Telcordia Technologies Inc v Telkom SA Ltd

• Jurisdiction: South Africa

Telcordia Technologies Inc v Telkom SA Ltd
2007 (3) SA 266 (SCA)

2007 (3) SA p266

Citation	2007 (3) SA 266 (SCA)
Case No	26/05
Court	Supreme Court of Appeal
Judge	Harms JA, Conradie JA, Cloete JA, Lewis JA and Ponnan JA
Heard	October 30, 2006 and October 31, 2006
Judgment	November 22, 2006
Counsel	W H Trengove SC, D M Fine SC and A E Franklin SC (with them J P V McNally and K H Shozi) for the appellant.; C H J Badenhorst SC and G J Marcus SC (with them D B Spitz and S Budlender) for the respondent.

Flynote : Sleutelwoorde B

Arbitration — Award — Review of — Grounds for setting aside.

Arbitration — Arbitration Act 42 of 1965 — Appeal against decision to review and set aside C award given in private arbitration proceedings — Whether alleged errors of law committed by arbitrator can found review under s 33(1) of Act — Circumstances in which refusal by arbitrator to state case for opinion of court under s 20 constituting gross irregularity in conduct of proceedings — Whether arbitrator exceeding powers — Whether Court a D quo correctly exercising discretion in appointment of new arbitration tribunal.

Arbitration — Arbitration Act 42 of 1965 — Statement of case to Court in terms of s 20(1) for opinion during arbitration proceedings — Party's 'right' to state case — Statement of case being matter for discretion of arbitrator — Party to arbitration E proceedings having no 'right' to state case for opinion of court.

Arbitration — Award — Review of — Grounds for setting aside — Material error of law — Parties agreeing to arbitration — Parties thereby limiting interference by courts to procedural irregularities set out in s 33(1) of Act — Accordingly, award not reviewable on ground of material error of law.

Arbitration — Award — Review F of — Proper approach of Court on review — Court not to misconceive its function and treat review as appeal — Court not to enquire into correctness of award but to confine itself to examining correctness of procedure adopted in arriving at award.

Arbitration — Award — Setting aside of — Arbitrator exceeding powers in conduct of arbitration proceedings in terms of Arbitration Act 42 of 1965, s 33(1)(b) — What constitutes — Whether arbitrator mandated with interpretation of agreement exceeding powers in incorrectly G interpreting agreement, in determining applicable law, or in determining admissibility of evidence.

Arbitration — Award — Setting aside of — Gross irregularity by arbitrator in conduct of arbitration proceedings — Arbitration Act 42 of 1965, H s 33(1)(b) — Such ground of review envisaging gross irregularity in 'conduct', and not 'result' or outcome, of proceedings — Qualification being that 'gross irregularity' committed where decision-maker misconceiving whole nature of enquiry or duties in connection therewith — Misconception of nature of enquiry — What constitutes — Whether mistaken interpretation of agreement by arbitrator mandated with interpretation thereof amounting to misconception of nature of enquiry. I

Headnote : Kopnota

The parties had entered into a so-called Integrated Agreement in terms of which the appellant, Telcordia, was to provide the respondent, Telkom, with a state-of-the-art telecommunications system. A dispute arose as to Telcordia's delivery obligations of certain highly specialised software under the J

2007 (3) SA p267

agreement, which hinged on the parties' respective interpretations of the agreement. The A dispute was referred to arbitration and the arbitrator ultimately accepted Telcordia's interpretation of the agreement.

Telkom then proceeded to launch an application in the High Court for the review and setting aside of the arbitrator's award on the grounds that:

(1)

in incorrectly interpreting the Integrated Agreement, the arbitrator had committed a material error so fundamental that he had misconceived the nature of the enquiry and his duties; and B

(2)

by denying Telkom the opportunity to apply to court under s 20 of the Arbitration Act 42 of 1965 for an order compelling him to state legal questions for the decision by the court, the arbitrator had committed a gross irregularity and acted irrationally.

Telkom relied on: (i) the common-law ground of review of awards tainted by material error of law; and (ii) review in terms of C s 33(1)(b) of the Act, on the ground of the arbitrator's having committed a gross irregularity in the proceedings or having exceeded his powers by misconceiving the whole nature of the enquiry and his duties in connection therewith.

The High Court upheld the application on the latter ground and reviewed and set aside the arbitrator's award. On appeal, D

Review for material error of law

Held, that, by agreeing to arbitration, the parties had limited the grounds of interference in their contract by the courts to the procedural irregularities set out in s 33(1) of the Act. By necessary implication, they had waived the right to rely on any further grounds of review, whether at common law or otherwise. (Paragraph [51] at 292A - B.) E

Held, further, that the Act did not allow for review on the ground of material error of law and Telkom could accordingly not avail itself of this ground of review. (Paragraph [67] at 297C.)

'Gross irregularity'

Held, that the general principle was that an irregularity related to the conduct of the proceedings rather than to the merits. F Aqualification to that general principle was that a 'gross irregularity' was committed where the decision-maker misconceived the whole nature of the enquiry, ie he misconceived his mandate, or his duties in connection therewith. (Paragraphs [71] and [72] - [73] at 297I - 298A and 298C - E.)

Held, further, that, in the present case, the arbitrator's mandate included interpreting the Integrated Agreement. An arbitrator G was always entitled to be wrong on the merits and a wrong interpretation of the agreement did not amount to a misconception of the nature of the enquiry and therefore to an irregularity. (Paragraph [85] at 301J - 302C.)

Held, further, that a wrong interpretation of the agreement also did not entail the arbitrator's exceeding his powers. The power given to him was to, rightly or wrongly, interpret the agreement; H determine the applicable law; and determine what evidence was admissible. Errors of this kind had nothing to do with his exceeding his powers but were errors committed by him within the scope of his mandate. (Paragraph [86] at 302D - 303B.)

Held, further, that, on the evidence, the arbitrator had clearly understood his duties and consciously used the powers he had according to his terms of reference. (Paragraphs [90] - [93] at I 303G - 304E.)

Held, further, that the Court a quo had erred in treating the review application as an appeal: instead of considering whether the gross irregularities alleged had been committed, it had re-interpreted the agreement, coming to a conclusion different to that of the arbitrator and, on that basis, had found that the arbitrator failed to apply his mind, and misconceived the whole nature of J

2007 (3) SA p268

the enquiry and his duties in connection therewith, ie he was found to have committed an irregularity, and simultaneously to have A exceeded his powers. (Paragraph [99] at 305H - 306C.)

Held, further, that the Court a quo had misconceived its function in the additional respect that it dealt with the review as an appeal in the broad sense, taking into account facts that had not been before the arbitrator. (Paragraph [109] at 308E.) B

Section 20 of the Act

Held, that Telkom had no 'right' to approach the Court and the arbitrator had not infringed any such right when he declined, on Telkom's application, to state a case for the opinion of the court. (Paragraph [156] at 320B.)

Appeal upheld. Order of the Court a quo set aside and replaced with one dismissing the application. (Paragraphs [157] and [158] at 320C - E.) C

Cases Considered

Annotations

Reported cases

Southern African cases D

Administrator, South West Africa v Jooste Lithium Myne (Eiendoms) Bpk 1955 (1) SA 557 (A): referred to

Administrator, Transvaal v Kildrummy Holdings (Pty) Ltd and Another 1978 (2) SA 124 (T): referred to

Amalgamated Clothing and Textile Workers Union of South Africa v Veldspun (Pty) Ltd 1994 (1) SA 162 (A): E referred to

Bester v Easigas (Pty) Ltd and Another 1993 (1) SA 30 (C): referred to

Briscoe v Deans 1989 (1) SA 100 (W): referred to

Brisley v Drotsky 2002 (4) SA 1 (SCA) (2002 (12) BCLR 1229; [2002] 3 All SA 363): applied

Crystal Springs Aerated Water Co v Kan [1902] TH 21 at 27: compared

Datacolor International (Pty) Ltd v Intamarket (Pty) Ltd 2001 (2) SA 284 (SCA) ([2001] 1 All SA 581): F referred to

Dickenson & Brown v Fisher's Executors 1915 AD 166: applied

Dorman Long Swan Hunter (Pty) Ltd v Karibib Visserye Ltd 1984 (2) SA 462 (C): compared

Doyle v Shenker & Co Ltd 1915 AD 233: applied

Du Toit v Minister of Transport 2006 (1) SA 297 (CC) (2005 (11) BCLR 1053): referred to G

Dutch Reformed Church v Town Council of Cape Town (1898) 15 SC 14: referred to

Ellis v Morgan; Ellis v Dessai 1909 TS 576: referred to

Gentiruco AG v Firestone SA (Pty) Ltd 1972 (1) SA 589 (A): compared

Goldfields Investment Ltd v City Council of Johannesburg 1938 TPD 551: applied H

Government of the Republic of South Africa v Midkon (Pty) Ltd and Another 1984 (3) SA 552 (T): referred to

H A Millard & Son (Pty) Ltd v Enzenhofer 1968 (1) SA 330 (T): referred to

Hira and Another v Booysen and Another 1992 (4) SA 69 (A): referred to

Hyperchemicals International (Pty) Ltd and Another v Maybaker Agrichem (Pty) Ltd and Another 1992 (1) SA 89 (W): I referred to

Johnston v Leal 1980 (3) SA 927 (A): referred to

Kannenberg v Gird 1966 (4) SA 173 (C): referred to

Lamprecht and Another v McNeillie 1994 (3)...