The Supreme Court of Appeal (SCA) upheld an arbitration award that was challenged by the buyers of shares in a company, who argued that the arbitrator had ignored their suggestion to hold a separate hearing on one of the claims. The SCA found that the suggestion was not binding on the arbitrator, and that he had acted fairly and within his mandate.

The case involved the sale of shares in a company. The seller and the buyers entered into a sale agreement in 2017, which required any disputes to be referred to arbitration. A third party guaranteed the performance of the buyers. Various disputes arose between the parties, and they appointed an arbitrator to resolve them.

The seller’s counsel sent an email to the arbitrator, with the consent of the buyers’ counsel, suggesting that the arbitrator should convene a separate hearing to determine the quantum of one of the claims, known as the stock claim. The arbitrator acknowledged the email but did not follow the suggestion. Instead, he issued his award, deciding on all the claims including the stock claim.

The buyers were unhappy with the award, and they applied to the High Court to review and set aside the award, on the grounds of gross irregularity and exceeding of powers by the arbitrator. They argued that the arbitrator had ignored the email and had failed to give them a fair opportunity to present their case on the stock claim.

The SCA explained that the review of an arbitration award is limited to the conduct of the proceedings, not the outcome or the merits. The parties have the freedom to choose their arbitrator and the procedure, and that the courts should respect their autonomy and finality of their choice. The email was not an agreement, but a mere suggestion, and that the arbitrator had not breached his mandate nor acted unfairly. The quantum of the stock claim was clear from the evidence, and that the arbitrator had decided all the issues that were referred to him.

The SCA’s decision reaffirms the principle that arbitration is a private and consensual process, and that the courts should not interfere with the arbitrator’s authority or discretion, unless there is a serious procedural irregularity that affects the fairness of the proceedings. The case illustrates the importance of clear communication and documentation between the parties and the arbitrator, to avoid any misunderstandings.

Case: Rabinowitz v Levy and Others Others (1276/2022) [2024] ZASCA 8 (26 January 2024)

This blog post was co-authored by Ngarothe Netshipale, Candidate Attorney.