Initiation of arbitration proceedings

In Samancor Holdings (Pty) Ltd and Others v Samancor Chrome Holdings (Pty) Ltd and Another [2021] 3 All SA 342 (SCA), s 8 of the Arbitration Act allows for the extension of a time-barred period for initiating arbitration proceedings, where a court is of the opinion that in the circumstances of the case, undue hardship would otherwise be caused.

By Merilyn Rowena Kader LLB (Unisa), Legal Editor at LexisNexis South Africa.

Mediation and Arbitration - Initiation of arbitration proceedings: In Samancor Holdings (Pty) Ltd and Others v Samancor Chrome Holdings (Pty) Ltd and Another [2021] 3 All SA 342 (SCA), the terms of a sale of shares agreement the first respondent, Samancor Chrome Holdings (Pty) Ltd (SCH) acquired a chrome business from the second respondent, Samancor Chrome Ltd (Samancor Chrome) by buying the shares in Samancor Chrome from the first appellant, Samancor Holdings (Pty) Ltd (Samancor Holdings). The second and third appellants BHP Billiton SA Ltd (BHP) and Anglo South Africa Capital (Pty) Ltd (ASAC) were Samancor Holdings’ shareholders.

The defined effective date of the agreement was 1 June 2005. In terms of the agreement, that was the date on which the parties implemented their agreement economically. It was not possible, however, for the restructuring and transfer of shares to SCH to be completed by that date. The agreement contained an indemnity clause in respect of Samancor Chrome’s income tax up to a stipulated date. In terms of a time-bar clause, proceedings in respect of the income tax indemnity had to be issued before the sixth anniversary of the effective date of 1 June 2005. The six-year time-bar expired on 1 June 2011. On 16 August 2011, the South African Revenue Service began an investigation into Samancor Chrome’s tax affairs, including its 2005 tax year. That resulted in an additional assessment, which increased the original assessment of taxable income. SCH and Samancor Chrome (the claimants) initiated arbitration proceedings against Samancor Holdings, to recover the amount paid as additional tax.

The effect of the arbitration ruling (on appeal) was that the claimants were required to have the period for initiating the arbitration proceedings extended in terms of s 8 of the Arbitration Act 42 of 1965. The claimants’ application to the High Court for such extension was granted, leading to the present appeal.

The court, per Rogers AJA (Mbatha, Navsa, Saldulker JJA and Ledwaba AJA concurring) held that s 8 allows for the extension sought by the claimants where a court is of the opinion that in the circumstances of the case, undue hardship would otherwise be caused. The hardship, which the section contemplates, is hardship to the claimant because its claim is time-barred. To be regarded as undue, the hardship must be unwarranted or inappropriate because it is excessive or disproportionate.

It could not be found that the High Court was guilty of any legal or factual misdirection in assessing the claimants’ delay in launching their s 8 application. In exercising its discretion, that court considered factors, which had a material bearing on the question of the claimants’ delay. The appeal was dismissed with costs.

Merilyn Rowena Kader
Legal Editor at LexisNexis