BM PACKAGING(PTY) LTD v.

PPC BOTSWANA (PTY) LTD 1998 BLR 309 (HC)

Citation: 1998 BLR 309 (HC)

Court: High Court, Lobatse

Case No:

Judge: Mosojane J

Judgment Date: April 30, 1998

Counsel:

Considered Ropace Botswana (Pty) Ltd v. Dawson and Fraser (Pty) Ltd [2001] 1 B.L.R. 479 (HC)
Referred to Fencing Centre (Pty) Ltd v. Murray & Roberts Construction and Others [2002] 2 B.L.R.
269 (HC) Distinguished Botswana Ash (Pty) Ltd v. Zuzumbe

Flynote

Arbitration - Stay of judicial proceedings - Arbitration agreement - Agreement to refer dispute to

arbitration - Summons issued by plaintiff against defendant for breach of contract - Entry of
appearance and filing of plea by defendant - Application by defendant to stay proceedings in reliance
upon arbitration agreement - Whether defendant precluded from relying on arbitration agreement

1998 BLR p310

by virtue of Arbitration Act - Whether court discretion to stay proceedings - Arbitration Act (Cap. 06:
01), s. 6. A

Headnote

It is provided by the Arbitration Act (Cap. 06:01), s. 6 (1) as follows:

"6. (1) If any party to a submission, or any person claiming through or under him, commences
any legal proceedings in any court against any other party to the submission, or any person claiming
through or under him, in respect to any matter B agreed to be referred, any party to such legal
proceedings may at any time after appearance, and before delivering any pleadings or taking any
other steps in the proceedings, apply to that court to stay the proceedings, and that court, if
satisfied that there is no sufficient reason why the matter should not be referred in accordance with
the submission, and that the applicant was, at the time when the proceedings were commenced, and
still remains, ready and willing to do all C things necessary to the proper conduct of the arbitration,
may make an order staying the proceedings subject to such terms and conditions as may be just."
On or about 21 December 1994 the parties concluded a written contract styled a "supply
agreement", clause 15 of which provided that any disputes arising between the parties concerning
the contract shall be determined by D arbitration. On 25 September 1996 the plaintiff without
reference to arbitration, caused a writ of summons to be issued against the defendant claiming
damages for breach of contract. The defendant entered appearance and filed its plea. It
subsequently filed a special plea pleading that the plaintiff was obliged to comply with clause 15 of
the agreement before approaching the courts. The plaintiff responded by alleging that clause 15 was
not mandatory; that no dispute existed at the date of issue of summons; that the defendant was not
willing to submit E to the provisions of clause 15; that the defendant was in any case precluded
from applying for a stay of proceedings instituted by the plaintiff having taken a further step in the
proceedings; and, that in any event the court had a discretion to refuse and ought to refuse a stay of
proceedings because the dispute gave rise to complex questions of law which should properly be
decided by the court. F

Held:
(1) on the interpretation of clause 15 of the agreement, if either party required that a dispute should
be referred to an arbitration, the other party must accede to it, in that the parties had agreed to do
so in advance in terms of the contract. A party to the agreement could not unilaterally elect to
proceed to court for the purpose of resolving any dispute and thus deprive the other party of its
contractual right to arbitration.

(2) It is well established that a dispute must exist before any question of arbitration can arise. On
the evidence, a G dispute did exist between the parties at the time of issue of summons and prior
thereto.

(3) The defendant did state in its special plea that it was willing and able to submit to an arbitration
in terms of the provisions of clause 15 of the agreement. Such a plea is the equivalent of the
exceptio litis pendentis in the case of a pending suit. Thus filing of the special plea by the defendant
unequivocally constituted the expression of H willingness and ability on the part of the defendant to
arbitrate the dispute. Stanhope v. Combined Holdings and Industries Ltd. 1950 (3) S.A. 52 at p. 57D
applied.

(4) The defendant was not precluded from applying for a stay of the proceedings by virtue of the
provisions of section 6 of the Arbitration Act. The defendant was entitled to raise in a special plea an
arbitration clause as the procedure provided in the Arbitration A Act was not obligatory but
permissive and did not derogate from the practice of pleading the submission clause either by way of
a preliminary plea or by way of defence. Rhodesian Railways Ltd. v. Mackintosh 1932 A.D. 359 at p.
371 and Street v. Dublin 1961 (2) S.A. 4 applied.

(5) A court has a discretion whether or not to stay proceedings, but it would generally do so once it
was satisfied that a dispute fell within an ambit of an arbitration, and a very strong case would have
to be made before a court B would exercise its discretion so as to preclude the operation of an
arbitration agreement. In the instant case, the action would be stayed pending resolution of the
matter by arbitration.

Case Information

Cases referred to: C

(1) Parekh v. Shah Jehan Cinemas (Pty.) Ltd. and Others 1980 (1) S.A. 301 (D).
(2) Nash v. Muirhead (1908) 18 C.T.R. 444.
(3) Stanhope v. Combined Holdings and Industries Ltd. 1950 (3) S.A. 52 (E).
(4) Rhodesian Railways Ltd. v. Mackintosh 1932 A.D. 359.
(5) Street v. Dublin 1961 (2) S.A. 4 (W.L.D.). D
(6) Stocks Construction (Ofs) (Pty.) Ltd. v. Metter - Pingon (Pty.) Ltd. 1978 (4) S.A. 35
(T.P.D.).
(7) Metallurgical and Commercial Consultants (Pty) Ltd. v. Metal Sales Co. (Pty.) Ltd. 1971 (2)
S.A. 388.
(8) Polysius (Pty.) Ltd. v. Transvaal Alloys (Pty) Ltd. 1983(2) S.A. 630 (W).
APPLICATION for stay of judicial proceedings for the matter to be submitted to arbitration in terms of
an E arbitration agreement entered into by the parties. The facts are sufficiently stated in the
ruling.
Collins, Newman for the plaintiff. F
Advocate R. G. Serrurier for the defendant.

Judgment

Mosojane J.:
It is common cause between the parties in this matter that on or about 21 December 1994 in
Gaborone the parties concluded a written agreement styled a "Supply Agreement". The agreement
contains various dispute resolution provisions the most material of which, in so far as these
proceedings are concerned, is clause 15.1 which provides in part: G
"Subject to any clause providing for an alternative procedure, should any disputes or differences
whatsoever arise at any time between the parties concerning this agreement or its construction or
effect or as to the rights, duties and/or liabilities of the parties or either of them under or by virtue
of this agreement or otherwise or as to any other matter in any way H arising out of the subject
matter of this agreement then either party (The emphasis is mine.):
15.1.1 may declare a dispute by delivering the details of the dispute to the other party, and
1998 BLR p312
MOSOJANE J
15.1.2 request that the dispute be referred to by the parties . . . to mediation by a single
mediator at a place and time to be A determined by him;
15.1.3 if, within 30 days of the delivery of the declaration of a dispute, the parties have not
agreed to accept mediation then the dispute shall be determined by arbitration as prescribed
below." B
Then follows the provisions relating, inter alia, to agreement for appointment or selection of a
mediator and/or arbitrator).
On 25 September 1996 the plaintiff caused a writ of summons to be issued out of this court claiming
against the defendant an amount of Pl,292,798.00 as penalty or compensation for the loss of
revenue suffered by the plaintiff C from the failure by the defendant to order and take delivery of
the target number of bags of cement in terms of the said supply agreement, it being also alleged
that the defendant failed and/or refused to make payment notwithstanding demand. The defendant
duly registered an appearance to defend and subsequently filed its plea denying the claim and at the
same time counterclaimed against the plaintiff. It also filed a special plea pleading D that the
plaintiff was obliged to have recourse to the provisions of clause 15 of the agreement before
attempting to enforce its claim by way of litigation in a court of law and further that the plaintiff's
action, was in the premises, inapposite and ought to be stayed pending arbitration.
It is not necessary to set out in any detail the claims of each party except those claims which fall to
be determined under the arbitration provisions of the agreement aforesaid. In its special plea the
defendant pleads: E
(1) that the cause of action pleaded by the plaintiff arises in consequence of a dispute between
the parties as contemplated in clause 15 of the agreement;
(2) that, in the premises, the plaintiff was obliged to have recourse to the provisions of clause
15 of the agreement; F
(3) that the defendant, at all material times was willing and able to submit itself to the
provisions of clause 15 of the agreement;
(4) that, notwithstanding this, the plaintiff has sought resolution of its disputes in a court of
law;
(5) that in the circumstances the plaintiff's action against the defendant is out of order and
ought to be stayed. G
In response the plaintiff contends:
(1) that the provisions of clause 15 of the agreement relating to mediation and arbitration are
permissive and not peremptory; H
(2) that as at the date of issue of the summons, no dispute existed between the parties as to
the plaintiff's entitlement to the amount claimed or the defendant's liability to pay such amount;
(3) that the defendant was, at all material times, not willing and able to submit itself to the
provisions of clause 15 of the agreement;

1998 BLR p313

MOSOJANE J
(4) that the defendant is in any event precluded from applying for a stay of the proceedings
instituted A against it by the plaintiff on the grounds that -
(a) clause 15 of the agreement amounts to a "submission" as envisaged in the Arbitration
Act (Cap. 06:01) ("the Act");
(b) section 6 of the Act requires that the defendant apply for a stay of proceedings after
entering appearance to defend but before delivering any pleading or taking any further step in the
B proceedings;
(c) the defendant, notwithstanding these provisions and requirements, has taken steps in the
proceedings subsequent to the delivery by it of its appearance to defend;
(5) that further, in any event, the court has a discretion to refuse a stay of proceedings in
appropriate C circumstances and the court ought to exercise its discretion against a stay of these
proceedings for the following reason: that the disputes raised by the defendant in its plea give rise
to complex questions of law which should properly be decided by this court.
There are, accordingly, in essence, five issues which require to be resolved for the purposes of
establishing D whether or not the defendant's special plea, as a matter of law, is sustainable,
namely:
(1) whether or not clause 15 contains a permissive provision, i.e. whether or not unless both
parties agree that the matter be referred to arbitration, then either party may proceed to sue in
court; E
(2) whether or not a dispute has arisen between the parties;
(3) whether or not the defendant was willing and able to submit itself to arbitration in the event
of it being found that a dispute did indeed exist between the parties;
(4) whether or not the defendant was obliged to make application for a stay of proceedings
prior to it taking F any further steps subsequent to delivery by it of its appearance to defend;
(5) whether or not because there are complex questions of law the court ought to exercise its
discretion against a stay of proceedings.
In regard to the first issue the plaintiff's counsel has argued that the procedure contained in clause
15 of the G agreement is permissive not mandatory. It does not provide that a failure by either
party to comply with clause 15 deprives the other party of its right to sue. Accordingly, if the parties
do not agree to go to arbitration or neither of them elects to declare a dispute in terms of that clause
then the parties have no other remedy except go to court. This is an issue relating to the
interpretation of the contract in particular clause 15 thereof. I think the key H words in this clause
are the words "either of them" and, as Mr. Serrurier, counsel for the defendant pointed out, I find
myself in agreement that the proper interpretation to be given to that clause is that if either party
requires an arbitration the other party must abide and fall in with that requirement because it has
agreed to do so in advance in terms of the agreement. It is only in a situation where

1998 BLR p314

MOSOJANE J
neither party wishes to go to arbitration that the court could entertain the dispute because in that
situation neither A party would have availed itself of the alternative dispute resolution provision
contained in clause 15. The express terms of this clause seem to me to require that either party to
the contract may not unilaterally elect to proceed to court for purposes of resolving any dispute and
thus deprive the other party of its contractual right to arbitration. I am fortified in this view by the
other provisions of the supply agreement, in particular clauses 16.3, B 16.4 and 16.5 in terms of
which the parties waive the right to rely on any alleged express provision not contained in the
agreement; neither party may rely on any representation which allegedly induced that party to sign
the agreement unless the representation is recorded in the supply agreement; and, no waiver of any
right under the agreement shall be effective unless reduced to writing and signed on behalf of the
parties. The defendant cannot therefore be deemed to have, and it has not been suggested, waived
any right under the contract by not electing C to declare a dispute at a time when the plaintiff
might have expected it to do so. Thus the parties have committed themselves to a particular dispute
resolution process and neither party is at liberty to proceed directly to a court of law instead. D
Concerning the second issue counsel for the plaintiff has contended that at the date of issue of
summons no dispute existed between the parties which was referable to arbitration in terms of
clause 15 of the agreement. It is well established law that a dispute must exist before any question
of arbitration can arise. See Parekh v. Shah Jehan Cinemas (Pty.) Ltd. and Others 1980 (1) S.A. 301
(D) at p.304F and the cases referred to therein; Butler and Finsen, Arbitration in South Africa at p.
64. I think, as has been submitted by counsel for the defendant, a E clear dispute arose, if it did
not arise before, at a meeting of the parties which is confirmed by the plaintiff in its letter to the
defendant dated 12 September 1996 in the following terms:
"During my discussion with Mr. Scott and Mr. Brodie of PPC, they informed me they have no
intention of settling this F penalty account, and if needs be they would go to litigation over the
matter, as they believe Cempak has a case not to pay this penalty."
That meeting pre-dates the issue of summons and there are also indications that the dispute arose
before the meeting as evidenced by the stance taken by the defendant in previous communications.
I must find therefore G that a dispute did indeed exist at the time of issue of summons and prior
thereto.
With respect to the third issue the contention on behalf of the plaintiff is that the defendant was, at
all material times, not willing and able to submit itself to the provisions of clause 15 of the
agreement regarding mediation H and arbitration. The basis for this claim was not sufficiently
canvassed in the submissions of counsel. However, there is authority to the effect that a defendant "
must state in his special plea that he is agreeable that the dispute be submitted to arbitration".
(Herbstein & Van Winsen, The Civil Practice of the Supreme Court of South Africa (4th ed.) p. 477;
Mash v. Muirhead (1908) 18 C.T.R. 444). The defendant did state in its special plea that it was,

1998 BLR p315

MOSOJANE J
at all material times, "willing and able to submit itself to the provisions of clause 15 of the
agreement . . ." This A appears to me to be sufficient rebuttal for the claim that the defendant was,
at all material times, not willing and able to submit itself to arbitration. In any event it has been held
that:
" it is not necessary for a party who resorts, for the purpose of obtaining a stay of the
proceedings, to the practice of filing a special plea of agreement to arbitration either to allege or
show the readiness and willingness referred to in the Arbitration B Acts. Such a plea is the
equivalent of the exceptio litis pendetis in the case of a pending law suit."
See Stanhope v. Combined Holdings and Industries Ltd. 1950 (3) S.A. 52 (E) at p. 57D. Thus filing
of the special C plea by the defendant unequivocally constitutes the expression of willingness and
ability on the part of the defendant to arbitrate the dispute.
The fourth issue concerns the contention that the defendant is precluded from applying for a stay of
the proceedings by virtue of it not having complied with the provisions of section 6 of the Arbitration
Act (Cap. 06:01). D The defendant's position is that it is entitled to raise in a special plea an
arbitration clause as the procedure provided in the Act is not obligatory but permissive and does not
derogate from the practice of pleading the submission clause either by way of a preliminary special
plea or by way of defence. As this point was conceded by the plaintiff's counsel in argument what
remains for me to do is simply to confirm the legal position. The provisions of section 6 of the
Arbitration Act (Cap. 06:01) are materially identical to the equivalent section of the E Arbitration
Act of South Africa. Thus, a party who desires to make an application by virtue of section 6 of the
Arbitration Act to stay proceedings "must do so before taking any step in the proceedings other than
entering appearance" (Herbstein Van Winsen, supra, at p. 269, see also Butler and Finsen, supra, at
p. 321). On the preponderance of authorities however, the existence of the Arbitration Act does not
preclude a party from being F entitled to raise the fact of an arbitration clause by way of a special
plea. Thus, as stated in Rhodesian Railways Ltd. v. Mackintosh 1932 A.D. 359 at p. 371:
"In pleading . . . you can raise the defence that the case ought to be decided by arbitration; this
can be done by a special G preliminary plea. There is nothing in sec. 6 (1) which hints at any
intention on the part of the Legislature to alter in any way the common law practice. The section
merely provides that a party brought into Court on a contract may at any time after appearance
apply to the Court to stay proceedings, and there is nothing in the section that this procedure is in
H substitution of the former practice. I am therefore of the opinion that... the procedure provided in
sec. 6 (1) is not obligatory but permissive, and that it in no way derogates from the former practice
of pleading the submission clause either by way of a preliminary special plea or by way of a
defence."

1998 BLR p316

MOSOJANE J
(The Rhodesian Railways Ltd. v. Mackintosh 1932 A.D. 359 at 371; see also Street v. Dublin 1961
(2) S.A. 4 A (WLD) at p. 11F-H, Joubert: Law of South Africa, vol. 1, para 467; Stocks Construction
(OFS) (Pty.) Ltd. v. Metter-Pinegon (Pty.) Ltd. 1978 (4) S.A. 35 (TPD) at pp. 38 D-F and 39A;
Parekh, supra, at p. 306 A-B; MacKenzie, The law of Building and Engineering Contracts and
Arbitration, (5th ed.) at p. 169, Butler & Finsen, supra, at p. 64 ff. 207 and the cases referred to
therein). B
The fifth and last issue is the issue of the discretion of this court to grant or not to grant a stay of
proceedings. There is no question that the court enjoys such a discretion. It is however, the manner
in which such discretion is to be exercised which calls for particular focus:
"A court has a discretion whether or not to stay proceedings, but it would generally do so once it
is satisfied that a dispute C falls within the ambit of an arbitration agreement, and a very strong
case would have to be made before a court would exercise its discretion so as to preclude the
operation of an arbitration agreement."
(Mackenzie, supra, at p. 170). The court must, of course, decide each case upon its own facts. It will
not, D however, readily refuse a stay but will exercise its discretion sparingly, the modern tendency
being to lean in favour of a stay of the proceedings. The courts have been consistent in their
approach in requiring 'a very strong case' to be made out by a party seeking to be absolved from a
contract to have a dispute referred to arbitration. The onus of satisfying the court that it should not,
in the exercise of its discretion, refer the matter to arbitration is E on the party who instituted the
legal proceedings. The mere fact that there is a point of law to be determined is not sufficient for a
refusal of a stay if there are other matters for decision. There is no general rule that, if the sole issue
is a point of law, the court should refuse a stay."
(Herbstein & Van Winsen, supra, at pp. 270-271). See also Metallurgical and Commercial
Consultants (Pty.) F Ltd. v. Metal Sales Co. (Pty.) Ltd. 1971 (2) S.A. 388 (W) at p. 391 C-H;
Polysius v. Transvaal Alloys (Pty.) Ltd. 1983 (2) S.A. 630 (W) at pp. 639D-640C.
Thus the onus is on the plaintiff to satisfy the court that it should not, in the exercise of its
discretion, refer the matter to arbitration; and, that the complex legal questions it has referred to
preclude a reference to arbitration G and a stay of these proceedings pending the outcome of such
reference. With regard to issues of law, section 30 of the Arbitration Act (Cap. 06:01) expressly
empowers an arbitrator seised with a dispute between parties to refer legal issues arising in the
course of that dispute to the court for decision by a judge. The provisions of section 30 appear to be
directed at precisely the type of situation envisioned by the plaintiff's counsel. Thus the parties are,
by virtue of the provisions of the Arbitration Act, able to enjoy the benefit of having both a
technically H qualified and a legally trained adjudicator in one and the same proceeding. The
dispute between the parties involves a large number of technical matters, particularly having regard
to the defendant's contention that the product (polypropylene bags) manufactured

1998 BLR p317

by the plaintiff were defective. It would no doubt be most appropriate for the adjudicator of that
dispute to be A someone qualified in the appropriate technical field. Besides , in terms of their
contract, the parties agreed that all disputes or differences arising out of the contract are to be
adjudicated by way of arbitration. The plaintiff has failed to satisfy this court why the parties should
not abide by the terms of that contract.
The plaintiff having failed on all the issues raised by it I uphold the defendant's plea and grant the
relief sought B therein. This action shall therefore be stayed pending resolution of the matter by
arbitration.
Counsel for the defendant has submitted that the defendant is, in this event, entitled to the costs of
the proceedings subsequent to the date of delivery of its special plea and that such costs should
include the costs occasioned by the employment of senior counsel. I see no reason why the
defendant should not be awarded C these costs. The plaintiff shall pay these costs accordingly.
Stay of proceedings granted.
M.T. D