Leadtrain Assessments (Pty) Ltd v Leadtrain (Pty) Ltd

Various disputes between the appellants (Leadtrain Assessments (Pty) Ltd, College-on-Line CC, and Steve Byron) and the respondents (Leadtrain (Pty) Ltd, Richard Lilford and others) were referred to arbitration by agreement. The arbitrator made an award on the merits and a costs award. In the costs award, the arbitrator ordered Leadtrain (Pty) Ltd to pay 80% of the arbitration costs and certain high court costs. In paragraphs 4 and 5 of the costs award, the arbitrator directed certain costs to be included and ordered Mr Lilford to bear half the costs jointly and severally with Leadtrain (Pty) Ltd. The appellants applied to the South Gauteng High Court for the award to be made an order of court under s 31 of the Arbitration Act 42 of 1965. Mr Lilford brought a counter-application to set aside or remit paragraphs 4 and 5 of the costs award under s 32(2) of the Act, alleging the arbitrator misdirected himself. Meyer J made most of the award an order of court by agreement, except paragraphs 4 and 5. Mabesele J then granted the counter-application and set aside the contentious paragraphs. The appellants appealed to the Supreme Court of Appeal.

• Whether misdirection by an arbitrator in exercising discretion in relation to costs constitutes 'good cause' for remittal under s 32(2) of the Arbitration Act 42 of 1965
• The correct interpretation and application of s 32(2) of the Arbitration Act
• Whether an arbitrator's costs award is subject to review on the same basis as the exercise of statutory authority
• The scope and limits of judicial interference with arbitration awards in consensual arbitration

The appeal was upheld with costs to be paid by the respondents jointly and severally. The orders of the court below (Mabesele J) were set aside. The following substituted orders were made: (i) The application succeeds to the extent that paragraphs 4 and 5 of the costs award made by the arbitrator on 5 August 2011 are made an order of court, with the respondents to pay the costs of the application; (ii) The counter-application is dismissed with costs; (iii) In each case the costs are to be paid by the respondents jointly and severally.

The binding legal principle established is that in consensual arbitration under the Arbitration Act 42 of 1965, an arbitrator's award (including costs awards) is final and binding under s 28, subject only to the narrow review grounds in s 33(1). Mere misdirection or error by an arbitrator in exercising discretion does not constitute 'good cause' for remittal under s 32(2) of the Act. 'Good cause' under s 32(2) must be interpreted in the context of the Act's emphasis on finality and requires something other than mere error by the arbitrator - it exists pre-eminently where the arbitrator has failed to deal with an issue, but not where an issue has been pertinently addressed and decided. To permit remittal based on alleged misdirection would emasculate the provisions of s 33(1) and allow parties to take arbitrators on appeal under the guise of remittal. The principles applicable to judicial review of statutory arbitration (as in Kathrada) do not apply to consensual arbitration, where the power to review is confined to what is stipulated in the Arbitration Act itself.

The court observed that while it is correct that an arbitrator is obliged to award costs on the same basis as would a court, the Joubert case was incorrect in stating that an award is liable to be set aside on review if the arbitrator fails to do so - at least in the context of consensual arbitration. The court noted it would be extraordinary if conduct of an arbitrator that falls short of the strict constraints of s 33(1) could nonetheless be set aside and remitted under s 32(2). The court declined to attempt to comprehensively circumscribe when 'good cause' for remitting a matter will exist, preferring to leave this to be developed on a case-by-case basis. The court also noted there was no justification for a punitive costs award despite the appellants seeking one.

This case is significant in South African arbitration law as it clarifies and reinforces the principle of finality of arbitration awards in consensual arbitration under the Arbitration Act 42 of 1965. It provides authoritative guidance on the correct interpretation of s 32(2) concerning remittal of awards, distinguishing it from the review grounds in s 33(1). The judgment corrects previous misapplication of principles from statutory arbitration cases (particularly Kathrada) to consensual arbitration. It establishes that mere misdirection or error by an arbitrator does not constitute 'good cause' for remittal under s 32(2), preventing parties from effectively appealing arbitration awards by disguising appeals as remittal applications. This promotes certainty and finality in arbitration, a key advantage of the arbitration process. The case has been widely cited in subsequent arbitration matters and represents a leading authority on the limits of judicial intervention in consensual arbitration awards.