Mikando Investments (Pvt) Ltd v Blackdawn Investments (Pvt) Ltd

### Preamble
1
HH 792-18
HC 12090/16
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MIKANDO INVESTMENTS (PVT) LTD

versus

BLACKDAWN INVESTMENTS (PVT) LTD

HIGH COURT OF ZIMBABWE

CHIKOWERO J

HARARE, 21 November 2018 & 28 November 2018

Special Plea of abatement: referral to arbitration

V. Muza, for the plaintiff

N. Mashizha, for the defendant

CHIKOWERO J:

FACTUAL BACKGROUND AND THE PLEADINGS

After hearing argument from counsel I upheld the special plea, stayed these proceedings and referred the parties to arbitration.

These are my reasons for the judgment.

The plaintiff, on the basis of a cancelled written agreement which had been entered into between the parties on 8 December 2013 at Harare issued summons against the defendant. Summons was issued on 29 November 2016.

The agreement, headed:

“JOINT VENTURE AGREEMENT”, has as its second preamble the following words:

“And Whereas the parties are desirous to enter into a joint venture agreement where BLACKDAWN INVESTMENTS (PVT) LTD will provide undeveloped residential stands in specified areas whilst MIKANDO INVESTMENTS (PVT) LTD will service and or develop the said stands and sell them to the public.”

The agreement also set out the following relevant terms. The defendant would provide

the plaintiff with the stands. The plaintiff would service or develop them and thereafter sell them to the public on an instalment basis. The plaintiff would pay US$12-00 per square metre to the defendant for the undeveloped stands on an instalment basis.  The total value of the land was US$7200 000-00 payable as follows:

A deposit of US$250 000 was payable within seven days of signing the agreement. The balance of US$6 950 000-00 was payable in equal monthly instalments of US$60 000-00. Upon payment of the deposit the plaintiff was entitled to access the land for purposes of servicing the same.

The defendant thereafter cancelled the agreement, in writing, with effect from 30 July 2014.

The plaintiff alleged that it had paid a total sum of US$809 100-00 as at the date of such cancellation.

In the summons a refund of this amount, interest and costs is made.

The refund sought was amended to a figure of US$410 000 at the Pre-trial conference held on 24 July 2018.

After entering an appearance to defend, the defendant filed a special plea on 7 November 2017. It was averred therein that the Joint Venture Agreement was subject to an arbitration clause. Consequently, the defendant prayed that the proceedings initiated through the issuance of the summons be stayed and that the parties be referred to arbitration.

Acting on the basis of a Notice to Plead and Intention to Bar filed on 23 April 2018 the defendant pleaded to the merits of the claim. Its plea, filed on 26 April 2018 made the following averments. The written contract was not an instalment sale of land as alleged by the plaintiff. It was a Joint Venture Agreement where no land was sold to the plaintiff. The parties agreed to service and develop the land into stands, through the plaintiff. The contemplated sale to third parties was after servicing of the land. In any event, assuming “without conceding” that land was sold in instalments as alleged the agreement of sale was void ad initio for want of compliance with s 39 (i) (b) (i) of the Regional Town and Country Planning Act [Chapter 29:12] since the land would have been illegally sold in the absence of a subdivision permit. The Joint Venture Agreement was cancelled because the plaintiff did not comply with its terms and conditions.

It is necessary that I quote the following passages as they appear in the plea:

“4.	… No money had been received by defendant from plaintiff when the agreement was cancelled …

5.	Defendant categorically denies that plaintiff paid it any money in this matter as alleged or at all and plaintiff is put to the strictest proof thereof …. All payments received by the defendant in this matter were not paid in terms of the Joint Venture Agreement but were paid by the Association (LILFORDIA HOUSING SCHEME ASSOCIATION) in terms of a Tripartite Memorandum of Understanding between plaintiff, Defendant and the Association ….

It is therefore not legally feasible for the plaintiff to claim a refund as it is doing in this 	matter simply because it never paid anything to 	defendant in 	this matter.”

The plaintiff refused to be outdone. It replicated on 28 May 2018. In respect of the special plea its response was this. No dispute was disclosed therein. There was nothing to refer to arbitration. The plaintiff was merely seeking a refund of the moneys it paid to defendant upon the cancellation of the contract.

The plaintiff set out the following by way of replicating to the plea on the merits. There was no meeting of the minds as to the nature of the agreement between the plaintiff and the defendant. The plaintiff alleged an instalment sale of land. The defendant averred a Joint venture Agreement. There was no consensus ad idem between the parties. They were at cross purposes. There was no contract in the first place. Consequently, the defendant had no arbitration clause to invoke. In response to the averment, that the contract was null and void, the plaintiff alleged that the transaction entered into between the parties was for the purchase of the defendant’s rights in the land which was owned by Zvimba Municipality and does not fall within the purview of s 39 (i) (b) of the Regional Town and Country Planning Act [Chapter 29:12]. The plaintiff paid the defendant the sum of US$809 100-00. The plaintiff was in the process of servicing the land when the defendant cancelled the agreement between the parties. The plaintiff is entitled to be put in the position it was before the contract was entered into. In other words, the plaintiff maintained its claim. This was the replication.

To complete the picture, I will move to the issues referred to trial at the Pre-Trial Conference held before a Judge of this court.

THE JOINT PRETRIAL CONFERENCE MINUTE

The issues are:

Whether or not the dispute ought to be referred to Arbitration in terms of clause 21 of the Joint Venture Agreement?

Whether or not there were any moneys paid to defendant by plaintiff in terms of the Joint Venture Agreement and if so how much?

Whether or not the Joint venture Agreement, in so far as it is alleged to be an instalment sale of the land by the plaintiff, is void ab initio and unenforceable for want of compliance with section 39 (i) (b) (i) of the Regional Town and Country Planning Act [Chapter 29:12]

Whether or not the plaintiff is entitled to a refund of the sum of US$410 000.

THE ARBITRATION CLAUSE

Clause 21, being the Arbitration clause contained in the Joint venture Agreement, was couched in peremptory terms. It ran:

“In the event that any dispute shall arise between the parties as to the coming into effect of 	this agreement or its interpretation, or arising out of the implementation of this agreement or 	its cancellation, then such dispute shall be referred to arbitration by an arbitrator appointed for 	the purpose by the parties or, failing their agreement in that connection within fourteen (14) 	days of a dispute having been declared, appointed by the Commercial Arbitration Centre in 	Harare. In making his award the arbitrator shall not be bound by strict rules of law but shall 	act as amiable compositeur.”

Counsel were agreed that this is an arbitration clause. It is.

THE LAW

Article 8 (1) of the Model Law, set out in the schedule to the Arbitration Act, states:

“A court before which proceedings are brought in a matter which is the subject of an 	arbitration agreement shall, if a party so requests not later than when submitting his first 	statement on the substances of the dispute, stay those proceedings and refer the parties to 	arbitration unless it finds that the agreement is null and void, inoperative or incapable of 	being performed.” (underlining is mine).

If I find that this matter is subject to the arbitration agreement I have no option but to stay the proceedings and refer the parties to arbitration, unless I also find that the agreement is null and void, inoperative or incapable of being performed. I have no discretion in the matter: Shell Zimbabwe (Pvt) Ltd v Zimsa (Pvt) Ltd and Anor 2007 (2) ZLR 366 (H); Zimbabwe Broadcasting Corporation v Flame Lily Broadcasting (Pvt) Ltd 1999 (2) ZLR 448 (H).

THE DISPUTE

It is settled law that a matter can only be referred to arbitration if there is a dispute, and that the dispute should appear on the face of the pleadings: Cargill Zimbabwe v Cuvenham Trading (Pvt) Ltd 2006 (1) ZLR 381 (H); PTA Bank v Elanne (Pvt) Ltd and Others 2000 (1) ZLR.

Besides the summons, plea on the merits and replication, I have the added advantage of the Joint Pre-Trial Conference Minute filed of record.

I have absolutely no doubt in my mind that there is a dispute arising out of cancellation of the Joint Venture Agreement. It is whether the plaintiff paid the sum of US$410 000 before the agreement was cancelled and, if so, whether he is entitled to a refund thereof.

This same dispute is also about implementation of the contract seeking as the plaintiff alleges the payment was made as it performed its obligation of payment under the contract.

Faced with a similar situation in Independence Mining (Pvt) Ltd v Fawcett Security Operations (Pvt) Ltd 1991 (1) ZLR 268 (HC) Chidyausiku J (as he then was) remarked at 271 C:

“This dispute, therefore, is really about the performance of the contract. The arbitration clause 	covers any dispute arising from the provisions of the agreement. A dispute about the 	performance, non-performance or inadequate performance of a contract cannot but arise 	from the provision of the contract…”

These sentiments apply with equal force to the present matter.

The arbitration clause is wide enough to cover the dispute.

I have no business trying to curtail the sphere of operation of that clause: Bitumat Ltd v Multicom Ltd 2000 (1) ZLR 637 (H).

The dispute about whether the parties entered into a joint venture agreement for provision of land and the servicing thereof or a deed of sale is, in my view, imaginary and of no consequence. My interpretation is it was both.

The agreement was not null and void. I agree with the plaintiff’s position in its replication that since the land belonged to Zvimba Municipality (the correct name is Zvimba Rural District Council) no subdivision permit was required at the time of entering into the agreement in question.

This is so because section 39 (2) (b) of the Regional Town and Country Planning Act [Chapter 29:12] states:

“(2) Subsection (1) shall not apply to –

(a) …..

(b) land within a local government area administered and controlled by a local authority 	which 	is owned by that local authority or the state.”

It is common cause that before its cancellation the Joint Venture Agreement was operative and its provisions capable of being performed. Indeed, the cancellation was on the alleged basis of the plaintiff not having met its side of the bargain.

I do not accept Mr Muza’s submission that the use of the word “is” I have underlined in Article 8 (1) of the Model Law in reference to the agreement limits the application of that Article to subsisting arbitration agreements only. My finding is even arbitration agreements which have been cancelled but contain arbitration clauses are subject to dispute resolution through arbitration.

This is in line with the approach adopted by the Supreme Court in Banking Employers Association of Zimbabwe v Zimbabwe Bank and Allied Workers Union SC 34/15 where Guvava JA, in delivering the judgment of the court, said at page 4 of the cyclostyled judgment:

“In order to give a proper interpretation to the intention of the parties, it was incumbent 	upon 	the court to examine the whole agreement and not just to rely on a single word.”

See also Metro International (Pvt) Ltd v The Old Mutual Property Investment Corporation (Pvt) Ltd and Anor 2007 (1) 408 (S); Runatsa v Rumani Estate (Pvt) Ltd and Ors 2009 (2) ZLR 286 (S).

To the same effect are the following South African judgments: Africast (Pty) Ltd and Pangbourne Properties Ltd 2010 /2117 (South Gauteng High Court); Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA). The principles of interpretation are the same when interpreting legislation and contracts.

In a matter where substantive disputes were identified at the Pre-Trial Conference stage and the matter referred to trial for resolution of those disputes, as well as the Special Plea, I was surprised by Mr Muza’s about turn. Before me, he submitted in effect that no dispute appeared ex facie the summons, plea, replication and Joint Pre-Trial Conference Minute. But he, just like Mr Mashizha, signed the Joint Pre-Trial Conference Minute. I confess inability to understand his attempt to distinguish between a dispute and a triable issue. It is one and the same thing. His novel argument was that the issues in the Joint PTC Minute are not disputes but triable issues. I disagree.

I think an order should have been granted, by consent, at the Pre-Trial Conference stage staying these proceedings and referring the parties to arbitration or at the very least the special plea should have been disposed of then. This is so because failing settlement, a matter should, at Pre-Trial Conference be referred to trial on the merits. See Doelcam (Pvt) Ltd v Pichanick and others 1999 (1) ZLR 390 (H).

Finally, I disregarded Mr Muza’s argument that the parties abandoned the arbitration clause. I did so because that point was not raised in the plaintiff’s replication. Evidence was set out in plaintiff’s heads of argument to move me to find that the parties abandoned the arbitration clause. That obviously was improper. In any event that evidence clearly showed that the parties never abandoned the arbitration clause.

Defendant’s case on the special plea was so clear that plaintiff should simply have consented to the order sought even as late as the date of the hearing. This court is busy. Only deserving cases should be argued.

Costs

In its special plea, Heads of Argument and in oral argument at the hearing defendant neither asked for costs nor presented argument relative thereto.

Had costs been sought, I would surely have awarded them. Defendant’s success clearly justified an order of costs.

On the other hand, I mention in passing that even if l had found for plaintiff there clearly would have been no basis for crowning such success with an order of costs on the higher scale. Plaintiff prayed for costs on the punitive scale.

Disposition

Inevitably, I upheld the special plea.

Order

I ordered that:

The proceedings under case number HC 12090/16 are stayed.

The parties are referred to arbitration.

Muza and Nyapadi, plaintiff’s legal practitioners

Nelson Mashizha Legal Counsel, defendant’s legal practitioners