had been fully reimbursed. Van Zyl responded that clause 40(4) of the building contract made provision for arbitration if one of the parties was dissatisfied with the adjudication (as Hyde apparently was). D

[6] Van Zyl said that she had previously forwarded the proposed arbitration agreement to both parties but that only Hyde had signed. The DFT indicated that it did not agree that there should be arbitration and thus refused 'to acknowledge the arbitrator's agreement'. Van Zyl noted this comment but indicated that the arbitration would proceed. According E to the minutes, she informed the parties that the rules to be followed in the arbitration would be the Standard Procedure Rules for the Conduct of Arbitrations 6 ed, being Rules issued by the Association (the rules).

[7] Rule 2 of the rules states: F

'Save as varied herein or, insofar as the provisions of the Arbitration Act are mandatory, the Act shall apply.'

[8] Rule 9 contains a procedure for challenging the appointment of an arbitrator. A party to the arbitration may make written application to the G chairman of the Association to revoke an arbitrator's appointment and to appoint a new arbitrator if the existing arbitrator 'falls seriously ill, or becomes unable or unfit to act' or 'lacks the necessary independence' or 'for any other reason ought not to continue as arbitrator (eg lacks impartiality)'. The application must be made within 10 days of the litigant becoming aware of the circumstances justifying removal. The H chairman appoints a committee consisting of not fewer than three members to consider the removal application. The Association notifies the applicant of 'the relevant fee' to be lodged in order for the committee to consider the removal application. Failure to pay the fee within 10 days renders the challenge 'invalid'. The committee may give directives I regarding the costs of the challenge and, if the challenge is successful, the amount of fees and expenses to be paid for the outgoing arbitrator's services, but may only give directions regarding the costs of the arbitration proceedings if the parties so agree.

[9] During February 2012 the DFT lodged an application in terms of rule 9 for Van Zyl's removal. On 5 March 2012 she notified the parties that J

Rogers J (Traverso DJP and Bozalek J concurring)

A she was resigning as arbitrator without admitting any fault or failure on her part.

[10] On 20 March 2012 the Association appointed Du Toit as the new arbitrator. A pre-arbitration meeting took place before him on 17 April 2012. B There is no minute of the meeting. By this stage the DFT appears to have accepted that clause 40(4) of the building contract entitled Hyde to proceed to arbitration. At the meeting a short arbitration agreement was signed. Clause 1 dealt with the arbitrator's fees and disbursements. In terms of clause 2 the parties consented 'to the procedures for the conduct of the arbitration as directed from time to time by the C Arbitrator'. The agreement contained nothing else of relevance to the present case. A timetable for pleadings and other procedural steps was determined, and the hearing was scheduled to start on 2 July 2014.

[11] By the time of Du Toit's appointment the DFT had engaged Adv DJ Coetsee D (Coetsee) to represent them in the arbitration, and he was present at the meeting on 17 April 2012. The application which the DFT subsequently brought for Du Toit's removal arose from the fact that several years previously Coetsee had represented another client in proceedings in which Du Toit personally was the plaintiff. HJ Erasmus J, sitting on circuit, dismissed Du Toit's claim with costs in a judgment E delivered on 27 March 2009. Coetsee and Du Toit recognised each other when they met on 17 April 2012. At that stage, according to the DFT, Coetsee was not concerned about Du Toit's role as arbitrator because he assumed that Du Toit had accepted the outcome of his case and that it was water under the bridge.

F [12] Things changed after the meeting of 17 April 2012. On 3 May 2012 Du Toit served, in the circuit-court proceedings, an application for condonation and for leave to appeal against the judgment of Erasmus J. The application contained a scathing attack on the propriety of Coetsee's conduct in the case. The DFT's legal representatives learnt of the G existence of this application on 23 May 2012. On 29 May 2012 the DFT's attorneys wrote to Du Toit asking him to recuse himself. In a response dated 3 June 2012 Du Toit, apart from persisting in his attack on Coetsee, denied that he was disqualified. Somewhat curiously, he concluded his letter by stating that, if the DFT persisted in pursuing its H attack in the High Court, he would not oppose it.

[13] On 6 June 2012 the DFT lodged with the Association an application for Du Toit's removal in terms of rule 9. On 12 June 2012 the Association's secretary notified the DFT's attorneys that a committee had been appointed to consider the challenge and it was now necessary for I the DFT to lodge R75 000 'as a deposit towards the fees of' the committee. In an email of 19 June 2012 the DFT's attorneys said that they and the DFT were 'quite perturbed' by the requested deposit, which to them seemed 'completely exorbitant'. They requested particulars of the computation of the fee. They asked whether the committee would have the power to make a costs order against Du Toit. They also referred to J practice note 26 issued by the Association, which they interpreted to

Rogers J (Traverso DJP and Bozalek J concurring)

mean that the DFT was not obliged to follow the rule 9 procedure but A could apply for Du Toit's removal in terms of s 13(2) of the Act . [1]

[14] On 21 June 2012 the Association's chairman, Mr FC Blackie, responded. He pointed out that the challenge would need to be considered by three senior practitioners who were entitled to remuneration. B The matter did not appear to be as straightforward as the previous request for Van Zyl's removal (where the requested fee had been R40 000). Mr Blackie said that there was nothing in the rules which precluded a party from making an application to the High Court for removal in terms of s 13(2) of the Act [2] and he noted that Du Toit had indicated that such an application would not be opposed. C

[15] On 25 June 2012 Hyde filed an opposing affidavit in the rule 9 application, together with heads of argument.

[16] On 26 June 2012 the 10-day period for the DFT to lodge the deposit of R75 000 expired. This meant, in terms of rule 9.4, that its challenge became 'invalid'. D

[17] According to the DFT, its decision to make application to the High Court for Du Toit's removal (and not to pursue the rule 9 application to the Association) was made on the morning of Wednesday 27 June 2012 following a meeting with its legal representatives. At...