Professional Computer Services (Private) Limited v National Social Security Authority and National Merchant Bank

### Preamble
1
HH426-2012
HC 2870-2012
PROFESSIONAL COMPUTER SERVICES (PRIVATE) LIMITED
versus
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PROFESSIONAL COMPUTER SERVICES (PRIVATE) LIMITED
versus
NATIONAL SOCIAL SECURITY AUTHORITY
and
NATIONAL MERCHANT BANK

HIGH COURT OF ZIMBABWE
BERE J
HARARE, 25 JULY AND 18 OCTOBER 2012

Ms N. Tiyago, for the applicant
A. Moyo, for the 1st respondent
No appearance for the 2nd defendant

BERE J: On 13 March 2012 the applicant filed an application in this court seeking the following relief:-

“It is ordered that:-

1. The security bond held in favour of the first respondent by the second respondent in the name of the applicant dated 1 October 2010 is hereby declared to be of no force or effect.

2. The second respondent shall upon being served with a copy of this order, immediately pay to the applicant $220 000 (two hundred and twenty united states dollars) being the amount the second respondent held back in lieu of cashing the performance bond.

3. The respondents shall bear the cost of suit.”

The background to the dispute

The applicant, *Professional Computer Services (Private) Limited*, herein referred to as ‘PCS’ is a company which provides management, consultancy, training and service in the field of computer technology. The first respondent, *National Social Security Authority*, shortly ‘NSSA’ is a body corporate established in terms of the *National Social Security Act [Cap 17:04]* and whose core business is to provide social protection for its insured members. The second respondent is *National Merchant Bank Limited* herein referred to as ‘NMB’ a commercial bank established in accordance with the laws of Zimbabwe, and operating from 4th floor Unity Court Kwame Nkruma Avenue, Harare.


Initially the parties entered into a written agreement on 11 October 2005, after PCS had made a successful bid for a tender flighted by NSSA for the supply of computer systems and ancillary services for NSSA head office and Regional offices in accordance with the functional specifications set out in the tender documents. It is common cause that the application software to be supplied and implemented was to be based on what is technically referred to as “Apogee software.”

A performance security bond in the form of a bank guarantee by the second respondent in favour of NSSA and amounting to US$220 000 (two hundred and twenty thousand united states dollars only) was put in place by the applicant. This was meant to guarantee timeous performance of the contract in terms of the conditions of the contract as defined by the contracting parties.

The original contract encountered a number of challenges which prompted the parties to seek arbitration. On 27 November 2008, the Arbitral Tribunal found in favour of PCS and declared the purported cancellation of the agreement by the first respondent to be invalid and of no force and effect.

On 9 September 2009, the parties entered into an amended agreement for the same purpose. The new agreement ran into further challenges again prompting the parties to seek further arbitration once more with the parties clearly defining the issues which the Arbitrary Tribunal had to deal with. There were allegations and counter allegations of breach of contract thrown at each other by the contracting parties with each party claiming damages for breach of contract.

To assist the Arbitrary Tribunal both the applicant and the first respondent drafted a statement of agreed facts and issues that screamed for determination.

In a well reasoned decision the three team Arbitrary Tribunal granted the following order on 24 November 2011.

“The order:

1. NSSA is to pay PCS the sum of USD 1 145830, with interest thereon at the rate of 5% per annum, calculated from the date of demand, being 21 April 2011, to the date of payment.

2. Each party is to bear the costs incurred by it in these arbitration proceedings.


3. The fees charged by the arbitrators are to be paid in equal shares by the parties.”

Following upon the granting of this order the first respondent instructed the second respondent to cash a security bond that had been given to them as security for the applicant’s performance.

It is the encashment of this bond which forms the bone of contention between the parties, viz the applicant and the first respondent. It is precisely this conduct by the first respondent which prompted the applicant to file the instant application seeking the order earlier on referred to.

The applicant’s position is that the finding of the Arbitration was that neither party had a resounding victory and damages were awarded to both parties. The applicant further contended that there was no order allowing the first respondent to encash the bond other than the damages in the form of travel expenses which were set-off against the amount due and payable to the applicant by the respondent.

It was further the applicant’s position that allowing the first respondent to encash the performance bond would amount to allow the first respondent to circumvent the arbitration or to unfairly go beyond what that order entailed and that in any event, the performance bond itself had expired and or superceded by the events leading to the granting of the arbitrary award.

In its notice of opposition, the first respondent sought to have the applicant’s matter dismissed on basically two points in limine.

It was argued by the first respondent that the agreement of the parties, having provided for arbitration in the event of a dispute meant that this court had no jurisdiction to deal with the applicant’s application.

Secondly and interconnected with the alleged lack of jurisdiction, was the argument that this matter was *res judicata*, the dispute having been settled through arbitration.

On merits the first respondent read the arbitrary order to mean that the applicant failed to deliver in terms of the contract and therefore the encashment of the security bond was automatic in terms of clause 16.2.2 of the agreement as evidenced by annexure ‘B’ to its notice of opposition.

The second respondent decided not to have anything to do with the applicant’s application on the eleventh hour as advised by the applicant’s counsel. This probably explains why they did not file any heads of argument. I will assume, its default is indicative of its desire on reflection not to oppose the application and to abide by the decision of the court.

Let me now deal with the issues raised by both counsel starting with the points in limine.

DOES THIS COURT HAVE JURISDICTION TO ENTERTAIN THIS MATTER?

In laying the foundation of its case the first respondent placed emphasis on clause 13 of the agreement operative between the applicant and the first respondent which stated that in the event of dispute between the parties such dispute had to be referred to arbitration. The clause in question reads as follows:-

“The contract shall be governed by and interpreted in accordance with the laws of Zimbabwe. All matters of differences between the parties arising hereunder, out or in connection with this agreement including the formation and validity of the contract and whether arising during or after the period of this agreement, shall be resolved amicably between the parties by informal negotiation failing it shall be referred to Arbitration in accordance with the Arbitration Act [Cap 7:02] and each party shall appoint one arbitrator, failing which such Arbitrator shall appoint a third Arbitrator, failing which this shall be done by the Harare Commercial Arbitration Centre. The three arbitrators shall decide by majority, failing, which the verdict of the third Arbitrator shall prevail”¹

It was argued by the first respondent’s counsel that the parties, having made their intentions clear, this court must stay out of the parties’ dispute as it has no jurisdiction to entertain this matter.

I was referred to a number of cases cited in the heads of argument as authorities for the proposition that this court has no jurisdiction.²

¹ Clause 13 of the parties’s agreement on page 25 of the consolidated index.
² Authorities appearing on pages 202-206 of the consolidated index.


The applicant argued that the matter was properly before this court as what the applicant sought was a declaratory order falling outside the mandate of the Arbitrary tribunal.

With due respect to the first respondent’s counsel, I am more persuaded to follow the applicant’s counsel’s argument for the reasons that I will deal with and expand on hereunder.

It will be noted that once the applicant and the first respondent decided to refer their dispute for arbitration they jointly compiled a statement of agreed facts and issues to be determined by the arbitrary tribunal. The arbitrary tribunal proceeded to determine all the issues referred to it and came up with a unanimous position in the form of an arbitrary order as captured above. That order did not make any reference to the first respondent being authorized to encash the performance bond. In fact the issue of the performance bond was not one of the issues which was referred for determination by the arbitrary tribunal. It is clear to me that this particular issue was not specifically referred for arbitration because both the applicant and the first respondent fully appreciated it had been superceded by subsequent developments in their contractual relationship.

Once the arbitrary tribunal pronounced its order, by operation of law it became functus officio and what the applicant now seeks is the interpretation of the award made by that arbitrary tribunal. The applicant wants a relief in the form of a declaratory order couched in the manner outlined in the penultimate part of this judgment and my view is that this court has jurisdiction to do that. Authorities are very clear on this point that it is only this court which can grant the relief sought by the applicant. In this regard, I feel more inclined to follow the position lucidly laid down by MAKARAU J (as she then was) in the case of Martin Sibanda and Godfrey Moyo vs Benson Chinemhute N.O.\(^3\) when she stated:-

“A declaratory order is sui generis relief that only this court can grant. This it can do by virtue of the provisions of section 14 of the High Court. Act.”\(^4\)

\(^3\) HH 131/04
\(^4\) Page 7 of the pschstyled judgment (supra)


The same position, though in a slightly different manner, was reaffirmed by CHINHENGO J, in the case of *Conforce (Pvt) Ltd v City of Harare* 5 where the headnote reads:-

“A court should not interfere with an arbitrator’s award so as to alter it to what the court thinks the arbitrator decided. However, it can interpret ambiguities.”

Really, this court is properly seized with this matter. It will be interesting to note that in concluding its findings the tribunal emphasised that neither party had recorded a resounding success. Thus the tribunal stated as follows:-

“Neither party to this arbitration has achieved anything like major success. NSSA has proved that its termination of the agreement was lawful. That issue occupied more than half of the time of the hearing and concluding arguments.

On the other hand, it has been found that PCS is to be paid $1145830-29 for the work it performed for NSSA up to 13 April 2011. This award is a mere 9,15% of the USD12 507408-35 it initially sought to be paid by NSSA……..”

The tribunal then proceeded to announce its order which clearly did not make reference to the encashment of the performance bond and that order is very clear. It is clear to me and it must be the natural conclusion that the first respondent’s desired encashment of the performance bond must be derived from the four corners of the arbitrary award. The pronounced award did not provide for that and the first respondent has no basis at law to claim that which the tribunal did not award.

The first respondent must not be allowed to circumvent the award of the tribunal by going beyond the award made by being allowed to encash the performance bond.

When everything is said and considered one cannot help but conclude that the first respondent’s letter to the second respondent demanding the encashment of the performance bond was in bad taste and actuated by greed and a stout effort to subvert the arbitrary order of the tribunal.

THE ISSUE OF RES JUDICATA


As I have endeavoured to demonstrate above, this issue does not arise as what is sought by the applicant is the interpretation of the arbitrary award followed by a declaratory order.

One gets the impression that this issue has been thrown in the ring to cloud issues. If anything it is both frivolous and vexatious for reasons already outlined under the subheading of jurisdiction.

ON MERITS

Again, the issues have already been adequately covered.

The applicant and the first respondent were very clear on the facts and issues which the tribunal had to grapple with. The encashment of the performance bond was not one such issue and it cannot become an issue after the order has been pronounced. If the parties wanted this issue to occupy the mind of the tribunal they could have specifically stated so at the time they jointly crafted both the statement of agreed facts and the issues.

COSTS

The second respondent has on the 11th hour decided not to contest the applicant’s application and I believe because it realised the futility of its position. I believe the position adopted by the second respondent was a well thought one and for this reason, it shall be spared of the burden of costs.

Consequently it is ordered as follows:-

1. The security bond held in favour of the first respondent by the second respondent in the name of the applicant dated 1 October 2010 be and is hereby declared to be of no force or effect.
2. The second respondent shall upon being served with a copy of this order immediately pay to the applicant $220 000 (two hundred and twenty united states dollars) being the amount the second respondent held back in lieu of cashing the performance bond.
3. The first respondent (NSSA) pays the costs of suit.

Messrs Scanlen and Holderness, Applicant’s legal practitioners
Messrs Kantor and Immerman, first Respondent’s legal practitioners
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