Termico (Pty) Limited v SPX Technologies (Pty) Limited and Others; SPX Technologies (Pty) Limited v Termico (Pty) Limited

SPXT engaged Termico in 2006 to become its BEE shareholder in DBT Technologies, with Termico acquiring 25.1% of shares financed through a loan from SPXT (Loan B). The parties entered into a shareholders' agreement providing for a Put Option exercisable by Termico after a seven-year lock-in period. Despite DBT's revenue growing significantly from R250m to R2.4bn and large fees paid to the SPX Group, minimal dividends were declared to shareholders. After the lock-in period expired, Termico exercised the Put Option on 3 June 2014. SPXT disputed the validity of the exercise and later purported to exercise a Call Option. The matter proceeded to arbitration before three senior counsel. On 5 July 2016, the arbitrators issued an award in Termico's favour, declaring the Put Option valid and determining the Put Price at R287,337,807. The arbitrators did not make a monetary award because they found they lacked jurisdiction to determine the outstanding balance of Loan B. SPXT refused to attend meetings to calculate the final amount payable. SPXT then applied to set aside the arbitration award under s 33(1)(b) of the Arbitration Act, alleging gross irregularity. Termico launched a counter-application to make the award an order of court under s 31 and for a money judgment.

• Whether the arbitrators committed a gross irregularity in failing to make a final award that warranted setting aside the award under s 33(1)(b) of the Arbitration Act 42 of 1965
• Whether the counter-application for a money judgment constituted an impermissible 'hybrid order' combining partial arbitration award and partial court order
• Whether a court could make the arbitration award an order of court under s 31 of the Arbitration Act and grant a money judgment for the balance payable after deducting Loan B
• Whether SPXT's refusal to attend meetings to determine the value of Loan B could be dealt with by deeming the meeting to have occurred
• Whether the balance owing on Loan B was a disputed issue requiring further arbitration

The appeal was upheld with costs. The High Court's order setting aside the arbitration award was set aside. The arbitration award dated 5 July 2016 was made an order of court. SPXT was ordered to pay Termico R255,846,850.25, together with interest at 9% per annum from 20 July 2016 to date of payment. SPXT's repudiation appeal was dismissed with costs, including costs of two counsel.

An arbitration award does not commit a gross irregularity warranting being set aside under s 33(1)(b) of the Arbitration Act merely because the arbitrators decline to make a money judgment when certain calculations (such as set-offs) fall outside their mandate or were not issues referred to them. An order is not an impermissible 'hybrid order' where a court makes an arbitration award an order of court and grants a money judgment based on calculations that were not issues before the arbitrators and fell outside their jurisdiction. A court will construe arbitration awards liberally, seeking to uphold rather than invalidate them, and will not be astute to look for defects. Where a party deliberately frustrates the holding of a contractually required meeting, the court may deem that meeting to have occurred. All issues submitted to arbitrators must be resolved with finality and certainty, but this does not require arbitrators to decide issues that were not submitted to them or fell outside their mandate.

The court observed that clause 31.2.2 of the shareholders' agreement permitted parties to institute court action for liquidated amounts rather than proceeding to arbitration, even where arbitration clauses exist. The court noted that where there is undisputed evidence on affidavit as to amounts owing and no contrary version is put up by the opposing party, the court can accept those amounts as proven. The court commented that the exercise of both put and call options over the same shares are mutually incompatible. The judgment also contains observations about liberal construction of awards and determinations, noting that 'a court will, therefore, as far as possible construe an award or determination so that it is valid rather than invalid.'

This case provides important guidance on the scope of s 33(1)(b) of the Arbitration Act 42 of 1965 regarding when an arbitration award can be set aside for gross irregularity. It clarifies that arbitrators do not commit a gross irregularity merely because they decline to make a money judgment when certain calculations fall outside their mandate. The judgment significantly clarifies the meaning of 'hybrid orders' in the arbitration context, distinguishing situations where a court impermissibly decides issues still before arbitrators from situations where a court properly deals with post-arbitration issues that were never part of the arbitration mandate. The case also demonstrates the courts' willingness to give effect to arbitration awards and not be astute to find technical defects. It reinforces that arbitration awards should be construed liberally and that courts should construe them as valid rather than invalid where possible. The judgment provides practical guidance on when parties can bypass arbitration clauses to approach courts directly for liquidated claims arising from arbitration awards.