You chose a private judge. You cannot appeal your way out of the result.

A property developer lost an arbitration, then asked the High Court to overturn the award. It said the arbitrator, a retired judge, had misconducted himself, committed gross irregularities, exceeded his powers, and was biased. The court dismissed the challenge and ordered the developer to pay costs on the larger, punitive scale.

The reason is a rule every business that agrees to arbitration should understand: a review is not an appeal. If you choose a private judge, you are bound by the result, even if you think it is wrong.

The background

In 2008, the Flamwood Consortium and Senwes signed a Memorandum of Agreement to explore a land development around Senwes’ head office in Klerksdorp. The agreement said that disputes would be decided by arbitration, not by a court.

The relationship ran into trouble. In 2015, Senwes said it would not continue; in 2017 it reversed that position, then gave notice to terminate. Both sides eventually cancelled and blamed the other. They referred the dispute to a retired judge, sitting as arbitrator. After a hearing in 2021, he found for Senwes: Flamwood had no right to cancel, its own conduct amounted to repudiation, and its claim was dismissed with costs.

Flamwood asked the High Court to set the award aside and send the dispute back to be decided afresh.

Why the court refused to interfere

A court’s power to review an arbitration award is narrow. It is set out in section 33(1) of the Arbitration Act, which allows a court to set an award aside only where the arbitrator misconducted himself, committed a gross irregularity in the conduct of the proceedings, exceeded his powers, or where the award was improperly obtained. By agreeing to arbitrate, parties limit a court to those procedural grounds and give up any wider right to have the award reviewed.

Two points do the heavy lifting. First, misconduct means more than a mistake. An honest error of fact or law is not misconduct; the error must be so gross that it shows dishonesty, partiality or bad faith. Second, a gross irregularity is about how the arbitration was run, not whether the answer was right. The test is whether the problem prevented a fair hearing of the issues. An arbitrator who asks the correct question but gets the facts or the law wrong has not committed an irregularity.

Measured against that standard, the court found that Flamwood was really arguing that the arbitrator had reached the wrong conclusions. Its complaints used the language of an appeal: that the arbitrator “disregarded”, “failed to appreciate”, “misconceived”, and “erred”. Those are challenges to the correctness of the decision, not to the fairness of the process. Calling the challenge a review did not change what it was.

The complaints that were rejected

The court worked through each ground and found none of them reviewable.

• Disagreement with the findings. The arbitrator applied recognised legal principles to the evidence when he held that the 2015 repudiation had been withdrawn before Flamwood acted on it, that the 2017 termination was not a material breach, and that the land remained available for development. Whether those findings were correct was for the arbitrator, not the court.
• “No opportunity to be heard.” The interpretation issues had been raised in the pleadings and in argument. That the arbitrator decided them differently from what Flamwood hoped did not mean Flamwood was denied a hearing.
• The missing record. The hearing had been recorded, the review went ahead on a reconstructed record, and there was no suggestion the arbitrator had destroyed or withheld anything. The absence of a typed transcript was not an irregularity.
• Bias. The test is whether a reasonable, objective, and informed person would apprehend that the arbitrator would not bring an impartial mind to the case. The court noted that the arbitrator had made several findings in Flamwood’s favour, which pointed away from bias. Adverse findings alone do not create an apprehension of bias.

One ground, that the award had been improperly obtained, was abandoned before the hearing.

The sting: punitive costs

Losing the review was not the only consequence. Because Flamwood had accused a retired judge of misconduct and bias without a reasonable foundation, the court ordered it to pay Senwes’ costs on the attorney-and-client scale, including the cost of senior counsel. Serious allegations that cannot be supported carry a real financial risk.

Why it matters, and what to do

Arbitration trades the right of appeal for speed, privacy, and finality. If you agree to it, plan on the award being the end of the road. Before you sign an arbitration clause, and before you challenge an award, keep four things in mind:

• Know that finality is the point. In most arbitration agreements, there is no appeal. Choose your arbitrator with that in mind, because their view of the facts and the law will usually be final.
• Do not dress an appeal as a review. A court will look past the label. If your complaint is that the arbitrator got it wrong, rather than that the process was unfair, a review will fail.
• Reserve a right of appeal if you want one. If the stakes justify a second look, negotiate an arbitration appeal (for example, an appeal to a panel) into the agreement at the outset. You cannot create one afterwards.
• Be careful with allegations of misconduct or bias. These are grave charges. Made without a proper basis, they invite a punitive costs order on top of the loss.

If you are about to sign a contract with an arbitration clause, or you are unhappy with an award, contact Nikita Lalla or Ricardo Pillay so that your strategy fits the narrow grounds the law actually allows.

This article is general information and reflects the law at the time of writing. It is not legal advice. For advice on a specific matter, please speak to us.