This is an appeal against the whole judgment of the High Court
dismissing an application to set aside an arbitral award in terms of
section 34 of the Arbitration Act [Chapter 7:15].
The facts in
this matter are that the first respondent owned a plastic processing
plant which was insured by the appellant under an assets all risk
policy.
On 11 August 2013, a fire occurred on the premises of the
first respondent which destroyed its building. The first respondent
issued a claim with the appellant for the replacement of the building,
stock, and other movables which were covered under the insurance policy.
In
order to assess the damage, the appellant, on behalf of its auditors,
KPMG, requested a list of information from the first respondent.
After the audit, KPMG came up with an assessment of the amount to be paid as compensation.
The audit report was not made available to the first respondent, and a payment was made.
The
first respondent considered that the payment was far below the sum
insured, and proceeded to engage its own auditors, BDO, which came up
with a different computation of the value of stock to be insured.
A
dispute arose between the appellant and the first respondent concerning
the value of the stock, whether the crane was to be considered a
fixture in the building, and whether the electrical connections were
covered by the insurance policy.
In terms of the insurance
policy, any dispute arising in respect of a claim under it should be
referred to arbitration. In other words, the parties, when they signed
the insurance contract, voluntarily submitted to the jurisdiction of an
arbitrator in the event that a dispute arose between them.
The first respondent instituted a claim before an arbitrator, who is the second respondent. It claimed the following:
1.
That, the insurer replaces the insured's crane and/or pay a sum
equivalent to the value of the crane, which could be sourced from
suitable suppliers.
2. That, the forensic report by BDO Audit Firm be adopted and the insurer pays replacement value of stock as per the BDO report.
3.
That, the Bill of Quantities for electricals be prepared by a reputable
contractor appointed by the arbitrator, at the insurer's expense, to
replace the damaged electricals, and the value thereof be paid to the
insured.
4. Reimbursement of all costs incidental to the arbitration, including costs on an attorney/client scale.
The
appellant opposed the claim on the grounds, that, the crane was not
indemnified under the policy, that there was no basis for relying on the
BDO report in respect of the stock, and that the electricals were
already paid for.
The first respondent adduced evidence through
witnesses who testified, that, though the crane was detachable, it
constituted an integral part of the building and therefore was insured.
The appellant's witnesses testified, that, the crane was a detachable
fixture and was not covered by the insurance policy.
The
arbitrator held, that, the crane was part of the building, and, even if
that was not the case, it was covered by the policy because it was a
tangible asset that was owned by the first respondent. He ordered the
appellant to replace the crane or pay the sum equivalent to the value of
the crane.
In respect of the stock, the appellant insisted that
the valuation given by KPMG should be accepted, and that the BDO
valuation should be ignored, because it was done after the settlement of
the claim.
The appellant, however, did not challenge the
admissibility of the BDO report as evidence. It merely challenged the
figures that BDO came up with, and that the audit was conducted at the
instance of the first respondent.
From the evidence adduced by
the parties, the arbitrator observed that the KPMG report was defective
as it omitted some elements in its valuation. He also considered the
fact, that, the appellant did not lead evidence from a member of the
KPMG team which had conducted the audit. He held that the BDO assessment
was more accurate, and ordered the appellant to pay the sum of
$188,815=90 as the balance of the amount paid for stock that was
destroyed. Evidence was also led in respect of the electricals, and the
claim was dismissed. The arbitrator ordered the appellant to pay costs
on a legal practitioner/client scale.
Aggrieved by the arbitral
award, the appellant approached the High Court for an order setting it
aside in terms of Article 34 of the Arbitration Act.
Article 34(2)
of the Arbitration Act provides grounds upon which an arbitral award
may be set aside by the High Court. It states:
“(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 an 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 or 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.”
The
salient feature of the provision is that it prohibits any recourse
against an arbitral award other than in terms of its requirements, and
limits the grounds on which the award can be assailed.
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) of the Arbitration Act.
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.
In this case, the
appellant's grounds for setting aside the arbitral award were that it
contained decisions on matters that went outside the scope of
submissions for arbitration, and also, that, it violates the public
policy of Zimbabwe.
The court a quo considered whether or not the
appellant proved sufficient grounds upon which it could set aside the
arbitral award as the matter before it was not an appeal or a review,
but, that the award could only be set aside in accordance with
Article 34 of the Arbitration Act.
In respect of the first ground
advanced by the appellant, the court a quo found, that, after carefully
considering the papers before it, it was unable to find where the
arbitrator exceeded the terms of reference. The learned judge said, at
p6 of the cyclostyled judgment:
“Clearly, the second respondent was guided by the BDO report in dealing with the value of the stock.
Given
the above, I do not see how a person who accepts the formula suggested
in the BDO report, can then fail to order payment of a specific sum as
replacement value for the stock.”
The second ground advanced by
the appellant was also dismissed after the learned judge made a finding,
that, the award was not “so unreasonable” as to offend the public
policy of Zimbabwe.
The appellant then appealed to the Court on the following grounds:
“1.
Article 34 of the Arbitration Act [Chapter 7:15] is unconstitutional as
it fails to uphold the right to equal protection and benefit of the law
guaranteed in accordance with section 56(1) of the Constitution of
Zimbabwe Amendment (No.20) Act 2013....,.
Before
addressing this question, it is prudent to highlight why the Court was
of the view that the first ground of appeal was improperly before it.
The
ground of appeal, as outlined above, states that Article 34 of the
Arbitration Act is unconstitutional, as it fails to uphold the right to
equal protection and benefit of the law guaranteed in accordance with
section 56(1) of the Constitution of Zimbabwe Amendment (No.20) Act
2013.
The ground of appeal raises a constitutional question which was never before the court a quo.
Counsel
for the appellant persisted with this ground of appeal and urged the
Court to find, that, Article 34 of the Arbitration Act is a violation of
the appellant's rights.
This submission is erroneous.
A
constitutional question cannot be raised as a ground of appeal as it
should arise in the context of proceedings. The Supreme Court is a court
of record and deals with issues that were before the court of first
instance. A constitutional question does not just arise, on appeal,
because it is merely contemplated in the mind of a litigant. It should
be properly raised in the court a quo for the Court to determine it.
The
Court will also state, that, this is a classic display of mala fides by
the appellant, as it is clear, that, having seen that its application,
in terms of the provision, failed; it now seeks an order declaring the
same provision unconstitutional.
It is trite, that, where there
are two courses of action open to a litigant, as the appellant had, to
either challenge the constitutionality of Article 34 of the Arbitration
Act, or apply for the setting aside of the arbitral award, in terms of
that provision, and it unequivocally elected to take one of them, it
cannot turn round afterwards and take the other course of action.
The point was made in S v Marutsi 1990 (2) ZLR 370..., that:
“It
is trite that a litigant cannot be allowed to approbate and reprobate a
step taken in the proceedings. He can only do one or the other, not
both.”
The appellant cannot succeed in adopting a position
contrary to the one it elected on appeal simply because its application
failed in the court a quo.
The ground of appeal was therefore improperly raised as it was not an issue before the court a quo.
