IN THE REPUBLIC OF SOUTH AFRICA

GAUTENG DIVISION, PRETORIA

Date of hearing: 25 May 2015

Date of judgment: 18 December 2015

Case Number: 62030/12

In the matter between:

IRWING CONSTRUCTION 514 CC Applicant

and

J LE F PIENAAR First Respondent

C H BOTOULAS Second Respondent

S B BOTOULAS Third Respondent

_________________________________________________________

JUDGMENT

_________________________________________________________

A B ROSSOUW A J

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(1) This is an application for the review and setting aside of an

arbitrator's interim award dated 6 September 2011 and his final

award dated 10 August 2012 and for the review and setting

aside of the totality of the arbitration proceedings.

(2) The purpose of the arbitration was to resolve a number of

disputes that had arisen from a construction agreement which

the second and third respondents concluded with the applicant

during 2004.

(3) The hearing of the arbitration proceedings took place on 14 to

16 July 2010, 30 to 31 August 2010, 26 to 28 July 2011, 22

August 2011, 8 to 7 March 2012, 16 May 2012 and 18 July

2012 and the application for review comprises well over two

thousand pages.

(4) The history of this matter is, very briefly, the following:

(5) On 10 September 2004 the applicant (Irwing Construction 514

CC - henceforth referred to as ‘the contractor') and the

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 respondents (Dr Botoulas and Miss Watson- (now Mrs

Botoulas) - henceforth jointly referred to as ‘the employer’)

entered into a written agreement (a JBCC Series 2000

agreement) for the construction of a Tuscan-style house in

Chartwell, Johannesburg North for a contract sum of R2 214

429.06.

(6) The employer appointed Anton Richter Architects CC as his

agent in terms of the agreement.

(7) The construction period started on 10 September 2004 as per

the agreement. The contractor commenced with its work during

or about October 2004 and the employer reluctantly took

occupation of the house about a week or so before 25

December 2005.

(8) After the employer had taken occupation, the employer started

complaining about numerous defects in the contractor’s work

and the contractor’s failure to rectify same.

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(9) On 23 October 2006 the employer, through his attorney,

cancelled the agreement.

(10) The claimants issued summons against the contractor and the

agent out of the Gauteng Local Division of the High Court (as it

is now known) under the case number 07/4125.

(11) The matter was subsequently referred to arbitration and the

aforesaid action was (and still is) stayed pending the outcome

of the arbitration.

(12) The parties appointed an arbitrator (the first respondent) and

agreed to a separation of quantum and merits. The parties

agreed that the merits be arbitrated first and thereafter the

quantum. The merits involved the question as to whether the

employer validly cancelled the agreement in terms of the

agreement, and, if not, whether the contractor repudiated the

agreement and, if so, whether the employer cancelled the

agreement by the acceptance of the contractor’s repudiation.

The issue as to whether the defects complained of had been

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 rectified by the contractor when the agreement was cancelled

formed part of the merits.

(13) On 6 September 2012 the arbitrator made an interim award

regarding the merits and a portion of the quantum. The latter

award was based on a joint report of the parties’ experts which

contained an agreement regarding some defects and the

figures to rectify same.

(14) The contractor perceived the arbitrator’s conduct during the

proceedings as being biased and brought an application in

terms of rule 8 of the Rules of Conduct of Arbitrators (Fifth

Edition) to the Chairman of the Association of Arbitrators for the

removal of the arbitrator.

(15) The application for the recusal of the arbitrator was not brought

to finality. There is a dispute between the parties as to the

present status of this application.

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(16) The arbitration continued on the quantum and on 14

September 2012 the final award was made.

(17) The contractor brought an application against the arbitrator and

the employer to have both awards including the totality of the

arbitration proceedings set aside on the following grounds:

1. During the course of the evidence given on behalf of the employer

and in particular the evidence of the expert, the arbitrator became

biased in their favour and which resulted in an application for

recusal, which has not been finalised;

2. The arbitrator grossly misdirected himself by making interim awards

on the issue of quantum whilst the issue of quantum and merit had at

that stage still been separated and not all evidence heard;

3. The arbitrator grossly misdirected himself on the nature of the

dispute before him;

4. The arbitrator grossly misdirected himself regarding the issue of the

calculation of a final payment;

5. The arbitrator grossly misdirected himself in dealing with the

aforementioned issue by refusing an amendment allowing for the

defendant’s calculations of the amount due as a counterclaim and

failing to consider this issue as one of set-off;

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 6. the arbitrator grossly misdirected himself by having regard to the

relevant evidence and considerations and disregarding relevant

evidence and considerations;

7. the arbitrator grossly misdirected himself in accepting certain

evidence and simply ignoring other evidence without having made

any credibility findings or laying a basis for the aforesaid;

8. the arbitrator made so many misdirections that cumulatively they

amount to ‘misconduct’ and grossly unreasonable conduct as

provided for in section 33 (1) of the Arbitration Act 42 of 1965,

resulting in the arbitration proceedings and awards to be set aside

on the Arbitrations Act and/or the Common Law’.

(18) The arbitrator does not oppose the application.

(19) The contractor filed his replying affidavit almost a year late in

respect of which the employer seeks condonation. This

application is opposed.

(20) There is also a point in limine taken by the employer that the

application for the review and setting aside of the arbitrator’s

interim award is late and that it should have been brought

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 within six week after the interim award was published in terms

of s 33(2) of the Arbitration Act 42 of 1965 (‘the Act’).

(21) Regarding the application for condonation, the following:

(22) The employer’s opposing affidavit was served on 30 November

2012. The replying affidavit was only delivered on 18 November

2013, i.e. almost a year out of time. The contractor’s

explanation for the delay is, in short, that the senior counsel

who was involved in the arbitration proceedings was instructed

to prepare the draft replying affidavit, that the employer’s

attorneys contacted him every ten days or so, that senior

counsel time and again promised that he would attend to the

replying affidavit until about October 2013 when senior counsel

informed his attorneys that due to his workload he was not

getting to the finalisation of the replying affidavit and that the

appointment of junior counsel should be considered. This was

communicated to the employer’s attorneys and junior counsel

was briefed to finalise the replying affidavit. The reasons why

the specific senior counsel was kept on brief for such a long

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 period was primarily based on financial and practical

considerations. Save for stating that the employer’s attorneys

contacted the senior counsel every ten days or so and that the

said counsel time and again promised that he would attend to

his brief, the delay between November 2012 and October 2013

is in my view unreasonable and that no good cause has been

shown in terms of Uniform Rule 27(3). In the light hereof, I am

not inclined to grant the application for condonation. This

means that the contents of the replying affidavit cannot be

taken into consideration.

(23) Regarding the point in limine, the following:

(24) In terms of s 33(2) of the Act an application for the setting aside

of an award on the grounds mentioned in s 33(1) thereof, ie

misconduct, gross irregularity, exceeding of powers and

improper obtainment of an award, must be made within 6

weeks after the publication of the award. Different periods apply

where the award is requested to be set aside on the grounds of

corruption, which I find unnecessary to deal with.

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(25) Section 1 of the Act defines an award as including an interim

award and s 31 of the Act stipulates that an award may be

made an order of court and may be enforced in the same

manner as any judgment or order to the same effect.

(26) The interim award, which is a reasoned award, was given on 6

September 2011.

(27) If one looks at the interim award, it only contains the reasons of

the arbitrator. It does not contain an award in the form of an

order declaring the agreement to be validly cancelled and/or

directing the contractor to pay a sum of money to the employer.

If one reads the interim award, it is clear that the arbitrator

merely decided that the agreement was validly cancelled and

that certain aspects regarding the quantum of the employer’s

claim need not to be proved in the subsequent phase of the

arbitration and that any award to be made in future would be

based on these findings. In his final award that was given on 10

August 2012 the arbitrator says exactly that: ‘On 2011-09-26 I

issued an interim award that forms part of this award.’ He then

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proceeded by repeating his determination contained in the

interim award verbatim in the final award. The only award

proper that was ever made is contained in paragraph 18 of his

final award in terms whereof the contractor is ordered to pay

certain sums to the employer. This award is obviously based

upon the arbitrator’s decision contained in his interim award

that the employer validly cancelled the agreement. The

arbitrator’s decision contained in the interim award regarding

part of the quantum was only transformed into an award in

paragraph 18.1 of the final award. In this paragraph the

contractor is ordered to pay the employer an amount of R412

850.85, which amount includes the amount of R192 265.00, the

composition of which is contained in his interim award.

Furthermore, if his interim award is compared to his final award,

it is clear that the arbitrator never intended to make any award

prior to the final award: The arbitrator’s final award contains a

clear award comparable to an order of Court, whereas the

interim award does not. This is strengthened by the fact that the

arbitrator couched the interim award in a form that would not

make it susceptible to be made an order of court in terms of s

31 of the Act.

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(28) By reason of the foregoing, the point in limine is dismissed.

(29) I now turn to the merits of the application.

(30) Section 33(1) of the Arbitration Act 42 of 1965 (‘the Act’)

stipulates as follows:

Where –

(a) any member of an arbitration tribunal has misconducted

himself in relation to his duties as arbitrator or umpire; or

(b) an arbitration tribunal has committed any gross irregularity

in the conduct of the arbitration proceedings or has

exceeded its powers; or

(c) an award has been improperly obtained

the Court may, on application of any party to the reference after due

notice to the other party or parties, make an order setting the award

aside.

(31) To the extent that the contractor seeks to have the contractor’s

decision reviewed under the common law as stated in his

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 eighth ground for review, the following: There is no common

law review under arbitration law, nor can the contractor rely on

any administrative common-law review ground. (Telcordia

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

59). The contractor is limited to the grounds in terms of s 33

(1)(Amalgamated Clothing & Textile Workers Union v Veldspun

Ltd 1994 (1) SA 162 (AD) 169D).

(32) Although the contractor in his founding affidavit does not state

which particular sub-sections he relies upon in respect of each

ground, it appears as if he is mainly relying on (a) and the first

ground in (b), namely gross irregularity. The second ground in

(b) and the ground in (c) are not part of the contractor’s case.

(33) To the extent that the contractor relies on (a), the following: The

contractor alleges in his founding affidavit that the arbitrator

was biased. In this regard the contractor alleges that the

arbitrator had no experience, knowledge and expertise on the

subject matter, the he allowed one of the experts of the owner

to lecture him during the proceedings, that he allowed the said

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 expert to give evidence beyond the scope of the proceedings,

that he allowed the employer’s expert to give hearsay evidence,

that he was unduly impressed by the employer’s expert, that he

accepted the said expert’s evidence and that he paid little or no

attention to the expert of the contractor, all of which were

perceived by the contractor as impartiality or bias on the part of

the arbitrator.

(34) In Amalgamated Clothing & Textile Workers Union v Veldspun

Ltd at 169C-E the following was said:

As to misconduct, it is clear that the word does not extend to bona fide

mistakes the arbitrator may make whether as to fact or law. It is only

where a mistake is so gross or manifest that it would be evidence of

misconduct or partiality that a court might be moved to vacate the award:

Dickenson & Brown v Fisher’s Executors 1915 AD 166 at 174-81. It was

held in Donner v Ehrlich 1928 WLD 159 at 161 that even a gross mistake,

unless it establishes mala fides or partiality, would be insufficient to

warrant interference.

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(35) Assuming, without deciding, that the arbitrator did make all of

the mistakes as alleged and that these mistakes were gross

mistakes, I am not persuaded that his mistakes were so gross

as to establish partiality or mala fides or conduct involving

dishonesty or moral turpitude or any other improper conduct on

the part of the arbitrator. Furthermore, an arbitrator’s lack of

experience, knowledge and expertise on the subject matter per

se does not constitute misconduct in terms of (a), nor can it in

itself constitute a ground for review in terms s 33(1). This much

is clear from a plain reading of the section.

(36) That leaves me with the first ground in (b), namely whether the

arbitrator committed a gross irregularity in the conduct of the

arbitration proceedings.

(37) The contractor raises a number of grounds, but for the reasons

that follow, I shall confine myself only to the question as to

whether, in the words of the contractor, ‘the arbitrator grossly

misdirected himself on the nature of the dispute before him’.

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(38) In Goldfields Investments Ltd v City Council of Johannesburg

1938 TPD 551 it was held that the term ‘gross irregularity’

encompasses the case where a decision-maker misconceived

the whole nature of the inquiry or his duties in connection

therewith. This principle has been generally accepted by our

courts (See Telcordia at paras 71 and 72 where this principle

was discussed and explained with reference to the case law).

(39) Where the legal issue is left for the decision of the functionary

any complaint about how he reached his decision must be

directed at the method employed in reaching the decision and

not the result. This is known as the Doyle v Shenker principle.

If, for instance, a decision-maker has to interpret a document

and he interprets it wrongly, it cannot be said that the wrong

interpretation prevents the decision-maker from fulfilling his

duties or from considering the matter left to him for decision. On

the contrary, in interpreting the document the decision-maker is

actually fulfilling the function assigned to him and it follows that

his wrong interpretation of the document cannot afford any

ground for review by the Court. This differs from the Goldfields

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 principle which grants a ground for review where a wrong

interpretation by the decision-maker of his function leads to the

decision-maker not directing his mind to the issue which was

his duty to decide. (See Telcordia par 75 and 76 where this is

explained).

(40) The Goldfields principle and the Doyle v Shenker principle are

not mutually exclusive: If the arbitrator does not fall foul of the

Goldfields principle, the Doyle v Shenker principle applies.

(Telcordia para 78).

(41) In order to decide whether the present case falls within the

purview of Goldfields or Doyle v Shenker, a good starting point

will be the arbitrator’s terms of reference, in other words, the

nature of the disputes that were referred to the arbitrator for

determination. These disputes are defined in the employers’

statement of claim read with the contractor’s statement of

defence.

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(42) The employer’s statement of claim regarding the cancellation of

the agreement is, to say the least, unsatisfactory in a number of

respects:

(43) In paragraph 7 of his statement of claim the employer alleges

six forms of breaches committed by the contractor. Save for the

vagueness of these allegations, not one of the alleged

breaches is connected to a specific clause in the agreement,

which makes it difficult to ascertain which clause or clauses are

alleged to have been breached and how exactly they were

breached: Firstly, the employer alleges that the contractor

breached the agreement in that practical completion was never

obtained. In terms of clause 7.1.10 of the agreement the

contractor was obliged to bring the work to practical completion

on or before a date mentioned in the schedule to the

agreement. The blank space in the schedule for the date on or

before which practical completion had to be obtained was not

filled in. The statement of claim contains no allegations in this

regard. Moreover, the process towards practical completion is

set out in clause 9 of the agreement, which clause imposes

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obligations on both the agent and the contractor. The statement

of claim contains no facts indicating why the contractor, and not

the agent, should be blamed for practical completion not being

obtained. Secondly, it was alleged that the contractor

abandoned the building works. Only desertion or abandonment

of the contract without lawful excuse amounts to a breach of

the agreement. No factual basis is set out with reference to a

specific clause or clauses as to why the contractor’s alleged

abandonment was without lawful excuse. Thirdly, the owner

alleges that the contractor’s work contained various defects and

that it was not executed in a professional and workmanlike

manner. This in itself is not a breach in terms of the agreement.

A defect is defined in the agreement as an aspect of the work

which, in the opinion of the agent (not in the opinion of the

employer or a third party), is not in accordance with the

agreement. Furthermore, clause 9 of the agreement contains a

detailed procedure to be followed in the case of defects. Thus,

a defect or substandard work per se does not constitute a

breach - it merely sets the agreed process in motion. It is the

failure to remedy the breach after due demand in terms of the

agreement that constitutes the breach. Paragraph 7 does not

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 contain any factual allegation with reference to the relevant

clause or clauses substantiating a breach by the contractor in

this regard. Fourthly, the owner alleges that the contractor

failed to obtain certain certificates, without reference to a

specific clause. The clause apparently relied upon is clause

7.1.5. There is no allegation that these certificates were indeed

required by the relevant authorities and, if so, whether the

contractor was contractually obliged to pay for these

certificates. Lastly, the employer alleges that the contractor

breached the agreement by withdrawing retention moneys.

Again, this alleged breach is not linked to a specific clause.

(44) If one reads paragraph 8 of the statement of claim, it appears

as if the basis for the cancellation of the agreement was in

essence the contractor’s non-compliance with certain

instructions received from the agent and not the alleged

breaches mentioned in paragraph 7 of the statement of claim.

This poses the question as to the relevancy of the alleged

breaches mentioned in paragraph 7.

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(45) In paragraph 8.1 of his statement of claim the employer alleges

that certain instructions were issued by the agent, without

giving any indication as to whether these instructions were

issued in terms of the agreement and, if so, in terms of which

clause or clauses of the agreement and whether these

instructions were in writing as is required in terms of the

agreement. In paragraph 8.2 the employer alleges that the

agent issued a written demand dated 16 March 2006 for the

contractor to comply with his obligations before a certain date.

A copy of the demand is attached to the statement of claim.

(The contents of this letter is quoted below). It is uncertain in

terms of which clause of the agreement this letter was issued.

The letter appears be a contract instruction in terms of clause

6.2.12 read with clause 9.3.2 of the agreement. In paragraphs

8.3 and 8.4 the employer alleges that the contractor did not

comply with the demand as a result of which the employer

cancelled the agreement by notifying the contractor as such in

writing through its attorney on 23 October 2014. (The contents

of this letter is quoted below). Again, no reference is made in

terms of which clause the agreement was cancelled.

Furthermore, the agreement contains a clause 15, which

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specifically deals with the situation where the employer cancels

the agreement. In terms of clause 15.1.3 the employer may

cancel the agreement where the contractor fails to comply with

a contract instruction issued in terms of clause 6. If the

employer decides to cancel the agreement in terms of clause

15.1, the agent shall notify the contractor in writing of the

employer’s intention to cancel should the default continue for

seven calendar days after receipt of the notice. The letter of the

attorney dated 23 October 2014 attached to the statement of

claim is not on all fours with the agreed notice. Firstly, it was

not given by the agent in writing and secondly, it did not give

the contractor notice that the agreement would be cancelled

should the default continue for seven calendar days. It is trite

law that where a party wishes to enforce a cancellation clause,

the conditions for its implementation must be strictly followed.

The termination of an agent’s mandate is no excuse for not

complying with these terms, because the employer is

contractually obliged to have an agent appointed at all relevant

times in terms of clause 5.1.8 of the agreement.

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(46) The statement of claim regarding the basis and quantification of

the employer’s claim can only be describe as an arcane

muddle:

(47) The employer claims an amount of R1 574 160 in respect of the

costs to remedy the defects mentioned in the statement of

claim and the costs of obtaining certain certificates plus an

amount of R451 462.13 in respect of payments made in excess

of the contract sum as adjusted by the employer.

(48) These claims appear to be an independent claim for damages

rather than a claim in terms of clause 15.2 of the agreement.

Clause 15.2 sets out the procedure to be followed where the

employer cancels the agreement. This clause survives the

agreement where the agreement is cancelled by the employer

and the parties’ rights subsequent to the cancellation by the

employer can only be governed by these terms. Clause 15

stipulates that after cancellation of the agreement the agent

shall prepare and complete the final account within 30 working

days and the agent must issue a final payment certificate,

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 which is defined in the agreement as a document certifying the

amount due and payable by the contractor to the employer or

vice versa. Without this document no payment can be claimed.

Clause 15 further provides for the appointment of direct

contractors to complete the works and it further stipulates that

the employer may, instead of any penalty that could be levied in

terms of the agreement, recover expenses and losses resulting

from the cancellation. These items must be included and

quantified by the agent in the final payment certificate. Clause

13.7 stipulates that the agent shall include in the payment

certificate amounts due to the employer for work done by a

direct contractor, penalties levied as well as expenses and loss

incurred due to default by the contractor on cancellation of the

agreement in terms of clause 15. Only the items mentioned in

the agreement may be included in the final account and the

final certificate.

(49) Thus, the agreement contains a neat framework within which

the contractor’s default must be dealt with and it provides a

detailed basis upon which the employer’s claim should be

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 quantified and to which the parties are bound. Should a party

take issue with certain or all items contained in the final account

and/or the final certificate, he can follow the procedure set out

in the agreement to have those issues referred to arbitration.

(50) In paragraph 14 of his statement of claim the employer

attaches a final account apparently in lieu of the final account

envisaged in the agreement, which account does not make

provision for the remedying of defects. As alleged by the

employer, this statement of account is not the account

envisaged in the agreement. This statement is in my view

nothing but the employer’s own calculation of the amount of

damages that is owed to him. In paragraph 19 of the statement

of defence the validity of the statement of account is denied.

(51) From the aforesaid it is clear that the employer in his statement

of claim blows hot and cold. On the one hand he alleges that

the contractor breached the terms of the agreement which

justified him to cancel the agreement in terms of clause 15, but

on the other hand he demands payment of an amount based

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 on his own calculations and ignores the procedure laid down in

clause 15 and the requirement of a final payment certificate as

a precondition for payment.

(52) Furthermore, in paragraph 8 the employer alleges in the

alternative that the defendant repudiated the agreement, which

repudiation the employer accepted. If the agreement was

cancelled by the acceptance of the contractor’s repudiation,

then the agreement and all its terms, including the provisions of

clause 15, are no longer in esse, save for perhaps the

arbitration clause, and in which event the innocent party must

calculate his damages. It is hard to figure out whether the

calculation contained in the statement of claim is a calculation

in lieu of the final account mentioned in the agreement or

whether it is a calculation for damages or whether it is a hybrid

between the two. In any event, it is very confusing.

(53) Although the employer’s claim was everything but clear, the

arbitrator’s terms of reference, in other words the issues he had

to decide, was quite clear, namely whether the agreement was

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 cancelled in terms of the agreement, in other words, whether

the employer was entitled to cancel the agreement in terms of

clause 15 and, if the agreement was not cancelled in terms of

clause 15, whether the contractor repudiated the agreement

and, if so, whether the contractor accepted the repudiation. To

the extent that the statement of claim was unclear and lacked

the necessary averments to substantiate a cause of action,

nothing prevented the employer to place all the required

evidentiary material before the arbitrator to cover the holes in

the statement of claim in order to prove a valid cancellation,

especially in the light of the fact that the contractor never raised

any objection to the manner in which the statement of claim

was formulated.

(54) I shall now deal with the arbitrator’ interim and final awards in

order to decide whether the arbitrator committed a gross

irregularity as envisaged in s33(1)(b), in other words whether

the arbitrator misinterpreted his function and, if so, whether it

caused the arbitrator not to direct his mind to the issues he was

duty bound to decide.

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(55) In par 1 of the interim award the arbitrator says the following:

‘The first phase would deal with the merits of the matter, ie whether and in

which respect(s) the [contractor] is liable’. Thereafter, depending on the

outcome of the first phase, the second phase, dealing with the quantum,

would take place.’

(56) After dealing with the evidence relating to the defects and the

various so-called snag lists received by the contractor, the

arbitrator quoted the agent’s letter dated 16 March 2006. This is

the agent’s demand referred to in paragraph 8.2 of the

statement of claim, which demand I have already referred to

above. It reads as follows:

‘Subsequent to a site meeting held with [the employer] Monday

(13/03/2006) at above-mentioned residence it was noted that a number of

outstanding items handed to you on the 14th of February 2006 have still

not been attended to or are not acceptably rectified. The one week given

to you to attend to these items are long past. I have convinced the client

[the employer] to allow you once more to complete the work before the

24th of March 2006 failing which we will have no alternative but to appoint

another contractor to do the work at your cost.

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 This work has dragged on for months and the client was very lenient and

accommodating.

As previously instructed strict supervision must be applied at all times.

Please consider the privacy of the owners. Take care not to mess on the

carpets.

Attached find the list of items to be attended to.’

(57) Paragraph 14 of the reward reads as follows:

After [the employer’s expert] had made his report available, [the employer]

cancelled the agreement in writing by means of a letter dated 2006-10-23,

from attorneys Meyer and Mahuntsi to the [contractor], inter alia, in the

following terms (numbering omitted):

As you are aware, we act on behalf of [the employer] (‘our client’) who

contracted with [the contractor] for the building of their home at 211

Sandringham Street, Chartville, Johannesburg North.

We are instructed that in breach of the agreement you inter alia:

• withdrew monies from the retention fund despite the fact that no

practical completion certificate has as yet been issued;

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 • failed to comply with a reasonable contract instruction from the agent

in that you failed to remedy the defects listed in the agent’s fax dated

16 March 2006;

• failed to continue work on site without reasonable cause for more than

14 calendar days;

• failed to complete the work in proper and workmanlike manner;

Our client has obtained an independent expert’s report which estimates

the cost to remedy the defects in your building works at approximately R1

127 000-00.

By your letter dated 25 May 2006 as well is your actions subsequent, we

are of the view that you in any event cancelled the agreement,

alternatively repudiated it, which repudiation is hereby accepted.

Insofar as the agreement has not yet been cancelled either by your letter

or the agent’s letter dated 16 March 2006 as a result of your non-

compliance therewith, our instructions are to cancel the agreement, which

we hereby do.

(58) Paragraph 15 of the interim awards reads as follows:

I am satisfied (apart from the issue whether the [contractor] had

repudiated the agreement and whether the repudiation had been

accepted by the [employer], should acceptance of a repudiation by the

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 [employer] be a necessary element to found rescission) that the contract

was cancelled in terms of the letter dated 2006-10-23. Various alleged

breaches of the contract were listed in the letter of 2006-10-23 as well as

in the [employer’s] Statement of Claim. I need not address all the alleged

grounds. It is clear, despite the [contractor’s] attention to some of the

problems raised in various snag lists, that there were still serious defects

after the snag list of 2006-03-16 had been issued by the Agent. [The

employer's expert] visited the house during June/July 2006, and found the

defects as stipulated in his report. All these alleged defects as stated by

[the employer's expert] have not survived the joint exercise of the two

experts, but in terms of the joint report there were still many serious

defects as set out in the concluding paragraph (the determination) of this

interim award that entitled the [employer] to have cancelled the contract

and to claim payment in respect of the defective work.

(59) In paragraph 16 of the interim award the arbitrator reached the

following conclusion: ‘There was thus a material breach by the

[contractor] of an essential obligation of the [contractor]. The

arbitrator then proceeded to quote the work of Finsen, The

Building Contract (A Commentory on the JBCC Agreements)

and Christie, The Law of Contract in South Africa, where it

deals with a party’s right to cancel an agreement where the

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 breach goes to the root of the contract. He then proceeded to

say the following: ’In the instant matter there has been a breach

of an essential term, and the breach is major as appears from

the "Joint Expert’s Report”, as referred to in the determination

of this award.

(60) In paragraph 17 of the interim award, the arbitrator stated the

following: ‘But apart from the fact that the [employer was]

entitled to cancel on the basis that there was a major breach of

an essential term, the agreement does contain a forfeiture

clause (sic), clause 15.1, entitling the [employer] to cancel the

agreement on specific grounds, reading as follows: . . . ‘

(61) The arbitrator then dealt with the clause 15.1.13 of the

agreement and stated the following:

‘But when the Agent issued his instructions to the contractor on 2006-03-

16, after he had inspected the site with the [employer] on 2006-03-16, he

was the Agent and he referred to a formidable list of matters that needed

attention, but the [contractor] did not comply with this instruction. The

[employer was] thus also entitled to cancel the agreement between

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 themselves and the contractor in terms of clause 15.1.3 read with clauses

6.2 and 6.2.12, an aspect that was raised in the fourth paragraph of the

letter of cancellation of 2006-10-23: “Your breaches . . . in any event

justify cancellation in terms of clause 15 of the agreement.’

(62) In paragraph 20 the following is stated:

Mr Vlok did not rely on the grounds referred to in clause 15.1, and I do not

rely on these grounds to come to the conclusion that the agreement was

cancelled in terms of clause 15. It was cancelled in terms of the general

principles applicable to the cancellation of contracts as stated in

paragraph [13] [This appear to be an error and should be a reference to

para 16 of the interim award} above, as well as in terms of clause 15.1.3

of the Building Agreement.

(63) It should be noted that the arbitrator failed to deal with the issue

of repudiation in the following context or at all: In many cases

the repudiating party may have a bona fide belief that his

interpretation of the contract is correct, and may subjectively

intend to be bound by it, but the test that must be applied is

whether he acted in such a way as to lead a reasonable person

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 to the conclusion that he did not intend to fulfil his part of the

contract. Repudiation is not a matter of intention, it is a matter

of perception. The perception is that of a reasonable person

placed in the position of the aggrieved party. The test is

whether such notional reasonable person would conclude that

proper performance in accordance with a true interpretation of

the agreement will not be forthcoming. (See Datacor

International (Pty) Ltd v Intamarket (Pty) Ltd 2001 (2) SA 284

(SCA) at 294).

(64) From the quoted portions of the interim award, the following is

clear: The arbitrator regarded the mere existence of defects as

a breach justifying cancellation and that it was not necessary to

apply the terms the agreement in this regard. He further

regarded the letter of the attorney as sufficient for purposes of

determining whether the agreement was validly cancelled. He

was further of the view that it was not necessary to test the

letter of cancellation against the terms of the agreement in

order to determine whether the letter constituted a valid

cancellation in terms of the agreement. The arbitrator was also

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 clearly under the impression that the JBCC agreement could be

cancelled solely with resort to the general principles of the law

of contract pertaining to cancellation. In addition the arbitrator

was under the impression that the cancellation clause in the

JBCC agreement merely provided an alternative ground for

cancellation that stood alongside the general principles of the

law of contract relating to cancellation and that either one

could be applied or order to decide whether the agreement was

validly cancelled or not. It also appears from the reasoned

reward read as a whole that the arbitrator would have found

that the agreement was validly cancelled in terms of the

general principles of the law contract relating to cancellation,

irrespective of whether it was validly cancelled in terms of the

agreement.

(65) I am of the view that the present matter falls under the purview

of the Goldfields principle.The arbitrator misconceived the

nature of his function, namely to interpret and apply all the

relevant terms of the agreement to the facts for purposes of

determining whether the employer validly cancelled the

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 agreement. By asking the wrong question, namely whether the

the defects were still in existence at the time when the letter of

cancellation was sent and whether the employer was justified to

cancel the agreement in terms of the general principals of the

law of contract relating to cancellation, lead the arbitrator to

misconceive the nature of his function namely to determine the

validity of the cancellation within the four corners of the JBCC

agreement, which prevented a fair trial of the issue relating to

merits. This also explains why the arbitrator never raised any of

the issues relating to the employer’s statement of claim which I

have dealt with above.

(66) I therefor find that the arbitrator committed as gross irregularity

in the conduct of the arbitration proceedings in view of which

the final award must be set aside. Despite the fact that I have

found that the interim award was not an award proper, but

merely a decision, I am in any event going to set the interim

award aside in order to avoid any uncertainty in this regard.

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(67) The applicant also seeks the review and setting aside of the

totality of the arbitration proceedings. I find this unnecessary.

The effect of setting aside of the award is that everything that

has happened since the arbitrator entered into the reference is

nullified. His jurisdiction ceased on the publication of his or and

is not revived by its setting aside.

(68) Because of my findings, I find it unnecessary to deal with the

other issues raised in the papers.

(69) In the result, I make the following order:

1. The applicant’s application for condonation for the late

filing of its replying affidavit is dismissed;

2. The interim award made by the first respondent on 6

September 2011 is set aside;

3. The final award made by the first respondent 10 August

2012 is set aside;

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4. The disputes between the parties shall be submitted to a

new arbitration tribunal in accordance with clause 18 of the

JBCC Minor Works Agreement that was entered into

between the parties on 10 September 2004;

5. The applicant is ordered to pay the cost of the application

for condonation for the late filing of its replying affidavit;

6. The first and second respondents are ordered to pay the

costs of the application for review, jointly and severally, the

one to pay the other to be absolved, including the costs

consequent upon the employment of two counsel.

_______________________

A B ROSSOUW A J

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FOR THE APPLICANT

ADVOCATE: N DAVIS SC AND P A SWANEPOEL

ATTORNEYS: TINTINGERS INC, PRETORIA

FOR THE SECOND AND THIRD RESPONDENTS

ADVOCATE: J VLOK

ATTORNEYS: BOOYSE ATTORNEYS, GARSFONTEIN,

PRETORIA ℅ COUZYN HERTZOG & HORAK, PRETORIA

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