Opposed
Application
MATHONSI
J:
This judgment is a two-in-one. It disposes of the application in
HC9909/18, an application in which Harare Sports Club (the applicant)
seeks a registration of an arbitral award issued by an arbitrator and
HC10011/18 one in which Zimbabwe Cricket (the respondent) seeks the
setting aside of the same arbitral award on the ground that it is
contrary to the public policy of Zimbabwe.
Registration
of the award is caught by the applicant in terms of Article 35 while
the setting aside of the award is sought by the respondent in terms
of Article 34 of the Model Law in the Arbitration Act [Chapter 7:15].
The
contentious arbitral award was issued in terms of an agreement
entered into between the parties on 16 July 1999 supported by an
order of this court, per MANGOTA J, handed down on 21 July 2017.
The
award itself was delivered on 28 August 2018.
By
order of this court, per CHIKOWERO J, granted on 27 March 2019, the 2
mutually destructive applications were consolidated for set down and
determination at the same time.
At
the commencement of the hearing counsel for the parties agreed that
upholding one of the applications necessarily brings the other to its
knees. In other words if the court finds that there is no merit in
the application to set aside the arbitral award, it should without
further ado, recognize the award and register it for enforcement.
The
background is that the applicant is the registered owner of a
sporting complex known as Harare Sports Club which it leased to the
respondent, then known as Zimbabwe Cricket Union, by Notarial
Agreement of Lease signed on 16 July 1999, at a time when the
Zimbabwe dollar ruled the roost.
The
rental payable was therefore fixed in that currency at $40,000 per
month and in terms of clause 3(c) the rent was to be escalated on an
annual basis with effect from the agreement's first anniversary at
a rate to be agreed between the parties.
In
the event of the parties failing to agree the rent was: “to be
determined and set by an independent arbitrator appointed by mutual
agreement between the parties, whose decision shall be final and
binding as between them based upon any fluctuation in the prime bank
rate of interest and the inflation rate prevailing in Zimbabwe at the
relevant juncture.”
When
the Zimbabwe dollar became moribund at the beginning of 2009 the
parties could not agree on the rent in foreign currency and a dispute
arose which has escalated over the years resulting in the need to
refer the matter to arbitration in terms of clause 3(c) of the
agreement.
The
parties still could not agree on an arbitrator to resolve the dispute
and as they bickered endlessly the applicant brought an application
in this court under case no. HC217/17 in which it cited both the
respondent and the Commercial Arbitration Centre.
It
sought an order authorizing the Commercial Arbitration Centre to
appoint an arbitrator to determine the dispute over rent.
The
application was made in terms of Article 11(4) of the Model Law which
recognizes the right of the parties to agree on a procedure of
appointing an arbitrator but provides that should they fail to agree
such arbitrator may be appointed by the High Court on request of a
party.
The
respondent opposed that application arguing inter alia that Article
11(4) empowers the High Court itself to appoint an arbitrator and not
to delegate the power to appoint to someone else.
The
respondent also argued in opposition that the dispute over the
appropriate rental for the property was governed by the Commercial
Rent Regulations and should thus be determined by the Commercial Rent
Board.
The
respondent further argued that clause 3(c) of the parties agreement
which provides for arbitration of a rent dispute was void by virtue
of section 29 of the Commercial Rent Regulations which provides:
“……
any
agreement by which any person purports to limit his right to proceed
under these Regulations for the determination of a fair rent or the
variation of such a determination, or the limit or affect any other
rights to which he would be entitled under these Regulations, shall
be void.”
The
respondent sought to side-foot the imperatives of the agreement it
entered into with the applicant and avoid arbitration by hiding
behind the Commercial Rent Regulations which would have meant that
the dispute would be referred to the Commercial Rent Board.
MANGOTA
J who heard the application was not persuaded by that argument.
Neither was he persuaded by the argument that the High Court could
not delegate the power to appoint an arbitrator to the Commercial
Arbitration Centre.
In
Harare Sports Club v Zimbabwe Cricket & Anor HH471-17 the learned
judge upheld the principle of sanctity of contract holding that
having crafted for themselves “a clearly defined manner of
resolving their disputes” neither of the parties was entitled to
renege from the agreement.
On
the issue of the power of the court to delegate the authority to
appoint an arbitrator, the learned judge ruled that this court has
inherent jurisdiction to do so and in the exercise of that inherent
jurisdiction, he authorised the Commercial Arbitration Centre to do
the honours.
It
was by virtue of that judgment that Daniel Tivadar was appointed
arbitrator and having heard the matter he issued the arbitral award
which is the subject of this application.
The
case of Harare Sports Club, supra, is significant in two ways:
(i)
Firstly it determined the issue of the arbitrator's jurisdiction to
adjudicate over the dispute and clothed him with authority to do so.
(ii)
Secondly it completely resolved the issue of the validity of the
arbitration clause, that is clause 3(c) of the parties agreement, and
ruled that it was valid notwithstanding section 29 of the Commercial
Rent Regulations.
As
shall be seen later, the respondent has not given up on these
arguments which form the main thrust of its challenge to the arbitral
award and why it moves that the award be set aside and why it should
not are registered for reinforcement purposes.
It
is significant that the judgment of MANGOTA J in Harare Sport Club,
supra has not been challenged in any way. It has not been appealed
and remains extant to this day.
As
I have said the applicant has made an application for the
registration of the arbitral award in terms of Article 35 of the
Model Law.
The
award directs the respondent to pay rent of US$7500 per month with
effect from 28 August 2018 for the Sports Complex, to pay
US$88,119.85 together with interest from 6 December 2016, to pay rent
of US$3,000 per month from 1 January 2018 to the date of the award
and costs of suit.
In
its application for setting aside the award, the respondent states
that the arbitral award is against the public policy of Zimbabwe
because the arbitrator enforced clause 3(c) of the agreement which
provides for referral of the dispute to arbitration when that clause
is contrary to statute law, namely section 29 of the Commercial Rent
Regulations which provides that any provision in a lease agreement
which limits the rights of the parties in terms of those Regulations
shall be void.
Secondly,
the arbitrator did not deal with the issue of rent escalation.
As
the parties had agreed on an interim rental of US$170-00 a month, it
is that rent which should have been escalated in terms of clause 3(c)
of the agreement.
Thirdly,
the award unjustly enriches the applicant at the respondent's
expense because it came out during the hearing that the applicant is
renting out a portion of the complex to the Tobacco Industry Cricket
Supporter's Association for a rental.
Fourthly,
the respondent submitted that the arbitrator pitched camp with the
applicant because he allowed for expert evidence on what is a fair
rent for the complex to be presented which the applicant had not
submitted.
I
must put the issue of unjust enrichment out of the way straight away.
Mr
Diza for the respondent conceded that it is an issue which was not
argued before the arbitrator. Mr Mugandiwa for the applicant
submitted that unjust enrichment is a cause of action which should
have been pleaded before the arbitrator. It was not and therefore
cannot be relied upon to challenge the award.
I
agree.
Raising
a defence which was not relied upon before the arbitrator only means
that a party is seeking a fresh hearing of the case and not a
challenge of the arbitrator's decision, a decision arrived at
without consideration of the new defence.
That
cannot be allowed. The issue must end there.
Mr
Mugandiwa took essentially 2 points in limine namely;
(i)
That the application for the setting aside of the arbitral award
issued by the arbitrator on 10 April 2018 was filed out of time and
should fail for that reason alone.
(ii)
Secondly, he submitted that the respondent cannot challenge the
arbitrator's ruling on jurisdiction at this stage because the time
during which to do so lapsed in terms of Article 16 of the Model Law.
There
is merit in both points in limine.
At
the commencement of the arbitration process the respondent objected
to the jurisdiction of the arbitrator to arbitrate the dispute. In
fact the lack of jurisdiction was one of 7 preliminary objections
made on behalf of the respondent at that stage.
In
an award dated 10 April 2018, the arbitrator dismissed that
preliminary point holding that he had jurisdiction. He proceeded with
the arbitration.
An
arbitrator is entitled to rule on his or her own jurisdiction in
terms of Article 16(1) of the Model Law. That Article further
provides in paragraphs (2) and (3);
“(2)
A plea that the arbitral tribunal does not have jurisdiction shall be
raised not later than the submission of the statement of defence. A
party is not precluded from raising such a plea by the fact that he
has appointed, or participated in the appointment, of an arbitrator.
A plea that the arbitral tribunal is exceeding the scope of its
authority shall be raised as soon as the matter alleged to be beyond
the scope of its authority is raised during the arbitral proceedings.
The arbitral tribunal may, in either case, admit a later plea if it
considers the delay justified.
(3)
The arbitral tribunal may rule on a plea referred to in paragraph (2)
of this article either as a preliminary question or in an award on
the merits.
If
the arbitral tribunal rules on such a plea as a preliminary question,
any party may request, within thirty days after having received
notice of that ruling, the High Court to decide the matter, which
decision shall be subject to no appeal; while such request is pending
the arbitral tribunal may continue the arbitral proceedings and make
an award.”
The
respondent did not challenge the determination on jurisdiction within
the period of 30 days provided for in paragraph (2) of Article 16. In
fact the respondent only mounted the challenge in the main
application filed on 30 October 2018, almost 7 months later.
It
could not do that without seeking condonation.
That
is not the only reason why the challenge on the arbitrator's
jurisdiction cannot succeed.
I
have stated that in Harare Sports Club, supra this court determined
the issue of the arbitrator's jurisdiction. It also determined the
application of section 29 of the Commercial Rent Regulations, both
arguments still being pursued by the respondent.
What
we have therefore is a case in which the setting aside of an arbitral
award is sought on arguments that have already been determined by
this court and the determination has not been challenged leaving the
court's decision extant.
After
exchanging pleasantries with Mr Diza on the propriety of that
approach, he submitted that I am not bound by the judgment of MANGOTA
J and that I should overlook it and uphold the respondent's
challenge on the arbitrator's jurisdiction.
Asked
as to how that could be possible in light of the two of us enjoying
the same level of jurisdiction, meaning that I cannot review the
decision of another court of the same jurisdiction, Mr Diza submitted
that the prior decision is not binding because it is premised on a
wrong conclusion of the law.
Mr
Diza obviously misses the point. The issue is not whether the
decision is correct. It is that the arbitrator was appointed in terms
of a court order which is still extant. Even if the arbitrator had no
jurisdiction, the order of this court clothed him with jurisdiction.
It
was incompetent for the respondent to still insist on absence of
jurisdiction in the face of a court order it did not challenge.
It
was also incompetent for the respondent to still raise the issue of
an alleged invalidity of Clause 3(c), the arbitration clause, when
the court had ruled it valid and the respondent had not appealed the
court's judgment.
It
was an exercise in futility.
That
is what happens when a tenant is imbued with magical qualities beyond
the ken of mortals, the power of resisting demand for payment of fair
rent insisting on paying only what it wants to pay for a lengthy
period of close to 10 years. When the magic is taken away by a court
order, it disappears so inexplicably it may be seen as a terminal
development.
In
fact, the respondent appears to have this unrivalled record of
pressing the self-destruct button when it comes to its rent dispute
with the applicant.
How
can a litigant which has a court order authorising the appointment of
an arbitrator to its rent dispute beat the same drum about absence of
jurisdiction before that arbitrator and again before the same court
which authorised the appointment of the arbitrator?
That
is done at the expense of the merits of the matter.
This
may well be a case of res judicata, that the issues of jurisdiction
and the validity of clause 3(c) have already been determined by this
court and cannot be lawfully revisited again.
The
present legal fact is that the order remains valid and binding.
Arbitration was conducted in terms of it.
The
Supreme Court made the crucial point in Wolfenden v Jackson 1985 (2)
ZLR 313 (S) at 316B-C:
“The
exceptio rei judicatae is based principally upon the public interest
that there must be an end to litigation and that the authority vested
in judicial decisions be given effect to, even if erroneous. See Le
Roux en'n Ander v Le Roux 1967 (1) SA 446 (A) at 461H.
It
is a form of estoppel and means that where a final and definitive
judgment is delivered by a competent court, the parties to that
judgment or their privies (or, in the case of a judgment in rem, any
other person) are not permitted to dispute its correctness.”
The
law recognises that once a dispute between the same parties has been
exhausted by a competent court, it cannot be brought up for
adjudication again. There is need for finality.
As
stated by MAKARAU JP (as she then was) in Chimpondah & Anor v
Muvami HH81-07 (unreported):
“To
allow litigants to plough over the same ground hoping for a different
result will have the effect of introducing uncertainty into court
decisions and will bring the administration of justice into
disrepute.”
See
also Towers v Chitapa 1996 (2) ZLR 261 (H).
The
decision to hold the respondent to the terms of the agreement between
the parties is grounded in good authority.
Quite
often in their relations parties agree among themselves, as they
conclude agreements, that any dispute arising therefrom be referred
to and resolved by arbitration which is an alternative dispute
resolution mechanism in terms of which the parties refer their
dispute to a third party, the arbitrator, for impartial
determination.
Although
it does not oust the jurisdiction of the court, it simply compliments
the court process, it is an accepted way of dispute resolution and is
respected by the courts.
In
the words of GOLDSTONE JA in Amalgamuted Clothing & Textile
Workers Union of South Africa v Veldspun (Pty) Ltd 1994 (1) SA 162
(A) at 169F-H:
“When
parties agree to refer a matter to arbitration, unless the submission
provides otherwise, they implicitly, if not explicitly (and subject
to the limited power of the Supreme Court under section 3(1) of the
Arbitration Act), abandon the right to litigate in courts of law and
accept that they will be finally bound by the decision of the
arbitrator…..
In
my opinion the courts should in no way discourage parties from
resorting to arbitration and should deprecate conduct by a party to
an arbitration who does not do all in his power to implement the
decision of the arbitrator promptly and in good faith.”
See
also Brumat Ltd v Multicom Ltd 2000 (1) ZLR 637 (H).
So
the ruling on the jurisdiction of the arbitrator, and therefore the
validity of clause 3(c) of the parties agreement should have been
approached by the respondent from 3 fronts, none of which was
resorted to.
(i)
The respondent could have appealed MANGOTA J's judgment authorising
the appointment of an arbitrator. It was not done.
(ii)
When the arbitrator ruled on his own jurisdiction, the respondent had
the leeway to challenge that determination in terms of Article 16(2)
within 30 days. This was not done.
(iii)
Finally the respondent could have sought that it be set aside in
terms of Article 34 within 3 months. Again this was not done.
Surely
the respondent cannot be seen to smuggle that issue into the
application now.
That
then brings me to the last two factors considered by the respondent
as indicative of the award being contrary to the public policy of
this country, namely, that the arbitrator did not escalate the rent
in terms of the parties agreement and that the arbitrator pitched
camp with the applicant by allowing more information to be provided
which the applicant had not initially provided.
In
terms of Article 34(2)(b) an arbitral award may be set aside by this
court only if the court finds that the subject matter of the dispute
is not capable of settlement by arbitration under the law of this
country or the award is in conflict with the public policy of
Zimbabwe.
Article
34(5) goes further to set out what would ordinarily be regarded as
being contrary to the public policy. 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; or
(b)
a breach of the rules of natural justice occurred in connection with
the making of the award.”
In
a line of cases, the courts have been very careful to interpret that
provision narrowly cognisant of the need to protect the principle of
sanctity of contract.
After
all, it is the parties who voluntarily submit to arbitration as an
instrument for the speedy and cost effective means of resolving their
dispute. The courts are therefore more inclined to deprecate conduct
of a party intent on disrespecting the agreement by undermining the
process of arbitration agreed upon by the parties.
Fanciful
defences against registration of arbitral awards and frivolous
applications seeking to set aside an award by inviting the court to
plough through the same dispute which has been resolved by an
arbitrator in the forlorn hope of obtaining a different outcome will
not be entertained.
As
eloquently stated in Zesa v Maphosa 1999 (2) ZLR 452 (S) at 466E–G:
“Under
articles 34 and 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.”
See
also Delta Operations v Origen Corp (Pvt) Ltd 2007 (2) ZLR 81 (S) at
85C–D; Provincial Superior Jesuit Province of Zimbabwe v Kamoto &
Ors 2007 (2) ZLR 8 (3) at 13C–D; Origen Corporation (Pvt) Ltd v
Delta Operations (Pvt) Ltd 2005 (2) ZLR 349 (H) at 355; Decimal
Investments (Pvt) Ltd v Arundel Village (Pvt) Ltd 2012 (1) ZLR 581
(H).
I
agree with Mr Mugandiwa for the applicant that an arbitrator is
entitled to be wrong without attracting the setting aside of the
award.
That
view was expressed with silky eloquence by GARDINER J in Clark v
African Guarantee and Indemnity Co. Ltd 1915 CPD 68 at 77:
“The
courts will always be most reluctant to interfere with the award of
an arbitrator. The parties have chosen to go to arbitration instead
of resorting to the courts of the land, they have specially selected
the personnel of the tribunal, and they have agreed that the award of
the tribunal shall be final and binding.
As
Halsbury LC said in Holmes Oil Co. v Pumpherston Oil Co. Court of
Sess R 18 at 53:
'One
of the advantages that people are supposed to get by reference to
arbitration is the finality of the proceedings when the arbitrator
has once stated his determination. They sacrifice something for that
advantage. They sacrifice the power to appeal. If, in their judgment,
the particular judge whom they have selected has gone wrong in point
of law or in point of fact, they have no longer the same wide power
to appeal which an ordinary citizen prosecuting his remedy in the
courts of law possesses, but they sacrifice that advantage in order
to obtain a final decision between the parties. It is well-settled
law, therefore, that when they have agreed to refer their
difficulties to arbitration, as they have here, you cannot set aside
the award simply because you think it is wrong.'”
See
also Kolber & Anor v Sourcecom Solutions (Pty) Ltd & Ors;
Sourcecom Technology Solutions (Pty) Ltd v Kolber & Anor 2001 (2)
SA 1097 at 1111G–I, 1112A.
The
views expressed in the foregoing authorities were endorsed by the
South African Supreme Court of Appeal in Telcordia Technologies Inc v
Telkom SA Ltd 2007 (3) SA 266. HARMS JA stated at 302A:
“An
arbitrator 'has the right to be wrong' on the merits of the case,
and it is a perversion of language and logic to label mistakes of
this kind as a misconception of the nature of the inquiry; they may
be misconceptions about meaning, law or the admissibility of evidence
but that is a far cry from saying that they constitute a
misconception of the nature of the inquiry.”
Pursing
the same line of reasoning that it does not matter that the
arbitrator may have misinterpreted the agreement, failed to apply the
law correctly or had regard to inadmissible evidence, the learned
judge of appeal stated at 302D-E:
“Likewise,
it is a fallacy to label a wrong interpretation of a contract, a
wrong perception or application of South African law, or an incorrect
reliance on inadmissible evidence by the arbitrator as a
transgression of the limits of his power. The power given to the
arbitrator was to interpret the agreement rightly or wrongly; to
determine the applicable law, rightly or wrongly; and to determine
what evidence was admissible, rightly or wrongly---. To illustrate,
an arbitrator in a 'normal' local arbitration has to apply South
African law but if he errs in his understanding or application of
local law the parties have to live with it.”
That
position is settled, a party to arbitration cannot come to court
because the arbitrator was wrong.
The
court will only interfere with an award which is not just wrong but
where the reasoning or conclusion goes beyond mere faultiness or
incorrectness but can be regarded as constituting a palpable inequity
so far-reaching and so outrageous in its defiance of logic or
acceptable moral standards as to cause a fair-minded person to regard
it as unbearably hurting all sense of justice and fairness.
In
my view the authorities set a very high threshold for the court to
interfere.
It
is certainly not enough that a party does not agree with the decision
of the arbitrator and would rather have a re-assessment of the
dispute.
That
is not what Articles 34 and 36 are intended for.
Regarding
the issue of escalation of rent provided for in Clause 3(e) of the
agreement the respondent's position is that when multi-currencies
were introduced the parties reached an agreement that rent would be
US$170.00 a month. For that reason it is that figure which should
have been escalated in terms of the agreement.
The
applicant's case was that the parties failed to agree on a fair
rent and while the dispute escalated they agreed on an interim figure
of US$170 which was later revised to US$3000.
The
arbitrator found in favour of the applicant concluding that the only
agreed rent which was expressed in writing was one sounding in
Zimbabwe dollars which could not be escalated after that currency
ceased to exist.
In
light, inter alia of Clause 25 which required all agreements to be
expressed in writing, there was no agreement for payment of any
amount in United States dollars.
In
my view the decision reached by the arbitrator was supported by full
reasons. He applied his mind and came to a conclusion. I am unable to
see anything contrary to the public policy of Zimbabwe.
Surely
public policy cannot be disturbed by a decision adverse to one of the
contesting parties.
On
the issue of the procedure adopted by the arbitrator in the conduct
of arbitration, it should be observed that arbitration proceedings
are free from the trappings of formal court formalities and
procedures. In fact their informality is their major strength which
continuously attract parties to resort to that alternative dispute
resolution mechanism.
The
arbitrator invited parties to provide additional information he
required to arbitrate.
He
openly did so and also gave them an opportunity to make
representations in that regard mindful of the rules of natural
justice.
This
was an arbitration conducted in terms of an agreement containing
Clause 20(d), to wit:
“The
arbitrator shall decide the matter submitted to him according to what
he considers just and equitable in the circumstances and therefore
the strict rules of law need not be observed or to be taken into
account by him in arriving at his decision.”
There
can be no doubt that this clause liberated the arbitrator from the
shackles of procedure allowing him to decide the matter in any manner
he deemed just and equitable.
I
do not regard requesting expert evidence on a fair rent to be an act
of descending into the arena of battle as envisaged in the case of
Leopard Rock Hotel (Pvt) Ltd v Warrent Construction (Pvt) Ltd 1994
(1) ZLR 255 (S) at 278B-F, relied upon by Mr Diza.
Even
a court of law which is bound by rules of procedure is entitled to
call a witness to clarify grey areas in a case.
There
was therefore nothing wrong, at least nothing which would offend
public policy, with the arbitrator calling for evidence on the
current fair rent.
The
application for setting aside the arbitral award is clearly meritless
and cannot succeed.
I
have said that both parties agreed that a dismissal of the
application for setting aside the award necessarily means that the
award should be registered by the grant of the application for
registration.
I
am however disinclined to award punitive costs. The respondent was
entitled to test the correctness of the arbitral award.
In
the result, it is ordered that;
1.
The application for the setting aside of the arbitral awards of
Daniel Tivador dated 10 April 2018 and 28 August 2018 which is case
No.10011/18 is hereby dismissed.
2.
The application for registration of the arbitral award which is case
No. HC9909/18 is hereby granted.
3.
The arbitral award of Daniel Tivador dated 28 August 2018 is hereby
registered as an order of the High Court of Zimbabwe in terms of
Article 35(1) of the First Schedule to the Arbitration Act [Chapter
7:15].
4.
The respondent shall pay the applicant the sum of US$112,119.85.
5.
The respondent shall pay interest on the sum of US$88,119.85 at the
rate of 5% per annum reckoned from 6 December 2016 to date of final
payment.
6.
The respondent shall pay the costs of suit.
Kantor
and Immerman, applicant's legal practitioners
Mhishi
Nkomo Legal Practice, respondent's legal practitioners
