Tribunal For Commercial Property – A First For SA

Tribunal For Commercial Property Offers Alternative In A Ground Breaking Move For Commercial Property In South Africa

In a ground breaking move for commercial property in South Africa, a group of legal and commercial property experts have put their heads together and conceptualised the country’s first Tribunal for Commercial Property. The Tribunal offers the commercial property industry a viable alternative to the lengthy and often expensive court proceedings by arbitrating disputes.

The Tribunal for Commercial Property was first conceptualised by Gideon Pretorius, Chris Erasmus SC and Ben Ridgard. Gideon is a practising attorney operating under the name Gideon Pretorius Inc, specialising in the law of landlord and tenant in the retail, commercial and industrial sectors. Chris is a practising advocate of 28 years’ experience, and a member of the Pretoria Bar, who has extensive litigation experience in the commercial, administrative and constitutional fields of law. Ben is a practising advocate of approximately 10 years’ experience, and a member of the Johannesburg Bar, who has extensive experience of inter alia the law of landlord and tenant.

The need for the Tribunal, which will function in terms of the Arbitration Act No 42 of 1965, was prompted by the need to find a solution to the problem of a mismatch in the time commercial businesses need legal issues to be resolved and the amount of time taken by the court system to process such issues. Simply put, commercial clients need disputes to be resolved quickly and efficiently, but the court system and other role players take far too long and the process becomes costly. Many matters have been abandoned and many a dispute has gone unresolved, because an aggrieved party simply cannot afford the delays. These delays also effect the availability of witnesses and other evidence.

Arbitration has long been an accepted and respected method of dispute resolution in South Africa. The outcome of an arbitration process is legally binding on the parties concerned, giving it the same force as a court order. It has often been a preferred process to litigation in professional circles, because arbitrators are expected to have a thorough and in-depth knowledge of the industry, as well as the required legal qualifications.

An agreement referring a dispute relating to cancellation of an agreement of lease to arbitration has been acknowledged and enforced by South African courts as long ago as 1884. Recently the highest court in South Africa, namely the Constitutional Court, again reinforced the binding force of arbitration agreements, and the fact that the courts in South Africa should honour and enforce arbitration awards. In the majority judgment (http://www.saflii.org/za/cases/ZACC/2009/6.html) the Constitutional Court emphasised the importance that courts should respect the choice of the parties to resolve disputes on arbitration through an arbitrator properly nominated in accordance with a process agreed upon by the parties. Arbitrations and the awards made by arbitrators are recognised in terms of the Arbitration Act No 42 of 1965, and are therefore a recognised and protected dispute resolution mechanism in South Africa.

Arbitrations facilitated by the Tribunal have many advantages over litigation in courts of law and to name a few:

  • The process in accordance with which the arbitration is conducted is determined by the rules adopted by the Tribunal;
  • The parties agree, in terms of the rules, how evidence will be received, and the process has been specifically designed for effective dispute resolution.
  • The process for exchange of pleadings has been simplified and can be done through electronic mail;
  • The process will be more cost effective than litigation;
  • The arbitrations are held in private and are not open to members of the public, and as such this contributes to the preservation of the relationship between the litigating parties;
  • The arbitrations will be much more speedy than the litigation in court;
  • The arbitrators having been specially selected and trained, have specific expertise in the commercial property industry;
  • Because the proceedings are confidential all information and evidence made known during the arbitration process remains confidential and do not come to the attention of the general public;
  • The award of the arbitrator is final and not subject to a lengthy appeal process.

The following are examples from typical disputes that will be ventilated in arbitrations facilitated by the Tribunal for Commercial Property:

  • Calculation and liability in respect of any disputed amount such as rent, turnover rent, allowances, rates and taxes and commodities;
  • Obligations of either the landlord or the tenant;
  • Restrictions against subletting or cession;
  • The withholding by the landlord of consent on a variety of topics such as alterations to the lease premises;
  • The expansion or reduction of lease premises;
  • The relocation of the tenant and/or disputes relating to redevelopment provisions;
  • The option to renew and the exercise of such option;
  • The exclusivity provisions as provided for in the lease agreement;
  • Permissible commercial activities on the lease premises and issues relating to the adequacy of the property;
  • The enforcement of restrictions on the use of lease premises;
  • The failure by the landlord and/or tenant to comply with their obligations arising out of the lease agreement.
  • The cancellation or termination of the lease agreement;
  • The eviction of the tenant from the premises;
  • Disputes between the landlord and the surety relating to the latter’s obligations for and on behalf of the tenant;

and other:

  • Disputes between the land owner and service providers;
  • Disputes emanating from agreements concluded between the land owner and contractors relating to the maintenance or upgrade of the premises;
  • Disputes between co-owners of commercial property.

The Tribunal and panel of arbitrators

The Tribunal for Commercial Property approached retired Judge Willem van der Merwe who agreed to participate as custodian. Judge van der Merwe, together with the Tribunal, interviewed and appointed each arbitrator to a panel of arbitrators, consisting of an initial twenty seven practising advocates with varied seniority. The various arbitrators were selected from the Bars of Johannesburg, Pretoria, Cape of Good Hope and Durban.

In order to equip the arbitrators to adjudicate matters relating to the commercial property industry, a course in commercial lease arbitration was developed by the University of Pretoria (Continued Education) with the course leader Professor Chris Cloete. The panel of arbitrators attended the first course at the beginning of 2015.

“We take the process of hand-picking arbitrators and training them very seriously. While we understand that we’re all human and that people make mistakes, we want to minimise that and keep the standards high. This is something we want to be proud of,” comments Judge van der Merwe. “We asked Judge van der Merwe to be involved because he is one of the country’s foremost caseflow managers, being the former Deputy Judge President of the Pretoria High Court. Furthermore, this is a unique initiative in that it is completely industry-specific,” Chris Erasmus adds.

What and how?

One of the primary areas of focus will be the adjudication of disputes between landlords and tenants. Gideon Pretorius emphasises here that it is important to make a clear distinction between the Tribunal for Commercial Property and some of the other arbitration or dispute-resolution bodies. Whereas other Arbitration Tribunals in South Africa either make provision for arbitrations on a wide variety of issues, or has a narrow focus only adjudicating construction or building disputes, the Tribunal for Commercial Property focuses on facilitating disputes emanating from the commercial property industry.

The Tribunal for Commercial Property will also entertain disputes from co-ownership agreements, service provider agreements and smaller construction agreements.

Parties wishing to embark on an arbitration process via the Tribunal will be able to submit an application on the newly-launched website, www.tribunalcp.co.za. While the site does not offer legal advice, users will be able to download reference documents, and the arbitrators will use it as a platform from which to make contact with parties. The website will also be useful as a mechanism for keeping track of the progress of the various arbitrations, which will allow Judge van der Merwe to monitor the overall process.

Although the litigation option is always open to those wishing to use it, many companies prefer not to go that route. Many tenants, for example, would prefer to maintain a working relationship with landlords. In addition, many of the companies we are dealing with are not litigious by nature and don’t want to take matters to court. The arbitration process is not constrained by the same requirements as the court system, so the Tribunal for Commercial Property offers a more effective system by which people can finally resolve their disputes in a matter of months rather than years.

It is important to note, however, that participants in the process have no appeal against an arbitration decision, which is final and binding. This will effectively eliminate unmerited appeals. In addition, once parties elected to seek an arbitration, they have elected to forego the right to have the issue aired in court –but they are then squarely within the ambit of the arbitration process. This is why it is so important to hand-pick the arbitrators for the Tribunal and to ensure that they are well trained to fulfil their roles.

A completely new initiative

The Tribunal for Commercial Property is revolutionary in more than one way. For a start, not many countries around the world have a dedicated body for adjudicating commercial property disputes – there are only a handful that the Tribunal is aware of. Certain other additional factors add to its pioneering characteristics.

The process is inquisitorial in line with international models and those used by the South African Competition Commission and the Small Claims CourtThe arbitrator may therefore step into the arena and his/her questions are not only limited to clarification but he/she can embark on his/her own “investigation” of the facts. The process of arbitration has been shortened to a twelve week period excluding the award that should be given within 10 (ten) days of closing arguments.

Additional unique features are as follows:

  • The claimant is required to deliver a complete statement of case at the outset, which will consist of a summary of all the facts and underlying law which is relied upon, together with witness statements and all relevant documents including copies thereof. The defendant is likewise required to respond, thus limiting discovery of documents at a later stage that could lead to “surprises” and thereby curbing unnecessary postponements and amendments flowing therefrom;
  • The statement of claim may be delivered without intervention of third parties, i.e. the sheriff, thus limiting the reliance on third parties which may cause a further delay in the finalisation of matters. The parties may agree to make use of the filing system available on the website where documents can also be filed and withdrawn and where arbitrators and case managers may communicate with the parties;
  • As time progresses the arbitrators will be exposed to the industry on an ongoing basis, building on the foundation of the University of Pretoria’s course and their own experience to become “experts” in the resolution of disputes in the commercial property industry;
  • The arbitrations will take place in Johannesburg, Pretoria, Cape Town and Durban or elsewhere at venues as directed by the arbitrator or Tribunal with the aim to obtain fixed venues once the case flow patterns in various centres are more predictable;
  • All cost orders will be granted on the attorney and client scale to narrow the gap between what is paid by any party to their legal representative, and ultimately recovered if successful. The arbitrator will also (in terms of the Act) fix and determine the costs which would make the taxing of the costs through the system of the High Court obsolete;
  • There will be no appeal against any award made by the arbitrator in line with the majority of standard arbitration provisions;
  • An award can be made an order of court in terms of the Act, whereafter the process of execution can commence if required. This process is completed by application to the court with the time lines ranging between approximately four weeks to four months depending on the jurisdiction;
  • Arbitrators on specific matters will be independently appointed by Judge van der Merwe whilst overseeing fairness, quality and effectiveness.

Users of the Tribunal for Commercial Property such as property owners, tenants and attorneys are currently in the process of inserting the clauses into agreements which can be downloaded on the website, www.tribunalcp.co.za. Once a clause has been downloaded it can be incorporated in the agreement of lease and, where applicable, in any deed of suretyship. It is recommended that legal assistance be obtained in incorporating the provisions into master agreements or templates or as addendums to agreements already concluded.

The arbitration clauses do not amend any substantive rights or obligations emanating from the agreement of lease, but merely describe the extent of any dispute relating to the occupancy of any premises. Aspects such as tenant installation, storage and parking agreements, options to renew which might not be a formal part of the agreement of lease, are addressed to also form part of possible “disputes”.

Matters may also be referred to the Tribunal in terms of arbitration agreements where the arbitration provisions did not form part of the initial agreement and the parties elect to refer a dispute. An example of such an agreement is available on the website. Finally, the cost of referring matters to the Tribunal for Commercial Property is recorded as part of the terms and conditions which can be viewed on the website.

The aim of the Tribunal for Commercial Property is to create accessible justice for all participants. Should any further information be required kindly contact us on the website alternatively email info@tribunalcp.co.za.