PATEL
J: The
background to this case is as follows. The applicant and 1st
respondent ran a real estate business in partnership for
approximately 2 to 3 years until a dispute arose between them. The
applicant then instituted proceedings in this Court in Case No.
HC2521/05. In order to expedite the resolution of the matter, the
dispute was referred to the 2nd
respondent (the arbitrator) for determination. The arbitrator
delivered his award in January 2007. The applicant now challenges
that award under Article 34(2)(a)(iii) and 34(2)(b)(ii) of the First
Schedule to the Arbitration Act [Chapter
7:15]
(the Model Law).
The
Law
Article
34(2) of the Model Law, in its relevant portions, provides as
follows:
“An
arbitral award may be set aside by the High Court only if —
(a)
the party making the application furnishes proof that—
(i)………………………………………………;
or
(ii)………………………………………………;
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)………………………………………………;
or
(b)
the High Court finds, that —
(i)………………………………………………;
or
(ii)
the award is in conflict with the public policy of Zimbabwe.”
The
circumstances in which an award may be held to be in conflict with
public policy were considered in ZESA
v Maphosa
1999 (2) ZLR 452 (S) at 465-466. It was held, per GUBBAY CJ, that:
“The
substantive effect of an award may also make it contrary to public
policy. For example, an arbitral award which, after a consideration
of the merits of the dispute, endorsed an agreement to break up a
marriage, or the dealing in dangerous drugs or prostitution, on any
view of the concept would be in conflict with the public policy of
Zimbabwe.
What has to be focused upon is
whether the award, be it foreign or domestic, is contrary to the
public policy of Zimbabwe. If it is, then it cannot be sustained no
matter that any foreign forum would be prepared to recognise and
enforce it.
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.
……………………………………………………………………………………………………………………………………………………………………
An award will not be contrary to
public policy merely because the reasoning or conclusions of the
arbitrator are wrong in fact or in 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.”
In
Pamire
& Ors v Dumbutshena NO & Anor
2001 (1) ZLR 123 (H) it was noted that an award of damages for breach
of contract is intended to put the parties in the position they would
have been had the contract been properly performed. Accordingly,
MAKARAU J held that to grant full damages to a party in spite of its
own failure to meet all its obligations under the contract would
violate elementary notions of justice and would thus be contrary to
public policy.
The
Challenged Award
Having
found that the applicant had not brought any assets into the
partnership, the arbitrator proceeded to make his award. In essence,
taking into account the 1st
respondent's material contribution to the partnership, he awarded
the remaining assets of the partnership in a manner that was more
favourable to the 1st
respondent. He also issued specific directions to the liquidator in
drawing up the accounts of the partnership. Each party was ordered to
bear its own costs in connection with the arbitration and each party
was to pay half of the arbitration fee.
Submissions
Mr.
Madya
for the applicant submits that the arbitrator's award must be set
aside for two reasons. Firstly, the arbitrator went beyond the issues
referred to him for determination, as set out in the applicant's
Statement of Claim, in that he proceeded to apportion the assets of
the partnership as between the parties. Secondly, in apportioning the
assets, he acted without the benefit of any valuation of the
partnership assets or partnership accounts or submissions on
apportionment and also disregarded the law of partnership. In so
doing, he acted in a manner that was grossly unreasonable and
therefore contrary to public policy.
Mr.
Mundiye
for the 1st
respondent submits that the dispute between the parties is properly
reflected in the pleadings filed in Case No. HC2521/05. It is the
issues in that case that were referred to the arbitrator, as appears
in a letter dated the 5th
of December 2005 from the 1st
respondent's lawyers to the applicant's lawyers, and as amplified
in the applicant's Statement of Claim and the 1st
respondent's Response thereto. The arbitrator was therefore at
large to resolve the dispute in whatever manner he considered fair,
reasonable and lawful and to apportion the assets of the partnership.
Disposition
The
relief sought by the applicant in Case No. HC2521/05 was an order
dissolving the partnership and an order appointing a liquidator to
realise the assets of the partnership, to liquidate its liabilities,
to prepare a final account and to distribute the net assets of the
partnership. In their letter of the 5th
of December 2005, the 1st
respondent's lawyers proposed a possible settlement of the dispute,
failing which the matter should be referred to arbitration. The
applicant's lawyers responded on the 3rd
of January 2006, rejecting the proposed settlement and agreeing to
the referral of the matter to arbitration by the 2nd
respondent. Thereafter, there was no formal submission by the parties
of the specific issues to be determined by the arbitrator.
Given
this background, I find it difficult to discern how it can be said
that the arbitrator dealt with a dispute not contemplated by or not
falling within the submission to arbitration, or that his award
contained decisions on matters beyond the scope of the submission to
arbitration. In short, I am unable to accept the applicant's
contention that the arbitrator's award went beyond his remit under
the broad submission to arbitration.
Turning
to the substance of the award, it is clear that the essential purpose
of the reference to arbitration was to resolve the dispute between
the parties as to the assets of the partnership and the respective
rights and interests of the parties in those assets upon the
dissolution of the partnership. Therefore, given that the partnership
was not intended to continue but was to be dissolved, the
apportionment of assets at that stage cannot logically be contrary to
the law of partnership. In any event, even assuming the correctness
of the applicant's contention in that regard, I cannot see any
justification for setting the award aside in
casu.
As
the case authorities show, the public policy argument under Article
34(2)(b)(ii) of the Model Law is to be restrictively construed so as
to preserve and recognise the basic objective of finality in the
arbitration process. An award cannot be held to be contrary to public
policy merely because the reasoning or conclusions of the arbitrator
are wrong in fact or in law. Moreover, even if it were to be found
that the arbitrator's decision was erroneous as contended by the
applicant, I am not persuaded that his reasoning or conclusions were
so flawed as to violate some fundamental principle of the law or
morality or justice. In my view, the challenged award does not
constitute 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.
Accordingly,
the applicant has not succeeded in justifying either of the grounds
of challenge that he has mounted in
casu.
In the result, this application is dismissed with costs.
Wintertons,
applicant's legal practitioners
Gill
Godlonton & Gerrans,
1st
respondent's legal practitioners
