The
applicant seeks an order setting aside an arbitral award handed down by the
second respondent on 16 August 2010. The applicant avers that the award is in
conflict with the public policy of Zimbabwe in the following material respects:
(a)
“The Arbitrator made a determination on the issues not placed before him for
adjudication.”
(b)
“A breach of the rules of natural justice occurred in connection with the
making of the award.”
(c)
“The award conflicts with the substantive law of Zimbabwe in material
respects.”
The
applicant substantiates these averments as follows:
(a) Issues not
before the arbitrator for determination
(i)
A determination was made on a claim for realised proceeds. This claim had not
been placed before the arbitrator (second respondent) for determination.
(ii)
The arbitrator did not consider the first and second issues placed before him
and erroneously held that they were alternative claims, where no such
alternative claims had been made and placed before him. In the result, he
awarded an amount in excess of what the first respondent had claimed.
As
a result, the applicant submits that the arbitrator had gone “on a frolic of
his own” making a determination outside his terms of reference. The award,
argues the applicant, is procedurally improper and should be set aside on that
basis.
(b) Breach of the
Rules of Natural Justice
The
applicant further submits that the arbitrator made a determination on an issue
that was improperly introduced by the first respondent; that is the claim on
realised proceeds. This claim was single-handedly introduced by the first
respondent in its heads of argument. The first respondent's claim in the
procedure document should have been amended to accommodate this new claim. The
issue of this claim had not been included and agreed to by the parties. In the
result, the applicant was prejudiced in the conduct of its defence as it was
not accorded an opportunity to fully present its defence on this claim. This
amounts to a breach of the rules of natural justice argues the applicant. For that reason the award must be set aside
on the grounds that it is in conflict with the public policy of Zimbabwe.
(c) Award conflicts
with the substantive law of Zimbabwe
It
is averred that the award conflicts with the substantive law of Zimbabwe in
that the dispute was not determined in terms of the governing contract between
the parties in that with regards the 2005 Tobacco Agreement.
(i)
The arbitrator, in awarding the first respondent all the proceeds generated
from the scheme, failed to apply the exchange rates agreed to by the parties in
terms of the agreement. He gave a remedy which was not provided for in the
contract. He, accordingly, acted outside the law of Zimbabwe thus the award
must be set aside as being contrary to the public policy of Zimbabwe.
(ii)
Alternatively, in awarding all the proceeds to the first respondent, the
arbitrator's reasoning “went beyond mere faultiness or incorrectness and
constituted a palpable inequity that was so far reaching 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.”
(iii)
With regards the 2006 Tobacco Agreement, the applicant attacks the award on the
same grounds as the 2005 Agreement with the inclusion of an additional ground,
namely, that the arbitrator failed to take into account any trade usage of the
tabacco industry. In particular, that the tobacco auction rate was different
from the interbank rate, a notorious fact at the time.
(iv)
The arbitrator awarded, according to the applicant, the remedy of specific
performance in circumstances where the other party had admitted to breaching
the 2006 agreement in material respects, namely, the partial funding of the
establishment of the grower scheme and the procurement of inputs.
(v)
Alternatively, the arbitrator entertained a point raised in the first
respondent's heads of argument for the first time, namely, that first
respondent had met its obligations in terms of the contract and was therefore
not in breach, when in fact, the first respondent had, in its admissions of
fact, admitted that its funding was only partial with regards establishment of
growers' scheme and nil with regards the purchase of green tobacco. This argues,
the applicant, amounted to a breach of the rules of natural justice in that the
applicant was not afforded the opportunity to address the issue introduced by
the first respondent belatedly.
(vi)
The arbitrator failed to make a determination as to the legality of the
agreements entered into by the parties, despite extensive arguments on the
point, says the applicant. For that reason, the applicant avers that the
arbitrator gave a blind eye to illegality, a fact which is contrary to the
public policy of Zimbabwe. In particular, a ruling should have been made as to
whether the Reserve Bank had authorised the transactions, argues the applicant.
(d)
Arbitrator had no power to act outside the Procedure Document….,.
In
its opposing affidavit, sworn to by Hampton Mhlanga, its Acting Managing
Director, the first respondent avers that the award is not in conflict with
public policy. Instead, it is based on sound principles of law consistent with
the dictates of public policy. The respondent's understanding of the award is
that with regards both the 2005 and 2006 agreements, the applicant had a duty
to account to the respondents all monies advanced to it. It rendered its
account, which the first respondent accepted, from which account arose the
relief sought. The relief sought was not based only on the admissions made by
the applicant nor was it confined only to such admissions. It was, instead,
based on the full accounts given by the applicant with regards funds disbursed
to it in terms of both agreements. As for the applicable exchange rate, the
arbitrator found, on the evidence presented to him by the parties, that the
rate of exchange had been agreed by the parties. Further, the first respondent
argues that its initial statement of claim was amended by agreement of the
parties under the stewardship of the arbitrator. It is also denied that the
rules of natural justice were breached in view of the fact the “new” issue
alleged to have been brought up belatedly arose when the applicant, which
hitherto had denied its obligations to account for all the funds availed to it
in terms of the two agreements, later, during the course of the arbitration,
admitted to such obligation. This was a separate admission from the ones
previously made by it. Naturally, the papers were amended to capture this new
development occasioned by the applicant's own conduct. The applicant cannot, in
the circumstances, cry foul, contends the first respondent. It also denies that
the arbitrator made a determination on an issue outside his terms of reference.
On the contrary, all the issues determined by the arbitrator are captured in
the first respondent's amended claim and the parties' agreed issues.
The
first respondent further argues that the arbitrator determined the issues
before him by reference to the terms of the agreements entered into by the
parties and analysis of the evidence adduced by both parties, including
findings on the credibility of the witnesses. It cannot, in the circumstances,
be said that, in doing so, the arbitrator acted in conflict with the
substantive laws of Zimbabwe….,.
These
submissions by the first respondent constitutes the basis of its defence to
this application.
A
perusal of the record of arbitration vindicates the first respondent's
assertions as to how the proceedings were conducted and the basis upon which
the award was granted. I find nothing untoward in the manner in which the
hearing was conducted, both in terms of procedural propriety, evidential
analysis, and interpretation of the laws governing contractual relationships.
In
support of this application, the applicant has relied, inter alia, on the case
of Delta Operations (Pvt) Ltd vs Origen Corporation (Pvt) Ltd SC86-06.
It
is clear that a court will only set aside an arbitral award where the “reasoning or conclusion in 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 reached the point mentioned
above.”
By
any stretch of the imagination, it cannot be said that the present award
constitutes a palpable inequity in the proportions envisaged in the Delta
Operations (Pvt) Ltd vs Origen Corporation (Pvt) Ltd SC86-06 case. On the
contrary, as already indicated, I do not find any faultiness or incorrectness
in the arbitration proceedings let alone of the magnitude described by the
applicant. The award, in my view, is in accordance with the substantive and
procedural laws of Zimbabwe. Both parties were afforded a fair hearing in
accordance with the rules of natural justice. In particular, it has not been
shown in what way the award is in conflict with the public policy of Zimbabwe.
Accordingly,
the application cannot succeed. For these reasons, I order as follows:
(1)
That the application be and is hereby dismissed in its entirety.
(2)
The applicant shall pay the costs.
