Opposed
Matter
MANGOTA
J:
The applicant and the first respondent entered into a lessor-lessee
relationship respectively. They, on 16 July 1999, signed a notarial
agreement of lease [“the lease”].
The
applicant let, and the first respondent hired, a certain portion of
the property known as Harare Sport Club [“the property”]. This is
situated in the District of Harare formerly Salisbury. The agreed
monthly rent for the property was Z$40,000. This was changed to
US$170 per month at the introduction of the multiple currency.
The
lessee, it was agreed, would pay a pro-rata share of electricity
and/or water charges it would have used. The monthly rentals, it was
further agreed, would be escalated annually at the parties mutually
agreed rate.
The
applicant and the first respondent [“the parties”] maintained
their lessor-lessee relationship cordially for ten (10) years
running. Each, it is assumed, made every effort to remain within the
four corners of the lease.
The
introduction of the multiple currency saw the two of them drifting
apart.
At
the centre of their disagreement was the quantum of rentals which the
first respondent was to pay on a month-by-month basis for its lease
of the applicant's property.
The
applicant's position was that the sum of USD170 was a token monthly
rental. It stated that the parties agreed upon that figure whilst
discussions for rent which was to be paid for the property remained
in progress.
It
said the understanding was that the negotiations would enable the
parties to strike a balance between them and agree upon a monthly
rental which was commensurate with the value of the property.
It
submitted that, in April 2015, rent for the property was increased
from USD170 to USD3000 per month. It averred that the stated figure
of $3000 per month remained way below its expectations of what it
considered to be a realistic monthly rental for the property.
The
first respondent denied that rent for the property was increased from
USD170 to USD3000 per month. It acknowledged the agreed monthly sum
of USD170 and not more than that. It stated that the two of them
agreed, as parties, that it would continue to pay USD170 per month.
It
averred that the rent was deliberately low because the parties agreed
between them that the first respondent would be responsible for
making all the necessary improvements that would be required on the
property from time to time. Such improvements, it said, would accede
to the applicant subject to the latter compensating it for the same.
It
stated that compensation would be by way of set off against rentals
in terms of clause 5(c) of the lease.
The
parties disagreement on the issue of rent which the first respondent
should pay and ancillary matters prompted the applicant to file the
present application.
It
moved the court to authorise the second respondent to appoint an
arbitrator to determine its disputes with the first respondent. It
filed its application in terms of Article II of the Model Law
Schedule (Section 2) of the Arbitration Act [Chapter 7:15] (“the
Act”).
The
first respondent opposed the application.
The
second respondent who was cited for purposes of the applicant's
intended order did not opposes the application.
The
first respondent's two in limine matters were that:
(a)
the court did not have the power to authorise the second respondent
to appoint an arbitrator who would preside over the parties
contractual issues; and
(b)
because the parties dispute related to the appropriate rental for the
property, the matter should have been referred to the Commercial Rent
Board for determination.
It
stated, on the merits, that no dispute(s) existed between the
applicant and it.
It
submitted that the parties were still negotiating the issue of rent
which it was to pay for the property.
It
said clause 5(c) of the lease excused it from paying rent.
The
clause, it claimed, obliged the applicant to deduct its rentals from
the value of the improvements which it made on the property. It
indicated that it owed the applicant nothing.
It
stated that the necessary measures which Article 11(4) of the Model
Law envisaged related to the court appointing the arbitrator. The
court, it submitted, could not assign that responsibility to the
second respondent.
It,
therefore, moved the court to dismiss the application with costs.
The
first respondent was not being candid when it stated that no
dispute(s) existed between the applicant and it.
The
existence of the dispute(s) requires little, if any, debate.
The
correspondence which the parties exchanged between them in November
2014 constitutes ample evidence of the existence of the same. It was
indeed in some of that correspondence that the first respondent
declared the existence of a dispute or disputes between the applicant
and it. It even threatened, from as far back as the mentioned period,
to exercise its rights in terms of the lease and have the dispute(s)
referred to arbitration.
In
a letter, Annexure BC3, which it addressed to the applicant's
erstwhile legal practitioners on 3 November 2014, the first
respondent wrote, on a without prejudice basis, and stated, in part,
as follows:
“The
dispute between Harare Sports Club (HSC) and Zimbabwe Cricket (ZC)
has now degenerated to levels where we require independent
intervention. In case you are not aware, let me advise you that this
dispute has been going on for some time now.” (emphasis added).
In
its second letter, Annexure C4, which its legal practitioners wrote
to the applicant's legal practitioners on 24 November 2014, the
first respondent stated, in part, as follows:
“We
have instructions to advise you that our client is not agreeable to
the unilateral figure of $10,000 as the monthly rental for the
cricket field. It is apparent that this figure was plucked out of
thin air without any legal or practical basis. To that end, our
client evokes clause 3(c) of the lease agreement and exercises its
rights to refer the matter to an independent arbitrator to make a
determination………
In
addition to this, our client disputes yours baseless allegation that
it is unable to hold on to financially sustained or viable
international or local cricket especially in light of the recent
games against South Africa and Australia. Our client questions yours
interpretation of clause 21(b)(iii) of the lease agreement and would
like to subject your client's view of the breach of that clause to
arbitration in terms of clause 20(a) of the lease agreement.……….
Furthermore,
our client has also been paying Harare Sports Club water, rates and
electricity bills out of charity but however in consideration of your
client's present stance and the stand-off between the parties as
well as clause 3(b) of the lease agreement, our client will only pay
its prorata share and shall calculate the amounts which were due to
be paid by your client and will seek reimbursement of the same.”
[emphasis added]
The
first respondent declared the existence of a dispute from as far back
as November 2014.
It
was, therefore, naive for it to suggest, as it did, that there was no
dispute when the applicant declared the same in the present
application.
Its
assertion which was to the effort that there was no dispute because
the parties were still negotiating the rent which it should pay for
the property was as misplaced as it was too far fetched.
Parties
who, in ernest, commenced discussing the issue of what rent it should
pay in 2009 cannot be heard to say that they are still discussing the
same subject matter some six or so years later.
It,
however, did the honourable thing when it conceded during the hearing
of this application, the existence of the dispute(s) between the
applicant and it.
Clause
20(a), and to some extent clause 3(c), of the lease spelt out the
manner in which disputes which arise between the parties would be
resolved.
Clause
3(c) makes reference to the escalation of rentals. It reads, in part,
as follows:
“(c)
the rentals…. shall be escalated on an annual basis with effect
from the first anniversary of the effective date at a rate to be
agreed between the parties, in default of which it shall 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……” [emphasis added]
Clause
20(a) of the lease is wider in scope and substance than clause 3(c).
It reads, in part, as follows:
“20(a)
Save as is otherwise expressly provided in this agreement, should any
dispute arise between any of the parties in regard to:
(i)
the interpretation of;
(ii)
the effect of;
(iii)
the parties respective rights or obligations under;
(iv)
breach of;
(v)
the termination of; or
(vi)
any matter arising out of the termination of this agreement; that
dispute shall be decided by arbitration in the manner set out
hereunder:
(b)(i)…………
(ii)………….
(iii)…………
(c)
the arbitrator shall be selected by mutual agreement between the
parties.
(d)…………
(e)
the parties irrevocably agree that the decision made by the
arbitrator shall be final and binding upon them and shall be carried
into effect and can be made an order of court or (sic) competent
jurisdiction. Such decision shall not be subject to review, appeal or
re-hearing.” [emphasis added].
The
parties, it is evident, crafted for themselves a clearly defined
manner of resolving their dispute(s).
The
understanding between them was, and is, that they would mutually
agree to appoint an arbitrator who would determine their cause
whenever such arose or arises.
It
was never their intention that when disputes arise, one of them would
renege on the agreed position and suggest another way of resolving
the same.
The
lease which the parties signed is a contract. The parties adherence
to its terms and conditions cannot be understated.
A
fortiori when, as in casu, the lease is couched in clear and
unambiguous terms.
The
first respondent's suggestion which was to the effect that the
applicant should have taken the dispute(s) between them to the
Commercial Rent Board is, on the basis of the principle of sanctity
of contract, misplaced.
Sanctity
of contract provides that, once a contract is entered into freely and
voluntarily, it becomes sacrosanct and courts should enforce it. [See
Innocent Maja: The Law of Contract in Zimbabwe page 24].
Our
legal system pays great respect to the principle of sanctity of
contract.
The
courts would rather uphold than reject contracts: [see Mudoo (Pvt)
Ltd v Wallace, 1979 (2) SA 957].
The
doctrine of sanctity of contract holds in Zimbabwe: [see Old Mutual
Shared Services (Pvt) Ltd v Shadaya, HH15/13].
The
principle of sanctity of contract was not the only reason which made
the Commercial Rent Board route impossible for the parties to pursue.
The
suggested route could not hold for other reasons; chief amongst those
reasons were the assertions of the first respondent.
The
matters which it raised in its affidavit fell outside the mandate of
the Commercial Rent Board. Amongst those matters were the following:
(i)
whether or not clause 5(c) of the lease excused the first respondent
from paying rent for its use of the applicant's property;
(ii)
whether or not the Commercial Rent Board could determine matters
which pertained to the first respondent's payment of electricity
and/or water it used, or uses, for its operations at the property;
(iii)
whether or not rent increased from $170 to $3,000 in April 2015; and
(iv)
whether or not the first respondent owes the applicant $64,119.85 for
rentals, electricity and water charges.
The
above matters fall more into the realms of clause 20(a) of the lease
than they fall under the provisions of the Commercial Rent Board.
They
speak to the interpretation of the lease, breach or otherwise of the
same as well as the parties rights and obligations under the lease.
The Commercial Rent Board does not, in my view, contain any
provisions by means of which such matters can be resolved.
It
cannot, in short, competently deal with the observed matters.
The
Commercial Rent Board route which the first respondent was so pleased
to persuade the court to follow is out of the question.
The
lease was a well thought out document. It contained a mechanism for
resolving disputes. Its shortcoming was that it failed to provide for
all possible eventualities.
It,
for instance, remained silent on what would happen where parties
failed to mutually agree on a way forward when a dispute such as the
present one has arisen. It did not envisage a situation where the
parties would fail to mutually agree on the appointment of an
arbitrator to resolve their dispute or, as in casu, their disputes.
The
observed shortcoming of the provisions of the lease prompted the
applicant to apply as it did.
It
moved the court to authorise the second respondent to appoint an
arbitrator who would determine the parties disputes. It placed
reliance on Article 11(4) of the Arbitration Act [Chapter 7:15] [“the
Act”] in the mentioned regard.
The
first respondent's position was that the court did not have the
power to authorize the second respondent to appoint an arbitrator. It
stated that the court can appoint an arbitrator. The power of the
court does not, according to it, extent beyond its ability to appoint
an arbitrator.
The
court established the existence of a dispute, or disputes, between
the parties. It also ruled out the Commercial Rent Board route which
the first respondent urged it to consider favourably. It remained
alive to the fact that:
(a)
the parties agreed on a procedure for appointing an arbitrator; and
(b)
the procedure in question contained some shortcomings which the
parties could not, on their own, cure except through such an
application as the present one.
Whether
or not the court has the power to authorise the second respondent to
appoint an arbitrator for the parties case does, in a large measure,
depend on the interpretation which must be placed on the applicable
law.
Article
11 of the Act makes reference to the Appointment of Arbitrators. It
reads, in part, as follows:
“(1)………
(2)
The parties are free to agree on a procedure of appointing the
arbitrator or arbitrators, subject to the provisions of paragraphs
(4) and (5) of this article.
(3)
Failing such agreement -
(a)
in an arbitration with three arbitrators each party shall appoint one
arbitrator, and the two arbitrators thus appointed shall appoint the
third arbitrator; if a party fails to appoint the arbitrator…. or
if two arbitrators fail to agree on the third arbitrator…. the
appointment shall be made, upon request of a party, by the High
Court;
(b)
in an arbitration with a sole arbitrator, if the parties are unable
to agree on the arbitrator, he shall be appointed, upon request of a
party, by the High Court. [emphasis added].
4.
Where, under an appointment procedure agreed upon by the parties -
(a)
a party fails to act as required under such procedure; or
(b)……;
or
(c)
…..; any party may request the High Court to take the necessary
measure unless the agreement on the appointment procedure provides
other means for securing the appointment.” [emphasis added]
A
reading of the above cited Article shows that the court can only
properly act under section 3(a) and (b) of the Act. It can do so at
the request of the aggrieved party.
The
parties case falls under section 4 of Article 11 of the Model Law.
They
agreed on an appointment procedure. They incorporated their position
in this regard in the lease. The first respondent failed to act under
the procedure which the parties defined for themselves.
The
court cannot appoint an arbitrator for them. It, in any event, was
not requested to do so.
What
the applicant moved the court to do was to take the necessary
measure.
The
court has the power to take that necessary measure. The relevant law,
Article 11(4) of the Model Law, confers that power upon it, given the
fact that:
(a)
the parties disputes cannot remain unresolved for times immemorial;
(b)
the first respondent failed to act as is required of it under the
procedure which the parties defined for themselves; and
(c)
the parties agreement does not provide them with another way of
securing the appointment of the arbitrator;
The
necessary measure which the law allows the court to take is to
authorise the second respondent to appoint the arbitrator who would
deal with, and determine, the parties dispute(s).
That,
in my view, is the correct interpretation which must be placed on the
phrase “any party may request the High Court to take the necessary
measure.” Any interpretation which falls outside the stated one
would produce an absurd result.
The
law is not crafted to produce absurd results.
The
legislature, in its wisdom, could not insert into the Act a clause
which served no purpose. It remained alive to the inherent
jurisdiction of the court. It allowed the court a wide discretion to
enable it to deal with such a matter as the present one.
The
court can, in the exercise of its inherent jurisdiction, authorise
the second respondent to act in line with the applicant's prayer.
The law allows it to act as such.
The
court has considered all the circumstances of this case. It is
satisfied that the applicant proved its case on a balance of
probabilities. The application is, therefore, granted as prayed.
Kantor
& Immerman, applicant's legal practitioners
Mhishi
Nkomo Legal Practice, 1st & 2nd respondent's legal
practitioners
