THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Not Reportable
Case No: 1016/2021
In the matter between:
JVE CIVIL ENGINEERS INC.

APPELLANT
and
BLUE BANTRY INVESTMENTS 235 (PTY) LTD                             FIRST RESPONDENT
PETRUS BURTON FOURIE N.O                                           SECOND RESPONDENT

Neutral citation: JVE Civil Engineers Inc. v Blue Bantry Investments 235 (Pty) Ltd
and Another (1016/2021) [2023] ZASCA 12 (16 February 2023)
Coram: Van der Merwe, Mocumie and Hughes JJA and Goosen and Windell AJJA
Heard:
23 November 2022
Delivered:  16 February 2023
Summary: Arbitration – Arbitration Act 42 of 1965 – review of arbitration award in
terms of s 33(1)(b) of the Act –  arbitrator exceeded powers –  determined two claims
in dispute on grounds not pleaded – defence (compromise) pleaded in respect of
another claim found to be proved by arbitrator – constituted complete defence to two
claims in dispute – artificial and unjust to disregard defence because not specifically
pleaded in respect of claims in dispute – appeal dismissed.

___________________________________________________________________

ORDER
___________________________________________________________________

On appeal from: Western Cape Division, Cape Town (Pangarker AJ sitting as a court
of first instance):

The appeal is dismissed with costs, including the costs of two counsel.
___________________________________________________________________

JUDGMENT
___________________________________________________________________
Hughes JA (Van der Merwe, Mocumie JJA and Goosen and Windell AJJA
concurring):
[1] This is an appeal against the order of the Western Cape Division of the High
Court, Cape Town (the high court) dismissing the review application of an appeal
arbitration award. The appeal is with leave of the high court.

[2] The appellant is JVE Civil Engineers Inc (JVE), an engineering company which
provided engineering services to the first respondent, Blue Bantry Investment 235
(Pty) Ltd (Blue Bantry), a property developer in the Western Cape Province. The
parties were engaged in a residential property development on the farm Groot
Phesantekraal, Durbanville, Western Cape Province.

[3] JVE sued Blue Bantry in the high court for fees arising from engineering
services it had rendered to Blue Bantry with regards to this development. During the
course of such litigation, the parties opted for arbitration proceedings and concluded
an arbitration agreement in August 2018. They further agreed that the pleadings in the
high court would stand as pleadings in the arbitration. JVE was unsuccessful in the
arbitration and proceeded to appeal the award which came before the second

respondent, retired Judge Fourie.1 On 12 December 2019, he dismissed JVE’s
appeal. A determined JVE proceeded to the high court to review the appeal arbitration
award, raising a number of grounds to have the award reviewed and set aside. I deal
with these grounds further in the judgment. On 15 June 2021, the high court dismissed
JVE’s review application with costs.

Background
[4] A brief background is necessary. The facts are as follows: Mr van Eeden of
JVE and Mr Brink of Blue Bantry had a longstanding personal and professional
relationship. Blue Bantry purchased Groot Phesantekraal and sought the assistance
and engineering services of JVE to develop part of the farm. JVE had assisted Blue
Bantry with engineering services during both Phase 1 and Phase 2 of the residential
development. During the course of these two phases, no agreement was documented
due to their close relationship.

[5] During 2008, a change in the ownership regime took effect at Blue Bantry and
for the first time, on 12 May 2008, JVE and Blue Bantry recorded an agreement in
respect of the engineering services for Phase 3 of the residential development (Phase
3), in an email, referred to as the JVE1 agreement. JVE was thus appointed by Blue
Bantry as civil engineers for Phase 3. The JVE1 agreement set out the scope of work
to be conducted, the relevant instructions for JVE and the fee and payment structure
applicable to this phase. JVE’s claims against Blue Bantry are in relation to this
agreement in respect of Phase 3.

[6]   As I shall demonstrate, this matter concerns engineering fees in respect of
external bulk infrastructure services. Municipalities levy Bulk Infrastructure
Contribution Levies (BICL) from developers in respect of the use of existing municipal
bulk infrastructure services for new residential developments. These bulk
infrastructure services relate to water, stormwater, sewage and roads. When the
existing infrastructure requires upgrades or additions, the developer is expected to

1 The second respondent, Judge Fourie, did not partake in the appeal.

erect or install such services, for which the developer would be compensated by
receiving BICL credits from the municipality.

[7] Clause 6 of the JVE1 agreement read as follows:
‘Fees for external services will be paid at 100% of the [Engineering Council of South Africa
(ECSA)] rate if it can be fully recovered from the bulk services contributions otherwise a 20%
discount will also apply here. Interim payments will be calculated at the 20% discount. 100%
fee scenario will therefore only apply if the bulk services contributions exceeds the cost
obligation to infrastructure provided by the client/developer.’ (As interpreted by the
respondent.)2
The ‘bulk services contributions’ in clause 6 referred to BICL credits. This clause thus
meant that JVE would receive 80% of the ECSA tariff for work related to external
services, unless BICL credits exceeded the costs of the infrastructure provided by
Blue Bantry, in which case the additional 20% would become payable. The parties
were also ad idem that in terms of the ECSA tariff a 1.25 multiplication factor, which
would translate to a 25% addition to fees, applied where the work concerned
constituted alterations to existing work.

[8] During the course of Phase 3, Blue Bantry and the City of Cape Town
concluded a new service agreement in December 2008 (Service Agreement 2008). It
extended the scope of BICL credits available to Blue Bantry, as follows:
‘7. Cost of bulk services versus development contributions
Table 5
. . .
7.1
COMPANY must fund the payment of the municipal services (as detailed in Table 5)
on the basis of completed work as certified by the consultants, from own sources: provided
that the amount due by COMPANY to the City in respect of bulk services contributions, will
be credited with the approved capital costs. This includes all bulk services contributions
(roads, water, sewage and stormwater) that have not been levied as on 1 December 2008.See
Table 6.

2 Record Vol 1 p 143: ‘6. Fooie vir eksterne dienste sal teen 100% van ECSA tarrief betaal word
SLEGS indien dit ten volle kan verhaal word van die grootmaat dienste bydraes andersins sal 20%
afslag ook hier geld. Interim betalings sal bereken teen die 20% afslag. 100% fooi scenario sal dus
slegs van toepassing wees indien die grootmaatdienstebydraes die koste verpligtinge om
infrastruktuur te voorsien deur die klient/ontwikkelaar oorskry.’

7.2
Any additional infrastructure provided by the COMPANY which exceeds bulk
contributions as detailed in Table 6 will be carried forward and refunded by the City in terms
of credit on bulk service contributions for any further development by the COMPANY or any
nominated entity of the COMPANY’s choice for development in the northern corridor area (As
currently defined by The City of Cape Town). The monetary value of the additional
infrastructure will be calculated by converting the value into current equivalent development
contributions for residential erven and/or commercial area and/or industrial area. Once bulk
infrastructure contributions levies are payable for future development as mentioned above,
the credit due to COMPANY or his nominated entity will become claimable in part or in total.
7.3 For the avoidance of doubt it is specifically agreed that the [intention] above is to
compensate the company for its loss of interest on the capital expenditure [through] the benefit
of having year to year growth in value of the credits for bulk contribution obligations.
. . .’

Arbitration proceedings
[9] Before the commencement of the arbitration proceedings, the parties narrowed
the issues for determination and compiled a document headed ‘Points of Dispute’. In
terms thereof, certain issues stood over for later determination. The remaining issues
concerned claims by JVE for fees for external services, fees for internal services and
damages for alleged breach of contract. The claims for external services included a
claim for the additional 20% fees under clause 6 (the BICL claim), as well as a 1.25
multiplication factor fee claim in respect of alterations to existing work (the 1.25
multiplication factor claim).

[10] The BICL claim was squarely based on clause 6 of the JVE1 agreement. JVE
contended that the condition that entitled it to the additional 20% fees had been
fulfilled, irrespective of or because of the effect of the Service Agreement 2008. It is
unnecessary to relate the particulars of these contentions. In respect of the 1.25
multiplication factor claim JVE’s case was that the claimed fees related to work that
constituted alterations to existing work and that the relevant requirements of the ECSA
tariff had been met. These allegations were eventually conceded by Blue Bantry. As
part of its answer to the damages claim, in para 8.2.4 of its amended plea, Blue Bantry
pleaded the conclusion of a separate subsequent agreement, as follows:
‘Between 20 August 2009 and 7 September 2009 the parties met so as to discuss the
Plaintiff’s fees as aforesaid. The Plaintiff was represented by the said Van Eeden and the

Defendant by the said Hooper and Brink. At this meeting Brink and Hooper advised Van
Eeden that, whilst he was not entitled to the payment of the 20% discount and/or 25%
surcharge, the Defendant would pay him these amounts if and when they were recovered
from the municipality. Plaintiff agreed thereto.’

[11] In both the arbitration and its appeal, JVE was unsuccessful. As I shall explain,
it is only necessary to consider the reasoning and findings of the appeal arbitrator.
Only the BICL and 1.25 multiplication factor claims remain relevant to the appeal. The
appeal arbitrator held that the Service Agreement 2008 had amended the JVE1
agreement, which precluded reliance on clause 6 as a cause of action. He proceeded
to hold that the contents of para 8.2.4 of the amended plea had been proved and had,
in fact, been admitted in evidence by Mr van Eeden. As it was common cause that the
relevant amounts had not been recovered from the City of Cape Town, the appeal
arbitrator held that the 1.25 multiplication factor claim was premature and had to fail.

In the high court
[12] In terms of s 33(1) of the Arbitration Act 42 of 1965 (the Act), an award may be
reviewed and set aside where (a) an arbitrator has misconducted themselves in
relation to their duties as arbitrator or (b) where an arbitrator has committed a gross
irregularity or exceeded their powers in arbitration proceedings or (c) where an award
was improperly attained. In the high court, JVE sought to have the decision of the
appeal arbitrator set aside in terms of s 33(1)(b).

[13] In the review proceedings before the high court JVE acknowledged that an
arbitrator was ‘entitled to be wrong’. It contended, however, that the appeal arbitrator
had exceeded his powers and/or committed a gross irregularity in the conduct of the
proceedings by determining the two relevant claims on a basis not pleaded at all (the
amendment of JVE1 agreement) and not pleaded in answer to these claims (para
8.2.4 of the amended plea).

[14] The high court found that the appeal arbitrator ‘considered the arbitrator’s
approach and findings, [in relation to] paragraph 8.2.4 of the amended Plea’ with
reference to the concession of Mr Van Eeden during cross examination.  It concluded
that ‘[t]he aspect regarding the oral agreement concluded between the parties in

August/September 2009, and on which evidence was lead, was specifically pleaded
at paragraph 8.2.4 of the amended Plea’. Thus, the high court dismissed the review
application, as it found that the appeal arbitrator acted within his powers when he
made his finding as regards the oral agreement.

The law
[15] The terms of the Act, though no specific mention is made of appeal arbitrations,
‘clearly enable an agreement to refer an arbitrator’s award to an appeal body, and the
provisions of the Act must apply to an appeal tribunal, and its award, in the same way
as they do to an arbitration and an arbitral award.’3 It follows that should the appeal
arbitration award be set aside on review, the original arbitration award would not be
revived or reinstated, but s 33(4) of the Act finds application. It provides that in such a
case the dispute must at the request of any of the parties be submitted to a new
arbitration tribunal constituted in the manner directed by the court.

[16]   Harms JA, in Telcordia Technologies Inc v Telkom SA Ltd4, said the following:
‘The fact that the arbitrator may have either misinterpreted the agreement, failed to apply
South African law correctly, or had regard to inadmissible evidence does not mean that he
misconceived the nature of the inquiry or his duties in connection therewith. It only means that
he erred in the performance of his duties. An arbitrator ‘has the right to be wrong’ on the merits
of the case, and it is a perversion of language and logic to label mistakes of this kind as a
misconception of the nature of the inquiry – they may be misconceptions about meaning, law
or the admissibility of evidence but that is a far cry from saying that they constitute a
misconception of the nature of the inquiry. To adapt the quoted words of Hoexter JA: It cannot
be said that the wrong interpretation of the Integrated Agreement prevented the arbitrator from
fulfilling his agreed function or from considering the matter left to him for decision. On the
contrary, in interpreting the Integrated Agreement the arbitrator was actually fulfilling the
function assigned to him by the parties, and it follows that the wrong interpretation of the
Integrated Agreement could not afford any ground for review by a court.’ 5

3 Hos+Med Medical Aid Scheme v Thebe ya Pelo Healthcare and Others [2007] ZASCA 163; 2008 (2)
SA 608 (SCA) (Hos+Med Medical Aid Scheme) para 3.
4 Telcordia Technologies Inc v Telkom SA Ltd [2006] ZASCA 112; 2007 (3) SA 266 (SCA).
5 Ibid para 85.

[17] I am also mindful of what Wallis JA stated in Palabora Copper (Pty) Ltd v
Motlokwa Transport & Construction (Pty) Ltd,6 that ‘[i]t suffices to say that where an
arbitrator for some reason misconceives the nature of the enquiry in the arbitration
proceedings with the result that a party is denied a fair hearing or a fair trial of issues
that constitutes a gross irregularity. The party alleging the gross irregularity must
establish it. Where an arbitrator engages in the correct enquiry, but errs either on the
facts or the law, that is not an irregularity and is not a basis for setting aside an award.
If the parties choose arbitration, courts endeavour to uphold their choice and do not
lightly disturb it. The attack on the award must be measured against these standards.’7

[18]   An arbitrator has only the powers afforded to her or him in terms of the relevant
arbitration agreement; the arbitrator has no inherent power. Lewis JA articulated this
as follows:
‘In my view it is clear that the only source of an arbitrator’s power is the arbitration agreement
between the parties and an arbitrator cannot stray beyond their submission where the parties
have expressly defined and limited the 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 . . . It is of course possible for parties in an arbitration to amend
the terms of the reference by agreement, even possibly by one concluded tacitly, or by
conduct . . .’8 [Footnotes omitted]

[19] I now turn to consider the grounds raised by JVE in the review application
before the high court.

Discussion
[20] In this matter the arbitration agreement limited the powers of the arbitrator to
the determination of the issues as defined in the pleadings. It is common cause that it
was not a pleaded issue that the Service Agreement 2008 had amended the JVE1
agreement. In dismissing the BICL claim on this basis, the appeal arbitrator exceeded

6 Palabora Copper (Pty) Ltd v Motlokwa Transport & Construction (Pty) Ltd [2018] ZASCA 23; [2018
(5) SA 462 (SCA) (Palabora Copper).
7 Ibid para 8.
8 HOD+MED Medical Aid Scheme v Thebe Ya Bophelo Healthcare Marketing & Consulting (Pty) Ltd
and Others 2008 (2) SA 608 (SCA) para 30.

his powers. In the result he did not apply his mind to whether the condition in clause
6 had been fulfilled as alleged. It is also clear that para 8.2.4 of the amended plea was
pleaded as part of the defence to the damages claim and not specifically to the two
claims under consideration. The question is whether these factors justified the review
and setting aside of the appeal arbitration award. For the reasons that follow, I am of
the view that the answer to the question must be ‘no’.

[21] It is important to have regard to the nature of the agreement referred to in para
8.2.4 of the amended plea. Mr Brink on behalf of Blue Bantry at the time denied liability
towards JVE for the BICL and 1.25 multiplication factor claims. He nevertheless
offered to pay these amounts if and when they were recovered from the City of Cape
Town. Mr van Eeden on behalf of JVE expressly accepted the offer. Thus, a
compromise was entered into in respect of these claims. The compromise constituted
a complete defence to the claims. It would be wholly artificial and unjust to disregard
the pleaded and proved compromise simply because it had not been pleaded directly
in answer to these claims. Put differently, it could not in the circumstances be said that
the appeal arbitrator failed to afford the parties a fair hearing. Consequently, the
dismissal of these claims did not amount to a gross irregularity within the meaning of
s 33(1)(b).

Order
[22] Consequently, I make the following order:
The appeal is dismissed with costs, including the costs of two counsel.

________________
W HUGHES
JUDGE OF APPEAL

APPEARANCES

For the Appellant:
C Joubert SC
Instructed by:
Laas & Scholtz Inc., Cape Town

Webbers Attorneys, Bloemfontein.

For the Respondent:
Roelof Van Riet SC

S Miller
Instructed by:
Roelof Feenstra Inc., Cape Town

Lovius Block Inc, Bloemfontein.

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL
From:
The Registrar, Supreme Court of Appeal
Date:

16 February 2023
Status:
Immediate
The following summary is for the benefit of the media in the reporting of this case and does not
form part of the judgments of the Supreme Court of Appeal
JVE Civil Engineers Inc. v Blue Bantry Investments 235 (Pty) Ltd and Another
(1016/2021) [2023] ZASCA 12 (16 February 2023)
Today, the Supreme Court of Appeal (SCA) dismissed an appeal from the Western Cape Division of
the High Court, Cape Town (high court). The matter pertained to a review application of an appeal
arbitration award. The appellant, JVE Civil Engineers Inc (JVE) provided engineering services to the
first respondent, Blue Bantry Investment 235 (Pty) Ltd (Blue Bantry) in the development of certain
property. The parties initially enjoyed an amicable relationship whereby JVE assisted in the
development of phases one and two of the property. However, a change in JVE’s ownership resulted
in Blue Bantry and JVE entering into a written agreement (JVE1 agreement) in respect of the third
phase, accompanied by a schedule which had clearly set out the scope of work required, as well as the
applicable fee and payment structure.

This matter concerned engineering fees in respect of bulk infrastructure services levied by municipalities
in terms of municipal Bulk Infrastructure Contribution Levies (BICL) for the use of existing municipal
bulk infrastructure services in new residential developments. Any infrastructural alterations or additions
attendant to new residential developments were to be erected by the developers, who were, in turn,
compensated by amounts recovered from the municipality, the City of Cape Town, in terms of BICL
credits. In terms of clause 6 of the JVE1 agreement, JVE would receive 80% of the Engineering Counsel
of South Africa (ECSA) tariff for work related to external services, unless BICL credits exceeded the
costs of the infrastructure provided by Blue Bantry, resulting in the payment of an additional 20%. The
parties also agreed to a 1.25 multiplication factor fee, which resulted in a 25% addition to the relevant
fees. Subsequently however, Blue Bantry and the City of Cape Town entered into a new service
agreement (the 2008 agreement) which extended the scope of BICL credits available to Blue Bantry.

When the matter proceeded to arbitration, it concerned claims by JVE for external and internal services
as well as a claim for damages resulting from breach of contract. The claims for external services
included a claim for the additional 20% (the BICL claim) in terms of clause 6 as well as the 1.25
multiplication factor fee (multiplication claim). JVE contended that the conditions attached to its
entitlement of the additional 20% had been fulfilled in terms of the JVE1 agreement, regardless of the
subsequent 2008 agreement. Similarly, JVE contended that the work related to eligibility for the 25%

multiplication claim, had been completed. Blue Bantry conceded these contentions, but in its defence
set out in an amended plea, held that a separate agreement had been entered into between Blue Bantry
and JVE in 2009 in which Blue Bantry stated that JVE was not entitled to either 20% of 25%, but such
amounts would be paid in any event, once the amounts had been recovered from the City of Cape
Town. JVE agreed to this.

Upon arbitration and the subsequent appeal, JVE was unsuccessful. In light of the entirety of the matter,
only the BICL claim and the multiplication claim remained relevant to the appeal because the appeal
arbitrator held that the 2008 agreement entered into by Blue Bantry and the City of Cape Town amended
the JVE1 agreement, thereby precluding any reliance on clause 6 of the JVE1 agreement. In addition,
as far as the multiplication claim was concerned, the relevant amounts had not yet been recovered from
the City of Cape Town in terms of the 2008 agreement, and therefore the claim was premature, and
failed. In the high court, JVE sought to review the arbitration proceedings in terms of s 33(1)(b) of the
Arbitration Act 42 of 1965, on the grounds that the arbitrator had committed a gross irregularity or
exceeded his powers. JVE held this contention on the basis that the arbitrator determined two claims
on a basis that had not been pleaded, thereby exceeding his powers.

On appeal, the SCA found that the arbitration agreement limited the powers of the arbitrator to the
determination of the issues as defined in the pleadings. The amendment of the JVE1 agreement by the
2008 agreement was never a pleaded issue, meaning the arbitrator exceeded his powers when he
dismissed the BICL claim on this basis. In the result, he did not apply his mind to whether the condition
in clause 6 had been fulfilled or that the amended plea was pleaded as part of a defence to a claim for
damages and not specifically to the two claims under consideration.

Despite this, the SCA held that, these factors did not justify reviewing and setting aside the arbitration
appeal award. The SCA stressed the importance of the nature of the agreement set out in the amended
plea. Blue Bantry, at the time, denied liability towards JVE for the BICL and multiplication claims but
nevertheless offered to pay these amounts once they were recovered from the City of Cape Town. JVE
expressly accepted the offer, thereby having entered into a compromise with Blue Bantry. This Court
found that this compromise constituted a complete defence to these claims, and it would have been
artificial and unjust to disregard them simply because they had not been directly pleaded in answer to
the claims.

In the result, the dismissal of the claims did not amount to a gross irregularity in terms of s 33(2)(b) and
the appeal was dismissed with costs.