Bidoli v Bidoli & another (436/10) [2011] ZASCA 82 (27 May 2011)

The Bidoli brothers – Guido (the appellant), Fabrizio (deceased, represented by his wife Barbara as the first respondent in her capacity as executrix of his estate and in her personal capacity), and Romolo (the second respondent) – were involved in various joint and separate business ventures as building contractors in South Africa, Namibia, and Italy since 1960, operating under a partnership known as Bidoli and Sons until 1995.

The partnerships and companies involved did not maintain accurate records of profit distribution, complicating matters due to shared equipment and services rendered to each other.

Since 1971, the brothers had been sending money to their late father in Italy to finance the construction of a block of flats on the outskirts of Rome, which was completed in 1984 and registered in the names of the three brothers. An adjacent vacant piece of land was also acquired and registered jointly in their names.

In 2000, the block of flats was sold, and the proceeds were deposited into a bank account in Rome in the joint names of the brothers.

Disputes arose among the brothers, and in 2007 they entered into an arbitration agreement to resolve all disputes, including those related to their partnership and claims regarding the funds in the joint bank account in Rome. The arbitration was governed by the Arbitration Act 42 of 1965.

During the arbitration proceedings, the parties reached a settlement agreement. However, Romolo expressed dissatisfaction with the settlement and requested the arbitrator to reopen the arbitration, which led to the arbitrator recording the settlement in the form of an award.

Guido applied to the Western Cape High Court to have the arbitral award made an order of court, while Romolo opposed the application and counter-applied for the award to be set aside as void ab initio.

The High Court found in favor of Romolo, setting aside the arbitral award on the basis that the arbitrator's mandate terminated upon the settlement of disputes by the parties, and thus any award issued thereafter was void for want of jurisdiction.

Guido appealed the High Court's decision to the Supreme Court of Appeal.

The ratio decidendi of the Supreme Court of Appeal's decision in the Bidoli v Bidoli case is that an arbitrator has the authority to record a settlement agreement reached by the parties in the form of an agreed award during the course of arbitration proceedings, even in the absence of a specific statutory provision allowing for such an action. This is based on the principle that the parties to an arbitration agreement have the freedom to define the powers of the arbitrator and to modify or withdraw that power by further agreement.

The court held that the parties had a dispute when the arbitration proceedings commenced, and the arbitration had been running for several days before it was settled by the parties. The settlement agreement was dependent upon the issuance of an arbitral award, which both parties had requested the arbitrator to issue. The court found that it was within the parties' rights to order their affairs in this way and that the arbitrator's mandate did not automatically terminate upon the settlement of the dispute. Instead, the mandate continued until the arbitrator issued a final award, which in this case was the recording of the settlement agreement as an award.

The court also rejected the argument that the award was merely declaratory and that the High Court should not make an order that can only be carried into effect outside of its jurisdiction. The court found that the order was enforceable against the respondent in South Africa and that the High Court had the power to make such an order.

Therefore, the core legal principle underlying the decision is that parties to an arbitration can agree to have their settlement recorded as an arbitral award, which can then be made an order of court, and that such an award is not void for lack of jurisdiction or because it deals with matters outside the court's territorial jurisdiction.

The Supreme Court of Appeal referred to several cases. One of the key cases cited was Telecall (Pty) Ltd v Logan 2000 (2) SA 782 (SCA). This case was used to reiterate the general principle that before there can be a reference to arbitration, a dispute capable of proper formulation at the time when an arbitrator is to be appointed must exist. The court in the Bidoli case distinguished between the initiation of arbitration, which requires a dispute, and the continuation of arbitration, which can culminate in an agreed award even after a settlement has been reached.

This case of Total Support Management (Pty) Ltd v Diversified Health Systems (SA) (Pty) Ltd 2002 (4) SA 661 (SCA) was referenced to emphasise that arbitration is an adjudication flowing from the consent of the parties to the arbitration agreement, who define the powers of adjudication and are equally free to modify or withdraw that power at any time by way of further agreement.

Metlika Trading Ltd & others v Commissioner, South African Revenue Services 2005 (3) SA 1 (SCA) was cited to support the argument that a High Court order does not affect the sovereignty of a foreign court and is enforceable against respondents subject to the Court’s jurisdiction, not against third parties.

Carmel Trading Co Ltd v Commissioner, South African Revenue Service and others 2008 (2) SA 433 (SCA) was used to further support the enforceability of court orders against parties within the jurisdiction of the South African courts, even if the order pertains to matters outside the court's territorial jurisdiction.