Zhongji Development Construction Engineering Co Ltd v Kamoto Copper Co Sarl

• Jurisdiction: South Africa
• Judge: Mpati P, Willis JA, Mbha JA, Mathopo AJA and Gorven AJA
• Judgment Date: 01 October 2014
• Citation: 2015 (1) SA 345 (SCA)
• Docket Number: 421/2013 [2014] ZASCA 160
• Hearing Date: 19 September 2014
• Counsel: MD Kuper SC (with W la Grange) for the appellant. B Leech SC for the respondent.
• Court: Supreme Court of Appeal

Willis JA (Mpati P, Mbha JA and Mathopo AJA concurring):

[1] This appeal is concerned with whether the high court (Myburgh AJ) was correct in dismissing an application for a declaratory order that a J particular dispute was 'arbitrable' and whether an arbitration agreement

Willis JA (Mpati P, Mbha JA and Mathopo AJA concurring)

applied in respect of certain invoices that form the subject-matter of the A dispute between the parties. The appeal to this court is with the leave of the high court. [*1]

[2] The appellant, which was the applicant in the high court, is a Chinese company known as Zhongji Development Construction Engineering B Company Ltd (Zhongji Construction). The respondent is a Congolese company, Kamoto Copper Company SARL (Kamoto). The parties are therefore both peregrini of the courts of South Africa.

[3] In April 2007 Zhongji Construction had been invited by a South African company, Bateman Minerals & Metals (Pty) Ltd (Bateman), acting on behalf of a Congolese company known as DRC Copper and C Cobalt Project SARL (DCP), to tender for the supply and construction of piling and civil works at DCP's mining site near Kolwezi in the Democratic Republic of Congo (the Congo). Arising from this invitation Zhongji Construction was awarded the tender. As a result of the award of the tender Zhongji Construction and DCP concluded a written agreement on 20 August 2008. D

[4] The parties have referred throughout the proceedings in both the high court and this court to this agreement as 'the main agreement'. For convenience I shall do so as well. In terms of this agreement the 'governing law' thereof is 'English law'. The main agreement provides that, unless the parties otherwise agree, disputes between them 'shall be E finally settled under the Rules for the Conduct of Arbitrations as published by the Association of Arbitrators (Southern Africa)' (the Arbitration Association). This main agreement also provides that three arbitrators would be appointed in any arbitration between them, these arbitrators to be chosen either by agreement between the parties or, F failing such an agreement, by the chairperson of the Arbitration Association. The arbitration clause in the main agreement moreover provides that the arbitration shall be held in Gauteng.

[5] At all material times in its dealings with Zhongji Construction, Bateman had been acting on behalf of DCP. Prior to the formal G conclusion of the main agreement Bateman had advised Zhongji Construction in a series of letters, stretching from 12 May 2007 to 21 September 2007, that it would be awarded the tender and should proceed accordingly. In November 2007 Bateman, again acting on behalf of DCP, informed Zhongji Construction that, as a result of 'merger talks', Zhongji Construction should suspend its construction operations for H about 'three to six months'.

[6] In the meantime shipments from China to the Congo were already on the high seas and could not be stopped. In consequence of the suspension of operations, representatives of Zhongji Construction and DCP met in Beijing on 26 and 27 November 2007 to reach an agreement I that would ensure that Zhongji Construction would not be compromised in respect of work already done and expenses actually incurred thus far.

Willis JA (Mpati P, Mbha JA and Mathopo AJA concurring)

A [7] Arising from the discussions which took place at the meeting in Beijing in November 2007, an interim agreement was reached between Zhongji Construction and DCP to tide things over until there was greater certainty about the future of the piling and construction project. This interim agreement is reflected, at first, in an exchange of correspondence B at the end of November 2007 and the beginning of December 2007. The interim agreement was formalised on 30 January 2008. The parties have referred to this agreement as the 'interim agreement'. I shall do so as well. Concluded under stressful conditions, the interim agreement had, quite understandably, been short on detail other than what were, in the C minds of the parties, the essentialia. Counsel for Zhongji Construction has referred to the interim agreement as being 'skeletal'. This is not an inaccurate description. It contains no clause dealing with any dispute resolution mechanisms.

[8] On 8 May 2008 Bateman gave notice to Zhongji Construction that D the piling and civil work should proceed and that the drilling rigs should be remobilised. With a view to this work being done, Bateman supplied Zhongji Construction with geological data so that it could proceed with the piling, as well as the pile cape and the pile layout. Bateman also gave Zhongji Construction drawings for the civil works, instructing Zhongji Construction to purchase the necessary materials for construction and to E mobilise the necessary equipment and personnel accordingly. Zhongji Construction began driving the first test piles at the site during September 2008, completing all test piles by 24 October 2008.

[9] Similarly to its conduct on 8 May 2008, DCP instructed Zhongji Construction on 15 October 2008 not to proceed with the procurement F or shipping of any cement or reinforcing steel and also informed it that it should not mobilise any additional personnel to site until further notice. On 29 October 2008 DCP instructed Zhongji Construction to suspend progress of all works.

[10] On 20 November 2008 Bateman on behalf of DCP gave Zhongji G Construction a written instruction that all materials in transit between China and the site near Kolwezi should be dealt with as follows:

(a)

Cargo that was at that time in transit in Zambia, Zimbabwe or the northern parts of South Africa should be delivered to and held in storage at Bridgeport, No 1 Bridge Close, City Deep, Johannesburg; H and

(b)

all other cargo in transit either in or to South Africa should be delivered to and held in storage at Bridgeport, 151 South Coast Road, Rossburgh, Durban.

[11] In this instruction of 20 November 2008 Bateman assured Zhongji I Construction that it would be reimbursed for all expenses in relation thereto, storage charges in South Africa to be levied at USD 2,75 per ton per week and USD 210 per container per week. Zhongji Construction implemented the instruction, incurring transport and storage costs.

[12] On 5 December 2008 Zhongji Construction was given due notice J that the construction work by it was no longer to continue. As a result

Willis JA (Mpati P, Mbha JA and Mathopo AJA concurring)

Zhongji Construction ceased operations and commenced with its A demobilisation on 2 January 2009. Zhongji Construction did no further construction work at the site near Kolwezi.

[13] Arising from the interim agreement, Zhongji Construction submitted payment certificates to Bateman as follows:

(a)

On 21 May 2008 in an amount of USD 1 733 294,39 (relating, B inter alia, to the construction costs of the construction camp itself as well as the batch plants and approved lump sum costs). This was approved by Bateman on 19 June 2008.

(b)

On 13 July 2008 in an amount of USD 1 049 386,30 (relating, inter alia, to the cost of building the cement stores as well as standing time from 1 May 2008 to the end of June 2008). This was approved C by Bateman on 2 October 2008.

(c)

On 25 August 2008 in an amount of USD 623 994,30 (relating, inter alia, to standing time for July 2008). This was also approved by Bateman on 2 October 2008.

(d)

On 23 September 2008 in an amount of USD 823 994,30 (relating, D inter alia, to standing time for August 2008, as well as a once-off cost of remobilising and servicing the drilling rigs). This was approved by Bateman on 19 November 2008.

[14] The DCP paid Zhongji Construction USD 1 733 294,39 in respect of the first of these invoices. Zhongji Construction has not been paid in E respect of the remaining three invoices, arising from the interim agreement, in respect of which there is a total of USD 2 497 374,90 outstanding. Zhongji Construction claims this amount, together with interest and costs, from Kamoto.

[15] Moreover, Zhongji Construction also submitted an invoice in an F amount of USD 7 938 780,98 for work performed in terms of the main agreement during September 2008. Bateman rejected this claim, indicating a number of items that should be removed therefrom. Zhongji Construction then submitted a revised interim payment certificate for USD 5 027 380,99, which Bateman approved on 1 December 2008. Zhongji Construction also submitted a claim for work performed in G terms of the main agreement for the period from 1 – 29 October 2008 in an amount of USD 3 324 995,68. This claim remains unpaid.

[16] Meanwhile DCP and Kamoto concluded a written agreement of merger in Kinshasa in the Congo on 25 July 2009. The language in H which this merger agreement was concluded was French. The merger was authorised by a decree signed by the President of the Congo on 27 April 2010. Translations into English of both the merger agreement and the decree were annexed to Zhongji Construction's replying affidavit. The accuracy of these translations is not in dispute.

[17] The English translation from the French of the relevant portion of I the merger agreement reads:

'Under the terms hereof, DCP hereby contributes with the ordinary legal guarantees and subject to the definitive fulfillment of the conditions precedent hereafter set out under Clause 9, to KCC, which accepts all of its goods, rights and obligations, assets and liabilities on 31 December J

Willis JA (Mpati P, Mbha JA and Mathopo AJA concurring)

A 2008, without exception or reserve, in return for taking over its liabilities on the same date under the terms and conditions provided in this agreement in consideration of these contributions, the shareholders of DCP shall be allotted, in exchange, new shares in KCC.

Therefore, as a result of...