R Data (Pty) Ltd v Nordic Light Properties (Pty) Ltd [2022] ZAWCHC 137 (6 June 2022)

This judgment from the High Court of South Africa Western Cape Division, Cape Town deals with a dispute between R Data (Pty) Ltd, the tenant, and Nordic Light Properties (Pty) Ltd, the landlord, regarding the return of a R400,000 deposit paid under a lease agreement. The lease contained a dispute resolution clause providing for negotiation, mediation or arbitration.

After the landlord refused to return the deposit, the tenant initiated legal proceedings. In response, the landlord delivered a special plea, requesting a stay of the action, pending arbitration, as provided for in the lease agreement. Seven months later, the tenant brought a substantive application seeking:

1. A declaratory order confirming the Court's jurisdiction to adjudicate the action, arguing that the dispute was about the payment of money and therefore fell outside the scope of the arbitration clause; and

2. Judgment against the landlord, as the latter had failed to plead over the merits of the tenant's claim.

The landlord then applied to set aside the tenant's application as an irregular step under Rule 30.

The defendant did not allege any prejudice in its founding affidavit if the plaintiff's application were to proceed. This issue was instead raised during oral arguments. The necessity of explicitly addressing potential prejudice in the affidavits became a contentious issue during the proceedings.

The plaintiff directed the court to multiple authorities establishing the clear principle that without demonstrating prejudice, a Rule 30 application cannot to succeed. Hence, the plaintiff argued, the affidavit initiating the application should specifically mention any potential prejudice.

Affidavits are not mandatory in Rule 30 and other interlocutory applications. See Chelsea Estates & Contractors CC v Speed-O-Rama 1993 (1) SA 198 (SE) at 202C; and Harms Civil Procedure Superior Court, paragraph B30.5). However, in the case of M & M Quantity Surveyors v CC v Orvall Corporate Designs (Pty) Ltd 2021 JDR 1059 (GP), the court held citing Erasmus Superior Court Practice, that proof of prejudice is required on affidavit.

That is no doubt the case when prejudice is not immediately apparent from the circumstances surrounding the alleged procedural irregularity, and when specific factual assertions suggest prejudice. Under these circumstances, the respondent in a Rule 30 application must have the opportunity to contest these factual allegations of prejudice in their response. Authorities cited by the parties (notably De Klerk v De Klerk 1986 (4) SA 424 (W) at 427F-I and SA Metropolitan Lewensversekeringsmaatskappy Bpk v Louw NO 1981 (4) SA 329 (O) at 333G-334D), confirms that proving prejudice is essential. However, these precedents are not authority for the proposition that prejudice must always be explicitly pleaded in every case. Prejudice can be argued if it is apparent from the papers and the context (as per De Klerk).

The ratio decidendi of this case is that a party cannot circumvent the ordinary course of a trial by bringing a substantive application to determine a special plea, such as a dispute resolution clause, outside of the agreed forum. The Court held that doing so would prejudice the other party's right to a fair trial, including their right to lead evidence and cross-examine witnesses. Also, prejudice need not be specifically raised in affidavits in every matter.

The High Court confirmed that it had jurisdiction to hear the matter and that a party could apply for a declaratory order at any time, but that in this case, the application was an irregular step because it circumvented the trial procedure. The Court emphasised that rules of procedure are in place to secure the inexpensive and expeditious completion of litigation and should not be easily disregarded.

Ultimately, the application was set aside as an irregular step, and the tenant was ordered to pay the landlord's costs.

The court primarily relied on Centre for Child Law v Hoërskool Fochville and another (2016) to establish the principle that procedural rules are in place to secure the inexpensive and expeditious completion of litigation and should not be easily disregarded.

Additionally, the following cases were referred to in the judgment:

Trans-African Insurance Co Ltd v Maluleka (1956) — For the proposition that objections to procedural irregularities should not be allowed to interfere with the decision of cases on their merits, in the absence of prejudice.
Meyerson v Health Beverages (Pty) Ltd (1989) — Which holds that a defendant is not required to plead over on the merits when they raise a special plea, and if the special plea fails, the court will allow them to deliver a plea on the merits.
David Beckett Construction (Pty) Ltd v Bristow (1987) — This case supports the above, stating that the intended effect of the Rules of Court is that 'every defence must be raised as part and parcel of the plea required by Rule 22'.
Pretorius v Fourie NO en 'n Ander (1962) — Confirms the differing Cape approach to pleading over on the merits, especially where a special plea has been raised.
PCL Consulting (Pty) Ltd v Tresso Trading 119 (Pty) Ltd (2009) — This holds that the Arbitration Act does not compel a litigant to raise an arbitration agreement by application, and the common law has not been ousted in this respect. Litigants have a choice between applying under the Act or delivering a special plea.
Foize Africa (Pty) Ltd v Foize Beheer BV (2013) — Confirms that a court does not lose jurisdiction over a matter due to the existence of an arbitration clause; instead, it has a discretion whether to exercise such jurisdiction.
M & M Quantity Surveyors v CC Orvall Corporate Designs (Pty) Ltd (2021) — This case notes that prejudice must be shown by affidavit in a Rule 30 application, but this is not necessary where prejudice can be inferred from the papers and context.
De Klerk v De Klerk (1986) and SA Metropolitan Lewensversekeringsmaatskappy Bpk v Louw NO (1981) — These cases emphasise that prejudice is a necessary requirement for a successful Rule 30 application, and it can be argued in the absence of an affidavit setting it out.
Metallurgical and Commercial Consultants (Pty) Ltd v Metal Sales Co (Pty) Ltd (1971) — This supports the possibility of applying to lead oral evidence on factual disputes that arise in the course of an application.
Capitec Bank Holdings Ltd v Coral Lagoon Investments 194 (Pty) Ltd (2022) — This case emphasises the wide remit given to the admission of extrinsic evidence of context and purpose in contractual interpretation cases.

The judgment also refers briefly to Chelsea Estates & Contractors CC v Speed-O-Rama (1993) and Harms Civil Procedure Superior Court, both of which note that affidavits are not always required for Rule 30 applications, and that the court has a general discretion to regulate its own procedure.