Perapanjakam Naidoo and Reginald Tobias Marais v EP Property Projects (Pty) Ltd and Others

The dispute concerned ownership of coastal property (Portion 14 of farm Sea View 28). EP Property Projects acquired the property in 1980. In 1990, Blignault sold his shares in EP to Alex Stevenson for R400,000, with shares transferred to the Alexander Campbell Stevenson Family Trust. Alex and Gary Stevenson became registered directors and controlled EP for 15 years. In 2005, Blignault attempted to convene a meeting to remove the Stevensons as directors, but a court order of 26 May 2005 required him to institute proceedings to declare himself the sole member or be barred. He failed to pursue these proceedings. In February 2006, in breach of the court order, Blignault purported to transfer the property to Tobias Marais. EP challenged this transfer. On 26 October 2006, the parties agreed by court order to submit the dispute to arbitration before Hodes SC. Tobias participated in the arbitration until December 2009 when his postponement application was refused and his legal team withdrew. The arbitrator found the 2006 sale agreement fraudulent and awarded ownership to EP. Tobias sought to set aside the award and opposed its confirmation as a court order. Naidoo entered a funding agreement with Tobias on 31 July 2009, acquiring control of the litigation and standing to receive a substantial portion of the property.

• Whether the arbitrator had jurisdiction to conduct the arbitration given allegations that the Stevensons lacked authority to represent EP
• Whether the court order referring the matter to arbitration should be rescinded on the basis of mistake of law common to the parties
• Whether non-compliance with section 25(1) of the Arbitration Act regarding publication of the award invalidated it
• Whether the arbitrator's conduct constituted reviewable misconduct under section 33 of the Arbitration Act
• Whether the arbitrator exceeded his powers or committed gross irregularities in conducting the arbitration
• Whether costs could be awarded against Naidoo as a non-party funder

The appeal was dismissed with costs, including costs consequent upon employment of two counsel where so employed.

The binding legal principles established are: (1) A party who participates in arbitration proceedings without objecting to the arbitrator's jurisdiction at the outset, particularly when represented by counsel, is deemed to have acquiesced to that jurisdiction and cannot subsequently challenge it after receiving an unfavorable award. (2) Where parties agree to arbitration and that agreement is made an order of court, the court order confers jurisdiction on the arbitrator unless and until it is set aside, rescinded or varied. (3) Under section 33 of the Arbitration Act 42 of 1965, an arbitral award can only be set aside on narrow grounds: misconduct by the arbitrator, gross irregularity in conducting proceedings, exceeding powers, or improper procurement of the award. The threshold is high and requires proof of wrongful conduct, dishonesty, mala fides, partiality or moral turpitude - not mere procedural complaints or disagreement with outcomes. (4) A non-party funder may be held liable for costs where: (a) they acquire control of the litigation and become dominus litis rather than remaining a passive funder; (b) they stand to receive substantial commercial benefits from the litigation; and (c) the court considers it just and fair in the circumstances to make such an order. (5) Courts will impose punitive costs orders where litigants engage in vexatious conduct, institute frivolous applications, and deliberately attempt to subvert court orders.

The Court made several notable observations: (1) It condemned Tobias's conduct throughout the litigation as dishonourable, noting he instituted many frivolous applications, deliberately subverted court orders, obtained orders through fraud, and pursued vexatious proceedings to obtain property he knew he was not entitled to. Such conduct warranted the punitive costs order. (2) The Court criticized the state of the appeal record, noting it contained six volumes of arbitration records that were not relevant to determining the appeal, unnecessary duplication, and material that the appellants themselves conceded was irrelevant. This was described as 'flagrant disregard of the rules of this court pertaining to appeals which is to be deprecated.' (3) The Court quoted with approval the principle from English authority that a litigant cannot 'wait and see' how claims turn out before pursuing complaints of bias or jurisdictional defects - they cannot 'have the best of both worlds' by participating and then challenging only after losing. (4) The Court emphasized that parties who choose arbitration 'sacrifice something for that advantage [of finality] – they sacrifice the power to appeal' and cannot later seek to set aside awards 'simply because you think it wrong.'

This case is significant for several principles in South African law: (1) It confirms the very limited grounds for court interference with arbitral awards, emphasizing party autonomy and finality in arbitration. Courts observe a high degree of deference to arbitral decisions. (2) It establishes that a party who participates in arbitration without raising jurisdictional objections at the outset, particularly when represented by counsel, will be deemed to have acquiesced to the arbitrator's jurisdiction and cannot later challenge it after an unfavorable outcome. (3) It clarifies when a funder can be held liable for costs as a non-party. Where a funder takes control of litigation through agreements like pactum de quota litis, becomes dominus litis, and stands to receive substantial commercial benefits, courts may exercise discretion to award costs against them. (4) It demonstrates the court's willingness to impose punitive costs orders where litigants engage in vexatious, frivolous litigation and attempts to subvert court orders through fraud. (5) It emphasizes that section 33 of the Arbitration Act sets a high threshold for setting aside awards - requiring proof of actual misconduct, gross irregularity, or improper conduct, not mere disagreement with the outcome.