On
21 June 2012 the respondent (as applicant), in Case No.5936/11,
instituted proceedings in terms of Article 35 of the Arbitration Act
for the registration of an arbitral award. It was opposed by the
applicant (as respondent).
On
5 March 2013, and by consent of the parties, and in terms of a court
order, the two matters were consolidated. On the day of the hearing,
and with the consent of the parties, I heard arguments in respect of
HC6361/11 first. The understanding was that if the matter succeeds
then case number HC5737/11 will be dismissed. If it fails then the
order sought in HC5731/11 will be granted.
The
brief background to the matter is that in September 2009 the
applicant entered into a contract with the first respondent to
finance his tobacco crop for 2009-2010 tobacco growing season. In
terms of the contract, the applicant was required to grow a certain
hectrage of tobacco and to market the produce exclusively through the
first respondent. It is common cause that the applicant cultivated
the required hectare and marketed tobacco worth USD10,890=29 through
the first respondent. The first respondent then demanded the sum of
USD51,687=56 which it alleged was the outstanding Grower Debt. The
applicant disputed liability to pay the sum alleged or at all. As a
result, the dispute was referred for arbitration. The second
respondent was appointed the arbitrator. He made an award in favor of
the first respondent.
The
applicant seeks the setting aside of the award on the following
grounds as averred in the founding affidavit:
A..
The arbitrator's conclusion, in holding that the supply of
sub-standard coal did not constitute a breach of the agreement is
grossly irrational, and, in the circumstances of the case, it
resulted in a failure of justice.
B.
The arbitrator's finding that the first respondent, who had reached
the agreement by supplying sub-standard coal, should be paid the
whole Grower Debt, is against public policy.
C.
The decision by the arbitrator to award the first respondent the full
value of the coal which:
(i)
By the first respondent's own admission had been reduced owing to the
poor quality of the coal.
(ii)
Had caused him massive losses at the curing stage of the tobacco was
not only grossly irrational but also is repugnant to the basic
notions of justice.
D.
In any event, the arbitrator erred in a material, obvious and gross
manner in creating an issue between the parties which did not arise
from their submissions.
E.
The arbitrator misconstrued the facts or dismally failed to apply his
mind to the question regarding the Annual Production Schedule or he
totally misunderstood the issue pertaining thereto and made a grossly
irrational conclusion so much that the resultant injustice
intolerably hurt the conception of justice in Zimbabwe and resulted
in a failure of justice.
F.
The Arbitrator's reasoning or conclusion in respect of the issue of
Annexure E goes beyond mere faultiness or incorrectness and
constitutes a palpable inequity and is outrageous in its defiance of
logic or accepted moral standards. Further, acceptance by the
arbitrator of Annexure E, at face value, was, considering the
circumstances of the case, contrary to public policy.
G.
The finding that a contract farmer, who has performed all his
obligations in terms of the contract of this nature, is obliged to
pay the Grower Debt, from other sources of income in case of poor
harvest, is contrary to public policy.
The
first respondent opposes the application on the basis that none of
the grounds relied upon by the applicant for the setting aside of the
award fall within the ambit of the limited grounds for setting aside
an award. It further avers that the applicant failed to appreciate
the proper meaning of what constitutes an award that is contrary to
public policy. The arbitrator's award in this matter is in no way
contrary to public policy.
1.
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.”
Public
policy has been defined in a number of cases in our jurisdiction. The
fact that an award could be wrong, by which is meant it is at
variance with the law, does not make it contrary to public policy.
See Catering
Employers Association of Zimbabwe v Deputy Chairman, Labour Relations
Tribunal & Another
HH206-00
where
it was stated:
"Even
when the Arbitrator made a finding that was erroneous or unreasonable
the court should not interfere but it could only interfere if the
decision was attended by a gross irregularity or it resulted in a
failure of justice."
See
also
Zimbabwe
Electricity Supply Authority v Maposa
1999
(2) ZLR 452 (S).., where GUBBAY CJ stated:
“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 recognize 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.”
In
exercising its powers in terms of Article 34, the court must be
cognisant of the need to preserve and recognize the basic objective
of finality in the arbitration process. See Zimbabwe
Electricity Supply Authority v Maposa
1999
(2) ZLR 452 (S)…,.
See also
Muchaka
v
Zhanje
2009 (2) ZLR 9 (H).
I
agree with the approach adopted by counsel for the respondent to
identify the issues placed before the arbitrator, what he dealt with
and how he dealt with it. After this exercise the court can then be
able to determine whether a breach of public policy occurred.
Counsel
for the applicant,
at the hearing, in my view, totally departed from the heads of
argument filed by the applicant. He contended that there are three
main public considerations in this matter viz:
1.
Gross errors in the arbitrators finding on both substantive and
procedural issues
Under
this head, he submitted that the understanding by the Arbitrator of
the contract between the parties was not correct. What was agreed on
by the parties to be recoverable is the value of the crop inputs and
financial assistance to be agreed on by the parties. There is nowhere
in the contract where reference is made to the sum of money advanced
to the applicant. Nowhere in the draw-down document, Annexure C, is
an amount mentioned. The assistance to the applicant was in kind and
not financial. The understanding by the arbitrator of the contract
therefore materially clouded the manner in which he subsequently
dealt with rest of the issues.
2.
The contract that the first respondent sought to enforce was contrary
to the specific provisions of the law
Under
this head, counsel for the applicant contended that on p107,
paragraph one in the second line, the Arbitrator stated that the
Annual Production Schedule (APS), attached as Annexure C to the
contract, indicates that the estimated cost of the crop finance as at
that date USD32,313=18. The Arbitrator relied on a wrong document as
the APS only sets out the materials required to cultivate the
hectrage and the quantities thereof. That error created a fundamental
difficulty. The Arbitrator had to define what type of contract the
parties entered into.
It
could have been one of two: i.e. an agreement of sale or a loan
agreement.
He
contended that the arbitrator shied away from making that
determination on that point but that there was a debtor and creditor
relationship between the parties. At the same time, the arbitrator
contradicts himself when he makes a finding that there was an
agreement of sale. According to the applicants papers, the deliveries
were done when there was no agreement in place. The absence of a
price is critical. An agreement of sale would require a definite and
certain price. From the facts, it could not be a loan. Therefore, the
arbitrator made an award for a sum of money when there was no
agreement in respect of that in the contract.
3.
Counsel for the applicant further submitted on p111, the last
paragraph, the Arbitrator made a finding in favor of the respondent
in respect of an issue which had not been answered by the applicant.
The arbitrator grossly erred. What was not denied by the first
respondent is taken to be admitted i.e that the first respondent
induced the applicant to sign the invoice on p34.
On
p112, the Arbitrator made a finding that it was not necessary to sign
the Annual Production Schedule (APS). This permeates from the mistake
that he used the wrong Annexure C. On p113, in the last paragraph,
the arbitrator found gross anomalies regarding the dates of the
invoice. The invoice refers to a schedule which the arbitrator did
not see. Patently, the invoice was incomplete. The person who signed
on behalf of the applicant is not identified. The arbitrator makes a
finding binding the applicant with those factual findings. There was
no basis for the arbitrator to make the finding that he did.
On
p114, the arbitrator concedes that the issue of the non-variation
clause had not been argued before him but he proceeded to make a
finding based on that clause.
On
p116, in the last paragraph, the arbitrator made a finding that the
first respondent admits to not having supplied coal of the required
quality but he did not make a finding that was a breach of the
contract by the first respondent.
The
arbitrator failed to make a finding that the respondent failed to
uphold the principles that underlie the contract it entered into i.e
the contract was entered in furtherance of a Government Program to
empower A1 and A2 farmers. The contract was entered into in terms of
S.I 61 of 2004. The respondent was supposed to source off-shore
funding and supply products at cost to the grower.
The
first respondent admits that the pricing model that it adopted is
less than clear, see p77 paragraph 16(2). The principles underlying
the Government enacting that particular Statutory
Instrument
was to allow the first respondent to finance for growers and not to
ensure that the respondent made un-mitigated profits at the expense
of the grower. The fairness of the contract has to be measured
against the expectation of the Government. It is patently unfair for
a financier to trap the grower into a debt. If the applicant had
known the purchase price in 2008 he would have elected whether to
enter into the contract of not. Public policy in Zimbabwe would not
allow international capital to take advantage of the new breed of
farmers in that fashion.
The
first respondent admits to providing sub-standard coal. It gives a
discount but at the same time insists that it wants all its money. It
is unconscionable and against good morals. The situation that the
applicant finds himself in is due to sub-standard coal. The
arbitrator did not invite the parties to make submission on the
applicants counter claim.
Counsel
for the respondent,
in his opening submissions, remarked that he had listened to appeal
submissions which the court cannot relate to in such an application.
There is no relationship between the founding affidavit and the
submissions made on behalf of the applicant. Counsel for the
applicant took very fresh issues some of which should have been dealt
with in the founding affidavit e.g the issue of illegality.
Counsel
for the respondent contended that the issue of illegality was not
raised before the Arbitrator; see the Agreed Statement of Facts. It
was also not raised in the founding papers. It is an issue founded on
facts. The applicant must establish how much was expended in bringing
these inputs and that what was being charged is above what was being
claimed.
On
the issue of the supply of the sub-standard coal, counsel for the
respondent submitted that the applicant must show that the type of
coal made him lose so much and that the claim by the first respondent
is so much and that there must therefore be a set off. This is not
what the applicant did before the Arbitrator. It did not make such a
claim before the Arbitrator. It is not the duty of the Arbitrator to
relate to a claim that has not been made.
Regarding
the issue of breach of the contract, counsel for the respondent
submitted that at p130 paragraph 7.2 the applicant admits that it was
not peremptory for the first respondent to supply coal. The
Arbitrator made his finding based on the clause that the first
respondent “will buy and secure partial grower requirements of
coal” contained in the Annual Production Schedule (APS). The
Arbitrator was therefore correct in making a finding that there was
no breach of contract.
He
further submitted that the contract between the parties was a debtor
creditor contract i.e a mutuum:
a loan for consumption. The issue of the type of contract was not an
issue before the Arbitrator. It was not suggested before the
arbitrator that there was no cause of action.
I
extensively recorded the submissions by counsel for the applicant
because they were a total departure from the Heads of Argument filed
of record. I agree with counsel for the respondent
that
the submissions by counsel for the applicant were mostly appeal
submissions which this court cannot relate to in an application filed
in terms of Article 34. I also agree that most of the issues that he
raised were fresh matters which were not alluded to in the founding
affidavit and which were not before the arbitrator.
The
first point raised by counsel for the applicant is that there were
gross errors in the Arbitrator's findings on both substantive and
procedural issues.
He
also submitted that the Arbitrator grossly erred when he made a
finding in favour of the first respondent on an issue which the first
respondent had not contested.
The
case authorities are very clear that under Article 34 or 36, the
court does not exercise appeal powers. An award cannot be set aside
because the reasoning or conclusion of the arbitrator was wrong in
fact and in law. The Arbitrator's decision, even if erroneous, as
contended by counsel for the applicant,
cannot be set aside unless the reasoning or conclusions were so
flawed as to violate some fundamental principle of law or morality of
justice.
All
the other issues raised in the applicant's submissions, such as the
illegality of the contract, the nature of the contract between the
parties, that the Arbitrator used a wrong Annex C, supplying coal of
a substandard coal - the applicant attacked the findings made by the
Arbitrator. He did not go further to establish that the reasoning in
the 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 not consider that the
conception of justice in Zimbabwe would be intolerably hurt by the
award.
On
the issue of sub-standard coal, counsel for the applicant submitted
that it was unconscionable and against good morals that the first
respondent would insist on getting the full amount for the coal
despite its admission that it provided substandard coal. He further
submitted that the Arbitrator did not invite the applicant to make
submissions on the counter-claims. What is unconscionable is the
conduct of the first respondent not the award by the arbitrator.
Failure to invite submissions does not warrant the award to be set
aside. In any event, it was up to the applicant to make out his case
before the arbitrator.
From
the above, its clear that the applicant has not made out a case to
have the award set aside. In view of that, I will dismiss the
application to set aside the award and grant the application to
register the award.
As
a result, I will make the following order:
1.
The arbitration granted by the Arbitrator, Advocate David Ochieng,
dated 5 April 2011, be and is hereby registered as an order of the
High Court.
2.
The applicant shall pay the cost of suit.
