THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA

Reportable

CASE  NO:  406/2001

In the matter between :

SOUTH AFRICAN FORESTRY COMPANY LIMITED
Appellant

and

YORK TIMBERS LIMITED
Respondent
_____________________________________________________________
Coram:
HOWIE, MPATI et NUGENT JJA
Heard:
5 SEPTEMBER 2002
Delivered:
19 SEPTEMBER 2002
Summary:
Costs of arbitration – whether award includes qualifying costs
of experts – remittal to arbitrator
_____________________________________________________________

J U D G M E N T

_____________________________________________________________
NUGENT JA/

NUGENT JA:
[1] This appeal raises two questions – whether an award of costs that was
made by an arbitrator includes the qualifying costs of expert witnesses and,
if not, whether the award should be remitted to the arbitrator for
reconsideration.   Both questions were answered in the negative by the court
a quo (Van der Walt J in the High Court at Pretoria, whose judgment is
reported at 2001 (4) SA 884 (T)) and the appeal is brought with the leave of
this Court.

[2] The arbitration to which the award relates took place pursuant to two
agreements between the parties for the supply of timber over an extended
period.  The price at which the timber was to be supplied was subject to
revision from time to time and was to be fixed by an arbitrator if the parties
could not reach agreement.  The award that is now in issue fixed the price

for timber that was supplied during 1995.  In the course of the arbitration
both parties called a number of expert witnesses to give evidence but neither
party requested the arbitrator to make express provision in his award for the
recovery of the qualifying costs of the witnesses.  The arbitrator’s award in
relation to costs was as follows: ‘The [respondent] is to pay the costs of the
arbitration, inclusive of all costs previously reserved by me.’

[3] The award was made on 31 March 2000.   On 1 August 2000 the
appellant submitted a bill of costs to the taxing master of the Pretoria High
Court that included the qualifying costs of its expert witnesses.  Three weeks
later the appellant was advised that the respondent objected to the inclusion
of those costs in the bill because the award made no express provision for
their recovery. The appellant’s attorney wrote to the respondent’s attorney
alleging that ‘the whole arbitration was conducted and concluded on the

basis that the evidence of [the] expert witnesses was necessary and that the
successful party would be entitled to these costs’ and requested the
respondent to agree to the inclusion of the item in the bill or to the remittal
of that part of the award to the arbitrator for reconsideration.  The
respondent declined to agree to either proposal and the appellant
immediately launched the application that is the subject of this appeal.

[4] The relief sought by the appellant, after the notice of motion had been
amended, was essentially twofold.   Primarily the appellant sought an order
declaring, as a matter of law, that the arbitrator’s award allowed for the
recovery of the qualifying costs of the expert witnesses.  In the alternative it
sought an order remitting that part of the award to the arbitrator for
reconsideration.

[5] The agreements pursuant to which the arbitration was held contained
no express provision relating to the costs of the arbitration but they provided
that the Arbitration Act 42 of 1965 would apply to matters referred to the
arbitrator.  Section 35 of the Act deals with the question of costs in the
following terms (only the first two subsections are relevant for purposes of
this appeal):

‘35.
Costs of arbitration proceedings -

(1)
Unless the arbitration agreement otherwise provides, the award of costs in
connection with the reference and award shall be in the discretion of the
arbitration tribunal, which shall, if it awards costs, give directions as to the
scale on which such costs are to be taxed and may direct to and by whom
and in what manner such costs or any part thereof shall be paid and may
tax or settle the amount of such costs or any part thereof, and may award
costs as between attorney and client.

(2)
If no provision is made in an award with regard to costs, or if no directions
have been given therein as to the scale on which such costs shall be taxed,
any party to the reference may within fourteen days of the publication of
the award, make application to the arbitration tribunal for an order
directing by and to whom such costs shall be paid or giving directions as
to the scale on which such costs shall be taxed, and thereupon the
arbitration tribunal shall, after hearing any party who may desire to be

heard, amend the award by adding thereto such directions as it may think
proper with regard to the payment of costs or the scale on which such
costs shall be taxed’

[6] An arbitrator’s discretion in terms of s 35(1) to award ‘costs in
connection with the reference and award’ is sufficiently broad to allow him
to award the qualifying costs of expert witnesses (cf De Villiers en ‘n Ander
v Stadsraad van Pretoria 1968 (2) SA 607 (T); Community Development
Board v Katija Suliman Lockhat Trust 1973 (4) SA 225 (N) in relation to
similar provisons of other statutes).  The appellant submitted in its written
heads of argument that the award in the present case of the ‘costs of the
arbitration’ must be taken to have been an award of all the ‘costs in
connection with the reference and award’ as contemplated by that section
and thus includes such qualifying costs.  In my view the submission is
fallacious and it was not persisted in before us.  Merely because the

arbitrator had the discretion to award such costs does not mean that he
exercised that discretion and awarded them.  Whether or not he did so is to
be determined by construing his award rather than by construing the
empowering statute.

[7] In Kathrada v Arbitration Tribunal and Another 1975 (2) SA 673 (A),
which concerned similar powers of an arbitrator in terms of s 45(3) of the
Community Development Act 3 of 1966, Botha JA pointed out at 680H that
the arbitrator’s discretion to award costs was ‘a discretion which must be
exercised judicially upon a consideration of all the relevant facts and in
accordance with recognised principles’ and that the ‘failure to act in
accordance with the settled practice and principles upon which costs are
generally awarded’ would constitute an irregularity. One such settled
principle is that the qualifying costs of expert witnesses are not recoverable

unless they are specially awarded.  In Lockhat Trust, supra, at 229A, Van
Heerden J pointed out that the rule is too well established to be questioned.
The rationale for the rule was expressed as follows in Wocke v Williams
1922 TPD 78 at 80:
‘It is not advisable that discretion should be given to a litigant to get the expert
evidence of professional men and so increase the costs against his opponent.
There ought always to be an application to the Court, so that the Court’s mind
may be directed to the question of whether, in the particular case, expert evidence
was or was not necessary.’

[8] There is no suggestion in the present case that the arbitrator acted
irregularly or in conflict with established principles when making his award
and indeed, in my view, he clearly did not, for the qualifying costs of expert
witnesses were not even addressed at the hearing.  In those circumstances I
see no grounds for construing his award as if it included the qualifying costs
of expert witnesses, which would properly have required a special order to

be made.   In my view the court a quo correctly held that the award made by
the arbitrator does not include the qualifying costs of the expert witnesses.

[9] Ordinarily an arbitrator is functus officio once his award has been
made but s 32 of the Act allows for an award to be remitted for
reconsideration in certain circumstances.  The first two subsections provide
as follows:

‘32
Remittal of Award

(1)
The parties to a reference may within six weeks after the publication of the
award to them, by any writing signed by them remit any matter which was
referred to arbitration, to the arbitration tribunal for reconsideration and
for the making of a further award or a fresh award or for such purpose as
the parties may specify in the writing.

(2)
The court may, on the application of any party to the reference after due
notice to the other party or parties within six weeks after the publication of
the award to the parties, on good cause shown, remit any matter which
was referred to arbitration, to the arbitration tribunal for reconsideration
and for the making of a further award or a fresh award or for such other
purpose as the court may direct.’

[10] The respondent submitted (and it was so held by the court a quo) that
it is not competent to remit an award of costs to the arbitrator for
reconsideration because the question of costs is not a ‘matter that was
referred to arbitration’ as contemplated by s 32(2).  The only ‘matter’ that is
referred to arbitration, so it was submitted, is the principal issue referred to
in the arbitration agreement, which in the present case was the question of
the price to be fixed for the timber.

[11] It would be most anomalous if the legislature intended that the
principal award should be capable of being remitted for reconsideration
(whether by agreement, or by a court on good cause shown) but not the
ancillary award of costs.  The respondent submitted that the purpose of
excluding a costs award from the ambit of s 32 was to ensure finality but that
begs the question why finality was sought in relation to one part of the

award and not in relation to the other.  The respondent also submitted that in
order to uphold the appellant’s construction of the section it would be
necessary to overrule the decision in the Lockhat Trust case, supra, in which
it was said, in relation to an arbitrator’s award of costs, that ‘[i]t is not
possible to remit the matter to the arbitrators for their further consideration
as they have become functus officio’.  That case concerned an award made in
terms of the Community Development Act 1966 which had no provision
comparable to s 32 of the Arbitration Act and has no bearing on the issue
before us.   It was submitted further that s 35(2) of the Act (the terms of
which were set out earlier in this judgment) would be superfluous if an
award of costs were to be capable of being remitted to the arbitrator in terms
of s 32(2).  I do not think that is correct.  The two subsections serve quite
different purposes.  Section 35(2) applies where the arbitrator has failed to
make an award, or has failed to direct upon which scale the award is to be

taxed.  In such cases either party is entitled, as of right, to request the
arbitrator to make an award or to give a direction as the case may be.  The
circumstances in which s 32(2) comes into play are quite different – the
section applies where an award has been made, but the award requires
reconsideration, as in the present case, in which the award is said to be
deficient.

[12] In John Sisk & Son (SA) (Pty) Ltd v Urban Foundation and Another
1985 (4) SA 349 (N) it was accepted without question that an award of costs
is capable of being remitted to an arbitrator in terms of s 32(2) of the Act
and in my view that must be correct.  The issue of costs is as much a ‘matter
that [is] referred to arbitration’ as any other matter that falls within the
arbitrator’s terms of reference (unless it is excluded by the terms of the
agreement).  Clearly the section was intended to apply to all matters that are

capable of forming the subject of an award.  Not only does the language of
the section admit of that construction but the alternative construction would
result in absurdity.

[13] An application for remittal must be made within six weeks after the
publication of the award but s 38 permits a court to extend any period of
time fixed by the Act on ‘good cause shown’.  In the present case the
application was made some 22 weeks after the award was published.
Notwithstanding its view that the award was not capable of being remitted
the court a quo nevertheless went on to consider whether the appellant had
made out a case for extending the period of time referred to in s 32(2) and
for remitting the award to the arbitrator and found that in both respects the
appellant must fail.  In my view the court a quo misdirected itself in

reaching its conclusions on both those issues.   It is convenient to deal with
the two issues in reverse order.

[14] The court a quo expressed the view that a remittal should be permitted
only ‘when there are compelling reasons put forward’ and that none had
been advanced in the present case (precisely what considerations were taken
into account in that regard do not appear from the judgment).  That is not the
test that the court was enjoined to apply - an award may be remitted where
‘good cause’ has been shown for doing so and not only where the
circumstances are ‘compelling’.  ‘Good cause’ is a phrase of wide import
that requires a court to consider each case on its merits in order to achieve a
just and equitable result in the particular circumstances.  As pointed out by
Innes CJ in Cohen Brothers v Samuels 1906 TS 221 at 224 in relation to the
meaning of that phrase albeit in another context:

‘No general rule which the wit of man could devise would be likely to cover all
the varying circumstances which may arise in applications of this nature.  We can
only deal with each application on its merits, and decide in each case whether
good cause has been shown.’

Undoubtedly the principle of finality will weigh heavily with a court that is
charged with considering an application to remit (Benjamin v Sobac South
African Building and Construction (Pty) Ltd 1989 (4) SA 940 (C) at 963I-
964D) but against that must be weighed other relevant factors and in
particular the relative prejudice that will be caused to the parties if the matter
is or is not remitted.

[15] The reason why a special order was not sought from the arbitrator in
the present case was quite simply that the appellant’s attorney erroneously
overlooked the necessity for doing so and failed to instruct counsel
accordingly.  Careless though that error might have been in my view that is

not decisive.  I can see no prejudice that will be caused to the respondent by
remitting the award to the arbitrator (other than that the respondent might
forfeit a windfall which it would ordinarily not have received).  The
respondent alleged that its holding company, which is listed on the
Johannesburg Stock Exchange, reported the outcome and financial effect of
the arbitration in its annual and interim reports, which received widespread
publicity, and that to revive the matter now would cause ‘profound
uncertainty and speculation’.  Why a remittal should have any of those
effects was left unexplained and a close examination of the company’s
interim report and preliminary annual report does not substantiate that bald
allegation.  It must also be borne in mind that the remittal is sought on a
narrow issue relating only to an ancillary issue.  There is no question of
further evidence being required or of matters being reopened that have
already been thrashed out.  What is required of the arbitrator is little more

than to refresh his memory in order to determine whether and to what extent
the qualifying costs should be recoverable.  That might cause some
inconvenience but I can see no material prejudice to the respondent in the
sense in which it is understood in law (cf Trans-African Insurance Co. Ltd v
Maluleka 1956 (2) SA 273 (A) at 278F-G and 279A-E).  Not to remit the
matter to the arbitrator will do no more than enable the respondent to defeat
what might be a good claim against it merely on the grounds of a procedural
technicality.

[16] The appellant, on the other hand, will clearly be materially prejudiced
if the matter is not remitted, for it will forfeit the prospect of recovering
substantial costs to which it might otherwise be entitled.  There is no
suggestion by the respondent that the appellant’s claim in that regard is
without substance nor that the amount to which it might be entitled is trivial.

The substantial prejudice to the appellant if the matter is not remitted in my
view far outweighs the inconvenience to the respondent if the order is
granted.  Bearing in mind the relative prejudice to the parties, and the narrow
scope of the matter in issue, in my view there is indeed good cause to remit
the award.

[17] The remaining question is whether the appellant has shown ‘good
grounds’ for condoning the delay in seeking the remittal.  The court a quo
said that the appellant had given no explanation at all for the delay and on
that ground it found that good grounds for the delay had not been shown.  In
my view the court a quo misdirected itself in that regard.  There was indeed
an explanation for the delay, which was inherent in the reason for seeking
the remittal.  It is clear from the evidence of the appellant’s attorney that he
remained oblivious to the necessity for a special order until the time that the

respondent objected to the bill.  Once the appellant became aware of the
oversight it acted promptly in seeking a remittal.  I can see no prejudice that
was caused to the respondent by the delay and in my view there is good
cause to condone it.

[18] Notwithstanding the conclusion to which I have come I do not think it
was unreasonable for the respondent to insist that the appellant apply to a
court for the matter to be remitted, nor was it unreasonable to oppose the
application.  In those circumstances the appellant ought to bear the costs of
the application.

[19] Accordingly the appeal is upheld with costs.  The order of the court a
quo is set aside and the following order is substituted:

‘1.
The costs award made in the arbitration between the parties
concerning the 1995 price revision is remitted to the arbitrator
in terms of s 32(2) of the Arbitration Act 42 of 1965 to consider
whether and to what extent an additional award should be made
in respect of the qualifying costs of the expert witnesses who
testified on behalf of the applicant.

2.
The applicant is to pay the costs of the application, including
the costs of opposition, which are to include the costs of two
counsel.’

_______________________
R W NUGENT

JUDGE OF APPEAL

HOWIE JA )
MPATI  JA )    CONCUR