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THE ALL SOUTH AFRICAN LAW REPORTS
HOS+MED MEDICAL AID SCHEME v THEBE YA BOPHELO HEALTHCARE AND OTHERS, 2008 (2) All SA 132 SCA
Appeal tribunals & arbitration agreements
The Appellant was a medical aid scheme and the first respondent was its broker. A dispute regarding the fees payable to the first respondent was referred to arbitration, and the arbitrator found that the appellant was liable to pay the fees claimed, but that decision was set aside on appeal.
When the first respondent obtained the setting aside of the appeal award, the present appeal was noted.
The following relevant observations were made:
Paragraph 30: “…it is clear that the only source of an arbitrator’s power is the arbitration agreement between the parties and an arbitrator cannot stay beyond their submission where the parties have expressly defined and limited issues, as the parties have done in this case to the matters pleaded. Thus the arbitrator and therefore also the appeal tribunal, had no jurisdiction to decide a matter not pleaded.
Paragraph 31: “The appeal tribunal held, however, that it was entitled to go beyond the pleadings where the issue had been traversed in evidence. It relied on Shill v Milner where De Villiers JA said: “The importance of pleadings should not be unduly magnified. The object of pleading is to define the issues; and parties will be kept strictly to their pleas where any departure would cause prejudice or would prevent full inquiry. But within those limits the court has a wide discretion. For pleadings are made for the court, not the court for pleadings. Where a party has had every facility to place all the facts before the trial court and the investigation into all the circumstances has been as thorough and as patient as in this instance, there is no justification for interference by an appellate tribunal merely because the pleading of the opponent has not been as explicit as it might have been.”
Paragraph 32: “…the appeal tribunal was not entitled to take this approach: its powers were conferred by the arbitration agreement and it did not have the power to go beyond that. But even if, for the sake of argument, it were accepted that the appeal tribunal did have jurisdiction, it can hardly be contended that the question whether there was unanimous assent was properly canvassed before the arbitrator.”
Paragraph 34: “The facts, on which the Shill v Milner principle can be applied, even if it had been open to the appeal tribunal to rely on it, were not traversed in evidence. There was thus no basis for the appeal tribunal to find that there was unanimous assent to the disposal of the right to claim fees for ongoing services.”
In the circumstances the appeal tribunal exceeded its powers: it went beyond the terms of the arbitration agreement. This is a clear case where the arbitration appeal tribunal exercised a power that it did not have and under the Arbitration Act, that warrants the setting aside of the order.
MILLENNIUM WASTE MANAGEMENT (PTY) LTD v CHAIRPERSON TENDER BOARD, 2008 (2) All SA 145 (SCA)
Condonation of non-compliance with tender requirements
The second respondent had invited tenders for the lawful disposal of medical waste. The appellant was one of the companies which submitted a tender.
Explaining how the tenders were dealt with, the chairman of the departmental tender committee stated that the tenders received were subjected to evaluation criteria which were divided into two phases, namely administrative compliance and technical compliance. The appellant’s tender was disqualified at the first phase for failing to comply with the administrative requirements. The defect was failure to sign a form titled “declaration of interest”.
Section 217 of the 1996 Constitution lays down minimum requirements for a valid tender process and contracts entered into following an award of tender to a successful tenderer.
The section requires that the tender process preceding the conclusion of contracts for the supply of goods and services must be “fair, equitable, transparent, competitive and cost-effective” and as the decision to award a tender constitutes administrative action, the provisions of the Promotion of Administrative Justice Act (PAJA) will apply to the process.
On 7 April 2005, the appellant was informed that the tender was disqualified for failing to sign the declaration of interest and that the consortium had won the tender. The declaration referred to was duly completed and initialed on each of the two pages. The department’s argument was upheld by the court below and found that the tender committee lacked authority to condone the appellant’s failure to comply with peremptory requirements of the tender.
The court then referred to paragraph 31 in Pepper Bay Fishing 2004 (1) SA 308 (SCA): “As a general principle an administrative authority has no inherent power to condone failure to comply with a peremptory requirement. It only has such power if it has been afforded the discretion to do so… the Chief Director derives all his powers and authorities from the enactment constituted by the general notice. If the general notice therefore affords him no discretion, he has none. The question whether he had a discretion is therefore entirely dependant on a proper construction of the general notice.”
The court then stated the following: “With this I agree and wish to add that in the present case the tender committee was afforded the necessary discretion by regulation 5(c). Therefore it erred in thinking that it did not possess such power.”
Our law permits condonation of non-compliance with peremptory requirements in cases where condonation is not incompatible with public interest and if such condonation is granted by the body in whose benefit the provision was enacted. In this case condonation of the appellant’s failure to sign would have served the public interest as it would have facilitated competition among the tenderers. By condoning the failure the tender committee would have promoted the values of fairness, competitiveness and cost-effectiveness which are listed in section 217.
The court upheld the appeal and made the following order:
(a) the exclusion of the tender of the applicant and the consequent decision to accept the tender of the third respondent are declared to have been invalid.
(b) the tender board is directed to evaluate the tender that was submitted by Millennium Waste Management and the tender submitted by the consortium relative to one another and to decide by not later than 15 February 2008, … which tender ought properly to have been accepted.
BUCKLAND v MANGA, 2008 (2) All SA 177 (E)
Servitude by prescription
The applicant and respondent were owners of adjacent properties, separated by a passageway. The applicant sought declaratory relief confirming his right of way to the gate at the rear of his property along the passageway belonging to the respondent, and directing the respondent to remove any physical obstacle to the applicant exercising such servitude.
The issue for determination was whether the applicant had acquired a servitude over the passage by prescription or not.
Section 6 of the Prescription Act 68 of 1969 provides that a person shall acquire a servitude by presumption if he has openly exercised the rights and powers which a person who has a right to such servitude is entitled to exercise for an uninterrupted period of thirty years.
It is common cause that the applicant enjoyed access to his house through the front door of the house and through the said passage which accommodate a wooden gate through which entry into the applicant’s property is gained and which leads to his back door. The combined periods of use of the passage by the applicant and his predecessor-in-title, were in excess of thirty (30) years.
The respondent’s case is essentially that he was unaware that the passage was being used by the applicant and therefore any allegation of him being entitled to the servitude by prescription because it was acquired through an uninterrupted use over a period of thirty years cannot be sustained. For the same reason, the respondent argues, the applicant cannot rely on any period during which the applicant’s predecessor-in-title exercised the same rights and powers.
The court made following observation: ‘The respondent had owned the property… for approximately twelve years before he informed the applicant of his intention to close the passage.
It is undisputed that the applicant exercised the rights and powers to use the passage, as did his predecessor-in-title, openly and as though he was entitled to do so, as a person who indeed had a right to such servitude and that he did so throughout the twelve-year period.
The respondent ought to have had knowledge of the applicant’s conduct in the light of this substantial period of time. It is difficult to accept that he did not know this. He certainly ought to have known about it in the circumstances.
The application was granted.
OMNI TECHNOLOGIES (PTY) LTD t/a GESTETNER EC v BARNARD AND OTHERS, 2008 (2) All SA 207 SE
Restraint of Trade
Seeking to enforce certain restraint of trade provisions, the applicant approached the court for an interdict preventing the first three respondents from being employed by the fourth respondent or any other competitor of the applicant.
The question was whether the employment of the second and third respondents by the fourth respondent constituted a breach of the restraint provisions. The provisions barred the respondents after cessation of their employment with the applicant, within the area and for the period stipulated in the provisions, from being associated with, or involved in, any undertaking similar to that of the applicant. It was common cause that the fourth respondent was a competitor of the applicant in the field of office automation equipment. Thus, the employment of the respondent with the fourth respondent constituted an infraction of the restraint of trade provisions.
The next consideration related to the legal enforceability of the restraint provisions. The court set out in detail, the applicable legal principles.
(a) A matter such as the present is substantially an application for final relief. A final order can only be granted in motion proceedings if the facts stated by the respondent together with the admitted facts in the applicant’s affidavit justify the order, irrespective of where the onus lies.
(b) Agreements in restraint of trade are valid and enforceable unless they are unreasonable and thus contrary to public policy, which necessarily as a consequence of their common-law-validity has the effect that a party who challenges the enforceability of the agreement bears the burden of alleging and proving that it is unreasonable and therefore against public policy.
(c) All agreements including those in restraint of trade are subject to constitutional rights obliging courts to consider fundamental constitutional values when applying and developing the law of contract in accordance with the constitution, in particular the Bill of Rights, section 36 and section 39.
(d) ….
(e) The value judgment made in determining the reasonableness of a restraint is made with two principle considerations in mind: the first is that the public interest requires that parties should comply with their contractual obligations and the second is that all persons should in the interests of society be productive and permitted to engage in trade and commerce or the professions.
(f) In applying these two principal considerations, the particular interests must be examined. A restraint is against public policy and unenforceable if it would prevent a party after termination of his or her employment from participating in trade or commerce without a corresponding interest of the other party deserving of protection. Five question require to be answered when the reasonableness of a complaint is considered:
(i) Does the one party have an interest that deserves protection after termination of the agreement?
(ii) If so, is that interest threatened by the other party?
(iii) In that case, does such interest weigh up qualitatively and quantitatively against the interest of the other party not to be economically inactive and unproductive?
(iv) Is there any aspect of public policy having nothing to do with the relationship between the parties that requires the restraint to be maintained or rejected?
(v) Does the restraint go further than necessary to protect the interest?
Where the interest of the party sought to be restraint weighs more than the interest to be protected, the restraint is unreasonable and consequently unenforceable.
The court on the evidence concluded that the applicant had established that it had interest worthy of protection.
Paragraph 16 of the judgment reads as follows: “The applicant’s trade secrets consist inter alia of confidential information relating to its customer base and pricing structures. Included therein are the identities and addresses of customers, their peculiar needs, requirements and preferences, the commencement and termination dates of the contracts concluded with customers, and the specific pricing structures relating to individual customers…”
The court found that the second respondent had made her manager aware of her intention to join the fourth respondent’s company, and had met with no objection. That amounted to a waiver of the right to enforce the restraint. The applicant was also non-suited against the third respondent as she had not been in the applicant’s employ long enough to learn the applicant’s trade secrets.
The application was dismissed with costs.
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