This
is an application to set aside the arbitral award granted by the
second respondent on 15 December 2015. The application is opposed.
The
applicant's founding affidavit states:
“This
is an application 13(3), 34(2)(a)(iv) and 34(2)(b)(ii) of the
Schedule of the Arbitration Act [Chapter 7:15] (“the Act”). It
seeks an order that invalidates the appointment of the Honourable
Justice Moses Hungwe Chinhengo as arbitrator in a dispute between the
parties.”
The
relevant sections of the Articles under which the application is made
provide as follows:
“Article
13(3)
(1)…,.
(3)
If a challenge under any procedure agreed upon by the parties or
under the procedure of paragraph (2) of this article is not
successful, the challenging party may request, within thirty days
after having received notice of the decision rejecting the challenge,
the High Court to decide on the challenge, which decision shall be
subject to no appeal; while such a request is pending, the arbitral
tribunal, including the challenged arbitrator, may continue the
arbitral proceedings and make an award.”
Article
34(2)(a)(iv) and 34(2)(b)(ii)
“(1)…,.
(2)
An arbitral award may be set aside by the High Court only if -
(a)
The party making the application furnishes proof that -
(i)…,.
(ii)…,.
(iii)…,.
(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 proviso 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)…,.
(ii)
The award is in conflict with the public policy of Zimbabwe.”
On
16 April 2014, the applicant and the first respondent entered into an
agreement whose purpose was given as:
“To
secure the services of CS to secure repayment of the funds due to
Meikles by the Reserve Bank of Zimbabwe/Ministry of Finance in
respect of Meikles Limited United States Dollar deposit with the
Reserve Bank of Zimbabwe (“the Deposit”).”
Clause
9 of the Agreement provided, in full, as follows:
“9.
ARBITRATION
9.1
Any dispute between the Parties, arising out of or in connection with
this Agreement, including any question regarding its existence,
interpretation, validity or termination or the enforcement of any of
the provisions hereof, shall be referred to and resolved by
arbitration. The Parties hereby irrevocably agree that the decision
of the arbitrator in such arbitration shall be final and binding upon
each them.
9.2
The arbitrator shall be chosen by the Parties provided that if the
Parties are unable to agree on the appointment of the arbitrator, the
appointment shall be made by a Director of the Commercial Arbitration
Centre in Harare, or any successor to that Centre, on the written
request of either of the parties.
9.3
The place of arbitration shall be Harare, but the Parties may agree,
or failing such agreement, the arbitrator may direct that any hearing
or proceedings be
held elsewhere.
9.4
In determining any dispute between the Parties, both the substantive
and the procedural law of Zimbabwe shall apply.
9.5
Any arbitration in terms of this clause shall be administered by the
Commercial Arbitration Centre in Harare. The administrative
procedures and the schedule of costs of the Commercial Arbitration
Centre in Harare in force at the time of commencement of the
Arbitration shall apply.
9.6
No party shall be precluded from approaching the High Court as a
matter of urgency for the purpose of obtaining urgent relief against
another.”…,.
Following
a dispute between the parties, the Commercial Arbitration Centre,
upon a request from the first respondent, appointed the second
respondent as an Arbitrator. When arbitration proceedings commenced,
the applicant raised a preliminary issue. It argued that the
appointment of the second respondent was irregular in that “the
parties never engaged in the process of choosing an arbitrator for
the dispute. They did not disagree on the choice of arbitrator. This
much is clear from the following...,.:”
Clearly,
the above argument was anchored on clause 9.2 (quoted above) of the
Agreement between the parties.
On
15 December 2015, after a hearing of the preliminary issue, the
second respondent made the following award:
“19.
In the result, my ruling on the preliminary objection is -
(a)
The preliminary objection raised by the respondent is dismissed.
(b)
Each party shall bear its own costs.
(c)
Each party shall pay, out the arbitrator's fees, the quantum of
which was agreed at conclusion of the hearing of the preliminary
point.”
On
3 February 2016, the applicant then filed this application seeking
the following relief:
“1.
The appointment of the 2nd
respondent as arbitrator in the contractual dispute between the
applicant and 1st
respondent be and is hereby set aside.
2.
The 1st
respondent be and is hereby ordered to pay the costs of this
application.”
Generally,
in this jurisdiction, where the court is called upon to interfere
with an arbitral award, it, in addition to grounds laid out in
Article 34 of the Arbitration Act [Chapter 7:15], is also guided by
the principles set out in Zimbabwe Electricity Supply Authority v
Maposa 1999 (2) ZLR 452 (S) where GUBBAY CJ…, said:
“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 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.”
The
second respondent's ruling, which should be examined against the
relevant provisions of the Act (i.e Article 34 of the Arbitration Act
[Chapter 7:15]) and the principles of law laid out in the above
passage, was crafted in the following terms:
“15.
To sum up: I am satisfied that the interaction of the parties, in
particular the emails exchanged between them in the period July to
September 2015 justify the inference that the parties were unable to
agree on the appointment of an arbitrator. The inability to do so
arose principally from the deterioration in their relationship. This
was a case in which the parties could not reasonably be expected,
because of the polarization of their relationship, to meet or consult
each other with any prospect that they would be able to agree on the
appointment of an arbitrator. They had reached the stage in their
relationship at which it could legitimately be concluded that they
were unable to agree on the appointment. That constrained the
claimant to write to the CAC for it to appoint an arbitrator. The
claimant was, in the circumstances, justified in doing so.
16.
I am emboldened in my conclusion by the fact that there is absolutely
no perceivable prejudice to either party from the fact that the CAC
appointed, in its absolute discretion, as provided in clause 9.2, an
arbitrator that it considered suitable to adjudicate in this matter.
Additionally, the parties had all the opportunity they needed to
agree on a suitable arbitrator - even as they were before me on this
preliminary objection. The fact that they could not accommodate each
other speaks to the correctness of the inference I have drawn, from
their interaction, that they were unable to appoint an arbitrator. I
do not agree with Mr Tshuma that the claimant acted dishonestly. In
my view, the claimant considered the circumstances and reached a
conclusion that the parties were unable to mutually appoint an
arbitrator, which conclusion I have found to be reasonable, and then
asked the CAC to make the appointment. For these reasons I would
dismiss the preliminary objection raised by the respondent.
17.
I am further emboldened by the facts that the respondent candidly
acknowledged, as recorded in paragraph 1 of the pre-arbitration
minutes of 19 November, that I was not disqualified on any basis, and
that similarly Mr Mpofu's affidavit, attached to the papers
originating the objection, acknowledged the same.”
I
must immediately point out that, given the circumstances of this
case, I find nothing unreasonable in the above reasoning. To that
end, in order to fully appreciate the second respondent's
reasoning, I shall, in this judgment, quote extensively from his
award.
The
main thrust of the applicant's argument is that clause 9.2 of the
agreement between the parties was not complied with when the
arbitrator was appointed and that the first respondent lied when it
said the parties were unable to agree on the appointment of an
arbitrator. That, according to the applicant, amounted to a
mispresentation.
In
addressing that argument, the second respondent reasoned as follows:
“5.
The respondent's contention is that, in terms of clause 9.2, any
dispute between the parties under the Agreement, is to be resolved by
an arbitrator chosen by the parties by mutual agreement. If the
parties are unable to agree on the appointment of an arbitrator,
either of them may approach the CAC for it to make the appointment.
The
respondent characterizes the claimant's statement that the parties
were unable to agree on the appointment of the arbitrator as a
“misrepresentation of facts”; “a well-calculated
misrepresentation of facts”; “a fraudulent and/or reckless
misrepresentation of facts”;“a false statement…, made
deliberately and/or recklessly by the claimant.”
The
respondent stated that it had no objection to the person of the
arbitrator and that it was objecting only to the unprocedural manner
in which the appointment was made. It, accordingly, contends that the
appointment is invalid, and, as such, the arbitrator has no
jurisdiction in the matter.
I
think, however, that whilst the claimant's letter to the CAC may
have misrepresented the factual position, the representation therein
made was not fraudulent. There is no evidence before me that the
claimant used, if it did, a false representation to gain an unjust or
unfair advantage. The parties agreed that they would refer any
dispute between them to arbitration and where such reference has been
made no unjust advantage is gained merely by making the reference so
that the dispute can be resolved by arbitration. I think that the
respondent mis-characterized the representation made by the claimant
by calling it fraudulent. A false representation is not necessarily
fraudulent.”
The
second respondent went further to say:
“12.
The claimant's email was clear intimation to the respondent that it
would resort to arbitration.
From
this correspondence, it is clear to me that the parties were in
disagreement not only over the liability of the respondent but also
over how to progress their dispute to finality. The respondent had
clearly indicated that it was prepared to settle the dispute
“elsewhere”; and “elsewhere”, in the circumstances, meant
only by arbitration.
The
claimant's email of 2 September was an unequivocal indication to
the respondent that the claimant would refer the matter to the CAC
for the appointment of the arbitrator. No party shouldered, on its
own, the burden to propose a formal meeting to appoint an arbitrator,
which was the only reasonable route left for the parties to take in
the circumstances. The parties had, in relation to each other,
adopted intransigent positions which could be handled only by
referring the dispute to arbitration. It seems to me that the
respondent was unwilling to progress the matter so that it could be
finalised and was also opposed to the reference of the dispute to
arbitration even though it had indicated that it was agreeable to the
dispute being settled elsewhere. If the respondent was keen on the
arbitration route, it was an easy enough matter for it to have
proposed a meeting to appoint an arbitrator.
From
the foregoing, an inference can be drawn that the parties were unable
to agree on the appointment of an arbitrator. I find, also, that the
respondent was unwilling to have an arbitrator appointed thus
constraining the claimant to write to the CAC for it to appoint an
arbitrator.”
A
proper reading of the above passages informs that the second
respondent accepted the fact that there was, indeed, never any formal
agreement on the issue of appointment of an arbitrator. However, the
conduct of the parties clearly demonstrated that the parties were not
agreeing on anything. The second respondent, in his ruling, took into
account the correspondence between the parties and that
correspondence indicated that the parties were, above all, agreed
that arbitration was the only route remaining for the resolution of
the dispute.
Whilst
I agree that Article 13.3 of the Arbitration Act [Chapter 7:15] and
clause 9.2 of the Agreement may not have been strictly adhered to,
the one crucial fact is that the parties had agreed that after the
collapse of negotiations arbitration was the process to follow. The
absence of a formal disagreement on the appointment of an arbitrator
is an issue that, in my view, and as spelt out in his ruling, the
second respondent reasonably and adequately dealt with. It would,
therefore, be totally absurd for this court to fault the practical
and robust approach adopted by the second respondent in dealing with
the application of clause 9.2 in the Agreement, as read with Articles
13 and 34 of the Arbitration Act [Chapter 7:15].
It
is also important to take into account that, in its founding
affidavit, the applicant clearly stated:
“5.4.
The applicant then raised the objection before the 2nd
respondent. It was based on the same ground that, while not impugning
the 2nd
respondent's qualification and suitability for appointment, Clause
9.2 had not been complied with. On that basis, the applicant prayed
that the 2nd
respondent had no jurisdiction.”…,.
Furthermore,
the applicant, having raised the preliminary issue, accepts that the
second respondent was prepared to discuss his own appointment, which,
in any case, they were not opposed to. To that end, the applicant
itself states:
“Respondent,
indeed, wrote a letter of protest to the claimant's lawyers dated
18th
November 2015. Attached hereto is the said letter as Annexure C.
Having not received a reply from the claimant, Respondent, through
its legal practitioner, informed the Tribunal that there is s a
preliminary point that the parties needed to discuss before the
matter is heard. Indeed, the Honourable Arbitrator was kind enough to
leave the parties in the Board Room to try and resolve the
preliminary point and the way forward regarding to the issue of the
appointment of the current tribunal.
There
was no agreement as to the way forward.
The
Commercial Arbitration Centre has since written to the claimant in
relation to the respondent's letter of protest and attached hereto
are the correspondences which were delivered to the respondent by the
Commercial Arbitration Centre.”…,.
Surely,
given the opportunity to engage before arbitration commenced in
earnest, I am at pains to fully understand the genuineness of the
applicant's real problem. The applicant clearly states that it was
not against the appointed arbitrator but only the procedure. Once
given the opportunity to discuss the problem, one would have expected
the parties to agree. They were unable to; yet the applicant still
says:
“(20)
The respondent would like to categorically state that it has
absolutely nothing against the arbitrator chosen by the Commercial
Arbitration Centre as it has read about him being an eminent former
Judge of the High Court of Zimbabwe.”
Failure
to even ask the second respondent to give the parties more time to
consider the issue, and yet, at the same time, have the applicant
pronounce that it had nothing against the credentials and suitability
of the second respondent, clearly points to the fact that the parties
were unable to agree. That being the case, and for the sake of
progress, the intervention of the Commercial Arbitration Centre, as
provided for in their agreement was, therefore, in my view, called
for.
In
any case, on 23 November 2013, the Commercial Arbitration Centre had
said:
“Please
clear with your counterparts, Chinamasa, Mudimu & Maguranyanga,
the various issues canvassed in their letter under reference. One you
have done so, please revert accordingly to the Centre so that the
arbitral process may continue without any undue delay.”
The
above clearly indicates that the Commercial Arbitration Centre did
not ignore the applicant's stated problem. However, the parties
never went back to it as had been requested.
In
view of the foregoing, I am unable to fault the reasoning of the
second respondent. The application cannot therefore succeed. The
application is dismissed with costs.
