Edgars Stores Limited v Fortrid Resources Africa (Pvt) Ltd and David Coltart N.O.

### Preamble
1
HB 170/25
HCBC 1329/24
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EDGARS STORES LIMITED

Versus

FORTRID RESOURCES AFRICA (PVT) LTD

AND

DAVID COLTART N.O

IN THE HIGH COURT OF ZIMBABWE

KABASA J

BULAWAYO 16 SEPTEMBER AND 17 OCTOBER 2025

Opposed Application

W. Musengwa, for the applicant.

M. Ndlovu, for the respondent

KABASA J: 	This is an application to set aside an arbitral award.  There was a consolidation of the matters due to the fact that one party (the respondent) had filed an application seeking for the registration of the award whilst the applicant herein filed its own application seeking the setting aside of that award.

At the hearing of the matter the parties agreed that the application for the setting aside of the award be argued first as its resolution would directly affect the other application.  Following that agreement, each party abandoned the points in limine that each one had raised.  I therefore do not intend to detain myself over the abandoned points in limine.  Suffice for me to merely mention that points in limine had been raised without necessarily stating what those were as that serves no purpose.

The background to this application is this:-

The applicant and 1st respondent concluded a Merchandise Supply Agreement (MSA) in September 2017.  According to the applicant, in June 2022, 1st respondent was asked to supply merchandise worth ZAR 602 000 which the applicant duly paid for.  However, clothing items worth US$34 146,24 were not delivered and the explanation was that an entity called Lutfeyah Fashionary was responsible for the non-delivery.  In November 2022, 1st respondent, at applicant’s instance supplied goods worth US$245 187,70.  The applicant settled the amount but withheld US$34 146,24. The 1st respondent was aggrieved by this and declared a dispute in terms of clause 18 of the MSA and the matter was referred for arbitration. The 1st respondent’s contention being that it had nothing to do with the agreement between applicant and Lutfeyah Fashionary as it had only assisted the applicant by paying for the goods supplied by Lutfeyah. The applicant was therefore to look to Lutfeyah for redress and not withhold payment for the goods supplied by the 1st respondent.

The arbitrator was mandated to determine the following issues: -

“1.	Whether or not the respondent is indebted to the claimant in the sum of US$40 534.08.

2.	Whether or not claimant is indebted to the respondent in respect of the undelivered Lutfeyah Fashionary consignment.  If yes, whether or not the respondent is entitled to withhold payment to the claimant on account of the undelivered consignment.

3.	…

4.	…

5.	Which party is to be awarded costs and on what scale.”

The third and fourth issues were abandoned by the parties and so were not adjudicated on by the arbitrator.

After the hearing, the arbitrator awarded claimant’s claim and stated that the payment “shall be in US dollars (cash or by payment to a NOSTRO account” and the respondent was not entitled to pay in any other currency.

In coming up with this award the arbitrator had this to say:-

“In summary I am left in no doubt that the transaction being adjudicated upon did not fall under the ambit of the original Merchandise Agreement.  There was a separate agreement reached between the parties, known as a 3rd party agreement which did not involve the supply of products and in which the claimant clearly acted on behalf of the respondent to effect payment and clearance of products supplied by a completely separate entity.”

The arbitrator further held that the respondent was estopped from evading liability due to its conduct as it initiated the arrangement, made representations to the claimant which the claimant acted on in good faith to its prejudice.  A third-party agreement therefore existed, and the respondent could not rely on the provisions of the ‘MSA’ to avoid liability.

The applicant contends that this award offends public policy in that the arbitrator barred the applicant from relying on the ‘MSA’ which was the basis of the parties’ relationship and also clothed the arbitrator with the jurisdiction to hear the matter and yet relied on the same agreement to assume jurisdiction over the matter.  The respondent’s cause of action arose from the “MSA” and yet the arbitrator virtually dispensed of that agreement thereby creating a cause of action for the respondent.

The award itself is to be paid in United States dollars, in cash or into a NOSTRO account, an order which is contrary to the laws of Zimbabwe, which provide for legal tender, therefore allowing for payment in that legal tender. The parties were not invited to address on this issue and such an order had not been sought. The arbitrator therefore exceeded his mandate.

In opposing the application, respondent’s argument was that a litigant must demonstrate that public policy has been violated in order to succeed in having an arbitral award set aside.  The court is not asked to delve into the merits of the matter.  The parties submitted themselves to arbitration, the arbitrator relied on the agreement which created the parties’ relationship and the decision was based on that agreement.  The applicant cannot seek the setting aside of the award just because it is not happy with it.

As regards the award itself, the fact that it sounds in United States dollars does not mean it cannot be satisfied through the country’s legal tender.  The payment can therefore be made in the local currency.

The question to be answered here is whether the award is against public policy.  In an endeavor to answer this question, I will look at the arguments for and against the relief being sought by the applicant.

Applicant’s Argument

The applicant referred to several decided cases which speak to the circumstances under which an arbitral award can be set aside.

Article 34(2)(b)(ii) of the First Schedule to the Arbitration Act [Chapter 7:15] provides that an arbitral award can be set aside, inter alia, if it is against public policy.

Reference was made to the decision in Zimbabwe Electricity Supply Authority (ZESA) v Maposa 1999 (2) ZLR 452 (S) where the Supreme Court stated that an arbitral award can only be set aside if the conclusions therein go beyond mere faultiness or incorrectness but constitute a palpable inequity that is so outrageous in its defiance of logic or accepted moral standards.  The level of injustice must be so intolerable that it offends the public’s sense of justice.  The threshold is thus very high.  (see also Zimdef v Vengesai Architects S97/19)

By going outside the “MSA” and ordering payment only in United States dollars, the arbitrator passed the threshold of what is reasonable and equitable.  The sanctity of contract principle was violated thereby offending accepted and moral standards and hurting the concept of justice (Riogold (Private) Limited v Falcon Gold Zimbabwe Limited & Anor HH 258-21), so counsel argued.

1st Respondent’s Argument

Counsel for the 1st respondent’s contention was that the threshold of an award that is contrary to public policy has not been reached.  An award is not contrary to public policy merely because the reasoning and conclusions arrived at by the arbitrator are wrong in fact and in law (ZESA v Maposa 1999 (2) ZLR 452)

An award ought not to be set aside because the arbitrator’s decision is wrong in fact and in law.  To do so would be tantamount to allowing the court to review arbitral awards creating room for endless litigation.  (Alliance Insurance v Imperial Plastics (Pvt) Ltd & Anor S 30-17).

This is precisely why the threshold is extremely high in order to ensure finality to litigation and unnecessary interference with arbitral awards (Botha v Gwanda Municipality HB 157-18).

The agreement between the applicant and 1st respondent was not for the supply of merchandise but a finance agreement.  Clause 4 of the “MSA” was therefore not applicable as there was never a supply of goods.  No request for supply of products per clause 6 of the “MSA” was ever made and so there was no purchase.  The ZAR 602 000 was paid to a 3rd party and so the transaction between the parties was not regulated by the ‘MSA’.

An employee of the applicant confirmed the engagement with the 3rd party and that the 1st respondent was only requested to pay for the products.  No purchase order was issued to 1st respondent as such order was sent to Lutfeyah Fashionary. Correspondence between the applicant’s officials and the 1st respondent confirmed the “3rd party” agreement. Lutfeyah Fashionary are the ones who did not deliver the order in full and it is not the 1st respondent’s responsibility to account for Lutfeyah’s failure to deliver.

The arbitrator therefore acknowledged what was evident from the parties’ interactions and respected the 3rd party arrangement, making the applicant liable to pay in full what was supplied by 1st respondent without withholding an amount which is Lutfeyah’s responsibility.

The award was therefore just and fair and does not offend public policy, so counsel argued.

Analysis of the Arguments

It is not in dispute the applicant and 1st respondent’s relationship was birthed upon the signing of the “MSA.”  That agreement entailed orders being placed by the applicant and 1st respondent supplying such orders, culminating in payment of whatever goods were supplied.

When a dispute arose after applicant withheld part payment for goods supplied, the matter was referred to arbitration as per the “MSA”.  It is therefore the ‘MSA” that allowed for referral to arbitration.

Clause 4 of the “MSA” regulated the relationship of the parties as regards the placing of orders and payment thereof.  Clause 5 provided for the supplier, that is 1st respondent’s obligations and clause 6 provided for the applicant’s obligations.  The agreement was purely for the supply of merchandise.  The parties’ relationship was captured in clause 3 thus:-

“The supplier is an independent business and under no circumstances will the supplier be deemed to be an agent, partner or employee of Edgars nor be deemed to have entered into a joint venture, partnership or any agency with Edgars, in the performance of its duties and responsibilities pursuant to this Agreement.

Neither the supplier nor its representatives or its employees are authorized to contract on behalf of Edgars or to bond Edgars in any way whatsoever and the supplier hereby fully indemnifies Edgars against any loss or harm that Edgars may suffer as a result of a breach of this clause by the supplier, its representatives or its employees.”

The arbitrator was alive to the nature of the parties’ relationship as captured in the four corners of the “MSA”.  After hearing evidence he found as common cause that a duly authorized representative of the applicant requested a change in the arrangement due to cash flow challenges that came in as a result of the introduction of RTGS.  The applicant could not pay for products supplied by 3rd parties and requested the 1st respondent to pay for such products.  As a result, a senior buyer of the applicant requested that payment be made to Lufteyah, Lufteyah was the supplier of the goods and was a registered merchandise supplier of the applicant.  ZAR 602 000 was paid by the 1st respondent but Lufteyah did not deliver the full consignment.

It was on the basis of these facts that the arbitrator held that the supply of goods by Lufteyah was between Lufteyah and applicant.  The 1st respondent only paid for the goods at applicant’s request.  That verbal agreement birthed a 3rd party payment agreement and on 10 February 2023 applicant’s representative confirmed the 3rd party payment agreement and the responsibility which lay with applicant to assume the “risk” should the 3rd party not deliver.

It is as a result of these findings that the arbitrator acknowledged that although the parties’ relationship emanated from the “MSA”, the issue of the non-delivery of merchandise by Lufteyah could not be resolved by having recourse to the “MSA” as such “MSA” did not relate to the “verbal agreement” that came in due to financial constraints.

Was this tantamount to creating a contract for the parties?  Is there no such communication from applicant’s representatives confirming liability under this 3rd party payment agreement?  If such communication is there, did the arbitrator fall into grave error and therefore reached conclusions so outrageous in their defiance of logic, in holding that applicant is liable to pay all that was supplied by the 1st respondent and not withhold part payment as a set-off for that which Lufteyah did not deliver? Was the arbitrator mandated to look into that which was outside the parties’ agreement as captured in the ‘MSA’?

The setting aside of arbitral awards must be done sparingly.  Did the arbitrator create a contract for the parties and a cause of action for the respondent?  Did he grant a remedy not sought for?  Was there a violation of moral standards and public policy?  (Delta Operations (Pvt) Ltd v Origen Corp (Pvt) Ltd 2007 (2) ZLR 81 (S), Great Zimbabwe University v Vengesai Architects & Anor S 10-23, Zimbabwe Educational, Scientific, Social and Cultural Workers’ Union v Welfare Educational Institutions’ Employers’ Association 2013 (1 ZLR 187 (S), Central African Building Society v Finermacg Consultancy (Pvt) Ltd & Anor S 56/2022, Peruke Investments (Pvt) Ltd v Willoughby’s Investments (Pvt) Ltd & Anor S 11-2015).

The starting point in answering these rhetorical questions is the agreement which clothed the arbitrator with jurisdiction.  Such jurisdiction was to be exercised within the four corners of that agreement.  But for that “MSA” the matter would not have been referred for arbitration.

Having said that, how could the arbitrator acknowledge the “MSA” only in so far as assuming jurisdiction then go out of it for purposes of adjudicating over the issues referred to him?  By doing so he was going beyond his mandate, assuming jurisdiction over a dispute for which he had acknowledged he had no jurisdiction once he pronounced that the matter was outside the “MSA”. He locked himself out once he had pronounced that the parties’ dispute was outside the agreement which regulated their relationship.

The cause of action was located in the “MSA” and it is to the “MSA” that the arbitrator ought to have looked not outside it.

The reference to a ‘verbal agreement’ and the correspondence by applicant’s officials regarding the 3rd party payment agreement was not part of the ‘MSA’.  The ‘MSA’ specifically provided that: -

“Whole Agreement

It is recorded:-

19.1 	That these representations contain and record the whole agreement and supercede any other agreement between the parties hereto and the parties acknowledge that no representation, warranty, undertaking or promise whatsoever not embodied herein has been made or given by either of them or any representative, agent or servant of either of them to the other.

19.2	That any variation in the terms and conditions of this agreement as may be agreed upon between the parties shall be in writing and shall be signed by or on behalf of the parties otherwise the same shall be of no force and effect.”

I am therefore persuaded by counsel for the applicant’s argument that once the arbitrator identified that the cause of action was outside the ‘MSA’ he ought to have stopped there.  That would not have meant that the respondent could not bring the matter to the courts, not on the basis of the “MSA” but the agreement concluded outside the ‘MSA.’

I consider it a contradiction, a fatal one at that, to say in one breath, I assume jurisdiction in terms of the contract entered into by the parties as embodied in the ‘MSA’ and in the same breath turn around and say I however will go outside the contract as embodied in that same “MSA” in resolving the dispute.

The decision to go beyond the ‘MSA’ is also evident in the award when the arbitrator stated the following:-

“In conclusion I find that the respondent is liable to pay the sum of US$40 534,08 claimed by the claimant.  Payment shall be in US dollars (in cash or by payment to a NOSTRO account) and the respondent shall not be entitled to pay in any other currency.” (my emphasis)

The ‘MSA’ had no such clause and the papers show that payment was not necessarily strictly in US$ when the parties engaged under the ‘MSA.’  However because the arbitrator had concluded that the transaction he was adjudicating upon did not fall under the ambit of the ‘MSA’, he proceeded to impose conditions that were not envisaged by the parties per their contract.

This was not a simple issue of a party being unhappy with an arbitral award as argued by Mr. Ndlovu, counsel for the respondent.  The parties submitted themselves before the arbitrator who was supposed to look to their contract as embodied in the ‘MSA’ in resolving their dispute.  The parties could not have sought the arbitrator to go outside the very contract upon which a dispute had been declared, empowering the arbitrator to adjudicate as per that contract.

The principle which flows through the several cases cited herein is that the court will only intervene if the award goes beyond mere faultiness or incorrectness and constitutes a palpable inequity that is so outrageous in its defiance of logic or accepted moral standards.

I hold the view that it is against public policy to go outside the contract whose provisions gives you the mandate to adjudicate over disputes emanating from such contract.  It is tantamount to going on a frolic of your own.

A case has therefore been made for this court to intervene on public policy grounds.

That said, I make the following order:-

1.	The application is hereby granted.

2.	The arbitration award dated 26 September be and is hereby set aside.

3.	The 1st respondent shall pay the costs of suit.

Ndlovu and Dube, applicant’s legal practitioners

Chimuka Mafunga Commercial Attorneys, respondent’s legal practitioners