Ummi Properties (Pty) Ltd v Knights Street Properties (Pty) Ltd (3028/2016) [2016] ZAECPEHC 79 (13 December 2016) per JW Eksteen J.

The high court refused to grant an application for a declaration that no arbitrable dispute exits in the statement of dispute and that the arbiter has no locus standi as arbitrator for the purpose of deciding any dispute between the parties.  The applicant sought a further declarator that rulings made by the arbiter are not of any force and effect.  Parties who have bound themselves to resolve disputes by arbitration cannot avoid arbitration by refusing to engage in the face of a patent dispute.   ‘Situations may often arise where the contentions advanced by one party may not be known to the other, even though the conduct of the former, viewed in context, demonstrates unequivocally that a dispute exists’ and ‘[i]n short a dispute for the purposes of the Act is one in relation to which opposing contentions are or can be advanced’.

Excerpts without footnotes

Application of the facts to the legal principles

[10]   In Parekh v Shah Jehan Cinemas (Pty) Ltd and Others 1980 (1) SA 301 (D) Didcott J set out an articulate description of arbitration proceedings and its purpose.  At 304E-G he stated:

“Arbitration is a method for resolving disputes.  That alone is its object, and its justification.  A disputed claim is sent to arbitration so that the dispute which it involves may be determined.  No purpose can be served, on the other hand, by arbitration on an undisputed claim.  There is then nothing for the arbitrator to decide.  He is not needed, for instance, for a judgment by consent or default.  All this is so obvious that it does not surprise one to find authority for the proposition that a dispute must exist before any question of arbitration can arise.”

[11]   Mr Scott SC, on behalf of the applicant, contends that the first respondent has failed to properly formulate a dispute, and the terms of such a dispute.  Denton articulated the applicant’s stance in the replying affidavit.   He stated:

“… until the First Respondent sets forth, in its Statement of Claim, a description of the dispute between the parties, that is, their respective and differing or competing views with regard to a particular aspect of the matter, … there can be no talk of the commencement of arbitration proceedings.”

[12]   For this contention Mr Scott seeks refuge in the decision of Telecall (Pty) Ltd v Logan 2000 (2) SA 782 (SCA) where Plewman JA stated at para [12]:

“I conclude that before there can be a reference to arbitration a dispute, which is capable of proper formulation at the time when an arbitrator is to be appointed, must exist and there cannot be an arbitration and therefore no appointment of an arbitrator can be made in the absence of such a dispute.  It also follows that some care must be exercised in one’s use of the word ‘dispute’.  If, for example, the word is used in a context which shows or indicates that what is intended is merely an expression of dissatisfaction not founded upon competing contentions no arbitration can be entered upon.”

[13]   All of this, I think, is uncontentious and Mr Buchanan SC, on behalf of the first respondent, does not take issue with these statements.  He has referred me, however, to Peter Ramsden:  The Law of Arbitration at p.  50-51 wherein the author summarises the position in English Law by reference to a judgment of Jackson J in the matter of Amec Civil Engineering Ltd v Secretary of State for Transport [2005] 1 WLR 2339 CA, [2005] EWCA Civ 291.    At p.  50-51 the author quotes the dicta of Jackson J to the following effect:

“(a)      The word “dispute” which occurs in many arbitration clauses should be given its normal meaning.   It does not have some special or unusual meaning conferred upon it by lawyers.   Despite the simple meaning of the word ‘dispute’, there has been much litigation over the years as to whether or not disputes existed in a particular situation or not.

(b)        The mere fact that one party notifies the other party of a claim does not automatically and immediately give rise to a dispute.   It is clear, both as a matter of language and from judicial decisions, that a dispute does not arise unless and until it emerges that the claim is not admitted.

(c)        The circumstances from which it may emerge that a claim is not admitted are protean.   For example, there may be an express rejection of the claim.   There may be discussions between the parties from which objectively it is to be inferred that the claim is not admitted.   The defendant may prevaricate, thus giving rise to the inference that he does no admit the claim.   The defendant may simply remain silent for a period of time, thus giving rise to the same inference.

(d)        …

(f)        If the claim as presented by the claimant is so nebulous and ill-defined that the defendant cannot sensibly respond to it, neither silence by the defendant nor even an express non-admission is likely to give rise to a dispute for the purposes of arbitration or adjudication.”

In Collins (Contractors) Ltd v Baltic Quay Management (1994) Ltd  [2004]  2 All ER 982, [2004] EWCA Civ 1757, Lord Clarke, after quoting this dictum of Jackson J stated at para 63:

“…  I entirely accept that all depends on the circumstances of the particular case.   I would, in particular, endorse the general approach that while the mere making of a claim does not amount to a dispute, a dispute will be held to exist once it can reasonably be inferred that the claim is not admitted.   …”

[14]   He proceeded at para 64 to state:

“It appears to me that negotiation and discussion are likely to be more consistent with the existence of a dispute, albeit an as yet unresolved dispute, than with an absence of a dispute.   It also appears to me that the court is likely to be willing readily to infer that a claim is not admitted and that a dispute exists so that it can be referred to arbitration or adjudication.”

[15]   English authority dealing with the requirements for a dispute for arbitration do, of course, have strong persuasive value in our law.  See The Law of Arbitration in South Africa – Jacobs at p.  1-2.

[16]   I agree with the views expressed by Ramsden.  A party who has bound himself to have his disputes resolved by arbitration cannot, in the face of a patent dispute, avoid arbitration by refusing to engage.   Situations may often arise where the contentions advanced by one party may not be known to the other, even though the conduct of the former, viewed in context, demonstrates unequivocally that a dispute exists.

I am fortified in this view by the finding of Plewman JA in Telecall (Pty) Ltd supra at 786I  where he held:

“In short a dispute for the purposes of the Act is one in relation to which opposing contentions are or can be advanced.”

[17]   This, I think, acknowledges that a valid dispute under the Act may arise even though the contentions of the opposing party supporting the position which he evinces by his conduct are not known to the counterparty.  On the facts of the present matter I think that the prevarication on the part of Denton gives rise to the inescapable inference that the enforceability of the notarial agreement of sub-lease was being disputed and that the referral to arbitration was valid.

It follows that in my view the dispute is properly and accurately formulated in the most recent “Terms of Dispute” quoted earlier.   The existence of this dispute is ultimately confirmed, albeit ex post facto, by the statement of defence filed wherein the applicant contended that the agreement is unenforceable by virtue thereof that it conferred a personal right which has prescribed.   This clearly is a matter for the arbitrator to decide.