The
applicant seeks an order setting aside the arbitral award made by an
independent arbitrator, Justice A M EBRAHIM, on 4 December 2013, on
the ground that it offends the public policy of Zimbabwe in terms of
Article 34 of the Unicitral Model Law contained in the Arbitral Act
[Chapter
7:15].
The said arbitration was conducted in terms of Clause 11 of the
agreement entered into between the parties which provides:
“Any
dispute arising from the interpretation or implementation of this
agreement shall be forwarded to a mutually agreed arbitrator and the
parties shall submit and bind themselves to the decision of such
arbitrator. In the event that the parties are unable to agree on the
appointment shall be made by Commercial Arbitration Centre in Harare
under the terms and conditions of the Commercial Arbitration Centre
in Harare.”
The
facts leading to the arbitration appear ex-facie
the arbitral award.
The
applicant issued summons against the first respondent in the High
Court in July 2012 claiming the sums of $1,227,557=; $155,534= and
$150,000= together with interest. The first two (2) claims arose out
of the supply of crop inputs for two (2) consecutive seasons, namely,
2010-2011 and 2011-2012 growing seasons in terms of an agreement of
the parties for the production of tobacco. The applicant maintained
that those sums, save for a negligible amount of $9,924= selling
commission, were not repaid. The claim of $150,000= arose as a result
of the applicant standing as surety and co-principal debtor for the
first respondent's faithful performance of its obligations in terms
of a loan agreement it entered into with ZB Bank which the applicant
was obliged to pay as a result of the first respondent's failure to
repay the loan.
When
the first respondent excepted to the High Court action on the basis
that the dispute had to be resolved by arbitration, the parties
agreed to proceed by arbitration. They agreed that the arbitration
deals with both the applicant's claim and the first respondent's
counter-claim, and that the second respondent, who is a Director of
the first respondent, be joined as a party to the arbitration.
The
arbitrator received the parties' respective statements of claim and
took the viva
voce
evidence of the parties' witnesses and on that evidence. He drew
the following conclusion at pages 1-2 of the award:
“In
this matter, most of the facts are established by the pleadings or
the evidence of Mr Muller. The only witness called by the claimants
legal practitioner during the hearing gave evidence which took the
matter no further forward. The claimants' principal representative,
who was the person with whom the second respondent dealt with, was Mr
James Liu. He was said to be unavailable and was not called to give
evidence. This failure to call such an important witness did not
assist the claimants' case.
There
was nothing inherently improbable about Mr Muller's evidence,
though he was a little vague or confused on a few points. I am
satisfied, though, that there was no intent on his part to mislead
me. In so saying, I am not thereby casting Mr Liu in the role of
villain of the piece. Mr Muller himself did not see Mr Liu as a
villain; on the contrary, he found Mr Liu charming and persuasive,
and he felt that Liu wanted the venture to succeed. Whether the fact
that the venture did not succeed was because of dishonesty,
incompetence, circumstances beyond the control of either party, or
just bad luck is not necessary to decide.”
The
arbitrator thoroughly considered the evidence and submissions made by
the parties. He concluded that both claims must fail and dismissed
them.
The
applicant had argued, before the arbitrator, that in March 2009, it
had entered into an agreement with the first respondent in terms of
which it supplied crop inputs for the productions of flue cured
tobacco. Clause 6 of that agreement provided that the applicant was
to supply inputs worth $350,000= to support tobacco production on 70
hectares of land for the 2010 season. For the 2011 season, the
applicant was to supply $320,000= to support tobacco production on 60
hectares of land.
Despite
those agreements, the applicant submitted that for the 2010-2011
planting season it granted a loan in the form of inputs to the first
respondent valued at $132,499= for production of tobacco on 70
hectares of land. Although the first respondent made profit, it only
repaid a sum of $9,924= during that season in breach of the agreement
between the parties. It demanded the balance of $122,575=.
In
respect of the 2011-2012 season, the applicant argued that it
supplied further crop inputs to the first respondent valued at
$155,534=.
Note
that it had committed to supply $320,000= worth of inputs for
production on 60 hectares.
The
applicant asserted that although the first respondent had made a
profit, it had not repaid the loan, in breach of the contract,
thereby entitling the applicant to a payment of $155,534= which was
advanced.
The
applicant's third claim related to a loan obtained by the first
respondent from ZB Bank Limited in March 2010 in which the applicant
was forced to pay to the Bank the sum of $150,000= on 11 November
2011 as it had stood as surety and co-principal debtor for the due
repayment of the loan, the first respondent having failed to honour
its obligations. The dispute over the ZB Bank loan is still pending
in this court.
The
applicant's claim was strongly contested by the respondents who
made the point that the applicant had failed to supply inputs in
terms of the agreement; only succeeding in making sporadic supplies
which came nowhere near the values that had been agreed by the
parties. Although the applicant was clearly in breach, the first
respondent had religiously paid all the sums due until the
applicant's defaults rendered it impossible for it to do so. It
then cancelled the agreement.
Prior
to that, at the instance of the applicant, the first respondent had
been forced to take a loan of $630,000= from ZB Bank Limited to
assist the applicant meet its obligations to it as it was unable to
do so being out of funds.
The
agreement between the parties for the 2010-2011 and part of 2011-2012
seasons had continued in terms of the agreement signed in March 2009
which is why the agreements produced by the applicant had not been
signed.
According
to the respondent, the working capital that should have been supplied
by the applicant for the initial agreement should have been
$350,000=, but, in breach of the agreement, the applicant only
supplied $132,499= inputs. For May 2011, the applicant had agreed to
supply $320,000=. It only supplied $155,534=06 worth of inputs.
The
applicant's failure to provide adequate inputs resulted in lower
yields of tobacco than would have been achieved. The situation was
exacerbated by the applicant's failure to buy the tobacco from the
respondents on time as it had no money. The respondents' bales were
therefore held at Tobacco Sales Floor for extended periods affecting
the quality and weight of the tobacco as the applicant battled to
raise money. When it finally did, the applicant wanted to buy at
ridiculously low prices. At some point, because of its precarious
cash low position, the applicant was constrained to authorise the
respondents to sell their tobacco elsewhere as it simply did not have
the funds.
As
a result of the applicant's flagrant breach of contract, the
respondents suffered heavy losses. They counterclaimed for payment of
the sum of $711,823= representing the loss incurred less the amounts
of the loans claimed by the applicant.
Having
considered the evidence and the submissions made by the parties, the
arbitrator found as proven that the applicant had breached the
agreement. At page 8 of the award, he reasoned as follows:
“It
seems to me that GDI (applicant herein) breached the contract in two
ways. The first is that it did not provide the inputs it said it
would, nor did it provide them timeously. The evidence, both from Mr
Muller and in the Statement of Claim, shows that sums of money were
paid sporadically. They did not total what had been promised, and
they often did not arrive in time to be of real benefit. All in all,
the haphazard way in which the inputs were provided made it
impossible for Willemse Farming to produce the crop it should have.
If
I am wrong in finding above that there was performance per
acquipollens
in respect of the year 2010-11 was not permissible, the second
fundamental breach of the contract was GDI's failure to pay the
full price for the tobacco for that season. The fact that it did not
do so because it could not do so is irrelevant. This was a
self-created impossibility which -
'does
not discharge the contract, but leaves the party whose act created
the impossibility liable for the consequences. This
will be so whether the impossibility is complete or partial, and
whether or not the act that causes the impossibility is wrongful:'
(Christe op
cit
p 493).
A
party who has caused the other's breach by making it impossible or
nugatory to perform cannot found any claim on the breach he has thus
precipitated: Christie op cit p 516. If GDI wished to claim that it
had not breached the requirements to pay the full price for the
grade, it could only do so by saying that there had been an agreement
by Willemse Farming
to accept a lower price, a position which would be quite incompatible
with the approach it has taken in these proceedings.”
The
applicant was aggrieved by that award and made this application to
have it set aside in terms of Article 34 of the Model Law…, on the
basis that it offends against the public policy of Zimbabwe.
The
applicant stated that in dismissing its claim, the arbitrator had not
taken into account the undisputed fact that the first respondent
received various sums of money from the applicant, as, in terms of
the contract, there was no fixed sum to be provided to the first
respondent. Having been provided with the inputs, the first
respondent failed to remit proceeds of the tobacco except for
$9,924=. The dismissal of the applicant's claim was contrary to the
principle against unjust enrichment.
The
applicant maintained that the arbitrator had not considered that the
first respondent had requested inputs outside the normal tobacco
season meaning that there was no legal obligation on the part of the
applicant to perform as demanded. The arbitrator had also pre-empted
the decision of the High Court in respect of the claim of money paid
to ZB Bank Limited and the decision on that aspect obliges the
applicant to meet that loan without regard to how the High Court will
determine the matter.
In
their opposition, the respondents took the view that the issue of
unjust enrichment had not been part of the applicant's case before
the arbitrator; the applicant having premised its claim on breach of
contract, the applicant can therefore not raise an argument in this
application which was not before the arbitrator. The respondents also
drew attention to the non-joinder of the arbitrator in this
application which has incapacitated the court by reason that the
record of proceedings before the arbitrator has not been availed to
the court.
The
respondents maintained that what is contrary to public policy in the
award has not been explained, save for the vague reference to unjust
enrichment, which argument was not made before the arbitrator. There
is nothing in the reasoning of the arbitrator which is contrary to
public policy. Given that the applicant had not led any evidence
regarding the dispute, the evidence of Mr Muller had stood
uncontroverted and the arbitrator correctly relied upon it.
Counsel
for the respondents, while taking a number of points in
limine
in her heads of argument, appeared to abandon them in submissions.
She had raised the issue of non-joinder of the arbitrator, the filing
of the application outside the requisite three (3) months after the
award was made, and the deposition of the founding affidavit by
Tapiwa Moga, the applicant's Projects Manager, when he had not been
involved in the agreement of the parties….,.
This
application has been brought in terms of Article 34 of the Model Law
- it had to because the applicant, having contracted out of all other
rights it may have had by the inclusion of clause 11 in the agreement
binding the parties to the decision of the arbitrator, it had no
other remedy. Article 34 of
the Unicitral Model Law contained in the Arbitration Act [Chapter
7:15]
provides:
“(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)…,.
(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.”
Article
34 takes the issue further by declaring what is contrary to the
public policy of Zimbabwe. 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 the public policy of Zimbabwe if -
(a)
The making of the award was induced or effected by fraud or
corruption;
(b)
A breach of the rules of natural justice occurred in connection with
the making of the award.”
Counsel
for the applicant drew attention to paragraph 17 of the first
respondent's response to the applicant's Statement of Claim
before the arbitrator in which the first respondent appeared to admit
owing a sum of $155,534= and suggested that it be deducted from its
counter-claim, as a pointer to the fact that the arbitrator did not
apply his mind. If he had, he would have granted that which was
admitted instead of dismissing the entire claim.
I
do not agree.
In
fact, the entire case of the applicant misses the point. The
arbitrator dismissed the applicant's claim because the applicant
had, admittedly, breached the contract between the parties. He drew
the conclusion, correctly in my view, that having breached the
contract thereby inducing the respondents to also commit a breach,
the applicant could not “found any claim on the breach he has thus
precipitated?” In other words, the applicant caused the first
respondent to commit a breach by breaching the agreement itself,
failing to supply adequate inputs, supplying inputs late, and failing
to purchase the product.
On
the basis of contract, unjust enrichment had not been relied upon,
the applicant could not claim from the first respondent as it did.
The breach it committed vitiated any remedy it may have had. This is
a basic principle of the law of contract which the arbitrator
impressively propounded and relied upon it. I did not hear counsel
for the applicant to argue that it was a wrong or faulty conclusion
of the law.
It
was stated in Zesa
v Maphosa
1999
(2) ZLR 452 (S)…, that:
“Under
Articles 34 and 36, the court does not exercise an appeal power and
either upholds or sets aside or declines 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 any
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 acceptable moral standards that a sensible or
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.”
See
also Delta
Operations v Origen Corp (Pvt) Ltd
2007
(2) ZLR 81 (S)…,.; Provincial
Superior Jesuit Province of Zimbabwe v Kamoto & Ors
2007
(2) ZLR 8 (S)…,.; Decimal
Investments (Pvt) Ltd v Arundel Village (Pvt) Ltd & Anor
2012
(1) ZLR 581 (H).
Clearly,
the standard set in the above authorities has not been matched by the
applicant in this matter. Quite to the contrary, the reasoning of the
arbitrator cannot possibly be faulted at all.
Parties
who submit to arbitration agreeing that the decisions of the
arbitrator shall be final and binding upon them should desist from
such footling litigation the moment the outcome is not favourable to
them. This court finds itself inundated by endless such applications
which are informed, not by a desire to obtain justice but merely by
obvious unwillingness to commit to what parties would have agreed
upon. The time has come to admonish such litigants with an award of
costs on a punitive scale.
Accordingly,
the application is hereby dismissed with costs on a legal
practitioner and client scale.
