Goodliving REAL Estate (Pvt) LTD Versus ADAM & Company (Pvt) LTD AND SGI Properties (Pvt) LTD AND Honourable Justice Smith

### Preamble
1
HH 489-18
HC 1054/17
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GOODLIVING REAL ESTATE (PVT) LTD

versus

ADAM & COMPANY (PVT) LTD

and

SGI PROPERTIES (PVT) LTD

and

HONOURABLE JUSTICE SMITH

HIGH COURT OF ZIMBABWE

PHIRI J

HARARE, 3 April 2018 & 22 August 2018

Opposed Matter

Adv F Matinenga, for the applicant

Adv F Mahere, for the respondents

PHIRI J: This was an application for the setting aside of an arbitral award made by the third respondent on 6 December 2016.

The application was opposed.

At the hearing of this application this court granted the order as prayed for.

Simultaneously this court was also asked to deal with the application for the registration of the arbitral award made in Case number HC 1054/17.

This court dismissed the application for the registration of the aforesaid arbitral award in terms of Articles 35 and 36 of the Arbitration Act [Chapter 7:15]

THE APPLICATION FOR THE SETTING ASIDE OF THE ARBITRAL AWARD

The application for the setting asides of the arbitral award was made in terms of Article 34 (2) (ii) of the Schedule to the Arbitration Act [Chapter 7:15], in which the relevant part reads as follows;

“An arbitral award may be set aside by the High Court only if—

…;

The High Court finds that:

….; or

The award is in conflict with the public policy of Zimbabwe”

APPLICANTS FOUNDING AFFIDAVIT

In its founding affidavit it was stated on behalf of the applicant that the arbitral ward was contrary to public policy in that;

The third respondent (the arbitrator) had been challenged to recuse himself, he instead of dealing with the application for recusal, had the same referred to a two men tribunal.

Applicant averred that in terms of Annexure “H”  attached to the founding affidavit, applicant’s then lawyers, were opposed to the appointment of the two men tribunal but “The two men tribunal went ahead with the arbitration…”

The two men arbitral award was dated 13 May 2016 and annexed to the application as Annexure “C”

“Annexure “D” is a preliminary award made by the third respondent on 11 October 2016.  In that award the third respondent refused to recuse himself. His refusal was based on the findings of the two men tribunal (4.3.5 of the founding affidavit). Applicant stated that;

“Curiously on  20 April 2015 the third respondent made a determination on the application for recusal and rendered the award attached as Annexure “E”

What makes the aforesaid curious is the fact that on 11 May 2016 (see Annexure “C”). The two men tribunal had made a ruling on the application for recusal. The third respondent was aware of this. On 11 October 2016 the third respondent  issued an interim award accepting the findings by the two men tribunal (see Annexure “D”. Never at any stage did he say that he had as far back as 20 April, 2015 determined the application. (paragraph 4.3.7 of the founding affidavit).”

Applicant also averred that the determination in respect of the recusal application was never availed to the parties.

Applicant further averred that the parties were not afforded the opportunity to argue, the recusal application before “he rendered his award.”

Applicant therefore alleged that for these reasons third respondent breached the principles of natural justice.

APPLICATION IN CASE NO HC 4415/16

Applicants further submitted that it filed an application in case number HC 445/16 challenging the appointment of the two men tribunal.

Applicant stated that third application was served on the third respondent May 2916 at his offices as 16.30 p.m.

Applicant raised the point that if third respondent had as far back as 20 April 2015 determined the application for recusal per Annexure “E” he would have responded to the application by advising the courts of this fact “He never responded to the application” (See paras 4.3.11 to 4.314 of the founding affidavit).

The order by Justice Chigumba in case no HC 445/16

Applicant also referred to the court order granted by Justice Chigumba on 23 November 2016 wherein it was ordered that;

“1. It is hereby declared that the third respondent abdicated his duties by directing that a panel of independent arbitrators must determine the application for his recusal.

2. The order or directive by the third respondent, that the applicant and first respondent should appoint an independent tribunal of two arbitrators to determine an application for his recusal filed on 20 March 2015, be and is hereby declared contrary to public policy and is hereby set aside.

3. There shall be no order as to costs.”

In para 6.1 of its founding affidavit applicant submitted that;

“Despite having been served with a court order which expressly and unequivocally stated that he had abdicated his duties the third respondent chose to ignore the court order, failed to abide by it and handed down his award in the face of the court order.”

THE ORDER OF JUSTICE TAKUVA IN CASE NO. HC 7215/13

The applicant further argued that the final award which was awarded by the third respondent is contrary to public policy in that it had the effect of disregarding the High Court order made by Justice Takuva in Case number HC 7215/13.

The Order of Takuva J stipulated that:

“IT IS ORDERED BY CONSENT THAT;

Pending the final disposition of the substantive dispute between the parties through arbitration proceedings, the status quo obtaining at the premises in question shall continue to subsist and the parties relations shall continue to be regulated by the existing agreements.

The parties shall proceed with due expedition, to refer the dispute between them to the Commercial Arbitration Centre for resolution by an arbitrator who shall dispose of the substantive dispute in accordance with the provisions of the Arbitration Act.

Each party is to bear its own costs.”

Applicant submitted that it challenged the first “temporary award dated 29 May 2014.

This was by way of a court application in case number HC 5209/14 and that this matter is still pending before this court.

Applicant argued, in the founding affidavit that the third respondent went further to issue his final award on 16 December 2016 despite pending matters before this court.

Applicant also contended that “The third respondent made the final award by hearing one party in the absence of the applicant’s submissions thereby giving rise to the likelihood of bias by the third respondent against the applicant.”

Award of Costs on a Punitive Scale

In its founding affidavit the applicant raised issue of the award of costs made on a punitive scale by the third respondent.

In para 13.6 of its founding affidavit applicant stated the following;

“… the third respondent stated that the applicant shall pay the first respondent for the amounts paid by the first respondents. How did the first respondent know that the first respondent was going to pay for the award on behalf of the applicant?”

Applicant raised the issue “of likelihood of apparent bias by the arbitrator against the applicant.

In its own words the applicant alleged that;

“The award is contrary to public policy in that it failed to deal with the real issues between the

parties. It contains decisions on matter(s) beyond the scope of the submission to arbitration. The award has failed to address the claimant’s claim before the arbitrator which also gives the likelihood of bias on the arbitrator’s part.”

The First & Second Respondents’ Opposing Affidavit

An opposing affidavit was filed for and on behalf of the first and second respondents. It was deposed by one Tarik Adam a director of the first respondent who was duly authorised to depose to the opposing affidavit by both the first and second respondents.

It was submitted that the third respondent was “Always ready to deal with the application for his recusal. (See para 6.3 p 87).

It was submitted that the parties’ legal practitioners agreed that it was in their best interests that the issue of the third respondent’s recusal be dealt with by “An independent person.”

It was contended that the parties’ legal practitioners initially agreed on former judge Chinhengo.

Applicant’s legal practitioners indicated that they had “concerns” about form judge Chinhengo.

“The first and second respondents insisted on former judge Chinhengo.”

It was contended that the third respondent was not privy to these discussions between the parties.

It was submitted that;

“The third respondent asked the parties to inform him of their selection in order that he would send requisite documents to that person of the parties’ choice.” (See para 6.2 p 78 of respondents’ opposing affidavit.”

It was submitted that third respondent, “… only got to know of these persons through a letter by the first and second respondents’ legal practitioners to the applicant’s legal practitioner. The letter was dated 19 June 2015 and is annexed to the papers as Annexure “M” (See para 6.2 p 78).

Respondents contended that--- “this was followed by the letter of formal appointment of former judge Chinhengo and Professor Lovemore Madhuku dated 20 July 2015. (Marked as Annexure “N” annexed to the opposing affidavit).

Respondents accordingly contended that this application is founded or premised on a falsehood that the third respondent appointed an independent tribunal to whom he referred the application for his recusal.

Respondents alleged that applicant “clandestinely obtained” a default order in Case No. HC 445/16 and an application for rescission of judgment is pending before this court.

Respondents argued that all the awards by the third respondent are consistent with the laws of Zimbabwe and that…”The parties presented their cases and third respondent decided accordingly.” (See p 80 of the opposing affidavit).

Applicant’s Answering Affidavit

In its answering affidavit the applicant referred  to the e-mail annexed as “B1” in which it quoted the following words from Justice Chinhengo;

“I observe that nowhere in the papers filed of record is it stated that the parties have agreed that the question whether or not the arbitrator should recuse himself should be decided, not by the arbitrator himself but by a two men tribunal.” (See p 124 of the record)

Applicant maintained that that e-mail “”condemned” the third respondent’s referral as “unlawful and unprocedural.”

Applicant also maintained that after it had submitted its application for the third respondent’s recusal the third respondent failed to ask the parties to file their submissions and  argue the matter before him.

Applicant contended that third respondent, instead, referred the matter to the two men tribunal which in its (applicant’s) view was not n accordance with the dictates of the law.

Applicant also argued that Article 13 (2) of the Arbitration Act requires the arbitrator whose appointment is challenged to decide on the challenge.

Applicant maintained that the present application is for the setting aside of the award handed down by the third respondent on 6 December 2016.

THE LAW

Article 34 |(2) of the Schedule to the Arbitration Act [Chapter 7:15] provides instances in which an arbitral award can be said to be in conflict with the public policy of Zimbabwe.

It stipulates that;

“For the avoidance of doubt, and without limiting the generally of para (2) (b) (ii) of this article, it is declared that an award is in conflict with the public policy of Zimbabwe if—

the making of the award was induced or effected by fraud ort corruption; or

a breach of the rules of natural justice occurred in connection with the making of the award.

Generally courts are reluctant to interfere with arbitral awards. In Cone Textiles (Pvt) Ltd

v Redgment & Others 1983 (1) ZLR 88 at 92 FIELDSEND CJ stated that:

“The starting point is that the parties have chosen to go to arbitration instead of resorting to the courts, they have specifically selected the personnel of the tribunal, and they have agreed that the award shall be final and binding: it is for these reasons that a court will always be most reluctant to interfere with an award of an arbitrator.”

As a result what constitutes public policy is narrowly construed by the court because of the need to finality in all arbitrations. In Zimbabwe Supply Authority v Maposa 1999 (2) ZLR 452 (S) GUBBAY CJ held that;

“In my opinion the approach to be adopted is to construe the public policy defence as being applicable to either foreign or domestic award, restrictively  in order to preserve and recognise the basic objective of finality in all arbitrations, and to hold such defence applicable only if some fundamental principles of law or morality or justice is violated.”

The test to be applied in determining whether an award is in conflict with the public policy of Zimbabwe was set out by the Supreme Court in Zimbabwe Electricity Supply Authority v Maposa 1999 (2) ZLR 452 (S) where at 466 GUBBAY CJ said:

“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 on the grounds that it was contrary to the public policy of Zimbabwe.

Under Article 34 and 36 the court does not exercise an appeal power and either uphold or set aside or decline to recognise and enforce and award by having regard to what it considers should have been the correct decision. Where, however, the reasoning or conclusions in an award goes beyond mere faultiness or incorrectness and constitutes a palpable inequity that is so for 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.

The same consequence applies where the arbitrator has not applied his mind to the question or has totally misunderstood the issue, and the resultant injustice reaches the point mentioned above.”

Further reference is made to in the case of Pioneer Transport (Pvt) Ltd v Delta

Corporation Ltd & Anor HH 11-2012 at p 10 where GOWORA J held that;

“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.”

FINDINGS OF THIS COURT

After considering the present application and hearing submissions for and on behalf of the parties in this case, this court, is of the view that the arbitral award which was awarded by the third respondent be set aside.

This court finds that there is conflicting evidence as to whether or not the application for recusal was either dealt with by the third respondent or on the other hand, by the two men tribunal, namely Justice Moses Chinhengo or Professor  Lovemore Madhuku?

In the first instance the third respondent is alleged to have stated that he made a determination on the application for recusal on 20 April 2015. (See para 10 herein).

The two men tribunal award was dated 11 May 2016 (See para 9).

Similarly on 11 October 2016 the third respondent issued an interim award accepting the findings of the two men tribunal with the respect to the application for recusal.

This court finds that despite this issue being raised in the papers and also, when the matter was argued, the respondents failed to explain this discrepancy or anomaly or conflict in the evidence and therefore substantively and procedurally this court cannot accept all the respondents’ accounts as to what may have really transpired and accordingly holds that the final award made is in violation of the rules of natural justice, and, also, in defiance of logic

What is even more disturbing to this court is the fact that the third respondent totally ignored and disregarded the order which was made by this honourable court on 23 November 2016 which CHIGUMBA J declared that the third respondent abducted his duties by directing that a panel of independent arbitrators must determine the application for his recusal.

The same aforesaid order held that the directive by the third respondent that the applicant and first respondent should appoint an independent tribunal of two arbitrators to determine an application for his recusal was declared to be contrary to public policy and was accordingly set aside.

This court finds that non-compliance of the order of the court so granted by

CHIGUMBA J, was in violation of an order of this court, and, accordingly contrary to public policy in terms of Article 24 (2) (c) (ii) of the Schedule to the Arbitration Act.

Having arrived at this decision this court equally finds that the application for the registration of the aforesaid arbitral award in Case No, HC 1054/17 be and is hereby dismissed.

This court further holds in view of the findings of this court it is appropriate that an order for costs on a legal practitioner and client scale be made against the respondents.

Kanokanga & Partners, applicant’s legal practitioners

Garabga, Ncube & Partners, 1st & 2nd respondents’ legal practitioners