Perdikis v Jamieson

• Jurisdiction: South Africa
• Citation: 2002 (6) SA 356 (W)

Perdikis v Jamieson
2002 (6) SA 356 (W)

2002 (6) SA p356

Citation	2002 (6) SA 356 (W)
Case No	A3123/2000
Court	Witwatersrand Local Division
Judge	Boruchowitz J, Van Oosten J and Mlambo J
Heard	February 20, 2001
Judgment	November 6, 2001
Counsel	D J B Osborn SC for the appellant.; A R Bhana for the respondent.

Flynote : Sleutelwoorde

Expert valuer — Determination by — Right of valuer to rectify mistake in — If expert (referee) acts in quasi-judicial capacity, B ie as arbitrator and not as valuer, functus officio rule applying — Whether acting as arbitrator or as valuer depending on facts — Subject-matter of disputed agreement and manner in which referee appointed to act thereunder important considerations — Ultimate test C whether referee obliged to reach decision by acting wholly or partially on parties' evidence and submissions, or by adjudicating on opposing contentions relying on own expert opinion — If referee acts as valuer, entitled to rectify patently incorrect or manifestly unjust valuation on equitable grounds, even where valuation expressed to be 'final and binding'. D

Partnership — Dissolution of — Valuation of partnership — Mistake by expert valuer — Rectification of — If valuer in fact acts as valuer and not as arbitrator, not functus officio and entitled to rectify patently incorrect or manifestly unjust valuation on equitable grounds, even where valuation expressed to be 'final and binding'. E

Headnote : Kopnota

The instant appeal concerned the right of expert valuer, who had been employed to conduct a valuation of a partnership between the appellant and the respondent, to rectify a mistake in his determination. The partnership was dissolved when the appellant resigned. The partnership agreement stated if one of the partners were F to withdraw from the partnership, the remaining partner would be obliged to purchase the retiring partner's share at a price calculated according to a certain formula. Disputes about the price had to be referred to a chartered accountant, who would act as 'an expert and not an arbitrator', and his determination would be 'final and binding on the partners'. The partners were unable to agree upon the value of the partnership and one C, a chartered accountant, was appointed as G referee. After holding meetings with the partners, receiving oral representations and being provided with certain documentation, C determined the appellant's share in the partnership to be R105 798,50. The partnership's accountant then noticed that a casting error in the balance sheet had resulted in a R30 000 overstatement of liabilities. Five days later C amended his determination to rectify the H mistake, restating the appellant's share at R135 798,50. The respondent refused to accept the validity of the amended determination and tendered the original sum. The appellant then approached a Local Division for an order declaring the amended valuation to be binding. The application was dismissed on the ground that C had been functus officio when he amended his award. I

Held (per Boruchowitz J, Mlambo J concurring), that the function of an expert valuer was distinct from that of an arbitrator: the duty of the valuer was not to hear and determine a dispute but to decide the questions submitted to him by the exercise of his judgment and skill without a judicial enquiry. He did not exercise a quasi-judicial function and was not required to hear or receive submissions from either party. All he had to do was to exercise an J

2002 (6) SA p357

honest judgment, or arbitrium boni viri. It was, however, often difficult to discern whether a referee was required to act as A valuer or arbitrator. There was no comprehensive test and in the final analysis the question had to be answered in the light of the facts of each case. (Paragraph [5] at 361I - 362C.)

Held, further, that neither the wording of the reference, nor the existence of a dispute or disagreement about the valuation, nor the fact that the determination had to be based on evidence or submissions of the parties, was in itself decisive of whether B arbitration or valuation was intended. The subject-matter of the agreement and the manner in which the referee was appointed to act thereunder were, however, important considerations. The ultimate test was whether the referee was obliged to reach his own conclusion by acting wholly or partly on the evidence and submissions made by the parties, or by adjudicating on the opposing contentions by using his own expertise. (Paragraph [5] at 362C - 363E/F.) C

Held, further, that the following factors, taken collectively, supported the conclusion that it had not been the intention of the parties that C should exercise an arbitral or quasi-judicial function when making his determination: the partnership agreement clearly provided that the referee would act as an 'expert' and not an arbitrator; the parties had agreed that it would be left to D C to resolve what rules, if any, would govern his determination and how he would arrive at his award; and he was not obliged to hear evidence or to receive submissions. C was not required to make a choice between two opposing contentions as to the value of the appellant's interest: his appointed function was to determine the value of the partnership based on the criteria referred to in the partnership agreement, and the primary material on which he was to act was his own knowledge and E experience, supplemented by his own investigations and the material put before him by the parties. (Paragraph [6] at 363J - 364G/H.)

Held, accordingly, that C had not exercised an arbitral or quasi-judicial function and had not been functus officio. Hence the principles governing the alteration of arbitration award were not applicable in the instant case. (Paragraph [6] at 364H.) F

Held, further, as to whether the valuation was susceptible of rectification on equitable grounds, that C had clearly committed an error when he had relied on the erroneous statement of current liabilities. The fact that no error was shown to exist on the face of the award did not assist the respondent: there was no distinction in law between the effect of a mistake appearing on the face of the G award and one not so appearing. (Paragraph [7] at 365C/D - E.)

Held, further, that the fact that the valuation was said to be 'final and binding' did not mean that it was incapable of alteration unless fraud, collusion or capriciousness was proved. (Paragraph [7] at 365G/H - H/I.)

Held, further, that since C had acted upon a materially incorrect assumption it could not be said that he had properly H performed his mandate and exercised the judgment of a reasonable man. The error perpetrated was such as to lead to a patently inequitable result. In the circumstances the appellant was not bound by the figure fixed in C's first valuation. (Paragraph [8] at 366C/D - E.)

Held, further, as to whether it had been competent for C himself to rectify the evaluation, that it had to be borne in mind that I the parties had designated C, not the Court, to perform the valuation. Moreover, a valuer was liable for negligence in the discharge of his functions, and it was thus proper that he should be allowed to correct a manifestly wrong award in order to avoid or ameliorate any loss. (Paragraph [9] at 366G - H/I.)

Held, that the legal position was the following: where a manifestly incorrect or unjust valuation had taken place, there was in fact no determination under J

2002 (6) SA p358

the agreement between the parties. The agreement did not ipso facto lapse but remained executory, A leaving it open for the valuer to make a correct determination. Once made there was no reason why the correct determination should not bind the parties. (Paragraph [10] at 366H/I - J.)

Held, accordingly, that the appeal had to be allowed with costs, and the order of the Court a quo set aside and replaced by an order that C's amended determination was binding upon the parties and directing the respondent to pay the applicant the B sum of R135 798,50 together with interest. (Paragraph [12] at 367E/F - H/I.) (Van Oosten J dissenting.)

Cases Considered

Annotations

Reported cases

Ajzner v Cartonlux (Pty) Ltd (1972) VR 919: dictum at 928 - 9 applied C

Attorney-General, Eastern Cape v Blom and Others 1988 (4) SA 645 (A): referred to

Bekker v R S A Factors 1983 (4) SA 568 (T): dictum at 573A - F applied

Campbell v Edwards [1976] 1 All ER 785 (CA): not followed

Chelsea West (Pty) Ltd and Another v Roodebloem Investments (Pty) Ltd and Another 1994 (1) SA 837 (C): applied D

Dickenson and Brown v Fisher's Executors 1915 AD 166: referred to

Estate Milne v Donohoe Investments (Pty) Ltd and Others 1967 (2) SA 359 (A): dictum at 373H - 374A applied

Firestone South Africa (Pty) Ltd v Genticuro AG 1977 (4) SA 298 (A): referred to

Hurwitz and Others NNO v Table Bay Engineering (Pty) Ltd and Another 1994 (3) SA 449 (C): dictum at 456E - H E applied

Iscor Pension Fund v Balbern Holdings (Pty) Ltd 1973 (4) SA 515 (T): dictum at 521B - 522B applied

Maceys Consolidated (Pvt) Ltd v TA Holdings Ltd 1987 (1) SA 173 (ZS): not followed

Palacath Ltd v Flanagan [1985] 2 All ER 161 (HL): dictum at 166b - e applied F

Re Hammond and Waterton (1890) 62 LT 808: dictum at 809 applied

Rössing Stone Crushers (Pty) Ltd v Commercial Bank of Namibia and Another 1994 (2) SA 622 (Nm): dicta at 628E - G and 632E - I applied

Sachs v Gillibrand and Others 1959 (2) SA 233 (W): dictum at 235E - 236A applied G

Van Heerden v Basson 1998 (1) SA 715 (T): dictum at 718I - 719B applied.

Case Information

Appeal from a decision of a single Judge (Goldstein J). The facts appear from the judgment of Boruchowitz J.

D J B Osborn SC for the appellant.

A R Bhana for the respondent. H

Cur adv vult.

Postea (6...