Palabora Copper (Pty) Ltd v Motlokwa Transport & Construction (Pty) Ltd

Palabora Copper awarded Motlokwa Transport a tender for waste removal services by way of a letter titled ‘Notice of Contract Award’ in December 2014, which Motlokwa accepted. Relations deteriorated before performance commenced, and Palabora approached the High Court seeking a declarator that no binding contract existed or that any contract had been validly cancelled. Motlokwa counterclaimed, alleging a binding contract and claiming damages for loss of profits due to Palabora’s repudiation. By agreement, the dispute was referred to arbitration. The arbitrator found that a binding contract had been concluded, rejected Palabora’s defences (including lack of consensus and iustus error), dismissed Palabora’s claim, and upheld Motlokwa’s counterclaim, awarding substantial damages. Palabora sought to set aside the arbitration award under s 33(1)(b) of the Arbitration Act, alleging gross irregularity, particularly in the award of damages and the allocation of the onus of proof.

The appeal was upheld with costs. The High Court’s order was set aside. The application to make the arbitration award an order of court was dismissed. The arbitration award was set aside only in respect of paragraph D (the damages award). The dispute concerning the counterclaim was referred to a new arbitration tribunal.

The case clarifies the application of s 33(1)(b) of the Arbitration Act, particularly the distinction between mere errors of law or fact and gross irregularities justifying judicial intervention. It is significant for confirming that an arbitrator’s misconstruction of the onus of proof and the nature of the enquiry on damages may constitute a gross irregularity. The judgment is also important for its clear endorsement of the principle of severability of arbitration awards in South African law.