Intent or Animus Contrahendi re: Fortuitous or Unforeseen Events

SC04-22 : HOMELINK (PRIVATE) LIMITED vs CLEVER MAPUTSENI
Ruled By: MAVANGIRA JA, UCHENA JA and CHITAKUNYE JA

This is an appeal against the whole judgment of the High Court handed down on 8 September 2020, declaring “that payment by the applicant (respondent) of the sum of RTGS$235,620=99 together with interest at the prescribed lending rate calculated from 19 February 2020 to the date of final payment shall ...

FACTUAL BACKGROUND

The appellant is Homelink (Private) Limited, a registered money-lender in terms of the law. The respondent is a Zimbabwean national living in the diaspora.

On 17 August 2018, the parties entered into a loan agreement which came into effect on 30 October 2018. In terms of the agreement, the respondent was granted a loan in the sum of US$450,000 to purchase an immovable property, being a certain piece of land situate in the district of Salisbury called the remainder of Stand 251 Helensvale Township measuring 8,242 square metres in extent also known as 2 Denys Close, Helensvale, Harare.

The same Stand was also to be used as security for the loan. A mortgage bond was accordingly registered in favour of the appellant in the sum of US$450,000.

The parties also agreed that the interest applicable to the loan “shall be at a variable rate currently pegged at 10 percent per annum or at such rate as shall be determined by the Lender from time to time.”

Furthermore, that the interest “shall be calculated on the outstanding balance (at all times expressed in United States Dollars) at the prevailing interest rate.”

It was also agreed that repayments would commence on 30 October 2018 and that “the principal balance, interest, and charges accruing thereon shall have been paid in full by 30 September 2033.”

The parties also agreed, in clause 10, as follows:

“10 CHANGES IN CIRCUMSTANCES

10.1 If by reason of:

10.1.1 The introduction of any change in any applicable law or regulation, or any change in the interpretation or application thereof; or

10.1.2 Compliance by the Lender with any directive, request or requirement (whether or not having the force of law) of any Central Bank, Government, fiscal, or other authority;

10.1.3 It becomes unlawful or it is prohibited or it is contrary to such directive, request or requirement for the Lender to maintain the Loan or to give effect to any of its obligations, as contemplated by this Agreement, then, the Lender may notify the Borrower and the Borrower shall promptly prepay the Loan, together with all interest costs and expenses accrued thereon.”

At the time that the loan agreement was concluded, the United States dollar was the dominant legal tender along with other multi currencies.

Although the loan was expressed in United States dollars, it was disbursed in two parts or tranches.

US$5,685=85 was disbursed on 13 September 2018. The greater part of the loan, in the amount of US$444,341=15 was disbursed on 16 November 2018 - after the separation of the RTGS dollars and nostro foreign currency bank accounts and it was disbursed in RTGS dollars or local currency at the rate of one-to-one to the United States dollar.

The reason for disbursement of the greater part of the loan in RTGS dollars is unexplained in the papers.

In its opposing affidavit a quo, the respondent merely states as follows:

“The correct position is that S.I.33 of 2019 came into force on 22 February 2019. The sum of US$444,341=15…, was disbursed on 16 November 2018 as stated above.”

In his application in the court a quo, the respondent stated the crisp issue before the court as follows:

“The legal issue is whether or not the loan agreement, or the liability arising therefrom, falls within the ambit of section 4(1)(d) of S.I.33/2019 now incorporated in terms of section 22(1)(d) the Finance (No.2) Act 2019 and is therefore deemed to be in RTGS dollars at a rate of one-to-one to the United States dollar.”

As stated at the commencement of this judgment, the court a quo found in the respondent's favour. The court stated, at p8 of its judgment:

“The difficulty of the dispute of the parties is exacerbated by the fact that neither the Principal Act nor the Finance (No.2) Act of 2019 appears to have defined the phrase foreign loan and/or obligation.

However, insights into the same can be gleaned from what the Cambridge Dictionary states on that issue: dictionary.cambridge.org defines a foreign loan as a loan to, or from, a Government or an organisation in another country. The Longman Business Dictionary defines foreign loan as a loan to a country or organisation made by a foreign Government or financial institution.

It is evident, from the definitions which have been examined, that, the loan which the respondent advanced to the applicant does not fall under the definition of a foreign loan. Nor can the obligation which arises from the contract of the parties be classified/defined as a foreign obligation to the applicant. The loan has all the characteristics of a domestic loan which falls under the ambit of the provisions of the Act.”

The court found, at p9:

“The loan cannot, by any stretch of imagination, be defined as a foreign loan. It is, to all intents and purposes, a local loan which is classified as such because of the characteristics which are apparent on its face. It is, accordingly, properly covered under the provisions of the Act.”

THIS APPEAL

The appellant was aggrieved by the court a quo's decision granting the declaratur sought by the respondent and it filed this appeal on the following grounds:

“1. The court a quo erred and misdirected itself in not giving effect to the parties agreement, namely, that, all repayments would be made in United States Dollars. Consequently, the court a quo made a contract on the parties behalf;

2. The court a quo erred and misdirected itself in not finding that the parties loan agreement was a foreign obligation within the contemplation of section 21(2)(b) of the Finance (No.2) Act 2019 and therefore continued to be payable in foreign currency.”

The appellant prayed for the success of his appeal and for the setting aside of the decision of the court a quo and the substitution thereof with an order dismissing the application with costs.

Counsel for the appellant submitted, that, the issue arising from the appellant's second ground of appeal is dispositive of this matter; the narrow issue being whether the court a quo was correct in finding that the loan agreement was not a foreign loan, within the contemplation of section 21(2)(b) of the Finance (No.2) Act of 2019, that continued to be payable in foreign currency.

It was his submission, that, the first ground of appeal will either be upheld or fall away depending on the finding thus made regarding the nature of the loan agreement. If it is a foreign loan, the first ground of appeal must succeed, but if not, then the first ground falls away, so he contended.

Counsel sought to buttress the appellant's stance, that the loan is a foreign obligation, by submitting that the loan in casu was issued on the strength of exchange control approval given by the Reserve Bank of Zimbabwe. He referred the court to a document at p65 of the record.

It is a letter dated 2 August 2019 authored by the Deputy Director, Foreign Investment, at the Reserve Bank of Zimbabwe and addressed to the Managing Director of the appellant. The body of the letter reads:

“Thank you for your letter dated 09 July 2019 regarding the request to continue issuing diaspora mortgages in foreign currency. We wish to advise that Homelink (Pvt) Ltd can continue to issue mortgages denominated in foreign currency to diaspora clients as authorised under Exchange Control authority GR4268 dated 26 October 2016.”…,.

To his credit, counsel readily conceded that the appellant's failure to attach to its papers the authority referred to as GR4268 placed the court a quo, and, by extension, this Court, in an invidious position as its contents are and remain unknown.

Counsel argued, that, the court a quo ought to have accepted and adopted a wider and more generous definition of a foreign loan or foreign obligation and that if it had done so, it would have found that the loan agreement in casu was a foreign obligation on the part of the respondent and that it therefore continued to be payable in United States dollars.

It was also counsel's submission, that, the disbursement of the loan in local currency was immaterial to the determination of the dispute as that was in accordance with the dictates of the agreement which clearly stipulated that repayments were to be made in United States dollars.

He placed reliance for this submission on the case of Magodora & Ors v Care International Zimbabwe 2014 (1) ZLR 397…, SC24-14 where this Court held that:

“In principle, it is not open to the courts to rewrite a contract entered into between the parties or to excuse any of them from the consequences of the contract that they have freely and voluntarily accepted, even if they are shown to be onerous or oppressive. This is so as a matter of policy.”

Counsel for the respondent, on the other hand, submitted that the appellant's second ground of appeal relates to findings of fact and the conclusion made by the court a quo that the loan was a domestic loan. That being so, the principle relating to appellate courts not lightly upsetting findings of fact by lower courts applies.

Counsel submitted, that, the factual findings made by the court a quo were based on and supported by the evidence that was placed before the court.

He further submitted, that, on an application of the definitions that the court a quo had regard to and applied to the facts, one of the parties to the contract had to be a foreigner, and, in casu, neither of the parties was a foreigner.

Although the respondent was working in Ethiopia, the mere fact of him coming home to enter into the contract showed that it was a domestic loan. Furthermore, the respondent's domicilium citandi et executandi did not change his Zimbabwean domicile.

He further submitted, that, the agreement having been signed in Harare, Zimbabwe, by a Zimbabwean national and a Zimbabwean moneylender, for the sole purpose of the purchase of an immovable property in Zimbabwe, the loan was undoubtedly not a foreign loan.

Counsel argued, that, the disbursement of the greater part of the loan in RTGS dollars was another telling factor, further justifying and fortifying the court a quo's findings.

He submitted, that, there was thus nothing to warrant a finding by this Court that the court a quo's findings were irrational and therefore called for interference.

Regarding the appellant's first ground of appeal relating to sanctity of contract, counsel submitted, that, by enacting section 22(1)(d) of the Finance (No.2) Act, Parliament abrogated the said common law principle.

For convenience, the provision is reproduced hereunder:

“That, for accounting and other purposes (including the discharge of financial or contractual obligations), all assets and liabilities that were, immediately before the first effective date, valued and expressed in United States dollars (other than assets and liabilities referred to in section 44C(2) of the principal Act), shall, on the first effective date, be deemed to be values in RTGS dollars at a rate of one-to-one to the United States dollar.”

ISSUE FOR DETERMINATION

The issue for determination by this Court is whether or not the loan agreement entered into by and between the parties is a foreign loan which gave rise to a foreign obligation payable in foreign currency by the respondent.

This stated issue is dispositive of the appeal. This is so because, as rightly pointed out by the court a quo at pp10-11 of its judgment:

“Where the law speaks in clear and unambiguous terms about the substance of any matter, the intention of the Legislature should be respected as well as given respect to. That intention takes precedence over the parties intention as expressed in their contract.”

Section 4 of S.I. 33/2019 provides in relevant part:

“4(1) For the purposes of section 44C of the principal Act, as inserted by these regulations, the Minister shall be deemed to have prescribed the following with effect from the date of promulgation of these regulations (“the effective date”) –

(a)…,.

(b) That, Real Time Gross Settlement system balances expressed in the United States dollar (other than those referred to in section 44C of the principal Act) immediately before the effective date, shall, from the effective date, be deemed to be opening balances in RTGS dollar at par with the United States dollar; and

(c)…,.

(d) That, for accounting and other purposes, all assets and liabilities that were, immediately before the effective date, valued and expressed in United States dollars (other than assets and liabilities referred to in section 44C(2) of the principal Act), shall, on and after the effective date, be deemed to be values in RTGS dollars at a rate of one-to-one to the United States dollar.”

The provisions in section 4(1)(d) of SI 33/2019 (supra) were incorporated in the Finance (No.2) Act 2019, section 22(1)(d) of which provides:

“(1) Subject to section 5, for the purposes of section 44C of the principal Act, the Minister shall be deemed to have prescribed the following with effect from the first effective date -

…,.

(d) That, for accounting and other purposes (including the discharge of financial or contractual obligations), all assets and liabilities that were, immediately before the first effective date, valued and expressed in United states dollars (other than assets and liabilities referred to in section 44C(2) of the principal Act) shall, on the first effective date, be deemed to be values in RTGS dollars at a rate of one-to-one to the United States dollar.”…,.

The Finance (No.2) Act 2019 further provides, in section 22(4)(a), that:

“(4) For the purposes of this section -

(a) It is declared for the avoidance of doubt, that, financial or contractual obligations concluded or incurred before the first effective date, that were valued and expressed in United states dollars (other than assets and liabilities referred to in section 44C(2) of the principal Act), shall, on the first effective date, be deemed to be values in RTGS dollars at a rate of one to one to the United States dollar.”…,.

The appellant contends, that, by virtue of the provisions of section 44C(2)(b) of the principal Act, the respective assets and liabilities of the parties in casu are excluded from the effects of section 4(1)(d) of SI 33 of 2019.

Section 44C(2) of the principal Act (the Reserve Bank of Zimbabwe Act [Chapter 22:15] provides as follows:

“(2) For the avoidance of doubt, it is declared that the issuance of any electronic currency shall not affect or apply in respect of -

(a) Funds held in Nostro foreign currency accounts, which shall continue to be designated in such foreign currencies; and

(b) Foreign loans and foreign obligations in any foreign currency, which shall continue to be payable in such foreign currency.”

In Zambezi Gas Zimbabwe (Pvt) Ltd v N.R. Barber (Pvt) Ltd & Anor SC03-20 (Zambezi Gas), at p9, this Court concluded:

“In interpreting section 4(1)(d), regard should be had to assets and liabilities which existed immediately before the effective date of the promulgation of S.I.33/19. The value of the assets and liabilities should have been expressed in United States dollars immediately before 22 February 2019 for the provisions of section 4(1)(d) of SI33/19 to apply to them.

Section 4(1)(d) of S.I. 33/19 would not apply to assets and liabilities, the values of which were expressed in any foreign currency other than the United States dollar immediately before the effective date….,.

It is the assessment and expression of the value of assets and liabilities in United States dollars that matters.

Section 4(1)(d) of SI 33/19 is specific as to the type of assets and liabilities that are excluded from the reach of its provisions. The origin of the liabilities is not a criterion for exclusion….,.

What brings the asset or liability within the provisions of the statute is the fact that its value was expressed in United States dollars immediately before the effective date and did not fall within the class of assets and liabilities referred to in section 44C(2) of the Reserve Bank of Zimbabwe Act [Chapter 22:15] (“the principal Act)….,.”

It is without doubt, that, Zambezi Gas Zimbabwe (Pvt) Ltd v N R Barber (Pvt) Ltd & Anor SC03-20, having interpreted and clarified the law, the appellant can only succeed in this appeal if it can show, that, the loan agreement in casu is a foreign loan and that the court a quo therefore erred and misdirected itself in coming to a contrary conclusion.

The inescapable facts that the court a quo properly paid regard to are that the lender and the borrower in the loan agreement were both Zimbabweans, albeit an institution and an individual; the loan agreement was executed in Zimbabwe; the sole purpose of the loan was the purchase of an immovable property situated in Zimbabwe; the loan was largely disbursed in local currency, except for a small portion that was disbursed earlier in United States dollars at a time when the United States dollar was one of the legal tender currencies.

Sight is not lost to the fact, that, the above are factual findings made by the court a quo.

No irrationality was alleged or shown in the making of such findings. No specifics were provided as to the nature and source of the “generous” or 'wider' definition of “foreign loan” or 'foreign obligation' that the court a quo is criticised for not having had regard to.

The contention, that, the exchange control approval that was given by the Reserve Bank of Zimbabwe (RBZ) was proof that this was a foreign loan was not supported by documentary evidence. No explanation was proffered as to why the alleged document, which does not form part of the papers, was not relied on and availed by the appellant.

In any case, it is beyond the scope of the Reserve Bank of Zimbabwe (RBZ) to convert what is factually a domestic loan into a foreign loan.

In view of the strenuous submissions made in urging this Court to consider this aspect favourably for the appellant, this would appear to be an omission by the appellant of a crucial document.

It is trite, that, a court decides a matter on the basis of the evidence that is placed before it.

It therefore follows, that, the court a quo cannot be faulted for failing to take into account evidence that was not placed before it. The court a quo would face severe criticism if it had done so.

The court thus correctly found, that, the loan agreement was not a foreign loan and did not create a foreign obligation on the respondent's part.

In Breastplate Service (Private) Limited v Cambria Africa PLC SC66-20, at pp9-10, this Court stated:

“Section 44(C)(2)(b) of the Reserve Bank Act, as inserted by section 3(1) of the 2019 Regulations, makes it clear that the issuance of any electronic currency, i.e. RTGS dollars, shall not affect or apply to any foreign obligation. This is reinforced by section 4(1)(d) of the Regulations which explicitly excludes foreign obligations valued and expressed in United States dollars from the deemed parity valuation in RTGS dollars.”

With the factual finding made a quo, that, the loan agreement was not a foreign loan which created a foreign obligation, and the appellant having failed to show the error or misdirection therein, the appellant must accept and submit to the clear dictates of the law.

No basis having been established for this Court to upset the court a quo's findings and consequent conclusion, it is our view that this appeal has no merit.

The emphasis on motivating the appellant's second ground of appeal, and the submission that the first ground would only become relevant if the appellant succeeded on the second ground of appeal effectively translates to the above discourse sealing the appellant's fate.

Notably, it would also be absurd for the appellant to be paid United States dollars for a loan that it largely disbursed in local currency.

The argument that it must be so because the loan agreement stipulated that repayments were to be in United States dollars is a roundabout way of surreptitiously resorting to the first ground of appeal which the appellant clearly realized did not stand scrutiny.

Costs will follow the cause.

We are not satisfied that they should be on the scale of legal practitioner and client as urged by the respondent. In our view, there is no legal basis that has been given that would warrant an award of costs on a higher scale.

It is accordingly ordered as follows:

The appeal be and is hereby dismissed with costs.

SC43-22 : LEGACY HOSPITALITY MANAGEMENT SERVICES LIMITED vs AFRICAN SUN LIMITED and HON. JUSTICE MTSHIYA (RTD) N.O.
Ruled By: MAKONI JA, MATHONSI JA and MWAYERA JA

This is an appeal against the entire judgment of the High Court dismissing an application to set aside an arbitral award in terms of Article 34 of the Arbitration Act [Chapter 7:15] and registering the award instead.FACTUAL BACKGROUNDThe appellant is a non-resident company in the business of hospitality management providing ...

FACTUAL BACKGROUND

The appellant is a non-resident company in the business of hospitality management providing hotel management services. The first respondent is a resident Zimbabwean company that leases hotels and lodges in Zimbabwe and is listed on the Zimbabwe Stock Exchange.

Sometime in 2015, the first respondent decided to outsource the management of some of its premium hotels and selected the appellant to manage its hotels.

On or about 18 September 2015, the parties entered into a management agreement (“the agreement”) to regulate their business relationship in terms of which the appellant was to render management services to the first respondent's hotels. The agreement was amended and re-signed on 10 October 2015.

Thereafter, the agreed services were delivered by the appellant.

Subsequently, about three years later, on or about 13 September 2018, the first respondent purported to terminate the agreement between the parties on the basis that the Reserve Bank of Zimbabwe (RBZ), as the Exchange Control Authority, had refused to accommodate the first respondent's continued position of incurring the obligation to pay fees in foreign currency to the appellant in terms of the agreement.

In addition to the Reserve Bank of Zimbabwe's refusal to countenance the obligation for payment of fees by the first respondent, the first respondent also sought to terminate the agreement on the basis that the appellant had refused to re-negotiate the terms and rates of payment in order to bring the parties agreement in conformity with the Reserve Bank of Zimbabwe's Exchange Control Regulations.

The first respondent indicated that it was unable to pay outside the Reserve Bank of Zimbabwe's directives, as it deemed that this would be illegal.

Further, the first respondent averred that the fact that the Reserve Bank of Zimbabwe refused to countenance the continued accrual of the foreign currency obligation made the fulfilment of its contractual obligation permanently impossible to perform.

The respondent averred that the impossibility to perform was through no fault of either party, but that a supervening impossibility barred the parties from performing the terms of the agreement.

The appellant was not amenable to the termination of the agreement and disputed the lawfulness of the termination by the respondent.

Dissatisfied with the purported termination by the first respondent, a dispute arose and the parties referred the dispute to the second respondent for arbitration.

PROCEEDINGS BEFORE THE ARBITRATOR

In its claim before the second respondent (the arbitrator) the appellant contended, that, the first respondent had unlawfully terminated the agreement as it should have given the appellant notice of the force majeure in terms of clause 25.12.3 of the agreement.

It averred, that, after being given notice of termination, only the appellant was entitled to terminate the agreement and not the first respondent, since it was the one alleging failure to perform due to the Reserve Bank of Zimbabwe directives.

The appellant claimed, before the arbitrator, that the termination was unlawful and invalid.

The appellant further claimed, that, there was no supervening impossibility warranting the purported termination of the agreement.

The appellant, in summary, sought an order in the following terms;

1. The purported termination was invalid and improper and should be set aside for non-compliance with the parties agreement.

2. There was no supervening impossibility, as refusal of authority to pay by the Reserve Bank of Zimbabwe (RBZ) only amounted to delay in payment, which did not excuse non-performance.

The second respondent found in favour of the first respondent.

His finding was based on the fact, that, the lack of approval of the agreement from the Reserve Bank of Zimbabwe (RBZ) signified the existence of force majeure. He stated that it was unlawful for two parties to enter into an agreement without the authority of the RBZ in terms of the Exchange Control Act [Chapter 22:05]. The resultant force majeure was detrimental to both parties, and, as such, the first respondent was equally entitled to withdraw from the agreement by operation of the law.

He issued an award in favour of the first respondent, effectively dismissing the appellant's claim.

PROCEEDINGS IN THE COURT A QUO

The appellant, dissatisfied with the arbitral award, approached the High Court in terms of Article 34(2)(b)(ii) of the Arbitration Act seeking to have it set aside.

The appellant averred, that, the award issued by the second respondent was contrary to public policy.

It was illogical as it was in conflict with substantive Contract Law and it abrogated the tenets of the pacta sunt servanda principle, which recognises the sanctity of contract and provides that once a contract is entered into freely and voluntarily it becomes sacrosanct and the courts should enforce it.

The appellant insisted that the agreement was lawful, and, therefore, the purported termination by the first respondent was invalid.

The first respondent, in turn, opposed the application and also made a counter application for the registration of the award.

The court a quo found that the award was not so illogical as to offend public policy, as the parties had not obtained the authority of the Reserve Bank of Zimbabwe, a pre-requisite in terms of the Exchange Control Act.

The court a quo reasoned, that, the award could not be said to be contrary to public policy as there was indeed a supervening impossibility since the agreement could not be implemented without the exchange control approval.

It then dismissed the application for the setting aside of the award and registered it instead.

Aggrieved by the finding of the court a quo, the appellant lodged the present appeal on five grounds of appeal.

GROUNDS OF APPEAL

1. The court a quo erred in failing to determine, that, the second respondent's arbitral award abrogated the pacta sunt servanda principle. The second respondent's award is inimical to public policy in that it irregularly excuses the first respondent from complying with express provisions of the contract relating to force majeure.

2. The court a quo erred in failing to hold, that, the second respondent's arbitral award went far beyond mere faultiness or incorrectness. The Reserve Bank of Zimbabwe had no ability to cause nor call for cancellation of the contract inter partes. Consequently, the court a quo ought to have found offence in the second respondent concluding that the Reserve Bank's suggestion that parties renegotiate their contract actuated force majeure.

3. The court a quo grossly misdirected itself in failing to find, that, the second respondent's adjudication was palpably anomalous in that it was predicated on non-existent datum such as the finding that the appellant had refused to negotiate with the first respondent. Any decision born of non-existent facts is inimical to logic and thereby impairs the conception of justice.

4. The court a quo also erred in failing to hold, that, the arbitral award offended acceptable moral standards and what fair minded persons would consider just. In conflating the Exchange Control approval of the agreement by the Reserve Bank, and the approval of payment, the court a quo erred in law and rewrote the contract between the parties.

5. The court a quo also ignores, that, in the circumstances, the second respondent's arbitral award is not only anomalous at law but goes on to actuate a sense of shock for a society in the midst of trying to court foreign investment in the ilk of the appellant. The registration of an award that negates what the parties agree in a contract eviscerates current law on exchange control and occasion dis-investment in the country is contrary to public policy and must be set aside.

ISSUES FOR DETERMINATION

Although there are five grounds of appeal, there are only two issues for determination, namely;

1. Whether the court a quo erred in not setting aside the award; and

2. Whether or not the court a quo erred in registering the award.

SUBMISSIONS ON APPEAL

Counsel for the appellant submitted, that, the court a quo erred in registering the arbitral award which was not only illogical but contrary to public policy. He argued that the termination of the agreement by the first respondent was unlawful and invalid. He further asserted, that, even if it was to be assumed that the first respondent was entitled to terminate the agreement, the termination was unlawful for want of giving notice.

He contended, that, in terms of clause 25.12.3 of the agreement, the respondent ought to have first given the appellant notice of the force majeure before terminating.

After such notice, it was the appellant who was entitled to terminate the agreement, and not the first respondent, as it was the one alleging failure to perform due to the Reserve Bank of Zimbabwe's directive.

He further submitted, that, there was no force majeure, contending that the termination was unlawful, and, as such, the arbitral award ought to be vacated.

Per contra, counsel for the first respondent submitted, that, the termination of the agreement was above board and was lawfully done.

He submitted, that, the agreement was registered with the Reserve Bank of Zimbabwe (RBZ) for one year, from 8 January 2016 to 7 January 2017. The yearly contract was not thereafter extended as the RBZ stated that the management fees had to be reviewed before the agreement could be renewed. He contended, that, the fact that the RBZ did not grant the relevant authority amounted to a supervening impossibility which had the effect of terminating the agreement.

It was further submitted, that, the respondent could not incur obligations to make a payment outside Zimbabwe without the Reserve Bank of Zimbabwe's authority in terms of clause 11(1)(b) of the Exchange Control Regulations, and, that without authority from the RBZ, the contract became not only unenforceable, but illegal.

He submitted, that, the respondent conducted itself in accordance with the suspensive condition clause and the force majeure clause.

Counsel argued that the court a quo properly registered the arbitral award which was not contrary to public policy. He urged the court to dismiss the appeal with costs.

THE LAW

Article 34 of the Model Law (Schedule to the Arbitration Act [Chapter 7:15]) prescribes the procedure for setting aside an arbitral award and the substantive grounds upon which it may be set aside by the High Court.

In terms of Article 34(2)(b) of the Model Law:

“An arbitral award may be set aside by the High Court only, if it finds that the subject matter or dispute is not capable of settlement by arbitration under the law of this country or the award is in conflict with public policy of Zimbabwe.”

Article 34(5) of the Model Law goes further to set out what would ordinarily be regarded as being contrary to public policy. It states:

“For the avoidance of doubt, and without limiting the generality of paragraph (2)(b)(ii) of this article, it is declared that an award is in conflict with public policy of Zimbabwe if:

(a) The making of the award was induced or affected by fraud or corruption; or

(b) A breach of the rules of natural justice occurred in connection with the making of the award.”

These provisions were considered in Zimbabwe Electricity Supply Authority v Maposa 1999 (2) ZLR 452 (S) where the Court set out the approach to be adopted when considering whether an award is contrary to public policy.

GUBBAY CJ, at 465D, made the following remarks:

“In my opinion, the approach to be adopted is to construe the public policy defence, as being applicable to either a foreign or domestic award, restrictively, in order to preserve and recognise the basic objective of finality in all arbitrations, and to hold such defence applicable only if some fundamental principle of the law or morality or justice is violated.”

He further stated, at 466E-H:

“An award will not be contrary to public policy merely because the reasoning or conclusions of the arbitrator are wrong in fact or law. In such a situation, the court would not be justified in setting the award aside.

Under Article 34 or 36, the court does not exercise an appeal power and either uphold or set aside or decline to recognise and enforce an award by having regard to what it considers should have been the correct decision.

Where, however, the reasoning or conclusion in an award goes beyond mere faultiness or incorrectness and constitutes a palpable inequity that is so far reaching and outrageous in its defiance of logic or accepted moral standards that a sensible and fair-minded person would consider that the conception of justice in Zimbabwe would be intolerably hurt by the award, then, it would be contrary to public policy to uphold it.

The same consequence applies where the arbitrator has not applied his mind to the question or has totally misunderstood the issue, and the resultant injustice reaches the point mentioned above.”

Force majeure, which is also known as vis major in contract, means that a superior force has occurred, disabling a party from performing contractual obligations due to a circumstance(s) beyond their control.

A force majeure clause in a contract excuses a party from performing some, or all, of its obligations.

The case of Standard Chartered Bank Zimbabwe Limited v China Shougang International 2013 (2) ZLR 385 (S) is apposite in illustrating what constitutes force majeure.

The Court made reference to the case of Peter Flamman and Company v Kokstad Municipality 1919 AD 427, in which SOLOMON ACJ said;

“Nor is it necessary to consider generally what are the circumstances in which it can be said a contract has become impossible of performance. The authorities are clear, that, if a person is prevented from performing his contract by vis major or casus fortuitus, under which would be included such Act of State as we are concerned with in this appeal, he is discharged from liability.”

See also the case of Firstel Cellular (Pvt) Ltd v Net One Cellular 2015 (1) ZLR 94 (S) in which the Court, when dealing with suspension of contractual obligations on the basis of a vis major or causa fortuitus, held that…,.:

“It is trite that the courts will be astute not to exonerate a party from performing its obligations under a contract that it has voluntarily entered into at arm's length. Thus, the suspension of a contractual obligation by dint of vis major or casus fortuitus can only be allowed in very compelling circumstances.

The courts are enjoined to consider the nature of the contract, the relationship between the parties, the circumstances of the case, and the nature of the alleged impossibility.

See also Watergate (Pvt) Ltd v Commercial Bank of Zimbabwe 2006 (1) ZLR 9 (S) at 14B-F.”…,.

The Latin maxim pacta sunt servanda aptly refers to the sanctity of a contract to the effect, that, a contract freely and voluntarily entered into is sacrosanct and should be given effect by the courts.

In Barkhuizen v Napier 2007 (5) SA 323 (CC) the maxim pacta sunt servanda was succinctly defined as meaning that parties to a contract have freedom to contract and assent to whichever terms they wish to and the court should only intervene and oversee when such contract contravenes another set of legal rights.

In Makani and Ors v Arundel School and Ors CC07-16 the Constitutional Court fluidly, and in clear terms, visited the import of the doctrine of sanctity of contract. It stated the following…,:

“It is trite that a contract concluded in contravention of the written or unwritten law, or one that is contrary to public policy, is susceptible to being struck down and rendered of no force or effect. The doctrine of sanctity of contracts is obviously subject to constitutional limits. As was observed in Bredenkamp and Ors v Standard Bank of South Africa Ltd 2010 (4) SA 468 (SCA) at para 39, every contract or institutional rule must pass Constitutional muster.”

Again, in Barkhuizen v Napier 2007 (5) SA 323 (CC)…, it was emphasised that:

“All law, including common law of contract, is now subject to Constitutional control. The validity of all laws depends on their consistency with provisions of the Constitution and the values that underlie our Constitution. The application of the principle pacta sunt servanda is, therefore, subject to constitutional control.”

APPLICATION OF THE LAW TO THE FACTS

The appellant's main contention is that the arbitral award ought not to have been registered as it was illogical and offends the public policy of Zimbabwe.

To buttress this contention, the appellant relied heavily on the contention that the award goes against the pacta sunt servanda principle which is at the heart of contractual agreements.

In order to determine whether the arbitral award offends public policy, as contended by the appellant and vehemently disputed by the first respondent, due consideration to the agreement entered by the parties ought to be made.

A close look at the contract reveals, that, the parties entered into a management agreement which needed exchange control approval as Legacy Hospitality Management Services Limited is a foreign company. The parties, in due recognition of this legal position, included a suspensive condition in their contract, in clause 5, which provides:

“5.3 This agreement is subject to the following suspensive conditions -

5.31…,.

5.32…,.

5.33 That both parties receive all statutory and regulatory approvals necessary for the legal fulfilment of all requirements attendant to this management agreement.”

The exchange control approval relates to approval to enter into a liability to pay a foreign company which has to be paid in foreign currency.

When the Reserve Bank of Zimbabwe (RBZ) declined to authorize the agreement, in terms of the Exchange Control Regulations, this constituted a supervening impossibility to the performance of the contractual obligations as it would have been unlawful to proceed without the authority of the regulatory Board.

It is apparent from the record that the parties received a year's approval from the Reserve Bank of Zimbabwe. After the lapse of one year, the Reserve Bank of Zimbabwe refused to authorize the agreement and advised the parties to re-negotiate.

The re-negotiation did not work out.

The court a quo's finding was that when the parties entered into the contract, they subjected themselves to fulfilment of statutory and regulatory requirements.

In this case, there was no regulatory authority approval thus termination of the contract was inevitable.

The force majeure affected both parties such that termination, at the instance of either of the parties, without giving notice, was appropriate.

The court a quo, having made a finding that the refusal of the Exchange Control authority to register the agreement fell squarely within a force majeure event, as defined in clause 25.12.1 of the agreement, found no fault in the arbitral award setting aside the contract.

The court a quo's findings in that regard cannot be faulted.

In compliance with guidelines outlined in Article 34(2)(ii) of the Arbitration Act on what constitutes an award that conflicts with public policy, the courts have been scrupulous to interpret that provision narrowly.

In doing so, the courts have been cognisant of the need to protect the principle of sanctity of contract.

The sentiments of MATHONSI J…, in Harare Sports Club v Zimbabwe Cricket HH398-19…, on the need to adopt a narrow interpretation as to what constitutes conflict with public policy, are apposite. He stated:

“…,. After all, it is the parties who voluntarily submit to arbitration as an instrument for speedy and cost-effective means of resolving their disputes. The courts are therefore more inclined to deprecate conduct of a party intent on disrespecting the agreement by undermining the process of arbitration agreed upon by the parties. Fanciful defences against registration of arbitral awards and frivolous applications seeking to set aside an award, by inviting the court to plough through the same dispute which has been resolved by an arbitrator, in the forlorn hope of obtaining a different outcome, will not be entertained.”

See also Zimbabwe Cricket v Harare Sports Club & Anor SC27-22.

It is trite that parties to a contract are bound by the terms of the contract.

If parties contractually agree to arbitration as a means of dispute resolution, then, the court should be loathe to interfere with decisions made by arbitrators.

Intervention is only resorted to if the decision reached is in contravention of the Arbitration Act [Chapter 7:15] and/or is so irregular and illogical to amount to moral turpitude on the part of the arbitrator.

This principle was emphatically enunciated by MALABA DCJ…, in Alliance Insurance v Imperial Plastics (Pvt) Limited & Anor SC30-17 wherein he stated…,.:

“The rationale behind the provision is that voluntary arbitration is a consensual adjudication process which implies that the parties have agreed to accept the award given by the arbitrator, even if it is wrong, as long as the proper procedures are followed. The courts therefore cannot interfere with the arbitral award except on the grounds outlined in Article 34(2). An application brought before the court under this provision is, in essence, a restricted appeal and the applicant should prove the grounds set out in order to succeed in its application.”

The cautionary approach was lucidly enunciated in Peruke Investments (Pvt) Ltd v Willoughby Investments (Pvt) Ltd & Anor 2015 (1) ZLR 491 (S) and also Zimbabwe Electricity Supply Authority v Maposa 1999 (2) ZLR 452 (S).

See also Clark v African Guarantee and Indemnity Co Ltd 1915 CPD 68…, and Tel Cordia Technologies INC v Telkom SA Ltd 2007 (3) SA 266…, where HARMS JA stated as follows:

“Likewise, it is a fallacy to label a wrong interpretation of a contract, a wrong perception or application of South African law, or an incorrect reliance on inadmissible evidence by the arbitrator as a transgression of limits of his power. The power given to the arbitrator was to interpret the agreement, rightly or wrongly; to determine the applicable law, rightly or wrongly; and to determine what evidence was admissible, rightly or wrongly…,. To illustrate, an arbitrator in a 'normal' local arbitration has to apply South African law, but, if he errs in his understanding or application of the local law, the parties have to live with it.”

From the cases cited above, it appears settled that an arbitral award will not be lightly set aside on the basis that a party considers that the decision of the arbitrator is wrong.

The court will not interfere with an award unless the reasoning of the arbitrator constitutes a palpable inequity so outrageous and far reaching in its defiance of logic or acceptable moral standards as to cause a fair-minded person to regard it as hurting all sense of justice and fairness.

Article 34 of the Model Law is certainly not intended for the court to re-assess a dispute on the basis that the appellant views the arbitrator's decision as wrong.

The court a quo's conclusion, that the arbitrator's finding that the parties subjected themselves to a suspensive condition in conformity with the exchange control regulations, cannot be faulted.

The continuity of the management agreement was centred on Reserve Bank of Zimbabwe approval.

When the Reserve Bank of Zimbabwe (RBZ) declined to authorise the obligation to incur a foreign liability, the contract was rendered illegal and incapable of performance, regard being had to the fact that the appellant is a foreign entity.

This constituted a vis major.

It is apparent that the suspensive condition could not be fulfilled and this rendered continuity of the agreement unlawful and impossible.

The sanctity of contract was not in any manner interfered with by the registration of the award by the court a quo.

The fact that the contract was impossible of performance meant that either of the parties was entitled to terminate it on that basis.

The arbitral award registered by the court a quo did not amount to creation of a new contract for the parties, neither did it interfere with freedom and sanctity of contract. Registration of the award actually gave effect to the contract made and entered into by the parties, contrary to the appellant's contention that termination of the agreement fell foul of the maxim pacta sunt servanda, which recognises the sanctity of contract.

The agreement itself was self-regulating as it contained a suspensive condition. Once the authority to register the agreement was not given and/or renewed, the agreement was brought to its knees.

DISPOSITION

Considering the circumstance of this matter and the nature of the agreement between the parties, the second respondent's finding that there was a supervening impossibility and that termination was inevitable cannot be said to be illogical and outrageous.

The arbitral award was not so iniquitous as to violate principles of justice and fairness. It does not at all conflict with public policy, and, as such, was properly registered.

The management agreement was terminated for impossibility to perform. The judgment of the court a quo cannot be faulted in that regard.

The appeal is without merit and stands to be dismissed.

Regarding the issue of costs, there is no reason why the costs should not follow the result.

In the result, it be and is hereby ordered as follows:

The appeal be and is hereby dismissed with costs.

SC50-22 : LONRHO LOGISTICS (PRIVATE) LIMITED vs RAM PETROLEUM (PRIVATE) LIMITED
Ruled By: UCHENA JA, MATHONSI JA and KUDYA JA

Dismayed by the respondent's outright refusal to deliver to it outstanding fuel in terms of an agreement of sale entered into between the parties, the appellant filed a claim for specific performance in the High Court (“the court a quo”).

The appellant sought judgment compelling the respondent to deliver 120,000 litres of diesel purchased from the respondent.

By judgment delivered on 31 March 2021, the court a quo dismissed the claim and issued the following order:

“Accordingly, I order as follows:

1. The plaintiff's claim is dismissed.

2. The contract entered into between the parties, whereby the plaintiff purchased 150,000 lrs of fuel from the defendant, be and is hereby cancelled.

3. The defendant be and is hereby is (sic) ordered to pay the plaintiff the sum of $159,300 representing the plaintiff's partial performance of the contract.

4. The plaintiff be and is hereby ordered to pay the defendant's costs of suit.”

This is an appeal against that whole judgment of the court a quo.

THE FACTS

The background facts are largely common cause.

The appellant is a transporter of note while the respondent is a fuel monger. They have a long standing business relationship whereby the respondent has been supplying the appellant with bulk fuel over the years.

On 1 November 2018, the parties entered into a sale agreement in terms of which the respondent sold and the appellant purchased 150,000 litres of diesel.

On 2 November 2018, the appellant paid the purchase price of $201,000 in terms of the invoice presented to it by the respondent but did not take delivery of the diesel in question. In fact, it was not until 28 November 2018 that the respondent delivered only 30,000 litres of the diesel on the instructions of the appellant.

This left a balance of 120,000 litres of diesel which is the subject of the present litigation involving the parties.

Problems started in January 2019 when three events occurred in quick succession:

(i) First, the Minister of Finance and Economic Development gazetted the Customs and Excise (Tariff) (Amendment) Notice (No.7, 2019) as S.I. 9 of 2019. The Statutory Instrument came into operation on 13 January 2019. It was enacted to amend Part II of the Second Schedule of the Customs and Excise (Tariff) Notice, 2017 which was published in Statutory Instrument 53 of 2017.

(ii) Second, and subsequently to that, the Petroleum (Petroleum Products Pricing) Regulations S.I.10 of 2019 were gazetted. Section 3 thereof made it clear that they applied to “petroleum products prices in relation to wholesaling and retailing activities.” Section 5 provided the formulas that were to be applied by the Zimbabwe Energy Regulatory Authority (“ZERA”) in calculating the price of any petroleum product.

It is significant to note, that, the amount of duty imposed by S.I 10 of 2019 appears to have been equivalent to the amount fixed by S.I 9 of 2019, which, as I have stated, specifically stated that it came into operation on 13 January 2019 without in any way suggesting that it had retrospective effect.

(iii) Third, and obviously in response to the imperatives of the Statutory Instruments referred to above, the Zimbabwe Energy Regulatory Authority (ZERA) issued a directive requiring all oil companies to declare their fuel stocks as of midnight on 12 January 2019. The directive was contained in a circular dated 17 January 2019 which reads in relevant part:

“RE: DECLARATION OF OIL COMPANY FUEL STOCKS AS OF MIDNIGHT 12TH JANUARY 2019

Pursuant to the meeting held at the Ministry of Finance on the 16th January 2019 between Ministry of Energy and Power Development, Ministry of Finance, Zimbabwe Energy Regulatory Authority and Oil Companies, the authority requires that Oil Companies declare the details of the following:

1.0 Stockholding of diesel, petrol and paraffin held by the Oil Company at depot or at NOIC (old duty paid) as of midnight 12th January 2019 before the new pricing (Statutory Instrument 10 of 2019) came into effect.

2.0 Outstanding coupons (yet to be redeemed) as of midnight 12th January 2019, indicating products, category of customers, volumes and value, as well as special conditions attaching to coupons.

Oil Companies are further advised that they are required to pay the difference in duty between the old duty and new duty to ZIMRA on the stock referred to in 1.0 as the fuel will be sold in terms of S.I 10 of 2019.”…,.

Following these developments the appellant moved quickly.

On 24 January 2019, it demanded the immediate delivery of the balance of 120,000 litres of diesel.

The respondent was unmoved.

Citing an increase in duty, the respondent refused to deliver until the appellant paid additional duty on the outstanding diesel.

By email of 24 January 2019, the respondent tabled three options available to the appellant. The respondent wrote:

“…, we wish to provide you with below three options.

1. Lonrho pay the difference of duty amounting to $1=65.

2. Lonrho can draw down at the current price of fuel to exhaust your prepayment with us.

3. RAM Petroleum can refund Lonrho the total amount prepaid.”

The appellant would have none of it.

Calling the respondent's proposal “nonsense” it emotionally put its case across that the Zimbabwe Energy Regulatory Authority (ZERA) directive did not apply to the diesel that had already been sold.

With the battle lines drawn, the appellant enlisted the services of its legal practitioners whose letter of demand to the respondent yielded nothing.

PROCEEDINGS BEFORE THE COURT A QUO

On 7 February 2019, the appellant sued out a summons against the respondent seeking an order directing the respondent to deliver the outstanding diesel.

The claim was contested by the respondent.

In a long winding plea characterized by a number of alternative averments, the respondent pleaded the existence of a tacit term of the agreement that the appellant should have taken delivery within seventy two hours after effecting payment.

In addition, it asserted that section 230(1) of the Customs and Excise Act [Chapter 23:02] constituted an implied term that it was entitled to recover from the appellant any amount by which duty was increased.

Some of the pleas raised by the respondent related to fictional fulfilment of the contract in the sense that it had tendered delivery of the diesel which the appellant refused.

Also, that by failing to accept delivery, the appellant had repudiated the contract thereby entitling the respondent to cancel it and tender the sum of $159,300 being the difference.

Following a full trial, the court a quo found that the contract became perfecta when the parties agreed on the thing sold (the merx), the price (pretium) and showed they had the requisite animus to contract.

It was the court a quo's finding, that, the contract was perfected when the respondent accepted the payment for the 150,000 litres of diesel.

Regarding transfer of ownership of the diesel, the court a quo remarked:

“It is evident to me that in the present matter, transfer of ownership of the fuel in question happened by way of constitutum possessorium without actual delivery of the thing and by means of a mere change in the parties intention regarding animus domini. The change in animus in this matter repeatedly took place each time the plaintiff paid for the fuel and the defendant accepted payment for the fuel. By that exchange, the plaintiff acquired ownership in the fuel, when looking at the facts in the present matter means that ownership of the 150,000 litres transferred to the plaintiff in early November 2018.”

Notwithstanding those findings, the court a quo went on to find that the burden for paying for the increase in duty passed to the appellant.

Further, it found that by failing to accept delivery, the appellant repudiated the contract of sale.

In disposing of the matter, other than dismissing the appellant's claim, the court a quo also granted positive relief to the respondent, namely, the cancellation of the contract and the return of the purchase price paid by the appellant.

PROCEEDINGS BEFORE THIS COURT

The appellant remained aggrieved. It noted this appeal on the following grounds of appeal:

1. Having come to the conclusion, that, the contract between the parties had become perfecta and ownership passed to the appellant, the court a quo erred in not concluding that provisions of Statutory Instrument 10 of 2019 were, on the circumstances of the matter, not engaged in that:

(a) The duty chargeable under and in terms of that Statutory Instrument was not meant to, and did not, affect transactions that had already been concluded.

(b) Respondent did not place before the court any evidence tending to show that it had been required to and had in fact paid additional duties on fuel already purchased by the appellant.

2. The court a quo erred, at any rate, in concluding that the increase of duty on future sales was a risk which the appellant was required to bear by operation of law.

3. Consequently, the court a quo erred in not finding that the respondent had breached the agreement between the parties by reason of its failure to deliver diesel that had been purchased by the appellant.

4. The court a quo seriously misdirected itself on the facts, such misdirection amounting to an error in law in not finding, at any rate, that there was no agreement between the parties on the delivery timelines and that the respondent had, at all times, been prepared to effect delivery of the fuel to the appellant.

5. The court a quo erred in granting the respondent positive relief on the basis of averments made in its plea.

The over-arching issue commending itself for determination from the foregoing grounds is whether the appellant's consignment of diesel was subject to additional duty under SI10 of 2019. Also, whether there were any timelines for the delivery of the diesel, and whether the court a quo erred by granting relief to the respondent.

Counsel for the appellant submitted that S.I.10 of 2019 was not applicable in the circumstances of this case, it having come into effect on 13 January 2019 and not having retrospective effect.

In counsel's view, and for that reason, the directive to oil companies given by the Zimbabwe Energy Regulatory Authority (ZERA) only applied to fuel that was still to be sold and not the fuel, like the 120,000 litres of diesel, that had already been sold.

The fuel that had already been sold could not be subjected to further taxation and did not carry such risk.

Counsel submitted, that, the respondent had no business subjecting the appellant's fuel to the directive issued by the Zimbabwe Energy Regulatory Authority (ZERA).

Regarding the applicability of section 230(1) of the Customs and Excise Act, counsel for the appellant took the view, that, the section was not engaged. There was no evidence, so it was argued, that the respondent had been requested to, and did pay, any additional duty as envisaged by section 230(1) of the Customs and Excise Act.

On repudiation, counsel for the appellant submitted, that, the court a quo's findings were not supported by any evidence at all. There was nothing in the conduct of the parties suggesting that delivery was to be made within 72 hours. Neither was there evidence of any delivery timelines or any tender of delivery.

Per contra, counsel for the respondent contended, that, the appellant's reference to S.I.10 of 2019 was not only a false premise, it was also irrelevant. This is because the additional duty was imposed by SI9 of 2019.

In counsel's view, it was a fallacy that the directive by the Zimbabwe Energy Regulatory Authority (ZERA) imposed a duty on fuel.

Counsel further contended, that, section 230(1) of the Customs and Excise Act constituted a term imposed by law which transferred liability to pay duty onto the appellant.

Finding it difficult to defend most of the findings made by the court a quo, which appeared contradictory, counsel for the respondent submitted that the court a quo arrived at a correct conclusion on wrong reasons.

Given that a party does not appeal against the reasons for judgment, so it was argued, the respondent could not do anything about the situation.

WHETHER THE DIESEL WAS SUBJECT TO ADDITIONAL DUTY

On the evidence presented before the court a quo, including the manner in which the parties conducted themselves, the basis upon which the appellant should pay an additional duty was the directive given by the Zimbabwe Energy Regulatory Authority (ZERA) as read with S.I.10 of 2019, the Petroleum (Petroleum Products Pricing) Regulations.

I mention here, that, the court a quo correctly found that the sale became perfecta at the beginning of November 2018.

In other words, the sale was completed before the Statutory Instrument came into effect.

The question which then arises is whether its application extended to the diesel, which, for all intents and purposes, had been sold and belonged to the appellant.

I have already dealt with the two Statutory Instruments (SI9 of 2019 and SI10 of 2019), their introduction, and purposes. I have also stated that S.I.9 of 2019 expressly provided that it came into effect on 13 January 2019 and that it did not provide for retrospective application.

In statutory interpretation, there is a salutary presumption, as can be gleaned from section 20(1) of the Interpretation Act [Chapter 1:01], that statutes are not to be construed retrospectively.

In fact, the general rule is that, in the absence of express provision to the contrary, statutes should be regarded as affecting future matters only. They should, if possible, be so interpreted as not to take away rights actually vested at the time of their promulgation: see Curtis v Johannesburg Municipality 1906 TS 308…,.

The above proposition has been hallowed by repetition over the years in this jurisdiction: see Nkomo & Anor v Attorney General & Ors 1993 (2) ZLR 422 (S)…,.; and Greatermans Stores (1979) (Pvt) Ltd & Anor v Minister of Public Service, Labour and Social Welfare & Anor 2018 (1) ZLR 335 (CC)…,.

I have no hesitation in concluding, that, the pricing regime introduced in January 2019, not having retrospective application, did not affect the diesel forming the basis of this dispute.

This is so because ownership of it had long passed to the appellant.

The issue however does not end there because the respondent also placed reliance on section 230(1) of the Customs and Excise Act [Chapter 23:02] as bringing the diesel in question under the new pricing regime. The section provides:

“230 Seller under contract may recover any increase and purchaser may deduct any decrease of duty

(1) Whenever any duty is imposed or increased on any goods, and such goods, in pursuance of a contract made before the duty or increased duty becomes payable, are thereafter delivered to and accepted by the purchaser, the seller of the goods may, in the absence of agreement to the contrary, recover from the purchaser, as an addition to the contract price, a sum equal to any amount paid by him reason of the said duty or increase.”

This provision admits of no ambiguity. It must be given its simple grammatical meaning.

In the context of the present case, it raises a number of juridical factors that must be established before its provisions are engaged:

(i) First, there must be a contract entered into before duty was increased.

(ii) Second, duty must have been increased.

(iii) Third, the goods must have been delivered to and accepted by the purchaser after duty was increased.

(iv) Fourth, the seller must have paid the duty thereby entitling him or her to recover a sum equal to the amount so paid by reason of the increase.

In light of the definition of “duty” in section 2 of the Customs and Excise Act as “any duty leviable under this Act or any other law relating to customs and excise and includes surtax” one wonders whether the Petroleum (Petroleum Pricing) Regulations 2018 are a law relating to customs and excise.

They incorporate the component of duty in the pricing formula to be considered by the Zimbabwe Energy Regulatory Authority (ZERA).

The Petroleum (Petroleum Pricing) Regulations 2018 merely ensure just prices of petroleum products and do not levy a duty.

It is the Customs and Excise (Tariff) (Amendment) Notice (No.7) 2019, however, which is a law relating to customs and excise.

This issue was not canvassed with counsel in argument. Accordingly, it will not be engaged any further in the resolution of this appeal.

Let it suffice to say, though, that, the requirements for the application of section 230(1) of the Customs and Excise Act have not been met in this case.

In that regard, I agree with counsel for the appellant that the pre-requisite juridical facts required for the section to be engaged are patently absent.

The respondent did not lead any evidence showing that it paid any additional duty.

In the absence of proof of payment of additional duty, among other things, section 230(1) of the Customs and Excise Act could not be triggered. This is so because it is intended for a seller who has paid additional duty, subsequent to the fixing of the contract price, to recover it from the purchaser.

That the court a quo found delivery as having occurred by constitutum possessorium at the beginning of November 2018, which finding was not contested, was not helpful to the respondent's cause.

If that is so, delivery occurred before the increase in duty, which increase could not affect the transaction within the contemplation of section 230(1) of the Customs and Excise Act.

It follows, that, the consignment of 120,000 litres of diesel was not subject to additional duty. The respondent could not recover any from the appellant.

WHETHER THERE WERE ANY TIMELINES FOR DELIVERY

The court a quo agreed with the respondent that the contract provided for delivery of fuel within 72 hours of payment.

It is difficult to appreciate how such a finding could have been made from the evidence placed before the court.

I need do no more than point to the fact, that, not only was there no reference in the correspondence between the parties to that timeline, there was also a stubborn fact staring the court a quo in the face.

It is, that, the only delivery made by the respondent was of 30,000 litres of diesel. This delivery was effected on 28 November 2018 without demur - some 26 days after payment.

Clearly, there was no evidence pointing to any timelines in delivery.

The court a quo appears to have read into the contract a non-existent term.

It is not open to the courts to rewrite a contract for the parties. Neither is it permissible to read into the parties contract some implied or tacit term that is in direct conflict with the express terms: see Magodora & Ors v Care International Zimbabwe 2014 (1) ZLR 397 (S)…,.

From the contents of the emails between the parties, and the conduct of delivering the first consignment of 30,000 litres 26 days after the contract became “perfecta” it is clear that the parties never set any time-lines for delivery.

The court a quo was clearly wrong in its assessment. The importation of a non-existent term into the parties contract was a gross misdirection.

WHETHER THE COURT A QUO ERRED IN GRANTING POSITIVE RELIEF TO THE RESPONDENT ON THE BASIS OF ITS PLEA

It is curious that the court a quo granted an order in favour of the respondent cancelling the sale and directing the respondent to refund the balance of the purchase price.

That relief was granted on the strength of a plea and nothing more. The respondent had not filed a counter-claim.

The point is made in Indium Investments (Pvt) Ltd v Kingshaven (Pvt) Ltd & Anor 2015 (2) ZLR 40 (S)…, that:

“A plea is a defence, and, as such, can be likened to a shield. It is not a weapon or a sword. No relief can attach to a party through a plea.”

Unfortunately, that is precisely what the court a quo granted in this case.

However just the court a quo may have considered the respondent's tender of the sum of $159,300 to be, it was plainly incompetent for it to ratify it through an unsolicited court order.

Doing so was a gross misdirection.

DISPOSITION

The court a quo made quite a number of errors and grossly erroneous findings of fact which cut against the grain of evidence.

On appeal, this Court is entitled to interfere with those findings: see Barros & Anor v Chimphonda 1999 (1) ZLR 58 (S).

The Statutory Instrument and the Zimbabwe Energy Regulatory Authority (ZERA) directive did not apply to the fuel that had already been purchased by the appellant from the respondent. Section 230(1) of the Customs and Excise Act did not come into effect in respect of the fuel in dispute. Finally, there were no timelines for delivery agreed upon by the parties.

As such, the appellant was still entitled to delivery of the balance of the fuel.

The appeal has merit. It ought to be allowed.

Regarding costs, they normally follow the result. It has not been suggested, and I see no reason why the costs should not be awarded in favour of the successful party.

In the result, it is ordered as follows:

1. The appeal is allowed with costs.

2. The judgment of the court a quo is set aside and substituted with the following:

“(i) Judgment is entered for the plaintiff for the delivery by the defendant of 120,000 litres of diesel within 7 days of this order.

(ii) The defendant shall bear the costs of suit.”

Appealed
SC27-22 : ZIMBABWE CRICKET vs HARARE SPORTS CLUB and ADVOCATE DANIEL TIVADAR (ARBITRATOR)
Ruled By: MALABA CJ, GUVAVA JA and MAVANGIRA JA

This is an appeal against the judgment of the High Court (“the court a quo”) handed down on 5 June 2019 wherein the appellant's application to set aside an arbitral award was dismissed for lack of merit.

After hearing argument from both parties and considering the submissions made, the court dismissed the appeal.

The court indicated that reasons for the decision would follow in due course. These are the reasons.

The background of the dispute is that the first respondent was the registered owner of a sporting complex known as Harare Sports Club, which it leased to the appellant, then known as Zimbabwe Cricket Union, through a Notarial Agreement of Lease (“the lease”) signed on 16 July 1999.

At the time, the Zimbabwe dollar was the official currency in the country.

The rental payable was fixed in that currency at $40,000 per month.

In terms of clause 3(c) of the lease, the rent was to be escalated on an annual basis, at a rate to be agreed between the parties. In terms of clause 20 of the lease, in the event that the parties failed to agree on the rent, the rental was to be determined and set by an independent arbitrator appointed by mutual agreement between the parties.

The decision of the arbitrator was to be final and binding on the parties.

When the multi-currency system was introduced, at the beginning of 2009, the parties failed to agree on the rent chargeable in foreign currency.

The matter was referred to arbitration in terms of clause 3(c) of the lease.

The parties could not agree on the appointment of the arbitrator.

The first respondent made an application to the court a quo seeking an order authorising the Commercial Arbitration Centre to appoint the second respondent as the arbitrator.

The application was made in terms of Article 11(4) of the United Nations Commission on International Trade Law (“the UNCITRAL Model Law”) as set out in the First Schedule to the Arbitration Act [Chapter 7.15] (“the Arbitration Act”).

Article 11(4) of the Model Law recognises the right of the parties to agree on a procedure of appointing an arbitrator but provides, that, should they fail to agree on the procedure to be followed, the arbitrator may be appointed by the High Court upon request of either party.

The appellant opposed the application, arguing that Article 11(4) of the UNCITRAL Model Law empowers the High Court to appoint an arbitrator of its own accord.

The contention was that the High Court had no power to delegate the authority to appoint an arbitrator to another body, such as the Commercial Arbitration Centre.

The appellant also argued, that, the dispute over the appropriate rental for the property was governed by the Commercial Premises (Rent) Regulations, Statutory Instrument No.176 of 1983 (“the Rent Regulations”) and, as such, should be determined by the Commercial Rent Board.

The appellant further argued, that, clause 3(c) of the lease was invalid by virtue of section 29 of the Rent Regulations.

Section 29 of the Rent Regulations provides, that, any agreement by which any party purports to limit his or her or its right to proceed under the Rent Regulations for the determination of a fair rent or the variation thereof is void.

The court a quo was not persuaded by the argument. It was also not persuaded by the argument that it had no authority to delegate the power to appoint an arbitrator to the Commercial Arbitration Centre.

It held, that, the parties were bound by the procedure for the resolution of the dispute arising from the contract they had agreed upon.

The court a quo made the order directing the Commercial Arbitration Centre to appoint the second respondent as the arbitrator in the dispute between the parties.

As a result of the order of the court a quo, the second respondent was appointed the arbitrator in the dispute regarding the rentals.

Having heard the matter, he issued the arbitral award which is the subject of the appeal.

Two applications were made to the court a quo. They were consolidated for purposes of hearing and the determination of the issues raised.

In the first application, the appellant sought the setting aside of the arbitral award in terms of Article 34 of the UNCITRAL Model Law. In the second application the first respondent sought the registration of the award in terms of Article 35 of the UNCITRAL Model Law.

The court a quo was of the view, that, a party to arbitration cannot approach it for review of the arbitral award on the ground that the arbitrator made an incorrect decision. It held that the courts only interfere with an arbitral award where the reasoning or conclusion goes beyond mere faultiness or incorrectness. The courts only interfere with an arbitral award which can be regarded as constituting a palpable inequity, so far-reaching and so outrageous in its defiance of logic or acceptable moral standards as to cause a fair-minded person to regard it as unbearably hurting all sense of justice and fairness.

The court a quo further expressed the view, that, the decision that had been reached by the second respondent was supported by the facts. It held that the second respondent applied his mind to the matter and came to a conclusion which was not contrary to the public policy of Zimbabwe.

The application for setting aside the arbitral award was found to be meritless and dismissed. Consequently, the application for the registration of the arbitral award was granted.

Dissatisfied with the decision of the court a quo, the appellant noted the appeal.

The main argument, on appeal, was that the court a quo misdirected itself in finding that the second respondent's award on the rentals payable was not susceptible to being set aside. It was also argued that the court a quo misdirected itself when it endorsed a formula by the second respondent for rent variation other than the one contemplated by the parties in terms of the lease. The contention was that the second respondent had no authority to determine the issue of rent variation in terms of a formula other than the one contemplated by the parties.

The first respondent argued, that, the decision of the court a quo was un-impeachable because the appellant had not challenged the second respondent's ruling on whether he had jurisdiction to hear the matter. It was also argued that the appellant had failed to meet the required standard for proving that the arbitral award was in conflict with the public policy of Zimbabwe.

The issue for determination was whether the appellant met the requirements of Article 34 of the UNCITRAL Model Law. Article 34 provides as follows:

“Application for setting aside as exclusive recourse against arbitral award

(1) Recourse to a court against an arbitral award may be made only by an application for setting aside in accordance with paragraphs (2) and (3) of this article.

(2) An arbitral award may be set aside by the High Court only if —

(a) The party making the application furnishes proof that —

(i) A party to the arbitration agreement referred to in Article 7 was under some incapacity, or, the said agreement is not valid under the law to which the parties have subjected it, or, failing any indication on that question, under the law of Zimbabwe; or

(ii) The party making the application was not given proper notice of the appointment of an arbitrator of the arbitral proceedings or was otherwise unable to present his case; or

(iii) The award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; or

(iv) The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Model Law from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Model Law; or

(b) The High Court finds, that —

(i) The subject-matter of the dispute is not capable of settlement by arbitration under the law of Zimbabwe; or

(ii) The award is in conflict with the public policy of Zimbabwe.

(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the award, or, if a request had been made under Article 33, from the date on which that request had been disposed of by the arbitral tribunal.

(4) The High Court, when asked to set aside an award, may, where appropriate and so requested by a party, suspend the setting aside proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the arbitral tribunal's opinion will eliminate the grounds for setting aside.

(5) For the avoidance of doubt, and without limiting the generality of paragraph (2)(b)(ii) of this Article, it is declared that an award is in conflict with the public policy of Zimbabwe if —

(a) The making of the award was induced or effected by fraud or corruption; or

(b) A breach of the rules of natural justice occurred in connection with the making of the award.”

The court a quo held, that, the arbitral award could not be found to be in conflict with public policy of Zimbabwe because the second respondent did not escalate the rent in terms of the parties agreement.

In ZESA v Maphosa 1999 (2) ZLR 452 (S)..., it was stated that:

“Under Article 34 or 36, the court does not exercise an appeal power and either uphold or set aside or decline to recognise and enforce an award by having regard to what it considers should have been the correct decision. Where, however, the reasoning or conclusion in an award goes beyond mere faultiness or incorrectness and constitutes a palpable inequity that is so far reaching and outrageous in its defiance of logic or accepted moral standards that a sensible and fair minded person would consider that the conception of justice in Zimbabwe would be intolerably hurt by the award, then, it would be contrary to public policy to uphold it.

The same consequence applies where the arbitrator has not applied his mind to the question or has totally misunderstood the issue, and the resultant injustice reaches the point mentioned above.”

The position is settled, that, a party to arbitration cannot come to court because the arbitrator was wrong.

The allegation in the court a quo was that the second respondent's decision to enforce a clause in the agreement requiring the parties dispute over the escalation of rent to be submitted to the arbitration procedure was a breach of section 29 of the Rent Regulations.

Section 29 of the Commercial Premises (Rent) Regulations, SI176 of 1983 (the Rent Regulations) provides:

“Any agreement by which any person purports to limit his right to proceed under these Regulations for the determination of a fair rent or the variation of such a determination, or to limit or affect any other rights to which he would be entitled under these Regulations, shall be void.”

The court a quo held, that, the Rent Regulations were not applicable because cricket activities did not relate to commercial enterprises.

The order of the court a quo was not appealed against.

The second respondent was therefore bound to perform his duties. The second respondent had the power to act in the manner he did.

View Appeal
HH398-19 : HARARE SPORTS CLUB CASE NO. HC9909/18 and ZIMBABWE CRICKET CASE NO HC10011/18 vs ZIMBABWE CRICKET and HARARE SPORTS CLUB and ARBITRATOR ADVOCATE DANIEL TIVADAR
Ruled By: MATHONSI J

This judgment is a two-in-one.

It disposes of the application in HC9909/18, an application in which Harare Sports Club (the applicant) seeks a registration of an arbitral award issued by an arbitrator and HC10011/18, one in which Zimbabwe Cricket (the respondent) seeks the setting aside of the same arbitral award on the ground that it is contrary to the public policy of Zimbabwe.

Registration of the award is sought by the applicant in terms of Article 35 while the setting aside of the award is sought by the respondent in terms of Article 34 of the Model Law in the Arbitration Act [Chapter 7:15].

The contentious arbitral award was issued in terms of an agreement entered into between the parties on 16 July 1999 supported by an order of this court, per MANGOTA J, handed down on 21 July 2017.

The award itself was delivered on 28 August 2018.

By order of this court, per CHIKOWERO J, granted on 27 March 2019, the two (2) mutually destructive applications were consolidated for set down and determination at the same time.

At the commencement of the hearing, counsel for the parties agreed that upholding one of the applications necessarily brings the other to its knees. In other words, if the court finds that there is no merit in the application to set aside the arbitral award, it should, without further ado, recognize the award and register it for enforcement.

The background is that the applicant is the registered owner of a sporting complex known as Harare Sports Club which it leased to the respondent, then known as Zimbabwe Cricket Union, by Notarial Agreement of Lease signed on 16 July 1999, at a time when the Zimbabwe dollar ruled the roost.

The rental payable was therefore fixed in that currency, at $40,000 per month, and, in terms of clause 3(c) the rent was to be escalated on an annual basis with effect from the agreement's first anniversary at a rate to be agreed between the parties.

In the event of the parties failing to agree, the rent was “to be determined and set by an independent arbitrator appointed by mutual agreement between the parties, whose decision shall be final and binding as between them, based upon any fluctuation in the prime bank rate of interest and the inflation rate prevailing in Zimbabwe at the relevant juncture.”

When the Zimbabwe dollar became moribund, at the beginning of 2009, the parties could not agree on the rent in foreign currency and a dispute arose, which has escalated over the years, resulting in the need to refer the matter to arbitration in terms of clause 3(c) of the agreement.

The parties still could not agree on an arbitrator to resolve the dispute, and, as they bickered endlessly, the applicant brought an application in this court under case no. HC217/17 in which it cited both the respondent and the Commercial Arbitration Centre.

It sought an order authorizing the Commercial Arbitration Centre to appoint an arbitrator to determine the dispute over rent.

The application was made in terms of Article 11(4) of the Model Law which recognizes the right of the parties to agree on a procedure of appointing an arbitrator but provides, that, should they fail to agree, such arbitrator may be appointed by the High Court on request of a party.

The respondent opposed that application arguing, inter alia, that Article 11(4) of the Model Law empowers the High Court itself to appoint an arbitrator and not to delegate the power to appoint to someone else.

The respondent also argued in opposition, that, the dispute over the appropriate rental for the property was governed by the Commercial Rent Regulations and should thus be determined by the Commercial Rent Board.

The respondent further argued, that, clause 3(c) of the parties agreement, which provides for arbitration of a rent dispute, was void by virtue of section 29 of the Commercial Rent Regulations which provides:

“…, any agreement by which any person purports to limit his right to proceed under these Regulations for the determination of a fair rent or the variation of such a determination, or the limit or affect any other rights to which he would be entitled under these Regulations, shall be void.”

The respondent sought to side-foot the imperatives of the agreement it entered into with the applicant and avoid arbitration by hiding behind the Commercial Rent Regulations which would have meant that the dispute would be referred to the Commercial Rent Board.

MANGOTA J, who heard the application, was not persuaded by that argument. Neither was he persuaded by the argument that the High Court could not delegate the power to appoint an arbitrator to the Commercial Arbitration Centre.

In Harare Sports Club v Zimbabwe Cricket & Anor HH471-17 the learned judge upheld the principle of sanctity of contract holding that having crafted for themselves “a clearly defined manner of resolving their disputes” neither of the parties was entitled to renege from the agreement.

On the issue of the power of the court to delegate the authority to appoint an arbitrator, the learned judge ruled that this court has inherent jurisdiction to do so, and, in the exercise of that inherent jurisdiction, he authorized the Commercial Arbitration Centre to do the honours.

It was by virtue of that judgment that Daniel Tivadar was appointed arbitrator, and, having heard the matter, he issued the arbitral award which is the subject of this application.

The case of Harare Sports Club v Zimbabwe Cricket & Anor HH471-17 is significant in two ways:

(i) Firstly, it determined the issue of the arbitrator's jurisdiction to adjudicate over the dispute and clothed him with authority to do so.

(ii) Secondly, it completely resolved the issue of the validity of the arbitration clause, that is, clause 3(c) of the parties agreement, and ruled that it was valid notwithstanding section 29 of the Commercial Rent Regulations....,.

It is significant that the judgment of MANGOTA J in Harare Sports Club v Zimbabwe Cricket & Anor HH471-17 has not been challenged in any way. It has not been appealed and remains extant to this day....,.

The decision to hold the respondent to the terms of the agreement between the parties is grounded in good authority.

Quite often, in their relations, parties agree among themselves, as they conclude agreements, that any dispute arising therefrom be referred to and resolved by arbitration which is an alternative dispute resolution mechanism in terms of which the parties refer their dispute to a third party, the arbitrator, for impartial determination.

Although it does not oust the jurisdiction of the court, it simply compliments the court process; it is an accepted way of dispute resolution and is respected by the courts.

In the words of GOLDSTONE JA in Amalgamated Clothing & Textile Workers Union of South Africa v Veldspun (Pty) Ltd 1994 (1) SA 162 (A)…,.:

“When parties agree to refer a matter to arbitration, unless the submission provides otherwise, they implicitly, if not explicitly (and subject to the limited power of the Supreme Court under section 3(1) of the Arbitration Act), abandon the right to litigate in courts of law and accept that they will be finally bound by the decision of the arbitrator….,.

In my opinion, the courts should, in no way, discourage parties from resorting to arbitration and should deprecate conduct by a party to an arbitration who does not do all in his power to implement the decision of the arbitrator promptly and in good faith.”

See also Brumat Ltd v Multicom Ltd 2000 (1) ZLR 637 (H).

HH471-17 : HARARE SPORTS CLUB vs ZIMBABWE CRICKET and COMMERCIAL ARBITRATION CENTRE
Ruled By: MANGOTA J

The applicant and the first respondent entered into a lessor-lessee relationship respectively. They, on 16 July 1999, signed a notarial agreement of lease [“the lease”].

The applicant let, and the first respondent hired, a certain portion of the property known as Harare Sports Club [“the property”]. This is situated in the District of Harare, formerly Salisbury. The agreed monthly rent for the property was Z$40,000. This was changed to US$170 per month at the introduction of the multiple currency.

The lessee, it was agreed, would pay a pro-rata share of electricity and/or water charges it would have used. The monthly rentals, it was further agreed, would be escalated annually at the parties mutually agreed rate.

The applicant and the first respondent [“the parties”] maintained their lessor-lessee relationship cordially for ten (10) years running. Each, it is assumed, made every effort to remain within the four corners of the lease.

The introduction of the multiple-currency saw the two of them drifting apart.

At the centre of their disagreement was the quantum of rentals which the first respondent was to pay on a month-by-month basis for its lease of the applicant's property.

The applicant's position was that the sum of USD170 was a token monthly rental. It stated that the parties agreed upon that figure whilst discussions for rent which was to be paid for the property remained in progress.

It said the understanding was that the negotiations would enable the parties to strike a balance between them and agree upon a monthly rental which was commensurate with the value of the property.

It submitted that, in April 2015, rent for the property was increased from USD170 to USD3,000 per month. It averred that the stated figure of US$3,000 per month remained way below its expectations of what it considered to be a realistic monthly rental for the property.

The first respondent denied that rent for the property was increased from USD170 to USD3,000 per month. It acknowledged the agreed monthly sum of USD170 and not more than that. It stated that the two of them agreed, as parties, that it would continue to pay USD170 per month.

It averred, that, the rent was deliberately low because the parties agreed between them that the first respondent would be responsible for making all the necessary improvements that would be required on the property from time to time. Such improvements, it said, would accede to the applicant subject to the latter compensating it for the same.

It stated, that, compensation would be by way of set off against rentals in terms of clause 5(c) of the lease.

The parties disagreement on the issue of rent which the first respondent should pay, and ancillary matters, prompted the applicant to file the present application.

It moved the court to authorise the second respondent to appoint an arbitrator to determine its disputes with the first respondent. It filed its application in terms of Article 11 of the Model Law, Schedule (section 2) of the Arbitration Act [Chapter 7:15] (“the Act”).

The first respondent opposed the application.

The second respondent, who was cited for purposes of the applicant's intended order, did not oppose the application.

The first respondent's two in limine matters were that:

(a) The court did not have the power to authorize the second respondent to appoint an arbitrator who would preside over the parties contractual issues; and

(b) Because the parties dispute related to the appropriate rental for the property, the matter should have been referred to the Commercial Rent Board for determination.

It stated, on the merits, that no dispute(s) existed between the applicant and it. It submitted, that, the parties were still negotiating the issue of rent which it was to pay for the property.

It said clause 5(c) of the lease excused it from paying rent.

The clause, it claimed, obliged the applicant to deduct its rentals from the value of the improvements which it made on the property. It indicated that it owed the applicant nothing.

It stated that the necessary measures which Article 11(4) of the Model Law envisaged related to the court appointing the arbitrator. The court, it submitted, could not assign that responsibility to the second respondent.

It, therefore, moved the court to dismiss the application with costs.

The first respondent was not being candid when it stated that no dispute(s) existed between the applicant and it.

The existence of the dispute(s) requires little, if any, debate.

The correspondence which the parties exchanged between them in November 2014 constitutes ample evidence of the existence of the same. It was indeed in some of that correspondence that the first respondent declared the existence of a dispute or disputes between the applicant and it. It even threatened, from as far back as the mentioned period, to exercise its rights in terms of the lease and have the dispute(s) referred to arbitration.

In a letter, Annexure BC3, which it addressed to the applicant's erstwhile legal practitioners on 3 November 2014, the first respondent wrote, on a without prejudice basis, and stated, in part, as follows:

“The dispute between Harare Sports Club (HSC) and Zimbabwe Cricket (ZC) has now degenerated to levels where we require independent intervention. In case you are not aware, let me advise you that this dispute has been going on for some time now.”…,.

In its second letter, Annexure C4, which its legal practitioners wrote to the applicant's legal practitioners on 24 November 2014, the first respondent stated, in part, as follows:

“We have instructions to advise you that our client is not agreeable to the unilateral figure of $10,000 as the monthly rental for the cricket field. It is apparent that this figure was plucked out of thin air without any legal or practical basis. To that end, our client evokes clause 3(c) of the lease agreement and exercises its rights to refer the matter to an independent arbitrator to make a determination….,.

In addition to this, our client disputes yours baseless allegation that it is unable to hold on to financially sustained or viable international or local cricket especially in light of the recent games against South Africa and Australia. Our client questions yours interpretation of clause 21(b)(iii) of the lease agreement and would like to subject your client's view of the breach of that clause to arbitration in terms of clause 20(a) of the lease agreement….,.

Furthermore, our client has also been paying Harare Sports Club water, rates, and electricity bills out of charity; but, however, in consideration of your client's present stance and the stand-off between the parties, as well as clause 3(b) of the lease agreement, our client will only pay its prorata share and shall calculate the amounts which were due to be paid by your client and will seek reimbursement of the same.”…,.

The first respondent declared the existence of a dispute from as far back as November 2014.

It was, therefore, naive for it to suggest, as it did, that there was no dispute when the applicant declared the same in the present application.

Its assertion, which was to the effort that there was no dispute because the parties were still negotiating the rent which it should pay for the property, was as misplaced as it was too far fetched.

Parties who, in ernest, commenced discussing the issue of what rent it should pay in 2009 cannot be heard to say that they are still discussing the same subject matter some six or so years later.

It, however, did the honourable thing when it conceded, during the hearing of this application, the existence of the dispute(s) between the applicant and it.

Clause 20(a), and, to some extent, clause 3(c) of the lease spelt out the manner in which disputes which arise between the parties would be resolved.

Clause 3(c) makes reference to the escalation of rentals. It reads, in part, as follows:

“(c) the rentals…, shall be escalated on an annual basis with effect from the first anniversary of the effective date at a rate to be agreed between the parties, in default of which it shall be determined and set by an independent arbitrator appointed by mutual agreement between the parties, whose decision shall be final and binding as between them….,.”…,.

Clause 20(a) of the lease is wider in scope and substance than clause 3(c). It reads, in part, as follows:

“20(a) Save as is otherwise expressly provided in this agreement, should any dispute arise between any of the parties in regard to:

(i) The interpretation of;

(ii) The effect of;

(iii) The parties respective rights or obligations under;

(iv) Breach of;

(v) The termination of; or

(vi) Any matter arising out of the termination of this agreement; that dispute shall be decided by arbitration in the manner set out hereunder:

(b)(i)…,.

(ii)…,.

(iii)…,.

(c) The arbitrator shall be selected by mutual agreement between the parties.

(d)…,.

(e) The parties irrevocably agree that the decision made by the arbitrator shall be final and binding upon them and shall be carried into effect and can be made an order of court or (sic) competent jurisdiction. Such decision shall not be subject to review, appeal, or re-hearing.”…,.

The parties, it is evident, crafted for themselves a clearly defined manner of resolving their dispute(s).

The understanding between them was, and is, that they would mutually agree to appoint an arbitrator who would determine their cause whenever such arose or arises.

It was never their intention, that, when disputes arise, one of them would renege on the agreed position and suggest another way of resolving the same.

The lease which the parties signed is a contract. The parties adherence to its terms and conditions cannot be understated.

A fortiori when, as in casu, the lease is couched in clear and un-ambiguous terms.

The first respondent's suggestion, which was to the effect that the applicant should have taken the dispute(s) between them to the Commercial Rent Board is, on the basis of the principle of sanctity of contract, misplaced.

Sanctity of contract provides, that, once a contract is entered into freely and voluntarily, it becomes sacrosanct and courts should enforce it: see INNOCENT MAJA: The Law of Contract in Zimbabwe…,.

Our legal system pays great respect to the principle of sanctity of contract.

The courts would rather uphold than reject contracts: see Mudoo (Pvt) Ltd v Wallace 1979 (2) SA 957.

The doctrine of sanctity of contract holds in Zimbabwe: see Old Mutual Shared Services (Pvt) Ltd v Shadaya HH15-13.

The principle of sanctity of contract was not the only reason which made the Commercial Rent Board route impossible for the parties to pursue.

The suggested route could not hold for other reasons; chief amongst those reasons were the assertions of the first respondent.

The matters which it raised in its affidavit fell outside the mandate of the Commercial Rent Board. Amongst those matters were the following:

(i) Whether or not clause 5(c) of the lease excused the first respondent from paying rent for its use of the applicant's property;

(ii) Whether or not the Commercial Rent Board could determine matters which pertained to the first respondent's payment of electricity and/or water it used, or uses, for its operations at the property;

(iii) Whether or not rent increased from $170 to $3,000 in April 2015; and

(iv) Whether or not the first respondent owes the applicant $64,119=85 for rentals, electricity, and water charges.

The above matters fall more into the realms of clause 20(a) of the lease than they fall under the provisions of the Commercial Rent Board.

They speak to the interpretation of the lease, breach or otherwise of the same, as well as the parties rights and obligations under the lease. The Commercial Rent Board does not, in my view, contain any provisions by means of which such matters can be resolved.

It cannot, in short, competently deal with the observed matters.

The Commercial Rent Board route, which the first respondent was so pleased to persuade the court to follow, is out of the question.

The lease was a well thought out document. It contained a mechanism for resolving disputes. Its shortcoming was that it failed to provide for all possible eventualities.

It, for instance, remained silent on what would happen where parties failed to mutually agree on a way forward when a dispute such as the present one has arisen. It did not envisage a situation where the parties would fail to mutually agree on the appointment of an arbitrator to resolve their dispute, or, as in casu, their disputes.

The observed shortcoming of the provisions of the lease prompted the applicant to apply as it did.

It moved the court to authorize the second respondent to appoint an arbitrator who would determine the parties disputes. It placed reliance on Article 11(4) of the Arbitration Act [Chapter 7:15] [“the Act”] in the mentioned regard.

The first respondent's position was that the court did not have the power to authorize the second respondent to appoint an arbitrator. It stated that the court can appoint an arbitrator. The power of the court does not, according to it, extend beyond its ability to appoint an arbitrator.

The court established the existence of a dispute, or disputes, between the parties. It also ruled out the Commercial Rent Board route which the first respondent urged it to consider favourably. It remained alive to the fact that:

(a) The parties agreed on a procedure for appointing an arbitrator; and

(b) The procedure in question contained some shortcomings which the parties could not, on their own, cure except through such an application as the present one.

Whether or not the court has the power to authorise the second respondent to appoint an arbitrator for the parties case does, in a large measure, depend on the interpretation which must be placed on the applicable law.

Article 11 of the Arbitration Act makes reference to the appointment of arbitrators. It reads, in part, as follows:

“(1)…,.

(2) The parties are free to agree on a procedure of appointing the arbitrator or arbitrators, subject to the provisions of paragraphs (4) and (5) of this Article.

(3) Failing such agreement -

(a) In an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two arbitrators thus appointed shall appoint the third arbitrator; if a party fails to appoint the arbitrator…, or if two arbitrators fail to agree on the third arbitrator…, the appointment shall be made, upon request of a party, by the High Court;

(b) In an arbitration with a sole arbitrator, if the parties are unable to agree on the arbitrator, he shall be appointed, upon request of a party, by the High Court….,.

4. Where, under an appointment procedure agreed upon by the parties -

(a) A party fails to act as required under such procedure; or

(b)…,.; or

(c)…,.; any party may request the High Court to take the necessary measure, unless, the agreement on the appointment procedure provides other means for securing the appointment.”…,.

A reading of the above cited Article shows, that, the court can only properly act under section 3(a) and (b) of Article 11 of the Arbitration Act. It can do so at the request of the aggrieved party.

The parties case falls under section 4 of Article 11 of the Model Law.

They agreed on an appointment procedure. They incorporated their position in this regard in the lease. The first respondent failed to act under the procedure which the parties defined for themselves.

The court cannot appoint an arbitrator for them. It, in any event, was not requested to do so.

What the applicant moved the court to do was to take the necessary measure.

The court has the power to take that necessary measure. The relevant law, Article 11(4) of the Model Law, confers that power upon it, given the fact that:

(a) The parties disputes cannot remain unresolved for time immemorial;

(b) The first respondent failed to act as is required of it under the procedure which the parties defined for themselves; and

(c) The parties agreement does not provide them with another way of securing the appointment of the arbitrator;

The necessary measure which the law allows the court to take is to authorize the second respondent to appoint the arbitrator who would deal with, and determine, the parties dispute(s).

That, in my view, is the correct interpretation which must be placed on the phrase “any party may request the High Court to take the necessary measure.”

Any interpretation which falls outside the stated one would produce an absurd result.

The law is not crafted to produce absurd results.

The legislature, in its wisdom, could not insert into the Arbitration Act a clause which served no purpose. It remained alive to the inherent jurisdiction of the court. It allowed the court a wide discretion to enable it to deal with such a matter as the present one.

The court can, in the exercise of its inherent jurisdiction, authorize the second respondent to act in line with the applicant's prayer. The law allows it to act as such.

The court has considered all the circumstances of this case. It is satisfied that the applicant proved its case on a balance of probabilities. The application is, therefore, granted as prayed.

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SC04-22 : HOMELINK (PRIVATE) LIMITED vs CLEVER MAPUTSENI
Ruled By: MAVANGIRA JA, UCHENA JA and CHITAKUNYE JA

SC43-22 : LEGACY HOSPITALITY MANAGEMENT SERVICES LIMITED vs AFRICAN SUN LIMITED and HON. JUSTICE MTSHIYA (RTD) N.O.
Ruled By: MAKONI JA, MATHONSI JA and MWAYERA JA

SC50-22 : LONRHO LOGISTICS (PRIVATE) LIMITED vs RAM PETROLEUM (PRIVATE) LIMITED
Ruled By: UCHENA JA, MATHONSI JA and KUDYA JA

Appealed
SC27-22 : ZIMBABWE CRICKET vs HARARE SPORTS CLUB and ADVOCATE DANIEL TIVADAR (ARBITRATOR)
Ruled By: MALABA CJ, GUVAVA JA and MAVANGIRA JA

View Appeal
HH398-19 : HARARE SPORTS CLUB CASE NO. HC9909/18 and ZIMBABWE CRICKET CASE NO HC10011/18 vs ZIMBABWE CRICKET and HARARE SPORTS CLUB and ARBITRATOR ADVOCATE DANIEL TIVADAR
Ruled By: MATHONSI J

HH471-17 : HARARE SPORTS CLUB vs ZIMBABWE CRICKET and COMMERCIAL ARBITRATION CENTRE
Ruled By: MANGOTA J

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Intent or Animus Contrahendi re: Fortuitous or Unforeseen Events

SC04-22 : HOMELINK (PRIVATE) LIMITED vs CLEVER MAPUTSENI Ruled By: MAVANGIRA JA, UCHENA JA and CHITAKUNYE JA

SC43-22 : LEGACY HOSPITALITY MANAGEMENT SERVICES LIMITED vs AFRICAN SUN LIMITED and HON. JUSTICE MTSHIYA (RTD) N.O. Ruled By: MAKONI JA, MATHONSI JA and MWAYERA JA

SC50-22 : LONRHO LOGISTICS (PRIVATE) LIMITED vs RAM PETROLEUM (PRIVATE) LIMITED Ruled By: UCHENA JA, MATHONSI JA and KUDYA JA

Appealed SC27-22 : ZIMBABWE CRICKET vs HARARE SPORTS CLUB and ADVOCATE DANIEL TIVADAR (ARBITRATOR) Ruled By: MALABA CJ, GUVAVA JA and MAVANGIRA JA

View Appeal HH398-19 : HARARE SPORTS CLUB CASE NO. HC9909/18 and ZIMBABWE CRICKET CASE NO HC10011/18 vs ZIMBABWE CRICKET and HARARE SPORTS CLUB and ARBITRATOR ADVOCATE DANIEL TIVADAR Ruled By: MATHONSI J

HH471-17 : HARARE SPORTS CLUB vs ZIMBABWE CRICKET and COMMERCIAL ARBITRATION CENTRE Ruled By: MANGOTA J

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SC04-22 : HOMELINK (PRIVATE) LIMITED vs CLEVER MAPUTSENI
Ruled By: MAVANGIRA JA, UCHENA JA and CHITAKUNYE JA

SC43-22 : LEGACY HOSPITALITY MANAGEMENT SERVICES LIMITED vs AFRICAN SUN LIMITED and HON. JUSTICE MTSHIYA (RTD) N.O.
Ruled By: MAKONI JA, MATHONSI JA and MWAYERA JA

SC50-22 : LONRHO LOGISTICS (PRIVATE) LIMITED vs RAM PETROLEUM (PRIVATE) LIMITED
Ruled By: UCHENA JA, MATHONSI JA and KUDYA JA

Appealed
SC27-22 : ZIMBABWE CRICKET vs HARARE SPORTS CLUB and ADVOCATE DANIEL TIVADAR (ARBITRATOR)
Ruled By: MALABA CJ, GUVAVA JA and MAVANGIRA JA

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HH398-19 : HARARE SPORTS CLUB CASE NO. HC9909/18 and ZIMBABWE CRICKET CASE NO HC10011/18 vs ZIMBABWE CRICKET and HARARE SPORTS CLUB and ARBITRATOR ADVOCATE DANIEL TIVADAR
Ruled By: MATHONSI J

HH471-17 : HARARE SPORTS CLUB vs ZIMBABWE CRICKET and COMMERCIAL ARBITRATION CENTRE
Ruled By: MANGOTA J