Canton Trading 17 (Pty) Ltd t/a Cube Architects v Fanti Bekker Hattingh N O

Canton Trading, a firm of architects, provided professional architectural services to the Qwaha Trust for several projects since 2011. In 2013-2014, Canton Trading was engaged for a project to expand the Itau Mill. On 5 February 2014, Canton Trading, as principal agent for the Trust, concluded a JBCC building agreement with a contractor. In March 2014, Canton Trading's attorneys prepared a document titled 'Appointment of Professional Service Provider' (PSP), which contained an arbitration clause (clause 23) referring disputes to mediation and arbitration under AFSA rules. The PSP was never signed by either party, but Canton Trading rendered services and was paid by the Trust. The JBCC agreement was terminated on 2 August 2014 due to defective work by the contractor. The Trust alleged Canton Trading failed in its duties and in 2017 invoked the arbitration clause in the PSP. After correspondence, Canton Trading initially agreed "in principle" to arbitration and to appointment of an arbitrator. However, at a pre-arbitration meeting on 24 January 2018, Canton Trading requested insertion of a clause requiring its insurer's consent. Shortly thereafter, on 30 January 2018, Canton Trading took the position that the PSP was never signed and the arbitration clause was unenforceable. The Trust applied to the high court to compel Canton Trading to submit to arbitration.

• Whether the high court has discretion to decide the existence of an arbitration agreement when there is a dispute of fact as to whether the parties consented to arbitrate
• The application of the doctrines of separability and competence-competence in South African arbitration law
• Whether the requirements for applying a robust approach to resolve disputes of fact on motion proceedings were met
• Whether an arbitration clause can subsist separately from the main agreement and confer jurisdiction on arbitrators to determine their own jurisdiction, including disputes about the existence of the arbitration agreement
• Whether the high court exceeded its jurisdiction by determining issues that should have been referred to an arbitrator under AFSA rules

The appeal was upheld with costs. The order of the full court was set aside. The matter was remitted to the high court to determine whether the application should be referred to evidence, and if so on what terms, or whether the application should be dismissed.

The binding legal principles established are: (1) Where there is a genuine dispute of fact, supported by evidence, as to whether parties concluded an arbitration agreement, a court hearing an application to compel arbitration cannot simply assume consent exists and refer the "existence dispute" to arbitration; (2) The doctrines of separability (that an arbitration clause is separate from the main agreement) and competence-competence (that arbitrators can decide their own jurisdiction) presuppose the existence of consent to arbitrate - they cannot be invoked to establish consent where its very existence is disputed on the evidence; (3) Where an arbitration clause references rules (such as AFSA rules) that give arbitrators power to determine the existence and validity of the arbitration agreement, but a party disputes ever agreeing to those rules, the court cannot enforce those rules to have the arbitrator decide the existence dispute without first determining whether the parties agreed to arbitrate under those rules; (4) When faced with a genuine dispute of fact as to the existence of an arbitration agreement in motion proceedings, a court should consider whether to refer the matter to evidence for determination or, in appropriate cases, consider the application of competence-competence principles (allowing arbitrators to initially decide jurisdiction), but cannot resolve the factual dispute by assessing probabilities unless the strict requirements for a robust approach are met; (5) Submission to arbitration is consensual and courts must protect parties from being compelled to arbitrate disputes they never agreed to submit to arbitration.

The court made several non-binding observations: (1) The principle of competence-competence, while not yet definitively applied by South African courts, has warrant for application in appropriate cases, given the respect South African law accords to party autonomy in arbitration and in line with section 39(1)(b) and (c) of the Constitution requiring consideration of international and foreign law; (2) Courts should steer a course between discouraging time-wasting obstructionism and protecting parties from being forced to arbitrate without consent; (3) The principle of competence-competence has positive and negative aspects - the positive aspect (arbitrators can rule on their own jurisdiction) is uncontroversial, but the negative aspect (courts should defer to arbitrators on jurisdictional questions) involves considerations of timing and judicial restraint; (4) Generally, parties intend disputes to be resolved under a unitary jurisdiction (either courts or arbitration), not a bifurcated jurisdiction; (5) Courts should be respectful of the intentions of parties in relation to arbitration procedure and bear in mind the purposes of private arbitration, including fast and cost-effective resolution of disputes; (6) Business parties often conduct affairs without great formality, particularly where there has been a longstanding beneficial relationship; (7) The correspondence from Canton Trading's attorney using words like "in principle prepared to proceed" suggested caution and indecision rather than definitive consent to arbitration. Phatshoane AJA, in a separate judgment, expressed the view that the high court had no jurisdiction to determine the question of existence of the arbitration agreement at all, and that clause 23 of the PSP read with AFSA rules should have been given effect to, with the arbitrator determining all jurisdictional issues including existence of the agreement. This represents an alternative approach favouring stronger application of competence-competence principles.

This case is significant in South African arbitration law as it: (1) Clarifies the limits of the doctrines of separability and competence-competence - these principles only apply where there is evidence of consent to arbitration; they cannot be invoked to override a genuine factual dispute about whether parties ever agreed to arbitrate; (2) Emphasizes that submission to arbitration requires the consent of parties, and courts must carefully scrutinize whether such consent exists before compelling arbitration; (3) Affirms that while South African law respects party autonomy to submit disputes to arbitration, courts retain jurisdiction to determine whether an arbitration agreement came into existence when this is genuinely disputed; (4) Provides guidance on when courts should defer to arbitrators to decide jurisdictional questions versus when courts should decide such questions themselves; (5) Reiterates the strict requirements for applying a robust approach in motion proceedings - such approach cannot be used to override genuine disputes of fact; (6) Balances the policy of facilitating arbitration with the need to protect parties from being forced to arbitrate without their consent; (7) Recognizes that while AFSA rules and similar arbitration rules give arbitrators power to decide their own jurisdiction, this presupposes that parties validly agreed to arbitrate under those rules in the first place.