On 1 January 2003, the applicant and the first respondent executed an agreement for the “supply of primary beverage transport services.”In terms of clause 8 of the agreement, the first respondent, Delta, appointed the services of the applicant, Pioneer, to distribute and deliver products on its behalf to various destinations.In ...
On 1 January 2003, the applicant and the first respondent executed an agreement for the “supply of primary beverage transport services.”
In terms of clause 8 of the agreement, the first respondent, Delta, appointed the services of the applicant, Pioneer, to distribute and deliver products on its behalf to various destinations.
In order to perform its obligations under the agreement, Pioneer undertook to supply vehicles to Delta for use in the distribution aforesaid. To that end, Pioneer had to make available to Delta twelve mechanical horses which would be used to draw thirty-four trailers, these being supplied by Delta.
The agreement also provided for the supply of additional horses, by Pioneer, on an ad hoc basis as the exigencies of the situation would have demanded.
As sometimes happens, the parties had a falling out.
The agreement, in terms of clause 18 thereof, provided for the settlement of disputes through an arbitration process.
In due course, the second respondent was appointed as arbitrator to the dispute and the matter referred to him. The parties were called before him, and, on 16 January 2010, he issued an award.
The applicant has, through these proceedings, brought an application to have the award set aside by this court in terms of Chapter VII, Article 34 of the First Schedule to the Arbitration Act [Chapter 7:15]. The applicant also seeks costs against the first respondent.
The founding affidavit has been deposed to by a John Groves. He states that he is employed as a Managing Director by the applicant and that he is authorised to depose to the affidavit.
He states therein that the application was being brought to court in accordance with the provisions of section 2 of Article 34 of the First Schedule to the Arbitration Act [Chapter 7:15].
The dispute is centred around the effect to be given to clause 9(f) of the agreement, in terms of which, upon termination of the agreement, Pioneer was supposed to return the trailers to Delta, and such return to be in “good working condition” and order fair wear and tear excepted.
The deponent states that, on 26 September, Delta commenced arbitration proceedings in terms of a Statement of Claim filed of record. Pioneer opposed the claim and the matter was set down for hearing before the arbitrator. Both parties adduced viva voce evidence.
According to the deponent to the affidavit the crystal issue before the arbitrator was the duration of the agreement.
The arbitrator found that the claim by Delta had not prescribed at the time that it submitted the dispute to arbitration. The deponent contends, therefore, that the arbitrator acted outside the enabling provisions of the agreement.
He contends, further, that the finding by the arbitrator that the agreement between the parties terminated on 30 November 2005 was not rationally linked to either the evidence adduced by the parties or submissions made by the same on the papers or during the hearing. He contends, further, that, in finding as he did, that the agreement terminated on 30 November instead of 31 December, as provided for in clause 2 of their agreement, the arbitrator had created a new contract for them.
In addition to the above, the applicant contended that the mandate of the arbitrator was limited to the duration of the agreement, and that consequently he was supposed to ascertain the obligations of the parties as at the date of termination of the agreement.
However, contends the applicant, the arbitrator seemed to have extended the applicant's obligations under the contract beyond the lifespan of the agreement.
It is further contended that the applicant's liabilities ought to have been ascertained as at the date.
According to the applicant, the award is not limited to the termination date, as found by the arbitrator, that is 30 November 2005, but goes beyond that. Therefore, the applicant contends, even on his own version, the arbitrator has acted outside the provisions of the contract. This, he suggests, is contrary to the Zimbabwean substantive law on the privity of contracts and therefore contrary to public policy.
The deponent also avers, that, by awarding specific performance in favour of a party who had, in terms of the contract, bilateral obligations which it had itself not performed, and was not in a position to perform, the arbitrator had unjustly enriched one of the parties at the expense of the other contrary to the positive law in Zimbabwe regarding bilateral obligations and further that this was contrary to public policy.
In the event, the applicant prayed for the setting aside of the arbitral award....,.
The applicant has attacked the award on three prongs;
(i) Firstly, that the arbitrator acted outside the provisions of the enabling agreement;
(ii) That the claim was prescribed; and
(iii) That the order for specific performance was contrary to the public policy of Zimbabwe regarding bilateral and reciprocal obligations and the principle of unjust enrichment.
According to the applicant, the award should therefore be set aside on the following grounds:
1. That the arbitrator acted outside the provisions of the enabling agreement;
2. That the claim was prescribed in terms of section 14 of the Prescription Act; and
3. That the order for specific performance, in the circumstances of this case, was contrary to the public policy of Zimbabwe regarding bi-lateral reciprocal obligations and the principles of unjust enrichment.
In relation to the first issue, the applicant contended that the arbitrator had acted outside the provisions of the enabling agreement.
It is contended that the first respondent had an onus to establish the duration of the agreement between the parties. Contrary to the provisions of the contract, so the applicant contends, the arbitrator placed the onus on the applicant to disprove the contentions of the claimant.
The applicant contends that, before the arbitrator, it put up the case that the agreement commenced on 1 January 2003 and terminated on 31 December 2004 and that the respondent, had, contrary to that assertion, contended that the agreement had not terminated up to the time that it instituted proceedings.
The applicant contends that the arbitrator disagreed with the versions that both parties placed before the arbitrator, and that, in approaching the matter as he did, he created a new contract between the parties based on what he termed practical considerations.
The applicant contends, in this regard, that the arbitrator unilaterally extended the duration of the contract where he held the date of termination as 30 November 2005.
The applicant contends, therefore, that the award is liable to be set aside on the grounds that it is in conflict with the public policy of Zimbabwe.
The applicant suggests that there was ambiguity in the contract and that in fact the arbitrator did confirm that the contract was ambiguous and that therefore he should have invoked the contra proferentum rule in favour of the applicant and this error on his part constituted a gross error on his part which further rendered the award unenforceable.
He suggests that the arbitrator must have found that clause 8(d) was ambiguous and contrary to the clear provisions of clauses 1 and 2 of the agreement which stated the commencement and termination dates. He suggests that the contract was prepared by Delta, and, as it was ambiguous in relation to clause 8(d), the arbitrator should have been guided by the contra proferentem rule and find that the contract had terminated as provided for in clause 2.
He stated that the arbitrator failed to apply the clear and positive principles of Zimbabwean law in resolving the dispute, and that, in the circumstances, the award was contrary to the public policy of Zimbabwe.
The first respondent has contended that it is not for this court to decide whether or not the arbitrator was correct to find that the agreement would have terminated on the date that the arbitrator said it terminated. It was suggested, by the respondent, that what this court must ask itself is whether the conclusions reached by the arbitrator offends the public policy of Zimbabwe in the sense of being so far reaching and outrageous in its defiance of logic or accepted moral standards that a sensible and fair-minded person would consider the conception of justice in Zimbabwe would be intolerably hurt by the award: see Zimbabwe Electricity Supply Authority v Maposa 1999 (2) ZLR 452 (S).
The critical issue for determination before the arbitrator was the duration of the contract.
It is trite that the original UNCITRAL Model did not define the concept of public policy. It is accepted, however, that the concept covers fundamental principles of law and justice in substantive as well as procedural law.
In casu, the standard set in Zimbabwe Electricity Supply Authority v Maposa 1999 (2) ZLR 452 (S) has not been met.
The applicant has chosen not to place the record of proceedings before for the court resulting in the court being unable to judge for itself whether or not the conclusions of the arbitrator are so outrageous in defiance of logic and accepted moral standards as to lead a fair minded person to believe that justice in Zimbabwe would be intolerably hurt by the award in favour of the first respondent.
The applicant has not, in the affidavit on which the application is premised, even alleged that the conclusions reached by the arbitrator defied logic to such unacceptable standards.
Instead, the applicant has sought to deal with the matter as if it were an appeal or application for review.
In Zimbabwe Electricity Supply Authority v Maposa 1999 (2) ZLR 452 (S) the court stated:
“An award will not be contrary to public policy merely because the reasoning or conclusions of the arbitrator are wrong in fact or 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 decline to recognise an award having regard to what it considers should have been the correct decision.”
Whether or not the arbitrator arrived at the wrong decision is not an issue that this court is empowered, in terms of Article 34, to decide.
What the applicant should have established is that the decision and conclusions reached, based on the standard set in Zimbabwe Electricity Supply Authority v Maposa 1999 (2) ZLR 452 (S) was so outrageous in its defiance of logic and reasoning that any fair-minded person would have a conception that justice in Zimbabwe would be hurt by that award.
This is not the case of the applicant.
There is no suggestion anywhere in the heads of argument pointing me to an aspect of the award that breached the rules of natural justice.
In any event, there is no principle that says that an arbitrator can have his award set aside on the basis that he erred or was wrong. If it is there I have not been made aware of it.
In Telcordia Technologies Inc v Telcom SA 2007 (3) SA 266 HARMS JA stated:
“…,. An arbitrator 'has the right to be wrong' on the merits of the case, and it is a perversion of the language 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 far cry from saying that they constitute a misconception of the nature of the inquiry.
To adopt the quoted words of HOEXTER JA;
'It cannot be said that the wrong interpretation of the Integrated Agreement prevented the arbitrator from fulfilling his agreed function or from considering the matter left for him for decision. On the contrary, in interpreting the Integrated Agreement, the arbitrator was fulfilling the function assigned to him by the parties, and it follows that the wrong interpretation of the Integrated Agreement could not afford any ground for review by the court.'”
The next point to consider is whether or not the claim before the arbitrator had prescribed and that the award by the arbitrator, therefore, in the circumstances, was contrary to the public policy of Zimbabwe.
The deponent to the founding affidavit contends that the agreement terminated on 31 December 2004. Prescription then started running on 1 January 2005 and completed its course on 31 December 2008.
The claim was instituted on 26 September, well after it had become prescribed.
He states that the date of termination of the agreement cannot be in doubt as the first respondent sought a renewal in a letter dated 12 September 2005. It is further contended, by the applicant, that the new contract, save for alterations to the dates for commencement and termination, is in exactly the same terms as that concluded on 1 January 2003.
The applicant has argued that the arbitrator correctly identified the critical issue for determination as being the duration of the agreement and that once this had been established the issue of liability would be settled. It was in the view of the applicant, up to the claimant to establish the duration of the agreement but that surprisingly the onus appeared to have been placed on the applicant.
The applicant further contends that it is against the public policy of Zimbabwe to enforce obligations which have become extinguished through prescription. Therefore, the applicant contends, the relief granted to the first respondent was contrary to the provisions of sections14 and 15 of the Prescription Act [Chapter 8:11].
Further to this, the applicant is alleged to have admitted liability in terms of two documents admitted as exhibits before the arbitrator.
These documents, according to the first respondent, served to interrupt any alleged prescription as claimed by the applicant.
In addition to this, the first respondent contended that despite the protestations by the applicant, the parties had not executed a subsequent agreement and yet they continued to deal with each other leading to the conclusion that the contract did not terminate on 31 December 2004, as alleged by the applicant, but continued beyond the stipulated date as found by the second respondent.
The respondent denied that the second respondent had sought refuge in clause 8(d) of the contract and it denies, further, that this clause contradicts clauses 1 and 2 of the same.
In the premises, the first respondent denied that there had been a contravention of sections 14 and 15 of the Prescription Act.
Clauses 1 and 2 of the agreement provide for a commencement as well as a termination date. However, clause 8(d) also speaks of the duration of the agreement notwithstanding the provisions of the two clauses referred to above.
This is what it provides:
“Notwithstanding the date of signature of this agreement, this agreement shall be deemed to have commenced on the commencement date and shall be relevant after two years. After this review period, the agreement shall continue indefinitely save that either party may withdraw from this agreement on giving three months notice in writing to the other.”
In addition, the evidence adduced before the arbitrator seemed to suggest that the parties continued trading with each other long after the agreement would have been terminated.
If indeed the arbitrator came to the conclusion that the matter had not prescribed when in fact it had, such a finding is not, in my view, a breach of section 14 of the Prescription Act. The Act does not create a criminal offence in the event that a debt that has prescribed is found by a court or tribunal not to have prescribed.
