arbitration / adr news

The Gauteng Local Division of the High Court of South Africa recently explored the application of section 8 of the Arbitration Act 42 of 1965 (Arbitration Act) where a party had failed to timeously deliver a notice of appeal.

The case (22 pages / 158KB PDF) is a useful reminder of the application of section 8 and the requirements that must be met before it will come to the assistance of a party that has failed to file a notice in accordance with the provisions of its arbitration agreement.

Van Den Heever NO v N'komati Anthracite

Liviero Mining (Pty) Ltd (Liviero) performed opencast mining services on behalf of N’komati Anthracite (Pty) Ltd (N’komati) as part of an agreement, concluded between the parties in August 2017, which contained an arbitration clause. Liviero was liquidated in May 2020 and, in October of that year, N’komati entered into business rescue. During Nkomati’s business rescue proceedings, the joint liquidators of Liviero appointed a forensic auditor to determine the extent of its claim against N’komati. The auditor’s report concluded that N’komati owed Liviero an amount of R17,863,604 (USD1,036,803).

N’komati disputed the auditor’s report, but ended up paying Liviero an amount of R4,117,843.00. Liviero then claimed for payment of the remainder of the amount in the auditor’s report. In its defence, N’komati alleged that it had previously paid certain amounts to Liviero which should be offset from the remainder claimed. In any case, it argued, the amount was not due and owing.

The parties agreed to refer the dispute to arbitration proceedings in accordance with the dispute resolution mechanisms contained in N’komati’s business rescue plan and the parties concluded an arbitration agreement with the aim of resolving the financial dispute. After the proceedings were completed, the arbitrator issued an award in favour of Liviero on 14 August 2021 and ordered N’komati to pay Liviero the remainder of the amount together with interest. N’komati was not satisfied with the award and delivered a notice of appeal on 1 September 2021. The notice was delivered outside of the 10-day time period stipulated in the arbitration agreement.

Given N’komati’s failure to deliver the notice of appeal in time, the liquidators of Liviero’s applied to court to make the arbitration award an order of court. The basis of their application was that N’komati’s notice of appeal was time-barred as clause 9.2 of the arbitration agreement required such notice of appeal to be delivered within 10 calendar days of the publication of the award, failing which the right to appeal shall lapse and the award shall not be appealable. Therefore, in Liviero’s view, N’komati was barred from appealing the arbitration award as it has delivered its notice of appeal 18 calendar days after the publication of the award.

N’komati’s counterapplication

However, N’komati opposed Liviero’s application and also brought a counterapplication under section 8 of the Arbitration Act, requesting the court exercise its discretion to grant an extension of the time period for the delivery of the notice of appeal in arbitration. The counterapplication further directed Liviero to nominate arbitrators to constitute the arbitration appeal tribunal.

Section 8 of the Arbitration Act empowers the court to extend time fixed in arbitration agreement for commencing arbitration proceedings, provided that the court is of the opinion that the circumstances of the case are such that giving effect to the time fixed in the arbitration agreement will result in undue hardship to either party. In this case, N’komati claimed that it would suffer undue hardship if it had to give effect to the agreement. Liviero opposed the counterapplication and argued that the delay in delivering the notice of appeal had not been properly or adequately explained; the intended appeal had no prospects of success; and that Liviero stood to suffer prejudice if the intended appeal were allowed.

The court held that the proper application of section 8 means that “where the hardship is due to the fault of the claimant, it means hardship the consequences of which are out of proportion to such fault.” The Court held that N’komati had in fact provided a detailed explanation of how and why the notice of appeal had been delivered late. The delay had resulted from a misunderstanding between the N’komati’s attorney and the advocates, and the delay had been further exacerbated by a confluence of most unfortunate circumstances.

Furthermore, the court held that while the delay in delivering the notice of appeal could obviously have been avoided, the non-compliance or default was certainly not deliberate. The court also noted that there had been no historical pattern of delay on N’komati’s part during the arbitration proceedings and that N’komati’s failure to timeously file the notice of appeal was not part of an ongoing strategy of delay.

Examination of hardship

In delving into the examination of whether the hardship occasioned by N’komati’s failure to file the notice of appeal timeously, is “undue” or “disproportionate” to such fault, the court noted that the failure to deliver the notice of appeal was slight and as a result of an administrative oversight. While the mistake in this case was neither deliberate nor reckless, nor indicative of an election not to appeal, the court held that the hardship and prejudice that would result if N’komati is not allowed to pursue the appeal is wholly disproportionate.

In addressing Liviero’s second point of contention, the court held that while prospects of success remain relevant to the question of undue harm, section 8 does not include a requirement of good or reasonable prospects before relief can be granted under it. However, it is undeniable that if N’komati is correct in its contentions, the prejudice it will suffer if the court does not condone its failure to file timeously, is wholly undue and disproportionate compared to the mistake of filing a notice of appeal out of time. The court was of the view that it cannot be said that N’komati’s prospects of success is so unreasonable that it should not be granted an indulgence.

Lastly, the court held that while some delay is inevitable, this delay does not outweigh the prejudice that N’komati is exposed to, should the right to appeal be forfeited. The consequences of this would include N’komati losing the right to an appeal despite this right being agreed to in the parties’ arbitration agreement. If N’komati loses the right to challenge the findings of the arbitrator in circumstances where it is submitted that disputes and issues beyond the scope of the separated issues were determined, and the interim award was made in circumstances where the separated issues concerned a narrower question.

Moreover, if N’komati contends that the principal separated issue is an important, serious legal issue that ought to be reconsidered, and which, if it is correct, will be corrected on appeal. An award will be made in a lesser amount and N’komati’s right to proceed to arbitration on all the remaining issues, will be restored. As such, the intended appeal has a bearing and an impact not only on the interim award, but also on the future conduct of the arbitration.

The court, taking all of the above into account, was of the view that an appropriate case for relief in terms of section 8 of the Arbitration Act was made and that N’komati is entitled to an extension of the time period for the delivery of it notice of appeal in the arbitration. Accordingly, the court dismissed Liviero’s application.

Source: Pinsent Masons - Out-law