REPUBLIC OF NAMIBIA

HIGH COURT OF NAMIBIA, MAIN DIVISION, WINDHOEK

JUDGMENT

Case no: HC-MD-CIV-ACT-CON-2017/03148

In the matter between:

OPUWO TOWN COUNCIL PLAINTIFF

and

DOLLY INVESTMENTS CC DEFENDANT

Neutral Citation: Opuwo Town Council v Dolly Investments CC (HC-MD-CIV-ACT-

CON-2017/03148) [2018] NAHCMD 309 (24 September 2018)

CORAM: PRINSLOO J
Heard: 03 September 2018
Delivered: 24 September 2018
Reasons: 27 September 2018

Flynotes: Contract – Arbitration clause – Whether peremptory or discretionary in

nature as formulated in the agreement entered into between the parties.
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Summary: The parties in this matter entered into a building contract agreement – What
came up for consideration by this court is the special plea of arbitration raised by the
defendant as a defence against the plaintiff’s damages claim against the defendant for
breach of contract – The plaintiff is of the view that the arbitration clause is worded in a
discretionary nature whereas the defendant submits that the dispute must proceed to
arbitration, staying the present proceedings.

ORDER

Special plea is upheld with costs.

JUDGMENT

PRINSLOO J:

[1] The parties before me entered into a written agreement wherein the defendant
undertook to design, manufacture and construct a close storm water system and the
work to be done were subject to specifications as per the agreement and as per
instructions of an engineer.

[2] It is alleged that the defendant failed to perform as per the written agreement and
the plaintiff instituted proceedings against the defendant with the following prayers:

a) for payment of monies paid to the defendant as advance payment for the work to
be concluded by the defendant under the written contract between the parties;

b) for payment of monies necessary for the construction of the remainder of the
works, resulting from the defendant’s alleged repudiation of the contract and
subsequent vacating of the work site.
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[3] In opposition, the defendant filed a special plea for the plaintiff’s action to be
stayed pending the final determination of the dispute in terms of the written agreement
under clause 20 thereof, providing for the conditions of contract for construction and
dispute arising out of the terms of the agreement to be settled by a Dispute Adjudication
Board (DAB).

Contentions of the parties

On behalf of the Defendant

[4] The defendant relied on clause 20 of the written agreement which clauses
specifically made the following provisions:

Clause 20.2
‘Disputes shall be adjudicated by a Dispute Adjudication Board (DAB) in accordance with sub-
clause 20.4. the parties shall jointly appoint a DAB by the date stated in the Appendix to
Tender…’

Clause 20.4
‘If a dispute (of any kind whatsoever) arises between the parties in connection with or arising out
of, the contract or the execution of the works, including any dispute as to any certificate,
determination, instruction, opinion or valuation of the Engineer, either party may refer the
dispute in writing to the DAB for its decision…’

Clause 20.6
‘Unless settled amicably, any dispute in respect of which DAB’s decision (if any) has not
become final and binding shall be finally settled by International Arbitration…’

[5] As the defendant is of the view that the plaintiff’s claim arises out of the execution
of the contract, the aforementioned clauses for dispute resolution should be applied
over the plaintiff’s claim.
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[6] The defendant cites Teichman Plant Hire (Pty) Ltd v RCC MCC Joint Venture
(I1216-2015) NAHCMD 278 wherein Miller AJ stated that arbitration clauses, voluntarily
entered into by the parties, relinquish most of the rights of access to public courts. The
defendant further cites Trustco Group International (Pty) Ltd v The Namibian Rugby
Union (I I2781/2010) 2014 NAHCMD 169 at para 9 wherein Van Niekerk J enunciated
that a party who wishes to rely on an arbitration clause may bring an application to stay
the proceedings in terms of s 6 of the Arbitration Act 42 of 1965 or raise a special plea
defence that the plaintiff’s action should be stayed, pending the outcome of the
arbitration.

[7] The defendant submits that as per s 6 of the Arbitration Act, an application for
stay of legal proceedings must be granted by a court in the event that the agreement,
upon which the cause of action is based, contains an arbitration clause which is
applicable to the dispute and further that valid reasons compelling the court not to grant
the order are not provided. The defendant further submits that if this court is to grant the
special plea, the parties would then proceed as per the agreement in a step by step
order to undergo the arbitration process as out lined in the agreement.

[8] In concluding, the defendant argues that at the time of the plaintiff’s termination
of the agreement the defendant was on site fulfilling its obligations as per the agreement
and as such the plaintiff’s termination of the agreement was unlawful and therefore the
argument advanced on behalf of the plaintiff the entire agreement falls away, including
the arbitration clause does not hold water.

On behalf of the Plaintiff

[9] The plaintiff is of the view that the agreement between the parties was terminated
and where there is not provision catering for the survival of certain clauses in an
agreement, the entire agreement falls away as a consequence. In the result, the plaintiff
submits that the defendant cannot rely on arbitration clause in a contract that is no
longer existent.
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[10] The plaintiff cites Telecall (Pty) Ltd v Logan 2000 (2) SA 782 (SCA) wherein
Plewman JA stated that:

‘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’.

[11] With the above, the plaintiff submits that the defendant in this matter merely
alleges a dispute and demands referral to arbitration but omits to formulate the dispute,
thus failing to make out a case for referral.

[12] Furthermore, the plaintiff submits that the defendant relied on arbitration clauses
as mentioned above in this judgment that do not support its referral to arbitration in that
the clauses mentioned required positive acts by the parties to be concluded first , (i.e.
the appointment of a DAB in clause 20.2 and the discretionary nature of the wording in
clause 20.4 that either party may refer a dispute to arbitration) and as a result, the
arbitration clauses relied on by the defendant cannot be enforced at this stage.

The law applicable and application to the facts

[13] A party wishing to rely on an arbitration clause must allege and proof the
underlying jurisdictional facts1.In the matter in casu this onus rests on the defendant as
the party who raises the special plea.

[14] In Harms, Amler’s Precedents of Pleadings (7th ed) p38, the following are said to
be the required jurisdictional facts:

1
Goodwin Stable Trust v Duohex (Pty) Ltd 1998 (4) SA 606 (C) 615D-F.
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‘(a) the existence of the arbitration clause or agreement, which must be in writing (but not
necessarily signed)2;
(b) that the arbitration clause or agreement is applicable to the dispute between the parties 3;

(c) that there exists a dispute between the parties, which dispute must be demarcated in the
special plea4;

It is not necessary for the defendant to allege a readiness or willingness to arbitrate 5 and

(d) that all the preconditions contained in the agreement for commencing arbitration have
been complied with6.

[15] However, on the other hand the party resisting the stay-of-court proceedings
bears the onus of convincing the court that owing to exceptional circumstances the stay
should be refused. In other words, courts will enforce an agreement to arbitrate unless
there are compelling reasons to order otherwise7. Courts, as a general rule, must refer
matters which have arbitration clauses to arbitration if agreements so provide. In Umso
Construction Pty Ltd v Bk Investments Holdings (Pty) Ltd 8, the following was stated at
para 7 of the judgment –

‘The onus is on the respondent to satisfy the court that it should not in its discretion refer the
matter to arbitration - . . . A court will only refuse to refer the matter to arbitration where a very
strong case has been made out - . . .’

2
Mervis Brothers v Interior Acoustics 1999 (3) SA 607 (W).
3
Kathmer Investments (Pty) Ltd v Woolworths [1970] 2 All SA 570 (A), 1970 (2) SA 498 (A); Universiteit
van Stellenbosch v JA Louw (Edms) Bpk [1983] 2 All SA 415 (A), 1983 (4) SA 321 (A);tocks Construction
(OFS) (Pty) Ltd v Metter-Pingon (Pty) Ltd [1980] 1 All SA 326 (A), 1980 (1) SA 507 (A).
4
Parekh v Shah Jehan Cinemas (Pty) Ltd [1980] 1 All SA 239 (D), 1980 (1) SA 301 (D) 306; Delfante v
Delta Electrical Industries Ltd [1992] 3 All SA 968 (C), 1992 (2) SA 221 (C); Withinshaw Properties (Pty)
Ltd v Dura Construction Co (SA) (Pty) Ltd 1989 (4) SA 1073 (A).
5
Stanhope v Combined Holdings & Industries Ltd 1950 (3) SA 52 (E).
6
Richtown Construction Co (Pty) Ltd v Witbank Town Council [1983] 1 All SA 61 (T), 1983 (2) SA 409 (T);
Santam Insurance Ltd v Cave t/a The Entertainers & The Record Box [1986] 1 All SA 513 (A), 1986 (2)
SA 48 (A); Gerolemou/Thamane Joint Venture v AJ Construction CC [1999] 3 All SA 74 (T).
7
Harms, Amler’s Precedents of Pleadings (7th ed) p39.
8
(5541/2011) [2012] ZAFSHC 141 (10 August 2012).
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[16] What should be born in mind is that arbitrations do not automatically bar legal
proceedings. Didcott J in Parekh v Shah Jehan Cinemas (Pty) Ltd & Others 1980 (1) SA
301 at 305 had this to say:

‘While the arbitration is in progress, the Court is there whenever needed to give appropriate
directions and to exercise due supervision. And the award of an arbitrator cannot be enforced
without the Court’s imprimatur, which may be granted or withheld. But that is by no means all.
Arbitration itself is far from an absolute requirement, despite the contractual provision for it. If
either party takes arbitrable disputes straight to Court, and the other does not protest, the
litigation follows its normal course, without pause. The check it, the objector must actively
request a stay of the proceedings. Not even that interruption is decisive. The Court has
discretion whether to call a halt for arbitration or to tackle the dispute itself… Throughout, its
jurisdiction, though, sometimes latent, thus remains intact’.

[17] There is an issue between the parties as to the interpretation of the contract.
More specifically in respect of the appointment of a DAB in clause 20.2 and the
discretionary nature of the wording in clause 20.4 that either party may refer a dispute to
arbitration.

[18] Wessels CJ said the following in respect of the interpretation of contracts in

Scottish Union & National Insurance Company Ltd v Native Recruiting Corporation Ltd
1934 AD 458 at 465:

'We must gather the intention of the parties from the language of the contract itself, and if that
language is clear, we must give effect to what the parties themselves have said; and we must
presume that they knew the meaning of the words they use. It has been repeatedly decided in
our Courts that in construing every kind of written contract the Court must give effect to the
grammatical and ordinary meaning of the words used therein. In ascertaining this meaning, we
must give to the words used by the parties there plain, ordinary and proper meaning, unless it
appears clearly from the contract that both parties intended them to bear a different meaning. If,
therefore, there is no ambiguity in the words of the contract, there is no room for a more
reasonable interpretation than the words themselves convey. If, however, the ordinary sense of
the words necessarily leads to some absurdity or some repugnance or inconsistency with the
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rest of the contract, then the Court may modify the words just so much as to avoid that absurdity
or inconsistency but no more . . .'

[19] Having the above in mind, I agree with the submissions by the plaintiff that the
defendant may have relied on the wrong clauses to refer the dispute to arbitration but it
does not detract from the fact that clause 20.8 of the agreement entered into by the
parties provides that:

‘If a dispute arises between the parties in connection with, or arising out of, the contract or the
execution of the works and there is no DAB in place, whether by reason of the expiry of the
DAB’s appointment or otherwise:

a) Sub-clause 20.4 (Obtaining Dispute Adjudication Board’s Decision) and Sub-clause 20.5
(Amicable Settlement) shall not apply, and

b) The dispute may be referred directly to arbitration under Sub-clause 20.6 (Arbitration).’

[20] The argument advanced by the defendant in that once the referral to arbitration is
granted, the parties are to follow the procedural steps as outlined in the agreement to
undergo arbitration proceedings does not sit well practically. Clause 20.2 provided that
the parties had to appoint a DAB in order to adjudicate disputes arising between the
parties and this clause was framed in a mandatory fashion with the word “shall”.
Consequently, it turned out the parties failed to do for reasons not provided by either
party to this court and it begs the question whether this court is in a position to force the
parties to do what they agreed as per the agreement entered into between the parties.
Consequently, it seems as though either party may have relied on this clause to halt any
proceeding instituted in this court in order to comply with the arbitration clauses once
the need for it arose, in this case being the defendant.

[21] It is common practice that building contracts always contain arbitration clauses
and the practice directions under PD 19 also make provision for building contract claims
to be referred to alternate dispute resolution. Generally, one would opine that the
arbitration clauses and referral to alternate dispute resolution aims at affording the
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parties the opportunity to resolve their disputes expeditiously and cost effectively.
Running a trial for a dispute that could have been arbitrated effectively therefore defeats
the purpose of judicial case management and overriding objectives that this court aims
for.

[22] As per clause 20.2 of the agreement entered into between the parties, a DAB
would then have to be established and an adjudicator will have to be appointed and the
parties will then naturally be required to formulate the dispute in order for the adjudicator
to effectively adjudicate the dispute. If this is to be so, would it not further run up the
costs of this dispute between the parties where this court is all terms and purposes
already seized with the matter?

[23] An arbitrator well versed with building contracts or an arbitrator with considerable
experience in the building industry might be in a better position to analyze the dispute
between the parties and reach a conclusion quicker and more effectively wherein the
parties can consent to. In those circumstances, it would then be practical to refer the
matter to arbitration. What makes this decision easier is the fact that the parties
themselves failed to adhere to the provisions of the agreement they themselves
voluntarily entered into and clause 20.2 was one such clause that required the parties to
positively comply with.

[24] This court has a discretion whether to call a halt to the proceedings to permit
arbitration to take place or to tackle the disputes itself. 9 I am however satisfied that the
defendant has proven the underlying jurisdictional fact in that the arbitration clause
exists in the agreement between the parties and that the arbitration clause relates to the
dispute between the parties, i.e. the completion of work as set out in the agreement.
The dispute between the parties was clearly delineated in the special plea and even
though clause 20.2 was not positively complied with the parties can still be referred
directly to arbitration.

9
Parekh v Shah Jehan Cinemas (Pty) Ltd 1980 (1) SA 301 (D - C) at 305G - H).
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[25] The plaintiff was unable to convince me that there are any exceptional
circumstance or compelling reasons which would cause the court to refuse the stay
pending the outcome of the arbitration.

[27] The result is therefore that the dispute must be referred for arbitration and
plaintiff’s action must be stayed pending the outcome thereof.

[28] For these reasons, I make the following order:

Special plea is upheld with costs.

_________________
J S Prinsloo
Judge
APPEARANCES:

FOR THE PLAINTIFF: V Kauta

of Dr Weder, Kauta & Hoveka Inc., Windhoek.

FOR THE DEFENDANT: N Shilongo

of Sisa Namandje & Co Inc., Windhoek.