This is an appeal against the whole judgment of the High Court (the court a quo) sitting at Harare, handed down on 9 May 2023, dismissing the first appellant's application for a declaration under case HC5989/19 and granting the first respondent's application to set aside the second respondent's decision to ...
This is an appeal against the whole judgment of the High Court (the court a quo) sitting at Harare, handed down on 9 May 2023, dismissing the first appellant's application for a declaration under case HC5989/19 and granting the first respondent's application to set aside the second respondent's decision to uplift judicial attachment on Stand 654 Pomona Township, under case HC10315/19.
Aggrieved by the decision of the court a quo, the appellants have noted the present appeal.
The Facts
The first respondent obtained an arbitral award against the first appellant in the sum of US$4,800,000 excluding interest. The award was granted on 19 March 2015.
The first appellant appealed the arbitral award, which appeal was dismissed on 11 February 2019.
The award was ultimately registered as an order of the court a quo on 26 June 2019.
A writ of execution was issued by the first respondent leading to the attachment of Stand No.654 Pomona Township held under Deed of Grant No.2884/10 (“the property”).
Thereafter, the first appellant paid the sum of RTGS $4,800,000 as the judgment debt and RTGS $1,078,040=21 as interest thereon.
Following these payments, the second respondent advised the judgment creditors (ie the first respondent) that the debt had been discharged and he was thus proceeding to remove the property from judicial attachment.
He did so through letters to the first respondent dated 21 and 25 November 2019, respectively.
The first respondent protested this move, arguing that the property should not be removed from attachment as the judgment debt had not been extinguished because the amount should be paid at the prevailing inter-bank rate between the US$ and the RTGS, and not at the rate of 1US$ to 1RTGS$.
The second respondent did not heed that advice.
It was then that the first respondent approached the court a quo, under HC10315/19, for an order setting aside the second respondent's decision to remove the property from attachment. It also sought consequential relief.
At the close of submissions, the court a quo found in favour of the first respondent who had sued, under HC10315/19, for the setting aside of the second respondent's decision to remove the property from attachment.
Under HC5989/19 the court a quo dismissed the first appellant's application for a declaration that the judgment debt be extinguished at the rate of 1:1 between the US$ and the RTGS$.
For convenience, the two applications were heard together.
The appellants appeal the decisions of the court a quo on the following grounds:
“GROUNDS OF APPEAL
1. The court a quo erred in failing to hold that the Arbitral Award dated 19 August 2015, granted in favour of the first respondent, constituted a liability affected by the provisions of section 4(1)(d) of Statutory Instrument 33 of 2019 (subsequently section 22 of the Finance Act No.2 of 2019).
2. Concomitantly, the court a quo also erred in determining that the Arbitral Award issued on the 19th of March 2015 only became effectual upon its registration on the 26th of June 2019. At law, an arbitral award constitutes a binding obligation as at the date of its grant and not its registration.
3. With respect, the court a quo also grossly misdirected itself in holding that the first appellant's RTGS payments did not fully discharge its indebtedness to the first respondent in respect of the registered arbitral award dated 19th March 2015. Such payments fully discharged what was lawfully due.
4. The court a quo also erred in determining that the second respondent had acted unlawfully in uplifting the judicial attachment on Stand 654 Pomona held under Deed of Grant 2884/10. The voiding of such uplifting was anomalous at law given that the first appellant had discharged its indebtedness, thereby obviating the continuation of execution.
5. Additionally, the court a quo erred in cancelling 'any and all' transfers effected on Stand 654 Pomona Township in circumstances where the second appellant had received title by operation of an extant Deed of Settlement and court order handed down by the court a quo under HC4528/19.
6. The court a quo also erred in ordering the advertisement and sale in execution of Stand 652 Pomona Township held under Deed of Grant No.2884/10 after the cancellation of all subsequent transfers. Such determination is anomalous, in that, after the aforesaid cancellation of subsequent transfers, the land reverts to being State land, incapable of being sold in execution.”
The appellants seek the following relief:
“1. That, the instant appeal succeeds with costs.
2. That, the order of the court a quo be set aside and be substituted with:
Case No. HC5989/19
(i) The application for a declaration order be and is hereby granted.
(ii) The liability arising from the Arbitral Award dated 19th March 2015, in favour of the first respondent, be and is hereby declared executable in RTGS dollars at the rate of one to one to the United States dollars in accordance with section 4(1)(d) of Statutory Instrument 22 of 2019.
(iii) The first respondent to pay costs of suit.
Case No. HC10315/19
(i) The application is dismissed with costs.”
The grounds of appeal raise only one issue, that is, whether the arbitral award in issue, is subject to the provisions of SI 33 of 2019 in terms of which all assets and obligations denominated in United States dollars immediately before the effective date of 22 February 2019 shall be redeemed at the rate of 1US$ to 1RTGS$.
If that question is answered in the affirmative, then, the appeal should succeed. If not, then, the appeal stands to be dismissed....,.
APPELLANTS SUBMISSIONS IN THIS COURT
It is now trite, that, all assets and liabilities that were denominated in United States dollars immediately before 22 February 2019, must, on or after that date, be valued in RTGS dollars on a one is to one rate. This is the effect of section 4(1)(d) of SI 33 of 2019, and, subsequently, section 22 of the Finance Act No.2 of 2019.
This position was confirmed by MALABA CJ in the seminal case of Zambezi Gas Zimbabwe P/L v N.R. Barber P/L and Anor SC03-20.
The appellants submit, that, the court a quo erred in interpreting the above provisions in that it treated a judgment debt as if it was separate from the definition of “debt”.
It also erred in taking the date of registration of the arbitral award as if it was the date on which the debt came into existence. It failed to appreciate, that, prior to the registration of the award, a debt already existed, as confirmed by the arbitration award of 2015, paving the way for enforcement. This debt arose before 22 February 2019, the effective date under S.I.33 of 2019.
The court a quo also erred in treating an arbitration award as of no force or effect as long as it was not registered. It misunderstood the existence of an award embodying a debt and its enforcement.
The appellants further submitted, that, the law is clear that the registration of an award in the court a quo is purely for purposes of execution through the Sheriff. To that end, the registration of an award, as an order of the court a quo, does not create a new debt nor does it, at law, change the status of the debt.
The appellant relied in this regard on the words of BHUNU JA in the case of Gwanda Rural District Council v Botha SC174-20 wherein he had this to say:
“Before delving into the merits or otherwise of the grounds of appeal, l pause to observe that when presiding over the registration of an arbitral award, the court a quo had very limited jurisdiction. This is mainly because its function was merely to register the arbitral award for purposes of enforcement. To that end, it did not, in the main, exercise its appellate or review jurisdiction.”
Accordingly, argue the appellants, the High Court does not enquire into anything when registering an award. It is merely permitting the applicant access to its enforcement mechanism.
The court a quo was thus in error when it held, that, an arbitral award, dated 19 March 2015, only became effective when it was registered by the court a quo on 26 June 2019 - well after the effective date fixed under Statutory Instrument 33 of 2019.
The appellants reiterate that such registration by the court a quo was for purposes of execution only.
It was because of that error that the court a quo determined, that, the arbitral award was not affected by the provisions of section 4(1)(d) of SI 33/2019, a finding contrary to law.
The appellants further relied on the case of Air Zimbabwe Holdings v Chiweshe and Others 2019 (1) ZLR 311 (S) where GOWORA JA had this to say by way of dicta:
“Once rendered, an arbitral award is binding upon everyone to whom it pertains until set aside.”
In other words, the first appellant's liability to pay arose on the date of issue of the award, that is, on the 19th March 2015 and not on the date of registration in the court a quo.
Reliance was placed on the case of Dudka & Ors v Cheni Investments (Pvt) Ltd 2011 (1) ZLR I where MAKONI J…, remarked that:
“An award takes effect upon its grant. Its execution has no effect on whether it is binding or not. A party can choose to obey an award, such that there would not be need for the award to be registered.”
The court a quo, according to the appellants, was wrong when it held that the first appellant was only obligated to pay the respondent after the arbitral award was registered.
Further, under our law, the registration of an arbitral award does not turn such an award into an order of the High Court. Arbitral awards are registered and enforced as is without being transformed into court judgments: see Thornton v Mckenzie 2006 (2) ZLR 91 (H)…,.
The registration of an arbitral award does not create new obligations, further submitted the appellants.
In Ropa v Reosmart Investments (Pvt) Ltd 2006 (2) ZLR 283 (S)…, the finality of arbitral awards was explained by GWAUNZA JA…, in the following terms:
“In addition to this, I found to be persuasive the submission made by the respondent, that, the effect of the arbitral award is to bring to finality the dispute between the parties.”
At law, therefore, no new rights and entitlements are obtained by the holder of an arbitral award upon recognition and enforcement.
Accordingly, submit the appellants, the registration of the 19 March 2015 arbitral award did not create a new liability or circumstances that allowed it to escape the jaws of section 4(1)(d) of SI 33/19.
The appellants further argue that “the novation upon registration” that the first respondent refers to is erroneous at law. It is that submission that led the court a quo astray.
Counsel for the Sheriff (the second respondent) filed heads of arguments titled:
“SECOND RESPONDENT'S/CROSS APPELLANT'S HEADS OF ARGUMENTS INCORPORATING SECOND RESPONDENT'S HEADS OF ARGUMENTS IN RESPECT OF THE MAIN APPEAL”
Counsel for the Sheriff (second respondent) stated in his heads of arguments, that, the second respondent had been served with the Notice of Appeal filed by the appellants on 12 May 2023. The second respondent filed a cross-appeal in terms of Rule 45(1) as read with Rule 45(2) of the Supreme Court Rules 2018 on 22 May 2023.
The cross appeal is on three critical errors of law and fact made by the court a quo:
(i) Firstly, the court a quo grossly misdirected itself and erred in failing to consider or address, in its judgment, the Sheriff's report which had been filed of record on 23 June 2020, at pages 373-374 of the record. The report was filed in case No. HC10315/19 and bears the full citation of the case.
The second respondent contends, that, it is a valid Sheriff's Report compiled, and filed, in terms of the rules of the court a quo. The report is comprehensive in that it sets out the background of the matter, the steps taken by the Sheriff, and the reasons therefor. It explains how the amount of RTGS4,800,000 had been paid out, and how the property had been transferred to the second appellant. The report is quoted from p8 as follows:
“8. We proceeded to uplift the caveat and transferred the property to Doorest Properties as per court order by Justice Mushore.
9. Our actions led to Messrs Mutumbwa Mugabe Legal Practitioners filing the current application as they believed we failed to execute our mandate properly.
10. It is our belief that the $4,800,000 paid constitutes the judgment debt in full.
11. Our decision to act in the manner we did was informed by the legal position prevailing with regards to execution of court orders denominated in USD dollars, in light of SI 33/2019 and Finance Act 2 of 2019.
12. If our position was wrong, it was because of the lack of clarity with regards to the interpretation of the relevant statutes.
13. The matter was once directed to the Judicial Service, as a complaint, and the position taken was that the Sheriff had not acted improperly.
14. We believe our decision was not irrational. The case arises from different interpretations of available statutory instruments. We are now aware of the Supreme Court judgment which vindicates the position that we took.
15. We pray that no costs are levied against the Sheriff as we believe we acted reasonable in terms of the law.
M. Madhega, Sheriff of the High Court of Zimbabwe, Harare.”
Thus, the Sheriff's report constitutes a full and proper response to the issues raised by the first respondent in the court a quo. It does not, argues the second respondent, in any way constitute disrespect of the court proceedings nor a failure to respond nor is it an improper pleading.
The second respondent asserts, that, the application in the court a quo, under HC10315/19, was, to all intents and purposes, a review of the action taken by the Sheriff. The Sheriff was thus functus officio. The Rules do not require him to file opposing affidavits. He is only required to file a report informing the court as to what he did and the reasons therefore.
In such situations, the Sheriff is not a litigant but an officer of the court, charged with the execution of court orders.
The Sheriff's report having been tendered to the court a quo, in conformity with its Rules, should have been given due regard before the court a quo arrived at its decision. If the court a quo had applied its mind to this report, it would have arrived at a different decision.
That the application before the court a quo was for review of the second respondent's decision is confirmed by the court a quo when it states:
“The applicant in the first instance, Fairclot Investments, seeks a review of the decision of the second respondent, of 21 November 2019, to uplift the judicial attachment of Stand 654 Pomona Township….,.”
The second respondent further argues, that, it is common cause that the Sheriff gave notice to all parties that the judgment debt had been discharged in full, and, for that reason, he was removing the attachment.
Nothing was done clandestinely or maliciously as all concerned were informed beforehand.
In the circumstances, there was no basis for the levying of costs against the Sheriff (which, on its own, is unusual on an officer of the court) let alone on the legal practitioner and client scale.
The court a quo misdirected itself on the facts when it held:
“Given the history of the case, and the manner in which the Sheriff handled the case, refusing to heed the call not to uplift the caveat, when advised that the writ had not been satisfied, the defiance requires a sanction be imposed upon the Sheriff. Most disturbing is the fact, that, despite being cited in an application where costs are claimed on the attorney/client scale, the Sheriff made no effort to defend himself/herself.
Without any submission from the Sheriff as to why costs on a higher scale should not be imposed, the court is left with no option but to accede to the prayer for costs against the Sheriff.”
Clearly, the court a quo, argues the second respondent, did not take into account the contents of the Sheriff's report giving reasons why the court should not levy costs against it. The finding on costs is therefore without basis.
With regards the interpretation of SI 33/2019 as read with the Finance Act 2/2019, the second respondent agreed with the first and second appellants, that, the award granted in March 2015 is payable in RTGS$ at the rate of 1 to 1 with the US$, and, further that the registration of the award in the court a quo was only for purposes of execution. Such registration does not novate or change the status of the arbitral award.
SUBMISSIONS BY THE FIRST RESPONDENT
On the merits, counsel for the first respondent submitted, that, an arbitral award does not become final as long as it is being challenged. He submitted further, that, it does not become final if it has not been recognized (ie registered as an order of the court a quo) or the party against whom it is made has not paid in accordance with its terms.
In other words, although in casu the arbitral award was granted in 2015, it was not final until the challenges brought against it, by the first appellant, had been resolved, and it had been registered by the court a quo.
Reliance was placed in this regard on the provisions of Article 34(4) of the Model Law which provides:
“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.”
For that reason, it is argued, that, for as long a party has challenged an award, finality cannot be achieved. Matters will remain fluid until the award has been finally recognized.
It is further argued, that, Article 36 of the Model Law sets out the grounds upon which the court a quo may decline to register an award. This is a clear sign that the arbitral award is not final until it is registered.
The gravamen of the first respondent's argument is that because of the continued litigation, at the instance of the first appellant, there was still a live dispute between the parties such that the debt could not have been affected by the provisions of SI 33 of 2019.
For this proposition, the first respondent has relied on the cases of Lock v Lock and Another SC127-22 and Lugalulu Investments and Another v National Railways of Zimbabwe SC43-22.
It must be noted, that, these cases dealt with High Court judgments (therefore judgments debts) as opposed to arbitral awards.
The first respondent submits, that, since the award in casu was registered after the effective date, in terms of SI33 of 2019, the award is not affected by the provisions of that statutory instrument. In other words, the debt is payable in United States dollars converted to RTGS at the prevailing bank rate.
The first respondent concedes, that, an arbitral award is not a judgment debt. It submits, however, that once registered as an order of the court a quo it becomes a judgment debt.
ANALYSIS
Both parties have cited authorities tending to show, on behalf of the appellants, that an arbitral award is final upon its grant, and, on behalf of the first respondent, that it is not final until it is registered.
We note that there is no legislative provision that says that the filing of a challenge to an arbitral award suspends the operation of the award.
That being the case, we would agree with counsel for the first and second appellants, that, an arbitral award is effective upon its grant until it is set aside.
In any event, it does not matter when the arbitral award may be regarded as being final. The point is, whether, at the time of ultimate registration in the court a quo, such an award becomes a judgment of the court a quo.
We agree with counsel for the first and second appellants, that, registration of an award in the court a quo does not change the status of the award. The award is registered simply for the purpose of execution. The court a quo, at registration, does not determine the rights and obligations of the parties. These have already been determined by the arbitrator. The court a quo does not, and cannot, determine the matter on the merits.
For that reason, the order for registration does not become a judgment debt because it is not a judgment of the court a quo. The fact that the court a quo may refuse to register an award, on any of the grounds set out under Article 36 of the Model Law, is irrelevant to the issue at hand, namely, whether the registration of an arbitral award transforms it into a judgement debt.
The rights and obligations of the parties were determined by the arbitrator in 2015. The award/debt is fully covered by the provisions of S.I. 33 of 2019 notwithstanding its registration after 22 February 2019 (the effective date).
The position would have been different if proceedings in a court of law had been instituted in 2015 but concluded after the effective date. The order given would be a judgment debt. In such a scenario, the rights and obligations of the parties would have been determined by a court after the effective date, and, therefore, the judgement debt so arising would be payable in Unites States dollars converted to RTGS at the prevailing bank rate.
An arbitral award granted in 2015 cannot assume a similar status merely because it was registered by the court a quo after the effective date.
The court a quo therefore misdirected itself in treating the order for registration of the award as a novation of the arbitral award giving rise to a judgment debt. Having so misdirected itself, it wrongly concluded, that, the debt was not covered by SI 33 of 2019 and disregarded the payment in full in RTGS dollars made by the first appellant.
There is no evidence in the judgment of the court a quo, that, it took into account or noted the Sheriff's report filed of record. There is absolutely no reference to it. If it had had regard to the Sheriff's Report, it would not have issued an order for costs against him on the higher scale, or, indeed any costs at all.
As already indicated, the Sheriff is an officer of the court, not a litigant. He is not required to file opposing papers. His report is sufficient to inform the court, and the parties, as to his actions and the reasons therefor.
We agree that the Sheriff, when in doubt, should seek directions from the court. He should have done so.
As it turns out, however, he was right in his assertion that the debt had been fully discharged in RTGS at the prescribed rate of one is to one to the United States dollar.
For that reason, the order granted against him cannot stand.
In any event, the Sheriff acted in terms of an order granted by MUSHORE J.
