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 ...
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.
As shall be seen later, the respondent has not given up on these arguments, which form the main thrust of its challenge to the arbitral award and why it moves that the award be set aside and why it should not are registered for enforcement purposes.
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.
As I have said, the applicant has made an application for the registration of the arbitral award in terms of Article 35 of the Model Law.
The award directs the respondent to pay rent of US$7,500 per month with effect from 28 August 2018 for the Sports Complex; to pay US$88,119=85 together with interest from 6 December 2016; to pay rent of US$3,000 per month from 1 January 2018 to the date of the award; and costs of suit.
In its application for setting aside the award, the respondent states that the arbitral award is against the public policy of Zimbabwe because the arbitrator enforced clause 3(c) of the agreement, which provides for referral of the dispute to arbitration, when that clause is contrary to statute law, namely, section 29 of the Commercial Rent Regulations, which provides that any provision in a lease agreement which limits the rights of the parties in terms of those Regulations shall be void.
Secondly, the arbitrator did not deal with the issue of rent escalation.
As the parties had agreed on an interim rental of US$170 a month, it is that rent which should have been escalated in terms of clause 3(c) of the agreement.
Thirdly, the award unjustly enriches the applicant at the respondent's expense because it came out during the hearing, that, the applicant is renting out a portion of the complex to the Tobacco Industry Cricket Supporters Association for a rental.
Fourthly, the respondent submitted that the arbitrator pitched camp with the applicant because he allowed for expert evidence on what is a fair rent for the complex to be presented which the applicant had not submitted.
I must put the issue of unjust enrichment out of the way straight away.
Counsel for the respondent conceded, that, it is an issue which was not argued before the arbitrator. Counsel for the applicant submitted, that, unjust enrichment is a cause of action which should have been pleaded before the arbitrator. It was not, and, therefore, cannot be relied upon to challenge the award.
I agree.
Raising a defence which was not relied upon before the arbitrator only means that a party is seeking a fresh hearing of the case and not a challenge of the arbitrator's decision - a decision arrived at without consideration of the new defence.
That cannot be allowed. The issue must end there.
